<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Wasington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securites Exchange Act of 1934
Date of Report (Date of earliest event reported) August 1, 1994
--------------
COMMERCIAL BANCSHARES, INCORPORATED
-----------------------------------
(Exact name of registrant as specified in its charter)
West Virginia 000-20232 55-0622108
------------- --------- ----------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
415 Market Street, Parkersburg, West Virginia 26101
----------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: 304-424-0300
------------
Page 1 of 20
<PAGE>
Item 5. Other Events
The Convertible Preferred Stock of Commercial BancShares, Inc.
("Commercial") issued in 1985 in conjuction with the acquisition of Jackson
County Bank is being redeemed for cash on October 28, 1994. Holders of
Convertible Preferred Stock were notified September 1, 1994, of the the
redemption. The Convertible Preferred Stock will be redeemed for $105 per
share. Until October 28, 1994, the holders may elect to convert their
Convertible Preferred Stock into $5 par Common Stock of Commercial at a ratio of
7.332 shares of Common Stock for each share of Convertible Preferred Stock.
Assuming that all holders of Convertible Preferred Stock elect to convert their
shares to Common Stock, the maximum number of shares that could be issued is
199,173. The most recent price of which Commercial is aware that was offered by
a broker for BancShares Common Stock was $28.25 per share, making the market
value of 7.332 shares of common stock equal to $207.13, which exceeds the $105
per share redemption value.
Item 7. Financial Statements and Exhibits
In its June 30, 1994, Form 10-QSB, Commercial reported in Item 5 that it
had consummated the merger of Commercial with Hometown Bancshares, Inc.
("Hometown") on August 1, 1994. The financial statements of Hometown as of
December 31, 1993, and December 31, 1992, were included in the Form S-4
Registration Statement No. 33-53017, effective May 10, 1994, and were
incorporated into Commercial's June 30, 1994, Form 10-QSB by reference. The
June 30, 1994, statements for Hometown were not available at that time and are
included in this report.
The following financial statements are filed as a part of this report:
Hometown Bancshares, Inc. Unaudited Condensed Consolidated
Balance Sheet as of June 30, 1994
Hometown Bancshares, Inc. Unaudited Condensed Consolidated Statement of
Income for Six Months Ended June 30, 1994
Hometown Bancshares, Inc. Unaudited Condensed Consolidated Statement of
Changes in Shareholders' Equity for Six Months Ended June 30, 1994
Hometown Bancshares, Inc. Unaudited Condensed Consolidated Statement of
Cash Flows for Six Months Ended June 30, 1994
Commercial BancShares, Inc. Unaudited Pro Forma Condensed Consolidated
Balance Sheet as of June 30, 1994
Commercial BancShares, Inc. Unaudited Pro Forma Condensed Consolidated
Statement of Income for Six Months Ended June 30, 1994
Commercial BancShares, Inc. Unaudited Pro Forma Condensed Consolidated
Statement of Changes in Shareholders' Equity for Six Months Ended
June 30, 1994
Commercial BancShares, Inc. Unaudited Pro Forma Condensed Consolidated
Statement of Cash Flows for Six Months Ended June 30, 1994
Page 2 of 20
<PAGE>
HOMETOWN BANCSHARES, INCORPORATED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1994
(In Thousands)
<TABLE>
<CAPTION>
Hometown
Bancshares,
Inc.
<S> <C>
ASSETS
Cash and Due from Banks $ 3,213
Interest-Bearing Deposits in Banks 385
Federal Funds Sold 1,820
Investment Securities (Market Value
$37,285) 37,293
Loans - Net of Unearned Discount 49,101
LESS: Reserve for Loan Losses (793)
Premises and Equipment - Net 1,506
Accrued Interest Receivable 797
Other Assets 925
-------
TOTAL ASSETS $94,247
=======
LIABILITIES AND CAPITAL
Deposits:
Demand - Non-Interest Bearing $ 7,135
Demand - Interest Bearing 13,306
Savings 29,845
Time Deposits 28,258
-------
TOTAL DEPOSITS $78,544
Federal Funds Purchased and Securities
Sold Under Agreement to Repurchase 5,465
Other Liabilities 517
-------
TOTAL LIABILITIES $84,526
=======
SHAREHOLDERS' EQUITY
Common Stock $ 337
Additional Paid In Capital 4,825
Undivided Profits 4,726
Net Unrealized Gain (Loss) on
Available-for-Sale Securities (167)
LESS: Treasury Stock, at cost -0-
-------
TOTAL SHAREHOLDERS' EQUITY $ 9,721
=======
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $94,247
=======
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
Page 3 of 20
<PAGE>
HOMETOWN BANCSHARES, INCORPORATED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1994
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Hometown
Bancshares,
Inc.
<S> <C>
INTEREST INCOME
Interest and Fees on Loans $2,314
Interest on Investment Securities:
Taxable Investments 991
Non - Taxable Investments 79
Interest on Federal Funds Sold 46
Interest on Time Deposits with Other
Banks 4
TOTAL INTEREST INCOME ------
$3,434
======
INTEREST EXPENSE
Interest on Deposits
Interest on Federal Funds Purchased and $1,195
Securities Sold Under Agreement to
Repurchase 67
------
TOTAL INTEREST EXPENSE $1,262
======
NET INTEREST INCOME $2,172
Provision for Loan Losses 56
------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES $2,116
======
OTHER INCOME
Service Charges and Fees $ 116
Security Gains 108
Other Income 95
------
TOTAL OTHER INCOME $ 319
======
OTHER EXPENSES
Employee Compensation and Benefits $ 790
Occupancy Expense (Net of Revenue) 108
Furniture and Equipment 103
Other Operating Expenses 554
------
TOTAL OTHER EXPENSES $1,555
======
INCOME BEFORE INCOME TAXES $ 880
Applicable Income Taxes 307
------
NET INCOME $ 573
======
NET INCOME AVAILABLE FOR COMMON
SHAREHOLDERS $ 573
======
EARNINGS PER SHARE DATA:
Primary $ 1.70
======
Fully diluted $ 1.70
======
Cash Dividends Declared $ .50
======
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
Page 4 of 20
<PAGE>
HOMETOWN BANCSHARES, INCORPORATED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1994
(In Thousands)
<TABLE>
<CAPTION>
Hometown
Bancshares,
Inc.
<S> <C>
COMMON STOCK
Balance at Beginning of Year $ 337
------
Balance at End of Period $ 337
------
ADDITIONAL PAID IN CAPITAL
Balance at Beginning of Year $4,825
------
Balance at End of Period $4,825
------
UNDIVIDED PROFITS
Balance at Beginning of Year $4,322
Net Income 573
Cash Dividend Declared on Common Stock 169
------
Balance at End of Period $4,726
------
LESS: NET UNREALIZED GAIN (LOSS) ON
AVAILABLE FOR SALE SECURITIES
Balance at Beginning of Year $ 76
Change, Net of Applicable Deferred
Income Taxes (243)
Balance at End of Period ------
$ (167)
------
TOTAL SHAREHOLDERS' EQUITY $9,721
======
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
Page 5 of 20
<PAGE>
HOMETOWN BANCSHARES, INCORPORATED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1994
(In Thousands)
<TABLE>
<CAPTION>
Hometown
Bancshares,
Inc.
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 573
--------
Adjustments to Reconcile Net Income to
Net Cash from Operating Activities:
Depreciation $ 76
Provision for Loan Loss 56
Investment Amortization - Net 63
Other - Net 30
Realized Gains on Investment Securities (108)
Provision for Deferred Taxes 10
(Increase) Decrease in Other Assets (71)
Increase (Decrease) in Other Liabilities (16)
--------
TOTAL ADJUSTMENTS $ 40
--------
NET CASH FLOWS FROM OPERATING ACTIVITIES $ 613
========
CASH FLOWS FROM INVESTING ACTIVITIES
Net (Increase) Decrease in Federal
Funds Sold $ (1,283)
Proceeds from Maturities of Securities 4,570
Proceeds from Sales of Securities 1,895
Purchases of Securities (7,310)
Net (Loans Originated) Principal
Collected (2,430)
Capital Expenditures (52)
--------
NET CASH FLOWS FROM INVESTING ACTIVITIES $ (4,610)
========
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase (Decrease) in Total
Deposits $ 1,323
Net Increase (Decrease) in Federal
Funds Purchased 1,283
Dividends Paid (169)
--------
NET CASH FLOWS FROM FINANCING ACTIVITIES $ 2,437
========
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ (301)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 3,899
--------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 3,598
========
</TABLE>
During the first six months of 1994 the Corporation paid $1,022,000 in
interest on deposits and other borrowings and $297,000 for income taxes.
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
Page 6 of 20
<PAGE>
HOMETOWN BANCSHARES, INCORPORATED AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED FINANCIAL INFORMATION
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six month period ended June 30, 1994,
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1994. For further information, refer to the consolidated
financial statements and footnotes thereto included in Hometown's annual report
on Form 10-K for the year ended December 31, 1993.
NOTE 2: INVESTMENT SECURITIES
The consolidated amortized cost and approximate consolidated market value
of investment securities for the six months ended are as follows:
<TABLE>
<CAPTION>
---------------------------------------------
June 30, 1994
---------------------------------------------
(In Thousands)
Gross Gross Aggregate
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Available for Sale
U.S. Treasury and Government Agency
Securities:
Mortgage Backed Securities $ -0- $ $ $ -0-
Collateralized Mortgage Obligations -0- -0-
Other Treasury and Agency Securities 6,536 (194) 6,342
Corporate Debt Securities -0- -0-
Equity Securities - FHLB Stock 611 (70) 541
---------------------------------------------
TOTAL $ 7,147 $-0- $ (264) $ 6,883
=============================================
Held to Maturity
U.S. Treasury and Government Agency
Securities:
Mortgage Backed Securities $ -0- $ $ $ -0-
Other Treasury and Agency Securities 27,425 (2) 27,423
Obligations of States and their 2,985 (6) 2,979
Subdivisions
Corporate Debt Securities -0- -0-
---------------------------------------------
TOTAL $30,410 $-0- $ (8) $30,402
=============================================
</TABLE>
Page 7 of 20
<PAGE>
HOMETOWN BANCSHARES, INCORPORATED AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED FINANCIAL INFORMATION
NOTE 3: LOANS
Major classifications of loans on the consolidated basis are summarized as
follows for the six months ended:
<TABLE>
<CAPTION>
June 30, 1994
-------------
(In Thousands)
<S> <C>
Real Estate Loans $26,200
Installment Loans 15,950
Commercial Loans 7,848
-------
$49,999
Unearned Income (897)
TOTAL LOANS $49,101
=======
</TABLE>
Changes in the allowance for loan losses on the consolidated basis were as
follows for the six months ended:
<TABLE>
<CAPTION>
June 30, 1994
-------------
(In Thousands)
<S> <C>
Balance, Beginning of Year $ 749
Provision Charged to Operation 56
Loans Charged Off (43)
Recoveries 31
-------
Balance, End of Period $ 793
=======
</TABLE>
NOTE 4: DEPOSITS
Time deposits in denominations of $100,000 or more at June 30, 1994 was
$3,208,000.
NOTE 5: INCOME TAX EXPENSE
The provision for income taxes on the consolidated basis is summarized as
follows:
<TABLE>
<CAPTION>
June 30, 1994
-------------
(In Thousands)
<S> <C>
Current
Federal $269
State 38
----
TOTAL PROVISION FOR APPLICABLE INCOME
TAXES $307
====
</TABLE>
Page 8 of 20
<PAGE>
HOMETOWN BANCSHARES, INCORPORATED AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED FINANCIAL INFORMATION
NOTE 6: CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY
<TABLE>
<CAPTION>
Hometown
BALANCE SHEET Bancshares,
Inc.
<S> <C>
ASSETS
Cash and Due from Banks (All from
Subsidiaries) $ 413
Investment in Subsidiaries (Equity
Basis) 9,104
Other Assets 239
------
TOTAL ASSETS $9,756
======
LIABILITIES
Other Liabilities $ 35
------
TOTAL LIABILITIES $ 35
------
STOCKHOLDERS EQUITY
Common Stock $ 337
Additional Paid in Capital 4,825
Undivided Profits 4,726
Unrealized Gain (Loss) on Securities
Available for Sale, Net (167)
TOTAL STOCKHOLDERS EQUITY ------
$9,721
------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $9,756
======
STATEMENT OF INCOME
REVENUE
Dividend from Subsidiary Banks $ -0-
Fees from Subsidiaries 103
------
TOTAL REVENUE $ 103
------
EXPENSES
Employee Compensation and Benefits $ -0-
Occupancy and Furniture Expense -0-
Other Expenses 55
------
TOTAL EXPENSES $ 55
------
Income before Tax Benefit and Equity in
Undistributed Net Income of
Subsidiaries $ 48
Applicable Income Taxes (Benefit) 35
------
Income before Equity in Undistributed
Net Income of Subsidiaries $ 13
Equity in Undistributed Net Income of
Subsidiaries 560
------
NET INCOME $ 573
======
</TABLE>
Page 9 of 20
<PAGE>
HOMETOWN BANCSHARES, INCORPORATED AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED FINANCIAL INFORMATION
NOTE 6: CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY (CONTINUED)
<TABLE>
<CAPTION>
Hometown
Bancshares,
Inc.
<S> <C>
STATEMENT OF CASH FLOWS
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 573
------
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating
Activities:
Depreciation 2
Net Amortization of Purchase Accounting
Adjustments 39
Undistributed Net (Income) Loss on
Subsidiaries (560)
Realized Gain on Investments Securities (103)
(Increase) Decrease Other Assets (2)
Increase (Decrease) Other Liabilities 35
------
TOTAL ADJUSTMENTS $ (589)
------
NET CASH FLOWS FROM OPERATING ACTIVITIES $ (16)
======
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Investment
Securities $ 395
Capital Expenditures -0-
------
NET CASH FLOWS FROM INVESTING ACTIVITIES $ 395
======
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends Paid $ (169)
------
NET CASH FLOWS FROM FINANCING
ACTIVITIES: $ (169)
======
NET DECREASE IN CASH AND CASH
EQUIVALENTS $ 210
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 203
------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 413
======
</TABLE>
Page 10 of 20
<PAGE>
COMMERCIAL BANCSHARES, INCORPORATED AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1994
(In Thousands)
<TABLE>
<CAPTION>
Commercial Hometown Pro Forma
BancShares, Bancshares, Pro Forma Consolidated
Inc. Inc. Adjustments Balance
------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and Due from Banks $ 10,528 $ 3,213 $ $ 13,741
Interest-Bearing Deposits in Banks 239 385 624
Federal Funds Sold 8,375 1,820 10,195
Investment Securities (Market Value 51,605 37,293 88,898
$89,112)
Loans - Net of Unearned Discount 191,379 49,101 240,480
LESS: Reserve for Loan Losses (2,481) (793) (3,274)
Premises and Equipment - Net 5,580 1,506 7,086
Notes Receivable 255 -0- 255
Accrued Interest Receivable 1,707 797 2,504
Foreclosed Properties - Net 1,616 -0- 1,616
Other Assets 3,469 925 4,394
-------- ------- -------- --------
TOTAL ASSETS $272,272 $94,247 $ -0- $366,519
======== ======= ======== ========
LIABILITIES AND CAPITAL
Deposits:
Demand - Non-Interest Bearing $ 34,447 $ 7,135 $ $ 41,582
Demand - Interest Bearing 42,970 13,306 56,276
Savings 55,006 29,845 84,851
Time Deposits 110,146 28,258 138,404
-------- ------- -------- --------
TOTAL DEPOSITS $242,569 $78,544 $ -0- $321,113
Federal Funds Purchased and Securities
Sold Under Agreement to Repurchase 5,300 5,465 10,765
Accrued Interest Payable 547 -0- 547
Other Liabilities 1,739 517 2,256
-------- ------- -------- --------
TOTAL LIABILITIES $250,155 $84,526 $ -0- $334,681
======== ======= ======== ========
SHAREHOLDERS' EQUITY
Convertible Preferred Stock $ 2,716 $ -0- $ $ 2,716
Common Stock 3,792 337 2,211 6,340
Additional Paid In Capital 5,683 4,825 (2,211) 8,297
Undivided Profits 10,711 4,726 15,437
Net Unrealized Gain (Loss) on
Available-for-Sale Securities (438) (167) (605)
LESS: Treasury Stock, at cost (347) -0- (347)
-------- ------- -------- ---------
TOTAL SHAREHOLDERS' EQUITY $ 22,117 $ 9,721 $ -0- $ 31,838
======== ======= ======== ========
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $272,272 $94,247 $ -0- $366,519
======== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
Page 11 of 20
<PAGE>
COMMERCIAL BANCSHARES, INCORPORATED AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1994
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Commercial Hometown Pro Forma
BancShares, Bancshares, Pro Forma Consolidated
Inc. Inc. Adjustments Balance
---------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $7,851 $2,314 $ $10,165
Interest on Investment Securities:
Taxable Investments 1,137 991 2,128
Non - Taxable Investments 249 79 328
Interest on Federal Funds Sold 97 46 143
Interest on Time Deposits with Other
Banks 4 4 8
------ ------ ----------- -------
TOTAL INTEREST INCOME $9,338 $3,434 $ -0- $12,772
====== ====== =========== =======
INTEREST EXPENSE
Interest on Deposits $3,316 $1,195 $ $ 4,511
Interest on Federal Funds Purchased and
Securities Sold Under Agreement to
Repurchase 26 67 93
------ ------ ----------- -------
TOTAL INTEREST EXPENSE $3,342 $1,262 $ -0- $ 4,604
====== ====== =========== =======
NET INTEREST INCOME $5,996 $2,172 $ $ 8,168
Provision for Loan Losses 126 56 182
------ ------ ----------- -------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES $5,870 $2,116 $ -0- $ 7,986
====== ====== =========== =======
OTHER INCOME
Trust Department Income $ 247 $ -0- $ $ 247
Service Charges and Fees 437 116 553
Security Gains -0- 108 108
Other Income 298 95 393
------ ------ ----------- -------
TOTAL OTHER INCOME $ 982 $ 319 $ -0- $ 1,301
====== ====== =========== =======
OTHER EXPENSES
Employee Compensation and Benefits $2,490 $ 790 $ $ 3,280
Occupancy Expense (Net of Revenue) 265 108 373
Furniture and Equipment 353 103 456
Other Operating Expenses 1,486 554 2,040
------ ------ ----------- -------
TOTAL OTHER EXPENSES $4,594 $1,555 $ -0- $ 6,149
====== ====== =========== =======
INCOME BEFORE INCOME TAXES $2,258 $ 880 $ $ 3,138
Applicable Income Taxes 904 307 $ 1,211
------ ------ ----------- -------
NET INCOME $1,354 $ 573 $ -0- $ 1,927
====== ====== =========== =======
NET INCOME AVAILABLE FOR COMMON
SHAREHOLDERS
EARNINGS PER SHARE DATA: $1,218 $ 573 $ 1,791
====== ====== =======
Primary $ 1.64 $ 1.70 $ 1.43
====== ====== =======
Fully diluted $ 1.44 $ 1.70 $ 1.33
====== ====== =======
Cash Dividends Declared $ .50 $ .50 $ 0.44
====== ====== =======
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
Page 12 of 20
<PAGE>
COMMERCIAL BANCSHARES, INCORPORATED AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1994
(In Thousands)
<TABLE>
<CAPTION>
Commercial Hometown Pro Forma
BancShares, Bancshares, Pro Forma Consolidated
Inc. Inc. Adjustments Balance
------------------------------------------------------
<S> <C> <C> <C> <C>
CONVERTIBLE PREFERRED STOCK
Cumulative Preferred $100 Series:
Balance at Beginning of Year $ 2,716 $ -0- $ -0- $ 2,716
------- ------ -------- -------
Balance at End of Period $ 2,716 $ -0- $ -0- $ 2,716
------- ------ -------- -------
COMMON STOCK
Balance at Beginning of Year $ 3,792 $ 337 $ 2,211 $ 4,129
------- ------ -------- -------
Balance at End of Period $ 3,792 $ 337 $ 2,211 $ 4,129
------- ------ -------- -------
ADDITIONAL PAID IN CAPITAL
Balance at Beginning of Year $ 5,683 $4,825 $ (2,211) $10,508
------- ------ -------- -------
Balance at End of Period $ 5,683 $4,825 $ (2,211) $10,508
------- ------ -------- -------
UNDIVIDED PROFITS
Balance at Beginning of Year $ 9,864 $4,322 $ -0- $14,186
Net Income 1,354 573 1,927
Cash Dividend Declared on Preferred
Stock 137 0 137
Cash Dividend Declared on Common Stock 370 169 539
Balance at End of Period ------- ------ ----------- -------
$10,711 $4,726 $ -0- $15,437
------- ------ -------- -------
LESS: NET UNREALIZED GAIN (LOSS) ON
AVAILABLE FOR SALE SECURITIES
Balance at Beginning of Year $ -0- $ 76 $ -0- $ 76
Change, Net of Applicable Deferred
Income Taxes (438) (243) (681)
------- ------ -------- -------
Balance at End of Period $ (438) $ (167) $ -0- $ (605)
------- ------ -------- -------
LESS: EMPLOYEE STOCK OWNERSHIP PLAN
SHARES COLLATERALIZING DEBT, AT COST
Balance at Beginning of Year $ 424 $ -0- $ -0- $ 424
Principal Reduction of ESOP Obligation (424) (424)
------- ------ -------- -------
Balance at End of Period $ -0- $ -0- $ -0- $ -0-
------- ------ -------- -------
LESS: TREASURY STOCK, AT COST
Balance at Beginning of Year $ (347) $ -0- $ -0- $ (347)
------- ------ -------- -------
Balance at End of Period $ (347) $ -0- $ -0- $ (347)
------- ------ -------- -------
TOTAL SHAREHOLDERS' EQUITY $22,117 $9,721 $ -0- $31,838
======= ====== ======== =======
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
Page 13 of 20
<PAGE>
COMMERCIAL BANCSHARES, INCORPORATED AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1994
(In Thousands)
<TABLE>
<CAPTION>
Commercial Hometown Pro Forma
BancShares, Bancshares, Pro Forma Consolidated
Inc. Inc. Adjustments Balance
-----------------------------------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,354 $ 573 $-0- $ 1,927
--------- -------- ---- ---------
Adjustments to Reconcile Net Income to
Net Cash from Operating Activities:
Depreciation $ 328 $ 76 $-0- $ 404
Deferred Employee Benefits 424 0 424
Provision for Loan Loss 126 56 182
Investment Amortization - Net 284 63 347
Other - Net (6) 30 24
Realized Gains on Investment Securities -0- (108) (108)
Income Tax Benefit (16) 0 (16)
Provision for Deferred Taxes 5 10 15
(Increase) Decrease in Other Assets (684) (71) (755)
Increase (Decrease) in Other Liabilities (127) (16) (143)
--------- -------- ---- ---------
TOTAL ADJUSTMENTS $ 334 $ 40 $-0- $ 374
--------- -------- ---- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES $ 1,688 $ 613 $-0- $ 2,301
========= ======== ==== =========
CASH FLOWS FROM INVESTING ACTIVITIES
Net (Increase) Decrease in Federal $ (827) $ (1,283) $-0- $ (2,110)
Funds Sold
Proceeds from Maturities of Securities 7,443 4,570 12,013
Proceeds from Sales of Securities -0- 1,895 1,895
Purchases of Securities (3,797) (7,310) (11,107)
Net (Loans Originated) Principal
Collected (17,153) (2,430) (19,583)
Capital Expenditures (250) (52) (302)
--------- -------- ---- ---------
NET CASH FLOWS FROM INVESTING ACTIVITIES $ (14,584) $ (4,610) $-0- $ (19,194)
========= ======== ==== =========
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase (Decrease) in Total
Deposits $ 8,495 $ 1,323 $-0- $ 9,818
Net Increase (Decrease) in Federal
Funds Purchased 5,696 1,283 6,979
Principal Payments on ESOP Borrowing (424) -0- (424)
Principal Payments on Capital Lease
Payable (9) -0- (9)
Dividends Paid (506) (169) (675)
--------- -------- ---- ---------
NET CASH FLOWS FROM FINANCING ACTIVITIES $ 13,252 $ 2,437 $-0- $ 15,689
========= ======== ==== =========
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ 356 $ (301) $-0- $ 55
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 10,172 3,899 $-0- $ 14,071
--------- -------- ---- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 10,528 $ 3,598 $-0- $ 14,126
========= ======== ==== =========
</TABLE>
During the first six months of 1994 the Corporation paid $4,604,000 in
interest on deposits and other borrowings and $745,000 for income taxes.
The accompanying notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
Page 14 of 20
<PAGE>
COMMERCIAL BANCSHARES, INCORPORATED AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-QSB of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the six month
period ended June 30, 1994, are not necessarily indicative of the results that
may be expected for the year ended December 31, 1994. For further information,
refer to the consolidated financial statements and footnotes thereto included in
Commercial's' annual report on Form 10-KSB for the year ended December 31,
1993.
A description of the pro forma adjustments made to the unaudited pro forma
consolidated financial information is as follows:
The capital accounts have been reclassified to give effect for the exchange of
all 337,077 outstanding shares of Hometown Bancshares, Inc. common stock for
Commercial BancShares, Inc common stock on the basis of 1.512 shares of
Commercial for each share of Hometown. This reclassification between common
stock and paid in capital is a result of the difference in the par value of
Hometown's shares received versus the par value of Commercial's shares issued.
In addition, this transaction will be accounted for under the pooling of
interest method therefore, no adjustments to the income or expense accounts as
a result of this combination are necessary.
NOTE 2: INVESTMENT SECURITIES
The consolidated amortized cost and approximate consolidated market value
of investment securities for the six months ended are as follows:
<TABLE>
<CAPTION>
---------------------------------------------
June 30, 1994
---------------------------------------------
(In Thousands)
Gross Gross Aggregate
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Available for Sale
U.S. Treasury and Government Agency
Securities:
Mortgage Backed Securities $ 4,248 $ 4 $ (172) $ 4,080
Collateralized Mortgage Obligations 2,104 6 (30) 2,080
Other Treasury and Agency Securities 39,889 108 (651) 39,152
Corporate Debt Securities 333 333
Equity Securities - FHLB Stock 1,153 1,083
---------------------------------------------
TOTAL $47,727 $118 $ (853) $46,728
=============================================
Held to Maturity
U.S. Treasury and Government Agency
Securities:
Mortgage Backed Securities $ 19 $ $ $ 19
Other Treasury and Agency Securities 28,208 (14) 28,194
Obligations of States and their 13,434 279 (69) 13,644
Subdivisions
Corporate Debt Securities 509 21 530
---------------------------------------------
TOTAL $42,170 $300 $ (83) $42,387
=============================================
</TABLE>
Page 15 of 20
<PAGE>
COMMERCIAL BANCSHARES, INCORPORATED AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
NOTE 3: LOANS
Major classifications of loans on the consolidated basis are summarized as
follows for the six months ended:
<TABLE>
<CAPTION>
June 30, 1994
-------------
(In Thousands)
<S> <C>
Real Estate Loans $ 92,180
Installment Loans 52,455
Credit Card Loans 2,963
Commercial Loans 93,781
--------
$241,379
Unearned Income (899)
TOTAL LOANS $240,480
========
</TABLE>
Changes in the allowance for loan losses on the consolidated basis were as
follows for the six months ended:
<TABLE>
<CAPTION>
June 30, 1994
-------------
(In Thousands)
<S> <C>
Balance, Beginning of Year $3,137
Provision Charged to Operation 182
Loans Charged Off (106)
Recoveries 61
------
Balance, End of Period $3,274
======
</TABLE>
NOTE 4: DEPOSITS
Time deposits in denominations of $100,000 or more at June 30, 1994 was
$10,447,000.
NOTE 5: LONG-TERM BORROWINGS
During 1992, the ESOP Trust obtained a revolving conversion note for the
principal amount of one million dollars to finance the acquisition of Commercial
common stock, pledging those shares as collateral. The revolving conversion
note was a conversion line-of-credit up to $1,000,000, available on a revolving
basis until May 31, 1993. The amount of the credit outstanding on May 31, 1993,
converted to a term loan. Interest on the unpaid principal balance of the loan
was payable at the end of each calendar quarter since September 30, 1992. The
principal balance of the term loan was payable at the end of each calendar
quarter commencing June 30, 1993, in 28 equal quarterly installments. Interest
was at a rate of the lender's prime plus 1/2%, fluctuating accordingly. The
interest rate as of December 31, 1993, was 6.50%. The ESOP paid off
the loan in its entirety in March, 1994
NOTE 6: INCOME TAX EXPENSE
The provision for income taxes on the consolidated basis is summarized as
follows:
<TABLE>
<CAPTION>
June 30, 1994
-------------
(In Thousands)
<S> <C>
Current
Federal $1,048
State 155
Deferred Applicable Income Taxes 8
------
TOTAL PROVISION FOR APPLICABLE INCOME
TAXES $1,211
======
</TABLE>
Page 16 of 20
<PAGE>
COMMERCIAL BANCSHARES, INCORPORATED AND SUBSIDIARIES
NOTE TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
NOTE 7: CONVERTIBLE PREFERRED STOCK
In conjunction with the acquisition of Jackson County Bank, Ravenswood,
West Virginia, Commercial issued 28,764 shares of Convertible Preferred Stock to
former owners of Jackson County Bank Common Stock. The Convertible Preferred
has a stated value of $100 per share and pays cumulative dividends of $10.00 per
share per year, paid quarterly. Shares of Convertible Preferred are convertible
by the holders into 7.332 shares of Commercial Common Stock at any time.
Convertible Preferred may be redeemed during 1994 at $105 per share, and after
January 1, 1995, at $100 per share. Holders of Convertible Preferred vote as a
class on the election of two members of Commercial's Board of Directors as long
as more than 13,673 shares of Convertible Preferred remain outstanding.
Thereafter one member of the Board will be elected by holders of Convertible
Preferred as long as any shares remain outstanding. To date, 1,599 shares of
Convertible Preferred stock have been converted to Commercial Common Stock.
The entire issue of Convertible Preferred Stock will be redeemed for cash
on October 28, 1994 at $105 per share. A redemption notice was mailed to
holders of Convertible Preferred Stock on September 1, 1994. Management expects
holders will elect to convert their Convertible Preferred Stock to Common Stock
prior to the redemption date, and anticipates issuing up to 199,173 shares of
common stock in exchange.
Page 17 of 20
<PAGE>
COMMERCIAL BANCSHARES, INCORPORATED AND SUBSIDIARIES
NOTE TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
NOTE 8: CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY
<TABLE>
<CAPTION>
Commercial Hometown Pro Forma
BALANCE SHEET BancShares, Bancshares, Pro Forma Consolidated
Inc. Inc. Adjustments Balance
------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and Due from Banks (All from $ 173 $ 413 $ $ 586
Subsidiaries)
Accounts Receivable (All from 184 -0- 184
Subsidiaries)
Notes Receivable 255 -0- 255
Investment in Subsidiaries (Equity 21,086 9,104 30,190
Basis)
Premises and Equipment - Net 412 -0- 412
Other Assets 270 239 509
------- ------ -------- -------
TOTAL ASSETS $22,380 $9,756 $ -0- $32,136
======= ====== ======== =======
LIABILITIES
Other Liabilities $ 263 $ 35 $ $ 298
------- ------ -------- -------
TOTAL LIABILITIES $ 263 $ 35 $ -0- $ 298
======= ====== ======== =======
STOCKHOLDERS EQUITY
Preferred Stock $ 2,716 $ -0- $ $ 2,716
Common Stock 3,792 337 2,211 6,340
Additional Paid in Capital 5,683 4,825 (2,211) 8,297
Undivided Profits 10,711 4,726 15,437
Unrealized Gain (Loss) on Securities
Available for Sale, Net (438) (167) (605)
Treasury Stock (347) 0 (347)
------- ------ -------- -------
TOTAL STOCKHOLDERS EQUITY $22,117 $9,721 $ -0- $31,838
======= ====== ======== =======
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $22,380 $9,756 $ -0- $32,136
======= ====== ======== =======
STATEMENT OF INCOME
REVENUE
Dividend from Subsidiary Banks $ 935 $ -0- $ $ 935
Fees from Subsidiaries 474 103 577
------- ------ -------- -------
TOTAL REVENUE $ 1,409 $ 103 $ -0- $ 1,512
======= ====== ======== =======
EXPENSES
Employee Compensation and Benefits $ 396 $ -0- $ $ 396
Occupancy and Furniture Expense 145 -0- 145
Other Expenses 166 55 221
------- ------ -------- -------
TOTAL EXPENSES $ 707 $ 55 $ -0- $ 762
======= ====== ======== =======
Income before Tax Benefit and Equity in
Undistributed Net Income of $ 702 $ 48 $ $ 750
Subsidiaries
Applicable Income Taxes (Benefit) (16) 35 19
------- ------ -------- -------
Income before Equity in Undistributed
Net Income of Subsidiaries $ 718 $ 13 $ -0- $ 731
Equity in Undistributed Net Income of
Subsidiaries 636 560 1,196
------- ------ -------- -------
NET INCOME $ 1,354 $ 573 $ -0- $ 1,927
======= ====== ======== =======
</TABLE>
Page 18 of 20
<PAGE>
COMMERCIAL BANCSHARES, INCORPORATED AND SUBSIDIARIES
NOTE TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
NOTE 8: CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY (CONTINUED)
<TABLE>
<CAPTION>
Commercial Hometown Pro Forma
STATEMENT OF CASH FLOWS BancShares, Bancshares, Pro Forma Consolidated
Inc. Inc. Adjustments Balance
-----------------------------------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $1,354 $ 573 $ $ 1,927
------ ------ ----------- --------
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating
Activities:
Depreciation 81 2 83
Net Amortization of Purchase Accounting
Adjustments 2 39 41
Undistributed Net (Income) Loss on (636) (560) (1,196)
Subsidiaries
Realized Gain on Investments Securities -0- (103) (103)
Deferred Employee Benefits 424 -0- 424
(Increase) Decrease Accounts Receivable (93) -0- (93)
(Increase) Decrease Accrued Interest 2 -0- 2
Receivable
(Increase) Decrease Other Assets 13 (2) 11
Increase (Decrease) Other Liabilities (228) 35 (193)
Income Tax Benefit (16) -0- (16)
------ ------ ----------- --------
TOTAL ADJUSTMENTS $ (451) $ (589) $ -0- $ (1,040)
------ ------ ----------- --------
NET CASH FLOWS FROM OPERATING ACTIVITIES
$ 903 $ (16) $ -0- $ 887
======= ====== =========== ========
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Investment $ -0- $ 395 $ $ 395
Securities
Capital Expenditures (14) -0- (14)
------ ------ ----------- --------
NET CASH FLOWS FROM INVESTING ACTIVITIES $ (14) $ 395 $ -0- $ 381
======= ====== =========== ========
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal Payments on ESOP and
long-term debts $ (424) $ -0- $ $ (424)
Dividends Paid (507) (169) (676)
------ ------ ----------- --------
NET CASH FLOWS FROM FINANCING
ACTIVITIES: $ (931) $ (169) $ -0- $ (1,100)
======= ====== =========== ========
NET DECREASE IN CASH AND CASH
EQUIVALENTS $ (42) $ 210 $ -0- $ 168
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 215 203 418
------ ------ ----------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 173 $ 413 $ -0- $ 586
======= ====== =========== ========
</TABLE>
Page 19 of 20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Commercial BancShares, Inc.
(Registrant)
/s/ William E. Mildren, Jr.
-----------------------------------------------
William E. Mildren, Jr.
Chairman, President and Chief Executive Officer
Date: September 14, 1994
------------------
Page 20 of 20
