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 March 31, 1998
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 April 30, 1998
Common stock, $0.01 par value 2,663,654 common shares
Transitional Small Business Disclosure Format:
Yes [ ] No [ X ]
WOOD BANCORP, INC.
FORM 10-QSB
Quarter ended March 31, 1998
INDEX
PART I - FINANCIAL INFORMATION
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
Item 1. Legal Proceedings.....................................................
Item 2. Changes in Securities and Use of Proceeds.............................
Item 3. Defaults Upon Senior Securities.......................................
Item 4. Submission of Matters to a Vote of Security Holders...................
Item 5. Other Information.....................................................
Item 6. Exhibits and Reports on Form 8-K......................................
SIGNATURES .....................................................................
WOOD BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, June 30,
1998 1997
------------- -------------
ASSETS
Cash and due from banks ..................................... $ 3,053,116 $ 2,844,578
Federal funds sold .......................................... 889,000 70,000
------------- -------------
Cash and cash equivalents ............................... 3,942,116 2,914,578
Interest-bearing deposits in other financial institutions ... 694,241 2,229,104
Securities available for sale ............................... 10,018,397 14,148,537
Mortgage-backed securities available for sale ............... 8,409,662 8,844,333
Loans, net .................................................. 136,595,229 131,317,923
Office properties and equipment, net ........................ 2,374,379 1,860,331
Federal Home Loan Bank stock, at cost ....................... 1,480,900 1,403,200
Accrued interest receivable ................................. 855,883 853,736
Other assets ................................................ 636,096 346,100
------------- -------------
Total assets ....................................... $ 165,006,903 $ 163,917,842
============= =============
LIABILITIES
Deposits $ .................................................. 129,156,890 $ 120,546,079
Advances from Federal Home Loan Bank ........................ 12,657,030 21,775,306
Other borrowed funds ........................................ 250,000
Accrued interest payable .................................... 167,674 193,166
Other liabilities ........................................... 988,385 1,237,711
------------- -------------
Total liabilities ....................................... 143,219,979 143,752,262
------------- -------------
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 500,000 shares authorized,
no shares issued or outstanding
Common stock, $.01 par value, 5,000,000 shares authorized,
3,107,065 shares issued at March 31, 1998; 2,500,000
shares authorized, 1,657,347 shares issued at June 30, 1997 31,071 16,573
Additional paid-in capital .................................. 11,171,630 10,884,182
Retained earnings - substantially restricted ................ 13,919,815 12,805,953
Treasury stock, at cost; 443,411 shares at March 31, 1998 and
244,886 shares at June 30, 1997 ........................... (3,057,250) (3,130,066)
Obligation under employee stock ownership plan .............. (301,741) (301,741)
Unearned compensation ....................................... (16,406) (30,977)
Unrealized gain (loss) on available for sale securities, net 39,805 (78,344)
------------- -------------
Total shareholders' equity .............................. 21,786,924 20,165,580
------------- -------------
Total liabilities and shareholders' equity ......... $ 165,006,903 $ 163,917,842
============= =============
See accompanying notes to consolidated financial statements.
WOOD BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
--------------------------- ---------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
Interest income
Loans ............................. $ 3,001,101 $ 2,767,925 $ 9,000,538 $ 7,932,364
Securities ........................ 172,401 269,916 577,799 822,504
Mortgage-backed and related
securities ...................... 139,926 143,729 424,486 455,174
Other ............................. 66,075 38,941 178,012 113,948
----------- ----------- ----------- -----------
Total interest income ......... 3,379,503 3,220,511 10,180,835 9,323,990
Interest expense
Interest on deposits .............. 1,388,665 1,237,083 4,108,255 3,690,322
FHLB borrowings ................... 209,112 320,822 802,667 783,016
Other borrowed funds .............. 3,630 2,470 7,316 4,916
----------- ----------- ----------- -----------
Total interest expense ........ 1,601,407 1,560,375 4,918,238 4,478,254
----------- ----------- ----------- -----------
Net interest income .................... 1,778,096 1,660,136 5,262,597 4,845,736
Provision for loan losses .............. 30,000 30,000 90,000 90,000
----------- ----------- ----------- -----------
Net interest income after provision
for loan losses ...................... 1,748,096 1,630,136 5,172,597 4,755,736
Noninterest income
Service charges ................... 74,075 67,462 235,914 207,399
Loan sale gains ................... 173,958 38,565 389,202 106,966
Other ............................. 24,450 25,186 104,168 75,494
----------- ----------- ----------- -----------
Total noninterest income ...... 272,483 131,213 729,284 389,859
WOOD BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(continued)
Three Months Ended Nine Months Ended
March 31, March 31,
--------------------------- ---------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
Noninterest expense
Salaries and benefits ............. 635,845 485,999 1,776,074 1,467,499
Occupancy and equipment ........... 103,328 91,444 296,322 279,624
Data processing ................... 108,714 87,263 290,056 226,022
Insurance expense ................. 25,978 27,817 83,392 834,943
Franchise taxes ................... 56,638 48,234 159,085 178,251
Advertising and promotional ....... 32,415 32,363 116,996 96,875
Other ............................. 117,651 93,812 354,111 359,744
----------- ----------- ----------- -----------
Total noninterest expense ..... 1,080,569 866,932 3,076,036 3,442,958
----------- ----------- ----------- -----------
Income before income tax ............... 940,010 894,417 2,825,845 1,702,637
Provision for income tax ............... 362,890 317,830 1,058,575 617,630
----------- ----------- ----------- -----------
Net income ............................. $ 577,120 $ 576,587 $ 1,767,270 $ 1,085,007
=========== =========== =========== ===========
Earnings per common share:
Basic ............................. $ .22 $ .21 $ .68 $ .40
=========== =========== =========== ===========
Diluted ........................... $ .21 $ .20 $ .64 $ .38
=========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
WOOD BANCORP, INC. 5.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
March 31,
1998 1997
------------ ------------
Cash flows from operating activities
Net income ................................................. $ 1,767,270 $ 1,085,007
Adjustments to reconcile net income to net cash from
operating activities
Depreciation ........................................... 94,596 92,045
Provision for loan losses .............................. 90,000 90,000
Amortization of mortgage servicing rights .............. 32,197 3,565
Net accretion .......................................... (50,734) (85,548)
Security (gains)/losses, net ........................... (13,226) 461
Loan sale gains ........................................ (389,202) (106,966)
Proceeds from loans sold ............................... 21,587,619 6,535,012
Loans originated for sale .............................. (21,410,611) (6,520,436)
FHLB stock dividend .................................... (77,700) (69,700)
Amortization of unearned compensation .................. 14,571 29,446
ESOP expense ........................................... 364,215 209,845
Change in
Interest receivable ............................... (2,147) (89,122)
Other assets ...................................... (247,633) 218,217
Other liabilities ................................. (249,326) 72,873
Interest payable .................................. (25,492) 139,341
Deferred loan fees ................................ (5,158) 12,342
------------ ------------
Net cash flows from operating activities ...... 1,479,239 1,616,382
Cash flows from investing activities
Net change in interest-bearing balances with banks ......... 1,534,863 (631,409)
Repurchase agreement ....................................... 2,500,000
Securities and mortgage-backed securities available for sale
Sales .................................................. 1,050,000
Purchases .............................................. (2,055,224) (3,900,000)
Proceeds from calls and maturities ..................... 6,300,000 3,520,000
Proceeds from principal payments on mortgage-
backed securities .................................... 563,010 578,239
Net increase in loans, net of loans sold ................... (5,362,148) (20,034,151)
Properties and equipment expenditures ...................... (608,644) (377,200)
------------ ------------
Net cash from investing activities ..................... 371,857 (17,294,521)
See accompanying notes to consolidated financial statements.
WOOD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
Nine Months Ended
March 31,
1998 1997
------------ ------------
Cash flows from financing activities
Net increase in deposits .............................. $ 8,610,811 $ 2,092,769
Net change in other borrowed funds .................... 250,000
Proceeds from FHLB borrowings ......................... 1,682,511 19,150,000
Repayment of FHLB borrowings .......................... (10,800,787) (4,846,257)
Cash dividends paid ................................... (630,998) (399,948)
Proceeds from exercise of stock options, gross ........ 64,905 16,675
Purchase of treasury stock ............................ (147,375)
------------ ------------
Net cash from financing activities ................ (823,558) 15,865,864
------------ ------------
Net change in cash and cash equivalents .................... 1,027,538 187,726
Cash and cash equivalents at beginning of period ........... 2,914,578 2,637,396
------------ ------------
Cash and cash equivalents at end of period ................. $ 3,942,116 $ 2,825,122
============ ============
Supplemental disclosures of cash flow information
Cash paid during the period for
Interest .......................................... $ 4,943,730 $ 4,338,913
Income taxes ...................................... 958,000 777,371
See accompanying notes to consolidated financial statements.
WOOD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter ended March 31, 1998
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 March 31, 1998, and its results
of operations and cash flows for the periods presented. All such adjustments are
normal and recurring in nature. The accompanying consolidated financial
statements have been prepared in accordance with the instructions of Form 10-QSB
and, therefore, 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 1997 consolidated financial statements and notes thereto of the Company
for the year ended June 30, 1997, included in its 1997 Annual Report. Reference
is made to the accounting policies of the Company described in the notes to the
consolidated financial statements contained in its 1997 Annual Report. The
Company has consistently followed these policies in preparing this Form 10-QSB.
The consolidated financial statements include the accounts of the Company and
the Bank. All significant intercompany transactions and balances have been
eliminated.
The Company is engaged in the business of banking with operations conducted
through its main office and six 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.
To prepare financial statements in conformity with generally accepted accounting
principles, management makes estimates and assumptions based upon available
information. 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 based upon available
information 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.
The Company records income tax expense based on the amount of tax due on its tax
return plus deferred taxes computed based on 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 on the effective tax rate expected to be applicable for the
entire year.
WOOD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter ended March 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings Per Share," on December 31, 1997. SFAS No. 128 requires dual
presentation of basic and diluted earnings per share ("EPS") for entities with
complex capital structures. All prior EPS data has been restated to conform to
the new method. Basic EPS is based on net income divided by the weighted average
number of shares outstanding during the period. Diluted EPS shows the dilutive
effect of unearned recognition and retention plan ("RRP") shares and the
additional common shares issuable under stock options. The weighted average
number of shares outstanding for basic EPS was 2,599,528 and 2,592,216 for the
three and nine months ended March 31, 1998. The weighted average number of
shares outstanding for basic EPS was 2,703,717 and 2,710,040 for the three and
nine months ended March 31, 1997. The weighted average number of shares
outstanding for diluted EPS, which includes the effect of stock options granted
and unearned RRP shares using the treasury stock method was 2,771,247 and
2,753,444 for the three and nine months ended March 31, 1998. Similarly, the
weighted average number of shares outstanding for diluted EPS was 2,834,749 and
2,839,274 for the three and nine months ended March 31, 1997. The dilutive
effect of unearned RRP shares was to increase weighted average shares
outstanding by 784 and 632 for the three and nine months ended March 31, 1998.
The dilutive effect of unearned RRP shares was to increase the weighted average
shares outstanding by 1,281 and 1,237 for the three and nine months ended March
31, 1997. The dilutive effect of stock options was to increase weighted average
shares outstanding by 170,843 and 160,491 for the three and nine months ended
March 31, 1998 and 129,807 and 128,058 for the three and nine months ended March
31, 1997. Unreleased employee stock ownership plan shares are not considered to
be outstanding for determining the weighted average number of shares used in
calculating both basic and diluted EPS. Unearned RRP shares are not considered
to be outstanding shares for determining the weighted average number of shares
used in calculating basic EPS.
On July 1, 1997, the Board of Directors declared a 50% stock dividend paid on
July 29, 1997, which was accounted for similar to a three-for-two stock split.
On January 5, 1998, the Board of Directors declared a 25% stock dividend paid on
January 29, 1998, which was accounted for similar to a five -for -four stock
split. All earnings and dividends per share disclosures have been restated to
reflect the stock dividends.
SFAS No. 129, "Disclosures of Information about Capital Structure," became
effective for the Company as of December 31, 1997. SFAS No. 129 consolidated
existing accounting guidance relating to disclosure about a company's capital
structure. SFAS No. 129 did not affect the Company's disclosures.
WOOD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter ended March 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. SFAS No. 130 requires all items required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. It does not require a specific format for that financial
statement, but requires an enterprise display an amount representing total
comprehensive income for the period in that financial statement.
SFAS No. 130 requires an enterprise (a) classify items of other comprehensive
income by their nature in a financial statement and (b) display the accumulated
balance of other comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of a statement of financial
position. SFAS No. 130 is effective for fiscal years beginning after December
15, 1997. Reclassification of financial statements for earlier periods provided
for comparative purposes is required.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This Standard significantly changes the way
public business enterprises report information about operating segments in
annual financial statements, and requires those enterprises report selected
information about reportable segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. SFAS No. 131 uses a
"management approach" to disclose financial and descriptive information about an
enterprise's reportable operating segments which is based on reporting
information the way management organizes the segments within the enterprise for
making operating decisions and assessing performance. For many enterprises, the
management approach will likely result in more segments being reported. In
addition, the Standard requires significantly more information be disclosed for
each reportable segment than is presently being reported in annual financial
statements. The Standard also requires selected information be reported in
interim financial statements. SFAS No. 131 is effective for financial statements
for periods beginning after December 15, 1997.
Certain items in the 1997 interim financial statements have been reclassified to
correspond with the 1998 presentation.
WOOD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter ended March 31, 1998
NOTE 2 - SECURITIES
The amortized cost, gross unrealized gains and losses and estimated fair values
of securities at March 31, 1998 and June 30, 1997 are as follows:
----------------------------March 31, 1998--------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------------- ------------ ------------ ----------------
Available for sale
U.S. Treasury securities $ 589,146 $ 160,254 $ 749,400
U.S. Government agencies 6,196,512 19,210 $ 51,699 6,164,023
U.S. Government agency step-up
bonds 300,000 1,313 298,687
Mutual funds and equity
investments 2,836,531 3,498 73,742 2,766,287
Other 40,000 40,000
--------------- ------------ ------------ ----------------
Total securities $ 9,962,189 $ 182,962 $ 126,754 $ 10,018,397
=============== ============ ============ ================
Mortgage-backed securities
CMOs and REMICs $ 4,630,123 $ 41,011 $ 17,828 $ 4,653,306
Other mortgage-backed
securities 3,775,435 30,869 49,948 3,756,356
--------------- ------------ ------------ ----------------
Total mortgage-backed
securities $ 8,405,558 $ 71,880 $ 67,776 $ 8,409,662
=============== ============ ============ ================
Securities with a carrying value of $1,388,353 at March 31, 1998 were pledged to
secure public deposits and for other purposes as required or permitted by law.
WOOD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter ended March 31, 1998
NOTE 2 - SECURITIES (Continued)
-----------------------------June 30, 1997--------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------------- ------------ ------------ ----------------
Available for sale
U.S. Treasury security $ 540,627 $ 152,073 $ 692,700
U.S. Government agencies 9,972,708 23,327 $ 86,647 9,909,388
U.S. Government agency step-up
bonds 800,000 9,252 790,748
Mutual funds and equity
investments 2,781,306 276 65,881 2,715,701
Other 40,000 40,000
--------------- ------------ ------------ ----------------
Total securities $ 14,134,641 $ 175,676 $ 161,780 $ 14,148,537
=============== ============ ============ ================
Mortgage-backed securities
CMOs and REMICs 4,650,973 41,272 100,746 4,591,499
Other mortgage-backed
securities 4,325,959 6,124 79,249 4,252,834
--------------- ------------ ------------ ----------------
Total mortgage-backed
securities $ 8,976,932 $ 47,396 $ 179,995 $ 8,844,333
=============== ============ ============ ================
A security with a carrying value of $499,843 as of June 30, 1997 was pledged to
secure public deposits and for other purposes as required or permitted by law.
WOOD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter ended March 31, 1998
NOTE 2 - SECURITIES (Continued)
The amortized cost and estimated market value of debt securities at March 31,
1998, 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 $ 1,299,918 $ 1,292,687
Due after one year through five years 2,088,106 2,241,679
Due after five years through ten years 3,697,634 3,677,744
--------------- ----------------
7,085,658 7,212,110
Mutual funds and equity investments 2,836,531 2,766,287
Other 40,000 40,000
--------------- ----------------
9,962,189 10,018,397
CMOs and REMICs 4,630,123 4,653,306
Other mortgage-backed securities 3,775,435 3,756,356
--------------- ----------------
8,405,558 8,409,662
--------------- ----------------
$ 18,367,747 $ 18,428,059
=============== ================
Proceeds from the sale of securities available for sale totaled $1,050,000 for
the nine months ended March 31, 1997, resulting in gross losses of $2,410. Gross
gains on securities called prior to maturity totaled $13,226 for the nine months
ended March 31, 1998 and $1,949 for the nine months ended March 31, 1997.
WOOD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter ended March 31, 1998
NOTE 3 - LOANS RECEIVABLE
Loans receivable are summarized below:
March 31, June 30,
1998 1997
------------- -------------
Real estate mortgage loans (principally conventional)
Secured by one-to-four family residences ....... $ 91,074,680 $ 93,537,749
Secured by other properties .................... 8,948,731 7,295,761
Construction loans ............................. 5,514,275 4,515,950
Home equity .................................... 10,555,549 8,334,481
------------- -------------
116,093,235 113,683,941
Loans in process ............................... (2,825,900) (2,245,571)
Net deferred loan origination fees ............. (195,502) (200,660)
------------- -------------
Total first mortgage loans ................. 113,071,833 111,237,710
------------- -------------
Consumer and other loans
Automobile ..................................... 7,833,558 7,695,651
Commercial ..................................... 10,613,228 8,035,167
Other .......................................... 5,707,510 4,925,380
------------- -------------
Total consumer and other loans ............. 24,154,196 20,656,198
------------- -------------
137,226,129 131,893,908
Allowance for losses on loans ....................... (630,900) (575,985)
------------- -------------
Loans, net ..................................... $ 136,595,229 $ 131,317,923
============= =============
There were no loans on nonaccrual at March 31, 1998, or June 30, 1997. Accruing
loans that are contractually past due 90 days or more totaled $542,000 at March
31, 1998 compared to $371,000 at June 30, 1997. Impaired loans were
insignificant at March 31, 1998 and June 30, 1997 and for the three and nine
months ended March 31, 1997.
WOOD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter ended March 31, 1998
NOTE 3 - LOANS RECEIVABLE (Continued)
Activity in the allowance for losses on loans for the three and nine months
ended March 31, 1998 and 1997 are as follows:
Three months ended Nine months ended
March 31, March 31,
--------- ---------
1998 1997 1998 1997
------------ ------------ ------------ ------------
Balance at beginning of
period $ 604,534 $ 500,921 $ 575,985 $ 513,367
Provision for loan losses 30,000 30,000 90,000 90,000
Recoveries 5,044 30,445 10,450 30,612
Charge-offs (8,678) (17,392) (45,535) (90,005)
------------ ------------ ------------ ------------
Balance at end of period $ 630,900 $ 543,974 $ 630,900 $ 543,974
============ ============ ============ ============
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 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 $442,611, 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 March 31, 1998 to June 30, 1997 and the results of operations for the
three months and nine months ended March 31, 1998 and 1997. This discussion
should be read in conjunction with the interim financial statements and
footnotes included herein.
FINANCIAL CONDITION
Total assets grew $1,089,061, or 0.7%, from $163,917,842 at June 30, 1997 to
$165,006,903 at March 31, 1998. The growth is attributable to increases in loans
and cash and cash equivalents, partially offset by decreases to interest bearing
deposits with other institutions and securities available for sale.
Cash and cash equivalents increased $1,027,538 from $2,914,578 at June 30, 1997
to $3,942,116 at March 31, 1998. Interest-bearing deposits with banks decreased
$1,534,863 from $2,229,104 at June 30,1997 to $694,241 at March 31, 1998. The
net proceeds were primarily used to fund new loans.
Securities available for sale decreased $4,130,140, or 29.2%, from $14,148,537
at June 30, 1997 to $10,018,397 at March 31, 1998. The decrease was primarily
due to $6,300,000 in calls and maturities, offset by $2,055,224 in purchases.
The proceeds were used primarily to fund new loans.
At March 31, 1998, the Company's mortgage-backed securities portfolio which is
classified as available for sale was comprised primarily of agency issued
adjustable rate securities. 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 $5,277,306, or 4.0%, from $131,317,923 at June 30,
1997 to $136,595,229 at March 31, 1998. 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. To mitigate the
interest rate risk associated with loans held for sale, management obtains fixed
secondary market purchase commitments for these loans. Increases in loans
receivable were funded primarily by decreases in interest-bearing deposits with
banks and proceeds from calls and maturities of securities available for sale,
as well as funds from increased customer deposits.
WOOD BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION (Continued)
Office properties and equipment, net of accumulated depreciation increased
$514,048, or 27.6% primarily due to the purchase of property for a future branch
site in Perrysburg, Ohio.
FHLB stock, accrued interest receivable, and other assets remained relatively
constant from June 30, 1997 to March 31, 1998.
Deposits increased $8,610,811, or 7.1%, from $120,546,079 at June 30, 1997 to
$129,156,890 at March 31, 1998. The Bank used the period's deposit growth to pay
down advances from the FHLB and partially fund loan growth. FHLB advances
decreased $9,118,276 during the period, bringing the total balance from
$21,775,306 at June 30,1997 to $12,657,030 at March 31, 1998.
RESULTS OF OPERATIONS
Net income increased $533, or 0.1%, from $576,387 for the three months ended
March 31, 1997 to $577,120 for the same period in 1998. The increase was
primarily due to increases in net interest income and noninterest income being
offset by an increase in noninterest expense.
Net income increased $682,263 from $1,085,007 for the nine months ended March
31, 1997 to $1,767,270 for the same period in 1998. The 1998 increase was
essentially due to the $442,611, net of tax, special assessment charge in the
1997 period resulting from legislation passed on September 30, 1996, regarding
the SAIF. See Note 4 in the interim financial statements. Excluding the SAIF
assessment, the Company would have reported net income of $1,527,618 for the
nine months ended March 31, 1997. The difference of $239,652, or 15.7%, was
primarily due to increases in net interest income and noninterest income,
partially offset by increases in noninterest expense, excluding the SAIF
assessment.
Net interest income increased $117,960, or 7.1%, during the three months and
$416,861, or 8.6%, during the nine months ended March 31, 1998, as compared to
the same periods in 1997. The increases were primarily due to increases in
average loans during the 1998 periods as compared to the 1997 periods.
The provision for loan losses was $30,000 for the three months and $90,000 for
the nine months ended March 31, 1998 and 1997. The provision is based on
management's assessment of risk factors affecting the loan portfolio. The
allowance for loan losses was approximately .46% of loans, net of unearned and
deferred income, as of March 31, 1998, compared to .41% at March 31, 1997.
Management believes the allowance for loan losses is adequate to absorb
reasonably foreseeable inherent losses in the loan portfolio; however, future
additions to the allowance may be necessary based on changes in economic
conditions.
WOOD BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (Continued)
Noninterest income increased $141,270 and $339,425 for the three and nine months
ended March 31, 1998, as compared to the same periods in 1997. The increases
were primarily due to an $135,393 and $282,236 increase in loan sale gains for
the three and nine months ended March 31, 1998, as compared to the same periods
in 1997. The increase in loan sale gains was due to increased volume of
fixed-rate loans that were sold on the secondary market.
Noninterest expense increased $216,637, or 24.6%, for the three months ended
March 31, 1998, compared to the same period in 1997, primarily due to increases
in salaries and benefits expense and data processing expense. Salaries and
employee benefits increased primarily due to the impact that the Company's stock
price increase had on the ESOP.
Noninterest expense, excluding the SAIF assessment, increased $303,701, or
11.0%, for the nine months ended March 31, 1998, compared to the same period in
1997. The increase was primarily due to salaries and benefits expense increase
of $308,575, partially offset by decreases in deposit insurance expense of
$80,928, excluding the SAIF assessment. Salary and employee benefits increased
primarily due to the ESOP which was previously discussed.
The Company's federal income tax expense was $362,890 and $317,830 for the
three-month periods ended March 31, 1998 and 1997 and $1,058,575 and $617,630
for the nine-month periods ended March 31, 1998 and 1997. The increase was
primarily due to the increase in pretax income.
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 4% of the sum of its average daily balance of net
withdrawable deposit accounts and borrowings payable in one year or less. At
March 31, 1998, First Federal complied with this requirement with a liquidity
ratio of 14.8%. Management considers this liquidity position adequate to meet
its expected needs.
WOOD BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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
March 31, 1998:
Tangible Capital to Tier 1 Capital to Tier 1 Capital to Total Capital to
Adjusted Total Assets Adjusted Total Assets Risk-Weighted Assets Risk-Weighted Assets
Amount % Amount % Amount % Amount %
-------- ---- --------- ---- -------- ----- --------- ----
Actual $ 16,093 9.93% $ 16,093 9.93% $ 16,093 15.08% $ 16,670 15.62%
Required 2,431 1.50 6,483 4.00 4,269 4.00 8,537 8.00
-------- ---- --------- ---- -------- ----- --------- ----
Excess $ 13,662 8.43% $ 9,610 5.93% $ 11,824 11.08% $ 8,133 7.62%
======== ==== ========= ==== ======== ===== ========= ====
The Bank's tangible capital consists solely of shareholders' equity. Core
capital consists of tangible capital plus, through 1998, 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.
Year 2000 Issue
Many computer programs use only two digits to identify a year in the date field
and were apparently designed and developed without considering the impact of the
upcoming change in the century. Such programs could erroneously read entries for
the Year 2000 for the Year 1900. This could result in major systems failures and
miscalculations. Rapid and accurate data processing is essential to the
operations of financial institutions, such as the Company. The Company has
formed a Year 2000 committee to assess the extent to which it and its outside
vendors may be adversely affected by Year 2000 problems. Management has
determined that most programs are or will be capable of identifying the turn of
the century. The issue is closely monitored by management and full compliance is
expected by the end of 1998. While the Company does not anticipate that any Year
2000 computer problems or expenses required to correct such problems will
materially affect its financial condition and results of operations, no
assurance can be given in this regard.
FORM 10-QSB
Quarter ended March 31, 1998
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 March 31, 1998.
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: May 13, 1998 /s/Richard L. Gordley
---------------------
Richard L. Gordley
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 13, 1998 /s/David L. Nagel
-----------------
David L. Nagel
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)