UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM _________________ TO ______________________
COMMISSION FILE NUMBER 0-23345
WYMAN PARK BANCORPORATION, INC.
- --------------------------------------------------------------------------------
(Name of small business issuer in its charter)
Delaware 52-2068893
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
11 West Ridgely Road, Lutherville, Maryland 21093
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (410) 252-6450
--------------
Securities Registered Pursuant to Section 12(b) of the Act:
None
----
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share
---------------------------------------
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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 herein, 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 the issuer's revenues for its most recent fiscal year: $5,251,000.
The aggregate market value of the voting stock held by non-affiliates of
the registrant, computed by reference to the average of the bid and ask price of
such stock as of June 30, 1999, was approximately $5.0 million. (The exclusion
from such amount of the market value of the shares owned by any person shall not
be deemed an admission by the registrant that such person is an affiliate of the
registrant.)
As of June 30, 1999, there were 905,926 shares issued and outstanding of
the registrant's Common Stock.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Annual Report to Stockholders for the fiscal year ended June
30, 1999 (Part II)
2. Portions of Proxy Statement for 1999 Annual Meeting of Stockholders (Part
III)
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
FORWARD-LOOKING STATEMENTS
When used in this filing and in future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases or other
public or shareholder communications, or in oral statements, the words or
phrases "would be," "will allow," "intends to," "will likely result," "are
expected to," "will continue," "is anticipated," "estimate," "project" or
similar expressions are intended to identify "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are subject to risks and uncertainties, including but not limited to
changes in economic conditions in the Company's market area, changes in policies
by regulatory agencies, fluctuations in interest rates, demand for loans in the
Company's market area and competition, all or some of which could cause actual
results to differ materially from historical earnings and those presently
anticipated or projected.
The Company wishes to caution readers not to place undue reliance on any
such forward-looking statements, which speak only as of the date made, and
advises readers that various factors, including regional and national economic
conditions, substantial changes in levels of market interest rates, credit and
other risks of lending and investment activities and competitive and regulatory
factors, could affect the Company's financial performance and could cause the
Company's actual results for future periods to differ materially from those
anticipated or projected.
The Company does not undertake, and specifically disclaims any obligation,
to update any forward-looking statements to reflect occurrences or unanticipated
events or circumstances after the date of such statements.
THE COMPANY. Wyman Park Bancorporation, Inc. (the "Company") is a savings
and loan holding company which became sole stockholder of Wyman Park Federal
Savings & Loan Association (the "Association" or "Wyman Park") in connection
with the Association's conversion from the mutual to the stock form on January
5, 1998. All references to the Company prior to January 5, 1998, except where
otherwise indicated, are to the Association.
At June 30, 1999, the Company had assets of $70.5 million, deposits of
$58.0 million and stockholders' equity of $8.0 million.
The principal executive offices of the Company are located at 11 West
Ridgely Road, Lutherville, Maryland 21093, and its telephone number is (410)
252-6450.
The activities of the Company itself have been limited to investment in the
stock of the Association, interest-bearing deposits at financial institutions,
short-term borrowings and a note
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receivable from the Association's Employee Stock Ownership Plan. Unless
otherwise indicated, all activities discussed below are of the Association.
THE ASSOCIATION. The Association is a federally-chartered savings
association with its principal executive offices in Lutherville, Maryland. Its
deposits are insured up to applicable limits, by the Federal Deposit Insurance
Corporation (the "FDIC"), which is backed by the full faith and credit of the
United States. The Association is primarily engaged in the business of
attracting savings deposits from the general public and investing such funds in
permanent mortgage loans secured by one- to four-family residential real estate
located primarily in central Baltimore county and northern Baltimore City,
Maryland. Through its branch office located in Glen Burnie, a suburb to the
south of Baltimore, the Association also services Anne Arundel County, Maryland.
In addition to permanent mortgage loans, the Association also originates, to a
lesser extent, loans for the construction of one- to four-family real estate,
commercial loans secured by multi-family real estate (over four units) and
nonresidential real estate, and consumer loans, including home equity lines of
credit, home improvement loans, and loans secured by savings deposits. The
Association invests in U.S. government obligations, interest-bearing deposits in
other financial institutions, mortgage-backed securities, and other investments
permitted by applicable law.
LENDING ACTIVITIES
MARKET AREA. The Company's office is located at 11 West Ridgely Road,
Lutherville, Maryland. Through this office and a branch location, the Company
primarily serves central Baltimore County and northern Baltimore City, Maryland,
as well as Glen Burnie, a suburb south of Baltimore and Anne Arundel County,
Maryland.
GENERAL. The principal lending activity of the Company is originating first
mortgage loans secured by owner-occupied one- to four-family residential
properties located in its primary market areas. In addition, in order to
increase the yield and the interest rate sensitivity of its portfolio and in
order to provide more comprehensive financial services to families and community
businesses in the Company's primary market area, the Company also originates
commercial real estate, multi-family, consumer (secured and unsecured), land,
and second mortgage loans. The Company reserves the right in the future to
adjust or discontinue any product offerings to respond to competitive or
economic factors.
2
<PAGE>
Loan Portfolio Composition. The following information concerning the
composition of the Company's loan portfolios in dollar amounts as of the dates
indicated.
June 30,
------------------------------
1999 1998
------------ ------------
Amount Amount
------ ------
(Dollars in Thousands)
Real Estate Loans:
- -----------------
One- to four-family ....................... $ 47,324 $ 51,779
Multi-family .............................. 508 362
Commercial ................................ 6,395 6,683
Construction or development ............... 621 ---
-------- --------
Total real estate loans ............... 54,848 58,824
Other Loans:
- -----------
Consumer Loans:
Deposit account loans ................... 151 309
Home equity ............................. 2,850 3,390
Home improvement ........................ 13 12
Overdraft lines of credit ............... 8 ---
-------- --------
Total consumer loans ................. 3,022 3,711
-------- --------
Total loans, gross ................... 57,870 62,535
-------- --------
Less:
- ----
Loans in process .......................... (528) ---
Deferred fees and discounts ............... (219) (215)
Allowance for losses ...................... (283) (278)
-------- --------
Total loans receivable, net ............... $ 56,840 $ 62,042
======== ========
Loan Maturities. The following table reflects at June 30, 1999 the dollar
amount of loans maturing or subject to rate adjustment based on their
contractual terms to maturity. Loans with fixed rates are reflected based upon
the contractual repayment schedule while loans with variable interest rates are
reflected based upon the contractual repayment schedule up to the contractual
rate adjustment date. Demand loans, loans having no stated schedule of
repayments and loans having no stated maturity are reported as due within one
year or less.
<TABLE>
<CAPTION>
Due in One Year Due After One Year Due After
or Less through Five Years Five Years Total
------- ------------------ ---------- -----
(In thousands)
<S> <C> <C> <C> <C>
One-to-four family..................... $ 6,454 $ 10,973 $ 29,897 $ 47,324
Multi-family and Commercial............ 1,216 1,874 3,813 6,903
Consumer loans......................... 2,907 115 --- 3,022
Construction or development............ 621 --- --- 621
------------ --------------- ------------ ------------
Total 11,198 12,962 33,710 57,870
============ =============== ============ ============
</TABLE>
3
<PAGE>
Under federal law, the aggregate amount of loans that the Company is
permitted to make to any one borrower is generally limited to 15% of unimpaired
capital and surplus (25% if the security for such loan has a "readily
ascertainable" value or 30% for certain residential development loans). At June
30, 1999, based on the above, the Company's regulatory loan-to-one borrower
limit was approximately $1,477,000. On the same date, the Company had no
borrowers with outstanding balances in excess of this amount. As of June 30,
1999, the largest dollar amount of indebtedness to one borrower or group of
related borrowers was a $665,000 loan secured by a residence. The next two
largest loans had outstanding balances of $615,000 and $596,000, respectively,
and were secured by a strip shopping center and a warehouse. Such loans are
performing in accordance with their terms.
ONE- TO FOUR-FAMILY RESIDENTIAL REAL ESTATE LENDING
The principal activity of the Company's lending program involves the
origination of loans secured by first mortgages on owner-occupied one- to
four-family residences. At June 30, 1999, $47.3 million, or 81.7% of the
Company's gross loan portfolio consisted of such loans. Substantially all of the
residential loans originated by the Company are secured by properties located in
the Company's market area.
Although the Company has generally sold its fixed-rate loan production
since 1989, historically, the Company originated for retention in its own
portfolio 30-year fixed-rate loans secured by one- to four-family residential
real estate. The Company also originates adjustable rate mortgage loans
("ARMs"). The Company has from time to time sold some of its ARM production,
which conforms to standards promulgated by Freddie Mac (so-called "conforming
loans") and as a result of continued consumer demand, particularly during
periods of relatively low interest rates, the Company has also continued to
originate fixed-rate residential loans in amounts and at rates and terms which
are monitored for compliance with the Company's asset/liability management
policy. Currently, the Company originates both conforming and jumbo construction
and jumbo fixed-rate permanent loans with maturities of up to 30 years. Jumbo
loans are loans with initial balances in excess of the maximum amount permitted
for conforming loans.
The Company's ARM and balloon loans are offered at rates, terms and points
determined in accordance with market and competitive factors. The Company's
current one- to four-family residential ARMs are fully amortizing loans with
contractual maturities of up to 30 years. Balloon loans also have terms of up to
30 years. Though from time to time "teaser" rates are offered, applicants are
qualified pursuant to Freddie Mac guidelines, which permits qualifications at
less than the fully indexed rate, and no ARMs allow for negative amortization.
The interest rates on the ARMs originated by the Company are generally subject
to adjustment at one-, three- and five-year intervals based on a margin over the
Treasury Securities Constant Maturity Index. Decreases or increases in the
interest rate of the Company's ARMs are generally limited to 6% above the
initial interest rate over the life of the loan, and up to a 2% per adjustment
period per year or per adjustment period. The Company's ARMs may be convertible
into fixed-rate loans, depending on the program selected, and do not contain
prepayment penalties. Loans are not
4
<PAGE>
assumable. At June 30, 1999, the total balance of one- to four-family ARMs was
$8.0 million, or 13.8% of the Company's gross loan portfolio.
As a service to its older customers, the Company originates and sells
reverse mortgages, allowing the homeowner to utilize equity values that have
built up in the underlying property.
The Company originates residential mortgage loans with loan-to-value ratios
generally up to 95%. On mortgage loans exceeding an 80% loan-to-value ratio at
the time of origination, the Company will generally require private mortgage
insurance in an amount intended to reduce the Company's exposure to less than
80% of the appraised value of the underlying property.
CONSTRUCTION AND DEVELOPMENT LENDING
The Company makes construction loans to individuals for the construction of
their primary or secondary residences. Loans to individuals for the construction
of their residences typically run for up to nine months. The borrower pays
interest only during the construction period. Residential construction loans are
generally underwritten pursuant to the same guidelines used for originating
permanent residential loans. At June 30, 1999 construction loans totaled
$621,000, or 1.1% of the Company's gross loan portfolio.
The Company has participated in loans to builders and developers to finance
the construction of residential property. Such loans generally have adjustable
interest rates based upon prime or treasury indexes with variable terms. The
proceeds of the loan are advanced during construction based upon the percentage
of completion as determined by an inspection by the lead lender. The loan amount
normally does not exceed 75% of the projected completed value. Whether the
Company is willing to provide permanent takeout financing to the purchaser of
the home is determined independently of the construction loan by separate
underwriting. In the event that upon completion the house is not sold, the
builder is required to make principal and interest payments until the house is
sold.
Building lot loans, which include loans to acquire vacant or raw land, are
made to individuals. All of such loans are secured by land zoned for residential
developments and located within the Company's market area. Before extending
credit, the Company will require percolation tests and related permits to be
secured.
Construction and development lending, through participation or direct
lending, generally affords the Company an opportunity to receive interest at
rates higher than those obtainable from residential lending and to receive
higher origination and other loan fees. In addition, such loans are generally
made for relatively short terms. Nevertheless, construction lending to persons
other than owner-occupants is generally considered to involve a higher level of
credit risk than one- to four-family permanent residential lending due to the
concentration of principal in a limited number of loans and borrowers and the
effects of general economic conditions on construction projects, real estate
developers and managers. In addition, the nature of these loans is such that
they are more difficult to evaluate and monitor. The Company's risk of loss on a
construction or development loan is dependent largely upon the accuracy of the
initial estimate of the property's
5
<PAGE>
value upon completion of the project and the estimated cost (including interest)
of the project. If the estimate of value proves to be inaccurate, the Company
may be confronted, at or prior to the maturity of the loan, with a project with
a value which is insufficient to assure full repayment and/or the possibility of
having to make substantial investments to complete and sell the project. Because
defaults in repayment may not occur during the construction period, it may be
difficult to identify problem loans at an early stage. When loan payments become
due, the cash flow from the property may not be adequate to service the debt. In
such cases, the Company may be required to modify the terms of the loan.
COMMERCIAL REAL ESTATE LENDING
The Company's commercial real estate loan portfolio consists of loans on a
variety of non-residential properties including retail facilities, warehouses,
small office buildings, small industrial parks and shopping centers. At June 30,
1999, the Company had $6.4 million in commercial real estate loans, comprising
11.1% of the Company's gross loan portfolio.
The Company has originated both balloon, adjustable-rate and fixed-rate
commercial real estate loans, although most current originations have balloon or
adjustable rates. Commercial loans generally adjust based on a constant maturity
index plus a margin. Adjustable rate loans generally have a balloon feature
after one or two adjustment periods to allow the Company to re-evaluate the
terms of the loan. Balloon loans mature at the end of the initial balloon term
and may be modified, extended or refinanced by the Company. Commercial loans are
generally underwritten in amounts of up to 75% of the appraised value of the
underlying property.
Substantially all of the commercial real estate loans originated by the
Company are secured by properties located within the Company's market area.
Commercial real estate loans generally present a higher level of credit
risk than loans secured by one- to four-family residences. This greater risk is
due to several factors, including the concentration of principal in a limited
number of loans and borrowers, the effects of general economic conditions on
income producing properties and the increased difficulty of evaluating and
monitoring these types of loans. Furthermore, the repayment of loans secured by
commercial real estate is typically dependent upon the successful operation of
the related real estate project. If the cash flow from the project is reduced
(for example, if leases are not obtained or renewed), the borrower's ability to
repay the loan may be impaired.
MULTI-FAMILY LENDING
The Company has historically made few permanent multi-family loans in its
primary market area. As with commercial real estate loans, multi-family loans
present a higher level of credit risk than do loans secured by one- to
four-family residences. At June 30, 1999, loans secured by multi-family
properties aggregated $508,000, or .9% of the Company's gross loan portfolio.
6
<PAGE>
The Company's multi-family loan portfolio includes loans secured by five or
more unit residential buildings located primarily in the Company's market area.
CONSUMER LENDING
The Company offers a variety of consumer loans, including loans secured by
savings deposits, home equity lines of credit and overdraft lines of credit as
well as unsecured home improvement loans. The Company currently originates
substantially all of its consumer loans in its market area. At June 30, 1999,
the Company's consumer loans totaled $3.0 million or 5.2% of the Company's gross
loan portfolio.
The largest component of the Company's consumer lending program is its home
equity line. At June 30, 1999, home equity loans totaled $2.8 million or 4.8% of
gross loans receivable. The Company's home equity lines of credit are originated
in amounts which, together with the amount of the first mortgage, generally do
not exceed 90% of the appraised value of the property securing the loan. At June
30, 1999, the Company had $6.3 million of funds committed, but undrawn, under
such lines.
Consumer loans may entail greater risk than residential mortgage loans,
particularly in the case of consumer loans which are unsecured or secured by
rapidly depreciable assets. In addition, consumer loan collections are dependent
on the borrower's continuing financial stability, and thus are more likely to be
affected by adverse personal circumstances. Furthermore, the application of
various federal and state laws, including federal and state bankruptcy and
insolvency laws, may limit the amount which can be recovered on such loans.
DELINQUENCIES AND NON-PERFORMING ASSETS
NON-PERFORMING ASSETS. The table below sets forth the amounts and
categories of non-performing assets in the Company's loan portfolio. Loans are
placed on non-accrual status when the collection of principal and/or interest
becomes doubtful. Foreclosed assets include assets acquired in settlement of
loans.
June 30,
-----------------------------------
1999 1998
--------------- ----------------
(Dollars in Thousands
Non-accruing loans:
One-to four-family................ $ --- $ 25
---- ---
Total non-performing assets............ $ --- $ 25
==== ===
Total as a percentage of total assets.. ---% .04%
==== ====
CLASSIFICATION OF ASSETS. Federal regulations require that each savings
institution classify its own assets on a regular basis. In addition, in
connection with examinations of savings institutions, OTS and FDIC examiners
have authority to identify problem assets and, if appropriate, require them to
be classified. There are three classifications for problem assets:
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Substandard, Doubtful and Loss. Substandard assets have one or more defined
weaknesses and are characterized by the distinct possibility that the Company
will sustain some loss if the deficiencies are not corrected. Doubtful assets
have the weaknesses of Substandard assets, with the additional characteristics
that the weaknesses make collection or liquidation in full on the basis of
currently existing facts, conditions and values questionable, and there is a
high possibility of loss. An asset classified Loss is considered uncollectible
and of such little value that continuance as an asset on the balance sheet of
the institution, without establishment of a specific valuation allowance or
charge-off, is not warranted. Assets classified as Substandard or Doubtful
require the institution to establish prudent general allowances for loan losses.
If an asset or portion thereof is classified as a Loss, the institution may
charge off such amount against the loan loss allowance. If an institution does
not agree with an examiner's classification of an asset, it may appeal this
determination to the District Director of the OTS.
On the basis of management's review of its assets, at June 30, 1999, the
Company had no loans classified substandard.
OTHER ASSETS OF CONCERN. In addition to non-performing loans and
substandard loans discussed above, as of June 30, 1999, the Company had 4 loans
totaling $192,000, which, because of known information about the possible credit
problems of the borrowers or the cash flows of the security property, would
cause management to have some doubts as to the ability of the borrowers to
comply with present loan repayment terms and may result in the future inclusion
of such assets in non-performing asset categories.
ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses is established
through a provision for loan losses charged to earnings based on management's
evaluation of the risk inherent in its entire loan portfolio and changes in the
nature and volume of its loan activity. Such evaluation, which includes a review
of all loans of which full collectibility may not be reasonably assured,
considers the estimated net realizable value of the underlying collateral,
economic conditions, historical loan loss experience and other factors that
warrant recognition in providing for an adequate allowance for loan losses. In
determining the general reserves under these policies, historical charge-offs
and recoveries, changes in the mix and levels of the various types of loans, net
realizable values, the current loan portfolio and current economic conditions
are considered. Management also considers the Company's non-performing assets in
establishing its allowance for loan losses.
As of June 30, 1999, the Company's allowance for loan losses as a percent
of gross loans receivable and as a percent of non-performing loans amounted to
.49% and 0%, respectively. While management believes that it uses the best
information available to determine the allowance for loan losses, unforeseen
market conditions could result in adjustments to the allowance for loan losses,
and net earnings could be significantly affected, if circumstances differ
substantially from the assumptions used in making the final determination.
8
<PAGE>
The following table sets forth an analysis of the Company's allowance for
loan losses.
June 30,
---------------------
1999 1998
----------- ---------
(Dollars in Thousands)
Balance at beginning of period ......................... $ 278 $270
Charge-offs
Commercial real estate ............................... --- ---
------ ----
Net charge-offs ........................................ --- ---
------ ----
Additions charged to operations ........................ 5 8
------ ----
Balance at end of period ............................... $ 283 $278
------ ====
Ratio of net charge-offs during the period to
Average loans outstanding during the period ............ ---% ---%
====== ====
Ratio of net charge-offs during the period to
Average non-performing assets .......................... ---% ---%
====== ====
The distribution of the Company's allowance for losses on loans at the
dates indicated is summarized as follows:
<TABLE>
<CAPTION>
June 30,
---------------------------------------------------------
1999 1998
--------------------------- --------------------------
Percent Percent
of Loans of Loans
in Each in Each
Amount of Category Amount of Category
Loan Loss to Total Loan Loss to Total
Allowance Loans Allowance Loans
--------- ----- --------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
One- to four-family......... $ 25 81.78% $ 27 82.80%
Multi-family................ --- .88 --- .58
Commercial real estate...... 64 11.05 64 10.69
Construction or development. --- 1.07 --- ---
Consumer.................... --- 5.22 --- 5.93
Unallocated................. 194 -- 187 ---
---- ------ ---- -----
Total $ 283 100.00% $ 278 100.00%
==== ====== ==== ======
</TABLE>
INVESTMENT ACTIVITIES
As part of its asset/liability management strategy and liquidity
requirements, the Company invests in U.S. government and agency obligations to
supplement its lending activities. The Company's investment policy also allows
for investments in overnight funds, mortgage-backed securities and certificates
of deposit. The Company may consider the expansion of investments into other
securities if deemed appropriate. At June 30, 1999, the
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<PAGE>
Company did not own any securities of a single issuer which exceeded 10% of the
Company's retained earnings. See Note 3 of the Notes to the Consolidated
Financial Statements for additional information regarding the Company's
investment securities portfolio.
The Company is required by federal regulations to maintain a minimum amount
of liquid assets that may be invested in specified securities and is also
permitted to make certain other securities investments. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital." Cash flow projections are regularly reviewed and updated
to assure that adequate liquidity is provided. As of June 30, 1999, the
Company's liquidity ratio (liquid assets as a percentage of net withdrawable
savings and current borrowings) was 29.3% as compared to the OTS requirement of
4.0%.
All of the Company's investment securities, except mortgage-backed
securities, are classified as available for sale. Mortgage-backed securities are
classified as held to maturity. The Company may elect to classify investment
securities acquired in the future as trading securities or as held to maturity,
instead of available-for-sale, but there are no current plans to do so.
The following table sets forth the composition of the Company's investment
and mortgage-backed securities at the dates indicated.
<TABLE>
<CAPTION>
June 30,
---------------------------- --------------------------------
1999 1998
-------------- ------------- -------------- -----------------
Book Book
Value % of Total Value % of Total
----- ---------- ----- ----------
(Dollars in Thousands)
Investment securities:
<S> <C> <C>
Federal agency obligations:......................... $ --- ---% $ --- ---%
---- ----
Subtotal............................................ --- ---% --- ---
----
FHLB stock.......................................... 509 100.00 510 100.00
--------- ------ --------- ------
Total investment securities and FHLB stock.......... $ 509 100.00% $ 510 100.00%
========= ====== ========= ======
Average remaining life of investment securities..... ---
Other interest-earning assets:
Interest bearing deposits with banks................ $ 7,069 60.14% $ 2,071 31.18%
Federal funds sold.................................. 4,685 39.86 4,571 68.82
--------- ------ --------- ------
Total............................................... $ 11,754 100.00% $ 6,642 100.00%
========= ====== ========= ======
Securities Available-for-sale:
Mortgage-backed securities:
FNMA................................................ $ 2 .92% $ 2 .70%
FHLMC............................................... 215 99.08 282 99.30
--------- ------ --------- ------
Total mortgage-backed securities.................... $ 217 100.00% $ 284 100.00%
--------- ====== ========= ======
</TABLE>
The following table sets forth the contractual maturities of the Company's
mortgage-backed securities at June 30, 1999.
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<PAGE>
Due in June 30, 1999
10 to 20 Balance
Years Outstanding
----- -----------
(In Thousands)
Freddie Mac................. $ 215 $ 215
Fannie Mae.................. 2 2
---- ----
Total................... $ 217 $ 217
==== ====
SOURCES OF FUNDS
General. The Company's primary sources of funds are deposits, amortization
and prepayment of loan principal, maturities of investment securities,
short-term investments and funds provided from operations as well as FHLB
advances and short-term borrowings.
Deposits. The Company offers a variety of deposit accounts having a wide
range of interest rates and terms. The Company's deposits consist of passbook
and statement accounts, NOW accounts, Christmas Club and money market and
certificate accounts, including Individual Retirement Accounts. The Company
relies primarily on advertising, including newspaper and radio, pricing policies
and customer service to attract and retain these deposits. Neither premiums nor
brokered deposits are utilized.
The flow of deposits is influenced significantly by general economic
conditions, changes in money market and prevailing interest rates and
competition. The Company's mix of transaction accounts and certificate accounts
is less favorable than its peers, resulting in a higher cost of funds for the
Company in relation to its peer group. At June 30, 1999, 31.0% of the Company's
deposits were in transaction accounts, versus 69.0% in certificates.
The Company has become more susceptible to short-term fluctuations in
deposit flows, as customers have become more interest rate sensitive. The
Company manages the pricing of its deposits in keeping with its asset/liability
management, profitability and growth objectives. Based on its experience, the
Company believes that its passbook, demand and NOW accounts are relatively
stable sources of deposits. However, the ability of the Company to attract and
maintain certificate deposits, and the rates paid on these deposits, has been
and will continue to be significantly affected by market conditions.
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<PAGE>
The following table sets forth the dollar amount of savings deposits in the
various types of deposit programs offered by the Company for the periods
indicated.
June 30,
--------------------------------------------
1999 1998
-------------------- --------------------
Average Average Average Average
Amount Rate Amount Rate
------ ---- ------ ----
(Dollars in Thousands)
Transactions and Savings Deposits:
- ---------------------------------
Demand Deposits..................... $ 5,727 3.27% $ 5,737 3.15%
Money Market & NOW Accounts......... 11,268 2.57 9,520 2.87
------- ----- ------ -----
Total Non-Certificates.......... 16,995 2.81 15,257 2.98
------- ----- ------- -----
Certificates:
- ------------
Total Certificates.................. 39,980 5.50 39,720 5.60
------- ===== ------ -----
Total Deposits...................... $56,975 4.70% $ 54,977 4.87
======= ===== ======== =====
At June 30, 1999, the Company had approximately $5.2 million in certificate
accounts in amounts of $100,000 or more maturing as follows:
Maturity Period Amount
----------------------------------------------------- -------------------
(Dollars in
Thousands)
Three months or less........................... 370
Over three through six months.................. ---
Over six through 12 months..................... 2,351
Over 12 months................................. 2,497
-------------
Total.......................................... 5,218
=============
Borrowings. The Company's other available sources of funds, not currently
utilized, include advances from the FHLB of Atlanta and other borrowings. As a
member of the FHLB of Atlanta, the Association is required to own capital stock
in the FHLB of Atlanta and is authorized to apply for advances from the FHLB of
Atlanta. Each FHLB credit program has its own interest rate, which may be fixed
or variable, and range of maturities. The FHLB of Atlanta may prescribe the
acceptable uses for these advances, as well as limitations on the size of the
advances and repayment provisions. The Association's immediate credit
availability at the FHLB of Atlanta was approximately $8 million at June 30,
1999.
12
<PAGE>
The Company may also borrow funds from other financial institutions. At
June 30, 1999, the Company had a $2.65 million loan outstanding from a
commercial bank that was obtained to fund the Company's $6 per share
distribution to shareholders in June 1999.
COMPETITION
The Company experiences strong competition both in originating real estate
loans and in attracting deposits. This competition arises from a highly
competitive market area with numerous commercial banks and savings institutions,
as well as credit unions and mortgage bankers and, with respect to deposits,
banking institutions and other financial intermediaries. The Association
competes for loans principally on the basis of the interest rates and loan fees
it charges, the types of loans it originates and the quality of services it
provides to borrowers.
The Company attracts all of its deposits through the communities in which
its offices are located; therefore, competition for those deposits is
principally from other savings institutions, commercial banks, securities firms,
money market and mutual funds and credit unions located in the same community.
The ability of the Company to attract and retain deposits depends on its ability
to provide an investment opportunity that satisfies the requirements of
investors as to rate of return, liquidity, risk, convenient locations and other
factors. The Company competes for these deposits by offering a variety of
deposit accounts at competitive rates, convenient business hours and a
customer-oriented staff. At June 30, 1999, the Company had in excess of 60
financial institutions competing with it in its market area. The Company
estimates its market share of savings deposits in its market area to be
approximately 11.4%.
EMPLOYEES
At June 30, 1999, the Company had a total of 16 full-time employees and no
part-time employees. None of the Company's employees are represented by any
collective bargaining group. Management considers its employee relations to be
good.
13
<PAGE>
REGULATION
GENERAL
As a federal savings bank, Wyman Park is subject to regulation, supervision
and regular examination by the OTS. In addition, the FDIC has certain regulatory
and examination authority over OTS-regulated savings institutions and may
recommend enforcement actions against savings institutions to the OTS. The
supervision and regulation of Wyman Park is intended primarily for the
protection of the deposit insurance fund and depositors.
As a savings institution holding company, the Holding Company is subject to
OTS regulation, examination, supervision and reporting requirements. The Holding
Company also is required to file certain reports with, and otherwise comply with
the rules and regulations of, the SEC under the federal securities laws.
REGULATION OF WYMAN PARK
Regulatory Capital. The OTS's capital adequacy regulations require savings
institutions such as Wyman Park to meet three minimum capital standards: a
"core" capital requirement of between 3% and 5% of adjusted total assets, a
"tangible" capital requirement of 1.5% of adjusted total assets, and a
"risk-based" capital requirement of 8% of total risk-based capital to total
risk-weighted assets. In addition, the OTS has adopted regulations imposing
certain restrictions on savings institutions that have a total risk-based
capital ratio of less than 8%, a ratio of Tier 1 capital to risk-weighted assets
of less than 4% or a ratio of Tier 1 capital to total assets of less than 4% (or
3% if the institution is rated composite 1 under the CAMELS examination rating
system). See "--Prompt Corrective Regulatory Action."
The following table sets forth Wyman Park's compliance with its regulatory
capital requirements as of June 30, 1999.
<TABLE>
<CAPTION>
WYMAN PARK'S CAPITAL
CAPITAL REQUIREMENTS EXCESS CAPITAL
---------------- ----------------- --------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Tangible capital......... 9,850,000 14.0% 1,058,000 1.5% $8,792,000 12.5%
Core capital.............. 9,850,000 14.0 2,116,000 3.0 7,734,000 11.0
Total Risk-based capital 10,133,000 27.9 2,907,000 8.0 7,226,000 19.9
</TABLE>
Prompt Corrective Regulatory Action. The Federal Deposit Insurance Act
("FDI Act") requires the federal banking regulators to take prompt corrective
action in respect of depository institutions that do not meet certain minimum
capital requirements, including a leverage limit and a risk-based capital
requirement. The federal bank regulators, including the OTS, have issued
regulations that classify insured depository institutions by capital levels and
provide that the applicable agency will take various prompt corrective actions
to resolve the problems of any
14
<PAGE>
institution that fails to satisfy the capital standards. Under the joint prompt
corrective action regulations, a "well-capitalized" institution is one that is
not subject to any regulatory order or directive to meet any specific capital
level and that has or exceeds the following capital levels: a total risk-based
capital ratio of 10%, a Tier 1 risk-based capital ratio of 6%, and a ratio of
Tier 1 capital to total assets ("leverage ratio") of 5%. An "adequately
capitalized" institution is one that does not qualify as "well capitalized" but
meets or exceeds the following capital requirements: a total risk-based capital
of 8%, a Tier 1 risk-based capital ratio of 4%, and a leverage ratio of either
(i) 4% or (ii) 3% if the institution has the highest composite examination
rating. An institution not meeting these criteria is treated as
"undercapitalized," "significantly undercapitalized," or "critically
undercapitalized" depending on the extent to which its capital levels are below
these standards. An institution that falls within any of the three
"undercapitalized" categories will be subject to certain severe regulatory
sanctions required by the FDI Act and the implementing regulations. As of June
30, 1999, Wyman Park was "well-capitalized" as defined by the regulations.
Qualified Thrift Lender Test. The Home Owners' Loan Act ("HOLA") and OTS
regulations require all savings institutions to satisfy one of two Qualified
Thrift Lender ("QTL") tests or to suffer a number of sanctions, including
restrictions on activities. A savings institution must maintain its status as a
QTL on a monthly basis in at least nine out of every 12 months. An initial
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 Federal Home Loan Bank. If a savings institution
does not requalify under the QTL test within the three-year period after it
fails the QTL test, it would be required to terminate any activity not
permissible for a national bank and repay as promptly as possible any
outstanding advances from its Federal Home Loan Bank. In addition, the holding
company of such an institution would similarly be required to register as a bank
holding company with the Federal Reserve Board. At June 30, 1999, Wyman Park
qualified as a QTL.
Limitations on Capital Distributions. OTS regulations impose limitations
upon capital distributions by savings institutions, such as cash dividends,
payments to repurchase or otherwise acquire its shares, payments to stockholders
of another institution in a cash-out merger and other distributions charged
against capital. Under the OTS capital distribution regulations, a savings
institution that qualifies for expedited treatment of applications by
maintaining specified supervisory examination ratings and that is not otherwise
restricted in making capital distributions may, without prior approval by the
OTS, make capital distributions during a calendar year equal to its net income
for such year plus its retained net income for the preceding two years. Capital
distributions in excess of such amount are subject to prior OTS approval. In
addition, even if a proposed capital distribution is less than the above limit,
a savings institution must give notice to the OTS at least 30 days before
declaration of a capital distribution to its holding company.
Under the OTS's prompt corrective action regulations, Wyman Park would be
prohibited from paying dividends if Wyman Park were classified as
"undercapitalized" under such rules. See "--Prompt Corrective Regulatory
Action." Further, earnings of Wyman Park appropriated to bad debt reserves and
deducted for federal income tax purposes are not available for payment
15
<PAGE>
of dividends or other distributions to Wyman Park without payment of taxes at
the then current tax rate by Wyman Park on the amount of earnings removed from
the reserves for such distributions.
Transactions with Affiliates and Insiders. Generally, transactions between
a savings association or its subsidiaries and its affiliates are required to be
on terms as favorable to the association as transactions with non-affiliates. In
addition, certain of these transactions, such as loans to an affiliate, are
restricted to a percentage of the association's capital. Affiliates of Wyman
Park include the Holding Company and any company that is under common control
with the Association. In addition, a savings association may not lend to any
affiliate engaged in activities not permissible for a bank holding company or
acquire the securities of most affiliates. The OTS has the discretion to treat
subsidiaries of savings associations as affiliates on a case by case basis.
Certain transactions with directors, officers or controlling persons are
also subject to conflict of interest regulations enforced by the OTS. These
conflict of interest regulations and other statutes also impose restrictions on
loans to such persons and their related interests. Among other things, such
loans must generally be made on terms that are substantially the same as for
loans to unaffiliated individuals.
Reserve Requirements. The Federal Reserve Board requires all depository
institutions to maintain noninterest bearing reserves at specified levels
against their transaction accounts (primarily checking, NOW and Super NOW
checking accounts). At June 30, 1999, Wyman Park was in compliance with these
reserve requirements.
Liquidity Requirements. Wyman Park is required by OTS regulations to
maintain an average daily balance of liquid assets. The current minimum liquid
asset ratio required by the OTS is 4% of a liquidity base as defined under OTS
regulations. For the quarter ended June 30, 1999, Wyman Park was in compliance
with the requirement, with an average daily liquidity ratio of 29.3%.
Federal Home Loan Bank System. The Federal Home Loan Bank System consists
of 12 district Federal Home Loan Banks subject to supervision and regulation by
the Federal Housing Finance Board ("FHFB"). The Federal Home Loan Banks provide
a central credit facility primarily for member institutions. As a member of the
FHLB, Wyman Park is required to acquire and hold shares of capital stock in the
FHLB in an amount at least equal to 1% of the aggregate unpaid principal of its
home mortgage loans, home purchase contracts, and similar obligations at the
beginning of each year, or 1/20 of its advances (borrowings) from the FHLB,
whichever is greater. Wyman Park was in compliance with this requirement, with
an investment in FHLB stock at June 30, 1999 of $508,500.
REGULATION OF THE COMPANY
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
16
<PAGE>
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, which permits the OTS to restrict or prohibit activities that are
determined to be a serious risk to the subsidiary savings association.
As a unitary savings and loan holding company, the Company generally is not
subject to activity restrictions. If the Company were to acquire control of
another savings association as a separate subsidiary, it would become a multiple
savings and loan holding company, and the activities of the Company and any of
its subsidiaries (other than Wyman Park or any other SAIF-insured savings
association) would become subject to such restrictions unless such other
associations each qualify as a QTL and were acquired in a supervisory
acquisition.
If Wyman Park fails the QTL test, the Company must obtain the approval of
the OTS prior to continuing after such failure, directly or through its other
subsidiaries, any business activity other than those approved for multiple
savings and loan holding companies or their subsidiaries. In addition, within
one year of such failure the Company would be required to register as, and would
become subject to, the restrictions applicable to bank holding companies. The
activities authorized for a bank holding company are more limited than are the
activities authorized for a unitary or multiple savings and loan holding
company. See "--Qualified Thrift Lender Test."
The Company must obtain approval from the OTS before acquiring control of
any other SAIF-insured association. Such acquisitions are generally prohibited
if they result in a multiple savings and loan holding company controlling
savings associations in more than one state. However, such interstate
acquisitions are permitted based on specific state authorization or in a
supervisory acquisition of a failing savings institution.
17
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTIES
The following table sets forth information concerning the main office and a
branch office of the Company at June 30, 1999.
OWNED NET BOOK
YEAR OR VALUE AT
LOCATION OPENED LEASED(1) JUNE 30, 1999
---------------------------- ---------- ---------------- ---------------
MAIN OFFICE:
11 Ridgely Road 1977 Land Leased;(2) $56,600
Lutherville, MD 21093 Building Owned
BRANCH OFFICE:
7963 Baltimore/Annapolis Blvd. 1981 Leased;(3) N/A
Glen Burnie, MD 21060
- ---------------------
(1) See Note 6 to Notes to Consolidated Financial Statements.
(2) There are five, five-year options which expire in May 2027.
(3) Lease expires in November, 2001.
The Company's depositor and borrower customer files are maintained by an
independent data processing company. The net book value of the data processing
and computer equipment utilized by the Company at June 30, 1999 was
approximately $19,400.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company and its subsidiaries are parties to various
legal proceedings incident to its business. At June 30, 1999, there were no
legal proceedings which management anticipates would have a material adverse
effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the quarter
ended June 30, 1999.
18
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The information contained under the section captioned "Stock Listing and
Price Range of Common Stock" in the Company's 1999 Annual Report to Shareholders
(the "Annual Report") filed as Exhibit 13 hereto is incorporated herein by
reference.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The information contained in the table captioned "Selected Consolidated
Financial Information" in the Company's Annual Report is incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS
The following information appearing in the Company's Annual Report to
Stockholders for the year ended June 30, 1999, is incorporated by reference in
this Annual Report on Form 10-KSB and attached hereto as Exhibit 13.
Report of Independent Auditors
Consolidated Statements of Financial Condition as of June 30, 1999 and 1998
Consolidated Statements of Operations for the Years Ended June 30, 1999 and
1998
Consolidated Statements of Stockholders' Equity for Years Ended June 30,
1999 and 1998
Consolidated Statements of Cash Flows for Years Ended June 30, 1999 and 1998
Notes to Consolidated Financial Statements
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable
19
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
DIRECTORS
For information concerning the Board of Directors of the Company, the
information contained under the section captioned "Election of Directors" in the
Company's definitive proxy statement for the Company's 1999 Annual Meeting of
Shareholders (the "Proxy Statement") is incorporated herein by reference.
EXECUTIVE OFFICERS
For information concerning the executive officers of the Company, the
information contained under the section captioned "Executive Officers" in the
Company's definitive proxy statement for the Company's 1999 Annual Meeting of
Shareholders (the "Proxy Statement") is incorporated herein by reference.
COMPLIANCE WITH SECTION 16(A)
Information regarding delinquent Form 3, 4 or 5 filers is incorporated
herein by reference to the section entitled "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Proxy Statement.
ITEM 10. EXECUTIVE COMPENSATION
The information contained under the section captioned "Election of
Directors -- Executive Compensation" in the Proxy Statement is incorporated
herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
Information required by this item is incorporated
herein by reference to the section captioned "Voting
Securities and Principal Holders of Securities" in
the Proxy Statement.
(b) Security Ownership of Management
Information required by this item is incorporated
herein by reference to the sections captioned "Voting
Securities and Principal Holders of Securities" and
"Election of Directors" in the Proxy Statement.
20
<PAGE>
(c) Changes in Control
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
registrant.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by reference
to the section captioned "Election of Directors" in the Proxy Statement.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
REFERENCE TO
PRIOR FILING OR
EXHIBIT EXHIBIT NUMBER
NUMBER DOCUMENT ATTACHED HERETO
3(i) Certificate of Incorporation *
3(ii) Bylaws *
4 Instruments defining the rights of security holders, *
including debentures
10 Material Contracts
(a) Employment Contract between *
Ernest A. Moretti and the Association
(b) Executive Supplemental Retirement Plan **
13 Annual Report to Stockholders 13
21 Subsidiaries of Registrant 21
23 Consents of Experts and Counsel 23
27 Financial Data Schedule 27
- -------------
* Filed as exhibits to the Company's Form SB-2 Registration Statement as
initially filed on September 22, 1997 and subsequently amended (File
No. 333-36119) of the Securities Act of 1933. All of such previously
filed documents are hereby incorporated herein by reference in
accordance with Item 601 of Regulation S-B.
** Filed as exhibit 10(b) to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1998 and is hereby incorporated herein
by reference in accordance with Item 601 of Regulation S-B.
(B) REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K on May 26, 1999 to report a
$6.00 special cash distribution payable on June 21, 1999 to shareholders or
record as of June 7, 1999. The report is dated May 19, 1999.
21
<PAGE>
SIGNATURES
In accordance with Section 13 of 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WYMAN PARK BANCORPORATION, INC.
Date: 9/24/99 By: /s/ Ernest A. Moretti
-----------------------------------------
Ernest A. Moretti
(President and Chief Executive Officer)
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By: /s/ Ernest A. Moretti By: /s/Ronald W. Robinson
-------------------------------- -------------------------------
Ernest A. Moretti Ronald W. Robinson,
(Principal Executive Officer) (Principal Financial and
Accounting Officer)
Date: 9/24/99 Date: 9/24/99
By: /s/Allan B. Heaver By: /s/ H. Douglas Huether
-------------------------------- -------------------------------
Allan B. Heaver, H. Douglas Huether, Director
Chairman of the Board
Date: 9/24/99 Date: 9/24/99
By: /s/ John K. White By: /s/ John R. Beever
-------------------------------- -------------------------------
John K. White, Director John R. Beever, Director
Date: 9/24/99 Date: 9/24/99
By: /s/ Albert M. Copp By: /s/ Gilbert D. Marsiglia, Sr.
-------------------------------- -------------------------------
Albert M. Copp, Director Gilbert D. Marsiglia, Sr.,
Director
Date: 9/24/99 Date: 9/24/99
By: /s/Jay H. Salkin By: /s/ G. Scott Barhight
-------------------------------- -------------------------------
Jay H. Salkin, Director G. Scott Barhight, Director
Date: 9/24/99 Date: 9/24/99
22
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
June 30,
----------------------------------------------------------------
1999 1998 1997 1996 1995
----------------------------------------------------------------
(In Thousands)
Selected Financial Condition Data:
<S> <C> <C> <C> <C> <C>
Total assets............................................ $70,530 $70,541 $62,241 $63,866 $64,258
Loans receivable, net................................... 56,840 62,042 55,189 53,244 54,403
Mortgage-backed securities.............................. 217 284 356 424 520
Investment securities................................... --- --- 2,993 2,964 5,920
Deposits................................................ 58,008 54,018 56,095 57,871 58,474
Total equity............................................ 8,029 14,266 4,750 4,599 4,277
</TABLE>
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------------
1999 1998 1997 1996 1995
--------------------------------------------------
(In Thousands)
Selected Operations Data:
<S> <C> <C> <C> <C> <C>
Total interest income................................ $5,106 $5,081 $4,658 $4,725 $4,788
Total interest expense............................... 2,686 2,722 2,756 3,073 2,891
----- ----- ----- ----- -----
Net interest income............................... 2,420 2,359 1,902 1,652 1,897
Provision for (recovery of) loan losses.............. 5 8 145 25 (88)
----- ----- ----- ----- -----
Net interest income after provision for loan losses.. 2,415 2,351 1,757 1,627 1,985
Fees and service charges............................. 69 60 48 47 36
Gain on sales of loans, mortgage-backed securities
and investment securities......................... 49 6 6 20 23
Other non-interest income............................ 27 27 24 39 26
----- ----- ----- ----- -----
Total non-interest income............................ 145 93 78 106 85
Total non-interest expense........................... 1,555 1,597 1,614 1,278 1,361
----- ----- ----- ----- -----
Income before taxes.................................. 1,005 847 221 455 709
Income tax provision................................. 379 329 87 161 276
----- ----- ----- ----- -----
Net income........................................... $ 626 $ 518 $ 134 $ 294 $ 433
===== ===== ===== ===== =====
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------
Selected Financial Ratios and Other Data:
<S> <C> <C> <C> <C> <C>
Performance Ratios:
Return on assets (ratio of net income to average
total assets)..................................... .87% .77% .22% .46% .67%
Return on equity (ratio of net income to average
equity)........................................... 4.64 5.49 2.87 6.56 10.52
Interest rate spread information:
Average during period.............................. 2.49 2.75 2.76 2.26 2.70
End of period...................................... 2.36 2.68 2.77 2.19 2.25
Net interest margin(1)............................... 3.40 3.55 3.14 2.63 2.98
Ratio of operating expense to average total assets... 2.15 2.37 2.62 2.01 2.11
Ratio of average interest-earning assets to
Average interest-bearing liabilities............... 124.25 119.45 108.40 107.66 106.24
Loans as a percentage of total assets................ 80.59 87.95 88.67 83.37 84.66
Quality Ratios:
Non-performing assets to total assets at end of .00 .04 .28 .04 .30
period.............................................
Allowance for loan losses to non-performing loans.... --- 1,112.00 153.11 456.89 51.89
Allowance for loan losses to loans receivable, net... .50 .45 .49 .24 .18
Capital Ratios:
Stockholders' equity to total assets at end of period 11.38(2) 20.28 7.64 7.24 6.73
Average stockholders' equity to average assets....... 18.66 14.03 7.58 7.04 6.36
Other Data:
Number of full-service offices....................... 2 2 2 2 2
</TABLE>
- --------
(1) Net interest income divided by average interest-earning assets.
(2) Stockholders' equity at end of period reflects special return of capital
distribution.
3
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATIONS
Forward-Looking Statements
When used in this filing and in future filings by Wyman Park
Bancorporation, Inc. (the "Company") with the Securities and Exchange
Commission, in the Company's press releases or other public or shareholder
communications, the words or phrases "would be," "will allow," "intends to,"
"will likely result," "are expected to," "will continue," "is anticipated,"
"estimate," "project" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are subject to risks and
uncertainties, including but not limited to changes in economic conditions in
the Company's market area, changes in policies by regulatory agencies,
fluctuations in interest rates, demand for loans in the Company's market area
and competition, all or some of which could cause actual results to differ
materially from historical earnings and those presently anticipated or
projected.
The Company wishes to caution readers not to place undue reliance on any
such forward-looking statements, which speak only as of the date made, and
advises readers that various factors, including regional and national economic
conditions, substantial changes in levels of market interest rates, credit and
other risks of lending and investment activities and competitive and regulatory
factors, could affect the Company's financial performance and could cause the
Company's actual results for future periods to differ materially from those
anticipated or projected.
The Company does not undertake, and specifically disclaims any obligation,
to update any forward-looking statements to reflect occurrences or unanticipated
events or circumstances after the date of such statements.
General
Management's discussion and analysis of financial condition and results of
operations is intended to assist in understanding the financial condition and
results of operations of the Company. The information contained in this section
should be read in conjunction with the consolidated financial statements and
accompanying notes thereto. The principal business of the Company consists of
accepting deposits from the general public and investing these funds primarily
in loans, investment securities and short-term liquid investments. The Company's
loans consist primarily of loans secured by residential real estate located in
its market areas, commercial real estate loans and consumer loans.
The Company's net income is dependent primarily on its net interest income,
which is the difference between interest earned on interest-earning assets and
the interest paid on interest-bearing liabilities. Net interest income is a
function of the Company's "interest rate spread," which is the difference
between the average yield earned on interest-earning assets and the average rate
paid on interest-bearing liabilities. The interest rate spread is affected by
regulatory, economic and competitive factors that influence interest rates, loan
demand and deposit flows. To a lesser extent,
4
<PAGE>
the Company's net income also is affected by the level of general and
administrative expenses and the level of other income, which primarily consists
of service charges and other fees.
The operations of the Company are significantly affected by prevailing
economic conditions, competition and the monetary, fiscal and regulatory
policies of government agencies. Lending activities are influenced by the demand
for and supply of housing, competition among lenders, the level of interest
rates and the availability of funds. Deposit flows and costs of funds are
influenced by prevailing market rates of interest, primarily on competing
investments, account maturities and the levels of personal income and savings in
the Company's market area. The Company has been notified by its service
providers that they are making satisfactory progress in addressing the Year 2000
matter and that costs associated with resolving the issue will not be material.
Management of the Company will continue to monitor this issue.
Historically, the Company's mission has been to originate loans on a
profitable basis to the communities it serves. In seeking to accomplish this
mission, the Board of Directors and management have adopted a business strategy
designed (i) to maintain the Company's capital level in excess of regulatory
requirements; (ii) to maintain the Company's asset quality; (iii) to maintain,
and if possible, increase the Company's earnings; and (iv) to manage the
Company's exposure to changes in interest rates.
Financial Condition
June 30, 1999 compared to June 30, 1998
Total assets remained basically unchanged at $70.5 million at June 30, 1999
and June 30, 1998. Loan payoffs caused loans receivable to decrease by $5.2
million or 8.4% to $56.8 million at June 30, 1999 from $62.0 million at June 30,
1998. The $5.2 million decrease in loans receivable consisted of $4.3 million in
residential real estate loans, $288,000 in commercial real estate loans and
$690,000 in consumer loans. Cash and cash equivalents increased $5.3 million or
77.9%, to $12.1 million at June 30, 1999 from $6.8 million at June 30, 1998
primarily as a result of loan payoffs, increased savings deposits and increased
borrowings, offset in part by the Company's special distribution to
stockholders. Funds from loan payoffs were temporarily invested in cash
equivalents during a period of low loan demand to obtain substantially
comparable yields. Cash balances remained relatively high as the Company took
advantage of decreasing rates in the market place to originate and sell mortgage
loans in the secondary market.
Total savings deposits increased approximately $4.0 million or 7.4%, to
$58.0 million at June 30, 1999 from $54.0 million at June 30, 1998. The $4.0
million increase in savings deposits consisted of $2.8 million in money market
and NOW accounts, $1.0 million in time deposits (certificates of deposit) and
$200,000 in demand deposits. The increase in savings deposits is primarily the
result of marketing efforts to attract transaction accounts and small commercial
accounts.
Total liabilities increased approximately $6.2 million or 11.0%, to $62.5
million at June 30, 1999 from $56.3 million at June 30, 1998. This increase was
primarily the result of the $4.0 million
5
<PAGE>
increase in savings deposits and an increase of $2.7 million in borrowings, to
partially fund the Company's special distribution to stockholders, offset by a
decrease of $278,000 in Federal and state income taxes payable.
Total stockholders' equity declined approximately $6.3 million or 44.1%, to
$8.0 million at June 30, 1999 from $14.3 million at June 30, 1998. The decrease
was primarily the result of the payment of a special return of capital
distribution to stockholders of $5.4 million, the repurchase of 105,787 shares
of the Company's stock of $1.2 million, the Company's Recognition and Retention
Plan of $309,000, offset by net income of $626,000.
Operating Results
Comparison of Operating Results for the Years Ended June 30, 1999 and 1998
Performance Summary. Net income for the year ended June 30, 1999 was
approximately $626,000, an increase of $108,000, or 20.8% from net income of
$518,000 for the year ended June 30, 1998. The increase was primarily due to an
increase in net interest income of $61,000, a decrease in provision for loan
losses of $3,000, an increase in non-interest income of $52,000 and a decrease
in non-interest expense of $42,000, producing an increase in income before
provision for income taxes of $158,000 to $1,005,000 for the year ended June 30,
1999 as compared to $847,000 for the year ended June 30, 1998. For the years
ended June 30, 1999 and 1998, the returns on average assets were .87% and .77%,
respectively, while the returns on average equity were 4.64% and 5.49%,
respectively.
Net Interest Income. Net interest income increased by approximately
$61,000, or 2.6%, to $2,420,000 for the year ended June 30, 1999 from $2,359,000
for the year ended June 30, 1998. This reflects an increase of $25,000, or .5%,
in interest income to $5,106,000 in fiscal 1999 from $5,081,000 in fiscal 1998,
while interest expense was decreasing by $36,000, or 1.4%, to $2,686,000 in
fiscal 1999 from $2,722,000 in fiscal 1998. The increase in net interest income
arose primarily from the increase in the excess of the average balance of
interest-earning assets over the average balance of interest-bearing
liabilities.
For the year ended June 30, 1999, the yield on average interest-earning
assets was 7.18% compared to 7.64% for the year ended June 30, 1998. The cost of
average interest-bearing liabilities was 4.69% for the year ended June 30, 1999,
a decrease from 4.89% for the year ended June 30, 1998. The average balance of
interest-earning assets increased by $4.7 million or 7.1%, to $71.2 million for
the year ended June 30, 1999 from $66.5 million for the year ended June 30,
1998. The average balance of interest-bearing liabilities increased by $1.6
million or 2.9%, to $57.3 million for the year ended June 30, 1999, compared to
$55.7 million for the year ended June 30, 1998.
The interest rate spread decreased to 2.49% for the year ended June 30,
1999 from 2.75% for the year ended June 30, 1998 as the Company originated loans
at the lower market rates and as higher yielding loans were refinanced at lower
rates. The net interest margin decreased to 3.40% for the year ended June 30,
1999 from 3.55% for the year ended June 30, 1998.
6
<PAGE>
Provision for Loan Losses. During the year ended June 30, 1999, the Company
recorded a provision for loan losses of $4,600 compared to $8,000 for the year
ended June 30, 1998. During the year ended June 30, 1999, the Company's
nonperforming loans decreased to zero from $25,000.
Management will continue to monitor its allowance for loan losses, making
additions to the allowance through the provision for loan losses as economic
conditions and other factors dictate. Although the Company maintains its
allowance for loan losses at a level which it considers to be adequate to
provide for loan losses, there can be no assurance that future losses will not
exceed estimated amounts or that additional provisions for loan losses will not
be required in the future.
Non-Interest Income. For the year ended June 30, 1999 non-interest income
increased approximately $52,000 or 55.9%, to $145,000 from $93,000 for the year
ended June 30, 1998. This increase is primarily due to an increase in loan fees
and service charges of $9,000 and an increase in gains on sales of loans
receivable of $43,000 as the Company took advantage of market place conditions
to originate and sell mortgage loans during fiscal year 1999.
Non-Interest Expense. Non-interest expense decreased $42,000 or 2.6%, to
$1,555,000 for the year ended June 30, 1999 from $1,597,000 for the year ended
June 30, 1998. This decrease was primarily due to a decrease in salaries and
employee benefits of $112,000 or 11.3%, to $878,000 for the year ended June 30,
1999 from $990,000 for the year ended June 30, 1998, primarily due to the
funding of a supplemental executive retirement plan in the year ended June 30,
1998. This decrease in non-interest expense was offset by an increase in
professional services of $35,000 or 74.5% to $82,000 for the year ended June 30,
1999 from $47,000 for the year ended June 30, 1998, and an increase in other
non-interest expense of $46,000 or 24.3% to $235,000 for the year ended June 30,
1999 from $189,000 for the year ended June 30, 1998, consisting primarily of
contributions and employment agency fees.
Income Taxes. The provision for income taxes increased by approximately
$50,000 or 15.2%, to $379,000 for the year ended June 30, 1999 from $329,000 for
the year ended June 30, 1998. This increase results from the corresponding
$158,000 increase in income before the tax provision. The Company's effective
tax rates were 37.7% and 38.9% for the years ended June 30, 1999 and 1998,
respectively.
Yields Earned and Rates Paid
The following table presents for the periods indicated the total dollar
amount of interest income from average interest-earning assets and the resultant
yields, as well as the interest expense on average interest-bearing liabilities,
expressed both in dollars and rates. No tax equivalent adjustments were made.
All average balances are monthly average balances. The use of monthly averages,
rather than daily averages, does not materially affect the information in the
table. Non-accruing loans have been included in the table as loans carrying a
zero yield.
7
<PAGE>
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------------------------------------------------------
1999 1998
------------------------------------- ------------------------------------
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate
------- ---- ---- ------- ---- ----
(Dollars in Thousands)
Interest-Earning Assets:
<S> <C> <C> <C> <C> <C> <C>
Loans receivable(1)......... $ 60,154 $ 4,540 7.55% $59,695 $4,681 7.84%
Mortgage-backed securities.. 247 17 6.88 318 23 7.23
Investment securities....... --- --- --- 1,334 85 6.37
FHLB stock.................. 509 38 7.47 510 37 7.25
Other investments........... 10,248 511 4.99 4,624 255 5.51
----------- --------- ------- ------
Total interest-earning assets(1) $ 71,158 $ 5,106 7.18 $66,481 $5,081 7.64
=========== ========= ==== ======= ====== ====
Interest-Bearing Liabilities:
Savings deposits............ $ 5,727 $ 187 3.27% $ 5,737 $ 181 3.15%
Demand and NOW deposits..... 11,268 290 2.57 9,520 273 2.87
Certificate accounts........ 39,980 2,200 5.50 39,720 2,226 5.60
Escrow deposits............. 73 4 5.48 97 5 5.15
Borrowings.................. 221 5 2.26(2) 583 37 6.35
----------- --------- ------- ------
Total interest-bearing liabilities $ 57,269 $ 2,686 4.69 $55,657 $2,722 4.89
=========== ========= ==== ======= ====== ====
Net interest income........... $ 2,420 $2,359
========= ======
Net interest rate spread...... 2.49% 2.75%
==== ====
Net earning assets............ $ 13,889 $10,824
=========== =======
Net yield on average
interest-earning assets..... 3.40% 3.55%
==== ====
Average interest-earning assets
to average interest-bearing
liabilities................. 1.24x 1.19x
==== ====
</TABLE>
(1) Calculated net of deferred loan fees, loan discounts, loans in process and
loss reserves.
(2) Amounts reflect Company's short-term borrowing of $2.65 million on June 20,
1999 at an annual rate of 6.99%. For more information, see Note 8 of Notes
to Consolidated Financial Statements.
8
<PAGE>
Rate Volume Analysis
The following schedule presents the dollar amount of changes in interest
income and interest expense for major components of interest-earning assets and
interest-bearing liabilities. It distinguishes between the changes related to
outstanding balances and that due to the changes in interest rates. For each
category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume (i.e.,
changes in volume multiplied by old rate) and (ii) changes in rate (i.e.,
changes in rate multiplied by old volume). For purposes of this table, changes
attributable to both rate and volume, which cannot be segregated, have been
allocated proportionately to the change due to volume and the change due to
rate.
<TABLE>
<CAPTION>
Year Ended June 30,
1999 vs. 1998 1998 vs. 1997
---------------------------------- -------------------------------
Increase Increase
(Decrease) Total (Decrease) Total
Due to Increase Due to Increase
Volume Rate (Decrease) Volume Rate (Decrease)
------ ---- ---------- ------ ---- ----------
(Dollars in Thousands)
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C>
Loans receivable..................... $ 34 $(175) $(141) $454 $(23) $431
Mortgage-backed securities........... (5) (1) (6) (5) 1 (4)
Investment securities................ (85) (85) (68) 13 (55)
Other................................ 287 (30) 257 71 (20) 51
----- ----- ----- ---- ---- ----
Total interest-earning assets...... $ 231 $(206) $ 25 $452 $(29) $423
----- ----- ----- ---- ---- ----
Interest-bearing liabilities:
Savings deposits..................... $ --- $ 6 $ 6 $ (4) $ 11 $ 7
Demand and NOW deposits.............. 45 (28) 17 (7) (29) (36)
Certificate accounts................. 14 (40) (26) (25) (16) (41)
Escrow deposits...................... (1) --- (1) (1) --- (1)
Borrowings........................... (8) (24) (32) 7 --- 37
----- ----- ----- ---- ---- ----
Total interest-bearing liabilities. $ 50 $ (86) $ (36) $--- $(34) $(34)
----- ----- ----- ---- ---- ----
Net interest income................... $ 61 $457
===== ====
</TABLE>
9
<PAGE>
Asset/Liability Management
Quantitative Aspects of Market Risk. The Company does not maintain a
trading account for any class of financial instrument. Further, it is not
currently subject to foreign currency exchange rate risk or commodity price
risk. The stock in the FHLB of Atlanta does not have equity price risk because
it is issued only to members and is redeemable for its $100 par value. The
following table illustrates quantitative sensitivity to interest rate risk for
financial instruments other than cash and cash equivalents, FHLB stock and
demand deposit accounts for the Company as of June 30, 1999.
<TABLE>
<CAPTION>
Maturing in Years Ended June 30,
2001 & 2003 & 2005 2010
2000 2002 2004 2009 2019 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
(Dollars in Thousands)
Assets
------
Loans receivable:
<S> <C> <C> <C> <C> <C> <C> <C>
Amount................. $10,517 $ 5,945 $4,430 $16,231 $15,825 $4,922 $57,870
Average interest rate.. 7.87% 6.87% 7.45% 6.94% 7.21% 7.04% 7.22%
Mortgage-backed securities:
Amount................. $ 217 $ 217
Average interest rates. 6.46% 6.46%
Investment securities:
Amount.................
Average interest rates.
Liabilities
-----------
Deposit Certificate Accounts:
Amount................. $24,812 $13,419 $1,804 $40,035
Average interest rates. 5.60% 5.71% 5.34% 5.63%
Borrowings:
Amount.................. $2,650 $ 2,650
Average interest rate... 6.99% 6.99%
</TABLE>
Qualitative Aspects of Market Risk. One of the Company's principal
financial objectives is to achieve long-term profitability while reducing its
exposure to fluctuations in interest rates. The Company has sought to reduce
exposure of its earnings to changes in market interest rates by managing the
mismatch between asset and liability maturities and interest rates. The
principal element in achieving this objective has been to increase the
interest-rate sensitivity of the Company's assets by originating loans with
interest rates subject to periodic repricing to market conditions. Accordingly,
the Company has emphasized the origination of one- to three-year adjustable rate
mortgage loans, balloon loans, short-term and adjustable-rate commercial loans,
and consumer loans for retention in its portfolio.
An asset or liability is interest rate sensitive within a specific time
period if it will mature or reprice within that time period. If the Company's
assets mature or reprice more quickly or to a greater extent than its
liabilities, the Company's net portfolio value and net interest income would
tend to increase during periods of rising interest rates but decrease during
periods of falling interest rates. If the Company's assets mature or reprice
more slowly or to a lesser extent than its liabilities,
10
<PAGE>
the Company's net portfolio value and net interest income would tend to decrease
during periods of rising interest rates but increase during periods of falling
interest rates.
The Company's Board of Directors has formulated an Interest Rate Risk
Management Policy designed to promote long-term profitability while managing
interest-rate risk. The Board of Directors has established an Asset/Liability
Committee which consists primarily of the management team of the Company. This
committee meets periodically and reports to the Board of Directors quarterly
concerning asset/liability policies, strategies and the Company's current
interest rate risk position. The committee's first priority is to structure and
price the Company's assets and liabilities to maintain an acceptable interest
rate spread while reducing the net effects of changes in interest rates.
Management's principal strategy in managing the Company's interest rate
risk has been to maintain short and intermediate term assets in the portfolio,
including one and three year adjustable rate mortgage loans, as well as
increased levels of commercial and consumer loans, which typically are for short
or intermediate terms and carry higher interest rates than residential mortgage
loans. In addition, in managing the Company's portfolio of investment securities
and mortgage-backed and related securities, management seeks to purchase
securities that mature on a basis that approximates as closely as possible the
estimated maturities of the Company's liabilities or purchase securities that
have adjustable rate provisions. The Company does not engage in hedging
activities.
In addition to shortening the average repricing of its assets, the Company
has sought to lengthen the average maturity of its liabilities by adopting a
tiered pricing program for its certificates of deposit, which provides higher
rates of interest on its longer term certificates in order to encourage
depositors to invest in certificates with longer maturities. This policy is
blended with management's strategy for reducing the overall balance in
certificate accounts in order to reduce the Company's interest expense.
Net Portfolio Value. In order to encourage associations to reduce their
interest rate risk, the OTS adopted a rule incorporating an interest rate risk
("IRR") component into the risk-based capital rules. The IRR component is a
dollar amount that will be deducted from total capital for the purpose of
calculating an institution's risk-based capital requirement and is measured in
terms of the sensitivity of its net portfolio value ("NPV") to changes in
interest rates. NPV is the difference between incoming and outgoing discounted
cash flows from assets, liabilities, and off-balance sheet contracts. An
institution's IRR is measured as the change to its NPV as a result of a
hypothetical 200 basis points ("bp") change in market interest rates. A
resulting change in NPV of more than 2% of the estimated market value of its
assets will require the institution to deduct from its capital 50% of that
excess change. The rules provide that the OTS will calculate the IRR component
quarterly for each institution. Management reviews the OTS measurements on a
quarterly basis. In addition to monitoring selected measures on NPV, management
also monitors effects on net interest income resulting from increases or
decreases in rates. This measure is used in conjunction with NPV measures to
identify excessive interest rate risk. The following table presents the
Company's NPV at June 30, 1999, as calculated by the OTS, based on information
provided to the OTS by the Company.
11
<PAGE>
NPV as % of
Portfolio Value
Net Portfolio Value of Assets
-------------------------------------- -----------------------
Change NPV
in Rates $Amount $Change % Change Ratio % Change
-------- ------- ------- -------- ----- --------
(Dollars in Thousands)
+300 $8,201 ($2,972) (27)% 12.10% (3.46)%
+200 9,279 (1,895) ( 17) 13.40 (2.15)
+100 10,304 (869) (8) 14.60 (.96)
Static 11,173 --- --- 15.56 ---
(100) 11,732 559 5 16.13 .57
(200) 11,976 802 7 16.31 .76
(300) 12,116 942 8 16.38 .82
In the above table, the first column on the left presents the basis points
increments of yield curve shifts. The second column presents the overall dollar
amount of NPV at each basis point increment. The third and fourth columns
present the Company's actual position in dollar change and percentage change in
NPV at each basis point increment. The remaining columns present the Company's
percentage and percentage change in its NPV as a percentage of portfolio value
of assets.
Had it been subject to the IRR component at June 30, 1999 the Company would
have been considered to have had a greater than normal level of interest rate
exposure and a deduction from capital of $53,500 would have been required.
Although the OTS has informed the Company that it is not subject to the IRR
component discussed above, the Company is still subject to interest rate risk
and, as can be seen above, rising interest rates will reduce the Company's NPV.
The OTS has the authority to require otherwise exempt institutions to comply
with the rule concerning interest rate risk.
Certain shortcomings are inherent in the method of analysis presented in
the computation of NPV. Although certain assets and liabilities may have similar
maturities or periods within which they will reprice, they may react differently
to changes in market interest rates. The interest rates on certain types of
assets and liabilities may fluctuate in advance of changes in market interest
rates, while interest rates on other types may lag behind changes in market
rates.
The Company's Board of Directors is responsible for reviewing the Company's
asset and liability policies. The Board reviews interest rate risk and trends on
a quarterly basis and liquidity, capital ratios and requirements, on a monthly
basis. Management is responsible for administering the policies and
determinations of the Board of Directors with respect to the Association's
assets and liability goals and strategies.
12
<PAGE>
Liquidity and Capital Resources
The primary investment activity of the Company is originating one- to
four-family residential mortgages, commercial real estate loans, and consumer
loans to be held to maturity. For the fiscal years ended June 30, 1999 and 1998
the Company originated loans for its portfolio in the amount of $10.0 million
and $16.5 million, respectively. For the same two fiscal years, these activities
were funded from repayments of $14.2 million and $9.7 million, respectively, and
sales and participations of $4.6 million and $711,000, respectively.
The Company is required to maintain minimum levels of liquid assets under
government regulations. The Company's liquid assets are determined by adding (1)
cash on hand, (2) daily investable deposits, (3) U.S. Government agency
obligations with maturities of less than five years and (4) accrued interest on
unpledged liquid assets. The liquidity base is defined as net withdrawable
accounts maturing in less than one year, plus short-term borrowings. The
Company's liquidity ratio is determined by dividing the sum of the liquid assets
for each calendar day in the current quarter by the liquidity base at the end of
the preceding quarter multiplied by the number of calendar days in the current
quarter.
The Company's most liquid assets are cash and cash equivalents, which
include short-term investments. At June 30, 1999 and 1998, cash and cash
equivalents were $12.1 million and $6.8 million, respectively. In addition, the
Company has used jumbo certificates of deposit as a source of funds. Deposits of
$100,000 or more represented $8.6 million at June 30, 1999 (of which $5.2
million were jumbo certificates of deposit) and $5.7 million at June 30, 1998,
or 14.8% and 10.6% of total deposits, respectively. The regulatory liquidity
requirement for the Company is 4.0%. The Company has always met the liquidity
requirements. The Company's eligible total liquidity ratios were 29.3% and
18.7%, respectively, at June 30, 1999 and 1998.
Liquidity management for the Company is both an ongoing and long-term
function of the Company's asset/liability management strategy. Excess funds,
when applicable, generally are invested in overnight deposits at a correspondent
bank and at the FHLB of Atlanta. Currently when the Company requires funds,
beyond its ability to generate deposits, additional sources of funds are
available through the FHLB of Atlanta. The Company has the ability to pledge its
FHLB of Atlanta stock or certain other assets as collateral for such advances.
Management and the Board of Directors believe that due to significant amounts of
adjustable rate mortgage loans that could be sold and the Company's ability to
acquire funds from the FHLB of Atlanta, the Company's liquidity is adequate.
The Company's principal sources of funds are deposits, loan repayments and
prepayments, short-term borrowings and other funds provided by operations. While
scheduled loan repayments are relatively predictable, deposit flows and early
loan prepayments are more influenced by interest rates, general economic
conditions, and competition. The Company maintains investments in liquid assets
based upon management's assessment of (1) need for funds, (2) expected deposit
flows, (3) yields available on short-term liquid assets and (4) objectives of
the asset/liability management program.
13
<PAGE>
Impact of Inflation and Changing Prices
The financial statements and related data presented herein have been
prepared in accordance with generally accepted accounting principles which
require the measurement of financial position and operating results in terms of
historical dollars without considering changes in the relative purchasing power
of money over time due to inflation. The primary impact of inflation on the
operations of the Company is reflected in increased operating costs. Unlike most
industrial companies, virtually all of the assets and liabilities of a financial
institution are monetary in nature. As a result, interest rates, generally, have
a more significant impact on a financial institution's performance than does
inflation. Interest rates do not necessarily move in the same direction or to
the same extent as the prices of goods and services.
Current Accounting Issues
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" was issued in June, 1999. This Statement standardizes the accounting
for derivative instruments including certain derivative instruments embedded in
other contracts, by requiring that an entity recognize these items as assets or
liabilities in the statement of financial position and measure them at fair
value. This Statement generally provides for matching the timing of gain or loss
recognition on the hedging instrument with the recognition of the changes in the
fair value of the hedged asset or liability that are attributable to the hedged
risk or the earnings effect of the hedged forecasted transaction. The Statement,
which is effective for all fiscal quarters of all fiscal years beginning after
June 15, 2000, will not affect the Company's financial position or its results
of operations.
Impact of the Year 2000
The Company has conducted a comprehensive review of its environmental and
computer systems to identify any potential risk associated with the Year 2000,
and has developed an implementation plan to address the issues.
The Company's data processing is performed by a service provider. Other
support software, computer hardware and environmental controls, such as HVAC and
alarm systems, utilized in-house are under maintenance agreements with third
party vendors, consequently the Company is very dependent on these vendors to
conduct its business. The Company has contacted each vendor to request time
tables for Year 2000 compliance and expected costs, if any, to be passed along
to the Company. To date, the Company has been part of a national testing of its
service provider, and following the testing, the service provider has stated
that their system is Year 2000 qualified. All software applications considered
mission critical have been tested and are Year 2000 qualified. Other support
software, although not considered mission critical, is being tested and Year
2000 qualified as vendors provide upgrades and instructions for testing.
Environmental controls do not utilize date driven computer chips, and present no
Year 2000 risk.
The Company has developed a detailed Business Resumption and Contingency
Plan. In the event that the Company can not function normally on the first
business day of the Year 2000, the plan outlines contingency planning for both
environmental and operational failures related to the
14
<PAGE>
Year 2000. The Company has contracted with its service provider to reserve a
seat at a disaster recovery site, in the worst-case event that the Company does
not have electrical power on the first business day of the Year 2000, or for any
extended period. The Company will also have year-end reports from its service
provider, and can function manually for a limited time, using year-end balances.
The Company has determined that, although more labor intense, functions
performed by support software can be performed manually, if necessary. The
Company previously identified certain hardware and equipment that was not Year
2000 compliant. This hardware and equipment has been replaced and the related
capital expenditures totaled approximately $12,000 and have been included in the
1999 fiscal year results. Expenses related to Year 2000 are not expected to have
a significant impact on the Company's financial position.
15
<PAGE>
Independent Auditor's Report
The Board of Directors
Wyman Park Bancorporation, Inc.
Lutherville, Maryland
We have audited the accompanying consolidated statements of financial condition
of Wyman Park Bancorporation, Inc. and Subsidiaries as of June 30, 1999 and
1998, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the two years in the two year period ended June 30,
1999. These consolidated financial statements are the responsibility of Wyman
Park Bancorporation, Inc.'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 audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial position of Wyman
Park Bancorporation, Inc. and Subsidiaries at June 30, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
two years in the two year period ended June 30, 1999, in conformity with
generally accepted accounting principles.
August 9, 1999
Baltimore, Maryland
F-1
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
ASSETS
<S> <C> <C>
Cash and non-interest bearing deposits $ 346,756 $ 206,303
Interest bearing deposits in other banks 7,068,548 2,071,076
Federal funds sold 4,685,426 4,570,744
------------ ------------
Total cash and cash equivalents (Notes 1 and 13) 12,100,730 6,848,123
Loans receivable, net (Notes 1, 4 and 13) 56,839,675 62,042,464
Mortgage backed securities held-to-maturity at amortized
cost, fair value of $217,971 (1999) and $291,212 (1998)
(Notes 1, 3 and 13) 216,663 283,715
Federal Home Loan Bank of Atlanta stock, at cost
(Notes 2 and 13) 508,500 509,900
Accrued interest receivable (Note 5) 292,175 328,934
Ground rents owned, at cost (Note 13) 122,600 129,108
Property and equipment, net (Notes 1 and 6) 155,281 188,120
Federal and state income taxes receivable 13,688 130
Deferred tax asset (Notes 1 and 9) 189,020 150,019
Prepaid expenses and other assets 92,056 60,504
------------ ------------
Total assets $ 70,530,388 $ 70,541,017
============ ============
LIABILITIES AND EQUITY
Liabilities
- -----------
Demand deposits $ 5,803,776 $ 5,611,764
Money market and NOW accounts 12,169,347 9,429,037
Time deposits 40,035,036 38,977,347
------------ ------------
Total deposits (Notes 7 and 13) 58,008,159 54,018,148
Checks outstanding in excess of bank balance -- 143,430
Borrowings (Notes 8 and 13) 2,650,000 --
Advance payments by borrowers for taxes,
insurance and ground rents (Note 13) 1,278,634 1,368,467
Accrued interest payable on savings deposits 20,148 17,495
Accrued interest on borrowings 5,038 --
Federal and state income taxes payable 727 279,073
Accrued expenses and other liabilities 538,375 448,120
------------ ------------
Total liabilities 62,501,081 56,274,733
Commitments and contingencies (Notes 4, 6, 9, 10 and 13)
Stockholders' Equity
- --------------------
Common stock, par value $.01 per share, authorized 2,000,000
shares, issued 1,011,713 shares in 1999 and in 1998 10,117 10,117
Additional paid-in capital 3,959,985 9,704,005
Contra equity - Employee Stock Ownership Plan (ESOP) (632,420) (720,090)
Retained earnings, substantially restricted 5,891,389 5,272,252
Treasury stock at cost, 105,787 shares in 1999 (1,199,764) --
------------ ------------
Total stockholders' equity 8,029,307 14,266,284
------------ ------------
Total liabilities and stockholders' equity $ 70,530,388 $ 70,541,017
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-2
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
CONSOLIDATED STATEMENTS OF OPERATIONS
JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Interest and fees on loans receivable $4,540,414 $4,680,659
Interest on mortgage backed securities 16,824 23,301
Interest on investment securities -- 85,215
Interest on other investments 548,437 292,130
---------- ---------
Total interest income 5,105,675 5,081,305
Interest on savings deposits 2,677,149 2,679,815
Interest on Federal Home Loan Bank advances (short term) -- 37,394
Interest on borrowings 5,038 --
Interest on escrow deposits 4,008 5,327
---------- ---------
Total interest expense 2,686,195 2,722,536
Net interest income 2,419,480 2,358,769
Provision for loan losses (Notes 1 and 4) 4,600 8,000
---------- ---------
Net interest income after provision for loan losses 2,414,880 2,350,769
Other Income
- ------------
Loan fees and service charges 69,132 59,831
Gains on sales of loans receivable 49,270 6,518
Other 26,752 26,834
---------- ---------
Total other income 145,154 93,183
General and Administrative Expenses
- -----------------------------------
Salaries and employee benefits 877,553 989,616
Occupancy costs 94,342 94,999
Federal deposit insurance premiums 33,432 35,112
Furniture and fixtures depreciation and maintenance 51,442 63,515
Data processing 84,273 73,262
Advertising 42,439 52,770
Franchise and other taxes 54,015 51,500
Professional services 82,355 47,426
Other 234,915 188,699
---------- ---------
Total general and administrative expenses 1,554,766 1,596,899
Income before tax provision 1,005,268 847,053
Provision for income taxes (Notes 1 and 9) 379,301 329,220
---------- ---------
Net income $ 625,967 $ 517,833
========== ==========
Basic earnings per share $ 0.70 $ N/A
========== ==========
Diluted earnings per share $ 0.70 $ N/A
========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-3
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
Accumulated
Additional Contra Equity Other
Common Paid-In Employee Stock Retained Comprehensive Treasury
Stock Capital Ownership Plan Earnings Income Stock Total
----- ------- -------------- -------- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1997 $ -- $ -- $ -- $ 4,754,419 $ (4,600) $ -- $ 4,749,819
Proceeds from stock
offering net of cost 10,117 9,662,936 -- -- -- -- 9,673,053
Borrowings for Employee
Stock Ownership Plan -- -- (809,370) -- -- -- (809,370)
Compensation under stock
based benefit plan -- 41,069 89,280 -- -- -- 130,349
Comprehensive Income:
Net income -- -- -- 517,833 -- -- --
Adjustment to unrealized
holding losses on
available for sale
securities, net of
taxes $2,900 -- -- -- -- 4,600 -- --
Comprehensive income -- -- -- -- -- -- 522,483
-------- ----------- --------- ------------ ---------- ------------ -----------
Balance at June 30, 1998 10,117 9,704,005 (720,090) 5,272,252 -- -- 14,266,284
Purchase of 105,787 shares
of common stock -- -- -- -- -- (1,199,764) (1,199,764)
Compensation under stock
based benefit plan,
net of tax -- (5,797) 87,670 -- -- -- 81,873
Deferred compensation -
Recognition And Retention
Plan ("RRP") -- (378,334) -- (6,830) -- -- (385,164)
Compensation under RRP -- 75,667 -- -- -- -- 75,667
Special distribution
($6.00 per share) -- (5,435,556) -- -- -- -- (5,435,556)
Net income -- -- -- 625,967 -- -- 625,967
-------- ------------ --------- ------------ ---------- ------------ -----------
Balance at June 30, 1999 $ 10,117 $ 3,959,985 $(632,420) $ 5,891,389 $ -- $ (1,199,764) $ 8,029,307
======== ============ ========= ============ ========== ============ ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-4
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
Cash flows from operating activities
<S> <C> <C>
Net income $ 625,967 $ 517,833
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 52,829 62,158
Non-cash compensation under Stock Based
Benefit and Bonus Plans 157,540 130,349
Deferred income tax benefit (39,001) (94,413)
Provision for loan losses 4,600 8,000
Amortization of loan fees (88,465) (88,909)
Gain on sales of loans receivable (49,270) (6,518)
Loans originated for resale (4,575,600) (710,700)
Proceeds from sale of loans originated for resale 4,624,870 717,218
Decrease in accrued interest receivable 36,759 8,460
(Increase) decrease in prepaid expenses and
other assets (31,552) 28,260
Increase in accrued expenses and other liabilities 90,255 327,969
Increase in federal and state income taxes receivable (13,558) (130)
(Decrease) increase in federal and state income
taxes payable (278,346) 262,910
Increase (decrease) in accrued interest payable 7,691 (1,499)
----------- -----------
Net cash provided by operating activities 524,719 1,160,988
----------- -----------
Cash flows from investment activities
- -------------------------------------
Maturity of investment securities available for sale -- 3,000,000
Net decrease (increase) in loans receivable 5,286,654 (5,212,938)
Purchases of loans receivable -- (1,560,051)
Mortgage backed securities principal repayments 67,052 72,472
Sale of Federal Home Loan Bank of Atlanta stock 1,400 --
Purchases of property and equipment (19,990) (46,959)
Sale of ground rents owned 6,508 --
----------- -----------
Net cash provided by (used in) investing activities 5,341,624 (3,747,476)
----------- ----------
</TABLE>
F-5
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
Cash flows from financing activities
- ------------------------------------
<S> <C> <C>
Net increase (decrease) in savings deposits $ 3,990,011 $ (2,077,184)
Net (decrease) increase in checks outstanding
in excess of bank balance (143,430) 143,430
(Decrease) increase in advance payments by borrowers
for taxes, insurance and ground rents (89,833) 127,590
Increase in borrowings 2,650,000 --
Net proceeds from issuance of common stock -- 8,863,683
Special distribution (5,435,556) --
Repurchase common stock (1,199,764) --
Common shares repurchased under Stock Bonus Plan (385,164) --
------------ ------------
Net cash provided by (used in) financing activities (613,736) 7,057,519
------------ ------------
Net increase in cash and cash equivalents 5,252,607 4,471,031
Cash and cash equivalents at beginning of year 6,848,123 2,377,092
------------ ------------
Cash and cash equivalents at end of year $ 12,100,730 $ 6,848,123
============ ============
Supplemental information
- ------------------------
Interest paid on savings deposits and borrowed funds $ 2,686,196 $ 2,724,709
============ ============
Income taxes $ 732,411 $ 159,604
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-6
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
------------------------------------------
Basis of Presentation
---------------------
The accompanying consolidated financial statements for the year
ended June 30, 1999 include Wyman Park Bancorporation, Inc. (the
"Company") and its wholly-owned subsidiaries, Wyman Park Federal
Savings and Loan Association (the "Association") and W. P. Financial
Corporation. All significant intercompany transactions have been
eliminated. The Company is the holding company of the Association.
The Association's primary business activity is the acceptance of
deposits from the general public and using the proceeds for
investments and loan originations. The Association is subject to
competition from other financial institutions. The Association is
subject to the regulations of certain federal agencies and undergoes
periodic examinations by those regulatory authorities.
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the statements of
financial condition and income and expenses for the period. Actual
results could differ significantly from those estimates. Material
estimates that are particularly susceptible to significant change in
the near term relate to the determination of the allowance for loans
losses.
Mortgage Backed Securities
--------------------------
Debt securities are classified as held to maturity and are
recorded at amortized cost. Management has the positive intent and
ability to hold the securities to maturity. Management does not invest
in securities for trading purposes. Fair value is determined based on
bid prices published in financial newspapers or bid quotations
received from securities dealers.
Premiums and discounts on mortgage backed securities are
amortized over the term of the security using the interest method.
Gains and losses on the sale of investments and mortgage backed
securities are determined using the specific identification method.
Property and Equipment
----------------------
Property and equipment are carried at cost less accumulated
depreciation and amortization. Depreciation and amortization are
accumulated using the straight-line method over the estimated useful
lives of the assets. Additions and improvements are capitalized, and
charges for repairs and maintenance are expensed when incurred. The
related cost and accumulated depreciation or amortization are
eliminated from the accounts when an asset is sold or retired and the
resultant gain or loss is credited or charged to income.
F-7
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies - Continued
------------------------------------------
Income Taxes
------------
Deferred income taxes are recognized for temporary differences
between the financial reporting basis and income tax basis of assets
and liabilities based on enacted tax rates expected to be in effect
when such amounts are realized or settled. Deferred tax assets are
recognized only to the extent that it is more likely than not that
such amounts will be realized based on consideration of available
evidence.
Loans Receivable
----------------
Loans receivable that management has the intent and ability to
hold for the foreseeable future or until maturity or pay-off are
reported at their outstanding principal balance adjusted for any
charge-offs, the allowance for loan losses, and any deferred fees or
costs on originated loans.
Loan origination fees and certain direct origination costs are
capitalized and recognized as an adjustment of the yield of the
related loan.
An allowance for loan losses is provided through charges to
income in an amount that management believes will be adequate to
absorb losses on existing loans that may become uncollectible, based
on evaluations of the collectibility of loans and prior loan loss
experience. The evaluations take into consideration such factors as
changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans, and current
economic conditions that may affect the borrowers' ability to pay.
Determining the amount of the allowance for loan losses requires the
use of estimates and assumptions. Management believes the allowance
for losses on loans is adequate. While management uses available
information to estimate losses on loans, future additions to the
allowances may be necessary based on changes in economic conditions,
particularly in the State of Maryland. In addition, various regulatory
agencies, as an integral part of their examination process,
periodically review the Association's allowances for losses on loans.
Such agencies may require the Association to recognize additions to
the allowances based on their judgments about information available to
them at the time of their examination. Statement of Financial
Accounting Standards ("SFAS") No. 114, as amended by SFAS No. 118
addresses the accounting by creditors for impairment of certain loans.
It is generally applicable for all loans except large groups of
smaller balance homogeneous loans that are collectively evaluated for
impairment, including residential mortgage loans and consumer
installment loans. It also applies to all loans that are restructured
in a troubled debt restructuring involving a modification of terms.
SFAS No. 114 requires
F-8
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies - Continued
------------------------------------------
Loans Receivable - Continued
----------------
that impaired loans be measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate, or
at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. A loan is considered
impaired when, based on current information and events, it is probable
that a creditor will be unable to collect all amounts due according to
the contractual terms of the loan agreement.
Accrual of interest is discontinued on a loan when management
believes, after considering economic and business conditions and
collection efforts, that the borrower's financial condition is such
that collection of interest is doubtful. When a payment is received on
a loan on non-accrual status, the amount received is allocated to
principal and interest in accordance with the contractual terms of the
loan.
Foreclosed Real Estate
----------------------
Real estate acquired through foreclosure is initially recorded at
the lower of cost or estimated fair value, less estimated selling
costs. Management periodically evaluates the carrying value of real
estate owned and establishes a valuation allowance for declines in
fair value, less estimated selling costs, below the initially recorded
value. Costs relating to holding such real estate are charged against
income in the current period, while costs relating to improving such
real estate are capitalized until a saleable condition is reached.
Earnings Per Share
------------------
The Company adopted Statement of Financial Accounting Standards
No. 128, "Earnings Per Share" in 1999. This Standard establishes
revised standards for computing and presenting earnings per share data
("EPS"). It requires dual presentation of "basic" and "diluted" EPS on
the face of the statements of income and a reconciliation of the
numerators and denominations used in the calculation of the "basic"
and "diluted" EPS.
Basic EPS is computed by dividing net income by the weighted
average number of common shares outstanding for the appropriate
period. Unearned ESOP shares are not included in outstanding shares.
Diluted EPS is computed by dividing net income by the weighted average
shares outstanding as adjusted for the dilutive effect of stock
options and unvested stock awards based on the "treasury stock"
method. Basic and
F-9
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies - Continued
------------------------------------------
Earnings Per Share - Continued
------------------
diluted earnings per share have not been presented for fiscal 1998
since the Association converted to stock form on January 5, 1998 and
such information would not be meaningful. Information relating to the
calculation of net income per share of common stock is summarized for
the year ended June 30, 1999, as follows:
1999
----
Net income $625,967
========
Weighted Average Shares
Outstanding used for basic EPS 888,705
Dilutive Items
Stock options 5,430
Unvested stock awards 1,737
-------
Adjusted weighted average shares outstanding
used for dilutive EPS 895,872
=======
Statement of Cash Flows
-----------------------
For the purposes of the statement of cash flows, the Association
considers all highly liquid investments with maturities at date of
purchase of three months or less to be cash equivalents. Cash
equivalents consist of interest-bearing deposits and federal funds.
Reclassification
----------------
Certain prior years' amounts have been reclassified to conform to
the current year's method of presentation.
Note 2 - Insurance of Savings Accounts and Related Matters
-------------------------------------------------
The Federal Deposit Insurance Corporation, through the Savings
Association Insurance Fund, insures deposits of account holders up to
$100,000. The Association pays an annual premium to provide for this
insurance. The Association is a member of the Federal Home Loan Bank
System and is required to maintain an investment in the stock of the
Federal Home Loan Bank of Atlanta equal to at least 1% of the unpaid
principal balances of its residential mortgage loans, .3% of its total
assets or 5% of its outstanding advances from the bank, whichever is
greater. Purchases and sales of stock are made directly with the bank
at par value.
F-10
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Held-to-Maturity Securities:
---------------------------
Mortgage backed securities are guaranteed by the Federal National
Mortgage Association (FNMA) or the Federal Home Loan Mortgage
Corporation (FHLMC) as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
June 30, 1999
FNMA $ 1,832 $ 64 $ -- $ 1,896
FHLMC 214,831 1,244 -- 216,075
-------- -------- ----- --------
Mortgage backed
securities $216,663 $ 1,308 $ -- $217,971
======== ======== ===== ========
June 30, 1998
FNMA $ 2,098 $ 81 $ -- $ 2,179
FHLMC 281,617 7,416 -- 289,033
-------- -------- ----- --------
Mortgage backed
securities $283,715 $ 7,497 $ -- $291,212
======== ======== ===== ========
There were no sales of investment securities or mortgage backed
securities during the years ended June 30, 1999 and 1998.
Note 4 - Loans Receivable
----------------
Substantially all of the Association's loans receivable are
mortgage loans secured by residential and commercial real estate
properties located in the State of Maryland. Loans are extended only
after evaluation by management of customers' creditworthiness and
other relevant factors on a case-by-case basis. The Association
generally does not lend more than 95% of the appraised value of a
property and requires private mortgage insurance on residential
mortgages with loan-to-value ratios in excess of 80%. In addition, the
Association generally obtains personal guarantees of repayment from
borrowers and/or others for construction, commercial and multi-family
residential loans and disburses the proceeds of construction and
similar loans only as work progresses on the related projects.
F-11
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Loans Receivable - Continued
----------------
Residential lending is generally considered to involve less risk
than other forms of lending, although payment experience on these
loans is dependent to some extent on economic and market conditions in
the Association's primary lending area. Commercial and construction
loan repayments are generally dependent on the operations of the
related properties or the financial condition of its borrower or
guarantor. Accordingly, repayment of such loans can be more
susceptible to adverse conditions in the real estate market and the
regional economy.
Loans receivable are summarized as follows at June 30:
1999 1998
---- ----
Loans secured by first mortgages on real estate:
Residential - one-to-four family $ 47,324,070 $ 51,779,174
Residential - multi-family 508,109 361,994
Commercial 6,395,139 6,683,136
Construction loans 621,000 --
------------ ------------
Total first mortgage loans 54,848,318 58,824,304
Home equity lines-of-credit 2,849,665 3,390,206
Home improvement loans 13,323 12,183
Loans secured by savings deposits 150,695 309,222
Overdraft lines of credit 8,008 --
------------ ------------
57,870,009 62,535,915
Less: Undisbursed portion of loans in process (528,500) --
Unearned loan fees, net (219,234) (215,451)
Allowance for loan losses (282,600) (278,000)
------------ ------------
Loans receivable, net $ 56,839,675 $ 62,042,464
============ ============
The following is a summary of non-performing loans and troubled
debt restructuring as of June 30:
1999 1998
---- ----
Non-accrual loans $ -- $ 25,286
Troubled debt restructuring -- --
-------- ---------
Total non-performing loans and troubled
debt restructuring $ -- $ 25,296
======== =========
F-12
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Loans Receivable - Continued
----------------
Loans are placed on non-accrual status when they become ninety
days or more delinquent. Interest income on such loans is recognized
only to the extent that payments have been received. The accrual of
interest income on these loans is resumed only after the borrowers
have taken steps to bring the loans current and management has reason
to believe the loans are no longer impaired. The contractual amount of
interest that would have been recorded on the above non-accrual loans
at June 30, 1998 was $1,270. Actual interest income recorded on such
loans was $2,389 for the year ended June 30, 1998. Non-accrual loans
at June 30, 1998 and for the year then ended were all residential
mortgage loans not included within the scope of SFAS No. 114.
Accordingly, there were no allowances for loan losses established
specifically for these loans. The average non-accrual loan balance for
the year ended June 30, 1999 was $30,243.
The Association, through its normal asset review process,
classifies certain loans which management believes involve a degree of
risk warranting additional attention. Not included above in
non-performing and restructured loans was $191,957 and $462,579 at
June 30, 1999 and 1998, respectively, which had not yet become ninety
days or more delinquent, but had been designated by management for
additional collection and monitoring efforts.
Changes in the allowance for losses on loans are summarized as
follows for the years ended June 30:
1999 1998
---- ----
Balance at beginning of the year $278,000 $270,000
Provision for loan losses 4,600 8,000
Charge-offs, net of recoveries -- --
-------- --------
Balance at end of the year $282,600 $278,000
======== ========
Commitments to extend credit are agreements to lend to customers,
provided that terms and conditions established in the related
contracts are met. At June 30, 1999, the Association had commitments
to originate first mortgage loans on real estate and home equity loans
exclusive of undisbursed loan funds of $1,721,800, of which $1,360,800
carry a fixed rate, ranging between 6.125% and 7.125%, based on the
market rate at the date of commitment and $361,000 carry a variable
rate of interest. At June 30, 1998, the Association had commitments to
originate first mortgage loans on real estate and home equity loans,
exclusive of undisbursed loan funds, of $1,279,700, of which $618,800
carry a fixed rate, ranging between 6.125% and 8%, based on the market
rate at the date of commitment and $660,900 carry a variable rate of
interest.
F-13
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Loans Receivable - Continued
----------------
For the years ended June 30, 1999 and 1998 the Association also
had commitments to loan funds under unused home-equity lines of credit
aggregating approximately $6,333,776 and $5,755,244, respectively.
Such commitments carry a floating rate of interest.
Commitments for mortgage loans generally expire within six months
and such loans and other commitments are generally funded from loan
principal repayments, excess liquidity and savings deposits. Since
certain of the commitments may expire without being drawn upon or may
not be utilized, the total commitment amounts do not necessarily
represent future cash requirements.
Substantially all of the Association's outstanding commitments at
June 30, 1999 are for loans, which would be secured by real estate
with appraised values in excess of the commitment amounts. The
Association's exposure to credit loss under these contracts in the
event of non-performance by the other parties, assuming that the
collateral proves to be of no value, is represented by the commitment
amounts.
Loans serviced for others, which are not included in the
Association's assets, were approximately $1,983,280 and $2,274,655 at
June 30, 1999 and 1998, respectively. A fee is charged for such
servicing based on the unpaid principal balances.
In the normal course of business, loans are made to officers and
directors of the Association and their related interests. These loans
are consistent with sound banking practices, are within regulatory
lending limitations and do not involve more than normal risk of
collectibility. Transactions in these loans (omitting loans which
aggregate less than $60,000 per officer or director) for the years
ended June 30, 1999 and 1998 are summarized as follows:
Balance at June 30, 1997 $423,716
New loans 430,500
Repayments (65,104)
--------
Balance at June 30, 1998 789,112
New loans 175,000
Repayments (102,350)
--------
Balance at June 30, 1999 $861,762
========
F-14
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - Accrued Interest Receivable
---------------------------
Accrued interest receivable is summarized as follows at June 30:
1999 1998
---- ----
Loans receivable $287,973 $308,231
Mortgage backed securities 2,406 3,405
Other 1,796 17,298
-------- --------
$292,175 $328,934
======== ========
Note 6 - Property and Equipment
----------------------
Property and equipment are summarized as follows at June 30:
Estimated
Useful
1999 1998 Lives
---- ---- -----
Buildings and improvements $357,668 $357,668 23 years
Furniture, fixtures and equipment 311,043 345,607 3-20 years
Leasehold improvements 81,499 81,499 5-10 years
-------- --------
Total at cost 750,210 784,774
Less accumulated depreciation
and amortization 594,929 596,654
-------- --------
Property and equipment, net $155,281 $188,120
======== ========
The provision for depreciation charged to operations for the
years ended June 30, 1999 and 1998 amounted to $52,829 and $62,158,
respectively. Depreciation is calculated on a straight-line basis over
the estimated useful life.
The Association is obligated under long-term operating leases for
its branch offices. These leases expire at various dates to 2002,
subject to renewal options. The approximate future minimum rental
payments under these leases at June 30, 1999 are as follows:
Due in Year
Ended June 30,
--------------
2000 $37,896
2001 37,896
2002 28,390
2003 21,600
Subsequent to 2003 21,600
--------
Total $147,382
========
Rent expense was $38,391 and $38,396 for the years ended June 30,
1999 and 1998, respectively.
F-15
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7 - Deposits
--------
Time deposits are summarized as follows at June 30:
1999 1998
--------------------- ----------------------
Amount % Amount %
------ - ------ -
Contractual maturity of Certificate
Accounts from June 30:
- ----------------------
Under 12 months $24,811,614 62.0 $18,017,936 46.2
12 to 24 months 8,481,519 21.2 13,965,905 35.8
24 to 36 months 4,937,232 12.3 1,739,829 4.5
36 to 48 months 491,394 1.2 4,796,680 12.3
48 to 60 months 1,301,792 3.3 445,512 1.2
Over 60 months 11,485 0.0 11,485 0.0
----------- ------- ----------- -------
$40,035,036 100.0 $38,977,347 100.0
=========== ======= =========== =======
Interest expenses on savings deposits consists of the following
for the years ended June 30:
1999 1998
---- ----
Certificates $2,199,354 $2,225,469
Passbook 187,459 180,969
NOW and money market 290,336 273,377
---------- ----------
$2,677,149 $2,679,815
========== ==========
As of June 30, 1999 and 1998, the Association had customer
deposits in savings accounts of $100,000 or more of approximately
$8,620,665 and $5,715,858, respectively.
Note 8 - Borrowings
----------
At June 30, 1999, borrowings consist of a short-term adjustable
rate note bearing interest of 6.99%. The interest rate is adjusted
daily and is based on the LIBOR rate. The note is collateralized by
1,011,713 shares of the Association's stock.
F-16
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - Income Taxes
------------
The provision for income taxes consists of the following for the
years ended June 30:
1999 1998
---- ----
Current:
Federal $341,911 $346,898
State 76,391 76,735
-------- --------
418,302 423,633
Deferred:
Federal (31,934) (78,262)
State (7,067) (16,151)
-------- --------
(39,001) (94,413)
Provision for income taxes $379,301 $329,220
======== ========
The net deferred tax asset at June 30, 1999 and 1998 consists of
total deferred tax assets of $289,256 and $278,211, respectively, and
deferred tax liabilities of $100,236 and $128,192, respectively. The
tax effects of temporary differences between the financial reporting
and income tax basis of assets and liabilities relate to the following
at June 30:
1999 1998
---- ----
Interest and fees on loans $ 21,947 $ 36,508
Allowance for losses on loans 109,140 107,364
Federal Home Loan Bank stock dividends (80,684) (80,684)
Deferred compensation 12,767 13,989
Tax bad debt reserve (7,932) (11,897)
Senior Executive Retirement Plan 119,705 111,081
ESOP contribution 2,600 --
Stock Bonus Plan accrual 12,177 --
Other (700) (26,342)
--------- --------
$ 189,020 $150,019
========= ========
No valuation allowance has been provided against the net deferred
tax asset at June 30, 1999 because the amount could be realized
through a carryback against taxable income of prior years.
F-17
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - Income Taxes - Continued
------------
A reconciliation between the provision for income taxes and the
amount computed by multiplying income before provision for income
taxes by the statutory federal income tax rate is as follows for the
years ended June 30:
1999 1998
---------------------- ---------------------
Percent Percent
of Pretax of Pretax
Amount Income Amount Income
------ ------ ------ ------
Tax provision at statutory rate $ 341,791 34.0% $ 288,000 34.0%
State income taxes, net of
federal income tax benefit 45,754 4.6 39,745 4.7
Other (8,244) (0.9) 1,475 0.2
--------- ------ --------- ------
$ 379,301 37.7% $ 329,220 38.9%
========= ====== ========= ======
The Association was allowed a special bad debt deduction limited
generally to 8% of otherwise taxable income. Beginning July 1, 1996
the percentage of taxable income method of computing the Association's
tax bad debt deduction is not longer allowed and the amount by which
the tax reserve for bad debts exceeds such amount at June 30, 1998
must be recaptured over a six year period. A tax liability has been
established for the recapture. If the amounts which qualified as
deductions for federal income tax purposes prior to December 31, 1987
are later used for purposes other than to absorb loan losses,
including distributions in liquidations, they will be subject to
federal income tax at the then current corporate rate. Retained
earnings at June 30, 1999 and 1998 include $1,777,000, for which no
provision for federal income tax has been provided. The unrecorded
deferred income tax liability on the above amount was approximately
$686,000.
Note 10 - Pension Plan
------------
Substantially all employees of the Association are participants
in the Financial Institutions Retirement Fund, a multi-employer
non-contributory defined benefit pension plan. The actuarial present
value of benefit obligations and fair value of plan assets
attributable to the Association are not available for this
multi-employer plan. Pension expense in connection with the Financial
Institutions Retirement Fund reflects the Association's required
annual contribution to the Fund. Pension expense for the years ended
June 30, 1999 and 1998 was $9,843 and $2,417, respectively.
F-18
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10 - Pension Plan - Continued
------------
During the year ended June 30, 1998, the Association established
a supplemental Executive Retirement Plan for the benefit of the
President of the Association. As a result of this Plan, the
Association incurred expense for the years ended June 30, 1999 and
1998 of $22,330 and $287,625, respectively.
Note 11 - Common Stock and Stock Benefit Plans
------------------------------------
On June 18, 1997, the Board of Directors adopted a plan of
conversion which provided for (i) the conversion of the Association
from a federally chartered mutual savings and loan association to a
federally chartered stock savings and loan association, the "Converted
Association," and (ii) the concurrent formation of a holding company
for the Converted Association, the "Company."
A subscription offering of shares of the Company's capital stock
was offered to eligible members, employees and officers of the
Association at a price based on an appraisal by an independent
appraisal firm. When the Conversion was completed, 1,011,713 shares of
common stock were sold for a total price of $10,117,130. Costs
associated with the Conversion totaling $444,077 were deducted from
the sales price.
At the time of the Conversion, the Association established a
liquidation account in the amount of $4,749,819, an amount equal to
the Association's retained earnings as of June 30, 1997. The
liquidation account is maintained for the benefit of eligible savings
account holders who maintained their savings accounts in the
Association after the Conversion. In the event of a complete
liquidation (and only in such event), each eligible savings account
holder would be entitled to receive a liquidation distribution from
the liquidation account in an amount equal to the account holder's
then interest in the liquidation account before any liquidation
distribution may be made with respect to capital stock.
The Company has no significant source of income other than
dividends from the Association. As a result, the Company's dividends
will depend primarily upon receipt of dividends from the Association.
OTS regulations limit the payment of dividends and other capital
distributions by the Association. The Association is able to make
capital distributions during a calendar year, without regulatory
approval, to the extent of its net income for such year plus its
retained net income for the preceding two years. The Association must
obtain prior OTS approval to make capital distributions in excess of
this amount.
F-19
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 - Common Stock and Stock Benefit Plans - Continued
------------------------------------
In addition to the above restriction on its capital
distributions, the Association would not be able to pay dividends if
Wyman Park would be classified as "undercapitalized" under OTS prompt
corrective action regulations following the dividend or if the amount
of the dividend would reduce the Association's retained earnings below
its accumulated bad debt deduction or the liquidation amount described
above.
During fiscal 1999, the Company paid a special distribution of
$6.00 per common stock share from funds retained by the Company in the
conversion. Management anticipates that this will constitute a return
of capital. Accordingly, the Company charged the return of capital
distribution to additional paid-in-capital. Management believes the
entire distribution should constitute a tax-free return of capital.
Employee Stock Ownership Plan
-----------------------------
The Association has established an Employee Stock Ownership Plan
(ESOP) for its employees. On January 5, 1998 the ESOP acquired 80,937
shares of the Company's common stock in connection with the
Association's conversion to a capital stock form of organization. The
ESOP holds the common stock in a trust for allocation among
participating employees, in trust or allocated to the participants'
accounts, and an annual contribution from the Association to the ESOP
and earnings thereon.
All employees of the Association who attain the age of 21 and
complete twelve months of service with the Association will be
eligible to participate in the ESOP. Participants will become 100%
vested in their accounts after six years of service with the
Association or, if earlier, upon death, disability or attainment of
normal retirement age. Participants receive credit for service with
the Association prior to the establishment of the ESOP.
The Association recognizes the cost of the ESOP in accordance
with AICPA Statement of Position 93-6 "Employers' Accounting for
Employee Stock Ownership Plans". As shares are committed to be
released from collateral, the Association reports compensation expense
equal to the current market price of the shares and the shares become
outstanding for earnings-per-share computations. Dividends on
allocated shares are recorded as a reduction of retained earnings;
dividends on unallocated shares are recorded as a reduction of debt.
For the year ended June 30, 1999 compensation expense recognized
related to the ESOP and the Association's contribution to the ESOP was
$104,166.
F-20
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 - Common Stock and Stock Benefit Plans - Continued
------------------------------------
The ESOP shares were as follows as of June 30:
1999
----
Shares released and allocated 17,065
Unearned shares 63,872
--------
80,937
========
Fair value of unearned shares $435,128
========
Stock Option Plan
-----------------
The Company has a Stock Option Plan (the "Plan") whereby 198,729
shares of common stock have been reserved for issuance under the Plan.
Options granted under the Plan may be Incentive Stock Options within
the meaning of Section 422 of the Internal Revenue Code of 1986 as
amended or Non-Incentive Stock Options. Options are exercisable in
five annual installments at the market price of common stock at the
date of grant. The Options must be exercised within ten years from the
date of grant. During the year ended June 30, 1999, the Company
granted options to purchase 85,990 shares at a weighted average price
of $11.00 per share. Such shares and fair value have been adjusted to
168,909 shares at a weighted average price of $5.60 for the effect of
the special distribution that management anticipates will be a return
of capital.
The following table summarizes the status of and changes in the
Company's stock option plan during the past two years, as
retroactively adjusted for the Company's special distribution that
management anticipates will constitute a return of capital.
Weighted
Average
Exercise
Shares Price
------ -----
Outstanding at June 30, 1998 -- --
Granted 168,909 $5.60
-------
Outstanding at June 30, 1999 168,909 $5.60
=======
Exercisable at June 30, 1999 33,782
=======
F-21
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 - Common Stock and Stock Benefit Plans - Continued
------------------------------------
SFAS No. 123, "Accounting for Stock-Based Compensation", requires
the Association to make certain disclosures as if the fair value
method of accounting had been applied to the Association's stock
option grants made subsequent to 1994. Accordingly, the Association
estimated the grant date fair value of each option awarded in fiscal
1999 using the Black-Scholes Option-Pricing model with the following
relevant assumptions: dividend yield of 0%, risk-free interest rate of
4.71% and expected lives of 10 years. The assumption for expected
volatility was 27.31%. Had 1999 compensation cost been determined
including the weighted-average estimate of fair value of each option
granted of $2.43, the Association's net income would be reduced to
proforma amount of $374,033. Proforma earnings, basic and diluted, per
share would have been $.42 in fiscal 1999.
Stock Bonus Plan
----------------
The Company established a Recognition and Retention Plan (the
"Stock Bonus Plan" or "RRP") to encourage directors, officers and key
employees to remain in the service of the Association. Up to 40,469
shares of common stock may be awarded under the terms of the Stock
Bonus Plan. Shares of common stock awarded under the plan vest in five
equal annual installments beginning at the date of grant. On January
20, 1999, awards of 34,394 shares of common stock with a fair market
value of $11.00 per share, were granted. The Association funded the
purchase of 34,394 shares of its common stock at an average price of
$11.17 to provide shares for distribution under the Stock Bonus Plan.
Note 12 - Retained Earnings and Regulatory Matters
----------------------------------------
The Association is subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory, and
possible additional discretionary, actions by the regulators that, if
undertaken, could have a direct material effect on the Association's
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Association
must meet specific capital guidelines that involve quantitative
measures of the Association's assets, liabilities, and certain
off-balance sheet items as calculated under regulatory accounting
practices. The Association's capital amounts and classifications are
also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
F-22
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 - Retained Earnings and Regulatory Matters - Continued
----------------------------------------
Quantitative measures established by regulation to ensure capital
adequacy require the Association to maintain minimum amounts and
ratios (set forth in the table below) of total and Tier I capital (as
defined in the regulations) and risk-weighted assets (as defined), and
of Tier I capital (as defined) to average assets (as defined). As of
June 30, 1999, the Association met all capital adequacy requirements
to which it is subject.
As of June 30, 1999, the most recent notification from the Office
of Thrift Supervision categorized the Association as well capitalized
under the regulatory framework for prompt corrective action. To be
categorized as well capitalized the Association must maintain minimum
total risk-based, Tier I risk-based, and Tier I leverage ratios as set
forth in the table. There are no conditions or events since that
notification that management believes have changed the Association's
category. The Association's actual capital amounts and ratios are also
presented in the table.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
----------------------- ------------------- ------------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
As of June 30, 1999:
<S> <C> <C> <C> <C> <C> <C>
Tangible (1) $ 9,849,962 14.0% $1,058,000 1.5% $ N/A N/A%
Tier I capital (2) 9,849,962 27.1% N/A N/A% 2,180,000 6.0%
Core (1) 9,849,962 14.0% 2,116,000 3.0% 3,527,000 5.0%
Risk-weighted (2) 10,132,562 27.9% 2,907,000 8.0% 3,634,000 10.0%
As of June 30, 1998:
Tangible (1) $ 9,430,167 14.0% $1,011,225 1.5% $ N/A N/A%
Tier I capital (2) 9,430,167 24.8% N/A N/A% 2,279,640 6.0%
Core (1) 9,430,167 14.0% 2,696,600 4.0% 3,370,750 5.0%
Risk-weighted (2) 9,708,167 25.6% 3,039,520 8.0% 3,799,400 10.0%
(1) To adjusted total assets
(2) To risk-weighted assets
</TABLE>
F-23
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 - Retained Earnings and Regulatory Matters - Continued
----------------------------------------
Total equity in accordance with generally accepted accounting
principles (GAAP capital) is reconciled to regulatory capital as
follows:
<TABLE>
<CAPTION>
Tangible Core Risk-Based
Capital Capital Capital
------- ------- -------
<S> <C> <C> <C>
GAAP capital as of June 30, 1999 $ 8,029,307 $ 8,029,307 $ 8,029,307
Less: Equity of parent company 1,820,655 1,820,655 1,820,655
Add: Allowance for losses on loans
included in risk-based capital-
limited to 1.25% of risk-
weighted assets -- -- 282,600
------------ ------------ ------------
Regulatory capital as of June 30, 1999 $ 9,849,962 $ 9,849,962 $ 10,132,562
============ ============ ============
GAAP capital as of June 30, 1998 $ 14,266,284 $ 14,266,284 $ 14,266,284
Less : Equity of parent company (4,836,117) (4,836,117) (4,836,117)
Add: Allowance for losses on loans
included in risk-based capital-
limited to 1.25% of risk-
weighted assets -- -- 278,000
------------ ------------ ------------
Regulatory capital as of June 30, 1998 $ 9,430,167 $ 9,430,167 $ 9,708,167
============ ============ ============
</TABLE>
F-24
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13 - Disclosures About Fair Value of Financial Instruments
-----------------------------------------------------
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it is
practicable to estimate that value.
Cash and Cash Equivalents - For cash, non-interest bearing
deposits, variable rate interest-bearing deposits in other
banks and federal funds sold, the carrying amount is a
reasonable estimate of fair value.
Securities - For marketable securities available for sale and
mortgage backed securities, fair values are based on quoted
market prices or dealer quotes.
Loans Receivable - For fixed rate residential mortgages, fair
value is based on computed present value of cash flows using
weighted average term to maturity and weighted average rate
of the Association's portfolio. For variable rate loans, the
carrying amount is considered a reliable estimate of fair
value.
Ground Rents - The fair value of ground rents is estimated by
management based on anticipated realization in the current
market. Ground rents are peculiar to the Baltimore
Metropolitan area. They carry a fixed interest rate of 6%.
Consequently, the fair value varies with fluctuations in
market interest rates. Although the fair value may never
recover to the Association's carrying amount because ground
rents do not have a stated maturity, any permanent decline in
value will not be material to the Association's financial
statements.
Federal Home Loan Bank Stock - Because of the limited nature
of the market for this instrument, the carrying amount is a
reasonable estimate of fair value.
Deposits Liabilities - The fair value of demand deposits,
savings accounts and advance payments by borrowers for taxes,
insurance and ground rents is the amount payable on demand at
the reporting date. The fair value for certificate accounts
is based on computed present value of cash flows using the
rates currently offered for deposits of similar remaining
maturities.
Borrowings - The fair value of short-term borrowings is the
amount payable at the reporting date.
Commitments - For commitments to originate loans and purchase
loans and mortgage backed securities, fair value considers
the differences between current levels of interest rates and
committed rates if any.
F-25
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13 - Disclosures About Fair Value of Financial Instruments - Continued
-----------------------------------------------------
The estimated fair values of the Association's financial
instruments as of June 30 are as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------- ------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
------ ---------- ------ ----------
Financial Assets
- ----------------
<S> <C> <C> <C> <C>
Cash and cash
Equivalents $12,100,730 $12,100,730 $ 6,848,123 $ 6,848,123
Mortgage backed securities 216,663 217,971 283,715 291,212
Loans receivable 57,122,275 62,320,464
Less: allowance for loan
losses 282,600 278,000
----------- -----------
56,839,675 56,260,000 62,042,464 62,600,000
Ground rents 122,600 73,560 129,108 77,465
Federal Home Loan Bank
of Atlanta stock 508,500 508,500 509,900 509,900
Financial Liabilities
- ---------------------
Savings deposits 58,008,159 58,206,100 54,018,148 54,180,224
Borrowings 2,650,000 2,650,000 -- --
Advance payments by
borrowers for taxes,
insurance and ground
rents 1,278,634 1,278,634 1,368,467 1,368,467
Loan commitments -- 8,055,376 -- 7,034,944
</TABLE>
F-26
<PAGE>
WYMAN PARK BANCORPORATION, INC.
AND SUBSIDIARIES
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14 - Accounting Pronouncements With Future Effective Dates
-----------------------------------------------------
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" was issued in June, 1998. This Statement standardizes the
accounting for derivative instruments including certain derivative
instruments embedded in other contracts, by requiring that an entity
recognize these items as assets or liabilities in the statement of
financial position and measure them at fair value. This Statement
generally provides for matching the timing of gain or loss recognition
on the hedging instrument with the recognition of the changes in the
fair value of the hedged asset or liability that are attributable to
the hedged risk or the earnings effect of the hedged forecasted
transaction. The Statement, which is effective for all fiscal quarters
of all fiscal years beginning after June 15, 2000, will not affect the
Company's financial position or its results of operations.
Statement of Position ("SOP") 98-5, "Reporting on the Costs of
Start-Up Activities". This Statement provides guidance on the
financial reporting of start-up cost and organization cost. It
requires costs of start-up activities and organization cost to be
expensed as incurred. The "SOP" also requires the initial application
to be reported as a cumulative effect of a change in accounting
principle. This "SOP" which is effective for fiscal years beginning
after December 15, 1998 will not affect the Company's financial
position or results of operations.
F-27
<PAGE>
WYMAN PARK BANCORPORATION, INC. AND SUBSIDIARIES
STOCKHOLDER INFORMATION
ANNUAL MEETING
The annual meeting of stockholders will be held at 3:00 p.m., local time, on
October 20, 1999, at the main office located at 11 West Ridgely Road,
Lutherville, Maryland.
STOCK LISTING AND PRICE RANGE OF COMMON STOCK
The Company's stock is traded on the OTC Electronic Bulleting Board under the
symbol "WPBC." Quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not represent actual transactions.
The source of this information is IDD Information Services.
High Low Dividends
March 31, 1998 $16.00 $13.00 $ --
June 30, 1998 15.25 14.00 --
September 30, 1998 14.25 10.875 --
December 31, 1998 12.875 10.00 --
March 31, 1999 12.00 10.75 --
June 30, 1999 14.25 6.625 6.00(1)
- ----------------------------
(1) Reflects a $6.00 per share return of capital distribution paid on June 21,
1999.
Dividend payment decisions are made with consideration of a variety of
factors including earnings, financial condition, market considerations and
regulatory restrictions. Restrictions on dividend payments are described in Note
11 of the Notes to Financial Statements included in this report.
SHAREHOLDERS AND GENERAL INQUIRIES TRANSFER AGENT
Ernest A. Moretti, President and CEO Registrar and Transfer Company
Wyman Park Bancorporation, Inc. 10 Commerce Drive
11 West Ridgely Road Cranford, New Jersey 07016
Lutherville, Maryland 21093 (908) 272-8511
(410) 252-6450
ANNUAL REPORTS ON FORM 10-KSB
The Company has filed an annual report on Form 10-KSB for its fiscal year ended
June 30, 1999, with the Securities and Exchange Commission. Copies of the Form
10-KSB may be obtained without charge by contacting:
Ernest A. Moretti, President and CEO
Wyman Park Bancorporation, Inc.
11 West Ridgely Road
Lutherville, Maryland 21093
(410) 252-6450
<PAGE>
CORPORATE INFORMATION
<TABLE>
<CAPTION>
COMPANY AND BANK ADDRESS
<S> <C>
11 West Ridgely Road Telephone: (410) 252-6450
Lutherville, Maryland 21093 Fax: (410) 252-6744
DIRECTORS OF THE BOARD
Allan B. Heaver John K. White
Managing General Partner of Heaver Properties Retired Executive Vice President and current
Lutherville, Maryland member of the Board of Directors of Baltimore Life
Insurance Company and Life of Maryland Insurance
Ernest A. Moretti John R. Beever
President and Chief Executive Officer of Wyman Park Retired Chairman of the Board and President of
Bancorporation, Inc. John Dittmar & Sons, Inc.
H. Douglas Huether Albert M. Copp
President and Chairman of the Board of Independent Co-owner and President of Woodhall Wine Cellars
Can Company Principal of Woodhall Associates
Gilbert D. Marsiglia, Sr. Jay H. Salkin
President of the real estate brokerage Senior Vice President - Branch Manager of Advest,
firm of Gilbert D. Marsiglia & Co., Inc. Inc.
G. Scott Barhight
Partner in the law firm of Whiteford, Taylor &
Preston, L.L.P.
</TABLE>
WYMAN PARK BANCORPORATION, INC. AND SUBSIDIARY OFFICERS
Ernest A. Moretti Ronald W. Robinson
President and Chief Executive Officer Treasurer
Charmaine M. Snyder
Secretary and Loan Servicing Manager
INDEPENDENT AUDITORS SPECIAL COUNSEL
Anderson Associates, L.L.P. Kutak Rock
7621 Fitch Lane Suite 1000
Baltimore, Maryland 21236 1101 Connecticut Avenue, N.W.
Washington, DC 20036
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Wyman Park Bancorporation, Inc.
11 West Ridgely Road
Lutherville, Maryland 21093
We consent to the incorporation by reference in the registration statement
of Wyman Park Bancorporation, Inc. on Forms S-8 (File Nos. 333-74235 and
333-74249) of our report dated July 24, 1998, on our audits of the consolidated
financial statements of Wyman Park Bancorporation, Inc. as of June 30, 1998, and
for the year ended June 30, 1999, which report is included in this Form 10-KSB.
/s/ Anderson Associates LLP
Anderson Associates LLP
Baltimore, Maryland
September 24, 1999
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
WYMAN PARK BANCORPORATION & SUBSIDIARIES AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001046354
<NAME> Wyman Park Bancorporation
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 246,756
<INT-BEARING-DEPOSITS> 7,068,548
<FED-FUNDS-SOLD> 4,685,426
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 216,663
<INVESTMENTS-MARKET> 217,971
<LOANS> 56,839,675
<ALLOWANCE> (282,600)
<TOTAL-ASSETS> 70,530,388
<DEPOSITS> 58,008,159
<SHORT-TERM> 2,650,000
<LIABILITIES-OTHER> 1,842,922
<LONG-TERM> 0
0
0
<COMMON> 10,117
<OTHER-SE> 8,019,190
<TOTAL-LIABILITIES-AND-EQUITY> 70,530,388
<INTEREST-LOAN> 4,540,414
<INTEREST-INVEST> 16,824
<INTEREST-OTHER> 548,437
<INTEREST-TOTAL> 5,105,675
<INTEREST-DEPOSIT> 2,677,149
<INTEREST-EXPENSE> 2,686,195
<INTEREST-INCOME-NET> 2,419,480
<LOAN-LOSSES> (4,600)
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,554,766
<INCOME-PRETAX> 1,005,268
<INCOME-PRE-EXTRAORDINARY> 1,005,268
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 625,967
<EPS-BASIC> .704
<EPS-DILUTED> .696
<YIELD-ACTUAL> 7.18
<LOANS-NON> 0
<LOANS-PAST> 191,957
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> (278,000)
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> (282,600)
<ALLOWANCE-DOMESTIC> (282,600)
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
