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 December 31, 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 February 13, 1998
- --------------------------------------------------------------------------------
Common stock, $0.01 par value 2,660,654 common shares
Transitional Small Business Disclosure Format:
Yes [ ] No [ X ]
<PAGE>
WOOD BANCORP, INC.
FORM 10-QSB
Quarter ended December 31, 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. 3.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, June 30,
1997 1997
------------- -------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 3,410,678 $ 2,844,578
Federal funds sold 714,000 70,000
------------- -------------
Cash and cash equivalents 4,124,678 2,914,578
Interest-bearing deposits in other financial institutions 1,057,563 2,229,104
Securities available for sale 11,506,419 14,148,537
Mortgage-backed securities available for sale 8,638,010 8,844,333
Loans, net 136,637,286 131,317,923
Office properties and equipment, net 1,862,722 1,860,331
Federal Home Loan Bank stock, at cost 1,454,900 1,403,200
Accrued interest receivable 859,505 853,736
Other assets 405,158 346,100
------------- -------------
Total assets $ 166,546,241 $ 163,917,842
============= =============
LIABILITIES
Deposits $ 127,262,738 $ 120,546,079
Advances from Federal Home Loan Bank 16,835,939 21,775,306
Accrued interest payable 164,199 193,166
Other liabilities 968,785 1,237,711
------------- -------------
Total liabilities 145,231,661 143,752,262
------------- -------------
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 500,000 shares
authorized, no shares issued or outstanding
Common stock, $.01 par value, 5,000,000 shares
authorized at December 31, 1997 and 2,500,000
shares authorized at June 30, 1997,
2,485,867 shares issued 24,859 24,859
Additional paid-in capital 11,041,746 10,875,896
Retained earnings - substantially restricted 13,574,744 12,805,953
Treasury stock, at cost; 357,129 shares at
December 31, 1997 and 367,329 shares
at June 30, 1997 (3,071,110) (3,130,066)
Obligation under employee stock ownership plan (301,741) (301,741)
Unearned compensation (20,201) (30,977)
Unrealized gains/(losses) on available for sale
securities, net 66,283 (78,344)
------------- -------------
Total shareholders' equity 21,314,580 20,165,580
------------- -------------
Total liabilities and shareholders' equity $ 166,546,241 $ 163,917,842
============= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
WOOD BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income
Loans $3,015,927 $2,654,259 $5,999,437 $5,164,439
Securities 193,043 276,840 405,398 552,588
Mortgage-backed and related
securities 143,392 155,657 284,560 311,446
Other 60,153 39,072 111,937 75,007
---------- ---------- ---------- ----------
Total interest income 3,412,515 3,125,828 6,801,332 6,103,480
---------- ---------- ---------- ----------
Interest expense
Interest on deposits 1,382,052 1,236,006 2,719,589 2,453,239
FHLB borrowings 272,531 274,803 593,555 462,194
Other 1,333 1,185 3,688 2,445
---------- ---------- ---------- ----------
Total interest expense 1,655,916 1,511,994 3,316,832 2,917,878
---------- ---------- ---------- ----------
Net interest income 1,756,599 1,613,834 3,484,500 3,185,602
Provision for loan losses 30,000 30,000 60,000 60,000
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 1,726,599 1,583,834 3,424,500 3,125,602
---------- ---------- ---------- ----------
Noninterest income
Service charges 79,985 70,738 161,839 139,937
Loan sale gains 119,115 33,549 215,244 68,401
Other 35,739 22,633 79,719 50,308
---------- ---------- ---------- ----------
Total noninterest income 234,839 126,920 456,802 258,646
---------- ---------- ---------- ----------
Noninterest expense
Salaries and benefits 593,455 501,889 1,140,230 981,500
Occupancy and equipment 102,053 91,631 192,994 188,180
Data processing 92,385 73,350 181,342 138,759
Insurance expense (Note 4) 27,104 65,085 57,414 807,126
Franchise taxes 51,224 64,866 102,447 130,017
Advertising and promotional 42,628 36,457 84,581 64,512
Other 128,356 133,866 236,460 265,932
---------- ---------- ---------- ----------
Total noninterest expense 1,037,205 967,144 1,995,468 2,576,026
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
WOOD BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
------------------------- ---------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Income before income tax $ 924,233 $ 743,610 $1,885,834 $ 808,222
Provision for income tax 345,635 260,825 695,685 299,800
---------- ---------- ---------- ----------
Net income $ 578,598 $ 482,785 $1,190,149 $ 508,422
========== ========== ========== ==========
Earnings per common share:
Basic $ .22 $ .18 $ .46 $ .19
========== ========== ========== ==========
Diluted $ .21 $ .17 $ .43 $ .18
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
WOOD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
December 31,
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 1,190,149 $ 508,422
Adjustments to reconcile net income to net cash from
operating activities
Depreciation 60,108 61,322
Provision for loan losses 60,000 60,000
Net accretion (84,022) (70,253)
Security (gains)/losses, net (13,226) 461
Gain on loan sales (215,244) (68,401)
Proceeds from loans sold 11,913,516 3,873,410
Loans originated for sale (11,794,401) (3,848,658)
FHLB stock dividend (51,700) (46,400)
Amortization of unearned compensation 10,776 20,444
ESOP expense 220,868 125,855
Change in
Interest receivable (5,769) 47,941
Other assets (133,564) 383,151
Other liabilities (268,926) 49,228
Interest payable (28,967) 108,652
Deferred loan fees 114 8,599
------------ ------------
Net cash from operating activities 859,712 1,213,773
------------ ------------
Cash flows from investing activities
Net change in interest-bearing balances with banks 1,171,541 (676,328)
Repurchase agreement 2,500,000
Securities and mortgage-backed securities available
for sale
Sales 1,050,000
Purchases (700,000) (3,100,000)
Proceeds from calls and maturities 3,500,000 1,720,000
Proceeds from principal payments on mortgage-
backed securities 364,822 355,284
Net increase in loans, net of loans sold (5,283,348) (15,583,380)
Properties and equipment expenditures (62,499) (72,574)
------------ ------------
Net cash used in investing activities (1,009,484) (13,806,998)
------------ ------------
</TABLE>
(Continued)
<PAGE>
<TABLE>
<CAPTION>
WOOD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
Six Months Ended
December 31,
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from financing activities
Net increase in deposits $ 6,716,659 $ 686,818
Proceeds from FHLB borrowings 1,860,391 16,650,000
Repayment of FHLB borrowings (6,799,758) (4,393,870)
Cash dividends paid (416,627) (256,662)
Proceeds from exercise of stock options, net (793) 16,675
Purchase of treasury stock (147,375)
------------ ------------
Net cash from financing activities 1,359,872 12,555,586
------------ ------------
Net change in cash and cash equivalents 1,210,100 (37,639)
Cash and cash equivalents at beginning of period 2,914,578 2,637,396
------------ ------------
Cash and cash equivalents at end of period $ 4,124,678 $ 2,599,757
============ ============
Supplemental disclosures of cash flow information
Cash paid during the period for
Interest $ 3,345,799 $ 2,809,226
============ ============
Income taxes $ 690,000 $ 301,945
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
WOOD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter ended December 31, 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 December 31, 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 six 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 December 31, 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 loan 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.
<PAGE>
WOOD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter ended December 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
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. On January
5, 1998, the Board of Directors declared a 25% stock dividend paid on January
29, 1998. All earnings and dividends per share disclosures have been restated to
reflect the stock dividends. Weighted average number of shares outstanding used
to compute basic earnings per share were 2,653,799 and 2,711,205 for the
three-month periods ended 1997 and 1996, and 2,583,496 and 2,711,216 for the
six-month periods ended 1997 and 1996 as restated for the stock dividends.
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 December 31, 1997
NOTE 2 - SECURITIES
The amortized cost, gross unrealized gains and losses and estimated fair values
of securities at December 31, 1997 and June 30, 1997 are as follows:
<TABLE>
<CAPTION>
December 31, 1997
-----------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Available for sale
U.S. Treasury securities $ 572,773 $ 164,027 $ 736,800
U.S. Government agencies 7,393,111 28,842 $ 46,790 7,375,163
U.S. Government agency
step-up bonds 600,000 750 1,969 598,781
Mutual funds and equity
investments 2,818,084 3,498 65,907 2,755,675
Other 40,000 40,000
----------- ----------- ----------- -----------
Total investment securities 11,423,968 197,117 114,666 11,506,419
----------- ----------- ----------- -----------
Mortgage-backed securities
CMOs and REMICs 4,636,650 68,972 16,116 4,689,506
Other mortgage-backed
securities 3,983,388 35,395 70,279 3,948,504
----------- ----------- ----------- -----------
Total mortgage-
backed securities 8,620,038 104,367 86,395 8,638,010
----------- ----------- ----------- -----------
Total investment and
mortgage-backed securities
available for sale $20,044,006 $ 301,484 $ 201,061 $20,144,429
=========== =========== =========== ===========
</TABLE>
Securities with a carrying value of $1,494,452 at December 31, 1997 were 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 December 31, 1997
NOTE 2 - SECURITIES (Continued)
<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 December 31, 1997
NOTE 2 - SECURITIES (Continued)
The amortized cost and estimated market value of debt securities at December 31,
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 $ 1,799,750 $ 1,791,295
Due after one year through five years 2,321,493 2,478,423
Due after five years through ten years 4,444,641 4,441,026
----------- -----------
8,565,884 8,710,744
CMOs and REMICs 4,636,650 4,689,506
Other mortgage-backed securities 3,983,388 3,948,504
----------- -----------
8,620,038 8,638,010
Mutual funds and equity investments 2,818,084 2,755,675
Other 40,000 40,000
----------- -----------
$20,044,006 $20,144,429
=========== ===========
</TABLE>
Proceeds from the sale of securities available for sale totaled $1,050,000 for
the three- and six-month periods ended December 31, 1996, resulting in gross
losses of $2,410. Gross gains on securities called totaled $13,226 for the
three- and six-month period ended December 31, 1997 and $1,949 for the three and
six-month periods ended December 31, 1996.
<PAGE>
WOOD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter ended December 31, 1997
NOTE 3 - LOANS RECEIVABLE
Loans receivable are summarized below:
<TABLE>
<CAPTION>
December 31, June 30,
1997 1997
------------ ------------
<S> <C> <C>
Real estate mortgage loans (principally conventional)
Principal balances
Secured by one-to-four family residences $ 93,215,911 $ 93,537,749
Secured by other properties 8,409,928 7,295,761
Construction loans 7,249,175 4,515,950
Home equity 10,133,231 8,334,481
------------ ------------
119,008,245 113,683,941
Less:
Loans in process 3,549,955 2,245,571
Net deferred loan origination fees 200,774 200,660
------------ ------------
Total first mortgage loans 115,257,516 111,237,710
------------ ------------
Consumer and other loans
Principal balances
Automobile 7,787,149 7,695,651
Commercial 8,595,574 8,035,167
Other 5,601,581 4,925,380
------------ ------------
Total consumer and other loans 21,984,304 20,656,198
------------ ------------
137,241,820 131,893,908
Allowance for losses on loans 604,534 575,985
------------ ------------
Loans, net $136,637,286 $131,317,923
============ ============
</TABLE>
There were no loans on nonaccrual at December 31, 1997. Nonaccrual loans totaled
$24,000 at June 30, 1997. Accruing loans which are contractually past due 90
days or more totaled $614,000 at December 31, 1997 compared to $371,000 at June
30, 1997. Interest not recognized on nonaccrual loans totaled approximately $588
and $348 for the three month periods ended December 31, 1997 and 1996,
respectively, and $1,241 and $1,320 for the six month periods ended December 31,
1997 and 1996, respectively.
<PAGE>
WOOD BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter ended December 31, 1997
NOTE 3 - LOANS RECEIVABLE (Continued)
Activity in the allowance for losses on loans for the three and six-month
periods ended December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
------------------------ ------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance at beginning of period $ 596,693 $ 537,491 $ 575,985 $ 513,367
Provision for loan losses 30,000 30,000 60,000 60,000
Recoveries 5,238 100 5,406 167
Charge-offs (27,397) (66,670) (36,857) (72,613)
--------- --------- --------- ---------
Balance at end of period $ 604,534 $ 500,921 $ 604,534 $ 500,921
========= ========= ========= =========
</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. The FDIC announced that the special
assessment rate will be 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 totaled $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 FICO assessment
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 ("First Federal" or the
"Bank") at December 31, 1997 to June 30, 1997 and the results of operations for
the three months and six months ended December 31, 1997 and 1996. This
discussion should be read in conjunction with the interim financial statements
and footnotes included herein.
FINANCIAL CONDITION
Total assets grew $2,628,399, or 1.60%, from $163,917,842 at June 30, 1997 to
$166,546,241 at December 31, 1997. The growth is attributable to increases in
loans and cash and cash equivalents, partially offset by decreases to interest
bearing deposits with other institutions and securities available for sale.
Cash and cash equivalents increased $1,210,100 from $2,914,578 at June 30, 1997
to $4,124,678 at December 31, 1997. Interest-bearing deposits with banks
decreased $1,171,541 from $2,229,104 at June 30,1997 to $1,057,563 at December
31, 1997. The proceeds were primarily used to fund new loans.
Securities available for sale decreased $2,642,118, or 18.67%, from $14,148,537
at June 30,1997 to $11,506,419 at December 31, 1997. The decrease was primarily
due to $3,500,000 in calls and maturities, offset by $700,000 in purchases. The
proceeds were used primarily to fund new loans.
At December 31, 1997, the Company's mortgage-backed securities portfolio which
is classified as available for sale was comprised primarily of agency issued
adjustable rate securities. The company does not anticipate the need to sell
these securities. 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 through
principal paydowns and help protect the Company against interest rate risk. See
also Note 2 in the interim financial statements.
Loans receivable increased $5,319,363, or 4.05%, from $131,317,923 at June 30,
1997 to $136,637,286 at December 31, 1997. Fixed rate loan originations continue
to be sold on the secondary market, which corresponds to the Bank's policy of
selling virtually all fixed rate loan originations in the secondary market,
while maintaining variable rate loans in the Bank's portfolio. Increases in
loans receivable were funded primarily by decreases in interest-bearing deposits
with banks and proceeds from calls and maturities of securities available for
sale, as well as funds from increased customer deposits.
<PAGE>
WOOD BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION (Continued)
Office properties and equipment, FHLB stock, accrued interest receivable, and
other assets remained relatively constant from June 30, 1997 to December 31,
1997.
Deposits increased $6,716,659, or 5.57%, from $120,546,079 at June 30, 1997 to
$127,262,738 at December 31, 1997. The Bank used the period's deposit growth to
pay down advances from the FHLB and partially fund loan growth. FHLB advances
decreased $4,939,367 during the period, bringing the total balance from
$21,775,306 at June 30,1997 to $16,835,939 at December 31, 1997.
RESULTS OF OPERATIONS
Net income increased $95,813, or 19.8%, from $482,785 for the three months ended
December 31, 1996 to $578,598 for the same period in 1997. The increase was
primarily due to an increase in net interest income for the 1997 quarter of
$142,765 and increased noninterest income of $107,919 over the comparable period
in 1996.
Net income increased $681,727 from $508,422 for the six-month period ended
December 31, 1996 to $1,190,149 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 interim financial statements. Excluding
the SAIF assessment, the Company would have reported net income of $951,033 for
the period ended December 31, 1996. The difference of $239,116, or 25.1%, 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 $142,765, or 8.8%, during the three-month period
and $298,898, or 9.4%, during the six-month period ended December 31, 1997, as
compared to the same periods in 1996. The increases were primarily due to
increases in average loans during the 1997 periods as compared to the 1996
periods.
The provision for loan losses was $30,000 for the three-month periods and
$60,000 for the six-month periods ended December 31, 1997 and 1996. The
provision is based on management's assessment of risk factors affecting the loan
portfolio. The allowance for loan losses was approximately .44% of loans, net of
unearned and deferred income, as of December 31, 1997, compared to .39% at
December 31, 1996. Management believes the allowance for loan losses is adequate
to absorb potential losses; however, future additions to the allowance may be
necessary based on changes in economic conditions.
<PAGE>
WOOD BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (Continued)
Noninterest income increased $107,919 and $198,156 for the three- and six-month
periods ended December 31, 1997 as compared to the same periods in 1996. The
increases were primarily due to an $85,566 and $146,843 increase in loan sale
gains for the three- and six- month periods ended December 31, 1997 as compared
to the same periods in 1996. The increase in loan sale gains was due to
increased volume of fixed rate loans which are sold on the secondary market.
Noninterest expense increased $70,061, or 7.24%, for the three months ended
December 31, 1997 compared to the same period in 1996, primarily due to
increases in salaries and benefits expense and data processing expense,
partially offset by decreases in insurance and franchise tax expense.
Noninterest expense, excluding the SAIF assessment, increased $90,064, or 4.73%,
for the six months ended December 31, 1997 compared to the same period in 1996.
The increase was primarily due to salaries and benefits expense increase of
$158,730, partially offset by decreases in insurances expense of $79,090,
excluding the SAIF assessment.
The Company's federal income tax expense was $345,635 and $260,825 for the
three-month periods ended December 31, 1997 and 1996, respectively and $695,685
and $299,800 for the six-month periods ended December 31, 1997 and 1996,
respectively. The increase was primarily due to the increase in pre-tax income
for the 1997 three- and six-month periods.
LIQUIDITY
Federally insured banks are required to maintain minimum levels of liquid
assets. First Federal is currently required to maintain an average daily balance
in liquid assets of at least 4% of the sum of its average daily balance of net
withdrawable deposit accounts and borrowings payable in one year or less. At
December 31, 1997, First Federal was in compliance with this requirement with a
liquidity ratio of 4.37%. Management considers this liquidity position adequate
to meet its expected needs.
<PAGE>
WOOD BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAPITAL RESOURCES
Savings institutions insured by the Federal Deposit Insurance Corporation are
required by federal law to meet three regulatory capital requirements. The
following table presents the Bank's compliance with its capital requirements at
December 31, 1997:
<TABLE>
<CAPTION>
Risk
Tangible Core Based
Capital Capital Capital
------- ------- -------
Amount % Amount % Amount %
------ - ------ - ------ -
<S> <C> <C> <C> <C> <C> <C>
Actual $ 15,416 9.41% $ 15,416 9.41% $ 15,980 15.76%
Required 2,457 1.50 4,914 3.00 8,114 8.00
-------------- -------- --------------- -------- -------------- ---------
Excess $ 12,959 7.91% $ 10,502 6.41% $ 7,866 7.76%
============== ======== =============== ======== ============== =========
</TABLE>
The Bank'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 December 31, 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:
(a) On October 21, 1997, the Company held its Annual Meeting of
Stockholders.
(b) At the meeting, Dale L. Myers and Randal R. Huber were
elected for terms to expire in 2000.
(c) Stockholders voted on the following matters:
(i) The election of the following directors of the Company:
Votes: For Withheld
------ --- --------
Dale L. Myers 1,612,804 63,440
Randal R. Huber 1,619,104 57,140
(ii) Approval of amendment to the Company's Certificate
of Incorporation to increase authorized common
stock:
Votes: For Against Abstain
------ --- ------- -------
1,602,235 43,034 30,975
(iii.) The ratification of the appointment of Crowe Chizek &
Company LLP as independent auditors of the Company
for the fiscal year ending June 30, 1998.
Votes: For Against Abstain
------ --- ------- -------
1,659,312 3,825 13,107
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 December 31, 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: February 13, 1998 /s/Richard L. Gordley
---------------------
Richard L. Gordley
President and Chief Executive Officer
(Principal Executive Officer)
Date: February 13, 1998 /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> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 3,410,678
<INT-BEARING-DEPOSITS> 1,057,563
<FED-FUNDS-SOLD> 714,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 20,144,429
<INVESTMENTS-CARRYING> 20,144,429
<INVESTMENTS-MARKET> 20,144,429
<LOANS> 137,241,820
<ALLOWANCE> 604,534
<TOTAL-ASSETS> 166,546,241
<DEPOSITS> 127,262,738
<SHORT-TERM> 4,810,392
<LIABILITIES-OTHER> 1,132,984
<LONG-TERM> 12,025,547
0
0
<COMMON> 24,859
<OTHER-SE> 21,289,721
<TOTAL-LIABILITIES-AND-EQUITY> 166,546,241
<INTEREST-LOAN> 5,999,437
<INTEREST-INVEST> 689,958
<INTEREST-OTHER> 111,937
<INTEREST-TOTAL> 6,801,332
<INTEREST-DEPOSIT> 2,719,589
<INTEREST-EXPENSE> 3,316,832
<INTEREST-INCOME-NET> 3,484,500
<LOAN-LOSSES> 60,000
<SECURITIES-GAINS> 13,226
<EXPENSE-OTHER> 1,995,468
<INCOME-PRETAX> 1,885,834
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,190,149
<EPS-PRIMARY> .46
<EPS-DILUTED> .43
<YIELD-ACTUAL> 438
<LOANS-NON> 0
<LOANS-PAST> 614,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 575,985
<CHARGE-OFFS> 36,857
<RECOVERIES> 5,406
<ALLOWANCE-CLOSE> 604,534
<ALLOWANCE-DOMESTIC> 604,534
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
