U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1998
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
------------ ------------
Commission File Number 0-22997
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WSB HOLDING COMPANY
------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Pennsylvania 23-2908963
- ------------------------------- -------------------------------------
(State or other jurisdiction of I.R.S. Employer Identification Number
incorporation or organization)
807 Middle Street, Pittsburgh, Pennsylvania 15212
- ------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (412) 231-7297
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
X Yes No
--- ---
As of November 9, 1998, there were 327,859 shares of the Registrant's
common stock, par value $0.10 per share, outstanding. The Registrant has no
other classes of common equity outstanding.
Transitional small business disclosure format:
Yes X No
--- ---
<PAGE>
WSB HOLDING COMPANY AND SUBSIDIARY
PITTSBURGH, PENNSYLVANIA
TABLE OF CONTENTS
PAGE
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - as of September 30, 1998
(Unaudited) and June 30, 1998 3
Consolidated Statements of Income - (Unaudited) for
the three months ended September 30, 1998 and 1997 4
Consolidated Statements of Cash Flows - (Unaudited)
for the three months ended September 30, 1998 and 1997 5
Notes to (Unaudited) Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and use of Proceeds 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
`
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
(2)
<PAGE>
WSB HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
September 30,
1998 June 30,
(Unaudited) 1998
----------- ------------
<S> <C> <C>
Cash and cash equivalents:
Interest bearing $ 5,061,759 $ 4,750,915
Non-interest bearing 390,476 406,629
Securities held-to-maturity (estimated fair
value of $ 11,426,052 and $ 11,701,996) 11,341,632 11,667,658
Securities available-for-sale, at fair value 3,024,673 3,245,015
Loans (net of allowance for loan losses
of $ 176,562 and $ 198,168) 16,429,101 16,301,248
Foreclosed real estate 119,152 319,073
Federal Home Loan Bank stock, at cost 153,300 153,300
Accrued interest receivable 299,397 228,175
Premises and equipment, net 1,028,691 1,017,168
Other assets 96,136 106,431
Income taxes receivable -- 9,859
Deferred income taxes 26,372 3,001
------------ ------------
TOTAL ASSETS $ 37,970,689 $ 38,208,472
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 31,937,504 $ 31,867,605
Federal Home Loan Bank advances 1,000,000 1,000,000
Advances from borrowers for taxes and insurance 115,318 223,848
Accrued expenses and other liabilities 130,193 327,473
Accrued income taxes 20,336 --
------------ ------------
TOTAL LIABILITIES 33,203,351 33,418,926
------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock ($ .10 par value, 1,000,000 shares
authorized, none outstanding) -- --
Common stock ($ .10 par value, 4,000,000 shares authorized;
330,600 shares issued and 327,859 shares outstanding in
1998 and 330,600 shares issued and 329,435 shares
outstanding in 1997) 33,060 33,060
Additional paid-in capital 2,992,127 2,989,212
Retained earnings, substantially restricted 2,223,883 2,179,378
Unearned Employee Stock Ownership Plan shares (ESOP) (235,826) (242,438)
Unearned compensation - Restricted Stock Plan (RSP) (187,450) (197,864)
Treasury stock, at cost; 2,741 and 1,165 shares (42,288) (19,431)
Accumulated other comprehensive income, net
of applicable income taxes of $ (6,930) and $ 17,360 (16,168) 47,629
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 4,767,338 4,789,546
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 36,970,689 $ 38,208,472
============ ============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
(3)
<PAGE>
WSB HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1998 1997
--------- ---------
<S> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans $340,817 $316,266
Investments 236,055 259,479
Other interest earning assets 79,463 69,930
-------- --------
TOTAL INTEREST AND DIVIDEND INCOME 656,335 645,675
-------- --------
INTEREST EXPENSE
Deposits 362,478 332,670
Advances from FHLB 14,450 43,928
-------- --------
TOTAL INTEREST EXPENSE 376,928 376,598
-------- --------
NET INTEREST INCOME 279,407 269,077
PROVISION FOR LOAN LOSSES -- 8,700
-------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 279,407 260,377
-------- --------
NONINTEREST INCOME
Service charges and other fees 21,031 20,812
Gain on sale of securities available-for-sale 28,931 --
Gain on sale of foreclosed real estate 20,665 --
Income from real estate rental 2,215 975
-------- --------
TOTAL NONINTEREST INCOME 72,842 21,787
-------- --------
NONINTEREST EXPENSE
Compensation and benefits 137,747 117,880
Occupancy and equipment expense 40,661 34,688
Insurance premiums 7,731 6,248
Other 99,128 69,547
-------- --------
TOTAL NONINTEREST EXPENSE 285,267 228,363
-------- --------
INCOME BEFORE INCOME TAXES 66,982 53,801
INCOME TAX EXPENSE 22,477 5,373
-------- --------
NET INCOME $ 44,505 $ 48,428
======== ========
EARNINGS PER COMMON SHARE-BASIC (since inception in 1997) $ .15 $ .06
======== ========
EARNINGS PER COMMON SHARE-DILUTED (since inception for 1997) $ .15 $ .06
======== ========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
(4)
<PAGE>
WSB HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1998 1997
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 44,505 $ 48,428
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of:
Deferred loan origination fees (563) (826)
Premiums and discounts on
investment securities 7,550 (2,767)
Net gain on sale of securities available-for-sale (28,931) --
Net gain on sales of real estate owned (20,665) --
Unearned ESOP shares 9,527 2,915
Compensation expense related to RSP 10,414 --
Provision for loan losses -- 8,700
Depreciation of premises and equipment 12,858 14,239
(Increase) decrease in:
Accrued interest receivable (71,222) 33,569
Other assets 10,295 57,199
Income taxes receivable 9,859 --
Deferred income taxes 919 --
Increase (decrease) in:
Accrued expenses and other liabilities (5,532) 9,022
Accrued income taxes 20,336 5,373
----------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (650) 175,852
----------- -----------
INVESTING ACTIVITIES
Purchases of securities held-to-maturity (3,199,000) (2,650,000)
Proceeds from maturities of and principal
repayments on securities held-to-maturity 3,517,476 2,546,537
Proceeds from sale of securities
available-for-sale 360,580 --
Purchases of securities available-for-sale (213,776) --
Proceeds from maturities of and principal
repayments on securities available-for-sale 14,382 342,728
Net loan originations and principal
repayments on loans (127,290) 25,890
Proceeds from sales of real estate owned 220,586 --
Purchases of premises and equipment (24,381) --
----------- -----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 548,577 265,155
----------- -----------
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
(5)
<PAGE>
WSB HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1998 1997
----------- -----------
<S> <C> <C>
FINANCING ACTIVITIES
Net increase in deposits 69,899 57,725
Net decrease in FHLB advances -- (1,000,000)
Purchase of treasury stock (22,857) --
Proceeds from issuance of common stock -- 3,041,520
Payment of conversion costs -- (252,122)
Net decrease in advances from
borrowers for taxes and insurance (108,530) (91,923)
Contribution to Restricted Stock Plan (RSP) for the
purchase of treasury stock (191,748) --
----------- -----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (253,236) 1,755,200
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 294,691 2,196,207
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,157,544 2,804,804
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,452,235 $ 5,001,011
=========== ===========
SUPPLEMENTAL DISCLOSURES Cash paid during the period for:
Interest on deposits, advances,
and other borrowings $ 305,706 $ 369,305
Income taxes $ -- $ --
Transfer from loans to real estate
acquired through foreclosure $ -- $ --
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
(6)
<PAGE>
WSB HOLDING COMPANY AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ORGANIZATION
WSB Holding Company (the "Company") was incorporated under the laws of the
Commonwealth of Pennsylvania for the purpose of becoming the holding company of
Workingmens Bank (the "Bank") in connection with the Bank's conversion from a
federally chartered mutual savings bank to a federally chartered stock savings
bank, pursuant to its Plan of Conversion. The Company commenced operations on
August 27, 1997, the date of a Subscription Offering of its shares in connection
with the conversion of the Savings Bank (the "Conversion"). The financial
statements of the Bank are presented on a consolidated basis with those of the
Company.
The consolidated financial statements included herein are for the Company, the
Bank and the Bank's wholly owned subsidiary, Workingmens Service Corporation
(WSC). The impact of WSC on the consolidated financial statements is not
material.
NOTE B - BASIS OF PREPARATION
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-QSB and therefore, do not include all
disclosures necessary for a complete presentation of the consolidated balance
sheets, consolidated statements of income, consolidated statements of
stockholders' equity, and consolidated statements of cash flows in conformity
with generally accepted accounting principles. However, all adjustments which
are, in the opinion of management, necessary for the fair presentation of the
interim financial statements have been included. All such adjustments are of a
normal recurring nature. The statement of income for the three month period
ended September 30, 1998 is not necessarily indicative of the results which may
be expected for the entire year or any other interim period.
These consolidated financial statements should be read in conjunction with the
audited consolidated financial statements and notes thereto for the Company for
the year ended June 30, 1998 which are included in the Form 10KSB (file no.
0-22997).
As of July 1, 1998, the Corporation adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income." This statement establishes
standards for reporting and presentation of comprehensive income and its
components (revenues, expenses, gains and losses) in a full set of general
purpose financial statements. It requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is presented with the same prominence as
other financial statements. Statement No. 130 requires that companies (I)
classify items of other comprehensive income by their nature in a financial
statement and (ii) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of the statement of financial condition. Reclassification of financial
statements for earlier periods provided for comprehensive purposes is required.
Total comprehensive income (loss) for the three months ended September 30, 1998
and 1997 was $(19,292) and $67,733, respectively.
The adoption of this Statement had no impact on the Company's net income or
stockholders' equity. Statement 130 requires unrealized holding gains or losses
on the Company's available-for-sale securities, which prior to adoption were
reported separately in stockholders' equity to be included in other
comprehensive income. Prior period financial statements have been reclassified
to conform to the requirements of Statement 130. The Company uses the
statement-of-changes-in-equity approach for presenting comprehensive income.
(7)
<PAGE>
WSB HOLDING COMPANY AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE C - EARNINGS PER SHARE
During 1997, the Company adopted the provisions of the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share". SFAS No. 128 supersedes Accounting
Principles Board Opinion No. 15, "Earnings Per Share", and specifies the
computation, presentation, and disclosure requirements for earnings per share
(EPS). SFAS No. 128 replaces the presentation of primary EPS and fully diluted
EPS with a presentation of basic EPS and diluted EPS, respectively. SFAS No. 128
also requires dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures. All prior
period EPS data is required to be restated to confirm with SFAS No. 128.
Basic EPS excludes dilution and is computed by dividing net income by
weighted-average shares outstanding. Diluted EPS is computed by dividing net
income by weighted-average shares outstanding plus potential common stock
resulting from dilutive stock options and Restricted Stock Plan (RSP) shares
that have not yet vested.
For purposes of computing weighted-average shares outstanding, unallocated
shares under the Company's employee stock ownership plan are not considered
outstanding until they are committed to be released for allocation.
The following data shows the amounts used in computing earnings per share and
the effect on income and the weighted average number of shares of dilutive
potential common stock.
<TABLE>
<CAPTION>
Three Months Ended
September 30, 1998
1998 1997
--------- ---------
<S> <C> <C>
Net income $ 44,505 $ 48,428
Less income attributable to pre-stock
conversion (7/1/97 - 8/26/97) -- (30,004)
--------- ---------
Income available to common
stockholders used in basic and
diluted EPS $ 44,505 $ 18,424
========= =========
Weighted average number of shares
used in basic EPS 306,793 304,262
Effect of dilutive securities:
Stock options -- --
Restricted Stock Plan -- --
--------- ---------
Weighted number of shares and
dilutive potential common stock
used in diluted EPS 306,793 304,262
========= =========
</TABLE>
(8)
<PAGE>
WSB HOLDING COMPANY AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE D - EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
As part of the conversion discussed in Note D, an Employee Stock Ownership Plan
(ESOP) was established for all employees who have completed one year of service
and have attained the age of 21. The ESOP borrowed $ 264,480 from the Company
and used the funds to purchase 26,448 shares of common stock of the Company
issued in the offering. The loan will be repaid principally from the Bank's
discretionary contributions to the ESOP over a period of 10 years. On September
30, 1998, the loan had an outstanding balance of $ 238,030 and an interest rate
of 8.5%. The loan obligation of the ESOP is considered unearned compensation
and, as such, recorded as a reduction of the Company's stockholders' equity.
Both the loan obligation and the unearned compensation are reduced by an amount
of the loan repayments made by the ESOP. Shares purchased with the loan proceeds
are held in a suspense account for allocation among participants as the loan is
repaid. Contributions to the ESOP and shares released from the suspense account
are allocated among participants on the basis of compensation in the year of
allocation. Benefits become fully vested at the end of seven years of service
under the terms of the ESOP Plan. Benefits may be payable upon retirement,
death, disability, or separation from service. Since the Bank's annual
contributions are discretionary, benefits payable under the ESOP cannot be
estimated. Compensation expenses are recognized to the extent of the fair value
of shares committed to be released.
For the three months ended September 30, 1998 and 1997, compensation from the
ESOP of $ 9,527 and $ 2,915 was expensed. Compensation is recognized at the
average fair value of the ratably released shares during the accounting period
as the employees performed services. At September 30, 1998, the ESOP had 2,861
allocated shares and 23,587 unallocated shares. For the purpose of computing
earnings per share, all ESOP shares committed to be released have been
considered outstanding.
NOTE E - STOCK OPTION PLAN
In March 1998, the Company approved a stock option plan (the "Option Plan")
whereby 33,060 authorized shares are reserved for issuance by the Company upon
exercise of stock options granted to officers, directors, and employees of the
Company from time to time. Options constitute both incentive stock options and
nonqualified stock options. Options awarded are exercisable at a rate of 20%
annually with the first 20% exercisable on the one-year anniversary of the date
of grant. Any shares subject to an award which expires or is terminated
unexercised will again be available for issuance. The Option Plan has a term of
ten years, unless sooner terminated. The exercise price for the purchase of
shares subject to an incentive stock option may not be less than 100 percent of
the fair market value of the common stock on the date of grant of such option.
The exercise price per share for nonqualified stock options shall be the price
as determined by an option committee, but not less than the fair market value of
the common stock on the date of grant. On March 16, 1998, 33,060 options were
granted under the Option Plan. The fair market value of the Company's common
stock on March 16, 1998 was $ 15.75 per share. The Company accounts for these
stock options under Accounting Principles Board (APB) Opinion No. 25. No options
were exercised during the quarter ended September 30, 1998.
(9)
<PAGE>
WSB HOLDING COMPANY AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE F - RESTRICTED STOCK PLAN
In March 1998, the Bank established a Restricted Stock Plan ("RSP"). Under the
terms of the RSP, a total of 13,224 shares of the Company's common stock is
available for the granting of awards to officers, directors and employees during
a period of twenty-one years, unless sooner terminated. During the three months
ended September 30, 1998 the Bank contributed sufficient funds to the RSP to
purchase 13,224 shares of the Company's common stock in the open market. All
stock purchased by the RSP was purchased at the fair market value on the date of
purchase. Stock awarded is earned at a rate of 20% annually with the first 20%
awarded on the one-year anniversary of the date of grant. The market value of
the common stock at the date of award is included as a reduction of
stockholders' equity in the consolidated balance sheet and is recorded as
compensation expense using the straight-line method over the vesting period of
the awards. The awards vest pro rata over five years at each anniversary of the
award. On March 16, 1998, 13,224 shares of the Company's common stock was
awarded under the RSP. The fair market value of the Company's stock on March 16,
1998 was $ 15.75 per share.
The Company applies Accounting Principles Board (APB) Opinion No. 25 in
accounting for the RSP. Aggregate compensation expense with respect to the
foregoing RSP awards was $ 10,414 for the three month period ended September 30
1998.
NOTE G - ASSET QUALITY
At September 30 1998 and June 30, 1998, the Company had total nonperforming
loans (i.e., loans which are contractually past due 90 days or more) of
approximately $ 137,000 and $ 301,000, respectively. Nonperforming loans were
.83% of total loans at September 30, 1998. Total nonperforming assets as a
percent of total assets at September 30, 1998 was .67%.
(10)
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
The following discussion and analysis is intended to assist in understanding the
financial condition and the results of operations of the Company. References to
the "Company" and "Bank" include WSB Holding Company and/or Workingmens Bank as
appropriate.
Comparison of Financial Condition at September 30, 1998 and June 30, 1998.
Total consolidated assets decreased by approximately $ 238,000, or .62% to $
37.97 million at September 30, 1998 from $ 38.21 million at June 30, 1998. The
decrease in total assets was primarily attributable to the common stock
purchased for the RSP. Cash from our FHLB demand account in the amount of $
215,000 was used to purchase shares for the RSP.
Comparison of Results of Operations for the Three Months Ended September 30,
1998 and 1997.
Net Income. Net income decreased $ 3,000 from a profit of $ 48,000 for the three
months ended September 30, 1997 to a profit of $ 45,000 for the three months
ended September 30, 1998. The change was primarily the result of increased
compensation expenses and of additional expenditures of being a publicly held
Company offset by gains on sales of securities and foreclosed real estate.
Net Interest Income. Net interest income increased $ 10,000 or 4.0% from $
269,000 for the three months ended September 30, 1997 to $ 279,000 for the three
months ended September 30, 1998. The improvement in net interest income
primarily reflects an increase in average interest-earning assets over average
interest-bearing liabilities for the Company of $ 1.2 million for the three
months ended September 30, 1998 as compared to 1997. The interest rate spread
decreased to 2.48% for three months ended September 30, 1998 as compared to
2.82% for the three months ended September 30, 1997, primarily due to an
increase in our cost of funds and a reduction in our yield of our investment
portfolio.
Provision for Loan Losses. Our provision for loan losses decreased $ 8,700 from
$ 8,700 for the three months ended September 30, 1997 to $ 0 for the three
months ended September 30, 1998. No provision for loan losses was necessary due
to adequate loss reserves booked at September 30, 1998.
Historically, we have emphasized our loss experience over other factors in
establishing the provision for loan losses. We review the allowance for loan
losses in relation to (I) our past loan loss experience, (ii) known and inherent
risks in our portfolio, (iii) adverse situations that may affect the borrower's
ability to repay, (iv) the estimated value of any underlying collateral, and (v)
current economic conditions. Because of the increased coverage of the allowances
for loan losses to total loans, management believes the allowance for loan
losses is a level that is considered to be adequate to provide for estimated
losses; however, there can be no assurance that further additions will not be
made to the allowance and that such losses will not exceed the estimated amount.
(11)
<PAGE>
Noninterest Income. Our noninterest income increased by $ 51,000 or 234% from $
22,000 for the three months ended September 30, 1997 to $ 73,000 for the three
months ended September 30, 1998. This increase was attributable to our decision
to sell securities available-for-sale which provided us with a gain of $ 29,000
and our sale of various foreclosed real estate properties which resulted in a $
21,000 gain.
Noninterest Expense. Our non-interest expense increased by $ 57,000 or 24.9%
from $ 228,000 for the three months ended September 30, 1997 to $ 285,000 for
the three months ended September 30, 1998, primarily as a result of anticipated
expenses related to compensation increases and the implementation of the ESOP
and the RSP totaling $ 20,000 for the three months ended September 30, 1998.
Legal, accounting and other fees increased $ 24,000 due to activities relating
to being a public company. The remainder of the increase in non-interest
expenses was associated with increased loan expenses, advertising and upgrades
associated with the Bank's technology.
Income Tax Expense. Our income tax expense for the three months ended September
30, 1998 was $ 22,000 (effective tax rate of 33.6%) compared to an expense of $
5,000 (effective tax rate of 10.0%) for the three months ended September 30,
1997. The $ 17,000 change in expense was the result of the effective tax rate
fluctuation due to a recording of a previously unrecorded Federal net operating
loss carryforward tax benefit during the three months ended September 30, 1997.
Year 2000 Compliance
In July 1998, the Company adopted a Year 2000 compliance plan and established a
Year 2000 compliance committee. The objectives of the plan and the committee are
to prepare the Company for the Year 2000. As recommended by the Federal
Financial Institutions Examination Council, the plan encompasses the following
phases: awareness, assessment, renovation, validation and implementation. These
phases will enable the Company to identify risks, develop an action plan,
perform adequate testing and complete certification that its processing systems
will be Year 2000 ready. Execution of the plan is currently on schedule. The
Company is currently in the validation stage, which includes testing of changes
to hardware and software, accompanied by monitoring and testing with vendors.
Prioritization of the most critical applications has been addressed, along with
contract and service agreements. The primary operating software for the Company
is provided and maintained by an external service bureau. The Company has
maintained ongoing contact with the service bureau to ensure that testing and
monitoring of the system is progressing. In September 1998, the Company tested
their software with the external service bureau and the results of the testing
showed that there were minimal problems in submitting information on
transactions from the Company to the external service bureau using January 2000
dates for all transactions tested. Final testing is scheduled to be completed by
March 31, 1999.
The Company has contacted all other material vendors and suppliers as well as
all material customers and non- information technology supplies regarding their
year 2000 state of readiness. Each of these third parties has delivered written
assurance to the Company that they expect to be Year 2000 compliant prior to the
Year 2000. The validation phase is targeted for completion by March 31, 1999.
The implementation phase is to certify that systems are Year 2000 ready, along
with assurances that any new systems are compliant on a going-forward basis. The
implementation phase is scheduled for completion by June 30, 1999.
Costs have been and will be incurred due to enhancements made to non-compliant
teller software and fees incurred from our external service bureau. The Company
does not anticipate that the related overall costs will be material in any
single year. In total, the Company estimates that its cost for compliance will
amount to approximately $ 15,000 over the two year period from 1998-1999, of
which approximately $ 7,000 was incurred as of September 30, 1998. No assurance
can be given that the Year 2000 compliance plan will be completed successfully
by the year 2000, in which event the Company could incur significant costs. If
the external service bureau is unable to resolve the potential problem in time,
the Company would likely experience significant data processing delays, mistakes
or failures. These delays, mistakes or failures could have a significant adverse
impact on the financial statements of the Company. However, the Company is in
the process of developing a contingency plan whereby daily transactions normally
processed by external service bureau would be processed by the Company and
stored electronically for future processing by the external service bureau.
(12)
<PAGE>
Successful and timely completion of the Year 2000 project is based on
management's best estimates derived from various assumptions of future events
which are inherently uncertain, including the progress and results of the
Company's external service bureau, testing plans, and all vendors, suppliers and
customer readiness.
Liquidity and Capital Resources
The Company's primary sources of funds are new deposits, proceeds from principal
and interest payments of loans, and repayments on mortgage-backed securities.
While maturities and scheduled amortization of loans are a predictable source of
funds, deposit flows and mortgage prepayments are greatly influenced by general
interest rates, economic conditions and competition. The Company maintains
liquidity levels adequate to fund loan commitments, investment opportunities,
deposit withdrawals and other financial commitments. At September 30, 1998, the
Bank had obligations to fund outstanding loan commitments of approximately $
88,000.
At September 30, 1998, management had no knowledge of any trends, events or
uncertainties that will have or are reasonably likely to have material effects
on the liquidity, capital resources or operations of the Company. Further at
September 30, 1998, management was not aware of any current recommendations by
the regulatory authorities which, if implemented, would have such an effect.
(13)
<PAGE>
The Bank exceeded all of its capital requirements at September 30, 1998. The
Bank had the following capital ratios at September 30, 1998.
<TABLE>
<CAPTION>
(IN THOUSANDS)
FOR CAPITAL CATEGORIZED AS
ACTUAL ADEQUACY PURPOSES: "WELL CAPITALIZED"
--------------------------- ---------------------------- ------------------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------------ ------------ -------------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
As of September 30, 1998:
Total Risk-Based Capital
(to Risk-Weighted Assets) $ 4,043 26.0% $ 1,244 8.0% $ 1,555 10.0%
Tier I Capital
(to Risk-Weighted Assets) 3,866 24.9% 622 4.0% 933 6.0%
Tier I Capital
(to Total Assets) 3,866 10.5% 1,475 4.0% 1,844 5.0%
Tangible Capital
(to Total Assets) 3,866 10.5% 553 1.5% 1,844 5.0%
</TABLE>
(14)
<PAGE>
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
From time to time, the Company and its subsidiaries may be a party to
various legal proceedings incident to its or their business. At
September 30, 1998, there were no legal proceedings to which the
Company or any subsidiary was a party, or to which of any of their
property was subject, which were expected by management to result in a
material loss.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No matter was submitted to a vote of security holders during the first
quarter of fiscal 1999.
Item 5. Other Information
-----------------
On October 19, 1998, the Company declared a cash dividend of $ .04 per
share to stockholders of record as of November 2, 1998. Such dividend
is payable on November 16, 1998.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
(a)
(3)(I) Restated Articles of Incorporation of WSB Holding Company*
(3)(ii) Bylaws of WSB Holding Company**
(4) Specimen Stock Certificate of WSB Holding Company**
(10) Employment Agreement between Workingmens Bank and Robert Neudorfer ***
(10.1) 1998 Stock Option Plan ****
(10.2) Workingmens Bank Restricted Stock Plan and Trust Agreement ****
(27) Financial Data Schedule (electronic filing only)
(b) Reports on Form 8-K
None
</TABLE>
- ------------------------------------
* Incorporated by reference to the registration statement on Form 8-A
(0-22997).
** Incorporated by reference to the registration statement on Form SB-2
(333-29389).
*** Incorporated by reference to the Form 10QSB for December 31, 1997
(0-22997).
**** Incorporated by reference to the Definitive Proxy Statement filed February
6, 1998 (0-22997).
(15)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WSB Holding Company
Date: November 12, 1998 By /s/Robert D. Neudorfer
-------------------- ----------------------------------------
Robert D. Neudorfer, President
(Principal Financial Officer)
Date: November 12, 1998 By /s/Ronald W. Moreschi
-------------------- ----------------------------------------
Ronald W. Moreschi
Vice President and Treasurer
(Principal Accounting Officer)
(16)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION DERIVED FROM THE
QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> SEP-30-1998
<CASH> 390,476
<INT-BEARING-DEPOSITS> 5,061,759
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,024,673
<INVESTMENTS-CARRYING> 11,341,632
<INVESTMENTS-MARKET> 14,450,725
<LOANS> 16,605,663
<ALLOWANCE> 176,562
<TOTAL-ASSETS> 37,970,689
<DEPOSITS> 31,937,504
<SHORT-TERM> 0
<LIABILITIES-OTHER> 265,847
<LONG-TERM> 1,000,000
0
0
<COMMON> 33,060
<OTHER-SE> 2,568,851
<TOTAL-LIABILITIES-AND-EQUITY> 37,970,689
<INTEREST-LOAN> 340,817
<INTEREST-INVEST> 236,055
<INTEREST-OTHER> 79,463
<INTEREST-TOTAL> 656,335
<INTEREST-DEPOSIT> 362,478
<INTEREST-EXPENSE> 376,928
<INTEREST-INCOME-NET> 279,407
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 28,931
<EXPENSE-OTHER> 285,267
<INCOME-PRETAX> 66,982
<INCOME-PRE-EXTRAORDINARY> 66,982
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44,505
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
<YIELD-ACTUAL> 3.08
<LOANS-NON> 137,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 198,168
<CHARGE-OFFS> 21,606
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 176,562
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
