<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
____________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
Commission File Number: 0-21385
-------
WESTWOOD HOMESTEAD FINANCIAL CORPORATION
--------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Indiana 31-1463057
- ----------------------- -----------------
(State of incorporation) (I.R.S. Employer
Identification No.)
3002 Harrison Avenue, Cincinnati, Ohio 45211-5789
- -----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(513) 661-5735
--------------
Indicate by checkmark whether the registrant (1) filed all
reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the preceding 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 the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical
date. Shares outstanding at June 30, 1997 common stock, $.01
par value: 2,795,475.
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<PAGE>
CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of
June 30, 1997 and December 31, 1996 (Unaudited) 1
Consolidated Statements of Operations for the Three and
Six Months Ended June 30, 1997 and 1996 (Unaudited) 2
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1997 and 1996 (Unaudited) 3
Notes to Consolidated Financial Statements (Unaudited) 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings 8
Item 2. Changes in Securities 8
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matters to a Vote of
Security-Holders 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURES
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
WESTWOOD HOMESTEAD FINANCIAL CORPORATION
Consolidated Statements of Financial Condition
(Unaudited)
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
------------ -----------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 11,916,476 $ 13,420,389
Securities available for sale 2,994,599 3,969,430
Mortgage backed securities available
for sale 14,206,500 15,034,115
Loans held for sale 516,886 527,381
Loans receivable, net 102,177,402 84,525,374
Stock in Federal Home Loan Bank 987,500 953,600
Accrued interest receivable 749,222 589,124
Premises and equipment, net 565,340 607,339
Income taxes 207,035 210,422
Prepaid expenses and other assets 338,810 114,209
------------ ------------
Total assets $134,654,770 119,951,383
============ ============
Liabilities and stockholders' equity
Deposits 82,531,538 79,082,778
Federal Home Loan Bank advances 12,121,767 127,458
Advances from borrowers for taxes
and insurance 136,236 633,857
Income taxes 56,542 --
Accrued expenses and other liabilities 210,434 124,872
------------ ------------
Total liabilities 95,056,517 79,968,965
============ ============
Contingencies (Note 5)
Stockholders' equity:
Common Stock, $.01 par value,
15,000,000 shares authorized,
2,795,475 and 2,843,375 shares
outstanding at June 30, 1997 and
December 31, 1996, respectively 28,434 28,434
Additional paid in capital 27,739,434 27,709,597
Retained income 15,164,434 14,876,066
Employee Stock Ownership Plan (Note 6) (2,143,370) (2,238,386)
Treasury Stock, at cost; 49,700 shares
(Note 3) (641,006) --
Net unrealized loss on securities
available for sale (549,673) (393,293)
------------ ------------
Total stockholders' equity 39,598,253 39,982,418
------------ ------------
Total liabilities and stockholders'
equity $134,654,770 119,951,383
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
1<PAGE>
<PAGE>
WESTWOOD HOMESTEAD FINANCIAL CORPORATION
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ----------------------
1997 1996 1997 1996
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Interest income:
Loans receivable $2,005,471 1,546,443 3,836,637 3,050,426
Mortgage-backed securities 236,317 263,685 483,317 534,054
Investment securities 46,965 13,375 105,500 26,750
Interest-bearing deposits
with banks 181,211 28,746 366,573 56,089
---------- --------- --------- ---------
Total interest income 2,469,964 1,852,249 4,792,027 3,667,319
---------- --------- --------- ---------
Interest expense:
Deposits 1,183,578 1,207,538 2,315,216 2,415,043
Borrowings 155,673 4,304 216,971 7,119
---------- --------- --------- ---------
Total interest expense 1,339,251 1,211,842 2,532,187 2,422,162
---------- --------- --------- ---------
Net interest income 1,130,713 640,407 2,259,840 1,245,157
Provision for loan losses 35,507 15,082 53,993 30,169
---------- --------- --------- ---------
Net interest income after
provision for loan losses 1,095,206 625,325 2,205,847 1,214,988
---------- --------- --------- ---------
Non-interest income:
Gain on sale of securities -- 7,271 -- 4,458
Gain on loan sales -- 1,397 -- 36,569
Service charges and fees 33,109 14,989 62,567 28,161
---------- --------- --------- ---------
Total non-interest income 33,109 23,657 62,567 69,188
---------- --------- --------- ---------
Non-interest expense:
Compensation and benefits 280,306 238,229 563,291 476,372
Occupancy costs 39,285 30,838 81,310 63,691
Franchise tax 119,771 46,800 240,042 99,300
Federal deposit insurance premiums 12,800 46,760 25,530 93,018
Data processing 29,747 19,862 55,086 41,284
Legal, accounting and examination
fees 76,074 23,026 100,079 39,566
Consulting fees 9,314 5,585 16,792 23,267
Advertising 10,746 14,717 19,139 24,601
Other 55,314 52,502 124,704 95,148
---------- --------- --------- ---------
Total non-interest expenses 633,357 478,319 1,225,973 956,247
---------- --------- --------- ---------
Income before income tax expense 494,958 170,663 1,042,441 327,929
Income tax expense 169,600 58,000 356,000 111,500
---------- --------- --------- ---------
Net income $ 325,358 112,663 686,441 216,429
========== ========= ========= =========
Net income per share (Note 4) $.12 N/A $.26 N/A
=== === === ===
</TABLE>
See accompanying notes to consolidated financial statements.
2<PAGE>
<PAGE>
WESTWOOD HOMESTEAD FINANCIAL CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1997 1996
--------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 686,441 216,429
Adjustments to reconcile net income to net
cash provided by operating activities:
Net amortization of premium and discounts (19,843) 6,726
Depreciation of premises and equipment 51,640 30,321
Federal Home Loan Bank stock dividend (33,900) (31,100)
Deferred income taxes (23,158) 15,057
Accretion of net loan fees deferred 35,697 3,861
Provision for loan loss 53,993 30,169
Gain on securities sales -- (4,457)
Gain on loan sales -- (36,569)
Net loans repaid (originated) held for sale 10,495 (437,079)
Proceeds from sale of loans held for sale -- 1,477,483
Employee Stock Ownership Plan amortization 124,851 --
Change in:
Accrued interest receivable (160,098) (21,412)
Prepaid expenses and other assets (219,601) (342,660)
Accrued expenses 85,562 (45,910)
Income taxes 163,648 168,012
----------- -----------
Net cash provided by operating activities 755,727 1,028,871
----------- -----------
Cash from investing activities:
Proceeds from sale of mortgage backed securities -- 1,667,340
Principal payments on mortgage backed
securities 1,585,349 330,621
Net increase in loans receivable (17,741,718) (4,834,076)
Additions to premises and equipment (9,641) (50,121)
----------- -----------
Net cash used in investing activities (16,166,010) (2,886,236)
----------- -----------
Cash flows from financing activities
Net increase in deposits 3,448,760 1,039,046
Cash dividends (398,072) --
Purchase of common stock for treasury (641,006) --
Short term Federal Home Loan Bank advances
and Federal Funds 5,000,000 1,000,000
Long term Federal Home Loan Bank advance
repayments (5,691) (5,434)
Long term Federal Home Loan Bank advances 7,000,000 --
Net decrease in advances from borrowers for
taxes and insurance (497,621) (396,187)
----------- -----------
Net cash provided by financing activities 13,906,370 1,637,425
----------- -----------
Net decrease in cash and cash equivalents (1,503,913) 1,637,425
Beginning cash and cash equivalents 13,420,389 869,124
----------- -----------
Ending cash and cash equivalents $11,916,476 $ 649,184
=========== ===========
</TABLE>
See accompanying notes to financial statements
3<PAGE>
<PAGE>
WESTWOOD HOMESTEAD FINANCIAL CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
June 30, 1997 and December 31, 1996
(1) Basis of Presentation.
----------------------
The accompanying unaudited consolidated financial statements were
prepared in accordance with instructions for Form 10-Q and
therefore, do not include all disclosures necessary for a
complete presentation of the consolidated statements of financial
condition, income and cash flows in conformity with generally
accepted accounting principles, and should be read in conjunction
with the consolidated financial statements and notes thereto for
the fiscal year ended December 31, 1996. However, all
adjustments which are, in the opinion of management, necessary
for the fair presentation of the interim financial statements
have been included. The consolidated statements of income for
the quarter and six months ended June 30, 1997 are not
necessarily indicative of the results which may be expected for
the entire year.
(2) Consummation of the Conversion
------------------------------
On September 27, 1996, the Westwood Homestead Savings Bank (the
"Bank") completed its conversion from an Ohio mutual savings bank
to an Ohio stock savings bank and was simultaneously acquired by
Westwood Homestead Financial Corporation (the "Company"), an
Indiana corporation, which was formed to act as the holding
company of the Bank.
On the date of conversion, the Company issued 2,843,375 shares of
common stock, $.01 par value, at $10 per share, raising net
proceeds of $27.7 million. In accordance with the plan of
conversion, $13.9 million of the net proceeds were utilized to
purchase 100% of the stock of the Bank.
(3) Treasury Stock
--------------
During the quarter ended June 30, 1997, the Company has purchased
47,900 of its common stock in the open market. These repurchases
were undertaken primarily to meet the anticipated needs of the
Company's Management Recognition Plan (MRP) which will be
submitted for stockholder approval later this year.
(4) Net income per share
--------------------
Earnings per share is not presented for the quarter and six
months ended June 30, 1996 because no shares of stock were
outstanding for those periods.
(5) Contingencies
-------------
Although the Bank, from time to time, is involved in various
legal proceedings in the normal course of business, there are no
material legal proceedings to which the Bank is a party or to
which any of its property is subject.
(6) Employee Stock Ownership Plan
-----------------------------
Effective January 1, 1996, the Company established the Employee
Stock Ownership Plan (ESOP). On September 30, 1996, the ESOP
purchased 227,470 shares of the Company's common stock. The ESOP
was capitalized with a loan from the Company for $2.4 million
which is secured by the shares of common stock purchased. The
obligation of the ESOP, net of amounts charged to expense, is
shown as a reduction of stockholders' equity.
The Bank intends to make annual contributions to the ESOP
sufficient to repay the loan plus interest over a 13 year period.
Amortization of the ESOP of $125,000 has been recorded as
compensation expense for the six months ended June 30, 1997.
4<PAGE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1997 AND DECEMBER
31, 1996
Westwood Homestead Savings Bank (the "Bank") converted from
a state chartered mutual savings bank to a state chartered stock
savings bank on September 27, 1996. In the conversion, 2,843,375
shares of common stock of Westwood Homestead Financial
Corporation (the "Company") were sold, generating net proceeds
after conversion expenses of $27.7 million. Of this amount,
$13.9 million was used to purchase 100% of the common stock of
the Bank, $2.4 million to fund the stock purchase made by the
Employee Stock Ownership Plan and the balance was used to
purchase investments and for other corporate purposes.
Total assets increased $14.7 million, or 12.3% from $120.0
million at December 31, 1996 to $134.7 million at June 30, 1997.
Loans receivable increased $17.7 million, or 20.9% from $84.5
million at December 31, 1996 to $102.2 million at June 30, 1997
as a result of strong loan demand, expanded loan products and
successful marketing. This increase consisted of 73% one to four
family loans and 56% adjustable rate loans.
Total liabilities increased $15.1 million from $80.0
million at December 31, 1996 to $95.1 million at June 30, 1997.
This increase was due primarily to $12.0 million of Federal Home
Loan Bank ("FHLB") fixed rate advances with terms ranging from
seven months to 120 months. Competition for local CDs has
shifted the Banks's funding source to FHLB advances in recent
periods.
COMPARISON OF OPERATING RESULTS FOR THE QUARTER AND SIX MONTHS
ENDED JUNE 30, 1997 AND 1996
Net Income. Net income for the quarter ended June 30, 1997
was $325,000, or 12 cents per share, as compared with $113,000
for the quarter ended June 30, 1996. Return on average equity
and return on average assets were 3.23% and 0.99%, respectively,
for the quarter ended June 30, 1997 compared to 3.07% and .46%,
respectively, for the same quarter in 1996. Net income for the
six months ended June 30, 1997 was $686,000, or 26 cents per
share, as compared with $216,000 for the six months ended June
30, 1996.
Net Interest Income. Net interest income increased $491,000
to $1,131,000 for the quarter ended June 30, 1997 from $640,000
for the quarter ended June 30, 1996. This increase was due to
$25.7 million more in net interest earning assets as a result of
the investment of stock conversion proceeds. Net interest margin
increased to 3.48% for the quarter ended June 30, 1997 as
compared to 2.65% for the same quarter in 1996 primarily due to
increased net interest earning assets. Net interest income
increased $1,015,000 to $2,260,000 for the six months ended June
30, 1997 from $1,245,000 for the six months ended June 30, 1996.
Interest Income. Interest income increased $618,000, or
32.5%, to $2.5 million for the quarter ended June 30, 1997 from
$1.9 million for the quarter ended June 30, 1996. Interest
income on loans receivable increased $459,000, or 30.0%, to
$2,005,000 for the quarter ended June 30, 1997 from $1,546,000
for the quarter ended June 30, 1996. The average balance of
loans receivable increased 26.9% to $98.7 million for the quarter
ended June 30, 1997 from the same quarter a year ago while the
average yield increased 18 basis points to 8.13%. Stock
conversion proceeds increased the average of other earning assets
$11.1 million from the year ago quarter resulting in $152,000
more in other interest income. Interest income increased
$1,125,000, or 30.4%, to $4.8 million for the six months ended
June 30, 1997 from $3.7 million for the six months ended June 30,
1996.
5<PAGE>
<PAGE>
Interest Expense. Interest expense increased $127,000 to
$1,339,000 for the quarter ended June 30, 1997 from $1,212,000
for the quarter ended June 30, 1996. This increase is due to
$7.4 million more in average interest bearing liabilities and an
increase in the average cost to 5.91% for the quarter ended June
30, 1997 from 5.83% for the quarter ended June 30, 1996.
Interest expense increased $110,000 to $2,532,000 for the six
months ended June 30, 1997 from $2,422,000 for the six months
ended June 30, 1996.
Provision for Loan Losses. The Bank established provisions
for loan losses of $36,000 and $15,000 during the quarters ended
June 30, 1997 and 1996, respectively. The loan portfolio is
regularly reviewed by management, including problem loans, and
changes in the relative makeup to determine whether any loans
require classification or the establishment of additional
reserves.
Non-Interest Income. Non-interest income increased $9,000
to $33,000 for the quarter ended June 30, 1997 from $24,000 for
the quarter ended June 30, 1996. Service charges and fees
increased $18,000 to $33,000 for the quarter ended June 30, 1997
from $15,000 for the quarter ended June 30, 1996. This increase
reflects the Bank's emphasis on attracting new checking accounts
in the last year. Non-interest income decreased $6,000 to
$63,000 for the six months ended June 30, 1997 from $69,000 for
the six months ended June 30, 1996 due to a $37,000 gain on loan
sales recorded during the six months ended June 30, 1996 while no
loans were sold during the current year.
Non-Interest Expense. Non-interest expense increased
$155,000 to $633,000 for the quarter ended June 30, 1997 from
$478,000 for the quarter ended June 30, 1996. This increase was
due primarily to an increase of $73,000, or 155%, in Ohio
Franchise Tax which is based on year end net worth. Compensation
and benefits increased $42,000, or 17.6%, during the quarter
ended June 30, 1997 as compared to the quarter ended June 30,
1996 primarily due to the ESOP amortization accrual of $62,000.
Legal and accounting fees increased $53,000 due to expenses
relating to being a public company. Data processing expenses
increased $10,000 due to expenses relating to the upcoming
conversion to Fiserv. The Bank anticipates additional
deconversion costs in excess of $30,000 in the quarter ending
September 30, 1997. Due to the reduction in premiums resulting
from the recapitalization of the Savings Association Insurance
Fund ("SAIF") in 1996, FDIC insurance expense decreased $34,000,
or 72.6% for the quarter ended June 30, 1997. The ratio of non-
interest expense to average assets was 1.93% for the quarter
ended June 30, 1997 as compared to 1.95% for the same quarter a
year ago. Non-interest expense increased $270,000 to $1,226,000
for the six months ended June 30, 1997 from $956,000 for the six
months ended June 30, 1996.
Income Taxes. The Company recorded income tax expense of
$356,000 and $112,000 for the six months ended June 30, 1997 and
1996, respectively. This represented an effective tax rate of
34.15% and 34.00% for the six months ended June 30, 1997 and
1996, respectively.
6<PAGE>
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $11.9 million at June 30,
1997 which consisted primarily of overnight federal funds and
Federal Home Loan Bank term deposits. In order for the Company
to enhance shareholder returns and generate a competitive return
on equity, management plans to engage in an aggressive strategy
of growth, both externally through the selective acquisition of
other financial institutions and internally through expansion of
the Bank's lending activities. There can be no assurance that
the Company will in fact be able to identify attractive
acquisition candidates or to acquire such candidates on favorable
terms. Certificate of deposits maturing in one year or less
total $39.2 million, which includes $9.2 million of the ten year
term CDs. Management believes that current liquidity levels and
borrowing limits are adequate to fund daily operations.
The Bank is subject to various regulatory capital
requirements administered by the federal banking agencies.
Failure to meet minimum capital requirements can initiate certain
mandatory - and possibly additional discretionary - actions by
regulators that, if undertaken, could have a direct material
effect on the Company's consolidated financial statements.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios
( set forth in the table below ) of Tangible, Tier I/Core and
Risk-based capital (as defined in the regulations). Management
believes, as of June 30, 1997, that the Bank meets all capital
adequacy requirements to which it is subject.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provision
----------------- ----------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Tangible Capital $29,485,027 24.49% 1,805,710 1.50% 6,019,034 5.00%
Tier 1/Core Capital 29,485,027 24.49% 3,611,420 3.00% 7,222,841 6.00%
Risk-based Capital 29,704,533 40.57% 5,857,680 8.00% 7,322,100 10.00%
</TABLE>
7<PAGE>
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Although the Bank, from time to time, is involved in various
legal proceedings in the normal course of business, there are no
material legal proceedings to which the Bank is a party or to
which any of its property is subject.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None
ITEM 5. OTHER INFORMATION
Westwood Homestead Savings Bank has signed a contract with
Fiserv, Inc. to provide core processing for its loan and deposit
accounts. The conversion to the Fiserv system is scheduled to
take place in September and will facilitate movement to offering
alternative delivery channels of loan and deposit products. The
Bank intends to improve the convenience, accessibility and speed
of financial knowledge to its customers and improve internal
operations to achieve greater efficiency.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits are being filed with
-------- this report.
Exhibit Description
------- -----------
27 Financial Data Schedule
(b) Reports on Form 8-K. None
-------------------
8<PAGE>
<PAGE>
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.
WESTWOOD HOMESTEAD FINANCIAL CORPORATION
Date: July 29, 1997 By: /s/ Michael P. Brennan
-----------------------------
Michael P. Brennan
(Principal Executive Officer)
Date: July 29, 1997 By: /s/ John E. Essen
-----------------------------
John E. Essen
(Principal Financial Officer)
9
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 769,147
<INT-BEARING-DEPOSITS> 10,664,682
<FED-FUNDS-SOLD> 482,647
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 17,201,099
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 102,694,288
<ALLOWANCE> 219,506
<TOTAL-ASSETS> 134,654,770
<DEPOSITS> 82,531,538
<SHORT-TERM> 5,000,000
<LIABILITIES-OTHER> 403,212
<LONG-TERM> 7,121,767
0
0
<COMMON> 28,434
<OTHER-SE> 39,569,819
<TOTAL-LIABILITIES-AND-EQUITY> 134,654,770
<INTEREST-LOAN> 2,005,471
<INTEREST-INVEST> 283,282
<INTEREST-OTHER> 181,211
<INTEREST-TOTAL> 2,469,964
<INTEREST-DEPOSIT> 1,183,578
<INTEREST-EXPENSE> 1,339,251
<INTEREST-INCOME-NET> 1,130,713
<LOAN-LOSSES> 35,507
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 633,357
<INCOME-PRETAX> 494,958
<INCOME-PRE-EXTRAORDINARY> 494,958
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 325,358
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
<YIELD-ACTUAL> 1.69
<LOANS-NON> 0
<LOANS-PAST> 85,683
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 183,999
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 219,506
<ALLOWANCE-DOMESTIC> 219,506
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
