SELECTED CONSOLIDATED FINANCIAL INFORMATION
December 31,
1992 1993 1994 1995 1996
(In thousands)
Selected Financial Condition Data:
Total assets $157,613 $169,198 $175,902 $204,076 $215,668
Loans receivable, net 124,009 125,144 137,228 142,151 158,021
Available-for-sale securities - - 13,761 13,703 13,969
Held-to-maturity securities 23,464 27,239 12,491 27,843 29,162
Deposits 142,778 135,842 135,587 159,314 169,486
Total borrowings 2,250 7,450 15,150 17,400 19,116
Shareholders' equity 11,492 24,334 23,691 25,454 25,196
Year Ended December 31,
1992 1993 1994 1995 1996
(In thousands)
Selected Operations Data:
Total interest income $ 13,098 $ 12,308 $ 12,259 $ 14,681 $ 16,207
Total interest expense 8,104 6,694 6,025 8,262 9,289
--------------------------------------------------------
Net interest income 4,994 5,614 6,234 6,419 6,918
Provision for loan losses 364 58 10 8 9
---------------------------------------------------------
Net interest income
after provision
for loan losses 4,630 5,556 6,224 6,411 6,909
Non interest income 420 600 326 434 376
Non interest expense 3,264 3,938 4,053 4,027 5,401
--------------------------------------------------------
Income before tax
provision and
effect of accounting change 1,786 2,218 2,497 2,818 1,884
Tax provision 717 782 850 963 650
--------------------------------------------------------
Income before effect
of accounting
change 1,069 1,436 1,647 1,855 1,234
Effect of accounting change - 75 - - -
--------------------------------------------------------
Net income $ 1,069 $ 1,511 $ 1,647 $ 1,855 $ 1,234
========================================================
Earnings per share N/A $ 1.11 $ 1.27 $ 1.46 $ 0.98
Dividends per share N/A .30 .62 .68 .76
Dividend payout ratio N/A 27.0% 48.8% 46.6% 77.6%
Year Ended December 31,
1992 1993 1994 1995 1996
Selected Financial Ratios
and Other Data:
Performance Ratios:
Return on assets (ratio of net
income to
average total assets) .69% .92% .98% .98% .59%
Average interest rate spread(1) 3.16 2.98 3.37 2.92 2.86
Net interest margin(2) 3.37 3.56 3.89 3.52 3.43
Ratio of operating expense to
average total assets 2.10 2.39 2.40 2.12 2.56
Return on equity (ratio of net
income to
average shareholders' equity) 9.68 6.59 6.80 7.54 4.84
Asset Quality Ratios (end of period):
Non-performing loans to
total assets 0.23 0.18 0.56 0.32 0.59
Allowance for loan losses to
non-performing loans 127.89 163.19 51.06 77.68 39.51
Allowance for loan losses to
net loans 0.37 0.39 0.37 0.36 0.32
Capital Ratios:
Shareholders' equity to total
assets at end of period 7.28 14.38 13.47 12.47 11.68
Average shareholders' equity to
average assets 7.11 13.85 14.36 12.98 12.11
Ratio of average interest-earning
assets to
average interest-bearing
liabilities 1.04x 1.14x 1.14x 1.13x 1.12x
Number of full service offices 4 4 4 4 5
<FN>
(1) Average yield on earning assets less average cost
of interest-bearing liabilities.
(2 Net interest income divided by average interest
earning assets.
</FN>
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. All average balances are daily average balances.
Year Ended December 31,
1994 1995 1996
Average Interest Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate Balance Paid Rate
---------- ------- ------ ----------- ------ ------ ----------- ------- ------
(Dollars in thousands)
Interest-Earning Assets:
Loans receivable(1) $131,972 $10,565 8.01% $142,671 $12,128 8.50% $150,934 $12,850 8.51%
Available-for-sale
securities(2) 14,066 900 6.24 16,703 1,024 6.13 14,370 958 6.67
Held-to-maturity securities
and other investments 12,912 721 5.58 21,710 1,436 6.61 35,137 2,297 6.54
FHLB stock 1,282 73 5.69 1,354 93 6.87 1,451 102 7.03
-----------------------------------------------------------------------------------------
Total interest-earning
assets(1) 160,232 12,259 7.65 182,438 14,681 8.05 201,892 16,207 8.03
-----------------------------------------------------------------------------------------
Interest-Bearing Liabilities:
Time deposits 76,933 3,960 5.15 99,869 5,766 5.77 117,934 7,057 5.98
Savings accounts 34,877 1,126 3.23 28,383 1,134 4.00 27,568 838 3.04
Interest-bearing demand
deposit accounts 18,431 446 2.42 16,810 394 2.34 16,192 340 2.10
Borrowings 10,367 493 4.76 15,865 968 6.10 17,961 1,054 5.87
-----------------------------------------------------------------------------------------
Total interest-bearing
liabilities 140,608 6,025 4.28 160,927 8,262 5.13 179,655 9,289 5.17
-----------------------------------------------------------------------------------------
Net interest income $ 6,234 $ 6,419 $ 6,918
=========================================================================================
Net interest rate spread 3.37% 2.92% 2.86%
=========================================================================================
Net earning assets $ 19,624 $ 21,511 $ 22,237
=========================================================================================
Net yield on average interest-
earning assets 3.89% 3.52% 3.43%
=========================================================================================
Average interest-earning assets
to average interest-bearing
liabilities 1.14x 1.13x 1.12x
=========================================================================================
<FN>
(1) Calculated net of deferred loan fees, loan discounts,
loans in process and loss reserves.
(2) Yield is calculated without consideration of the net
unrealized gain (loss) on available-for-sale securities.
</FN>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
General
Oak Hills Savings and Loan Company, F.A. ("Oak Hills" or the
"Company") converted from a federally insured mutual savings and
loan association to a federally insured stock savings and loan
association on February 5, 1993. In this conversion, 1,356,600
shares of common stock of OHSL Financial Corp. ("OHSL") were sold,
generating net proceeds after conversion expenses of $12.9
million. Of this amount, $6.5 million was utilized to purchase
100% of the common stock of the Company and the balance was
utilized to purchase investments and for other corporate purposes.
Financial Condition
Total assets increased from $204.1 million at December 31, 1995 to
$215.7 million at December 31, 1996, an increase of $11.6 million
or 5.7%. During 1996, loans receivable increased by $15.9 million
and held-to-maturity securities increased by $1.3 million. These
increases were funded principally by a reduction in cash and cash
equivalents of $5.9 million, an increase in deposit accounts of
$10.2 million and by a net increase in borrowings of $1.7 million.
During 1996, the Company continued its efforts to regain deposit
market share, with a focus on the following areas: (a) the
introduction of new deposit products with adjustable rate
features; (b) a strong emphasis on the cross-selling of deposit
products at the retail level; (c) the introduction of financial
incentives to branch employees; (d) above-market rates paid on
selected deposit products; (e) advertising campaigns aimed at
transaction account customers.
Loans receivable, as noted above, increased $15.9 million in 1996.
Mortgage loans secured by 1-4 family residences increased by $13.1
million in 1996 (excluding the $566,000 decrease in loans held for
sale) and consumer loans increased by $2.3 million. The majority
of the offsetting decline came from the construction loan
category, which, net of loans in process, declined from $8.0
million at December 31, 1995 to $5.8 million at the end of 1996.
During 1996, the Company hired two additional loan originators and
also completed training of all branch managers to enable those
individuals to focus more of their efforts on loan origination,
particularly residential and consumer loans.
Held-to-maturity securities increased by $1.3 million during 1996.
While the balance of U.S. Government obligations declined by $2.0
million, the balance of collateralized mortgage obligations
increased during 1996 by $3.4 million. Tax-free obligations showed
no change.
Results of Operations
OHSL's results of operations depend primarily on the levels of net
interest income, the provision for loan losses, non-interest
income and non-interest expenses. Net interest income is dependent
upon the volume of interest-earning assets and interest-bearing
liabilities and on the interest rates which are earned or paid on
these items. Net interest income is the difference between
interest income earned on OHSL's interest-earning assets and
interest expense paid on interest-bearing liabilities. The primary
interest-earning assets are loans and investments. The primary
interest-bearing liabilities are deposit accounts and borrowings.
Net interest income is affected by regulatory, economic, and
competitive factors that influence interest rates. The Company,
like other thrift associations, is subject to interest rate risk
to the extent that its interest-earning assets may mature or
reprice at different times or to a different degree than its
interest-bearing liabilities.
In addition to net interest income, the results of operations are
also affected by the provision for loan losses. The Company
establishes its provision for loan losses and evaluates the
adequacy of the resultant allowance for loan losses based on a
number of factors, including historical loss experience, trends in
the level of non-performing loans, the composition of the loan
portfolio and the general economic environment within which it
operates.
Management believes that the allowance for loan losses at December
31, 1996 is sufficient to absorb potential losses which currently
exist in the Company's loan portfolio. There is no guarantee,
however, that future additions to the allowance for loan losses
will not be required as a result of deteriorating economic
conditions, local employment conditions or other factors.
The Company's operating results are also affected by the levels of
non-interest income, such as loan fees charged, fees and service
charges on deposit and/or transaction accounts, gains or losses on
the sale of loans and securities and other non-interest items.
Non-interest expenses, such as employee salaries and benefits,
occupancy costs, federal deposit insurance premiums, data
processing costs and other operating expenses, are also
significant in the determination of financial performance.
Comparison of Operating Results for the Years Ended December 31,
1996 and 1995
General. Net income for the year ended December 31, 1996 was
$1,234,000, a decrease of $621,000 or 33.5% from the net income
for the year ended December 31, 1995. This decline resulted
primarily from an increase in net interest income of $499,000 and
a decrease in the income tax provision of $313,000, offset by an
increase in non-interest expense of $1,374,000, the majority of
which ($954,000 or 69.4% of the increase) was the increase in
deposit insurance expense related to the special assessment to
recapitalize the Savings Association Insurance Fund (SAIF).
Net Interest Income. Net interest income for the year ended
December 31, 1996 increased to $6,918,000 from $6,419,000 for
1995, an increase of $499,000 or 7.8%. Generally, this increase is
attributable to an increase in net interest-earning assets. The
net interest-earning assets of OHSL (the excess of average
interest-earning assets over the average of interest-bearing
liabilities) increased from $21.5 million in 1995 to $22.2 million
in 1996. This increase was offset somewhat by a reduction in the
net yield on average interest-earning assets, which decreased from
3.52% in 1995 to 3.43% in 1996. This yield reduction is the result
of a somewhat smaller interest rate spread (defined as the
difference between the weighted average yield on interest-earning
assets and the weighted average cost of interest-bearing
liabilities) in 1996 when compared to 1995. In 1995, the net
interest rate spread was 2.92% compared to 2.86% in 1996. The
major factors which contributed to this reduction were believed to
be: (a) the relatively flat yield curve which existed throughout
1996, which made it more difficult for OHSL to earn a significant
spread between its lending and investment activities compared to
its deposit and borrowing activities; (b) management's efforts to
reacquire market share in deposits required the establishment of
some accounts at rates over current market; and (c) strong
competition for loan originations resulted in lower yields than
desired on some loan products.
Interest Income. Interest income on loans increased $722,000
during 1996 when compared to 1995. This increase is attributable
to an increase in the average outstanding balance of loans
receivable of $8.3 million (a 5.8% increase) and a minor increase
of 1 basis point (from 8.50% in 1995 to 8.51% in 1996) in the
weighted average yield on those loans.
Interest earned on investments (including available-for-sale
securities, held-to-maturity securities and other investments)
increased by $795,000 in 1996 when compared to 1995. The average
outstanding balance of investments increased from $38.4 million in
1995 to $49.5 million in 1996, an increase of $11.1 million. The
Company acquired $9.0 million of callable U.S. Government Agency
obligations during 1996. However, despite these acquisitions, due
to the call structure of these acquired bonds, as well as the call
features and scheduled maturities of the Company's other
investments, the Company's holdings of these securities at
December 31, 1996 was actually below the December 31, 1995 totals
for these securities. The average balance for these securities for
1996 was significantly higher than the year-end balance however,
and these investments contributed to the higher yield attained in
1996 from the securities portfolio.
Interest Expense. Interest expense for the year ended December 31,
1996 increased by $1.0 million when compared to 1995. Generally,
this increase resulted from the carrying of larger deposit and
borrowed fund balances during 1996, and also from the slightly
higher overall cost of the deposits when compared to 1995 amounts.
During 1996, the Company continued its programs designed to enable
it to reacquire market share in the deposit area. During 1996, the
average outstanding balance of time deposits increased by $18.1
million, while the average outstanding balance for savings
accounts and interest-bearing demand deposit accounts declined
during 1996 by $0.8 million and $0.6 million respectively.
Overall, the weighted average cost of deposit accounts increased
slightly during 1996. The weighted average cost of time deposits
rose from 5.77% in 1995 to 5.98% in 1996. However, this increase
was substantially offset by a decline in the weighted average cost
of savings accounts, from 4.00% in 1995 to 3.04% in 1996, and
interest-bearing deposit accounts, where 1995's cost of 2.34% was
reduced to 2.10% in 1996.
The Company increased its borrowings from the Federal Home Loan
Bank of Cincinnati during 1996. The average outstanding balance of
borrowings increased from $15.9 million in 1995 to $18.0 million
in 1996, and the cost of these funds declined from 6.10% in 1995
to 5.87% in 1996. Federal Home Loan Bank borrowings are utilized
by the Company for funding in times of low cash availability, as
well as to fund specific needs, such as large loans. Another use
is the funding of securities, where an attractive spread is
offered when compared to the cost of the borrowings and where both
the investment and borrowing have similar terms to maturity or
similar repricing patterns. Management believes that the use of
Federal Home Loan Bank borrowings is a prudent measure in the
above instances. Federal Home Loan Bank borrowings may also be
used as an instrument in the control of interest rate risk when
appropriate.
Provision for Loan Losses. The 1996 provision for loan losses was
$9,000, an increase of $1,000 over the 1995 amount. The Company
has historically followed strict underwriting guidelines in its
loan origination process, and this is considered to be one of many
factors which have resulted in minimal loan losses over the last
decade. Management believes that the allowance for loan losses is
adequate.
The ratio of non-performing loans to total assets at December 31,
1996 was 0.59% compared to 0.32% at December 31, 1995. While the
1996 percentage is above 1995's level, it is comparable to the
1993 ratio and it compares favorably to peer ratios for
non-performing loans.
Non Interest Income. Non interest income decreased from $434,000
in 1995 to $376,000 in 1996, a decline of $58,000 or 13.4%. The
principal reason for this decrease was a reduction in the net gain
on loans originated for sale. During 1996, the Company realized
gains on the sale of loans (including mortgage loans and education
loans) of $71,000 compared to $54,000 in 1995. However, this
increase in realized gains was offset by the effect of unrealized
gains/losses. As the Company identifies certain loans which it
originates as "held for sale", these loans are accounted for at
the lower of their historical cost or their current market value.
During 1996, due to interest rate movements, the market value of
the loans in this category declined, resulting in a net write down
of $13,000 for 1996, whereas in 1995 a net write-up of $81,000 was
recorded.
Non Interest Expense. Non interest expense increased from $4.0
million in 1995 to $5.4 million in 1996, an increase of $1.4
million or 34.1%. The major components of this increase are
salaries and benefits expense (an increase of $83,000 or 3.9%),
occupancy and equipment expense (an increase of $180,000 or
45.3%), computer service (an increase of $47,000 or 15.2%),
deposit insurance (an increase of $954,000 or 300.0%) and other
expenses (an increase of $87,000 or 14.9%).
Salaries and benefits expense increased modestly during 1996, from
$2,111,000 in 1995 to $2,194,000 in 1996, an increase of $83,000.
Increases in employee compensation ($95,000), and in Employee
Stock Ownership Plan expense ($21,000) were somewhat offset by
reductions in the expense for the Company's Bank Incentive Plan
($33,000) and in the Company's 401(k) benefit program ($22,000).
Occupancy and equipment expense increased from $397,000 in 1995 to
$577,000 in 1996, an increase of $180,000. The major components of
this increase were an increase in rent expense of $15,000
resulting primarily from the leasing of the Company's
Cleves-Warsaw branch (which began service in April 1996), an
increase in depreciation expense for equipment of $98,000 and
increases in maintenance costs for buildings and equipment of
$49,000. The increases in depreciation expense and maintainance
costs are directly related to the computer conversion discussed
below.
Computer service costs increased during 1996, from $310,000 in
1995 to $357,000 in 1996, an increase of $47,000. Much of this
increase consists of conversion costs incurred during 1996 as the
Company began performing its own data processing rather than
outsourcing this activity. The Company expects computer service
costs to decline in the future as efficiencies occur in this area.
The expenses recorded during 1996 included non-recurring
conversion costs and, for two-thirds of the year, outside service
bureau costs, which will not be incurred in the future.
The Company's deposit insurance provider, the Federal Deposit
Insurance Corporation ("FDIC"), through the Savings Association
Insurance Fund ("SAIF"), collected a special assessment during
1996. This assessment was intended to recapitalize the SAIF and to
place the cost of bank and thrift deposit insurance on a
relatively level basis. This one-time assessment totaled $927,000
for OHSL. The Company's deposit insurance increased by $954,000
during 1996 over 1995, with the special assessment being the
primary reason. Larger deposit balances during 1996 when compared
to 1995 account for the balance of this increase.
Other expenses increased during 1996, from $582,000 to $669,000,
an increase of $87,000. Principal components of this increase
include supplies expense ($23,000 increase) and advertising
expense ($49,000 increase).
Income Tax Provision. The income tax provision decreased from
$963,000 in 1995 to $650,000 in 1996, a decrease of $313,000. This
decrease is the result of lower levels of pre-tax income recorded
in 1996, compared to 1995.
Comparison of Operating Results for the Years Ended December 31,
1995 and 1994
General. Net income for the year ended December 31, 1995 was
$1,855,000, an increase of $208,000 or 12.6% over net income for
the year ended December 31, 1994. This improvement resulted from
an increase in net interest income of $185,000, a reduction in the
provision for loan losses of $2,000, an increase in non-interest
income of $108,000 and a reduction in non-interest expense of
$26,000. These improvements were somewhat offset by an increase in
the income tax provision of $113,000.
Net Interest Income. Net interest income for the year ended
December 31, 1995 increased to $6,419,000 from $6,234,000 for
1994, an increase of $185,000 or 3.0%. Generally, this increase is
attributable to an increase in net interest-earning assets. The
average net interest-earning assets of OHSL (the excess of average
interest-earning assets over average interest-bearing liabilities)
increased from $19.6 million in 1994 to $21.5 million in 1995.
This increase was somewhat offset by a reduction in the net yield
on average interest-earning assets, which decreased from 3.89% in
1994 to 3.52% in 1995. This yield reduction is the result of a
smaller interest rate spread (defined as the difference between
the weighted average yield on interest-earning assets and the
weighted average cost of interest-bearing liabilities) in 1995
when compared to 1994. In 1995, the net interest rate spread was
2.92% as compared to 3.37% in 1994. The major factors which
contributed to this reduction were believed to be: (a) the
flat yield curve which existed throughout the latter part of 1995,
which made it more difficult for OHSL to earn a positive spread on
new deposit and new borrowing activity which occurred in 1995; (b)
management's efforts to reacquire market share in deposits
required some premium to be paid over market rates in order to
attract and maintain deposit accounts in 1995.
Interest Income. Interest income on loans increased $1,563,000
during 1995 when compared to 1994. This increase was attributable
to an increase in the average outstanding balance of loans
receivable of $10.7 million (an 8.1% increase) and an increase in
the weighted average yield on those loans. The weighted average
yield on loans receivable during 1994 was 8.01%. During 1995, this
yield rose to 8.50%, an increase of 6.1%.
Interest earned on investments (including available-for-sale
securities) increased by $859,000 in 1995 when compared to 1994.
The average outstanding balance of both available-for-sale
securities, held-to-maturity securities and other investments
increased over 1994 amounts, by a combined total of $11.4 million.
The average outstanding balance of available-for-sale securities
increased from $14.1 million in 1994 to $16.7 million in 1995. The
average outstanding balance of held-to-maturity securities and
other investments increased from $12.9 million in 1994 to $21.7
million in 1995. The weighted average yield on available-for-sale
securities decreased slightly during 1995, as it declined from
6.24% in 1994 to 6.13% in 1995. The weighted average yield on
held-to-maturity securities and other investments increased during
1995, as it rose from 5.58% in 1994 to 6.61% in 1995. This
increase is largely attributable to the purchase of callable
Federal agency obligations in late 1994 and throughout 1995. Such
obligations were generally offered at attractive, above-market
rates in order to compensate the buyer for the call feature.
During 1995, OHSL invested in several callable Federal agency and
tax-free callable issues, taking advantage of these attractive
rate features.
Interest Expense. Interest expense for the year ended December 31,
1995 increased by $2.2 million when compared to 1994. Generally,
this increase resulted from the carrying of larger deposit and
borrowed fund balances in 1995, and from the higher overall cost
of such deposits and borrowings in 1995 when compared to 1994.
During 1995, the Company recorded substantially higher balances
for time deposits (generally certificates of deposit) of its
retail customers. Average outstanding time deposits increased by
$22.9 million during 1995, while average outstanding savings
accounts and interest-bearing demand deposit accounts (which
generally carry lower rates of interest) declined during 1995. The
average outstanding balance of savings accounts decreased by $6.5
million (from $34.9 million in 1994 to $28.4 million in 1995) and
the average outstanding balance of interest-bearing demand
deposits decreased by $1.6 million (from $18.4 million in 1994 to
$16.8 million in 1995).
The weighted average cost of deposit accounts generally increased
in 1995 as compared to 1994. The weighted average cost of time
deposits rose from 5.15% in 1994 to 5.77% in 1995. The weighted
average cost of savings accounts rose from 3.23% in 1994 to 4.00%
in 1995. A slight decline in the weighted average cost of
interest-bearing demand deposits took place, as the 1994 cost of
2.42% declined to 2.34% in 1995.
The Company increased its borrowings from the Federal Home Loan
Bank of Cincinnati during 1995. The average outstanding balance of
borrowings increased by $5.5 million during 1995. Federal Home
Loan Bank borrowings are utilized by the Company for funding in
times of low cash availability, as well as to fund specific
needs, such as large loans. Another use is the funding of
investment securities, where an attractive spread is offered when
compared to the cost of the borrowing and where both the
investment and borrowing have similar terms to maturity or similar
repricing patterns. Management believes that the use of Federal
Home Loan Bank borrowings is a prudent measure in the above
instances. Federal Home Loan Bank borrowings may also be used as
an instrument in the control of interest rate risk when
appropriate.
Provision for Loan Losses. The 1995 provision for loan losses was
$8,000, compared to $10,000 in 1994. The Company has historically
followed strict underwriting guidelines in its loan origination
process, and this is considered to be one of many factors which
have resulted in minimal loan losses over the last decade.
Management believes that the allowance for loan losses is
adequate.
The ratio of non-performing loans to total assets at December 31,
1995 was 0.32%, compared to 0.56% at December 31, 1994. A major
reason for this change is the improvement in the status of a large
single family loan (1994 balance of $550,000) which was classified
as non-performing in 1994. This loan was performing at December
31, 1995.
Non Interest Income. Non interest income increased from $326,000
in 1994 to $434,000 in 1995, an increase of $108,000 or 33.1 %.
The principal reason for this improvement was an increase in the
net gain on loans originated for sale. The Company identifies
certain loans which it originates as "held for sale" in the
secondary loan market. These loans are accounted for at the lower
of their historical cost or current market value. During 1994, due
to interest rate movements, the market value of loans in this
category declined, resulting in the write down of these loans to
their then current market value. As interest rates declined
throughout much of 1995, the market value of these loans
recovered, allowing the Company to recover its previous
write-downs. In addition, during 1995 the Company realized gains
on the actual sale of mortgage loans in the amount of $19,000 and
a gain of $35,000 on the sale of student loans.
Management believes that it will continue to sell loans on an
occasional basis in the secondary market (principally to the
Federal Home Loan Mortgage Corporation, a U.S. government agency)
for purposes of asset/liability management, cash management or
other corporate reasons.
The Company's commission income (which is earned through its
subsidiary, CFSC, Inc.) on the sale of mutual funds and
tax-deferred annuities declined from $70,000 in 1994 to $20,000 in
1995. This decrease was largely due to the unexpected resignation
during mid-1995 of the sole marketing representative in this area.
Despite strong efforts, this position was not filled until January
of 1996.
Non Interest Expense. Non interest expense decreased from
$4,053,000 in 1994 to $4,027,000 in 1995, a decrease of $26,000 or
0.6%. The major components of this modest decrease are a decrease
in salaries and benefits expense ($77,000) and a decrease in
franchise taxes ($38,000). These improvements were substantially
offset by increases in occupancy and equipment expense ($12,000),
computer services expense ($22,000), deposit insurance assessments
($13,000) and other operating expenses ($42,000).
Salaries and benefits expense decreased modestly in 1995, from
$2,188,000 in 1994 to $2,111,000 in 1995. The primary reasons for
this decline are staffing reductions in certain areas. The
retirement of one of OHSL's officers and the resignation of one of
the Company's managers has served to reduce payroll costs. The
duties of these individuals have generally been reassigned to
other employees. These savings are somewhat offset by higher costs
assigned in accounting for OHSL's Employee Stock Ownership Plan
(the "ESOP"). Current accounting rules under Statement of Position
93-6 "Employer's Accounting for Employee Stock Ownership Plans"
require that the value of shares of OHSL which are earned by plan
participants be based on the fair value of such shares (as opposed
to their cost). The higher market price of OHSL's shares in 1995
compared to 1994 results in a higher cost for this benefit in
1995. The 1995 cost allocated to the ESOP benefit was $221,000
compared to $204,000 for 1994.
Income Tax Provision. The income tax provision increased from
$850,000 in 1994 to $963,000 in 1995, an increase of $113,000 or
13.3%. The principal reason for this increase is the higher level
of pre-tax income recorded in 1995 ($2,818,000) compared to 1994
($2,497,000).
Impact of Inflation and Changing Prices
The Consolidated Financial Statements and Notes thereto 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 the changes in the relative purchasing power
of money over time due to inflation. The impact of inflation is
reflected in the increased cost of OHSL's operations. Unlike most
industrial companies, nearly all of OHSL's assets and liabilities
are monetary in nature. As a result, interest rates have a greater
impact on OHSL's performance than do the effects of general levels
of inflation. Interest rates do not necessarily move in the same
direction or to the same extent as the price of goods and
services.
New Accounting Pronouncements
In 1996, the Financial Accounting Standards Board (FASB) issued
FAS 125-"Accounting For Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities." This Standard revises
the accounting for transfers of financial assets, such as loans
and securities, and provides guidance on distinguishing between
sales and secured borrowings. It affects certain transactions
beginning in 1997 and others in 1998. Management does not expect
this standard to have a significant effect on OHSL's financial
condition or results of operations.
In 1997, the FASB issued FAS 128-"Earnings Per Share (EPS)." This
Standard is effective for financial statements beginning with year
end 1997 and simplifies the calculation of earnings per share by
replacing primary EPS with basic EPS. It also requires dual
presentation of basic EPS and diluted EPS for entities with
complex capital structures. Basic EPS includes no dilution and is
computed by dividing income available to common shareholders by
the weighted-average common shares outstanding for the period.
Diluted EPS reflects the potential dilution of securities that
could share in earnings, such as stock options, warrants or other
common stock equivalents. OHSL expects the Statement to have
little impact on its earnings per share calculations in future
years, other than changing terminology from primary EPS to basic
EPS.
Asset/Liability Management
The measurement and analysis of OHSL's exposure to changes in the
interest rate environment is referred to as asset/liability
management. One way to analyze the Company's interest rate
sensitivity is to measure the Company's interest rate sensitivity
"gap," which is the difference between the amount of
interest-earning assets which are anticipated to mature or reprice
within that period and the amount of interest-bearing liabilities
which are expected to mature or reprice within the same period.
OHSL relies on certain assumptions, such as the amount and timing
of loan prepayments, for example, in the measurement of the
interest rate sensitivity gap. A gap measurement is referred to as
positive when the amount of interest rate sensitive assets exceeds
the amount of interest rate sensitive liabilities. Conversely, a
negative gap indicates a situation where the amount of liabilities
which mature or reprice in a given period exceeds the amount of
interest rate sensitive assets.
In a period of declining interest rates, a negative gap would tend
to enhance (that is, to increase) net interest income as maturing
and/or repricing liabilities can be replaced with lower rate
liabilities more quickly than maturing assets. Conversely, a
positive gap would generally adversely affect net interest income
in a period of declining rates.
In a period of rising interest rates, a positive gap could enhance
net interest income as maturing assets could be reinvested at
higher rates faster than liabilities would increase in rate. A
negative gap would adversely affect net interest income in a
period of rising interest rates.
In an attempt to manage its exposure to changes in interest rates,
management closely monitors the Company's interest rate risk. The
Company has an asset/liability management committee consisting of
all of the Company's directors and executive officers which meets
at least once per quarter to review the Company's interest rate
risk position and to make recommendations for adjusting such
position. In addition, the asset/liability management committee
reviews the estimated effect on the Company's earnings and capital
under various interest rate scenarios.
In managing its asset/liability mix, the Company may, at times-depending
on the relationship between long- and short-term
interest rates, market conditions and consumer preference-place
somewhat greater emphasis on maximizing its net interest margin
than on strictly matching the interest rate sensitivity of its
assets and liabilities. The Board of Directors believes that the
increased net income resulting from a modest mismatch in the
maturity of its asset and liability portfolios can, during periods
of stable interest rates, provide high enough returns to justify
the increased exposure which can result from such a mismatch. The
Board of Directors has established limits on the Company's
interest rate risk based on an interest rate risk simulation
model. However, there can be no assurance that management's
efforts to limit interest rate risk will be successful.
To the extent consistent with interest rate spread objectives, the
Company attempts to reduce its interest rate risk by taking
various steps. First, the Company focuses a portion of its 1-4
family residential lending program on adjustable-rate mortgage
loans ("ARMs"). Despite the decline in ARM originations over the
last several years as a result of the decline in market interest
rates (resulting in greater customer demand for fixed-rate loans),
at December 31, 1996, approximately $46.3 million (38.7%) of the
Company's 1-4 family residential loans consisted of ARMs. Second,
the Company has maintained a significant portfolio of multi-family
and commercial real estate loans having adjustable rates. Third,
the Company seeks to maintain its portfolio of consumer and
construction loans having short terms to maturity and/or
adjustable interest rates. Fourth, the Company maintains a
substantial portion of its investment portfolio in instruments
having adjustable interest rates and/or short or intermediate
effective terms to maturity. Fifth, the Company has from time to
time offered attractive interest rates and other promotions to
attract transaction accounts, which are considered to be more
resistant to changes in interest rates than certificate accounts.
Finally, the Company may from time to time utilize long-term
borrowings and/or promotions which are designed to attract
intermediate to long-term deposits in an effort to extend the term
to maturity of its liabilities.
The table which follows sets forth the anticipated repricing or
maturity of OHSL's assets and liabilities as of December 31, 1996,
based on the following significant assumptions:
(i) Fixed-rate certificate accounts will not be withdrawn prior to
maturity.
(ii) Transaction accounts are assumed to reprice during the first
time period included in the table.
(iii) Adjustable-rate mortgage loans which reprice annually on 1-4
family residential properties are assumed to prepay at a rate of
approximately 28% per year and the amortized balances are shown as
being due in the period in which the interest rates are next
subject to change. Adjustable-rate mortgage loans on 1-4 family
residential properties are assumed to prepay at a rate of
approximately 20% per year.
(iv) Fixed-rate 1-4 family loans with remaining terms to maturity
of five years or less are assumed to prepay at a rate of 12% per
year. Loans with remaining terms to maturity of over five years
will prepay annually as follows:
Mortgage Loan Prepayment
Interest Rate Assumptions
Less than 8% 9%
8% to 8.99% 14%
9% to 9.99% 18%
10% or greater 17%
The prepayment assumptions are based on recent prepayment history
of similar loans in the State of Ohio.
The following table does not necessarily indicate the impact of
general interest rate movements on OHSL's net interest margin, as
the repricing of some assets and liabilities is subject to outside
forces which may be beyond the Company's control, such as a
decision by a U.S. government agency such as the Federal Home Loan
Bank to call a security owned by the Company for payment.
Accordingly, there is no certainty that OHSL's assets and
liabilities will, in fact, mature or reprice within the time
frames indicated in the following table.
Maturing or Repricing
Total
0-3 4-12 Within Over 1-3 Over 3-5 Over
Months Months One Year Years Years 5 Years Total
(Dollars in Thousands)
Mortgage Loans:
Adjustable-rate/residential 1 to 4(1) $ 14,332 $ 27,469 $ 41,801 $ 4,514 $ - $ - $ 46,315
Fixed-rate/residential 1 to 4 3,123 8,163 11,286 17,914 13,406 30,696 73,302
Other residential and all non-residential 3,554 10,260 13,814 12,711 1,016 1,148 28,689
Consumer loans 5,934 1,413 7,347 2,846 819 - 11,012
Available-for-sale securities(2) 5,265 7,772 13,037 - - 1,035 14,072
Held-to-maturity securities and other 8,366 7,225 15,591 1,649 741 14,974 32,955
--------------------------------------------------------------------------------
Total interest-earning assets 40,574 62,302 102,876 39,634 15,982 47,853 206,345
--------------------------------------------------------------------------------
Savings deposits 24,294 - 24,294 - - - 24,294
NOW and money markets 28,060 - 28,060 - - - 28,060
Certificates 23,540 41,620 65,160 29,896 18,478 929 114,463
FHLB advances 7,500 2,000 9,500 250 5,700 3,666 19,116
--------------------------------------------------------------------------------
Total interest-bearing liabilities 83,394 43,620 127,014 30,146 24,178 4,595 185,933
--------------------------------------------------------------------------------
Interest-earning assets less
interest-bearing liabilities $(42,820) $ 18,682 $(24,138) $ 9,488 $ (8,196) $ 43,258 $ 20,412
================================================================================
Cumulative interest-rate sensitivity gap $(42,820) $(24,138) $(24,138) $(14,650) $(22,846) $ 20,412
====================================================================
Cumulative interest-rate gap as
a percentage of interest-earning assets (20.75)% (11.70)% (11.70)% (7.10)% (11.07)% 9.89%
<FN>
(1) Includes loans held for sale of $443.
(2) Shown at amortized cost.
</FN>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
OHSL Financial Corp.
Cincinnati, Ohio
We have audited the accompanying consolidated statements of
financial condition of OHSL Financial Corp. as of December 31,
1996 and 1995 and the related consolidated statements of income,
changes in shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
condition of OHSL Financial Corp. as of December 31, 1996 and
1995, and the results of its operations and cash flows for each of
the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.
/s/ Crowe, Chizek and Company LLP
Crowe, Chizek and Company LLP
Indianapolis, Indiana
March 6, 1997
OHSL FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, 1996 and 1995
(Dollars in thousands, except per share amounts)
1996 1995
ASSETS
Cash and due from banks $ 4,680 $ 4,264
Short-term investments 3,693 10,054
-----------------------
Cash and cash equivalents 8,373 14,318
Interest-bearing balances with financial institutions 100 600
Available-for-sale securities (Note 2) 13,969 13,703
Held-to-maturity securities (fair value of $28,953 and
$27,875) (Note 2) 29,162 27,843
Loans held for sale 436 1,002
Loans receivable (Note 3) 158,520 142,666
Less: Allowance for loan losses (Note 4) (499) (515)
-----------------------
Loans - net 158,021 142,151
Office properties and equipment - net (Note 5) 2,398 1,520
Federal Home Loan Bank stock, at cost 1,518 1,417
Accrued interest receivable 1,371 1,319
Other assets 320 203
-----------------------
$215,668 $204,076
-----------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits (Note 6) $169,486 $159,314
Advances from Federal Home Loan Bank (Note 7) 19,116 17,400
Accrued interest payable 215 90
Advances from borrowers for taxes and insurance 690 797
Other liabilities 965 1,021
-----------------------
190,472 178,622
Commitments and contingent liabilities (Note 10)
Shareholders' equity
Common stock ($.01 par value - 3,500,000 shares
authorized and 1,401,611 and 1,391,729 shares issued) 14 14
Additional paid-in capital 13,652 13,429
Retained earnings 14,839 14,526
Unamortized cost of bank incentive plan (15) (45)
Unearned shares held by employee stock ownership plan (475) (594)
Treasury stock (147,351 and 107,580 shares, at cost) (2,751) (1,904)
Unrealized gain/(loss) on available-for-sale securities, net
of tax benefit/(liability) of $35 and $(13) (68) 28
-----------------------
25,196 25,454
-----------------------
$215,668 $204,076
-----------------------
OHSL FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1996, 1995 and 1994
(Dollars in thousands, except per share amounts)
1996 1995 1994
INTEREST INCOME
Loans, including related fees $ 12,850 $ 12,128 $ 10,565
Short-term investments 262 411 61
Interest-bearing balances with financial institutions 16 35 53
Mortgage-backed investments 1,425 833 750
Other investments 1,654 1,274 830
------------------------------------
16,207 14,681 12,259
------------------------------------
INTEREST EXPENSE
Deposits 8,235 7,294 5,532
Federal Home Loan Bank advances 1,054 968 493
------------------------------------
9,289 8,262 6,025
------------------------------------
NET INTEREST INCOME 6,918 6,419 6,234
Less provision for loan losses (Note 4) 9 8 10
------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 6,909 6,411 6,224
------------------------------------
NONINTEREST INCOME
Service charges and fees 224 230 248
Net gain/(loss) on loans originated for sale 45 99 (27)
Gain/(loss) on securities (Note 2) 10 - (6)
Commissions 10 20 70
Other 87 85 41
------------------------------------
376 434 326
NONINTEREST EXPENSE
Salaries and employee benefits (Note 9) 2,194 2,111 2,188
Occupancy and equipment, net 577 397 385
Computer service 357 310 288
Deposit insurance 1,272 318 305
Franchise taxes 332 309 347
Other 669 582 540
------------------------------------
5,401 4,027 4,053
------------------------------------
INCOME BEFORE INCOME TAXES 1,884 2,818 2,497
Income tax expense (Note 11) 650 963 850
------------------------------------
NET INCOME $ 1,234 $ 1,855 $ 1,647
------------------------------------
Per share data (Note 12):
Primary $ .98 $ 1.47 $ 1.27
Fully diluted .98 1.46 1.27
OHSL FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended December 31, 1996, 1995 and 1994
(Dollars in thousands, except per share amounts)
Net
Unrealized
Gain/(Loss) on
Additional Available-
Common Paid-in Retained for-Sale Benefit Treasury
Stock Capital Earnings Securities Plans Stock Total
Balance, January 1, 1994 $ 14 $ 12,890 $ 12,618 $ (15) $(1,173) $ - $ 24,334
Implementation of Financial
Accounting Standard No. 115 - - - 36 - - 36
Bank incentive plan
amortization expense - - - - 115 - 115
Exercise of stock options
(18,064 shares at $10/share) - 181 - - - - 181
Acquisition of treasury stock
(87,215 shares) - - - - - (1,544) (1,544)
Employee stock ownership
shares earned - 85 - - 237 - 322
Net income - - 1,647 - - - 1,647
Cash dividends ($.62/share) - - (768) - - - (768)
Change in net unrealized
gain/(loss) - - - (632) - - (632)
-----------------------------------------------------------------------------------------
Balance, December 31, 1994 14 13,156 13,497 (611) (821) (1,544) 23,691
Bank incentive plan
amortization expense - - - - 63 - 63
Exercise of stock options
(17,065 shares at $10.00/share) - 171 - - - - 171
Acquisition of treasury stock
(20,365 shares) - - - - - (360) (360)
Employee stock ownership
shares earned - 102 - - 119 - 221
Net income - - 1,855 - - - 1,855
Cash dividends ($.68/share) - - (826) - - - (826)
Change in net unrealized
gain/(loss) - - - 639 - - 639
-----------------------------------------------------------------------------------------
Balance, December 31, 1995 14 13,429 14,526 28 (639) (1,904) 25,454
Bank incentive plan
amortization expense - - - - 30 - 30
Exercise of stock options
(9,882 shares at $10.00/share) - 99 - - - - 99
Acquisition of treasury stock
(39,771 shares) - - - - - (847) (847)
Employee stock ownership
shares earned - 124 - - 119 - 243
Net income - - 1,234 - - - 1,234
Cash dividends ($.76/share) - - (921) - - - (921)
Change in net unrealized
gain/(loss) - - - (96) - - (96)
------------------------------------------------------------------------------------------
Balance, December 31, 1996 $ 14 $ 13,652 $ 14,839 $ (68) $ (490) $(2,751) $ 25,196
------------------------------------------------------------------------------------------
</TABLE
OHSL FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1996, 1995 and 1994
(Dollars in thousands)
1996 1995 1994
Cash flows from operating activities
Net income $ 1,234 $ 1,855 $ 1,647
Adjustments to reconcile net income to net cash from operating activities
Depreciation and amortization 247 147 153
Net amortization/(accretion) on securities 16 20 (2)
Provision for loan losses 9 8 10
(Gain)/loss on securities (10) - 6
Gain on sale of loans (71) (54) (46)
Change in allowance for loans held for sale 13 (81) 73
Loans originated for sale, net of sales proceeds 624 (200) 1,495
Deferred loan fees (194) (229) (142)
Federal Home Loan Bank stock dividends (101) (93) (73)
Employee stock ownership shares earned 243 221 322
Change in assets and liabilities
Interest receivable (52) (175) (221)
Other assets (140) 41 100
Accrued interest payable 125 20 46
Income tax payable 48 106 103
Other liabilities (3) 7 (197)
----------------------------------------
Net cash from operating activities 1,988 1,593 3,274
Cash flows from investing activities
Net change in interest-bearing balances with financial institutions 500 546 (146)
Purchase of held-to-maturity securities (13,220) (11,103) (3,964)
Proceeds from maturities and repayments of held-to-maturity securities 11,897 4,879 1,731
Purchase of available-for-sale securities (3,815) (9,892) (4,893)
Proceeds from maturities and repayments of available-for-sale securities 1,399 1,771 4,112
Proceeds from sales of available-for-sale securities 2,004 - 3,042
Loans made to customers net of payments received (15,685) (6,515) (11,910)
Proceeds from sale of loans - 1,848 -
Purchase of property and equipment (1,125) (102) (55)
----------------------------------------
Net cash from investing activities (18,045) (18,568) (12,083)
OHSL FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1996, 1995 and 1994
(Dollars in thousands)
1996 1995 1994
Cash flows from financing activities
Net change in deposits $ 10,172 $ 23,727 $ (255)
Proceeds from Federal Home Loan Bank advances 28,500 26,500 19,500
Payments on advances from Federal Home Loan Bank (26,784) (24,250) (11,800)
Net change in advances from borrowers for taxes and insurance (107) 100 85
Purchase of treasury stock (847) (360) (1,544)
Exercise of stock options 99 171 181
Cash dividends (921) (826) (768)
-----------------------------------
Net cash from financing activities 10,112 25,062 5,399
-----------------------------------
Net change in cash and cash equivalents (5,945) 8,087 (3,410)
Cash and cash equivalents at beginning of period 14,318 6,231 9,641
-----------------------------------
Cash and cash equivalents at end of period $ 8,373 $ 14,318 $ 6,231
-----------------------------------
Cash paid during the period for:
Interest $ 9,164 $ 8,242 $ 5,979
Income taxes 602 857 747
Non cash investing activities
Transfer of securities to available-for-sale
upon adoption of FAS 115 - - 14,752
Transfer of available-for-sale securities to
held-to-maturity securities - 9,120 -
OHSL FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
(Dollars in thousands, except per share amounts)
NOTE 1-SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Presentation: The consolidated financial statements
include the accounts of OHSL Financial Corp. (OHSL) and its
wholly-owned subsidiary, Oak Hills Savings and Loan Company, FA
(Company) and the Company's wholly-owned subsidiary, CFSC, Inc.
All significant intercompany accounts and transactions have been
eliminated.
Description of Business: OHSL operates primarily in the banking
industry which accounts for more than 90% of its revenues,
operating income and assets. OHSL generates mortgage and consumer
loans and receives deposits from customers located primarily in
the counties of Hamilton, Butler and Clermont in Ohio, and Ohio,
Dearborn and Franklin counties in Indiana. A substantial portion
of the loan portfolio is secured by single family and multifamily
mortgages. CFSC, Inc. sells investment products, primarily mutual
fund and annuity products, to retail customers. The majority of
the Company's revenue is derived from retail lending activities
and securities.
Use of Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates. Areas where management's estimates and
assumptions are more susceptible to change in the near term
include the allowance for loan losses and the fair values of
certain securities.
Statement of Cash Flows: For purposes of the statement of cash
flows, cash and cash equivalents include cash on hand, amounts due
from banks and short-term investments. The Company reports cash
flows for customer loan transactions and deposit transactions and
interest-bearing balances with other financial institutions in a
net cash flow format.
Securities: OHSL classifies its securities into held-to-maturity
and available-for-sale categories. Held-to-maturity securities are
those which OHSL has the ability to hold until maturity and which
management intends to do so. These are reported at amortized cost.
Available-for-sale securities are those which management may
decide to sell, if needed, for liquidity, asset-liability
management, or other reasons. Available-for-sale securities are
reported at fair value with unrealized gains or losses included as
a separate component of equity, net of tax.
Realized gains or losses are determined based on the amortized
cost of the specific security sold. Interest and dividend income,
adjusted for the amortization of purchase premiums or discounts,
is included in earnings.
Inventory of Loans Held for Sale: The Company sells a portion of
its mortgage loan production in the secondary market. Whenever the
cost of loans held for sale exceeds market value on a net
aggregate basis, a valuation reserve is recorded and the loans are
carried at the lower of cost or market. At December 31, 1996, a
reserve of $6 was required, as cost exceeded market value.
Loans: Interest income on loans is accrued over the term of the
loans. Loans are placed on non-accrual status when the collection
of interest becomes doubtful. When a loan is placed on
non-accrual, the Company also discontinues the amortization of
deferred loan fees associated with the loan. Loan fees, net of
direct loan origination costs, are deferred and recognized over
the life of the loan as an adjustment to interest income using the
level yield method.
Allowance for Loan Losses: The allowance for loan losses is a
valuation allowance, increased by the provision for loan losses
and decreased by charge-offs less recoveries. Management estimates
the allowance balance required based on past loan loss experience,
known and inherent risks in the portfolio, information about
specific borrower situations and estimated collateral values,
economic conditions, and other factors. Allocations of the
allowance may be made for specific loans, but the entire allowance
is available for any loan that, in management's judgment, should
be charged-off.
Loan impairment is reported when full payment under the loan terms
is not expected. Management evaluates all loans selected for
specific review during their analysis of the allowance for loan
losses for impairment. Generally, that analysis does not consider
small balance consumer credits or one to four family residential
real estate loans which are evaluated collectively for impairment.
In general, loans classified as doubtful or loss are considered
impaired while loans classified as substandard are individually
evaluated for impairment. Depending on the relative size of the
credit relationship, late or insufficient payments of 30 to 90
days will cause management to re-evaluate the credit under its
normal evaluation procedures.
The carrying values of impaired loans are periodically adjusted to
reflect cash payments, revised estimates of future cash flows, and
increases in the present value of expected cash flows due to the
passage of time. Cash payments representing interest income are
reported as such. Other cash payments are reported as reductions
in carrying value, while increases or decreases due to changes in
estimates of future payments and due to the passage of time are
reported as provision for loan losses expense.
Other Real Estate: Real estate acquired through foreclosure is
carried at the lower of cost (fair value at the date of
foreclosure) or the fair value less estimated selling costs.
Losses are recognized by a charge to income and the creation of a
valuation allowance. The allowance may increase or decrease by
charges or credits to income. Expenses incurred in carrying other
real estate are charged to operations as incurred. At December 31,
1996, no other real estate was held by the Company.
Servicing Rights: Prior to adopting Financial Accounting Standard
No. 122 at the start of 1996, servicing right assets were recorded
only for purchased rights to service mortgage loans. Subsequent to
adopting this standard, servicing rights represent both purchased
rights and the allocated value of servicing rights retained on
loans sold. Servicing rights are expensed in proportion to, and
over the period of, estimated net servicing revenues. Impairment
is evaluated based on the fair value of the rights, using
groupings of the underlying loans as to interest rates and then,
secondarily, as to geographic and prepayment characteristics. The
impairment of a grouping is recognized by the recording of a
valuation allowance.
Office Properties and Equipment: Office properties and equipment
are stated at cost less accumulated depreciation. Depreciation is
computed by straight-line and accelerated methods, with useful
lives of twenty-five to forty years for buildings and three to ten
years for furniture and equipment.
Benefit Plans: The Company maintains an Employee Stock Ownership
Plan (ESOP) covering substantially all full time employees. The
expense recognized as ESOP shares are earned by participants is
based on the current market value of such shares. Unearned shares
are not considered to be outstanding shares for the purpose of
computing earnings per share. The difference between the cost of
ESOP shares earned, and their market value, is reflected as an
addition to (or deduction from) additional paid-in capital.
Income Taxes: Income tax expense is the amount of income tax
payable for the current year plus or minus the change in deferred
tax liabilities and assets. Deferred tax liabilities and assets
are determined at each balance sheet date. They are measured by
applying enacted tax laws to future amounts that will result from
differences in the financial statement and tax basis of assets and
liabilities. Recognition of deferred tax assets is limited by the
establishment of a valuation reserve unless management concludes
that they are more likely than not going to result in future tax
benefits to OHSL.
Fair Values of Financial Instruments: Fair values of financial
instruments are estimated using relevant market information and
other assumptions, as more fully disclosed separately. Fair value
estimates involve uncertainties and matters of significant
judgment regarding interest rates, credit risk, prepayments, and
other factors, especially in the absence of broad markets for
particular items. Changes in assumptions or in market conditions
could significantly affect the estimates. The fair value estimates
of existing on- and off-balance sheet financial instruments does
not include the value of anticipated future business or the values
of assets and liabilities not considered financial instruments.
Financial Statement Presentation: Certain items in the 1995
consolidated financial statements have been reclassified to
correspond with 1996 presentation. These reclassifications had no
impact on net income or equity.
NOTE 2-SECURITIES
The amortized cost and fair value of available-for-sale securities
were as follows at December 31:
1996
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Corporate notes $ 500 $ - $ (32) $ 468
Mutual funds 2,798 11 (39) 2,770
Mortgage-backed
securities 10,774 29 (72) 10,731
--------------------------------------------
$ 14,072 $ 40 $ (143) $ 13,969
1995
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Corporate notes $ 500 $ - $ (8) $ 492
Mutual funds 2,798 47 (35) 2,810
Mortgage-backed
securities 10,364 55 (18) 10,401
-----------------------------------------
$ 13,662 $102 $ (61) $13,703
The amortized cost and fair value of available-for-sale securities
at December 31, 1996, by contractual maturity, are shown below.
Actual maturities may differ from contractual maturities because
issuers may have the right to call or repay obligations with or
without call or prepayment penalties.
Amortized Fair
Cost Value
Due within one year $ - $ -
Due after one year
through five years - -
Due after five years
through ten years 500 468
Due after ten years - -
Mutual funds 2,798 2,770
Mortgage-backed
securities 10,774 10,731
----------------------
$14,072 $13,969
----------------------
Sales of available-for-sale securities during 1994 generated gross
gains of $14 and gross losses of $25. In addition, during 1994 the
Company recovered a $5 write-down recorded during 1993 on a
mortgage-backed security that was held-for-sale. Sales of
available-for-sale securities during 1996 generated gross gains of
$22 and gross losses of $12.
The amortized cost and fair value of held-to-maturity securities
were as follows at December 31:
1996
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Obligations of U.S.
Government agencies $17,330 $74 $(126) $17,278
Tax-free obligations 810 11 (3) 818
Collateralized mortgage
obligations 11,022 3 (168) 10,857
---------------------------------------
$29,162 $88 $(297) $28,953
---------------------------------------
1995
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Obligations of U.S.
Government agencies $19,410 $127 $ (5) $19,532
Tax-free obligations 808 14 - 822
Collateralized mortgage
obligations 7,625 7 (111) 7,521
---------------------------------------
$27,843 $148 $(116) $27,875
---------------------------------------
The amortized cost and fair value of held-to-maturity securities
at December 31, 1996, by contractual maturity, are shown below.
Actual maturities may differ from contractual maturities because
issuers may have the right to call or prepay obligations with or
without call or prepayment penalties.
Amortized Fair
Cost Value
Due within one year $ - $ -
Due after one year
through five years 3,481 3,487
Due after five years
through ten years 10,109 10,126
Due after ten years 4,550 4,483
Collateralized mortgage
obligations 11,022 10,857
------------------
$29,162 $28,953
To secure public deposits at December 31, 1996 and 1995, the
Company has pledged a portion of one of its mortgage-backed
securities. The carrying value of the pledged amount was $477 and
$478 at December 31, 1996 and 1995, respectively, and the market
value was approximately $471 and $471.
NOTE 3-LOANS RECEIVABLE
Loans receivable consist of the following:
1996 1995
Mortgage loans secured by:
One-to-four family residences $111,054 $ 97,921
Other properties 28,689 26,575
Construction 9,866 11,115
Loans on savings accounts 223 248
Second mortgage loans 2,319 1,861
Home improvement loans 478 472
Consumer loans 5,935 4,696
Automobile loans 4,091 3,045
Educational loans 285 386
------------------
Gross loans receivable 162,940 146,319
Undisbursed portion of loans in
process (4,065) (3,116)
Unearned interest, premiums and
discounts, net 12 24
Deferred loan fees, net (367) (561)
------------------
$158,520 $142,666
Mortgage loans serviced for others are not included in the
accompanying Consolidated Statements of Financial Condition. The
unpaid principal balances of these loans are summarized as
follows:
1996 1995 1994
Mortgage loan portfolios
serviced for:
FHLMC $18,503 $17,835 $17,555
Other investors 5,331 5,471 6,293
--------------------------
$23,834 $23,306 $23,848
--------------------------
Activity for capitalized originated mortgage servicing rights was
as follows:
1996
Beginning of year $ -
Additions 33
Amortized to expense (6)
---
End of year $27
---
Certain of OHSL's officers and directors are loan customers of the
Company. The balance of loans outstanding to these individuals was
not significant at December 31, 1996 or 1995.
The balance of loans on non-accrual status was not significant at
December 31, 1996 or 1995.
The Company had no loans designated as impaired at December 31,
1996 or 1995, nor were any loans so designated during either year.
NOTE 4-ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses are summarized as
follows:
1996 1995 1994
Balance at beginning of period $515 $507 $501
Provision for loan losses 9 8 10
Loan charge-offs (25) - (7)
Recoveries - - 3
-----------------------
Balance at end of period $499 $515 $507
NOTE 5-OFFICE PROPERTIES AND EQUIPMENT
A summary of office properties and equipment is as follows:
1996 1995
Land $ 126 $ 126
Office buildings and improvements 2,396 2,275
Furniture and equipment 2,489 1,484
----------------
5,011 3,885
Accumulated depreciation and
amortization 2,613 2,365
----------------
$2,398 $1,520
NOTE 6-DEPOSITS
Deposits are summarized as follows:
1996 1995
Amount Percent Amount Percent
Non interest-bearing
deposits $ 2,669 1.6% $ 4,042 2.5%
NOW accounts 16,487 9.7 15,180 9.5
Savings accounts and
MMDA's 35,867 21.2 35,104 22.1
--------------------------------
55,023 32.5 54,326 34.1
--------------------------------
Certificates of deposit
2.00% to 3.99% 906 0.5 912 0.6
4.00% to 5.99% 57,360 33.9 39,554 24.8
6.00% to 7.99% 52,274 30.8 60,225 37.8
8.00% to 9.99% 3,923 2.3 4,297 2.7
--------------------------------
114,463 67.5 104,988 65.9
--------------------------------
$169,486 100.0% $159,314 100.0%
At December 31, 1996, scheduled maturities of certificates of
deposit are as follows:
1997 $ 65,160
1998 24,155
1999 5,741
2000 6,415
2001 12,063
Thereafter 929
--------
$114,463
The aggregate amount of certificates of deposit in denominations
of $100 or more was $14,087 and $12,032 at December 31, 1996 and
1995, respectively.
NOTE 7-ADVANCES FROM FEDERAL HOME
LOAN BANK
Advances from the Federal Home Loan Bank of Cincinnati (FHLB)
consist of the following:
Weighted Average
Interest Rate
at December 31,
Final Maturity 1996 Balance
1997 5.77% $ 5,750
1998 5.65 5,500
1999 6.00 1,500
2000 6.25 700
2001 6.23 2,750
2002 6.57 2,916
-------
$19,116
-------
Required annual principal payments for those advances outstanding
at December 31, 1996 are as follows:
Year Ending
1997 $ 7,783
1998 3,867
1999 2,201
2000 267
2001 2,082
2002 2,916
-------
$19,116
-------
These advances require monthly interest payments and are secured
by a blanket collateral agreement covering the majority of the
Company's residential mortgage loans.
NOTE 8-CAPITAL REQUIREMENTS
At the time of its conversion to a stock form of organization, the
Company established a liquidation account in an amount equal to
its total net worth as of the date of the latest statement of
financial condition appearing in the final prospectus, which was
$10,998. The liquidation account is maintained for the benefit of
eligible depositors who continue to maintain their accounts at the
Company after the conversion. The liquidation account declines
annually to the extent that eligible depositors have reduced their
qualifying deposits. Subsequent increases will not restore an
eligible account holder's interest in the liquidation account. In
the event of a complete liquidation, each eligible depositor will
be entitled to receive a distribution from the liquidation account
in an amount proportionate to the current adjusted qualifying
balances for accounts then held. The balance allocated to the
liquidation account is not available for payment of dividends.
The Company has qualified under provisions of the Internal Revenue
Code which permit it to deduct from taxable income a provision for
bad debts in excess of the provision for such losses charged
against income in the financial statements, if any. If, in the
future, this portion of retained earnings is used for any purpose
other than to absorb bad debt losses, federal income taxes would
be imposed at the then applicable rates. In accordance with FAS
No. 109, the Company has not recorded a tax liability for $2,300
of the tax reserve which accumulated prior to January 1, 1988. At
current tax rates, the tax due on that amount would be $782.
The Company is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet the
Office of Thrift Supervision's (OTS) minimum capital requirements
can result in certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could
have a direct material effect on the financial statements. These
guidelines and the Federal Deposit Insurance Corporation's (FDIC)
regulatory framework for prompt corrective action involve
quantitative measures of capital, assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting
practices as well as qualitative judgments by the regulators about
components, risk weightings, and other factors. At December 31,
1996, the most recent notification from the OTS categorized the
Company as well capitalized. There were no conditions or events
since that notification that management believes have changed the
institution's category.
At December 31, under these capital requirements the Company had:
OTS FDIC
----------------------------------------
Minimum Required
Required For Capital Minimum To Be
Actual Adequacy Purposes "Well Capitalized"
------------------------------------------------------
Amount Amount Amount
($000) Ratio ($000) Ratio ($000) Ratio
------------------------------------------------------
1996
Total Capital (to Risk Weighted Assets) $19,968 18.40% $8,681 8.00% $10,851 10.00%
Tier I Capital (Core Capital)
(to Risk Weighted Assets) 19,481 17.95 4,341 4.00 6,510 6.00
Tier 1 Capital (Core Capital)
(to Adjusted Assets) 19,481 9.24 8,435 4.00 10,544 5.00
Tangible Capital (to Adjusted Assets) 19,481 9.24 3,163 1.50 N/A N/A
1995
Total Capital (to Risk Weighted Assets) 19,813 20.13 7,875 8.00 9,844 10.00
Tier I Capital (Core Capital)
(to Risk Weighted Assets) 19,303 19.61 3,938 4.00 5,906 6.00
Tier 1 Capital (Core Capital)
(to Adjusted Assets) 19,303 9.73 5,950 3.00 9,916 5.00
Tangible Capital (to Adjusted Assets) 19,303 9.73 2,975 1.50 N/A N/A
Total capital differs from tangible and core capital due to the
inclusion of the Company's general valuation allowance which
totaled $487 and $510 at December 31, 1996 and 1995.
NOTE 9-BENEFIT PLANS
The Company sponsored a defined benefit pension plan that covered
substantially all full-time employees. Effective April 22, 1994,
the Board approved the termination of that Plan and the
distribution of its assets to participants. During 1995, the net
assets of the plan were distributed to participants in full
satisfaction of the Company's accumulated obligation pursuant to
the plan. Expense recorded for this plan was $80 for 1994.
OHSL shareholders approved a Stock Option Plan in 1993 which
reserved 135,660 shares of common stock for granting options to
directors and officers of OHSL and the Company. Under the terms of
the Plan, options would be granted at values not less than the
fair market value of the shares at the date of the grant. Options
must be exercised within ten years of grant. There were 124,796
options granted during 1993 at a price of $10 per share. No
options have been granted since that time. During 1996, 1995 and
1994, 9,882, 17,065 and 18,064 options were exercised. No options
have been forfeited. At December 31, 1996, 79,785 options remain
outstanding and all are currently vested and exercisable.
In 1993, the Company established a Bank Incentive Plan (BIP) that
awarded 40,696 shares of stock to certain officers and directors
of the Company. The stock awarded under the Plan is restricted as
to certain rights at the time of issuance. These restrictions are
removed over a two year period for directors and a four year
period for officers. The cost of these shares is amortized over
the vesting periods described above. Expense recorded for the BIP
totalled $30 in 1996, $63 in 1995 and $115 in 1994.
In 1993, the Company established an Employee Stock Ownership Plan
(ESOP) which purchased 7%, or 94,962 shares, of the stock offered
in the conversion. The funds used by the ESOP to purchase the
stock were provided by a loan from OHSL which will be repaid by
contributions to the ESOP by the Company in the future. Pursuant
to the ESOP, 11,870 of the 94,962 shares are to be allocated to
participants annually. The ESOP covers substantially all employees
and shares are allocated based upon employee compensation levels
during the year. ESOP expense is based on the fair value of shares
earned and totaled $243, $221 and $204 for 1996, 1995 and 1994. At
December 31, 1996, 59,352 shares with a fair value of $1,269 were
unearned and held in suspense by the ESOP, 11,870 shares had been
released for allocation and 23,740 shares had been allocated to
participants. Dividends paid on unreleased shares are used to
service ESOP debt.
NOTE 10-COMMITMENTS AND CONTINGENT
LIABILITIES
Expense for leased premises was $32, $17 and $17 for the years
ended December 31, 1996, 1995 and 1994. Future minimum lease
payments at December 31, 1996 for all non-cancelable leases are as
follows:
1997 $ 32
1998 38
1999 39
2000 40
2001 10
Thereafter -
----
$159
The Company, in the ordinary course of business, has loans,
commitments and contingent liabilities, such as guarantees and
commitments to extend credit, which are not reflected in the
accompanying consolidated statements of financial condition. The
Company's exposure to credit loss in the event of nonperformance
by the other party to the financial guarantees is represented by
the contractual amounts of those instruments. The Company uses the
same credit policy to make such commitments as it uses for
on-balance-sheet items.
At December 31, 1996 and 1995 these financial instruments are
summarized as follows:
1996 1995
Commitments to make loans:
Fixed rate $1,339 $ 276
Variable rate 382 37
Unused portions of lines of credit 4,311 3,913
Standby letters of credit 221 -
The commitments to make loans relate to residential mortgage
loans. Generally such commitments are for 45 days. At December 31,
1996, the fixed rate loan commitments had an average rate of
8.09%. The lines of credit are primarily variable rate home equity
lines of credit.
OHSL and the Company are party to various legal actions arising in
the course of its business. In the opinion of management, OHSL and
the Company have adequate legal defenses and/or insurance coverage
with respect to these actions. Management does not believe their
resolution will materially affect the operations or financial
position of the OHSL.
NOTE 11-INCOME TAX EXPENSE
An analysis of income tax expense is as follows:
1996 1995 1994
Current $567 $816 $725
Deferred 83 147 125
----------------------
$650 $963 $850
----------------------
The difference between the financial statement income tax expense
and amounts computed using the statutory federal tax rate of 34%
is reconciled as follows:
1996 1995 1994
Income tax provision
computed at statutory rate $641 $958 $850
Add (subtract) tax effect of
Tax-exempt interest (15) (7) (3)
Other 24 12 3
----------------------
$650 $963 $850
----------------------
The net deferred tax liability, as of December 31, 1996 and 1995,
reflected in the consolidated statement of financial position is
comprised of the following components:
1996 1995
Deferred tax receivable from:
Deferred loan fees $136 $191
Unrealized loss on available-for-sale
securities 35 -
Other 21 30
----------------
192 221
Deferred tax liability for:
Bad debt deductions (231) (228)
FHLB stock dividends (255) (220)
Unrealized gain on available-for-sale
securities - (13)
Other (48) (67)
----------------
(534) (528)
Valuation allowance for deferred tax
receivable - -
----------------
Net deferred tax liability $(342) $(307)
NOTE 12-EARNINGS PER SHARE
Primary and fully diluted earnings per share are based on the
weighted average number of shares outstanding during the period,
adjusted for the effect of common stock equivalents. The stock
options outstanding are considered common stock equivalents.
Weighted average shares outstanding are increased by the number of
shares issuable under the options, assuming full exercise, and
reduced by the number of shares that could, hypothetically, be
reacquired using the proceeds from the exercise of those options.
The average number of unreleased ESOP shares are not considered to
be outstanding while the shares awarded under the BIP are
considered to be outstanding.
The following table presents the number of shares used to compute
primary and fully diluted earnings per share, and the results of
those computations:
1996 1995 1994
Number of shares
Primary 1,262,415 1,262,167 1,299,570
Fully diluted 1,263,981 1,267,035 1,299,570
Earnings per share
Primary $ .98 $ 1.47 $ 1.27
Fully diluted .98 1.46 1.27
NOTE 13-DISCLOSURES ABOUT FAIR VALUE
OF FINANCIAL INSTRUMENTS
OHSL is required to disclose the estimated fair value of its
financial instruments. The following methods and assumptions were
used to estimate the fair value of each class of financial
instruments:
Cash, Short-Term Investments, FHLB Stock, Accrued Interest
Receivable and Accrued Interest Payable: The carrying amount of
these instruments is a reasonable estimate of their fair value.
Securities: Fair values are based on quoted market prices or
dealer quotes. If a quoted market price is not available, fair
value is estimated using quoted market prices for similar
instruments.
Loans Receivable: The fair value of loans receivable was estimated
based upon quoted market prices for individual loans, or pools of
loans, that had characteristics (rate, term, repricing frequency)
similar to those loans in the Company's loan portfolio.
Deposits: The fair value of demand deposits, savings accounts and
certain money market deposits is the amount payable on demand at
the reporting date. The fair value of fixed-maturity certificates
of deposit is estimated using the rates currently offered for
deposits of similar remaining maturities.
Advances: The fair value of these advances was estimated based
upon the current rates charged for advances with similar terms.
Off-Balance Sheet Items: Carrying value is a reasonable estimate
of fair value. These instruments are generally variable rate or
short-term in nature, with minimal fees charged.
The estimated fair values of the Company's financial instruments
are as follows:
1996 1995
Carrying Fair Carrying Fair
Value Value Value Value
Financial assets
Cash and short-term
investments $ 8,473 $ 8,473 $ 14,918 $ 14,918
Available-for-sale
securities 13,969 13,969 13,703 13,703
Held-to-maturity
-securities 29,162 28,953 27,843 27,875
Loans (net) 158,457 161,742 143,153 147,602
FHLB stock 1,518 1,518 1,417 1,417
Accrued interest
receivable 1,371 1,371 1,319 1,319
Financial liabilities
Deposits (169,486) (170,982) (159,314) (161,152)
FHLB Advances (19,116) (19,056) (17,400) (17,448)
Accrued interest payable (215) (215) (90) (90)
Off-balance sheet items - - - -
NOTE 14-PARENT COMPANY FINANCIAL STATEMENTS
Presented below are the condensed balance sheets and the related
condensed statements of income and cash flows for the parent
company.
CONDENSED BALANCE SHEETS
December 31, 1996 and 1995
1996 1995
ASSETS
Cash and cash equivalents $ 1,693 $ 854
Investment in subsidiary 19,418 19,290
Other investments 4,118 4,760
Loan to ESOP (see Note 10) 594 712
Other assets 120 132
-------------------
Total assets $25,943 $25,748
-------------------
LIABILITIES $ 747 $ 294
SHAREHOLDERS' EQUITY 25,196 25,454
-------------------
Total liabilities and
shareholders' equity $25,943 $25,748
-------------------
CONDENSED STATEMENTS OF INCOME
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994
Operating income
Dividends from the Company $1,200 $1,200 $1,814
Other 312 331 290
---------------------------
Total operating income 1,512 1,531 2,104
Operating expenses 162 141 157
---------------------------
Income before taxes and
equity in undistributed
income of the Company 1,350 1,390 1,947
Income tax provision 52 67 45
---------------------------
Income before equity in
undistributed income of
the Company 1,298 1,323 1,902
Equity in undistributed income
of the Company (64) 532 (255)
---------------------------
Net income $1,234 $1,855 $1,647
---------------------------
CONDENSED STATEMENTS OF CASH FLOWS
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994
Cash flows from operating activities
Net income $ 1,234 $ 1,855 $ 1,647
Adjustments to reconcile net income
to net cash from operating activities:
Equity in undistributed income of
the Company 64 (532) 255
Unrealized (gain)/loss on security - - (5)
Net amortization/(accretion)
on securities (7) (7) 3
Change in other assets 19 2 (43)
Change in other liabilities 453 8 74
----------------------
Net cash from operating activities 1,763 1,326 1,931
Cash flows from investing activities
Purchase of securities - (550) (2,200)
Maturity of securities 627 674 2,323
ESOP loan repayment 118 119 119
----------------------
Net cash from investing activities 745 243 242
Cash flows from financing activities
Dividends paid (921) (826) (768)
Repurchase of treasury stock (847) (360) (1,544)
Exercise of stock options 99 171 181
----------------------
Net cash from financing activities (1,669) (1,015) (2,131)
----------------------
Net change in cash and cash equivalents 839 554 42
Cash and cash equivalents at beginning
of year 854 300 258
-----------------------
Cash and cash equivalents at end
of year $ 1,693 $ 854 $ 300
-----------------------
Taxes paid during 1996, 1995 and 1994 totalled $(23), $42 and $32,
respectively.
NOTE 15-PENDING ACCOUNTING CHANGES
Financial Accounting Standard No. 125, Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of
Liabilities, was issued by the Financial Accounting Standards
Board in 1996. It revises the accounting for transfers of
financial assets, such as loans and securities, and for
distinguishing between sales and secured borrowings. It is
effective for some transactions in 1997 and others in 1998.
Management does not expect adoption of this Standard to have a
significant effect on OHSL's financial position or results of
operations.
STOCKHOLDER INFORMATION
Stock Listing Information
Oak Hills Savings and Loan Company, F.A. converted from a mutual
to a stock company effective February 5, 1993, and formed OHSL
Financial Corp., the holding company. OHSL Financial Corp. common
stock is traded on the Nasdaq National Market tier of the Nasdaq
Stock Market under the symbol "OHSL."
Stock Price Information
Shares of common stock were made available to qualified
subscribers at $10 per share during the initial public offering.
The following table sets forth the high and low sales prices for
OHSL's common stock as reported on the Nasdaq Market. At December
31, 1996, the average of the bid and asked price for OHSL common
stock was $21.375 per share.
Low High
Quarter ended:
March 31, 1995 $16.75 $18.75
June 30, 1995 17.50 19.00
September 30, 1995 17.50 19.75
December 31, 1995 19.50 22.00
Quarter ended:
March 31, 1996 $19.75 $21.50
June 30, 1996 19.50 22.00
September 30, 1996 19.50 21.00
December 31, 1996 19.50 21.50
Dividends
Dividends are paid upon the determination of the Board of
Directors that such payment is consistent with the long-term
interests of OHSL and Oak Hills. The factors affecting this
determination include OHSL's current and projected earnings,
operating results, financial condition, regulatory restrictions,
future growth plans and other relevant factors. OHSL declared
quarterly dividends during 1996 as follows:
Per share
Record date Payment date amount
Mar. 29, 1996 April 12, 1996 $0.19
June 28, 1996 July 15, 1996 $0.19
Sept. 30, 1996 Oct. 15, 1996 $0.19
Dec. 31, 1996 Jan. 15, 1997 $0.19