<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED].
For the transition period from __________ to __________.
Commission file number 0-20232
COMMERCIAL BANCSHARES, INCORPORATED
-----------------------------------
(Exact name of small business issuer in its charter)
----------------------------------------------------
West Virginia 55-0622108
--------------------------------- --------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
415 Market Street
Parkersburg, West Virginia 26101
--------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (304) 424-0300
--------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $5.00 per share
---------------------------------------
(Title of class)
Check whether the issuer (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 .
--
Check if the disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.[X]
The issuer's revenues for its most recent fiscal year: $28,948,000.
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 13, 1995, based on the average of the bid and asked price
on that date:
Common Stock, $5.00 par value -$32,239,140
------------------------------------------
The number of shares outstanding of the issuer's classes of common stock as of
March 13, 1995:
Common Stock, $5.00 par value - 1,467,040 shares
------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual shareholders meeting to be
held May 10, 1995 are incorporated by reference into Part III.
Page 1 of 73
<PAGE>
PART I
------
Item 1. BUSINESS
Commercial BancShares, Incorporated may also be referred to herein as
"Commercial". The subsidiaries may be referred to as follows: Commercial
Banking and Trust Company as "CB&T", Jackson County Bank as "Jackson", Farmers
and Merchants Bank of Ritchie County as "F&M", The Dime Bank as "Dime", Union
Bank of Tyler County as "Union", The Community Bank as "Community", the Bank of
Paden City as "Paden City", and Hometown Insurance Agency, Inc., as "Hometown
Insurance".
Commercial BancShares, Incorporated
The management of Commercial Banking and Trust Company of Parkersburg,
West Virginia, caused Commercial BancShares, Incorporated to be formed in 1982
to provide greater flexibility in meeting CB&T's capital requirements and to
permit future acquisition and ownership of bank-related businesses and the
pursuit of other bank-related activities not permitted CB&T under applicable
law. On October 28, 1983, the shareholders of CB&T became shareholders of
Commercial and CB&T became a wholly-owned subsidiary of Commercial BancShares,
Incorporated.
On January 29, 1985, shareholders of Jackson County Bank, Ravenswood, West
Virginia approved an agreement and plan of merger pursuant to which Jackson
would merge into a wholly-owned subsidiary of Commercial and thereby become a
wholly-owned subsidiary of Commercial. The transaction was finalized March 1,
1985.
On May 15, 1987, shareholders of Farmers and Merchants Bank of Ritchie
County (formerly Farmers and Merchants Bank of Cairo), Harrisville, West
Virginia, approved an agreement and plan of merger pursuant to which F&M would
merge into a wholly-owned subsidiary of Commercial and thereby become a wholly-
owned subsidiary of Commercial. The transaction was finalized November 30, 1987.
On March 21, 1991, shareholders of The Dime Bank, Marietta, Ohio approved
an agreement and plan of merger pursuant to which Dime would merge into a
wholly-owned subsidiary of Commercial and thereby become a wholly-owned
subsidiary of Commercial. The transaction was finalized February 28, 1992.
On June 7, 1994, shareholders of Hometown Bancshares, Inc., ("Hometown")
approved an agreement and plan of merger pursuant to which Hometown would merge
with Commercial. Commercial would be the surviving corporation and the former
subsidiaries of Hometown (Union, Community, Paden City and Hometown Insurance)
would become wholly-owned subsidiaries of Commercial. The transaction was
finalized August 1, 1994.
Commercial Banking and Trust Company
CB&T was chartered as a West Virginia Banking Corporation on August 18,
1903, and opened its doors on the corner of Third Street and Court Square,
Parkersburg, West Virginia. CB&T remained in its original location until
January, 1916, when it acquired the assets of the Parkersburg Banking and Trust
Company and moved to its present location at 415 Market Street, Parkersburg,
West Virginia. On December 10, 1984 it opened a branch in Mineral Wells, West
Virginia. On September 29, 1986 a second branch was opened on Grand Central
Avenue in Vienna, West Virginia. A third branch was opened at 2107 Pike Street,
Parkersburg, West Virginia on May 8, 1989.
CB&T provides a complete range of financial services to both retail and
commercial customers. Additionally, CB&T has full trust powers and provides a
wide variety of those services to individuals, corporations, foundations and
others.
Jackson County Bank
Jackson County Bank was chartered as a West Virginia Banking Corporation on
April 1, 1899, and was originally located on Walnut Street in Ravenswood, West
Virginia. In 1958 the present quarters on Wall Street were first occupied.
As the only full-service commercial bank headquartered in Ravenswood,
Jackson provides a complete range of retail banking services to the community's
individuals and businesses. Jackson does not provide trust or correspondent
banking services.
Page 2
<PAGE>
Farmers and Merchants Bank of Ritchie County
F&M was incorporated in 1941 as a West Virginia Banking Corporation with
the name "Farmers and Merchants Bank of Cairo" and was located in Cairo, West
Virginia. In 1984 offices were rented at 1500 East Main Street in Harrisville,
West Virginia, to serve as a branch location. In 1985, the main offices of F&M
were moved from Cairo to the Harrisville location, and the Cairo office
continued as a branch facility. The Harrisville offices were purchased by F&M in
1987.
F&M is the smaller of two banks in Harrisville, the county seat of Ritchie
County. It offers services normally offered by a full-service commercial bank,
including all types of deposit accounts and loans. It does not offer trust
services or correspondent banking services.
The Dime Bank
The Dime Savings Society of Marietta, Ohio, was converted to a commercial
bank, The Dime Bank, on May 1, 1972. At that time, The Dime Savings Society of
Marietta had moved from the former Dime Savings Society Building at the corner
of Front and Greene Streets to the corner of Second and Putnam Streets in
Marietta. On April 1, 1982, The Dime Bank of Ross County, N.A. was merged into
The Dime Bank. On December 31, 1983, The Dime Bank sold its branch in Ross
County, formerly The Dime Bank of Ross County, N.A., to Kingston National Bank.
On March 31, 1986, a group of forty-two investors purchased one hundred percent
of the stock of The Dime Bank from American Bancorporation of Wheeling, West
Virginia.
The main offices of The Dime Bank have remained at the Second and Putnam
location since May 1, 1972. In June of 1974, The Dime Bank established a branch
at Second and Butler Streets in Marietta, Ohio. In February of 1981, Dime
established a branch in Devola, on State Route 60.
Dime is a State of Ohio bank and a member of the Federal Reserve System.
Its main operations are conducted at its offices at 200 Putnam Street in
Marietta, Ohio, with drive-in banking services at each of the two branches. Dime
provides services normally offered by a full-service commercial bank, but does
not offer trust services and is not active in correspondent banking services.
Union Bank of Tyler County
Union was organized and chartered under the laws of the State of West
Virginia as "Tyler County Bank" on February 18, 1947. The bank has been at its
present location at the corner of Fair and Dodd Streets in Middlebourne, West
Virginia, since 1977. On January 1, 1984, the bank merged with Union National
Bank of Sistersville and was rechartered under the name "Union Bank of Tyler
County". Its main office remains in Middlebourne and the Sistersville branch is
the former main office of the merged Union National Bank. Union operates as a
full-service bank in both Middlebourne and Sistersville, offering a wide range
of financial services to retail and commercial customers, including trust
services.
The Community Bank
Community was organized and chartered as a West Virginia banking
corporation on September 30, 1936. It is located at 112 Collins Avenue,
Pennsboro, West Virginia and operates a drive-through facility on Masonic
Avenue, also in Pennsboro. Community offers a wide range of financial services
to retail and commercial customers in its local area, although it does not offer
trust or correspondent banking services.
Bank of Paden City
Paden City was organized and chartered under the laws of the State of West
Virginia on May 14, 1976. Its principal office is located at 4th and Main
Streets in Paden City, West Virginia. In December, 1984, Paden City opened a
full-service branch on State Route 2 in New Martinsville, West Virginia,
referred to as the Steelton Financial Center. Paden City offers the wide range
of services usually offerred by a full-service commercial bank, but it does not
offer trust or correspondent banking services.
Hometown Insurance Agency, Inc.
Hometown Insurance is a wholly-owned subsidiary corporation chartered under
the laws of West Virginia on June 21, 1989. The agency was historically
operated through July 31, 1993, under provisions of the Federal Reserve Board's
Regulation Y, allowing a bank holding company to operate an insurance agency in
a place with a population of 5,000 or less. The insurance agency is presently
inactive, conducts no business and has no employees. The charter exists to
preserve the name.
Page 3
<PAGE>
Employees
As of December 31, 1994, Commercial and its subsidiaries had 215 full-time
equivalent employees.
Competition
The primary market area of Commercial and its subsidiaries includes Wood,
Wirt, Jackson, Tyler, Wetzel and Ritchie Counties in West Virginia, and
Washington County, Ohio, with a secondary market area including Pleasants and
Wirt Counties in West Virginia and Monroe, Noble, Meigs, Morgan and Athens
Counties in Ohio.
As of June 30, 1994, the most recent date for which branch data is
available, there were seven banks with 26 locations in Wood County. They
reported total deposits of $891,716,000 in the county. CB&T ranked third among
the banks with 16.44% of the total bank deposits. In addition there was one
savings bank office located in the county and 14 federal credit unions. Total
deposits of all institutions in the county were reported at $1,149,933,000. CB&T
ranked fourth among all institutions with 12.75% of the total deposits.
Community is second largest and F&M is the third largest of the five banks
with offices in Ritchie County. Community has 23.75% and F&M has 17.52% of the
$18,711,000 in bank deposits in the county. There are no non-bank financial
institutions in Ritchie County. The two subsidiaries of Commercial combined
held 41.27% of the total deposits for the county.
Six banks had 8 offices located in Jackson County on June 30, 1994, with
total bank deposits of $248,875,000. Jackson ranked fourth among the banks, with
18.22% of the bank deposits. In addition to the banks, there is one savings and
loan association and one federal credit union located in Jackson County, and
total deposits for all financial institutions totaled $269,242,000 at June 30.
Jackson ranked fourth among all institutions with 16.84% of the total deposits.
The principal market area of both Union and Paden City is the Tyler
County and Wetzel County, West Virginia, market. The banking business in the
Tyler/Wetzel County market area is highly competitive. As of June 30, 1994,
Union's deposits were $33,060,000, or approximately 17.93% of that total two-
county commercial bank market, and was the third largest of the seven commercial
banks with offices in Tyler and Wetzel County. Paden City's deposits were
$27,430,000, 14.87% of the market, and was the fourth largest. Combined, the two
subsidiaries of Commercial held 32.80% of the total commercial bank deposits in
the Tyler/Wetzel County market. Three thrift institutions and one federal credit
union also operate in the market, and combined deposits of all institutions
amounted to $348,293,000 as of June 30, 1994. Union and Paden City held 17.37%
of all deposits for the market.
As of June 30, 1994, there were nine banks located in Washington County
with total deposits of $682,845,000. The Dime Bank is the fifth largest of the
nine and holds 5.50% of the total deposits. The nine banks operate at eighteen
offices within Washington County. In addition to the commercial banks, there are
two savings and loan associations located in Washington County.
The comparisons made above are not indicative of the highly competitive
nature of the financial services industry, where many of the providers are less
regulated and are not subject to the same public reporting requirements as banks
or bank holding companies. Commercial's banks also compete with other financial
service providers such as money market and other mutual funds, finance
companies, and a variety of financial service and advisory companies, including
those marketed by direct mail. In addition, personal and corporate trust and
investment services are offered by insurance companies, investment counseling
firms and other business firms and individuals. Despite this high level of
competition for deposits, loans and services from several sources, Commercial's
banks continue to attract customers who seek personal service provided by local
residents at convenient locations.
Supervision and Regulation
Commercial is a bank holding company within the meaning of the Bank Holding
Company Act of 1956 (the "Act") and is registered as such with the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"). As a
bank holding company, Commercial is required to file with the Federal Reserve
Board an annual report and such other information as may be required. The
Federal Reserve Board has the authority (which it has not exercised) to regulate
provisions of certain bank holding company debt.
Page 4
<PAGE>
The Act requires every bank holding company to obtain prior approval of the
Federal Reserve Board before acquiring substantially all the assets of or direct
or indirect ownership or control of more than 5% of the voting shares of any
bank which is not already majority-owned. The Act also prohibits a bank holding
company, with certain exceptions, from itself engaging in or acquiring direct or
indirect control of more than 5% of the voting shares of any company engaged in
non-banking activities. One of the principal exceptions to these prohibitions
is for engaging in or acquiring shares of a company engaged in activities found
by the Federal Reserve Board by order or regulation to be so closely related to
banking or managing banks as to be a proper incident thereto. The Act prohibits
the acquisition by a bank holding company of more than 5% of the outstanding
voting shares of a bank located outside the state in which the operations of its
banking subsidiaries are principally conducted, unless such an acquisition is
specifically authorized by statute of the state in which the bank to be acquired
is located. Under Section 106 of the 1970 amendments to the Act and regulations
of the Federal Reserve Board, a bank holding company and its subsidiaries are
prohibited from engaging in certain tie-in arrangements in connection with any
extension of credit or provision of any property or services.
CB&T, Jackson, F&M, Union, Community, Paden City and Dime are insured banks
organized under the banking laws of the states in which they are headquartered.
Accordingly, their operations are subject to Federal and State laws applicable
to commercial banks and commercial banks with trust powers and to regulation by
the state regulatory authorities and the Federal Deposit Insurance Corporation.
Among other restrictions, the West Virginia Banking Law provides that banks
organized thereunder may pay dividends only out of undivided profits.
The Ohio Division of Banks, the Banking Commissioner of the State of West
Virginia, the Federal Reserve Board and the Federal Deposit Insurance
Corporation have the discretion to examine the affairs of the various banks for
the purpose of determining the financial condition of CB&T, Jackson F&M, Dime,
Union, Community and Paden City.
Additionally, CB&T, Jackson, F&M, Dime, Union, Community and Paden City are
subject to certain regulations issued by the Board of Governors of the Federal
Reserve System, the Federal Deposit Insurance Corporation, the Department of
Banking of the State of West Virginia, the Ohio Division of Banks, the Internal
Revenue Service, the tax departments of Ohio and West Virginia, the county and
city governments of the communities in which the banks are located, and other
agencies in varying degrees. Commercial, likewise is subject to rules and
regulations issued by the regulators noted above, as well as the Securities and
Exchange Commission. This control and scrutiny affects the timing and manner in
which Commercial and its subsidiaries conduct their business, the level of
profitability achieved, and the volume and the type of reports given to the
public and government.
Government Monetary Policies and Economic Controls
The earnings and growth of the banking industry and of the banks are
affected by the credit policies of monetary authorities, including the Federal
Reserve System. An important function of the Federal Reserve System is to
regulate the national supply of bank credit in order to combat recession and
curb inflationary pressures. Among the instruments of monetary policy used by
the Federal Reserve to implement these objectives are open market operations in
U.S. Government securities, changes in the discount rate on member bank
borrowings and changes in reserve requirements against bank deposits. These
means are used in varying combinations to influence overall growth of bank
loans, investments and deposits and may also affect interest rates charged on
loans or paid for deposits. The monetary policies of the Federal Reserve Board
have had a significant effect on the operating results of commercial banks in
the past and are expected to continue to have such an effect in the future.
In view of changing conditions in the national economy and in the money
markets, as well as the effect of actions by monetary and fiscal authorities,
including the Federal Reserve System, no prediction can be made as to possible
future changes in interest rates, deposit levels, loan demand or their effect on
the business and earnings of Commercial BancShares, Incorporated, Commercial
Banking and Trust Company, Jackson County Bank, Farmers and Merchants Bank of
Ritchie County or The Dime Bank.
Item 2. PROPERTIES
The principal executive offices of CB&T and Commercial are located at 415
Market Street, Parkersburg, West Virginia. This building, a 3-story bank and
office building, is owned by CB&T. During 1984, CB&T constructed a branch office
in Mineral Wells, West Virginia. The branch is one and one-half stories with a
Page 5
<PAGE>
full basement. During 1986, CB&T constructed a branch office in Vienna, West
Virginia, on leased property. At the end of the ten-year lease, CB&T has a
fixed purchase price option. The building is a one-story masonry structure with
attached drive-in lanes. CB&T subsequently purchased three adjacent lots, one
of which is used for parking, and two are vacant. Construction is in progress
on an addition to the building. CB&T also leases a portion of a two-story bank
building on Pike Street in Parkersburg.
Jackson owns and occupies a modern two-story masonry bank building at the
intersection of Wall Street with State Route 68 on the edge of downtown
Ravenswood, West Virginia.
F&M owns and occupies modern bank buildings in Harrisville and Cairo, West
Virginia. The office in Cairo was built in 1974 and is a one-story brick
building in colonial style. The Harrisville office is a one-story building of
brick construction built in 1971 and remodeled in 1984. In 1988 an addition was
made as well as some remodeling.
Dime's main offices are located at 200 Putnam Street in Marietta, Ohio in
an eight-story office building. One-half of the building was constructed in the
late 1800's and the other half in the early 1900's. There have been several
remodelings. Each floor of the building contains approximately 3,200 square
feet. The drive-in facility at Second and Butler Streets was constructed for
that purpose in 1974 and has the capacity for four lanes. The site includes an
employee parking lot and an automated teller machine. The Devola branch of Dime
was constructed in 1981 as a full-service branch, but the bank presently
operates a drive-in facility only on the half-acre site.
The current principal office of Union is located at Fair and Dodd Streets
in Middlebourne, West Virginia. Property adjacent to the building is owned by
the bank and used for employee and customer parking. Union also owns and
operates a facility referred to as the Sistersville Office located at 700 Wells
Street in Sistersville, West Virginia. Union also owns two pieces of property on
Wells Street in Sistersville that it uses for employee parking.
Community's principal office is located at 112 Collins Avenue in
Pennsboro, West Virginia. Community also operates a drive-through facility on
Masonic Avenue. Both of these properties are owned by Community. In addition,
Community owns three lots used for employee and customer parking.
The principal office of Paden City is located at Fourth and Main Streets in
Paden City, West Virginia. Paden City owns this building and adjacent lots
which are used for employee and customer parking. Paden City also owns a branch
facility, referred to as the Steelton Financial Center, which is located at
State Route 2 North in New Martinsville, West Virginia. The land on which this
facility is built is leased by Paden City.
In addition to the banking buildings, CB&T, Jackson, F&M, Union, Paden
City, Community, Dime and Commercial own other real properties which, when
considered in the aggregate, are not material to their operations.
Item 3. LEGAL PROCEEDINGS
Various actions and proceedings are presently pending to which CB&T,
Jackson, F&M, Dime, Union, Community and Paden City are party. Management
considers that the aggregate liabilities, if any, arising from such actions
would not have material adverse effect on the consolidated financial position of
Commercial.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Page 6
<PAGE>
Part II
Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Page 41 of the 1994 Annual Report to shareholders is incorporated herein by
reference
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the related comments in the President's letter are included
inside the front cover of the 1994 Annual Report to shareholders and on pages 31
to 40 of the Annual Report.
Item 7. FINANCIAL STATEMENTS
The report of independent accountants and consolidated financial
statements are included on pages 2 through 30 of the 1994 Annual Report to
shareholders.
Quarterly Results of Operations for the year ended December 31,
1994 included on page 29 of the 1994 Annual Report to shareholders are
incorporated herein by reference.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
The information required by Items 9 through 12 in this part is incorporated
herein by reference from BancShares' definitive proxy statement dated April 1,
1995 for the annual meeting of shareholders to be held on May 10, 1995, which is
included as Exhibit 99.
Page 7
<PAGE>
PART IV
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) (1) Financial Statements
(2) Financial Statement Schedules
The response to this portion of Item 13 is submitted as a
separate section of this report.
(3) Listing of Exhibits
Exhibit 11 - Statement Re: Earnings per share
Exhibit 23 - Consent of Independent Accountants
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
December 31, 1994.
(c) Exhibits
The response to this portion of Item 13 is submitted as a
separate section of this report.
(d) Financial Statement Schedules
None
Page 8
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
COMMERCIAL BANCSHARES, INCORPORATED
------------------------------------------
(Registrant)
By: /s/ William E. Mildren, Jr.
------------------------------------------
William E. Mildren, Jr.
Chairman, President and
Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
/s/ William E. Mildren, Jr. 3/28/95
------------------------------------------------------
William E. Mildren, Jr.
Chairman, President and
Chief Executive Officer
------------------------------------------------------
Bruce Bingham
Director
------------------------------------------------------
Frank L. Christy
Director
------------------------------------------------------
A. Vernon Criss, III
Director
/s/ Gary R. Davis 3/29/95
------------------------------------------------------
Gary R. Davis
Director
------------------------------------------------------
Wilson Davis
Director
/s/ Carl E. Dollman 3/29/95
------------------------------------------------------
Carl E. Dollman
Director
/s/ James A. Meagle, Jr. 3/29/95
------------------------------------------------------
James A. Meagle, Jr.
Director
/s/ David L. Mendenhall 3/29/95
------------------------------------------------------
David L. Mendenhall
Director
/s/ Larry G. Johnson 3/28/95
------------------------------------------------------
Larry G. Johnson
Executive Vice President and
Chief Financial Officer
/s/ Jack F. Poe 3/28/95
------------------------------------------------------
Jack F. Poe
Director
/s/ Robert E. Richardson 3/29/95
------------------------------------------------------
Robert E. Richardson
Director
------------------------------------------------------
W.S. Ritchie, Jr.
Director
/s/ Susan S. Ross 3/29/95
------------------------------------------------------
Susan S. Ross
Director
/s/ Donald L. Scothorn 3/29/95
------------------------------------------------------
Donald L. Scothorn
Director
------------------------------------------------------
James L. Wahle
Director
------------------------------------------------------
Thomas N. Webster
Director
------------------------------------------------------
Morris B. Wilkins
Director
Page 9
<PAGE>
FORM 10-K--ITEM 14(a)(1) and (2)
COMMERCIAL BANCSHARES, INCORPORATED
INDEX OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements and report of independent
auditors of Commercial BancShares, Incorporated and subsidiaries are included in
Item 8:
Report of independent auditors
Consolidated balance sheets--December 31, 1994 and 1993
Consolidated statements of income--Years ended December 31, 1994, 1993 and
1992
Consolidated statements of shareholders' equity--Years ended December 31,
1994, 1993 and 1992
Consolidated statements of cash flows--Years ended December 31, 1994, 1993
and 1992
Notes to consolidated financial statements--December 31, 1994
Schedules to the consolidated financial statements required by Article 9 of
Regulation S-X are not required under the related instructions or are
inapplicable, and therefore have been omitted.
Page 10
<PAGE>
EXHIBIT 11--STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
COMMERCIAL BANCSHARES, INCORPORATED
<TABLE>
<CAPTION>
Year Ended December 31
PRIMARY: 1994 1993
-------------------------
<S> <C> <C>
Average shares outstanding 1,285,391 1,250,283
Net Income $4,397,737 $3,716,000
Less dividend paid on convertible
preferred stock 203,738 272,460
-------------------------
Applicable to common stock $4,193,999 $3,443,540
=========================
Per Share Amount $3.26 $2.98
FULLY DILUTED:
Average shares outstanding 1,285,391 1,250,283
Effect of conversion of
convertible preferred stock 164,250 199,284
-------------------------
TOTAL 1,449,641 1,449,567
=========================
Net Income $4,397,737 $3,716,000
=========================
Per Share Amount $3.03 $2.56
</TABLE>
<PAGE>
EXHIBIT 13
[LOGO OF COMMERCIAL BANCSHARES, INC]
COMMERCIAL
BANCSHARES, INC.
-------------------------------------------------------------------------------
1994 ANNUAL REPORT
[FRONT COVER--ANNUAL REPORT]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
President's Message
-----------------------------------------------------------------------------
Dear Shareholders and Friends:
I am pleased to report on another very successful year for Commercial
BancShares. Net income in 1994 rose 18.35% to $4.4 million from $3.7 million in
1993. Fully diluted earnings per share reached $3.03 compared to $2.56 for
1993.
The financial statements have been significantly affected by the
acquisition of Hometown Bancshares in October, 1994. The acquisition totaled
$95 million in assets and was accounted for as a pooling of interest, which
resulted in the restatement of all financial information contained within this
annual report.
Total assets grew to $372 million compared to $350 million in 1993. Each
of Commercial's subsidiary banks had a return of over 1% on assets, with a
1.22% return on assets on a consolidated basis for Commercial BancShares. This
was the best year in the history of the holding company for earnings as a
percentage of assets.
With the acquisition of Hometown Bancshares, Commercial BancShares now
has seven subsidiary community banks located in eleven different communities.
Growth through acquisitions has been the key to our success over the last ten
years and we believe the acquisitions will add value for our shareholders for
many years to come.
I believe our key strength and franchise value lies in the fact that we
have a local presence and flavor in each community we serve, with each Bank
having its own President and Board of Directors. However, back office
functions are being consolidated to achieve economies of scale. Much of our
earnings improvement, I feel, is the result of the consolidation of the support
functions, particularly data processing.
Because of our strong earnings, the Board of Directors voted to increase
the dividend to $1.03 per share which compares to $0.94 in 1993, a 9.7%
increase.
In November, we were saddened by the death of Robert W. Burk, Jr. Bob
had been associated with the bank for many years and served on Commercial's
board of director from 1982 until his untimely death. He was an attorney and
represented the 10th District in the West Virginia House of Delegates. His
contributions to the board were important and will be missed.
My father retired from active service on the board of directors of the
holding company after 50 years of continuous service to the company. A native
of Marietta, he came to Commercial Banking and Trust Company in 1944 as
Executive Vice President and became President in 1947. He continues to serve
on the Board of Directors of Commercial Banking and Trust Company, and was
elevated to the status of Director Emeritus of Commercial BancShares, Inc.
Four new members joined the board of directors in 1994. Three were added
as a result of the acquisition of Hometown Bancshares. Mr. Gary R. Davis, Mr.
Wilson Davis and Mr. David L. Mendenhall, each an officer of one of the
newly-acquired subsidiary banks, joined the Board at its November meeting. Mr.
James L. Wahle, President and Chief Executive Officer of Kardex Systems, Inc.,
Marietta, Ohio, was appointed to the board to replace Mr. Mildren, Sr.
Commercial continues to be receptive to discussing affiliation with banks
interested in becoming part of a successful network of community banks. We
expect to continue to improve the support systems provided by the holding
company to its subsidiary banks, so they may offer the finest in customer
products and services.
I encourage our shareholders to take advantage of the quality products and
high level of service provided by the seven subsidiary banks and to recommend
them to your associates.
Sincerely,
William E. Mildren, Jr.
Chairman, President and
Chief Executive Officer
[INSIDE FRONT COVER--ANNUAL REPORT]
<PAGE>
Commercial BancShares, Inc. Subsidiaries
Selected Financial Data
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Commercial BancShares, Incorporated
and Subsidiaries
At Year End 1994 1993 1992 1991 1990
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Total Assets $372,223 $349,713 $337,005 $317,876 $309,000
Total Deposits 323,959 311,303 301,714 286,119 280,754
Total Loans 256,402 222,621 223,013 203,131 200,226
Total Shareholders' Equity 33,608 30,844 28,373 26,416 24,583
Long-term Debt 0 424 362 221 393
----------------------------------------------------------------------------
For the Year Ended
(Thousands of Dollars)
Total Interest Income $ 26,933 $ 25,559 $ 27,468 $ 28,536 $ 28,482
Net Interest Income 17,312 15,594 15,494 13,677 12,725
Provision for Loan Losses 417 247 983 962 792
Net Income 4,398 3,716 3,240 2,212 2,090
----------------------------------------------------------------------------
Per Common Share
(Dollars)
Net Income (Primary) $ 3.26 $ 2.98 $ 2.60 $ 1.79 $ 1.47
Cash Dividends Declared 1.03 .94 .83 .80 .76
----------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
[GRAPH OF TOTAL ASSETS] [GRAPH OF NET INCOME]
Points Plotted, In millions of Dollars Points Plotted, In Thousands of Dollars
1990 309 1990 2,090
1991 318 1991 2,212
1992 337 1992 3,240
1993 350 1993 3,716
1994 372 1994 4,398
[GRAPH OF SHAREHOLDERS' EQUITY] [GRAPH OF TOTAL DEPOSITS]
Points Plotted, In Millions of Dollars Points Plotted, In Millions of Dollars
1990 25 1990 281
1991 26 1991 286
1992 28 1992 302
1993 31 1993 311
1994 34 1994 324
</TABLE>
[Annual Report Page 1]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Consolidated Balance Sheets
as of December 31, 1994 and 1993
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
IN THOUSANDS OF DOLLARS
1994 1993
---- ----
<S> <C> <C>
ASSETS
Cash and Due from Banks.................................................................. $ 16,304 $ 13,680
Interest-Bearing Demand Deposits with Other Banks........................................ 323 182
Interest-Bearing Time Deposits with Other Banks.......................................... 299 307
Federal Funds Sold....................................................................... 1,405 8,699
Investment Securities:
Held to Maturity, at Amortized Costs (Market
Values: 1994 - $40,384; 1993 - $88,676).............................................. 41,150 86,846
Available-for-Sale, at Market Values................................................... 42,940 5,718
Loans - Net.............................................................................. 256,402 222,621
LESS: Reserve for Loan Losses........................................................... (3,430) (3,138)
Premises and Equipment - Net............................................................. 7,129 7,141
Notes Receivable......................................................................... 255 255
Accrued Interest Receivable.............................................................. 2,549 2,437
Foreclosed Properties - Net.............................................................. 1,329 1,274
Other Assets............................................................................. 5,568 3,691
----------------------------
TOTAL ASSETS............................................................................. $372,223 $349,713
============================
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS
Demand - Noninterest Bearing........................................................... $ 46,499 $ 40,138
Demand - Interest Bearing.............................................................. 44,462 63,668
Savings................................................................................ 98,039 77,273
Time Deposits.......................................................................... 134,959 130,224
----------------------------
TOTAL DEPOSITS........................................................................... $323,959 $311,303
Federal Funds Purchased and Securities Sold
under Agreements to Repurchase......................................................... 10,972 4,182
ESOP Borrowings.......................................................................... -0- 424
Accrued Interest Payable................................................................. 812 748
Other Liabilities........................................................................ 2,872 2,212
----------------------------
TOTAL LIABILITIES........................................................................ $338,615 $318,869
============================
SHAREHOLDERS' EQUITY
Convertible Preferred Stock ($100.00 Par Value: 43,328 Shares
Authorized: Issued Shares: -0- in 1994, 27,165 in 1993)............................. $ -0- $ 2,716
Common Stock
($5.00 Par Value: 2,000,000 Shares Authorized:
Issued Shares; 1,467,040 in 1994; 1,267,904 in 1993)................................. 7,335 6,339
Additional Paid in Capital............................................................. 10,079 8,298
Undivided Profits...................................................................... 17,122 14,185
LESS: Employee Stock Ownership Plan Shares
Collateralizing Debt, at Cost
(-0- Shares in 1994; 43,062 Shares in 1993).................................... -0- (424)
Treasury Stock, at Cost (10,578 Shares in 1994;
17,643 Shares in 1993)......................................................... (209) (347)
Unrealized Gain (Loss) on Securities Available-for-
Sale, Net of Applicable Deferred Income Taxes.................................. (719) 77
----------------------------
TOTAL SHAREHOLDERS' EQUITY..................................................... $ 33,608 $ 30,844
----------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............................................... $372,223 $349,713
============================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
[Annual Report Page 2]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Consolidated Statements of Income
for the year ended December 31, 1994, 1993, and 1992
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
IN THOUSANDS OF DOLLARS
EXCEPT FOR PER SHARE DATA
-----------------------------------------
1994 1993 1992
(restated)
<S> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans............................................................ $ 21,777 $ 20,052 $ 21,328
Interest on Notes Receivable.......................................................... -0- 17 14
Interest and Dividends on Securities.................................................. 4,894 4,975 5,612
Interest on Federal Funds Sold........................................................ 242 498 499
Interest on Deposits with Banks....................................................... 20 17 15
-----------------------------------------
TOTAL INTEREST INCOME................................................................... $ 26,933 $ 25,559 $ 27,468
-----------------------------------------
INTEREST EXPENSE
Interest on Deposits.................................................................. $ 9,370 $ 9,805 $ 11,894
Interest on Other Borrowings.......................................................... 251 160 80
-----------------------------------------
TOTAL INTEREST EXPENSE.................................................................. $ 9,621 $ 9,965 $ 11,974
-----------------------------------------
NET INTEREST INCOME..................................................................... $ 17,312 $ 15,594 $ 15,494
Provision for Loan Losses............................................................. 417 247 983
-----------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES............................................................. $ 16,895 $ 15,347 $ 14,511
-----------------------------------------
NONINTEREST INCOME
Trust Department Income............................................................... $ 529 $ 536 $ 409
Service Charges, Fees, and Commissions................................................ 1,221 1,203 1,026
Security Gains (Losses)............................................................... (220) 15 5
Other Income.......................................................................... 485 601 555
-----------------------------------------
TOTAL NONINTEREST INCOME................................................................ $ 2,015 $ 2,355 $ 1,995
-----------------------------------------
NONINTEREST EXPENSES
Employee Compensation and Benefits.................................................... $ 7,000 $ 6,278 $ 5,746
Occupancy Expense, Net of Revenues.................................................... 675 727 737
Furniture and Equipment Expense....................................................... 955 946 968
Other Operating Expenses.............................................................. 4,356 4,119 4,179
-----------------------------------------
TOTAL NONINTEREST EXPENSES.............................................................. $ 12,986 $ 12,070 $ 11,630
-----------------------------------------
INCOME BEFORE INCOME TAXES.............................................................. $ 5,924 $ 5,632 $ 4,876
Applicable Income Taxes............................................................... 1,526 1,916 1,636
-----------------------------------------
NET INCOME.............................................................................. $ 4,398 $ 3,716 $ 3,240
-----------------------------------------
NET INCOME AVAILABLE FOR COMMON
SHAREHOLDERS.......................................................................... $ 4,194 $ 3,443 $ 2,967
-----------------------------------------
EARNINGS PER SHARE DATA:
Primary............................................................................... $3.26 $2.98 $2.60
-----------------------------------------
Fully Diluted......................................................................... $3.03 $2.56 $2.24
-----------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
[Annual Report Page 3]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity
for the year ended December 31, 1994, 1993, and 1992
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IN THOUSANDS OF DOLLARS
----------------------------------
1994 1993 1992
---- ---- ----
(restated)
<S> <C> <C> <C>
CONVERTIBLE PREFERRED STOCK
(43,328 Shares Authorized):
Cumulative Preferred $100.00 Series:
Balance at Beginning of Year............................................................ $ 2,716 $ 2,725 $ 2,725
Conversion of Preferred Stock to
Common Stock.......................................................................... (2,716) (9) -0-
----------------------------------
BALANCE AT END OF YEAR -
-0- Shares Outstanding in 1994;
27,165 Shares Outstanding in 1993; and
27,246 Shares Outstanding in 1992......................................................... $ -0- $ 2,716 $ 2,725
----------------------------------
COMMON STOCK
($5.00 Par Value; 2,000,000 Shares
Authorized):
Balance at Beginning of Year.......................................................... $ 6,339 $ 6,336 $ 6,336
Issuance of Common Stock under Conversion
of Preferred Stock.................................................................. 996 3 -0-
----------------------------------
BALANCE AT END OF YEAR -
1,467,040 Shares Issued in 1994;
1,267,904 Shares Issued in 1993; and
1,267,311 Shares Issued in 1992........................................................... $ 7,335 $ 6,339 $ 6,336
----------------------------------
ADDITIONAL PAID IN CAPITAL
Balance at Beginning of Year.............................................................. $ 8,298 $ 8,292 $ 8,292
Additional Paid in Capital from
Conversion of Preferred Stock to
Common Stock............................................................................ 1,720 5 -0-
Additional Paid in Capital from
Resale of Treasury Stock................................................................ 68 1 -0-
Payment of Fractional Shares.............................................................. (7) -0- -0-
----------------------------------
BALANCE AT END OF YEAR...................................................................... $10,079 $ 8,298 $ 8,292
----------------------------------
UNDIVIDED PROFITS
Balance at Beginning of Year.............................................................. $14,185 $11,761 $ 9,628
Net Income................................................................................ 4,398 3,716 3,240
Cash Dividends Declared:
Convertible Preferred Stock............................................................. (204) (273) (273)
Common Stock............................................................................ (1,257) (1,019) (834)
----------------------------------
BALANCE AT END OF YEAR...................................................................... $17,122 $14,185 $11,761
----------------------------------
UNREALIZED GAIN (LOSS) ON SECURITIES
AVAILABLE-FOR-SALE, NET OF APPLICABLE
DEFERRED INCOME TAXES
Balance at Beginning of Year.............................................................. $ 77 $ (29) $ (18)
Change in Unrealized Gain (Loss) on
Securities Available-for-Sale........................................................... (796) 106 (11)
----------------------------------
BALANCE AT END OF YEAR...................................................................... $ (719) $ 77 $ (29)
----------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
[Annual Report Page 4]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity
for the years ended December 31, 1994, 1993, and 1992
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
IN THOUSANDS OF DOLLARS
----------------------------------
1994 1993 1992
---- ---- ----
(restated)
<S> <C> <C> <C>
LESS: EMPLOYEE STOCK OWNERSHIP PLAN SHARES
COLLATERALIZING DEBT, AT COST
Balance at Beginning of Year........................................................ $ 424 $ 362 $ 196
Purchase of Common Stock............................................................ 94 362
Principal Reduction of ESOP Obligation.............................................. (424) (32) (196)
----------------------------------
BALANCE AT END OF YEAR
-0- Shares in 1994; 43,062 Shares in 1993; and
52,014 Shares in 1992............................................................... $ -0- $ 424 $ 362
----------------------------------
LESS: TREASURY STOCK, AT COST
Balance at Beginning of Year......................................................... $ 347 $ 350 $ 352
Resale of 7,065 Shares, 135 Shares, and 90 Shares of
Treasury Stock, at Cost in 1994, 1993, and 1992,
Respectively......................................................................... (138) (3) (2)
----------------------------------
BALANCE AT END OF YEAR
10,578 Shares in 1994; 17,643 Shares in 1993; and
17,778 Shares in 1992................................................................ $ 209 $ 347 $ 350
----------------------------------
TOTAL SHAREHOLDERS' EQUITY................................................................... $33,608 $30,844 $28,373
==================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
[Annual Report Page 5]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
for the years ended December 31, 1994, 1993 and 1992
-------------------------------------------------------------------------
<TABLE>
<CAPTION>
IN THOUSANDS OF DOLLARS
-------------------------------
1994 1993 1992
---- ---- ----
(restated)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.................................................. $ 4,398 $ 3,716 $ 3,240
-------------------------------
Adjustments to Reconcile Net Income
to Net Cash from Operating Activities:
Deferred Compensation Benefits.......................... $ -0- $ 60 $ 218
Depreciation............................................ 861 850 862
Provision for Loan Losses............................... 417 247 983
Provision for Losses on Foreclosed Properties........... -0- 190 -0-
Net Amortization (Accretion) on Investments............. 610 375 77
Provision for Deferred Taxes............................ (782) (173) (125)
(Gain) Loss on Sale of Capitalized Assets............... 21 2 4
Realized (Gain) Loss on Sale of Investment Securities... 220 (15) (5)
Income Tax Benefit...................................... (160) (258) (228)
Purchase Adjustments.................................... 83 82 113
Other Items - Net....................................... (16) 7 (13)
(Increase) Decrease:
Accrued Interest Receivable........................... (112) (168) 356
Other Assets.......................................... (1,844) (997) (69)
Increase (Decrease):
Accrued Interest Payable.............................. 64 (121) (429)
Other Liabilities..................................... 1,334 304 787
-------------------------------
TOTAL ADJUSTMENTS................................... $ 696 $ 385 $ 2,531
-------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES...................... $ 5,094 $ 4,101 $ 5,771
-------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (Increase) Decrease in Short-Term Investments........... $ 7,294 $ 7,042 $ (2,794)
Proceeds from Sales of Investments Held-to-Maturity......... 806 1,097 -0-
Proceeds from Sales of Investments Available-for-Sale....... 12,737 -0- -0-
Proceeds from Maturities of
Investments Held-to-Maturity.............................. 15,911 25,938 26,977
Proceeds from Maturities of
Investments Available-for-Sale............................ 6,364 -0- -0-
Purchases of Investments Held-to-Maturity................... (10,126) (47,134) (25,427)
Purchases of Investments Available-for-Sale................. (18,265) -0- -0-
Net (Increase) Decrease in Loans............................ (34,774) 551 (20,945)
Proceeds from Sale of REO................................... 419 120 -0-
Proceeds from Sale of Capital Assets........................ -0- 43 39
Capital Expenditures........................................ (857) (749) (875)
-------------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES...................... $(20,491) $(13,092) $(23,025)
-------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
[Annual Report Page 6]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
for the years ended December 31, 1994, 1993 and 1992
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
IN THOUSANDS OF DOLLARS
-----------------------------
1994 1993 1992
---- ---- ----
(restated)
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase (Decrease) in Total
Deposits.................................... $12,657 $ 9,420 $15,595
Net Increase (Decrease) in Federal
Funds Purchased and Securities Sold
under Agreements to Repurchase.............. 6,790 596 930
Proceeds from Sale of Treasury Stock.......... 204 3 2
Payment for Fractional Shares................. (7) -0- -0-
Principal Payments on ESOP Borrowings......... -0- (32) (196)
Principal Payments on Capital Lease
Obligations................................. -0- (27) (25)
Principal Payments on Notes Payable........... -0- -0- (25)
Proceeds from Issuance of ESOP Debt........... -0- 94 362
Liquidating Dividend Paid..................... (22) -0- -0-
Dividends Paid................................ (1,461) (1,292) (1,107)
-----------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES........ $18,161 $ 8,762 $15,536
-----------------------------
NET INCREASE (DECREASE) IN CASH AND DUE
FROM BANKS.................................... $ 2,764 $ (229) $(1,718)
CASH AND DUE FROM BANKS AT BEGINNING OF
YEAR.......................................... 13,863 14,092 15,810
-----------------------------
CASH AND DUE FROM BANKS AT END OF YEAR.......... $16,627 $13,863 $14,092
-----------------------------
SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Conversion of Convertible Preferred
Stock to Common Stock..................... $ 2,716 $ 9 $ -0-
Loans Transferred to Foreclosed Properties.. $ 247 $ 124 $ 288
Change in Unrealized Gain (Loss)
on Available-for-Sale Securities.......... $ (796) $ 106 $ (11)
SUPPLEMENTARY DISCLOSURE OF CASH FLOWS
INFORMATION:
Cash Paid during the Year For:
Interest.................................. $ 9,557 $10,087 $12,404
Income Taxes.................................... $ 1,996 $ 2,642 $ 1,118
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
[Annual Report Page 7]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
-------------------------------------------------------------------------------
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Basis of Presentation
The accounting and reporting policies of Commercial BancShares, Inc. and
Subsidiaries are in conformity with generally accepted accounting principles
followed within the banking industry. The significant accounting policies
employed in the preparation of the accompanying consolidated financial
statements are summarized below.
Certain items previously reported have been reclassified to conform with
current year's classifications.
Principles of Consolidation
The consolidated financial statements of Commercial BancShares, Inc. and
Subsidiaries (the Corporation) include the accounts of the Corporation and its
eight wholly-owned subsidiaries. Material intercompany transactions and
accounts have been eliminated. Purchase accounting adjustments applicable to
the acquisitions of various wholly-owned subsidiaries have been included in the
Corporation's consolidated financial statements.
Business Combinations
Effective February 1, 1993, the Corporation acquired the net assets of
The Dime Bank by exchanging 214,266 shares of its common stock for all of the
outstanding shares of The Dime Bank. The combination has been recorded using
the pooling- of-interests method of accounting and, accordingly, the
accompanying consolidated financial statements were prepared as if the
combination had occurred on January 1, 1992. All significant intercompany
transactions have been eliminated.
Effective August 1, 1994, the Corporation acquired the net consolidated
assets of Hometown Bancshares, Inc. (Hometown) by exchanging 509,398 shares of
its common stock for all of the outstanding shares of Hometown. The combination
has been recorded using the pooling-of-interests method of accounting and,
accordingly, the accompanying consolidated financial statements were prepared as
if the combination had occurred on January 1, 1992. All significant
intercompany transactions have been eliminated.
Summarized results of operations, in thousands, of the Corporation, The
Dime Bank, and Hometown Bancshares, Inc. for each of the appropriate operating
periods are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------------------------- -------------------------- ----------------------------------------
COMMERCIAL HOMETOWN COMMERCIAL HOMETOWN COMMERCIAL HOMETOWN
BANCSHARES, BANCSHARES, BANCSHARES, BANCSHARES, BANCSHARES, BANCSHARES,
INC. AND INC. AND INC. AND INC. AND INC. AND INC. AND THE DIME
SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES BANK
(12 MONTHS) (7 MONTHS) (12 MONTHS) (12 MONTHS) (12 MONTHS) (12 MONTHS) (1 MONTH)
(restated) (restated)
<S> <C> <C> <C> <C> <C> <C> <C>
Total Interest Income $ 22,998 $ 3,935 $18,474 $ 7,085 $19,680 $ 7,504 $ 284
Total Interest Expense (8,155) (1,466) (7,114) (2,852) (8,372) (3,462) (140)
Provision for Loan Losses (351) (66) (88) (159) (779) (204) -0-
Other Income 1,563 452 1,966 390 1,599 372 24
Other Expenses (11,110) (1,876) (9,002) (3,068) (8,477) (3,023) (130)
Applicable Income Taxes (1,176) (350) (1,462) (454) (1,212) (416) (8)
-------- ------- ------- ------- ------- ------- -----
NET INCOME $ 3,769 $ 629 $ 2,774 $ 942 $ 2,439 $ 771 $ 30
-------- ------- ------- ------- ------- ------- -----
</TABLE>
[Annual Report Page 8]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
-------------------------------------------------------------------------------
Change in Accounting Principles
In 1993, the Corporation adopted Statement of Financial Accounting
Standards (SFAS) 109, Accounting for Income Taxes, retrospectively, resulting in
the restatement of the 1992 comparative financial information. The new standard
changed many of the requirements of prior accounting standards, particularly
with respect to the criteria for the recognition of deferred tax assets and
liabilities. A further discussion of the temporary differences resulting in
deferred tax balances is incorporated in Note 8 to the consolidated financial
statements.
The following adjustments resulting from the adoption of SFAS 109 have
increased (decreased) previously reported categories:
<TABLE>
<CAPTION>
In Thousands of Dollars
December 31, 1992
-------------------------------------
Previously Accounting
Reported Change Restated
<S> <C> <C> <C>
BALANCE SHEET
Other Assets $ 2,536 $ 335 $ 2,871
Other Liabilities $ 1,766 $ 130 $ 1,896
Undivided Profits $11,556 $ 205 $11,761
STATEMENTS OF INCOME
Applicable Income Taxes $ 1,739 $(103) $ 1,636
Net Income $ 3,137 $ 103 $ 3,240
Net Income Available for
Common Shareholders $ 2,864 $ 103 $ 2,967
Primary - Per Share $ 2.39 $ .21 $ 2.60
Fully Diluted - Per Share $ 2.06 $ .18 $ 2.24
</TABLE>
In 1994, the Corporation adopted SFAS Number 115, Accounting for Certain
Investments in Debt and Equity Securities, by classifying its debt and
marketable equity securities, including previously reported investment
securities, in a new balance sheet caption, securities available-for-sale.
These securities are valued at fair value, with the resulting net unrealized
gains and losses recorded directly to a separate component of shareholders'
equity, net of deferred income tax. The adoption of SFAS 115 had no effect on
net income.
Statement of Cash Flows
For the purpose of reporting cash flows, the Corporation has defined cash
equivalents as those amounts included in the balance sheet caption "Cash and Due
from Banks" and "Interest-Bearing Demand Deposits with Other Banks."
Securities
It is the policy of the Corporation and its subsidiaries to prohibit the
use of their respective investment accounts to maintain a trading account or to
speculate in securities that would demonstrate management's intent to profit
from short-term price movements.
Management determines the appropriate classification of securities at the
time of purchase. If management has the intent and the Corporation has the
ability, at the time of purchase, to hold securities until maturity or on a
long-term basis, they are classified as held-to-maturity and carried at
amortized historical cost. Securities to be held for indefinite periods of time
and not intended to be held to maturity or on a long-term basis are classified
as available for sale and carried at fair value. Securities held for indefinite
[Annual Report Page 9]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
-------------------------------------------------------------------------------
periods of time include securities that management intends to use as part of its
asset and liability management strategy and that may be sold in response to
changes in interest rates, resultant prepayment risk, and other factors related
to interest rate and resultant prepayment risk changes.
Realized gains and losses on dispositions are based on the net proceeds
and the adjusted book value of the securities sold, using the specific
identification method. Unrealized gains and losses on investment securities
available for sale are based on the difference between book value and fair value
of each security. These gains and losses are credited or charged to
shareholders' equity, whereas realized gains and losses flow through the
Corporation's yearly operations.
The Corporation generally anticipates prepayments of principal in the
calculation of the effective yield for collateralized mortgage obligations.
Market values of all securities are determined by prices obtained from
independent market sources.
Note Receivable
The Corporation has a note receivable with MOVE Capital, Inc. which had an
original principal balance of $255 thousand. The principal balance of the note
matures March 31, 1996. The borrower promises to pay one-half of the interest
when and as earned on certain certificates of deposit and one-half of all
payments of interest when and as received rom certain investments and such
additional amount as needed per year so that interest paid equals five percent
per annum on the unpaid principal balance.
Loans
Loans are stated at the amount of unpaid principal, reduced by unearned
interest and deferred loan fees.
The net amount of loan origination and commitment fees, and direct costs
incurred to underwrite and issue the loan are deferred and amortized as an
adjustment of the related loan's yield over the contractual life of the loan in
a manner which approximates the interest method.
Interest income on discounted loans is generally recognized as income
based on methods that approximate the interest method. For all other loans,
interest is accrued daily on the outstanding balances. Unearned income on
discounted loans is credited to the unearned interest account when the loan is
made and is recorded as interest income monthly over the life of the loan using
the interest method.
Nonaccrual loans are those on which the accrual of interest has ceased.
Loans, other than consumer loans, are placed on nonaccrual status immediately
if, in the opinion of management, principal or interest is not likely to be paid
in accordance with the terms of the loan agreement, or when principal or
interest is past due 90 days or more and collateral is insufficient to cover
principal and interest. Interest accrued but not collected at the date a loan
is placed on nonaccrual status is reversed against interest income. In
addition, any interest accrued in prior years is charged to the reserve for loan
losses. Subsequent cash receipts are applied either to the outstanding principal
balance or recorded as interest income, depending on management's assessment of
the ultimate collectibility of principal and interest. Loans are reclassified
to accrued status only when interest and principal payments are brought current
and future payments appear assured.
Restructured loans are loans with original terms which have been modified
to below market rate terms as a result of a change in the borrower's financial
condition. Interest income on restructured loans is accrued at the reduced
rates.
A commitment to extend credit is a binding agreement to make a loan to a
customer in the future if certain conditions are met and is subject to the same
[Annual Report Page 10]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
-------------------------------------------------------------------------------
risk, credit review, and approval process as a loan. Many commitments expire
without being used and, therefore, do not represent future funding requirements.
Reserve for Possible Loan Losses
The reserve for loan losses is maintained at a level determined by
management to be adequate to provide for probable losses inherent in the loan
portfolio, including commitments to extend credit. The reserve is maintained
through the provision for loan losses, which is a charge to operations. When a
loan is considered uncollectible, the loss is charged to the reserve.
Recoveries of previously charged off loans are credited to the reserve. The
potential for loss in the portfolio reflects the risks and uncertainties
inherent in the extension of credit.
The determination of the adequacy of the reserve is based upon management's
assessment of risk elements in the portfolio, factors affecting loan quality,
and assumptions about the economic environment in which the Corporation
operates. The process includes identification and analysis of loss potential in
various portfolio segments utilizing a credit risk grading process and specific
reviews and evaluations of significant individual problem credits. In addition,
management reviews overall portfolio quality through an analysis of current
levels and trends in charge-off, delinquency, and nonaccruing loan data, review
of forecasted economic conditions, and the overall banking environment. These
reviews are of necessity dependent upon estimates, appraisals, and judgments
which may change quickly because of changing economic conditions and the
Corporation's perception as to how these factors may affect the financial
condition of debtors.
Foreclosed Properties
Properties acquired through foreclosure or in settlement of loans are
classified as foreclosed properties and are valued at the lower of the loan
value or estimated fair value of the property acquired less estimated selling
costs. At the time of foreclosure, the excess, if any, of the loan value over
the estimated fair value of the property acquired less estimated selling costs
is charged to the reserve for loan losses. Additional decreases in the carrying
values of foreclosed properties or changes in estimated selling costs,
subsequent to the time of foreclosure, are recognized through a provision
charged to operations. A valuation reserve is maintained for estimated selling
costs and to record the excess of the carrying values over the fair market
values of properties if changes in the carrying values are judged to be
temporary.
The fair value of foreclosed properties is determined based upon appraised
value, utilizing either the estimated replacement cost, the selling price of
properties utilized for similar purposes, or discounted cash flow analyses of
the properties' operations.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation.
Premises and equipment are depreciated over their estimated useful lives using
either straight-line or an accelerated method. Useful lives are revised when a
change in life expectancy becomes apparent.
Maintenance and repairs are charged to expense and major renewals and
betterments are capitalized. Gains or losses on dispositions of premises and
equipment are included in income as realized.
Applicable Income Taxes
Income tax expense is based on income reported in the financial statements.
Deferred income taxes are generally provided for transactions reported for tax
purposes in periods different than when reported in the Corporation's financial
statements.
[Annual Report Page 11]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
-------------------------------------------------------------------------------
The Corporation and its subsidiaries file consolidated Federal and state
tax returns. Tax allocation arrangements between the Corporation and its
subsidiaries follow the policy of determining Federal and state income taxes as
if the subsidiaries filed separate Federal and state income tax returns with
consolidation surtax eliminations at the Corporation's level.
Trust Fees
In accordance with general practices within the banking industry, trust
fees are recorded when received. Reporting such income on an accrual basis
would not materially affect the results of operations as reported.
Earnings Per Share
Primary earnings per share of common stock are based on the weighted-
average number of shares of common stock outstanding during each period. Such
weighted-average shares outstanding were 1,285,391 shares, 1,250,283 shares,
and 1,249,795 shares for the years 1994, 1993, and 1992, respectively. Fully
diluted earnings per share assumes the conversion of outstanding convertible
preferred stock and elimination of dividends paid thereon, as of the beginning
of each period, in order to compute the weighted-average of common shares
outstanding during each period. Such weighted-average shares assuming full
dilution were 1,449,641 shares, 1,449,567 shares, and 1,449,563 shares in 1994,
1993, and 1992, respectively.
Fair Value of Financial Instruments
SFAS 107 requires the Corporation to disclose the fair value of its
financial instruments. A financial instrument is defined as cash, evidence of
an ownership interest in an entity, or a contract that conveys or imposes the
contractual right or obligation to either receive or deliver cash or another
financial instrument. Examples of financial instruments included in the
Corporation's balance sheet are cash, Federal funds sold or purchased, debt and
equity securities, loans, demand, savings, and other interest-bearing deposits,
and notes. Examples of financial instruments which are not included in the
Corporation's balance sheet are commitments to extend credit, and standby
letters-of-credit. Fair value is defined as the amount at which a financial
instrument could be exchanged in a current transaction between willing parties,
other than in a forced sale or liquidation, and is best evidenced by a quoted
market price if one exists.
NOTE 2: SECURITIES
At December 31, 1994, the investment securities portfolio was comprised of
securities classified as available for sale and held-to-maturity, in accordance
with SFAS Number 115. This resulted in investment securities available for sale
being carried at market values and investment securities held-to-maturity being
carried at amortized cost, adjusted for amortization of premiums and accretions
of discounts. Hometown had elected early adoption of SFAS Number 115, resulting
in its investment securities portfolio at December 31, 1993, to be comprised of
securities classified as available-for-sale and held-to-maturity. Since SFAS
Number 115 does not allow retroactive restatement only the portion of the
investment securities portfolio at December 31, 1993 relating to Hometown is
presented per SFAS Number 115 requirements.
[Annual Report Page 12]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
-------------------------------------------------------------------------------
The following represents the investment securities portfolio for the years
ended:
<TABLE>
<CAPTION>
In Thousands of Dollars
December 31, 1994
----------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Securities Held-to-Maturity
U. S. Government and Federal
Agency/Corporation Obligations:
Mortgage-Backed Securities..................... $ 218 $ -0- $ -0- $ 218
Other, Primarily U. S. Treasuries.............. 26,733 25 (668) 26,090
Obligations of States and Political Subdivisions 13,723 110 (248) 13,585
Other Debt Securities............................ 476 18 (3) 491
-----------------------------------------
TOTAL.............................................. $41,150 $ 153 $ (919) $40,384
-----------------------------------------
Securities Available-for-Sale:
U. S. Government and Federal
Agency/Corporation Obligations:
Mortgage-Backed Securities..................... $ 3,970 $ 2 $ (265) $ 3,707
Collateralized Mortgage Obligations............ 1,916 5 (37) 1,884
Other, Primarily U. S. Treasuries.............. 36,785 51 (862) 35,974
Other Debt Securities............................ 149 -0- -0- 149
-----------------------------------------
$ 42,820 $ 58 $(1,164) $41,714
Equity Securities................................ 1,313 -0- (87) 1,226
-----------------------------------------
TOTAL.............................................. $44,133 $ 58 $(1,251) $42,940
-----------------------------------------
<CAPTION>
In Thousands of Dollars
December 31, 1994
----------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Securities Held-to-Maturity
U. S. Government and Federal
Agency/Corporation Obligations:
Mortgage-Backed Securities..................... $ 3,895 $ 27 $ (9) $ 3,913
Collateralized Mortgage Obligations............ 3,122 36 (19) 3,139
Government Agencies and U. S. Treasuries....... 64,153 1,303 (60) 65,396
Obligations of States and Political
Subdivisions................................... 13,814 533 (9) 14,338
Other Debt Securities............................ 1,416 28 -0- 1,444
Equity Securities - FHLB Stock................... 446 -0- -0- 446
-----------------------------------------
TOTAL.............................................. $86,846 $ 1,927 $ (97) $88,676
-----------------------------------------
Securities Available-for-Sale:
U. S. Government and Federal Agency.............. $ 4,731 $ 63 $ (21) $ 4,773
Equity Securities................................ 871 103 (29) 945
-----------------------------------------
TOTAL.............................................. $ 5,602 $ 166 $ (50) $ 5,718
-----------------------------------------
</TABLE>
[Annual Report Page 13]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
------------------------------------------------------------------------------
The amortized cost and estimated market value of securities at December 31,
1994, by contractual maturity, are presented as follows. Expected
maturities will differ from contractual maturities because borrowers may
have the right to prepay obligations without prepayment penalties.
<TABLE>
<CAPTION>
Securities He Securities Available-
to-Maturity for-Sale
-------------------- -----------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
<S> <C> <C> <C> <C>
Due in One Year or Less........................................... $10,717 $10,692 $ 6,938 $ 6,914
Due after One Year through Five Years............................. 23,760 23,142 26,220 25,468
Due after Five Years through Ten Years............................ 5,915 5,766 8,206 7,880
Due after Ten Years............................................... 758 784 1,456 1,452
------- ------- ------- -------
$41,150 $40,384 $42,820 $41,714
Equity Securities................................................. -0- -0- 1,313 1,226
------- ------- ------- -------
TOTAL............................................................. $41,150 $40,384 $44,133 $42,940
------- ------- ------- -------
</TABLE>
Proceeds from sales of investments in debt securities during 1994, 1993,
and 1992 were $13,543, $1,097, and $-0- thousand, respectively. Gross gains of
$110, $3, and $-0- thousand and gross losses of $331, $-0-, and $-0- thousand
were realized on those sales during 1994, 1993, and 1992, respectively. Security
gains of $-0- thousand and $15 thousand recognized in 1994 and 1993,
respectively, resulted from calls of investment obligations beyond the control
of the Corporation.
The market values of obligations of state and political subdivisions are
established with the assistance of an independent pricing service and are based
on available market data which often reflect transactions of relatively small
size and are not necessarily indicative of the prices at which large amounts of
particular issues could readily be sold or purchased.
Securities pledged to secure public monies and other purposes as required
or permitted by law had a carrying value of $27,607 thousand and $22,534
thousand and estimated market value of $28,367 thousand and $23,296 thousand at
December 31, 1994 and 1993, respectively.
Interest on Securities
The following represents the interest on securities, presented by
investment classifications, for the years ended:
<TABLE>
<CAPTION>
In Thousands of Dollars
December 31,
------------------------
1994 1993 1992
------------------------
<S> <C> <C> <C>
U. S. Government and Federal Agency/
Corporation Obligations............. $4,014 $4,055 $4,452
State, County, and Municipal Bonds
(Substantially All Exempt from
Federal Income Tax)................ 747 756 858
Other Investments..................... 133 164 302
------------------------
TOTAL................................. $4,894 $4,975 $5,612
------------------------
</TABLE>
[Annual Report Page 14]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
-------------------------------------------------------------------------------
NOTE 3: LOANS
Major classifications of loans, net of deferred fees, are
summarized as follows for the years ended:
<TABLE>
<CAPTION>
In Thousands of Dollars
December 31,
-----------------------
1994 1993
---- ----
<S> <C> <C>
Real Estate....................................................... $ 88,321 $ 82,354
Consumer.......................................................... 61,305 48,696
Commercial and Industrial......................................... 103,230 88,790
Credit Card Loans................................................. 4,527 3,805
--------------------
$257,383 $223,645
Unearned Interest................................................. (981) (1,024)
--------------------
LOANS - NET....................................................... $256,402 $222,621
--------------------
</TABLE>
Changes in the allowance for loan losses were as follows for the years
ended:
<TABLE>
<CAPTION>
In Thousands of Dollars
December 31,
------------------------------
1994 1993 1992
------------------------------
<S> <C> <C> <C>
BALANCE, BEGINNING OF YEAR................................................. $ 3,138 $ 2,958 $2,360
Provisions Charged to Operations......................................... 417 247 983
Loans Charged Off........................................................ (245) (280) (699)
Recoveries............................................................... 120 213 314
------------------------------
BALANCE, END OF YEAR....................................................... $ 3,430 $ 3,138 $2,958
------------------------------
</TABLE>
Set forth below are the principal balances of nonaccrual (cash basis) and
renegotiated loans and other assets acquired in loan relatedtransactions for
the years ended:
<TABLE>
<CAPTION>
In Thousands of Dollars
December 31,
------------------------------
1994 1993 1992
------------------------------
<S> <C> <C> <C>
Nonaccrual Loans........................................................... $ 739 $ 355 $ 766
Renegotiated or Restructured Loans......................................... 1,403 121 86
------------------------------
TOTAL NONPERFORMING LOANS.................................................. $ 2,142 $ 476 $ 852
Other Assets Acquired in Satisfaction of
Loans (Primarily Foreclosed Properties).................................. 1,329 1,274 1,593
------------------------------
TOTAL NONPERFORMING ASSETS................................................. $ 3,471 $ 1,750 $2,445
------------------------------
</TABLE>
Restructured or renegotiated loans are those loans on which the rate of
interest has been reduced as a result of the inability of the borrower to meet
the original terms of the loan. At December 31, 1994, there were no commitments
to lend additional funds to borrowers whose loans were classified nonaccrual
(cash basis) or renegotiated.
The approximate effect of foregone revenue from nonaccrual or renegotiated
loans was as follows for the years ended:
<TABLE>
<CAPTION>
In Thousands of Dollars
December 31,
------------------------------
1994 1993 1992
------------------------------
<S> <C> <C> <C>
Gross Amount of Interest That Would Have
Been Recorded at Original Rate........................................... $ 154 $ 60 $ 77
Interest That Was Reflected in Revenue /(1)/............................... (17) (3) (9)
------------------------------
NEGATIVE INTEREST REVENUE IMPACT........................................... $ 137 $ 57 $ 68
------------------------------
</TABLE>
/(1)/ Represents interest collected on nonaccrual loans.
[Annual Report Page 15]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
-------------------------------------------------------------------------------
Foreclosed properties of $1,329 thousand and $1,274 thousand are stated
net of reserves of $190 thousand and $190 thousand at December 31, 1994 and
1993, respectively. The reserve at December 31, 1994 includes $-0- for estimated
selling costs. Provisions charged to operations for changes in the carrying
value of foreclosed properties amounted to $-0- thousand, $190 thousand, and
$-0- thousand in 1994, 1993, and 1992, respectively.
NOTE 4: BANK PREMISES AND EQUIPMENT
Bank premises and equipment is presented on the balance sheet at cost net
of accumulated depreciation and consists of the following for the years ended:
<TABLE>
<CAPTION>
In Thousands of Dollars
December 31,
Estimated ------------------------
Description Useful Life 1994 1993
----------- ----------- ---- ----
<S> <C> <C> <C>
Land.................................................. $ 1,421 $ 1,404
Bank Premises...................... 5 to 40 Years..... 7,453 7,354
Furniture and Equipment............ 5 to 10 Years..... 4,861 6,353
----------------
$13,735 $15,111
LESS: Accumulated Depreciation....................... (6,606) (7,970)
----------------
TOTAL................................................. $ 7,129 $ 7,141
----------------
</TABLE>
Depreciation and amortization amounted to $861 thousand, $850 thousand,
and $862 thousand for the years ended December 31, 1994, 1993, and 1992,
respectively.
NOTE 5: TIME DEPOSITS
The maturity of time deposits in denominations of $100 thousand or more
was as follows for the years ended:
<TABLE>
<CAPTION>
In Thousands of Dollars
December 31,
------------------------------------------------------
1994 1993
------------------------------------------------------
BALANCE PERCENT BALANCE PERCENT
<S> <C> <C> <C> <C>
MATURING:
Three Months or Less $ 5,385 31% $ 2,609 20%
Over Three to Six Months 2,380 14 1,487 12
Over Six to Twelve Months 2,860 16 4,991 38
Over One Year 6,888 39 3,786 30
--------------------- ----------------------
$17,513 100% $12,873 100%
------------------------------------------------------
</TABLE>
Interest expense on time deposits in denominations of $100 thousand or more
as of December 31, 1994, 1993, and 1992 was $589 thousand, $454 thousand, and
$553 thousand, respectively.
[Annual Report Page 16]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
-------------------------------------------------------------------------------
NOTE 6: FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENT TO
REPURCHASE
Federal funds purchased and securities sold under agreement to repurchase
generally represent overnight-borrowing transactions.
The details of these classifications for the years 1994 and 1993 are as
follows:
<TABLE>
<CAPTION>
In Thousands of Dollars
December 31,
-----------------------------
1994 1993
-----------------------------
<S> <C> <C>
FEDERAL FUNDS PURCHASED
Balance at End of Year $7,233 $ 750
Average during Year $4,635 $ 840
Maximum Month-End Balance $8,233 $2,250
Average Rate during Year 4.62% 2.86%
Rate at Year End 6.21% 3.00%
SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE
Balance at End of Year $3,739 $3,432
Average during Year $5,027 $4,619
Maximum Month-End Balance $6,377 $9,312
Average Rate during Year 4.48% 2.91%
Rate at Year End 5.12% 3.17%
</TABLE>
NOTE 7: ESOP BORROWING
ESOP borrowing, as presented on the consolidated balance sheet, is as
follows for the years ended:
<TABLE>
<CAPTION>
In Thousands of Dollars
December 31,
-----------------------
1994 1993
<S> <C> <C>
During 1992, the ESOP Trust obtained a revolving conversion note for the principal amount of one
million dollars to finance the acquisition of the Corporation's 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 loans is payable on each calendar quarter since September 30, 1992. The principal balance
of the term loan is payable on each calendar quarter commencing on June 30, 1993 in 28 equal
quarterly installments. The Corporation had principal borrowings and repayments of $-0- thousand
and $424 thousand, respectively, in 1994 and $94 thousand and $32 thousand, respectively, in
1993. Interest expense of $-0- thousand and 25 thousand recognized in 1994 and 1993,
respectively. ......................................................................................... -0- $ 424
-----------------
TOTAL .................................................................................................. $ -0- $ 424
=================
</TABLE>
[Annual Report Page 17]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
-------------------------------------------------------------------------------
NOTE 8: INCOME TAXES
A reconciliation of the Federal statutory tax rate to the reported
effective tax rate is as follows for the years ended:
<TABLE>
<CAPTION>
December 31,
----------------------------
1994 1993 1992
---- ---- ----
(restated)
<S> <C> <C> <C>
Federal Statutory Tax Rate......................................... 34 % 34 % 34 %
Tax-Exempt Interest Income......................................... (11)% (12)% (12)%
State Income Tax................................................... 4 % 5 % 4 %
Tax Effect of Other Items.......................................... (1)% 7 % 7 %
----------------------------
REPORTED EFFECTIVE TAX RATE........................................ 26 % 34 % 33 %
============================
</TABLE>
The provision for income taxes in the consolidated statement of income
consists of the following for the years ended:
<TABLE>
<CAPTION>
December 31,
----------------------------
1994 1993 1992
---- ---- ----
(restated)
<S> <C> <C> <C>
Current Income Taxes:
Federal.......................................................... $2,014 $1,791 $1,466
State............................................................ 294 298 295
Deferred Income Taxes.............................................. (782) (173) (125)
----------------------------
NET INCOME TAXES................................................... $1,526 $1,916 $1,636
============================
</TABLE>
The approximate tax effects of the net investment securities transactions
for the years ended December 31, 1994, 1993, and 1992 were $(88) thousand, $7
thousand, and $2 thousand, respectively.
Deferred income tax expense (benefit) results from differences in the
timing of revenue and expense recognition for income tax return and financial
reporting purposes. These temporary differences are primarily attributable to
the following transactions presented below:
<TABLE>
<CAPTION>
December 31,
--------------------------
1994 1993 1992
---- ---- ----
(restated)
<S> <C> <C> <C>
Provision for Loan Losses.......................... $(680) $ (48) $ (48)
Provision for Foreclosed Properties................ -0- (50) -0-
Amortization of Organizational Expenses............ 3 1 (14)
Differences Between Tax and Book Depreciation...... (22) 1 (11)
Accretion of Bond Discount......................... -0- (16) (2)
Deferred Compensation for Officers and Directors... (83) (61) (50)
-----------------------
TOTAL $(782) $(173) $(125)
=======================
</TABLE>
Deferred taxes are recorded by applying the marginal tax rate to temporary
differences. Temporary differences, such as provisions for loan losses, are
transactions reported for tax purposes in periods different from the periods
when such transactions are reported in the Corporation's financial statements.
Deferred tax assets represent the tax benefit of future deductible temporary
differences and, if it is more likely than not (a greater than 50 percent
likelihood) that deferred tax assets will not be realized, a valuation allowance
[Annual Report Page 18]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
-------------------------------------------------------------------------------
will be required to reduce the recorded deferred tax assets to net realizable
value.
The Corporation adopted SFAS 109 retrospectively in the First Quarter of
1993. The income tax benefit of the Corporation's deductible temporary
differences are recognized under the new standard and are subjected to an
evaluation of whether it is more likely than not that the income tax benefits
will not be realized. The level of the valuation allowance has been determined
taking into consideration management's best judgments regarding the amounts and
timing of future taxable income and available tax planning strategies.
NOTE 9: SHAREHOLDERS' EQUITY
Common Stock
The Corporation has 2,000,000 shares of $5.00 par value common stock
authorized and each share carries voting rights of one vote per common share.
Shares issued were 1,467,040 shares, 1,267,904 shares, and 1,267,311 shares at
December 31, 1994, 1993, and 1992, respectively. Shares outstanding were
1,456,462 shares, 1,250,261 shares, and 1,249,533 shares at December 31, 1994,
1993, and 1992, respectively.
The outstanding shares at December 31, 1994, 1993, and 1992 include 87,427
shares, 79,051 shares, and 75,001 shares, respectively, owned by the ESOP.
During 1993, 81 shares of convertible preferred stock were converted into
593 shares of common stock and during 1994, 27,165 shares of convertible
preferred stock were converted into 199,130 shares of common stock.
Cash dividends paid per share on common stock were $1.03, $.94, and $.83
for the years 1994, 1993, and 1992, respectively.
Convertible Preferred Stock
During 1985, the shareholders approved and authorized 43,328 shares of
convertible preferred stock $100.00 Series of which 28,764 shares of convertible
preferred stock were issued in connection with the acquisition of Jackson County
Bank. As of December 31, 1994, 1993, and 1992, this was the only series of
convertible preferred stock authorized, issued, and outstanding. Convertible
preferred stock outstanding as of December 31, 1994, 1993, and 1992 was -0-
shares, 27,165 shares, and 27,246 shares, respectively.
The holders of the convertible preferred stock were entitled to receive,
before any dividends were paid to holders of common stock, dividends at the rate
of $10.00 per share per year and cumulative to the extent not paid.
The convertible preferred stock was convertible at the option of the
holders, at any time prior to redemption, into 7.332 shares of common stock of
Commercial BancShares. No fractional shares were issued on conversion but a cash
adjustment was paid to the shareholder otherwise entitled to receive a
fractional interest. The shares had a redemption provision entitling the holders
to be paid as follows:
YEAR PRICE
1994 $105.00
Thereafter $100.00
During 1994, following a notice of redemption issued by the Corporation,
the preferred stock shareholders converted all 27,165 shares of preferred stock
into 199,130 shares of common stock.
[Annual Report Page 19]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
-------------------------------------------------------------------------------
Upon the reacquisition of shares of convertible preferred stock through
conversion, such reacquired shares have been cancelled and have become part of
the authorized and unissued preferred stock but shall not be authorized and
unissued shares of the convertible preferred stock.
NOTE 10: CONCENTRATION OF CREDIT RISK
Most of the Subsidiaries' loans, commitments, lines-of-credit, and standby
letters-of-credit have been granted to customers in that subsidiaries' market
area. Most customers are depositors of that subsidiary. Investments in state
and municipal securities also involve governmental entities within that
subsidiary's market area. The concentrations of credits, by type of loan, are
set forth in Note 3. The distribution of commitments to extend credit
approximates the distribution of loans outstanding. Standby letters-of-credit
were granted primarily to commercial borrowers. The subsidiaries, as a matter
of policy, do not extend credit to any single borrower or group of related
borrowers in excess of 15% of that subsidiary's capital at the time of the loan
closing.
The Corporation manages its loan portfolio to avoid concentration by
industry or loan size to minimize its credit exposure. Commercial loans may be
collateralized by the assets underlying the borrower's business such as accounts
receivable, equipment, inventory, and real property. Consumer loans such as
residential mortgage and installment loans are generally secured by the real or
personal property financed. Commercial real estate loans are generally secured
by the underlying real property and rental agreements.
Securities and short-term investment activities are conducted with a
diverse group of domestic governments, corporations, depository, and other
financial institutions. The Corporation evaluates the counterparty's
creditworthiness and the need for collateral on a case by case basis.
NOTE 11: FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Subsidiaries of the Corporation are parties to financial instruments
with off-balance-sheet risk in the normal course of business to meet the
financing needs of their customers. These financial instruments include
commitments to extend credit, standby letters-of-credit, and financial
guarantees. Those instruments involve, to varying degrees, elements of credit,
interest rate, or liquidity risk in excess of the amount recognized in the
statement of financial position. The contract amounts of those instruments
express the extent of involvement the Subsidiaries have in particular classes of
financial instruments.
Loan commitments are made to accommodate the financial needs of the
subsidiaries' customers. Standby letters-of-credit commit the subsidiaries to
make payments on behalf of customers if certain specified future events occur.
They primarily are issued to support public and private borrowing arrangements
including commercial paper, bond financing, and similar transactions.
Historically, approximately 90 percent of the standby letters-of-credit expire
unfunded.
Both arrangements have credit risk essentially the same as that involved in
extending loans to customers and are subject to the subsidiaries' normal credit
policies. Collateral is obtained based on management's credit assessment of the
customer.
[Annual Report Page 20]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
--------------------------------------------------------------------------------
A summary of these financial instruments is as follows for the years ended:
<TABLE>
<CAPTION>
In Thousands of Dollars
December 31,
---------------------------
1994 1993
---------------------------
<S> <C> <C>
Financial Instruments Whose Contract
Amounts Represent Credit Risk:
Commitments to Extend Credit $ 8,794 $11,082
Standby Letters-of-Credit 1,106 877
Lines-of-Credit 24,257 24,568
---------------------------
TOTAL $34,157 $36,527
===========================
</TABLE>
NOTE 12: COMMITMENTS AND CONTINGENT LIABILITIES
Two of the subsidiaries of the Corporation lease properties for their
branch facilities under non-cancelable operating leases which contain renewal
or purchase options. Rent expense under these leases was $71 thousand per year
for the years ended December 31, 1994, 1993, and 1992, respectively. Future
minimum lease payments in thousands of dollars, excluding real estate taxes and
insurance, for the years ending December 31 are as follows:
<TABLE>
<S> <C>
1995 $ 56
1996 47
1997 42
1998 25
1999 25
Thereafter 125
----
TOTAL $320
====
</TABLE>
In the ordinary course of business, there are various legal proceedings
pending against or involving the Corporation or its subsidiaries. Management,
after consultation with legal counsel, does not consider that the anticipated
impact, if any, arising from such pending legal proceedings is expected to have
a material adverse affect upon the consolidated financial position and
consolidated results of operations of the Corporation.
NOTE 13: REGULATORY MATTERS
The Corporation is a bank holding company subject to supervision and
regulation by the Board of Governors of the Federal Reserve System under the
Bank Holding Company Act of 1956. As a bank holding company, the Corporation's
activities are limited to the business of banking and activities closely related
or incidental to banking.
The Corporation's subsidiary banks are subject to supervision and
examination by various Federal and state regulatory authorities. The deposits of
the Corporation's subsidiary banks are insured by and, therefore, the subsidiary
banks are subject to the regulations of the Federal Deposit Insurance
Corporation. The banks are also subject to requirements and restrictions under
Federal and state law, including requirements to maintain reserves against
deposits, restrictions on the types and amounts of loans that may be granted and
the interest that may be charged thereon, limitations on the types of
investments that may be made, and the types of services that may be offered.
Various consumer laws and regulations also affect the operations of the
Corporation's subsidiary banks.
[Annual Report Page 21]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
--------------------------------------------------------------------------------
The payment of dividends to shareholders by Commercial BancShares, Inc. is
not encumbered by any restrictive provisions in its long-term indentures. There
are, however, limitations set by law on the amount of funds available to
Commercial BancShares, Inc. from its subsidiaries. Dividends may be paid out of
funds legally available therefore subject to the restrictions set forth in West
Virginia Code, Section 31A-4-25 which provides that prior approval of the West
Virginia Commissioner of Banking is required if the total of all dividends
declared by a state bank in any calendar year will exceed the bank's net profits
for that year combined with its retained net profits for the preceding two
years. The amount of funds legally available for distribution of dividends by
the subsidiaries to the Corporation without prior approval from regulatory
authorities at December 31, 1994 was $7,627 thousand.
The Federal Reserve Board has issued standards requiring banks and bank
holding companies to maintain minimum amounts of capital to total "risk-
weighted" assets, as defined by the banking regulators. The Federal Financial
Institutions Examination Council (FFIEC) announced on December 23, 1992, among
other things, that beginning in 1993, Federally supervised banks and savings
associations should report deferred tax assets in accordance with generally
accepted accounting principles in the regulatory reports filed with the
respective Federal regulatory agencies beginning with the quarter ending March
31, 1993. The Board of Governors of the Federal Reserve System issued revisions
to capital adequacy guidelines whereby the Board indicated they will allow
adoption of the new standard for regulatory reporting purposes. The Board also
adopted the FFIEC's recommendation with respect to limiting the amount of
deferred tax assets that can be used to meet risk-based capital requirements.
This recommendation limits deferred tax assets to those assets which may be
realized from income taxes paid in prior carryback years, the reversal of future
taxable temporary differences, and the lesser of: (1) the amount of deferred tax
assets expected to be realized within one year of the quarter-end date based on
future taxable income (exclusive of tax carryforwards and reversals of existing
temporary differences) for that year, or (2) ten percent of Tier 1 capital. The
Corporation did use the deferred tax asset at December 31, 1994 in computing
regulatory risk-based capital. At December 31, 1994, the Corporation and its
subsidiaries are required to have minimum Tier 1 and total capital ratios of
4.00% and 8.00%, respectively. The Corporation's consolidated actual ratios at
that date were 13.16% and 14.41%, respectively, which exceeded the minimum
regulatory requirements.
Management and the Board of Directors, based on an annual review of capital
objectives, have adopted an objective of achieving a Tier 1 risk-based capital
ratio of 6.00% and a total risk-based capital ratio of 10.00% for the
Corporation and each of its subsidiary banks.
The Corporation's subsidiary banks are required to maintain reserves
against certain deposit liabilities in either cash or balances on deposit with
the Federal Reserve System. The Corporation's subsidiary banks maintained
average reserves of approximately $400 thousand in 1994 with the Federal Reserve
Bank of Richmond.
NOTE 14: POST-RETIREMENT BENEFIT PLANS
The Corporation restated and amended its previous post retirement benefit
plans into an Employee Stock Ownership Plan with 401(k) provisions, effective
January 1, 1993. The Plan covers all eligible employees of the Corporation and
its subsidiaries that qualify under the Plan's provisions. Annual contributions
are provided in such amounts as the Board of Directors of the Corporation may
determine and amounted to $297 thousand and $287 thousand in 1994 and 1993,
respectively. Under the previous post retirement plan, the Corporation's
contribution payment was $279 thousand in 1992.
[Annual Report Page 22]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
--------------------------------------------------------------------------------
NOTE 15: EXECUTIVE AND DIRECTOR BENEFIT PLANS
Five of the subsidiaries of the Corporation have established Directors'
Deferred Income Plans and Executive Supplemental Income Plans that cover certain
directors and officers of their respective banks which defers payment of
directors fees and officer income. The payment of the director fees will
commence at such time the director reaches age 65. The Executive Supplemental
Income Plan is non-contributory and non-vesting plan with benefits payable only
upon retirement of the officer.
The subsidiary banks are funding the future payments of these plans through
an investment with a value of $3,165 thousand and $2,377 thousand in 1994 and
1993, respectively. The expense recorded for the future liability was $338
thousand, $193 thousand, and $206 thousand in 1994, 1993, and 1992,
respectively.
Four of the subsidiary bank's plans are primarily funded through insurance
plans underwritten by Confederation Life. During 1994, Confederation Life was
placed in rehabilitation, resulting in a temporary freeze on the applicable
funding contracts. It is managements opinion, based partially on correspondence
from the plan administrator, that the situation with Confederation Life is only
temporary and the effect, if any, on the funding contracts will be immaterial.
NOTE 16: TRANSACTIONS WITH DIRECTORS AND OFFICERS
Some of the officers and directors (including their affiliates, families,
and entities in which they are principal owners) of the Corporation and its
subsidiaries are customers of the subsidiaries and have had, and are expected to
have, transactions with the subsidiaries in the ordinary course of business. In
addition, some officers and directors are also officers and directors of
corporations which are customers of the subsidiaries and have had, and are
expected to have, transactions with the subsidiaries in the ordinary course of
business. These transactions with officers and directors were made on the same
terms, including interest rates, collateral, and repayment terms, as those
prevailing at the time for comparable transactions with the general public and
none of these transactions involve more than the normal risk of collectibility
or present other unfavorable features.
Indebtedness of related parties is summarized as follows for the year:
<TABLE>
<CAPTION>
In Thousands
of Dollars
December 31,
------------
1994
----
<S> <C>
BALANCE AT BEGINNING OF YEAR $ 14,168
Repayments (11,458)
Borrowings 15,422
--------
BALANCE AT END OF YEAR $ 18,132
========
</TABLE>
[Annual Report Page 23]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
--------------------------------------------------------------------------------
NOTE 17: OTHER OPERATING EXPENSES
The following represents the major expense classifications included in
other operating expenses for the years ended:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
EDP Processing and Services............................................. $ 845 $ 662 $ 640
Professional and Directors Fees......................................... 1,335 725 649
Advertising and Public Relations........................................ 307 327 240
Deposit and Liability Insurance......................................... 755 736 746
Franchise and Other Taxes............................................... 282 184 290
Provision for Losses on Foreclosed Properties........................... -0- 190 -0-
Other Operating Expense................................................. 832 1,295 1,614
---------------------------------------
TOTAL................................................................... $4,356 $4,119 $4,179
=======================================
</TABLE>
NOTE 18: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS Number 107,
Disclosures about Fair Value of Financial Instruments. The estimated fair value
amounts have been determined by the Corporation using available market
information and appropriate valuation methodologies. However, considerable
judgment is necessarily required to interpret market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Corporation could realize in a current
market exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------------------
DECEMBER 31, 1994
--------------------------
CARRYING ESTIMATED
AMOUNT FAIR VALUE
<S> <C> <C>
FINANCIAL ASSETS:
Cash and Short-Term Investments............................................. $ 18,331 $ 18,331
Marketable Securities....................................................... $ 84,090 $ 83,324
Loans, Net.................................................................. $256,402 $245,000
Other Financial Instruments................................................. $ 255 $ 200
FINANCIAL LIABILITIES:
Demand Deposits............................................................. $ 90,961 $ 91,000
Time Deposits............................................................... $232,998 $234,500
OFF-BALANCE-SHEET UNREALIZED GAINS (LOSSES):
Commitments to Extend Credit................................................ $ -0- $ (93)
Standby Letters-of-Credit................................................... $ -0- $ (88)
Lines-of-Credit............................................................. $ -0- $ (1,031)
NON-FINANCIAL INSTRUMENTS:
Core Deposit Valuation...................................................... $ -0- $ 1,364
</TABLE>
[Annual Report Page 24]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
--------------------------------------------------------------------------------
The fair value of marketable securities is based on quoted market prices,
dealer quotes, and prices obtained from independent pricing services. The fair
value of loans, time deposits, other financial instruments, and commitments is
estimated based on present values using applicable risk-adjusted spreads to the
U. S. Treasury curve to approximate current entry-value interest rates
applicable to each category of such financial instruments.
No adjustment was made to the entry-value interest rates for changes in
credit of performing commercial loans for which there are no known credit
concerns. Management segregates loans in appropriate risk categories. Management
believes that the risk factor embedded in the entry-value interest rates along
with the general reserves applicable to the performing commercial loan portfolio
for which there are no known credit concerns result in a fair valuation of such
loans on an entry-value basis. The fair value of nonperforming loans with a
recorded book value of $2,142 thousand was not estimated because it is not
practicable to reasonably assess the credit adjustment that would be applied in
the marketplace for such loans.
As required by the Statement, deposit liabilities with no stated maturity,
such as demand deposits, NOW, and money market accounts, are shown at their face
value and, therefore, there is no inherent value recognition of these core
deposit relationships. Management estimates, however, that such deposits have an
unrealized embedded market value discount or gain of approximately $1.4 million,
shown separately. The estimated fair value ascribed to core deposits is computed
based on an estimate of cost savings from the low cost of such deposits over
their estimated life, discounted using an incremental cost of funds rate. In
addition, the statement does not require disclosure of the fair value of
nonfinancial instruments, such as the Corporation's premises and equipment, its
banking and trust franchises, and its core deposit intangible. The Corporation
believes these nonfinancial instruments have significant fair value.
The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1994. Although management
is not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these financial statements since that date and, therefore, current estimates
of fair value may differ significantly from the amounts presented herein.
[Annual Report Page 25]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
--------------------------------------------------------------------------------
NOTE 19: CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY
The following financial statements reflect the financial position and
results of operations of Commercial BancShares, Inc. and Subsidiaries (Parent
Company Only).
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS
DECEMBER 31,
-------------------------------------------------
1994 1993
---- ----
<S> <C> <C>
ASSETS
Cash and Due from Banks (All from
Subsidiaries)............................................. $ 968,108 $ 418,206
Accounts Receivable......................................... 835,243 91,383
Notes Receivable............................................ 254,813 254,852
Investment in Subsidiaries (Equity Basis)................... 31,126,318 29,575,513
Investment Securities Available-for-Sale.................... -0- 394,740
Premises and Equipment - Net................................ 333,250 478,365
Other Assets................................................ 651,786 596,280
-------------------------------------------------
TOTAL ASSETS.................................................. $34,169,518 $31,809,339
=================================================
LIABILITIES
ESOP Borrowings............................................. $ -0- $ 423,849
Other Liabilities........................................... 561,291 541,212
-------------------------------------------------
TOTAL LIABILITIES............................................. $ 561,291 $ 965,061
-------------------------------------------------
SHAREHOLDERS' EQUITY
Convertible Preferred Stock (Par Value $100.00),
Authorized 43,328 Shares:(Issued Shares: -0- in 1994
and 27,165 in 1993)....................................... $ -0- $ 2,716,500
Common Stock (Par Value $5.00), Authorized 2,000,000
Shares, (Issued Shares: 1,467,040 in 1994 and 1,267,904
in 1993).................................................. 7,335,200 6,339,520
Additional Paid in Capital.................................. 10,079,567 8,297,792
Undivided Profits........................................... 17,121,662 14,185,096
LESS: Employee Stock Ownership Plan Shares Collateralizing
Debt, at Cost (43,062 Shares in 1993)....................... -0- (423,849)
Treasury Stock, at Cost (10,578 Shares in 1994
and 17,643 Shares in 1993).................................. (209,496) (347,264)
Unrealized Gain (Loss) on Securities Available-for-Sale,
Net of Applicable Deferred Income Taxes..................... (718,706) 76,483
-------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY.................................... $33,608,227 $30,844,278
-------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................... $34,169,518 $31,809,339
=================================================
</TABLE>
[Annual Report Page 26]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
--------------------------------------------------------------------------------
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
REVENUE
Interest Income.......................... $ (422) $ 17,351 $ 14,425
Management Fees from Subsidiaries........ 981,855 525,890 310,618
Dividends from Subsidiaries.............. 2,599,235 1,710,920 915,040
Other Dividend Income.................... -0- 13,932 13,932
Other Income............................. 80 6,325 6,073
Security Gains........................... 102,717 -0- -0-
--------------------------------------
TOTAL REVENUE........................ $3,683,465 $2,274,418 $1,260,088
--------------------------------------
EXPENSES
Interest on Notes Payable................ $ -0- $ -0- $ 717
Employee Compensation and Benefits....... 906,408 658,376 357,899
Occupancy Expense, Net of Revenues....... 65,697 48,000 29,184
Furniture and Equipment Expense.......... 236,519 228,617 267,426
Other Operating Expenses................. 536,822 419,735 374,548
--------------------------------------
TOTAL EXPENSES....................... $1,745,446 $1,354,728 $1,029,774
--------------------------------------
Income (Loss) before Income Taxes,
Equity in Undistributed Net Income
of Subsidiaries.......................... $1,938,019 $ 919,690 $ 230,314
Applicable Income Taxes (Benefit).......... (160,273) (257,871) (219,925)
--------------------------------------
Income before Equity in Undistributed
Net Income of Subsidiaries............... $2,098,292 $1,177,561 $ 450,239
Equity in Undistributed Net Income (Loss).. 2,299,445 2,538,447 2,789,622
--------------------------------------
NET INCOME................................. $4,397,737 $3,716,008 $3,239,861
======================================
</TABLE>
[Annual Report Page 27]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS
DECEMBER 31,
------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.................................................. $ 4,397,737 $ 3,716,008 $ 3,239,861
---------------------------------------
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Deferred Employee Benefits............................... $ -0- $ 32,606 $ 196,457
Depreciation............................................. 170,061 165,034 186,124
Net Amortization of Purchase Accounting Adjustments...... 83,260 108,285 153,172
Undistributed Net (Income) Loss of Subsidiaries.......... (2,299,445) (2,538,447) (2,789,622)
(Gain) Loss from Sale of Investments......................... (102,717)
Income Tax Benefit....................................... (160,273) (257,871) (228,298)
(Gain) Loss on Sale of Capitalized Assets................ 3,744
(Increase) Decrease:
Accounts Receivable.................................... (743,860) 221,229 (100,049)
Accrued Interest Receivable............................ 2,412 (11,833) (6,704)
Other Assets........................................... (57,916) (4,430) 10,553
Increase (Decrease):
Other Liabilities...................................... 153,258 (154,577) 616,155
---------------------------------------
TOTAL ADJUSTMENTS............................................ $(2,955,220) $(2,440,004) $(1,958,468)
---------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES..................... $ 1,442,517 $ 1,276,004 $ 1,281,393
---------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sales of Investments Available-for-Sale...... $ 394,740 $ -0- $ -0-
Proceeds from Sale of Capitalized Assets................... 20,500
Proceeds from Note Receivable.............................. 39 99 151
Capitalized Expenditures................................... (24,946) (45,922) (5,331)
Purchases of Investments Held-to-Maturity.................. -0- (13,488) -0-
---------------------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES..................... $ 369,833 $ (59,311) $ 15,320
---------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase (Decrease) in Short-Term Borrowings........... $ -0- $ -0- $ -0-
Proceeds from Sale of Treasury Stock....................... 204,715 3,180 1,980
Payment for Fractional Shares of Converted Preferred Stock. (5,993) (16)
Principal Payments on Borrowings........................... (32,606) (221,372)
Proceeds from Issuance of ESOP Debt........................ 94,180 362,275
Cash Dividends Paid........................................ (1,461,170) (1,291,594) (1,106,764)
---------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES..................... $(1,262,448) $(1,226,856) $ (963,881)
---------------------------------------
NET INCREASE (DECREASE) IN CASH.............................. $ 549,902 $ (10,163) $ 332,832
CASH AT BEGINNING OF YEAR.................................... 418,206 428,369 95,537
---------------------------------------
CASH AT END OF YEAR.......................................... $ 968,108 $ 418,206 $ 428,369
=======================================
SUPPLEMENTARY DISCLOSURE OF CASH FLOWS INFORMATION
Cash Paid during the Year for:
Interest............................................... $ -0- $ -0- $ 717
Income Taxes........................................... $ 1,996,423 $ 2,090,038 $ 666,724
</TABLE>
[Annual Report Page 28]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
--------------------------------------------------------------------------------
Principal sources of revenues for the Corporation are dividends received
from its banks, interest earned on short-term investments, and fees for services
provided to subsidiaries. State law imposes limitations on the payment of
dividends by the subsidiaries of the Corporation. A dividend may not be paid if
the total of all dividends declared by a bank in any calendar year is in excess
of the current year's net profits combined with the retained net profits of the
two preceding years unless the bank obtains regulatory approval.
Loans and extensions of credit from an affiliate must be secured in
specified amounts. The Corporation had no borrowings outstanding from any of its
subsidiary banks during 1994.
NOTE 20: QUARTERLY FINANCIAL DATA (IN THOUSANDS OF DOLLARS EXCEPT FOR PER
COMMON SHARE AND CASH DIVIDENDS PAID INFORMATION)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
<S> <C> <C> <C> <C> <C>
1994
----
Net Interest Revenue.............. $3,868 $4,300 $4,567 $4,160 $16,895
Provision for Possible Loan Loss.. $ 93 $ 89 $ 114 $ 120 $ 416
Net Operating Revenue............. $1,798 $1,340 $1,953 $ 832 $ 5,923
Applicable Income Taxes........... $ 541 $ 670 $ 486 $ (171) $ 1,526
Net Income........................ $ 908 $1,019 $1,467 $1,004 $ 4,398
Applicable to Common Stock........ $ 840 $ 950 $1,400 $1,004 $ 4,194
Per Common Share.................. $ 0.65 $ 0.74 $ 1.09 $ 0.78 $ 3.26
Cash Dividends Paid Common Stock.. $ 0.25 $ 0.25 $ 0.25 $ 0.28 $ 1.03
1993
----
Net Interest Revenue.............. $3,872 $3,788 $3,974 $3,960 $15,594
Provision for Possible Loan Loss.. $ 210 $ 82 $ 82 $ (127) $ 247
Net Operating Revenue............. $1,474 $1,570 $1,547 $1,041 $ 5,632
Applicable Income Taxes........... $ 542 $ 548 $ 546 $ 361 $ 1,997
Net Income........................ $1,013 $1,022 $1,001 $ 680 $ 3,716
Applicable to Common Stock........ $ 945 $ 954 $ 933 $ 612 $ 3,444
Per Common Share.................. $ 0.79 $ 0.79 $ 0.78 $ 0.62 $ 2.98
Cash Dividends Paid Common Stock.. $ 0.23 $ 0.23 $ 0.23 $ 0.25 $ 0.94
1992
----
Net Interest Revenue.............. $3,824 $3,914 $3,794 $3,962 $15,494
Provision for Possible Loan Loss.. $ 237 $ 308 $ 248 $ 190 $ 983
Net Operating Revenue............. $1,060 $1,154 $1,111 $1,551 $ 4,876
Applicable Income Taxes........... $ 350 $ 410 $ 459 $ 417 $ 1,636
Net Income........................ $ 710 $ 744 $ 652 $1,134 $ 3,240
Applicable to Common Stock........ $ 642 $ 650 $ 584 $1,091 $ 2,967
Per Common Share.................. $ 0.55 $ 0.56 $ 0.51 $ 0.98 $ 2.60
Cash Dividends Paid Common Stock.. $ 0.20 $ 0.20 $ 0.20 $ 0.23 $ 0.83
</TABLE>
Financial data for 1992 has been restated to reflect retrospective
application of SFAS 109 Accounting for Income Taxes, which resulted in a
decrease of applicable income taxes of $103 thousand for 1992.
Cash dividends paid on common stock for 1993 and 1992 are historical
dividends paid by Commercial BancShares, Inc.
[Annual Report Page 29]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Independent Accountant's Report
------------------------------------------------------------------------------
Harman, Thompson, Mallory & Ice, A.C. Towne Square
Certified Public Accountants Parkersburg, West Virginia 26102
Board of Directors
Commercial BancShares, Inc.
Parkersburg, West Virginia
We have audited the accompanying consolidated balance sheets of Commercial
BancShares, Inc. and Subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of income, changes in shareholders' equity, and
cash flows for the years ended December 31, 1994, 1993, and 1992. These
consolidated financial statements are the responsibility of management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statements presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, based on our audits, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Commercial BancShares, Inc. and Subsidiaries as of December 31, 1994
and 1993, and the results of its operations and its cash flows for the years
ended December 31, 1994, 1993, and 1992 in conformity with generally accepted
accounting principles.
As described in Note 1 to the consolidated financial statements, in 1994 the
Corporation adopted SFAS Number 115, Accounting for Certain Investments in Debt
and Equity Securities.
/s/ Harman, Thompson, Mallory & Ice, A.C.
Parkersburg, West Virginia
March 9, 1995
[Annual Report Page 30]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Management's Discussion and Analysis
of Financial Condition and Results of Operations
-------------------------------------------------------------------------------
The purpose of this discussion is to focus on information about Commercial
BancShares, Incorporated and its financial condition and results of operations
which is not otherwise apparent from the consolidated financial statements
included in this Annual Report. Reference should be made to those statements
and the selected financial data presented elsewhere in this report for an
understanding of the following discussion and analysis.
Financial Condition
BancShares functions as a financial intermediary, and as such its financial
condition should be examined in terms of trends in its sources and uses of
funds. Ordinarily, BancShares' primary use of funds is to meet the loan demands
of bank customers. Average loans outstanding increased by $19.8 million or 9%
in 1994, which followed a 2.25% increase in 1993. Every major category of loans
grew during 1994 and total loans outstanding at December 31, 1994, were up 15%
from the year-end 1993 figure. Consumer loans increased 25.9% and commercial
loans grew 16.3% during 1994, with credit card outstandings up 19% from the
prior year's December 31 amount. Real estate loans, which were affected by the
rising rate environment more than other types of loans, grew by 7.25%
Investment securities, another major use of funds, increased $6.3 million
in the taxable category in 1994 after increasing $8.8 million in 1993.
Non-taxable investments were increased by $2.1 million, or 19% in 1994, after
decreasing in 1993. The growth in non-taxable securities resulted from an
increased issuance of bonds by political subdivisions in areas where BancShares
has subsidiary banks located. In general, the issues were small and not rated,
and were placed in the banks' portfolios to be held to maturity.
Average Federal funds sold decreased $10.8 million, or 64.7% in 1994,
following a 17.2% increase in 1993. Simultaneously, borrowed funds were
increased $0.1 million (1.9%) in 1994, after increasing $3.6 million (139%) in
1993. During 1994, BancShares has intentionally reduced its selling position
in Federal funds, reinvesting in more profitable loans and securities. As the
year progressed, there was increasing reliance on borrowed funds to meet
short-term liquidity needs. In addition, there continued to be a small amount
of short-term borrowings representing sales to a BancShares subsidiary by one
of its correspondent banks for that bank's convenience.
As the primary source of funds, average deposits increased $13.8 million
(4.5%) in 1994 and $9.4 million (3.2%) in 1993. However, the increase was not
consistent in all deposit categories. Among interest-bearing deposits, savings
deposits were the largest source of funds in both years, with the average
balance increasing 5% in 1994, following a 16% increase in 1993. Average NOW
and money market deposit accounts grew 3% in 1994, after remaining constant in
1993. The average balances of all other time deposits decreased slightly in
both years. Average noninterest-bearing demand deposits was the deposit
category with the greatest increase in 1994, growing $9.2 million, or 24.7%,
following a decline of $0.4 million (0.9%) in 1993.
In 1993, scheduled payments were made by the ESOP on long-term borrowings
guaranteed by BancShares, however, in March 1994 the ESOP paid off the debt
completely.
[Annual Report Page 31]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Management's Discussion and Analysis
of Financial Condition and Results of Operations
-------------------------------------------------------------------------------
The following table indicates the average balances and interest rates on
a fully taxable equivalent basis for the years indicated.
Average Balances and Interest Rates
<TABLE>
<CAPTION>
1994 1993 1992
-------------------------------- ------------------------------ -------------------------------
Average Yield/ Average Yield/ Average Yield/
Balance Interest/2/ Rate Balance Interest/2/ Rate Balance Interest/2/ Rate
------- ------------- ---- ------- ------------- ---- ------- ------------- ------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
Interest-bearing deposits
with other banks $ 603 20 3.32% $ 352 17 4.83% $ 386 15 3.89%
Federal funds sold 5,906 242 4.10% 16,726 498 2.98% 14,270 500 3.50%
Taxable investments 75,181 4,084 5.43% 68,874 4,215 6.12% 60,076 4,627 7.70%
Non-taxable investments 13,332 1,227 9.20% 11,204 833 7.43% 12.333 1,068 8.66%
Notes receivable 255 0 0.00% 255 17 6.67% 255 14 5.49%
Loans/1/ 239,938 21,777 9.08% 220,164 20,052 9.11% 215,311 21,445 9.96%
-------------------- ----------------- -----------------
TOTAL INTEREST-
EARNING ASSETS $335,215 27,350 8.16% $317,575 25,632 8.07% $302,631 27,669 9.14%
-------------------- ----------------- -----------------
Non-Interest Earning Assets:
Cash and due from banks $ 13,502 15,503 14,514
Other Assets 16,047 14,841 15,001
Less: Allowance for
Loan Losses -3,271 -3,236 -2,693
-------- -------- --------
TOTAL ASSETS $361,493 $344,683 $329,453
======== ======== ========
Liabilities and
Shareholders' Equity
Interest-bearing Liabilities:
Savings Deposits $ 79,016 2,295 2.90% $ 75,278 1,847 2.45% $ 64,891 2,648 4.08%
NOW, MMDA Accounts 60,846 1,458 2.40% 59,104 1,513 2.56% 59,080 1,999 3.38%
Time Deposits 133,119 5,617 4.22% 133,969 6,446 4.81% 134,585 7,246 5.38%
-------------------- ----------------- -----------------
Total Deposits $272,981 9,370 3.43% $268,351 9,806 3.65% $258,556 11,893 4.60%
Other Borrowed Funds 6,370 252 3.96% 6,251 160 2.56% 2,620 80 3.05%
-------------------- ----------------- -----------------
TOTAL INTEREST-
BEARING LIABILITIES $279,351 9,622 3.44% $274,602 9,966 3.63% $261,176 11,973 4.58%
Non-interest Bearing
Liabilities:
Demand Deposits 46,287 37,134 37,487
Other Liabilities 3,539 3,038 3,044
-------- -------- --------
TOTAL LIABILITIES $329,177 $314,774 $301,707
Shareholders' Equity 32,316 29,909 27,746
-------- -------- --------
LIABILITIES AND
SHAREHOLDERS EQUITY $361,493 $344,683 $329,453
======== ======== ========
Net Interest Earnings $ 17,728 $15,666 $15,696
Net Yield on Interest-earning
Assets 5.29% 4.93% 5.19%
</TABLE>
/1/ For the purpose of these computations, nonaccruing loans are included in
the daily average loan amounts outstanding.
/2/ Interest received on tax-exempt investments is calculated on a fully
taxable equivalent at the 34% rate.
[Annual Report Page 32]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Management's Discussion and Analysis
of Financial Condition and Results of Operations
--------------------------------------------------------------------------------
The following table sets forth for the periods indicated a summary of the
changes in interest earned and interest paid resulting from changes in volume
and changes in rates.
Rate/Volume Analysis of Net Interest Revenue
(Fully Taxable Equivalent Basis)
<TABLE>
<CAPTION>
1994 Compared to 1993 1993 Compared to 1992
Increase (Decrease) Increase (Decrease)
Due to/1/ Due to/1/
------------------------------------ -------------------------------------
Volume Rate Net Volume Rate Net
------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest bearing deposits with
other banks $ 9 $ (6) $ 3 $ (1) $ 3 $ 2
Federal funds sold (399) 143 (256) 79 (81) (2)
Taxable investments 367 (498) (131) 619 (1,031) (412)
Non-taxable investments 175 219 394 (92) (143) (235)
Notes receivable 0 (17) (17) 0 3 3
Loans 1,791 (66) 1,725 474 (1,867) (1,393)
------------------------------------------------------------------------------------
TOTAL INTEREST EARNING
ASSETS $1,943 $( 225) $1,718 $1,079 $(3,116) $(2,037)
====================================================================================
Savings deposits $ 95 $ 353 $ 448 $ 376 $(1,177) $ (801)
NOW, MMDA accounts 43 (98) (55) 1 (487) (486)
Time deposits (41) (788) (829) (33) (767) (800)
Other borrowed funds 3 89 92 95 (15) 80
------------------------------------------------------------------------------------
TOTAL INTEREST BEARING
LIABILITIES $ 100 $ (444) $(344) $ 439 $(2,446) $(2,007)
====================================================================================
</TABLE>
/1/ The change in interest due to both volume and rate has been allocated to
volume and rate changes in proportion to the relationship of the absolute dollar
amounts of the change in each.
Investment Portfolio
The following table sets forth the amortized cost of the investment
securities at the dates indicated.
<TABLE>
<CAPTION>
December 31
-----------
1994 1993 1992
---- ---- ----
(In thousands of dollars)
<S> <C> <C> <C>
U. S. Treasury and other U.S.
government agencies $69,622 $75,901 $57,792
Obligations of States and political
subdivisions 13,723 13,814 11,670
Other Investments 1,938 2,733 2,786
-----------------------------------------------
Total $85,283 $92,448 $72,248
===============================================
</TABLE>
[Annual Report Page 33]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Management's Discussion and Analysis
of Financial Condition and Results of Operations
--------------------------------------------------------------------------------
The following table sets forth the maturities of investment securities at
December 31, 1994, and the weighted average yields of such securities
(calculated after adjusting annualized interest revenue for the accretion of
discounts and the amortization of premiums). Tax-equivalent adjustments (using
a 34% rate) have been made in calculating yield on obligations of states and
political subdivisions.
<TABLE>
<CAPTION>
Maturing
---------------------------------------------------------------------------
After 1 After 5
1 Year Year to Years to Over
or Less 5 Years 10 Years 10 Years
------- ------- -------- --------
Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ -----
(Amounts in thousands of dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury
and other U.S.
government
agencies $15,038 6.15% $44,826 6.22% $8,215 5.04% $1,543 6.02%
States and
political
subdivisions 2,617 8.08% 5,130 7.72% 5,580 10.67% 396 6.76%
Other 0 24 6.65% 326 9.04% 275 5.39%
------- ------- ------- ------
Total $17,655 6.44% $49,980 6.37% $14,121 7.36% $2,214 6.07%
======= ======= ======= ======
</TABLE>
Loan Portfolio
The following table shows BancShares' loan distribution at the end of
each of the last five years.
<TABLE>
<CAPTION>
December 31
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(In thousands of dollars)
<S> <C> <C> <C> <C> <C>
Commercial and Industrial $103,230 $ 88,790 $ 93,216 $ 76,375 $ 76,772
Real Estate 88,321 82,354 76,715 73,071 69,974
Installment and Credit Cards 64,851 51,477 53,082 53,685 53,480
------------------------------------------------------------
Total $256,402 $222,621 $223,013 $203,131 $200,226
============================================================
</TABLE>
The following table shows the maturity of loans (excluding residential
mortgages of 1-4 family residences, installment loans and credit card loans) as
of December 31, 1994.
<TABLE>
<CAPTION>
Maturing
-------------------------------------------------------------------
Within After One but After
One Year Within 5 Years 5 Years Total
------- -------------- ------- -----
(In thousands of dollars)
<S> <C> <C> <C> <C>
Commercial and
Industrial Loans $87,008 8,289 7,933 103,230
Loans maturing after one year with:
Fixed interest rates $7,662 $7,933
Variable interest rates 627 0
-----------------------------
$8,289 $7,933
=============================
</TABLE>
[Annual Report Page 34]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Management's Discussion and Analysis
of Financial Condition and Results of Operations
--------------------------------------------------------------------------------
Nonaccrual, Past Due, and Restructured Loans
The following table summarizes BancShares' nonaccrual, past due, and
restructured loans.
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(In thousands of dollars)
<S> <C> <C> <C> <C> <C>
Accruing Loans Past due
90 days or more $ 464 $ 338 $ 464 $ 582 $1,745
============================================================
Principal amount of nonaccrual
loans at year end 739 355 766 $1,121 $1,285
Restructured loans 1,403 121 86 423 522
------------------------------------------------------------
$2,142 $ 476 $ 852 $1,544 $1,807
============================================================
Gross amount of interest that
would have been recorded at
the original rate on
nonaccrual loans $ 154 $ 60 $ 77 $ 113 $ 90
Interest collected on
nonaccrual loans which
was reflected in revenue 17 3 9 44 37
-----------------------------------------------------------
Net impact on interest
revenue $( 137) $( 57) $( 68) $( 69) $( 53)
</TABLE>
Reserve for Possible Loan Losses
The following table summarizes BancShares' loan loss experience for each
of the five years ended December 31, 1994.
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(In thousands of dollars)
<S> <C> <C> <C> <C> <C>
Balance at January 1 $3,138 $2,958 $2,360 $2,191 $ 1,909
Charge-offs:
Commercial loans $ 81 $ 74 $ 406 $ 532 $ 365
Real estate 43 51 25 88 22
Consumer 121 155 268 311 248
------------------------------------------------------------
Total 245 $ 280 $ 699 $ 931 $ 635
Recoveries:
Commercial loans 53 124 210 63 74
Real estate 7 15 10 5 2
Consumer 60 74 94 70 49
------------------------------------------------------------
Total $ 120 $ 213 $ 314 $ 138 $ 125
------------------------------------------------------------
Net Charge-offs 125 $ 67 $ 385 $ 793 $ 510
Additions charged to operations/1/ 417 247 983 962 792
------------------------------------------------------------
Balance at December 31 $3,430 $3,138 $2,958 $2,360 $ 2,191
============================================================
Ratio of net charge-offs
to average loans outstanding 0.05% 0.03% 0.18% 0.40% 0.30%
</TABLE>
/1/ The amount charged to operations and the related balance in the reserve for
management. These evaluations consider several important factors including, but
not limited to, general economic conditions, loan portfolio composition, prior
loan loss experience, and management's estimation of future potential losses.
[Annual Report Page 35]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Management's Discussion and Analysis
of Financial Condition and Results of Operations
--------------------------------------------------------------------------------
The following table shows an allocation of the allowance for loan losses as of
the end of each of the last five years.
<TABLE>
<CAPTION>
Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992 Dec. 31, 1991 Dec. 31, 1990
------------- ------------- ------------- ------------- -------------
Percent Percent Percent Percent Percent
of loans of loans of loans of loans of loans
in each in each in each in each in each
category category category category category
to total to total to total to total to total
Amount loans Amount loans Amount loans Amount loans Amount loans
------ ----- ------ ----- ------ ----- ------ ----- ------- -----
(In thousands of dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial and industrial $1,382 40.3% $1,252 39.9% $1,236 41.8% $ 887 37.6% $ 841 38.4%
Real estate 1,180 34.4% 1,161 37.0% 1,017 34.4% 850 36.0% 765 34.9%
Consumer 868 25.3% 725 23.1% 705 23.8% 623 26.4% 585 26.7%
----------------------------------------------------------------------------------------------
Total $3,430 100.0% $3,138 100.0% $2,958 100.0% $2,360 100.0% $2,191 100.0%
=============================================================================================
</TABLE>
Commercial BancShares, Inc. does not follow the practice of allocating the
allowance for loan losses by loan category, therefore, the amounts allocated for
this schedule were based on the percentage of loans in each category to total
loans as of the end of each period.
Deposits
The average daily amount of deposits and rates paid on such deposits is
summarized for the periods indicated in the following table.
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
Balance Rate Balance Rate Balance Rate
------- ---- ------- ---- ------- ----
(In thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing
demand deposits $ 46,287 N/A $ 37,134 N/A $ 37,487 N/A
Interest-bearing
demand deposits 60,846 2.40% 59,104 2.56% 59,080 3.38%
Savings deposits 79,016 2.90% 75,278 2.45% 64,891 4.08%
Time deposits 133,119 4.22% 133,969 4.81% 134,585 5.38%
---------------------------------------------------------
Total $319,268 $305,485 $296,043
=========================================================
</TABLE>
Capital Resources
In January, 1990, the Federal Reserve Board released new standards for
measuring capital adequacy for U.S. banking organizations. In general, the
standards require banks and bank holding companies to maintain capital based on
"risk-adjusted" assets so that categories of assets with potentially higher
credit risk will require more capital backing than assets with lower risk. In
addition, banks and bank holding companies are required to maintain capital to
support, on a risk-adjusted basis, certain off-balance-sheet activities such as
loan commitments.
The Federal Reserve Board standards classify capital into two tiers,
referred to as Tier 1 and Tier 2. Tier 1 capital consists of common
shareholders' equity, noncumulative and cumulative (bank holding companies only)
perpetual preferred stock, and minority interests less goodwill. Tier 2 capital
consists of allowance for loan and lease losses, perpetual preferred stock (not
included in Tier 1), hybrid capital instruments, term subordinated debt, and
intermediate-term preferred stock. On December 31, 1993, all banks were
required to meet a minimum ratio of 8% of qualifying total capital to
risk-adjusted total assets with at least 4% Tier 1 capital. Capital that
qualifies as Tier 2 capital is limited to 100% of Tier 1 capital.
The final standards also provide for a transition period for implementing
the risk-based capital standards. As of December 31, 1991, banks and bank
holding companies were expected to meet an
[Annual Report Page 36]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Management's Discussion and Analysis
of Financial Condition and Results of Operations
--------------------------------------------------------------------------------
interim target risk-based capital ratio of 7.25%. One-half of that amount had
to be in the form of Tier 1 capital, as defined in the interim period.
Effective September 7, 1991, the Federal Reserve Board implemented
regulations that established a minimum leverage capital ratio of 3% of Tier 1
capital to total assets less goodwill.
The table below illustrates BancShares' regulatory capital ratios at
December 31 under the year-end 1993 requirements.
<TABLE>
<CAPTION>
1994 1993
---- ----
(In thousands of dollars)
<S> <C> <C>
Tier 1 Capital $ 32,553 $ 30,200
Tier 2 Capital 3,092 2,700
----------------------------------
Total Qualifying Capital $ 35,645 $ 32,900
==================================
Risk Adjusted Total Assets (including
off-balance sheet exposures) $247,375 $219,020
==================================
Tier 1 Risk-based Capital Ratio 13.16% 13.79%
Total Risk-based Capital Ratio 14.41% 15.02%
Leverage Ratio 8.79% 8.65%
</TABLE>
As shown in the table above, BancShares' capital ratios under the
year-end 1994 requirements were approximately 14.41% (and approximately 13.16%
for Tier 1) compared with the 8% (and 4% for Tier 1) that are required. For
most banks, including BancShares' subsidiary banks, the minimum Tier 1 leverage
ratio is to be 3% plus an additional cushion of at least 100 to 200 basis points
depending upon risk profiles and other factors. As of December 31, 1994,
BancShares' Tier 1 leverage ratio was 8.79%.
In addition to these regulatory requirements, a certain level of capital
growth must be achieved to maintain appropriate ratios of equity to total
assets. As shown in the table on selected financial data, growth in total
average assets was 4.9% in 1994 and 4.6% in 1993. In order to maintain
appropriate ratios of equity to total assets, a corresponding level of capital
growth must be achieved. During 1994 total shareholders' equity grew 8.96%,
following an increase of 8.71% in 1993, as shown in the table of Selected
Financial Data. BancShares expects to continue to rely on internal capital
growth as the primary means of maintaining capital adequacy.
The following table illustrates the relationship between earnings retention
and internal capital growth.
<TABLE>
<CAPTION>
1994 1993 1991
---- ---- ----
<S> <C> <C> <C>
Return on equity 13.61% 12.42% 11.68%
times
Earnings retained 62.85% 66.50% 65.83%
equals
Internal capital growth 8.55% 8.26% 7.69%
</TABLE>
Management intends to continue its efforts to increase BancShares' return
on assets while maintaining a dividend payout consistent with others in the
banking industry.
Capital and Dividends
Total shareholders' equity as a measure of capital increased by
approximately $2.8 million in 1994 and $2.5 million in 1993 with retained
earnings accounting for the major portion of the increase in both years. Total
dividends paid in 1994 amounted to $1.5 million compared to $1.3 million for
1993.
[Annual Report Page 37]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Management's Discussion and Analysis
of Financial Condition and Results of Operations
--------------------------------------------------------------------------------
Liquidity and Interest Rate Sensitivity Management
The primary functions of asset/liability management are to assure adequate
liquidity and maintain an appropriate balance between interest-sensitive earning
assets and interest-bearing liabilities. Liquidity management involves the
ability to meet the cash flow requirements of customers who may be either
depositors wanting to withdraw funds or borrowers needing assurance that
sufficient funds will be available to meet their credit needs. Interest rate
sensitivity management seeks to avoid fluctuating net interest margin and to
enhance consistent growth of net interest income through periods of changing
interest rates.
Marketable investment securities, particularly those of short maturities,
and Federal funds sold are the principal sources of asset liquidity. Securities
maturing in one year or less amounted to $23.2 million at December 31, 1994,
representing 27.6% of the investment portfolio. Other types of assets, such as
Federal funds sold, as well as maturing loans, are sources of liquidity. Federal
funds sold at December 31, 1994, were $1.4 million.
Available to BancShares 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. Three of BancShares'
subsidiaries 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, BancShares is aware of
several brokers who could, in a short period of time, provide large amounts of
certificates of deposit at market rates. None of BancShares' banks currently
use or intend to use brokered funds, but the source exists should liquidity
needs require its use. BancShares' banks also have extensions of credit which
are guaranteed by U. S. government agencies and are, therefore, salable.
Interest rate sensitivity varies with different types of interest-earning
assets and interest-bearing liabilities. Overnight Federal funds on which rates
change daily and loans which are tied to the prime rate differ considerably from
long-term investment securities and fixed-rate loans. Similarly, time deposits
over $100,000 and short-term certificates are much more interest sensitive than
savings accounts and longer-term certificates of deposit. The shorter term
interest rate sensitivities are the key to management of the interest
sensitivity gap, or the excess of interest-sensitive earning assets over
interest-bearing liabilities.
The following table shows the interest sensitivity gaps for four
different time intervals as of December 31, 1994. For the first 90 days, there
is a $15 million excess of interest-bearing liabilities over interest-earning
assets. Although much of BancShares' loan portfolio is in variable rate loans
which reprice whenever the prime rate changes, increased reliance on short-term
borrowings as a funding source, coupled with the large volume of interest-
bearing demand deposits and savings accounts that are considered immediately
repriceable combine to create the negative gap in assets and liabilities
repricing in 0-90 days. The cumulative gap at one year is $(4.0) million or
1.2% of total earning assets. There are several issues of investment securities
that are either callable or have variable repayments and could reprice in a
different category than that indicated in the table below. The likelihood of
any of these securities actually being called or repaid cannot be determined.
Therefore, the table reflects contractual maturities of all investment
securities.
[Annual Report Page 38]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Management's Discussion and Analysis
of Financial Condition and Results of Operations
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
0-90 91-365 1 Year Over
Days Days to 5 Yrs 5 Yrs
----------------------------------------------------
(In thousands of dollars)
<S> <C> <C> <C> <C>
Federal funds sold $ 1,405 $ 0 $ 0 $ 0
Investment securities 4,628 18,611 48,179 12,672
Loans 96,160 51,533 76,247 32,462
Other interest-earning 622 0 0 0
------------------------------------------------------
Total $ 102,815 $ 70,144 $124,426 $ 45,134
------------------------------------------------------
Interest-bearing demand deposits/1/ $ 22,231 $ 0 $ 0 $ 22,231
Savings deposits/1/ 49,021 0 0 49,017
CD's of $100,000 and more 5,673 5,201 6,384 0
Other time deposits 30,133 45,750 41,849 12
Borrowed funds 10,972 0 0 0
------------------------------------------------------
Total $ 118,030 $ 50,951 $ 48,233 $ 71,260
------------------------------------------------------
Interest sensitivity gap $ (15,215) $ 19,193 $ 76,193 $(26,126)
------------------------------------------------------
</TABLE>
/1/Although interest-bearing demand deposits and savings deposits
are subject to immediate repricing contractually, experience has shown that
portions of those deposits are much less sensitive to rate fluctuations. The
amounts indicated as repricing in more than 3 months are estimates by Management
of the true sensitivity of those deposits.
Results of Operations
Net interest income, which is the major determinant of BancShares' income,
increased by 11.02% in 1994 after increasing only 0.65% in 1993. The
improvement in 1994 resulted from a decline in interest expense of 3.45% and an
increase in interest income of 5.38%. Market interest rates generally increased
during 1994. Since BancShares assets repriced faster than its deposits, the
trend proved favorable to the company. In 1993, when rates were more stable and
historically low, interest expense was down by 16.78% as maturing time deposits
repriced into a lower market. Interest income had decreased 6.95% in 1993 due
to the lower rate environment, but this drop was offset by the decreased expense
for deposits.
In 1994, as the volume of Federal funds decreased and the funds were
redirected primarily to loans, income on those short term investments fell
51.41%. This compared to a virtually stable level of Fed funds income in 1993.
Securities income declined in both 1994 and 1993, falling 1.63% in 1994 and
11.35% in 1993. Decreasing yields on the taxable bond portfolio offset the
effect of the increasing volume of securities. Loan income increased 8.60% in
1994, following a decline of 5.98% in 1993. The increase was due to the growth
in the loan portfolio in 1994, while the 1993 decline was caused by falling
interest rates.
The provision for possible loan losses which is charged to operations is
based on the growth of the loan portfolio, the amount of net loan losses
incurred, and Management's estimation of potential losses based on an evaluation
of the portfolio risk and economic factors. The allowance for loan losses was
increased by the provision for possible loan losses of $417 thousand, $292
thousand more than net charge-offs of $125 thousand. This compares with a
provision of $247 thousand in 1993 ($180 thousand more than net charge-offs of
$67 thousand) and $983 thousand in 1992 ($598 thousand more than net charge-offs
of $385 thousand.)
The reserve for possible loan losses at year end 1994 totaled $3.4 million
(1.34% of total loans), as compared to $3.1 million (1.41% of total loans) in
1993.
Non-interest income decreased 14.44% in 1994, following an 18.05%
increase in 1993. Trust department income declined 1.31% in 1994 after a 31.05%
increase 1993. Income for the department can be affected by changes in the
volume of estates being handled. Service charges, fees and commissions rose
1.50% in 1994, compared with a 17.25% growth in 1993.
There were securities losses of $220 thousand in 1994. This compared to
minimal gains in 1993 which resulted from securities being called early by
issuers who chose to exercise their options and reduce their expense. The
losses of 1994 primarily resulted from sales of lower-yielding securities late
in the year. The proceeds from the sales were reinvested in higher-yielding
securities that only modestly
[Annual Report Page 39]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Management's Discussion and Analysis
of Financial Condition and Results of Operations
-------------------------------------------------------------------------------
increased the average maturity of the investment. The reinvested securities
will have a positive effect on BancShares 1995 earnings. BancShares does not
operate a trading account.
Other income decreased 19.30% in 1994, following an 8.29% increase in 1993.
Non-interest expenses grew 7.59% in 1994, following a 3.78% increase in
1993. Employee compensation and benefits were up $722 thousand in 1994 (11.50%),
following a $532 thousand rise in 1993 (9.26%). The incentive bonus programs
for officers of BancShares and its subsidiaries which was enacted in 1993 also
impacted 1994's level of compensation. Furniture and equipment expense
increased only 0.95% in 1994, after decreasing 2.27% in 1993. Occupancy expense
decreased 7.15% in 1994, following a decrease of 1.36% in 1993. All other
operating expenses increased 5.75% in 1994, compared to a decline of 1.44% in
1993.
Income tax expense decreased 23.59% in 1994, following a 22.07% increase in
1993. The change in applicable income tax expense was primarily attributable to
the reduction of the deferred tax valuation allowance account. This
determination considers that the reversal of the deductible temporary difference
could be offset by reversals of existing taxable temporary differences through
carryback provisions under the tax laws.
Financial Ratios
One means of measuring the results of operations is analysis of various
ratios. Two widely recognized performance indicators are the return on equity
and the return on assets. The following table sets forth those and other ratios
frequently used in analyzing bank holding company financial statements. It is
Management's intention to continue efforts to return 1% or better on average
total assets.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Profitability ratios:
Rate of Return/1/ on Average:
Earning Assets 1.31% 1.17% 1.07%
Total Assets 1.22% 1.08% 0.98%
Total Shareholders' Equity 13.61% 12.42% 11.68%
Liquidity and Capital Ratios:
Average Shareholders' Equity to
Average Earning Assets 9.64% 9.42% 9.17%
Average Shareholders' Equity to
Average Total Assets 8.94% 8.68% 8.42%
Common Dividend Payout Ratio/2/ 29.97% 29.60% 28.11%
</TABLE>
Notes:
/1/ Based on Net Income
/2/ Cash dividends declared on common stock as a percentage of net income
applicable to common stock.
[Annual Report Page 40]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Market for the Registrant's Common Stock
-------------------------------------------------------------------------------
Commercial BancShares, Incorporated's common stock has not been traded
extensively and such trades cannot be characterized as amounting to an active
trading market. Commercial is not listed on any exchange and is not a NASDAQ
quoted stock. In 1994, Legg Mason Wood Walker became an active market maker for
Commercial's common stock. In addition, several trades throughout 1994 were
initiated through Hazlett, Burt & Watson, Inc., although that firm is not
considered to be making a market in BancShares stock. On December 31, 1994, the
total number of holders of Commercial BancShares, Inc. common stock was 1,159.
The tables below present the high and low sales price reported for
Commercial BancShares, Incorporated and the cash dividends declared on common
stock in each quarter of the past five years.
Market Value of Common Stock:
(In Dollars)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First Quarter $28.50-29.50 $24.00-25.00 $ 18.50 $ 21.00 $20.00-21.00
Second Quarter 28.50-29.50 26.00-27.00 19.50 21.00 19.00-21.00
Third Quarter 28.50-29.50 27.00-29.00 20.00 17.00-20.50 19.00-20.00
Fourth Quarter 29.50-30.50 28.00-29.50 21.00-22.00 17.50-21.00 18.50-19.50
-----------------------------------------------------------------------------------------------------
</TABLE>
Cash Dividends Declared on Common Stock:
(In Dollars)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First Quarter $ .25 $ .23 $ .20 $ .20 $ .19
Second Quarter .25 .23 .20 .20 .19
Third Quarter .25 .23 .20 .20 .19
Fourth Quarter .28 .25 .23 .20 .19
-----------------------------------------------------------------------------------------------------
</TABLE>
Annual Meeting
The Annual Meeting of Stockholders will take place at 3:00 P.M. on Wednesday,
May 10, 1995 at Dils Banquet & Meeting Center, 6th Street and Williams Court
Alley, Parkersburg, WV.
-------------------------------------------------------------------------------
Copies of Commercial BancShares, Inc.'s Annual Report to the Securities and
Exchange Commission on Form 10-KSB are available to stockholders after April 1,
1995, on request to Larry G. Johnson, Secretary-Treasurer, Commercial
BancShares, Inc., P.O. Box 1427, Parkersburg, WV 26102-1427.
[Annual Report Page 41]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Directors
--------------------------------------------------------------------------------
Commercial BancShares, Inc.
415 Market Street
Parkersburg, WV 26101
304/424-0300
William E. Mildren, Jr.
Chairman, President and
Chief Executive Officer
Bruce Bingham
Chairman, Jackson County Bank
Frank L. Christy
Real Estate Developer
A. V. Criss, III
President, Century Block, Inc.
President, Century Limestone, Inc.
Vice President, Atlas Towing
Secretary-Treasurer,
Bluestone Quarries, Inc.
Gary R. Davis
Chairman & Chief Executive Officer
Union Bank of Tyler County
Wilson Davis
Chairman and President,
The Community Bank
Carl E. Dollman
Retired
James A. Meagle, Jr.
President & Chief Executive Officer
The Dime Bank
David L. Mendenhall
President & Chief Executive Officer
The Bank of Paden City
Jack F. Poe
Retired
Robert E. Richardson
Chairman, Richardson Printing Corp.
W. S. Ritchie, Jr.
Self-Employed
Susan S. Ross
Chairman & Chief Executive Officer
Storck Baking Company
Donald L. Scothorn
President & Chief Executive Officer
Commercial Banking and Trust Co.
James L. Wahle
President & Chief Executive Officer
Kardex Systems, Inc.
Thomas N. Webster
Vice-Chairman
Morris B. Wilkins
President, Caesars Pocono Resorts
William E. Mildren
Director Emeritus
Commercial Banking and
Trust Company
415 Market Street
Parkersburg, WV 26101
304/424-0300
William E. Mildren, Jr.
Chairman
Carl E. Dollman
Retired
Peyton J. Dudley
J.W. Dudley Sons Company
Larry G. Johnson
Executive Vice President & CFO
Commercial BancShares, Inc.
Arthur A. Maher
President & Chief Operating Officer
St. Joseph's Hospital
Daniel O. Martin
Executive Vice President
Mullen Motors Company
William E Mildren
Retired Chairman
Jack F. Poe
Retired President
Donald L. Scothorn
President & Chief Executive Officer
James W. Swearingen
Retired
Robert K. Tebay
Owner-Operator, Tebay Dairy
Thomas N. Webster
Vice-Chairman,
Commercial BancShares, Inc.
Bert F. Hider
Director Emeritus
The Dime Bank
200 Putnam St.
Marietta, OH 45750
614/373-0237
Robert E. Richardson
Chairman
Paul G. Bertram, Jr.
Vice-Chairman
Kenneth E. Bennett
Retired Physician
Harry M. Cogswell
President & Owner
Apex Feed & Supply, Inc.
C. Fred Hunter, Jr.
C. Fred Hunter & Associates
M.A. Hanna Engineering Resins
Robert G. Kelley
Vice President & Director
New Weihl Olds-GMC Trucks
Walter J. McCarthy
Real Estate Broker
James A. Meagle, Jr.
President
William E. Mildren, Jr.
Chairman, President & CEO
Commercial BancShares, Inc.
Richard A. Spindler
President,
Dowling Pool Company
Dan S. Stephan, Jr.
Vice President,
Valley News Service, Inc.
William C. Wigal
Retired Accountant
Neil R. Wynn
President,
Wynn Oil & Gas
[Annual Report Page 42]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Directors
-------------------------------------------------------------------------------
Jackson County Bank
Wall Street
Ravenswood, WV 26164
304/273-9351
Bruce Bingham
Chairman
Robert P. Hartley
President, Hartley Oil Company
Incorporated & Subsidiaries
Larry G. Johnson
Executive Vice President & CFO
Commercial BancShares, Inc.
Charles V. Kelly, O.D.
Optometrist
Thomas M. Lookabaugh
President
William E. Mildren, Jr.
Chairman,
Commercial BancShares, Inc.
A. Clark Ritchie
Real Estate Developer
Data Processing Consultant
W.S. Ritchie, Jr.
Self-Employed
Stephen F. Seaman
Merchant - Almeda's
Thomas N. Webster
Vice-Chairman
Commercial BancShares, Inc.
Farmers & Merchants Bank
of Ritchie County
1500 East Main Street
Harrisville, WV 26362
304/643-2974
Donald L. Scothorn
Chairman
Bobby O. Chancey
Manager, Armstrong Telephone Co.
Kenneth Paul Goodnight
President, All State Energy Corporation
A.D. Jackson
Owner, Western Auto Store
William E. Mildren, Jr.
Chairman,
Commercial BancShares, Inc.
Donna L. Perine
President & Chief Executive Officer
Henry D. Sassi
Vice-Chairman
Union Bank of Tyler County
Fair & Dodd Streets
Middlebourne, WV 26149
304/758-2191
Gary R. Davis
Chairman & Chief Executive Officer
Timothy R. Aiken
President & Chief Operating Officer
Gloria J. Burge
Executive Vice President
Robert E. Doak
Retired Partner, Doak's IGA
Philip B. Hill
Attorney at Law
William P. Ingram
Farmer
Donald K. Jemison
Retired Supervisor, Ormet Corporation
Paul E. Jemison
Retired Supervisor, PPG Industries
David L. Mendenhall
President & Chief Executive Officer,
Bank of Paden City
William E. Mildren, Jr.
Chairman, President &
Chief Executive Officer,
Commercial BancShares, Inc.
Robert C. Sellers
Retired Supervisor,
LCP Chemicals of WV, Inc.
Harry S. Peters
Retired Supervisor, Union Carbide Corp.
Owner, Peters Realty Co.
J. Allen Woodburn
Retired Colonel,
State of West Virginia
Department of Natural Resources
Bank of Paden City
4th & Main Street
Paden City, WV 26159
304/337-2205
Edwin P. Barrett
Retired, D & J Auto Parts and
Paden City Auto Parts
George G. Couch
Owner & Administrator,
New Martinsville Health Care Center
Robert M. Feldmeier
President,
The Paul Wissmach Glass Company
Robert W. Friend
Attorney at Law
Nelson Hachem
Owner, McDonald's Restaurant
New Martinsville and St. Marys
David L. Mendenhall
President & Chief Executive Officer
Donald L. Scothorn
President & Chief Executive Officer,
Commercial Banking and Trust Co.
Richard B. Stender
Optometrist
Norman D. Trowbridge
Reitred Owner,
Mowery - Trowbridge Funeral Home
The Community Bank
112 Collins Ave.
Pennsboro, WV 26415
304/659-2964
Wilson Davis
Chairman & President
Timothy R. Aiken
President & Chief Operating Officer,
Union Bank of Tyler County
Orville R. Bonnell
Retired Wholesale Grocer
Gary R. Davis
Chairman and Chief Executive Officer,
Union Bank of Tyler County
Robert J. Michels
Owner, Michels Oil Co.
William F. Prunty
Retired Purchasing Manager,
Equitable Gas
[Annual Report Page 43]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Officers
--------------------------------------------------------------------------------
Commercial BancShares, Inc.
William E. Mildren, Jr.
Chairman, President and
Chief Executive Officer
Thomas N. Webster
Vice Chairman
Larry G. Johnson
Executive Vice President and
Chief Financial Officer
Patricia A. Tucker
Assistant Vice President
Daniel N. Canada
Assistant Vice President and
Director of Human Resources
Data Processing Department
--------------------------
Leo P. Mallamaci
Vice President and
Senior Data Processing Officer
Peter G. Gallo
Systems and Programming Manager
Faith J. Smith
Data Center Operations Manager
Auditing Department
-------------------
W. Bryan Pennybacker, CPA
Senior Audit Manager
Martha H. Garrett
Auditor
Marcia S. Westfall, CPA
Auditor
Commercial Banking
and Trust Company
William E. Mildren, Jr.
Chairman
Donald L. Scothorn
President and Chief Executive Officer
Thomas N. Webster
Vice Chairman
Commercial Loan Department
--------------------------
David M. Righter
Senior Vice President
Douglass J. Swearingen
Vice President
Debra V. Miller
Loan Officer
Mortgage Loan Department
------------------------
Henry D. Sassi
Senior Vice President
Carolyn S. Calhoun
Vice President
Sallie A. Fankhauser
Mortgage Loan & Elite Banking Officer
Consumer Loan Department
------------------------
Ronald L. Buchanan
Senior Vice President
Jack D. Carr
Vice President
Operations Department
---------------------
Wayne F. Lee
Senior Vice President & Cashier
Joan P. Snider
Vice President
William C. Deem
Data Support Manager
Theresa J. Westfall
Director of Marketing
Branch Management
-----------------
William P. Crites
Vice President - Branch Operations
Paul R. Mancuso, Jr.
Vice President
John O. Stewart
Vice President
Trust Department
----------------
C. Randall Law
Senior Vice President
and Senior Trust Officer
Charlotte J. Potter
Vice President & Trust Officer
Linda L. Daggett
Trust Operations Officer
Pamela S. Robinson
Assistant Trust Operations Officer
Jackson County Bank
Thomas M. Lookabaugh
President
B. Scott Miller
Vice President & Loan Officer
Betty L. Mathew
Assistant Vice President
Chad R. Matics
Cashier
Donna R. McCoy
Loan Officer
Farmers & Merchants Bank of Ritchie County
Donald L. Scothorn
Chairman
Henry D. Sassi
Vice Chairman
Donna L. Perine
President & Chief Executive Officer
Martha K. Kellar
Vice President & Cashier
Robert E. Bolin
Assistant Vice President
Tammy J. Richards
Credit & Compliance Officer
The Dime Bank
James A. Meagle, Jr.
President & Chief Executive Officer
Steven C. Hall
Executive Vice President
& Senior Loan Officer
Alice V. Skidmore
Vice President & Security Officer
Sonja P. Van Wey
Cashier & Treasurer
Jennifer L. Antill
Assistant Vice President &
Compliance Officer
Thomas L. Bogard
Assistant Vice President & Loan Officer
Carolyn A Ewart
Assistant Vice President & Secretary
Susan J. Hobensack
Assistant Vice President & Loan Officer
Shirley K. Lang
Assistant Vice President & Head Teller
[Annual Report Page 44]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Officers
-------------------------------------------------------------------------------
Union Bank of Tyler County
Gary R. Davis
Chairman and Chief Executive Officer
Timothy R. Aiken
President & Chief Operating Officer
Gloria J. Burge
Executive Vice President
Jeffrey A. Davis
Operations Officer
Paul E. Davis
Vice President
Janet W. Dieringer
Loan Officer
Margaret F. Jeffries
Assistant Vice President & Trust Officer
Patricia G. Mason
Vice President & Cashier
Linda L. Stackpole
Assistant Vice President & Loan Officer
R. R. Ullom
Loan Officer
The Community Bank
Wilson Davis
Chairman & President
Robert J. Michels
Vice President
Patty S. Poling
Cashier & Chief Executive Officer
Rosa Wright
Assistant Vice President & Loan Officer
Shirley L. Dulaney
Assistant Cashier
Barbara A. Devericks
Assistant Cashier
Bank of Paden City
David L. Mendenhall
President & Chief Executive Officer
Larry M. Tracey
Executive Vice President
Shirley D. Kendle
Vice President & Cashier
Judith M. Yeager
Assistant Vice President
Genelle Ferrebee
Assistant Vice President
Julia A. Haught
Administrative Assistant
Tammy R. Waggoner
Loan Officer
Kathy A. Howell
Assistant Cashier
Tamara J. Bowers
Assistant Cashier
Ruth B. Longwell
Assistant Loan Officer
[Annual Report Page 45]
<PAGE>
[Logo of Commercial BancShares, Inc.]
Commercial BancShares, Inc.
415 Market Street
Parkersburg, West Virginia 26101
[Back Cover - Annual Report]
<PAGE>
CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23
Commercial BancShares, Inc.
[LOGO OF HARMAN, THOMPSON, MALLORY & ICE, A.C.]
HARMAN, THOMPSON, MALLORY & ICE, A.C.
Certified Public Accountants
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Commercial BancShares, Inc. and Subsidiaries
Parkersburg, West Virginia
We consent to incorporation by reference of our report dated March 9, 1995,
relating to the consolidated balance sheet of Commercial BancShares, Inc. and
Subsidiaries as of December 31, 1994 and 1993 and the related consolidated
statements of income, changes in shareholders' equity, and cash flows for each
of the years in the three-year period ended December 31, 1994 which appears in
the Company's Form 10K Registration Statement. Similarly, we also consent to
reference to our firm in the Management's Discussion and Analysis associated
with the financial information and statistical data for the above-mentioned
periods presented as a part of the above referenced filing.
/s/ Harman, Thompson, Mallory & Ice, A.C.
Harman, Thompson, Mallory & Ice, A.C.
Certified Public Accountants
Parkersburg, West Virginia
March 29, 1995
Towne Square, P.O. Box 148, Parkersburg, West Virginia 26102 304/485-6584
[Auditors' Consent Letter]
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-01-1994
<CASH> 16,304
<INT-BEARING-DEPOSITS> 622
<FED-FUNDS-SOLD> 1,405
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 85,283
<INVESTMENTS-MARKET> 83,324
<LOANS> 256,402
<ALLOWANCE> 3,430
<TOTAL-ASSETS> 372,223
<DEPOSITS> 323,959
<SHORT-TERM> 10,972
<LIABILITIES-OTHER> 3,684
<LONG-TERM> 0
<COMMON> 7,335
0
0
<OTHER-SE> 26,273
<TOTAL-LIABILITIES-AND-EQUITY> 372,223
<INTEREST-LOAN> 21,777
<INTEREST-INVEST> 4,894
<INTEREST-OTHER> 262
<INTEREST-TOTAL> 26,933
<INTEREST-DEPOSIT> 9,370
<INTEREST-EXPENSE> 9,621
<INTEREST-INCOME-NET> 17,312
<LOAN-LOSSES> 417
<SECURITIES-GAINS> (220)
<EXPENSE-OTHER> 12,986
<INCOME-PRETAX> 5,924
<INCOME-PRE-EXTRAORDINARY> 4,398
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,398
<EPS-PRIMARY> 3.26
<EPS-DILUTED> 3.03
<YIELD-ACTUAL> 5.29
<LOANS-NON> 739
<LOANS-PAST> 464
<LOANS-TROUBLED> 1,403
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,138
<CHARGE-OFFS> 417
<RECOVERIES> 120
<ALLOWANCE-CLOSE> 3,430
<ALLOWANCE-DOMESTIC> 3,430
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE>
EXHIBIT 99
COMMERCIAL BANCSHARES, INCORPORATED
415 Market Street
Parkersburg, West Virginia
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE is hereby given that the Annual Meeting of Stockholders of COMMERCIAL
BANCSHARES, INCORPORATED ("Commercial") will be held at the Dils Banquet &
Meeting Center, 6th Street & Williams Court Alley, Parkersburg, West Virginia,
at 3:00 p.m. on Wednesday, May 10, 1995, for the following purposes:
(1) To elect seventeen (17) Directors of Commercial ;
(2) To ratify the selection of Harman, Thompson, Mallory & Ice, A.C.,
Certified Public Accountants as auditors for Commercial for the year ending
December 31, 1995; and
(3) To transact such other business as may properly come before the meeting.
Only stockholders of record at the close of business on Monday, March 13,
1995, are entitled to notice of and to vote at the meeting. A list of these
stockholders will be available at the meeting and for 10 days preceding the
meeting at the office of the Secretary of Commercial Bancshares, 415 Market
Street, Parkersburg, West Virginia.
If you are unable to be present at the meeting, but desire to have your
shares voted, please mark, date and sign the enclosed proxy and return it in
the accompanying envelope.
By order of the Board of Directors
Larry G. Johnson
Secretary-Treasurer
April 1, 1995
WE URGE YOU TO MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS
POSSIBLE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. THIS WILL NOT LIMIT
YOUR RIGHT TO VOTE IN PERSON IF YOU WISH TO DO SO AT THE MEETING. THE PROXY
MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE.
[Proxy - Page 1]
<PAGE>
COMMERCIAL BANCSHARES, INCORPORATED
415 Market Street
Parkersburg, West Virginia 26101
April 1, 1995
---------------
PROXY STATEMENT
---------------
SOLICITATION AND REVOCABILITY OF PROXIES
Your proxy is solicited by your Board of Directors. It will be voted as you
direct. In the absence of your direction, it will be voted for the nominees
and proposals set forth below.
Any proxy may be revoked at any time before it is voted by notifying in
person or by giving a written notice to Larry G. Johnson, Secretary-
Treasurer, of the revocation, or by submitting a subsequently dated proxy,
or by attending the meeting and withdrawing the proxy before it is voted.
This proxy statement and the accompanying proxy are being mailed on or about
April 14, 1995 to all stockholders entitled to vote at the meeting.
INFORMATION AS TO VOTING SECURITIES
The Board of Directors has fixed the close of business on Monday, March 13,
1995, as the record date for the determination of stockholders entitled to
notice of and to vote at the Annual Meeting. On the record date 1,457,062
shares of common stock ("Common Stock") were outstanding and entitled to vote
at the meeting. Each share of stock is entitled to one vote.
At the election for Directors, each shareholder has the right to vote the
number of shares owned for as many persons as there are Directors to be
elected and for whose election he or she has the right to vote. Cumulative
voting in the election of Directors is permitted by State statute, and the
exercise of that right is not subject to any condition precedent. Each
stockholder may cast all of his votes for a single Director or he may
distribute them among the number to be voted for as he sees fit. Shareholders
desiring to cast cumulative votes by proxy should so indicate on the proxy.
The solicitation of proxies will be made primarily by mail. Proxies may
also be solicited personally and by telephone by regular employees of
Commercial or its subsidiaries without any additional remuneration and at
nominal cost. Management intends to request banks, brokerage houses,
custodians, nominees and fiduciaries to obtain authorization for the
execution of proxies. Commercial will bear the entire cost of soliciting
proxies.
The following shareholders are beneficial owners of more than 5% of the
indicated class of stock as of March 13, 1995:
<TABLE>
<CAPTION>
Amount and
Title of Name and Address Nature of Percent of
Class of Beneficial Owner Beneficial Ownership Class
----- ------------------- -------------------- -----
<S> <C> <C> <C>
Common Commercial BancShares, Inc.
Employee Stock Ownership Trust
(with 401(k) provisions) 87,427 Direct 6.00%
Parkersburg, WV
Common Mary S. Goodwin as Trustee of the
Mary S. Goodwin Living Trus t 73,329 Direct 5.032%
Waynesburg, PA
</TABLE>
[Proxy - Page 2]
<PAGE>
As of March 13, 1995, Commercial stock beneficially owned by the Directors
and Executive Officers as a group was as follows:
<TABLE>
<CAPTION>
Number of Shares Percent
Title of Class Beneficially Owned of Class
-------------- ------------------ --------
<S> <C> <C>
Common Stock 238,685/1/ 16.381%
</TABLE>
/1/ Included are 9,978 shares owned by Commercial BancShares Employee Stock
Ownership Trust (with 401(k) provisions) and allocated to Directors and
Executive Officers for which they disclaim voting power.
---------------------------------------
Proposal No. 1: Election of Directors
The Board of Directors of Commercial has proposed seventeen Directors be
elected to serve until the next Annual Meeting of Stockholders and until their
respective successors are duly elected and have qualified. It is intended
that shares represented by proxies solicited by the Board of Directors will,
unless contrary instructions are given, be voted in favor of the election as
Directors of the nominees listed below. Unless otherwise indicated on the
proxy, one vote per share owned will be voted in favor of each nominee.
Although the Board of Directors does not contemplate that any nominee will be
unavailable for election, in the event that vacancies occur unexpectedly, the
shares may be voted for substitute nominees, if any.
Each nominee is currently a Director of Commercial. Twelve are currently
Directors of one or more of the banking subsidiaries, Commercial Banking and
Trust Company (CB&T), Jackson County Bank (JCB), Farmers and Merchants Bank of
Ritchie County (F&M), Dime Bank (Dime), Union Bank of Tyler County (UBTC), The
Community Bank (Community) or Bank of Paden City (Paden City).
The following table sets forth the names and ages of the nominees and the
year the individual began continuous service as a Director of Commercial. Also
shown with respect to the nominees are their principal occupations at present
and for the past five years and directorships held by such persons in
companies (other than Commercial) which are required to file reports with the
Securities and Exchange Commission under the Securities Exchange Act of 1934
or registered under the Investment Company Act of 1940 and certain other
business or insurance companies. The number of shares of stock beneficially
owned by each Director and that number as a percentage of the total shares
outstanding is also shown.
THE FOLLOWING PERSONS ARE NOMINATED FOR ELECTION:
<TABLE>
<CAPTION>
Beneficially Owned
Director ------------------- Percent
Name Age Since Class Number of Class
---- --- -------- ----- ------ --------
<S> <C> <C> <C> <C> <C>
Bruce Bingham 65 1985 Common 10,648 0.731%
Ravenswood, West Virginia
</TABLE>
Mr. Bingham is retired from active employment with JCB, where he served as
President from 1983-1990. He became a Director of JCB in 1968, and Chairman
of the Board of Directors of JCB in 1995.
<TABLE>
<S> <C> <C> <C> <C> <C>
Frank L. Christy 47 1983 Common 5,296 0.363%
</TABLE>
Marietta, Ohio and Vero Beach, Florida
Mr. Christy is a Real Estate Developer and was a Director of CB&T from
1977-1990.
<TABLE>
<S> <C> <C> <C> <C> <C>
A. Vernon Criss, III 40 1985 Common 35,508 2.437%
Vienna, West Virginia
</TABLE>
Mr. Criss is the President of Century Block, Inc., and Century Limestone,
Inc., Vice President of Atlas Towing Company, and Secretary-Treasurer of
Bluestone Quarries, Inc. He was a Director of CB&T from 1984-1988.
[Proxy - Page 3]
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Gary R. Davis 50 1994 Common 22,414 1.538%
Sistersville, West Virginia
</TABLE>
Mr. Davis has been Chairman of Union Bank of Tyler County since January 1,
1995, and Chief Executive Officer since 1974. He was President from 1974
through 1994. He has been a Director of UBTC since 1974.
<TABLE>
<S> <C> <C> <C> <C> <C>
Wilson Davis 71 1994 Common 10,975 0.753%
Pennsboro, West Virginia
</TABLE>
Mr. Davis is the retired Director of the Ritchie County Educational Trust.
He is President and Chairman of The Community Bank. He became a Director of
Community in 1974.
<TABLE>
<S> <C> <C> <C> <C> <C>
Carl E. Dollman 71 1987 Common 3,110 0.213%
Vienna, West Virginia
</TABLE>
Mr. Dollman retired in 1986 from First Federal Savings and Loan Association
of Parkersburg where he had served as President. He became a director of
CB&T in 1987.
<TABLE>
<S> <C> <C> <C> <C> <C>
James A. Meagle, Jr. 49 1992 Common 4,250 0.292%
Marietta, Ohio
</TABLE>
Mr. Meagle has been President of The Dime Bank since 1980. He became a
Director of Dime in 1980.
<TABLE>
<S> <C> <C> <C> <C> <C>
David L. Mendenhall 51 1994 Common 7,047 0.484%
Paden City, West Virginia
</TABLE>
Mr. Mendenhall has been President and Chief Executive Officer of Bank of
Paden City since 1976. He became a Director of Paden City in 1976.
<TABLE>
<S> <C> <C> <C> <C> <C>
William E. Mildren, Jr. 50 1983 Common 54,246 3.723%
Vienna, West Virginia
</TABLE>
Mr. Mildren is Chairman, President and Chief Executive Officer of
Commercial and Chairman of CB&T. He is a Director of CB&T, JCB, F&M and
Dime. He became a Director of CB&T in 1977, Chairman in 1987.
<TABLE>
<S> <C> <C> <C> <C> <C>
Jack F. Poe 72 1983 Common 5,210 0.358%
Parkersburg, West Virginia
</TABLE>
Mr. Poe is retired from CB&T, where he served as President for four years.
He became associated with CB&T in 1954, and has served as a Director of
CB&T since 1972. He is a life trustee of Marietta College.
<TABLE>
<S> <C> <C> <C> <C> <C>
Robert E. Richardson, Sr. 74 1992 Common 12,287 0.843%
Marietta, Ohio
</TABLE>
Mr. Richardson is President of Richardson Printing Company in Marietta,
Ohio. He became a Director of Dime in 1985 and has served as its Chairman
since 1986.
[Proxy - Page 4]
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
W. S. Ritchie, Jr. 67 1985 Common 5,359 0.368%
Ravenswood, West Virginia
</TABLE>
Mr. Ritchie retired in 1988 as Commissioner of the West Virginia Department
of Highways. He previously was affiliated with Ashland Coal Company, Inc.
and Hobet Mining Company. He became a Director of JCB in 1967.
<TABLE>
<S> <C> <C> <C> <C> <C>
Susan S. Ross 50 1983 Common 2,000 0.137%
Vienna, West Virginia
</TABLE>
Mrs. Ross is Chairman and Chief Executive Officer of Storck Baking Company
and was a Director of CB&T from 1982-1988.
<TABLE>
<S> <C> <C> <C> <C> <C>
Donald L. Scothorn 65 1994 Common 13,937 0.957%
Parkersburg, West Virginia
</TABLE>
Mr. Scothorn has been President and Chief Executive Officer of Commercial
Banking and Trust Company since August, 1992. He has served as Chairman of
the Board and Director of F&M since November, 1987. He became a Director of
CB&T in 1989.
<TABLE>
<S> <C> <C> <C> <C> <C>
James L. Wahle 58 1994 Common 440 0.030%
Vienna, West Virginia
</TABLE>
Mr. Wahle has been President of Kardex Systems, Inc. in Marietta, Ohio,
since February, 1994. Prior to joining Kardex he was President and CEO of
Spacesaver Corporation. He is a member of the Board of Directors of
Colborne Corporation, Glenview, Illinois.
<TABLE>
<S> <C> <C> <C> <C> <C>
Thomas N. Webster 75 1983 Common 2,754 0.189%
Vienna, West Virginia
</TABLE>
Mr. Webster is the Vice Chairman of Commercial. He is retired from CB&T,
where he served as Executive Vice President. He became a Director of CB&T
in 1982, and JCB in 1985.
<TABLE>
<S> <C> <C> <C> <C> <C>
Morris B. Wilkins 70 1987 Common 36,549 2.508%
Scotrun, Pennsylvania
</TABLE>
Mr. Wilkins is President of Caesars Pocono Resorts, Scotrun, Pennsylvania.
He served as Chairman of the Board, President and Director of F&M from 1982
to 1987.
---------------------------------------
All of the shares of Common Stock reported are owned directly by each nominee
unless otherwise indicated below:
Bingham, Bruce
Of the 10,648 shares of Common Stock beneficially owned by Mr. Bingham,
1,254 are owned by Commercial BancShares, Inc. Employee Stock Ownership
Trust (with 401(k) provisions) for which Mr. Bingham disclaims voting power.
Criss, A. Vernon, III
Of the 35,508 shares of Common Stock beneficially owned by Mr. Criss,
35,308 are owned by a company of which Mr. Criss is an officer.
[Proxy - Page 5]
<PAGE>
Davis, Gary R.
Of the 22,414 shares of Common Stock beneficially owned by Mr. Gary Davis,
661 are owned by Hometown Bancshares Employee Stock Ownership Trust, for
which Mr. Davis disclaims voting power.
Meagle, James A. Jr.
Of the 4,167 shares of Common Stock beneficially owned by Mr. Meagle, 349
are owned by Commercial BancShares, Inc. Employee Stock Ownership Trust
(with 401(k) provisions) for which Mr. Meagle disclaims voting power.
Mendenhall, David L.
Of the 7,047 shares of Common Stock beneficially owned by Mr. Mendenhall,
639 are owned by Hometown Bancshares, Inc. Employee Stock Ownership Trust,
for which Mr. Mendenhall disclaims voting power.
Mildren, William E. Jr.
Of the 49,268 shares of Common Stock beneficially owned by Mr. Mildren, 362
are held in trust for members of his immediate family, and 3,315 shares are
owned by Commercial BancShares, Inc. Employee Stock Ownership Trust (with
401(k) provisions) for which Mr. Mildren disclaims voting power.
Richardson, Robert E., Sr.
Of the 12,287 shares of Common Stock beneficially owned by Mr. Richardson,
10,619 are owned by a company of which Mr. Richardson is the Chief Executive
Officer.
Scothorn, Donald L.
Of the 13,937 shares of Common Stock beneficially owned by Mr. Scothorn,
1,668 are owned by Commercial BancShares, Inc. Employee Stock Ownership
Trust (with 401(k) provisions) for which Mr. Scothorn disclaims voting
power.
Wilkins, Morris B.
Of the 36,549 shares of Common Stock beneficially owned by Mr. Wilkins,
36,349 are owned by a member of his immediate family.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of Commercial met seven times in 1993. All directors
attended 75% or more of the board and committee meetings held except Mr.
Wilkins, who attended 50%.
During 1994, the Executive Committee of Commercial was composed of the same
members as the Executive Committee of CB&T and served both organizations
simultaneously, with a single meeting often intermingling the business of
Commercial and CB&T. The Executive Committee is composed of Directors
Mildren, Jr., Webster, Poe and Dollman, EVP & CFO Johnson and CB&T President
Scothorn, and, following the merger with Hometown BancShares, Director Gary
Davis. There were 16 meetings in 1994 of the Committee, which provides advice
and counsel to the official staff of CB&T and BancShares and acts for the
Board of Directors upon delegated authority between meetings of the Boards.
The Audit Committee of Commercial consisted of Mr. Poe as Chairman, Director
Criss and six outside Directors of Commercial subsidiaries: Orville Bonnell,
Peyton J. Dudley, A. D. Jackson, Arthur A. Maher, Stephen F. Seaman and
William C. Wigal. The Committee reviews and evaluates significant matters
related to the internal controls of Commercial, reviews the activities of
Commercial's internal audit staff, meets with appropriate management personnel
regarding internal audit results, and reports its findings to the Board of
Directors of Commercial. It met eleven times during 1994.
The Mergers and Acquisitions Committee of Commercial did not meet during
1994. The members were Directors Christy (who served as chairman), Dollman
Mildren, Jr., Mildren, Sr., (until his
[Proxy - Page 6]
<PAGE>
retirement in November) and Wilkins. The Committee's duties are to review and
analyze any offers or proposals to merge with Commercial. It reports its
analyses to the Executive Committee. It is also available to assist in the
analysis and preparation of proposals or offers to acquire or merge with other
corporations.
The Compensation Committee was created to review and make recommendations
regarding officers' salaries and benefits. Director Dollman served as
chairman. Other members of the Committee were Director Ross and outside
directors of Commercial subsidiaries: Robert L. Hartley, Neil R. Wynn, and,
following the Hometown merger, George G. Couch. The Committee met twice in
1994.
An EDP Steering Committee consists of the Presidents and members of the
Boards of Directors of the subsidiary Banks. Members included: Mr. Mildren,
Jr., Mr. Scothorn and Robert Tebay of CB&T, Thomas Lookabaugh and Clark
Ritchie of JCB, Mrs. Donna Perine of F&M, Mr. Meagle, Jr., and Dan Stephan,
Jr. of Dime, Mrs. Patty Poling of Community, Larry Tracey of Paden City and
Timothy Aiken of UBTC. There were seven meetings in 1994. The Committee
develops the budget and plan of operation for the Electronic Data Processing
Department, serves as a liaison between banks and the Department,
establishes priorities for implementation of new software, reviews standards
and procedures used within the Department, monitors its performance,
prepares a capital expenditures budget, including hardware and software, and
makes recommendations in the area of personnel.
In addition to these Committees, there were several committees of the boards
of directors of Commercial's subsidiaries which are assigned duties by, and
report to, the subsidiaries' boards of directors.
COMPENSATION OF DIRECTORS
Beginning in June, 1988, a monthly fee of $250 was paid by Commercial to
Directors who were not Directors of subsidiary banks. In addition, Directors
received $100 for each meeting of the Board of Directors attended. Directors
who were not active officers of Commercial or its subsidiaries also received
$100 for each committee meeting attended.
Performance Adjusted Fees:
At the recommendation of outside consultants engaged to advise Commercial
regarding incentive compensation for its officers and appropriate fee levels
for Directors, Commercial adopted a system of fee adjustments based on the
performance of the company. The adjustments paid to Directors increase as
corporate objectives with regard to return on assets are achieved or exceeded.
In considering the level of adjustment, the consultants also examined the fees
paid by banks and holding companies of comparable size with similar
performance. In addition to regular Board and Committee Fees, the fee
adjustment paid to Commercial's directors for 1994 was $3,707.
During 1994 Directors of Commercial who were also directors of subsidiary
banks were paid for their services to the banks according to the standard
arrangements and performance adjusted fees in effect at each bank. There were
no other arrangements pursuant to which any Director was compensated for
services as a Director.
DIRECTORS DEFERRED INCOME PLAN
Commercial, CB&T, F&M and Jackson have established Directors Deferred Income
Plans with certain Directors which defers payment of directors fees until such
time as the director reaches age 65. For those directors whose age was 65 or
older at the time the plan was established, the payment of directors fees is
deferred for five years.
EMPLOYMENT AGREEMENTS
Effective January 27, 1992, Commercial entered into an agreement with James
A. Meagle, Jr., President of Dime. Generally, the agreement provides that if
within five years from the "effective date" of the merger of Dime and
Commercial, Dime or Commercial (1) either merges with or becomes a wholly
[Proxy - Page 7]
<PAGE>
owned subsidiary of another entity or (2) ceases to do business or exist for
any reason, or (3) has change in control of ownership, and if concurrent with
or within one year after the effective date of any one or more of the
foregoing events, Mr. Meagle's employment is terminated involuntarily, with or
without cause for any reason, or Mr. Meagle terminates his employment
voluntarily for any reason, then Dime or Commercial will pay Mr. Meagle an
amount equal to one year's gross salary. Mr. Meagle's salary will be computed
at the highest annualized rate received by Mr. Meagle during the period from
the date of the agreement to the effective date of the termination of his
employment under the circumstances described above. The effective date of the
merger of Dime and Commercial was February 28, 1992.
Five-year employment agreements between UBTC and Gary R. Davis, its
President and Chief Executive Officer,. Community and Patty S. Poling, its
Cashier and Chief Executive Officer and Paden City and David L. Mendenhall,
its President and Chief Executive Officer, became effective on August 1, 1994,
(the "Effective Date") when there was a change in control due to the merger of
Hometown Bancshares with Commercial. The agreements are virtually identical.
The agreements provide for compensation during the employment period after a
change in control. Specifically, the Bank must pay to the executive a salary
at a rate not less than the rate in effect immediately prior to the Effective
Date. Thereafter, the executive will receive increases of five percent (5%)
per year or, if greater, increases as determined by the Board in its
discretion. In addition to the regular salary, the executive will be entitled
to participate fully and equitably in any bonus plan which the Bank makes
available to its employees.
The agreements provide for the payment of the executive's expenses including
but not limited to all expenses of travel and business related living expenses
provided that such expenses are incurred and accounted for in accordance with
the reasonable policies and procedures established by the Bank. The executive
is also entitled to participate in all of the Bank's executive benefit plans
and arrangements that are made available by the Bank to its executives and key
management employees on a basis consistent with the terms, conditions and
overall administration of such plans.
In addition to conditions of employment after a change in control, the
Agreements also provide severance compensation to an executive if his or her
employment should end under certain specified conditions after the Effective
Date. First, if an executive dies, the Bank is liable for any salary or other
benefits accrued as of the date of death. If the executive is disabled, the
executive will receive full benefits including the compensation for a period
of up to three (3) years. Any disability payments will be reduced by all
payments to which the executive may be entitled under any disability
insurance.
Compensation is also paid upon any termination without cause following the
Effective Date. In that instance, the Bank will be liable for any salary and
other benefits accrued as of the termination date. No later than thirty (30)
days after such termination, the Bank must also pay the executive a sum equal
to three times the executive's then current salary in one lump sum as well as
continue all benefit plans in effect at the date of termination for a period
of three (3) years.
In addition, compensation will be paid after the Effective Date if the
executive terminates the Agreement under certain circumstances. Specifically,
if the Bank, without the executive's express written consent (i) fails to
comply with any provision of this agreement after ten (10) days written notice
thereof from the executive to the Bank, or (ii) assigns the executive duties
inconsistent with the executive's position, then the executive may give Bank
thirty (30) days written notice that he/she is terminating the employment
under the Agreement. If the executive terminates the employment for these
reasons, the Bank will be liable for any salary and other benefits which have
accrued as of the termination date. No later than thirty (30) days after said
termination date, Bank must also pay the executive a sum equal to three (3)
times the Executive's current annual salary in one lump sum payment, along
with continuation of all benefit plans in effect at date of termination for a
period of three (3) years without any cost to the executive.
During the first twelve (12) months after the change in control, the
executive may resign all positions with the Bank. In that event, the Bank
will pay the executive in one lump sum an amount equal to the executive's
then current annual salary and shall continue all benefit plans in effect at
the time of the executive's resignation for one (1) year from the date of
resignation, without any cost to the executive.
[Proxy - Page 8]
<PAGE>
RELATIONSHIPS AND TRANSACTIONS WITH MANAGEMENT
Certain Directors and Officers of Commercial, CB&T, Jackson, F&M, Dime,
UBTC, Community and Paden City and their associates were customers of and had
transactions with the subsidiary banks in the ordinary course of the banks'
business during 1994. All outstanding loans and commitments included in such
transactions were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with others, and, in the opinion of the banks did not involve
more than normal risk of collectibility or present other unfavorable features.
EXECUTIVE OFFICERS
A description of the executive officers of Commercial and its subsidiaries as
of March 13, 1995, follows.
<TABLE>
<CAPTION>
Name Age Position Business Experience
---- --- -------- -------------------
<S> <C> <C> <C>
William E. Mildren, Jr. 50 Chairman, President, and President and Chief
Chief Executive Officer Executive Officer,
of Commercial Commercial and CB&T
Gary R. Davis 50 Chairman & Chief Executive Chairman and President,
Officer of UBTC Hometown; President & CEO,
UBTC
James A. Meagle, Jr. 49 President and Chief President and Chief
Executive Officer, Dime Executive Officer, Dime
David L. Mendenhall 51 President and Chief Vice President, Hometown;
Executive Officer, Paden City President and CEO, Paden City
Donald L. Scothorn 65 President and Chief Executive Vice President
Executive Officer, CB&T; and Chief Lending
Chairman, F&M Officer, CB&T
Larry G. Johnson 47 Executive Vice President and Secretary-Treasurer,
Chief Financial Officer, Commercial; Executive
Commercial; Corporate Vice President and Chief
Secretary, Commercial Financial Officer, CB&T
</TABLE>
The following executive officer, who is not a Commercial director, is
beneficial owner of shares of the indicated class of stock as of March 13, 1995:
Common Larry G. Johnson 6,655/1/ 0.457%
Parkersburg, West Virginia
/1/ Of the 6,655 shares owned by Mr. Johnson 2,091 are owned by Commercial
BancShares, Inc. Employee Stock Ownership Trust (with 401(k) provisions), for
which Mr. Johnson disclaims voting power.
[Proxy - Page 9]
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary of Cash and Certain Other Compensation
The following table shows, for the fiscal years ending December 31, 1992, 1993
and 1994, the cash compensation paid by Commercial and its subsidiaries, as well
as certain other compensation paid or accrued for those years, to executive
officers whose total annual salary and bonus exceeded $100,000.
<TABLE>
<CAPTION>
Annual Compensation
------------------------------------
Other
Name and Annual All Other
Principal Compen- Compen-
Position Year Salary($) Bonus($)/1/ sation($)/2/ sation($)/3/
------- ---- --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Wm. E. Mildren, Jr. 1994 $108,840 $75,723 $24,803 $3,113
Chairman, President 1993 $103,620 $29,210 $16,525 $11,343
and CEO, Commercial 1992 $98,640 $18,000 $15,150 $10,166
Donald L. Scothorn 1994 $89,280 $74,134 $100 $2,912
President and CEO, 1993 $85,020 $49,287 $8,976
CB&T 1992 $57,780 $14,000 $1,100 $6,056
Larry G. Johnson 1994 $70,440 $56,792 $8,301 $2,387
Exec. Vice Pres. & 1993 $67,200 $34,912 $4,200 $7,657
CFO, Commercial 1992 $63,390 $14,000 $4,200 $6,766
</TABLE>
/1/ Bonus is paid in January of the following year.
/2/ "Other Annual Compensation" includes amounts paid by Commercial and its
Subsidiaries as Directors Fees.
/3/ "All Other Compensation" includes contributions to Commercial BancShares
Employee Stock Ownership Plan (with 401(k) provisions) to match pre-tax
elective deferral contributions (included under Salary and Bonus) made to the
Plan, a basic contribution to the Plan and optional corporate contributions to
the Plan (included in 1992 and 1993 only, as 1994 information is not yet
available).
---------------------------------------
Proposal No. 2: Selection of Auditors
It is recommended that the stockholders ratify the selection by the Board of
Directors of Harman, Thompson, Mallory & Ice, A.C., Certified Public
Accountants, as auditors for Commercial for the year ending December 31, 1995.
Harman, Thompson, Mallory & Ice, A.C., examined the financial statements of
Commercial, CB&T, JCB, F&M and Dime in 1993, and, in the opinion of management
and the Board of Directors, their selection as auditors for the coming year
should be ratified. Representatives of Harman, Thompson, Mallory & Ice, A.C.,
are expected to be present at the annual meeting of shareholders with an
opportunity to make a statement if they desire to do so and they are expected to
be available to respond to appropriate questions. In the event ratification of
the selection of auditors is not approved by a majority of the shares of Common
Stock voting, the Board of Directors will consider the selection of another
accounting firm. If such selection were made, it might not become effective
until 1995 because of the difficulty and expense of making a substitution.
The Directors recommend that you vote FOR the above proposal.
---------------------------------------
[Proxy - Page 10]
<PAGE>
GENERAL INFORMATION
The Board of Directors and management would like to have you attend the
meeting in person. Please, however, mark, date, sign and return as promptly as
possible the enclosed proxy in any event. The Board of Directors strongly
recommends a vote FOR all nominees for election as Directors and the
ratification of the selection of auditors. If a proxy does not specify
otherwise, it will be voted in accordance with the foregoing recommendations.
If you attend the meeting, you may nonetheless vote in person by ballot if you
desire.
PROPOSALS OF STOCKHOLDERS
FOR PRESENTATION AT NEXT YEAR'S ANNUAL MEETING,
TO BE HELD MAY 8, 1996
Proposals which stockholders intend to present at next year's annual
meeting, to be held Wednesday, May 8, 1996, will be eligible for inclusion in
Commercial's proxy material for that meeting if they are submitted to the
Secretary of Commercial in writing not later than December 31, 1995. A proponent
may submit only one proposal. At the time of the submission of a proposal, a
stockholder also may submit a written statement in support thereof for inclusion
in the proxy statement for the meeting, if requested by the proponent; provided,
however, that a proposal and its supporting statement in the aggregate shall not
exceed 500 words.
OTHER MATTERS
As of the date hereof, the Board of Directors was not aware that any matters
not referred to in the form of proxy would be presented for action at the
meeting. If any other business should come before the meeting, the persons
named in the enclosed proxy will, as stated therein, have discretionary
authority to vote the shares represented by them in accordance with their best
judgment.
By order of the Board of Directors,
Larry G. Johnson
Secretary-Treasurer
Parkersburg, West Virginia
April 1, 1995
[Proxy - Page 11]
