UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period ended September 30, 1997
Commission File Number 0-22034
WOOD BANCORP, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 34-1742860
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
124 East Court Street, Bowling Green, Ohio 43402
(Address of principal executive offices)
(419) 352-3502
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the issuer was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Class: Outstanding at November 12, 1997
Common stock, $0.01 par value 2,120,038 common shares
Transitional Small Business Disclosure Format:
Yes [ ] No [ X ]
<PAGE>
WOOD BANCORP, INC.
FORM 10-QSB
Quarter ended September 30, 1997
Part I - Financial Information
Interim Financial Information required by Rule 10-01 of Regulation S-X and Item
303 of Regulation S-B is included in this Form 10-QSB as referenced below:
ITEM 1 - FINANCIAL STATEMENTS
Consolidated Balance Sheets ..............................................
Consolidated Statements of Income ........................................
Consolidated Statements of Cash Flows ....................................
Notes to Consolidated Financial Statements ...............................
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................
Part II - Other Information
OTHER INFORMATION...............................................................
SIGNATURES .....................................................................
<PAGE>
<TABLE>
<CAPTION>
WOOD BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, June 30,
1997 1997
------------- -------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 2,123,240 $ 2,844,578
Federal funds sold 106,000 70,000
------------- -------------
Cash and cash equivalents 2,229,240 2,914,578
Interest-bearing deposits in other financial institutions 2,862,044 2,229,104
Investment securities available for sale (Note 2) 12,104,214 14,148,537
Mortgage-backed securities available for sale (Note 2) 8,742,048 8,844,333
Loans, net (Note 3) 136,045,131 131,317,923
Office properties and equipment, net 1,835,696 1,860,331
Federal Home Loan Bank stock, at cost 1,428,800 1,403,200
Accrued interest receivable 875,313 853,736
Other assets 397,707 346,100
------------- -------------
Total assets $ 166,520,193 $ 163,917,842
============= =============
LIABILITIES
Deposits $ 123,478,771 $ 120,546,079
Advances from Federal Home Loan Bank 21,025,806 21,775,306
Accrued interest payable 192,521 193,166
Other liabilities 1,116,492 1,237,711
------------- -------------
Total liabilities 145,813,590 143,752,262
------------- -------------
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 500,000 shares
authorized, no shares issued or outstanding
Common stock, $.01 par value, 2,500,000 shares
authorized, 2,485,867 shares issued and outstanding 24,859 24,859
Additional paid-in capital 10,952,038 10,875,896
Retained earnings - substantially restricted 13,204,020 12,805,953
Treasury stock at cost; 367,329 shares at
September 30, 1997 and June 30, 1997 (3,130,066) (3,130,066)
Obligation under employee stock ownership plan (301,741) (301,741)
Unearned compensation (25,589) (30,977)
Unrealized loss on available for sale securities, net (16,918) (78,344)
------------- -------------
Total shareholders' equity 20,706,603 20,165,580
------------- -------------
Total liabilities and shareholders' equity $ 166,520,193 $ 163,917,842
============= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
WOOD BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
-------------------------
1997 1996
---------- ----------
<S> <C> <C>
Interest income
Loans $2,983,511 $2,510,180
Investment securities 212,355 275,748
Mortgage-backed and related securities 141,168 155,788
Other 51,784 35,935
---------- ----------
Total interest income 3,388,818 2,977,651
---------- ----------
Interest expense
Deposits 1,337,538 1,217,232
FHLB borrowings 321,024 187,391
Other 2,355 1,260
---------- ----------
Total interest expense 1,660,917 1,405,883
---------- ----------
Net interest income 1,727,901 1,571,768
Provision for loan losses (Note 3) 30,000 30,000
---------- ----------
Net Interest income after provision for loan losses 1,697,901 1,541,768
---------- ----------
Noninterest income
Service charges 81,854 69,200
Net gains from sale of loans 96,129 34,852
Security gains 13,226
Other 30,754 27,675
---------- ----------
Total noninterest income 221,963 131,727
---------- ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WOOD BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(continued)
Three Months Ended
-------------------------
1997 1996
---------- ----------
<S> <C> <C>
Noninterest expense
Salaries and benefits 546,775 479,611
Occupancy and equipment 90,941 96,549
Data processing 88,957 65,409
Insurance expense (Note 4) 30,309 742,042
Franchise taxes 51,224 65,151
Advertising and promotional expense 41,953 28,055
Other 108,104 132,067
---------- ----------
Total noninterest expense 958,263 1,608,884
---------- ----------
Income before income tax 961,601 64,611
Provision for income tax 350,050 38,975
---------- ----------
Net income $ 611,551 $ 25,636
========== ==========
Earnings per common share $ .28 $ .01
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
WOOD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
September 30,
----------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net income $ 611,551 $ 25,636
Adjustments to reconcile net income to net cash from
operating activities
Depreciation 29,858 30,813
Provision for loan losses 30,000 30,000
Net accretion (48,411) (33,810)
Gain on loan sales (96,129) (34,852)
Proceeds from sale of loans 5,679,265 1,773,370
Loans originated for sale (5,583,136) (1,759,851)
FHLB stock dividend (25,600) (23,000)
Amortization of unearned compensation 5,388 9,636
ESOP expense 76,142 62,108
Change in
Interest receivable (21,577) (52,293)
Other assets (83,251) 258,010
Other liabilities (121,219) 368,585
Interest payable (645) 43,781
Deferred loan fees 5,858 13,347
----------- -----------
Net cash from operating activities 458,094 711,480
=========== ===========
Cash flows from investing activities
Net change in interest-bearing balances with banks (632,940) (174,015)
Repurchase agreement 2,500,000
Investment and mortgage-backed securities available
for sale
Purchases (700,000) (1,350,000)
Proceeds from principal payments on mortgage-
backed securities 138,089 155,991
Proceeds from calls and maturities 2,850,000
Net increase in loans (4,763,066) (7,422,724)
Properties and equipment expenditures (5,223) (46,899)
----------- -----------
Net cash used in investing activities (3,113,140) (6,337,647)
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WOOD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
Three Months Ended
September 30,
----------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from financing activities
Net increase/(decrease) in deposits $ 2,932,692 $(1,868,721)
Proceeds from FHLB borrowings 1,000,000 8,650,000
Repayment of FHLB borrowings (1,749,500) (1,046,578)
Cash dividends paid (213,484) (128,813)
----------- -----------
Net cash from financing activities 1,969,708 5,605,888
----------- -----------
Net change in cash and cash equivalents (685,338) (20,279)
Cash and cash equivalents at beginning of period 2,914,578 2,637,396
----------- -----------
Cash and cash equivalents at end of period $ 2,229,240 $ 2,617,117
=========== ===========
Supplemental disclosures of cash flow information
Cash paid during the period for interest $ 1,661,562 $ 1,362,102
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
WOOD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter Ended September 30, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These interim financial statements are prepared without audit and reflect all
adjustments which, in the opinion of management, are necessary to present fairly
the financial position of Wood Bancorp, Inc. ("Company") and its sole
subsidiary, First Federal Bank (the "Bank") at September 30, 1997, and its
results of operations and cash flows for the periods presented. All such
adjustments are normal and recurring in nature. The accompanying financial
statements do not purport to contain all the necessary financial disclosures
required by generally accepted accounting principles that might otherwise be
necessary in the circumstances and should be read in conjunction with the 1997
consolidated financial statements and notes thereto of the Company for the year
ended June 30, 1997.
Consolidation Policy: The consolidated financial statements include the accounts
of the Company and the Bank. All significant intercompany transactions and
balances have been eliminated.
Industry Segment Information: The Company is engaged in the business of banking
with operations conducted through its main office and five branches located in
Bowling Green, Ohio, and neighboring communities. These communities are the
source of substantially all of the Company's deposit and loan activities. The
majority of the Company's income is derived from one- to four-family residential
real estate loans.
Use of Estimates in Preparation of Financial Statements: In preparing financial
statements, management must make estimates and assumptions. These estimates and
assumptions affect the amounts reported for assets, liabilities, revenues and
expenses as well as affecting the disclosures provided. Future results could
differ from current estimates. Areas involving the use of management's estimates
and assumptions primarily include the allowance for loan losses, the realization
of deferred tax assets, fair value of certain securities and the determination
and carrying value of impaired loans.
Investment Securities: Securities are classified into held-to-maturity,
available-for-sale, and trading categories. Held-to-maturity securities are
those which the Company has the positive intent and ability to hold to maturity,
and are reported at amortized cost. Available-for-sale securities are those
which the Company may decide to sell if needed for liquidity, asset-liability
management, or other reasons. Available-for-sale securities are reported at fair
value, with unrealized gains or losses included as a separate component of
equity, net of tax.
Realized gains or losses on sales are determined based on the amortized cost of
the specific security sold. Amortization of premiums and accretion of discounts
are computed under the level-yield method and are recognized as adjustments to
interest income. Prepayment activity on mortgage-backed securities is affected
primarily by changes in interest rates. Yields on mortgage-backed securities are
adjusted as prepayments occur through changes to premium amortization or
discount accretion.
<PAGE>
WOOD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter Ended September 30, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loans: Interest income on loans is accrued over the term of the loans based upon
the principal outstanding. The accrual of interest on loans is suspended when,
in management's opinion, the collection of all or a portion of the loan
principal has become doubtful. When a loan is placed on nonaccrual status,
accrued and unpaid interest at risk is charged against income. The carrying
value of impaired loans is periodically adjusted to reflect cash payments,
revised estimates of future cash flows and increases in the present value of
expected cash flows due to the passage of time. Cash payments representing
interest income are reported as such and other cash payments are reported as
reductions in carrying value. Increases or decreases in carrying value due to
changes in estimates of future payments or the passage of time are reported as
reductions or increases in bad debt expense.
Effective July 1, 1996, the Company adopted SFAS No. 122, "Accounting for
Mortgage Servicing Rights." SFAS No. 122 requires lenders who sell or securitize
originated loans and retain the servicing rights to recognize as separate assets
the rights to service mortgage loans for others. SFAS No. 122 also requires that
capitalized mortgage servicing rights be assessed for impairment based on the
fair value of those rights. For purposes of measuring impairment, management
stratifies loans type, interest rate and investor. SFAS No. 122 did not
materially impact the Company's financial condition or results of operations.
Mortgage loans originated by the Bank and intended for sale in the secondary
market are carried at the lower of cost or estimated market value in the
aggregate. Net unrealized losses are recognized in a valuation allowance by
charges to income. To mitigate the interest rate risk associated with loans held
for sale, management obtains fixed secondary market purchase commitments for
these loans.
Loan fees, net of direct loan origination costs, are deferred and recognized
over the life of the loan as a yield adjustment.
Allowance for Losses on Loans: Because some loans may not be repaid in full, an
allowance for losses on loans is maintained. Increases to the allowance are
recorded by a provision for loan losses charged to expense. Estimating the risk
of the loss and the amount of loss on any loan is necessarily subjective.
Accordingly, the allowance is maintained by management at a level considered
adequate to cover losses that are currently anticipated based on past loss
experience, general economic conditions, information about specific borrower
situations including their financial position and collateral values, and other
factors and estimates which are subject to change over time. While management
may periodically allocate portions of the allowance for specific problem loan
situations, the whole allowance is available for any loan charge-offs that
occur. A loan is charged-off against the allowance by management when deemed
uncollectible, although collection efforts continue and future recoveries may
occur.
Real Estate Owned: Real estate owned, other than that which is used in the
normal course of business, is recorded at fair value less estimated costs to
sell. For real estate acquired through foreclosure, any initial loss is recorded
as a charge to the allowance for losses on loans prior to being transferred to
real estate owned. Any subsequent reduction in fair value is recognized in a
valuation allowance by charges to income.
<PAGE>
WOOD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter Ended September 30, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Office Properties and Equipment: Office properties and equipment are stated at
cost less accumulated depreciation. Depreciation is computed based on both the
straight-line method and the accelerated method over the estimated useful lives
of the respective properties and equipment. Maintenance and repairs are expensed
and major improvements are capitalized.
Income Taxes: The Company records income tax expense based upon the amount of
tax due on its tax return plus deferred taxes computed based upon the expected
future tax consequences of temporary differences between the carrying amounts
and tax bases of assets and liabilities, using enacted tax rates. The provision
for income taxes is based upon the effective tax rate expected to be applicable
for the entire year.
Statement of Cash Flows: For purposes of this statement, cash and cash
equivalents are defined to include the Company's cash on hand, due from banks
and federal funds sold. The Company reports net cash flows for customer loan
transactions, deposit transactions and interest-bearing deposits made with other
financial institutions.
Earnings Per Share: Earnings per common share were computed by dividing net
income by the weighted average number of shares outstanding for the period. On
July 1, 1997, the Board of Directors declared a 50% stock dividend paid on July
29, 1997, which was accounted for similar to a 3 for 2 stock split. All earnings
and dividends per share disclosures have been restated to reflect the stock
dividend. Weighted average number of shares outstanding used to compute earnings
per share were 2,200,038 and 2,266,281 for the 1997 and 1996 periods,
respectively.
Financial Statement Presentation: Certain items in the 1996 interim financial
statements have been reclassified to correspond with the 1997 presentation.
<PAGE>
WOOD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter Ended September 30, 1997
NOTE 2 - INVESTMENT SECURITIES
The amortized cost, gross unrealized gains and losses and estimated fair values
of investment securities at September 30, 1997 and June 30, 1997 are as follows:
<TABLE>
<CAPTION>
----------------------------September 30, 1997-------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Available for sale
U.S. Treasury security $ 556,480 $ 160,220 $ 716,700
U.S. Government agencies 8,039,358 31,790 56,806 8,014,342
U.S. Government agency
step-up bonds 600,000 1,593 3,375 598,218
Mutual funds and equity
investments 2,799,497 1,350 65,893 2,734,954
Other 40,000 40,000
----------- ----------- ----------- -----------
Total investment
Securities 12,035,335 194,953 126,074 12,104,214
----------- ----------- ----------- -----------
Mortgage-backed securities:
CMOs and REMICs 4,644,041 14,942 52,874 4,606,109
Other mortgage-backed
securities 4,192,521 34,151 90,733 4,135,939
----------- ----------- ----------- -----------
Total mortgage-
backed securities 8,836,562 49,093 143,607 8,742,048
----------- ----------- ----------- -----------
Total investment and
mortgage-backed securities
available for sale $20,871,897 $ 244,046 $ 269,681 $20,846,262
=========== =========== =========== ===========
</TABLE>
<PAGE>
WOOD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter Ended September 30, 1997
NOTE 2 - INVESTMENT SECURITIES (Continued)
Investment securities with a carrying value of $767,968 as of September 30, 1997
were pledged to secure public deposits and for other purposes as required or
permitted by law.
<TABLE>
<CAPTION>
-------------------------------June 30, 1997---------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------------- ------------ ------------ -----------------
<S> <C> <C> <C> <C>
Available for sale
U.S. Treasury security $ 540,627 $ 152,073 $ 692,700
U.S. Government agencies 9,972,708 23,327 $ 86,647 9,909,388
U.S. Government agency
step-up bonds 800,000 9,252 790,748
Mutual funds and equity
investments 2,781,306 276 65,881 2,715,701
Other 40,000 40,000
----------------- ------------ ------------ -----------------
Total investment
securities 14,134,641 175,676 161,780 14,148,537
----------------- ------------ ------------ -----------------
Mortgage-backed securities
CMOs and REMICs 4,650,973 41,272 100,746 4,591,499
Other mortgage-backed
securities 4,325,959 6,124 79,249 4,252,834
----------------- ------------ ------------ -----------------
Total mortgage-
backed securities 8,976,932 47,396 179,995 8,844,333
----------------- ------------ ------------ -----------------
Total investment and
mortgage-backed securities
available for sale $ 23,111,573 $ 223,072 $ 341,775 $ 22,992,870
================= ============ ============ =================
</TABLE>
An investment security with a carrying value of $499,843 as of June 30, 1997 was
pledged to secure public deposits and for other purposes as required or
permitted by law.
<PAGE>
WOOD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter Ended September 30, 1997
NOTE 2 - INVESTMENT SECURITIES (Continued)
The amortized cost and estimated fair value of debt securities at September 30,
1997, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
Cost Fair Value
----------- -----------
<S> <C> <C>
Available for sale
Due in one year or less $ 1,749,290 $ 1,740,873
Due after one year through five years 2,654,890 2,801,886
Due after five through ten years 4,791,658 4,786,501
----------- -----------
9,195,838 9,329,260
CMOs and REMICs 4,644,041 4,606,109
Other mortgage-backed securities 4,192,521 4,135,939
----------- -----------
8,836,562 8,742,048
Mutual funds and equity investments 2,799,497 2,734,954
Other 40,000 40,000
----------- -----------
$20,871,897 $20,846,262
=========== ===========
</TABLE>
<PAGE>
WOOD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter Ended September 30, 1997
NOTE 3 - LOANS
Loans are summarized below:
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
------------ ------------
<S> <C> <C>
Real estate mortgage loans (principally conventional)
Principal balances
Secured by one-to-four family residences $ 94,067,217 $ 93,537,749
Secured by other properties 8,588,247 7,295,761
Construction 6,357,975 4,515,950
Home equity 9,449,695 8,334,481
------------ ------------
118,463,134 113,683,941
Less:
Loans in process 3,194,125 2,245,571
Net deferred loan origination fees 206,518 200,660
------------ ------------
Total real estate mortgage loans 115,062,491 111,237,710
------------ ------------
Consumer and other loans
Principal balances
Automobile 7,881,994 7,695,651
Commercial 8,192,308 8,035,167
Other 5,505,031 4,925,380
------------ ------------
Total consumer and other loans 21,579,333 20,656,198
------------ ------------
136,641,824 131,893,908
Allowance for losses on loans 596,693 575,985
------------ ------------
Loans, net $136,045,131 $131,317,923
============ ============
</TABLE>
Nonaccrual loans totaled $24,000 at September 30, 1997 and June 30, 1997.
Accruing loans which are contractually past due 90 days or more totaled $536,000
at September 30, 1997 compared to $371,000 at June 30, 1997. Interest not
recognized on nonaccrual loans totaled approximately $668 and $602 for the three
month periods ended September 30, 1997 and 1996, respectively.
<PAGE>
WOOD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter Ended September 30, 1997
NOTE 3 - LOANS (Continued)
Activity in the allowance for losses on loans for the three month periods ended
September 30, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
Three months ended
September 30,
1997 1996
--------- ---------
<S> <C> <C>
Balance at beginning of period $ 575,985 $ 513,367
Provision for loan losses 30,000 30,000
Recoveries 168 67
Charge-offs (9,460) (5,943)
--------- ---------
Balance at end of period $ 596,693 $ 537,491
========= =========
</TABLE>
NOTE 4 - FDIC INSURANCE
The deposits of savings associations such as the Bank are presently insured by
the Savings Association Insurance Fund (the "SAIF"), which, along with the Bank
Insurance Fund (the "BIF"), is one of the two insurance funds administered by
the FDIC. Financial institutions which are members of the BIF were experiencing
substantially lower deposit insurance premiums because the BIF had achieved its
required level of reserves, while the SAIF had not yet achieved its required
reserves. On September 30, 1996, President Clinton signed into law the Omnibus
Bill which included provisions designed to recapitalize the SAIF and to mitigate
the BIF/SAIF premium disparity. The Omnibus Bill required the FDIC to impose a
special assessment on SAIF-insured deposits, which was set at 65.7 cents per
$100 of SAIF insured deposits at March 31, 1995. The assessment was paid on
November 27, 1996 from working capital of the Bank. Since the SAIF reached its
required reserve ratio following the assessment, the FDIC reduced the annual
assessment rates for SAIF insured institutions to bring them in line with BIF
assessment rates. The Company's special assessment totalled $442,611, after
taxes.
The Bank, however, will continue to be subject to an assessment to fund the
repayment of the FICO obligations. It is anticipated that the premium for SAIF
insured institutions will be approximately 6.5 cents per $100 of deposits while
BIF insured institutions will pay approximately 1.5 cents per $100 of deposits
until the year 2000 when the assessment will be imposed at the same rate on all
FDIC insured institutions.
<PAGE>
WOOD BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion compares the financial condition of Wood Bancorp, Inc.
("Company") and its sole subsidiary First Federal Bank (the "Bank") at September
30, 1997 to June 30, 1997 and the results of operations for the three months
ended September 30, 1997 and 1996. This discussion should be read in conjunction
with the interim financial statements and footnotes included herein.
FINANCIAL CONDITION
Total assets grew $2,602,351, or 1.59%, from $163,917,842 at June 30, 1997 to
$166,520,193 at September 30, 1997. The growth is attributable to increases in
loans, partially offset by, decreases in cash and due from banks and investment
securities available for sale.
Cash and due from banks decreased $721,338 and total investment and
mortgage-backed securities decreased $2,146,608, or 9.34%, at September 30, 1997
compared to June 30, 1997 as a result of the Company investing a portion of its
cash on hand and funds obtained through the maturity of investment securities to
partially fund loan growth.
At September 30, 1997, the Company's mortgage-backed securities portfolio
classified as available for sale were comprised of agency issued adjustable rate
securities. The Company does not anticipate the need to sell these securities in
the near future. Management's strategy emphasizes investment in securities
guaranteed by the U.S. government and its agencies in order to minimize credit
risk. The investment strategy also includes purchasing variable rate
mortgage-backed security products with monthly and annually adjusting interest
rates. These securities provide the Company a continued cash flow stream through
principal paydowns and help protect the Company against interest rate risk. See
also Note 2 in the interim financial statements.
Loans receivable increased $4,727,208, or 3.60%, from $131,317,923 at June 30,
1997 to $136,045,131 at September 30, 1997. The increase was primarily due to
increased loan volume resulting from the Company's business development and
marketing efforts. Fixed rate loan originations continue to be sold on the
secondary market, which corresponds with the Bank's policy of selling virtually
all fixed rate loan originations on the secondary market, while maintaining
variable rate loans in the Bank's portfolio. Increases in loans receivable were
funded by decreases in cash and due from banks, proceeds from investment
security maturities, as well as, increases in deposits.
Office properties and equipment, Federal Home Loan Bank ("FHLB") stock, accrued
interest receivable, and other assets remained relatively constant from June 30,
1997 to September 30, 1997.
Deposits increased $2,932,692, or 2.43%, from $120,546,079 at June 30, 1997 to
$123,478,771 at September 30, 1997. The growth was primarily in certificates of
deposits, which increased $3,456,959.
FHLB advances decreased $749,500 during the period, as funding for loan growth
was obtained from the sources discussed above. The Company, however, intends to
continue using FHLB advances, as needed, to fund loan growth.
<PAGE>
WOOD BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION (Continued)
RESULTS OF OPERATIONS
Net income increased $585,915 from $25,636 for the quarter ended September 30,
1996 to $611,551 for the same period in 1997. The 1997 increase was essentially
due to the $442,611 (net of tax) special assessment charge in the 1996 period
resulting from legislation passed on September 30, 1996, regarding the SAIF. See
Note 4 in the Notes to Financial Statements. Excluding the SAIF assessment, the
Company would have reported net income of $468,247 for the quarter ended
September 30, 1996. The difference of $143,304, or 30.6%, was primarily due to
increases in net interest income and noninterest income, partially offset by
increases in noninterest expense, excluding the SAIF assessment.
Net interest income increased $156,133, or 9.93%, during the period ended
September 30, 1997 as compared to the same period in 1996. The increase was
primarily due to an increase in average loans during the 1997 period as compared
to the 1996 period.
A provision for loan losses of $30,000 was recorded for the quarters ended
September 30, 1997 and 1996, based on management's assessment of risk factors
affecting the allowance for loan losses. The allowance for loan losses was
approximately .44% of loans net of deferred and unearned income as of September
30, 1997 as compared to .45% as of September 30, 1996. Management believes the
allowance for loan loss is adequate to absorb potential losses; however, future
additions to the allowance may be necessary based on changes in economic
conditions.
Noninterest income increased $90,236 from $131,727 for the quarter ended
September 30, 1996 to $221,963 for the same period in 1997. The increase was
primarily due to a $61,277 increase in loan sale gains. The increase in loan
sale gains was due to increased volume of fixed rate loan originations which are
sold on the secondary market.
Noninterest expense, excluding the SAIF assessment, increased $20,002 or 2.13%
for the quarter ended September 30, 1997 compared to the same period in 1996,
primarily due to increases in salaries and benefits expense and data processing
expense, partially offset by a decrease in deposit insurance premiums following
the 1996 SAIF assessment. Additional personnel added for loan production and
annual salary adjustments combined to increase salaries and benefits by $67,164,
or 14.0%. Data processing expense increased $23,548, primarily due to data-line
and system upgrades installed during 1997. Advertising and promotional expense
increased from $28,055 for the 1996 period to $41,953 for the 1997 period due to
the Company's increased emphasis in business development and marketing efforts.
The Company's federal income tax expense was $350,050 and $38,975 for the
quarters ended September 30, 1997 and 1996, respectively. The increase was
primarily due to the increase in pre-tax income for the 1997 quarter.
<PAGE>
WOOD BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (Continued)
LIQUIDITY
Federally insured banks are required to maintain minimum levels of liquid
assets. First Federal is currently required to maintain an average daily balance
of liquid assets of at least 5% of the sum of its average daily balance of net
withdrawable deposit accounts and borrowings payable in one year or less. At
September 30, 1997, First Federal was in compliance with this requirement with a
liquidity ratio of 5.41%. Management considers this liquidity position adequate
to meet its expected needs for the foreseeable future.
CAPITAL RESOURCES
Savings institutions insured by the Federal Deposit Insurance Corporation are
required by federal law to meet three regulatory capital requirements. If a
requirement is not met, regulatory authorities may take legal or administrative
actions, including restrictions on growth or operations or, in extreme cases,
placing the institution in receivership or conservatorship.
The following table presents First Federal's compliance with its capital
requirements at September 30, 1997:
<TABLE>
<CAPTION>
Tangible Capital Core Capital Risk Based Capital
---------------- ------------ ------------------
Amount % Amount % Amount %
------- ---- ------- ---- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Actual $14,749 9.01% 14,749 9.01 15,278 15.28%
Required 2,456 1.50 4,913 3.00 8,002 8.00
------- ---- ------- ---- ------- -----
Excess $12,293 7.51% 9,836 6.01% 7,276 7.28%
======= ==== ======= ==== ======= =====
</TABLE>
First Federal's tangible capital consists solely of shareholders' equity. Core
capital consists of tangible capital plus, through 1997, certain intangible
assets, of which First Federal has none. Risk based capital consists of core
capital plus general loan loss allowances less certain assets required to be
deducted.
<PAGE>
FORM 10-QSB
Quarter ended September 30, 1997
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings:
There are no matters required to be reported under this item.
Item 2 - Changes in Securities:
There are no matters required to be reported under this item.
Item 3 - Defaults Upon Senior Securities:
There are no matters required to be reported under this item.
Item 4 - Submission of Matters to a Vote of Security Holders: There
are no matters required to be reported under this item.
Item 5 - Other Information:
There are no matters required to be reported under this item.
Item 6 - Exhibits and Reports on Form 8-K:
(a) Exhibit Number Exhibit
27 Financial Data Schedule (1)
(b) No current reports on Form 8-K were filed by the Company
during the quarter ended September 30, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WOOD BANCORP INC.
(Registrant)
Date: November 12, 1997 /s/Richard L. Gordley
---------------------
Richard L. Gordley
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 12, 1997 /s/David L. Nagel
-----------------
David L. Nagel
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
The schedule contains summary financial information quarterly report on Form
10-QSB for the fiscal quarter and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
<CASH> 2,123,240
<INT-BEARING-DEPOSITS> 2,862,044
<FED-FUNDS-SOLD> 106,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 20,846,262
<INVESTMENTS-CARRYING> 20,846,262
<INVESTMENTS-MARKET> 20,846,262
<LOANS> 136,641,824
<ALLOWANCE> 596,693
<TOTAL-ASSETS> 166,520,193
<DEPOSITS> 123,478,771
<SHORT-TERM> 8,500,000
<LIABILITIES-OTHER> 1,309,013
<LONG-TERM> 12,525,806
0
0
<COMMON> 24,859
<OTHER-SE> 20,681,744
<TOTAL-LIABILITIES-AND-EQUITY> 166,520,193
<INTEREST-LOAN> 2,983,511
<INTEREST-INVEST> 212,355
<INTEREST-OTHER> 192,952
<INTEREST-TOTAL> 3,388,818
<INTEREST-DEPOSIT> 1,337,538
<INTEREST-EXPENSE> 1,660,917
<INTEREST-INCOME-NET> 1,727,901
<LOAN-LOSSES> 30,000
<SECURITIES-GAINS> 13,226
<EXPENSE-OTHER> 958,263
<INCOME-PRETAX> 961,601
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 611,551
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.33
<LOANS-NON> 24,000
<LOANS-PAST> 536,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 575,985
<CHARGE-OFFS> 9,460
<RECOVERIES> 168
<ALLOWANCE-CLOSE> 596,693
<ALLOWANCE-DOMESTIC> 596,693
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
