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, 1999
( ) 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 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, 1999, there were 302,684 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
--- ---
(1)
<PAGE>
WSB HOLDING COMPANY AND SUBSIDIARY
PITTSBURGH, PENNSYLVANIA
TABLE OF CONTENTS
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - as of September 30, 1999
(Unaudited) and June 30, 1999 3
Consolidated Statements of Income - (Unaudited) for
the three months ended September 30, 1999 and 1998 4
Consolidated Statements of Cash Flows - (Unaudited)
for the three months ended September 30, 1999 and 1998 5-6
Notes to (Unaudited) Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and use of Proceeds 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
`
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
(2)
<PAGE>
WSB HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
September 30,
1999 June 30,
(Unaudited) 1999
----------- ------------
<S> <C> <C>
Cash and cash equivalents:
Interest bearing $ 888,747 $ 3,161,518
Non-interest bearing 376,547 250,666
Securities held-to-maturity (estimated fair
value of $ 14,826,714 and $ 13,959,821) 15,413,158 14,373,813
Securities available-for-sale, at fair value 3,563,663 3,909,755
Loans and real estate, net 18,177,265 16,989,946
Cash value of life insurance 1,174,345 1,162,749
Federal Home Loan Bank stock, at cost 153,300 153,300
Accrued interest receivable 341,029 303,415
Premises and equipment, net 971,363 986,468
Other assets 66,731 64,927
Deferred income taxes 32,888 -
------------ ------------
TOTAL ASSETS $ 41,159,036 $ 41,356,557
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 35,237,751 $ 35,250,627
Federal Home Loan Bank advances 1,000,000 1,000,000
Advances from borrowers for taxes and insurance 125,620 227,241
Accrued expenses and other liabilities 93,523 79,665
Accrued income taxes 36,090 10,690
Deferred income taxes - 4,006
------------ ------------
TOTAL LIABILITIES 36,492,984 36,572,229
------------ ------------
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 302,684 shares outstanding at September 30, 1999
and 330,600 shares issued and
312,934 shares outstanding at June 30, 1999) 33,060 33,060
Additional paid-in capital 2,994,366 2,994,026
Retained earnings, substantially restricted 2,328,472 2,287,772
Unearned Employee Stock Ownership Plan shares (ESOP) (209,376) (215,988)
Unearned compensation - Restricted Stock Plan (RSP) (129,264) (139,679)
Treasury stock, at cost; 27,916 and 17,666 shares (311,742) (204,792)
Accumulated other comprehensive income, net
of applicable income taxes of $ (16,913) and $ 12,826 (39,464) 29,929
---------------- ----------------
TOTAL STOCKHOLDERS' EQUITY 4,666,052 4,784,328
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 41,159,036 $ 41,356,557
============ ============
</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,
1999 1998
------------- ------------
<S> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans $ 351,967 $ 340,817
Investments 308,860 236,055
Other interest earning assets 46,859 79,463
---------- ---------
TOTAL INTEREST AND DIVIDEND INCOME 707,686 656,335
---------- ---------
INTEREST EXPENSE
Deposits 376,790 362,478
Advances from FHLB 14,450 14,450
---------- ---------
TOTAL INTEREST EXPENSE 391,240 376,928
---------- ---------
NET INTEREST INCOME 316,446 279,407
PROVISION FOR LOAN LOSSES - -
---------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 316,446 279,407
---------- ---------
NONINTEREST INCOME
Service charges and other fees 37,924 21,031
Gain on sale of securities available-for-sale 6,169 28,931
Gain on sale of foreclosed real estate - 20,665
Income from real estate rental 925 2,215
---------- ---------
TOTAL NONINTEREST INCOME 45,018 72,842
---------- ---------
NONINTEREST EXPENSE
Compensation and benefits 155,619 137,747
Occupancy and equipment expense 43,692 40,661
Insurance premiums 8,311 7,731
Other 92,326 99,128
---------- ---------
TOTAL NONINTEREST EXPENSE 299,948 285,267
---------- ---------
INCOME BEFORE INCOME TAXES 61,516 66,982
INCOME TAX EXPENSE 20,816 22,477
---------- ---------
NET INCOME $ 40,700 $ 44,505
========== =========
EARNINGS PER COMMON SHARE-BASIC $ .15 $ .15
========== =========
EARNINGS PER COMMON SHARE-DILUTED $ .15 $ .15
========== ==========
</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,
1999 1998
------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 40,700 $ 44,505
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of:
Deferred loan origination fees (287) (563)
Premiums and discounts on
investment securities 760 7,550
Net loss (gain) on sale of securities available-for-sale (6,169) (28,931)
Net gain on sales of real estate owned - (20,665)
Unearned ESOP shares 6,952 9,527
Compensation expense related to RSP 10,415 10,414
Depreciation of premises and equipment 19,199 12,858
(Increase) decrease in:
Accrued interest receivable (37,614) (71,222)
Other assets (1,804) 10,295
Income taxes receivable 25,400 9,859
Deferred income taxes (7,154) 919
Cash value life insurance (11,596) -
Increase (decrease) in:
Accrued expenses and other liabilities 13,858 (5,532)
Accrued income taxes - 20,336
----------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 52,660 (650)
----------- -----------
INVESTING ACTIVITIES
Purchases of securities held-to-maturity (1,101,353) (3,199,000)
Proceeds from maturities of and principal
repayments on securities held-to-maturity 58,600 3,517,476
Proceeds from sale of securities
available-for-sale 82,699 360,580
Purchases of securities available-for-sale (66,739) (213,776)
Proceeds from maturities of and principal
repayments on securities available-for-sale 239,816 14,382
Net loan originations and principal
repayments on loans (1,187,032) (127,290)
Proceeds from sales of real estate owned - 220,586
Purchases of premises and equipment (4,094) (24,381)
----------- -----------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (1,978,103) 548,577
----------- -----------
</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,
1999 1998
------------ ------------
<S> <C> <C>
FINANCING ACTIVITIES
Net (decrease) increase in deposits (12,876) 69,899
Purchase of treasury stock (106,950) (22,857)
Net decrease in advances from
borrowers for taxes and insurance (101,621) (108,530)
Contribution to Restricted Stock Plan (RSP) for the
purchase of treasury stock - (191,748)
----------- ----------
NET CASH USED BY FINANCING ACTIVITIES (221,447) (253,236)
----------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS (2,146,890) 294,691
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,412,184 5,157,544
----------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,265,294 $ 5,452,235
=========== ===========
SUPPLEMENTAL DISCLOSURES Cash paid during the period for:
Interest on deposits, advances,
and other borrowings $ 370,493 $ 305,706
=========== ===========
Income taxes $ 2,000 $ -
=========== ===========
</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 - 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, 1999 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, 1999 which are included in the Form 10KSB (file no.
0-22997).
NOTE B - EARNINGS PER SHARE
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.
Three Months Ended
September 30, 1999
1999 1998
----------- -------------
Net income $ 40,700 $ 44,505
Adjustments - -
-------- ---------
Income available to common
stockholders used in basic and
diluted EPS $ 40,700 $ 44,505
======== =========
Weighted average number of shares
used in basic EPS 271,738 306,793
Effect of dilutive securities - -
-------- ---------
Weighted number of shares and
dilutive potential common stock
used in diluted EPS 271,738 306,793
======== =========
(7)
<PAGE>
WSB HOLDING COMPANY AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE C - EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
At September 30, 1999, the ESOP had 5,501 allocated shares and 20,947
unallocated shares. For the purpose of computing earnings per share, all ESOP
shares committed to be released have been considered outstanding.
NOTE D - COMPREHENSIVE INCOME
Total comprehensive loss for the three months ended September 30, 1999 and 1998
was $26,693 and $19,292, respectively.
(8)
<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
"we", "us" and "our" refer collectively to WSB Holding Company and Workingmens
Bank.
Comparison of Results of Operations for the Three Months Ended September 30,
1999 and 1998.
Net Income. Net income decreased $ 3,800 to $40,700 for the three months ended
September 30, 1999 from $44,500 for the comparable 1998 period.
Net Interest Income. Net interest income increased $37,000, or 13.3%, to
$316,000 for the three months ended September 30, 1999 from $279,000 for the
comparable 1998 period. The increase was primarily due to a 45 basis point
increase in the our net interest rate spread (the difference between our average
yield on our average interest earning assets and our average cost on our average
interest bearing liabilities) to 2.93% for the three months ended September 30,
1999 from 2.48% for the comparable 1998 period. Our net interest rate spread
increased primarily due to an increase in our yield on our average investment
portfolio.
Noninterest Income. Our noninterest income decreased $28,000 or 38%, to $45,000
for the three months ended September 30, 1999 from $73,000 for the comparable
1998 period. In the three months ended 1998, we recognized gains relating to
sales of available for sale securities of $29,000 and foreclosed properties of
$21,000. In the three months ended September 30, 1999, we recognized gains of
$6,000 on available sale securities. Offsetting such decrease, our service
charges and other fees increased $17,000 to $37,000 for the three months ended
September 30, 1999 from $21,000 for the 1998 comparable period. Such increase in
fees was primarily the result of a $12,000 increase in our investment in life
insurance which is to be used for a supplemental retirement plan for our
executive officers and directors.
Noninterest Expense. Our non-interest expense increased by $ 15,000 or 5.3% to
$300,000 for the three months ended September 30, 1999 from $ 285,000 for the
comparable 1998 period, primarily as a result of anticipated expenses related to
compensation increases.
(9)
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Year 2000 Readiness Disclosures
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
were to prepare for the Year 2000. The plan encompassed the following phases:
awareness, assessment, renovation, validation and implementation. We completed
the implementation phase of our plan on June 30, 1999. These phases enabled us
to identify risks, develop an action plan, perform adequate testing and complete
certification that the processing systems were Year 2000 ready.
Prioritization of the most critical applications has been addressed, along with
contract and service agreements. Our primary operating software is provided and
maintained by an external service bureau. We have maintained ongoing contact
with our external service bureau to ensure that testing and monitoring of the
system is progressing. In March 1999, we completed final testing with our
external service bureau and the results of the testing showed that there were no
problems in submitting information on transactions from us to our external
service bureau using January 2000 dates for all transactions tested. We also
contacted our material vendors and suppliers as well as material customers and
non-information technology suppliers regarding their Year 2000 readiness. Each
of these third parties has delivered written assurance to us that they expect to
be Year 2000 compliant prior to the Year 2000.
Costs have been and will be incurred due to enhancements made to non-compliant
teller software and fees incurred from our external service bureau. We do not
anticipate that the related overall costs will be material in any single year.
We estimated that our cost for compliance will amount to approximately $15,000
over the two year period from 1998-1999, which has been incurred as of September
30, 1999.
A Contingency and Business Resumption Plan was approved by the Board in June
1999. This plan addresses perceived risks associated with the year 2000 problem.
These activities include remediation contingency planning intended to mitigate
any risks associated with unforeseen system glitches, system failure, increased
demands for cash, or processes outside of our control. The remainder of 1999
will be used to further validate the plan.
While this plan was designed to significantly address our year 2000 problems,
the occurrence of the following could negatively impact us:
(a) utility service companies may be unable to provide the necessary
service to implement our data systems or provide sufficient sanitary
conditions for our offices;
(b) our external service bureau could have a major malfunction in their
system of their service could be disrupted due to their utility
providers, or some combination of the two; or
(c) we may have to transact our business manually.
Successful and timely completion of our Year 2000 readiness is based upon our
best estimates derived from various assumptions of future events which are
inherently uncertain, including the progress and results of our external service
bureau, testing plans, and all vendors, suppliers and customer readiness.
Despite our best efforts to address our Year 2000 readiness, the vast number of
external entities that have direct and indirect business relationships with us,
such as, customers, vendors, payment system providers and other financial
institutions, make it impossible to assure that a failure to achieve compliance
by one or more of these entities would not have a material adverse impact on our
business or on our consolidated financial statements.
(10)
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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, 1999, the
Bank had obligations to fund outstanding loan commitments of approximately
$692,000, for which adequate resources were available to fund these loans.
At September 30, 1999, 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, 1999, management was not aware of any current recommendations by
the regulatory authorities which, if implemented, would have such an effect.
(11)
<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, 1999, 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
---------------------------------------------------
None
Item 5. Other Information
-----------------
On October 18, 1999, the Company declared a cash dividend of $ .08 per
share to stockholders of record as of November 1, 1999. Such dividend
is payable on November 15, 1999.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(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) 1999 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
- ------------------------------------
* 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, 1998
(0-22997).
**** Incorporated by reference to the Definitive Proxy Statement filed February
6, 1999 (0-22997).
(12)
<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 10, 1999 By /s/Robert D. Neudorfer
----------------------------------
Robert D. Neudorfer, President
(Principal Financial Officer)
Date: November 10, 1999 By /s/Ronald W. Moreschi
----------------------------------
Ronald W. Moreschi
Vice President and Treasurer
(Principal Accounting Officer)
(13)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED 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-30-2000
<PERIOD-END> SEP-30-1999
<CASH> 376,547
<INT-BEARING-DEPOSITS> 888,747
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,563,663
<INVESTMENTS-CARRYING> 15,413,158
<INVESTMENTS-MARKET> 18,390,377
<LOANS> 18,342,747
<ALLOWANCE> 167,482
<TOTAL-ASSETS> 41,159,036
<DEPOSITS> 35,237,751
<SHORT-TERM> 0
<LIABILITIES-OTHER> 255,233
<LONG-TERM> 1,000,000
0
0
<COMMON> 33,060
<OTHER-SE> 2,655,726
<TOTAL-LIABILITIES-AND-EQUITY> 41,159,036
<INTEREST-LOAN> 351,967
<INTEREST-INVEST> 308,860
<INTEREST-OTHER> 46,859
<INTEREST-TOTAL> 707,686
<INTEREST-DEPOSIT> 376,790
<INTEREST-EXPENSE> 391,240
<INTEREST-INCOME-NET> 316,446
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 6,169
<EXPENSE-OTHER> 299,948
<INCOME-PRETAX> 61,516
<INCOME-PRE-EXTRAORDINARY> 61,516
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,700
<EPS-BASIC> .15
<EPS-DILUTED> .15
<YIELD-ACTUAL> 3.34
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 165,482
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 165,482
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
