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 December 31, 1997
( ) 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
WSB HOLDING COMPANY
--------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Pennsylvania 23-2908963
- ------------------------------- ---------------------
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification Number
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 registrant (1) has files 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 February 6, 1998, there were 330,660 shares of the Registrant's
common stock, par value $0.10 per share, outstanding. The Registrant has no
other class of common equity outstanding.
Transitional small business disclosure format:
Yes X No
----- ----
<PAGE>
WSB HOLDING COMPANY AND SUBSIDIARY
PITTSBURGH, PENNSYLVANIA
TABLE OF CONTENTS
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - (Unaudited) as of
December 31, 1997 and June 30, 1997 3
Consolidated Statements of Income - (Unaudited) for
the six months ended December 31, 1997 and 1996 4
Consolidated Statements of Income - (Unaudited) for
the three months ended December 31, 1997 and 1996 5
Consolidated Statements of Cash Flows - (Unaudited)
for the six months ended December 31, 1997 and 1996 6
Notes to (Unaudited) Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-14
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 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
December 31, June 30,
1997 1997
------------- ------------
<S> <C> <C>
Cash and cash equivalents:
Interest bearing $ 2,611,515 $ 2,547,897
Non-interest bearing 435,650 256,907
Securities held-to-maturity (estimated fair
value of $ 13,370,364 and $ 11,980,618) 13,325,367 12,007,456
Securities available-for-sale, at fair value 3,309,595 2,684,039
Loans and real estate, (net of allowance
for loan losses of $ 194,249 and $ 208,791) 14,989,630 14,590,996
Foreclosed real estate 2,500 -
Federal Home Loan Bank stock, at cost 153,300 153,300
Accrued interest receivable 187,330 299,469
Premises and equipment, net 1,031,941 1,057,667
Other assets 102,201 146,503
Deferred income taxes 22,264 52,426
------------ ------------
TOTAL ASSETS $ 36,171,293 $ 33,796,660
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 29,873,950 $ 28,405,775
Federal Home Loan Bank advances 1,000,000 3,000,000
Advances from borrowers for taxes and insurance 269,153 233,818
Accrued expenses and other liabilities 116,782 113,272
Accrued income taxes 14,569 -
------------ ------------
TOTAL LIABILITIES 31,274,454 31,752,865
------------ ------------
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 outstanding
at December 31, 1997) 33,060 -
Paid-in capital 2,984,675 -
Retained earnings, substantially restricted 2,126,476 2,063,990
Net unrealized gain (loss) on securities
available-for-sale, net of applicable
income taxes of $ 1,118 and $ (9,124) 8,295 (20,195)
Unearned Employee Stock Ownership Plan shares (ESOP) (255,667) -
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 4,896,839 2,043,795
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 36,171,293 $ 33,796,660
============ ============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
(3)
<PAGE>
WSB HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1997 1996
---------- ----------
<S> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans $ 640,130 $ 583,019
Investments 497,606 493,937
Other interest earning assets 151,752 43,826
---------- ----------
TOTAL INTEREST AND DIVIDEND INCOME 1,289,488 1,120,782
---------- ----------
INTEREST EXPENSE
Deposits 673,660 631,015
Advances from FHLB 68,147 26,769
---------- ----------
TOTAL INTEREST EXPENSE 741,807 657,784
---------- ----------
NET INTEREST INCOME 547,681 462,998
PROVISION FOR LOAN LOSSES 16,321 19,633
---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 531,360 443,365
---------- ----------
NONINTEREST INCOME
Service charges and other fees 41,275 43,312
Net gain (loss) on sale of securities
available-for-sale - (1,608)
Income from real estate rental 1,900 2,250
---------- ----------
TOTAL NONINTEREST INCOME 43,175 43,954
---------- ----------
NONINTEREST EXPENSE
Compensation and benefits 238,612 185,935
Occupancy and equipment expense 67,884 67,384
Insurance premiums 14,502 198,118
Other 156,562 122,508
---------- ----------
TOTAL NONINTEREST EXPENSE 477,560 573,945
---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES 96,975 (86,626)
INCOME TAX EXPENSE (BENEFIT) 34,489 (52,800)
---------- ----------
NET INCOME (LOSS) $ 62,486 $ (33,826)
========== ==========
EARNINGS PER COMMON SHARE (since inception) $ .21 N/A
========== ==========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
(4)
<PAGE>
WSB HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1997 1996
---------- --------
<S> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans $ 323,864 $ 293,788
Investments 238,127 259,992
Other interest earning assets 81,822 19,437
---------- ---------
TOTAL INTEREST AND DIVIDEND INCOME 643,813 573,217
---------- ---------
INTEREST EXPENSE
Deposits 340,990 310,090
Advances from FHLB 24,219 26,181
---------- ---------
TOTAL INTEREST EXPENSE 365,209 336,271
---------- ---------
NET INTEREST INCOME 278,604 236,946
PROVISION FOR LOAN LOSSES 7,621 10,009
---------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 270,983 226,937
---------- ---------
NONINTEREST INCOME
Service charges and other fees 20,463 22,012
Net gain (loss) on sale of securities
available-for-sale - (1,608)
Income from real estate rental 925 1,125
---------- ---------
TOTAL NONINTEREST INCOME 21,388 21,529
---------- ---------
NONINTEREST EXPENSE
Compensation and benefits 120,732 92,105
Occupancy and equipment expense 33,196 36,649
Insurance premiums 8,254 16,914
Other 87,015 60,907
---------- ---------
TOTAL NONINTEREST EXPENSE 249,197 206,575
---------- ---------
INCOME BEFORE INCOME TAXES 43,174 41,891
INCOME TAX EXPENSE 29,116 12,135
---------- ---------
NET INCOME $ 14,058 $ 29,756
========== =========
EARNINGS PER COMMON SHARE (since inception) $ .05 N/A
========== =========
</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>
Six Months Ended
December 31,
1997 1996
----------- ------------
<S> <C> <C>
OPERATIONS
Net income (loss) $ 62,486 $ (33,826)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Amortization of:
Deferred loan origination fees (2,005) (1,341)
Premiums and discounts on loans
and investment securities (4,209) 2,329
Net loss on sale of securities
available-for-sale - 1,608
Unearned ESOP shares 12,170 -
Provision for loan losses 16,321 19,633
Depreciation of premises and equipment 27,224 26,478
(Increase) decrease in:
Accrued interest receivable 112,139 61,308
Other assets 44,302 7,134
Deferred income taxes 19,920 (87,848)
Increase (decrease) in:
Accrued expenses and other liabilities 3,510 10,425
Accrued income taxes 14,569 -
----------- -----------
NET CASH PROVIDED BY OPERATIONS 306,427 5,900
----------- -----------
INVESTING ACTIVITIES
Purchases of securities held-to-maturity (5,900,000) (1,200,000)
Proceeds from maturities of and principal
repayments on securities held-to-maturity 4,586,298 903,477
Proceeds from sale of securities
available-for-sale - 231,369
Purchases of securities available-for-sale (1,000,000) -
Proceeds from maturities of and principal
repayments on securities available-for-sale 413,176 76,357
Net loan originations and principal
repayments on loans (415,450) (228,893)
Capitalized improvements on real estate owned - (2,150)
Net purchase of FHLB stock - (16,800)
Purchases of premises and equipment (1,498) (19,374)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (2,317,474) (256,014)
=========== ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
(6)
<PAGE>
WSB HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1997 1996
------------ -----------
<S> <C> <C>
FINANCING ACTIVITIES
Net increase (decrease) in deposits 1,468,175 (499,156)
Net increase (decrease) FHLB advances (2,000,000) 2,000,000
Proceeds from issuance of common stock 3,041,520 -
Payment of conversion costs (291,622) -
Net increase (decrease) in advances from
borrowers for taxes and insurance 35,335 (19,075)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,253,408 1,481,769
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 242,361 1,231,655
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,804,804 1,206,031
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 3,047,165 $ 2,437,686
============ ============
SUPPLEMENTAL DISCLOSURES Cash paid during the period for:
Interest on deposits, advances,
and other borrowings $ 641,200 $ 751,209
Income taxes $ 20,000 $ -
Transfer from loans to real estate
acquired through foreclosure $ 2,500 $ -
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
(7)
<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
insignificant.
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 statements of income for the six month and three
month periods ended December 31, 1997 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, 1997 which are included in the Form 10KSB (file no.
0-22997).
NOTE C - EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share." This statement
redefines the standards for computing earnings per share (EPS) previously found
in Accounting Principles Board opinion No. 15, Earnings Per Share. Statement 128
establishes new standards for computing and presenting EPS and requires dual
presentation of "basic" and "diluted" EPS on the face of income statement for
all entities with complex capital structures. Under Statement 128, basic EPS is
to be computed based upon income available to common shareholders and the
weighted average number of common shares outstanding for the period. Diluted EPS
is to reflect the potential dilution exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the
Company. Statement 128 also requires the restatement of all prior-period EPS
data presented. The Company currently maintains a simple capital structure, thus
there are no dilutive effects on earnings per share.
(8)
<PAGE>
WSB HOLDING COMPANY AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE D - STOCKHOLDERS' EQUITY
The Company was incorporated under Pennsylvania law in May 1997 to acquire and
hold all the outstanding common stock of the Bank, as part of the Bank's
conversion from a federally chartered mutual savings bank to a federally
chartered stock savings bank. In connection with the conversion, which was
consummated on August 27, 1997, the Company issued and sold 330,600 shares of
common stock at a price of $ 10.00 per share for total net proceeds of $
3,014,378 after conversion expenses of $ 291,622. The Company retained $
1,124,898 of the proceeds and used the remaining proceeds to purchase the newly
issued capital stock of the Bank in the amount of $ 1,625,000 and a loan to the
ESOP of $ 264,480.
The Bank may not declare or pay a cash dividend if the effect thereof would
cause its net worth to be reduced below either the amounts required for the
liquidation account discussed below or the regulatory capital requirements
imposed by federal and state regulations.
At the time of conversion, the Bank established a liquidation account in an
amount equal to its retained income as reflected in the latest consolidated
balance sheet used in the final conversion prospectus. The liquidation account
is maintained for the benefit of eligible account holders who continue to
maintain their deposit accounts in the Bank after conversion. In the event of a
complete liquidation of the Bank (and only in such an event), eligible
depositors who continue to maintain accounts shall be entitled to receive a
distribution from the liquidation account before any liquidation may be made
with respect to common stock.
NOTE E - 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 December
31, 1997, the loan had an outstanding balance of $ 257,867 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.
(9)
<PAGE>
WSB HOLDING COMPANY AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended December 31, 1997, compensation from the ESOP of
$12,170 was expensed. For the three month period ended December 31, 1997,
compensation from the ESOP of $ 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 December 31, 1997, the ESOP had
881 allocated shares and 25,567 unallocated shares.
The ESOP administrators will determine whether dividends on allocated and
unallocated shares will be used for debt service. Any allocated dividends used
will be replaced with common stock of equal value. For the purpose of computing
earnings per share, all ESOP shares committed to be released have been
considered outstanding.
NOTE F - ASSET QUALITY
At December 31, 1997, the Company had total nonperforming loans (i.e., loans
which are contractually past due 90 days or more) of approximately $ 803,000.
Nonperforming loans were 5.3% of total loans at December 31, 1997. Total
nonperforming assets as a percent of total assets at December 31, 1997 was 2.2%.
During the three months ended December 31, 1997, the Company acquired real
estate through foreclosure. Prior to foreclosure, the loan was written down $
30,863 from its cost of $ 33,363 to its fair value of $ 2,500 (carrying value at
December 31, 1997) as a charge-off to the allowance for loan losses.
(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 December 31, 1997 and June 30, 1997.
Total consolidated assets increased by approximately 2.4 million, or 7.0% to $
36.2 million at December 31, 1997 from $ 33.8 million at June 30, 1997. The
increase in total assets was primarily attributable to the net proceeds received
from the initial public offering.
Savings deposits increased $ 1.5 million, or 5.2% to $ 29.9 million at December
31, 1997 from $ 28.4 million at June 30, 1997, while other interest bearing
liabilities decreased $ 2.0 million which reflects a $ 2.0 million repayment on
borrowings from the FHLB.
During the three months ended December 31, 1997, the Company acquired real
estate through foreclosure. Prior to foreclosure, the loan was written down $
30,863 from its cost of $ 33,363 to its fair value of $ 2,500 as a charge-off to
the allowance for loan losses. The Company does not anticipate any further
reductions in the property's carrying amount.
Comparison of Results of Operations for the six months ended December 31, 1997
and 1996.
Net Income. Net income increased $ 96,000 from a loss of $ 34,000 for the six
months ended December 31, 1996 to a profit of $ 62,000 for the six months ended
December 31, 1997. The change was primarily the result of the 1996 recognition
of the one-time SAIF special insurance assessment in the amount of $ 108,000
(after taxes).
Net Interest Income. Net interest income increased $ 85,000 or 18.3% from $
463,000 for the six months ended December 31, 1996 to $ 548,000 for the six
months ended December 31, 1997. The improvement in net interest income primarily
reflects an increase in average interest-earning assets over average
interest-bearing liabilities for the Company of $ 2.2 million for the six months
ended December 31, 1997 as compared to 1996. This was primarily as a result of
the proceeds from the stock offering. The interest rate spread remained
consistent at 2.96% for six months ending December 31, 1997 and 1996.
Provision for Loan Losses. At December 31, 1997, we had loans totalling $
803,000 in our loan portfolio that were classified as nonperforming loans, on
which we are not receiving any interest. Of this amount, payment of $665,000 was
due from one borrower on June 30, 1997 and was not received. This borrower held
16 individual loans that ranged from $30,000 to $100,000 and were secured by
one- to four-family residences in the city of Pittsburgh. Subsequent to June 30,
1997, this borrower declared bankruptcy. The bankruptcy proceeding might delay
foreclosure proceedings for a prolonged period of time. If so, we will lose the
ability to use any monies that we might receive from the sale of these
properties and there is no guarantee that the value of these properties will be
maintained or that the value of the properties received from foreclosure will be
sufficient to pay the amounts outstanding on these loans. While we believe our
loan loss allowance is adequate, there can be no assurance that our allowance
for loan loss will be adequate to cover significant losses that we might incur
in the future. Also, risks associated with these loans and losses incurred on
these loans might result in higher provisions for loan losses in the future.
(11)
<PAGE>
Noninterest Expense. Our noninterest expense decreased by $ 96,000 or 16.7% from
$ 574,000 for the six months ended December 31, 1996 to $ 478,000 for the six
months ended December 31, 1997. The decrease was primarily attributable to a
decrease in our insurance premiums due the 1996 one-time special SAIF assessment
of $ 161,000 offset by an increase in our compensation and benefits expense of $
53,000. The increase in our compensation and benefits expense was primarily due
to salary increases and related payroll taxes of $27,000, $10,000 in our pension
plan expense due to changes in our plan's actuarial assumptions and funding
limitations, and $9,000 due to our Employee Stock Ownership Plan.
A great deal of information has been disseminated about the global computer year
2000. Many computer programs that can only distinguish the final two digits of
the year entered (a common programming practice in earlier years) are expected
to read entries for the year 2000 as the year 1900 and compute payment, interest
or delinquency based on the wrong date or are expected to be unable to compute
payment, interest or delinquency. Rapid and accurate data processing is
essential to the operation of the Bank. Data processing is also essential to
most other financial institutions and many other companies. All of the material
data processing of the Bank that could be affected by this problem is provided
by a third party service bureau. The service bureau of the Bank has advised the
Bank that it expects to resolve this potential problem before the year 2000.
However, if the service bureau is unable to resolve this potential problem in
time, the Bank would likely experience significant data processing delays,
mistakes or failures. These delays, mistakes or failures could have a
significant adverse impact on the financial condition and results of operations
of the Bank.
Based on a preliminary study, the Bank expects to spend approximately $ 2,000 to
$ 10,000 from 1998 through 1999 to modify its computer information systems
enabling proper processing of transactions relative to the year 2000 and beyond.
The Bank continues to evaluate appropriate courses of corrective action,
including replacement of certain systems whose associated costs would be
recorded as assets and amortized. Accordingly, the Bank does not expect the
amounts required to be expensed over the next two years to have a material
effect on its financial position or results of operations. The amount expensed
in 1997 was immaterial.
Income Tax Expense (Benefit). Our income tax expense for the six months ended
December 31, 1997 was $ 34,000 compared to a benefit of $ 53,000 for the six
months ended December 31, 1996. The $ 87,000 change in expense was the result of
pre-tax income increasing by $ 184,000, which was primarily the result of the
SAIF special insurance assessment and the increase in our net interest income
offset by an increase in our compensation and benefits. Additionally, we invest
in tax-exempt securities which provides us with nontaxable income.
Comparison of the Results of the Operations for the Three Months Ended December
31, 1997 and 1996
Net income decreased $ 16,000 from $ 30,000 for the three months ended December
31, 1996 to $ 14,000 for the three months ended December 31, 1997. This decrease
is primarily attributed to an increase in net interest income of $ 30,000 due to
an increase in the average balance of interest-earning assets over
interest-bearing liabilities offset by the $ 29,000 increase in compensation and
benefits and a $ 17,000 increase in income tax expense.
Provision for loan losses for the three months ended December 31, 1997 remained
consistent with the same three months ended December 31, 1996.
Noninterest income also remained consistent at $ 21,000 for the three months
ended December 31, 1997 and 1996.
There was an increase of $ 43,000 in noninterest expense from $ 206,000 as of
December 31, 1996 to $ 249,000 as of December 31, 1997. As noted previously, the
$ 29,000 increase in compensation and benefits is the primary reason for this
increase.
(12)
<PAGE>
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 December 31, 1997, the
Bank had obligations to fund outstanding loan commitments of approximately $
700,000.
At December 31, 1997, 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
December 31, 1997, 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 December 31, 1997. The Bank
had the following capital ratios at December 31, 1997:
<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 December 31, 1997
Total Risk-Basec Capital
(To risk weighted assets) $3,940 27.0% $1,169 8.0% $1,461 10.0%
Tier I Capital
(To risk weighted assets) $3,758 25.7% $ 584 4.0% $ 876 6.0%
Tier I Capital
(To total assets) $3,758 10.7% $1,406 4.0% $1,757 5.0%
Tangible Capital
(To total assets) $3,758 10.7% $ 527 1.5% $1,757 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
December 31, 1997, 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
-----------------------------------------
(d) Use of Proceeds
(4)
(v) Expenses of the offering which were direct or indirect
payments to others:
Underwriting discounts and commissions - $ 60,000;
Expenses paid to and for underwriters - $ 26,694; Other
Expenses - $ 204,928 (Actual); Total Expenses - $
291,622 (Actual);
(vi) Net offering proceeds - $ 3,014,378;
(vii) Direct or indirect payments to affiliates Loan to ESOP
of subsidiary bank - $ 264,480; Purchase outstanding
stock of subsidiary bank - $ 1,625,000; Short Term
investments - Passbook savings account of subsidiary
bank - $ 1,124,898.
(vii) Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a)
(3) (i) Restatated 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
(27) Financial Data Schedule (electronic filing only)
- ------------------------------------
* 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).
(b) Reports on Form 8-K
None
(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: 2/11/98 By /s/Robert D. Neudorfer
---------------------- -------------------------------------
Robert D. Neudorfer, President
(Principal Financial Officer)
Date: 2/11/98 By /s/Ronald W. Moreschi
---------------------- -------------------------------------
Ronald W. Moreschi
Vice President and Treasurer
(Principal Accounting Officer)
(16)
Exhibit 10
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into this 20th day of January, 1998 ("Effective
Date"), by and between Workingmens Bank (the "Savings Bank") and Robert D.
Neudorfer (the "Employee").
WHEREAS, the Employee has heretofore been employed by the Savings Bank
as President and is experienced in all phases of the business of the Savings
Bank; and
WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship of the Savings Bank and the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. The Employee is employed in the capacity as the
President of the Savings Bank. The Employee shall render such administrative and
management services to the Savings Bank and WSB Holding Company ("Parent") as
are currently rendered and as are customarily performed by persons situated in a
similar executive capacity. The Employee shall promote the business of the
Savings Bank and Parent. The Employee's other duties shall be such as the Board
of Directors for the Savings Bank (the "Board of Directors" or "Board") may from
time to time reasonably direct, including normal duties as an officer of the
Savings Bank.
2. Base Compensation. The Savings Bank agrees to pay the Employee
during the Term of this Agreement (as hereinafter defined at Section 5) a salary
at the rate of $66,420 per annum, payable in cash not less frequently than
monthly; provided, that the rate of such salary shall be reviewed by the Board
of Directors not less often than annually, and Employee shall be entitled to
receive annually an increase at such percentage or in such an amount as the
Board of Directors in its sole discretion may decide at such time.
3. Discretionary Bonus. The Employee shall be entitled to participate
in an equitable manner with all other senior management employees of the Savings
Bank in discretionary bonuses that may be authorized and declared by the Board
of Directors to its senior management employees from time to time. No other
compensation provided for in this Agreement shall be deemed a substitute for the
Employee's right to participate in such discretionary bonuses when and as
declared by the Board of Directors.
4. (a) Participation in Retirement and Medical Plans. The Employee
shall be entitled to participate in any plan of the Savings Bank relating to
pension, profit-sharing, or other retirement benefits and medical coverage or
reimbursement plans that the Savings Bank may adopt for the benefit of its
employees. Additionally, Employee's dependent family shall be eligible to
participate in medical and dental insurance plans sponsored by the
<PAGE>
Savings Bank or Parent with the cost of such premiums paid by the Savings Bank.
(b) Employee Benefits; Expenses. The Employee shall be eligible to
participate in any fringe benefits which may be or may become applicable to the
Savings Bank's senior management employees, including by example, participation
in any stock option or incentive plans adopted by the Board of Directors of
Savings Bank or Parent, reimbursement for club memberships, a reasonable expense
account, receipt of an appropriate automobile reimbursement allowance and any
other benefits which are commensurate with the responsibilities and functions to
be performed by the Employee under this Agreement. The Savings Bank shall
reimburse Employee for all reasonable out-of-pocket expenses which Employee
shall incur in connection with his service for the Savings Bank.
5. Term. The term of employment of Employee under this Agreement shall
be for the period commencing on the Effective Date and ending thirty-six (36)
months thereafter ("Term"). Additionally, on, or before, each annual anniversary
date from the Effective Date, the Term of employment under this Agreement shall
be extended for up to an additional period beyond the then effective expiration
date upon a determination and resolution of the Board of Directors that the
performance of the Employee has met the requirements and standards of the Board,
and that the Term of such Agreement shall be extended.
6. Loyalty; Noncompetition.
(a) The Employee shall devote his full time and attention to the
performance of his employment under this Agreement. During the term of
Employee's employment under this Agreement, the Employee shall not engage in any
business or activity contrary to the business affairs or interests of the
Savings Bank or Parent.
(b) Nothing contained in this Section 6 shall be deemed to prevent or
limit the right of Employee to invest in the capital stock or other securities
of any business dissimilar from that of the Savings Bank or Parent, or, solely
as a passive or minority investor, in any business.
7. Standards. The Employee shall perform his duties under this
Agreement in accordance with such reasonable standards expected of employees
with comparable positions in comparable organizations and as may be established
from time to time by the Board of Directors.
2
<PAGE>
8. Vacation and Sick Leave. At such reasonable times as the Board of
Directors shall in its discretion permit, the Employee shall be entitled,
without loss of pay, to absent himself voluntarily from the performance of his
employment under this Agreement, with all such voluntary absences to count as
vacation time; provided that:
(a) The Employee shall be entitled to annual vacation leave in
accordance with the policies as are periodically established by the Board of
Directors for senior management employees of the Savings Bank.
(b) The Employee shall not be entitled to receive any additional
compensation from the Savings Bank on account of his failure to take vacation
leave and Employee shall not be entitled to accumulate unused vacation from one
fiscal year to the next, except in either case to the extent authorized by the
Board of Directors for senior management employees of the Savings Bank.
(c) In addition to the aforesaid paid vacations, the Employee shall be
entitled without loss of pay, to absent himself voluntarily from the performance
of his employment with the Savings Bank for such additional periods of time and
for such valid and legitimate reasons as the Board of Directors in its
discretion may determine. Further, the Board of Directors shall be entitled to
grant to the Employee a leave or leaves of absence with or without pay at such
time or times and upon such terms and conditions as the Board of Directors in
its discretion may determine.
(d) In addition, the Employee shall be entitled to an annual sick leave
benefit as established by the Board of Directors for senior management employees
of the Savings Bank. In the event that any sick leave benefit shall not have
been used during any year, such leave shall accrue to subsequent years only to
the extent authorized by the Board of Directors for employees of the Savings
Bank.
9. Termination and Termination Pay.
The Employee's employment under this Agreement shall be terminated upon
any of the following occurrences:
(a) The death of the Employee during the term of this Agreement, in
which event the Employee's estate shall be entitled to receive the compensation
due the Employee through the last day of the calendar month in which Employee's
death shall have occurred.
3
<PAGE>
(b) The Board of Directors may terminate the Employee's employment at
any time, but any termination by the Board of Directors other than termination
for Just Cause, shall not prejudice the Employee's right to compensation or
other benefits under the Agreement. The Employee shall have no right to receive
compensation or other benefits for any period after termination for Just Cause.
Termination for "Just Cause" shall include termination because of the Employee's
personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule or regulation (other than traffic violations or
similar offenses) or final cease-and-desist order, or material breach of any
provision of the Agreement.
(c) Except as provided pursuant to Section 12 herein, in the event
Employee's employment under this Agreement is terminated by the Board of
Directors without Just Cause, the Bank shall be obligated to continue to pay the
Employee at the base salary rate then in effect for a period of not less than
twelve (12) thereafter and the cost of Employee obtaining all health, life,
disability, and other benefits which the Employee would be eligible to
participate in through such date based upon the benefit levels substantially
equal to those being provided to Employee at the date of termination of
employment.
(d) The voluntary termination by the Employee during the term of this
Agreement with the delivery of no less than 60 days written notice to the Board
of Directors, other than pursuant to Section 12(b), in which case the Employee
shall be entitled to receive only the compensation, vested rights, and all
employee benefits up to the date of such termination.
10. Regulatory Exclusions.
(a) If the Employee is suspended and/or temporarily prohibited from
participating in the conduct of the Savings Bank's affairs by a notice served
under Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(3) and (g)(1)),
the Savings Bank's obligations under the Agreement shall be suspended as of the
date of service, unless stayed by appropriate proceedings. If the charges in the
notice are dismissed, the Savings Bank may in its discretion (i) pay the
Employee all or part of the compensation withheld while its contract obligations
were suspended and (ii) reinstate any of its obligations which were suspended.
(b) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Savings Bank's affairs by an order issued
under Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA")
(12 U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Savings Bank under
this Agreement shall terminate, as of the effective date of the order, but the
vested rights of the parties shall not be affected.
4
<PAGE>
(c) If the Savings Bank is in default (as defined in Section 3(x)(1) of
FDIA) all obligations under this Agreement shall terminate as of the date of
default, but this paragraph shall not affect any vested rights of the
contracting parties.
(d) All obligations under this Agreement shall be terminated, except to
the extent determined that continuation of this Agreement is necessary for the
continued operation of the Savings Bank: (i) by the Director of the Office of
Thrift Supervision ("Director of OTS"), or his or her designee, at the time that
the Federal Deposit Insurance Corporation ("FDIC") enters into an agreement to
provide assistance to or on behalf of the Savings Bank under the authority
contained in Section 13(c) of FDIA; or (ii) by the Director of the OTS, or his
or her designee, at the time that the Director of the OTS, or his or her
designee approves a supervisory merger to resolve problems related to operation
of the Savings Bank or when the Savings Bank is determined by the Director of
the OTS to be in an unsafe or unsound condition. Any rights of the parties that
have already vested, however, shall not be affected by such action.
(e) Notwithstanding anything herein to the contrary, any payments made
to the Employee pursuant to the Agreement, or otherwise, shall be subject to and
conditioned upon compliance with 12 USC ss.1828(k) and any regulations
promulgated thereunder.
11. Disability. If the Employee shall become disabled or incapacitated
to the extent that he is unable to perform his duties hereunder, by reason of
medically determinable physical or mental impairment, as determined by a doctor
engaged by the Board of Directors, Employee shall nevertheless continue to
receive the compensation and benefits provided under the terms of this Agreement
in accordance with the Savings Bank's disability policy as in effect on the date
she becomes disabled. Such benefits noted herein shall be reduced by any
benefits otherwise provided to the Employee during such period under the
provisions of disability insurance coverage in effect for Savings Bank
employees. Thereafter, Employee shall be eligible to receive benefits provided
by the Savings Bank under the provisions of disability insurance coverage in
effect for Savings Bank employees. Upon returning to active full-time
employment, the Employee's full compensation as set forth in this Agreement
shall be reinstated as of the date of commencement of such activities. In the
event that the Employee returns to active employment on other than a full-time
basis, then his compensation (as set forth in Section 2 of this Agreement) shall
be reduced in proportion to the time spent in said employment, or as shall
otherwise be agreed to by the parties.
5
<PAGE>
12. Change in Control.
(a) Notwithstanding any provision herein to the contrary, in the event
of the involuntary termination of Employee's employment during the Term of this
Agreement following any change in control of the Savings Bank or Parent, absent
Just Cause, Employee shall be paid an amount equal to the product of 2.0 times
the aggregate taxable compensation paid to the Employee by the Bank and the
Parent during the one year period preceding the date of such Change in Control.
Said sum shall be paid, at the option of Employee, either in one (1) lump sum
within thirty (30) days of such termination or in periodic payments over the
remaining Term of this Agreement, as if Employee's employment had not been
terminated, and such payments shall be in lieu of any other future payments
which the Employee would be otherwise entitled to receive under Section 9 of
this Agreement. Notwithstanding the forgoing, all sums payable hereunder shall
be reduced in such manner and to such extent so that no such payments made
hereunder when aggregated with all other payments to be made to the Employee by
the Savings Bank or the Parent shall be deemed an "excess parachute payment" in
accordance with Section 280G of the Internal Revenue Code of 1986, as amended,
and regulations promulgated thereunder ("Code") and subject the Employee to the
excise tax set forth at Section 4999(a) of the Code. The term "control" shall
refer to the ownership, holding or power to vote more than 25% of the Parent's
or Savings Bank's voting stock, the control of the election of a majority of the
Parent's or Savings Bank's directors, or the exercise of a controlling influence
over the management or policies of the Parent or Savings Bank by any person or
by persons acting as a group within the meaning of Section 13(d) of the
Securities Exchange Act of 1934. The term "person" means an individual other
than the Employee, or a corporation, partnership, trust, association, joint
venture, pool, syndicate, sole proprietorship, unincorporated organization or
any other form of entity not specifically listed herein.
(b) Notwithstanding any other provision of this Agreement to the
contrary, Employee may voluntarily terminate his employment during the Term of
this Agreement following a change in control of the Savings Bank or Parent, and
Employee shall thereupon be entitled to receive the payment described in Section
12(a) of this Agreement, upon the occurrence, or within ninety (90) days
thereafter, of any of the following events, which have not been consented to in
advance by the Employee in writing: (i) if Employee would be required to move
his personal residence or perform his principal executive functions more than
thirty-five (35) miles from the Employee's primary office as of the signing of
this Agreement; (ii) if in the organizational structure of the Savings Bank or
Parent, Employee would be required to report to a person or persons other than
the Board of the Savings Bank or Parent; (iii) if the Savings Bank or Parent
should fail to maintain Employee's base compensation in effect as of the date of
the Change in Control and the existing employee benefits plans, including
material fringe
6
<PAGE>
benefit, stock option and retirement plans, except to the extent that such
reduction in benefit programs is part of an overall adjustment in benefits for
all employees of the Savings Bank or Parent and does not disproportionately
adversely impact the Employee; (iv) if Employee would be assigned duties and
responsibilities other than those normally associated with his position as
referenced at Section 1, herein; (v) if Employee would not be elected or
reelected to the Board of Directors of the Savings Bank; or (vi) if Employee's
responsibilities or authority have in any way been materially diminished or
reduced.
13. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding upon
any corporate or other successor of the Savings Bank or Parent which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of the Savings Bank
or Parent.
(b) Since the Savings Bank is contracting for the unique and personal
skills of the Employee, the Employee shall be precluded from assigning or
delegating his rights or duties hereunder without first obtaining the written
consent of the Savings Bank.
14. Amendments. No amendments or additions to this Agreement shall be
binding upon the parties hereto unless made in writing and signed by both
parties, except as herein otherwise specifically provided.
15. Applicable Law. This agreement shall be governed by all respects
whether as to validity, construction, capacity, performance or otherwise, by the
laws of the State of Pennsylvania, except to the extent that Federal law shall
be deemed to apply.
16. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
17. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the rules then in effect of the district office of the American
Arbitration Association ("AAA") nearest to the home office of the Savings Bank,
and judgment upon the award rendered may be entered in any court having
jurisdiction thereof, except to the extend that the parties may otherwise reach
a mutual settlement of such issue. The Savings Bank shall reimburse Employee for
all reasonable costs and expenses, including reasonable attorneys' fees, arising
from such dispute, proceedings or actions, following the delivery of the
decision of the arbitrator finding in favor of the Employee. Further, the
settlement of the dispute to be approved by the Board of the Savings Bank or the
Parent may include a provision for the
7
<PAGE>
reimbursement by the Savings Bank or Parent to the Employee for all reasonable
costs and expenses, including reasonable attorneys' fees, arising from such
dispute, proceedings or actions, or the Board of the Savings Bank or the Parent
may authorize such reimbursement of such reasonable costs and expenses by
separate action upon a written action and determination of the Board following
settlement of the dispute.
18. Entire Agreement. This Agreement together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
8
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 435,650
<INT-BEARING-DEPOSITS> 2,611,515
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,309,595
<INVESTMENTS-CARRYING> 13,325,367
<INVESTMENTS-MARKET> 13,370,364
<LOANS> 15,183,879
<ALLOWANCE> 194,249
<TOTAL-ASSETS> 36,171,293
<DEPOSITS> 29,873,950
<SHORT-TERM> 0
<LIABILITIES-OTHER> 400,504
<LONG-TERM> 1,000,000
0
0
<COMMON> 33,060
<OTHER-SE> 2,729,008
<TOTAL-LIABILITIES-AND-EQUITY> 36,171,293
<INTEREST-LOAN> 640,130
<INTEREST-INVEST> 497,606
<INTEREST-OTHER> 151,752
<INTEREST-TOTAL> 1,289,488
<INTEREST-DEPOSIT> 673,660
<INTEREST-EXPENSE> 741,807
<INTEREST-INCOME-NET> 547,681
<LOAN-LOSSES> 16,321
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 477,560
<INCOME-PRETAX> 96,975
<INCOME-PRE-EXTRAORDINARY> 96,975
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 62,486
<EPS-PRIMARY> .21
<EPS-DILUTED> 0
<YIELD-ACTUAL> 3.28
<LOANS-NON> 803,466
<LOANS-PAST> 803,466
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 208,791
<CHARGE-OFFS> 30,863
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 194,249
<ALLOWANCE-DOMESTIC> 0
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</TABLE>
