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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
450 5TH STREET, N.W.
WASHINGTON, D. C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to Commission File No. 0-24664
FIRST OZAUKEE CAPITAL CORP.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1781744
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
W61 N526 Washington Avenue, Cedarburg, Wisconsin 53012
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (414) 377-0750
Not applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
Indicate the number of shares outstanding of the issuer's classes of common
stock, as of the latest practicable date.
Class Outstanding January 31, 1997
Common Stock, par value $1.00 per share 627,477 Shares
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FIRST OZAUKEE CAPITAL CORP.
FORM 10-QSB
FOR THE QUARTER ENDED DECEMBER 31, 1996
INDEX
<CAPTION>
PAGE NO.
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PART I - Financial Information
Consolidated Statements of Financial Condition 1
Consolidated Statements of Operations 2
Consolidated Statements of Cash Flows 3
Note to Consolidated Financial Statements 4
Management's Discussion and Analysis of
Financial Condition and Results of Operations 5
PART II - Other Information 7
<PAGE>1
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FIRST OZAUKEE CAPITAL CORP.
Consolidated Statements of Financial Condition
(Dollars in Thousands)
<CAPTION>
December 31, September 30,
1996 1996
Assets (Unaudited)
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Cash and cash equivalents $ 1,090 725
Securities:
Available for sale, at market value
(amortized cost of $5,494 and $9,850,
respectively) 5,505 9,857
Held to maturity at amortized cost
(market value of $1,997 and $1,992,
respectively) 1,997 1,997
Stock in Federal Home Loan Bank, at cost 152 152
Mortgage-backed securities held to maturity,
at amortized cost (market value of $3,482
and $3,582, respectively) 3,597 3,721
Loans receivable, net 20,376 16,341
Premises and equipment, net 560 572
Accrued interest receivable:
Securities, certificates of deposit and
mortgage-backed securities 105 308
Loans receivable 56 75
Other assets 295 300
Total assets $ 33,733 34,048
Liabilities and Stockholders' Equity
Deposits $ 25,114 24,962
Advances from borrowers for taxes and insurance 8 373
Other liabilities 419 559
Income taxes payable (35) (32)
Total liabilities 25,506 25,862
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1.00 par value,
2,000,000 shares authorized;
shares issued - none - -
Common stock, $1.00 par value;
4,000,000 shares authorized;
627,477 shares issued and outstanding 627 627
Additional paid-in capital 4,037 4,032
Unearned ESOP compensation (211) (217)
Unearned BIP compensation (86) (111)
Unrealized gain (loss) on securities
available for sale, net 7 4
Retained earnings - substantially restricted 3,853 3,851
Total stockholders' equity 8,227 8,186
Total liabilities and stockholders' equity $ 33,733 34,048
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See accompanying note to consolidated financial statements.
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FIRST OZAUKEE CAPITAL CORP.
Consolidated Statements of Operations
(Dollars in Thousands)
<CAPTION>
Three Months Ended
December 31,
1996 1995
(Unaudited)
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Interest and dividend income:
Loans receivable $ 365 296
Mortgage-backed securities 56 64
Securities 156 281
Total interest income 577 641
Interest expense:
Deposits 288 350
Escrows and borrowed funds 2 2
Total interest expense 290 352
Net interest income 287 289
Provision for loan losses 4 5
Net interest income after provision
for loan losses 283 284
Noninterest income:
Other fees and service charges 4 1
Deposit account fees and service charges 2 2
Gain (loss) on sale of securities available
for sale 4 26
Gain (loss) on sale of loans receivable - 1
Rental income 2 2
Total noninterest income 12 32
General and administrative expenses:
Compensation and benefits 154 210
Occupancy and insurance expense 37 39
Data processing fees 27 25
Federal insurance premiums - 17
Directors' fees 7 6
Legal, auditing, examination and accounting fees 42 53
Advertising and promotional 3 4
Stationery, communications and other operating
expenses 23 26
Total general and administrative expenses 293 380
Income (loss) before income taxes 2 (64)
Income taxes - (28)
Net income (loss) $ 2 (36)
Net income (loss) per share $ .00 (.06)
Weighted-average shares outstanding 597,563 577,722
Dividends per share $ .00 .00
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See accompanying note to consolidated financial statements.
<PAGE>3
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FIRST OZAUKEE CAPITAL CORP.
Consolidated Statements of Cash Flows
(Dollars in Thousands)
<CAPTION>
Three Months Ended
December 31,
1996 1995
(Unaudited)
<S>
Cash flows from operating activities: <C> <C>
Net income (loss) $ 2 (36)
Adjustments to reconcile net income (loss)
to net cash provided by (used for)
operating activities:
Depreciation expense 12 11
Provision for loan losses 4 5
Gain on sale of securities available for sale (4) (26)
Gain on sale of loans receivable - (1)
ESOP expense 11 10
BIP expense 25 88
Amortization of premiums (discounts), net on
securities and MBS (1) (15)
Loans originated for sale - (110)
Proceeds from sale of loan - 111
Decrease (increase) in:
Accrued interest receivable 222 16
Other assets 5 7
Increase (decrease) in:
Other liabilities (140) 10
Income taxes payable (3) (29)
Net cash provided by (used for)
operating activities 133 41
Cash flows from investing activities:
Loans originated, net of principal collections
on loans (4,039) (799)
Principal collections on mortgage-backed
securities held to maturity 124 157
Securities:
Available for sale:
Purchased (1,997) -
Proceeds from sale 2,247 508
Proceeds from maturity or call 4,110 2,518
Held to maturity:
Proceeds from maturity or call - 1,750
Purchased - (1,000)
Proceeds from sale (purchases) of premises
and equipment, net - (2)
Net cash provided by (used for)
investing activities 445 3,132
Cash flows from financing activities:
Net increase (decrease) in:
Deposits 152 (1,687)
Advances from borrowers for taxes and insurance (365) (387)
Proceeds from advance from FHLB - 500
Repayment of advance from FHLB - (500)
Net cash provided by (used for) financing
activities (213) (2,074)
Net increase (decrease) in cash and cash
equivalents 365 1,099
Cash and cash equivalents at beginning of period 725 870
Cash and cash equivalents at end of period $ 1,090 1,969
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest on deposits $ 288 350
Interest on escrows and borrowed funds 2 2
Income taxes 5 -
Noncash investing activity - transfer of
securities from held to maturity to available
for sale $ - 10,430
</TABLE>
See accompanying note to consolidated financial statements.
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FIRST OZAUKEE CAPITAL CORP.
Note to Consolidated Financial Statements
(Unaudited)
(1)The information contained in the accompanying consolidated financial statements is
unaudited. In the opinion of management, the financial statements contain all adjustments
(none of which were other than normal recurring entries) necessary for a fair statement of
the results of operations for the interim periods. The results of operations for the interim
periods are not necessarily indicative of the results which may be expected for the entire
fiscal year. These consolidated financial statements should be read in conjunction with the
consolidated financial statements of the Company for the year ended September 30, 1996
contained in the 1996 Annual Report to Stockholders which is filed as an exhibit to the
Company's Annual Report on Form 10-KSB.
<PAGE>5
FIRST OZAUKEE CAPITAL CORP.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
General
First Ozaukee Capital Corp. (Company) has no significant assets other than common stock of First
Ozaukee Savings Bank (Bank), cash and cash equivalents, securities and the loan to the ESOP. The
Company's principal business is the business of the Bank. Therefore, the information in the
Management's Discussion and Analysis of Financial Condition and Results of Operations relates to the
Bank and its operations.
Certain statements in this report which relate to the Company's plans, objectives or future performance
may be deemed to be forward-looking statements within the meaning of Private Securities Litigation
Act of 1995. Such statements are based on management's current expectations. Actual strategies
and results in future periods may differ materially from those currently expected because of various
risks and uncertainties. Additional discussion of factors affecting the Company's business and
prospects is contained in periodic filings with the Securities and Exchange Commission.
Liquidity and Capital Resources
The Bank's principal sources of funds are cash receipts from deposits, principal collections on loans and
mortgage-backed securities, proceeds from maturities of securities, and net earnings. The Bank has
an agreement with the Federal Home Loan Bank to provide cash advances, should the Bank need
additional funds.
The Bank is required to maintain minimum amounts of capital to total "risk-weighted" assets, as defined
by the banking regulators. At December 31, 1996, the Bank is required to have a minimum 3% Tier
1 capital to total assets, a minimum 4% Tier 1 capital to risk-weighted assets ratio and a minimum 8%
of qualifying total capital to risk-weighted assets ratio. The Bank's actual ratios at that date were
18.09%, 35.50% and 36.36%, respectively. Wisconsin-chartered savings banks are also required to
maintain a minimum capital to assets ratio of 6%. The Bank's capital exceed all minimum standards
required by federal and state regulations.
For regulatory purposes, liquidity is measured as a ratio of cash and certain investments to
withdrawable deposits and short-term borrowings. The minimum level of liquidity required by regulation
is presently 8%. The Bank's liquidity ratio was over 40% at December 31, 1996.
Commitments to originate adjustable-rate mortgage loans (including loans in process) at December 31,
1996 were approximately $1,359,000. Commitments on behalf of borrowers for unused lines of credit
on home equity loans and unused credit card lines were $1,206,000 and $123,000, respectively.
Financial Condition
Proceeds from maturing, and sale of, securities available for sale were used to fund loans and increase
cash and cash equivalents. Accrued interest receivable decreased due to the timing of interest receipts.
Loans increased from $16.3 million at September 30, 1996 to $20.4 million at December 31, 1996 due
to the purchase of fixed-rate, single-family loans. Advances from borrowers for taxes and insurance
decreased due to the payment of real estate taxes on behalf of borrowers in December of each year.
Other liabilities decreased as a result of the payment of the SAIF special assessment and certain other
accrual items.
<PAGE>6
FIRST OZAUKEE CAPITAL CORP.
Results of Operations
Net Earnings
The Company incurred a net loss of $36,000 for the three months ended December 31, 1995
compared to net earnings of $2,000 for the three months ended December 31, 1996. The primary
reasons for the improvement in net income were due to lower compensation expense related to the
Bank Incentive Plan (BIP), lower Federal insurance premiums and lower professional expenses offset
by lower noninterest income.
Net Interest Income
Net interest income decreased from $289,000 for the three months ended December 31, 1995 to
$287,000 for the three months ended December 31, 1996. Interest income on loans increased due
to a higher average balance, while interest income on securities decreased due to a lower average
balance. Components of interest income change from time to time due to the availability and interest
rates of loans, investment securities and other interest-bearing assets. Interest expense on deposits
decreased as a result of a lower average balance which offset a higher weighted-average rate.
Provision for Loan Losses
Provision for loan losses is based upon management's consideration of economic conditions which may
affect the ability of borrowers to repay the loans. Management also reviews individual loans for which
full collectibility may not be reasonably assured and considers, among other matters, the risks inherent
in the Bank's portfolio and the estimated fair value of the underlying collateral. This evaluation is
ongoing and results in variations in the Bank's provision for loan losses. Nonperforming loans amounted
to $97,000 and $100,000 at December 31, 1996 and September 30, 1996, respectively. As a result
of this evaluation, the Bank's provision for loan losses for the three months ended December 31, 1996
and 1995 amounted to $4,000 and $5,000, respectively.
Noninterest income
Noninterest income decreased due to the amount of gains recognized on sale of securities available for
sale in 1995. Gain on sale of securities available for sale is not a stable source of income and no
assurance can be given that the Bank will generate such gains in the future.
General and Administrative Expenses
General and administrative expenses decreased from $380,000 for the three months ended December
31, 1995 to $293,000 for the three months ended December 31, 1996 due to lower compensation and
benefits, Federal insurance premiums and legal fees. The 1995 legal fees include initial services for
stock benefit plans and assistance with periodic securities filings. Management expects ongoing legal
fees and other professional fees to be reduced from the 1995 level. Compensation and benefits
decreased from $210,000 for the three months ended December 31, 1995 to $154,000 for the three
months ended December 31, 1996 due to the immediate vesting of one-third of the BIP shares upon
adoption of the plan on November 7, 1995. The remaining shares will vest on subsequent anniversary
dates. Compensation expense for stock awarded under this plan is recognized over the vesting periods.
Federal insurance premiums decreased as a result of the recapitalization of the SAIF. Recurring federal
insurance premiums are expected to be paid at an annual rate of 6.48 basis points of assessable
deposits effective January 1, 1997.
Income Taxes
Income taxes changed due to the level of earnings before income taxes.
<PAGE>7
FIRST OZAUKEE CAPITAL CORP.
PART II - Other Information
Item 1 - Legal Proceeding
There are no material legal proceedings to which the Holding Company or the Bank is a party or
of which any of their property is subject. From time to time, the Bank is a party to various legal
proceedings incident to its business.
Item 2 - Changes in Securities
None.
Item 3 - Defaults upon Senior Securities
Not applicable.
Item 4 - Submission of Matters to a Vote of Security Holders
None.
Item 5 - Other Information
None.
Item 6 - Exhibits and Reports on Form 8-K.
(a) Exhibits: none
(b) Reports on Form 8-K: No reports on Form 8-K have been filed during the quarter for which
this report is filed.
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.
FIRST OZAUKEE CAPITAL CORP.
(Registrant)
DATE: February 13, 1997 BY:Russell S. Jones
Russell S. Jones, Chairman of the Board and
President (Principal Executive Officer and
Principal Financial and Accounting Officer)
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<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1090
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5505
<INVESTMENTS-CARRYING> 5594
<INVESTMENTS-MARKET> 5479
<LOANS> 20,376
<ALLOWANCE> 0
<TOTAL-ASSETS> 33,733
<DEPOSITS> 25,114
<SHORT-TERM> 0
<LIABILITIES-OTHER> 392
<LONG-TERM> 0
0
0
<COMMON> 627
<OTHER-SE> 7600
<TOTAL-LIABILITIES-AND-EQUITY> 33,733
<INTEREST-LOAN> 365
<INTEREST-INVEST> 212
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 577
<INTEREST-DEPOSIT> 288
<INTEREST-EXPENSE> 290
<INTEREST-INCOME-NET> 287
<LOAN-LOSSES> 4
<SECURITIES-GAINS> 4
<EXPENSE-OTHER> 293
<INCOME-PRETAX> 2
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
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<ALLOWANCE-DOMESTIC> 0
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