UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2007
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 000-51209
---------
OC FINANCIAL, INC.
(Exact name of small business issuer as specified in its charter)
Maryland 20-2111183
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6033 Perimeter Drive
Dublin, Ohio 43017
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (800) 678-6228.
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
YES [ ] NO [X]
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the last practicable date.
Class Outstanding at May 15, 2007
Common Stock, $0.01 Par Value 560,198
Transitional Small Business Disclosure Format YES [ ] NO [X]
OC FINANCIAL, INC.
Form 10-QSB Quarterly Report
Table of Contents
PART I. FINANCIAL INFORMATION
Page Number
Item 1. Financial Statements ............................................. 1
Item 2. Management's Discussion and Analysis or Plan of Operation......... 10
Item 3. Controls and Procedures........................................... 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................. 19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds....... 19
Item 3. Defaults Upon Senior Securities................................... 19
Item 4. Submission of Matters to a Vote of Security Holders............... 19
Item 5. Other Information................................................. 20
Item 6. Exhibits.......................................................... 20
Signature Page ............................................................ 21
PART I: FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
OC FINANCIAL, INC.
CONSOLIDATED BALANCE SHEETS
March 31, 2007 and September 30, 2006
March 31, September 30,
2007 2006
---------------- ----------------
(UNAUDITED)
ASSETS
Cash and due from financial institutions $ 385,928 $ 456,730
Federal funds sold 9,464,000 6,273,000
---------------- ----------------
Total cash and cash equivalents 9,849,928 6,729,730
Securities held to maturity (fair value: 3/31/07 - $18,892,405;
09/30/06 - $20,846,386) 19,435,549 21,533,317
Federal Home Loan Bank stock 774,800 763,300
Loans, net of allowance of $239,234 at 3/31/07 and
$240,932 at 09/30/06 38,647,356 36,708,128
Loans held for sale 2,087,185 56,102
Real Estate Owned 62,934 -
Premises and equipment, net 668,387 679,743
Accrued interest receivable 238,928 229,118
Prepaid expenses 174,772 170,844
Other assets 147,617 74,654
---------------- ----------------
Total assets $ 72,087,456 $ 66,944,936
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Savings deposits $ 9,888,690 $ 10,991,399
Demand deposits 5,621,003 5,865,445
Money market deposits 1,501,687 1,727,815
Time deposits 30,050,424 28,089,783
---------------- ----------------
Total deposits 47,061,804 46,674,442
Federal Home Loan Bank advances 16,700,000 10,200,000
Payments collected on loans sold 1,259,865 1,328,271
Accrued interest payable 88,796 55,117
Drafts in process 240,753 1,646,387
Other liabilities 200,071 226,109
---------------- ----------------
Total liabilities 65,551,289 60,130,326
Common stock, $0.01 par value; 15,000,000 shares authorized,
560,198 shares issued and outstanding 5,602 5,602
Additional paid-in capital 4,952,482 4,951,052
Unearned ESOP shares (397,732) (425,743)
Retained earnings 1,975,815 2,283,699
---------------- ----------------
Total shareholders' equity 6,536,167 6,814,610
---------------- ----------------
Total liabilities and shareholders' equity $ 72,087,456 $ 66,944,936
================ ================
See accompanying notes to consolidated financial statements.
1
OC FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 2007 and 2006
(Unaudited)
For the three For the three
months ended months ended
March 31, March 31,
2007 2006
---------------- ----------------
INTEREST INCOME
Loans, including fees $ 605,555 $ 424,446
Securities and other investments 237,045 325,874
Federal funds sold and other 25,332 107,338
---------------- ----------------
867,932 857,658
INTEREST EXPENSE
Deposits 393,828 337,779
Federal Home Loan Bank advances 156,815 160,250
---------------- ----------------
550,643 498,029
---------------- ----------------
NET INTEREST INCOME 317,289 359,629
Provision for loan losses - 15,000
---------------- ----------------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 317,289 344,629
NONINTEREST INCOME
Service charges and other deposit fees 72,287 78,600
Gain on loan sales 21,421 -
Income from servicing of loans 27,276 23,333
Visa and ATM interchange income 8,740 9,446
Other 16,233 12,627
---------------- ----------------
145,957 124,006
NONINTEREST EXPENSE
Compensation and benefits 283,736 303,975
Occupancy and equipment 25,037 27,972
Depreciation and amortization 23,574 29,672
Computer processing expense 31,184 28,341
VISA and ATM expense 23,150 19,313
Bank service charges 20,839 20,414
Collection and loan expense 11,594 10,342
Advertising and promotion 29,294 35,793
Other insurance premiums 10,032 4,999
Professional and supervisory fees 47,685 67,837
State franchise tax expense 21,900 23,850
Other 58,724 64,935
---------------- ----------------
586,749 637,443
---------------- ----------------
LOSS BEFORE INCOME TAXES (123,503) (168,808)
Income tax benefit - (59,116)
---------------- ----------------
NET LOSS $ (123,503) $ (109,692)
================ ================
Net loss per share $ (0.24) $ (0.21)
================ ================
See accompanying notes to consolidated financial statements.
2
OC FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the Six Months Ended March 31, 2007 and 2006
(Unaudited)
For the six For the six
months ended months ended
March 31, March 31,
2007 2006
---------------- ----------------
INTEREST INCOME
Loans, including fees $ 1,169,702 $ 813,024
Securities and other investments 483,464 607,118
Federal funds sold and other 63,538 127,782
---------------- ----------------
1,716,704 1,547,924
INTEREST EXPENSE
Deposits 788,472 512,159
Federal Home Loan Bank advances 315,227 345,372
---------------- ----------------
1,103,699 857,531
---------------- ----------------
NET INTEREST INCOME 613,005 690,393
Provision for loan losses 5,000 30,000
---------------- ----------------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 608,005 660,393
NONINTEREST INCOME
Service charges and other deposit fees 148,772 171,382
Commercial Loan Referral Fee 10,000 -
Gain on loan sales 21,421 -
Income from servicing of loans 43,827 47,550
Visa and ATM interchange income 22,436 20,246
Other 41,605 30,223
---------------- ----------------
288,061 269,401
NONINTEREST EXPENSE
Compensation and benefits 602,199 574,045
Occupancy and equipment 47,830 57,124
Depreciation and amortization 49,056 59,241
Computer processing expense 60,334 55,073
VISA and ATM expense 44,471 40,539
Bank service charges 43,702 43,316
Collection and loan expense 23,910 11,981
Advertising and promotion 42,644 68,568
Other insurance premiums 16,824 10,163
Professional and supervisory fees 92,227 131,130
State franchise tax expense 45,750 34,500
Other 135,003 119,853
---------------- ----------------
1,203,950 1,205,533
---------------- ----------------
LOSS BEFORE INCOME TAXES (307,884) (275,739)
Income tax benefit - (96,322)
---------------- ----------------
NET LOSS $ (307,884) $ (179,417)
================ ================
Net loss per share $ (0.59) $ (0.35)
================ ================
See accompanying notes to consolidated financial statements
3
OC FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Six Months ended March 31, 2007 and 2006
(unaudited)
Additional Total
Common Paid in Retained Unearned Shareholders'
Stock Capital Earnings ESOP Equity
------------ ------------- ------------- ------------- -------------
BALANCE AT SEPTEMBER 30, 2005 $ 5,602 $ 4,949,797 $ 2,898,413 $ (448,150) $ 7,405,662
Earned ESOP Shares - - - 18,355 18,355
Net Loss for the six months ended
March 31, 2006 - - (179,417) - (179,417)
------------ ------------- ------------- ------------- -------------
BALANCE AT MARCH 31, 2006 $ 5,602 $ 4,949,797 $ 2,718,996 $ (429,795) $ 7,244,600
============ ============= ============= ============= =============
BALANCE AT SEPTEMBER 30, 2006 $ 5,602 $ 4,951,052 $ 2,283,699 $ (425,743) $ 6,814,610
Earned ESOP Shares - 1,430 - 28,011 29,441
Net Loss for the six months ended
March 31, 2007 - - (307,884) - (307,884)
------------ ------------- ------------- ------------- -------------
BALANCE AT MARCH 31, 2007 $ 5,602 $ 4,952,482 $ 1,975,815 $ (397,732) $ 6,536,167
============ ============= ============= ============= =============
See accompanying notes to consolidated financial statements.
4
OC FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended March 31, 2007 and 2006
(Unaudited)
For the six For the six
months ended months ended
3/31/2007 3/31/2006
--------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (307,884) $ (179,417)
Adjustments to reconcile net loss to net cash
from operating activities
Depreciation and amortization 49,056 59,241
Provision for loan losses 5,000 30,000
Deferred fee/costs amortization 7,705 6,013
Earned ESOP Shares 29,441 18,355
Federal Home Loan Bank stock dividends (11,500) (20,700)
Net amortization (accretion) on investment securities 4,886 (20,878)
Loans originated and purchased for sale (5,797,636) (157,219)
Proceeds from sale of loans 3,787,974 157,219
Net gains on sales of loans (21,421) -
Changes in other assets (86,701) (25,754)
Changes in other liabilities (60,765) (416,347)
--------------- ---------------
Net cash used in operating activities (2,401,845) (549,487)
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Securities held to maturity
Purchases - (2,954,688)
Maturities, calls and principal payments 2,092,882 1,770,343
Net increase in loans (2,014,867) (920,567)
Premises and equipment expenditures (37,700) (18,500)
--------------- ---------------
Net cash used in investing activities 40,315 (2,123,412)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits 387,362 16,932,232
Proceeds from Federal Home Loan Bank advances 6,500,000 -
Repayment of Federal Home Loan Bank advances - (5,250,000)
Changes in drafts in process (1,405,634) 50,551
--------------- ---------------
Net cash provided by financing activities 5,481,728 11,732,783
--------------- ---------------
Net change in cash and cash equivalents 3,120,198 9,059,884
Cash and cash equivalents at beginning of period 6,729,730 3,962,586
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,849,928 $ 13,022,470
=============== ===============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the six months for:
Interest $ 1,070,429 $ 870,627
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Transfer of loans to foreclosed real estate $ 234,276 $ -
Institution financed sale of REO $ 171,342 $ -
See accompanying notes to consolidated financial statements
5
OC FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2007
(Unaudited)
Note 1 - Principles of Consolidation and Basis of Presentation
The consolidated financial statements include OC Financial, Inc. (the
"Company"), Ohio Central Savings (the "Bank") and its wholly-owned subsidiary,
AUTOARM, LLC, together referred to as "the Corporation." Intercompany
transactions and balances are eliminated in the consolidation.
The Company was formed to serve as the stock holding company for the Bank as
part of the Bank's conversion and reorganization from a mutual holding company
structure. On March 31, 2005, the Bank completed its conversion and
reorganization, and the Company issued stock to the Bank's depositors to
complete its initial public offering. Prior to the consummation of the
reorganization, the Company had no assets or liabilities. For a further
discussion of the Company's formation see the Company's Registration Statement
on Form SB-2, as amended, declared effective on February 11, 2005 (File Number
333-121411).
The (a) condensed balance sheet as of September 30, 2006, which has been derived
from audited financial statements, and (b) the unaudited interim condensed
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim financial
information and with instructions for Form 10-QSB. Accordingly, they do not
include all of the information and footnotes required by accounting principles
generally accepted in the United States of America for complete financial
statements. In the opinion of management, all adjustments (all of which are
normal and recurring in nature) considered necessary for a fair presentation
have been included. Operating results for the three-month period and six-month
period ended March 31, 2007 are not necessarily indicative of the results that
may be expected for the year ending September 30, 2007. The Company's
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended September 30, 2006
should be read in conjunction with these statements. The Bank operates in one
business segment, banking.
The preparation of consolidated financial statements, in conformity with
accounting principles generally acceptable in the United States of America,
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements, and the
reported amounts of income and expenses during the reported periods. Actual
results could differ from current estimates. Estimates associated with the
allowance for loan losses and the fair values of securities are particularly
susceptible to change in the near term.
Note 2 - Adoption of Plan of Conversion and Reorganization
On December 14, 2004, the Board of Directors of the Bank adopted a plan of
conversion and reorganization pursuant to which the Bank reorganized from a
mutual holding company structure and became a wholly-owned subsidiary of the
Company which sold its common stock to eligible depositors of the Bank in a
subscription offering. The offering closed on March 31, 2005 with net proceeds
of $5.0 million received on the sale of 560,198 common shares. The net proceeds
were used for general corporate purposes, including the purchase of
mortgage-backed securities and funding of loans. The Company also provided a
$448,150 loan to the newly-established employee stock ownership plan, as
discussed in Note 3.
6
Note 3 - Employee Stock Ownership Plan
In connection with the stock offering, the Company established an Employee Stock
Ownership Plan ("ESOP") for the benefit of its employees. The Company issued
44,815 shares of common stock to the ESOP in exchange for a 20-year note in the
amount of $448,150. The interest rate is Prime floating, with annual principal
and interest payments due on the last business day of December starting in 2005
and ending in 2024. The loan for the ESOP purchase was obtained from the
Company.
Shares issued to the ESOP are allocated to ESOP participants based on principal
and interest payments made by the ESOP on the loan from the Company. The loan is
secured by shares purchased with the loan proceeds and will be repaid by the
ESOP with funds from the Bank's contributions to the ESOP and earnings on ESOP
assets.
As shares are released from collateral, the Company will report compensation
expense equal to the current market price of the shares and the shares will
become outstanding for earnings-per-share (EPS) computations. Dividends on
allocated ESOP shares would reduce retained earnings; dividends on unearned ESOP
shares would reduce accrued interest.
Note 4 - Net Loss Per Share
Net Loss per share for the three months and the six months ended March 31, 2007
were $(0.24) and $(0.59), respectively. Common shares outstanding for purposes
of the earnings per share calculation were as follows for the three months and
the six months ended March 31, 2007:
Three Months Six Months
Ended Ended
March 31, 2007 March 31, 2007
-------------- --------------
Average shares outstanding 560,198 560,198
Average unearned ESOP shares 40,054 40,754
-------------- --------------
Weighted average common shares outstanding,
basic and diluted 520,144 519,444
============== ==============
Three Months Six Months
Ended Ended
March 31, 2006 March 31, 2006
-------------- --------------
Average shares outstanding 560,198 560,198
Average unearned ESOP shares 42,980 43,898
-------------- --------------
Weighted average common shares outstanding,
basic and diluted 517,218 516,300
============== ==============
7
As of March 31, 2007, the Company currently had no potentially dilutive
securities. On April 19, 2006 the Company's shareholders approved the 2006 Stock
Incentive Plan pursuant to which the Company may grant stock options and award
shares of restricted stock to directors, officers and employees. As of March 31,
2007, no options or shares of restricted stock had been granted.
Note 5 - New Accounting Pronouncements
EITF 06-11
In March, 2007, the FASB ratified EITF Issue No. 06-11, "Accounting for Income
Tax Benefits of Dividends on Share-Based Payment Awards." EITF 06-11 required
companies to recognize the income tax benefit realized from dividends or
dividend equivalents that are charged to retained earnings and paid to employees
for nonvested equity-classified employee share-based payment awards as an
increase to additional paid-in capital. EITF 06-11 is effective for fiscal years
beginning after September 15, 2007. The Company does not expect EITF 06-11 will
have a material impact on its financial position, results of operations or cash
flows.
FASB 157
In July 2006, the FASB issued FASB Interpretation No. 48 "Accounting for
Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109 ("FIN
48"). FIN 48 prescribes a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken in a
tax return. The Company must presume the tax position will be examined by the
relevant tax authority and determine whether it is more likely than not that the
tax position will be sustained upon examination, including resolution of any
related appeals or litigation processes, based on the technical merits of the
position. A tax position that meets the more-likely-than-not recognition
threshold is measured to determine the amount of benefit to recognize in the
financial statements. FIN 48 also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. FIN 48 is effective for fiscal years beginning after
December 15, 2006. The cumulative effect of applying the provisions of FIN 48
represents a change in accounting principle and shall be reported as an
adjustment to the opening balance of retained earnings. The Company is currently
evaluating the impact of adopting FIN 48 on its Consolidated Financial
Statements.
SFAS 157
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
("SFAS No. 157"). SFAS No. 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and expands
disclosures about fair value measurements. The changes to current practice
resulting from the application of SFAS No. 157 relate to the definition of fair
value, the methods used to measure fair value and the expanded disclosures about
fair value measurements. SFAS No. 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007. Earlier application
is encouraged, provided that the reporting entity has not yet issued financial
statements for that fiscal year, including financial statements for an interim
period within that fiscal year. The provisions of SFAS No. 157 should be applied
prospectively as of the beginning of the fiscal year in which is initially
applie3d, except for certain financial instruments which require retrospective
application as of the beginning of the fiscal year of initial application (a
limited form of retrospective application). The transition adjustment, measured
as the difference between the carrying amounts and the fair values of those
financial instruments at the date SFAS No. 157 is initially applied, should be
recognized as a cumulative-effect adjustment to the opening balance of retained
earnings. The Company is currently evaluating the impact of adopting SFAS No.
157 on its Consolidated Financial Statements and whether to adopt its provisions
prior to the required effective date.
8
SAB 108
In September 2006, the Securities and Exchange Commission ("SEC") released Staff
Accounting Bulletin ("SAB") 108. This release expresses the staff's view
regarding the process of quantifying financial statement misstatements and
addresses diversity in practice in quantifying financial statement misstatements
and the potential under current practice for the build up of improper amounts on
the balance sheet. SAB No. 108 is effective for annual financial statements
covering the first fiscal year ending after November 15, 2006. The Company has
reviewed the SAB in connection with our condensed consolidated financial
statements for the current and prior periods, and has determined that its
adoption will not have an impact on any of these financial statements.
SFAS 159
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities - Including an amendment of FASB
Statement No. 115." SFAS No. 159 permits entities to choose to measure many
financial instruments and certain other items at fair value. Unrealized gains
and losses on items for which the fair value option has been elected will be
recognized in earnings at each subsequent reporting date. SFAS No. 159 is
effective for our company January 1, 2008. The Company is evaluating the impact
that the adoption of SFAS No. 159 will have on our consolidated financial
statements.
9
OC FINANCIAL, INC.
ITEM 2 - Management's Discussion and Analysis or Plan of Operation
FORWARD-LOOKING STATEMENTS
When used in this filing and in future filings by OC Financial, Inc. with
the Securities and Exchange Commission, in the Company's press releases or other
public or shareholder communications, or in oral statements made with the
approval of an authorized executive officer, the words or phrases, "anticipate,"
"would be," "will allow," "intends to," "will likely result," "are expected to,"
"will continue," "is anticipated," "estimated," "projected," or similar
expressions are intended to identify, "forward looking statements." Such
statements are subject to risks and uncertainties, including but not limited to
changes in economic conditions in OC Financial, Inc.'s market area, changes in
policies by regulatory agencies, fluctuations in interest rates, demand for
loans in OC Financial, Inc.'s market area, changes in the position of banking
regulators on the adequacy of our allowance for loan losses, and competition,
all or some of which could cause actual results to differ materially from
historical earnings and those presently anticipated or projected.
OC Financial, Inc. wishes to caution readers not to place undue reliance
on any such forward-looking statements, which speak only as of the date made,
and advise readers that various factors, including regional and national
economic conditions, substantial changes in levels of market interest rates,
credit and other risks of lending and investing activities, and competitive and
regulatory factors, could affect OC Financial, Inc.'s financial performance and
could cause OC Financial, Inc.'s actual results for future periods to differ
materially from those anticipated or projected.
OC Financial, Inc. does not undertake, and specifically disclaims any
obligation, to update any forward-looking statements to reflect occurrences or
unanticipated events or circumstances after the date of such statements.
GENERAL
On March 31, 2005, Ohio Central Savings became the wholly owned subsidiary
of OC Financial, Inc. after completing a conversion and reorganization from the
mutual form of organization and a divestiture from Third Federal Savings and
Loan Association of Cleveland, MHC ("Third Federal").
The Company's principal business has historically consisted of attracting
deposits from the general public and the business community and making loans
secured by various types of collateral, including vehicles, real estate and
general business assets. The Company is significantly affected by prevailing
economic conditions as well as government policies and regulations concerning,
among other things, monetary and fiscal affairs, housing and financial
institutions. Deposit flows are influenced by a number of factors, including
interest rates paid on competing investments, account maturities, fee
structures, and level of personal income and savings. Lending activities are
influenced by the demand for funds, the number and quality of lenders, and
regional economic cycles. Sources of funds for lending activities of the Bank
include deposits, borrowings, payments on loans, maturities of securities and
income provided from operations. The Company's earnings are primarily dependent
upon the Company's net interest income, which is the difference between interest
income and interest expense.
Interest income is a function of the balances of loans and investments
outstanding during a given period and the yield earned on such loans and
investments. Interest expense is a function of the amount of deposits and
borrowings outstanding during the same period and interest rates paid on such
deposits and borrowings. The Company's earnings are also affected by the
Company's provision for loan losses, service charges, gains from sales of loans,
interchange fees, other income, operating expenses and income taxes.
10
CRITICAL ACCOUNTING POLICIES
Certain of our accounting policies are important to the portrayal of our
financial condition, since they require management to make difficult, complex or
subjective judgments, some of which may relate to matters that are inherently
uncertain. Estimates associated with these policies are susceptible to material
changes as a result of changes in facts and circumstances. Facts and
circumstances which could affect these judgments include, but without
limitation, changes in interest rates, changes in the performance of the economy
or in the financial condition of borrowers. Management believes that its
critical accounting policy is the determination of the allowance for loan
losses. OC Financial, Inc.'s and Ohio Central Savings' accounting policies are
discussed in detail in Note 1 of the "Notes to the Consolidated Financial
Statements" contained in its September 30, 2006 consolidated financial
statements included in the Company's annual report on Form 10-KSB.
The allowance for loan losses represents management's estimate of probable
losses inherent in the loan portfolio. Determining the amount of the allowance
is considered a critical accounting estimate because it requires significant
judgment about the collectibility of loans and the factors that deserve
consideration in estimating probable credit losses. The allowance for loan
losses is a valuation allowance for probable incurred credit losses, increased
by the provision for loan losses and decreased by charge-offs less recoveries.
Management estimates the allowance balance required using the past loan loss
experience, the nature and volume of the portfolio, information about specific
borrower situations and estimated collateral values, economic conditions and
other factors. Allocations of the allowance may be made for specific loans, but
the entire allowance is available for any loan that, in management's judgment,
should be charged-off. Loan losses are charged against the allowance when
management believes the uncollectibility of a loan balance is confirmed.
Management evaluates the adequacy of the allowance at least quarterly. This
evaluation is inherently subjective as it requires material estimates that may
be susceptible to significant change.
The allowance consists of specific and general components. The specific
component relates to loans that are individually classified as impaired or loans
otherwise classified as special mention, substandard, or doubtful. The general
component covers non-classified loans and is based on historical loss experience
adjusted for current factors. Management relies on observable data from internal
and external sources to evaluate each of these factors, adjust assumptions and
recognize changing conditions to reduce differences between estimated and actual
observed losses from period to period. The evaluation of the allowance also
takes into consideration the inherent imprecision of loss estimation models and
techniques and includes general reserves for probable but undetected losses in
categories of loans. While the Company continually refines and enhances the loss
estimation models and techniques it uses to determine the appropriateness of the
allowance for loan losses, there have been no material substantive changes to
such models and techniques compared to prior periods. The portfolio consists
primarily of smaller balance homogeneous loans, therefore, impaired loans are
analyzed primarily on a pooled basis for purposes of establishing the allowance
for loan losses.
The allowance for loan losses and related provision expense can also be
susceptible to material change as a result of significant changes in individual
borrower circumstances on larger dollar loans. Given that the Company's
portfolio consists primarily of automobile loans, the variability in the
allowance and provision for loan losses would normally be the result of economic
and other trends in its lending market area, changes in the quality of its
lending staff, collection practices and loan administration. Adverse changes in
these areas could result in increases in non-performing loans and loan
charge-offs, requiring increases to the provision and allowance for loan losses.
11
BUSINESS STRATEGY
Prior to our three and a half year affiliation with Third Federal, from
November, 2001 to March, 2005, Ohio Central Savings was a full service
community-based savings institution generating a wide variety of loans for our
customers. As a result of our affiliation, and as part of our strategic plan,
our potential mortgage loan customers were referred to Third Federal. We also
increased our automobile lending program as part of the alliance through
marketing efforts with Third Federal. During our affiliation with Third Federal,
we originated $117.0 million in automobile loans, 80% of which were sold to
Third Federal. Also during our three and a half year affiliation our mortgage
loan portfolio declined by $11.3 million or about 63.1% from $17.9 million to
$6.6 million. Following our separation from Third Federal in March, 2005, we
reinitiated our mortgage lending activity within our market areas and retained
automobile loans in our portfolio. This strategy of increased lending activity
is intended to result in higher levels of earnings, but there can be no
guarantee that we will be able to accomplish this objective. We plan to retain
these loans in our portfolio, subject to our interest rate risk and liquidity
management needs, in order to improve our earnings.
We have continued to pursue growth in other loan products and deposit
accounts within our market areas, such as home equity loans and referrals for
the origination of credit card accounts to an outsourced provider. We will seek
deposit accounts in a blend of certificates of deposit, checking accounts and
money market accounts to provide funds for lending activities. Due to the limits
of our capital base prior to completing our stock conversion, our ability to
increase interest-earning assets had been constrained even though we otherwise
had the resources to increase our lending operations. Although we did not earn a
profit in the last quarter and the last fiscal year, we believe our increased
capital levels will allow us to improve our profitability through our efforts of
increasing interest-earning assets such as loans and reducing substantially our
reliance on income from securities in our investment portfolio.
We have also continued to pursue our automobile loan origination and
servicing business offered to other financial institutions through our
AutoARM(R) subsidiary. This subsidiary was formed in August 2003 and is a third
party originator and servicer of direct automobile loans for other financial
institutions. AutoARM(R) is a program designed by Ohio Central Savings to offer
these services to other financial institutions in a manner similar to the method
that was developed to be used with Third Federal. Loans originated and funded by
AutoARM(R) will not generate a gain on sale to the other institutions but will
generate servicing income to us. During the quarter ended March 31, 2007, we
entered into four new agreements with AutoARM(R) partners to originate and
service auto loans, bringing the total number of institutions to nineteen. We
anticipate that the number of AutoARM(R) customers will continue to increase
through our continued marketing efforts, but we cannot guarantee the results of
our efforts.
COMPARISON OF RESULTS OF OPERATION FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND
2006
GENERAL. Our net loss for the three months ended March 31, 2007 was
$124,000 compared to a net loss of $110,000 for the three months ended March 31,
2006. Our loss before income taxes for the three months ended March 31, 2007 was
$124,000 compared to a loss before income taxes of $169,000 for the three months
ended March 31, 2006.
The increase in our net loss can be attributed to not recognizing any tax
benefit on our operating losses. Also an overall increase in deposit costs, as a
result of the current inverted yield curve, has caused a corresponding decline
in our net interest margin. Within our own portfolio, we continued replacement
of lower interest rate loans with higher interest rate loans as market rates
increased over the three month period ended March 31, 2007.
12
INTEREST INCOME. Interest income increased to $868,000 for the three
months ended March 31, 2007 from $858,000 for the three months ended March 31,
2006. The primary reason for the increase in interest income was an increase of
$181,000 in loan income offset by a reduction in interest income on securities
and other investments of $89,000 and a reduction in federal fund interest of
$82,000. The increase in loan income was primarily due to a net increase in the
balance of our loan portfolio of $10.4 million from March 31, 2006 to March 31,
2007. As we intend to increase our emphasis on residential mortgage and consumer
lending, this trend of increasing interest-earning assets may continue. The
weighted average yield on loans increased from 5.68% for the three months ended
March 31, 2006 to 6.13% for the three months ended March 31, 2007. The weighted
average yield on securities decreased from 4.84% for the three months ended
March 31, 2006 to 4.54% for the three months ended March 31, 2007. The total
average balance of interest earning assets decreased $3.9 million from $68.5
million for the three months ended March 31, 2006 to $64.6 million for the three
months ended March 31, 2007. The weighted average yield on interest earning
assets increased 37 basis points from 5.00% for the three months ended March 31,
2006 to 5.37% for the three months ended March 31, 2007.
INTEREST EXPENSE. Interest expense increased $53,000 to $551,000 for the
three months ended March 31, 2007 from $498,000 for the three months ended March
31, 2006. The increase in interest expense was attributed to an increase in the
cost of deposits as a result of the increase in short-term market interest rates
during 2006 and 2007. From March 31, 2006 to March 31, 2007, our outstanding
deposits decreased $2.9 million. Interest expense on deposits increased $56,000
to $394,000 for the quarter ending March 31, 2007 from $338,000 for the quarter
ended March 31, 2006. The average cost of deposits increased 59 basis points to
3.41% for the quarter ended March 31, 2007 from 2.82% for the quarter ended
March 31, 2006.
As interest rates stabilize or increase, we expect interest expense will
increase as our cost of interest bearing liabilities increase through higher
rates on existing deposits and on new deposits. Our average weighted cost of
funds was 3.80% for the three months ended March 31, 2007 compared to 3.36% for
the three months ended March 31, 2006.
NET INTEREST INCOME. Net interest income decreased $43,000 to $317,000 for
the three months ended March 31, 2007 from $360,000 for the three months ended
March 31, 2006. The decrease in net interest income was primarily the result of
our gradual shift to loans from investments as described above offset by
increasing interest rates for deposits. Our net interest margin has declined to
1.96% for the three months ended March 31, 2007 compared to 2.04% for the three
months ended March 31, 2006.
PROVISION FOR LOAN LOSSES. The Company establishes provisions for loan
losses, which are charged to operations, at a level required to reflect probable
and estimable credit losses in the loan portfolio. In evaluating the level of
the allowance for loan losses, management considers historical loss experience,
the types of loans and the amount of loans in the loan portfolio, adverse
situations that may affect borrowers' ability to repay, estimated value of any
underlying collateral, and prevailing economic conditions. Large groups of
smaller balance homogeneous loans, such as automobile loans, residential real
estate and other consumer loans, are evaluated in the aggregate using historical
loss factors adjusted for current economic conditions and other relevant data.
Larger non-homogeneous loans such as commercial loans for which management has
concerns about the borrowers' ability to repay are evaluated individually, and
specific allowances are provided for such loans when necessary.
Based on management's evaluation of the above factors, no provision was
made for the three months ended March 31, 2007. A provision of $15,000 was made
for the three months ended March 31, 2006. The amount of general allowance
allocations made for smaller balance homogeneous loans has remained constant
during the three months ended March 31, 2007, primarily resulting from the
performance of the portfolio, actual losses and recoveries. Loan charge-offs
were $5,000, for the three
13
months ended March 31, 2007, down from $12,000 for the three months ended March
31, 2006. Recoveries were $1,000 for the three months ended March 31, 2007,
compared to $100 for the three month period ended March 31, 2006.
While management uses available information to recognize losses on loans,
future loan loss provisions may be necessary based on changes in economic
conditions. In addition, our regulator, the Office of Thrift Supervision
("OTS"), as an integral part of their examination process, periodically reviews
the allowance for loan losses and may require us to recognize additional
provisions based on its judgment of information available at the time of the
examination. The allowance for loan losses as of March 31, 2007 was maintained
at a level that represents management's best estimate of probable incurred
losses in the loan portfolio.
NON-INTEREST INCOME. Non-interest income increased $22,000 to $146,000 for
the three months ended March 31, 2007 from $124,000 for the three months ended
March 31, 2006. The overall increase in non-interest income was attributed
primarily to a $21,000 gain on the sale of a pool of auto loans in March, 2007.
NON-INTEREST EXPENSE. Non-interest expense was $587,000 for the quarter
ended March 31, 2007 which was $50,000 less than the same period in 2006. The
decrease was primarily due to a decrease in professional fees of $20,000 as well
as a decrease in compensation expense of $20,000 from the comparable period in
2006.
INCOME TAX EXPENSE. No income tax expense or benefit was recognized for
the three months ended March 31, 2007 due to our continuing operating losses
which has required the establishment of a valuation allowance on our deferred
tax assets related to our net operating loss carry forwards. An income tax
benefit of $59,000 was recognized for the three months ended March 31, 2006.
COMPARISON OF RESULTS OF OPERATION FOR THE SIX MONTHS ENDED MARCH 31, 2007 AND
2006
GENERAL. Our net loss for the six months ended March 31, 2007 was $308,000
compared to a net loss of $179,000 for the six months ended March 31, 2006.
A number of factors contributed to the increase in net loss, including an
increase in our interest expense offset in part by an increase in our interest
income. We also have not recognized a tax benefit on our operating losses for
the six months ended March 31, 2007 compared to the six months ended March 31,
2006. We continue to see a compression in our net interest margin as a result of
the inverted yield curve and its effects on our loan and deposit pricing
abilities. Within our own portfolio, we continued replacement of lower interest
rate loans with higher interest rate loans over the six month period ended March
31, 2007. Overall non interest income increased for the six months ended March
31, 2007 as compared to the six months ended March 31, 2006 primarily as a
result of an increase in the gain on sale of auto loans. Fee income decreased
during the period and non interest expenses remained constant.
INTEREST INCOME. Interest income increased to $1.7 million for the six
months ended March 31, 2007 from $1.5 million for the six months ended March 31,
2006. The primary reason for the increase in interest income were increases of
$357,000 in loan income offset by reductions of $124,000 and $64,000 in security
and investment income and interest on federal funds, respectively. The increase
in loan income was primarily due to a net increase in the balance of our loan
portfolio of $10.5 million from March 31, 2006 to March 31, 2007. As we continue
to increase our emphasis on residential mortgage and consumer auto lending, this
trend of increasing interest-earning assets may continue. The weighted average
yield on loans increased from 5.50% for the six months ended March 31, 2006 to
5.99% for the six months ended March 31, 2007. The weighted average yield on
securities decreased from 4.68% for
14
the six months ended March 31, 2006 to 4.56% for the six months ended March 31,
2007. The average balance of interest earning assets increased $1.6 million from
the six months ended March 31, 2006 to the six months ended March 31, 2007, and
the weighted average yield on interest earning assets increased 40 basis points
from 4.94% to 5.34%.
INTEREST EXPENSE. Interest expense increased $246,000 to $1.1 million for
the six months ended March 31, 2007 from $858,000 for the six months ended March
31, 2006. The increase in interest expense is attributed to an increase in the
cost of deposits as a result of the increase in short-term market interest rates
during 2006 and 2007. Interest expense on deposits increased $276,000 to
$788,000 for the six months ended March 31, 2007 from $512,000 for the six
months ended March 31, 2006. The average cost of deposits increased 89 basis
points to 3.42% for the six months ended March 31, 2007 from 2.53% for the six
months ended March 31, 2006.
As interest rates stabilize or increase, we expect interest expense will
increase as our cost of interest bearing liabilities increase through higher
rates on existing deposits and on new deposits. Our average weighted cost of
funds was 3.85% for the six months ended March 31, 2007 compared to 3.16% for
the six months ended March 31, 2006.
NET INTEREST INCOME. Net interest income decreased $77,000 to $613,000 for
the six months ended March 31, 2007 from $690,000 for the six months ended March
31, 2006. The decrease in net interest income was primarily the result of
increasing interest rates for deposits offset in part by a gradual shift to
loans from investments as described above. Our net interest margin has declined
to 1.91% for the six months ended March 31, 2007 compared to 2.20% for the six
months ended March 31, 2006 as the negative effects of the inverted yield curve
continue to impact our earnings.
PROVISION FOR LOAN LOSSES. The Company establishes provisions for loan
losses, which are charged to operations, at a level required to reflect probable
and estimable credit losses in the loan portfolio. Based on management's
evaluation of the factors previously discussed, a provision was made for the six
months ended March 31, 2007 in the amount of $5,000 compared to a provision of
$30,000 for the six months ended March 31, 2006. The decrease in provision for
loan losses was primarily attributable to management's ongoing assessment of
risk within our loan portfolio. Based upon this assessment, management believes
the current provision for loan losses to be adequate. The amount of general
allowance allocations made for smaller balance homogeneous loans has remained
constant during the six months ended March 31, 2007 primarily resulting from the
performance of the portfolio, actual losses and recoveries. Loan charge-offs
were $5,000, for the six months ended March 31, 2007, down from $14,000 for the
six months ended March 31, 2006. Recoveries were $1,000 for the six months ended
March 31, 2007, compared to $800 for the six month period ended March 31, 2006.
While management uses available information to recognize losses on loans,
future loan loss provisions may be necessary based on changes in economic
conditions. In addition, the OTS, as an integral part of its examination
process, periodically reviews the allowance for loan losses and may require us
to recognize additional provisions based on its judgment of information
available at the time of the examination. The allowance for loan losses as of
March 31, 2007 was maintained at a level that represents management's best
estimate of probable incurred losses in the loan portfolio.
NON-INTEREST INCOME. Non-interest income increased $19,000 to $288,000 for
the six months ended March 31, 2007 from $269,000 for the six months ended March
31, 2006. The overall increase in non-interest income was attributed primarily
to a $21,000 gain on the sale of a pool of auto loans in March, 2007 as well as
a $10,000 commercial loan referral fee received in October, 2006.
15
NON-INTEREST EXPENSE. Non-interest expense was $1.2 million for the six
months ended March 31, 2007 and was comparable to non-interest expense
recognized during the comparable six month period ended March 31, 2006.
INCOME TAX EXPENSE. No income tax expense or benefit was recognized for
the six months ended March 31, 2007 due to our continuing operating losses which
has required the establishment of a valuation allowance on our deferred tax
assets related to our net operating loss carry forwards. For the six months
ended March 31, 2006, the Company recognized a tax benefit of $96,000.
CHANGES IN FINANCIAL CONDITION FROM SEPTEMBER 30, 2006 TO MARCH 31, 2007.
GENERAL. Total assets increased by $5.2 million, or 7.68%, to $72.1
million at March 31, 2007 from $66.9 million at September 30, 2006. The increase
was attributed primarily to $6.5 million of short term Federal Home Loan Bank
advances obtained in March, 2007. The advances were utilized to fund the
purchase of short-term assets to grow our balance sheet in order to meet the
consumer loan percentage of asset limitations as imposed by the Home Owners'
Loan Act.
ASSETS. Our loan portfolio increased $1.9 million from $36.7 million at
September 30, 2006 to $38.6 million at March 31, 2007. Loans held for sale
increased $2.0 million from $56,000 at September 30, 2006 to $2.1 million at
March 31, 2007. The increase in loans held for sale was attributed to the
purchase of two pools of loans in March, 2007 with an outstanding principal
balance of $4.4 million. $2.2 million of the loans purchased were subsequently
sold with the servicing retained by the Company in March, 2007 with the
remaining loans available for sale.
Federal Funds outstanding increased $3.2 million from $6.3 million at
September 30, 2006 to $9.5 million at March 31, 2007. Federal Home Loan Bank
advances of $6.5 million were obtained in March, 2007 to fund the purchase of
short-term investments to grow our balance sheet in order to meet the consumer
loan percentage of asset limitations as imposed by the Home Owners' Loan Act.
The allowance for loan losses was $239,000 at March 31, 2007 or 0.62% of
loans, compared to $241,000, or 0.65% of loans at September 30, 2006. The
allowance for loan losses consists of general allowance allocations made for
pools of homogeneous loans and specific allowances on individual loans for which
management has significant concerns regarding the borrowers' ability to repay
the loans in accordance with the terms of the loans. Non-performing loans
totaled $27,000 at March 31, 2007 and $130,000 at September 30, 2006,
respectively. The decrease was attributed to the payoff of one non-performing
residential mortgage loan during the period. In determining the amount of
allowance for loan loss allocations needed for non-performing loans, management
has considered expected future borrower cash flows and the fair value of
underlying collateral.
DEPOSITS. Total deposits increased by $387,000, or 0.83%, to $47.1 million
at March 31, 2007 from $46.7 million at September 30, 2006. Time deposits
increased approximately $2.0 million during the same period primarily as a
result of the certificate of deposit promotion conducted in the three months
ended March 31, 2007.
BORROWINGS. Federal Home Loan Bank advance balances were $16.7 million at
March 31, 2007 and $10.2 million at September 30, 2006. Short-term advances
increased $6.5 million during the quarter ended March 31, 2007 to fund the
purchase of short-term investments to grow our balance sheet in order to meet
the consumer loan percentage of asset limitations as imposed by the Home Owners'
Loan Act. We expect that Federal Home Loan Bank advances will continue to
provide the Company with an additional funding source to meet the needs of its
lending activities.
16
SHAREHOLDERS' EQUITY. Total consolidated shareholders' equity for the
Company decreased $278,000, or 4.09%, to $6.5 million at March 31, 2007 from
$6.8 million at September 30, 2006. The decrease in equity was primarily the
result of our operating loss of $308,000 for the six month period.
CAPITAL RESOURCES. At March 31, 2007, capital at the Bank totaled $6.0
million. Management monitors the capital levels of the Bank to provide for
current and future business opportunities and to meet regulatory guidelines for
"well-capitalized" institutions.
17
The Bank is required by the OTS to meet minimum capital adequacy
requirements. The Bank's actual and required levels of capital as reported to
the OTS at March 31, 2007 are as follows:
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
---------------------- ---------------------- ----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
As of March 31, 2007
--------------------
Total capital (to risk weighted
assets)......................... $ 6,255 15.33% $ 3,263 8.00% $ 4,079 10.00%
Tier 1 (core) capital (to risk
weighted assets)................ $ 6,016 14.75% $ 1,632 4.00% $ 2,448 6.00%
Tier 1 (core) capital (to
adjusted total assets).......... $ 6,016 8.27% $ 2,900 4.00% $ 3,625 5.00%
LIQUIDITY
Management maintains a liquidity position that it believes will adequately
provide funding for loan demand and deposit run-off that may occur in the normal
course of business. The Company relies on a number of different sources in order
to meet its potential liquidity demands. The primary sources are increases in
deposit accounts and cash flows from loan payments and the securities portfolio.
In addition to these primary sources of funds, management has several
secondary sources available to meet potential funding requirements. At March 31,
2007, Ohio Central Savings had additional borrowing capacity of $11.2 million
with the Federal Home Loan Bank of Cincinnati. Additionally, Ohio Central
Savings has access to the Federal Reserve Bank of Cleveland discount window for
borrowing. The available line at the discount window is $19.6 million.
Our stock offering provided significant additional liquidity and capital
resources. As our liquidity positions have historically been maintained to
provide for loan demand and deposit run-off, the stock offering proceeds may
provide excess liquidity in the near term. The additional liquidity and capital
resources from the stock offering will help provide for the future growth of the
Company.
ITEM 3 - Controls and Procedures
An evaluation was performed under the supervision and with the
participation of the Company's management, including the Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
the Company's disclosure controls and procedures (as defined in Rule 13a-15(e)
or 15d-15(e) promulgated under the Securities and Exchange Act of 1934, as
amended) for the quarter ended March 31, 2007. Based on such evaluation, our
Chief Executive Officer and Chief Financial Officer, have concluded that our
disclosure controls and procedures are designed to ensure that information
required to be disclosed by us in the reports that we file or submit under the
Securities Act of 1934 is recorded, processed, summarized and reported within
the time periods specified in the SEC's rules and regulations and are operating
in an effective manner.
No change in our internal controls over financial reporting (as defined in
Rules 13a-15(f) or 15(d)-15(f) under the Securities Exchange Act of 1934)
occurred during the most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.
18
OC FINANCIAL, INC.
FORM 10-QSB
March 31, 2007
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company or
its subsidiaries is a party other than ordinary routine litigation incidental to
their respective businesses.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders of OC Financial, Inc. (the "Company"),
was held on February 28, 2007. There were present at the meeting, in person,
holders of 560,198 shares of Company common stock, constituting a quorum.
Matters Submitted:
Results of Stockholder Vote
---------------------------
Abstention and
Broker
For Against Withheld Non-Votes
-----------------------------------------------------
1) Election of the following directors for
terms expiring at the 2010 Annual Meeting
of the stockholders, and until their
successors are duly elected and qualified:
Christopher L. Lardiere 536,339 N/A 33,859 N/A
Diane M. Gregg 536,339 N/A 33,859 N/A
2) The stockholders of the company ratified
the appointment of Beard Miller Company,
LLP as the auditors of the Company for the
fiscal year ending September 30, 2007 by a
vote of: 536,339 23,859 N/A N/A
19
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS
a. Exhibits
31.1 Certification of Chief Executive Officer Pursuant to Rule
13a-14(a)/15d-14(a)
31.2 Certification of Chief Financial Officer Pursuant to Rule
13a-14(a)/15d-14(a)
32.1 Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
20
OC FINANCIAL, INC.
FORM 10-QSB
March 31, 2007
PART II - OTHER INFORMATION
Signatures
Pursuant to the requirements 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.
OC FINANCIAL, INC.
(Registrant)
Date: May 15, 2007 /s/ Robert W. Hughes
----------------------------------
Robert W. Hughes
Chairman, President, and Chief
Executive Officer
21