<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 1995
-------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
------ --------
Commission file number 0-20232
-------
COMMERCIAL BANCSHARES, INCORPORATED
-----------------------------------
(Exact name of small business issuer as specified in its charter)
West Virginia 55-0622108
------------- ----------
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) identification No.)
415 Market Street, Parkersburg, WV 26101
-----------------------------------------
(Address of principal executive offices)
304-424-0300
------------
(Issuer's telephone number)
Check whether the issue (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Class Outstanding at June 30, 1995
----- ------------------------------
Common Stock $5.00 par value 1,467,040
<PAGE>
COMMERCIAL BANCSHARES, INCORPORATED
("Commercial")
INDEX
<TABLE>
<CAPTION>
Part I Financial Information Page No.
<S> <C>
Condensed Consolidated Balance Sheet as of
June 30, 1995 and December 31, 1994................... 3
Condensed Consolidated Statement of Income for
Six Months ended June 30, 1995 and 1994............... 4
Condensed Statement of Changes in Stockholders
Equity for Six months ended June 30, 1995............. 5
Consolidated Statement of Cash Flows for the Six
Months ended June 30, 1995 and 1994................... 6
Notes to Condensed Consolidated Financial Statements.. 7-10
Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 11-12
Part II Other Information............................... 13
Signatures.............................................. 13
</TABLE>
2
<PAGE>
PART I FINANCIAL INFORMATION
COMMERCIAL BANCSHARES, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
ASSETS
<TABLE>
<CAPTION>
June 30, Dec. 31,
1995 1994
--------- ---------
(unaudited) *
<S> <C> <C>
Cash and Due from Banks........................................ $ 13,971 $ 16,304
Interest-Bearing Demand Deposits in Banks...................... 616 323
Interest-Bearing Time Deposits in Other Banks.................. 99 299
Federal Funds Sold............................................. 12,445 1,405
Investment Securities
Held to Maturity, at Amortized Costs......................... 38,614 41,150
(Market Value: $38,901 and $40,384)
Available for Sale, at Market Value.......................... 46,633 42,940
Loans - net of unearned discount............................... 258,212 256,402
LESS: Reserve for Losses...................................... ( 3,467) ( 3,430)
Premises and Equipment......................................... 7,816 7,129
Notes Receivable............................................... 255 255
Accrued Interest Receivable.................................... 2,670 2,549
Foreclosed Properties - Net.................................... 1,611 1,329
Other Assets................................................... 4,975 5,568
-------- --------
TOTAL ASSETS................................................. $384,450 $372,223
======== ========
</TABLE>
LIABILITIES AND CAPITAL
<TABLE>
<S> <C> <C>
Deposits:
Demand - Non-Interest Bearing................................ $ 50,749 $ 46,499
Demand - Interest Bearing.................................... 44,010 44,462
Savings...................................................... 85,174 98,039
Time Deposits................................................ 157,017 134,959
-------- --------
TOTAL DEPOSITS................................................. $336,950 $323,959
Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase.......................... 7,824 10,972
Accrued Interest Payable....................................... 1,089 812
Other Liabilities.............................................. 2,329 2,872
-------- --------
TOTAL LIABILITIES.............................................. $348,192 $338,615
-------- --------
Shareholders' Equity:
Preferred Stock (Stated Value: $100)
Outstanding: none......................................... $ 0 $ 0
Common Stock (Par Value $5.00)
Outstanding: 1,467,040 shares and 1,467,040 shares........ 7,335 7,335
Additional Paid In Capital................................... 10,186 10,079
Undivided Profits............................................ 18,651 17,122
Net Unrealized Gain (Loss) on Available-for-Sale Securities.. 86 (719)
Less: Employee Stock Ownership Plan
Shares Purchased with Debt............................. 0 (0)
Treasury Stock, at cost................................... 0 (209)
-------- --------
TOTAL SHAREHOLDERS' EQUITY................................... $ 36,258 $ 33,608
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY..................... $384,450 $372,223
======== ========
</TABLE>
*Condensed from audited financial statements.
The accompanying notes are an integral part of these condensed financial
statement.
3
<PAGE>
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
(In thousands of dollars except for per share data)
Six Months Ended Three Months Ended
June 30 June 30
1995 1994 1995 1994
-------- -------- -------- ------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans............... $12,137 $10,165 $6,112 $5,295
Interest and Dividends on Securities..... 2,569 2,456 1,326 1,242
Interest on Federal Funds Sold........... 278 143 187 91
Interest on Notes Receivable............. 12 0 12 1
Interest on Time Deposits with Other Banks 23 8 17 8
------- ------ ------ ------
TOTAL INTEREST INCOME.................... $15,019 $12,772 7,654 $6,637
------- ------- ------ ------
INTEREST EXPENSE
Interest on Deposits..................... $ 5,859 $ 4,511 $3,050 $2,269
Interest on Federal Funds Purchased and
Securities Sold Under Agreement to
Repurchase............................ 235 93 102 65
------- ------- ------ ------
TOTAL INTEREST EXPENSE................... $ 6,094 $ 4,604 $3,152 $2,334
------- ------- ------ ------
NET INTEREST INCOME...................... $ 8,925 $ 8,168 $4,502 $4,303
Provision for Loan Losses.................. 218 182 110 86
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES................ $ 8,707 $7,986 $4,392 $4,217
OTHER INCOME
Trust Department Income.................. 314 247 174 128
Service Charges and Fees................. 569 553 211 314
Security Gains........................... 0 108 0 103
Other Income............................. 415 393 350 211
------- ------- ------ ------
Total Other Income.................... 1,298 1,301 735 756
OTHER EXPENSES
Employee Compensations & Benefits........ $ 3,542 $3,280 $1,739 $1,542
Occupancy Expense
(Net of Rental Income)................ 409 373 199 177
Furniture and Equipment.................. 435 456 245 227
Other Operating Expenses................. 2,006 2,040 1,042 1,089
------- ------- ------ ------
Total Other Expenses.................. 6,392 6,149 3,225 3,035
INCOME BEFORE APPLICABLE
INCOME TAXES........................ $ 3,613 $ 3,138 $1,902 $1,938
Applicable Income Taxes.................... 1,268 1,211 673 713
------- ------- ------ ------
NET INCOME............................... $ 2,345 $ 1,927 $1,229 $1,225
======= ======= ====== ======
NET INCOME AVAILABLE FOR
COMMON STOCKHOLDERS........................ $ 2,345 $ 1,791 $1,229 $1,157
EARNINGS PER SHARE DATA:
Primary.................................. $1.61 $1.43 $.84 $.92
Fully Diluted............................ 1.61 1.33 .84 .85
Cash Dividends Declared.................. .56 .50 .28 .25
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
for the six months ended June 30, 1994
(unaudited)
<TABLE>
<CAPTION>
(in thousands
of dollars)
<S> <C>
Convertible Preferred stock (43,328 Shares authorized):
Cumulative Preferred $100 Series:
Balance at Beginning of Year..................................... $ 0
-------
Balance at End of Period......................................... $ 0
-------
Common Stock ($5.00 Par Value; 2,000,000 Shares authorized)
Balance at beginning of year....................................... $ 7,335
-------
Balance at end of period - 1,467,040 Shared Issued
and Outstanding at June 30, 1995................................. $ 7,335
-------
Additional Paid In Capital
Balance at Beginning of Year....................................... $10,079
Additional Paid in Capital from Resale of Treasury Stock........... 108
Payments for Fractional Shares..................................... ( 1)
-------
Balance at End of Period........................................... $10,186
-------
Undivided Profits
Balance at Beginning of Year....................................... $17,122
Net Income......................................................... 2,345
Cash Dividend Declared on Common Stock............................. ( 816)
-------
Balance at End of Period........................................... $18,651
-------
Unrealized Gain (Loss) on Securities Available-for-Sale,
Net of Applicable Deferred Income Taxes
Balance at Beginning of Year....................................... $( 719)
Change in Unrealized Gain (Loss) on Securities Available for Sale.. 805
-------
Balance at End of Period........................................... $ 86
-------
Less: Treasury Stock, at Cost
Balance at Beginning of Year....................................... $ 209
Resale of 10,578 shares of Treasury Stock at Cost.................. ( 209)
-------
Balance at End of Period (17,643 Shares)........................... $ 0
-------
Total Shareholders' Equity......................................... $36,258
=======
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(In thousands of dollars)
Six Months Ended
June 30
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income........................................................... $ 2,345 $ 1,927
Adjustments to Reconcile Net Income to Net
Cash from Operating Activities:
Depreciation.................................................... 387 404
Deferred Employee Benefits...................................... 424
Provision for Loan Loss......................................... 218 182
Investment Amortization - Net................................... 125 347
Other - Net..................................................... ( 16) 24
Realized Investment Securities (Gains) Losses................... ( 108)
(Gain) Loss on Sale of Capitalized Assets....................... ( 7)
Income Tax Benefit.............................................. 83 ( 16)
Provision for Deferred Taxes.................................... 41 15
Purchase Adjustments............................................ 43
(Increase) Decrease:
Accrued Interest Receivable................................... ( 125)
Other Assets.................................................. 556 ( 755)
Increase (Decrease):
Accrued Interest Payable...................................... 276
Other Liabilities............................................. ( 331) ( 143)
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES.......................... $ 3,595 $ 374
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (Increase) Decrease in Federal Funds Sold...................... $(13,957) $(2,110)
Net (Increase) Decrease in Interest bearing Time Deposits.......... 200
Proceeds from Maturities of Securities Reported at Amortized Cost.. 12,743 12,013
Proceeds from Sales of Securities.................................. 1,895
Purchases of Securities Held to Maturity........................... (11,721) (11,107)
Purchases of Securities Available for Sale......................... ( 1,201)
Net (Loans Originated) Principal Collected......................... ( 3,053) (19,583)
Proceeds from Sale of Other Real Estate Owned...................... 188
Proceeds from Sale of Capitalized Assets........................... 7
Capital Expenditures............................................... ( 1,080) ( 302)
------- --------
NET CASH FLOWS FROM INVESTING ACTIVITIES............................. $(17,874) (19,194)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase (Decrease) in Total Deposits.......................... $ 12,991 $ 9,818
Net Increase (Decrease) in Federal Funds Purchased................. ( 253) 6,979
Proceeds from Sale of Treasury Stock............................... 317
Payment for Fractional Shares...................................... ( 1)
Principal Payments on ESOP Borrowing............................... ( 424)
Principal Payments on Capital Lease................................ ( 9)
Dividends Paid..................................................... ( 816) (675)
------- --------
FINANCING ACTIVITIES............................................... $ 12,238 $ 15,689
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................................................... $( 2,041) $ 55
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR....................... 16,627 14,071
------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD........................... $ 14,586 $ 14,126
======== ========
</TABLE>
During the first six months of 1995 and 1994, the Corporation paid $5,818,000
and $4,604,000, respectively, in interest on deposits and other borrowings and
$1,121,000 and $745,000, respectively, for income taxes.
Disclosure of Accounting Policy:
For purposes of the statement of cash flows, Commercial has defined cash
equivalents as those amounts included in the balance sheet caption "Cash and Due
from Banks."
The accompanying notes are an integral part of these statements.
6
<PAGE>
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARIES
("Commercial")
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
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, 1995,
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1995. 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, 1994.
NOTE 2: INVESTMENT SECURITIES
The book value and approximate market value of investment securities as of
June 30, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
--------------------------------------------
June 30, 1995
--------------------------------------------
(Thousands of Dollars)
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 $ 5,125 $ 17 $ 77 $ 5,065
Collateralized Mortgage 3,784 17 1 3,800
Obligations
Other Treasury and Agency 36,138 520 296 36,362
Securities
Obligations of States and their 0 0
Subdivisions
Corporate Debt Securities 132 132
Equity Securities 1,330 56 1,274
--------- ---------- ---------- ---------
TOTAL $46,509 $554 $430 $46,633
========= ========== ========== =========
Held to Maturity
U.S. Treasury and Government Agency
Securities:
Mortgage Backed Securities $ 206 $ 206
Collateralized Mortgage 0 0
Obligations
Other Treasury and Agency 24,773 181 146 24,808
Securities
Obligations of States and their 13,389 292 45 13,636
Subdivisions
Corporate Debt Securities 246 7 2 251
--------- ---------- ---------- ---------
TOTAL $38,614 $480 $193 $38,901
========= ========== ========== =========
--------------------------------------------
June 30, 1994
--------------------------------------------
(Thousands of Dollars)
Gross Gross Aggregate
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
Available for Sale
U.S. Treasury and Government Agency
Securities:
Mortgage Backed Securities $ 4,248 $ 4 $172 $ 4,080
Collateralized Mortgage 2,104 6 30 2,080
Obligations
Other Treasury and Agency 39,889 108 651 39,346
Securities
Obligations of States and their 0 0
Subdivisions
Corporate Debt Securities 333 333
Equity Securities 1,153 70 1,083
--------- ---------- ---------- ---------
TOTAL $47,727 $118 $923 $46,922
========= ========== ========== =========
Held to Maturity
U.S. Treasury and Government Agency
Securities:
Mortgage Backed Securities $ 19 $ 19
Other Treasury and Agency 28,208 14 28,194
Securities
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>
7
<PAGE>
NOTE 3: LOANS
Major classifications of loans are summarized as follows:
<TABLE>
<CAPTION>
June 30
-------------------
1995 1994
(thousands of dollars)
<S> <C> <C>
Real Estate Loans....................... $ 90,581 $ 92,180
Installment Loans....................... 60,751 52,455
Credit Card Loans....................... 3,894 2,963
Commercial Loans........................ 103,057 93,781
-------- --------
$258,283 $241,379
-------- --------
Unearned Income......................... 71 899
-------- --------
TOTAL LOANS............................. $258,212 $240,480
======== ========
</TABLE>
Changes in the allowance for loan losses were as follows for the six months
ended June 30, 1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
(thousands of dollars)
<S> <C> <C>
Balance, Beginning of Year.............. $ 3,430 $ 3,137
Provision Charged to Operation.......... 218 182
Loans Charged Off....................... ( 230) ( 106)
Recoveries.............................. 49 61
-------- --------
Balance, End of Period.................. $ 3,467 $ 3,274
======== ========
</TABLE>
NOTE 4: DEPOSITS
Time deposits in denominations of $100,000 or more at June 30, 1995 and
1994 were $21,415,000 and $10,447,000 respectively.
NOTE 5: FEDERAL FUNDS PURCHASED AND OTHER BORROWINGS
Federal funds purchased and securities sold under repurchase agreements
generally represent overnight borrowing transactions.
The details of these classifications for the dates indicated are as
follows:
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
<S> <C> <C>
6-30-95 12-31-94
-------- ---------
FEDERAL FUNDS PURCHASED AND SECURITIES
SOLD UNDER REPURCHASE AGREEMENTS
Balance at End of Period $ 7,824 $ 10,972
Average during Period 5,835 9,662
Maximum Month-end Balance 7,824 14,610
Average Rate during Period 5.20% 4.55%
Rate at the end of Period 6.00% 5.84%
</TABLE>
NOTE 6: INCOME TAX EXPENSE
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
Six Months ended
June 30
1995 1994
--------- ----------
(In thousands of dollars)
<S> <C> <C>
Current:
State............................. $ 184 $1,048
Federal........................... 1,124 155
Deferred Income Taxes............. ( 40) 8
------ ------
TOTAL PROVISION FOR INCOME TAXES.. $1,268 $1,211
====== ======
</TABLE>
8
<PAGE>
NOTE 7: CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY
COMMERCIAL BANCSHARES, INCORPORATED (PARENT COMPANY ONLY)
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
--------- -------------
(In Thousands of Dollars)
<S> <C> <C>
ASSETS
Cash and Due from Banks (All from subsidiaries)............... $ 1,203 $ 968
Accounts Receivable (All from subsidiaries)................... 518 835
Notes Receivable.............................................. 255 255
Investment in Subsidiaries (Equity Basis)..................... 33,337 31,126
Premises and Equipment - Net.................................. 483 333
Other Assets.................................................. 647 652
------- -------
TOTAL ASSETS.................................................. $36,443 $34,169
======= =======
LIABILITIES
Other Liabilities............................................. $ 185 $ 561
------- -------
TOTAL LIABILITIES............................................. $ 185 $ 561
------- -------
STOCKHOLDERS EQUITY
Common Stock (Par Value $5.00, Authorized: 2,000,000 Shares.
Outstanding : 1,467,040 Shares and 1,467,040 Shares
at June 30, 1995 and December 31,1994, respectively)........ $ 7,335 $ 7,335
Surplus....................................................... 10,186 10,079
Undivided Profits............................................. 18,651 17,122
Unrealized Gain (Loss) on Securities Available for Sale, Net.. 86 (719)
LESS:
Treasury Stock, at cost..................................... ( 0) (209)
------- -------
TOTAL STOCKHOLDERS EQUITY..................................... $36,258 $33,608
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY..................... $36,443 $34,169
======= =======
</TABLE>
COMMERCIAL BANCSHARES, INCORPORATED (PARENT COMPANY ONLY)
CONDENSED STATEMENT OF INCOME
FOR SIX MONTHS ENDED JUNE 30, 1995
(In thousands)
<TABLE>
<S> <C>
REVENUE
Dividend from Subsidiary Banks.................... $1,130
Fees from Subsidiaries............................ 524
Interest Income................................... 12
------
TOTAL REVENUE....................................... $1,666
------
EXPENSES
Employee Compensation and Benefits................ $ 460
Occupancy and Furniture Expense................... 143
Other Expenses.................................... $ 208
------
TOTAL EXPENSES...................................... $ 811
------
Income before Tax Benefit and Equity in
Undistributed Net Income of Subsidiaries.......... $ 855
Income Tax Benefit.................................. ( 83)
------
Income before Equity in Undistributed
Net Income of Subsidiaries........................ $ 938
Equity in Undistributed Net Income of Subsidiaries.. 1,407
------
NET INCOME.......................................... $2,345
------
</TABLE>
9
<PAGE>
COMMERCIAL BANCSHARES, INCORPORATED (PARENT COMPANY ONLY)
STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIOD ENDING JUNE 30, 1995
(In Thousands)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income............................................ $ 2,345
Adjustments to Reconcile Net Income to Cash
Provided by Operating Activities:
Depreciation and Amortization.................... 72
Net Amortization of Purchase Accounting Adjustments 43
Undistributed Net(Income) Loss on Subsidiaries... (1,407)
Increase(Decrease) Accounts Receivable........... 317
Accrued Interest Receivable...................... 4
Other Assets..................................... ( 43)
Other Liabilities................................ ( 458)
Income Tax Benefit............................... $ 83
-------
NET CASH PROVIDED BY OPERATING ACTIVITIES............. $ 956
-------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures................................ $( 221)
-------
NET CASH USED BY INVESTING ACTIVITIES................. $( 221)
-------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Sale of Treasury Stock................ $ 317
Payment for Fractional Shares....................... ( 1)
Dividends paid...................................... ( 816)
-------
NET CASH USED BY FINANCING ACTIVITIES................. $( 500)
-------
NET INCREASE IN CASH AND CASH EQUIVALENTS............. $ 235
CASH AND DUE FROM BANKS AT BEGINNING OF YEAR.......... 968
-------
CASH AND DUE FROM BANKS AT END OF PERIOD.............. $ 1,203
-------
</TABLE>
During the first six months of 1995, Commercial paid $1,121,000 in income taxes.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SOURCES AND USES OF FUNDS
During the first six months of 1995, Commercial's largest source of funds, its
deposits, grew $13.0 million or 4.01% from December 31, 1994, to $336.9 million.
The largest increase was in time deposits, which were up 16.34% ($22.0 million).
Non interest-bearing demand deposits also experienced an increase, and were up
$4.2 million (9.14%). However, savings deposits decreased $12.9 million or
13.12% and interest bearing demand deposits decreased a minimal .45 million
(1.02%). The predominant interest for consumers during the first half of 1995
was in time certificates of deposit of short term. Customers moved from savings
to time deposits to increase their return as yields edged upward.
Commercial increased its sales of Federal funds over the year end. Net sales
of funds were $4.6 million at June 30, 1995, compared to net purchases of $9.6
million at year end. Commercial's banks regularly undertake borrowings to
accommodate smaller correspondent banks and in such cases those funds are
ordinarily invested in federal funds sold. Additionally, during the first half
of 1995 the increase in deposits exceeded the growth in loans. Federal funds
sold represent temporary liquid investments that may be used to meet loan or
deposit demands, as well as funds that are awaiting investment in longer term
investments.
Cash and due from banks decreased by $2.3 million or 14.31% from December 31,
1994, to June 30, 1995. Changes in this category are not unusual, as the
balance fluctuates with inflows and outflows of deposits.
Commercial's largest use of funds, lending, was virtually unchanged during the
first half, increasing by only $1.8 million (.71%) during the period. Consumer
and commercial loans both experienced decreases while real estate loans showed a
slight increase.
The securities being held to maturity decreased $2.5 million or 6.16% from
year end. Investments available for sale increased by 8.60%, or $3.7 million.
It is expected that the investment in securities available for sale will
continue to exceed the investments being held to maturity. This mix provides
the company with greater flexibility than would a predominance of securities
being held to maturity.
EARNINGS--SIX MONTHS
Consolidated net income for the first half of 1995 was 21.69% more than the
first half of 1994 ($2.3 million in 1995, $1.9 million in 1994). Fully diluted
earnings per common share were $1.61 compared to $1.33 for 1994.
Total interest income increased 17.59% or $2.2 million from $12.8 million in
1994 to $15.0 million in 1995. Total interest expense increased 32.36% or $1.5
million from the 1994 level. This resulted in an increase of 9.27% or $0.8
million in net interest income.
The provision for loan losses was 19.78% more in the first half of 1995 than
it was in 1994. The 1995 provision was $218 thousand compared to net loan
losses of $181 thousand. In 1994, the first half provision was $182 thousand
and there were net charge-offs of $33,000. At June 30, 1995, the reserve for
possible loan losses of $3,466,000 was equal to 1.34% of net loans outstanding.
This compares with $3,430,000 or 1.33% of net loans outstanding at December 31,
1994.
Non interest income decreased 0.23% from the first half of 1994 to the first
half of 1995. Trust department fees were up by 27.13%. Service charges and
fees grew 2.89%. Other income increased $22,000 or 5.60% from 1994 to 1995. A
gain on sale of securities of $108,000 in 1994, compared to $0 in 1995, was the
major factor in the change in non interest income. None of Commercial's
subsidiary banks sold securities during the first half of 1995. In 1994,
however, there were securities gains arising from a security being called at a
premium.
Non-interest expense increased 3.95%, or $243,000 from 1994 to 1995. The
major cause of the increase is attributed to employee compensation and benefits,
which grew $262,000 or 7.99%. In 1994, an unusually large proportion of the
employee expense was delayed until the fourth quarter because of late
implementation of a new incentive bonus program. For 1995, Commercial and its
banks have been accruing the 1995 expense since the beginning of the year. This
has caused a substantial increase in employee expense compared to 1994. It is
expected that the total employee expense for the year may be approximately 10%
more than the 1994 expense.
Occupancy expense was up $36,000 compared to the same period in 1994.
Furniture and equipment was down $21,000. Together, these fixed assets expenses
increased $15,000, from a combined total of $829,000 in 1994 to $844,000 in
1995.
Other operating expense decreased $34,000 (1.67%) from the first half of 1994.
Most items that are included in the category were not significantly different
from the prior year. FDIC Insurance increased due to the increase in deposits.
Net income before taxes was up $475,000 (15.14%) for the 1994 period, and the
provision for Federal and state income taxes increased $57,000 or 4.71%.
11
<PAGE>
EARNINGS--THREE MONTHS
Consolidated net income for the second quarter of 1995 was nearly unchanged
from the second quarter of 1994. Earnings were $1,229,000 in 1995, up 0.33%
from the $1,225,000 earned in 1994. Fully diluted earnings per share were
$0.84 compared to $0.85 for the 1994 quarter.
Total interest income increased 15.32% to $7,654,000 from $6,637,000 in 1994.
However, total interest expense increased 35.05% to $3,152,000 from $2,334,000
in 1994. As a result, net interest income increased $199,000 or 4.62% from the
second quarter of 1994.
The provision for loan losses was 27.91% higher during the second quarter of
1995 than it was during the second quarter of 1994. The 1995 provision was
$110,000 compared to net losses of $181,000. The 1994 second quarter provision
was $86,000 compared to net charge-offs of $33,000.
Non interest income decreased 2.78% from 1995 to 1994. Trust department
income experienced an increase of $46,000 (35.94%) from the second quarter 1994.
Services charges and fees were down $103,000 or 32.80% from the second quarter
of 1994, and other income increased $139,000 or 65.88%. Gain on sale of loans
and increases in other real estate income and mortgage servicing fees
contributed to the growth in other income.
Non-interest expense was up 6.33% ($192,000) from the second quarter of 1994.
Employee compensation and benefits increased by 12.91%, or $197,000. Occupancy
expense increased $22,000 (12.43%) while furniture and equipment increased
$18,000 (7.93%). All other operating expenses decreased $47,000 (4.32%).
Net income before taxes was down 1.86% and the provision for Federal and state
income taxes decreased $40,000 (5.61%) from 1994.
NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS
The principal amount of nonaccrual loans was $921,000 at June 30, 1995, an
increase of $182,000 (24.63%) from December 31, 1994. Loans past due 90 days or
more and still accruing totaled $86,000 June 30, 1995, down $378,000 from year
end totals. Restructured loans totaled $1,313,000 at the end of the second
quarter of 1995.
LIQUIDITY
BancShares primary source of liquidity has been the attraction and retention
of retail deposit accounts. The total deposit growth over the six month period
was 4.01%, or an increase of $12,991,000. Time deposits, a prime component of
core deposit relationships, grew $22.1 million, an 16.34% increase. Deposits
promise to continue to be a good source of funds. Also available to Commercial
are short-term market-rate liabilities, including Federal funds purchased and
securities sold under agreements to repurchase. These instruments are currently
used to accommodate customers and on a limited basis to provide a short-term
source of funds. Two of Commercial's subsidiary banks, including the largest,
are members of the Federal Home Loan Bank of Pittsburgh, which makes available
to its members a number of credit products, any or all of which could be used to
meet liquidity needs. Additionally, Commercial is aware of brokers who could,
in a short period of time, provide large amounts of certificates of deposit at
market rates. None of Commercial's banks currently use or intend to use
brokered funds, but the source exists should liquidity needs require its use.
Commercial's banks also have extensions of credit that are guaranteed by various
U.S. government agencies and are, therefore, salable.
Although liabilities provide its primary sources of liquidity, Commercial also
maintains an adequate level of cash and near-cash items on hand to meet day-to-
day operating needs. Additionally, Commercial owns marketable securities and
short-term investments that can be converted to cash in a very short time.
Maturing within one year is 20.7% of the total securities portfolio.
CAPITAL
During the first six months of 1995, Commercial increased it stockholders'
equity by $2,650,000 (7.89%), bringing the balance at June 30, 1995, to $36.3
million or, 9.43% of total assets. The increase was from internal capital
growth.
In January 1989, banking industry regulators officially released risk-
adjusted capital guidelines for banks and bank holding companies. The
guidelines established final requirements that must be achieved by year-end
1992. As of June 30, 1995, Commercial's Tier 1 ratio of 13.90% and combined
Tier 1 and Tier 2 ratio of 15.15% exceed the requirements. Additionally,
Commercial's ratios of primary capital to total assets of 9.06% and total
capital to total assets of 9.87% exceed the final requirements which became
effective at year-end 1992 for those relationships.
12
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
The company is a defendant in certain legal actions arising from normal
business activities. The ultimate liability, if any, resulting from them will
not materially affect the company's financial position.
Item 4. Submission of Matters to a Vote of Security Holders
A. The annual meeting of shareholders was held on May 10, 1995.
(1) Each of the persons named in the proxy statement as a nominee for director
was elected.
(2) The following are the voting results on each of the matters which were
submitted to the shareholders:
Election of Directors
-------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Common shares present and voting: 1,175,174
Name For
----------------------- ---------
Bruce Bingham 1,126,585
Frank L. Christy 1,126,570
A. V. Criss, III 1,736,984
Gary R. Davis 1,173,405
Wilson Davis 1,136,462
Carl E. Dollman 1,127,025
James A. Meagle, Jr. 1,127,385
David L. Mendenhall 1,150,828
William E. Mildren, Jr. 1,128,023
Jack F. Poe 1,127,385
Robert E. Richardson 1,127,348
W. S. Ritchie, Jr. 1,127,385
Susan S. Ross 1,128,023
James L. Wahle 1,127,523
Thomas N. Webster 1,127,385
Morris B. Wilkins 1,122,574
Appointment of Harman, Thompson,
--------------------------------
Mallory & Ice, A.C. as independent For Against Abstain
---------------------------------- -------- --------- -------
accountant for 1995 1,164,857 15 10,302
-------------------
</TABLE>
The text of the matters referred to under Item 4. A. is set forth in the proxy
statement dated April 1, 1995, filed with the Securities and Exchange Commission
on March 31, 1995, and is incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K
Commercial did not file any reports on Form 8-K during the three months
ended June 30, 1995.
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 thereunto duly authorized.
COMMERCIAL BANCSHARES, INC.
(Registrant)
Date: August 14, 1995 /s/ William E. Mildren, Jr.
---------------- ---------------------------
William E. Mildren, Jr.
Chairman, President and
Chief Executive Officer
Date: August 14, 1995 /s/ Larry G. Johnson
--------------- ---------------------------
Larry G. Johnson
Secretary-Treasurer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 13,971
<INT-BEARING-DEPOSITS> 715
<FED-FUNDS-SOLD> 12,445
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 46,633
<INVESTMENTS-CARRYING> 38,614
<INVESTMENTS-MARKET> 38,901
<LOANS> 258,212
<ALLOWANCE> 3,467
<TOTAL-ASSETS> 384,450
<DEPOSITS> 336,950
<SHORT-TERM> 7,824
<LIABILITIES-OTHER> 3,418
<LONG-TERM> 0
<COMMON> 7,335
0
0
<OTHER-SE> 28,923
<TOTAL-LIABILITIES-AND-EQUITY> 384,450
<INTEREST-LOAN> 12,137
<INTEREST-INVEST> 2,569
<INTEREST-OTHER> 313
<INTEREST-TOTAL> 15,019
<INTEREST-DEPOSIT> 5,859
<INTEREST-EXPENSE> 6,094
<INTEREST-INCOME-NET> 8,925
<LOAN-LOSSES> 218
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6,392
<INCOME-PRETAX> 3,613
<INCOME-PRE-EXTRAORDINARY> 2,345
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,345
<EPS-PRIMARY> 1.61
<EPS-DILUTED> 1.61
<YIELD-ACTUAL> 5.11
<LOANS-NON> 921
<LOANS-PAST> 86
<LOANS-TROUBLED> 1,313
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,430
<CHARGE-OFFS> 230
<RECOVERIES> 49
<ALLOWANCE-CLOSE> 3,467
<ALLOWANCE-DOMESTIC> 3,467
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
