<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(x) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE AT OF 1934
FOR THE QUARTERLY PERIOD ENDED
MARCH 31,1994
COMMISSION FILE NUMBER 0-10161
FIRST BANCORPORATION OF OHIO
(Exact name of registrant as specified in its charter)
OHIO 34-1339938
(State or other jursidiction of (IRS Employer Identification
incorporation or organization) Number)
106 SOUTH MAIN STREET, AKRON, OHIO 44308
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(216) 384-8000
(TELEPHONE NUMBER)
SHARES OF COMMON STOCK, AS OF MARCH 31, 1994
25,262,865
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
<PAGE> 2
FIRST BANCORPORATION OF OHIO
PART I - FINANCIAL STATEMENTS
ITEM 1 FINANCIAL STATEMENTS
- - ---------------------------
The following statements included in the quarterly unaudited report to
shareholders are incorporated by reference:
Consolidated Balance Sheets as of March 31, 1994, December 31,
1993 and March 31, 1993
Consolidated Statements of Income for the three months ended
March 31, 1994 and 1993
Consolidated Statements of Changes in Shareholders' Equity for
the year ended December 31, 1993 and for the three months ended
March 31, 1994
Consolidated Statements of Cash Flows for the three months ended
March 31, 1994 and 1993
<PAGE> 3
<TABLE>
FIRST BANCORPORATION OF OHIO AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- - ---------------------------------------------
<CAPTION>
(In thousands)
---------------------------------------------
March 31, December 31, March 31,
--------- ----------- ----------
1994 1993 1993
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investment securities $1,200,008 1,209,676 1,135,328
Federal funds sold 76,578 58,750 66,245
Loans less unearned income 2,458,931 2,396,463 2,379,474
Less allowance for possible loan losses 31,795 31,221 29,932
---------- ---------- ----------
Net loans 2,427,136 2,365,242 2,349,542
---------- ---------- ----------
Total earning assets 3,703,722 3,633,668 3,551,115
Cash and due from banks 229,135 222,260 160,195
Premises and equipment, net 70,665 69,804 68,348
Accrued interest receivable and other assets 82,732 70,996 92,671
---------- ---------- ----------
$4,086,254 3,996,728 3,872,329
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand-non-interest bearing $ 670,274 687,672 552,744
Demand-interest bearing 319,702 314,165 281,880
Savings 1,329,546 1,299,967 1,253,351
Certificates and other time deposits 1,155,857 1,125,409 1,232,098
---------- ---------- ----------
Total deposits 3,475,379 3,427,213 3,320,073
Securities sold under agreements to repurchase
and other borrowings 174,606 148,889 141,594
---------- ---------- ----------
Total funds 3,649,985 3,576,102 3,461,667
Accrued taxes, expenses, and other liabilities 40,559 28,985 44,338
---------- ---------- ----------
Total liabilities 3,690,544 3,605,087 3,506,005
Shareholders' equity:
Series preferred stock, without par value:
authorized and unissued 3,500,000 shares - - -
Common stock, without par value:
authorized 40,000,000 shares; issued 25,262,865,
25,249,166 and 12,603,536 shares, respectively 83,424 83,218 42,012
Surplus - - 40,647
Net unrealized holding gains (losses)
on available for sale securities (4,262) - -
Retained earnings 316,548 308,423 283,665
---------- ---------- ----------
Total shareholders' equity 395,710 391,641 366,324
---------- ---------- ----------
$4,086,254 3,996,728 3,872,329
========== ========== ==========
</TABLE>
<PAGE> 4
<TABLE>
FIRST BANCORPORATION OF OHIO AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
- - ---------------------------------------------
(In thousands except ratios)
<CAPTION>
Quarters
---------------------------------------------------------------
1994 1993
---------- -------------------------------------------------
4th 3rd 2nd 1st
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment securities $1,201,541 1,203,833 1,175,230 1,149,905 1,161,204
Federal funds sold 9,977 100,176 79,048 89,433 55,341
Loans less unearned income 2,412,611 2,380,701 2,370,152 2,378,200 2,347,656
Less allowance for possible
loan losses 31,828 31,446 30,968 30,515 29,811
---------- --------- --------- --------- ---------
Net loans 2,380,783 2,349,255 2,339,184 2,347,685 2,317,845
---------- --------- --------- --------- ---------
Total earning assets 3,662,301 3,653,264 3,593,462 3,587,023 3,534,390
Cash and due from banks 215,326 221,541 218,824 172,373 161,175
Premises and equipment, net 69,731 69,355 68,607 68,405 67,897
Accrued interest receivable
and other assets 66,659 69,808 78,257 83,611 83,754
---------- --------- --------- --------- ---------
$4,014,017 4,013,968 3,959,150 3,911,412 3,847,216
========== ========= ========= ========= =========
LIABILITIES
Deposits:
Demand-non-interest bearing $ 664,958 691,229 633,426 586,023 548,437
Demand-interest bearing 310,004 303,513 295,097 290,524 282,483
Savings 1,311,267 1,291,935 1,273,293 1,263,823 1,229,775
Certificates and other time
deposits 1,127,723 1,148,931 1,191,274 1,216,353 1,235,326
---------- --------- --------- --------- ---------
Total deposits 3,413,952 3,435,608 3,393,090 3,356,723 3,296,021
Securities sold under agreements to
repurchase and other borrowings 172,393 158,930 148,730 142,238 142,512
---------- --------- --------- --------- ---------
Total funds 3,586,345 3,594,538 3,541,820 3,498,961 3,438,533
Accrued taxes, expenses and
other liabilities 32,448 32,541 39,263 42,801 45,417
---------- --------- --------- --------- ---------
Total liabilities 3,618,793 3,627,079 3,581,083 3,541,762 3,483,950
SHAREHOLDERS' EQUITY 395,224 386,889 378,067 369,650 363,266
---------- --------- --------- --------- ---------
$4,014,017 4,013,968 3,959,150 3,911,412 3,847,216
========== ========= ========= ========= =========
RATIOS
Net income as a percentage of:
Average assets 1.42% 1.35% 1.42% 1.46% 1.39%
Average shareholders' equity 14.44% 13.97% 14.83% 15.48% 14.71%
</TABLE>
<PAGE> 5
<TABLE>
FIRST BANCORPORATION OF OHIO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
- - ---------------------------------------------
<CAPTION>
(In thousands except per
share data)
------------------------------
Quarters Ended March 31,
------------------------------
1994 1993
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest income:
Interest and fees on loans $48,349 50,305
Interest and dividends on securities:
Taxable 14,997 17,664
Exempt from Federal income taxes 1,958 1,913
Interest on Federal funds sold 651 437
------- -------
Total interest income 65,955 70,319
------- -------
Interest expense:
Interest on deposits:
Demand-interest bearing 1,696 1,771
Savings 7,673 9,108
Certificates and other time deposits 10,416 12,877
Interest on securities sold under agreements
to repurchase and other borrowings 1,164 877
------- -------
Total interest expense 20,949 24,633
------- -------
Net interest income 45,006 45,686
Provision for possible loan losses 1,298 1,920
------- -------
Net interest income after provision
for possible loan losses 43,708 43,766
------- -------
Other income:
Trust department income 3,516 2,448
Service charges on depositors' accounts 4,994 5,194
Credit card fees 1,877 1,793
Securities gains-net (28) (51)
Other operating income 4,329 3,700
------- -------
Total other income 14,688 13,084
------- -------
58,396 56,850
------- -------
Other expenses:
Salaries, wages, pension and employee benefits 19,847 19,150
Net occupancy expense 3,450 2,915
Equipment expense 2,242 2,429
Other operating expense 12,781 13,188
------- -------
Total other expenses 38,320 37,682
------- -------
Income before Federal income taxes 20,076 19,168
Federal income taxes 6,003 5,989
------- -------
Net income 14,073 13,179
------- -------
Per share data based on average number of
shares outstanding:
Net income .56 .52
Dividends paid .24 .22
Weighted average number of shares
outstanding 25,256,288 25,201,412
</TABLE>
<PAGE> 6
<TABLE>
FIRST BANCORPORATION OF OHIO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
- - ----------------------------------------------------------
Year Ended December 31, 1993 and
Three Months Ended March 31, 1994
<CAPTION>
(In thousands)
----------------------------------------------------------------------
Net unrealized
holding gains
(losses) on Total
Common available for Retained Shareholders'
Stock Surplus sale securities Earnings Equity
------ ------- --------------- -------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992 $41,993 40,371 - 275,901 358,265
Net Income - - - 55,205 55,205
Cash dividends ($.90 per share) - - - (22,683) (22,683)
Stock options exercised 854 - - - 854
Elimination of par value 40,371 (40,371) - - -
------- ------ ----- ------- -------
Balance at December 31, 1993 83,218 - - 308,423 391,641
Net Income - - - 14,073 14,073
Cash dividends ($ .24 per share) - - - (5,948) (5,948)
Stock options exercised 206 - - - 206
Market adjustment investment securities - - (4,262) - (4,262)
------- ------ ----- ------- -------
Balance at March 31, 1994 $83,424 - (4,262) 316,548 395,710
------- ------ ----- ------- -------
</TABLE>
<PAGE> 7
<TABLE>
FIRST BANCORPORATION OF OHIO AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1994 and 1993
- - ---------------------------------------------
<CAPTION>
(In thousands)
-------------------------
1994 1993
-------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $14,073 13,179
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 1,298 1,920
Provision for depreciation 1,672 1,588
Amortization of investment security premiums, net (557) 771
Amortization of income for lease financing (1,271) (485)
Loss on sales of investment securities, net 28 51
Deferred income taxes 301 (665)
Increase in interest receivable (1,839) (1,708)
Decrease in interest payable (251) (314)
Amortization of values ascribed to acquired intangibles 813 817
Other increases (decreases) 2,833 (1,995)
-------- -------
17,100 13,159
NET CASH PROVIDED BY OPERATING ACTIVITIES
Investing Activities
- - --------------------
*Proceeds from sales of investment securities
held to maturity 145 5,607
Proceeds from sales of investment securities
available for sale 14,901 -
*Proceeds from maturities of investment securities
held to maturity 97,679 102,184
Proceeds from maturities of investment securities
available for sale 19,772 -
*Purchases of investment securities held to maturity (56,772) (76,706)
Purchases of investment securities available for sale (71,809) -
Net (increase) decrease in short-term investments (17,828) 29,037
Net increase in loans (42,377) (53,436)
Purchases of assets to be leased (25,910) (7,191)
Principal payments received under leases 6,366 2,235
Purchases of premises and equipment (2,697) (3,666)
Sales of premises and equipment 164 1,181
-------- -------
NET CASH USED BY INVESTING ACTIVITIES (78,366) (755)
Financing Activities
- - --------------------
Net increase (decrease) in demand, NOW and
savings deposits 17,718 (62,856)
Net increase (decrease) in time deposits 30,448 (1,184)
Net increase in short-term borrowings 25,717 6,061
Cash dividends (5,948) (5,415)
Proceeds from exercise of stock options 206 295
-------- -------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 68,141 (63,099)
Increase (decrease) in cash and cash equivalents 6,875 (50,695)
Cash and cash equivalents at beginning of year 222,260 210,890
-------- -------
Cash and cash equivalents at end of period $229,135 160,195
======== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
- - -------------------------------------------------
Cash paid during the year for:
Interest, net of amount capitalized $13,485 15,358
Income taxes 0 2,350
======== =======
<FN>
*Note - The investment portfolio was not classified as held to maturity
or available for sale until fiscal year beginning 1994. The investment securities
cash flow information for fiscal year 1993 is classified as held to maturity
in the above analysis.
</TABLE>
<PAGE> 8
<TABLE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Average Consolidated Balance Sheet, Fully-tax Equivalent Interest Rates and
Interest Differential
(Dollars in thousands)
<CAPTION>
Quarters ended March 31, Year ended December 31,
--------------------------------- -------------------------------
1994 1993
---------------------------------- --------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment securities $1,201,541 17,909 5.96% 1,172,043 78,166 6.67%
Federal funds sold 79,977 651 3.30% 84,077 2,596 3.09%
Loans, net of unearned income 2,412,611 48,635 8.18% 2,369,361 202,203 8.53%
Less allowance for possible loan losses 31,828 - 30,690
---------- ------ --------- -------
Net loans 2,380,783 48,635 8.28% 2,338,671 202,203 8.65%
Cash and due from banks 215,326 - - 214,963 - -
Other assets 136,390 - - 148,479 - -
---------- ------ --------- -------
Total assets $4,014,017 66,935 - 3,958,233 282,965 -
========== ====== ========= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand-
non-interest bearing $ 664,958 - - 639,265 - -
Demand-
interest bearing 310,004 1,696 2.22% 293,153 6,903 2.35%
Savings 1,311,267 7,673 2.37% 1,265,424 34,440 2.72%
Certificates and other time deposits 1,127,723 10,416 3.75% 1,197,040 47,983 4.01%
---------- ------ --------- ------
Total deposits 3,413,952 19,785 2.35% 3,394,882 89,326 2.63%
Federal funds purchased, securities sold
under agreements to repurchase and
other borrowings 172,393 1,164 2.74% 148,822 3,905 2.62%
Other liabilities 32,448 - 38,814 -
Shareholders' equity 395,224 - 375,715 -
---------- ------ --------- ------
Total liabilities and shareholders' equity $4,014,017 20,949 - 3,958,233 93,231 -
========== ====== ========= =======
Total earning assets $3,662,301 66,935 7.41% 3,594,791 282,965 7.87%
========== ====== ========= =======
Total interest bearing liabilities $2,921,387 20,949 2.91% 2,904,439 93,231 3.21%
========== ====== ========= =======
Net yield on earning assets 46,986 5.09% 189,734 5.28%
====== ==== ======= ====
Interest rate spread 4.50% 4.66%
==== ====
</TABLE>
<TABLE>
<CAPTION>
Quarters ended March 31,
---------------------------------
1993
----------------------------------
Average Average
Balance Interest Rate
- - ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investment securities 1,161,204 20,487 7.16%
Federal funds sold 55,341 437 3.20%
Loans, net of unearned income 2,347,656 50,653 8.75%
Less allowance for possible loan losses 29,811 -
--------- ------
Net loans 2,317,845 50,653 8.86%
Cash and due from banks 161,175 - -
Other assets 151,651 - -
--------- ------
Total assets 3,847,216 71,577 -
========= ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand-
non-interest bearing 548,437 - -
Demand-
interest bearing 282,483 1,771 2.54%
Savings 1,229,775 9,108 3.00%
Certificates and other time deposits 1,235,326 12,877 4.23%
--------- ------
Total deposits 3,296,021 23,756 2.92%
Federal funds purchased, securities sold
under agreements to repurchase and
other borrowings 142,512 877 2.50%
Other liabilities 45,417 -
Shareholders' equity 363,266 -
--------- ------
Total liabilities and shareholders' equity 3,847,216 24,833 -
========= ======
Total earning assets 3,534,390 71,577 8.21%
========= ======
Total interest bearing liabilities 2,890,096 24,633 3.46%
========= ======
Net yield on earning assets 46,944 5.39%
====== ====
Interest rate spread 4.76%
====
<FN>
*Interest income on tax-exempt securities and loans have been adjusted to a fully taxable equivalent basis.
*Non-accrual loans have been included in the average balances.
</TABLE>
<PAGE> 9
RESULTS OF OPERATIONS
First Bancorporation of Ohio's net income for the quarter ended March 31,
1994 was $14,073,000 compared to $13,179,000 for the same period one year ago.
Net income for the first quarter of 1994 increased 6.8% compared to the first
quarter of 1993.
Return on average assets equaled 1.42% for the first quarter of 1994 compared
to 1.39% for the same quarter one year ago. The first quarter of 1994 return
on average equity was 14.44% compared to 14.71% in 1993. The Corporation's
performance as measured by return on average equity is significantly affected
by its strong capital base which provides a measure of safety to shareholders
and depositors.
On a per share basis, net income for the quarter ended March 31, 1994 was
$.56 per share compared to $.52 per share one year ago an increase of $.04 per
share. The components of change in per share income for the quarters ended
March 31, 1994 and 1993 are summarized in the following table.
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------
CHANGES IN EARNINGS PER SHARE
Three
Months Ended
March 31,
1994/1993
- - ------------------------------------------------------------------------------
<S> <C>
Net income for the quarter and
three months ended
March 31, 1993 $.52
Increases (decreases)
attributable to:
Net interest income-
taxable equivalent (.04)
Provision for possible
loan loss .02
Other income .07
Other expenses (.02)
Federal income taxes-
taxable equivalent .01
----
Net change in net income .04
----
Net income for the quarter ended
March 31, 1994 $.56
====
</TABLE>
NET INTEREST INCOME
Net interest income, the Corporation's principal source of earnings, is the
difference between the interest income generated by earning assets (primarily
loans and investment securities) and the total interest paid on interest
bearing funds (deposits and other borrowings). For the purpose of this
discussion, net interest income is presented on a fully-taxable equivalent
(FTE) basis, to provide a comparison among types of interest earning
<PAGE> 10
assets. Interest on tax-free securities and tax-exempt loans has been restated
as if such interest was taxed at the statutory Federal income tax rate of 35%,
adjusted for the non-deductible portion of interest expense incurred to acquire
the tax-free assets.
Net interest income FTE for the quarter ended March 31, 1994 was $46,259,000
compared to $46,944,000 for the same period one year ago, a decrease of
$685,000 or 1.0%.
As summarized in the schedule below, the increase in total interest income
FTE of $4,369,000 was affected by the lower market interest rates which reduced
the yield on earning assets from 8.21% one year ago to 7.44% for the first
quarter of 1994. Interest on loans and investment securities decreased
$3,315,000 and $3,179,000 respectfully due to lower interest rates.
CHANGES IN NET INTEREST DIFFERENTIAL -
FULLY-TAX EQUIVALENT RATE/VOLUME ANALYSIS
(Dollars in thousands)
<TABLE>
<CAPTION>
Three months ended March 31,
1994 and 1993
-----------------------------
Increase (Decrease)
Interest Income/Expense
-----------------------------
Yield
Volume Rate Total
------ ------ -----
<S> <C> <C> <C>
INTEREST INCOME
Investment securities $ 592 (3,179) (2,578)
Loans 1,310 (3,315) (2,005)
Federal funds sold 201 13 214
----- ----- -----
Total interest income $2,112 (6,481) (4,369)
INTEREST EXPENSE
Interest on deposits:
Demand-interest bearing $ 151 (226) (75)
Savings 477 (1,912) (1,435)
Certificates and other
time deposits (994) (1,467) (2,461)
Federal funds purchased,
securities sold under
agreements to repurchase
and other borrowings 202 85 287
---- ---- -----
Total interest expense $ (164) (3,520) (3,684)
---- ----- -----
Net interest income $2,276 (2,961) (685)
===== ===== ====
</TABLE>
As lower market interest rates reduced the yield on earning assets, it also
reduced the Corporation's cost of funds. The average rate for interest bearing
liabilities was 2.91% for the first quarter of 1994 compared to 3.46% for the
same period one year ago. The decrease in interest expense due to lower
interest rates affected all categories of interest bearing deposits as
summarized in the previous schedule. As interest rates continued to decline,
funds shifted from certificates of deposits to the more liquid savings and
demand deposits. Total interest expense for the quarter ended March 31, 1994
was down $3,684,000 compared to the same period one year ago.
<PAGE> 11
NET INTEREST MARGIN
The net interest margin, net interest income FTE divided by average earning
assets, is affected by changes in the level of earning assets, the proportion
of earning assets funded by non-interest bearing liabilities, the interest rate
spread, and changes in the corporate tax rates. A meaningful comparison of the
net interest margin requires an adjustment for the changes in the statutory
Federal income tax rate noted above. The schedule below shows the relationship
of the tax equivalent adjustment and the net interest margin.
<TABLE>
NET INTEREST MARGIN (IN THOUSANDS)
- - ------------------------------------------------------------------
<CAPTION>
Quarters Ended
March 31,
1994 1993
-----------------------
<S> <C> <C>
Net interest income per
financial statements $ 45,006 45,686
Tax equivalent adjustment 1,253 1,258
---------- ---------
Net interest income-FTE $ 46,259 46,944
========== =========
Average Earning
Assets $3,662,301 3,534,390
========== =========
Net Interest Margin 5.12% 5.39%
==== ====
</TABLE>
The Tax Reform Act of 1986 reduced the tax benefit available to banks
acquiring tax exempt assets which has resulted in the reduction of the
tax-equivalent adjustment since the Act's adoption.
Average loans outstanding increased 2.8% to $2,412,611,000 compared to
$2,347,656,000 in 1993. Average loans outstanding represent 65.9% of average
earning assets compared to 66.4% in 1993.
Average certificates and other time deposits have decreased from 42.7% of
total interest bearing funds in the first quarter of 1993 to 38.6% in the first
quarter of 1994, while average savings deposits increased from 42.6% in the
first quarter of 1993 to 44.9% in the respective period in 1994.
Interest bearing liabilities funded 79.8% of average earning assets for the
first quarter of 1994 compared to 81.8% one year ago. Maximizing the use of
non interest liabilities helps reduce the cost of funds, thus improving the net
interest margin.
NON INTEREST INCOME
Non interest income for the quarter ended March 31, 1994 was $14,688,000
compared to $13,084,000 for the same period one year ago, an increase of 12.3%.
Trust fees increased $1,068,000 in the first quarter of 1994 compared to the
same period one year ago or $3,516,000 compared to $2,448,000 from one year
ago. Credit card fees totaled $1,877,000, up 4.7% compared to one year ago;
other income $4,329,000, up 17.0%; and service charges total $4,994,000 down
3.9%. The
<PAGE> 12
Corporation continues to examine new sources of non-interest income as well as
the current pricing of existing products and services which provide a source of
revenues not sensitive to the interest rate environment.
NON INTEREST EXPENSE
Non-interest expense was $38,320,000 for the first quarter of 1994 compared
to $37,682,000 for the same quarter of 1993, an increase of 1.7%. Salaries and
benefits increased 3.6% in the quarter ended March 31, 1994 compared to the
same period one year ago, or $19,847,000 compared to $19,150,000, and
represented 51.8% of the first quarter total operating expenses compared to
50.8% in 1993.
Management is of the opinion that all necessary adjustments have been made to
the financial statements in order to fairly present the results of operations
of the Corporation for the three month periods ended March 31, 1994 and 1993.
<PAGE> 13
FINANCIAL CONDITIONS
INVESTMENT SECURITIES
In May 1993, the Financial Accounting Standards Board issued Statement No.
115, "Accounting for Certain Investments in Debt and Equity Securities". The
statement requires debt and equity securities to be classified as
held-to-maturity, available-for-sale, or trading. Securities classified as
held-to-maturity are measured at amortized or historical cost, securities
available-for-sale and trading at fair value. Adjustment to fair value of the
securities available-for-sale, in the form of unrealized holding gains and
losses, is excluded from earnings and reported as a net amount in a separate
component of shareholders' equity. Adjustment to fair value of securities
classified as trading is included in earnings. This statement becomes
effective in 1994.
To comply with SFAS #115, the Corporation placed its core investment
portfolio in held to maturity and its remaining investments into available for
sale. The core portfolio is held till maturity and should provide the
Corporation with earnings and liquidity over a relatively wide band of interest
rate movements. The available for sale portfolio represents those non-core
segments of the portfolio that under certain circumstances and interest rate
scenarios flexability relative to disposition is prudent. The Corporation's
entire investment portfolio is considered to be of high quality and compliance
with SFAS #115 should not be interpreted to signal a change in the
Corporation's investment strategy of focusing on high quality investments that
provide earnings, liquidity and assist in asset/liability management. The
Corporation does not engage in the trading of investment securities.
The book value and market value of investment securities
classified as held-to-maturity are as follows:
<TABLE>
<CAPTION>
March 31,
----------------------------------------------
1994
----------------------------------------------
Gross Gross
Book Unrealized Unrealized Market
Value Gains Losses Value
---------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities
and U.S. Government agency
obligations $482,538 3,020 4,472 481,086
Obligations of state and
political subdivisions 150,104 2,610 525 152,189
Mortgage-backed
securities 107,659 3,157 411 110,405
Other securities 36,095 343 91 36,347
------- ----- ----- -------
$776,396 9,130 5,499 780,027
===================================================================================
</TABLE>
<TABLE>
<CAPTION>
Book Market
Value Value
-----------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $179,231 180,753
Due after one year through five years 377,305 378,274
Due after five years through ten years 80,228 80,714
Due after ten years 139,632 140,286
------- -------
$776,396 780,027
====================================================================================
</TABLE>
The book value and market value of investment securities
classified as available-for-sale are as follows:
<TABLE>
<CAPTION>
March 31,
----------------------------------------------
1994
----------------------------------------------
Gross Gross
Book Unrealized Unrealized Market
Value Gains Losses Value
---------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities
and U.S. Government agency
obligations $322,095 863 6,508 316,450
Obligations of state and
political subdivisions - - - -
Mortgage-backed
securities 78,664 571 979 78,256
Other securities 29,130 19 243 28,906
------- ----- ----- -------
$429,889 1,453 7,730 423,612
===================================================================================
</TABLE>
<TABLE>
<CAPTION>
Book Market
Value Value
-----------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 5,050 5,043
Due after one year through five years 95,329 94,142
Due after five years through ten years 7,850 7,878
Due after ten years 321,660 316,547
------- -------
$429,889 423,612
====================================================================================
</TABLE>
<PAGE> 14
The book value and market value of investment securities including
mortgage-backed securities and derivatives at March 31, 1994, by contractual
maturity, are shown above. Expected maturities will differ from contractual
maturities based on the issuers' right to call or prepay obligations with or
without call or prepayment penalties.
The carrying value of investment securities pledged to secure trust and
public deposits and for purposes required or permitted by law amounted to
approximately $619,223,000 at March 31, 1994, $602,694,000 at December 31, 1993
and $555,708,000 at March 31, 1993.
As noted in prior periods, securities with remaining maturities over five
years reflected in the foregoing schedule consist largely of mortgage and asset
backed securities. This is part of a strategy to maximize future earnings.
While the contractual maturities of these mortgages and asset backed securities
are beyond five years, these instruments provide periodic principal payments
and include securities with adjustable interest rates, reducing the interest
rate risk associated with longer term investments.
LOANS
Total loans outstanding at March 31, 1994 amounted to $2,458,931,000 compared
to $2,396,463,000 at December 31, 1993 and $2,379,474,000 at March 31, 1993.
Loan demand was somewhat stronger during the first quarter as uncertainty about
the economy and interest rates continued. Loans showed an increase since year
end 1993 of $62,468,000 for an annualized growth rate of approximately 10%.
The loan to deposit ratio at March 31, 1994 equaled 70.8% compared to 69.9% and
71.7% at December 31, 1993 and March 31, 1993, respectively.
<PAGE> 15
ASSET QUALITY
Total non performing assets (non-accrual and restructured and other real
estate owned) amounted to $18,159,000 at March 31, 1994 or .74% of total loans
outstanding. At December 31, 1993 non performing assets equaled .74% of total
loans or $17,701,000 compared to 1.28% or $30,462,000 at March 31, 1993.
<TABLE>
<CAPTION>
(In thousands)
----------------------------------
March December March
31, 31, 31,
1994 1993 1993
----------------------------------------------------------------------
<S> <C> <C> <C>
Non-accrual loans $12,406 9,495 15,862
Restructured loans 1,905 3,926 2,359
Other real estate owned 3,848 4,280 12,241
------ ------ ------
$18,159 17,701 30,462
====== ====== ======
Past due loans
(90 days or more) $ 1,703 2,830 6,723
====== ====== ======
Total non-performing
assets as a percent of
total loans .74% .74% 1.28%
==== ==== ====
</TABLE>
As of this report, there were no loans outstanding which in total could be
considered a concentration of lending in any particular industry or group of
industries. Most of the Corporation's business activity is with customers
located within the state of Ohio.
ALLOWANCE FOR LOAN LOSSES
The allowance for possible loan losses at March 31, 1994 amounted to
$31,795,000 or 1.29% of total loans outstanding compared to $31,221,000 or
1.30% at December 31, 1993 and $29,932,000 at March 31, 1993 or 1.26%.
<TABLE>
<CAPTION>
(In thousands)
----------------------------------
March December March
31, 31, 31,
1994 1993 1993
- - ----------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning
of year $31,221 29,193 29,193
Provision charged to
operating expenses 1,298 6,594 1,920
Loans charged off 1,664 8,565 1,916
Recoveries on loans
previously charged off 940 3,999 735
------ ------ ------
$31,795 31,221 29,932
====== ====== ======
Net charge offs as a percent
of average loans .12% .19% .20%
Allowance for possible
loan losses:
As a percent of loans
outstanding at end of
period 1.29% 1.30% 1.26%
As a multiple of net
charge offs 10.83X 6.84X 6.25X
</TABLE>
The Credit Risk Management Division of the Corporation is responsible for
determining the adequacy of the allowance for possible loan losses through
internal review, analysis of delinquency trends and ratios, changes in the
composition and level of various loan categories, historical loss experience,
and current economic conditions.
<PAGE> 16
DEPOSITS
The following schedule illustrates the change in composition of the average
balances of deposits and average rates paid for the noted periods.
<TABLE>
<CAPTION>
(Dollars in Thousands)
Three Months Ended and Year Ended
-------------------------------------------------------------------------
March 31, December 31, March 31,
1994 1993 1993
-------------------------- ----------------------- --------------------
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
- - -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Demand deposits -
non-interest bearing $ 664,958 - 639,265 - 548,437 -
Demand deposits -
interest bearing 310,004 2.22% 293,153 2.35% 282,483 2.54%
Savings deposits 1,311,267 2.37 1,265,424 2.72 1,229,775 3.00
Certificates and other
time deposits 1,127,723 3.75 1,197,040 4.01 1,235,326 4.23
--------- --------- ---------
$3,413,952 2.35 3,394,882 2.63 3,296,021 2.92
========== ========= =========
</TABLE>
The following table summarizes the certificates and other time deposits in
amounts of $100,000 or more as of March 31, 1994 by time remaining until
maturity.
<TABLE>
<CAPTION>
Amount
------------------------------------------------
<S> <C>
Maturing in:
Under 3 months $101,922
3 to 12 months 26,922
Over 12 months 22,166
------
$151,010
========
</TABLE>
<PAGE> 17
CAPITAL RESOURCES
Shareholders' equity at March 31, 1994 totaled $395,710,000 compared to
$391,641,000 at December 31, 1993 and $366,324,000 at March 31, 1993.
The following table reflects the various measures of capital:
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------
As Of As Of As Of
March 31, 1994 December 30, 1993 March 31, 1993
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
In millions
Total equity $395,710 9.68% 391,641 9.80% 366,324 9.46%
Common equity 395,710 9.68% 391,641 9.80% 366,324 9.46%
Tangible common
equity (a) 377,612 9.28% 372,709 9.37% 344,889 8.96%
Tier 1 capital
(b) 385,871 15.25% 381,356 15.22% 354,636 13.95%
Total risk-based
capital (c) 417,666 16.51% 412,577 16.46% 384,568 15.13%
Leverage (d) 385,871 9.64% 381,356 9.53% 354,636 9.25%
<FN>
(a) Common equity less all intangibles; computed as a ratio to total assets
less intangible assets.
(b) Shareholders equity less goodwill; computed as a ratio to risk-adjusted
assets, as defined in the 1992 risk-based capital guidelines.
(c) Tier 1 capital plus qualifying loan loss allowance, computed as a ratio to
risk-adjusted assets, as defined in the 1992 risk-based capital
guidelines.
(d) Tier 1 capital; computed as a ratio to the latest quarters average assets
less goodwill.
</TABLE>
The risk-based capital guidelines issued by the Federal Reserve Bank in 1988
require banks to maintain capital equal to 8% of risk-adjusted assets effective
December 31, 1993. At March 31, 1994 the Corporation's risk-based capital
equaled 16.51% of risk-adjusted assets, far exceeding the minimum guidelines.
The cash dividend of $.235 paid in the first quarter has an indicated annual
rate of $.94 per share.
<PAGE> 18
ITEM 5. OTHER INFORMATION
On September 28, 1993 the Corporation entered into a definitive agreement
for the acquisition of Great Northern Financial Corporation of Barberton, Ohio.
This acquisition was completed on April 22, 1994.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No form 8-K was filed during period for which this report was filed.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
<TABLE>
<S> <C>
FIRST BANCORPORATION OF OHIO
(Registrant)
By: Gary J. Elek
--------------------------
Signature
GARY J. ELEK
Senior Vice President/Treasurer
Authorized to sign for the
Corporation
By: Gary J. Elek
-----------------------------
Signature
GARY J. ELEK
Senior Vice President/Treasurer
Principal Financial Officer and
Principal Accounting Officer
Date: May 11, 1994
</TABLE>
