0000914317-01-500355.txt : 20011009 0000914317-01-500355.hdr.sgml : 20011009 ACCESSION NUMBER: 0000914317-01-500355 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010926 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WYMAN PARK BANCORPORATION INC CENTRAL INDEX KEY: 0001046354 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 522068893 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-23345 FILM NUMBER: 1744770 BUSINESS ADDRESS: STREET 1: 11 WEST RIDGELY RD CITY: LUTHERVILLE STATE: MD ZIP: 21094 BUSINESS PHONE: 4102526450 MAIL ADDRESS: STREET 1: 11 WEST RIDGELY RD CITY: LUTHERVILLE STATE: MD ZIP: 21094 10KSB 1 form10k40706_9-17.txt 10KSB 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, 2001 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 (I.R.S. Employer Identification No.) of 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: $5,237,000. 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, 2001, was approximately $3.5 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 August 31, 2001 there were 822,490 shares issued and outstanding of the registrant's Common Stock. DOCUMENTS INCORPORATED BY REFERENCE 1. Portions of Annual Report to Stockholders for the fiscal year ended June 30, 2001 (Part II) 2. Portions of Proxy Statement for 2001 Annual Meeting of Stockholders (Part III) PART I Item 1. Description of Business Forward-Looking Statements When used in this filing and in future filings by the Wyman Park Bancorporation (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. General The Company. Wyman Park Bancorporation, Inc. (the "Company") is a savings and loan holding company which became the 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, 2001, the Company had assets of $70.6 million, deposits of $60.2 million and stockholders' equity of $8.7 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 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"). 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 may in the future adjust or discontinue any product offerings to respond to competitive or economic factors. The Company's commercial non-real estate lending operation provides business loans to small businesses in the local community. The Company believes that this additional lending activity will assist in increasing the yield on its total loan portfolio. 2 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, ------------------------------------- 2001 2000 ---- ---- Amount Amount ------ ------ (Dollars in Thousands) Real Estate Loans: ------------------ One- to four-family $ 51,189 $ 53,384 Multi-family 871 314 Commercial 7,467 7,709 Construction or development - residential 528 250 Construction or development - commercial 1,885 -- -------- -------- Total real estate loans 61,940 61,657 Commercial Non-Real Estate Loans 1,585 968 Other Loans: ------------ Consumer Loans: Deposit account loans 168 170 Home equity 3,087 3,010 Home improvement 23 11 Overdraft lines of credit 14 12 -------- -------- Total consumer loans 3,292 3,203 -------- -------- Total loans, gross 66,817 65,828 -------- -------- Less: ----- Loans in process (1,668) (112) Deferred fees and discounts (151) (207) Allowance for losses (285) (285) -------- -------- Total loans receivable, net $ 64,713 $ 65,224 ======== ========
Loan Maturities. The following table reflects at June 30, 2001 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 reporte d as due within one year or less.
Due in One Due After One Year Due After Year or Less through Five Years Five Years Total ------------ ------------------ ---------- ----- (In thousands) One-to-four family..................... $ 6,853 $12,670 $31,666 $51,189 Multi-family and Commercial............ 187 1,416 6,735 8,338 Commercial Non-Real Estate ............ 1,067 174 344 1,585 Consumer loans......................... 3,207 78 7 3,292 Construction or development............ 900 1,513 -- 2,413 ------- ------- ------- ------- Total $12,214 $15,851 $38,752 $66,817 ======= ======= ======= =======
3 The following table sets forth the dollar amount of loans maturing subsequent to the year ending June 30, 2002 between those with predetermined interest rates and those with floating, or variable, interest rates.
Fixed Variable Rate Rate Total ---- ---- ----- (In thousands) One-to-four family......................... $31,471 $12,865 $44,336 Multi-family and Commercial................ 5,169 2,982 8,151 Commercial Non-Real Estate ................ 501 17 158 Consumer loans............................. 85 -- 85 Construction or development................ -- 1,513 -- ------- ------- ------- Total $37,226 $17,377 $54,603 ======= ======= =======
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, 2001, based on the above, the Company's regulatory loan-to-one borrower limit was approximately $1.2 million. On the same date, the Company had no borrowers with outstanding balances in excess of this amount. As of June 30, 2001, the largest dollar amount of indebtedness to one borrower or group of related borrowers was a $983,000 loan secured by condominiums. The next largest indebtedness had an outstanding balance of $946,000 and was secured by a commercial office building and a strip shopping center. The third largest indebtedness had an outstanding balance of $878,000 and was secured by rental and investment properties. 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, 2001, $51.2 million, or 76.6% 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 also originates 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 4 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 assumable. At June 30, 2001, the total balance of one- to four-family ARMs was $16.0 million, or 24.0% 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, 2001 residential construction loans totaled $528,000, or 0.8% 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. 5 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 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, 2001, the Company had $7.5 million in commercial real estate loans, comprising 11.2% of the Company's gross loan portfolio, and $1.9 million in commercial construction loans, representing 2.8% 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. 6 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, 2001, loans secured by multi-family properties aggregated $871,000, or 1.3% of the Company's gross loan portfolio. 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, 2001, the Company's consumer loans totaled $3.3 million or 4.9% 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, 2001, home equity loans totaled $3.1 million or 4.6% 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, 2001, the Company had $6.1 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. 7 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, such as when there has been non payment for 90 days or more. Foreclosed assets include assets acquired in settlement of loans. As of June 30, 2001, there were no loans that were accruing but contractually past due 90 days or more as to principal and interest payments. Also, there were no loans that were "troubled debt restructurings" within the meaning of Statement of Financial Accounting Standards No. 15. June 30, --------------------------- 2001 2000 -------- -------- (Dollars in Thousands Non-accruing loans $ 112 $ -- ---- ---- Total non-performing assets............ $ 112 $ -- ==== ==== Total as a percentage of total assets.. 0.16% --% ===== ==== As of the most recent reported period, $8,099 in gross interest income would have been recorded for the year ended June 30, 2001 if the loans had been current in accordance with their original terms and had been outstanding throughout the year ended June 30, 2001 or since their origination (if held for only part of the fiscal year). For the year ended June 30, 2001, $6,370 in interest income on such loans was actually included in net income. 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: 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, 2001, the Company had four loans totaling $112,000 classified substandard. 8 Other Assets of Concern. In addition to non-performing loans and substandard loans discussed above, as of June 30, 2001, the Company had two loans totaling $162,000, 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, 2001, the Company's allowance for loan losses as a percent of gross loans receivable amounted to 0.4%. The Company had four non-performing loans. 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. The following table sets forth an analysis of the Company's allowance for loan losses.
June 30, -------------------------- 2001 2000 ----------- ----------- (Dollars in Thousands Balance at beginning of period $ 285 $ 283 Charge-offs -- -- Additions charged to operations -- 2 ---------- --------- Balance at end of period $ 285 $ 285 ========== ========= 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 --% --% ========== =========
9 The distribution of the Company's allowance for losses on loans at the dates indicated is summarized as follows:
June 30, ---------------------------------------------------------------------------- 2001 2000 ---------------------------------------------------------------------------- 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) One- to four-family......... $ 27 78.84% $ 27 81.10% Multi-family................ -- 1.33 -- 0.48 Commercial real estate...... 78 12.06 77 11.71 Commercial non-real estate.... 16 2.43 10 1.47 Construction or development. -- 0.30 -- 0.38 Consumer.................... -- 5.04 -- 4.86 Unallocated................. 164 -- 171 -- ------- -------- ------ ------ Total $ 285 100.00% $ 285 100.00% ======= ======== ====== ======
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, 2001, the 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. 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. 10 The following table sets forth the composition of the Company's investment and mortgage-backed securities at the dates indicated.
June 30, ------------------------------------------------------ 2001 2000 ---------------------- ---------------------------- Book Book Value % of Total Value % of Total ----- ---------- ----- ---------- (Dollars in Thousands) Investment securities: FHLB stock ......................... $ 529 100.00% $ 509 100.00% ====== ====== ====== ====== Other interest-earning assets: Interest bearing deposits with banks $ 94 2.65% $ 474 26.70% Federal funds sold ................. 3,456 97.35 1,301 73.30 ------ ------ ------ ------ Total .............................. $3,550 100.00% $1,775 100.00% ====== ====== ====== ====== Securities Held to Maturity: Mortgage-backed securities: FNMA ............................... $ 1 0.68% $ 1 0.57% FHLMC .............................. 145 99.32 173 99.43 ------ ------ ------ ------ Total mortgage-backed securities ... $ 146 100.00% $ 174 100.00% ------ ====== ------ ======
The following table sets forth the contractual maturities of the Company's mortgage-backed securities at June 30, 2001. Due after Due after June 30, 2001 5 through 10 10 through Balance Years 20 Outstanding Years ------------ ---------- ------------- (In Thousands) Freddie Mac.......... 1 $144 $145 Fannie Mae........... 1 1 ---- ---- ---- Total ............ $ 2 $144 $146 ---- ==== ==== 11 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, 2001, 24.4% of the Company's deposits were in transaction accounts, versus 75.6% 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. 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, --------------------------------------------------------------- 2001 2000 ---------------------------- ------------------------------ Average Average Average Average Amount Rate Amount Rate ------- ---- ------- ---- (Dollars in Thousands) Transactions and Savings Deposits: --------------------------------- Demand Deposits ............... $ 5,217 2.32% $ 5,597 3.02% Money Market & NOW Accounts.... 8,950 2.28 11,053 2.52 ------- ---- ------- ---- Total Non-Certificates..... 14,167 2.29 16,650 2.69 ------- ---- ------- ---- Certificates: ------------- Total Certificates ............ 43,133 5.91 38,961 5.40 ------- ---- ------- ==== Total Deposits ................ $57,300 5.02% $55,611 4.59% ======= ==== ======= ====
12 At June 30, 2001, the Company had approximately $7.1 million in certificate accounts in amounts of $100,000 or more maturing as follows: Maturity Period Amount -------------------------------------------------- --------------- (Dollars in Thousands) Three months or less........................... $ 849 Over three through six months.................. 1,289 Over six through 12 months..................... 1,408 Over 12 months................................. 3,564 ----- Total................................... $ 7,110 ===== Borrowings. The Company's other available sources of funds include advances from the Federal Home Loan Bank ("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 total credit line at the FHLB of Atlanta was approximately $14.0 million at June 30, 2001, of which the Association had drawn down nothing through FHLB advances. The Company may also borrow funds from other financial institutions. 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, 13 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, 2001, 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, 2001, 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. 14 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 and loan holding company, the Company is subject to OTS regulation, examination, supervision and reporting requirements. The 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 the Association's compliance with its regulatory capital requirements as of June 30, 2001.
Association's Capital ------------- ------- Capital Requirements Excess Capital ------- ------------ -------------- Amount Percent Amount Percent Amount Percent ------ ------- ------ ------- ------ ------- Tangible capital............ $8,058,000 11.4% $1,060,000 1.5% $ 6,998,000 9.9% Core capital................ 8,058,000 11.4 2,826,000 4.0 5,232,000 7.4 Total risk-based capital.... 8,343,000 20.5 3,252,000 8.0 5,091,000 12.5
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 15 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, 2001, 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, 2001, 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 16 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 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, 2001, Wyman Park was in compliance with these reserve requirements. 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, 2001 of $528,900. 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 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 17 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. 18 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, 2001. Owned Net Book Year Or Value at Location Opened Leased(1) June 30, 2001 ---------------------------- ---------- --------------- --------------- Main Office: 11 Ridgely Road 1977 Land Leased;(2) $49,189 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. 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, 2001, 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 matters were submitted to a vote of security holders during the quarter ended June 30, 2001. 19 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 2001 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 "Management's Discussion and Analysis or Plan of Operation" 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, 2001, 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, 2001 and 2000 Consolidated Statements of Operations for the Years Ended June 30, 2001 and 2000 Consolidated Statements of Stockholders' Equity for Years Ended June 30, 2001 and 2000 Consolidated Statements of Cash Flows for Years Ended June 30, 2001 and 2000 Notes to Consolidated Financial Statements Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable 20 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 "Proposal I - Election of Directors" in the Company's definitive proxy statement for the Company's 2001 Annual Meeting of Shareholders (the "Proxy Statement") is incorporated herein by reference. Executive Officers For information concerning the executive officers, who are not Directors of the Company, the information contained under the section captioned "Proposal I - Election of Directors - Executive Officers Who Are Not Directors" in 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 "Proposal I - 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 "Proposal I - Election of Directors" in the Proxy Statement. (c) Changes in Control 21 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 "Proposal I - 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 (a) 3(ii) Bylaws (a) 4 Instruments defining the rights of security holders, (a) including debentures 10 Material Contracts (a) Employment Contract between (a) Ernest A. Moretti and the Association (b) Executive Supplemental Retirement Plan (b) (c) 1999 Stock Option and Incentive Plan (c) (d) Recognition and Retention Plan (c) 13 Annual Report to Stockholders 13 21 Subsidiaries of Registrant 21 23 Consents of Experts 23
---------- (a) 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. (b) Filed as exhibit 10(b) to the Company's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1998 and is hereby incorporated herein by reference in accordance with Item 601 of Regulation S-B. (c) Incorporated by reference to the Company's Annual Report on Form 10-KSB for the fiscal year ended June 30, 2001. (b) Reports on Form 8-K There were no reports on Form 8-K filed during the last quarter of the year ended June 30, 2001. 22 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: September 26, 2001 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 /s/ Ronald W. Robinson ---------------------------- --------------------------------------- Ernest A. Moretti Ronald W. Robinson, (Principal Executive Officer) (Principal Financial and Accounting Officer) Date: September 26, 2001 Date: September 26, 2001 ------------------ ------------------ By: /s/ Allan B. Heaver By: /s/ H. Douglas Heuther ---------------------------- ----------------------------------- Allan B. Heaver, H. Douglas Huether, Director Chairman of the Board Date: September 26, 2001 Date: September 26, 2001 ------------------ ------------------ By: /s/ John K. White By: /s/ John R. Beever ---------------------------- ----------------------------------- John K. White, Director John R. Beever, Director Date: September 26, 2001 Date: September 26, 2001 ------------------ ------------------ By: /s/ Albert M. Copp By: /s/ Gilbert D. Marsiglia ---------------------------- ----------------------------------- Albert M. Copp, Director Gilbert D. Marsiglia, Sr., Director Date: September 26, 2001 Date: September 26, 2001 ------------------ ------------------ By: /s/ Jay H. Salkin By: /s/ G. Scott Barhight ---------------------------- ----------------------------------- Jay H. Salkin, Director G. Scott Barhight, Director Date: September 26, 2001 Date: September 26, 2001 ------------------ ------------------ 23 EX-13 3 exhibit13.txt EXHIBIT 13 TABLE OF CONTENTS
Letter to Shareholders..................................................................1 Selected Consolidated Financial Information.............................................2 Management's Discussion and Analysis or Plan of Operations..............................4 Independent Auditor's Report............................................................15 Consolidated Financial Statements Consolidated Statements of Financial Condition at June 30, 2001 and 2000..............16 Consolidated Statements of Operations for the Years Ended June 30, 2001 and 2000......17 Consolidated Statements of Stockholders' Equity for the Years Ended June 30, 2001 and 2000...............................................................18 Consolidated Statements of Cash Flows for the Years Ended June 30, 2001 and 2000......19 Notes to Consolidated Financial Statements............................................21 Stockholder Information.................................................................41 Corporate Information...................................................................42
LETTER TO OUR SHAREHOLDERS September 21, 2001 To our Shareholders: We are pleased to present the Annual Report of Wyman Park Bancorporation, Inc. for the fiscal year ended June 30, 2001. In our fourth year as a public company, the Bank closed fiscal year 2001 with total assets of $70.6 million and total shareholders' equity of $8.7 million compared to assets of $68.8 million and total shareholders' equity of $8.6 million at the end of fiscal year 2000. Deposits totaled $60.1 million at fiscal year 2001 and compared to $55.3 million at the close of fiscal year 2000. Net earnings for the fiscal year ended June 30, 2001 were $394,000 or $0.52 per diluted share, as compared to $436,000 or $0.54 per diluted share for fiscal year 2000, a decrease of $42,000 or 9.6%. The decrease in net earnings resulted primarily from a decrease in net interest income due to interest paid on higher savings deposits and Federal Home Loan Bank advances. You will find a detailed description of the 2001 fiscal year financial results of your Company contained in the audited consolidated Financial Statements and the accompanying Management's Discussion and Analysis of Financial Condition and Results of Operation. The Company continues to take positive steps to enhance shareholder value. Book value per share at June 30, 2001 was $10.56, an all-time high as adjusted for the $6 per share return of capital distribution in June 1999. During the fiscal year, we repurchased 76,236 shares of our common stock, bringing the total repurchased to 223,617 shares, or 22% of the total shares issued. The Board of Directors recently authorized the repurchase of an additional 20,000 shares at prevailing market prices from time to time, depending on market conditions. We continue to focus on customer service, providing our customers with excellent products and services in appreciation for their business. Since we compete with many larger national and regional banks in our area, we believe that Wyman Park Federal's reputation in our community is our most important asset. We continue to review our goals and our business plan, and therefore have focused on the improvement in our core earnings, as our immediate, primary goal. Your directors, officers and staff our confident that our current strategies direction has positioned Wyman Park Federal to meet the challenges confronting us as we enter our 87th year. As always, we wish to take this opportunity to thank all our customers and shareholders for your past and continuing support. Sincerely yours, /S/ Ernest A. Moretti /s/ Allan B. Heaver --------------------- ------------------- Ernest A. Moretti Allan B. Heaver President/CEO Chairman of the Board 1 SELECTED CONSOLIDATED FINANCIAL INFORMATION
June 30, ---------------------------------------------------------------------- 2001 2000 1999 1998 1997 ---------------------------------------------------------------------- (In Thousands) Selected Financial Condition Data: --------------------------------- Total assets .................... $70,649 $68,840 $70,530 $70,541 $62,241 Loans receivable, net ........... 64,713 65,224 56,840 62,042 55,189 Mortgage-backed securities....... 146 174 217 284 356 Investment securities ........... -- -- -- -- 2,993 Deposits ........................ 60,182 55,347 58,008 54,018 56,095 Total equity .................... 8,681 8,607 8,029 14,266 4,750
Year Ended June 30, -------------------------------------------------------------------------- 2001 2000 1999 1998 1997 -------------------------------------------------------------------------- (In Thousands) Selected Operations Data: ------------------------ Total interest income ................................. $5,110 $4,779 $5,106 $5,081 $4,658 Total interest expense ................................ 2,986 2,617 2,686 2,722 2,756 ------ ------ ------ ------ ------ Net interest income ............................... 2,124 2,162 2,420 2,359 1,902 Provision for loan losses ............................. -- 3 5 8 145 ------ ------ ------ ------ ------ Net interest income after provision for loan losses ... 2,124 2,159 2,415 2,351 1,757 Fees and service charges .............................. 106 87 69 60 48 Gain on sales of loans, mortgage-backed securities and investment securities ......................... 9 -- 49 6 6 Other non-interest income ............................. 12 25 27 27 24 ------ ------ ------ ------ ------ Total non-interest income ............................. 127 112 145 93 78 Total non-interest expense ............................ 1,599 1,557 1,555 1,597 1,614 ------ ------ ------ ------ ------ Income before taxes ................................... 652 714 1,005 847 221 Income tax provision .................................. 258 278 379 329 87 ------ ------ ------ ------ ------ Net income ............................................ $ 394 $ 436 $ 626 $ 518 $ 134 ====== ====== ====== ====== ======
2
Year Ended June 30, -------------------------------------------------------------- 2001 2000 1999 1998 1997 -------------------------------------------------------------- Selected Financial Ratios and Other Data: ---------------------------------------- Performance Ratios: Return on assets (ratio of net income to average total assets)................................................ 0.57% 0.65% 0.87% 0.77% 0.22% Return on equity (ratio of net income to average equity)...................................................... 4.63 5.25 4.64 5.49 2.87 Interest rate spread information: Average during period....................................... 2.46 2.64 2.49 2.75 2.76 End of period............................................... 2.38 2.68 2.36 2.68 2.77 Net interest margin(1).......................................... 3.13 3.28 3.40 3.55 3.14 Ratio of operating expense to average total assets.............. 2.32 2.34 2.15 2.37 2.62 Ratio of average interest-earning assets to Average interest-bearing liabilities........................ 115.21 116.13 124.25 119.45 108.40 Loans as a percentage of total assets........................... 91.60 94.75 80.59 87.95 88.67 Quality Ratios: Non-performing assets to total assets at end of period........................................................ 0.16 -- -- .04 .28 Allowance for loan losses to non-performing loans............... 254.46 -- -- 1,112.00 153.11 Allowance for loan losses to loans receivable, net.............. 0.44 0.44 0.50 0.45 0.49 Capital Ratios: Stockholders' equity to total assets at end of period........... 12.29 12.50 11.38(2) 20.28(3) 7.64 Average stockholders' equity to average assets.................. 12.34 12.47 18.66 14.03 7.58 Other Data: Number of full-service offices.................................. 2 2 2 2 2
3 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 4 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, 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. 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, 2001 compared to June 30, 2000 Total assets increased $1.8 million or 2.6% to $70.6 million at June 30, 2001 from $68.8 million at June 30, 2000. Loans receivable decreased by $500,000 or 0.8% to $64.7 million at June 30, 2001 from $65.2 million at June 30, 2000. The $500,000 decrease in loans receivable consisted of a decrease of $1.4 million in residential real estate loans, offset by an increase of $600,000 in commercial non-real estate loans, $200,000 in commercial real estate loans and $100,000 in consumer loans. The decrease in residential real estate loans was due primarily to normal loan amortization and payoffs. Cash and cash equivalents increased $2.3 million or 109.5%, to $4.4 million at June 30, 2001 from $2.1 million at June 30, 2000 primarily as a result of an increase in savings deposits and a decrease in loan production. Total savings deposits increased $4.9 million or 8.9%, to $60.2 million at June 30, 2001 from $55.3 million at June 30, 2000. The $4.9 million increase in savings deposits consisted of $4.9 million in time deposits (certificates of deposit) and $400,000 in money market and NOW accounts, offset by a decrease of $400,000 in demand deposits. The increase in savings deposits is primarily the result of deposits into certificates of deposit, which management believes resulted from the return of funds by customers into safer, less volatile investments. Total liabilities increased approximately $1.8 million or 3.0%, to $62.0 million at June 30, 2001 from $60.2 million at June 30, 2000. This increase was primarily the result of the $4.9 million increase in savings deposits and a decrease of $3.0 million in borrowings. 5 Operating Results Comparison of Operating Results for the Years Ended June 30, 2001 and 2000 Performance Summary. Net income for the year ended June 30, 2001 was approximately $394,000, a decrease of $42,000, or 9.6% from net income of $436,000 for the year ended June 30, 2000. The decrease was primarily due to a decrease in net interest income of $38,000. For the years ended June 30, 2001 and 2000, the returns on average assets were 0.57% and 0.65%, respectively, while the returns on average equity were 4.63% and 5.25%, respectively. Net Interest Income. Net interest income decreased by approximately $38,000, or 1.8%, to $2,124,000 for the year ended June 30, 2001 from $2,162,000 for the year ended June 30, 2000. This reflects an increase of $369,000, or 14.1% in interest expense to $2,986,000 in fiscal 2001 from $2,617,000 in fiscal 2000, partially offset by an increase in interest income of $331,000, or 6.9%, to $5,110,000 in fiscal 2001 from $4,779,000 in fiscal 2000. The decrease in net interest income arose primarily from the decrease in the excess of the average balance of interest-earning assets over the average balance of interest-bearing liabilities, coupled with the increase in the average balance of higher-costing certificates of deposit. For the year ended June 30, 2001, the yield on average interest-earning assets was 7.52% compared to 7.25% for the year ended June 30, 2000. The cost of average interest-bearing liabilities was 5.06% for the year ended June 30, 2001, an increase from 4.61% for the year ended June 30, 2000. The average balance of interest-earning assets increased by $2.1 million or 3.2%, to $68.0 million for the year ended June 30, 2001 from $65.9 million for the year ended June 30, 2000. The average balance of interest-bearing liabilities increased by $2.2 million or 3.9%, to $59.0 million for the year ended June 30, 2001, compared to $56.8 million for the year ended June 30, 2000. The interest rate spread decreased to 2.46% for the year ended June 30, 2001 from 2.64% for the year ended June 30, 2000 as the Company paid higher rates on its savings deposits and on its borrowings. The net interest margin decreased to 3.13% for the year ended June 30, 2001 from 3.28% for the year ended June 30, 2000, as the Company funded its lending operations primarily using higher-costing certificates of deposit. Provision for Loan Losses. During the year ended June 30, 2001, the Company recorded no provision for loan losses compared to $2,400 for the year ended June 30, 2000. During the year ended June 30, 2001, the Company had four nonperforming loans totaling $112,000. 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. 6 Non-Interest Income. For the year ended June 30, 2001 non-interest income increased approximately $15,000, or 13.4%, to $127,000 from $112,000 for the year ended June 30, 2000. This increase is primarily due to an increase in loan fees and service charges of $19,000, that reflects the Company's growth in average loans outstanding and in deposits. Non-Interest Expense. Non-interest expense increased $42,000 or 2.7%, to $1,599,000 for the year ended June 30, 2001 from $1,557,000 for the year ended June 30, 2000. The increase in non-interest expense is primarily due to an increase in salaries and employee benefits of $55,000 or 6.3% to $931,000 for the year ended June 30, 2001 from $876,000 for the year ended June 30, 2000, as a result of staffing additions. The increase in non-interest expense is partially offset by a decrease in federal deposit insurance premiums of $12,000 or 52.2% to $11,000 for the year ended June 30, 2001 from $23,000 for the year ended June 30, 2000, due to a scheduled reduction due to recapitalization of the insurance fund. Income Taxes. The provision for income taxes decreased by approximately $20,000 or 7.2%, to $258,000 for the year ended June 30, 2001 from $278,000 for the year ended June 30, 2000. This decrease results from the corresponding $63,000 decrease in income before the tax provision. The Company's effective tax rates were 39.6% and 39.0% for the years ended June 30, 2001 and 2000, 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
Year Ended June 30, ------------------- 2001 2000 -------------------------------------- ----------------------------------- Average Interest Average Interest Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Balance Paid Rate Balance Paid Rate ------- ---- ---- ------- ---- ---- (Dollars in Thousands) Interest-Earning Assets: Loans receivable(1) ..................... $65,033 $ 4,928 7.58% $61,359 $ 4,514 7.36% Mortgage-backed securities .............. 160 12 7.50 193 13 6.74 FHLB stock .............................. 515 38 7.38 509 39 7.70 Other investments ....................... 2,259 132 5.84 3,846 213 5.54 ------- ---- ------- ------- ---- Total interest-earning assets(1) .......... $67,967 $ 5,110 7.52 $65,907 $ 4,779 7.25 ==== ======= ======= ==== Interest-Bearing Liabilities: Savings deposits ........................ $ 5,217 $ 121 2.32% $ 5,597 $ 169 3.02% Demand and NOW deposits ................. 8,950 204 2.28 11,053 279 2.52 Certificate accounts .................... 43,133 2,549 5.91 38,961 2,102 5.40 Escrow deposits ......................... 37 2 5.41 60 3 5.00 Borrowings .............................. 1,656 110 6.64 1,083 64 5.91 ------- ------- ---- ------- ------- ---- Total interest-bearing liabilities ........ $58,993 $ 2,986 5.06 $56,754 $ 2,617 4.61 ==== ======= ======= ==== Net interest income ....................... $ 2,124 $ 2,162 ======= ======= Net interest rate spread .................. 2.46% 2.64% ==== ==== Net earning assets ........................ $ 8,974 $ 9,153 ======= ======= Net yield on average interest- ............ earning assets............................. 3.13% 3.28% ==== ==== Average interest-earning assets to average interest-bearing liabilities................................ 1.15x 1.16x ==== ====
(1) Calculated net of deferred loan fees, loan discounts, loans in process and loss reserves. 8 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.
Year Ended June 30, ------------------- 2001 vs. 2000 2000 vs. 1999 ------------------------------------ ---------------------------------------- Increase Increase (Decrease) Total (Decrease) Total Due to Increase Due to Increase Volume Rate (Decrease) Volume Rate (Decrease) ------ ---- -------- ------ ---- -------- (Dollars in Thousands) Interest-earning assets: Loans receivable ................... $ 271 $ 143 $ 414 $ 89 $(115) $ (26) Mortgage-backed securities ......... (2) 1 (1) (4) -- (4) Other .............................. (96) 14 (82) (354) 57 (297) ----- ----- ----- ----- ----- ----- Total interest-earning assets .... $ 173 $ 158 $ 331 $(269) $ (58) $(327) ----- ----- ----- ----- ----- ----- Interest-bearing liabilities: Savings deposits ................... $ (10) $ (38) $ (48) $ (4) $ (14) $ (18) Demand and NOW deposits ............ (50) (25) (75) (5) (6) (11) Certificate accounts ............... 253 194 447 (55) (43) (98) Escrow deposits .................... (1) -- (1) (1) -- (1) Borrowings ......................... 37 9 46 51 8 59 ----- ----- ----- ----- ----- ----- Total interest-bearing liabilities $ 229 $ 140 $ 369 $ (14) $ (55) $ (69) ----- ----- ----- ----- ----- ----- Net interest income ................. $ (38) $(258) ===== =====
9 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, 2001.
Maturing in Years Ended June 30, ------------------------------------------------------------------------------------------- 2003 & 2005 & 2007 - 2012 - 2002 2004 2006 2011 2021 Thereafter Total ---- ---- ---- ---- ---- ---------- ----- (Dollars in Thousands) Assets Loans receivable: Amount ................... $ 11,842 $ 7,166 $ 9,057 $ 20,033 $ 13,737 $ 4,982 $ 66,817 Average interest rate .... 7.75% 7.49% 7.32% 7.11% 7.46% 7.29% 7.38% Mortgage-backed securities: Amount ................... -- -- -- 2 144 -- 146 Average interest rates ... -- -- -- 14.23 7.15% -- 7.25% Liabilities Deposit Certificate Accounts: Amount ................... 28,101 12,507 4,873 -- -- -- 45,481 Average interest rates ... 5.90% 6.00% 6.90% -- -- -- 6.03%
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, 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. 10 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. 11 The following table presents the Company's NPV at June 30, 2001, as calculated by the OTS, based on information provided to the OTS by the Company.
NPV as % of Portfolio Value Net Portfolio Value of Assets ----------------------------------------------------- --------------------------- Change in Rates $Amount $Change % Change NPV Ratio % Change -------- ------- ------- -------- --------- -------- (Dollars in Thousands) +300 $7,042 $(3,250) (32)% 10.20% (3.76)% +200 8,190 (2,102) (20) 11.59 (2.37) +100 9,300 ( 991) (10) 12.87 (1.09) Static 10,291 --- --- 13.96 --- (100) 10,928 636 6 14.59 .64 (200) 11,142 850 8 14.73 .78 (300) 11,316 1,025 10 14.82 .87
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, 2001 the Company would have been considered to have had a greater than normal level of interest rate exposure and a deduction from capital of $131,000 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 12 administering the policies and determinations of the Board of Directors with respect to the Association's assets and liability goals and strategies. 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, 2001 and 2000 the Company originated loans for its portfolio in the amount of $9.9 million and $16.8 million, respectively. For the same two fiscal years, these activities were funded from repayments of $9.6 million and $9.4 million, respectively, and sales and participations of $800,000 in fiscal year 2001. There were no sales or participations in fiscal year 2000. They were also funded by the increase in certificate of deposit accounts, which usually have longer terms than demand deposit accounts or money market and NOW accounts, but also generate higher interest expense. The Company is required to maintain adequate 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, 2001 and 2000, cash and cash equivalents were $4.4 million and $2.1 million, respectively. In addition, the Company has used jumbo certificates of deposit as a source of funds. Deposits of $100,000 or more represented $9.7 million at June 30, 2001 (of which $7.1 million were jumbo certificates of deposit) and $6.9 million at June 30, 2000, or 16.1% and 12.5% of total deposits, respectively. There is no longer a mandated regulatory liquidity requirement for the Company. However, the Company's total liquidity ratios were 6.1% and 8.5%, respectively, at June 30, 2001 and 2000. 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 a line of credit with the FHLB of Atlanta of approximately $14 million, all of which was available at June 30, 2001. 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 13 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. 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. 14 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, 2001 and 2000, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the two years in the two year period ended June 30, 2001. 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, 2001 and 2000, 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, 2001, in conformity with generally accepted accounting principles. /s/ Anderson Associates, LLP ----------------------------- Anderson Associates, LLP July 19, 2001 Baltimore, Maryland 15 WYMAN PARK BANCORPORATION, INC. AND SUBSIDIARIES Lutherville, Maryland CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION JUNE 30, 2001 AND 2000
2001 2000 ---- ---- Assets Cash and non-interest bearing deposits $ 882,696 $ 310,442 Interest bearing deposits in other banks 93,680 474,358 Federal funds sold 3,455,641 1,301,106 Loans receivable, net (Notes 1, 4 and 13) 64,712,777 65,223,905 Mortgage backed securities held-to-maturity at amortized cost (Notes 1, 3 and 13) 145,796 174,086 Federal Home Loan Bank of Atlanta stock, at cost (Notes 2 and 13) 528,900 508,500 Accrued interest receivable (Note 5) 345,969 333,114 Ground rents owned, at cost (Note 13) 122,600 122,600 Property and equipment, net (Notes 1 and 6) 83,069 107,304 Federal and state income taxes receivable 6,237 16,985 Deferred tax assets (Notes 1 and 9) 217,646 203,364 Prepaid expenses and other assets 53,596 63,850 ------------- -------------- Total assets $70,648,607 $68,839,614 ============= ============== Liabilities and Equity Liabilities Demand deposits $ 5,246,632 $ 5,643,177 Money market and NOW accounts 9,454,074 9,093,949 Time deposits 45,481,277 40,609,938 ---------- ---------- Total deposits (Notes 7 and 13) 60,181,983 55,347,064 Borrowings (Notes 8 and 13) -- 3,000,000 Advance payments by borrowers for taxes, insurance and ground rents (Note 13) 1,196,077 1,315,538 Accrued interest payable on savings deposits 12,544 17,267 Federal and state income taxes payable 20,455 8,748 Accrued expenses and other liabilities 556,820 543,761 ------------- ------------ Total liabilities 61,967,879 60,232,378 Commitments and contingencies (Notes 4, 6, 9, 10 and 12) Stockholders' Equity Common stock, par value $.01 per share, authorized 2,000,000 shares, issued 1,011,713 shares in 2001and in 2000 (Note 11) 10,117 10,117 Additional paid-in capital 4,149,733 4,053,677 Contra equity - Employee Stock Ownership Plan (ESOP) (Note 11) (451,008) (539,770) Retained earnings, substantially restricted (Note 12) 6,720,826 6,327,076 Treasury stock at cost, shares 189,223 (2001) and 112,987 (2000) (1,748,940) (1,243,864) ----------- ------------ Total stockholders' equity 8,680,728 8,607,236 ----------- ------------ Total liabilities and stockholders' equity $70,648,607 $68,839,614 =========== ===========
The accompanying notes to consolidated financial statements are an integral part of these statements. 16 WYMAN PARK BANCORPORATION, INC. AND SUBSIDIARIES Lutherville, Maryland CONSOLIDATED STATEMENTS OF OPERATIONS JUNE 30, 2001 AND 2000
2001 2000 ---- ---- Interest and fees on loans receivable $4,928,291 $4,513,841 Interest on mortgage backed securities 12,125 12,744 Interest on other investments 169,513 252,473 ---------- ---------- Total interest income 5,109,929 4,779,058 Interest on savings deposits 2,873,794 2,550,106 Interest on Federal Home Loan Bank advances (short term) 109,717 61,017 Interest on borrowings -- 3,084 Interest on escrow deposits 2,328 3,336 ---------- ---------- Total interest expense 2,985,839 2,617,543 Net interest income 2,124,090 2,161,515 Provision for loan losses (Notes 1 and 4) -- 2,400 ---------- ---------- Net interest income after provision for loan losses 2,124,090 2,159,115 Other Income Loan fees and service charges 105,687 87,202 Gains on sales of loans receivable 8,428 -- Other 12,389 24,758 ---------- ---------- Total other income 126,504 111,960 General and Administrative Expenses Salaries and employee benefits 930,636 875,537 Occupancy costs 110,311 95,290 Federal deposit insurance premiums 11,198 23,029 Furniture and fixtures depreciation and maintenance 44,789 52,948 Data processing 84,504 81,845 Advertising 62,565 68,187 Franchise and other taxes 53,963 48,039 Professional services 74,367 88,833 Other 226,911 223,659 ---------- ---------- Total general and administrative expenses 1,599,244 1,557,367 Income before tax provision 651,350 713,708 Provision for income taxes (Notes 1 and 9) 257,600 278,021 ---------- ---------- Net income $ 393,750 $ 435,687 ========== ========== Basic earnings per share $ 0.54 $ 0.56 ========== ========== Diluted earnings per share $ 0.52 $ 0.54 ========== ==========
The accompanying notes to consolidated financial statements are an integral part of these statements. 17 WYMAN PARK BANCORPORATION, INC. AND SUBSIDIARIES Lutherville, Maryland CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
Additional Contra Equity Common Paid-In Employee Stock Retained Treasury Stock Capital Ownership Plan Earnings Stock Total ----------- -------------- --------------- ---------- ---------- ----------- Balance at June 30, 1999 $ 10,117 $ 3,959,985 $ (632,420) $ 5,891,389 $(1,199,764) $ 8,029,307 Purchase of 7,200 shares of common stock -- -- -- -- (44,100) (44,100) Compensation under stock based benefit plan, net of tax -- 18,025 92,650 -- -- 110,675 Compensation under Recognition and Retention Plan -- 75,667 -- -- -- 75,667 Net income -- -- -- 435,687 -- 435,687 ----------- ----------- ----------- ----------- ----------- ----------- Balance at June 30, 2000 10,117 4,053,677 (539,770) 6,327,076 (1,243,864) 8,607,236 Purchase of 76,236 shares of common stock -- -- -- -- (505,076) (505,076) Compensation under stock based benefit plan, net of tax -- 20,389 88,762 -- -- 109,151 Compensation under Recognition and Retention Plan -- 75,667 -- -- -- 75,667 Net income -- -- -- 393,750 -- 393,750 ----------- ----------- ----------- ----------- ----------- ----------- Balance at June 30, 2001 $ 10,117 $ 4,149,733 $ (451,008) $ 6,720,826 $(1,748,940) $ 8,680,728 =========== =========== =========== =========== =========== ===========
The accompanying notes to consolidated financial statements are an integral part of these statements. 18 WYMAN PARK BANCORPORATION, INC. AND SUBSIDIARIES Lutherville, Maryland CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
2001 2000 ---- ---- Cash flows from operating activities Net income $ 393,750 $ 435,687 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 40,988 50,642 Non-cash compensation under Stock Based Benefit and Bonus Plans 184,818 186,343 Deferred income tax benefit (14,282) (14,344) Provision for loan losses -- 2,400 Amortization of loan fees (82,710) (85,246) Gains on sales of loans receivable (8,428) -- Proceeds from sale of loans originated for resale 759,828 -- Loans originated for resale (751,400) -- Decrease in accrued interest receivable (12,855) (40,939) Decrease in prepaid expenses and other assets 10,254 28,206 Decrease (increase) in federal and state income taxes receivable 10,748 (3,297) Increase in accrued expenses and other liabilities 13,059 5,386 Increase in federal and state income taxes payable 11,707 8,021 Decrease in accrued interest payable (4,723) (7,919) ----------- ----------- Net cash provided by operating activities 550,754 564,940 Cash flows from investment activities Net decrease (increase) in loans receivable 593,838 (8,301,385) Mortgage backed securities principal repayments 28,290 42,577 Purchase of Federal Home Loan Bank of Atlanta stock (20,400) -- Purchases of property and equipment (16,753) (2,665) ----------- ----------- Net cash provided by (used in) investing activities 584,975 (8,261,473) Cash flows from financing activities Net increase (decrease) in savings deposits 4,834,919 (2,661,095) (Decrease) increase in advance payments by borrowers for taxes, insurance and ground rents (119,461) 36,904 (Decrease) increase in borrowings (3,000,000) 350,000 Repurchase common stock (505,076) (44,100) ----------- ----------- Net cash provided by (used in) financing activities 1,210,382 (2,318,291) ----------- -----------
19 WYMAN PARK BANCORPORATION, INC. AND SUBSIDIARIES Lutherville, Maryland CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
2001 2000 ---- ---- Net increase (decrease) in cash and cash equivalents $ 2,346,111 $(10,014,824) Cash and cash equivalents at beginning of year 2,085,906 12,100,730 ------------ ------------ Cash and cash equivalents at end of year $ 4,432,017 $ 2,085,906 ============ ============ The Following is a Summary of Cash and Cash Equivalents Cash and non-interest bearing deposits $ 882,696 $ 310,442 Interest bearing deposits in other banks 93,680 474,358 Federal funds sold 3,455,641 1,301,106 ------------ ------------ $ 4,432,017 $ 2,085,906 ============ ============ Supplemental Disclosures of Cash Flow information Cash Paid During the Year For: Interest paid on savings deposits and borrowed funds $ 2,990,562 $ 2,658,720 ============ ============ Income taxes $ 236,060 $ 297,197 ============ ============
The accompanying notes to consolidated financial statements are an integral part of these statements. 20 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, 2001 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 loan 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. 21 WYMAN PARK BANCORPOATION, 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 22 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 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. Information relating to the calculation of 23 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 net income per share of common stock is summarized for the years ended June 30, 2001 and 2000, as follows: 2001 2000 ---- ---- Net income $393,750 $435,687 ======== ======== Weighted Average Shares Outstanding used for basic EPS 726,475 774,164 Dilutive Items Stock options 31,624 30,012 Unvested stock awards 43 1,359 -------- -------- Adjusted weighted average shares outstanding used for dilutive EPS 758,142 805,535 ======== ======== 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. 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. 24 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 Amortized Unrealized Fair Cost Gains Value -------- -------- --------- June 30, 2001 FNMA $ 1,164 $ 70 $ 1,234 FHLMC 144,632 825 145,457 -------- -------- -------- Mortgage backed securities $145,796 $ 895 $146,691 ======== ======== ======== June 30, 2000 FNMA $ 1,523 $ 169 $ 1,692 FHLMC 172,563 2,095 174,658 -------- -------- -------- Mortgage backed securities $174,086 $ 2,264 $176,350 ======== ======== ======== There were no gross unrealized losses or sales of investment securities or mortgage backed securities during the years ended June 30, 2001 and 2000. 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. 25 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:
2001 2000 ---- ---- Loans secured by first mortgages on real estate: Residential - one-to-four family $ 51,189,420 $ 53,384,414 Residential - multi-family 870,640 313,882 Residential construction loans 527,650 249,600 Commercial 7,467,110 7,709,315 Commercial construction 1,885,146 -- ------------ ------------ Total first mortgage loans 61,939,966 61,657,211 Commercial non-real estate 1,585,393 968,163 Home equity lines-of-credit 3,086,645 3,009,857 Home improvement loans 23,321 10,406 Loans secured by savings deposits 168,105 170,055 Overdraft lines of credit 13,345 12,107 ------------ ------------ 66,816,775 65,827,799 Less: Undisbursed portion of loans in process (1,667,548) (111,608) Unearned loan fees, net (151,450) (207,286) Allowance for loan losses (285,000) (285,000) ------------ ------------ Loans receivable, net $ 64,712,777 $ 65,223,905 ============ ============
There were no impaired loans as defined by SFAS No. 114 at June 30, 2001 and 2000. There was no interest income recognized on impaired loans during these periods. 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. At June 30, 2001, non-accrual loans totaled approximately $112,000. There were no non-accrual loans at June 30, 2000. The average non-accrual loan balance for the year ended June 30, 2001 was $45,048. 26 WYMAN PARK BANCORPORATION, INC. AND SUBSIDIARIES Lutherville, Maryland NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 4 - Loans Receivable - Continued Interest income that would have been recorded under the original terms of such loans and the interest income actually recognized for the years ended June 30, are summarized below: 2001 2000 ---- ---- Interest income that would have been recorded $8,099 $ -- Interest income recognized 6,370 -- ------ ----- Interest income not recognized $1,729 $ -- ====== ===== 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 $249,672 and $277,513 at June 30, 2001 and 2000, 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: 2001 2000 ---- ---- Balance at beginning of the year $285,000 $282,600 Provision for loan losses -- 2,400 -------- -------- Balance at end of the year $285,000 $285,000 ======== ======== 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, 2001, the Association had commitments to originate first mortgage loans on real estate and home equity loans exclusive of undisbursed loan funds of $590,350 and commercial loans of $1,810,000 at a variable rate of interest. At June 30, 2000, the Association had commitments to originate first mortgage loans on real estate and home equity loans, exclusive of undisbursed loan funds, of $334,500 and commercial loans of $1,134,000 at a variable rate of interest. For the years ended June 30, 2001 and 2000 the Association also had commitments to loan funds under unused home-equity lines of credit aggregating approximately $6,053,254 and $6,097,843, respectively. Such commitments carry a floating rate of interest. 27 WYMAN PARK BANCORPORATION, INC. AND SUBSIDIARIES Lutherville, Maryland NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 4 - Loans Receivable - Continued Loan commitments 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. 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 $3,910,879 and $3,536,243 at June 30, 2001 and 2000, 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, 2001 and 2000 are summarized as follows: 2001 2000 ---- ---- Balance at beginning of year $ 772,255 $ 861,762 New loans -- 304,400 Repayments (21,385) (393,907) --------- --------- Balance at end of year $ 750,870 $ 772,255 ========= ========= Note 5 - Accrued Interest Receivable Accrued interest receivable is summarized as follows at June 30: 2001 2000 ---- ---- Loans receivable $343,513 $330,832 Mortgage backed securities 1,667 1,935 Other 789 347 -------- -------- $345,969 $333,114 ======== ======== 28 WYMAN PARK BANCORPORATION, INC. AND SUBSIDIARIES Lutherville, Maryland NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 6 - Property and Equipment Property and equipment are summarized as follows at June 30:
Estimated Useful 2001 2000 Lives ---- ---- ---------- Buildings and improvements $ 416,113 $ 357,668 23 years Furniture, fixtures and equipment 227,397 313,708 3-20 years Leasehold improvements 82,894 81,499 5-10 years --------- --------- Total at cost 726,404 752,875 Less accumulated depreciation and amortization (643,335) (645,571) --------- --------- Property and equipment, net $ 83,069 $ 107,304 ========= =========
The provision for depreciation charged to operations for the years ended June 30, 2001 and 2000 amounted to $40,988 and $50,642, 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, 2001 are as follows: Due in Year Ended June 30, -------------- 2002 $26,590 ======= Rent expense was $38,522 and $38,514 for the years ended June 30, 2001 and 2000, respectively. 29 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:
2001 2000 ------------------------ ------------------------ Amount % Amount % ------ ----- ------ ----- Contractual maturity of Certificate Accounts from June 30: Under 12 months $28,100,971 61.8 $18,280,953 45.0 12 to 24 months 8,602,989 18.9 17,500,234 43.1 24 to 36 months 3,904,047 8.6 2,313,832 5.7 36 to 48 months 4,135,218 9.1 1,305,842 3.2 48 to 60 months 738,052 1.6 1,209,077 3.0 Over 60 months -- 0.0 -- 0.0 ----------- ----- ----------- ----- $45,481,277 100.0 $40,609,938 100.0 =========== ===== =========== =====
Interest expenses on savings deposits consists of the following for the years ended June 30: 2001 2000 ---- ---- Certificates $2,548,794 $2,102,215 Passbook 121,028 168,983 NOW and money market 203,972 278,908 ---------- ---------- $2,873,794 $2,550,106 ========== ========== As of June 30, 2001 and 2000, the Association had customer deposits in savings accounts of $100,000 or more of approximately $9,663,447 and $6,926,948, respectively. Note 8 - Borrowings The Association has an available line of credit with the Federal Home Loan Bank of Atlanta. The credit availability for Wyman Park Federal Savings and Loan Association is 20% of the Association's total assets. The rate on these short-term advances varies daily. Wyman Park Federal Savings and Loan Association had no outstanding advances at June 30, 2001. Advances at June 30, 2000 amounted to $3,000,000 with a rate of 7.4%. 30 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: 2001 2000 ---- ---- Current: Federal $ 227,194 $ 241,340 State 44,688 51,025 --------- --------- 271,882 292,365 Deferred: Federal (11,694) (11,744) State (2,588) (2,600) --------- --------- (14,282) (14,344) --------- --------- Provision for income taxes $257,600 $278,021 ======== ======== 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:
2001 2000 ---- ---- Deferred Tax Assets Interest and fees on loans $ 10,868 $ 16,845 Allowance for losses on loans 110,067 110,067 Deferred compensation 13,983 13,184 Supplemental Executive Retirement Plan 143,646 128,997 Stock Bonus Plan accrual 12,177 12,177 Depreciation 7,792 4,335 Other 6,759 10,363 --------- --------- 305,292 295,988 Deferred Tax Liabilities Federal Home Loan Bank stock dividends (80,684) (80,684) Tax bad debt reserve (6,962) (11,940) --------- --------- (87,646) (92,624) --------- --------- Net deferred tax assets $ 217,646 $ 203,364 ========= =========
No valuation allowance has been provided against the net deferred tax asset at June 30, 2001 because the amount could be realized through a carryback against taxable income of prior years. 31 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:
2001 2000 -------------------------- ------------------------ Percent Percent of Pretax of Pretax Amount Income Amount Income -------- ------ -------- ------ Tax provision at statutory rate $221,459 34.0% $242,661 34.0% State income taxes, net of federal income tax benefit 27,786 4.3 31,960 4.5 Other 8,355 1.3 3,400 0.5 -------- ---- -------- ---- $257,600 39.6% $278,021 39.0% ======== ==== ======== ====
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, 2001 and 2000 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, 2001 and 2000 was $48,530 and $40,887, respectively. 32 WYMAN PARK BANCORPORATION, INC. AND SUBSIDIARIES Lutherville, Maryland NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 10- Pension Plan - Continued The Association has 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, 2001 and 2000 of $37,931 and $24,563, respectively. Note 11 - Common Stock and Stock Benefit Plans In fiscal 1998, the Association converted from a federally chartered mutual savings and loan association to a federally chartered stock savings and loan association. Simultaneously, the Association consummated the formation of a new holding company, Wyman Park Bancorporation, Inc., of which the Association is a wholly-owned subsidiary. In connection with the conversion, the Company issued 1,011,713 shares of common stock. 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. In addition to the above restriction on its capital distributions, the Association would not be able to pay dividends if Wyman Park Federal Savings and Loan Association 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 Association's liquidation account. 33 WYMAN PARK BANCORPORATION, INC. AND SUBSIDIARIES Lutherville, Maryland NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 11- Common Stock and Stock Benefit Plans - Continued Employee Stock Ownership Plan The Association has established an Employee Stock Ownership Plan (ESOP) for its employees. The ESOP holds the common stock in a trust for allocation among participating employees. 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 years ended June 30, 2001 and 2000 compensation expense recognized related to the ESOP and the Association's contribution to the ESOP was $112,785 and $116,315, respectively. All ESOP shares contain a "Put Option" which requires the Company to repurchase the share at the then fair market value subject to the availability of retained earnings. The "Put Option" may be exercised within 60 days of distribution of the shares and then again within 60 days after the fair market value determination date of the next plan year. The current fair market value of shares that have been allocated containing a "Put Option" is $370,678 at June 30, 2001. The ESOP shares were as follows as of June 30: 2001 ---- Shares released and allocated 51,128 Unearned shares 83,116 -------- 134,244 ======== Fair value of unearned shares $602,591 ======== 34 WYMAN PARK BANCORPORATION, INC. AND SUBSIDIARIES Lutherville, Maryland NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 11 - Common Stock and Stock Benefit Plans - Continued 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, 2000 and 2001 168,909 $5.60 ======= Exercisable at June 30, 2001 101,345 ======= 35 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 2001 and 2000 compensation cost been determined including the weighted-average estimate of fair value of each option granted of $2.43, the Association's net income in fiscal 2001 and 2000 would be reduced to proforma amount of $343,363 and $385,300, respectively. Proforma earnings, basic and diluted, per share would have been $.47 and $.45 in fiscal 2001 and $.50 and $.48 in fiscal 2000. 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. 36 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, 2001, the Association met all capital adequacy requirements to which it is subject. As of June 30, 2001, 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.
To Be Well Capitalized Under For Capital Prompt Corrective Actual Adequacy Purposes Action Provisions ---------------- ----------------- --------------------- Amount Ratio Amount Ratio Amount Ratio ------ ----- ------ ----- ------ ----- As of June 30, 2001: Tangible (1) $8,057,595 11.4% $1,059,767 1.5% $ N/A N/A% Tier I capital (2) 8,057,595 19.8% N/A N/A% 2,439,060 6.0% Core (1) 8,057,595 11.4% 2,826,046 4.0% 3,532,558 5.0% Risk-weighted (2) 8,342,595 20.5% 3,252,080 8.0% 4,065,100 10.0% As of June 30, 2000: Tangible (1) $7,466,914 10.9% $1,032,611 1.5% $ N/A N/A% Tier I capital (2) 7,466,914 18.7% N/A N/A% 2,399,400 6.0% Core (1) 7,466,914 10.9% 2,753,629 4.0% 3,442,036 5.0% Risk-weighted (2) 7,751,914 19.4% 3,199,200 8.0% 3,999,000 10.0%
(1) To adjusted total assets (2) To risk-weighted assets 37 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:
Tangible Core Risk-Based Capital Capital Capital --------- ------- ----------- GAAP capital as of June 30, 2001 $8,680,728 $8,680,728 $8,680,728 Less: Equity of parent company 623,133 623,133 623,133 Add: Allowance for losses on loans included in risk-based capital- limited to 1.25% of risk- weighted assets -- -- 285,000 ---------- ---------- ---------- Regulatory capital as of June 30, 2001 $8,057,595 $8,057,595 $8,342,595 ========== ========== ========== GAAP capital as of June 30, 2000 $8,607,236 $8,607,236 $8,607,236 Less: Equity of parent company 1,140,322 1,140,322 1,140,322 Add: Allowance for losses on loans included in risk-based capital- limited to 1.25% of risk- weighted assets -- -- 285,000 ---------- ---------- ---------- Regulatory capital as of June 30, 2000 $7,466,914 $7,466,914 $7,751,914 ========== ========== ==========
38 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 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. 39 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:
2001 2000 ------------------------------ ------------------------------ Carrying Carrying Amount Fair Value Amount Fair Value ------ ---------- ------ ---------- Financial Assets Cash and cash Equivalents $ 4,432,017 $ 4,432,017 $ 2,085,906 $ 2,085,906 Mortgage backed 145,796 146,691 174,086 176,350 securities Loans receivable, 64,712,777 65,775,000 65,233,905 63,622,000 net Ground rents 122,600 73,600 122,600 73,600 Federal Home Loan Bank of Atlanta stock 528,900 528,900 508,500 508,500 Financial Liabilities Savings deposits 60,181,983 60,700,706 55,347,064 55,890,025 Borrowings -- -- 3,000,000 3,000,000 Advance payments by borrowers for taxes, insurance and ground rents 1,196,077 1,196,077 1,315,538 1,315,538 Loan commitments -- 2,400,350 -- 7,558,843
40 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 17, 2001, 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 Bulletin 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 ---- --- --------- September 30, 1999 $ 7.50 $ 6.75 -- December 31, 1999 7.375 6.25 -- March 31, 2000 7.625 5.50 -- June 30, 2000 7.50 6.125 -- September 30, 2000 7.00 6.50 -- December 31, 2000 6.875 6.1875 -- March 31, 2001 7.125 6.1875 -- June 30, 2001 8.00 6.875 -- 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. SHAREHOLDER RELATIONS 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, 2001, 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 41 CORPORATE INFORMATION COMPANY AND BANK ADDRESS 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 Retired Chairman of the Board and President of Park Bancorporation, Inc John Dittmar & Sons, Inc. H. Douglas Huether Albert M. Copp President and Chairman of the Board of Co-owner and President of Woodhall Wine Cellars Independent 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, Inc. firm of Gilbert D. Marsiglia & Co., Inc. G. Scott Barhight Partner in the law firm of Whiteford, Taylor & Preston, L.L.P.
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, LLP Kutak Rock LLP 7621 Fitch Lane 1101 Connecticut Avenue, N.W. Baltimore, Maryland 21236 Washington, DC 20036 42 EX-21 4 exhibit-21.txt EXHIBIT 21 EXHIBIT 21 Subsidiaries of the Registrant Parent ------ Wyman Park Bancorporation, Inc.
State or Other Jurisdiction of Percentage Incorporation Ownership ------------- --------- Subsidiaries (1) ---------------- Wyman Park Federal Savings & Loan Association United States 100% Subsidiary of Wyman Park Federal Savings & Loan Association ----------------------------------------------------------- W.P. Finanicial Corporation Maryland 100%
------------ (1) The assets, liabilities and operations of the subsidiaries are included in the consolidated financial statements contained in the Annual Report to Stockholders attached hereto as an exhibit. EX-23 5 exhibit-23.txt EXHIBIT 23 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 of our report dated July 19, 2001, with respect to the financial statements of Wyman Park Bancorporation, Inc., included in this Form 10-KSB, for the year ended June 30, 2001, into the previously filed Registration Statements of Wyman Park Bancorporation, Inc., on Forms S-8 (File Nos. 333-74235 and 333-74249). /s/ Anderson Associates, LLP ---------------------------- Anderson Associates, LLP Baltimore, Maryland September 24, 2001