FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1999
[ ] Transition Report Pursuant to Section 13 or
15 (d) of the Securities Exchange Act of 1934
For the Transition Period From to
Commission file number 0-20886
OHSL FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
Delaware 31-1362390
(State of Incorporation) (I.R.S. Employer Identification No.)
5889 Bridgetown Road, Cincinnati, Ohio
(Address of principal executive office)
45248
(Zip Code)
(513) 574-3322
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months,
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 practicable date.
CLASS SHARES OUTSTANDING AT SEPTEMBER 30, 1999
common stock, $.005 par value 2,473,790
FORM 10-Q
INDEX
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Financial Condition
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about
Market Risk
Part II. Other Information:
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security
Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
OHSL FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
<TABLE>
September 30, December 31,
1999 1998
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks $1,798 $3,387
Short-term investments 557 15,625
------ ------
Cash and cash equivalents 2,355 19,012
Interest-bearing balances with
financial institutions 100 100
Held-to-maturity securities
(market value of $85,660
and $65,526) 89,408 65,268
Available-for-sale securities 9,058 9,372
Loans held for sale --- 1,360
Loans receivable-net 178,623 164,595
Office properties and
equipment-net 2,367 2,573
Real Estate Owned 226 ---
Federal Home Loan Bank stock,
at cost 2,529 1,977
Accrued interest receivable 1,782 1,530
Other assets 1,492 1,389
------- ------
Total Assets $287,940 $267,176
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $208,080 $206,755
Advances from Federal Home
Loan Bank 49,724 31,118
Accrued interest payable 299 200
Advances from borrowers for taxes
and insurance 473 707
Other liabilities 1,418 1,370
-------- -------
Total Liabilities 259,994 240,150
</TABLE>
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
OHSL FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (CONTINUED)
(Dollars in thousands except per share data)
<TABLE>
September 30, December 31,
1999 1998
---- ----
<S> <C> <C>
STOCKHOLDERS' EQUITY
Common stock, $ .005 par value,
3,500,000 shares authorized,
2,925,714 shares issued at September
30, 1999 and 2,870,820 shares
issued at December 31, 1998
$ 14 $ 14
Additional paid-in capital 15,044 14,512
Retained earnings 17,491 16,776
Unearned shares held by employee
stock ownership plan (148) (237)
Treasury stock (420,292 and
402,292 shares at cost) (4,344) (4,087)
Accumulated other comprehensive
income (111) 48
------- -------
Total Stockholders' Equity 27,946 27,026
------- -------
Total Liabilities and
Stockholders' Equity $287,940 $267,176
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
OHSL FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except per share data)
<TABLE>
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including related fees $3,458 $3,536 $10,106 $10,676
Mortgage-backed investments 1,105 614 3,134 1,604
Other investments 553 526 1,630 1,717
------ ------ ------- -------
Total Interest Income 5,116 4,676 14,870 13,997
INTEREST EXPENSE
Deposits 2,504 2,360 7,352 7,066
Federal Home Loan Bank advances 633 459 1,563 1,335
----- ----- ----- -----
Total Interest Expense 3,137 2,819 8,915 8,401
NET INTEREST INCOME 1,979 1,857 5,955 5,596
Less provision for loan losses 0 9 11 26
----- ----- ------ -----
NET INTEREST INCOME AFTER
PROVISION FOR LOSSES 1,979 1,848 5,944 5,570
NONINTEREST INCOME
Service charges and fees 95 76 277 199
Net gain on loans
originated for sale 0 75 68 234
Commission income 6 5 12 19
Other income 39 21 114 84
----- ------ ------ ----
140 177 471 536
NONINTEREST EXPENSE
Salaries and employee benefits 683 671 2,012 1,916
Occupancy and equipment expense 184 179 542 518
Computer service expense 53 42 158 118
Deposit insurance assessment 30 28 88 85
Franchise taxes 78 88 224 255
Merger related expenses 99 --- 111 ---
Other operating expenses 228 177 702 601
--- --- ------ -----
1,355 1,185 3,837 3,493
----- ----- ----- -----
</TABLE>
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
OHSL FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
(Dollars in thousands except per share data)
<TABLE>
Three months ended September 30, Nine months ended September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
INCOME BEFORE TAXES $764 $840 $2,578 $2,613
Income tax provision 328 312 945 976
NET INCOME $436 $528 $1,633 $1,637
====== ===== ====== ======
EARNINGS PER SHARE $0.18 $0.22 $0.67 $0.67
====== ===== ====== ======
EARNINGS PER SHARE, ASSUMING
DILUTION $0.18 $0.21 $0.66 $0.66
====== ===== ====== ======
DIVIDENDS PER SHARE $0.125 $0.125 $0.375 $0.36
====== ===== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
OHSL FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
<TABLE>
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income $436 $528 $1,633 $1,637
Other comprehensive income,
net of tax:
Unrealized gains (losses)
on securities held during
period (32) 42 (159) 62
--- ---- ------ ------
Comprehensive Income $404 $570 $1,474 $1,699
====== ===== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
OHSL FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
Nine months ended September 30,
1999 1998
<S> <C> <C>
Balance at January 1 $27,026 $26,032
Net income 1,633 1,637
Amortization of cost of bank incentive --- 1
plan
Purchase of treasury stock (257) (56)
Stock options exercised 274 90
Dividends on common stock (918) (878)
ESOP shares earned during the period 347 284
Change in net unrealized gain on
available-for-sale securities (159) 62
Balance at September 30 $27,946 $27,172
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
OHSL FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
Nine months ended September 30,
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $1,633 $1,637
Adjustments to reconcile net income to net
cash from operating activities 4,808 (827)
------ -------
Net cash from operating activities 6,441 810
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of held-to-maturity securities (38,216) (52,972)
Principal payments on held-to-maturity securities 13,226 5,385
Purchase of available-for-sale securities (1,000) 0
Principal payments on available-for-sale securities 1,087 1,037
Proceeds from maturities and calls on held-to-maturity securities 900 25,071
Loans made to customers net of payments received (17,834) 3,890
Purchase of property and equipment (57) (50)
------- --------
Net cash from investing activities (41,894) (17,639)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits 1,325 1,842
Payments on advances from Federal Home Loan Bank (10,394) (17,862)
Proceeds from Federal Home Loan Bank advances 29,000 28,000
Net change in advances from borrowers
for taxes and insurance (234) 265
Cash dividends (918) (878)
Purchase of treasury stock (257) (56)
Stock options exercised 274 90
------ -------
Net cash from financing activities 18,796 11,401
------- ------
Net change in cash and cash equivalents (16,657) (5,428)
Cash and cash equivalents at beginning of period 19,012 16,224
------ ------
Cash and cash equivalents at end of period $2,355 $10,796
====== =======
</TABLE>
See accompanying notes to consolidated financial statements.
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
OHSL FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying consolidated financial statements were prepared
in accordance with instructions for Form 10-Q 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.
These interim financial statements were prepared in a manner
consistent with the annual financial statements and include all
adjustments (consisting of only normal recurring accruals) which,
in the opinion of management, are necessary for a fair
presentation of the financial statements.
2. Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of OHSL Financial Corp. (" OHSL" or "the Corporation"),
Oak Hills Savings and Loan Company, F.A. ("Oak Hills" or "the
Company"), and its subsidiary, CFSC, Inc.
3. Earnings Per Share
The calculation of earnings per share ( EPS ) is presented below.
Earnings per share are calculated by dividing the Corporation's
net income by the weighted average shares outstanding during the
period. Weighted average shares outstanding do not include any
shares held by the Company' s Employee Stock Ownership Plan
("ESOP" ) which have not been allocated to the ESOP's
participants.
<TABLE>
For the three months ended September 30, this
calculation is as follows:
1999 1998
---- ----
<S> <C> <C>
Net Income $ 436,000 $528,000
======== ========
Weighted average shares outstanding during
the period 2,498,804 2,498,337
Less average unallocated ESOP shares during
the period 32,642 56,386
--------- ---------
Average shares outstanding for EPS calculation 2,466,162 2,441,951
========= =========
Earnings per share $0.177 $0.216
========= =========
For the nine months ended September 30,
this calculation is as follows:
1999 1998
Net Income $1,633,000 $1,637,000
========= =========
Weighted average shares outstanding during
the period 2,479,163 2,491,991
Less average unallocated ESOP shares during
the period 38,578 62,322
Average shares outstanding for EPS calculation 2,440,585 2,429,669
========= =========
Earnings per share $0.669 $0.674
========= =========
</TABLE>
The calculation of diluted earnings per share involves the
recalculation of weighted average outstanding shares by assuming
that all unexercised stock options are exercised at the exercise
price (in this case, $5.00 per share). These shares therefore
increase the weighted average outstanding shares. It is then
assumed that the proceeds from this exercise, including the value
of the tax benefit derived by the Corporation due to the exercise
(the Corporation receives a tax benefit which corresponds to the
taxability of any options exercised by outside directors of the
Corporation), are used to repurchase shares at the average market
price during the period. These repurchases act to reduce the
weighted average outstanding shares for EPS calculation purposes.
The net income for the period is then divided by the "diluted"
weighted average shares outstanding to arrive at diluted earnings
per share.
The calculation of diluted earnings per share for the three months
ended September 30 is presented below:
1999 1998
---- ----
Net Income $436,000 $528,000
======== ========
Shares used to compute basic earnings
per share 2,466,162 2,441,951
Average option shares issued 41,055 93,414
Less: shares repurchased with
option proceeds
and tax benefit (15,665) (38,914)
--------- ---------
Weighted average shares for
diluted earnings per share 2,491,552 2,496,451
========= =========
Diluted earnings per share $0.175 $0.212
========= =========
The calculation of diluted earnings per share
for the nine months ended September 30
is presented below:
<TABLE>
1999 1998
---- ----
<S> <C> <C>
Net Income $1,633,000 $1,637,000
========== ==========
Shares used to compute basic earnings
per share 2,440,585 2,429,669
Average option shares issued 64,719 100,218
Less: shares repurchased with option proceeds
and tax benefit (24,737) (40,004)
--------- ----------
Weighted average shares for diluted earnings per share 2,480,567 2,489,883
========= =========
Diluted earnings per share $0.658 $0.657
========= =========
</TABLE>
PART I: FINANCIAL INFORMATION
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OHSL FINANCIAL CORP.
SEPTEMBER 30, 1999
MERGER AGREEMENT:
- ----------------
On August 3, 1999, an agreement was announced whereby the
Provident Financial Group, Inc., a financial services company with
headquarters in Cincinnati, Ohio, would acquire OHSL Financial
Corp. in a stock transaction valued at $57 million. Terms of the
merger transaction call for Provident to exchange between .45 and
.56 shares of its common stock for each share of OHSL stock, with
the actual exchange ratio to be determined based on Provident's 10
day average share price two days before the close of the
transaction. The Agreement values OHSL shares at $22.50 each.
The deal is subject to shareholder and regulatory approval and is
expected to close in December, 1999. See Part II: Other
information for a discussion of the results of the Special Meeting
of shareholders held October 25, 1999.
FINANCIAL CONDITION:
- -------------------
Total assets increased from $267.2 million at December 31, 1998 to
$287.9 million at September 30, 1999, an increase of $20.8 million
or 7.8%. During the first nine months of 1999, held-to-maturity
securities increased by $24.1 million and loans receivable
increased by $14.0 million. These increases were funded by
increases in deposits of $1.3 million, and advances from the
Federal Home Loan Bank of $18.6 million and by a decrease in cash
and cash equivalents of $16.7 million. These changes are largely
the result of the Company's investment strategy, wherein favorable
interest rate spreads will be captured from time-to-time in an
effort to increase net interest income, and strong loan demand in
the Company's primary market area. In addition, the Company seeks
to grow its deposit base in order to gain market share and to
enable it to cross-sell other products and services.
Loans receivable, as noted above, increased by $14.0 million in
the first nine months of 1999. The Company has experienced strong
loan demand throughout 1999. The rise in interest rates which
occurred throughout the second and third quarters of 1999 caused
the Company to reduce its secondary market sales of fixed rate
loans. Consequently, the dollar volume of loans held in portfolio
increased, while gains achieved in the sale of such loans were
minimal in the second and third quarters of 1999.
Held-to-maturity securities increased by $24.1 million in 1999,
due largely to the Company's purchase of investment securities
during this time period. These purchases totaled $38.2 million,
and consisted of $16.1 million in U.S. Government Agency
securities, $4.0 million in mortgage backed investments, $17.4
million in collateralized mortgage obligations and $0.7 million in
other securities.
The stockholders' equity of OHSL increased by $920,000 during the
first nine months of 1999. The major components of this increase
are the Corporation's net income of $1,633,000, which was somewhat
offset by dividends on the Corporation's common stock of $918,000.
Stockholders' equity increased to $27.9 million at September 30,
1999.
RESULTS OF OPERATIONS:
- ---------------------
Net income for the nine months ended September 30, 1999 was
$1,633,000, a decrease of $4,000 or 0.2% from net income for the
nine months ended September 30, 1998. This represents earnings
per share of $0.66 (fully diluted), unchanged from the same period
in 1998.
Total interest income for the nine months ended September 30, 1999
was $14,870,000, compared to $13,997,000 for the same period in
1998. This increase ($873,000 or 6.2%) is generally the result of
larger loan and investment balances carried during the first nine
months of 1999 when compared to the same period in 1998.
Total interest expense for the nine months ended September 30,
1999 was $8,915,000, compared to $8,401,000 for the same period in
1998. This increase ($514,000 or 6.1%) is generally attributable
to the higher levels of deposits and borrowings carried during the
first nine months of 1999, as OHSL strives to increase its market
share of deposit products and to take advantage of spread
opportunities as described above.
While both interest income and interest expense increased during
the first nine months of 1999, net interest income for the nine
months ended September 30, 1999 totaled $5,955,000, an increase of
$359,000 or 6.4% over the same period in 1998.
The Corporation's provision for loan losses totaled $11,000 for
the nine months ended September 30, 1999, compared to $26,000 for
the same period in 1998. The credit quality of the Company's loan
portfolio remains very strong and is favorable when compared to
the prior year (delinquent loans over 60 days total $122,000 at
September 30, 1999). Due to its strong credit quality,
management believes that moderate additions to its loan loss
allowance are sufficient to cover potential future losses.
Noninterest income for the nine months ended September 30, 1999
was $471,000, compared to $536,000 for the same period in 1998.
This decrease ($65,000 or 12.1%) is largely attributable to a
decrease in net gains on loans originated for sale. During the
first nine months of 1999, the Company sold $4.5 million of fixed
rate, single family loans in the secondary market, generating
gains of $68,000, compared to secondary market sales of $12.4
million (generating gains of $234,000) in the first nine months of
1998. Income from service charges and fees during the nine months
ended September 30, 1999 totaled $277,000 compared to $199,000 for
the same period in 1998. This increase ($78,000) is primarily the
result of higher fees earned on customer checking accounts, ATM
card user fees and debit card fees.
Noninterest expense for the nine months ended September 30, 1999
was $3,837,000, compared to $3,493,000 for the same period in
1998. This increase ($344,000 or 9.8%) is largely attributable to
increases in salaries and employee benefits expense ($96,000),
computer service expense ($40,000), merger-related expenses (see
"Merger Agreement" for a more complete discussion of this area)
($111,000) and other operating expenses ($101,000). These
increases were somewhat offset by a reduction in franchise tax
expense of $31,000.
The above increase in salaries and employee benefits expense is
primarily the result of the hiring of personnel in 1999 to fill
positions created due to the Company's growth, coupled with merit
increases to the Company's staff and to salaries attributable to
the Company's takeover of the Sayler Park branch, which was
acquired from Cornerstone Bank in November 1998.
The above increase in computer service expense is largely the
result of higher costs charged by third party providers, including
higher costs for the processing of ATM transactions (ATM
transactions for 1999 reflect higher volumes than 1998) as well as
higher costs for the processing of customer checking account
transactions.
Merger-related expenses have been incurred due to OHSL's pending
merger with the Provident Bank (NASDAQ:PFGI). Expenses for legal
fees, accounting, merger consultation fees, postage and other
charges were incurred in 1999 relative to the pending merger.
The above increase in other operating expenses is largely the
result of higher costs for telephone expenses ($21,000), postage
expense ($11,000) , and to the amortization of goodwill associated
with the acquisition of the Sayler Park branch in 1998 ($57,000).
The income tax provision for the nine months ended September 30,
1999 was $945,000, compared to $976,000 for the same period in
1998. This decrease ($31,000) is largely attributable to the
higher level of tax exempt securities owned in 1999 compared to
1998.
Year 2000 Issues
- ----------------
It is well documented that some data processing systems may
experience processing difficulties upon encountering the millenium
change. This "Year 2000 Problem" is believed to be material for
virtually every public company. The following section describes
the steps which OHSL is taking to handle this serious matter. It
should be noted that this section in particular, as well as the
"Management Discussion and Analysis" area in general, contains
"forward-looking statements" which represent the opinions of
management. Such forward-looking statements are subject to
numerous risks and uncertainties which obviously accompany any
discussions of future actions, performances or results. The
reader of these discussions is hereby cautioned of the uncertain
nature of these discussions and is urged to use caution in relying
on such forward-looking statements in forming any opinions
concerning the future performance of OHSL.
The overall responsibility for Year 2000 readiness rests with
Kenneth L. Hanauer, the Chief Executive Officer of OHSL. Due to
the many diverse areas which may be affected by the Year 2000
problem, a team approach is being utilized. Teams have been
formed to handle the following areas: (a) review and testing of
the Company's in-house data processing system; (b) review of
vendors (suppliers of critical services) ; (c) review of the major
loan customers (to determine whether interruptions of their
Capital Resources:
OHSL's equity capital totaled $27.9 million at September 30, 1999,
an increase of $920,000 from December 31, 1998. As discussed more
fully in the Financial Condition section, the major components of
this increase include the net income for the nine months ended
September 30, 1999, which was partially offset by dividends
declared on the common stock.
Federal regulations require savings associations to maintain
certain minimum levels of regulatory capital. Regulations
currently require tangible capital, as defined by regulation,
divided by total assets (also as defined) to be at least 1.5%. The
regulations also require core capital, as defined by regulation,
divided by total assets (also as defined) to be at least 4.0%.
Finally, the regulations require total risk-based capital (as
defined) divided by total assets (as defined) to be at least 8.0%.
Oak Hills compliance with these requirements at September 30, 1999
is summarized below:
Amount Percent
(000) Applicable Assets
Tangible capital $20,787 7.40%
Requirement 4,215 1.50%
Excess $16,572 5.90%
Core capital $20,787 7.40%
Requirement 11,239 4.00%
Excess $ 9,548 3.40%
Total risk-based capital $21,348 15.74%
Requirement 10,851 8.00%
Excess $10,497 7.74%
At September 30, 1999, the book value per share of OHSL common
stock was $11.30 based upon 2,473,790 outstanding shares.
Accounting Changes:
The Financial Accounting Standards Board ("FASB" ) issues
Financial Accounting Standards ("FAS") that affect OHSL. The
following FAS represent new and / or significant pronouncements in
this area.
FAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities"
Effective January 1, 2001, FAS 133 as amended will require all
derivatives to be recorded at fair value. Unless designated as
hedges, changes in these fair values will be recorded in the
income statement. Fair value changes involving hedges will
generally be recorded by offsetting gains and losses on the hedge
and on the hedged item, even if the fair value of the hedged item
is not otherwise recorded. Upon adoption of this Standard,
entities may redesignate securities as either available-for-sale
or held-to-maturity. Management does not expect adoption of this
Standard to have a material effect but the effect will depend upon
derivative holdings upon adoption.
PART I: FINANCIAL INFORMATION
ITEM 3: QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Market Risk Disclosures
The Company, and to a lesser extent the Corporation, is subject to
extensive market risk in the fluctuation of interest rates. Such
risk, which is common to virtually all financial institutions, is
referred to as interest rate risk. In its efforts to manage its
exposure to changes in interest rates, management closely monitors
the Company's interest rate risk. The Company has an
asset/liability committee consisting of all of the Company's
directors and executive officers. This committee meets at least
once per quarter to review the Company's interest rate risk
position and to make recommendations for adjusting such position
if necessary. In addition, the asset/liability committee reviews
the estimated effect on the Company's earnings and capital under
various interest rate scenarios.
In managing its asset/liability mix, the Company may, at times,
place somewhat greater emphasis on maximizing its net interest
income rather than on the strict matching of the interest rate
sensitivity of its assets and liabilities. The Board of Directors
believes that the increased net income resulting from a modest
mismatch in the estimated maturity of its asset and liability
portfolios can often provide high enough returns to justify the
increased exposure which may result from such a mismatch. The
Board of Directors has established limits on the Company's
interest rate risk based on the interest rate risk simulation
model utilized by its primary regulator, the OTS. There can be no
assurance, however, that management's efforts to limit interest
rate risk will be successful.
To the extent consistent with interest rate spread objectives, the
Company attempts to reduce its interest rate risk by taking
various steps. First, the Company routinely seeks to sell its
longer term, fixed rate mortgage loans in the secondary market.
Second, the Company holds a significant portfolio of multi-family,
commercial real estate loans and consumer loans having short terms
to maturity and/or adjustable rate features. Third, the Company
has invested a substantial portion of its mortgage-related
securities in products having relatively short average lives. The
Company also maintains a sizeable portfolio of short-term
investments, such as mutual funds, commercial paper and overnight
type funds, which will provide a cushion in the event of an
increase in interest rates. Fourth, the Company has from time to
time offered attractive interest rates and other promotions to
attract transaction accounts, which are considered to be more
resistant to change in interest rates than certificate accounts.
Finally, the Company may from time to time utilize longer-term
borrowings from the Federal Home Loan Bank in an effort to extend
the term to maturity of its liabilities.
The OTS provides quarterly Interest Rate Risk Exposure Reports for
the associations which it regulates. These reports project the
impact on the Company's "net portfolio value" under specified
interest rate movements. Net portfolio value generally consists
of the estimated value of the Company's interest sensitive assets
less the estimated value of its interest sensitive liabilities
under different interest rate scenarios. Under this methodology,
assets and liabilities (including such "off-balance sheet" items
as commitments to make loans, unused lines of credit and other
items not yet reflected as assets and liabilities) are valued
following an immediate and permanent interest rate shock. The
resulting impact of such interest rate shocks which are provided
for rate increases and decreases of 100, 200, and 300 basis points
are reviewed by the asset/liability committee. The estimated
impact of such interest rate shocks is provided in both dollars
and percentages. The asset/liability committee reviews such
estimated changes and compares them with guidelines adopted in
this area. These guidelines specify the maximum percentage change
which the Company is willing to accept in a given interest rate
shock environment. Any deviations in excess of board guidelines
must be analyzed by management, with prompt corrective measures
outlined for board approval.
Management and the board of directors believe that interest rate
shocks up to 200 basis points (increase and decrease) offer the
most likely scenario and the Company's interest rate risk is
primarily designed to protect the Company's net portfolio value in
those circumstances. The following table reflects the estimated
change in the Company's net portfolio value under various interest
rate shock scenarios.
<TABLE>
Immediate change in rates Percentage change in net portfolio value at:
June 30, 1999 March 31, 1999 December 31, 1998 December 31, 1997
<S> <C> <C> <C> <C>
+200 basis points -31% -26% -24% -17%
+100 basis points -14% -11% -9% -8%
0 basis points 0% 0% 0% 0%
- -100 basis points 4% 3% 1% 4%
- -200 basis points 0% 1% 1% 6%
</TABLE>
Management believes that its interest rate risk position reflects
somewhat greater interest rate risk than its peer group, resulting
largely from its concentration of longer-term fixed rate loans and
investments, coupled with the Company's reliance on short-term and
adjustable deposits and borrowings.
PART II: OTHER INFORMATION
OHSL FINANCIAL CORP.
SEPTEMBER 30, 1999
Item 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings.
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 October 25, 1999, a Special Meeting of the
stockholders of OHSL Financial Corp. was held in order for the
stockholders to vote on the proposed acquisition of OHSL by
Provident Financial Group, Inc. The results of the voting was as
follows:
Votes cast in favor 1,312,379
Votes cast against 295,973
Abstentions (1) 21,770
Votes not returned (1) 873,348
Total eligible votes 2,503,470
(1) Abstentions (proxies returned with no choice
indicated) were considered to be in favor of the proposed
transaction while votes not returned were considered to be against
the proposed transaction.
Accordingly, a majority of eligible votes were cast in
favor of the proposed transaction.
Item 5. OTHER INFORMATION
Not Applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
On July 16, 1999, the Registrant filed a Form 8-K to
report the issuance of a press release announcing earnings for the
second quarter of 1999.
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.
OHSL Financial Corp.
Date: November 10, 1999 BY: /s/ Kenneth L. Hanuer
Kenneth L. Hanauer
President and Chief
Executive Officer
(Principal Executive officer)
Date: November 10, 1999 BY: /s/ Patrick J. Condren
Patrick J. Condren
Treasurer and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000893235
<NAME> OHSL FINANCIAL CORP.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,798
<INT-BEARING-DEPOSITS> 100
<FED-FUNDS-SOLD> 557
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 9,058
<INVESTMENTS-CARRYING> 89,408
<INVESTMENTS-MARKET> 85,660
<LOANS> 179,187
<ALLOWANCE> 564
<TOTAL-ASSETS> 287,940
<DEPOSITS> 208,080
<SHORT-TERM> 17,497
<LIABILITIES-OTHER> 2,190
<LONG-TERM> 32,227
0
0
<COMMON> 14
<OTHER-SE> 27,932
<TOTAL-LIABILITIES-AND-EQUITY> 287,940
<INTEREST-LOAN> 3,458
<INTEREST-INVEST> 1,658
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 5,116
<INTEREST-DEPOSIT> 2,504
<INTEREST-EXPENSE> 3,137
<INTEREST-INCOME-NET> 1,979
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,355
<INCOME-PRETAX> 764
<INCOME-PRE-EXTRAORDINARY> 764
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 436
<EPS-BASIC> 0.18
<EPS-DILUTED> 0.18
<YIELD-ACTUAL> 0.285
<LOANS-NON> 48
<LOANS-PAST> 74
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 564
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 564
<ALLOWANCE-DOMESTIC> 384
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 180
</TABLE>
