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 December 31, 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 February 10, 1997
Common stock, $0.01 par value 1,492,636 common shares
Transitional Small Business Disclosure Format:
Yes [ ] No [ X ]
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WOOD BANCORP, INC.
- --------------------------------------------------------------------------------
FORM 10-QSB
Quarter ended December 31, 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
CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, June 30,
1996 1996
------------- -------------
ASSETS
Cash and due from banks ................................. $ 2,351,757 $ 2,622,396
Federal funds sold ...................................... 248,000 15,000
------------- -------------
Cash and cash equivalents ........................... 2,599,757 2,637,396
Interest-bearing deposits in other financial institutions 754,043 77,715
Repurchase agreement .................................... 2,500,000
Securities available for sale (Note 2) .................. 16,363,658 15,885,647
Mortgage-backed securities available for sale (Note 2) .. 9,330,477 9,648,337
Loans - net (Note 3) .................................... 126,972,725 111,456,292
Real estate owned ....................................... 30,000 30,000
Office properties and equipment, net .................... 1,370,286 1,359,034
Federal Home Loan Bank stock, at cost ................... 1,355,000 1,308,600
Accrued interest receivable ............................. 768,560 816,501
Other assets ............................................ 148,688 529,160
------------- -------------
Total assets ................................... $ 159,693,194 $ 146,248,682
============= =============
LIABILITIES
Deposits $ .............................................. 116,516,709 $ 115,829,891
Advances from Federal Home Loan Bank .................... 21,572,075 9,315,945
Accrued interest payable ................................ 197,864 89,212
Other liabilities ....................................... 994,573 891,636
------------- -------------
Total liabilities ................................... 139,281,221 126,126,684
------------- -------------
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(continued)
December 31, June 30,
1996 1996
------------- -------------
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, 1,657,347 shares issued
at December 31, 1996, and 1,655,847 shares
issued at June 30, 1996 ............................... 16,573 11,039
Additional paid-in capital .............................. 10,781,413 10,686,033
Retained earnings - substantially restricted ............ 11,929,708 11,688,467
Treasury stock, at cost; 164,711 shares at
December 31, 1996 and 158,211 shares
at June 30, 1996 ...................................... (1,797,191) (1,671,491)
Obligation under employee stock ownership plan .......... (409,161) (409,161)
Unearned compensation ................................... (45,367) (42,561)
Unrealized losses on available for sale securities, net . (64,002) (140,328)
------------- -------------
Total shareholders' equity .......................... 20,411,973 20,121,998
------------- -------------
Total liabilities and shareholders' equity ..... $ 159,693,194 $ 146,248,682
============= =============
See accompanying notes to financial statements.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
------------------------- -------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
Interest income
Loans ....................... $2,654,259 $2,378,095 $5,164,439 $4,778,740
Securities .................. 276,840 144,351 552,588 290,452
Mortgage-backed and related
securities ................ 155,657 153,548 311,446 287,065
Other ....................... 39,072 98,417 75,007 165,730
---------- ---------- ---------- ----------
Total interest income ... 3,125,828 2,774,411 6,103,480 5,521,987
---------- ---------- ---------- ----------
Interest expense
Interest on deposits ........ 1,236,006 1,229,901 2,453,239 2,406,769
FHLB borrowings ............. 274,803 122,963 462,194 275,241
Other ....................... 1,185 2,399 2,445 3,729
---------- ---------- ---------- ----------
Total interest expense .. 1,511,994 1,355,263 2,917,878 2,685,739
---------- ---------- ---------- ----------
Net interest income .............. 1,613,834 1,419,148 3,185,602 2,836,248
Provision for loan losses (Note 3) 30,000 30,000 60,000 60,000
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses ...... 1,583,834 1,389,148 3,125,602 2,776,248
---------- ---------- ---------- ----------
Noninterest income
Service charges ............. 70,738 58,717 139,937 114,016
Loan sale gains ............. 33,549 31,894 68,401 55,301
Other ....................... 22,633 46,854 50,308 70,472
---------- ---------- ---------- ----------
Total noninterest income 126,920 137,465 258,646 239,789
---------- ---------- ---------- ----------
Noninterest expense
Salaries and benefits ....... 501,889 456,619 981,500 893,053
Occupancy and equipment ..... 91,631 79,739 188,180 157,526
Data processing ............. 73,350 66,850 138,759 128,533
Insurance expense (Note 4) .. 65,085 71,398 807,126 139,302
Franchise taxes ............. 64,866 63,058 130,017 123,009
Advertising and promotional . 36,457 41,260 64,512 71,559
Other ....................... 133,866 103,210 265,932 203,712
---------- ---------- ---------- ----------
Total noninterest expense 967,144 882,134 2,576,026 1,716,694
---------- ---------- ---------- ----------
See accompanying notes to financial statements.
CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
------------------------- -------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
Income before income tax . $ 743,610 $ 644,479 $ 808,222 $1,299,343
Provision for income tax . 260,825 237,193 299,800 473,483
---------- ---------- ---------- ----------
Net income ............... $ 482,785 $ 407,286 $ 508,422 $ 825,860
========== ========== ========== ==========
Primary and fully dilutive
earnings per common share $ .32 $ .27 $ .33 $ .54
========== ========== ========== ==========
See accompanying notes to financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
December 31,
-------------------------------
1996 1995
------------ ------------
Cash flows from operating activities
Net income ......................................... $ 508,422 $ 825,860
Adjustments to reconcile net income to net cash from
operating activities
Depreciation ................................... 61,322 50,622
Provision for loan losses ...................... 60,000 60,000
Net accretion .................................. (70,253) (10,322)
Security losses, net ........................... 461
Gain on loan sales ............................. (68,401) (55,301)
Proceeds from loans sold ....................... 3,873,410 8,014,808
Loans originated for sale ...................... (3,848,658) (8,014,808)
FHLB stock dividend ............................ (46,400) (43,400)
Amortization of unearned compensation .......... 20,444 34,451
ESOP expense ................................... 125,855 36,731
Change in
Interest receivable ....................... 47,941 4,915
Other assets .............................. 383,151 184,830
Other liabilities ......................... 49,228 118,022
Interest payable .......................... 108,652 (1,811)
Deferred loan fees ........................ 8,599 (19,890)
------------ ------------
Net cash from operating activities .... 1,213,773 1,184,707
------------ ------------
Cash flows from investing activities
Net change in interest-bearing balances with banks . (676,328) (4,096,070)
Repurchase agreement ............................... 2,500,000 (2,500,000)
Securities and mortgage-backed securities available
for sale
Sales .......................................... 1,050,000
Purchases ...................................... (3,100,000) (32,805)
Proceeds from calls and maturities ............. 1,720,000 400,000
Proceeds from principal payments on mortgage-
backed securities ............................ 355,284 356,596
Securities and mortgage-backed securities held to
maturity
Purchases ...................................... (662,944)
Proceeds from calls and maturities ............. 500,000
Proceeds from principal payments on mortgage-
backed securities ............................ 174,342
Net increase in loans, net of loans sold ........... (15,583,380) 1,463,509
Properties and equipment expenditures .............. (72,574) (44,638)
------------ ------------
Net cash used in investing activities .......... (13,806,998) (4,442,010)
------------ ------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
Six Months Ended
December 31,
------------------------------
1996 1995
------------ ------------
Cash flows from financing activities
Net increase in deposits .................... $ 686,818 $ 7,236,896
Proceeds from FHLB borrowings ............... 16,650,000 2,500,000
Repayment of FHLB borrowings ................ (4,393,870) (5,152,464)
Cash dividends paid ......................... (256,662) (162,217)
Proceeds from exercise of stock options ..... 16,675
Purchase of treasury stock .................. (147,375) (154,462)
------------ ------------
Net cash from financing activities ...... 12,555,586 4,267,753
------------ ------------
Net change in cash and cash equivalents .......... (37,639) 1,010,450
Cash and cash equivalents at beginning of period . 2,637,396 2,820,583
------------ ------------
Cash and cash equivalents at end of period ....... $ 2,599,757 $ 3,831,033
============ ============
Supplemental disclosures of cash flow information
Cash paid during the period for
Interest ................................ $ 2,809,226 $ 2,687,550
============ ============
Income taxes ............................ 301,945 427,914
============ ============
Noncash activities
Transfer securities to available for sale 8,705,534
============
See accompanying notes to financial statements.
WOOD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter ended December 31, 1996
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 December 31, 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.
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.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 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 fee, net of direct loan origination costs, are deferred and recognized over
the life of the loan as a yield adjustment.
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.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
Earnings Per Share: Primary and fully dilutive earnings per common share were
computed by dividing net income by the weighted average number of shares
outstanding for the period after considering the dilutive effect of common stock
equivalents. 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.
Financial Statement Presentation: Certain items in the 1995 interim financial
statements have been reclassified to correspond with the 1996 presentation.
NOTE 2 - SECURITIES
The amortized cost, gross unrealized gains and losses and estimated fair values
of securities at December 31, 1996 and June 30, 1996 are as follows:
December 31, 1996
-----------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
Available for sale
U.S. Treasury securities ....... $ 510,706 $ 160,996 $ $ 671,702
U.S. Government agencies ....... 12,083,147 16,886 117,836 11,982,197
U.S. Government agency
step-up bonds ................ 1,000,000 2,562 13,157 989,405
Mutual funds and equity
investments ................. 2,745,581 1,887 67,114 2,680,354
Other .......................... 40,000 40,000
----------- ----------- ----------- -----------
Total investment securities 16,379,434 182,331 198,107 16,363,658
Mortgage-backed securities
CMOs and REMICs ............ 4,664,440 8,927 40,022 4,633,345
Other mortgage-backed
securities ............... 4,747,236 41,122 91,226 4,697,132
----------- ----------- ----------- -----------
Total mortgage-
backed securities ... 9,411,676 50,049 131,248 9,330,477
----------- ----------- ----------- -----------
Total investment and
mortgage-backed securities
available for sale ........... $25,791,110 $ 232,380 $ 329,355 $25,694,135
=========== =========== =========== ===========
Securities with a carrying value of $278,250 at December 31, 1996 were pledged
to secure public deposits and for other purposes as required or permitted by
law.
NOTE 2 - SECURITIES (Continued)
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
=========== =========== =========== ===========
A 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.
To provide additional flexibility to meet liquidity and asset/liability needs,
the Company reclassified securities with an amortized cost of $8,705,534 from
held to maturity to available for sale. The securities were transferred in
December, 1995 as allowed by the SFAS No. 115 implementation guide issued by the
Financial Accounting Standards Board, with the related unrealized loss of
$69,977 recorded net of tax as an decrease in shareholders' equity.
NOTE 2 - SECURITIES (Continued)
The amortized cost and estimated market value of debt securities at December 31,
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 Market Value
----------- -----------
Available for sale
Due in one year or less .................. $ 1,199,740 $ 1,196,062
Due after one year through five years .... 4,846,626 4,801,871
Due after five years through ten years ... 7,547,487 7,645,371
----------- -----------
13,593,853 13,643,304
CMOs and REMICs .......................... 4,664,440 4,633,345
Other mortgage-backed securities ......... 4,747,236 4,697,132
----------- -----------
Total debt securities ................ 9,411,676 9,330,477
Mutual funds and equity investments ...... 2,745,581 2,680,354
Other .................................... 40,000 40,000
----------- -----------
$25,791,110 $25,694,135
=========== ===========
Proceeds from the sale of securities available for sale totaled $1,050,000 for
the three- and six-month periods ended December 31, 1996, resulting in gross
losses of $2,410. Gross gains on securities called totaled $1,949 for the three-
and six-month period ended December 31, 1996. No securities were sold during the
three- and six-month periods ended December 31, 1995.
NOTE 3 - LOANS RECEIVABLE
Loans receivable are summarized below:
December 31, June 30,
1996 1996
------------ ------------
Real estate mortgage loans (principally conventional)
Principal balances
Secured by one-to-four family residences ... $ 94,786,796 $ 85,387,205
Secured by other properties ................ 5,928,300 4,812,944
Construction loans ......................... 5,932,866 6,397,279
Home equity ................................ 6,110,459 4,111,607
------------ ------------
112,758,421 100,709,035
Less:
Loans in process ........................... 2,362,023 4,104,299
Net deferred loan origination fees ......... 217,333 208,733
------------ ------------
Total first mortgage loans ............. 110,179,065 96,396,003
------------ ------------
Consumer and other loans
Principal balances
Automobile ................................. 7,556,256 7,013,451
Commercial ................................. 5,626,265 4,098,055
Other ...................................... 4,112,060 4,462,150
------------ ------------
Total consumer and other loans ......... 17,294,581 15,573,656
------------ ------------
127,473,646 111,969,659
Allowance for losses on loans ....................... 500,921 513,367
------------ ------------
Loans, net .................................... $126,972,725 $111,456,292
============ ============
Nonaccrual loans totaled $0 at December 31, 1996 and $28,479 at June 30, 1996.
Accruing loans which are contractually past due 90 days or more totaled $533,000
at December 31, 1996 compared to $186,000 at June 30, 1996. Interest not
recognized on nonaccrual loans totaled approximately $348 and $603 for the three
month periods ended December 31, 1996 and 1995, respectively, and $1,320 and
$1,206 for the six month periods ended December 31, 1996 and 1995, respectively.
NOTE 3 - LOANS RECEIVABLE (Continued)
Activity in the allowance for losses on loans for the three and six-month
periods ended December 31, 1996 and 1995 are as follows:
Three months ended Six months ended
December 31, December 31,
------------------------ ------------------------
1996 1995 1996 1995
--------- --------- --------- ---------
Balance at beginning of period $ 537,491 $ 439,268 $ 513,367 $ 409,706
Provision for loan losses .... 30,000 30,000 60,000 60,000
Recoveries ................... 100 167
Charge-offs .................. (66,670) (3,717) (72,613) (4,155)
--------- --------- --------- ---------
Balance at end of period ..... $ 500,921 $ 465,551 $ 500,921 $ 465,551
========= ========= ========= =========
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 were experiencing
substantially lower deposit insurance premiums because the BIF had achieved its
required level of reserves, while the SAIF had not yet achieved its required
reserves. On September 30, 1996, President Clinton signed into law the Omnibus
Bill which included provisions designed to recapitalize the SAIF and to mitigate
the BIF/SAIF premium disparity. The omnibus Bill required the FDIC to impose a
special assessment on SAIF-insured deposits. The FDIC 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 was paid on November 27, 1996 from working
capital of the Bank. Since the SAIF reached its required reserve ratio following
the one-time assessment, the FDIC reduced the annual assessment rates for SAIF
insured institutions to bring them in line with BIF assessment rates. The
Company's special assessment totaled $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 ("First Federal" or the
"Bank") at December 31, 1996 to June 30, 1996 and the results of operations for
the three months and six months ended December 31, 1996 and 1995. This
discussion should be read in conjunction with the interim financial statements
and footnotes included herein.
FINANCIAL CONDITION
Total assets grew $13,444,512 , or 9.19%, from $146,248,682 at June 30, 1996 to
$159,693,194 at December 31, 1996. The growth is attributable to increases in
loans, partially offset by the maturity of a repurchase agreement. The increase
was primarily funded by increases in advances from the Federal Home Loan Bank
("FHLB") of Cincinnati.
Cash and cash equivalents remained relatively constant at December 31, 1996,
compared to June 30, 1996. Interest-bearing deposits with banks increased
$676,328 from $77,715 at June 30, 1996, to $754,043 at December 31, 1996.
In July, 1996, a $2,500,000 repurchase agreement secured by one- to four-family
residential real estate loans matured and the Bank used the proceeds to
partially fund loan growth. The Company has also used the sale of an investment
security, investment security maturities and mortgage backed securities
paydowns, as well as FHLB advances, to fund the loan growth.
At December 31, 1996, the Company's mortgage-backed securities portfolio which
is classified as available for sale was comprised primarily of agency issued
adjustable rate securities. The net unrealized losses on these securities
totaled $81,199 at December 31, 1996. The Company does not anticipate the need
to sell these securities. 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
through principal paydowns and help protect the Company against interest rate
risk. See also Note 2 in the interim financial statements.
Loans receivable increased $15,516,433, or 13.92%, from $111,456,292 at June 30,
1996 to $126,972,725 at December 31, 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 primarily by additional
FHLB advances as well as proceeds from the matured repurchase agreement.
FINANCIAL CONDITION (Continued)
Real estate owned, office properties and equipment, FHLB stock and accrued
interest receivable remained relatively constant from June 30, 1996 to December
31, 1996.
Other assets decreased $380,472 from June 30, 1996 to December 31, 1996,
primarily due to decreases in miscellaneous receivables of $160,686, prepaid
franchise taxes of $121,857 and prepaid deposit insurance of $50,457.
Deposits increased slightly from $115,829,891 at June 30, 1996 to $116,516,709
at December 31, 1996. The Bank offset the period's slow deposit growth and
funded the period's loan growth by taking additional advances from the FHLB.
FHLB advances were increased by $12,256,130 during the period, bringing the
total balance from $9,315,945 at June 30, 1996 to $21,572,075 at December 31,
1996. Accrued interest payable increased from $89,212 at June 30, 1996 to
$197,864 at December 31, 1996, primarily due to increases in FHLB advances.
Other liabilities increased from $891,636 at June 30, 1996 to $994,573 at
December 31, 1996, primarily due to increases in escrow tax accounts and accrued
federal income taxes.
RESULTS OF OPERATIONS
Net income increased $75,499, or 18.5%, from $407,286 for the quarter ended
December 31, 1995 to $482,785 for the same period in 1996. The increase was
primarily due to an increase in net interest income for the 1996 quarter of
$194,686 over the comparable period in 1995.
Net income decreased $317,438 from $825,860 for the period ended December 31,
1995 to $508,422 for the same period in 1996. The 1996 decrease was due to the
$445,000 (net of tax) special assessment charge resulting from legislation
passed on September 30, 1996, to recapitalize the SAIF. See also Note 4 in the
interim financial statements. Excluding the SAIF assessment, the Company would
have reported net income of $953,422 for the period ended December 31, 1996, an
increase of $127,562, or 15.4%, over the same period in 1995. The increase was
primarily due to increases in net interest income and non-interest income,
partially offset by increases in noninterest expense, excluding the SAIF
assessment.
Net interest income increased $194,686, or 13.7%, during the three-month period
and $349,354, or 12.3%, during the six-month period ended December 31, 1996, as
compared to the same periods in 1995. The increases were primarily due to
increases in average loans and investment securities during the 1996 periods as
compared to the 1995 periods.
Considering that approximately 80% of the Company's loan portfolio consists of
adjustable rate loans and that the Company's assets generally reprice more
quickly than its liabilities, it is likely that a decrease in interest rates
would have an adverse effect on net interest income.
RESULTS OF OPERATIONS (Continued)
The provision for loan losses was $30,000 for the three-month periods and
$60,000 for the six-month periods ended December 31, 1996 and 1995. The
provision is based on management's assessment of risk factors affecting the loan
portfolio. The allowance for loan losses was approximately .39% of loans, net of
unearned and deferred income, as of December 31, 1996, compared to .42% at
December 31, 1995. Management believes the allowance for loan losses is adequate
to absorb potential losses; however, future additions to the allowance may be
necessary based on changes in economic conditions.
Noninterest income decreased $10,545 for the three months ended December 31,
1996 as compared to the same period ending December 31, 1995. The decrease was
primarily due to decreases in service charges related to additional life,
accident and health insurance sales, partially offset by increases in deposit
account service charges and increases in loan sale gains from the adoption of
SFAS No. 122. See Note 1 in the notes to interim financial statements.
Noninterest expenses increased $85,010 for the three months ended December 31,
1996 and $185,090 for the six months ended December 31, 1996, as compared to the
respective periods ended December 31, 1995, excluding the SAIF assessment. The
increase consisted primarily of increased salaries and benefits expense and
other expenses. Additional personnel added for loan production and annual salary
reviews combined to increase salaries and benefits by $45,270, or 9.9%, and
$88,447, or 9.9%, for the three- and six-month periods, respectively. Other
expenses increased primarily due to additional professional, administrative,
printing and postage expenses related to operating as a publicly-owned company.
The Company's federal income tax expense was $260,825 and $237,193 for the
three-month periods ended December 31, 1996 and 1995, respectively, and $299,800
and $473,483 for the six-month periods ended December 31, 1996 and 1995,
respectively. The increase for the three-month period was primarily due to the
increases in pre-tax income, while the decrease for the six-month period was
related to the 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
in 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
December 31, 1996, First Federal was in compliance with this requirement with a
liquidity ratio of 8.1%. Management considers this liquidity position adequate
to meet its expected needs.
CAPITAL RESOURCES
Savings institutions insured by the Federal Deposit Insurance Corporation are
required by federal law to meet three regulatory capital requirements. The
following table presents the Bank's compliance with its capital requirements at
December 31, 1996:
Risk
Tangible Core Based
Capital Capital Capital
------- ------- -------
Amount % Amount % Amount %
------- ---- ------- ---- ------- -----
Actual ...... $12,722 8.10 $12,722 8.10 $13,188 14.62
Required .... 2,355 1.50 4,710 3.00 7,217 8.00
------- ---- ------- ---- ------- -----
Excess ...... $10,367 6.60% $ 8,012 5.10% $ 5,971 6.62%
======= ==== ======= ==== ======= =====
The Bank'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.
FORM 10-QSB
Quarter ended December 31, 1996
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) Exhibits - Not applicable.
(b) No current reports on Form 8-K were filed by the Company
during the quarter ended December 31, 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: February 14, 1997 /s/Richard L. Gordley
---------------------
Richard L. Gordley
President and Chief Executive Officer
(Principal Executive Officer)
Date: February 14, 1997 /s/David L. Nagel
-----------------
David L. Nagel
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)