Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________ to __________________
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)
Registrant's telephone number, including area code: (937) 325-4683
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of class)
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
requirements for the past 90 days. YES X . NO .
---- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[ ]
The aggregate market value of the voting stock held by non-affiliates
of the registrant, computed by reference to the closing price of such stock on
the Nasdaq National Stock Market as of March 6, 1998, was approximately $60.3
million. (The exclusion from such amount of the market value of the shares owned
by any person shall not be deemed an admission by the registrant that such
person is an affiliate of the registrant.)
As of March 6, 1998, there were issued and outstanding 2,352,236 shares
of the Registrant's Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Parts II and IV of Form 10-K - Portions of the Annual Report to Stockholders for
the fiscal year ended December 31, 1997.
Part III of Form 10-K - Portions of the Proxy Statement for Annual Meeting of
Stockholders.
PART I
Item 1. Business
General
Western Ohio Financial Corporation (the "Company"), a Delaware
corporation, was organized in March 1994 for the purpose of becoming a savings
and loan holding company. During fiscal 1997, the Company owned all of the
outstanding stock of Springfield Federal Savings Bank ("Springfield"), Mayflower
Federal Savings Bank ("Mayflower") and Seven Hills Savings Association ("Seven
Hills") (collectively, the "Banks"). During fiscal 1997, the Company combined
these three institutions into one institution under the name "Cornerstone Bank"
(the "Bank"). Unless otherwise noted, reference during fiscal 1997 includes
Springfield, Mayflower and Seven Hills.
The Company is subject to supervision by the Office of Thrift
Supervision , Department of Treasury ("OTS") and the Bank is subject to
comprehensive regulation, examination and supervision by the OTS and by the
Federal Deposit Insurance Corporation ("FDIC"). Cornerstone Bank is a member of
the Federal Home Loan Bank ("FHLB") System and its deposits are backed by the
full faith and credit of the United States Government and are insured up to
applicable limits by the FDIC.
The Company's primary market area covers Clark, Greene and Hamilton
Counties, Ohio and parts of contiguous counties, and is serviced through its
main office in Springfield, Ohio and nine branch offices in Cincinnati, Enon,
New Carlisle, Springfield, Yellow Springs and Beavercreek. At December 31, 1997,
the Company had total assets of $372.0 million, deposits of $246.9 million and
stockholders' equity of $54.6 million, or 14.7% of total assets. The Company's
Common Stock is traded on the Nasdaq National Market under the symbol "WOFC."
The Company has been, and intends to continue to be, a
community-oriented savings and loan holding company offering a variety of
financial services to meet the needs of the communities it serves. The principal
business of the Company consists of attracting retail deposits from the general
public and investing those funds primarily in one- to four-family residential
mortgage, construction and commercial and multi-family real estate loans and, to
a lesser extent, consumer and commercial business loans, all primarily within
the Company's market areas.
The executive offices of the Company are located at 28 East Main
Street, Springfield, Ohio 45501-0719, and the telephone number at that address
is (800) 600-1884.
The Company's primary market area consists of Clark County and portions
of contiguous counties. Located in west-central Ohio, Clark County's economic
environment consists of a traditional industrial base supplemented by the
service and support industries, and its close proximity to a major U.S. military
installation, Wright Patterson Air Force Base. Navistar Truck Manufacturers is
the largest industrial employer in the county. Its Clark County operations have
provided stable employment for the area over the last several decades. The
Community Hospital and Clark State Community College are also two major
employers in the area. In 1996, Clark County had an unemployment rate of 5.6% as
compared to the State of Ohio at 4.9% and the United States
2
at 5.2%. The unemployment rate in Clark County decreased to 4.6% in 1997 as
compared with 4.5% for the State of Ohio and 5.1% for the United States.
Clark County's population, the rate of increase of which lagged behind
the State of Ohio and national averages, nonetheless can be characterized as
stable, with a population of approximately 148,000 people. From 1990 to 1995,
Clark County's population grew .24%. For 1997, Clark County's median housing
value was approximately $54,900. In the event that real estate prices in Ohio or
the market area substantially weaken or economic conditions decline, the Company
may be adversely affected.
The Company's market area also includes Cincinnati, Ohio. The
Cincinnati metropolitan area, centered in the southwest corner of Ohio, has a
population of approximately 1.8 million. The economic base is generally
considered well diversified and stable. Employment is provided by companies
representing a broad spectrum of industrial sectors, including services,
wholesale/retail, manufacturing, government, and finance. Several "Fortune 500"
companies have headquarters in the Cincinnati area. The unemployment rate is
approximately 3.7% and the median home price is $100,400.
Lending Activities
General. While the Company primarily focuses its lending activities on
the origination of loans secured by first mortgages on owner-occupied,
one-to-four family residences, it also originates multi-family and commercial
real estate and construction loans and, to a lesser extent, consumer and
commercial business loans in its market area. At December 31, 1997, the
Company's net loan portfolio totaled $277.7 million. At December 31, 1997, the
Company's gross loan portfolio totaled $283.6 million, of which $224.3 million,
or 79.1%, was comprised of permanent loans secured by one-to-four family
residences.
The aggregate amount of loans that the Bank is permitted to make under
applicable federal regulations to any one borrower, including related entities,
or the aggregate amount that the Bank could have invested in any one real estate
project, is generally the greater of 15% of unimpaired capital and surplus or
$500,000. See "Regulation - Federal Regulation of Savings Institutions." At
December 31, 1997, the maximum amount which the Bank could have loaned to any
one borrower and the borrower's related entities was $6.6 million. At December
31, 1997, the Banks did not have any loans outstanding in excess of such
limitation. The largest principal balance and commitment to lend to any one
borrower, or group of related borrowers at the Bank was $2.5 million secured by
real estate including four speculation homes, land for development, a personal
residence and a line of credit partially secured by real estate. In addition,
four borrowers had a combined principal and commitment outstanding of $5.3
million at December 31, 1997. The first borrower's outstanding credit is secured
by a twelve unit apartment complex, three two-family investment properties and
ten single-family investment properties. The second borrower's outstanding
credit is secured by a medical building, two fast food restaurants, and a
$200,000 commercial line of credit. The third borrower's outstanding credit is
secured by two warehouses. The fourth borrower's outstanding credit is secured
by a thirty-four unit apartment complex and a mini warehouse storage building.
The security properties on all of these loans are located in the Bank's market
areas. All but one of these loans are performing in accordance with their terms.
The loan to the largest borrower was 90 days delinquent as of December 31, 1997.
3
Management always reserves the right to change its emphasis on the
amount or type of lending in which the Company engages to adjust to market or
other factors, including changes in the Company's asset/liability management
policies.
4
Loan Portfolio Composition. The following information concerning the
composition of the Company's loan portfolio in dollar amounts and in percentages
(before deductions for loans in process, deferred fees and discounts and
allowance for losses) as of the dates indicated.
December 31,
----------------------------------------------------------------------------------
1997 1996 1995
Amount Percent Amount Percent Amount Percent
----------------------------------------------------------------------------------
(Dollars in Thousands)
Real Estate Loans:
One-to-four family............... $224,289 79.10% $242,600 82.21% $131,262 84.93%
Multi-family..................... 11,247 3.97 12,476 4.23 4,502 2.91
Commercial real estate............ 21,583 7.61 20,531 6.96 10,531 6.81
Construction...................... 7,275 2.57 10,965 3.71 5,405 3.50
---------- ----- --------- ------- -------- ------
Total real estate loans........ 264,394 93.25 286,572 97.11 151,700 98.15
---------- ----- --------- ------- -------- ------
Other Loans:
Consumer Loans:
Home equity..................... 6,906 2.43 2,188 0.74 474 0.31
Deposit account................. 485 .17 384 0.13 363 0.24
Home improvement................ 18 --- 31 0.01 --- ---
Other secured................... 5,374 1.90 3,689 1.25 942 0.61
Other........................... 2,493 .88 --- --- 21 0.01
---------- ----- --------- ------- -------- ------
Total consumer loans............ 15,276 5.38 6,292 2.13 1,800 1.17
---------- ----- --------- ------- -------- ------
Commercial business loans......... 3,886 1.37 2,244 0.76 1,056 0.68
---------- ----- --------- ------- -------- ------
Total other loans.............. 19,162 6.75 8,536 2.89 2,856 1.85
---------- ----- --------- ------- -------- ------
Total loans.................... $283,556 100.00% $295,108 100.00% $154,556 100.00%
========= ====== ======== ====== ======== ======
Less:
Loans in process.................. (1,784) (5,651) (2,768)
Deferred fees and discounts....... (119) (130) (538)
Allowance for losses.............. (3,922) (1,716) (774)
---------- --------- --------
Total loans receivable, net.... $277,731 $287,611 $150,476
======== ======== ========
1994 1993
-------------------------- --------------------------
Amount Percent Amount Percent
------------------------------------------------------
Real Estate Loans:
One-to-four family............... $89,184 83.37% $ 86,816 83.97%
Multi-family..................... 4,194 3.92 3,466 3.35
Commercial real estate............ 8,463 7.91 6,002 5.81
Construction...................... 3,252 3.04 6,312 6.10
-------- -------- --------- ------
Total real estate loans........ 105,093 98.24 102,596 99.23
-------- -------- --------- ------
Other Loans:
Consumer Loans:
Home equity..................... 77 0.07 --- ---
Deposit account................. 465 0.43 750 0.72
Home improvement................ 6 0.01 29 0.03
Other secured................... 788 0.74 --- ---
Other........................... 24 0.02 15 0.02
-------- -------- --------- ------
Total consumer loans............ 1,360 1.27 794 0.77
-------- -------- --------- ------
Commercial business loans......... 525 0.49 --- ---
-------- -------- --------- ------
Total other loans.............. 1,885 1.76 794 0.77
-------- -------- --------- ------
Total loans.................... $106,978 100.00% $103,390 100.00%
======== ====== ======== ======
Less:
Loans in process.................. (954) (3,225)
Deferred fees and discounts....... (981) (1,291)
Allowance for losses.............. (774) (774)
-------- ---------
Total loans receivable, net.... $104,269 $ 98,100
======== ========
5
The following table shows the composition of the Company's loan
portfolio by fixed and adjustable rates at the dates indicated.
December 31,
----------------------------------------------------------------------------------
1997 1996 1995
Amount Percent Amount Percent Amount Percent
----------------------------------------------------------------------------------
(Dollars in Thousands)
Fixed-Rate Loans:
Real estate:
One-to-four family....................... $126,375 44.57% $155,232 52.61% $111,117 71.89%
Multi-family............................. 3,355 1.18 5,036 1.71 3,873 2.51
Commercial............................... 8,533 3.01 9,276 3.14 9,307 6.02
Construction............................. 477 .17 7,649 2.59 5,105 3.30
--------- ------ --------- ------- --------- -------
Total fixed-rate real estate loans.... 138,740 48.93 177,193 60.05 129,402 83.72
--------- ------ --------- ------- --------- -------
Commercial business....................... 804 .28 178 .06 401 0.26
Consumer.................................. 7,161 2.53 3,642 1.23 1,326 0.86
--------- ------ --------- ------- --------- -------
Total fixed-rate loans.......... 146,705 51.74 181,013 61.34 131,129 84.84
--------- ------ --------- ------- --------- -------
Adjustable-Rate Loans
Real estate:
One-to-four family....................... 97,969 34.55 87,368 29.61% 20,145 13.04%
Multi family............................. 7,892 2.78 7,440 2.52 629 0.41
Commercial............................... 13,049 4.60 11,255 3.81 1,224 0.79
Construction............................. 6,798 2.40 3,316 1.12 300 0.19
--------- ------ --------- ------- --------- -------
Total adjustable-rate real estate loans 125,708 44.33 109,379 37.06 22,298 14.43
--------- ------ --------- ------- --------- -------
Commercial business...................... 3,082 1.09 2,066 .70 655 0.42
Consumer.................................. 8,061 2.84 2,650 .90 474 0.31
--------- ------ --------- ------- --------- -------
Total adjustable-rate loans........... 136,851 48.26 114,095 38.66 23,427 15.16
--------- ------ --------- ------- --------- -------
Total loans........................... 283,556 100.00% 295,108 100.00% 154,556 100.00%
------- ====== --------- ====== ------- ======
Less:
Loans in process.......................... (1,784) (5,651) (2,768)
Deferred fees and discounts............... (119) (130) (538)
Allowance for loan losses................. (3,922) (1,716) (774)
---------- ---------- ------------
Total loans receivable, net............ $277,731 $287,611 $150,476
======== ======== ========
1994 1993
-------------------------- --------------------------
Amount Percent Amount Percent
------------------------------------------------------
Fixed-Rate Loans:
Real estate:
One-to-four family....................... $ 89,184 83.37% $ 86,816 83.97%
Multi-family............................. 4,194 3.92 3,466 3.35
Commercial............................... 8,463 7.91 6,002 5.81
Construction............................. 3,252 3.04 6,312 6.10
-------- ------- -------- -------
Total fixed-rate real estate loans.... 105,093 98.24 102,596 99.23
-------- ------- -------- -------
Commercial business....................... --- --- --- ---
Consumer.................................. 1,282 1.20 794 0.77
-------- ------- -------- -------
Total fixed-rate loans.......... 106,375 99.44 103,390 100.00
-------- ------- -------- -------
Adjustable-Rate Loans
Real estate:
One-to-four family....................... --- --- --- ---
Multi family............................. --- --- --- ---
Commercial............................... --- --- --- ---
Construction............................. --- --- --- ---
-------- ------- -------- -------
Total adjustable-rate real estate loans --- --- --- ---
-------- ------- -------- -------
Commercial business...................... 525 0.49 --- ---
Consumer.................................. 77 0.07 --- ---
-------- ------- -------- -------
Total adjustable-rate loans........... 602 0.56 --- ---
-------- ------- -------- -------
Total loans........................... 106,978 100.00% 103,390 100.00%
-------- ====== -------- ======
Less:
Loans in process.......................... (954) (3,225)
Deferred fees and discounts............... (981) (1,291)
Allowance for loan losses................. (774) (774)
-------- --------
Total loans receivable, net............ $104,269 $ 98,100
======== ========
6
The following schedule illustrates the maturities of the Company's loan
portfolio at December 31, 1997. Loans which have adjustable or renegotiable
interest rates are shown as maturing in the period during which the contract is
due. The schedule does not reflect the effects of possible prepayments or
enforcement of due-on-sale clauses.
Real Estate
--------------------------------------------------------
Multi-family Commercial business
One-to-four family and Commercial and Consumer Total
----------------------------- ------------------------ ------------------------- ------------------
Weighted Weighted Weighted Weighted
Average Average Average Average
Amount Rate Amount Rate Amount Rate Amount Rate
------- ----------- -------- ---------- -------- ---------- ------ ---------
(Dollars in Thousands)
Due During
Periods Ending
December 31,
- ------------------
1998(1)................ 2,637 8.54% 1,285 8.76% 3,109 8.64% 7,031 8.62%
1999................... 127 9.48 417 9.47 494 8.84 1,038 9.17
2000................... 254 9.14 1,106 9.54 5,551 8.83 6,911 8.96
2001 and 2002.......... 2,787 9.01 6,839 9.11 1,253 8.09 10,879 8.97
2003 to 2007........... 19,438 8.17 4,451 9.01 7,107 8.41 30,996 8.35
2008 to 2017........... 66,811 7.85 15,592 8.59 1,177 10.71 83,580 8.03
2018 and following..... 137,913 7.73 4,790 8.79 418 9.15 143,121 7.77
- -------------
(1) Includes demand loans and loans having no stated maturity.
At December 31, 1997, the total amount of loans due after December 31,
1998 which have predetermined interest rates is $144.9 million, while $131.6
million loans due after such dates have floating or adjustable interest rates.
One-to-Four Family Residential Mortgage and Construction Lending. The
Company focuses its lending efforts on the origination of loans secured by first
mortgages on owner-occupied, one-to-four family residences. Residential loan
originations of this type are generated by the Company's marketing efforts, its
present customers, walk-in customers and referrals from real estate agents and
builders. At December 31, 1997, the Company's one-to-four family residential
permanent mortgage loans totaled $224.3 million, or 79.1% of the Company's total
gross loan portfolio.
At December 31, 1997, $126.4 million of the Company's one-to-four
family residential mortgage loans, or 44.6% of the Company's total gross loan
portfolio, had fixed interest rates. From time to time, the Company may purchase
loans secured by one-to-four family residences. See "Originations, Purchases and
Sales of Loans and Mortgage-Backed Securities."
The Company currently originates up to a maximum of 30-year, owner
occupied one-to-four family residential mortgage loans in amounts up to 97% of
the appraised value of the security
7
property provided that private mortgage insurance is obtained in an amount
sufficient to reduce the Company's exposure to at or below the 80% loan-to-value
level. Interest rates charged on these loans are priced on a regular basis
according to market conditions. Residential loans do not include prepayment
penalties. The Company also originates up to a maximum of 30-year one-to-four
family residential loans to nonowner-occupants, with loan-to-value ratios of up
to 80%.
In underwriting one-to-four family residential real estate loans, the
Company evaluates, among other things, both the borrower's ability to make
monthly payments and the value of the property securing the loan. Most
properties securing real estate loans made by the Company are appraised by
independent licensed fee appraisers approved by the Board of Directors. The
Company requires borrowers to obtain title, fire and property insurance
(including flood insurance, if necessary) in an amount not less than the amount
of the loan. In prior years, the Company had accepted title opinions. Real
estate loans originated by the Company generally contain a "due on sale" clause
allowing the Company to declare the unpaid principal balance due and payable
upon the sale or disposition of the secured property.
The Company originates a limited number of loans to finance the
construction of one-to-four family residences. At December 31, 1997, the Company
had loans to finance the construction of one-to-four family residences totaling
$5.6 million, or 2.0% of the Company's loan portfolio. Substantially all of
these loans are made to individuals who propose to occupy the premises upon
completion of construction. Construction loans are generally structured for up
to a 30-year term with a six month construction phase, during which the borrower
pays interest only. Upon completion of the construction phase, these loans
continue as permanent loans of the Company. Loan proceeds are disbursed in
increments as construction progresses and as inspections warrant.
Multi-Family and Commercial Real Estate Lending. The Company has also
engaged in commercial and multi-family real estate lending in its market areas.
At December 31, 1997, the Company had $32.8 million of permanent commercial and
multi-family real estate loans, which represented 11.6% of the Company's gross
loan portfolio. The Company also has $1.7 million in construction loans secured
by multi-family and commercial real estate.
The Company's commercial and multi-family real estate loan portfolio is
secured primarily by apartment buildings, office buildings, strip shopping
centers, motels, nursing homes, restaurants and churches located in the
Company's market area. Multi-family and commercial real estate loans generally
have terms that do not exceed 15 years. Generally, the loans are made in amounts
up to 75% of the appraised value of the secured property. The Company analyzes
the financial condition of the borrower, the borrower's credit history, and the
reliability and predictability of the cash flow generated by the property
securing the loan. Currently, appraisals on properties securing multi-family and
commercial real estate loans originated by the Company are performed by
independent licensed fee appraisers.
Construction loans on multi-family and commercial real estate projects
are structured to be converted to permanent loans at the end of the construction
phase, which generally runs up to 12 months. These construction loans have rates
and terms which generally match any permanent multi-family or commercial real
estate loan then offered by the Company, except that during the
8
construction phase, the borrower pays interest only. These loans generally
provide for the payment of interest and loan fees from loan proceeds.
Construction and development loans are obtained principally through
continued business from developers and builders who have previously borrowed
from the Company, as well as referrals from existing customers and walk-in
customers. The application process includes a submission to the Company of
accurate plans, specifications and costs of the project to be
constructed/developed. These items are used as a basis to determine the
appraised value of the subject property. Loans are based on the lesser of
current appraised value and/or the cost of construction (land plus building).
In addition, the Company from time to time has purchased loans secured
by multi-family real estate. The Company purchased two multi-family real estate
participation loans in fiscal 1997.
Loans secured by commercial and multi-family real estate properties are
generally larger and involve a greater degree of credit risk than one-to-four
family residential mortgage loans. Because payments on loans secured by
commercial real estate properties are often dependent on the successful
operation or management of the properties, repayment of such loans may be
subject to adverse conditions in the real estate market or the economy. If the
cash flow from the project is reduced (for example, if leases are not obtained
or renewed), the borrower's ability to repay the loan may be impaired. The three
largest loans are as follows: (1) $1,105,500 secured by land; (2) $948,127
secured by a commercial building used for medical services, two fast food
restaurants and a $200,000 commercial line of credit; and (3) $747,776 secured
by warehouses.
Consumer Lending. The Company offers secured consumer loans, including
home improvement loans, home equity loans, loans secured by savings deposits and
equity securities, and retail mobile home loans. The Company has plans to expand
its consumer lending portfolio. The Company currently originates all of its
consumer loans in its primary market area. The Company originates consumer loans
on a direct basis by extending credit directly to the borrower.
At December 31, 1997, deposit loans were $485,000 or .2% of the
Company's gross loan portfolio. Home equity loans were $6.9 million or 2.4% of
the Company's gross loan portfolio as of that date.
Consumer loan terms vary according to the type and value of collateral,
length of contract and creditworthiness of the borrower. Loans secured by
deposit accounts at the Company are currently originated for up to 90% of the
account balance with a hold placed on the account restricting the withdrawal of
the account balance.
The underwriting standards employed by the Company for consumer loans,
other than loans secured by deposits, include an application, a determination of
the applicant's payment history on other debts and an assessment of ability to
meet existing obligations and payments on the proposed loan. Although
creditworthiness of the applicant is a primary consideration, the underwriting
process also includes a comparison of the value of the security, if any, in
relation to the proposed loan amount. The Company offers both secured and
unsecured loans.
9
Consumer loans may entail greater credit risk than do residential
mortgage loans, particularly in the case of consumer loans which are unsecured.
In such cases, any repossessed collateral for a defaulted consumer loan may not
provide an adequate source of repayment of the outstanding loan balance as a
result of the greater likelihood of damage, loss, depreciation or fluctuation in
value. In addition, consumer loan collections are dependent on the borrower's
continuing financial stability, and thus are more likely to be affected by
adverse personal circumstances. Furthermore, the application of various federal
and state laws, including bankruptcy and insolvency laws, may limit the amount
which can be recovered on such loans. At December 31, 1997, $322,000 of the
Company's consumer loans were not performing in accordance with their terms.
However, there can be no assurance that further delinquencies will not occur in
the future.
Commercial Business Lending. Commercial business loans have been added
to the list of the Company's products. The outstanding balance of unsecured
commercial lines of credit was $2.3 million as of December 31, 1997. Commercial
loans secured other than by mortgage had outstanding balances of $1.6 million as
of December 31, 1997. The purpose of these loans will generally be for working
capital or expansion of existing businesses. These loans have been priced at
prime plus a specified spread, or at the one year constant maturity treasury
index plus a specified spread. Some of these loans are payable on demand.
Unlike residential mortgage loans, which generally are made on the
basis of the borrower's ability to make repayment from his or her employment and
other income and which are secured by real property the value of which tends to
be more easily ascertainable, commercial business loans typically are made on
the basis of the borrower's ability to make repayment from the cash flow of the
borrower's business. As a result, the availability of funds for the repayment of
commercial business loans may be substantially dependent on the success of the
business itself (which, in turn, is likely to be dependent upon the general
economic environment). The Bank's commercial business loans may be secured by
business assets. However, the collateral securing the loans may depreciate over
time, may be difficult to appraise and may fluctuate in value based on the
success of the business.
Originations, Purchases and Sales of Loans and Mortgage-Backed Securities
Loan originations are developed from advertising, continuing business
with depositors and borrowers, soliciting realtors and builders, walk-in
customers and correspondent relationships in other markets. Loans are originated
by salaried loan officers, field originators compensated by salary and
commission.
While the Company offers fixed-rate and adjustable-rate loans, its
ability to originate loans is dependent upon the relative customer demand for
loans in its market, which is affected by the interest rate environment and
other factors. In fiscal 1997, the Company originated $49.1 million in
fixed-rate loans and $12.5 million in adjustable-rate loans. The Company
purchased a total of $10.6 million agency-backed collateralized mortgage
obligations ("CMOs") and real estate mortgage investment conduit ("REMIC")
investments in fiscal 1995, all of which had adjustable rates. The Company did
not purchase any mortgage-backed securities in 1995. All of the CMO and REMIC
securities purchased in 1995 were purchased to be held in the Company's
available-for-sale portfolio.
10
The Company also purchased $8.8 million of loans in 1995 secured by
owner-occupied, one-to-four family residences, most of which had fixed interest
rates.
During fiscal 1996, the Company sold $17.8 million in fixed rate loans
and $21.8 million in CMO, REMIC and mortgage-backed securities, as well as
purchased $45.2 million in fixed and adjustable rate loans. The Company has sold
$15.7 million in fixed rate loans and purchased $3.7 fixed and adjustable rate
loans during 1997. The Company also sold $10.7 million in REMIC and
mortgage-backed securities during 1997.
In periods of economic uncertainty, the ability of financial
institutions, including the Company, to originate large dollar volumes of real
estate loans may be substantially reduced or restricted, with a resultant
decrease in related loan origination fees, other fee income and operating
earnings.
11
The following table shows the origination, purchase, sale and repayment
activities of the Company for the periods indicated.
Year Ended December 31,
----------------------------------------------------
1997 1996 1995
----------------------------------------------------
(In Thousands)
Originations by type:
Adjustable-rate:
Construction............................................... $11,521 $11,256 $ 300
Real estate - one to four family............................ 23,600 33,075 11,380
- multi-family............................... 593 357 629
- commercial................................. 3,276 2,567 1,224
Commercial business.......................................... 1,894 1,860 130
Consumer - home equity....................................... 5,996 1,562 397
Other consumer............................................... 2,247 119 ---
Fixed-rate:
Construction............................................... 280
Commercial business........................................ 627 388 457
Consumer................................................... 7,213 3,422 430
Real estate - one-to-four family........................... 4,263 28,029 38,043
- multi-family............................... --- 500 584
------------
- commercial................................. 141 60 ---
---------- --------- ----------
Total loans originated.............................. 61,651 83,195 53,574
-------- -------- -------
Purchases:
Acquisitions:
Loans...................................................... --- 66,433 ---
MBS........................................................ 3,710 20,729 ---
One-to-four family........................................... --- 45,236 8,765
Mortgage derivative securities............................... --- --- 10,636
------------ ----------- -------
Total purchased....................................... 3,710 32,398 19,401
--------- -------- -------
Sales and Repayments:
Loans:
Loan sale.................................................. 15,751 17,783 ---
MBS sale................................................... 10,684 21,770 ---
MBS payments............................................... 3,908 7,567 ---
Loan payments.............................................. 57,604 37,730 ---
Principal repayments......................................... --- --- 22,638
Effect of classification to available-for-sale............... --- --- (975)
------------- ----------- -------
Total reductions...................................... 87,947 84,850 21,663
-------- -------- -------
Increase (decrease) in other items, net...................... (1,704) (2,484) 81
--------- --------- ---------
Net increase (decrease).............................. $24,290 $128,259 $51,393
======= ======== =======
12
Non-Performing Assets and Classified Assets
When a borrower fails to make a required payment on real estate secured
loans and consumer loans a notice is sent 30 days after payment is due. At 60
days after the payment is due, the Company generally institutes collection
procedures by notice and/or telephone. In most cases, delinquencies are cured
promptly; however, if a loan secured by real estate or other collateral has been
delinquent for more than 90 days, satisfactory payment arrangements must be
adhered to or the Company will initiate proceedings for foreclosure or
repossession.
When a loan becomes delinquent 90 days or more or when the collection
of principal or interest becomes doubtful, the Company will place the loan on a
non-accrual status and, as a result, previously accrued interest income on the
loan is taken out of current income. The loan will remain on a non-accrual
status as long as the loan is 90 days or more delinquent.
The following table sets forth information concerning delinquent loans
at December 31, 1997. The amounts presented represent the total remaining
principal balances of the related loans, rather than the actual payment amounts
which are overdue and are reflected as a percentage of the type of loan
category.
Loans Delinquent For:
----------------------------------------------------------------------------------------------------------
30-59 Days 60-89 Days 90 Days and over
---------------------------------------------------------------------- -----------------------------------
Number Amount Percent Number Amount Percent Number Amount Percent
----------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
Real Estate:
One-to-four family...... 45 $1,995 .86% 1 $523 .23% 16 $ 612 .26%
Non-residential......... 5 261 .80 2 489 1.49 4 1,061 3.23
Consumer/Commercial..... 50 354 1.85 14 103 .54 30 322 1.68
13
The table below sets forth the amounts and categories of non-performing
assets in the Company's loan portfolio. For all periods presented, the Company
has had no troubled debt restructurings (which involve forgiving a portion of
interest or principal on any loans or making loans at a rate materially less
than that of market rates). Foreclosed assets include assets acquired in
settlement of loans.
At December 31,
-------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- ---------- ---------- ----------
(Dollars in Thousands)
Non-accruing loans:
One-to-four family.................................. $ 612 $ 674 $ 579 $ 75 $235
Consumer............................................ 213 10 --- --- ---
Commercial real estate.............................. 1,170 1,266 --- --- 294
----- ------ ------ ------ ----
Total............................................ 1,995 1,950 579 75 529
----- ------ ----- ----- ----
Accruing loans delinquent more than 90 days........... --- 94 --- --- ---
Foreclosed assets..................................... 56 55 --- --- ---
-------- ------- ------ ------ -----
Total non-performing assets........................... $2,051 $2,099 $579 $ 75 $529
====== ====== ==== ===== ====
Total as a percentage of total assets................. .55% .52% .25% .04% .36%
====== ====== ==== ===== ====
For the year ended December 31, 1997, gross interest income that would
have been recorded had the non-accruing loans been current in accordance with
their original terms amounted to approximately $178,000. The Company did not
include any interest income on such loans in 1997.
Non-Performing Assets. Included in the table above in nonaccruing
one-to-four family loans at December 31, 1997, were 16 loans secured by
single-family residences located in the Company's primary market area. Also
included in non-performing assets are 26 consumer loans and 8 commercial real
estate loans.
Other Loans of Concern. Not categorized as non-performing assets at
December 31, 1997, were $2.4 million of potential problem loans. The potential
problem loans consisted of 28 single family residences, three commercial real
estate loans, two multi-family loans and four commercial loans.
Classified Assets. Federal regulations provide for the classification
of loans and other assets such as debt and equity securities considered by the
OTS to be of lesser quality, as "substandard," "doubtful" or "loss." An asset is
considered "substandard" if it is inadequately protected by the current net
worth and paying capacity of the obligor or of the collateral pledged, if any.
"Substandard" assets include those characterized by the "distinct possibility"
that the savings bank will sustain "some loss" if the deficiencies are not
corrected. Assets classified as "doubtful" have all of the weaknesses inherent
in those classified "substandard," with the added characteristic that the
weaknesses present make "collection or liquidation in full," on the basis of
currently existing facts, conditions, and values, "highly questionable and
improbable." Assets classified as "loss" are those considered "uncollectible"
and of such little value that their continuance as assets without the
establishment of a specific loss reserve is not warranted. Assets which do not
currently expose the
14
savings bank to sufficient risk to warrant classification in one of the
aforementioned categories, but possess weaknesses, are required to be designated
"special mention" by management.
When a bank classifies problem assets as either substandard or
doubtful, it may establish general allowances for loan losses in an amount
deemed prudent by management. General allowances represent loss allowances which
have been established to recognize the inherent risk associated with lending
activities, but which, unlike specific allowances, have not been allocated to
particular problem assets. When a savings bank classifies problem assets as
"loss," it is required either to establish a specific allowance for losses equal
to 100% of that portion of the asset so classified or to charge-off such amount.
A savings bank's determination as to the classification of its assets and the
amount of its valuation allowances is subject to review by the savings bank's
Regional Director at the regional OTS office, who may order the establishment of
additional general or specific loss allowances.
In connection with the filing of its periodic reports with the OTS and
in accordance with its classification of assets policy, the Bank regularly
reviews the loans in its portfolio to determine whether any loans require
classification in accordance with applicable regulations. On the basis of
management's review of its assets, at December 31, 1997, the Bank had classified
a total of $3.0 million of its assets as substandard, $58,000 as doubtful and
none as loss. At December 31, 1997, total classified assets were $3.1 million,
or .8% of the Bank's assets.
Allowance for Loan Losses. The allowance for loan losses is established
through a provision for loan losses based on management's evaluation of the risk
inherent in its loan portfolio and changes in the nature and volume of its loan
activity. Such evaluation, which includes a review of loans for which full
collectibility may not be reasonably assured, considers among other matters, the
estimated fair value of the underlying collateral, economic conditions,
historical loan loss experience and other factors that warrant recognition in
providing for an adequate loan loss allowance.
Real estate properties acquired through foreclosure are recorded at
fair value. If fair value at the date of foreclosure is lower than the balance
of the related loan, the difference will be charged-off to the allowance at the
time of transfer. Valuations are periodically updated by management and if the
value declines, a specific provision for losses on such property is established
by a charge to operations.
Although management believes that it uses the best information
available to determine the allowances, unforeseen market conditions could result
in adjustments and net earnings could be significantly affected if circumstances
differ substantially from the assumptions used in making the final
determination. Future additions to the Company's allowances will be the result
of periodic loan, property and collateral reviews and thus cannot be predicted
in advance. In the fourth quarter of fiscal 1997, the Company provided an
allowance of $1.9 million for certain loans. These loans were primarily of a
commercial nature. At December 31, 1997, the Company had a total allowance for
loan losses of $3.9 million, or 1.4% of loans receivable, net. See Note 4 of the
Notes to Consolidated Financial Statements in the Company's Annual Report to
Stockholders filed as Exhibit 13 hereto.
15
The following table sets forth an analysis of the Company's allowance
for loan losses.
Year Ended December 31,
-------------------------------------------------------------
1997 1996 1995 1994 1993
-------------------------------------------------------------
(Dollars in Thousands)
Balance at beginning of period..................... $1,716 $ 774 $774 $774 $ 37
Beginning balance acquisition...................... --- 577 --- --- ---
Charge-offs:
One-to-four family............................... 79 34 6 --- ---
Recoveries......................................... --- --- --- --- ---
------ ------- ------ ------ ------
Net charge-offs.................................... 79 34 6 --- ---
Additions charged to operations.................... 2,285 399 6 --- 737
------ ------- ------ ------ ----
Balance at end of period........................... $3,922 $1,716 $774 $774 $774
====== ====== ==== ==== ====
Ratio of net charge-offs during the period to
average loans outstanding during the period..... -- .01% -- ---% ---%
===== --- ===== === ===
Ratio of net charge-offs during the period to
average non-performing assets.................. 3.81% 1.66% 2.99% ---% ---%
==== ==== ==== === ===
The distribution of the Company's allowance for losses on loans at the
dates indicated is summarized as follows:
December 31,
------------------------------------------------------------------------------
1997 1996 1995
----------------------- -------------------------- --------------------------
Percent Percent Percent
of Loans of Loans of Loans
in Each in Each in Each
Category Category Category
to Total to Total to Total
Amount Loans Amount Loans Amount Loans
---------- ------------ --------- ----------- --------- --------------
(Dollars in Thousands)
One-to-four family.................. $ 669 79.10% $ 636 82.07% $287 84.93%
Multi-family........................ 190 3.97 197 4.23 59 2.91
Commercial real estate.............. 1,338 7.61 504 6.96 253 6.81
Consumer............................ 548 5.38 81 2.27 18 1.17
Construction........................ 72 2.57 46 3.71 22 3.50
Classified assets................... 673 --- 214 --- 108 ---
Commercial.......................... 432 1.37 38 .76 21 0.68
Unallocated......................... --- --- --- --- 6 ---
------ ------ ------ ------- ----- ------
Total.......................... $3,922 100.00% $1,716 100.00% $774 100.00%
====== ====== ====== ====== ==== ======
16
Investment Activities
The Bank must maintain minimum levels of investments that qualify as
liquid assets under OTS regulations. Liquidity may increase or decrease
depending upon the availability of funds and comparative yields on investments
in relation to the return on loans. Historically, the Bank has generally
maintained its liquid assets above the minimum requirements imposed by the OTS
regulations and at a level believed adequate to meet requirements of normal
daily activities, repayment of maturing debt and potential deposit outflows. As
of December 31, 1997, the Bank's liquidity ratios (liquid assets as a percentage
of net withdrawable savings deposits and current borrowings) was in compliance
with applicable regulations. See "Regulation - Liquidity."
Federally chartered savings institutions have the authority to invest
in various types of liquid assets, including United States Treasury obligations,
securities of various federal agencies, certain certificates of deposit of
insured banks and savings institutions, certain bankers' acceptances, repurchase
agreements and federal funds. Subject to various restrictions, federally
chartered savings institutions may also invest their assets in commercial paper,
investment grade corporate debt securities and mutual funds whose assets conform
to the investments that a federally chartered savings institution is otherwise
authorized to make directly.
Generally, the investment policy of the Company is to invest funds
among various categories of investments and maturities based upon the Company's
need for liquidity, to achieve the proper balance between its desire to minimize
risk and maximize yield, to provide collateral for borrowings, and to fulfill
the Company's asset/liability management policies.
At December 31, 1997, the Company's cash and interest-bearing deposits
in other financial institutions totaled $31.2 million, or 8.4% of total assets.
The Company also has a $6.5 million investment in the common stock of the FHLB
of Cincinnati in order to satisfy the requirement for membership therein.
OTS regulations restrict investments in corporate debt and equity
securities by the Bank. These restrictions include prohibitions against
investments in the debt securities of any one issuer in excess of 15% of the
Bank's unimpaired capital and unimpaired surplus as defined by federal
regulations, plus an additional 10% if the investments are fully secured by
readily marketable collateral. At December 31, 1997, the Bank was in compliance
with this regulation. See "Regulation - Federal Regulation of Savings
Institutions" for a discussion of additional restrictions on the Bank's
investment activities.
In November 1995, the Financial Accounting Standards Board issued a
special report, A Guide to Implementation of Statement 115 on Accounting for
Certain Investments in Debt and Equity Securities, which provided technical
interpretations and guidance relating to the adoption of SFAS No. 115. The guide
allowed an enterprise to reassess the appropriateness of the classifications of
all securities held at that time and to account for any resulting
reclassification at fair value in accordance with SFAS No. 115. One-time
reassessments had to be made no later than December 31, 1995. Accordingly,
management reclassified approximately $32.1 million of mortgage-backed
securities from "held to maturity" to "available for sale" on December 14, 1995,
to reflect its intention regarding those investments. See Note 3 to the Notes
to Consolidated Financial Statements.
17
The following table sets forth the composition of the Company's
investment portfolio at the dates indicated.
December 31,
---------------------------------------------------------------------------------
1997 1996 1995
---------------------------------------------------------------------------------
Book % of Book % of Book % of
Value Total Value Total Value Total
------------------------- ------------------------ ------------ ----------------
(Dollars in Thousands)
Investment Securities:
U.S. government securities................ $ 501 .88% $ 794 1.50$ --- ---%
Federal agency obligations................ 21,820 38.24 35,298 66.79 12,039 45.06
------ ----- -------- ------ ------ ------
Subtotal............................... 22,321 39.12 36,092 68.29 12,039 45.06
------ ----- ------ ------
FHLB stock.................................. 6,470 11.34 5,862 11.09 1,602 6.00
FHLMC stock................................. 134 .23 3 --- --- ---
------- -------- --------- ------- ------- -------
Total investment securities and
FHLB/FHLMC stock.................... 28,925 50.69 41,957 79.38 13,641 51.06
------ ----- -------- ------ ------ ------
Average remaining life of investment
securities............................... 7.51 years 4.78 years .24 years
Other Interest-Earning Assets:
Interest-bearing deposits with banks...... 22,022 38.60 2,747 5.20 2,000 7.49
Federal funds sold........................ 6,110 10.71 8,148 15.42 11,075 41.45
------- ------- -------- ------- ------- ------
Total.................................. $57,057 100.00% $52,852 100.00% $26,716 100.00%
======= ====== ======= ====== ======= ======
Average remaining life or term to
repricing of investment securities and
other interest-earning assets, excluding
FHLB/FHLMC stock........................... 3.32 years 3.77 years .12 years
The composition and maturities of the investment securities portfolio,
excluding FHLB of Cincinnati stock, are indicated in the following table.
December 31, 1997
-------------------------------------------------------------------------
Less Than 1 to 5 Over 5
1 Year Years Years Total Investment Securities
-------------------------------------------------------------------------
Book Value Book Value Book Value Book Value Market Value
-------------------------------------------------------------------------
(Dollars in Thousands)
U.S. government securities....................... $ --- $ 501 $ --- $ 501 $ 501
Federal agency obligations....................... 1,195 500 20,125 21,820 21,820
----- ------ ------ ------ --------
Total investment securities...................... $1,195 $1,001 $20,125 $22,321 $22,321
====== ====== ======= ======= =======
Weighted average yield........................... 5.14% 6.45% 6.69% 6.21% 6.21%
18
Mortgage-Backed Securities. The Company had a $22.4 million portfolio
of mortgage-backed securities at December 31, 1997, all of which were insured or
guaranteed by the Federal National Mortgage Association ("FNMA") or the Federal
Home Loan Mortgage Corporation ("FHLMC"). Accordingly, management believes that
the Company's mortgage-backed securities are generally more resistant to credit
problems than loans, which generally lack such insurance or guarantees. Because
these securities represent a pass through of principal and interest from
underlying individual 30-year mortgages, such securities do present prepayment
risk. Any such individual security contains mortgages that can be prepaid at any
time over the life of the security. In a rising interest rate environment the
underlying mortgages are likely to extend their lives versus a stable or
declining rate environment. A declining rate environment can result in rapid
prepayment. There is no certainty as to the security life or speed of
prepayment. The geographic makeup and correlated economic conditions of the
underlying mortgages also play an important role in determining prepayment. In
addition to prepayment risk, interest rate risk is inherent in holding any debt
security. As interest rates rise the value of the security declines and
conversely as interest rates decline values rise. Adjustable-rate
mortgage-backed securities have the advantage of moving their interest rate
within limits with the contractual index used, subject to the risk of
prepayment. Interest rate adjustments to $7.7 million of the Company's
adjustable-rate mortgage-backed securities are tied to the One Year Constant
Maturity Treasury Index, $9.4 million are tied to the 11th District cost of
funds and $100,000 are tied to the six month treasury. At December 31, 1997, 78%
of the Company's mortgage-backed securities consisted of adjustable-rate
mortgage-backed securities.
Mortgage-backed securities can serve as collateral for borrowings and,
through sales and repayments, as a source of liquidity. For information
regarding the carrying and market values of the Company's mortgage-backed
securities portfolio, see Note 3 of the Notes to Consolidated Financial
Statements in the Company's Annual Report to Stockholders filed as Exhibit 13
hereto. Under the OTS risk-based capital requirement, mortgage-backed securities
have a risk weight of 20% (or 0% in the case of Government National Mortgage
Association securities) in contrast to the 50% risk weight carried by
residential loans. See "Regulation." Management has purchased mortgage-backed
securities in order to supplement loan originations and in 1994 converted a
portion of its fixed-rate mortgage-backed securities to adjustable-rate
mortgage-backed securities to mitigate the consequences of an entirely
fixed-rate mortgage portfolio. The CMO and REMIC securities held by the Company
carry certain risks. The principal represented by such securities may be repaid
over a longer period than that assumed in management's initial purchase analysis
which may hamper certain aspects of the Company's asset/liability management
strategy. In addition, these securities have maximum interest rate caps. If and
as market interest rate levels approach these caps, the value of the underlying
security will decline.
As of December 31, 1997, the Company held $500,000 of CMO and REMIC
adjustable-rate securities. These securities are tied to the thirty day London
Interbank Offered Rate. Management purchased these investments to supplement
loan originations and to mitigate the consequences of its predominantly
fixed-rate mortgage portfolio.
19
The following table sets forth the contractual maturities of the
Company's mortgage-backed securities at December 31, 1997.
Due in Due in Due In Over December 31, 1997
1 to 5 years 6 to 10 years 10 Years Balance Outstanding
---------------------------------------------------------------------------
(In Thousands)
FHLMC.......................... $237 $1,425 $10,790 $12,452
FNMA........................... --- 285 5,768 6,053
CMOs and REMICs................ --- 488 --- 488
GNMA........................... 25 --- 3,415 3,440
---- --------- -------- ---------
$262 $2,198 $19,973 $22,433
==== ====== ======= =======
Sources of Funds
General. The Company's primary sources of funds are deposits,
borrowings, repayment of loan principal, sales and repayments of mortgage-backed
securities, maturing investments in certificates of deposit, and funds provided
from operations. Borrowings, consisting of FHLB advances, may be used at times
to compensate for seasonal reductions in deposits or deposit inflows at less
than projected levels, and may be used on a longer-term basis to support
expanded lending activities.
Deposits. The Company offers a variety of deposit accounts having a
wide range of interest rates and terms. The Company's deposits consist of
passbook and statement savings accounts, NOW, demand and money market fund
accounts, and certificate accounts ranging in terms from six months to ten
years. The Company only solicits deposits from its market area and does not
currently use brokers to obtain deposits. The Company relies primarily on
competitive pricing policies, advertising and customer service to attract and
retain these deposits.
The variety of deposit accounts offered by the Company has allowed it
to be competitive in obtaining funds and to respond with flexibility to changes
in consumer demand. The Company has become more susceptible to short-term
fluctuations in deposit flows, as customers have become more interest rate
conscious. The Company endeavors to manage the pricing of its deposits in
keeping with its asset/liability management and profitability objectives. The
ability of the Company to attract and maintain certificates of deposit accounts
and the rates paid on these deposits has been and will continue to be
significantly affected by market conditions.
20
The following table sets forth the savings flows at the Company during
the periods indicated. The flow of deposits is influenced significantly by
general economic conditions, changes in money market and prevailing interest
rates, and competition.
Year Ended December 31,
-------------------------------------------------------
1997 1996 1995
-------------------------------------------------------
(Dollars in Thousands)
Opening balance............................................ $233,203 $139,129 $117,529
Net deposits (withdrawals)................................. (4,220) 80,678(1) 15,359
Interest credited.......................................... 17,926 13,396 6,241
-------- --------- ---------
Ending balance............................................. $246,909 $233,203 $139,129
======== ======== ========
Net increase (decrease).................................... $ 13,706 $ 94,074 $ 21,600
======== ======== =========
Percent increase (decrease)................................ 5.8 % 67.6% 18.4%
==== ==== ====
(1) Net deposit increase is primarily due to the Company's acquisition of
Mayflower and Seven Hills during fiscal 1996.
The following table sets forth the dollar amount of savings deposits in
the various types of deposit programs offered by the Company for the periods
indicated.
Year Ended December 31,
--------------------------------------------------------------------------
1997 1996 1995
--------------------------------------------------------------------------
Percent Percent Percent
Amount of Total Amount of Total Amount of Total
-------- ---------- ------- ---------- -------- -----------
(Dollars in Thousands)
Transactions and Savings Deposits:
Passbook and Savings Accounts.............. $22,115 8.96% $ 27,981 12.00% $24,437 17.56%
NOW Accounts................................ 12,186 4.94 10,074 4.32 4,269 3.07
Money Market Accounts....................... 37,182 15.06 19,664 8.43 7,046 5.07
------ ----- ------- ------ -------- ------
Total Non-Certificates...................... 71,483 28.96 57,719 24.75 35,752 25.70
------ ----- -------- ------ -------- ------
Certificates:
0.00 - 3.49%.............................. 785 .32 971 .42 465 .33
3.50 - 5.49%.............................. 27,688 11.21 45,927 19.70 27,171 19.53
5.50 - 7.49%.............................. 146,319 59.26 121,281 52.00 68,859 49.49
7.50 - 9.49%.............................. 634 .25 7,305 3.13 6,882 4.95
---------- -------- -------- ------ -------- ------
Total Certificates.......................... 175,426 71.04 175,484 75.25 103,377 74.30
------- ----- -------- ------ -------- ------
Total Deposits.............................. $246,909 100.00% $233,203 100.00% $139,129 100.00%
======== ====== ======== ====== ======== ======
21
The following table shows rate and maturity information for the
Company's certificates of deposit as of December 31, 1997.
0.00- 3.50- 5.50- 7.50- Percent
3.49% 5.49% 7.49% 9.49% Total of Total
------- ------ -------- ------- ------ -----------
(Dollars in Thousands)
Certificate accounts maturing in quarter ending:
- -----------------------------------------------
March 31, 1998................................... $223 $7,869 $14,228 $ --- $22,320 12.72 %
June 30, 1998.................................... 77 8,998 12,820 --- 21,895 12.48
September 30, 1998............................... 92 3,368 17,659 --- 21,119 12.04
December 31, 1998................................ 23 1,861 15,851 35 17,770 10.13
March 31, 1999................................... 69 1,991 9,930 --- 11,990 6.83
June 30, 1999.................................... 118 733 16,015 131 16,997 9.69
September 30, 1999............................... 15 386 14,987 --- 15,388 8.77
December 31, 1999................................ 34 1,326 14,743 --- 16,103 9.18
March 31, 2000................................... 33 602 19,604 --- 20,239 11.54
June 30, 2000.................................... 2 354 3,678 --- 4,034 2.30
September 30, 2000............................... 3 --- 1,699 51 1,753 1.00
December 31, 2000................................ 97 --- 1,965 39 2,101 1.20
Thereafter....................................... --- 200 3,139 378 3,717 2.12
------- ---------- ---------- ----- ------- --------
Total......................................... $786 $27,688 $146,318 $634 $175,426 100.00%
==== ======= ======== ==== ======== ======
Percent of total.............................. .45% 15.78% 83.41% .36% 100.00%
==== ====== ===== === ======
The following table indicates the amount of the Company's certificates
of deposit and other deposits by time remaining until maturity as of December
31, 1997.
Maturity
--------------------------------------------------------------------------
Over Over
3 Months 3 to 6 6 to 12 Over
or Less Months Months 12 months Total
---------------------------------------------------------------------------
(In Thousands)
Certificates of deposit less
than $100,000.......................... $20,012 $19,027 $35,757 $80,406 $155,202
Certificates of deposit of
$100,000 or more....................... 2,308 2,868 3,132 11,916 20,224
-------- ------- ------ ------- -------
Total certificates of deposit........... $22,320 $21,895 $38,889 $92,322 $175,426
======== ======= ======= ======= ========
Borrowings. Another source of funds includes advances from the FHLB of
Cincinnati. As a member of the FHLB of Cincinnati, the Bank is required to own
capital stock and is authorized to apply for advances. Each FHLB credit program
has its own interest rate, which may be fixed or variable, and includes a range
of maturities. The FHLB of Cincinnati may prescribe the acceptable uses to which
these advances may be put, as well as limitations in the size of the advances
and repayment provisions.
22
Beginning in 1995, the Bank utilized a higher level and a wider variety
of FHLB advances than it had in the past. These advances were utilized for
increased investments and lending. The FHLB advances were secured by the Bank's
blanket agreement for advances and security agreement and are not tied to
specific investments or loans. Fixed rate advances of $20 million were taken to
fund the purchase of callable securities. The remainder of the borrowing was
variable-rate or fixed-rate in nature and was intended to fund mortgages.
The following table sets forth the maximum month-end balance and
average balance of FHLB advances for the periods indicated.
Year Ended December 31,
-----------------------------------------
1997 1996 1995
----------- ------------ -------------
(In Thousands)
Maximum Balance:
FHLB advances............................................... $113,112 $102,602 $31,528
Average Balance:
FHLB advances............................................... $ 86,929 $ 76,837 $12,985
The following table sets forth certain information as to the Bank's
FHLB advances at the dates indicated.
December 31,
----------------------------------------
1997 1996 1995
------------- ----------- -------------
(Dollars in Thousands)
FHLB advances................................................. $68,339 $102,602 $31,528
Weighted average interest rate of
FHLB advances................................................ 5.85% 5.84% 6.11%
Service Corporation Activities
Federal savings institutions generally may invest a limited percentage
of their assets in service corporations. In addition, federal savings
institutions may invest up to 50% of their regulatory capital in conforming
loans to their service corporations. In addition to investments in service
corporations, federal savings institutions are permitted to invest an unlimited
amount in operating subsidiaries engaged solely in activities in which federal
savings institutions may engage directly.
At December 31, 1997, the Bank had a net book value investment of
$20,000 in Springfield- Home Community Reinvestment Corporation
("Springfield-Home"), a 50%-owned service corporation, for low income housing
lending.
23
Additionally, at December 31, 1997, the Bank had a net book investment
of $115,900 in West Central Financial Services, an operating subsidiary created
to generate consumer lending that does not overlap with the Company's current
consumer lending.
Competition
The Company faces strong competition, both in originating real estate
and other loans and in attracting deposits. Competition in originating real
estate loans comes primarily from commercial banks, other savings institutions,
credit unions and mortgage bankers making loans secured by real estate located
in the Company's market areas. The Company competes for real estate and other
loans principally on the basis of the quality of services it provides to
borrowers, and loan fees it charges, and the types of loans it originates.
The Company attracts all of its deposits through its retail banking
offices, primarily from the communities in which those retail banking offices
are located; therefore, competition for those deposits is principally from
commercial banks, other savings institutions, credit unions and brokerage firms
located in the same communities. The Company competes for these deposits by
offering a variety of deposit accounts at competitive rates, convenient business
hours, and convenient branch locations with interbranch deposit and withdrawal
privileges at each.
REGULATION
General
The Bank is a federally chartered savings bank. Accordingly, the Bank
is subject to broad federal regulation extending to all its operations. The Bank
is a member of the FHLB of Cincinnati and subject to certain limited regulation
by the Board of Governors of the Federal Reserve System ("Federal Reserve
Board"). As a savings and loan holding company, the Company also is subject to
federal regulation and oversight. The purpose of the regulation of the Company
and other holding companies is to protect subsidiary savings associations. The
Bank's deposits are federally insured by the Savings Association Insurance Fund
("SAIF"), which together with the Bank Insurance Fund (the "BIF") are the two
deposit insurance funds administered by the FDIC, and their deposits are insured
by the FDIC. As a result, the FDIC has certain regulatory and examination
authority over the Banks.
Certain of these regulatory requirements and restrictions are discussed
below or elsewhere in this document.
24
Federal Regulation of Savings Institutions
The OTS has extensive authority over the operations of federal savings
institutions. As part of this authority, the Bank is required to file periodic
reports with the OTS and is subject to periodic examinations by the OTS and the
FDIC. When these examinations are conducted by the OTS and the FDIC, the
examiners may require an institution to provide for higher general or specific
loan loss reserves. All federal savings institutions are subject to a quarterly
assessment, based upon the institution's total assets, to fund OTS operations.
The Bank's OTS assessment for the fiscal year ended December 31, 1997 was
$128,117.
The OTS also has extensive enforcement authority over all federal
savings institutions and their holding companies, including the Company. This
enforcement authority includes, among other things, the ability to assess civil
money penalties, to issue cease-and-desist or removal orders and to initiate
injunctive actions. In general, these enforcement actions may be initiated for
violations of laws and regulations and unsafe or unsound practices. Other
actions or inactions may provide the basis for enforcement action, including
misleading or untimely reports filed with the OTS. Except under certain
circumstances, public disclosure of final enforcement actions by the OTS is
required.
In addition, the investment, lending and branching authority of the
Bank is prescribed by federal laws and they are prohibited from engaging in any
activities not permitted by such laws. For instance, no federal savings
institution may invest in non-investment grade corporate debt securities. In
addition, the permissible level of investment by federal institutions in loans
secured by non-residential real property may not exceed 400% of total capital,
except with approval of the OTS. Federal savings institutions are also generally
authorized to branch nationwide. The Bank is in compliance with the noted
restrictions.
The OTS, as well as the other federal banking agencies, has adopted
guidelines establishing safety and soundness standards on such matters as loan
underwriting and documentation, asset quality, earnings standards, internal
controls and audit systems, interest rate risk exposure and compensation and
other employee benefits. Any institution which fails to comply with these
standards must submit a compliance plan. A failure to submit a plan or to comply
with an approved plan will subject the institution to further enforcement
action.
Regulatory Capital Requirements. The Bank is required by OTS
regulations to meet certain minimum capital requirements. The following table
sets forth the amount and percentage level of regulatory capital of the Bank at
December 31, 1997, and the amount by which it exceeds the
25
minimum requirements. Tangible and core capital are reflected as a percentage of
adjusted total assets. Risk-based (or total) capital, which consists of core and
supplementary capital, is reflected as a percentage of risk-weighted assets.
At December 30, 1997
-------------------------------
Amount Percent
--------------- ------------
(In thousands)
Tangible capital....................... $41,897 11.4%
Requirement............................ 5,507 1.5
------- ----
Excess................................. 36,390 9.9
====== ====
Core capital........................... $41,897 11.4%
Requirement............................ 11,014 3.0
------ ----
Excess................................. 30,883 8.4
====== ====
Risk-based capital..................... $44,330 21.6%
Risk-based requirement................. 16,409 8.0
------ ----
Excess................................. 27,921 13.6
====== ====
Current capital requirements call for tangible capital of 1.5% of
adjusted total assets, core capital of 3.0% of adjusted total assets and
risk-based capital of 8% of risk-weighted assets (assets are weighted at
percentage levels ranging from 0% to 100% depending on their relative risk).
The OTS has adopted an interest rate risk component to the risk-based
capital requirement, though the implementation of that component has been
delayed. Pursuant to that requirement, a savings association would have to
measure the impact of an immediate 200 basis point change in interest rates on
the value of its portfolio, as determined under the methodology established by
the OTS. If the measured interest rate risk is above the level deemed normal
under the regulation, the association will be required to deduct one-half of
that excess exposure from its total capital when determining its level of
risk-based capital. In general, an association with less than $300 million in
assets and a risk-based implementation of the interest rate risk component, the
OTS may adjust the risk-based capital requirement on an individualized basis to
take into account risks due to concentrations of credit and non-traditional
activities.
The OTS has adopted regulations governing prompt corrective action to
resolve the problems of capital deficient and otherwise troubled savings
associations. At each successively lower defined capital category, an
association is subject to more restrictive and numerous mandatory or
discretionary regulatory actions or limits, and the OTS has less flexibility in
determining how to resolve the problems of the institution. In addition, the OTS
generally can downgrade an association's capital category, notwithstanding its
capital level, if, after notice and opportunity for hearing, the association is
deemed to be engaging in an unsafe or unsound practice because it has not
corrected deficiencies that resulted in it receiving a less than satisfactory
examination rating on matters other than capital or it is deemed to be in an
unsafe or unsound condition. All undercapitalized associations must submit a
capital restoration plan to the OTS within 45 days after it becomes
undercapitalized. Such associations will be subject to increased monitoring and
asset
26
growth restrictions and will be required to obtain prior approval for
acquisitions, branching and engaging in new lines of business. Furthermore,
critically undercapitalized institutions must be placed in conservatorship or
receivership within 90 days of reaching that capitalization level, except under
limited circumstances. The Bank's capital at December 31, 1997, met the
standards for a well- capitalized institution.
Insurance of Accounts and Regulation by the FDIC
The Bank's deposits are insured by the SAIF, which is administered by
the FDIC. Deposits are insured up to applicable limits by the FDIC and such
insurance is backed by the full faith and credit of the United States
Government. As insurer, the FDIC imposes deposit insurance premiums and is
authorized to conduct examinations of and to require reporting by FDIC-insured
institutions. It also may prohibit any FDIC-insured institution from engaging in
any activity the FDIC determines by regulation or order to pose a serious risk
to the SAIF or the BIF. The FDIC also has the authority to initiate enforcement
actions against savings associations, after giving the OTS an opportunity to
take such action, and may terminate the deposit insurance if it determines that
the institution has engaged in unsafe or unsound practices, or is in an unsafe
or unsound condition.
The FDIC's deposit insurance premiums are assessed through a risk-based
system under which all insured depository institutions are placed into one of
nine categories and assessed insurance premiums based upon their level of
capital and supervisory evaluation. Under the system, institutions classified as
well capitalized (i.e., a core capital ratio of at least 5%, a ratio of Tier 1
or core capital to risk-weighted assets ("Tier 1 risk-based capital") of at
least 6% and a risk-based capital ratio of at least 10%) and considered healthy
pay the lowest premium while institutions that are less than adequately
capitalized (i.e., core or Tier 1 risk-based capital ratios of less than 4% or a
risk-based capital ratio of less than 8%) and considered of substantial
supervisory concern pay the highest premium. Risk classification of all insured
institutions is made by the FDIC for each semi-annual assessment period.
The FDIC is authorized to increase assessment rates, on a semiannual
basis, if it determines that the reserve ratio of the SAIF will be less than the
designated reserve ratio of 1.25% of SAIF insured deposits. In setting these
increased assessments, the FDIC must seek to restore the reserve ratio to that
designated reserve level, or such higher reserve ratio as established by the
FDIC. The FDIC may also impose special assessments on SAIF members to repay
amounts borrowed from the United States Treasury or for any other reason deemed
necessary by the FDIC.
On September 30, 1996, federal legislation was enacted that required
the SAIF to be recapitalized with a one-time assessment on virtually all
SAIF-insured institutions, such as the Bank, equal to 65.7 basis points on
SAIF-insured deposits maintained by those institutions as of March 31, 1995. The
SAIF special assessment, which was paid to the FDIC in November 1996, was
approximately $798,000 for Springfield and $271,000 for Mayflower. These amounts
were accrued by the Company at September 30, 1996 by a charge to earnings.
As a result of the SAIF recapitalization, the FDIC amended its
regulation concerning the insurance premiums payable by SAIF-insured
institutions. Effective January 1, 1997, the SAIF
27
insurance premium range was 0 to 27 basis points per $100 of domestic deposits.
The Bank qualifies for the minimum SAIF assessment.
Additionally, the FDIC has imposed a Financing Corporation ("FICO")
obligation assessment on SAIF- assessable deposits for the first semi-annual
period of 1998 equal to 6.48 basis points per $100 of domestic deposits, as
compared to a FICO assessment on BIF-assessable deposits for that same period
equal to 1.30 basis points per $100 of domestic deposits.
Regulatory Capital Requirements
Federally insured savings association are required to maintain a
minimum level of regulatory capital. The OTS has established capital standards,
including a tangible capital requirement, a leverage ratio (or core capital)
requirement and a risk-based capital requirement applicable to such savings
associations. These capital requirements must be generally as stringent as the
comparable capital requirements for national banks. The OTS is also authorized
to impose capital requirements in excess of these standards on individual
associations on a case-by-case basis.
The capital regulations require tangible capital of at least 1.5% of
adjusted total assets (as defined by regulation). Tangible capital generally
includes common stockholders' equity and retained income, and certain
noncumulative perpetual preferred stock and related income. In addition, all
intangible assets, other than a limited amount of purchased mortgage servicing
rights, must be deducted from tangible capital. At December 31, 1997, the Bank
had intangible assets of mortgage servicing rights of $39,795 and goodwill of
$3,581,000.
The OTS regulations establish special capitalization requirements for
savings associations that own subsidiaries. In determining compliance with the
capital requirements, all subsidiaries engaged solely in activities permissible
for national banks or engaged in certain other activities solely as agent for
its customers are "includable" subsidiaries that are consolidated for capital
purposes in proportion to the association's level of ownership. For excludable
subsidiaries, the debt and equity investments in such subsidiaries are deducted
from assets and capital. The Bank's subsidiaries are includable subsidiaries.
At December 31, 1997, the Bank had tangible capital of $41.9 million,
or 11.4% of adjusted total assets, which is $36.4 million above the minimum
requirement of 1.5% of adjusted total assets in effect on that date.
The capital standards also require core capital equal to at least 3% of
adjusted total assets. Core capital generally consists of tangible capital plus
certain intangible assets, including a limited amount of purchased credit card
relationships. At December 31, 1997, the Bank had no intangibles which were
subject to these tests. As a result of the prompt corrective action provisions
discussed below, however, a savings association must maintain a core capital
ratio of at least 4% to be considered adequately capitalized unless its
supervisory condition is such to allow it to maintain a 3% ratio.
28
At December 31, 1997, the Bank had core capital equal to $41.9 million,
or 11.4% of adjusted total assets, which is $30.9 million above the minimum
leverage ratio requirement of 3% as in effect on that date.
The OTS risk-based requirement requires savings associations to have
total capital of at least 8% of risk-weighted assets. Total capital consists of
core capital, as defined above, and supplementary capital. Supplementary capital
consists of certain permanent and maturing capital instruments that do not
qualify as core capital and general valuation loan and lease loss allowances up
to a maximum of 1.25% of risk-weighted assets. Supplementary capital may be used
to satisfy the risk-based requirement only to the extent of core capital. The
OTS is also authorized to require a savings association to maintain an
additional amount of total capital to account for concentration of credit risk
and the risk of non-traditional activities. At December 31, 1997, the Bank had
no capital instruments that qualify as supplementary capital and $2.4 of general
loss reserves, which was less than 1.25% of risk-weighted assets.
Certain exclusions from capital and assets are required to be made for
the purpose of calculating total capital. Such exclusions consist of equity
investments (as defined by regulation) and that portion of land loans and
nonresidential construction loans in excess of an 80% loan-to-value ratio and
reciprocal holdings of qualifying capital instruments. The Bank had no such
exclusions from capital and assets at December 31, 1997.
In determining the amount of risk-weighted assets, all assets,
including certain off-balance sheet items, will be multiplied by a risk weight,
ranging from 0% to 100%, based on the risk inherent in the type of asset. For
example, the OTS has assigned a risk weight of 50% for prudently underwritten
permanent one-to-four family first lien mortgage loans not more than 90 days
delinquent and having a loan-to-value ratio of not more than 80% at origination
unless insured to such ratio by an insurer approved by the FNMA or FHLMC.
OTS regulations also require that every savings association with more
than normal interest rate risk exposure to deduct from its total capital, for
purposes of determining compliance with such requirement, an amount equal to 50%
of its interest-rate risk exposure multiplied by the present value of its
assets. This exposure is a measure of the potential decline in the net portfolio
value of a savings association, greater than 2% of the present value of its
assets, based upon a hypothetical 200 basis point increase or decrease in
interest rates (whichever results in a greater decline). Net portfolio value is
the present value of expected cash flows from assets, liabilities and
off-balance sheet contracts. The rule will not become effective until the OTS
evaluates the process by which savings associations may appeal an interest rate
risk deduction determination. It is uncertain as to when this evaluation may be
completed. Any savings institution with less than $300 million in assets and a
total capital ratio in excess of 12% is exempt from this requirement unless the
OTS determines otherwise.
On December 31, 1997, the Bank had total capital (as defined above) of
$44.3 million (including $41.9 million in core capital and $2.4 of general loss
reserves) and risk-weighted assets of $199.6 million; or total capital of 21.6%
of risk-weighted assets. This amount was $27.9 million above the 8% requirement
in effect on that date.
29
The OTS and the FDIC are authorized and, under certain circumstances
required, to take certain actions against savings associations that fail to meet
their capital requirements. The OTS is generally required to take action to
restrict the activities of an "undercapitalized association" (generally defined
to be one with less than either a 4% core capital ratio, a 4% Tier 1
risked-based capital ratio or an 8% risk-based capital ratio). Any such
association must submit a capital restoration plan and until such plan is
approved by the OTS may not increase its assets, acquire another institution,
establish a branch or engage in any new activities, and generally may not make
capital distributions. The OTS is authorized to impose the additional
restrictions that are applicable to significantly undercapitalized associations.
As a condition to the approval of the capital restoration plan, any
company controlling an undercapitalized association must agree that it will
enter into a limited capital maintenance guarantee with respect to the
institution's achievement of its capital requirements.
Any savings association that fails to comply with its capital plan or
is "significantly undercapitalized" (i.e., Tier 1 risk-based or core capital
ratios of less than 3% or a risk-based capital ratio of less than 6%) must be
made subject to one or more of additional specified actions and operating
restrictions which may cover all aspects of its operations and include a forced
merger or acquisition of the association. An association that becomes
"critically undercapitalized" (i.e., a tangible capital ratio of 2% or less) is
subject to further mandatory restrictions on its activities in addition to those
applicable to significantly undercapitalized associations. In addition, the OTS
must appoint a receiver (or conservator with the concurrence of the FDIC) for a
savings association, with certain limited exceptions, within 90 days after it
becomes critically undercapitalized. Any undercapitalized association is also
subject to the general enforcement authority of the OTS and the FDIC, including
the appointment of a conservator or a receiver.
The OTS is also generally authorized to reclassify an association into
a lower capital category and impose the restrictions applicable to such category
if the institution is engaged in unsafe or unsound practices or is in an unsafe
or unsound condition.
The imposition by the OTS or the FDIC of any of these measures on the
Banks may have a substantial adverse effect on the Company's operations and
profitability. The Company's stockholders do not have preemptive rights, and
therefore, if the Company is directed by the OTS or the FDIC to issue additional
shares of Common Stock, such issuance may result in the dilution in the
percentage of ownership of the Company.
Limitations on Dividends and Other Capital Distributions
OTS regulations impose various restrictions on savings associations
with respect to their ability to make distributions of capital which include
dividends, stock redemptions or repurchases, cash-out mergers and other
transactions charged to the capital account. OTS regulations also prohibit a
savings association from declaring or paying any dividends or from repurchasing
any of its stock if, as a result, the regulatory capital of the association
would be reduced below the amount required to be maintained for the liquidation
account established in connection with its mutual to stock conversion.
30
Generally, savings associations that before and after the proposed
distribution meet their capital requirements, may make capital distributions
during any calendar year equal to the greater of 100% of net income for the
year-to-date plus 50% of the amount by which the lesser of the association's
tangible, core or risk-based capital exceeds its capital requirement for such
capital component, as measured at the beginning of the calendar year, or 75% of
their net income for the most recent four quarter period. However, an
association deemed to be in need of more than normal supervision by the OTS may
have its dividend authority restricted by the OTS. The Bank may pay dividends in
accordance with this general authority.
Savings associations proposing to make any capital distribution need
only submit written notice to the OTS 30 days prior to such distribution.
Savings associations that do not, or would not meet their current minimum
capital requirements following a proposed capital distribution, however, must
obtain OTS approval prior to making such distribution. The OTS may object to the
distribution during that 30-day period notice based on safety and soundness
concerns. See "- Regulatory Capital Requirements."
The OTS has proposed regulations that would revise the current capital
distribution restrictions. Under the proposal a savings association may make a
capital distribution without notice to the OTS (unless it is a subsidiary of a
holding company) provided that it has a CAMELS 1 or 2 rating, is not of
supervisory concern, and would remain adequately capitalized (as defined in the
OTS prompt corrective action regulations) following the proposed distribution.
Savings associations that would remain adequately capitalized following the
proposed distribution but do not meet the other noted requirements must notify
the OTS 30 days prior to declaring a capital distribution. The OTS stated it
will generally regard as permissible that amount of capital distributions that
do not exceed 50% of the institution's excess regulatory capital plus net income
to date during the calendar year. A savings association may not make a capital
distribution without prior approval of the OTS and the FDIC if it is
undercapitalized before, or as a result of, such a distribution. As under the
current rule, the OTS may object to a capital distribution if it would
constitute an unsafe or unsound practice. No assurance may be given as to
whether or in what form the regulations may be adopted.
Liquidity
All savings associations are required to maintain an average daily
balance of liquid assets equal to a certain percentage of the sum of its average
daily balance of net withdrawable deposit accounts and borrowings payable in one
year or less. This liquid asset ratio requirement may vary from time to time
(between 4% and 10%) depending upon economic conditions and savings flows of all
savings associations. At the present time, the minimum liquid asset ratio is 4%.
At December 31, 1997, the Bank was in compliance with its regulatory liquidity
ratio.
Qualified Thrift Lender Test
All savings associations are required to meet a qualified thrift lender
("QTL") test to avoid certain restrictions on their operations. This test
requires a savings association to have at least 65% of its portfolio assets (as
defined by regulation) in qualified thrift investments on a monthly average for
nine out of every 12 months on a rolling basis. As an alternative, the savings
association may
31
maintain 60% of its assets in those assets specified in Section 7701(a)(19) of
the Internal Revenue Code. Under either test, such assets primarily consist of
residential housing related loans and investments. At December 31, 1997, the
Bank met the test and has always met the test since its effective date.
Any savings association that fails to meet the QTL test must convert to
a national bank charter, unless it requalifies as a QTL and thereafter remains a
QTL. If an association does not requalify and converts to a national bank
charter, it must remain SAIF-insured until the FDIC permits it to transfer to
the BIF. If such an association has not yet requalified or converted to a
national bank, its new investments and activities are limited to those
permissible for both a savings association and a national bank, and it is
limited to national bank branching rights in its home state. In addition, the
association is immediately ineligible to receive any new FHLB borrowings and is
subject to national bank limits for payment of dividends. If such association
has not requalified or converted to a national bank within three years after the
failure, it must divest of all investments and cease all activities not
permissible for a national bank. In addition, it must repay promptly any
outstanding FHLB borrowings, which may result in prepayment penalties. If any
institution that fails the QTL test is controlled by a holding company, then
within one year after the failure, the holding company must register as a bank
holding company and become subject to all restrictions on bank holding
companies. (See "- Holding Company Regulation.")
Community Reinvestment Act
Under the Community Reinvestment Act ("CRA"), every FDIC insured
institution has a continuing and affirmative obligation consistent with safe and
sound banking practices to help meet the credit needs of its entire community,
including low and moderate income neighborhoods. The CRA does not establish
specific lending requirements or programs for financial institutions nor does it
limit an institution's discretion to develop the types of products and services
that it believes are best suited to its particular community, consistent with
the CRA. The CRA requires the OTS, in connection with the examination of the
Banks, to assess the institution's record of meeting the credit needs of its
community and to take such record into account in its evaluation of certain
applications, such as a merger or the establishment of a branch, by the Bank. An
unsatisfactory rating may be used as the basis for the denial of an application
by the OTS.
The federal banking agencies, including the OTS, have recently revised
the CRA regulations and the methodology for determining an institution's
compliance with the CRA. Due to the heightened attention being given to the CRA
in the past few years, the Bank may be required to devote additional funds for
investment and lending in its local community. The Bank was examined for CRA
compliance in 1997 and received a rating of satisfactory.
Transactions with Affiliates
Generally, transactions between a savings association or its
subsidiaries and its affiliates are required to be on terms as favorable to the
association as transactions with non-affiliates. In addition, certain of these
transactions, such as loans to an affiliate, are restricted to a percentage of
the association's capital. Affiliates of the Bank include the Company and any
company which is
32
under common control with the Bank. In addition, a savings association may not
lend to any affiliate engaged in activities not permissible for a bank holding
company or acquire the securities of most affiliates. Springfield-Home is not
deemed an affiliate; however, the OTS has the discretion to treat subsidiaries
of savings institutions as affiliates on a case by case basis.
Certain transactions with directors, officers or controlling persons
are also subject to conflict of interest regulations enforced by the OTS. These
conflict of interest regulations and other statutes also impose restrictions on
loans to such persons and their related interests. Among other things, such
loans must be made on terms substantially the same as for loans to unaffiliated
individuals.
Holding Company Regulation
The Company is a unitary savings and loan Company subject to regulatory
oversight by the OTS. As such, the Company is required to register and file
reports with the OTS and is subject to regulation and examination by the OTS. In
addition, the OTS has enforcement authority over the Company and its non-savings
association subsidiaries which also permits the OTS to restrict or prohibit
activities that are determined to be a serious risk to the subsidiary savings
association.
As a unitary savings and loan company, the Company generally is not
subject to activity restrictions. If the Company acquires control of another
savings association as a separate subsidiary, it would become a multiple savings
and loan company, and the activities of the Company and any of its subsidiaries
(other than the Bank or any other SAIF-insured savings association) would become
subject to such restrictions unless such other associations each qualify as a
QTL and were acquired in a supervisory acquisition.
If the Bank fails the QTL test, the Company must obtain the approval of
the OTS prior to continuing after such failure, directly or through its other
subsidiaries, any business activity other than those approved for multiple
savings and loan holding companies or their subsidiaries. In addition, within
one year of such failure the Company must register as, and will become subject
to, the restrictions applicable to bank holding companies. The activities
authorized for a bank holding company are more limited than are the activities
authorized for a unitary or multiple savings and loan company. See "- Qualified
Thrift Lender Test."
The Company must obtain approval from the OTS before acquiring control
of any other SAIF-insured association. Such acquisitions are generally
prohibited if they result in a multiple savings and loan company controlling
savings associations in more than one state. However, such interstate
acquisitions are permitted based on specific state authorization or in a
supervisory acquisition of a failing savings association.
33
Federal Securities Law
The stock of the Company is registered with the SEC under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Accordingly,
the Company is subject to the information, proxy solicitation, insider trading
restrictions and other requirements of the SEC under the Exchange Act.
Company stock held by persons who are affiliates (generally officers,
directors and principal stockholders) of the Company may not be resold without
registration or unless sold in accordance with certain resale restrictions. If
the Company meets specified current public information requirements, each
affiliate of the Company is able to sell in the public market, without
registration, a limited number of shares in any three-month period.
Federal Reserve System
The Federal Reserve Board requires all depository institutions to
maintain non-interest bearing reserves at specified levels against their
transaction accounts (primarily checking, NOW and Super NOW checking accounts).
At December 31, 1997, the Bank was in compliance with these reserve
requirements. The balances maintained to meet the reserve requirements imposed
by the Federal Reserve Board may be used to satisfy liquidity requirements that
may be imposed by the OTS. (See "--Liquidity.")
Savings associations are authorized to borrow from the Federal Reserve
Bank "discount window," but Federal Reserve Board regulations require
associations to exhaust other reasonable alternative sources of funds, including
FHLB borrowings, before borrowing from the Federal Reserve Bank.
Federal Home Loan Bank System
The Bank is a member of the FHLB of Cincinnati, which is one of 12
regional FHLBs, that administers the home financing credit function of savings
associations. Each FHLB serves as a reserve or central bank for its members
within its assigned region. It is funded primarily from proceeds derived from
the sale of consolidated obligations of the FHLB System. It makes loans to
members (i.e., advances) in accordance with policies and procedures established
by the board of directors of the FHLB, which are subject to the oversight of the
Federal Housing Finance Board. All advances from the FHLB are required to be
fully secured by sufficient collateral as determined by the FHLB. In addition,
all long-term advances are required to provide funds for residential home
financing.
As a member, the Bank is required to purchase and maintain stock in the
FHLB of Cincinnati. At December 31, 1997, the Bank had $6.5 million in FHLB
stock, which was in compliance with this requirement. In past years, the Bank
had received substantial dividends on its FHLB stock. Over the past five
calendar years such dividends have averaged 5.37% and were 6.11% for 1997.
34
Under federal law the FHLBs are required to provide funds for the
resolution of troubled savings associations and to contribute to low- and
moderately priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income housing
projects. These contributions have affected adversely the level of FHLB
dividends paid and could continue to do so in the future. These contributions
could also have an adverse effect on the value of FHLB stock in the future. A
reduction in value of the Bank's FHLB stock may result in a corresponding
reduction in the Bank's capital.
For the year ended December 31, 1997, dividends paid by the FHLB of
Cincinnati to the Bank totaled $395,289, which constituted a $136,572 increase
over the amount of dividends received in 1996.
Federal and State Taxation
Savings associations that meet certain definitional tests relating to
the composition of assets and other conditions prescribed by the Internal
Revenue Code of 1986, as amended (the "Code"), had been permitted to establish
reserves for bad debts and to make annual additions thereto which may, within
specified formula limits, be taken as a deduction in computing taxable income
for federal income tax purposes. The amount of the bad debt reserve deduction
for "non-qualifying loans" is computed under the experience method. The amount
of the bad debt reserve deduction for "qualifying real property loans"
(generally loans secured by improved real estate) may be computed under either
the experience method or the percentage of taxable income method (based on an
annual election).
Under the experience method, the bad debt reserve deduction is an
amount determined under a formula based generally upon the bad debts actually
sustained by the savings association over a period of years.
The percentage of specially computed taxable income that is used to
compute a savings association's bad debt reserve deduction under the percentage
of taxable income method (the "percentage bad debt deduction") is 8%. The
percentage bad debt deduction thus computed is reduced by the amount permitted
as a deduction for non-qualifying loans under the experience method. The
availability of the percentage of taxable income method permits qualifying
savings associations to be taxed at a lower effective federal income tax rate
than that applicable to corporations generally (approximately 31.3% assuming the
maximum percentage bad debt deduction).
If an association's specified assets (generally, loans secured by
residential real estate or deposits, educational loans, cash and certain
government obligations) constitute less than 60% of its total assets, the
association may not deduct any addition to a bad debt reserve and generally must
include existing reserves in income over a four year period.
Under the percentage of taxable income method, the percentage bad debt
deduction cannot exceed the amount necessary to increase the balance in the
reserve for "qualifying real property loans" to an amount equal to 6% of such
loans outstanding at the end of the taxable year or the
35
greater of (i) the amount deductible under the experience method or (ii) the
amount which when added to the bad debt deduction for "non-qualifying loans"
equals the amount by which 12% of the amount comprising savings accounts at
year-end exceeds the sum of surplus, undivided profits and reserves at the
beginning of the year. At December 31, 1997, the 6% and 12% limitations
restricted the percentage bad debt deduction available to the Bank.
In August 1996, legislation was enacted that repeals the reserve method
of accounting (including the percentage of taxable income method) used by many
thrifts, including the Banks, to calculate their bad debt reserve for federal
income tax purposes. As a result, large thrifts such as the Bank must recapture
that portion of the reserve that exceeds the amount that could have been taken
under the specific charge-off method for post-1987 tax years. The legislation
also requires thrifts to account for bad debts for federal income tax purposes
on the same basis as commercial banks for tax years beginning after December 31,
1995. The recapture will occur over a six-year period, the commencement of which
will be delayed until the first taxable year beginning after December 31, 1996,
provided the institution meets certain residential lending requirements.
In addition to the regular income tax, corporations, including savings
associations such as the Bank, generally are subject to a minimum tax. An
alternative minimum tax is imposed at a minimum tax rate of 20% on alternative
minimum taxable income, which is the sum of a corporation's regular taxable
income (with certain adjustments) and tax preference items, less any available
exemption. The alternative minimum tax is imposed to the extent it exceeds the
corporation's regular income tax and net operating losses can offset no more
than 90% of alternative minimum taxable income. For taxable years beginning
after 1986 and before 1997, corporations, including savings associations such as
the Bank, are also subject to an environmental tax equal to 0.12% of the excess
of alternative minimum taxable income for the taxable year (determined without
regard to net operating losses and the deduction for the environmental tax) over
$2 million.
To the extent earnings appropriated to a savings association's bad debt
reserves for "qualifying real property loans" and deducted for federal income
tax purposes exceed the allowable amount of such reserves computed under the
experience method and to the extent of the institution's supplemental reserves
for losses on loans ("Excess"), such Excess may not, without adverse tax
consequences, be utilized for the payment of cash dividends or other
distributions to a shareholder (including distributions on redemption,
dissolution or liquidation) or for any other purpose (except to absorb bad debt
losses). As of December 31, 1997, the Bank's excess for tax purposes totaled
approximately $8.7 million.
The Company files consolidated federal income tax returns with the Bank
and its subsidiaries. Savings institutions, such as the Bank, that file federal
income tax returns as part of a consolidated group are required by applicable
Treasury regulations to reduce their taxable income for purposes of computing
the percentage bad debt deduction for losses attributable to activities of the
non-savings institution members of the consolidated group that are functionally
related to the activities of the savings institution member.
The Company has not been audited by the IRS during the last five years.
36
Ohio Taxation. The Bank is subject to an Ohio franchise tax based on
their net worth plus certain reserve amounts. Total net worth for this purpose
is reduced by certain exempted assets. The resultant net taxable value of stock
is taxed at a rate of 1.5% for 1997.
Ohio companies in a consolidated group, including the Company, are
subject to an Ohio franchise tax based on the greater of the tax on net worth or
the tax on net income, subject to various adjustments and varying rates. Local
taxes on property and income will also be imposed in certain jurisdictions.
Delaware Taxation. As a Delaware holding company, the Company is
exempted from Delaware corporate income tax but is required to file an annual
report with and pay an annual fee to the State of Delaware. The Company is also
subject to an annual franchise tax imposed by the State of Delaware.
37
Executive Officers
The executive officers of the Company are elected annually and hold
office until their respective successors have been elected and qualified or
until death, resignation or removal by the Board of Directors. Each executive
officer of the Company is also an executive officer of the Bank. There are no
arrangements or understandings between the persons named and any other person
pursuant to which such officers were selected.
Name Age Positions Held with the Company
- -----------------------------------------------------------------------------------------------
John W. Raisbeck 58 President and Chief Executive Officer
Thomas A. Estep 47 Vice President, Treasurer and Chief
Financial Officer
John T. Heckman 46 Executive Vice President
Gary L. Hicks 46 Executive Vice President
Robert P. Brezing 53 Senior Vice President
The business experience of each executive officer of the Company is
set forth below.
John W. Raisbeck. Mr. Raisbeck is President and Chief Executive
Officer of the Company and the Bank, a position he has held since May 7, 1997.
Mr. Raisbeck has been in the banking industry for over 30 years. Prior to
joining the Company, Mr. Raisbeck was associated with several financial
institutions, including: Manufacturers Hanover Trust Company, New York, New
York, where he was Assistant Vice President, National Division; United States
Trust Company, New York, New York, where he was Vice president and Manager of
the Southeastern Region for Corporation Banking; Charleston National Bank,
Charleston, West Virginia, where he was an Executive Vice President of the
Commercial and Retail Banking Group; Bank One, Youngstown, Ohio, where he was
Executive Vice President and Credit Policy Officer; and most recently Liberty
State Bank, Twinsburg, Ohio, where he served as President and Chief Executive
Officer.
Thomas A. Estep. Mr. Estep is Vice President, Treasurer and Chief
Financial Officer of the Company and the Bank. He was appointed as Treasurer in
1984 and as Vice President and Chief Financial Officer in 1993. Mr. Estep is
responsible for all data processing, accounting and investing functions.
John T. Heckman. Mr. Heckman is Executive Vice President, Operations
and Administration of the Company and the Bank. Mr. Heckman has responsibility
for all operational areas of banking activity other than lending. From 1987 to
April 1995, Mr. Heckman served as an Assistant Director at the Office of Thrift
Supervision.
Gary L. Hicks. Mr. Hicks is Executive Vice President of Mortgage
lending. Mr. Hicks has responsibility for all mortgage banking functions. Prior
positions he has held include Chief Executive Officer for a mortgage services
company and senior manager for a major Ohio Bank.
38
Robert P. Brezing. Mr. Brezing is Senor Vice President of the Company
and the Bank, positions he has held since October 1997. He is manager of
Business Banking responsible for all commercial loans, commercial real estate
and all consumer loans. From 1988 to 1997, Mr. Brezing served as Vice President
of Banc One Corporation, Columbus, Ohio.
Employees
At December 31, 1997, the Company and its subsidiary had a total of 99
employees, including three part-time employees. The Company's employees are not
represented by any collective bargaining group. Management considers its
employee relations to be good.
Item 2. Properties
The Company conducts its business at its main office, which also serves
as executive office and the Bank's nine branch offices located in its market
area. The following table sets forth information relating to each of the
Company's offices as of December 31, 1997.
Total Net Book
Date Approximate Value at
Location Acquired Square Footage December 31, 1997
- ----------------------------------------- ------------ -------------- -----------------
(In Thousands)
Main Office:
28 E. Main Street 1900 5,721 $1,014
Springfield, Ohio
Branch Offices:
7601 Dayton Springfield Road 1983 2,528 41
Enon, Ohio
210 N. Main Street 1987 2,369 349
New Carlisle, Ohio
1480 Upper Valley Pike 1950 3,777 389
Springfield, Ohio
50 Kahoe Lane 1993 2,369 381
Yellow Springs, Ohio
3216 Seajay Drive 1996 1,925 283
Beavercreek, Ohio
8370 Colerain Avenue 1996 4,800 460
Cincinnati, Ohio
1440 Main Street 1996 3,800 330
Cincinnati, Ohio
4860 Hunt Road Leased 1,008 6
Cincinnati, Ohio
6570 Gracely Drive 1996 1,200 12
Cincinnati, Ohio
39
The Company owns all but one of its offices. The total net book value
of the Company's premises and equipment (including land, building and leasehold
improvements and furniture, fixtures and equipment) at December 31, 1997 was
$3.7 million. See Note 6 of the Notes to Consolidated Financial Statements in
the Annual Report to Stockholders filed as Exhibit 13 hereto.
The Company conducts its data processing through a service bureau. The
net book value of the data processing and computer equipment utilized by the
Company at December 31, 1997 was approximately $201,000.
Item 3. Legal Proceedings
The Company and its subsidiary are involved from time to time as
plaintiff or defendant in various legal actions arising in the normal course of
their businesses. While the ultimate outcome of pending proceedings cannot be
predicted with certainty, it is the opinion of management, after consultation
with counsel representing the Company, the Bank or its subsidiary in the
proceedings, that the resolution of these proceedings should not have a material
effect on the Company's consolidated financial position or results of
operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended December 31,
1997.
PART II
Item 5. Market for the Registrant's Common Stock and Related Security Holder
Matters
Page 7 of the Company's 1997 Annual Report to Stockholders is herein
incorporated by reference.
Item 6. Selected Financial Data
Pages 8 and 9 of the Company's 1997 Annual Report to Stockholders is
herein incorporated by reference.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Pages 10 through 25 of the Company's 1997 Annual Report to Stockholders
are herein incorporated by reference.
40
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
In an attempt to manage its exposure to changes in interest rates,
management monitors the Company's interest rate risk. The Board of Directors
meets at least [quarterly] to review the Company's interest rate risk position
and profitability. The Board of Directors also reviews the Company's portfolio,
formulates investment strategies and oversees the timing and implementation of
transactions to assure attainment of the Company's objectives in the most
effective manner. In addition, the Board anticipates reviewing on a [quarterly]
basis the Company's asset/liability position, including simulations of the
effect on the Company's capital of various interest rate scenarios.
In managing its asset/liability mix, the Company, depending on the
relationship between long- and short-term interest rates, market conditions and
consumer preference, often places more emphasis on managing net interest margin
than on better matching the interest rate sensitivity of its assets and
liabilities in an effort to enhance net interest income. Management believes
that the increased net interest income resulting from a mismatch in the maturity
of its asset and liability portfolios can, during periods of declining or stable
interest rates, provide high enough returns to justify the increased exposure to
sudden and unexpected increases in interest rates.
The primary objective of the Company's investment strategy is to
provide liquidity necessary to meet funding needs as well as to address daily,
cyclical and long-term changes in the asset/liability mix, while contributing to
profitability by providing a stable flow of dependable earnings. Investments
generally include interest-bearing deposits in other federally insured financial
institutions, FHLB stock and U.S. Government securities.
Generally, the investment policy of the Company is to invest funds
among various categories of investments and maturities based upon the Company's
need for liquidity, to achieve the proper balance between its desire to minimize
risk and maximize yield, to provide collateral for borrowings, and to fulfill
the Company's asset/liability management policies.
The Company's cost of funds responds to changes in interest rates due
to the relatively short-term nature of its deposit portfolio. Consequently, the
results of operations are heavily influenced by the levels of short-term
interest rates. The Company offers a range of maturities on its deposit products
at competitive rates and monitors the maturities on an ongoing basis. For
additional information regarding market risk, see pages 8 to 20 of the Company's
Annual Report to Stockholders.
Item 8. Financial Statements and Supplementary Data
Pages 27 through 61 of the Company's 1997 Annual Report to Stockholders
are herein incorporated by reference.
41
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
As of December 31, 1997, there has been no Current Report on Form 8-K
filed reporting a change of accountants and/or reporting disagreements on any
matter of accounting principle or financial statement disclosure.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information concerning Directors of the Company is incorporated herein
by reference from the Company's definitive Proxy Statement for the Annual
Meeting of Stockholders scheduled to be held on April 28, 1998 (except for
information contained under the headings "Compensation Committee Report on
Executive Compensation" and "Stock Performance Presentation"), a copy of which
will be filed not later than 120 days after the close of the fiscal year. For
information concerning executive officers of the Company who are not also
Directors, see "Executive Officers" in Part I of this Annual Report on Form
10-K.
Item 11. Executive Compensation
Information concerning executive compensation is incorporated herein by
reference from the Company's definitive Proxy Statement for the Annual Meeting
of Stockholders scheduled to be held on April 28, 1998 (except for information
contained under the headings "Compensation Committee Report on Executive
Compensation" and "Stock Performance Presentation"), a copy of which will be
filed not later than 120 days after the close of the fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information concerning security ownership of certain beneficial owners
and management is incorporated herein by reference from the Company's definitive
Proxy Statement for the Annual Meeting of Stockholders scheduled to be held on
April 28, 1998 (except for information contained under the headings
"Compensation Committee Report on Executive Compensation" and "Stock Performance
Presentation"), a copy of which will be filed not later than 120 days after the
close of the fiscal year.
Item 13. Certain Relationships and Related Transactions
Information concerning certain relationships and transactions is
incorporated herein by reference from the Company's definitive Proxy Statement
for the Annual Meeting of Stockholders scheduled to be held on April 28, 1998
(except for information contained under the headings "Compensation Committee
Report on Executive Compensation" and "Stock Performance Presentation"), a copy
of which will be filed not later than 120 days after the close of the fiscal
year.
42
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1) Financial Statements:
The following information appearing in the Company's Annual Report to
Stockholders for the year ended December 31, 1997, is incorporated by reference
in this Annual Report on Form 10-K as Exhibit 13.
Pages in
Annual
Annual Report Section Report
---------------------- ----------
Consolidated Balance Sheets at
December 31, 1997 and 1996......................................... 27
Consolidated Statements of Income for the Years Ended
December 31, 1997, 1996 and 1995................................... 28-29
Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended December 31, 1997, 1996 and 1995............... 30-31
Consolidated Statements of Cash Flows for Years Ended
December 31, 1997, 1996 and 1995................................... 32-33
Notes to Consolidated Financial Statements........................... 34-61
Independent Auditors' Report......................................... 26
(a) (2) Financial Statement Schedules:
All financial statement schedules have been omitted as the information
is not required under the related instructions or is inapplicable.
43
(a) (3) Exhibits:
Reference to Prior
Regulation Filing-or-Exhibit
S-K Exhibit Number Attached
Number Document Hereto
- ---------------- -------- -------------------
2 Plan of acquisition, reorganization, None
arrangement, liquidation or
succession
3 (i) Certificate of Incorporation *
3 (ii) Bylaws *
4 Instruments defining the rights of *
security holders, including
indentures
9 Voting trust agreement None
10 Material contracts:
(a) 1995 Stock Option and **
Incentive Plan
(b) Management Recognition Plan **
(c) Employment Agreement with **
Jerry R. Mills
(d) Employment Agreement with **
Thomas A. Estep
(e) Employment Agreement with ***
John T. Heckman
(f) Employment Agreement with 10(f)
John W. Raisbeck
(g) Employment Agreement with 10(g)
Gary L. Hicks
(h) Employment Agreement with 10(h)
Robert P. Brezing
(i) 1998 Omnibus Incentive Plan 10(i)
11 Statement re computation of per None
share earnings
12 Statements re computation of ratios None
13 Annual report to security holders 13
44
Reference to Prior
Regulation Filing-or-Exhibit
S-K Exhibit Number Attached
Number Document Hereto
- ---------------- -------- -------------------
16 Letter re change in certifying 16
accountant
18 Letter re change in accounting None
principles
21 Subsidiaries of the registrant 21
22 Published report regarding matters None
submitted to vote of security holders
23 Consents of experts and counsel 23
24 Power of attorney None
27 Financial data schedule 27
99 Additional exhibits None
* Incorporated by reference to the Company's Registration Statement
No. 33-76734.
** Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1994.
*** Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1995.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended December 31,
1997.
44
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Date: March 31, 1998 By: /s/John W. Raisbeck
----------------------------------------
John W. Raisbeck, President and Chief
Executive Officer
(Duly Authorized Representative)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By: /s/John W. Raisbeck By: /s/David L. Dillahunt
-------------------------------------------------- -----------------------------------------------------
John W. Raisbeck, President and Chief David L. Dillahunt, Chairman of
Executive Officer the Board
(Principal Executive Officer)
Date: March 31, 1998 Date: March 31, 1998
By: /s/Howard V. Dodds By: /s/John E. Field
-------------------------------------------------- -----------------------------------------------------
Howard V. Dodds, Director John E. Field, Director
By: /s/Carl E. Mumma By: /s/William N. Scarff
-------------------------------------------------- -----------------------------------------------------
Carl E. Mumma, Director William N. Scarff, Director
Date: March 31, 1998 Date: March 31, 1998
By: By:
/s/Jeffrey L. Levine /s/Thomas A. Estep
-------------------------------------------------- -----------------------------------------------------
Jeffrey L. Levine, Director Thomas A. Estep, Vice President, Treasurer
and Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: March 31, 1998 Date: March 31, 1998