<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Mark One
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
------------------
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
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Commission File Number: 33-78046
Westside Financial Corporation
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(Exact name of small business issuer as specified in its charter)
Georgia 58-2104977
--------------------------------- -----------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
Post Office Box 2147, Marietta, Georgia 30061
---------------------------------------------
(Address of principal executive officers)
770-499-2265
---------------------------
(Issuer's Telephone Number)
N/A
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of June 30, 1996 586,300
--------
<PAGE>
WESTSIDE FINANCIAL CORPORATION
INDEX
Page No.
Part I. Financial Information
Consolidated Balance Sheet
June 30, 1996 3
Consolidated Statements of Income
Three Months Ended June 30, 1996 4
and 1995 and Six Months Ended
June 30, 1996 and 1995
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of 7-9
Operations
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
-2-
<PAGE>
PART I - FINANCIAL INFORMATION
WESTSIDE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
June 30, 1996
(Unaudited)
<TABLE>
<S> <C>
ASSETS
Cash and due from banks $ 3,845,730
Interest-bearing deposit in banks ----
Investment securities:
Held to maturity ----
Available for sale, at estimated market value 11,632,335
Federal funds sold ----
Loans 45,359,975
Less allowance for loan losses 646,998
Loans, net 44,712,977
Premises and equipment, net 2,011,669
Other assets 685,235
------------
Total assets $ 62,887,946
------------
------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand $ 9,994,562
Interest-bearing demand 14,636,572
Savings 1,685,165
Certificates of deposit 28,775,664
------------
Total deposits $ 55,091,963
Accrued expenses 246,330
Total liabilities $ 55,338,293
------------
Stockholders' equity
Common stock, 10,000,000 shares authorized;
586,300 shares issued and outstanding 3,056,500
Surplus 3,057,110
Retained earnings 1,911,082
Unrealized gain on investment securities, net of tax (60,039)
Less cost of 25,000 shares of treasury stock (415,000)
------------
Total stockholders' equity $ 7,549,653
------------
Total liabilities and stockholders equity $ 62,887,946
------------
------------
</TABLE>
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<PAGE>
WESTSIDE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended June 30, 1996 and 1995 and
Six Months Ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $ 1,133,279 $ 914,138 $ 2,181,735 $ 1,780,916
Interest on investment securities:
Taxable 166,065 169,410 338,646 312,070
Nontaxable 21,323 13,196 42,165 23,018
Interest on Federal funds sold 31,502 71,960 97,264 155,895
Interest on securities purchased under
agreement to resell -- -- 1,089 583
Interest on interest-bearing deposits -- -- -- --
----------- ----------- ----------- -----------
Total interest income $ 1,352,169 $ 1,168,704 $ 2,660,899 $ 2,272,482
Interest expense
Interest on deposits 552,691 482,924 1,096,376 913,704
Interest on Federal funds purchased -- -- -- --
Interest on securities sold under
agreement to purchase -- -- -- --
----------- ----------- ----------- -----------
$ 552,691 $ 482,924 $ 1,096,376 $ 913,704
Net interest income 799,478 685,780 1,564,523 1,358,778
Provision for loan losses 58,500 18,000 82,500 36,000
----------- ----------- ----------- -----------
Net interest income after
provision for loan losses $ 740,978 $ 667,780 $ 1,482,023 $ 1,322,778
----------- ----------- ----------- -----------
Other operating income
Service charges on deposit accounts $ 45,627 $ 49,796 $ 85,296 $ 103,451
Other income 19,071 12,713 33,045 26,173
----------- ----------- ----------- -----------
$ 64,698 $ 62,509 $ 118,341 $ 129,624
----------- ----------- ----------- -----------
Other operating expenses
Salaries and other employee benefits $ 257,667 $ 218,765 $ 501,036 $ 433,291
Occupancy and equipment expenses 61,056 48,079 117,389 95,943
Stationery and supplies 13,433 10,580 20,344 20,390
FDIC assessments 500 25,387 1,000 50,773
Audit and accounting 12,178 10,180 21,757 21,010
Directors fees 20,850 15,050 45,775 30,175
Other operating expense 113,187 103,672 219,390 205,310
Securities (gains) losses 4,157 -- 4,157 --
----------- ----------- ----------- -----------
Total operating expenses $ 483,028 $ 431,713 $ 930,848 $ 856,892
Income before income taxes $ 322,648 $ 298,576 $ 669,516 $ 595,510
Applicable income taxes $ 108,869 $ 108,473 $ 226,725 $ 218,255
----------- ----------- ----------- -----------
Net Income $ 213,779 $ 190,103 $ 442,791 $ 377,255
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Per share of common stock based on the
average number of shares outstanding
during the period
Net Income $ 0.36 $ 0.31 $ 0.76 $ 0.62
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Average shares outstanding 586,300 610,800 586,300 610,800
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Cash dividends per share of common stock .06 -- 0.12 0.15
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
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<PAGE>
WESTSIDE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 442,791 $ 377,255
----------- -----------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 67,263 63,702
Provision for loan losses 82,500 36,000
(Increase) decrease in interest receivable 14,268 (56,364)
Increase (decrease) in interest payable 10,335 36,628
Other prepaids, deferrals and accruals, net (564,420) 11,971
----------- -----------
Total adjustments $ (390,054) $ 91,937
----------- -----------
Net cash provided by operating activities $ 52,737 $ 469,192
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investment securities $ 1,270,143 $ ---
Proceeds from maturities of
investment securities 4,091,963 497,739
Purchase of investment securities (3,624,981) (2,499,890)
Net (increase) decrease in Federal funds sold 9,000,000 1,600,000
Net increase in loans (6,920,175) (1,867,704)
Acquisitions of other real estate --- ---
Capital expenditures (387,582) 11,801
----------- -----------
Net cash used in investing activities $ 3,429,368 $(2,258,054)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits $(2,638,394) $ 718,629
Dividend payments (70,356) (91,620)
Sale of common stock -- --
----------- -----------
Net cash provided by financing activities $(2,708,750) $ 627,009
----------- -----------
Net increase (decrease) in cash and
due from banks $ 773,355 $(1,161,853)
Cash and due from banks at beginning of year $ 3,072,375 $ 3,843,832
----------- -----------
Cash and due from banks at end of period $ 3,845,730 $ 2,681,979
----------- -----------
----------- -----------
</TABLE>
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<PAGE>
WESTSIDE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management,
necessary for a fair statement of results for the interim periods.
The results of operations for the three month period ended June 30,
1996 are not necessarily indicative of the results to be expected for
the full year.
Note 2. On January 1, 1995, the Company adopted Statement of Financial
Standard ("SFAS") No. 114, "Accounting by Creditors for Impairment of
a Loan" and No. 118, "Accounting by Creditors for Impairment of a Loan
- Income Recognition and Disclosures". The adoption of these
statements had no material effect on the consolidated financial
conditions or earnings of the Company.
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<PAGE>
WESTSIDE FINANCIAL CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial position and operating
results during the periods included in the accompanying consolidated financial
statements.
FINANCIAL CONDITION
The Company's subsidiary, Westside Bank & Trust Company experienced strong loan
growth in the first half of 1996. Total loans have increased approximately
17.99% since December 1995. Total deposits are down 4.57% from December 1995.
However, this is misleading due to a seasonal short-term deposit account of
approximately $7,500,000 at December 31, 1995. Earnings are up 17.37% over the
same period in 1995. This increase is primarily attributable to the increase in
earnings assets, particularly loan growth. As expected, the net interest margin
has narrowed slightly over the same period last year due largely to the
reduction in the prime rate.
The bank opened its first branch in July 1996. The branch is located in an area
surrounded by established residential neighborhoods, as well as new and older
strip centers targeting the needs of individuals living nearby. The branch is
expected to be a deposit generator with only moderate loan demand. Therefore,
management made the decision in the first quarter to concentrate on loan growth
at the main office in an attempt to help defray the drain on earnings a new
branch typically creates and anticipating strong core deposit growth with the
new branch. This strategy should help to sustain a 75-80% loan to deposit ratio
in 1996 and maximize earnings potential. Although management has made the
decision to concentrate on loan growth, primary emphasis continues to be on
credit quality and core earnings.
LIQUIDITY
The Bank's liquidity ratio at June 30, 1996 was 18.28%. The Bank's primary
sources of funds are increases in deposits, loan repayments, sales and
maturities of investment securities and net income. In addition, the Bank
joined the Federal Home Loan Bank in the first quarter providing an alternative
source of funding and maintains relationships with correspondent banks which
could provide funds on short notice, if needed. Management's strategy has been
to allow some deposit runoff due to higher rates offered elsewhere, which has
resulted in the liquidity ratio dropping below policy. Management fully
anticipated this drop in liquidity and expects the ratio to improve with core
deposit growth from the branch.
CAPITAL
The minimum capital requirements for banks and bank holding companies require a
leverage capital to total assets ratio of at least 4%, core capital to
risk-weighted assets ratio of at least 4% and total capital to risk-weighted
assets of 8%. The following table reflects the Company's compliance with
regulatory capital requirements at June 30, 1996:
Leverage capital ratio: 11.97%
Risk based capital ratios:
Core capital 14.40%
Total capital 15.63%
-7-
<PAGE>
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
Net income for the quarter ended June 30, 1996 increased $23,676 or 12.45% over
the same period in 1995. Net interest income increased $113,698 or 16.58%,
while operating expenses only increased 11.89% over the same period in 1995.
Interest expense increased $69,767 or 14.45%, interest income increased $183,465
or 15.70%. Average year-to-date total loans and interest bearing deposits were
$41,542,407 and $46,663,102, respectively. This compared to average total loans
of $33,251,303 and interest bearing deposits of $40,130,869 for the same period
in 1995. The effective rate on earning assets decreased .63% while the rate on
interest bearing liabilities increased 2.63%.
The provision for loan losses increased $40,500 or 225% over the same period in
1995. Management did not identify any specific problem loans during the second
quarter and the only charge off during the quarter was less than $500. However,
in connection with the merger of Eastside Holding Corporation, it was necessary
that we maintain the same loan loss reserve ratio as was present at October 31,
1995 and with the strong loan growth in the second quarter an additional
provision was necessary. The merger was consummated on July 31, 1996 and it is
likely we will reduce the provision for the remainder of 1996, that is assuming
we do not see any deterioration in the portfolio.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995.
Net interest income for the six month period ended June 30, 1996 was $1,564,523
a 15.14% increase over the $1,358,778 reported June 30, 1995. The increase in
net interest income is primarily attributable to the increase in loans. Average
earning assets increased $8,429,725 or 17.19% over the same period in 1995.
Related interest income increased $388,417 or 17.09%. Average interest bearing
liabilities increased $6,532,233 or 16.28%, related interest expense increased
$182,672 or 20.00% over the same period in 1995. The prime rate reductions in
late December and early February had an immediate impact on earning assets while
deposit rates have been slower to reprice. The bank is located in metro
Atlanta, a highly competitive deposit and loan market. Management reviews
competitors rates on a weekly basis and sets rates according to market
competition as well as the banks current needs.
Other operating income for the six month period ended June 30, 1996 decreased
8.70% over the same period in 1995. Regular service charges are up 6.45%,
however, analysis charges and insufficient check charges are down significantly.
The reduction in analysis charges is largely attributable to one customer who
has maintained higher average balances in 1996 and thus avoided paying analysis
charges. The decline in insufficient charges is not related to one or even
several accounts but more an overall decline in insufficient check writing.
Historically, the bank has attracted high dollar, low volume accounts which
produce minimal service charge or other fee income.
Salaries and employee benefits have increased 15.64% over the same period in
1995. The major contributing factor being a 117% increase in the bonus accrual.
The accrual was increased based on the 1995 bonus expense. Staff additions as
well as salary increases resulted in an 11.55% increase in salary expense over
the same period in 1995. Salary expense is expected to increase even more in
the second half of 1996 as a result of opening and fully staffing the branch
office.
Directors fees have increased $15,600 or 51.70% over the same period in 1995.
Fees were increased in 1996 based on a competitive market survey of other
community banks in the area and taking into account the bank's performance and
the directors contributions to the success of the institution.
-8-
<PAGE>
Other operating expenses increased a moderate 6.86% over June 30, 1995. Data
processing expense and depreciation on computer hardware and software is up
significantly over 1995 as a result of the bank changing data processors and
upgrading hardware and software. This expense is expected to continue to rise
during the second half of the year as depreciation on the new office,
furnishings and equipment will begin in July 1996.
Pre-tax income for the period ending June 30, 1996 increased $74,006 or 12.43%,
net income increased $65,536 or 17.37% over the same period in 1995. The
increase in earnings is attributable to the Bank's continued growth and the
increase in earnings assets. Management does expect the net interest margin to
narrow somewhat and additional expenses related to the opening of a branch, and
the merger with Eastside Holding Corporation will continue to have an impact on
1996 earnings. The long term effect of these actions is expected to benefit our
customers, our staff, the community and most importantly our shareholders.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
-9-
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WESTSIDE FINANCIAL CORPORATION
Date: August 6, 1996 By: /s/ Edward C. Milligan
-------------- -----------------------------
Edward C. Milligan, President
Date: August 6, 1996 By: /s/ Barbara J. Bond
-------------- -----------------------------
Barbara J. Bond, Treasurer
-10-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET AT JUNE 30, 1995 (UNAUDITED) AND THE CONSOLIDATED STATEMENTS OF
INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,845,730
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 11,632,335
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 45,359,975
<ALLOWANCE> 646,998
<TOTAL-ASSETS> 62,887,946
<DEPOSITS> 55,091,963
<SHORT-TERM> 0
<LIABILITIES-OTHER> 246,330
<LONG-TERM> 0
0
0
<COMMON> 6,113,610
<OTHER-SE> 1,436,043
<TOTAL-LIABILITIES-AND-EQUITY> 62,887,946
<INTEREST-LOAN> 2,181,735
<INTEREST-INVEST> 479,164
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 2,660,899
<INTEREST-DEPOSIT> 1,096,376
<INTEREST-EXPENSE> 1,096,376
<INTEREST-INCOME-NET> 1,564,523
<LOAN-LOSSES> 82,500
<SECURITIES-GAINS> (4,157)
<EXPENSE-OTHER> 926,691
<INCOME-PRETAX> 669,516
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 226,725
<EPS-PRIMARY> .76
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
