<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 1995
--------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
---------- ----------
Commission file number 0-20232
-------
COMMERCIAL BANCSHARES, INCORPORATED
-----------------------------------
(Exact name of small business issuer as specified in its charter)
West Virginia 55-0622108
------------- ----------
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) identification No.)
415 Market Street, Parkersburg, WV 26101
-----------------------------------------
(Address of principal executive offices)
304-424-0300
------------
(Issuer's telephone number)
Check whether the issue (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
---- ----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Class Outstanding at March 31, 1995
----- -------------------------------
Common Stock $5.00 par value 1,467,040
<PAGE>
COMMERCIAL BANCSHARES, INCORPORATED
INDEX
Part I Financial Information Page No.
<TABLE>
<CAPTION>
Page No.
<S> <C>
Condensed Consolidated Balance Sheet as of March 31, 1995
and December 31, 1994....................................... 3
Condensed Consolidated Statement of Income for
Three Months ended March 31, 1995 and 1994.................. 4
Condensed Statement of Changes in Stockholders
Equity for Three months ended March 31, 1995................ 5
Consolidated Statement of Cash Flows for the Three
Months ended March 31, 1995 and 1994........................ 6
Notes to Condensed Consolidated Financial Statements........... 7-10
Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 10-11
Part II Other Information...................................... 12
Signatures..................................................... 12
</TABLE>
2
<PAGE>
PART I FINANCIAL INFORMATION
COMMERCIAL BANCSHARES, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
ASSETS
<TABLE>
<CAPTION>
March 31, Dec. 31,
1995 1994
---------- ---------
(unaudited) *
<S> <C> <C>
Cash and Due from Banks........................................ $ 13,763 $ 16,304
Interest-Bearing Demand Deposits with Other Banks.............. 401 323
Interest-Bearing Deposits in Banks............................. 99 299
Federal Funds Sold............................................. 13,500 1,405
Investment Securities:
Held to Maturity, at Amortized Costs......................... 38,978 41,150
(Market Value: $38,775 and $40,384)
Available for Sale, at Market Value.......................... 43,058 42,940
Loans -- net of unearned discount.............................. 254,564 256,402
LESS: Reserve for Losses...................................... (3,459) (3,430)
Premises and Equipment......................................... 7,474 7,129
Notes Receivable............................................... 255 255
Accrued Interest Receivable.................................... 2,688 2,549
Foreclosed Properties -- Net................................... 1,295 1,329
Other Assets................................................... 5,763 5,568
--------------------
TOTAL ASSETS................................................. $378,379 $372,223
====================
LIABILITIES AND CAPITAL
Deposits:
Demand -- Non-Interest Bearing................................ $ 43,198 $ 46,499
Demand -- Interest Bearing.................................... 40,511 44,462
Savings....................................................... 94,111 98,039
Time Deposits................................................. 155,754 134,959
--------------------
TOTAL DEPOSITS.................................................. $ 333,574 $ 323,959
Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase........................... 6,613 10,972
Accrued Interest Payable........................................ 1,005 812
Other Liabilities............................................... 2,381 2,872
--------------------
TOTAL LIABILITIES............................................... $ 343,573 $ 338,615
--------------------
Shareholders' Equity:
Preferred Stock (Stated Value: $100)
Outstanding: None.......................................... $ 0 $ 0
Common Stock (Par Value $5.00)
Outstanding: 1,467,040 shares and 1,467,040 shares......... 7,335 7,335
Additional Paid In Capital.................................... 10,085 10,079
Undivided Profits............................................. 17,829 17,122
Net Unrealized Gain (Loss) on Available-for-Sale Securities... (246) (719)
Less: Employee Stock Ownership Plan
Shares Purchased with Debt................................ 0 0
Treasury Stock, at cost.................................... ( 198) (209)
--------------------
TOTAL SHAREHOLDERS' EQUITY.................................... $ 34,806 $ 33,608
--------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...................... $ 378,379 $372,223
====================
</TABLE>
*Condensed from audited financial statements.
The accompanying notes are an integral part of these condensed financial
statement.
3
<PAGE>
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
(In thousands of dollars
except for per share data)
Three Months Ended
March 31
1995 1994
<S> <C> <C>
INTEREST INCOME
Interest and Fees on Loans............................... $6,025 $4,871
Interest and Dividends on Securities..................... 1,243 1,214
Interest on Federal Funds Sold..................... 91 52
Interest on Notes Receivable............................. 0 (1)
Interest on Time Deposits with Other Banks............... 6
--------------------------
TOTAL INTEREST INCOME................................. $7,365 $6,135
--------------------------
INTEREST EXPENSE
Interest on Deposits..................................... 2,809 2,242
Interest on Federal Funds Purchased and Securities Sold
Under Agreement to Repurchase......................... 133 28
--------------------------
TOTAL INTEREST EXPENSE.............................. $2,942 $2,270
--------------------------
NET INTEREST INCOME...................................... $4,423 $3,865
Provision for Loan Losses.................................. 108 96
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES.......................................... $4,315 $3,769
OTHER INCOME
Trust Department Income.................................. 140 119
Service Charges and Fees................................. 358 239
Security Gains........................................... 0 5
Other Income............................................. 65 182
--------------------------
Total Other Income.................................... 563 545
OTHER EXPENSES
Employee Compensations & Benefits........................ $1,801 $1,738
Occupancy Expense (Net of Rental Income)................. 210 196
Furniture and Equipment.................................. 190 229
Other Operating Expenses................................. 964 951
--------------------------
Total Other Expenses.................................. 3,165 3,114
INCOME BEFORE APPLICABLE INCOME TAXES................. $1,711 1,200
Applicable Income Taxes.................................... 595 498
--------------------------
NET INCOME............................................... $1,116 $ 702
==========================
NET INCOME AVAILABLE FOR
COMMON STOCKHOLDERS........................................ $1,116 $ 634
EARNINGS PER SHARE DATA:
Primary.................................................. $.77 $.51
Fully Diluted............................................ .77 .48
Cash Dividends Declared.................................. .28 .25
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
for the three months ended March 31, 1995
(unaudited)
<TABLE>
<CAPTION> (in thousands
of dollars)
<S> <C>
Convertible Preferred stock (43,328 Shares authorized):
Balance at Beginning of Year..................................... $ 0
-------
Balance at End of Period......................................... $ 0
-------
Common Stock ($5.00 Par Value; 2,000,000 Shares authorized)
Balance at beginning of year....................................... $ 7,335
-------
Balance at end of period - 1,467,040 Shares Issued
and Outstanding at March 31, 1995................................ $ 7,335
-------
Additional Paid In Capital
Balance at Beginning of Year....................................... $10,079
Additional Paid in Capital from Resale of Treasury Stock........... 6
-------
Balance at End of Period........................................... $10,085
-------
Undivided Profits
Balance at Beginning of Year....................................... $17,122
Net Income......................................................... 1,116
Cash Dividend Declared on Common Stock............................. (409)
-------
Balance at End of Period........................................... $17,829
-------
Unrealized Gain (Loss) on Securities Available for Sale,
Net of Applicable Deferred Income Taxes
Balance at Beginning of Year....................................... $ (719)
Change in Unrealized Gain (Loss) on Securities Available for Sale.. 473
-------
Balance at End of Period........................................... $ (246)
-------
Less: Treasury Stock, at Cost
Balance at Beginning of Year....................................... $ 209
Resale of 600 shares of Treasury Stock at Cost..................... (11)
-------
Balance at End of Period (9,978 Shares)............................ $ 198
-------
Total Shareholders' Equity......................................... $34,806
=======
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(In thousands of dollars)
Three Months Ended
March 31
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income................................................... $ 1,116 $ 702
-------------------
Adjustments to Reconcile Net Income to Net
Cash from Operating Activities:
Depreciation............................................ 187 208
Provision for Loan Loss................................. 107 95
Investment Amortization - Net........................... 101 196
Purchase Adjustments.................................... 15 15
Other - Net............................................. (4) (4)
Realized Investment Securities (Gains) Losses........... (5)
Income Tax Benefit...................................... (60) (48)
Provision for Deferred Taxes............................ 21 31
(Increase) Decrease:
Accrued Interest Receivable........................... (138) (80)
Other Assets.......................................... 195 (743)
Increase (Decrease):
Accrued Interest Payable.............................. (102) 538
Other Liabilities..................................... 574 349
-------------------
Total Adjustments....................................... 896 552
-------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES.................... $ 2,012 $ 1,254
-------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (Increase) Decrease in Federal Funds Sold.............. $ (13,065) $ 3,501
Proceeds from Sale of Other Real Estate.................... (3)
Proceeds from Sales of Securities Held to Maturity......... 1,500
Proceeds from Maturities of Securities Held to Maturity.... 4,809 3,683
Proceeds from Maturities of Securities Available for Sale.. 903
Purchases of Securities Held to Maturity................... (1,895)
Purchases of Securities Available for Sale................. (1,244) (6,075)
Net (Loans Originated) Principal Collected................. 1,684 (7,935)
Capital Expenditures....................................... (532) (82)
-------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES..................... $ (9,340) (5,411)
-------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase (Decrease) in Total Deposits.................. $ 9,615 $ 3,156
Net Increase (Decrease) in Federal Funds Purchased......... (4,359) 1,166
Principal Payments on ESOP Borrowing....................... (424)
Proceeds from Sale of Treasury Stock....................... 17
Principal Payments on Capital Lease........................ (7)
Dividends Paid............................................. (408) (337)
-------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES..................... $ 4,865 $ 3,554
-------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS........................................... $ (2,463) $ (603)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR............... 16,627 14,070
-------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................... $ 14,164 $13,467
===================
</TABLE>
During the first quarters of 1995 and 1994, the Corporation paid $2,616,000 and
$2,365,000, respectively, in interest on deposits and other borrowings and
$60,000 and $982,000, respectively, for income taxes.
Disclosure of Accounting Policy:
For purposes of the statement of cash flows, BancShares has defined cash
equivalents as those amounts included in the balance sheet caption "Cash and Due
from Banks."
The accompanying notes are an integral part of these statements.
6
<PAGE>
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-QSB of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31,
1995, are not necessarily indicative of the results that may be expected for the
year ended December 31, 1995. For further information, refer to the
consolidated financial statements and footnotes thereto included in BancShares'
annual report on Form 10-KSB for the year ended December 31, 1994.
NOTE 2: INVESTMENT SECURITIES
The book value and approximate market value of investment securities as of
March 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
March 31, 1995
----------------------------------------------
(Thousands of Dollars)
Gross Gross Aggregate
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Held to Maturity
U.S. Treasury and Government Agency
Securities:
Mortgage Backed Securities $ 213 $ 213
Other Treasury and Agency 25,095 $ 63 $326 24,832
Securities
Obligations of States and their 13,203 178 133 13,248
Subdivisions
Other Debt Securities 467 17 2 482
----------------------------------------------
TOTAL $38,978 $258 $461 $38,775
==============================================
Available for Sale
U.S. Treasury and Government Agency
Securities:
Mortgage Backed Securities $ 5,506 $ 10 $150 $ 5,366
Other Treasury and Agency 36,250 230 508 35,972
Securities
Obligations of States and their 0 0
Subdivisions
Other Debt Securities 246 1 247
Equity Securities 1,545 72 1,473
----------------------------------------------
TOTAL $43,547 $241 $730 $43,058
==============================================
</TABLE>
<TABLE>
<CAPTION>
March 31, 1994
----------------------------------------------
(Thousands of Dollars)
Gross Gross Aggregate
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Held to Maturity
U.S. Treasury and Government Agency
Securities:
Mortgage Backed Securities $ 24 $ 24
Other Treasury and Agency 30,080 $312 $ 9 30,383
Securities
Obligations of States and their 14,244 451 33 14,662
Subdivisions
Other Debt Securities 727 4 731
----------------------------------------------
TOTAL $45,075 $767 $ 42 $45,800
==============================================
Available for Sale
U.S. Treasury and Government Agency
Securities:
Mortgage Backed Securities $ 5,881 $ 7 $ 77 $ 5,811
Other Treasury and Agency 40,330 240 575 39,995
Securities
Obligations of States and their 0 0
Subdivisions
Other Debt Securities 446 446
Equity Securities 1,436 56 1,492
----------------------------------------------
TOTAL $48,093 $303 $652 $47,744
==============================================
</TABLE>
7
<PAGE>
NOTE 3: LOANS
Major classifications of loans are summarized as follows:
<TABLE>
<CAPTION>
March 31
---------------------
1995 1994
(thousands of dollars)
<S> <C> <C>
Real Estate Loans....................... $ 88,303 $ 87,768
Installment Loans....................... 60,297 49,951
Credit Card Loans....................... 4,070 3,009
Commercial Loans........................ 102,735 90,228
-------------------
$255,405 $230,956
-------------------
Unearned Income......................... 841 937
-------------------
TOTAL LOANS............................. $254,564 $230,019
===================
</TABLE>
Changes in the allowance for loan losses were as follows for the three
months ended March 31, 1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
(thousands of dollars)
<S> <C> <C>
Balance, Beginning of Year.............. $ 3,430 $ 3,137
Provision Charged to Operation.......... 108 96
Loans Charged Off....................... (103) (57)
Recoveries.............................. 24 29
-------------------
Balance, End of Period.................. $ 3,459 $ 3,205
===================
</TABLE>
NOTE 4: DEPOSITS
Time deposits in denominations of $100,000 or more at March 31, 1995 and
1994 were $20,946,000 and $13,347,000 respectively.
NOTE 5: FEDERAL FUNDS PURCHASED AND OTHER BORROWINGS
Federal funds purchased and securities sold under repurchase agreements
generally represent overnight borrowing transactions.
The details of these classifications for the dates indicated are as
follows:
<TABLE>
<CAPTION>
Three Months Year
Ended Ended
3-31-95 12-31-94
-------- ---------
<S> <C> <C>
Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase
Balance at End of Period............. $ 6,612 $ 10,972
Average during Period................ 6,449 9,662
Maximum Month-end Balance............ 6,613 14,610
Average Rate during Period........... 6.08% 4.55%
Rate at the end of Period............ 5.73% 5.84%
</TABLE>
NOTE 6: INCOME TAX EXPENSE
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
Three Months ended
March 31
1995 1994
------------- -----------
Current: (In thousands of dollars)
<S> <C> <C>
State............................. $ 141 $ 64
Federal........................... 494 403
Deferred Income Taxes............. (40) 31
-------------------
TOTAL PROVISION FOR INCOME TAXES.. $ 595 $ 498
===================
</TABLE>
8
<PAGE>
NOTE 8: CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY
COMMERCIAL BANCSHARES, INCORPORATED (PARENT COMPANY ONLY)
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
ASSETS (In Thousands of Dollars)
<S> <C> <C>
Cash and Due from Banks (All from Subsidiaries)............... $ 1,349 $ 418
Accounts Receivable........................................... 912 835
Notes Receivable.............................................. 255 255
Investment in Subsidiaries (Equity Basis)..................... 31,681 31,126
Premises and Equipment - Net.................................. 504 333
Other Assets.................................................. 684 652
------- -------
TOTAL ASSETS.................................................. $35,385 $34,169
======= =======
LIABILITIES
Other Liabilities............................................. 579 561
------- -------------
TOTAL LIABILITIES............................................. $ 579 $ 561
------- -------------
STOCKHOLDERS EQUITY
Common Stock (Par Value $5.00, Authorized: 2,000,000 Shares.
Outstanding : 1,467,040 Shares and 1,467,040 Shares
at March 31, 1995 and December 31,1994, respectively)....... $ 7,335 $ 7,335
Additional Paid in Capital.................................... 10,085 10,079
Undivided Profits............................................. 17,829 17,122
Net Unrealized Gain (Loss) on Securities Available for Sale... (246) (719)
LESS:
Treasury Stock, at cost..................................... (198) (209)
------- -------------
TOTAL STOCKHOLDERS EQUITY..................................... $34,806 $33,608
------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY..................... $35,385 $34,169
======= =============
</TABLE>
COMMERCIAL BANCSHARES, INCORPORATED (PARENT COMPANY ONLY)
CONDENSED STATEMENT OF INCOME
FOR THREE MONTHS ENDED MARCH 31, 1995
(In thousands)
<TABLE>
<S> <C>
REVENUE
Dividend from Subsidiary Banks.................... $1,130
Fees from Subsidiaries............................ 253
------
TOTAL REVENUE....................................... $1,383
------
EXPENSES
Employee Compensation and Benefits................ $ 259
Occupancy and Furniture Expense................... 62
Other Expenses.................................... $ 88
------
TOTAL EXPENSES...................................... $ 409
------
Income before Tax Benefit and Equity in
Undistributed Net Income of Subsidiaries.......... $ 974
Income Tax Benefit.................................. ( 60)
------
Income before Equity in Undistributed
Net Income of Subsidiaries........................ $1,034
Equity in Undistributed Net Income of Subsidiaries.. 82
------
NET INCOME.......................................... $1,116
======
</TABLE>
9
<PAGE>
COMMERCIAL BANCSHARES, INCORPORATED (PARENT COMPANY ONLY)
STATEMENT OF CASH FLOWS
FOR THE THREE MONTH PERIOD ENDING MARCH 31, 1995
(In Thousands)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income................................................ $ 1,116
Adjustments to Reconcile Net Income to Cash
Provided by Operating Activities:
Depreciation and Amortization........................ 32
Net Amortization of Purchase Accounting Adjustments.. 15
Undistributed Net(Income) Loss on Subsidiaries....... ( 82)
Increase(Decrease) Accounts Receivable............... ( 77)
Accrued Interest Receivable.......................... 1
Other Assets......................................... ( 48)
Other Liabilities.................................... 78
Income Tax Benefit................................... $( 60)
----------
NET CASH PROVIDED BY OPERATING ACTIVITIES................. $ 975
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures.................................... $( 203)
----------
NET CASH USED BY INVESTING ACTIVITIES..................... $( 203)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of Treasury Stock.................... $ 17
Dividends paid.......................................... ( 408)
---------
NET CASH USED BY FINANCING ACTIVITIES..................... $( 391)
---------
NET INCREASE IN CASH AND CASH EQUIVALENTS................. $ 381
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR............ 968
---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................ $ 1,349
=========
</TABLE>
During the first three months of 1995, BancShares paid $60,000 in income taxes.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SOURCES AND USES OF FUNDS
During the first three months of 1995, BancShares' largest source of funds,
its deposits, grew $9.6 million, or 3.0%, to $333.6 million. The increase was
in time deposits, which were up 15.4% ($20.8 million). Non-interest bearing
demand deposits were down $3.3 million, or 7.1% , interest bearing demand
deposits decreased 8.89% ($4.0 million), and savings deposits were down 4.0%
($3.9 million). Customers took advantage of higher rates to lock in the returns
on their deposits in anticipation of level to declining rates.
BancShares' position in the Federal funds market changed substantially from
year end. At March 31, 1995, there were net sales of funds of $6.9 million,
compared to net purchases of $9.6 million at December 31, 1994. BancShares
banks undertake borrowings either to accommodate smaller correspondent banks, in
which case those funds are ordinarily invested in federal funds sold, or to
provide liquidity over a short period of time. Funds sold represent temporary
liquid investments which may be used to meet loan or deposit demands, as well as
funds that are awaiting investment in longer-term instruments.
Cash and due from banks decreased by $2.5 million or 15.6% from December 31,
1994, to March 31, 1995. Changes in this category are not unusual, as the
balance fluctuates with inflows and outflows of deposits.
Total loans decreased slightly and were down $1.8 million or 0.72% during the
first quarter of the year. There was a small decline in loan demand, caused by
rates being somewhat higher than in recent months. Borrowers appeared to be
willing to remain on the sidelines until they were better able to determine the
trend in rates.
The securities portfolio also decreased, and was down $2.1 million or 2.5%
from the year end. It is anticipated the level of securities will be increased
to absorb some of the investment in Federal funds sold.
10
<PAGE>
EARNINGS - THREE MONTHS
Consolidated net income for the first quarter of 1995 was 59.0% greatear than
the first quarter of 1994 ($1,116,000 in 1995, $702,000 in 1994). Fully diluted
earnings per common share were $0.77 compared to $0.48 for the 1994 quarter.
Total interest income increased 20.0%, or $1.3 million, from $6.1 million in
1994 to $7.4 million in 1995. Similarly, total interest expense decreased
29.6%, or $672 thousand from the 1994 level. This resulted in net interest
income being up $558 thousand, or 14.4%
The provision for loan losses was 12.5% more in 1995 than it was in the first
quarter of 1994. The 1995 provision was $108 thousand compared to net loan
losses of $78 thousand. In 1994, the first quarter provision was $96 thousand
and net charge offs were $28 thousand. At March 31, 1995, the reserve for
possible loan losses of $3.5 million was equal to 1.36% of net loans
outstanding. This compares with $3.4 million or 1.34% of net loans outstanding
at December 31, 1994.
Non-interest income increased 3.3% from the first quarter of 1994 to the first
quarter of 1995. Trust department fees were up by 17.65%. Service charges and
fees grew 49.8%. However, Other Income declined $117,000 or 64.29% from 1994 to
1995. The decline came from reduced income on other real estate, a decrease in
income on loans sold, and several other small reductions.
Securities gains during the first quarter of 1994 were $5,000. However, there
were no securities gains or losses taken during the first quarter of 1995,
resulting in a $5,000 decrease in gains on securities from 1994 to 1995.
Non-interest expense increased only 1.6%, or $51,000 from 1994 to 1995.
Employee expense grew $63 thousand or 3.6%, the result of merit and longevity
increases in salaries, coupled with attendant taxes and benefits.
Occupancy expense was $14,000, or 7.1% more than the same quarter in 1994.
Furniture and equipment expenses were down $39,000 or 17.03% from the prior
year. Together, these fixed assets expenses declined $25,000, from a combined
total of $425,000 in 1994 to $400,000 in 1995.
Other Operating Expense was virtually unchanged, increasing only $13,000
(1.37%) from the first quarter of 1994. If the Federal Deposit Insurance
Corporation determines premiums for the Bank Insurance Fund can be substantially
reduced, this category may demonstrate a decline in the last quarter of the
year.
Net income before taxes was up $511,000 (42.6%) from the 1994 quarter and the
provision for Federal and state income taxes grew $97,000, or 19.5%. The 1994
quarters taxes reflected adjustments in deferred taxes related to the provision
for loss on loans and loan fee income.
LIQUIDITY
BancShares primary source of liquidity has been the attraction and retention
of retail deposit accounts. The total deposit growth over the three month
period was 3.0%, or an increase of $9.6 million. Time deposits, which are the
most easily attracted deposits grew $20.8 million or 15.4%, demonstrating that
deposits promise to continue to be a good source of funds. Also 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 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 various U.S. government
agencies and are, therefore, salable.
Although liabilities provide its primary sources of liquidity, BancShares also
maintains an adequate level of cash and near-cash items on hand to meet day-to-
day operating needs. Additionally, BancShares owns marketable securities and
short-term investments which can be converted to cash in a very short time.
Maturing within one year is 25.5% of the total securities portfolio.
CAPITAL
During the first three months of 1995, BancShares increased its stockholders'
equity by $1.2 million (3.56%), bringing the balance at March 31, 1995, to $34.8
million or, 9.2% of total assets. The increase was from internal capital
growth.
In January 1989, banking industry regulators officially released risk-
adjusted capital guidelines for banks and bank holding companies. The
guidelines established final requirements that were to be achieved by year-end
1992. As of March 31, 1995, BancShares' Tier 1 ratio of 13.45% and combined
Tier 1 and Tier 2 ratio of 14.70% exceed the requirements. Additionally,
BancShares' ratios of primary capital to total assets of 8.87% and total capital
to total assets of 9.70% exceed the final requirements which became effective at
year-end 1992 for those relationships.
11
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The company is a defendant in certain legal actions arising from normal
business activities. The ultimate liability, if any, resulting from them will
not materially affect the company's financial position.
Item 6. Exhibits and Reports on Form 8-K
BancShares did not file any reports on Form 8-K during the three months
ended March 31, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMERCIAL BANCSHARES, INC.
(Registrant)
/s/ William E. Mildren, Jr.
Date:May 15, 1995 ----------------------------
William E. Mildren, Jr.
Chairman, President and
Chief Executive Officer
/s/ Larry G. Johnson
Date:May 15, 1995 ----------------------------
Larry G. Johnson
Executive Vice President
and Chief Financial Officer
12
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