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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1996 Commission File Number 0-24120
WESTERN OHIO FINANCIAL CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 31-1403116
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
28 East Main Street, Springfield, Ohio 45501-0719
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(Address of principal executive offices) (Zip Code)
Registrant's telephone
number, including area code: (513) 325-4683
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
As of July 31, there were 2,252,669 shares of the Registrant's common stock
issued and outstanding.
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INDEX
WESTERN OHIO FINANCIAL CORPORATION
PART I. FINANCIAL INFORMATION Pages
Item 1. Financial Statements:
Condensed Balance Sheets . . . . . . . . . . . . . . . .3
Condensed Statements of Income . . . . . . . . . . . . .4
Condensed Statements of Cash Flows . . . . . . . . . . .5
Notes to Condensed Financial Statements. . . . . . . .6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . .8-12
PART II. OTHER INFORMATION
Item 5. Other Information. . . . . . . . . . . . . . . . . . . 13
Signatures . . . . . . . . . . . . . . . . . . . . . . 14
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WESTERN OHIO FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
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(Dollars in thousands)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 5,600 $ 17,605
Certificates of Deposit 591 ---
Investment securities available for sale,
at market value 30,832 12,039
Mortgage-backed securities available for sale,
at market value 53,849 45,719
Loans receivable, net of allowance for losses 227,423 150,476
Real Estate Owned 56 ---
Federal Home Loan Bank stock 4,704 1,602
Premises and equipment 3,286 2,542
Other assets 2,882 1,404
Goodwill 3,301 ---
-------- --------
Total Assets $332,524 $231,387
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Savings deposits $186,477 $139,129
Advances from the Federal Home Loan Bank
of Cincinnati 88,742 31,528
Other liabilities 1,673 1,062
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Total Liabilities $276,892 $171,719
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Stockholders' equity:
Common stock 26 26
Additional paid-in capital 41,100 41,048
Unrealized gain on securities available
for sale, net of income taxes (796) 631
Deferred management recognition plan expense (887) (1,011)
Unallocated shares held by employee stock
ownership plan (1,904) (2,023)
Treasury stock; 212,914 and 157,914
shares at cost respectively (5,807) (3,450)
Retained earnings (substantially restricted) 23,900 24,447
-------- --------
Total Stockholders' Equity 55,632 59,668
-------- --------
Total Liabilities and Stockholders' Equity $332,524 $231,387
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
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WESTERN OHIO FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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<CAPTION>
For the Quarter Ended For the Six Months
June 30 Ended June 30
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1996 1995 1996 1995
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(Dollars in thousands except
per share amounts)
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $4,314 $2,276 $ 7,532 $4,549
Interest and dividends on
investment securities 1,074 294 1,434 524
Interest on mortgage-backed
securities 363 602 1,134 1,220
Other interest income 117 252 273 554
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Total interest income 5,868 3,424 10,373 6,847
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Interest expense:
Interest on deposits 2,327 1,520 4,122 2,866
Interest on borrowings 1,135 64 1,732 132
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Total Interest expense 3,462 1,584 5,854 2,998
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Net interest income 2,406 1,840 4,519 3,849
Provision for losses on loans
and securities 64 6 144 6
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Net interest income after provision
for losses 2,342 1,834 4,375 3,843
Gain on sale of investments --- 294 --- 573
Other income 131 19 154 38
Other expense (1,937) (1,283) (3,513) (2,640)
------ ------ ------- ------
Income before income
tax expense 536 864 1,016 1,814
Income tax expense 184 280 384 589
------ ------ ------- ------
Net Income $ 352 $ 584 $ 632 $1,225
====== ====== ======= ======
Earnings per common
and common equivalent share $0.15 $0.24 $0.27 $0.49
====== ====== ======= ======
</TABLE>
See Notes to Consolidated Financial Statements
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WESTERN OHIO FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30
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1996 1995
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(Dollars in thousands)
<S> <C> <C>
Cash flows from operating activities $ 1,416 $ 210
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Cash flows from investing activities:
Loans:
Originations (64,344) (11,467)
Collections 18,051 3,713
Mortgage-backed securities:
Purchases --- ---
Collections 5,679 1,574
Investment securities:
Purchases (20,500) ---
Maturities 2,420 7,135
Sales --- 612
Purchase of Federal Home Loan Bank Stock (2,583) ---
Property and equipment:
Additions (252) (177)
Sale proceeds --- ---
Investment in subsidiary (8,754) ---
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Net cash provided by investing activities (70,283) 1,390
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Cash flows from financing activities:
Net increase (decrease) in savings deposits 6,490 10,309
SOP stock repurchase (2,356) (494)
MRP stock repurchase --- (1,999)
Dividends paid (1,210) (1,308)
Advances from Federal Home Loan Bank 54,529 (18)
------- -------
Net cash provided (used) by financing activities 57,453 6,490
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Net Increase (decrease) in cash and cash
equivalents (11,414) 8,090
Cash and cash equivalents:
Beginning 17,605 19,951
------- -------
Ending $ 6,191 $28,041
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</TABLE>
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WESTERN OHIO FINANCIAL CORPORATION
Notes to Condensed Consolidated Financial Statements
1. Principles of consolidation:
The financial statements for 1996 are presented for Western Ohio
Financial Corporation (the "Company") and its wholly-owned subsidiaries,
Springfield Federal Savings Bank ("Springfield") and Mayflower Federal
Savings Bank ("Mayflower"). The statements of financial condition for the six
months ended June, 30 1996, are for the Company, Springfield and Mayflower.
The Corporation acquired Mayflower on March 29, 1996. The statements of
income include the operations of the Company and Springfield for the first six
months of 1996 and for the operations of Mayflower for the period March 30,
1996 through June 30, 1996. The statements of income for the first six months
of 1995 include the Company's and Springfield's operations.
2. Basis of presentation:
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial reporting and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. These unaudited condensed financial
statements should be read in conjunction with the financial statements and
notes thereto included in the Corporation's annual report on Form 10-K for the
year ended December 31, 1995. The financial data and result of operations for
periods presented may not necessarily, reflect the result to be anticipated
for the entire year.
3. Change in accounting principle:
The Corporation has adopted the provisions of Statement of Position (SOP)
No. 93-6, Employers' Accounting for Employee Stock Ownership Plans, issued by
the American Institute of Certified Public Accountants. As a result, ESOP
compensation expense for contributions to the ESOP will be measured by the
average market value of the shares during the period for which they are
committed to be released and, in the calculation of earnings per share, ESOP
shares that have not been committed to be released are not considered
outstanding. As of December 31, 1995 the Corporation had released 22,317
shares to the ESOP. At June 30, 1996, the Corporation is committed to release
an additional 7,439 shares as the result of repayment of the
internally-financed loan made for the initial acquisition of the 148,781
shares held by the ESOP.
On January 31, 1995, the stockholders approved at a special meeting the
Management Recognition Plan. This plan specified that 105,800 shares of
common stock be made available for award to the Board of Directors and
executive officers. The shares allocated will become vested over five years.
The first six months of 1996 expenses include six months amortization of the
cost of allocated shares based upon average market value.
4. Earnings per common and common equivalent share:
Earnings per common and common equivalent share is calculated by dividing
net income by the weighted average number of common shares including the
effect of options outstanding. The weighted average number of common shares
giving effect to options outstanding during the three and six months ended
June 30, 1996 were 2,342,302 and 2,363,195 respectively. The weighted average
number of common shares giving effect to options outstanding during the three
and six months ended June 30, 1995 were 2,477,443 and 2,484,450 respectively.
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5. Recent accounting pronouncements
In October 1994, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 119, Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments.
This statement requires disclosures about the amounts, nature and terms of
derivative financial instruments that are not subject to Statement 105,
Disclosures of Information about Financial Instruments and Off-Balance-Sheet
Risk, because they do not result in off-balance-sheet risk of accounting loss.
It requires that a distinction be made between financial instruments held or
issued for trading purposes (including dealing and other trading activities
measured at fair value with gains and losses recognized in earnings) and
financial instruments held or issued for purposes other than trading. SFAS
No. 119 is effective for financial statements for fiscal years ending after
December 15, 1995. The Company and its subsidiaries held no securities for
trading activities nor are any of the securities held considered a futures,
forward, swap or option contract. Considering the preceding factors,
management does not expect a material impact from the adoption of this
standard.
In May 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 122, Accounting for Mortgage Servicing
Rights. This statement requires that a mortgage banking enterprise recognize
as separate assets rights to service mortgage loans for others, however those
servicing rights are acquired. A mortgage banking enterprise that acquires
mortgage servicing rights through either the purchase or origination of
mortgage loans and sells or securitizes those loans with servicing rights
retained would allocate the total cost of the mortgage loans to the mortgage
servicing rights and the loans based on their relative fair value. SFAS No.
122 is effective for fiscal years beginning after December 31, 1995.
Management does not originate loans for sale as of the date of this report.
Management does expect to sell loans in the future, but does not expect that
the application of this standard will have a material impact.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
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Western Ohio Financial Corporation ("the Company") is the holding company
of Springfield Federal Savings Bank ("Springfield") and Mayflower Federal
Savings Bank ("Mayflower"). Consolidated assets of the Company totaled $332.5
million at June 30, 1996, an increase of $101.1 million from the December 31,
1995, total of $231.4 million. The primary funding source for the increase in
assets was an increase in Federal Home Loan Bank advances of $57.2 million.
Management believes the Company needs to increase its asset size prudently in
order to achieve a better rate of return on its equity.
On March 29, 1996, the Company acquired Mayflower. Each share of
Mayflower Financial Corporation was exchanged for $28.50 cash, resulting in an
approximate $10.0 million aggregate transaction. Mayflower had total assets
of $53.8 million as of March 31, 1996 following its acquisition by the
Company. The $53.8 million in total assets included core deposit goodwill of
$0.9 million and other goodwill of $2.4 million. The planned amortization of
goodwill for 1996 and 1997 will be $151,000 and $187,000 respectively.
During the six months ended June 30, 1996 Springfield created an
operating subsidiary known as West Central Financial Services. The focus of
this organization will be to generate consumer lending that does not overlap
with Springfield's current consumer lending. Springfield capitalized the
organization with $0.2 million. These funds will be provided as an extension
of credit to West Central Financial Services by Springfield.
On June 14, 1996, the Company entered into an Agreement and Plan of
Merger and Reorganization with Seven Hills Financial Corporation ("Seven
Hills") and Seven Hills Savings Association, pursuant to which Seven Hills
will merge with and into Western Ohio. Upon the merger, each share of common
stock of Seven Hills shall be converted into the right to receive an amount of
cash equal to $19.65 per share. The aggregate transaction value is
approximately $10.5 million. Closing of the transaction is expect to take
place during the fourth quarter of 1996. As of June 30, 1996, Seven Hills had
assets of $44.9 million and total deposits of $34.8 million.
Loans receivable increased $76.9 million during the six months ended June
30, 1996, rising to $227.4 million from $150.5 million on December 31, 1995.
The increase in loans is primarily the result of the addition of Mayflower's
loans receivable amounting to $30.8 million. This, coupled with aggressive
origination efforts on the part of Springfield and Mayflower that resulted in
$46.1 million in originations offset by repayments, comprised the growth.
Management anticipates that it will continue its aggressive marketing of
loans.
Cash and cash equivalents decreased by $12.0 million to $5.6 million on
June 30, 1996, from $17.6 million at December 31, 1995. Cash and cash
equivalents consist of cash, checking deposits and federal funds deposited at
other financial institutions. The decrease is the result of the increase in
total loans.
Investment securities available for sale increased by $18.8 million from
$12.0 million at December 31, 1995, to $30.8 million on June 30, 1996. The
$18.8 million increase is primarily the result of the purchase of a $20.0
million callable Federal Home Loan Mortgage Corporation security coupled with
the call of a $2.0 million Federal Home Loan Bank callable security and the
acquisition of Mayflower.
The Company's mortgage-backed securities available for sale increased by
$8.1 million from $45.7 million on December 31, 1995, to $53.8 million on June
30, 1996, due to the purchase of Mayflower, which held $14.3 million of<PAGE>
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mortgage-backed securities available for sale. The increase from the purchase
of Mayflower was offset by normal repayments on existing mortgage-backed
securities. A portion of these securities is often referred to as
derivatives. The derivative securities are all adjustable rate in nature and
were not "high risk" securities under the criteria set forth by the Federal
Financial Institutions Examination Council ("FFIEC").
The investment in the stock of the Federal Home Loan Bank of Cincinnati
increased by $3.1 million from $1.6 million at December 31, 1995, to $4.7
million at June 30, 1996. The increase is due primarily to the additional
investment required by the increased level of borrowing by Springfield and to
a lesser extent the acquisition of Mayflower. This investment is dictated by
an institution's membership in the Federal Home Loan Bank and is a factor of
the institution's borrowings and total assets. Currently, dividends on such
stock are paid primarily in the form of additional shares of stock.
Premises and equipment have grown by $0.8 million over the six months
from $2.5 million at December 31, 1995, to $3.3 million at June 30, 1996.
This increase is primarily the result of the acquisition of Mayflower.
Other assets increased by $1.5 million over the six months ended June 30,
1996, primarily due to the acquisition of Mayflower coupled with prepaid
franchise tax and other prepaid expenses.
Deposits increased by $47.3 million during the six months ended June 30,
1996. This increase is generally due to the acquisition of Mayflower that
contributed $40.8 million of the increase. Management has aggressively sought
increased deposits. Management believes that both Springfield and Mayflower
need to fund a large portion of their asset growth through growth in their
depositor base.
Advances from the Federal Home Loan Bank of Cincinnati increased by $57.2
million as the result of additional borrowings and to a much lesser extent the
acquisition of Mayflower.
Mayflower's acquisition contributed $2.7 million of the increase. The
remainder are fixed and variable rate advances utilized by Springfield and
Mayflower.
Other liabilities increased $.6 million from $1.1 million on December 31,
1995, to $1.7 million on June 30, 1996. This increase includes accounts
payable attributable to increased business activity as well as increased
escrow holdings for mortgage loans.
Total stockholders' equity decreased $4.1 million from $59.7 million at
December 31, 1995, to $55.6 million at June 30, 1996. This decline is
primarily due to the repurchase of shares for the Company's Stock Option Plan.
Funding the SOP in this manner avoids the dilution inherent in issuing shares
out of authorized but unissued common stock that would have diminished
earnings per share. The Company repurchased 103,000 shares at a cost of $2.4
million during the six months.
The Company has not experienced significant loan losses upon which
management can base its allowance for loan losses. It has however,
established a methodology that applies a factor to each of its types of
lending in seeking to establish objectively an allowance for loan and lease
losses. Based upon the March 31, 1996, composition of its loan portfolio
Springfield's provision was increased from $0.8 million to $1.0 million. In
addition, the acquisition of Mayflower contributed $0.3 million for a total of
$1.3 million in its provision for total loan losses. Management feels that
this total provision is adequate given the low loan losses experienced.
As of June 30, 1996, the Company had commitments to make $1.2 million of
residential loans and no nonresidential mortgage loans. It is expected that
these loans will be funded within 30 days. The Company also had $3.2 million
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in commitments to fund loans on residential properties under construction and
$88,000 remaining in commitments to fund construction of nonresidential
properties. These commitments are anticipated to be filled within nine
months. Unused commercial lines of credit were $559,000 and unused consumer
lines of credit were $1.3 million.
CAPITAL RESOURCES AND LIQUIDITY OF SPRINGFIELD FEDERAL SAVINGS BANK
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The Office of Thrift Supervision (OTS) has three minimum regulatory
capital standards for savings associations. During the six months ended June
30, 1996, Springfield continued to comply with all three requirements. The
following is a summary of Springfield's approximate regulatory capital
position, in dollars (millions) and as a percentage of regulatory assets, at
June 30, 1996.
Actual Required Excess
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Tangible Capital $42.7 15.6% $4.1 1.5% $38.6 14.1%
Core Capital $42.7 15.6% $8.2 3.0% $34.5 12.6%
Risk-Based Capital $43.7 33.0% $10.6 8.0% $33.1 25.0%
Federal regulations require Springfield to maintain an average daily
balance of liquid assets equal to at least 5%, and an average daily balance of
short-term liquid assets equal to at least 1%, of the average daily balance of
its net withdrawable accounts plus short-term borrowings for the preceding
calendar quarter. Liquidity is measured by cash and certain investments that
are not committed, pledged, or required to liquidate specific liabilities.
The following is a summary of Springfield's regulatory liquidity and
short-term liquidity ratios.
June 30, March 31, December 31, June 30,
1996 1996 1995 1995
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Liquid Assets 20.7% 12.4% 13.0% 19.8%
Short-term Assets 4.8% 6.3% 10.4% 12.6%
The above tables pertain only to Springfield. The resources of the
Corporation are not considered in meeting the above requirements.
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CAPITAL RESOURCES AND LIQUIDITY OF MAYFLOWER FEDERAL SAVINGS BANK
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The following is a summary of Mayflower's approximate regulatory capital
position, in dollars (million) and as a percentage of regulatory assets, at
June 30, 1996.
Actual Required Excess
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Tangible Capital $7.6 13.9% $0.8 1.5% $6.8 12.4%
Core Capital $7.6 13.9% $1.6 3.0% $6.0 10.9%
Risk-Based Capital $7.9 27.7% $2.3 8.0% $5.6 19.7%
The following is a summary of Mayflower's regulatory liquidity and
short-term liquidity ratios.
June 30, March 31, December 31, June 30,
1996 1996 1995 1995
-------- -------- ----------- -------
Liquid Assets 6.6% 7.4% 6.8% 6.9%
Short-term Assets 1.2% 2.3% 1.8% 2.1%
The above tables pertain only to Mayflower. The resources of the
Corporation are not considered in meeting the above requirements.
RESULTS OF OPERATIONS
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General
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For the six months ended June 30, 1996, net income declined by $593,000
compared to the six months ended June 30, 1995. The largest factor in the
decline was that the gain on sale of FHLMC stock in the six months ended June
30, 1995, was not present in the six months ended June 30, 1996. The gain on
sale of investments in the six months ended June 30, 1995, was $573,000. For
the quarter ended June 30, 1996, net income declined by $232,000 compared to
the quarter ended June 30, 1995. Again, the largest factor in the decline was
that the gain on sale of FHLMC stock in the quarter ended June 30, 1995, was
not present in the quarter ended June 30, 1996. The gain on sale of
investments in the quarter ended June 30, 1995, was $294,000. Other expenses
also increased for the quarter and six month period due to the acquisition of
Mayflower and expanded operations in 1996 and anticipated future expansions.
Management expects the investment in expanded operations to benefit future
periods.
Interest Income
- ---------------
For the six months ended June 30, 1996, interest income increased by $3.5
million compared to the six months ended June 30, 1995, from $6.9 million to
$10.4 million. Interest and fees on loans increased by $3.0 million for the
six months ended June 30, 1996, compared to the six months ended June 30,
1995. This is due primarily to higher outstanding balances over the first six
months of 1996. Interest on mortgage-backed securities is down by $86,000 due
primarily to repayment on such securities. Interest and dividends on
investment securities rose $910,000 during the six months ended June 30, 1996,
over the six months ended June 30, 1995. The increase in interest and
dividends on investment securities is due to the higher level of investment in
securities. Interest and dividends on investment securities increased
$780,000 from $294,000 for the three months ended June 30, 1995, to $1.1
million for the three months ended June 30, 1996. The increase is the result
of higher levels of investment during the three months ended June 30, 1996, as
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compared to the three months ended June 30, 1995. Other interest income is
down by $281,000 for the six month period and $135,000 for the three month
period as the result of lower levels of federal funds invested over the like
periods from the prior year.
Interest Expense
- ----------------
Interest expense increased by $2.9 million, from $3.0 million for the six
months ended June 30, 1995, as compared to $5.9 million for the six months
ended June 30, 1996. The increase was due to the expansion of both deposits
and Federal Home Loan Bank advances. Management has aggressively marketed its
deposit programs to provide funds for planned asset growth. Interest on
deposits increased by $1.3 million from $2.8 million for the six month period
ended June 30, 1995, to $4.1 million for the six month period ended June 30,
1996. Interest on deposits also increased by $807,000 for the three months
ended June 30, 1996 compared to the three months ended June 30, 1995. The
increased interest on deposits is primarily the result of growth in the
deposit base. Interest on borrowings is all attributable to borrowings from
the Federal Home Loan Bank of Cincinnati. The interest on borrowings
increased $1.6 million from $132,000 for the six months ended June 30, 1995,
to $1.7 million for the six months ended June 30, 1996. The increase is
primarily attributable to expanded borrowings over the whole six month period.
Interest on borrowings increased $1.0 million from $64,000 for the three month
period ending June 30, 1995 to $1.1 million for the three month period ending
June 30, 1996. These borrowings allowed expanded lending and purchase of
agency securities. These borrowings are both fixed and adjustable rate in
nature.
Net Interest Income
- -------------------
Net interest income increased by $670,000 to $4.5 million for the six
months ended June 30, 1996, as compared to $3.8 million for the six months
ended June 30, 1995. Net interest income increased by $566,000 to $2.4
million for the three months ended June 30, 1996, as compared to $1.8 million
for the three months ended June 30, 1995. This expansion is primarily due to
an increase in the total interest-bearing assets.
Allowance for Loan and Lease Losses
- -----------------------------------
There was a $144,000 addition to the provision for loan and lease losses
during the first six months of 1996 and a $6,000 addition during the six
months ended June 30, 1995. There was a $64,000 addition to the provision for
loan and lease losses during the three months ended June 30, 1996 and a $6,000
addition during the three months ended June 30, 1995. As discussed in the
financial condition section, factors have been established that provide for an
objective evaluation of the allowance for loan and lease losses based upon the
portfolio composition and levels of classified assets.
Gain on Sale of Investments
- ---------------------------
There was no gain on sale of investments during the six month period
ended June 30, 1996. The gain on sale of investments in the six months ended
June 30, 1995, was $573,000. The gain on sale of investments in the three
months ended June 30, 1995, was $294,000. These gains were the result of
selling 5,000 shares of FHLMC common stock in each of the first two quarters
of 1995.
Other Income
- ------------
Other income increased from $38,000 for the six months ended June 30,
1995, to $154,000 for the six months ended June 30, 1996. Other income
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increased from $19,000 for the six months ended June 30, 1995, to $131,000 for
the three months ended June 30, 1996. The increases for the six and three
months ended June 30, 1996 compared to the six and three month periods ended
June 30, 1995 are related to fees generated through increased levels of
customer activity. It is anticipated that this source of income will continue
to grow over the next three years. Management feels that it can generate an
increasing stream of fee income by actively marketing new products.
Other Expense
- -------------
Total other expense increased by $873,000 million, from $2.6 million for the
six month period ended June 30, 1995, compared to $3.5 million for the six
month period ended June 30, 1996. Total other expense increased by $654,000,
from $1.3 million for the three month period ended June 30, 1995, compared to
$1.9 million for the three month period ended June 30, 1996. An increase in
staffing and increased salaries and benefits to employees were the primary
reasons for the rise in total other expenses for the three and six month
periods ended June 30, 1996. Other major factors include increases in
franchise taxes, professional services, advertising, insurance premiums and
depreciation. These costs increased due to the expanded activities of the
Company.
Income Tax Expense
- ------------------
Income tax expense decreased in the period ended June 30, 1996, as a result of
changes in earnings before taxes.
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PART II - OTHER INFORMATION
Item 5. Other Information
The deposits of savings associations such as Springfield and Mayflower
are presently insured by the SAIF, which together with the BIF, are the two
insurance funds administered by the FDIC. On August 8, 1995, the FDIC revised
the premium schedule for BIF-insured banks to provide a range of .04% to .31%
of deposits (as compared to the current range of .23% to .31% of deposits for
both BIF and SAIF-insured institutions) in anticipation of the BIF achieving
its statutory reserve ratio. As a result, BIF members generally would pay
lower premiums than the SAIF members. The lower premiums for BIF members took
effect in the third quarter of 1995. It is anticipated that the SAIF will not
be adequately recapitalized until 2002, absent a substantial increase in
premium rates or the imposition of special assessments or other disparity,
SAIF members could be placed at a significant, competitive disadvantage to BIF
members due to higher costs for deposit insurance. A recapitalization plan
under consideration by the Treasury Department, the FDIC, the OTS and the
Congress reportedly provides for a one-time assessment to be imposed on all
deposits assessed at the SAIF rates in order to recapitalize the SAIF and
eliminate or diminish the disparity. Based upon Springfield's and Mayflower's
combined level of SAIF deposits at March 31, 1995, and assuming a special
assessment of .90%, Springfield's and Mayflower's combined assessment would be
approximately $1.5 million on a pre-tax basis. No assurance can be given,
however, as to whether the recapitalization plan will be implemented or as to
the nature or extent of any competitive disadvantage which may be experienced
by SAIF member institutions.
Item 6. Exhibits and Reports on Form 8-K
Exhibits:
Exhibit 27 - Financial Data Schedule
Reports on Form 8-K:
On May 29, 1996, the Company filed a current report on Form 8-K
announcing the completion of its acquisition of Mayflower Financial
Corporation and its subsidiary, Mayflower Savings Bank.
On June 24, 1996, the Company filed a current report on Form 8-K
announcing the entering into of an Agreement and Plan of Merger and
Reorganization with Seven Hills Financial Corporation and Seven Hills Savings
Association pursuant to which Seven Hills will merge with and into Western
Ohio. Following the merger, Seven Hills Savings Association will operate as a
subsidiary of Western Ohio.
<PAGE>
<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.
WESTERN OHIO FINANCIAL CORPORATION
Registrant
Date: August 14, 1996 /s/ C. William Clark
--------------- ------------------------------------
C. William Clark, President
and Chief Executive Officer
(Duly Authorized Officer)
Date: August 14, 1996 /s/ Thomas A. Estep
--------------- ------------------------------------
Thomas A. Estep, Vice President,
Treasurer and Chief Financial Officer
(Principal Financial and Accounting
Officer)
<TABLE> <S> <C>
<PAGE>
<PAGE>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-QSB FOR THE QUARTER ENDED JUNE 30, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,600
<INT-BEARING-DEPOSITS> 591
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