<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
---------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _______________
Commission File No. 0-18993
---------
WINTON FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-1303854
- ------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5511 Cheviot Road
Cincinnati, Ohio 45247
- ---------------------- --------
(Address of principal (Zip Code)
executive office)
Registrant's telephone number, including area code: (513) 385-3880
Check whether the issuer (1) has 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
----- -----
As of February 1, 1998, the latest practicable date, 2,007,152 shares of the
registrant's common stock, no par value, were issued and outstanding.
Page 1 of 15 pages
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WINTON FINANCIAL CORPORATION
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Consolidated Statements of Financial
Condition 3
Consolidated Statements of Earnings 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
PART II - OTHER INFORMATION 14
SIGNATURES 15
<PAGE> 3
<TABLE>
<CAPTION>
WINTON FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
DECEMBER 31, SEPTEMBER 30,
ASSETS 1997 1997
<S> <C> <C>
Cash and due from banks $ 1,736 $ 1,367
Interest-bearing deposits in other financial institutions 2,958 1,419
------- -------
Cash and cash equivalents 4,694 2,786
Investment securities available for sale - at market 4,599 3,631
Investment securities - at cost, approximate market
value of $13,188 and $12,679 at December 31,
1997 and September 30, 1997 13,092 12,585
Mortgage-backed securities available for sale - at market 746 799
Mortgage-backed securities - at cost, approximate market
value of $13,887 and $14,345 at December 31,
1997 and September 30, 1997 14,175 14,614
Loans receivable - net 276,075 276,334
Loans held for sale - at lower of cost or market 7,027 4,210
Office premises and equipment - net 2,645 2,627
Real estate acquired through foreclosure 509 513
Federal Home Loan Bank stock - at cost 3,052 2,998
Accrued interest receivable on loans 2,125 2,185
Accrued interest receivable on mortgage-
backed securities 106 109
Accrued interest receivable on investments 240 241
Prepaid expenses and other assets 364 393
Intangible assets - net 448 463
-------- --------
Total assets $329,897 $324,488
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $248,070 $240,317
Advances from the Federal Home Loan Bank 53,409 57,425
Accounts payable on mortgage loans serviced for others 853 842
Advance payments by borrowers for taxes and insurance 776 412
Other liabilities 1,102 1,137
Accrued federal income taxes 265 85
Deferred federal income taxes 1,031 993
-------- --------
Total liabilities 305,506 301,211
Shareholders' equity
Preferred stock - 2,000,000 shares without par value
authorized; no shares issued - -
Common stock - 5,000,000 shares without par value
authorized; 2,006,152 and 1,986,152 shares issued and outstanding - -
Additional paid-in capital 6,762 6,501
Retained earnings - substantially restricted 17,182 16,474
Unrealized gains on securities designated as available for sale, net 447 302
-------- --------
Total shareholders' equity 24,391 23,277
-------- --------
Total liabilities and shareholders' equity $329,897 $324,488
======== ========
</TABLE>
3
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<TABLE>
<CAPTION>
WINTON FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
For the three months ended December 31,
(In thousands, except share data)
1997 1996
<S> <C> <C>
Interest income
Loans $ 6,046 $ 5,296
Mortgage-backed securities 230 282
Investment securities 262 193
Interest-bearing deposits and other 61 46
------- -------
Total interest income 6,599 5,817
Interest expense
Deposits 3,243 2,885
Borrowings 783 673
------- -------
Total interest expense 4,026 3,558
------- -------
Net interest income 2,573 2,259
Other income
Gain on sale of mortgage loans 247 214
Gain on sale of mortgage-backed securities -- 36
Loss on sale of real estate acquired through foreclosure -- (4)
Service fees, charges and other 103 90
------- -------
Total other income 350 336
General, administrative and other expense
Employee compensation and benefits 740 660
Occupancy and equipment 310 291
Federal deposit insurance premiums 37 126
Franchise taxes 68 64
Amortization of intangible assets 15 15
Advertising 48 38
Other 241 254
------- -------
Total general, administrative and other expense 1,459 1,448
------- -------
Earnings before income taxes 1,464 1,147
Federal income taxes
Current 541 (230)
Deferred (37) 620
------- -------
Total federal income taxes 504 390
------- -------
NET EARNINGS $ 960 $ 757
======= =======
EARNINGS PER SHARE
Basic $ .48 $ .38
======= =======
Diluted $ .46 $ .38
======= =======
DIVIDENDS PAID PER COMMON SHARE $ .125 $ .105
======= =======
</TABLE>
4
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<TABLE>
<CAPTION>
WINTON FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended December 31,
(In thousands)
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net earnings for the period $ 960 $ 757
Adjustments to reconcile net earnings to net cash provided
by (used in) operating activities:
Amortization of premiums and discounts on investment and
mortgage-backed securities 10 --
Amortization of deferred loan origination fees (90) (63)
Depreciation and amortization 99 95
Amortization of intangible assets 15 15
Gain on sale of mortgage loans (214) (115)
Gain on sale of mortgage-backed securities -- (36)
Loss on sale of real estate acquired through foreclosure -- 4
Loans originated for sale in the secondary market (18,774) (9,473)
Proceeds from sale of loans in the secondary market 16,171 12,422
Federal Home Loan Bank stock dividends (54) (42)
Increase (decrease) in cash due to changes in:
Accrued interest receivable on loans 60 159
Accrued interest receivable on mortgage-backed securities 3 4
Accrued interest receivable on investments 1 (41)
Prepaid expenses and other assets 29 63
Accounts payable on mortgage loans serviced for others 11 51
Other liabilities (35) (1,379)
Federal income taxes
Current 180 (630)
Deferred (37) 620
-------- --------
Net cash provided by (used in) operating activities (1,665) 2,411
Cash flows from investing activities:
Principal repayments on mortgage-backed securities 483 586
Proceeds from sale of investment securities -- 122
Proceeds from the maturity of investment securities 3,500 2,000
Purchase of investment securities designated as held to maturity (4,008) (2,500)
Purchase of investment securities designated as available for sale (748) --
Loan principal repayments 20,869 21,694
Loan disbursements (23,019) (24,245)
Sale of loan participations 2,499 --
Purchase of office premises and equipment (113) (45)
Additions to real estate acquired through foreclosure -- (211)
Proceeds from sale of real estate acquired through foreclosure -- 16
-------- --------
Net cash used in investing activities (537) (2,583)
-------- --------
Net cash used in operating and investing
activities (balance carried forward) (2,202) (172)
</TABLE>
5
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<TABLE>
<CAPTION>
WINTON FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the three months ended December 31,
(In thousands)
1997 1996
<S> <C> <C>
Net cash used in operating and investing
activities (balance brought forward) $ (2,202) $ (172)
Cash flows from financing activities:
Net increase in deposit accounts 7,753 28
Repayments of Federal Home Loan Bank advances (13,016) (4,014)
Proceeds from Federal Home Loan Bank advances 9,000 4,000
Advances by borrowers for taxes and insurance 364 285
Proceeds from exercise of stock options 261 --
Dividends paid on common stock (252) (208)
-------- -------
Net cash provided by financing activities 4,110 91
-------- -------
Net increase (decrease) in cash and cash equivalents 1,908 (81)
Cash and cash equivalents at beginning of period 2,786 1,504
-------- -------
Cash and cash equivalents at end of period $ 4,694 $ 1,423
======== =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Federal income taxes $ 300 $ 400
======== =======
Interest on deposits and borrowings $ 3,942 $ 3,531
======== =======
Supplemental disclosure of noncash investing activities:
Unrealized gains (losses) on securities designated as available
for sale, net of related tax effects $ 145 $ (1)
======== =======
Recognition of mortgage servicing rights in accordance with
SFAS No. 122 $ 33 $ 99
======== =======
</TABLE>
6
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WINTON FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three month periods ended December 31, 1997 and 1996
1. Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements were
prepared in accordance with instructions for Form 10-QSB and,
therefore, do not include information or footnotes necessary for a
complete presentation of financial position, results of operations, and
cash flows in conformity with generally accepted accounting principles.
Accordingly, these financial statements should be read in conjunction
with the consolidated financial statements and notes thereto of Winton
Financial Corporation (the "Corporation" or "Winton Financial")
included in the Annual Report on Form 10-KSB for the year ended
September 30, 1997. However, all adjustments (consisting of only normal
recurring accruals) which, in the opinion of management, are necessary
for a fair presentation of the consolidated financial statements have
been included. The results of operations for the three-month periods
ended December 31, 1997 and 1996 are not necessarily indicative of the
results which may be expected for the entire fiscal year.
2. Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include the accounts
of Winton Financial and The Winton Savings and Loan Co. (the "Company"
or "Winton Savings"). All significant intercompany items have been
eliminated.
3. Effects of Recent Accounting Pronouncements
-------------------------------------------
In June 1996, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities", that provides accounting guidance on
transfers of financial assets, servicing of financial assets, and
extinguishment of liabilities. SFAS No. 125 introduces an approach to
accounting for transfers of financial assets that provides a means of
dealing with more complex transactions in which the seller disposes of
only a partial interest in the assets, retains rights or obligations,
makes use of special purpose entities in the transaction, or otherwise
has continuing involvement with the transferred assets. The new
accounting method, the financial components approach, provides that the
carrying amount of the financial assets transferred be allocated to
components of the transaction based on their relative fair values. SFAS
No. 125 provides criteria for determining whether control of assets has
been relinquished and whether a sale has occurred. If the transfer does
not qualify as a sale, it is accounted for as a secured borrowing.
Transactions subject to the provisions of SFAS No. 125 include, among
others, transfers involving repurchase agreements, securitizations of
financial assets, loan participations, factoring arrangements, and
transfers of receivables with recourse.
7
<PAGE> 8
WINTON FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three month periods ended December 31, 1997 and 1996
3. Effects of Recent Accounting Pronouncements (continued)
-------------------------------------------
An entity that undertakes an obligation to service financial assets
recognizes either a servicing asset or liability for the servicing
contract (unless related to a securitization of assets, and all the
securitized assets are retained and classified as held-to-maturity). A
servicing asset or liability that is purchased or assumed is initially
recognized at its fair value. Servicing assets and liabilities are
amortized in proportion to and over the period of estimated net
servicing income or net servicing loss and are subject to subsequent
assessments for impairment based on fair value.
SFAS No. 125 provides that a liability is removed from the balance
sheet only if the debtor either pays the creditor and is relieved of
its obligation for the liability or is legally released from being the
primary obligor.
SFAS No. 125 is effective for transfers and servicing of financial
assets and extinguishment of liabilities occurring after December 31,
1997, and is to be applied prospectively. Earlier or retroactive
application is not permitted. Management does not believe that adoption
of SFAS No. 125 will have a material adverse effect on the
Corporation's consolidated financial position or results of operations.
In June 1997, the 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 that all items that are 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 that an
enterprise display an amount representing total comprehensive income
for the period in that financial statement.
SFAS No. 130 requires that 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. SFAS No. 130 is not expected to
have a material impact on the Corporation's financial statements.
8
<PAGE> 9
WINTON FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three month periods ended December 31, 1997 and 1996
3. Effects of Recent Accounting Pronouncements (continued)
-------------------------------------------
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." SFAS No. 131 significantly
changes the way that public business enterprises report information
about operating segments in annual financial statements and requires
that 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 the way that 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, SFAS No. 131 requires
significantly more information to be disclosed for each reportable
segment than is presently being reported in annual financial statements
and also requires that selected information be reported in interim
financial statements. SFAS No. 131 is effective for fiscal years
beginning after December 15, 1997. SFAS No. 131 is not expected to have
a material impact on the Corporation's financial statements.
4. Earnings Per Share
------------------
Basic earnings per share for the three month periods ended December 31,
1997 and 1996 is computed based on 2,003,869 and 1,986,152
weighted-average shares outstanding during the respective periods.
Diluted earnings per share is computed taking into consideration common
shares outstanding and dilutive potential common shares, i.e. the
Corporation's stock option plan. Weighted-average common shares deemed
outstanding for purposes of computing diluted earnings per share
totaled 2,069,405 for the three month periods ended December 31, 1997,
and 1,996,268 for the three months ended December 31, 1996.
9
<PAGE> 10
WINTON FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward-Looking Statements
- --------------------------
In the following pages, management presents an analysis of Winton Financial's
financial condition as of December 31, 1997, and the results of operations for
the three-month period ended December 31, 1997, compared to the same period in
1996. In addition to this historical information, the following discussion
contains forward-looking statements that involve risks and uncertainties.
Economic circumstances, Winton Financial's operations and Winton Financial's
actual results could differ significantly from those discussed in the
forward-looking statements. Some of the factors that could cause or contribute
to such differences are discussed herein but also include changes in the economy
and interest rates in the nation and in Winton Financial's general market area.
Without limiting the foregoing, some of the statements in the referenced
sections of this discussion and analysis are forward looking and are therefore,
subject to such risks and uncertainties.
1. Management's determination of the amount and adequacy of the allowance for
loan losses as set forth under "Discussion of Changes in Financial
Condition from September 30, 1997 to December 31, 1997" and "Comparison of
Results of Operations for the Three Months Ended December 31, 1997 and
1996."
2. Management's determination of the potential effects of the year 2000 on its
information technology systems as set forth under "Other Matters."
Discussion of Financial Condition Changes from September 30, 1997 to December
- -----------------------------------------------------------------------------
31, 1997
- --------
At December 31, 1997, the Corporation had total assets of $329.9 million, an
increase of approximately $5.4 million, or 1.7%, over the level at September 30,
1997. The growth in assets was funded primarily by deposit growth of $7.8
million and net undistributed earnings of $708,000, which were partially offset
by a decline in Federal Home Loan Bank advances of $4.0 million.
Investment securities totaled approximately $17.7 million at December 31, 1997,
an increase of approximately $1.5 million, or 9.1%, over September 30, 1997
levels, as purchases of $4.8 million exceeded maturities of $3.5 million during
the period.
Mortgage-backed securities totaled approximately $14.9 million at December 31,
1997, a decrease of approximately $492,000, or 3.2%, since September 30, 1997,
primarily attributable to regular principal repayments during the period.
Loans receivable and loans held for sale totaled $283.1 million, an increase of
approximately $2.6 million, or .9%, over the level at September 30, 1997.
Proceeds from loan sales increased by $3.7 million during the current period to
$16.2 million, loan originations totaled $41.8 million, principal repayments
amounted to $20.9 million and sale of participations totaled $2.5 million.
10
<PAGE> 11
WINTON FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Discussion of Financial Condition Changes from September 30, 1997 to December
- -----------------------------------------------------------------------------
31, 1997 (continued)
- --------------------
At December 31, 1997, the allowance for loan losses of Winton Savings totaled
$827,000, the same level maintained at September 30, 1997. At December 31, 1997,
the allowance represented approximately .28% of the total loan portfolio and
261% of total nonperforming loans. At December 31, 1997, the ratio of total
nonperforming loans to total loans amounted to .11% as compared to .16% at
September 30, 1997. Although management believes that its allowance for loan
losses at September 30, 1997 was adequate based on the available facts and
circumstances, there can be no assurance that additions to such allowance will
not be necessary in future periods, which could adversely affect Winton
Financial's results of operations.
Deposits totaled $248.1 million at December 31, 1997, an increase of $7.8
million, or 3.2%, over September 30, 1997 levels. During fiscal 1997, management
elected to employ a strategy to achieve growth in the deposit portfolio that
included acquisition of brokered certificates of deposit. Such brokered deposits
totaled $20.0 million and $16.3 million at December 31, 1997 and September 30,
1997, respectively.
The Company is subject to capital standards which generally require the
maintenance of regulatory capital sufficient to meet each of three tests,
hereinafter described as the tangible capital requirement, the core capital
requirement and the risk-based capital requirement. At December 31, 1997, the
Company's tangible capital of $23.2 million, or 7.1%, exceeded the minimum
requirement of $4.9 million by $18.3 million, the Company's core capital of
$23.2 million, or 7.1%, exceeded the minimum requirement of $9.8 million by
$13.4 million, and the Company's risk-based capital of $24.0 million, or 11.1%,
exceeded the 8% requirement by approximately $6.6 million.
Comparison of Operating Results for the Three Month Periods ended December 31,
- ------------------------------------------------------------------------------
1997 and 1996
- -------------
General
- -------
Net earnings totaled $960,000 for the three months ended December 31, 1997, as
compared to $757,000 for the same period in 1996, an increase of $203,000, or
26.8%. The increased earnings resulted primarily from a $314,000 increase in net
interest income and a $14,000 increase in other income, which were partially
offset by an $11,000 increase in general, administrative and other expense, and
a $114,000 increase in the provision for federal income taxes.
Net Interest Income
- -------------------
Interest on loans and mortgage-backed securities increased by $698,000, or
12.5%, for the three months ended December 31, 1997, compared to the same period
in 1996. The increase resulted primarily from a $26.5 million increase in the
weighted-average portfolio outstanding year to year and a 20 basis point
increase in yield to 8.51%, for the three months ended December 31, 1997.
11
<PAGE> 12
WINTON FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Three Month Periods ended December 31,
- ------------------------------------------------------------------------------
1997 and 1996 (continued)
- -------------------------
Net Interest Income (continued)
- -------------------------------
Interest income on investment securities, interest-bearing deposits and other
increased by $84,000, or 35.1%, for the three months ended December 31, 1997.
The increase is a result of a $6.4 million increase in the average balance
outstanding, which was partially offset by a decrease in yields due to
replacement of called securities at a lower yield.
Interest expense on deposits increased by $358,000, or 12.4%, for the three
months ended December 31, 1997. The increase was primarily attributable to a
$23.3 million increase in weighted-average deposits outstanding year to year,
coupled with an increase in the weighted-average cost of deposits.
Interest expense on borrowings increased $110,000, or 16.3%, during the current
quarter, primarily due to an increase of $6.5 million in the weighted-average
balances of Federal Home Loan Bank advances outstanding, coupled with an
increase in the weighted-average cost of Federal Home Loan Bank advances.
As a result of the foregoing changes in interest income and interest expense,
net interest income increased by $314,000, or 13.9%, to a total of $2.6 million
for the three months ended December 31, 1997, compared to the same period in
1996. The interest rate spread increased by 4 basis points, to 2.92% for the
three months ended December 31, 1997, while the net interest margin increased by
6 basis points, to 3.25% for the three months ended December 31, 1997, compared
to 3.19% for the comparable period in 1996.
Provision for Losses on Loans
- -----------------------------
A provision for losses on loans is charged to earnings to bring the total
allowance for loan losses to a level considered appropriate by management based
on historical experience, the volume and type of lending conducted by the
Company, and the status of past due principal and interest payments, general
economic conditions, particularly as such conditions relate to the Company's
loan portfolio. As a result of such analysis, management concluded that the
allowance for losses on loans was adequate, and therefore did not provide a
provision for loan losses during the three-month period ended December 31, 1997.
There can be no assurance that the allowance for loan losses of the Company will
be adequate to cover losses on nonperforming assets in the future.
Other Income
- ------------
Other income increased by $14,000, or 4.2%, for the three months ended December
31, 1997, compared to the 1996 quarter, primarily due to an increase of $33,000
in gain on sale of mortgage loans, a $13,000 increase in service fees, charges
and other and a $4,000 loss on sale of real estate acquired through foreclosure
recorded in 1996, which were partially offset by a $36,000 gain on sale of
mortgage-backed securities designated as available for sale recorded in 1996.
12
<PAGE> 13
WINTON FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Three Month Periods ended December 31,
- ------------------------------------------------------------------------------
1997 and 1996 (continued)
- -------------------------
General, Administrative and Other Expense
- -----------------------------------------
General, administrative and other expense increased by $11,000, or .8%, for the
quarter ended December 31, 1997, compared to the same period in 1996. The
increase consisted primarily of an $80,000, or 12.1%, increase in employee
compensation and benefits, a $19,000, or 6.5%, increase in occupancy and
equipment, a $4,000, or 6.3%, increase in franchise tax expense, and a $10,000,
or 26.3%, increase in advertising expense, which were partially offset by a
$13,000, or 5.1 %, decrease in other operating expenses and an $89,000, or
70.6%, decrease in federal deposit insurance premiums. The increase in employee
compensation and benefits resulted primarily from increased staffing levels
coupled with normal merit increases, which were partially offset by an increase
in deferred loan origination costs due to the increased lending volume. The
decline in federal deposit insurance premiums resulted from lower premium rates
following the recapitalization of the Savings Association Insurance Fund in
November 1996.
Federal Income Taxes
- --------------------
The provision for federal income taxes amounted to $504,000 for the three months
ended December 31, 1997, an increase of $114,000, or 29.2%, over the same period
in 1996. The increase resulted primarily from a $317,000, or 27.6%, increase in
pretax earnings. The effective tax rates were 34.4% and 34.0% for the three
month periods ended December 31, 1997 and 1996, respectively.
Other Matters
- -------------
As with all providers of financial services, Winton Savings's operations are
heavily dependent on information technology systems. The Company is addressing
the potential problems associated with the possibility that the computers that
control or operate the Company's information technology system and
infrastructure may not be programmed to read four-digit date codes and, upon
arrival of the year 2000, may recognize the two-digit code "00" as the year
1900, causing systems to fail to function or to generate erroneous data. The
Company is working with the companies that supply or service its information
technology systems to identify and remedy any year 2000 related problems.
As of the date of this Form 10-QSB, the Company has not identified any specific
expenses that are reasonably likely to be incurred by the Company in connection
with this issue and does not expect to incur significant expense to implement
the necessary corrective measures. No assurance can be given, however, that
significant expense will not be incurred in future periods. In the event that
the Company is ultimately required to purchase replacement computer systems,
programs and equipment, or incur substantial expense to make the Company's
current systems, programs and equipment year 2000 compliant, the Company's net
earnings and financial condition could be adversely affected.
In addition to possible expense related to its own systems, the Company could
incur losses if loan payments are delayed due to year 2000 problems affecting
any major borrowers in the Company's primary market area. Because the Company's
loan portfolio is highly diversified with regard to individual borrowers and
types of businesses and the Company's primary market area is not significantly
dependent upon one employer or industry, the Company does not expect any
significant or prolonged difficulties that will affect net earnings or cash
flow.
13
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Winton Financial Corporation
PART II
ITEM 1. Legal Proceedings
-----------------
Not applicable
ITEM 2. Changes in Securities
---------------------
Not applicable
ITEM 3. Defaults Upon Senior Securities
-------------------------------
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On January 30, 1998, the Annual Meeting of the Shareholders of Winton
Financial Corporation was held. Three directors were nominated for
re-election and were re-elected for terms expiring in 2001, pursuant
to the following respective votes:
Robert J. Bollin For: 1,689,894 Withheld: 14,054
Thomas H. Humes For: 1,689,894 Withheld: 14,054
Henry L. Schulhoff For: 1,689,894 Withheld: 14,054
The shareholders also ratified the selection of Grant Thornton
LLP as the auditors of Winton Financial Corporation for the
current fiscal year, pursuant to the following vote:
For: 1,665,665 Against: 29,956 Abstain: 8,327
ITEM 5. Other Materially Important Events
---------------------------------
None
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
There were no Form 8-K's filed by Winton Financial Corporation during
the quarter ended December 31, 1997.
Exhibit 27: Financial Data Schedule for the Three Months Ended
December 31, 1997.
14
<PAGE> 15
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.
Date: February 12, 1998 By: /s/Robert L. Bollin
------------------------- -------------------------------
Robert L. Bollin
President
Date: February 12, 1998 By: /s/Jill M. Burke
------------------------- -------------------------------
Jill M. Burke
Chief Financial Officer
15
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