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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period ended September 30, 1996
Commission File Number 0-22034
WOOD BANCORP, INC.
------------------
(Exact name of small business issuer as specified in its charter)
Delaware 34-1742860
- -------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
124 East Court Street, Bowling Green, Ohio 43402
------------------------------------------------
(Address of principal executive offices)
(419) 352-3502
--------------
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the issuer was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Class: Outstanding at November 8, 1996
Common stock, $0.01 par value 1,497,636 common shares
Traditional Small Business Disclosure Format:
Yes [ ] No [ X ]
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WOOD BANCORP, INC.
FORM 10-QSB
Quarter ended September 30, 1996
Part I - Financial Information
Interim Financial Information required by Rule 10-01 of Regulation S-X and Item
303 of Regulation S-B is included in this Form 10-QSB as referenced below:
ITEM 1 - FINANCIAL STATEMENTS
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Part II - Other Information
OTHER INFORMATION
SIGNATURES
WOOD BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
- -----------------------------------------------------------------------------------------------
September 30, June 30,
1996 1996
------------- -------------
ASSETS
Cash and due from banks ................................. $ 2,492,117 $ 2,622,396
Federal funds sold ...................................... 125,000 15,000
------------- -------------
Cash and cash equivalents ........................... 2,617,117 2,637,396
Interest-bearing deposits in other financial institutions 251,730 77,715
Repurchase agreement .................................... 2,500,000
Investment securities available for sale (Note 2) ....... 17,271,079 15,885,647
Mortgage-backed securities available for sale (Note 2) .. 9,505,913 9,648,337
Loans, net (Note 3) ..................................... 118,833,635 111,456,292
Real estate owned ....................................... 30,000 30,000
Office properties and equipment, net .................... 1,375,120 1,359,034
Federal Home Loan Bank stock, at cost ................... 1,331,600 1,308,600
Accrued interest receivable ............................. 868,794 816,501
Other assets ............................................ 289,352 529,160
------------- -------------
Total assets ................................... $ 152,374,340 $ 146,248,682
============= =============
LIABILITIES
Deposits ................................................ $ 113,961,170 $ 115,829,891
Advances from Federal Home Loan Bank .................... 16,919,367 9,315,945
Accrued interest payable ................................ 132,993 89,212
Other liabilities ....................................... 1,292,963 891,636
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Total liabilities ................................... 132,306,493 126,126,684
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SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 500,000 shares
authorized, no shares issued or outstanding
Common stock, $.01 par value, 2,500,000 shares
authorized, 1,655,847 shares issued and outstanding ... 16,558 11,039
Additional paid-in capital .............................. 10,715,399 10,686,033
Retained earnings - substantially restricted ............ 11,579,771 11,688,467
Treasury stock at cost; 158,211 shares at
September 30, 1996 and June 30, 1996 .................. (1,671,491) (1,671,491)
Obligation under employee stock ownership plan .......... (409,161) (409,161)
Unearned compensation ................................... (32,925) (42,561)
Unrealized loss on available for sale securities, net ... (130,304) (140,328)
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Total shareholders' equity .......................... 20,067,847 20,121,998
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Total liabilities and shareholders' equity ..... $ 152,374,340 $ 146,248,682
============= =============
See accompanying notes to financial statements.
WOOD BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
- --------------------------------------------------------------------------------
Three Months Ended
September 30,
-----------------------
1996 1995
---------- ----------
Interest income
Loans ........................................... $2,510,180 $2,400,644
Investment securities ........................... 275,748 146,101
Mortgage-backed and related securities .......... 155,788 133,517
Other ........................................... 35,935 67,313
---------- ----------
Total interest income ....................... 2,977,651 2,747,575
---------- ----------
Interest expense
Deposits ........................................ 1,217,232 1,176,869
FHLB borrowings ................................. 187,391 152,278
Other ........................................... 1,260 1,331
---------- ----------
Total interest expense ...................... 1,405,883 1,330,478
---------- ----------
Net interest income .................................. 1,571,768 1,417,097
Provision for loan losses (Note 3) ................... 30,000 30,000
---------- ----------
Net interest income after provision for loan losses .. 1,541,768 1,387,097
---------- ----------
Noninterest income
Service charges ................................. 69,200 55,298
Net gains from sale of loans .................... 34,852 23,407
Other ........................................... 27,675 23,619
---------- ----------
Total noninterest income .................... 131,727 102,324
---------- ----------
(Continued)
WOOD BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME -- Continued
(Unaudited)
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Three Months Ended
September 30,
-----------------------
1996 1995
---------- ----------
Noninterest expense
Salaries and benefits ........................... 479,611 436,435
Occupancy and equipment ......................... 96,549 77,787
Data processing ................................. 65,409 61,682
Insurance expense (Note 4) ...................... 742,042 67,903
Franchise taxes ................................. 65,151 59,951
Other ........................................... 160,122 130,800
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Total noninterest expense ................... 1,608,884 834,558
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Income before income tax ............................. 64,611 654,863
Provision for income tax ............................. 38,975 236,290
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Net income ........................................... $ 25,636 $ 418,573
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Earnings per common share ............................ $ .02 $ .27
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See accompanying notes to financial statements.
WOOD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
- --------------------------------------------------------------------------------------
Three Months Ended
September 30,
--------------------------
1996 1995
----------- -----------
Cash flows from operating activities
Net income ......................................... $ 25,636 $ 418,573
Adjustments to reconcile net income to net cash from
operating activities
Depreciation ................................... 30,813 24,765
Provision for loan losses ...................... 30,000 30,000
Net (accretion)/amortization ................... (33,810) 1,914
Gain on loan sales ............................. (34,852) (23,407)
Proceeds from sale of loans .................... 1,773,370 4,276,742
Loans originated for sale ...................... (1,759,851) (4,253,335)
FHLB stock dividend ............................ (23,000)
Amortization of unearned compensation .......... 9,636 17,226
ESOP expense ................................... 62,108 15,964
Change in
Interest receivable ....................... (52,293) (41,972)
Other assets .............................. 258,010 21,303
Income taxes payable ...................... 41,120 224,876
Deferred taxes ............................ (2,145)
Other liabilities ......................... 329,610 (135,459)
Interest payable .......................... 43,781 8,216
Deferred loan fees ........................ 13,347 (3,159)
----------- -----------
Net cash from operating activities .... 711,480 582,247
----------- -----------
Cash flows from investing activities
Net change in interest-bearing balances with banks . (174,015) (3,502,634)
Repurchase agreement ............................... 2,500,000 (2,500,000)
Investment and mortgage-backed securities available
for sale
Purchases ...................................... (1,350,000) (10,692)
Proceeds from principal payments on mortgage-
backed securities ............................ 155,991 160,170
Investment and mortgage-backed securities held to
maturity
Purchases ...................................... (164,194)
Proceeds from calls and maturities ............. 500,000
Proceeds from principal payments on mortgage-
backed securities ............................ 9,211
Net (increase)/decrease in loans, net of loans sold (7,422,724) 1,049,211
Properties and equipment expenditures .............. (46,899) (10,933)
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Net cash used in investing activities .......... (6,337,647) (4,469,861)
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(Continued)
WOOD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS -- Continued
(Unaudited)
- --------------------------------------------------------------------------------------
Three Months Ended
September 30,
--------------------------
1996 1995
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Cash flows from financing activities
Net increase/(decrease) in deposits ................ $(1,868,721) $ 3,464,742
Proceeds from FHLB borrowings ...................... 8,650,000 2,500,000
Repayment of FHLB borrowings ....................... (1,046,578) (1,046,092)
Cash dividends paid ................................ (128,813) (73,939)
Purchase of treasury stock ......................... (80,625)
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Net cash from financing activities ............. 5,605,888 4,764,086
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Net change in cash and cash equivalents ................. (20,279) 876,472
Cash and cash equivalents at beginning of period ........ 2,637,396 2,820,583
----------- -----------
Cash and cash equivalents at end of period .............. $ 2,617,117 $ 3,697,055
=========== ===========
Supplemental disclosures of cash flow information
Cash paid during the period for
Interest ....................................... $ 1,362,102 $ 1,322,262
=========== ===========
See accompanying notes to financial statements.
WOOD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter Ended September 30, 1996
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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These interim financial statements are prepared without audit and reflect all
adjustments which, in the opinion of management, are necessary to present fairly
the financial position of Wood Bancorp, Inc. ("Company") and its sole
subsidiary, First Federal Bank (the "Bank") at September 30, 1996, and its
results of operations and cash flows for the periods presented. All such
adjustments are normal and recurring in nature. The accompanying financial
statements do not purport to contain all the necessary financial disclosures
required by generally accepted accounting principles that might otherwise be
necessary in the circumstances and should be read in conjunction with the 1996
consolidated financial statements and notes thereto of the Company for the year
ended June 30, 1996.
Consolidation Policy: The consolidated financial statements include the accounts
of the Company and the Bank. All significant intercompany transactions and
balances have been eliminated.
Industry Segment Information: The Company is engaged in the business of banking
with operations conducted through its main office and five branches located in
Bowling Green, Ohio, and neighboring communities. These communities are the
source of substantially all of the Company's deposit and loan activities. The
majority of the Company's income is derived from one- to four-family residential
real estate loans.
Use of Estimates in Preparation of Financial Statements: In preparing financial
statements, management must make estimates and assumptions. These estimates and
assumptions affect the amounts reported for assets, liabilities, revenues and
expenses as well as affecting the disclosures provided. Future results could
differ from current estimates.
Areas involving the use of management's estimates and assumptions primarily
include the allowance for loan losses, the realization of deferred tax assets,
fair value of certain securities and the determination and carrying value of
impaired loans.
Investment Securities: Securities are classified into held-to-maturity,
available-for-sale, and trading categories. Held-to-maturity securities are
those which the Company has the positive intent and ability to hold to maturity,
and are reported at amortized cost. Available-for-sale securities are those
which the Company 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.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Realized gains or losses on sales are determined based on the amortized cost of
the specific security sold. Amortization of premiums and accretion of discounts
are computed under the level-yield method and are recognized as adjustments to
interest income. Prepayment activity on mortgage-backed securities is affected
primarily by changes in interest rates. Yields on mortgage-backed securities are
adjusted as prepayments occur through changes to premium amortization or
discount accretion.
Loans: Interest income on loans is accrued over the term of the loans based upon
the principal outstanding. The accrual of interest on loans is suspended when,
in management's opinion, the collection of all or a portion of the loan
principal has become doubtful. When a loan is placed on nonaccrual status,
accrued and unpaid interest at risk is charged against income. The carrying
value of impaired loans is 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 and other cash payments are reported as
reductions in carrying value. Increases or decreases in carrying value due to
changes in estimates of future payments or the passage of time are reported as
reductions or increases in bad debt expense.
Mortgage loans originated by the Bank and intended for sale in the secondary
market are carried at the lower of cost or estimated market value in the
aggregate. Net unrealized losses are recognized in a valuation allowance by
charges to income. To mitigate the interest rate risk associated with loans held
for sale, management obtains fixed secondary market purchase commitments for
these loans.
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
122, "Accounting for Mortgage Servicing Rights", effective July 1, 1996. The
adoption of SFAS No. 122 resulted in the Company recording an asset for
servicing rights of $20,870 on $1,773,370 of qualifying fixed rate mortgages
sold to the secondary mortgage market. The Company retains servicing rights and
this asset relates only to mortgage loans originated and sold since the adoption
of SFAS No. 122. The book value of the sold real estate loans is reduced for the
amount assigned to these servicing rights and the gain on the sale of these
loans is increased accordingly. The servicing rights are being amortized against
future service fee income based upon the anticipated life of each loan.
Loan fees, net of direct loan origination costs, are deferred and recognized
over the life of the loan as a yield adjustment.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Allowance for Losses on Loans: Because some loans may not be repaid in full, an
allowance for losses on loans is maintained. Increases to the allowance are
recorded by a provision for loan losses charged to expense. Estimating the risk
of the loss and the amount of loss on any loan is necessarily subjective.
Accordingly, the allowance is maintained by management at a level considered
adequate to cover losses that are currently anticipated based on past loss
experience, general economic conditions, information about specific borrower
situations including their financial position and collateral values, and other
factors and estimates which are subject to change over time. While management
may periodically allocate portions of the allowance for specific problem loan
situations, the whole allowance is available for any loan charge-offs that
occur. A loan is charged-off against the allowance by management when deemed
uncollectible, although collection efforts continue and future recoveries may
occur.
Effective July 1, 1995, the Company adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan." SFAS No. 114 requires that the carrying
values of impaired loans be determined by calculating the present value of
estimated future cash flows, discounted using the loan's effective interest
yield. A loan is impaired when it is probable that the creditor will be unable
to collect all amounts due according to the contractual terms of the loan
agreement. SFAS No. 118 was issued in October 1994 and amends SFAS No. 114 to
allow a creditor to use existing methods to recognize income on impaired loans.
SFAS No. 114 and SFAS No. 118 did not materially impact the Company's financial
condition or results of operations.
Real Estate Owned: Real estate owned, other than that which is used in the
normal course of business, is recorded at fair value less estimated costs to
sell. For real estate acquired through foreclosure, any initial loss is recorded
as a charge to the allowance for losses on loans prior to being transferred to
real estate owned. Any subsequent reduction in fair value is recognized in a
valuation allowance by charges to income.
Office Properties and Equipment: Office properties and equipment are stated at
cost less accumulated depreciation. Depreciation is computed based on both the
straight-line method and the accelerated method over the estimated useful lives
of the respective properties and equipment. Maintenance and repairs are expensed
and major improvements are capitalized.
Income Taxes: The Company records income tax expense based upon the amount of
tax due on its tax return plus deferred taxes computed based upon the expected
future tax consequences of temporary differences between the carrying amounts
and tax bases of assets and liabilities, using enacted tax rates.
The provision for income taxes is based upon the effective tax rate expected to
be applicable for the entire year.
Statement of Cash Flows: For purposes of this statement, cash and cash
equivalents are defined to include the Company's cash on hand, due from banks
and federal funds sold. The Company reports net cash flows for customer loan
transactions, deposit transactions, FHLB advances and interest-bearing deposits
made with other financial institutions.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings Per Share: Earnings per common share were computed by dividing net
income by the weighted average number of shares outstanding for the period. On
June 18, 1996, the Board of Directors declared a 50% stock dividend paid on July
29, 1996, which is accounted for similar to a 3 for 2 stock split. All earnings
and dividends per share disclosures have been restated to reflect the stock
dividend. Weighted average number of shares outstanding used to compute earnings
per share were 1,510,854 and 1,572,708 for the 1996 and 1995 periods,
respectively.
Financial Statement Presentation: Certain items in the 1995 interim financial
statements have been reclassified to correspond with the 1996 presentation.
NOTE 2 - INVESTMENT SECURITIES
The amortized cost, gross unrealized gains and losses and estimated fair values
of investment securities at September 30, 1996 and June 30, 1996 are as follows:
------------------September 30, 1996-----------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
Available for sale
U.S. Treasury security ...... $ 696,153 $ 150,410 $ 846,563
U.S. Government agencies .... 12,377,584 14,248 $ 152,461 12,239,371
U.S. Government agency
step-up bonds ............ 1,518,051 6,799 19,205 1,505,645
Mutual funds and equity
investments .............. 2,728,300 88,800 2,639,500
Other ....................... 40,000 40,000
----------- ----------- ----------- -----------
Total investment
securities ......... 17,360,088 171,457 260,466 17,271,079
----------- ----------- ----------- -----------
Mortgage-backed securities:
CMOs and REMICs ......... 4,672,013 7,617 38,331 4,641,299
Other mortgage-backed
securities ........... 4,942,336 33,648 111,370 4,864,614
----------- ----------- ----------- -----------
Total mortgage-
backed securities 9,614,349 41,265 149,701 9,505,913
----------- ----------- ----------- -----------
Total investment and
mortgage-backed securities
available for sale ....... $26,974,437 $ 212,722 $ 410,167 $26,776,992
=========== =========== =========== ===========
NOTE 2 - INVESTMENT SECURITIES (Continued)
An investment security with a carrying value of $275,250 as of September 30,
1996 was pledged to secure public deposits and for other purposes as required or
permitted by law.
---------------------June 30, 1996-------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
Available for sale
U.S. Treasury security ...... $ 681,998 $ 156,673 $ 838,671
U.S. Government agencies .... 11,022,712 11,037 $ 150,593 10,883,156
U.S. Government agency
step-up bonds ............ 1,517,639 7,024 25,802 1,498,861
Mutual funds and equity
investments .............. 2,712,148 87,189 2,624,959
Other ....................... 40,000 40,000
----------- ----------- ----------- -----------
Total investment
securities ........... 15,974,497 174,734 263,584 15,885,647
----------- ----------- ----------- -----------
Mortgage-backed securities
CMOs and REMICs ......... 4,681,972 3,922 77,890 4,608,004
Other mortgage-backed
securities ............ 5,090,133 62,723 112,523 5,040,333
----------- ----------- ----------- -----------
Total mortgage-
backed securities 9,772,105 66,645 190,413 9,648,337
----------- ----------- ----------- -----------
Total investment and
mortgage-backed securities
available for sale ........ $25,746,602 $ 241,379 $ 453,997 $25,533,984
=========== =========== =========== ===========
An investment security with a carrying value of $276,468 as of June 30, 1996 was
pledged to secure public deposits and for other purposes as required or
permitted by law.
NOTE 2 - INVESTMENT SECURITIES (Continued)
The amortized cost and estimated fair value of debt securities at September 30,
1996, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
Amortized Estimated
Cost Fair Value
----------- -----------
Available for sale
Due in one year or less .................. $ 1,598,276 $ 1,584,660
Due after one year through five years .... 5,995,103 5,935,144
Due after five through ten years ......... 6,998,409 7,071,775
----------- -----------
14,591,788 14,591,579
CMOs and REMICs .......................... 4,672,013 4,641,299
Other mortgage-backed securities ......... 4,942,336 4,864,614
----------- -----------
9,614,349 9,505,913
Mutual funds and equity investments ...... 2,728,300 2,639,500
Other .................................... 40,000 40,000
----------- -----------
$26,974,437 $26,776,992
=========== ===========
NOTE 3 - LOANS
Loans are summarized below:
September 30, June 30,
1996 1996
------------ ------------
Real estate mortgage loans (principally conventional)
Principal balances
Secured by one-to-four family residences ... $ 91,145,739 $ 85,387,205
Secured by other properties ................ 4,664,426 4,812,944
Construction ............................... 5,987,826 6,397,279
Home equity ................................ 5,235,848 4,111,607
------------ ------------
107,033,839 100,709,035
Less:
Loans in process ........................... 3,590,631 4,104,299
Net deferred loan origination fees ......... 222,080 208,733
------------ ------------
Total real estate mortgage loans ....... 103,221,128 96,396,003
------------ ------------
Consumer and other loans
Principal balances
Automobile ................................. 7,149,619 7,013,451
Commercial ................................. 4,752,049 4,098,055
Other ...................................... 4,248,330 4,462,150
------------ ------------
Total consumer and other loans ......... 16,149,998 15,573,656
------------ ------------
119,371,126 111,969,659
Allowance for losses on loans ....................... 537,491 513,367
------------ ------------
Loans, net .......................................... $118,833,635 $111,456,292
============ ============
Nonaccrual loans totaled $28,479 at September 30, 1996 and June 30, 1996.
Accruing loans which are contractually past due 90 days or more totaled $386,000
at September 30, 1996 compared to $186,000 at June 30, 1996. Interest not
recognized on nonaccrual loans totaled approximately $602 and $8,144 for the
three month periods ended September 30, 1996 and 1995, respectively.
NOTE 3 - LOANS (Continued)
Activity in the allowance for losses on loans for the three month periods ended
September 30, 1996 and 1995 are as follows:
Three months ended
September 30,
---------------------------
1995 1994
--------- ---------
Balance at beginning of period ............. $ 513,367 $ 409,706
Provision for loan losses .................. 30,000 30,000
Recoveries ................................. 67
Charge-offs ................................ (5,943) (438)
--------- ---------
Balance at end of period ................... $ 537,491 $ 439,268
========= =========
NOTE 4 - FDIC INSURANCE
The deposits of savings associations such as the Bank are presently insured by
the Savings Association Insurance Fund (the "SAIF"), which, along with the Bank
Insurance Fund (the "BIF"), is one of the two insurance funds administered by
the FDIC. Financial institutions which are members of the BIF are experiencing
substantially lower deposit insurance premiums because the BIF has achieved its
required level of reserves, while the SAIF has not yet achieved its required
reserves. On September 30, 1996, President Clinton signed into law the Omnibus
Bill which includes provisions designed to recapitalize the SAIF and to mitigate
the BIF/SAIF premium disparity. The Omnibus Bill requires the FDIC to impose a
special assessment on SAIF-insured deposits. The FDIC has announced that the
special assessment rate will be set at 65.7 cents per $100 of SAIF insured
deposits at March 31, 1995. The assessment will be paid on November 27, 1996
from working capital of the Bank. When the SAIF reaches its required reserve
ratio following the one-time assessment, the FDIC has indicated that it will
reduce the annual assessment rates for SAIF insured institutions to bring them
in line with BIF assessment rates. The Company's special assessment totalled
$445,000, after taxes.
The Bank, however, will continue to be subject to an assessment to fund the
repayment of the FICO obligations. It is anticipated that the FICO assessment
for SAIF insured institutions will be approximately 6.5 cents per $100 of
deposits while BIF insured institutions will pay approximately 1.5 cents per
$100 of deposits until the year 2000 when the assessment will be imposed at the
same rate on all FDIC insured institutions.
WOOD BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
The following discussion compares the financial condition of Wood Bancorp, Inc.
("Company") and its sole subsidiary First Federal Bank ("the Bank") at September
30, 1996 to June 30, 1996 and the results of operations for the three months
ended September 30, 1996 and 1995. This discussion should be read in conjunction
with the interim financial statements and footnotes included herein.
FINANCIAL CONDITION
Total assets grew $6,125,658, or 4.19% from $146,248,682 at June 30, 1996 to
$152,374,340 at September 30, 1996. The growth is attributable to increases in
investment securities available for sale and loans, partially offset by the
maturity of a repurchase agreement. The increase was funded by increases in
advances from the Federal Home Loan Bank ("FHLB") of Cincinnati.
Cash and cash equivalents remained relatively constant at September 30, 1996
compared to June 30, 1996. Interest-bearing deposits with banks increased
$174,015 from $77,715 at June 30, 1996 to $251,730 at September 30, 1996.
During the quarter, a $2,500,000 repurchase agreement secured by one- to
four-family residential real estate loans matured and the Bank used the proceeds
to purchase additional investment securities available for sale and to partially
fund loan growth. Total investment and mortgage-backed securities increased
$1,243,008, or 4.87%, from $25,533,984 at June 30, 1996 to $26,776,992 at
September 30, 1996.
At September 30, 1996, the Company's mortgage-backed securities portfolio
classified as available for sale were comprised of agency issued adjustable rate
securities. The net unrealized losses on these securities totaled $108,436 at
September 30, 1996. The Company does not anticipate the need to sell these
securities in the near future. Management's strategy emphasizes investment in
securities guaranteed by the U.S. government and its agencies in order to
minimize credit risk. The investment strategy also includes purchasing variable
rate mortgage-backed security products with monthly and annually adjusting
interest rates. These securities provide the Company a continued cash flow
stream through principal paydowns and help protect the Company against interest
rate risk. See also Note 2 in the interim financial statements.
Loans receivable increased $7,377,343, or 6.62%, from $111,456,292 at June 30,
1996 to $118,833,635 at September 30, 1996. The increase was primarily due to
increased demand for adjustable rate loans in the Bank's market area. Fixed rate
loan originations continue to be sold on the secondary market, which corresponds
to the Bank's policy of selling virtually all fixed rate loan originations in
the secondary market, while maintaining variable rate loans in the Bank's
portfolio. Increases in loans receivable were funded by additional FHLB advances
as well as proceeds from a matured repurchase agreement.
FINANCIAL CONDITION (Continued)
Real estate owned, office properties and equipment, Federal Home Loan Bank stock
and accrued interest receivable remained relatively constant from June 30, 1996
to September 30, 1996.
Other assets decreased $239,808 from June 30, 1996 to September 30, 1996
primarily due to decreases in miscellaneous receivables of $156,548 and
decreases in prepaid franchise taxes of $59,991.
Deposits decreased $1,868,721, or 1.61%, from $115,829,891 at June 30, 1996 to
$113,961,170 at September 30, 1996, partially as a result of competitive
conditions. The Bank offset this decrease in deposits and funded the quarter's
loan growth by taking additional advances from the FHLB. FHLB advances were
increased by $7,603,422 during the quarter, bringing the total balance from
$9,315,945 at June 30, 1996 to $16,919,367 at September 30, 1996. Accrued
interest payable increased from $89,212 at June 30, 1996 to $132,993 at
September 30, 1996 primarily due to increases in FHLB advances.
Other liabilities increased $401,327, from $891,636 at June 30, 1996 to
$1,292,963 at September 30, 1996, primarily due to the recording of the one-time
special assessment payable to the SAIF. See Note 4 in the Notes to Financial
Statements.
RESULTS OF OPERATIONS
Net income decreased $392,937 from $418,573 for the quarter ended September 30,
1995 to $25,636 for the same period in 1996. The 1996 decrease was essentially
due to the $445,000 (net of tax) one-time special assessment charge resulting
from legislation passed on September 30, 1996, regarding the SAIF. See Note 4 in
the Notes to Financial Statements. Excluding the one-time SAIF assessment, the
Company would have reported net income of $470,636 for the quarter ended
September 30, 1996, as compared to $418,573 for the same period in 1995. The
difference of $52,063, or 12.4%, increase was primarily due to increases in net
interest income and noninterest income, partially offset by increases in
noninterest expense, excluding the one-time SAIF assessment.
Net interest income increased $154,671, or 10.9%, during the period ended
September 30, 1996 as compared to the same period in 1995. The increase was
primarily due to the increase in average loans and investment securities during
the 1996 period as compared to the 1995 period.
A provision for loan losses of $30,000 was recorded for the quarters ended
September 30, 1996 and 1995, based on management's assessment of risk factors
affecting the allowance for loan losses. The allowance for loan losses was
approximately .45% of loans net of deferred and unearned income as of September
30, 1996 as compared to .40% as of September 30, 1995. Management believes the
allowance for loan loss is adequate to absorb potential losses; however, future
additions to the allowance may be necessary based on changes in economic
conditions.
Noninterest income increased $29,403, or 28.74%, from $102,324 for the quarter
ended September 30, 1996 to $131,727 for the same period in 1996. The increase
was primarily due to a $13,902 increase in service charges and a $11,445
increase in loan sale gains. The increase in loan sale gains was due to the
adoption of SFAS No. 122. See Note 1 of the Notes to Financial Statements.
RESULTS OF OPERATIONS (Continued)
Noninterest expense, excluding the one time SAIF assessment, increased $100,084,
or 12.0%, for the quarter ended September 30, 1996 compared to the same period
in 1995, primarily due to increases in salaries and benefits expense, occupancy
and equipment expense and other expense. Additional personnel added for loan
production and annual salary adjustments combined to increase salaries and
benefits by $43,176, or 9.89%. Occupancy and equipment expense increased
$18,762, or 24.12%, while other expense increased $29,322, or 22.4%.
The Company's federal income tax expense was $38,975 and $236,290 for the
quarters ended September 30, 1996 and 1995, respectively. The decrease was
primarily due to the decrease in pre-tax income for the quarter, related to the
one-time SAIF assessment.
LIQUIDITY
Federally insured banks are required to maintain minimum levels of liquid
assets. First Federal is currently required to maintain an average daily balance
of liquid assets of at least 5% of the sum of its average daily balance of net
withdrawable deposit accounts and borrowings payable in one year or less. At
September 30, 1996, First Federal was in compliance with this requirement with a
liquidity ratio of 8.01%. Management considers this liquidity position adequate
to meet its expected needs for the foreseeable future.
CAPITAL RESOURCES
Savings institutions insured by the Federal Deposit Insurance Corporation are
required by federal law to meet three regulatory capital requirements. If a
requirement is not met, regulatory authorities may take legal or administrative
actions, including restrictions on growth or operations or, in extreme cases,
placing the institution in receivership or conservatorship.
The following table presents First Federal's compliance with its capital
requirements at September 30, 1996:
Tangible Capital Core Capital Risk Based Capital
---------------- --------------- ------------------
Amount % Amount % Amount %
------ --- ------ --- ------ ---
Actual $12,229 8.14% $12,229 8.14% $12,698 15.94%
Required 2,252 1.50 4,505 3.00 6,373 8.00
------- ---- ------- ---- ------- -----
Excess $ 9,977 6.64% $ 7,724 5.14% $ 6,325 7.94%
======= ==== ======= ==== ======= =====
First Federal's tangible capital consists solely of shareholders' equity. Core
capital consists of tangible capital plus, through 1996, certain intangible
assets, of which First Federal has none. Risk based capital consists of core
capital plus general loan loss allowances less certain assets required to be
deducted.
WOOD BANCORP, INC.
FORM 10-QSB
Quarter ended September 30, 1995
PART II - OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 1 - Legal Proceedings:
There are no matters required to be reported under this item.
Item 2 - Changes in Securities:
There are no matters required to be reported under this item.
Item 3 - Defaults Upon Senior Securities:
There are no matters required to be reported under this item.
Item 4 - Submission of Matters to a Vote of Security Holders:
There are no matters required to be reported under this item.
Item 5 - Other Information:
There are no matters required to be reported under this item.
Item 6 - Exhibits and Reports on Form 8-K:
(a) Exhibit Number Exhibit
-------------- -------
27 Financial Data Schedule (1)
(b) No current reports on Form 8-K were filed by the Company
during the quarter ended September 30, 1996.
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WOOD BANCORP INC.
-----------------
(Registrant)
Date: November 8, 1996 /s/Richard L. Gordley
------------------- -------------------------------------
Richard L. Gordley
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 8, 1996 /s/David L. Nagel
------------------- -------------------------------------
David L. Nagel
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)