SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report pursuant to section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the fiscal year ended June 30, 2000
-------------
OR
[X] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from __________________
to __________________.
Commission File No. 0-22997
WSB Holding Company
--------------------------------------------------
(Name of Small Business Issuer in Its Charter)
Pennsylvania 23-2908963
--------------------------------- -----------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
807 Middle Street, Pittsburgh, Pennsylvania 15212
------------------------------------------- -------------------
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number, Including Area Code: (412) 231-7297
----------------
Securities registered under to Section 12(b) of the Exchange Act: None
------
Securities registered under to Section 12(g) of the Exchange Act:
Common Stock, par value $0.10 per share
---------------------------------------
(Title of Class)
Check whether the issuer: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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.
YES X NO .
--- ---
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $3,011,380
The aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant, based on the average bid and asked
price of the registrant's Common Stock on September 1, 2000, was approximately
$2.3 million.
As of September 1, 2000, there were issued and outstanding 302,684
shares of the registrant's Common Stock.
Transition Small Business Disclosure Format (check one): YES NO X
--- ---
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Annual Report to Stockholders for the Fiscal Year
ended June 30, 2000. (Part II)
2. Portions of the Proxy Statement for the Annual Meeting of
Stockholders for the Fiscal Year ended June 30, 2000. (Part III)
<PAGE>
PART I
WSB Holding Company (the "Company" or "Registrant") may from time to
time make written or oral "forward-looking statements", including statements
contained in the Company's filings with the securities and exchange commission
(including this annual report on form 10-KSB and the exhibits thereto), in its
reports to stockholders and in other communications by the Company, which are
made in good faith by the Company pursuant to the "safe harbor" provisions of
the private securities litigation reform act of 1995.
These forward-looking statements involve risks and uncertainties, such
as statements of the Company's plans, objectives, expectations, estimates and
intentions, that are subject to change based on various important factors (some
of which are beyond the Company's control). The following factors, among others,
could cause the Company's financial performance to differ materially from the
plans, objectives, expectations, estimates and intentions expressed in such
forward-looking statements: the strength of the united states economy in general
and the strength of the local economies in which the Company conducts
operations; the effects of, and changes in, trade, monetary and fiscal policies
and laws, including interest rate policies of the board of governors of the
federal reserve system, inflation, interest rate, market and monetary
fluctuations; the timely development of and acceptance of new products and
services of the Company and the perceived overall value of these products and
services by users, including the features, pricing and quality compared to
competitors' products and services; the willingness of users to substitute
competitors' products and services for the Company's products and services; the
success of the Company in gaining regulatory approval of its products and
services, when required; the impact of changes in financial services' laws and
regulations (including laws concerning taxes, banking, securities and
insurance); technological changes; acquisitions; changes in consumer spending
and savings habits; and the success of the Company at managing the risks
involved in the foregoing.
The Company cautions that the foregoing list of important factors is
not exclusive. The Company does not undertake to update any forward-looking
statement, whether written or oral, that may be made from time to time by or on
behalf of the Company.
Item 1. Business
-----------------
General
The Company is a Pennsylvania corporation organized in June 1997 at the
direction of Workingmens Bank (the "Bank") to acquire all of the capital stock
that the Bank issued in its conversion from the mutual to stock form of
ownership (the "Conversion"). On August 27, 1997, the Bank completed the
Conversion and became a wholly owned subsidiary of the Company. The Company is a
unitary savings and loan holding company which, under existing laws, generally
is not restricted in the types of business activities in which it may engage
provided that the Bank retains a specified amount of its assets in housing-
related investments. The Company conducts no significant business or operations
of its own other than holding all of the outstanding stock of the Bank.
References to the Company or Registrant generally refers to the consolidated
entity which includes the main operating company, the Bank, unless the context
indicates otherwise.
The Bank is a federally chartered stock savings bank headquartered in
Pittsburgh, Pennsylvania. It is subject to examination and comprehensive
regulation by the Office of Thrift Supervision ("OTS") and its deposits are
federally insured by the Savings Association Insurance Fund ("SAIF"). The Bank
is a
1
<PAGE>
member of and owns capital stock in the Federal Home Loan Bank (the "FHLB") of
Pittsburgh, which is one of the 12 regional banks in the FHLB System.
The Registrant operates a traditional savings bank business, attracting
deposit accounts from the general public and using those deposits, together with
other funds, primarily to originate and invest in one- to four-family
residential real estate loans, multi-family real estate loans, and commercial
real estate loans. To a lesser extent, the Registrant also originates consumer
loans, which primarily consist of home equity loans, second mortgage loans, and
loans secured by deposit accounts.
Competition
Competition for deposits comes from other insured financial
institutions such as commercial banks, thrift institutions, credit unions,
finance companies, and multi-stage regional banks in the Registrant's market
areas located in the communities of the north side of Pittsburgh, Baldwin, and
the surrounding areas of Allegheny County. Deposit competition also includes a
number of insurance products sold by local agents and investment products such
as mutual funds and other securities sold by local and regional brokers. Loan
competition varies depending upon market conditions and comes from commercial
banks, thrift institutions, credit unions and mortgage bankers.
Lending Activities
Analysis of Loan Portfolio. The following table sets forth the
composition of the Registrant's loan portfolio in dollar amounts and in
percentages of the respective portfolios at the dates indicated.
<TABLE>
<CAPTION>
June 30,
--------------------------------------------------
2000 1999
------------------------------- ------------------
Amount Percent Amount Percent
------ ------- -------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Type of Loans:
-------------
Real Estate Loans:
One- to four-family ........................... $11,620 61.09% $10,567 61.60%
Multi-family .................................. 3,252 17.10 2,483 14.47
Home equity and second mortgage loans.......... 1,762 9.26 1,694 9.87
Commercial..................................... 1,212 6.37 1,299 7.57
------ ----- ------ -----
Total real estate loans.......................... 17,846 93.82 16,043 93.51
------ ----- ------ -----
Consumer Loans:
Share loans.................................... 378 1.98 429 2.50
Other loans.................................... 798 4.20 684 3.99
------ ----- ------ -----
Total consumer loans............................. 1,176 6.18 1,113 6.49
------- ----- ------ -----
Total loans................................. 19,022 100.0% 17,156 100.0%
===== =====
Less:
Allowance for loan losses...................... 155 166
------- -------
Total loans, net............................ $18,867 $16,990
======= =======
</TABLE>
2
<PAGE>
Loan Maturity Tables
The following table sets forth the estimated maturity of the
Registrant's loan portfolio at June 30, 2000. The table does not include
prepayments or scheduled principal repayments. All mortgage loans are shown as
maturing based on contractual maturities.
<TABLE>
<CAPTION>
Due after
Due within 1 through Due after
1 year 5 years 5 years Total
------ ------- ------- -----
(In Thousands)
<S> <C> <C> <C> <C>
One- to four-family residential real estate mortgages.. $139 $ 464 $11,017 $11,620
Multi-family real estate............................... 1 131 3,120 3,252
Commercial real estate................................. - - 1,212 1,212
Home equity and second mortgage loans.................. 415 795 552 1,762
Consumer loans......................................... 410 388 378 1,176
---- ------ ------- -------
Total.................................................. $965 $1,778 $16,279 $19,022
==== ====== ======= =======
</TABLE>
The following table sets forth as of June 30, 2000, the dollar amount
of all loans due after June 30, 2001, which have fixed interest rates and
floating or adjustable interests rates.
<TABLE>
<CAPTION>
Floating or
Fixed Rates Adjustable Rates Total
----------- ---------------- --------
(In Thousands)
<S> <C> <C> <C>
One- to four-family real estate mortgages... $11,481 $ - $11,481
Multi-family................................ 2,652 599 3,251
Commercial.................................. 1,212 - 1,212
Home equity and second mortgages............ 1,347 - 1,347
Consumer.................................... 766 - 766
------- ---- ------
Total................................... $17,458 $599 $18,057
======= ==== =======
</TABLE>
One- to Four-Family Residential Loans. The Registrant's primary lending
activity consists of the origination of one- to four-family fixed rate
residential mortgage loans secured by property located in its primary market
area. The Registrant generally originate one- to four-family fixed rate
residential mortgage loans in amounts up to 90% of the lesser of the appraised
value or purchase price, with private mortgage insurance required on loans with
a loan-to-value ratio in excess of 80%. The maximum loan-to- value ratio on
mortgage loans secured by non-owner occupied properties generally is limited to
80%. The Registrant retains all of the mortgage loans and originates these loans
with maturities of up to 20 years. On a limited basis, the Registrant originates
and retains fixed rate balloon loans having terms of up to 15 years, with
principal and interest payments calculated using up to a 30-year amortization
period. Mortgage loans originated and held by the Registrant generally include
due-on-sale clauses. This gives the Registrant the right to deem the loan
immediately due and payable in the event the borrower transfers ownership of the
property securing the mortgage loan without the Registrant's consent.
Multi-Family and Commercial Real Estate Loans. Multi-family real estate
loans are secured by apartment buildings and the size of the loans generally
have not exceeded $500,000 or have terms greater than 20 years. Commercial real
estate loans are secured by office buildings, and other commercial properties
and the size of the loans generally have not exceeded $500,000, or have terms
greater than 20 years.
3
<PAGE>
Multi-family and commercial real estate loans have significantly more
risk than one-to four-family residential loans due to the usually higher loan
amounts and the credit risk, which arises from concentration of principal in a
smaller number of loans, the effects of general economic conditions on income
producing property and the difficulty of evaluating and monitoring the loans. To
minimize these risks, the Registrant generally limits this type of lending to
its primary market area and to borrowers who are generally well known to the
Registrant.
Home Equity and Second Mortgage Loans. The Registrant originates home
equity loans and second mortgage loans which are secured by one to four-family
residences. These loans are originated on one- to four-family residences with
fixed rate terms of up to 10 years. The loans are generally subject to a 80%
combined loan-to-value limitation, including any other outstanding mortgages or
liens.
Loan Approval Authority and Underwriting. The Registrant has
established various lending limits for its officers and maintains a loan
committee. The President has loan authority to approve all loans and the Vice
President and Treasurer has authority to approve all applications for secured
and unsecured consumer loans. The loan committee ratifies all fixed rate
residential mortgage loans of $200,000 or more and all other real estate loans
and consumer loans.
Upon receipt of a completed loan application from a prospective
borrower, a credit report is ordered. Income and certain other information is
verified. If necessary, additional financial information may be requested. An
appraisal or other estimate of value of the real estate intended to be used as
security for the proposed loan is obtained. Appraisals are processed by
independent fee appraisers.
Title insurance is generally required on all real estate mortgage
loans. The Registrant does not require title insurance on home equity loans and
second mortgages, but obtains a property report from its local state tax office
which indicates whether there are any liens or other encumbrances against the
property. Borrowers also must obtain fire and casualty insurance. Flood
insurance is also required on loans secured by property that is located in a
flood zone.
Loan Commitments. Written commitments are given to prospective
borrowers on all approved real estate loans. Generally, the commitment requires
acceptance within 60 days of the date of issuance. At June 30, 2000, commitments
to fund originations of one-to four-family and multi-family mortgage loans
totaled $145,000. The Registrant believes that virtually all of their
commitments will be funded.
4
<PAGE>
Nonperforming Assets. The following table sets forth information
regarding nonaccrual loans and real estate owned, as of the dates indicated. The
Registrant has no loans categorized as troubled debt restructurings within the
meaning of the Statement of Financial Accounting Standards ("SFAS") 15 and no
impaired loans within the meaning of SFAS 114, as amended by SFAS 118. Interest
income that would have been recorded on loans accounted for on a nonaccrual
basis under the original terms of such loans was approximately $10,000 for the
year ended June 30, 2000.
<TABLE>
<CAPTION>
At June 30,
----------------------
2000 1999
------ ------
(Dollars in Thousands)
<S> <C> <C>
Loans accounted for on a non-accrual basis:
Real estate loans:
One- to four-family residential real estate......................... $ - $ -
Commercial real estate.............................................. 310 -
Home equity and second mortgages.................................... - -
Consumer.............................................................. - -
----- ------
Total non-accrual loans............................................... 310 -
===== ======
Accruing loans which are contractually past due 90 days or more:
Real estate loans:
One-to four-family residential real estate......................... - -
Commercial real estate............................................. - -
Home equity and second mortgages................................... - -
Consumer.............................................................. - -
------ ------
Total accrual loans................................................... $ - $ -
====== ======
Total non-performing loans............................................ $ 310 $ -
====== ======
Real estate owned..................................................... $ - $ -
====== ======
Total non-performing assets........................................... $ 310 $ -
===== ======
Total non-performing loans to total loans............................. 1.63% -%
==== =====
Total non-performing loans to total assets............................ 0.75% -%
==== =====
Total non-performing assets to total assets........................... 0.75% -%
==== =====
Classified Assets. OTS regulations provide for a classification system
for problem assets of savings associations which covers all problem assets.
Under this classification system, problem assets of savings institutions such as
ours are classified as "substandard," "doubtful," or "loss." An asset is
considered substandard if it is inadequately protected by the current net worth
and paying capacity of the borrower or of the collateral pledged, if any.
Substandard assets include those characterized by the "distinct possibility"
that the savings institution will sustain "some loss" if the deficiencies are
not corrected. Assets classified as doubtful have all of the weaknesses inherent
in those classified substandard, with the added characteristic that the
weaknesses present make "collection or liquidation in full," on the basis of
currently existing facts, conditions, and values, "highly questionable and
improbable." Assets classified as loss are those considered "uncollectible" and
of such little value that their continuance as assets without the establishment
of a specific loss reserve is not warranted. Assets may be designated "special
mention" because of potential weakness that do not currently warrant
classification in one of the aforementioned categories.
When a savings association classifies problem assets as either
substandard or doubtful, it may establish general allowances for loan losses in
an amount deemed prudent by management. General
5
<PAGE>
allowances represent loss allowances which have been established to recognize
the inherent risk associated with lending activities, but which, unlike specific
allowances, have not been allocated to particular problem assets. When a savings
association classifies problem assets as loss, it is required either to
establish a specific allowance for losses equal to 100% of that portion of the
asset so classified or to charge off such amount. A savings association's
determination as to the classification of its assets and the amount of its
valuation allowances is subject to review by the OTS, which may order the
establishment of additional general or specific loss allowances. A portion of
general loss allowances established to cover possible losses related to assets
classified as substandard or doubtful may be included in determining a savings
association's regulatory capital. Specific valuation allowances for loan losses
generally do not qualify as regulatory capital.
The following table sets forth the Registrant's classified assets in
accordance with its classification system:
At June 30, 2000
----------------
(In Thousands)
Special Mention $ -
Substandard 310
Doubtful -
Loss -
-----
$ 310
=====
Allowances for Loan Losses. A provision for loan losses is charged to
operations based on management's evaluation of the losses that may be incurred
in our loan portfolio. The evaluation, including a review of all loans on which
full collectibility of interest and principal may not be reasonably assured,
considers: (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.
Management monitors the allowance for loan losses and makes additions
to the allowance as economic conditions dictate. There can be no assurance that
the allowance for losses will be adequate to cover losses which in fact may be
realized in the future and that additional provisions for losses will not be
required.
6
<PAGE>
The following table sets forth information with respect to the
Registrant's allowance for loan losses at the dates indicated:
June 30,
------------------
2000 1999
---- ----
(Dollars in Thousands)
Total loans outstanding.................................. $19,022 $17,156
====== ======
Average loans outstanding................................ $18,532 $16,832
====== ======
Allowance balances at beginning of period................ $ 165 $ 198
Provision:
Real estate............................................ -- --
Commercial............................................. -- --
Home equity and second mortgages....................... -- --
Consumer............................................... -- --
Charge-offs:
Real estate............................................ -- (33)
Commercial............................................. -- --
Consumer............................................... (10) --
Recoveries:
Real estate........................................... -- --
Commercial............................................ -- --
Home equity and second mortgages...................... -- --
Consumer.............................................. -- --
------ -------
Allowance balance at end of period....................... $ 155 $ 165
====== =======
Allowance for loan losses as a percent of total loans
outstanding............................................ 1.00% 0.96%
==== ====
Net loans charged off as a percent of average loans
outstanding............................................ 0.05% 0.20%
==== ====
</TABLE>
Analysis of the Allowance for Loan Losses. The following table
illustrates the allocation of the allowance for loan losses for each category of
loan. The allocation of the allowance to each category is not necessarily
indicative of future loss in any particular category and does not restrict our
use of the allowance to absorb losses in other loan categories.
<TABLE>
<CAPTION>
At June 30,
---------------------------------------------------------------
2000 1999
---------------------------- ----------------------------
Percent of Percent of
Loans in Each Loans in Each
Category to Category to
Amount Total Loans Amount Total Loans
------ ----------- ------ -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
One- to four-family.................. $ 87 61.09% $125 61.60%
Multi-family......................... 33 17.10 25 14.47
Home equity and second
mortgage loans................... 18 9.26 6 9.87
Commercial............................ 12 6.37 7 7.57
Consumer.............................. 5 6.18 2 6.49
---- ------ ---- ------
Total.............................. $155 100.00% $165 100.00%
==== ====== ==== ======
</TABLE>
7
<PAGE>
Investment Activities
The Registrant is required under federal regulations to maintain a
minimum amount of liquid assets which may be invested in specified short-term
securities and certain other investments. The level of liquid assets varies
depending upon several factors, including: (i) the yields on investment
alternatives, (ii) management's judgment as to the attractiveness of the yields
then available in relation to other opportunities, (iii) expectation of future
yield levels, and (iv) management's projections as to the short-term demand for
funds to be used in loan origination and other activities. Investment
securities, including mortgage-backed securities, are classified at the time of
purchase, based upon management's intentions and abilities, as securities held
to maturity or securities available for sale. Debt securities acquired with the
intent and ability to hold to maturity are classified as held to maturity and
are stated at cost and adjusted for amortization of premium and accretion of
discount, which are computed using the level yield method and recognized as
adjustments of interest income. All other debt securities are classified as
available for sale to serve principally as a source of liquidity.
Current regulatory and accounting guidelines regarding investment
securities (including mortgage backed securities) require the Registrant to
categorize securities as "held to maturity," "available for sale" or "trading."
As of June 30, 2000, Registrant had securities (including mortgage-backed
securities) classified as "held to maturity" and "available for sale" in the
amount of $15,218,000 and $3,325,000, respectively and had no securities
classified as "trading." Securities classified as "available for sale" are
reported for financial reporting purposes at the fair market value with net
changes in the market value from period to period included as a separate
component of stockholders' equity, net of income taxes. Changes in the market
value of securities available for sale do not affect the Company's income. In
addition, changes in the market value of securities available for sale do not
affect the Bank's regulatory capital requirements or its loan-to-one borrower
limit.
At December 31, 1999, the Registrant's investment portfolio policy
allowed investments in instruments such as: (i) U.S. Treasury obligations, (ii)
U.S. federal agency or federally sponsored agency obligations, (iii) local
municipal obligations, (iv) mortgage-backed securities, (v) banker's
acceptances, (vi) certificates of deposit, and (vii) investment grade corporate
bonds, and commercial paper. The board of directors may authorize additional
investments.
As a source of liquidity and to supplement Registrant's lending
activities, the Registrant has invested in residential mortgage-backed
securities. Mortgage-backed securities can serve as collateral for borrowings
and, through repayments, as a source of liquidity. Mortgage-backed securities
represent a participation interest in a pool of single-family or other type of
mortgages. Principal and interest payments are passed from the mortgage
originators, through intermediaries (generally quasi-governmental agencies) that
pool and repackage the participation interests in the form of securities, to
investors, like us. The quasi-governmental agencies guarantee the payment of
principal and interest to investors and include the Federal Home Loan Mortgage
Corporation ("FHLMC"), Government National Mortgage Association ("GNMA"), and
Federal National Mortgage Association ("FNMA").
Mortgage-backed securities typically are issued with stated principal
amounts. The securities are backed by pools of mortgages that have loans with
interest rates that are within a set range and have varying maturities. The
underlying pool of mortgages can be composed of either fixed rate or adjustable
rate mortgage loans. Mortgage-backed securities are generally referred to as
mortgage participation certificates or pass-through certificates. The interest
rate risk characteristics of the underlying pool of mortgages (i.e., fixed rate
or adjustable rate) and the prepayment risk, are passed on to the certificate
holder. The life of a mortgage-backed pass-through security is equal to the life
of the underlying mortgages. Expected maturities will differ from contractual
maturities due to scheduled repayments and
8
<PAGE>
because borrowers may have the right to call or prepay obligations with or
without prepayment penalties. Mortgage-backed securities issued by FHLMC, GNMA,
and FNMA make up a majority of the pass- through certificates market.
At June 30, 2000, the Registrant's securities portfolio did not contain
securities of any issuer, other than those issued by U.S. government or its
agencies, with an aggregate book value in excess of 10% of the Registrant's
equity.
Investment Portfolio. The following table sets forth the carrying value
of the Registrant's securities at the dates indicated.
At June 30,
--------------------
2000 1999
------ ------
(In Thousands)
Securities held to maturity:
U.S. Government and agency securities............ $14,794 $13,879
CMOs............................................. 324 396
Corporate debt securities........................ 100 -
Certificates of deposit.......................... - 99
------- -------
Total securities held to maturity................. 15,218 14,374
------- -------
Securities available for sale:
FHLMC............................................. 44 55
GNMA.............................................. 872 1,080
FNMA.............................................. 192 259
CMOs.............................................. 9 19
Municipal bonds................................... 863 891
Corporate debt securities......................... 292 298
Equity securities - mutual funds.................. 960 1,119
FHLMC common stock................................ 41 87
FNMA common stock................................. 52 102
------- -------
Total securities available for sale............... 3,325 3,910
------- -------
Total investment and mortgage-backed securities... $18,543 $18,284
======= =======
9
<PAGE>
The following table sets forth information regarding the scheduled
maturities, carrying values, approximate fair values, and weighted average
yields for our investment securities portfolio at June 30, 2000 by contractual
maturity. The following table does not take into consideration the effects of
scheduled repayments or the effects of possible prepayments.
<TABLE>
<CAPTION>
As of June 30, 2000
---------------------------------------------------------------------------------------------------------------
More than More than More than Total Investment Securities and
One Year or Less One to Five Years Five to Ten Years Ten Years Mortgage-Backed Securities
------------------ ------------------ ----------------- ---------------- -----------------------------------
Carrying Average Carrying Average Carrying Average Carrying Average Carrying Average Market
Value Yield Value Yield Value Yield Value Yield Value Yield Value
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government
and agency
securities...... $ - -% $3,099 6.19% $4,871 6.69% $6,824 6.88% $14,794 6.67% $13,938
Municipal bonds..... - - - - - - 863 4.78 863 4.78 864
Corporate debt
securities........ - - 292 6.08 - - 100 7.50 392 6.44 388
FHLMC common
stock............. 41 - - - - - - - 41 - 41
FNMA common
stock............. 52 - - - - - - - 52 - 52
Mortgage-backed
securities........ - - - - - - 1,441 6.64 1,441 6.64 1,430
------- ------ ------ ------ ------- -------
Total............. $ 93 -% $3,391 6.18% $4,871 6.69% $9,228 6.65% $17,583 6.53% $16,713
======= ===== ====== ==== ====== ==== ====== ==== ======= ==== =======
</TABLE>
(1) Equity securities in the amount of $960 are not included in the above
table. Such equity securities are comprised of mutual funds which have no
stated maturity or stated interest rate.
10
<PAGE>
Sources of Funds
General. Deposits are the major external source of the Registrant's
funds for lending and other investment purposes. The Registrant derives funds
from amortization and prepayment of loans and, to a much lesser extent,
maturities of investment securities, borrowings, mortgage-backed securities and
operations. Scheduled loan principal repayments are a relatively stable source
of funds, while deposit inflows and outflows and loan prepayments are
significantly influenced by general interest rates and market conditions.
Deposits. Consumer and commercial deposits are attracted principally
from within the Registrant's primary market area through the offering of a
selection of deposit instruments including regular savings accounts, money
market accounts, and term certificate accounts. Deposit account terms vary
according to the minimum balance required, the time period the funds must remain
on deposit, and the interest rate, among other factors. At June 30, 2000, the
Registrant had no brokered accounts.
Time Deposits. The following table indicates the amount of the
Registrant's time deposits of $100,000 or more by time remaining until maturity
as of June 30, 2000.
Maturity Period Time Deposits
--------------- -------------
(In Thousands)
Within three months............................... $ 492
More than three through six months................ 400
Six through twelve months......................... -
Over twelve months................................ 660
------
Total.................................... $1,552
=====
Borrowings
The Registrant may obtain advances from the FHLB of Pittsburgh (the
"FHLB") to supplement its supply of lendable funds. Advances from the FHLB are
typically secured by a pledge of the Registrant's stock in the FHLB and a
portion of the Registrant's first mortgage loans and certain other assets. Each
FHLB credit program has its own interest rate, which may be fixed or variable,
and range of maturities. The Registrant, if the need arises, may also access the
Federal Reserve Bank discount window to supplement its supply of lendable funds
and to meet deposit withdrawal requirements.
The following table sets forth the maximum month-end balance and the
average balance of FHLB advances for the periods indicated.
11
<PAGE>
<TABLE>
<CAPTION>
During the Year Ended
June 30,
---------------------
2000 1999
------ ------
(In thousands)
<S> <C> <C>
Maximum amount of short-term borrowings outstanding at any
month end:
Advances from FHLB.......................................... $3,000 $ --
Approximate average short-term borrowings outstanding with
respect to:
Advances from FHLB.......................................... $1,497 $ --
Approximate weighted average rate paid on:
Advances from FHLB.......................................... 6.10% --%
</TABLE>
Employees
At June 30, 2000, the Registrant had 11 full-time and one part-time
employees. None of the Registrant's employees are represented by a collective
bargaining group. The Registrant believes that its relationship with its
employees is good.
Regulation
Set forth below is a brief description of certain laws which related to
the regulation of the Company and the Bank. The description does not purport to
be complete and is qualified in its entirety by reference to applicable laws and
regulations.
Recent Regulation
The Gramm-Leach-Bliley Act (the "Act"), became effective March 11,
2000, which permits qualifying bank holding companies to become financial
holding companies and thereby affiliate with securities firms and insurance
companies and engage in other activities that are financial in nature. The Act
defines "financial in nature" to include securities underwriting, dealing and
market making; sponsoring mutual funds and investment companies; insurance
underwriting and agency; merchant banking activities; and activities that the
Board has determined to be closely related to banking. A qualifying national
bank also may engage, subject to limitations on investment, in activities that
are financial in nature, other than insurance underwriting, insurance company
portfolio investment, real estate development, and real estate investment,
through a financial subsidiary of the bank.
The Act also prohibits new unitary thrift holding companies from
engaging in nonfinancial activities or from affiliating with an nonfinancial
entity. As a grandfathered unitary thrift holding company, the Company will
retain its authority to engage in nonfinancial activities. However, the Act will
have few direct effects on the operations or powers of federal savings
associations or of savings and loan holding companies.
The Act imposes significant new financial privacy obligations and
reporting requirements on all financial institutions, including federal savings
associations. Specifically, the statute, among other things, will require
financial institutions (a) to establish privacy policies and disclose them to
customers both at the commencement of a customer relationship and on an annual
basis and (b) to permit customers to opt out of a financial institution's
disclosure of financial information to nonaffiliated third parties. The Act
requires the federal financial regulators to promulgate regulations implementing
these provisions within six months of enactment, and the statute's privacy
requirements will take effect one year after enactment.
12
<PAGE>
Regulation of the Company
General. The Company is a unitary savings and loan holding company
subject to regulatory oversight by the OTS. As such, the Company is required to
register and file reports with the OTS and is subject to regulation and
examination by the OTS. In addition, the OTS has enforcement authority over the
Company and its non-savings association subsidiaries, should such subsidiaries
be formed, which also permits the OTS to restrict or prohibit activities that
are determined to be a serious risk to the subsidiary savings association. This
regulation and oversight is intended primarily for the protection of the
depositors of the Bank and not for the benefit of stockholders of the Company.
As a unitary savings and loan holding company, the Company generally is
not subject to activity restrictions, provided the Bank satisfies the Qualified
Thrift Lender ("QTL") test. The Act terminated the "unitary thrift holding
company exemption" for all companies that applied to acquire savings
associations after May 4, 1999. Since the Company is grandfathered under this
provision of the Act, its unitary holding company powers and authorities were
not affected. However, if the Company were to acquire control of an additional
savings association, its business activities would be subject to restriction
under the Home Owners' Loan Act. Furthermore, if the Company were in the future
to sell control of the Bank to any other company, such company would not succeed
to the Company's grandfathered status under the Act and would be subject to the
same business activity restrictions. See "- Regulation of the Bank - Qualified
Thrift Lender Test."
Regulation of the Bank
General. Set forth below is a brief description of certain laws that
relate to the regulation of the Bank. The description does not purport to be
complete and is qualified in its entirety by reference to applicable laws and
regulations. As a federally chartered, SAIF-insured savings association, the
Bank is subject to extensive regulation by the OTS and the FDIC. Lending
activities and other investments must comply with various federal statutory and
regulatory requirements. The Bank is also subject to certain reserve
requirements promulgated by the Federal Reserve Board.
The OTS, in conjunction with the FDIC, regularly examines the Bank and
prepares reports for the consideration of the Bank's Board of Directors on any
deficiencies that are found in the Bank's operations. The Bank's relationship
with its depositors and borrowers is also regulated to a great extent by federal
and state law, especially in such matters as the ownership of savings accounts
and the form and content of the Bank's mortgage documents.
The Bank must file reports with the OTS and the FDIC concerning its
activities and financial condition, in addition to obtaining regulatory
approvals prior to entering into certain transactions such as mergers with or
acquisitions of other savings institutions. This regulation and supervision
establishes a comprehensive framework of activities in which an institution can
engage and is intended primarily for the protection of the BIF and depositors.
The regulatory structure also gives the regulatory authorities extensive
discretion in connection with their supervisory and enforcement activities and
examination policies, including policies with respect to the classification of
assets and the establishment of adequate loan loss reserves for regulatory
purposes.
Insurance of Deposit Accounts. The deposit accounts held by the Bank
are insured by the BIF to a maximum of $100,000 for each insured member (as
defined by law and regulation). The Bank is required to pay insurance premiums
based on a percentage of its insured deposits to the FDIC for insurance of its
deposits by the BIF. The FDIC also maintains another insurance fund, the Savings
Institution
13
<PAGE>
Insurance Fund ("SAIF"), which primarily insures commercial bank deposits. The
FDIC has set the deposit insurance assessment rates for BIF-member institutions
for the first six months of 2000 at 0% to .027% of insured deposits on an
annualized basis, with the assessment rate for most savings institutions set at
0%.
In addition, all FDIC-insured institutions are required to pay
assessments to the FDIC at an annual rate of approximately .0212% of insured
deposits to fund interest payments on bonds issued by the Financing Corporation
("FICO"), an agency of the Federal government established to recapitalize the
predecessor to the SAIF. These assessments will continue until the FICO bonds
mature in 2017.
Regulatory Capital Requirements. OTS capital regulations require
savings institutions to meet three capital standards: (1) tangible capital equal
to 1.5% of total adjusted assets, (2) a leverage ratio (core capital) equal to
at least 3% of total adjusted assets, and (3) a risk-based capital requirement
equal to 8.0% of total risk-weighted assets.
Loans to One Borrower. A savings association may not make a loan or
extend credit to a single or related group of borrowers in excess of 15% of the
associations's unimpaired capital and surplus. An additional amount may be lent,
equal to 10% of the unimpaired capital and surplus, under certain circumstances.
At June 30, 2000, the Registrant's lending limit for loans to one borrower was
approximately $500,000 and had no outstanding commitments that exceeded the
loans to one borrower limit at the time originated or committed.
Dividend and Other Capital Distribution Limitations. The OTS imposes
various restrictions or requirements on the ability of savings institutions to
make capital distributions, including cash dividends.
A savings association that is a subsidiary of a savings and loan
holding company, such as the Bank must file an application or a notice with the
OTS at least 30 days before making a capital distribution. Savings associations
are not required to file an application for permission to make a capital
distribution and need only file a notice if the following conditions are met:
(1) they are eligible for expedited treatment under OTS regulations, (2) they
would remain adequately capitalized after the distribution, (3) the annual
amount of capital distribution does not exceed net income for that year to date
added to retained net income for the two preceding years, and (4) the capital
distribution would not violate any agreements between the OTS and the savings
association or any OTS regulations. Any other situation would require an
application to the OTS.
The OTS may disapprove an application or notice if the proposed capital
distribution would: (i) make the savings association undercapitalized,
significantly undercapitalized, or critically undercapitalized; (ii) raise
safety or soundness concerns; or (iii) violate a statue, regulation, or
agreement with the OTS (or with the FDIC), or a condition imposed in an
OTS-approved application or notice. Further, a federal savings association, like
the Bank, cannot distribute regulatory capital that is needed for its
liquidation account.
Qualified Thrift Lender Test. Federal savings institutions must meet
one of two Qualified Thrift Lender ("QTL") tests. To qualify as a QTL, a savings
institution must either (i) be deemed a "domestic building and loan association"
under the Internal Revenue Code by maintaining at least 60% of its total assets
in specified types of assets, including cash, certain government securities,
loans secured by and other assets related to residential real property,
educational loans and investments in premises of the institution or (ii) satisfy
the statutory QTL test set forth in the Home Owner's Loan Act by maintaining at
least 65% of its "portfolio assets" in certain"Qualified Thrift Investments"
(defined to include residential mortgages
14
<PAGE>
and related equity investments, certain mortgage-related securities, small
business loans, student loans and credit card loans, and 50% of certain
community development loans). For purposes of the statutory QTL test, portfolio
assets are defined as total assets minus intangible assets, property used by the
institution in conducting its business, and liquid assets equal to 10% of total
assets. A savings institution must maintain its status as a QTL on a monthly
basis in at least nine out of every 12 months. A failure to qualify as a QTL
results in a number of sanctions, including the imposition of certain operating
restrictions and a restriction on obtaining additional advances from its FHLB.
At June 30, 2000, the Bank was in compliance with its QTL requirement.
Federal Home Loan Bank System. The Bank is a member of the FHLB of
Pittsburgh, which is one of 12 regional FHLBs that administers the home
financing credit function of savings associations. Each FHLB serves as a reserve
or central bank for its members within its assigned region. It is funded
primarily from proceeds derived from the sale of consolidated obligations of the
FHLB System. It makes loans to members (i.e., advances) in accordance with
policies and procedures established by the Board of Directors of the FHLB.
As a member, the Bank is required to purchase and maintain stock in the
FHLB of Pittsburgh in an amount equal to at least 1% of its aggregate unpaid
residential mortgage loans, home purchase contracts or similar obligations at
the beginning of each year.
Liquidity Requirements. All savings associations are required to
maintain an average daily balance of liquid assets equal to a certain percentage
of the sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings associations.
Federal Reserve System. The Federal Reserve Board requires all
depository institutions to maintain non-interest bearing reserves at specified
levels against their transaction accounts (primarily checking, NOW, and Super
NOW checking accounts) and non-personal time deposits. The balances maintained
to meet the reserve requirements imposed by the Federal Reserve Board may be
used to satisfy the liquidity requirements that are imposed by the OTS. At June
30, 2000, the Bank was in compliance with these Federal Reserve Board
requirements.
Item 2. Description of Property
--------------------------------
(a) Properties. The Registrant owns its main office and branch office
which are both located in Pittsburgh, Pennsylvania. The main office is located
at 807 Middle Street and the branch office is located at 5035 Curry Road.
(b) Investment Policies. See "Item 1. Business" above for a general
description of the Bank's investment policies and any regulatory or Board of
Directors' percentage of assets limitations regarding certain investments. The
Bank's investments are primarily acquired to produce income, and to a lesser
extent, possible capital gain.
(1) Investments in Real Estate or Interests in Real Estate.
See "Item 1. Business - Lending Activities and - Regulation of the Bank," and
"Item 2. Description of Property."
(2) Investments in Real Estate Mortgages. See "Item 1.
Business - Lending Activities and - Regulation of the Bank."
15
<PAGE>
(3) Investments in Securities of or Interests in Persons
Primarily Engaged in Real Estate Activities. See "Item 1. Business - Lending
Activities and - Regulation of the Bank."
(c) Description of Real Estate and Operating Data. Not Applicable.
Item 3. Legal Proceedings
--------------------------
There are various claims and lawsuits in which the Registrant are
periodically involved, such as claims to enforce liens, condemnation proceedings
on properties in which the Registrant holds security interests, claims involving
the making and servicing of real property loans, and other issues incident to
the Registrant's business. In the opinion of management, no material loss is
expected from any of such pending claims or lawsuits.
Item 4. Submission of Matters to a Vote of Security Holders
-------------------------------------------------------------
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
------------------------------------------------------------------
The information contained under the section captioned "Stock Market
Information" of the Company's Annual Report to Stockholders for the fiscal year
ended June 30, 2000 (the "Annual Report") is incorporated herein by reference.
Item 6. Management's Discussion and Analysis or Plan of Operation
------------------------------------------------------------------
The information contained in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Annual Report is incorporated herein by reference.
16
<PAGE>
Item 7. Financial Statements
------------------------------
The Registrant's consolidated financial statements under Item 13(a) 13
are incorporated herein by reference.
The report of the prior independent accountants follows as part of this
Item 7.
[LOGO]
Stokes Kelly & Hinds, LLC
Certified Public Accountants
& Business Advisors
Members:
American and Pennsylvania Institutes
of Certified Public Accountants
Division for CPA Firms:
SEC Practice Section
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Shareholders
WSB Holding Company
We have audited the accompanying consolidated statements of financial condition
of WSB Holding Company and subsidiaries (the "Company") as of June 30, 1999, and
the related consolidated statements of income, stockholders' equity, and cash
flows for the one year then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of WSB Holding Company
and subsidiaries as of June 30, 1999, and the results of their operations and
their cash flows for the one year then ended in conformity with generally
accepted accounting principles.
/s/ Stokes Kelly & Hinds, LLC
-----------------------------
Pittsburgh, Pennsylvania
July 30, 1999
17
<PAGE>
Item 8. Changes in and Disagreements with Accountants On Accounting and
--------------------------------------------------------------------------------
Financial Disclosure
--------------------
Information regarding the change in accountants is incorporated herein
to Forms 8-K and 8-K/A, filed April 17, 2000 and May 11, 2000,
respectively.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons: Compliance
--------------------------------------------------------------------------------
with Section 16(a) of the Exchange Act
--------------------------------------
The information required under this item is incorporated herein by
reference to the Proxy Statement contained under the sections captioned
"Principal Holders," "Section 16(a) Beneficial Ownership Reporting Compliance,"
"Proposal I - Election of Directors," and " - Biographical Information."
Item 10. Executive Compensation
--------------------------------
The information required under this item is incorporated herein by
reference to the Proxy Statement contained under the section captioned "Director
and Executive Officer Compensation."
Item 11. Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners
(b) Security Ownership of Management
The information required by items (a) and (b) is incorporated
herein by reference to the Proxy Statement contained under the
sections captioned "Principal Holders" and "Proposal I -
Election of Directors."
(c) Management of the Company knows of no arrangements, including
any pledge by any person of securities of the Company, the
operation of which may at a subsequent date result in a change
in control of the Company.
Item 12. Certain Relationships and Related Transactions
--------------------------------------------------------
The information required by this item is incorporated herein by
reference to the Proxy Statement contained under the section captioned "Certain
Relationships and Related Transactions."
18
<PAGE>
Item 13. Exhibits, List, and Reports on Form 8-K
-------------------------------------------------
3. The following exhibits are included in this Report or
incorporated herein by reference:
(a) List of Exhibits:
3(i) Restated Articles of Incorporation of WSB Holding
Company *
3(ii) Bylaws of WSB Holding Company **
4 Specimen Stock Certificate **
10 Employment Agreement between the Bank and Robert D.
Neudorfer **
10.1 1998 Stock Option Plan ***
10.2 Restricted Stock Plan and Trust Agreement ***
10.3 Form of Supplemental Benefit Agreement****
10.4 Form of Split Dollar Agreement****
13 Portions of the 2000 Annual Report to Stockholders
21 Subsidiaries of the Registrant (See "Item 1-
Description of Business")
23 Consent of S.R. Snodgrass, A.C.
23.1 Consent of Stokes Kelly & Hinds, LLC
27 Financial Data Schedule (electronic filing only)
(b) Reports on Forms 8-K and 8-K/A, dated April 17, 2000 and May
11, 2000, respectively, were filed to disclose the change in
Registrant's independent accountant's.
--------------------
* Incorporated by reference to the Form 8A (File No. 0-22997) declared
effective by the SEC on August 21, 1997.
** Incorporated by reference to the registration statement on Form SB-2 (File
No. 333- 29389) declared effective by the SEC on July 15, 1997.
*** Incorporated by reference to the Proxy Statement for the Special Meeting of
Stockholders on March 16, 1998 and filed with the SEC on February 4, 1998.
**** Incorporated by reference to the June 30, 1999 Form 10-KSB filed with the
SEC on September 22, 1999.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 as of September 22,
2000.
WSB HOLDING COMPANY
By: /s/Robert D. Neudorfer
-----------------------------------------------------
Robert D. Neudorfer
President, Chief Executive Officer and Director
(Duly Authorized Representative)
Pursuant to the requirement of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated as of September 22, 2000.
<TABLE>
<CAPTION>
<S> <C>
/s/Robert D. Neudorfer /s/John P. Mueller
------------------------------------------------ ----------------------------------------------
Robert D. Neudorfer John P. Mueller
President, Chief Executive Officer and Director Chairman of the Board
(Principal Executive and Financial Officer)
/s/Ronald W. Moreschi /s/Stanford H. Rosenberg
------------------------------------------------ ----------------------------------------------
Ronald W. Moreschi Stanford H. Rosenberg
Treasurer, Chief Financial Officer, and Director Vice President and Director
(Principal Accounting Officer)
/s/Joseph J. Manfred /s/Johanna C. Guehl
------------------------------------------------ ----------------------------------------------
Joseph J. Manfred Johanna C. Guehl
Director Director
</TABLE>
