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<PAGE>
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 September 30, 1996 Commission File Number 0-24120
WESTERN OHIO FINANCIAL CORPORATION
- ----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 31-1403116
- -------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
28 East Main Street, Springfield, Ohio 45501-0719
- -------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(513) 325-4683
----------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (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 October 31, 1996 there were 2,190,388 shares of the Registrant's common
stock issued and outstanding.<PAGE>
<PAGE>
INDEX
WESTERN OHIO FINANCIAL CORPORATION
----------------------------------
Pages
PART I. FINANCIAL INFORMATION
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. 8-13
Signatures . . . . . . . . . . . . . . . . . 14
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WESTERN OHIO FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------ -----------
<S> <C> <C>
(Dollars in thousands)
ASSETS
Cash and cash equivalents $ 10,747 $ 17,605
Certificates of Deposit 591 0
Investment securities available for sale,
at market value 31,253 12,039
Mortgage-backed securities available for sale,
at market value 30,788 45,719
Loans receivable, net of allowance for losses 259,542 150,476
Real Estate Owned 56 0
Federal Home Loan Bank stock 5,108 1,602
Premises and equipment 3,437 2,542
Other assets 2,953 1,404
Goodwill 3,229 0
-------- --------
Total Assets $347,704 $231,387
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Savings deposits 191,571 139,129
Advances from the Federal Home Loan
Bank of Cincinnati 99,785 31,528
Other liabilities 3,125 1,062
-------- --------
Total Liabilities 294,481 171,719
-------- --------
Stockholders' equity:
Common stock 26 26
Additional paid-in capital 41,115 41,048
Unrealized gain on securities available for sale,
net of income taxes (852) 631
Deferred management recognition plan expense (826) (1,011)
Unallocated shares held by employee stock
ownership plan (1,845) (2,023)
Treasury stock; 212,914 and 157,914 shares
at cost respectively (7,579) (3,450)
Retained earnings (substantially restricted) 23,184 24,447
-------- --------
Total Stockholders' Equity 53,223 59,668
-------- --------
Total Liabilities and Stockholders' Equity $347,704 $231,387
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
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WESTERN OHIO FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the Quarter For the Nine Months
Ended Ended
September 30, September 30,
------------------- -------------------
1996 1995 1996 1995
-------- ------- -------- -------
<S> <C> <C> <C> <C>
(Dollars in thousands except per share amounts)
Interest Income:
Interest and fees on loans $ 5,078 $ 2,454 $ 12,610 $ 7,003
Interest and dividends on investment securities 665 275 1,658 799
Interest on mortgage-backed securities 664 892 2,341 2,112
Other interest income 84 126 357 680
-------- ------- -------- -------
Total interest income 6,491 3,747 16,966 10,594
-------- ------- -------- -------
Interest expense:
Interest on deposits 2,414 1,630 6,536 4,496
Interest on borrowings 1,332 217 3,064 349
-------- ------- -------- -------
Total Interest expense 3,746 1,847 9,600 4,845
-------- ------- -------- -------
Net interest income 2,745 1,900 7,366 5,749
Provision for losses on loans and securities 195 0 339 6
-------- ------- -------- -------
Net interest income after provision for losses 2,550 1,900 7,027 5,743
Gain on sale of investments 234 310 234 883
Other income 76 15 128 53
Other expense (3,098) (1,314) (6,611) (3,954)
-------- ------- -------- -------
Income before income tax expense (238) 911 778 2,725
Income tax expense (71) 297 313 886
-------- ------- -------- -------
Net Income $ (167) $ 614 $ 465 $ 1,839
======== ======= ======== =======
Earnings per common
and common equivalent share $(0.07) $ 0.25 $ 0.20 $ 0.74
======== ======= ======== =======
</TABLE>
See Notes to Consolidated Financial Statements.
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WESTERN OHIO FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended
September 30,
-------------------------
(Dollars in thousands) 1996 1995
---------- ----------
Cash flows from operating activities $ 2,540 $ 1,112
-------- --------
Cash flows from investing activities:
Loans:
Originations (107,835) (41,028)
Collections 29,233 11,347
Mortgage-backed securities:
Purchases 0 (10,645)
Collections 7,003 3,192
Sales 21,451 0
Investment securities:
Purchases (20,500) (12,000)
Maturities 2,420 14,335
Sales 25 941
Purchase of Federal Home Loan Bank Stock (2,894) 0
Property and equipment:
Additions (442) (396)
Sale proceeds 0 0
Investment in subsidiary (9,140) 0
-------- --------
Net cash provided by investing activities (80,679) (34,254)
-------- --------
Cash flows from financing activities:
Net increase (decrease) in savings deposits 11,661 15,039
Treasury stock repurchase (4,188) (925)
MRP stock repurchase 0 (1,999)
Dividends paid (1,767) (1,922)
Advances from Federal Home Loan Bank 65,575 20,615
-------- --------
Net cash provided (used) by
financing activities 71,281 30,808
-------- --------
Net Increase (decrease) in cash and
cash equivalents (6,858) (2,334)
Cash and cash equivalents:
Beginning 17,605 19,951
-------- --------
Ending $ 10,747 $ 17,617
======== ========
See Notes to Consolidated Financial Statements.
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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 nine months
ended September, 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
nine months of 1996 and the operations of Mayflower for the period March
30, 1996 through September 30, 1996. The statements of income for the
first nine 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 September 30, 1996, the
Corporation is committed to release an additional 11,159 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 nine months of 1996 expenses include nine 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 nine
months ended September 30, 1996 were 2,298,934 and 2,327,270 respectively.
The weighted average number of common shares giving effect to options
outstanding during the three and nine months ended September 30, 1995 were
2,487,439 and 2,487,048 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.
In October 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation, establishing financial accounting and reporting standards
for stock-based employee compensation plans. SFAS No. 123 encourages all
entities to adopt a new method of accounting to measure the compensation
cost of all employee stock compensation plans based on the estimated fair
value of awards at the date they are granted. Companies are, however,
allowed to continue to measure compensation costs for those plans using
the intrinsic value based method of accounting, which generally does not
result in compensation expense recognition for most plans. Companies that
elect to retain their existing accounting method are required to disclose
in a footnote to the financial statements pro forma net income and, if
presented, earnings per share as if SFAS No. 123 had been adopted. The
accounting requirements of SFAS No. 123 are effective for transactions
entered into during fiscal years that begin after December 15, 1995.
Companies are required, however, to disclose information for awards
granted in their first fiscal year ending after December 15, 1994.
Management has not completed an analysis of the potential effects of SFAS
No. 123 on its financial condition of results of operations.
In June 1996, the FASB issued SFAS No 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities, which
established accounting and reporting standards for transfers and servicing
of financial assets and extinguishment of liabilities. The standards are
based on a consistent application of a financial-components approach that
focuses on control. Under that approach, after a transfer of financial
assets an entity recognizes the financial and servicing assets it controls
and the liabilities it has incurred and ceases recognizing financial
assets when control has been surrendered and ceases recognizing
liabilities when they have been extinguished. SFAS No. 125 provides
consistent standards for distinguishing transfers of financial assets that
are sales from transfers that are secured borrowings. SFAS No. 125
supersedes SFAS No. 122. SFAS No. 125 is effective for transactions
occurring after December 31, 1996. Management does not expect an impact
from adoption of SFAS No. 125.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
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 $347.7
million at September 30, 1996, an increase of $116.3 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 $68.3 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 nine months ended September 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. Additional money to fund loans 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 and Seven Hills Savings Association will operate as a
subsidiary of the Company. 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
$19.69782 per share. The aggregate transaction value is approximately $10.5
million. Closing of the transaction is expected to take place during the fourth
quarter of 1996. As of September 30, 1996, Seven Hills had assets of $45.7
million and total deposits of $35.6 million.
Loans receivable increased $109.0 million during the nine months ended
September 30, 1996, rising to $259.5 million from $150.5 million on December 31,
1995. The increase in loans is primarily the result of aggressive origination
and purchase efforts on the part of Springfield and Mayflower that resulted in a
$78.3 million addition to loans offset by repayments. This, coupled with the
addition of Mayflower's loans receivable amounting to $30.8 million comprised
the growth. Management anticipates that it will continue its aggressive
marketing of loans.
Cash and cash equivalents decreased by $6.9 million to $10.7 million on
September 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 and were used to fund the increase in total loans.
Investment securities available for sale increased by $19.2 million from
$12.0 million at December 31, 1995, to $31.3 million on September 30, 1996. The
$19.2 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 decreased by
$14.9 million from $45.7 million on December 31, 1995, to $30.8 million on
September 30, 1996. This decline was due primarily to a sale of mortgage-backed
securities available for sale for which the book value was $21.2 million, offset
by the purchase of Mayflower, which held $14.3 million of mortgage-backed
securities available for sale. The change was also impacted by the normal
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repayments on mortgage-backed securities held by both institutions. 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 $3.5 million from $1.6 million at December 31, 1995, to $5.1
million at September 30, 1996. The increase is due primarily to the additional
investment required by the increased level of borrowing by both Springfield and
Mayflower 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 $0.9 million over the nine months from $2.5
million at December 31, 1995, to $3.4 million at September 30, 1996. This
increase is primarily the result of the acquisition of Mayflower.
Other assets increased by $1.5 million over the nine months ended September 30,
1996, primarily due to the acquisition of Mayflower coupled with prepaid
franchise tax and other prepaid expenses.
Deposits increased by $52.4 million during the nine months ended September
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 prefers that both Springfield and Mayflower fund
a substantial portion of their asset growth through growth in their depositor
base. Most of the current loan growth has been funded through increased Federal
Home Loan Bank of Cincinnati advances.
Advances from the Federal Home Loan Bank of Cincinnati increased by $68.3
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 $2.0 million from $1.1 million on December 31,
1995, to $3.1 million on September 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 $6.5 million from $59.7 million at
December 31, 1995, to $53.2 million at September 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 188,112 shares at a cost of $4.2 million
during the nine 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
June 30, 1996, composition of its loan portfolio Springfield's provision was
increased from $0.8 million to $1.1 million. In addition, the acquisition of
Mayflower contributed $0.3 million for a total of $1.4 million in its provision
for total loan losses. Management feels that this total provision is adequate
given the low loan losses experienced.
As of September 30, 1996, the Company had commitments to make $1.4 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 $6.2 million 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 $491,000 and unused consumer lines of
credit were $2.1 million.
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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 nine months ended
September 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 September 30, 1996.
Actual Required Excess
------------- ---------- -------------
Tangible Capital $42.7 15.2% $ 4.2 1.5% $38.5 13.7%
Core Capital $42.7 15.2% $ 8.5 3.0% $34.2 12.2%
Risk-Based Capital $43.8 29.5% $11.9 8.0% $31.9 21.5%
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.
September 30, June 30, March 31, December 31,
1996 1996 1996 1995
------------ ------- -------- -----------
Liquid Assets 5.5% 1.7% 3.7% 4.5%
Short-term Assets 5.5% 1.7% 3.1% 3.8%
CAPITAL RESOURCES AND LIQUIDITY OF MAYFLOWER FEDERAL SAVINGS BANK
- -----------------------------------------------------------------
The following is a summary of Mayflower's approximate regulatory capital
position, in dollars (million) and as a percentage of regulatory assets, at
September 30, 1996.
Actual Required Excess
------------- ---------- -------------
Tangible Capital $6.6 10.6% $0.9 1.5% $5.7 9.1%
Core Capital $6.6 10.6% $1.9 3.0% $4.7 7.6%
Risk-Based Capital $6.9 19.6% $2.8 8.0% $4.1 11.6%
The following is a summary of Mayflower's regulatory liquidity and
short-term liquidity ratios.
September 30, June 30, March 31, December 31,
1996 1996 1996 1995
------------ ------- -------- -----------
Liquid Assets 5.7% 6.6% 7.4% 6.8%
Short-term Assets 1.3% 1.2% 2.3% 1.8%
The above tables pertain only to Springfield and Mayflower. The resources
of the Company are not considered in meeting the above requirements.
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RESULTS OF OPERATIONS
General
For the nine months ended September 30, 1996, net income declined by $1.4
million compared to the nine months ended September 30, 1995. The largest
factor in the decline was a special assessment to recapitalize SAIF that was
signed into law September 30, 1996. The special assessment resulted in a charge
against earnings of $1.1 million. All institutions holding SAIF insured
deposits were assessed a charge of .657% of deposits held as of March 31, 1995.
The legislation is intended to fully recapitalize the SAIF fund so that
commercial bank and thrift deposits will be charged the same FDIC premiums
beginning October 1, 1996. In addition to the special assessment, a gain on
sale of FHLMC stock in the nine months ended September 30, 1995, was not present
in the nine months ended September 30, 1996. The gain on sale of investments in
the nine months ended September 30, 1995, was $883,000. The gain on sale of
investments in the nine months ended September 30, 1996, was $234,000. For the
quarter ended September 30, 1996, net income declined by $781,000 compared to
the quarter ended September 30, 1995. Again, the largest factor in the decline
was the $1.1 million special assessment to recapitalize SAIF in the quarter
ended September 30, 1996, that was not present in the quarter ended September
30, 1995. Other expenses also increased for the quarter and nine month periods
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 nine months ended September 30, 1996, interest income increased by
$6.4 million compared to the nine months ended September 30, 1995, from $10.6
million to $17.0 million. Interest and fees on loans increased by $5.6 million
for the nine months ended September 30, 1996, compared to the nine months ended
September 30, 1995. This is due primarily to higher outstanding balances over
the first nine months of 1996. Interest on mortgage-backed securities is up by
$229,000 due primarily to the addition of the $14.3 million of mortgage-backed
securities that was the result of the acquisition of Mayflower. Interest on
mortgage-backed securities is down $228,000 from $892,000 for the three months
ended September 30, 1995 to $664,000 for the three months ended September 30,
1996. Interest and dividends on investment securities rose $859,000 during the
nine months ended September 30, 1996, over the nine months ended September 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 $390,000 from $275,000 for the three months
ended September 30, 1995, to $665,000 for the three months ended September 30,
1996. The increase is the result of higher levels of investment during the
three months ended September 30, 1996, as compared to the three months ended
September 30, 1995. Other interest income is down by $323,000 for the nine
month period and $42,000 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 $4.8 million, from $4.8 million for the nine
months ended September 30, 1995, as compared to $9.6 million for the nine months
ended September 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 $2.0 million from $4.5 million for the nine
month period ended September 30, 1995, to $6.5 million for the nine month period
ended September 30, 1996. Interest on deposits also increased by $784,000 for
the three months ended September 30, 1996 compared to the three months ended
September 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 $2.7 million from $349,000 for the nine months ended
September 30, 1995, to $3.1 million for the nine months ended September 30,
1996. The increase is primarily attributable to expanded borrowings over the
whole nine month period. Interest on borrowings increased $1.1 million from
$217,000 for the three month period ending September 30, 1995 to $1.3 million
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for the three month period ending September 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 $1.6 million to $7.4 million for the nine
months ended September 30, 1996, as compared to $5.8 million for the nine months
ended September 30, 1995. Net interest income increased by $845,000 to $2.7
million for the three months ended September 30, 1996, as compared to $1.9
million for the three months ended September 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 $339,000 addition to the allowance for loan and lease losses
during the first nine months of 1996 and a $6,000 addition during the nine
months ended September 30, 1995. There was a $195,000 addition to the provision
for loan and lease losses during the three months ended September 30, 1996 and
no addition during the three months ended September 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 a gain of $234,000 on sale of investments during the nine month
period ended September 30, 1996 as compared to a gain of $883,000 for the nine
months ended September 30, 1995. There was a gain of $234,000 on sale of
investments during the three month period ended September 30, 1996 as compared
to a gain of $310,000 for the three months ended September 30, 1995. The gains
in 1995 were the result of selling 5,000 shares of FHLMC common stock in each of
the first three quarters of 1995. The gain in the three and nine months of 1996
is attributable to the sale of $21.2 million of mortgage-backed securities.
Other Income
Other income increased from $53,000 for the nine months ended September
30, 1995, to $128,000 for the nine months ended September 30, 1996. Other
income increased from $15,000 for the three months ended September 30, 1995, to
$76,000 for the three months ended September 30, 1996. The increases for the
nine and three months ended September 30, 1996 compared to the nine and three
month periods ended September 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 $2.6 million, from $4.0 million for the
nine month period ended September 30, 1995, compared to $6.6 million for the
nine month period ended September 30, 1996. Total other expense increased by
$1.8 million, from $1.3 million for the three month period ended September 30,
1995, compared to $3.1 million for the three month period ended September 30,
1996. The three month and nine month periods ended September 30, 1996 were
impacted by the $1.1 million special assessment levied against SAIF insured
deposits. An increase in staffing and increased salaries and benefits were also
the reasons for the rise in total other expenses for the nine month period ended
September 30, 1996. Other 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 September 30, 1996, as a
result of changes in earnings before taxes.
<PAGE>
<PAGE>
PART II
Item 6. Exhibits and Reports on Form 8-K
Exhibits:
Exhibit 27 - Financial Data Schedule
<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: November 12, 1996 /s/ C. William Clark
--------------------- -----------------------------------
C. William Clark, President
and Chief Executive Officer
(Duly Authorized Officer)
Date: November 12, 1996 /s/ Thomas A. Estep
--------------------- -----------------------------------
Thomas A. Estep, Vice President,
Treasurer and Chief Financial Officer
(Principal Financial and Accounting Officer)
<PAGE>
<TABLE> <S> <C>
<PAGE>
<PAGE>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 5,343
<INT-BEARING-DEPOSITS> 591
<FED-FUNDS-SOLD> 5,404
<TRADING-ASSETS> 0
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0
0
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