<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, 1995.
[ ] 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: $33,444,000.
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 20, 1996, based on the average of the bid and asked price
on that date:
Common Stock, $5.00 par value -$36,811,440
------------------------------------------
The number of shares outstanding of the issuer's classes of common stock as of
March 20, 1996:
Common Stock, $5.00 par value - 1,469,670 shares
------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual shareholders meeting to be
held May 8, 1996 are incorporated by reference into Part III.
<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. It was enlarged and remodeled extensively
during 1995. 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. A branch in Barlow, Ohio, at
the intersection of State Routes 339 and 501 was opened in November, 1995.
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 prinicpal 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 offered by a full-service commercial bank, but it does not
offer trust or correspondent banking services.
Page 3
<PAGE>
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.
Employees
As of December 31, 1995, Commercial and its subsidiaries had 219 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, 1995, the most recent date for which branch data is
available, there were seven banks with 24 locations in Wood County. They
reported total deposits of $903,459,000 in the county. CB&T ranked second among
the banks with 17.93% 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 $1,136,231,000.
CB&T ranked second among all institutions with 14.26% 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 23.34% and F&M has 17.64% of the
$79,598,000 in bank deposits in the county. There are no non-bank financial
institutions in Ritchie County. The two subsidiaries of Commercial combined
held 40.98% of the total deposits for the county.
Six banks had 8 offices located in Jackson County on June 30, 1995, with
total bank deposits of $259,671,000. Jackson ranked fourth among the banks,
with 17.89% 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 $280,067,000
at June 30. Jackson ranked fourth among all institutions with 16.59% of the
total deposits. In July, Jackson purchased a branch in Jackson County. Had it
owned the branch on June 30, it would still have been the fourth largest bank,
but would have had 20.08% of the bank deposits and 18.62% of the total financial
institution 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, 1995,
Union was the third largest of the seven commercial banks with offices in Tyler
and Wetzel County, and its deposits were approximately 17.69% of that total two-
county commercial bank market. Paden City's deposits were 14.74% of the market,
and it was the fourth largest bank. Combined, the two subsidiaries of
Commercial held 32.43% of the total commercial bank deposits in the Tyler/Wetzel
County market. Three thrift institutions and two federal credit unions also
operate in the market, and combined deposits of all institutions amounted to
$354,052,000 as of June 30, 1995. Union and Paden City held 17.15% of all
deposits for the market.
As of June 30, 1995, there were nine banks located in Washington County
with total deposits of $743,208,000. The Dime Bank is the fifth largest of the
nine and holds 5.2% of the total bank deposits. The nine banks operate at
nineteen offices within Washington County. In addition to the commercial banks,
there are two savings and loan associations located in Washington County. The
Dime Bank is the sixth largest financial institution and held 4.42% of all
deposits in the 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.
Page 4
<PAGE>
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.
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, The Dime Bank, Union Bank of Tyler County, The Community Bank,
or The Bank of Paden City.
Page 5
<PAGE>
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 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. In 1995, CB&T expanded the building and relocated
its drive-in lanes and parking lot onto adjacent property it had previously
purchased. The building is a one-story masonry structure with attached drive-in
lanes. CB&T also leases a two-story bank building on Pike Street in
Parkersburg, where it operates a branch with attached drive-in lanes.
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. During 1995, Jackson leased a supermarket banking
facility on U.S. Route 33 in Ripley, West Virginia, where it operates a branch.
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. During 1995 a new
full-service branch was built in Barlow, Ohio, at the intersection of Ohio State
Routes 550 and 339. The one story brick and masonry structure has attached
drive-in lanes and an automated teller machine.
The current principal office of Union is located at Fair and Dodd Streets
in Middlebourne, West Virginia. It was constructed in 1977, with a major
remodeling in 1984 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. It was built in 1978. 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. It is approximately 60 years old, but has had considerable
renovation. Community also operates a drive-through facility on Masonic Avenue
constructed in the late 1970's. Both of these properties are owned by
Community. In addition, Community owns three lots used for employee and
customer parking. Property was purchased in Ellenboro, West Virginia, in 1996.
The land, near U.S. Route 50 and State Route 16, is intended for use as the site
of a future branch.
The principal office of Paden City, built in 1977, is located at Fourth and
Main Streets on State Route 2 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 on State Route 2 in New Martinsville, West
Virginia. The land on which this facility was built is leased by Paden City.
In addition to the banking buildings, CB&T, Jackson, F&M, Union, Paden
City, Community, and Dime 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.
Page 6
<PAGE>
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Part II
- -------
Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Page 28 of the 1995 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 1995 Annual Report to shareholders and on pages 1
and 2 and 22 to 27 of the Annual Report.
Item 7. FINANCIAL STATEMENTS
The report of independent accountants and consolidated financial statements
are included on pages 3 through 21 of the 1995 Annual Report to shareholders.
Quarterly Results of Operations for the year ended December 31, 1995
included on page 20 of the 1995 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,
1996 for the annual meeting of shareholders to be held on May 8, 1996, which is
included as Exhibit 99.
Page 7
<PAGE>
PART IV
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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, 1995.
(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. 3/27/96 /s/ Larry G. Johnson 3/27/96
- ------------------------------------ ------------------------------------
William E. Mildren, Jr. Larry G. Johnson
Chairman, President and Executive Vice President and
Chief Executive Officer Chief Financial Officer
/s/ Bruce Bingham 3/27/96 ------------------------------------
- ------------------------------------ Jack F. Poe
Bruce Bingham Director
Director
/s/ Robert E. Richardson 3/27/96
------------------------------------
- ------------------------------------ Robert E. Richardson
Frank L. Christy Director
Director
/s/ W. S. Ritchie, Jr. 3/27/96
------------------------------------
- ------------------------------------ W.S. Ritchie, Jr.
A. Vernon Criss, III Director
Director
/s/ Susan S. Ross 3/27/96
------------------------------------
- ------------------------------------ Susan S. Ross
Gary R. Davis Director
Director
/s/ Donald L. Scothorn 3/28/96
------------------------------------
- ------------------------------------ Donald L. Scothorn
Wilson Davis Director
Director
/s/ James L. Wahle 3/27/96
/s/ Carl E. Dollman 3/27/96 ------------------------------------
- ------------------------------------ James L. Wahle
Carl E. Dollman Director
Director
/s/ James A. Meagle, Jr. 3/27/96 ------------------------------------
- ------------------------------------ Thomas N. Webster
James A. Meagle, Jr. Director
Director
------------------------------------
- ------------------------------------ Morris B. Wilkins
David L. Mendenhall Director
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, 1995 and 1994
Consolidated statements of income--Years ended December 31, 1995, 1994 and
1993
Consolidated statements of shareholders' equity--Years ended December 31,
1995, 1994 and 1993
Consolidated statements of cash flows--Years ended December 31, 1995, 1994
and 1993
Notes to consolidated financial statements--December 31, 1995
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: 1995 1994
------------------------
<S> <C> <C>
Average shares outstanding 1,463,201 1,285,391
Net Income $4,745,503 $4,397,737
Less dividend paid on convertible
preferred stock 0 203,738
------------------------
Applicable to common stock $4,745,503 $4,193,999
========================
Per Share Amount $ 3.24 $ 3.26
FULLY DILUTED:
Average shares outstanding 1,463,201 1,285,391
Effect of conversion of convertible
preferred stock 164,250
------------------------
TOTAL 1,463,201 1,449,641
========================
Net Income $4,745,503 $4,397,737
========================
Per Share Amount $ 3.24 $ 3.03
</TABLE>
Page 11
<PAGE>
EXHIBIT 13
[LOGO OF COMMERCIAL BANCSHARES, INC]
COMMERCIAL BANCSHARES, INC.
1995 ANNUAL REPORT
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Selected Financial Data
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Commercial BancShares, Incorporated
and Subsidiaries
At Year End 1995 1994 1993 1992 1991
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Total Assets $385,656 $372,223 $349,713 $337,005 $317,876
Total Deposits 340,584 323,959 311,303 301,714 286,119
Total Loans 263,731 256,402 222,621 223,013 203,131
Total Shareholders' Equity 38,203 33,608 30,844 28,373 26,416
Long-term Debt 0 0 424 362 221
- ------------------------------------------------------------------------------
For the Year Ended
(Thousands of Dollars)
Total Interest Income $ 30,425 $ 26,933 $ 25,559 $ 27,468 $ 28,536
Net Interest Income 17,873 17,312 15,594 15,494 13,677
Provision for Loan Losses 418 417 247 983 962
Net Income 4,745 4,398 3,716 3,240 2,212
- ------------------------------------------------------------------------------
Per Common Share
(Dollars)
Net Income (Fully Diluted) $ 3.24 $ 3.03 $ 2.56 $ 2.24 $ 1.44
Cash Dividends Declared 1.12 1.03 .94 .83 .80
- ------------------------------------------------------------------------------
</TABLE>
Communities Served by Commercial BancShares
[Map showing Counties and Communities in which Commercial BancShares operates.]
Wetzel County, West Virginia
New Martinsville
Paden City
Tyler County, West Virginia
Middlebourne
Sistersville
Ritchie County, West Virginia
Harrisville
Pennsboro
Cairo
Wood County, West Virginia
Parkersburg
Mineral Wells
Vienna
Jackson County, West Virginia
Ravenswood
Ripley
Washington County, Ohio
Marietta
Barlow
[Annual Report Page 1]
<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 1995 rose 7.9% to $4.75 million from $4.4 million in
1994. Fully diluted earnings per share reached $3.24 compared to $3.03 for
1994.
<TABLE>
<CAPTION>
CHART OF NET INCOME
<S> <C>
1995 $4,745,000
1994 $4,398,000
1993 $3,716,000
1992 $3,240,000
1991 $2,212,000
</TABLE>
Consolidated total assets increased to $386 million at December 31,
1995, an increase of 3.6% from a year earlier. Growth continues to come from
the expanding network of branches operated by our affiliate banks.
During 1995 Jackson County Bank acquired a supermarket branch in
Ripley. This new office has given Ripley residents improved access to our
complete offering of financial services. It has also increased the presence and
visibility of the Jackson County Bank in the county seat and the surrounding
area.
Late in the year, The Dime Bank opened a new branch in Barlow, Ohio.
The attractive facility serves a growing section of Washington County from a
convenient location at an important highway intersection.
Because of its continuing growth, the Vienna Branch of Commercial
Banking and Trust Company had a major expansion project completed during the
year. The enlarged facilities offer new drive-in lanes and more office and
conference space. Also, security was improved and additional work space was
provided.
With the new facilities, there are now fifteen communities being
served by the seven BancShares' banks. In addition to our investment in "bricks
and mortar," we are continually striving to improve our data processing and
communications systems. We also look for new ways to serve our customers.
During 1995, Commercial Banking and Trust Company introduced
Business|Manager(R), a program wherein the bank helps customers by
collecting their receivables for them and improving their cash flow.
<TABLE>
<CAPTION>
CHART SHOWING NUMBER OF LOCATIONS
<S> <C>
1995 15
1994 13
1993 8
1992 8
1991 6
</TABLE>
In each community we serve, there is a local presence and flavor and
each Bank has its own President and Board of Directors. That localized influence
provides us with many opportunities to give back to the communities we serve.
BancShares banks donated over $85,000 to charities in 1995. Our officers and
employees participated in many local non-profit organizations, including Boy
Scouts, Girl Scouts, American Red Cross, United Way, SW Resources, American
Cancer Society, Partners in Education, Habitat for Humanity, Easter Seals,
[Annual Report Page 2]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
President's Message
- -------------------------------------------------------------------------------
local hospitals, economic development groups, fine arts groups, school
boosters organizations and service clubs. Our affiliates own over six million
dollars in investment securities issued by the counties, cities and towns where
we are located.
Dividends for the year amounted to $1.12 per common share which
compares to $1.03 in 1994, an 8.7% increase. The dividend for 1995 was equal to
35% of net income.
<TABLE>
<CAPTION>
CHART SHOWING DIVIDENDS PER SHARE
<S> <C>
1995 $1.12
1994 $1.03
1993 $0.94
1992 $0.83
1991 $0.80
</TABLE>
Total Shareholders' equity at December 31, 1995, showed an increase of
13.7% from the December, 1994, amount. Earnings were the major factor in the
growth, with retained earnings after dividend adding 9.25% to equity. The
increase in the market value of securities available for sale added 3.2% and the
sale of all remaining treasury stock added 0.9%. The sale of new shares to the
Employee Stock Ownership Plan provided the remaining additions.
The Board of Directors took a significant step in November when it
decided to seek listing of Commercial BancShares common stock on the American
Stock Exchange. The application process is expected to be completed in 1996,
and listing will be widely announced. Listing on the AMEX should improve the
liquidity of BancShares stock, make our company more visible to the investment
community, and provide our shareholders with the opportunity to get the best
possible price every time they trade.
<TABLE>
<CAPTION>
CHART SHOWING TOTAL SHAREHOLDERS' EQUITY
<S> <C>
1995 $38,203,000
1994 $33,608,000
1993 $30,844,000
1992 $28,373,000
1991 $26,416,000
</TABLE>
At Commercial BancShares, we continue to be committed to operate as a
growing network of community banks. We pledge our best efforts to seeking
opportunities for expansion that reinforce that commitment. Our banks offer the
finest in customer products and services. And we will work to keep it that way.
I encourage our shareholders and friends to actively promote our seven
subsidiary banks. Use their services and recommend them to your associates.
Sincerely,
/s/ William E. Mildren, Jr.
William E. Mildren, Jr.
Chairman, President and
Chief Executive Officer
[Annual Report Page 3]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Consolidated Balance Sheets
as of December 31, 1995 and 1994
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IN THOUSANDS
----------------------
1995 1994
---- ----
ASSETS
<S> <C> <C>
Cash and Due from Banks $ 16,743 $ 16,304
Interest-Bearing Demand Deposits with 686 323
Other Banks
Interest-Bearing Time Deposits with 99 299
Other Banks
Federal Funds Sold 1,680 1,405
Investment Securities:
Held to Maturity, at Amortized Costs
(Market Values: 1995 - $34,675; 34,058 41,150
1994 - $40,384)
Available-for-Sale, at Market Values 53,366 42,940
Loans - Net 263,731 256,402
LESS: Allowance for Loan Losses (3,516) (3,430)
Premises and Equipment - Net 8,585 7,129
Notes Receivable 255 255
Accrued Interest Receivable 2,760 2,549
Foreclosed Properties - Net 1,652 1,329
Other Assets 5,557 5,568
-------- --------
TOTAL ASSETS $385,656 $372,223
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS
Demand - Noninterest Bearing $ 46,629 $ 46,499
Demand - Interest Bearing 44,577 44,462
Savings 85,673 98,039
Time Deposits 163,705 134,959
-------- --------
TOTAL DEPOSITS $340,584 $323,959
Federal Funds Purchased and Securities Sold
under Agreements to Repurchase 2,134 10,972
Accrued Interest Payable 1,217 812
Other Liabilities 3,518 2,872
-------- --------
TOTAL LIABILITIES $347,453 $338,615
-------- --------
SHAREHOLDERS' EQUITY
Common Stock ($5.00 Par Value: 2,000,000
Shares Authorized: Issued Shares; 1,469,670
in 1995, 1,467,040 in 1994) $ 7,348 $ 7,335
Additional Paid in Capital 10,261 10,079
Undivided Profits 20,230 17,122
Treasury Stock, at Cost (-0- Shares in 1995,
10,578 Shares in 1994) -0- (209)
Unrealized Gain (Loss) on Securities
Available-for-Sale, Net of Applicable
Deferred Income Taxes 364 (719)
-------- --------
TOTAL SHAREHOLDERS' EQUITY $ 38,203 $ 33,608
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $385,656 $372,223
======== ========
</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 Income
for the years ended December 31, 1995, 1994 and 1993
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IN THOUSANDS
EXCEPT FOR PER SHARE DATA
------------------------------------
1995 1994 1993
------- -------- --------
<S> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $24,588 $ 21,777 $ 20,052
Interest on Notes Receivable 21 -0- 17
Interest and Dividends on Securities 5,243 4,894 4,975
Interest on Federal Funds Sold 535 242 498
Interest on Deposits with Banks 38 20 17
------- -------- --------
TOTAL INTEREST INCOME $30,425 $ 26,933 $ 25,559
------- -------- --------
INTEREST EXPENSE
Interest on Deposits $12,161 $ 9,370 $ 9,805
Interest on Other Borrowings 391 251 160
------- -------- --------
TOTAL INTEREST EXPENSE $12,552 $ 9,621 $ 9,965
------- -------- --------
NET INTEREST INCOME $17,873 $ 17,312 $ 15,594
Provision for Loan Losses 418 417 247
------- -------- --------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES
$17,455 $ 16,895 $ 15,347
------- -------- --------
NONINTEREST INCOME
Trust Department Income $ 684 $ 529 $ 536
Service Charges, Fees, and Commissions 1,199 1,221 1,203
Security Gains (Losses) (1) (220) 15
Other Income 1,137 485 601
------- -------- --------
TOTAL NONINTEREST INCOME $ 3,019 $ 2,015 $ 2,355
------- -------- --------
NONINTEREST EXPENSES
Employee Compensation and Benefits $ 7,486 $ 7,000 $ 6,278
Occupancy Expense, Net of Revenues 900 675 727
Furniture and Equipment Expense 1,004 955 946
Other Operating Expenses 4,163 4,356 4,119
------- -------- --------
TOTAL NONINTEREST EXPENSES $13,553 $ 12,986 $ 12,070
------- -------- --------
INCOME BEFORE INCOME TAXES $ 6,921 $ 5,924 $ 5,632
Applicable Income Taxes 2,176 1,526 1,916
------- -------- --------
NET INCOME $ 4,745 $ 4,398 $ 3,716
======= ======== ========
NET INCOME AVAILABLE FOR COMMON
SHAREHOLDERS' $ 4,745 $ 4,194 $ 3,443
------- -------- --------
EARNINGS PER SHARE DATA:
Primary $3.24 $3.26 $2.98
------- -------- --------
Fully Diluted $3.24 $3.03 $2.56
------- -------- --------
</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 Changes in Shareholders' Equity
for the years ended December 31, 1995, 1994, and 1993
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IN THOUSANDS
------------------------------------
1995 1994 1993
------- -------- --------
<S> <C> <C> <C>
CONVERTIBLE PREFERRED STOCK
Cumulative Preferred $100.00
Series:(43,328 Shares Authorized):
Balance at Beginning of Year $ -0- $ 2,716 $ 2,725
Conversion of Preferred Stock to
Common Stock -0- (2,716) (9)
------- -------- --------
BALANCE AT END OF YEAR - -0- Shares
Outstanding in 1995 and 1994, 27,165
Shares Outstanding in 1993 $ -0- $ -0- $ 2,716
------- -------- --------
COMMON STOCK
($5.00 Par Value; 2,000,000 Shares
Authorized):
Balance at Beginning of Year $ 7,335 $ 6,339 $ 6,336
Issuance of Common Stock for Cash 13
Issuance of Common Stock under
Conversion of Preferred Stock -0- 996 3
------- -------- --------
BALANCE AT END OF YEAR - 1,469,670
Shares Issued in 1995, 1,467,040
Shares Issued in 1994, and 1,267,904
Shares Issued in 1993 $ 7,348 $ 7,335 $ 6,339
------- -------- --------
ADDITIONAL PAID IN CAPITAL
Balance at Beginning of Year $10,079 $ 8,298 $ 8,292
Additional Paid in Capital from New
Issuance 75
Additional Paid in Capital from
Conversion of Preferred Stock to
Common Stock -0- 1,720 5
Additional Paid in Capital from
Resale of Treasury Stock 108 68 1
Payment of Fractional Shares (1) (7) -0-
------- -------- --------
BALANCE AT END OF YEAR $10,261 $ 10,079 $ 8,298
------- -------- --------
UNDIVIDED PROFITS
Balance at Beginning of Year $17,122 $ 14,185 $ 11,761
Net Income 4,745 4,398 3,716
Cash Dividends Declared:
Convertible Preferred Stock -0- (204) (273)
Common Stock (1,637) (1,257) (1,019)
------- -------- --------
BALANCE AT END OF YEAR $20,230 $ 17,122 $ 14,185
------- -------- --------
UNREALIZED GAIN (LOSS) ON SECURITIES
AVAILABLE-FOR-SALE, NET OF APPLICABLE
DEFERRED INCOME TAXES
Balance at Beginning of Year $ (719) $ 77 $ (29)
Change in Unrealized Gain (Loss) on
Securities Available-for-Sale 1,083 (796) 106
------- -------- --------
BALANCE AT END OF YEAR $ 364 $ (719) $ 77
------- -------- --------
</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 Changes in Shareholders' Equity (continued)
for the years ended December 31, 1995, 1994, and 1993
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IN THOUSANDS
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
LESS: EMPLOYEE STOCK OWNERSHIP PLAN
SHARES COLLATERALIZING DEBT AT COST
Balance at Beginning of Year $ -0- $ 424 $ 362
Purchase of Common Stock -0- 94
Principal Reduction of ESOP
Obligation -0- (424) (32)
------- ------- -------
BALANCE AT END OF YEAR -0- Shares
in 1995 and 1994, 43,062 Shares in
1993 $ -0- $ -0- $ 424
------- ------- -------
TREASURY STOCK, AT COST
Balance at Beginning of Year $ 209 $ 347 $ 350
Resale of 10,578 Shares, 7,065
Shares, and 135 Shares of Treasury
Stock, at Cost in 1995, 1994, and
1993, Respectively (209) (138) (3)
------- ------- -------
BALANCE AT END OF YEAR -0- Shares
in 1995, 10,578 Shares in 1994,
and 17,643 Shares in 1993 $ -0- $ 209 $ 347
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY $38,203 $33,608 $30,844
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
[Annual Report Page 7]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (continued)
for the years ended December 31, 1995, 1994, and 1993
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IN THOUSANDS
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 4,745 $ 4,398 $ 3,716
-------- -------- --------
Adjustments to Reconcile Net Income
to Net Cash from Operating
Activities:
Deferred Compensation Benefits $ -0- $ -0- $ 60
Depreciation 871 861 850
Provision for Loan Losses 418 417 247
Provision for Losses on
Foreclosed Properties -0- -0- 190
Net Amortization (Accretion) on
Investments 227 610 375
Provision for Deferred Taxes (87) (782) (173)
(Gain) Loss on Sale of
Capitalized Assets 19 21 2
Realized (Gain) Loss on Sale of
Investment Securities 1 220 (15)
Income Tax Benefit (366) (160) (258)
Purchase Adjustments 76 83 82
Other Items - Net (15) (16) 7
(Increase) Decrease:
Accrued Interest Receivable (210) (112) (168)
Other Assets (444) (1,844) (997)
Increase (Decrease):
Accrued Interest Payable 404 64 (121)
Other Liabilities 1,033 1,334 304
-------- -------- --------
TOTAL ADJUSTMENTS $ 1,927 $ 696 $ 385
-------- -------- --------
NET CASH FLOWS FROM OPERATING ACTIVITIES $ 6,672 $ 5,094 $ 4,101
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (Increase) Decrease in Short-Term
Investments $ (75) $ 7,294 $ 7,042
Proceeds from Sales of Investments
Held-to-Maturity 1,274 806 1,097
Proceeds from Sales of Investments
Available-for-Sale -0- 12,737 -0-
Proceeds from Maturities of
Investments Held-to-Maturity 15,272 15,911 25,938
Proceeds from Maturities of
Investments Available-for-Sale 12,282 6,364 -0-
Purchases of Investments
Held-to-Maturity (11,170) (10,126) (47,134)
Purchases of Investments
Available-for-Sale (19,250) (18,265) -0-
Net (Increase) Decrease in Loans ( 8,611) (34,774) 551
Proceeds from Sale of Other Real
Estate Owned 322 419 120
Proceeds from Sale of Capital Assets 11 -0- 43
Capital Expenditures (2,357) (857) (749)
-------- -------- --------
NET CASH FLOWS FROM INVESTING ACTIVITIES $(12,302) $(20,491) $(13,092)
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
[Annual Report Page 8]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (continued)
for the years ended December 31, 1995, 1994, and 1993
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IN THOUSANDS
-----------------------------
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase (Decrease) in Total
Deposits $16,503 $12,657 $ 9,420
Net Increase (Decrease) in Federal
Funds Purchased and Securities Sold
under Agreements to Repurchase (8,838) 6,790 596
Proceeds from Issuance of Common Stock 88 -0- -0-
Proceeds from Sale of Treasury Stock 317 204 3
Payment for Fractional Shares (1) (7) -0-
Principal Payments on ESOP Borrowings -0- -0- (32)
Principal Payments on Capital Lease
Obligations -0- -0- (27)
Proceeds from Issuance of ESOP Debt -0- -0- 94
Liquidating Dividend Paid -0- (22) -0-
Dividends Paid (1,637) (1,461) (1,292)
------- ------- -------
NET CASH FLOWS FROM FINANCING ACTIVITIES $ 6,432 $18,161 $ 8,762
------- ------- -------
NET INCREASE (DECREASE) IN CASH AND DUE
FROM BANKS $ 802 $ 2,764 $ (229)
CASH AND DUE FROM BANKS AT BEGINNING OF
YEAR 16,627 13,863 14,092
------- ------- -------
CASH AND DUE FROM BANKS AT END OF YEAR $17,429 $16,627 $13,863
======= ======= =======
SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Conversion of Convertible Preferred
Stock to Common Stock $ -0- $ 2,716 $ 9
Loans Transferred to Foreclosed
Properties $ 527 $ 247 $ 124
Change in Unrealized Gain (Loss) on
Available-for-Sale Securities $ 1,083 $ (796) $ 106
SUPPLEMENTARY DISCLOSURE OF CASH FLOWS
INFORMATION:
Cash Paid during the Year For:
Interest $11,147 $ 9,557 $10,087
Income Taxes $ 1,945 $ 1,996 $ 2,642
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
[Annual Report Page 9]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1995
- -------------------------------------------------------------------------------
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Basis of Presentation
- ---------------------
The accounting and reporting policies of Commercial BancShares, Inc. and
Subsidiaries (the Corporation) 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 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 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, 1993. All significant
intercompany transactions have been eliminated.
Summarized results of operations, in thousands, of the Corporation and
Hometown for each of the appropriate operating periods are as follows:
<TABLE>
<CAPTION>
1994 1993
-----------------------------------------------------------
COMMERCIAL HOMETOWN COMMERCIAL HOMETOWN
BANCSHARES, BANCSHARES, BANCSHARES, BANCSHARES,
INC. AND INC. AND INC. AND INC. AND
SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES
(12 MONTHS) (7 MONTHS) (12 MONTHS) (12 MONTHS)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Total Interest Income $ 22,998 $ 3,935 $18,474 $ 7,085
Total Interest Expense (8,155) (1,466) (7,114) (2,852)
Provision for Loan Losses (351) (66) (88) (159)
Other Income 1,563 452 1,966 390
Other Expenses (11,110) (1,876) (9,002) (3,068)
Applicable Income Taxes (1,176) (350) (1,462) (454)
-------- ------- ------- -------
NET INCOME $ 3,769 $ 629 $ 2,774 $ 942
======== ======= ======= =======
</TABLE>
Nature of Operations
- ---------------------------
The Corporation's Subsidiaries provide a variety of financial services to
individuals and businesses through their 15 facilities located throughout the
Mid-Ohio Valley area encompassing West Virginia and Ohio. The Subsidiaries'
primary deposit products are demand deposits and certificates of deposit, and
their primary lending products are real estate mortgage, commercial, and
consumer loans.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for losses on loans and the
valuation of real estate or other property acquired in connection with
foreclosures or in satisfaction of loans. In connection with the determination
of the allowances for losses on loans and foreclosed real estate or other
property, management obtains independent appraisals for significant properties.
Change in Accounting Principles
- -------------------------------
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, 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 to prohibit the use of 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.
[Annual Report Page 10]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1995
- -------------------------------------------------------------------------------
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
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 during the month of April, 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 from 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 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. For all loans, interest is
accrued daily on the outstanding balances.
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.
The carrying values of impaired loans are periodically adjusted to reflect
cash payments, revised estimates of future cash flows, and increases in the
present value of expected cash flows due to the passage of time. Cash payments
representing interest income are reported as such. Other cash payments are
reported as reductions in carrying value, while increases or decreases due to
changes in estimates of future payments and due to the passage of time are
reported through bad debt expense.
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
risk, credit review, and approval process as a loan. Many commitments expire
without being used and, therefore, do not represent future funding requirements.
Allowance for Loan Losses
- -------------------------
The allowance 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 allowance 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 allowance. 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 allowance 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. In
addition, regulatory agencies, as an integral part of their examination process,
periodically review
[Annual Report Page 11]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1995
- -------------------------------------------------------------------------------
the Subsidiaries' allowances for losses on outstanding credit and foreclosed
properties in satisfaction of such credit. Such agencies may require the
Subsidiaries to recognize additions to the allowance based on their judgments
about information available to them at the time of their examination.
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.
FASB Standard No. 114 was adopted at January 1, 1995. Under this standard,
loans considered to be impaired are reduced to the present value of expected
future cash flows or to the fair value of collateral by allocating a portion of
the allowance for loan losses to such loans. If these allocations cause the
allowance for loan losses to require increase, such increase is reported as bad
debt expense. The adoption of this standard had no effect to the Corporation's
reported net income.
Foreclosed Properties
- ---------------------
Foreclosed 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, utilizing either the estimated
replacement cost, the selling price of properties utilized for similar purposes,
or discounted cash flow analyses of the properties' operations, less estimated
selling costs. In addition, foreclosed properties include in-substance
foreclosed properties which are those properties that physical possession has
been taken, regardless of whether formal foreclosure proceedings have taken
place. 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 allowance 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.
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
consolidated financial statements.
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 elimination 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 1,463,201 shares, 1,285,391 shares, and
1,250,283 shares for the years 1995, 1994, and 1993, 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 1,463,201 shares, 1,449,641 shares, and 1,449,567 shares in 1995,
1994 and 1993, respectively.
NOTE 2: SECURITIES
The investment securities portfolio is comprised of securities classified as
available-for-sale and held-to-maturity, in accordance with SFAS Number 115.
This results 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.
Securities and short-term investment activities are conducted with a diverse
group of domestic governments, corporations, depository, and other financial
institutions. Investments in state and municipal securities also involve
governmental entities within the Corporation's market area.
[Annual Report Page 12]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1995
- -------------------------------------------------------------------------------
The following represents the investment securities portfolio for the years
ended:
<TABLE>
<CAPTION>
IN THOUSANDS
DECEMBER 31, 1995
---------------------------------------------
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 $ 14 $-0- $ -0- $ 14
Other, Primarily U. S. Treasuries 21,012 265 (35) 21,242
Obligations of States and Political
Subdivisions 12,903 388 (4) 13,287
Other Debt Securities 129 4 (1) 132
------- ---- ------- -------
TOTAL $34,058 $657 $ (40) $34,675
======= ==== ======= =======
SECURITIES AVAILABLE-FOR-SALE:
U. S. Government and Federal
Agency/Corporation Obligations:
Mortgage-Backed Securities $ 8,811 $ 49 $ (37) $ 8,823
Collateralized Mortgage Obligations 4,559 62 -0- 4,621
Other, Primarily U. S. Treasuries 37,466 626 (66) 38,026
Other Debt Securities 1,127 6 (52) 1,081
------- ---- ------- -------
$51,963 $743 $ (155) $52,551
Equity Securities 815 -0- 0- 815
------- ---- ------- -------
TOTAL $52,778 $743 $ (155) $53,366
======= ==== ======= =======
</TABLE>
<TABLE>
<CAPTION>
IN THOUSANDS
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
======= ==== ======= =======
</TABLE>
The amortized cost and estimated market value of securities at December 31,
1995, 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>
IN THOUSANDS
------------------------------------------------------------
SECURITIES HELD-TO MATURITY SECURITIES AVAILABLE-FOR-SALE
----------------------------- -----------------------------
ESTIMATED ESTIMATED
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
<S> <C> <C> <C> <C>
Due in One Year or Less $ 7,815 $ 7,848 $12,296 $12,372
Due after One Year through Five Years 20,557 20,923 26,360 26,788
Due after Five Years through Ten Years 4,553 4,687 7,513 7,570
Due after Ten Years 1,133 1,217 5,794 5,821
------- ------- ------- -------
$34,058 $34,675 $51,963 $52,551
Equity Securities -0- -0- 815 815
------- ------- ------- -------
TOTAL $34,058 $34,675 $52,778 $53,366
======= ======= ======= =======
</TABLE>
Proceeds from sales of investments in debt securities during 1995, 1994, and
1993 were $1,274, $806, and $1,097 thousand, respectively. Gross gains of $-0-
, $110, and $3 thousand and gross losses of $1, $331, and $-0- thousand were
realized on those sales during 1995, 1994, and 1993, respectively. Security
gains of $-0- thousand recognized in 1995 and 1994, 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 $17,098 thousand and $27,607 thousand
and estimated market value of $18,671 thousand and $28,367 thousand at December
31, 1995 and 1994, respectively.
Interest on Securities
- ----------------------
The following represents the interest on securities, presented by investment
classifications, for the years ended:
<TABLE>
<CAPTION>
IN THOUSANDS
DECEMBER 31,
---------------------------------
1995 1994 1993
--------- --------- ----------
<S> <C> <C> <C>
U. S. Government and Federal Agency/
Corporation Obligations $4,367 $ 4,014 $ 4,055
State, County, and Municipal Bonds
(Substantially All Exempt from Federal
Income Tax) 744 747 756
Other Investments 132 133 164
------ -------- --------
TOTAL $5,243 $ 4,894 $ 4,975
====== ======== ========
</TABLE>
NOTE 3: LOANS
Major classifications of loans, net of deferred fees, are summarized as
follows for the years ended:
<TABLE>
<CAPTION>
IN THOUSANDS
DECEMBER 31,
-----------------------
1995 1994
-------- --------
<S> <C> <C>
Real Estate $102,941 $ 88,321
Consumer 52,124 61,305
Commercial and Industrial 104,645 103,230
Credit Card Loans 4,299 4,527
-------- --------
$264,009 $257,383
Deferred Loan Fees (278) (981)
-------- --------
LOANS - NET $263,731 $256,402
======== ========
</TABLE>
Changes in the allowance for loan losses were as follows for the years ended:
<TABLE>
<CAPTION>
IN THOUSANDS
DECEMBER 31,
--------------------------------
1995 1994 1993
------ -------- --------
<S> <C> <C> <C>
BALANCE BEGINNING OF YEAR $3,430 $ 3,138 $ 2,958
Provisions Charged to Operations 418 417 247
Loans Charged Off (428) (245) (280)
Recoveries 96 120 213
------ -------- --------
BALANCE, END OF YEAR $3,516 $ 3,430 $ 3,138
====== ======== ========
</TABLE>
[Annual Report Page 13]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1995
- -------------------------------------------------------------------------------
Information regarding impaired loans is as follows for the year ended:
<TABLE>
<CAPTION>
IN THOUSANDS
DECEMBER 31,
------------
1995
--------
<S> <C>
Information on Impaired Loans for the Period:
Average Investment in Impaired Loans $ 934
Interest Income Recognized on Impaired Loans Including Interest
Income Recognized on Cash Basis 132
Interest Income Recognized on Impaired Loans on Cash Basis 30
Information on Impaired Loans for the Period Ended:
Balance of Impaired Loans $ 1,181
LESS: Portion for which no Allowance for Loan Losses is Allocated (360)
--------
Portion of Impaired Loan Balance for which an Allowance for Loan
Losses is Allocated $ 821
--------
Portion of Allowance for Loan Losses Allocated to the Impaired
Loan Balance $ 102
--------
</TABLE>
Set forth below are the principal balances of nonaccrual (cash basis) and
renegotiated loans, including those loans which have been classified and
presented as impaired loans, and other assets acquired in loan related
transactions for the years ended:
<TABLE>
<CAPTION>
IN THOUSANDS
DECEMBER 31,
----------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Nonaccrual Loans $ 821 $ 739 $ 355
Renegotiated or Restructured Loans 1,399 1,403 121
------ ------ ------
TOTAL UNDER-PERFORMING LOANS $2,220 $2,142 $ 476
Other Assets Acquired in Satisfaction
of Loans (Primarily Foreclosed
Properties) 1,652 1,329 1,274
------ ------ ------
TOTAL UNDER-PERFORMING ASSETS $3,872 $3,471 $1,750
====== ====== ======
</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, 1995, 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
DECEMBER 31,
----------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Gross Amount of Interest That Would
Have Been Recorded at Original Rate $ 81 $ 154 $ 60
Interest That Was Reflected in
Revenue/1/ (30) (17) (3)
----- ----- -----
NEGATIVE INTEREST REVENUE IMPACT $ 51 $ 137 $ 57
===== ===== =====
</TABLE>
/1/ Represents interest collected on nonaccrual loans including loans
classified as impaired.
Foreclosed properties of $1,652 thousand and $1,329 thousand are stated net
of reserves of $190 thousand and $190 thousand at December 31, 1995 and 1994,
respectively. The reserve at December 31, 1995 includes $-0- for estimated
selling costs. Provisions charged to operations for changes in the carrying
value of foreclosed properties amounted to $-0- thousand, $-0- thousand, and
$190 thousand in 1995, 1994, and 1993, 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
DECEMBER 31,
------------------------
DESCRIPTION ESTIMATED USEFUL LIFE 1995 1994
--------- -------------
<S> <C> <C> <C>
Land $ 1,431 $ 1,421
Bank Premises 15 to 40 Years 8,970 7,453
Furniture and Equipment 5 to 10 Years 4,733 4,861
Construction in Progress 340 -0-
------- -------
$15,474 $13,735
LESS: Accumulated
Depreciation (6,889) (6,606)
------- -------
TOTAL $ 8,585 $ 7,129
======= =======
</TABLE>
Depreciation and amortization amounted to $871 thousand, $861 thousand, and
$850 thousand for the years ended December 31, 1995, 1994, and 1993,
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
-------------------------------------
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
BALANCE PERCENT BALANCE PERCENT
<S> <C> <C> <C> <C>
MATURING:
Three Months or Less $ 7,808 32% $ 5,385 31%
Over Three to Six Months 3,637 15% 2,380 14%
Over Six to Twelve Months 3,554 15% 2,860 16%
Over One Year 9,087 38% 6,888 39%
------- --- ------- ---
$24,086 100% $17,513 100%
======= === ======= ===
</TABLE>
Interest expense on time deposits in denominations of $100 thousand or more
as of December 31, 1995, 1994, and 1993 was $1,101 thousand, $589 thousand, and
$454 thousand, respectively.
[Annual Report Page 14]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1995
- -------------------------------------------------------------------------------
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 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
IN THOUSANDS
DECEMBER 31,
---------------------------
1995 1994
---- ----
<S> <C> <C>
FEDERAL FUNDS PURCHASED
Balance at End of Year $ 606 $7,233
Average during Year $ 914 $4,635
Maximum Month-End Balance $7,624 $8,233
Average Rate during Year 5.91 % 4.62 %
Rate at Year End 5.23 % 6.21 %
SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE
Balance at End of Year $1,528 $3,739
Average during Year $1,793 $5,027
Maximum Month-End Balance $4,898 $6,377
Average Rate during Year 5.04 % 4.48 %
Rate at Year End 5.20 % 5.12 %
</TABLE>
NOTE 7: ESOP BORROWING
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 of up to $1,000,000, available
on a revolving basis until May 31, 1993, at which time it was converted to a
term loan. The Corporation repaid the ESOP borrowing in full during the first
quarter of 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,
-------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Federal Statutory Tax Rate 34 % 34 % 34 %
Tax-Exempt Interest Income (9) % (11) % (12) %
State Income Tax 3 % 4 % 5 %
Tax Effect of Other Items 3 % (1) % 7 %
------ ------ ------
REPORTED EFFECTIVE TAX RATE 31 % 26 % 34 %
====== ====== ======
</TABLE>
The provision for income taxes in the Consolidated Statement of Income
consists of the following for the years ended:
<TABLE>
<CAPTION>
IN THOUSANDS
DECEMBER 31,
------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Current Income Taxes:
Federal $2,198 $2,014 $1,791
State 61 294 298
Deferred Income Taxes (83) (782) (173)
------ ------ ------
NET INCOME TAXES $2,176 $1,526 $1,916
====== ====== ======
</TABLE>
The approximate tax effects of the net investment securities transactions for
the years ended December 31, 1995, 1994, and 1993 were $-0- thousand, $(88)
thousand, and $7 thousand, respectively.
Deferred taxes are recorded by applying the marginal tax rate to temporary
differences. 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 will be required to reduce the recorded deferred tax assets to net
realizable value.
Net deferred income taxes are included in other assets on the Consolidated
Balance Sheets. Significant temporary differences between tax and financial
reporting that give rise to net deferred tax assets (liabilities) are as follows
for the years ended:
<TABLE>
<CAPTION>
IN THOUSANDS
DECEMBER 31,
-------------------------
1995 1994 CHANGE
------- -------
<S> <C> <C> <C>
Allowance for Loan Losses $1,399 $1,429 $ (30)
Valuation Allowance on Related Deferred
Tax (492) (506) 14
Organizational Expenses 3 6 (3)
Premises and Equipment (234) (227) (7)
Deferred Compensation for Officers and
Directors 561 452 109
------ ------ -----
$1,237 $1,154 $ 83
Unrealized Gain (Loss) On Securities
Available-For-Sale (222) 437 (659)
------ ------ -----
TOTAL $1,015 $1,591 $(576)
====== ====== =====
</TABLE>
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 1,469,670 shares, 1,467,040 shares, and 1,267,904 shares at
December 31, 1995, 1994, and 1993, respectively. Shares outstanding were
1,469,670 shares, 1,456,462 shares, and 1,250,261 shares at December 31, 1995,
1994, and 1993, respectively.
The outstanding shares at December 31, 1995, 1994, and 1993 include 127,141
shares, 87,427 shares, and 79,051 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 $1.12, $1.03, and $.94 for
the years 1995, 1994, and 1993, 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
[Annual Report Page 15]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1995
- -------------------------------------------------------------------------------
of December 31, 1994 and 1993, this was the only series of convertible
preferred stock authorized, issued, and outstanding. Convertible preferred
stock outstanding as of December 31, 1994 and 1993 was -0- shares and 27,165
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 were 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 the
Corporation. No fractional shares were issued on conversion but a cash
adjustment was paid to the shareholder otherwise entitled to receive a
fractional interest.
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.
Upon the reacquisition of shares of convertible preferred stock through
conversion, such reacquired shares have been canceled and have become part of
the authorized and unissued 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 subsidiary's market
area. Most customers are depositors of that Subsidiary. 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 Subsidiaries manage their loan portfolio to avoid concentration by
industry or loan size to minimize their 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.
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.
A summary of these financial instruments is as follows for the years ended:
<TABLE>
<CAPTION>
IN THOUSANDS
DECEMBER 31,
---------------------
1995 1994
------- --------
<S> <C> <C>
Financial Instruments Whose Contract
Amounts Represent Credit Risk:
Commitments to Extend Credit $ 3,301 $ 8,794
Standby Letters-of-Credit 1,501 1,106
Lines-of-Credit (Includes Credit Card 13,088 24,257
Lines-of-Credit) ------- -------
TOTAL $17,890 $34,157
======= =======
</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 $114 thousand for the
year ended December 31, 1995 and $71 thousand per year for the years ended
December 31, 1994, and 1993, 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>
1996 $124
1997 109
1998 109
1999 109
2000 94
Thereafter 281
----
TOTAL $826
====
</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
[Annual Report Page 16]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1995
- -------------------------------------------------------------------------------
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 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, 1995 was $5,427 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 not use the deferred tax asset
at December 31, 1995 in computing regulatory risk-based capital. At December
31, 1995, 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 14.25% and 15.50%, respectively,
which exceeded the minimum regulatory requirements. The consolidated leverage
ratio at December 31, 1995 was 9.51%.
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 maintained average reserves of approximately $400 thousand in
1995 with the Federal Reserve Bank of Richmond as required by the depository
agency.
NOTE 14: POST-RETIREMENT BENEFIT PLANS
The Corporation maintains an Employee Stock Ownership Plan with 401(k)
provisions that 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 $460 thousand, $297 thousand and $297 thousand in
1995, 1994, and 1993, respectively.
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 defer 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 $3,329 thousand and $3,165 thousand in 1995 and
1994, respectively. The expense recorded for the future liability was $365
thousand, $338 thousand, and $193 thousand in 1995, 1994, and 1993,
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 management's 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.
[Annual Report Page 17]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1995
- -------------------------------------------------------------------------------
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
DECEMBER 31,
------------------------
1995 1994
--------- -------------
<S> <C> <C>
BALANCE AT BEGINNING OF YEAR
$ 18,132 $ 14,168
Repayments (12,487) (11,458)
Borrowings 9,952 15,422
-------- --------
BALANCE AT END OF YEAR $ 15,597 $ 18,132
======== ========
</TABLE>
NOTE 17: OTHER OPERATING EXPENSES
The following represents the major expense classifications included in other
operating expenses for the years ended:
<TABLE>
<CAPTION>
IN THOUSANDS
DECEMBER 31,
----------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
EDP Processing and Services $ 412 $ 390 $ 382
Professional and Directors Fees 997 1,335 725
Advertising and Public Relations 302 307 327
Deposit and Liability Insurance 551 755 736
Franchise and Other Taxes 281 282 184
Provision for Losses on Foreclosed
Properties -0- -0- 190
Other Operating Expense 1,620 1,287 1,575
------ ------ ------
TOTAL $4,163 $4,356 $4,119
====== ====== ======
</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, 1995 DECEMBER 31, 1994
----------------------------------------------------------------------------
CARRYING AMOUNT ESTIMATED FAIR VALUE CARRYING AMOUNT ESTIMATED FAIR VALUE
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Cash and Short-Term Investments $ 19,208 $ 19,208 $ 18,331 $ 18,331
Marketable Securities $ 87,424 $ 88,041 $ 84,090 $ 83,324
Loans, Net $263,731 $254,232 $256,402 $245,000
Other Financial Instruments $ 255 $ 255 $ 255 $ 200
FINANCIAL LIABILITIES:
Demand Deposits $ 91,206 $ 91,206 $ 90,961 $ 90,961
Time Deposits $249,378 $250,359 $232,998 $234,500
</TABLE>
Cash and Cash Equivalents
- -----------------------------------
The carrying amounts reported in the Consolidated Balance Sheet for cash and
cash equivalents approximate those assets' fair values.
Federal Funds Sold
- ------------------
For Federal Funds sold, the carrying value approximates its fair value.
Investment Securities
- ---------------------
Fair values for investment securities are based on quoted market prices,
where available. If quoted market prices are not available, fair values are
based on quoted market prices of comparable instruments.
Loans
- -----
For variable-rate loans that reprice frequently and with no significant
change in credit risk, fair values are based on carrying amounts. The fair
values for other loans (for example, fixed rate commercial real estate and
rental property mortgage loans and commercial and industrial loans) are
estimated using discounted cash flow analysis, based on interest rates currently
being offered for loans with similar terms to borrowers of similar credit
quality. Loan fair value estimates include judgments regarding future expected
loss experience and risk
[Annual Report Page 18]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1995
- -------------------------------------------------------------------------------
characteristics. The carrying amount of accrued interest receivable approximates
its fair value.
Deposits
- --------
The fair values disclosed for demand deposits (for example, interest and non-
interest bearing checking accounts, regular savings, and certain types of money
market accounts) are, by definition, equal to the amount payable on demand at
the reporting date (that is, their carrying amounts). The fair values for
certificates of deposit are estimated using a discounted cash flow calculation
that applies interest rates currently being offered on certificates to a
schedule of aggregated contractual maturities on such time deposits. The
carrying amount of accrued interest payable approximates fair value.
Off-Balance-Sheet Instruments
- -----------------------------
Commitments to extend credit were evaluated and fair value was based on the
fees currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present creditworthiness of the
counterparties. The estimated fair values of these commitments approximate
their carrying value.
The fair value estimates presented herein are based on pertinent information
available to management as of December 31, 1995. 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.
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,
--------------------------
1995 1994
----------- -------------
<S> <C> <C>
ASSETS
Cash and Due from Banks (All from
Subsidiaries) $ 3,852,339 $ 968,108
Accounts Receivable 1,099,199 835,243
Notes Receivable 255,331 254,813
Investment in Subsidiaries (Equity
Basis) 32,798,798 31,126,318
Premises and Equipment - Net 422,558 333,250
Other Assets 794,396 651,786
----------- -----------
TOTAL ASSETS $39,222,621 $34,169,518
=========== ===========
LIABILITIES
Other Liabilities $ 1,019,147 $ 561,291
----------- -----------
TOTAL LIABILITIES $ 1,019,147 $ 561,291
----------- -----------
SHAREHOLDERS' EQUITY
Preferred Stock (Par Value $100.00),
Authorized 43,328 Shares: (Issued
Shares: -0- in 1995 and -0- in 1994) $ -0- $ -0-
Common Stock (Par Value $5.00),
Authorized 2,000,000 Shares, (Issued
Shares: 1,469,670 in 1995 and
1,467,040 in 1994) 7,348,350 7,335,200
Additional Paid in Capital 10,261,070 10,079,567
Undivided Profits 20,229,624 17,121,662
Treasury Stock, at Cost (-0- Shares
in 1995 and 10,578 Shares in 1994) -0- (209,496)
Unrealized Gain (Loss) on Securities
Available-for-Sale, Net of
Applicable Deferred Income Taxes 364,430 (718,706)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY $38,203,474 $33,608,227
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $39,222,621 $34,169,518
=========== ===========
</TABLE>
[Annual Report Page 19]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF INCOME
DECEMBER 31,
-------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
REVENUE
Interest Income $ 21,471 $ (422) $ 17,351
Management Fees from Subsidiaries 1,064,863 981,855 525,890
Dividends from Subsidiaries 4,621,000 2,599,235 1,710,920
Other Dividend Income -0- -0- 13,932
Other Income 71,595 80 6,325
Security Gains -0- 102,717 -0-
---------- ---------- ----------
TOTAL REVENUE $5,778,929 $3,683,465 $2,274,418
---------- ---------- ----------
EXPENSES
Employee Compensation and Benefits $1,242,682 $ 906,408 $ 658,376
Occupancy Expense, Net of Revenues 61,366 65,697 48,000
Furniture and Equipment Expense 255,792 236,519 228,617
Other Operating Expenses 449,707 536,822 419,735
---------- ---------- ----------
TOTAL EXPENSES $2,009,547 $1,745,446 $1,354,728
---------- ---------- ----------
Income (Loss) before Income Taxes,
Equity in Undistributed Net Income of
Subsidiaries $3,769,382 $1,938,019 $ 919,690
Applicable Income Taxes (Benefit) (386,777) (160,273) (257,871)
---------- ---------- ----------
Income before Equity in Undistributed
Net Income of Subsidiaries $4,156,159 $2,098,292 $1,177,561
Equity in Undistributed Net Income
(Loss) 589,344 2,299,445 2,538,447
---------- ---------- ----------
NET INCOME $4,745,503 $4,397,737 $3,716,008
========== ========== ==========
</TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
1995 1994 1993
------------ ------------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 4,745,503 $ 4,397,737 $ 3,716,008
----------- ----------- -----------
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating
Activities:
Deferred Employee Benefits $ -0- $ -0- $ 32,606
Depreciation 152,174 170,061 165,034
Net Amortization of Purchase
Accounting Adjustments 75,722 83,260 108,285
Undistributed Net (Income) Loss of
Subsidiaries (589,344) (2,299,445) (2,538,447)
Provision for Deferred Taxes (21,210) -0- -0-
(Gain) Loss from Sale of Investments -0- (102,717) -0-
Income Tax Benefit (365,567) (160,273) (257,871)
(Increase) Decrease:
Accounts Receivable (263,956) (743,860) 221,229
Accrued Interest Receivable (1,648) 2,412 (11,833)
Other Assets (217,246) (57,916) (4,430)
Increase (Decrease):
Other Liabilities 844,632 153,258 (154,577)
----------- ----------- -----------
TOTAL ADJUSTMENTS $ (386,443) $(2,955,220) $(2,440,004)
----------- ----------- -----------
NET CASH FLOWS FROM OPERATING ACTIVITIES $ 4,359,060 $ 1,442,517 $ 1,276,004
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sales of Investments
Available-for-Sale $ -0- $ 394,740 $ -0-
Proceeds from Sale of Capitalized Assets 1,458 -0- -0-
Proceeds from Note Receivable -0- 39 99
Capitalized Expenditures (242,940) (24,946) (45,922)
Purchases of Investments
Held-to-Maturity -0- -0- (13,488)
----------- ----------- -----------
NET CASH FLOWS FROM INVESTING ACTIVITIES $ (241,482) $ 369,833 $ (59,311)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Common Stock $ 88,105 $ -0- $ -0-
Proceeds from Sale of Treasury Stock 317,040 204,715 3,180
Payment for Fractional Shares of
Converted Preferred Stock (995) (5,993) (16)
Principal Payments on Borrowings -0- -0- (32,606)
Proceeds from Issuance of ESOP Debt -0- -0- 94,180
Cash Dividends Paid (1,637,497) (1,461,170) (1,291,594)
----------- ----------- -----------
NET CASH FLOWS FROM FINANCING ACTIVITIES $(1,233,347) $(1,262,448) $(1,226,856)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH $ 2,884,231 $ 549,902 $ (10,163)
CASH AT BEGINNING OF YEAR 968,108 418,206 428,369
----------- ----------- -----------
CASH AT END OF YEAR $ 3,852,339 $ 968,108 $ 418,206
=========== =========== ===========
SUPPLEMENTARY DISCLOSURE OF CASH FLOWS
INFORMATION
Cash Paid during the Year for:
Interest $ -0- $ -0- $ -0-
Income Taxes $ 1,945,381 $ 1,996,423 $ 2,090,038
</TABLE>
[Annual Report Page 20]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1995
- -------------------------------------------------------------------------------
Principal sources of revenues for the Corporation are dividends received from
its subsidiary banks and fees for services provided to its 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 1995.
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>
1995
- ----
Net Interest Revenue $4,461 $4,464 $4,465 $4,483 $17,873
Provision for Possible Loan Loss $ 107 $ 111 $ 111 $ 89 $ 418
Net Operating Revenue $1,711 $1,902 $1,755 $1,553 $ 6,921
Applicable Income Taxes $ 595 $ 673 $ 561 $ 347 $ 2,176
Net Income $1,116 $1,229 $1,193 $1,207 $ 4,745
Applicable to Common Stock $1,116 $1,229 $1,193 $1,207 $ 4,745
Per Common Share $ .77 $ .84 $ .81 $ .82 $ 3.24
Cash Dividends Paid Common Stock $ .28 $ .28 $ .28 $ .28 $ 1.12
1994
- ----
Net Interest Revenue $3,868 $4,300 $4,567 $4,577 $17,312
Provision for Possible Loan Loss $ 93 $ 89 $ 114 $ 121 $ 417
Net Operating Revenue $1,798 $1,340 $1,953 $ 833 $ 5,924
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 $ 280 $ 1,916
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
</TABLE>
[Annual Report Page 21]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Management's Discussion and Analysis
of Financial Condition and Results of Operations
- -------------------------------------------------------------------------------
Harman, Thompson, Mallory & Ice, A.C.
Certified Public Accountants
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, 1995 and 1994,
and the related consolidated statements of income, changes in shareholders'
equity, and cash flows for the years ended December 31, 1995, 1994, and 1993.
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 statement 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, 1995 and 1994, and the results of its operations and its cash flows
for the years ended December 31, 1995, 1994, and 1993 in conformity with
generally accepted accounting principles.
/s/Harman, Thompson, Mallory, & Ice A.C.
Parkersburg, West Virginia
February 9, 1996
Towne Square, Parkersburg, West Virginia 26102
[Annual Report Page 22]
<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 that is not otherwise apparent from the consolidated financial
statements included in this Annual Report. Reference should be made to those
statements and accompanying notes for an understanding of the following
discussion and analysis.
Results of Operations
Summary
Net income for 1995 was a record $4.745 million, up $347,000, or 7.9%,
from the 1994 earnings of $4.398 million. Net income per share was $3.24 for
1995, an increase of $.21 or 6.9% over the fully diluted 1994 income per share.
The net income was $3.716 million in 1993 and fully diluted income per share was
$2.56.
Dividends declared in 1995 amounted to $1.12 per share. This was an
increase of 8.7% over 1994, when dividends declared were $1.03 per share.
BancShares has increased its annual dividends for each of the last eight years.
In 1993, the dividends were $.94 per share.
BancShares' return on average shareholders' equity was 13.11%,
compared to 13.61% in 1994 and 12.42% in 1993. Average shareholders' equity as
a percentage of average total assets grew to 9.58% in 1995, up from 8.94% in
1994 and 8.68% in 1993. The return on total average assets for 1995 was 1.26%,
compared to 1.22% in 1994 and 1.08% in 1993.
Interest and fees on loans provide the major portion of BancShares'
revenue, amounting to 73.5% of 1995 revenues, 75.2% of 1994, and 71.8% of 1993.
Income from the interest and dividends on investment securities is also a
significant source of revenue, accounting for 15.7% of revenues in 1995, 16.9%
in 1994, and 17.8% in 1993.
Net Interest Income
Net interest income, which is the major determinant of BancShares'
income, increased by 3.24% in 1995 after increasing 11.02% in 1994. Factors
affecting net interest income include fluctuations in interest rates as well as
changes in the amount and type of earning assets and interest bearing
liabilities. The increases in 1995 and 1994 were primarily due to an increase
in the volume of average earning assets, which grew $15.8 million or 4.7% during
1995 and $17.6 million or 5.6% during 1994. This growth was primarily in
loans, which increased $17.6 million in 1995 and $19.8 million in 1994.
During 1995 interest income increased 12.97% after growing 5.38% in
1994. Along with loan growth, higher yields on loans and investments provided
increased income. Interest expense increased 30.46% in 1995, following a
decrease of 3.45% in 1994. The increased costs came from higher volume and
rates on time deposits.
BancShares expects interest rates during 1996 to continue the downward
trend established in late 1995. This should cause the net interest margin to
decrease. During times of decreasing rates, assets generally reprice more
quickly than deposits, causing the effective yield of earning assets to decline
faster than the costs of interest bearing liabilities. In addition, customers
will often reallocate their investments, particularly in time deposits, into the
highest yielding instruments available, further slowing the reduction in the
effective rate paid on deposits.
For more complete information regarding net interest income, the
following tables of average balances and interest rates on a fully taxable
equivalent basis are provided for the years indicated.
[Annual Report Page 23]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Management's Discussion and Analysis
of Financial Condition and Results of Operations
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Average Balances and Interest Rates
(In Thousands)
------------------------------------------------------------------------------------------
1995 1994 1993
--------------------------- -------------------------- ---------------------------
Average Yield/ Average Yield/ Average Yield/
Balance Interest/2/ Rate Balance Interest/2/ Rate Balance Interest/2/ Rate
-------- ---------- ------ ------- ----------- ------ -------- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
Interest-bearing deposits
with other banks $ 639 38 5.95% $ 603 20 3.32% $ 352 17 4.83%
Federal funds sold 7,438 535 7.19% 5,906 242 4.10% 16,726 498 2.98%
Taxable investments 72,972 4,565 6.25% 75,181 4,084 5.43% 68,874 4,215 6.12%
Non-taxable investments 12,227 1,027 8.41% 13,332 1,227 9.20% 11,204 833 7.43%
Notes receivable 255 21 8.24% 255 0 0.00% 255 17 6.67%
Loans/1/ 257,527 24,588 9.55% 239,938 21,777 9.08% 220,164 20,052 9.11%
-------- ------- -------- ------- -------- -------
TOTAL INTEREST-
EARNING ASSETS $351,058 30,774 8.77% $335,215 27,350 8.16% $317,575 25,632 8.07%
-------- ------- -------- ------- ---- -------- -------
Non-Interest Earning Assets:
Cash and due from banks $ 12,326 $ 13,502 $ 15,503
Other Assets 17,634 16,047 14,841
Less: Allowance for
Loan Losses -3,478 -3,271 -3,236
-------- -------- --------
TOTAL ASSETS $377,540 $361,493 $344,683
======== ======== ========
Liabilities and
Shareholders' Equity
Interest-bearing Liabilities:
Savings Deposits $ 75,130 2,255 3.00% $ 79,016 2,295 2.90% $ 75,278 1,847 2.45%
NOW, MMDA Accounts 59,647 1,408 2.36% 60,846 1,458 2.40% 59,104 1,513 2.56%
Time Deposits 154,324 8,498 5.51% 133,119 5,617 4.22% 133,969 6,446 4.81%
-------- ------- -------- ------- -------- -------
Total Deposits $289,101 12,161 4.21% $272,981 9,370 3.43% $268,351 9,806 3.65%
Other Borrowed Funds 5,236 391 7.47% 6,370 252 3.96% 6,251 160 2.56%
-------- ------- -------- ------- -------- -------
TOTAL INTEREST-
BEARING LIABILITIES $294,337 12,552 4.26% $279,351 9,622 3.44% $274,602 9,966 3.63%
------- ------- -------
Non-interest Bearing
Liabilities:
Demand Deposits 43,410 46,287 37,134
Other Liabilities 3,412 3,539 3,038
-------- -------- --------
TOTAL LIABILITIES $341,159 $329,177 $314,774
Shareholders' Equity 36,181 32,316 29,909
-------- -------- --------
LIABILITIES AND
SHAREHOLDERS EQUITY $377,540 $361,493 $344,683
======== ======== ========
Net Interest Earnings $18,221 $17,728 $15,666
======= ======= =======
Net Yield on Interest-earning
Assets 5.19% 5.29% 4.93%
</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 24]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Management's Discussion and Analysis
of Financial Condition and Results of Operations
- -------------------------------------------------------------------------------
The following table presents the changes in interest income and interest expense
resulting from changes in interest rates and changes in the volume of interest-
earning assets and interest-bearing liabilities. Changes attributable to both
rate and volume which cannot be segregated have been allocated in proportion to
the changes due to rate and volume.
<TABLE>
<CAPTION>
Rate/Volume Analysis of Net Interest Revenue
(Fully Taxable Equivalent Basis)
In Thousands
----------------------------------------------------------
1995 Compared to 1994 1994 Compared to 1993
Increase (Decrease) Increase (Decrease)
Due to Due to
Volume Rate Net Volume Rate Net
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest bearing deposits with
other banks $ 1 $ 17 $ 18 $ 9 $ (6) $ 3
Federal funds sold 75 218 293 (399) 143 (256)
Taxable investments (122) 603 481 367 (498) (131)
Non-taxable investments (98) (102) (200) 175 219 394
Notes receivable 0 21 21 0 (17) (17)
Loans 1,648 1,163 2,811 1,791 (66) 1,725
----------------------------------------------------------
TOTAL INTEREST EARNING
ASSETS $1,504 $1,920 $3,424 $1,943 $ (225) $1,718
==========================================================
Savings deposits $ (116) $ 76 $ (40) $ 95 $ 353 $ 448
NOW, MMDA accounts (27) (23) (50) 43 (98) (55)
Time deposits 987 1,894 2,881 (41) (788) (829)
Other borrowed funds (52) 191 139 3 89 92
----------------------------------------------------------
TOTAL INTEREST BEARING
LIABILITIES $ 792 $2,138 $2,930 $ 100 $ (444) $ (344)
==========================================================
</TABLE>
Other Income
Non-interest income increased 49.83% in 1995, following a 14.44%
decrease in 1994. Trust department income increased 29.30% in 1995 after
declining 1.31% in 1994. Income for the department is affected by changes in
the volume of estates being handled, as well as the value of assets owned.
Service charges, fees and commissions decreased 1.80% in 1995, compared with a
1.50% increase in 1994.
There were securities losses of $1 thousand in 1995. This compared to
losses of $220 thousand in 1994 which 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 increased the
average maturity of the investment. There were securities gains of $15 thousand
in 1993. BancShares does not operate a trading account.
All other income increased to $1.1 million in 1995, up
from $.5 million in 1994 and $.6 million in 1993.
Other Expense
Non-interest expenses were $13.6 million in 1995, compared to $13.0
million in 1994 and $12.0 million in 1993. Employee compensation and benefits
increased $486 thousand in 1995, following a $722 thousand rise in 1994.
Furniture and equipment expense increased 5.13% in 1995, after increasing 0.95%
in 1994. Occupancy expense increased 33.33% in 1995, following a decrease of
7.15% in 1994. The increases in these two categories were primarily related to
the expenses and depreciation associated with the expansion of a branch office
and purchase of computers. Other operating expenses decreased 4.43% in 1995,
compared to an increase of 5.18% in 1994. Major contributors to the decrease
were reductions in the amounts paid in professional and directors' fees and in
Federal Deposit Insurance.
Income Taxes
Income tax expense includes federal income tax and West Virginia
income tax accrued by BancShares. The effective tax rate was 31% in 1995, 26%
in 1994 and 34% in 1993. Tax exempt investment and loan income are the primary
reason the effective tax rate is less than the Federal statutory rate of 34%. A
decrease in nontaxable interest income in 1995, a decrease in the effective
state income tax rate, and an increase in other items combined to cause the
increase in the 1995 effective tax rate.
Financial Condition
Asset/Liability 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 minimize the risk of reduction in net interest
income that could result from fluctuations in market interest rates.
Interest Rate Sensitivity
The repricing schedule which follows reflects the contractual maturity
or repricing of each of BancShares' rate sensitive assets and liabilities held
at December 31, 1995. While most assets and liabilities reprice either at
maturity or according to contractual terms, several balance sheet components
demonstrate characteristics that require adjustments to more accurately reflect
their pricing behavior. Assumptions based on historical pricing relationships
and anticipated market reactions are made to certain core deposits to reflect
the elasticity of the changes in their interest rates relative to the changes in
market interest rates. In addition, estimates are made regarding early loan and
security repayments. These adjustments provide a more accurate picture of
BancShares' interest rate risk profile than the repricing schedule. Management
considers the adjusted information in making its decisions regarding the pricing
of loans and deposits and the purchase or sale of assets.
[Annual Report Page 25]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Management's Discussion and Analysis
of Financial Condition and Results of Operations
- -------------------------------------------------------------------------------
The following table shows the interest sensitivity gaps
for four different time intervals as of December 31, 1995.
<TABLE>
<CAPTION>
In Thousands
-----------------------------------------------------------------------------------------------------
0-90 91-365 1 Year Over
Days Days to 5 Yrs 5 Yrs
----------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Federal funds sold $ 1,680 $ 0 $ 0 $ 0
Investment securities 5,572 14,615 47,345 19,892
Loans 100,532 46,713 80,770 35,716
Other interest-earning 354 0 0 0
Total rate sensitive assets $108,138 $61,328 $128,115 $55,608
=============================================================================
Interest-bearing demand
deposits/1/ $ 22,288 $ 0 $ 0 $22,289
Savings deposits/1/ 42,837 0 0 42,836
CD's of $100,000 and more 7,808 7,191 9,087 0
Other time deposits 35,111 53,773 50,735 0
Borrowed funds 2,134 0 0 0
Total rate sensitive $110,178 $60,964 $ 59,822 $65,125
liabilities
=============================================================================
Interest sensitivity gap $ (2,040) $ 364 $ 68,293 $(9,517)
Cumulative gap $ (2,040) $(1,676) $ 66,617 $57,100
Cumulative gap/rate
sensitive assets (0.58%) (0.47%) 18.86% 16.17%
</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.
Total interest earning assets exceeded total interest bearing liabilities by
$57.1 million at December 31, 1995. This difference was funded through
noninterest bearing liabilities and shareholder's equity. The table reflects
contractual maturities of all investment securities and loans. It does not
include assumptions regarding early loan or security repayments. The table
indicates the total liabilities maturing or repricing within one year exceed
assets maturing or repricing within one year by $1.7 million. However,
repricing of some categories of assets or liabilities is subject to competitive
and other influences beyond the control of BancShares. Therefore, certain
assets and liabilities indicated as maturing or repricing within a certain
period may, in fact, mature or reprice in other periods or in different volumes.
Loan Portfolio
Ordinarily, BancShares' primary use of funds is to meet the loan demands of
bank customers. The loan portfolio is the largest and most profitable component
of average earning assets, totaling 73.4% of average earning assets. Average
total loans increased by $17.6 million or 7.3% in 1995, which followed a 9.0%
increase in 1994. As a result of net loan increases, BancShares' loan-to-
deposit ratio continued to increase in 1995, averaging 77.45%. This compares to
an average loan-to-deposit ratio of 75.15% in 1994 and 72.07% in 1993.
The following table shows BancShares' loan distribution at December 31 for
the years:
<TABLE>
<CAPTION>
In thousands
------------------------------------------------------
1995 1994 1993 1992 1991
-------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Commercial and Industrial $104,641 $103,230 $ 88,790 $ 93,216 $ 76,375
Real Estate 102,843 88,321 82,354 76,715 73,071
Installment and Credit Cards 56,247 64,851 51,477 53,082 53,685
------------------------------------------------------
Total $263,731 $256,402 $222,621 $223,013 $203,131
======================================================
</TABLE>
BancShares loan portfolio contains no loans to foreign borrowers. In
addition to the loans reported, BancShares also offers certain off-balance sheet
products such as letters of credit, revolving credit agreements, and other loan
commitments. These products are offered under the same credit standards as the
loans included in the loan portfolio and are included in BancShares' risk-based
capital ratios.
Provision and Allowance for Loan Losses
The provision for possible loan losses that 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 $418 thousand, $86
thousand more than net losses of $332 thousand. The net loss for 1995
represented 13% of average loans. This compares with a provision of $417
thousand in 1994, when net losses were $125 thousand (.05% of average loans).
The provision was $247 thousand in 1993, when net losses were $67 thousand (.03%
of average loans).
The reserve for possible loan losses at year end 1995 totaled $3.5 million
(1.33% of total loans), as compared to $3.4 million (1.34% of total loans) in
1994.
The following table summarizes BancShares' loan loss experience for each of
the five years ended December 31:
<TABLE>
<CAPTION>
In Thousands
-------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---------------- ----------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Balance at January 1 $3,430 $3,138 $2,958 $2,360 $2,191
- ---------------------------
Charge-offs:
Commercial loans $ 148 $ 81 $ 74 $ 406 $ 532
Real estate 26 43 51 25 88
Consumer 254 121 155 268 311
-------------------------------------------------------------------------------------
Total $ 428 $ 245 $ 280 $ 699 $ 931
Recoveries:
Commercial loans 32 53 124 210 63
Real estate 13 7 15 10 5
Consumer 50 60 74 94 70
-------------------------------------------------------------------------------------
Total $ 95 $ 120 $ 213 $ 314 $ 138
-------------------------------------------------------------------------------------
Net Charge-offs 333 125 $ 67 $ 385 $ 793
Additions charged to operations/1/ 418 417 247 983 962
-------------------------------------------------------------------------------------
Balance at December 31 $3,515 $3,430 $3,138 $2,958 $2,360
======================================================================================
Ratio of net charge-offs
to average loans outstanding 0.14% 0.05% 0.03% 0.18% 0.40%
</TABLE>
/1/ The amount charged to operations and the related balance in the reserve for
loan losses is based upon periodic evaluations of the loan portfolio by
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 26]
<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 for each of the years ended:
<TABLE>
<CAPTION>
In Thousands
-----------------------------------------------------------------------------------------------------
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
------------------------------- ---------------------------------- ------------------------------
Percent Percent Percent
of loans of loans of loans
in each in each in each
category category category
to total to total to total
Amount loans Amount loans Amount loans
-------------- --------------- ---------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Commercial and industrial $1,397 39.8% $1,382 40.3% $1,252 39.9%
Real estate 1,270 36.1% 1,180 34.4% 1,161 37.0%
Consumer 848 24.1% 868 25.3% 725 23.1%
-------------------------------------------------------------------------------------------------------
Total $3,515 100.0% $3,430 100.0% $3,138 100.0%
=======================================================================================================
<CAPTION>
In Thousands
--------------------------------------------------------------------
Dec. 31, 1992 Dec. 31, 1991
------------------------------- ----------------------------------
Percent Percent
of loans of loans
in each in each
category category
to total to total
Amount loans Amount loans
-------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Commercial and industrial $1,236 41.8% $ 887 37.6%
Real estate 1,017 34.4% 850 36.0%
Consumer 705 23.8% 623 26.4%
----------------------------------------------------------------------
Total $2,958 100.0% $2,360 100.0%
======================================================================
</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.
Under-Performing Assets
The following table summarizes BancShares' under-performing assets for
the years ended
<TABLE>
<CAPTION>
In Thousands
-----------------------------------------
December 31,
-----------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Accruing Loans Past due
90 days or more $ 990 $ 464 $ 338 $ 464 $ 582
-----------------------------------------
Principal amount of nonaccrual
loans at year end 821 739 355 766 $1,121
Restructured loans 1,399 1,403 121 86 423
-----------------------------------------
$2,220 $2,142 $ 476 $ 852 $1,544
Other real estate acquired in
satisfaction of loans $1,652 $1,329 $1,274 $1,593 $1,500
-----------------------------------------
Total under-performing assets $4,862 $3,935 $2,088 $2,909 $3,626
=========================================
</TABLE>
Securities
BancShares' securities portfolio, including securities available for sale
plus investment securities held to maturity, increased $3.3 million or 4.0% from
December 31, 1994, to December 31, 1995. The largest portion of the portfolio
at year-end 1995 was invested in U.S. government agency securities, which
totaled $39.2 million and comprise 44.87% of the carrying value of total
investments.
The following table sets forth the maturities of investment securities at
December 31, 1995, 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>
In Thousands
-------------------------------------------------------------------------
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
------- ------ ------- -------- ------- --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and other $18,140 6.08% $41,412 6.24% $ 7,120 5.95% $5,271 6.17%
U.S. government agencies
States and political 1,971 7.61% 5,481 7.74% 4,946 7.56% 1,026 7.82%
subdivisions
Other 0 24 6.25% 0 1,446 6.04%
------- ------- ------- ------
Total $20,111 6.23% $46,917 6.40% $12,066 6.70% $7,743 6.42%
======= ======= ======= ======
</TABLE>
Liquidity and Funding
Deposits are the largest, most stable, and generally least costly
source of funds for BancShares. During 1995, average deposits increased $13.2
million (4.1%) compared to $13.8 million (4.5%) in 1994. At December 31, 1995,
deposits represented 129.1% of total loans, compared to 126.3% at December 31,
1994.
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 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 that are guaranteed by U. S. government agencies and are, therefore,
salable.
Cash and due from banks are BancShares' most liquid assets. At
December 31, 1995, cash and due from banks totaled $16.7 million, an increase of
$802 thousand (4.8%) from December 31, 1994. Marketable investment securities,
particularly those of short maturities, and Federal funds sold are also sources
of asset liquidity. Securities maturing in one year or less amounted to $20.2
million at December 31, 1995, representing 23.5% of the investment portfolio.
Federal funds sold at December 31, 1995, were $1.7 million. Along with these
scheduled maturities, there will be repayments of mortgage backed securities and
the possible early redemption of callable securities.
Capital Resources
The following table presents the total common shareholders' equity in
thousands of dollars and the book value per common share at December 31 of the
years indicated.
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Common Shareholders' Equity $38,203 $33,608
Book Value Per Share $ 25.99 $ 23.08
</TABLE>
[Annual Report Page 27]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Management's Discussion and Analysis
of Financial Condition and Results of Operations
- -------------------------------------------------------------------------------
The following table illustrates BancShares' regulatory capital ratios at
December 31 and compares them to the minimum requirements.
<TABLE>
<CAPTION>
In Thousands
---------------------------------------
December 31, 1995 December 31, 1994
---------------------------------------
Amount Percent Amount Percent
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Tier 1 Risk-based Capital
Actual $ 36,550 14.25% $ 32,553 13.16%
Required 10,261 4.00% 9,895 4.00%
Total Risk-based Capital
Actual 39,756 15.50% 35,645 14.41%
Required 20,522 8.00% 19,790 8.00%
Risk Adjusted Total Assets
256,519 247,375
Leverage Ratio
Actual 36,550 9.51% 32,553 8.79%
Minimum required 11,531 3.00% 11,110 3.00%
Maximum required 19,218 5.00% 18,517 5.00%
</TABLE>
Tier 1 capital is total shareholders' equity excluding intangible assets,
deferred tax assets and the unrealized gain or loss in investment securities
available for sale. Tier 2 capital includes tier 1 capital plus the allowance
for loan losses not to exceed 1.25% of the risk weighted assets. The leverage
ratio is calculated by dividing tier 1 capital by year-end assets, net of
deferred tax assets and intangible assets.
Along with 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 4.4% in 1995 and 4.9% in 1994. To maintain appropriate ratios of equity to
total assets, a corresponding level of capital growth must be achieved. During
1995 total shareholders' equity grew 13.7%, following an increase of 8.96% in
1994, 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>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Return on equity 13.11% 13.61% 12.42%
times
Earnings retained 65.50% 62.85% 66.50%
equals
Internal capital growth 8.59% 8.55% 8.26%
</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. BancShares expects to pay quarterly cash dividends during
1996.
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. For the
years ended:
<TABLE>
<CAPTION>
December 31,
----------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Profitability ratios:
Rate of Return/1/ on Average:
Earning Assets 1.35% 1.31% 1.17%
Total Assets 1.26% 1.22% 1.08%
Total Shareholders' Equity 13.11% 13.61% 12.42%
Liquidity and Capital Ratios:
Average Shareholders' Equity to
Average Earning Assets 10.31% 9.64% 9.42%
Average Shareholders' Equity to
Average Total Assets 9.58% 8.94% 8.68%
Common Dividend Payout Ratio/2/ 34.50% 29.97% 29.60%
Notes:
</TABLE>
/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 28]
<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 1995 were
initiated through Hazlett, Burt & Watson, Inc., although that firm is not
considered to be making a market in BancShares stock. On December 31, 1995, the
total number of holders of Commercial BancShares, Inc. common stock was 1,144.
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.
<TABLE>
<CAPTION>
Market Value of Common Stock:
(In Dollars)
1995 1994 1993 1992 1991
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First Quarter $30.00-31.00 $28.50-29.50 $24.00-25.00 $ 18.50 $ 21.00
Second Quarter 30.25-31.25 28.50-29.50 26.00-27.00 19.50 21.00
Third Quarter 32.00-33.00 28.50-29.50 27.00-29.00 20.00 17.00-20.50
Fourth Quarter 33.00-34.00 29.50-30.50 28.00-29.50 21.00-22.00 17.50-21.00
</TABLE>
<TABLE>
<CAPTION>
Cash Dividends Declared on Common Stock:
(In Dollars)
1995 1994 1993 1992 1991
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First Quarter $ .28 $ .25 $ .23 $ .20 $ .20
Second Quarter .28 .25 .23 .20 .20
Third Quarter .28 .25 .23 .20 .20
Fourth Quarter .28 .28 .25 .23 .20
</TABLE>
[Annual Report Page 29]
<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 &
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 & 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
Former Chairman,
Storck Baking Company, Inc.
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
Bank of Paden City
4th & Main Street
Paden City, WV 26159
304/337-2205
Edwin P. Barrett
Retired, D& J Auto Parts &
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
Lester Doak
Director Emeritus
June Nichols
Director Emeritus
Norman D. Trowbridge, Sr.
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 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 & 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 30]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Directors
- ------------------------------------------------------------------------------
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
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
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, Allstate Energy Corporation
A.D. Jackson
Owner, Western Auto Store
Donna L. Perine
President & Chief Executive Officer
Henry D. Sassi
Vice-Chairman
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.
Retired 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.
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
William P. Ingram
Farmer
Donald K. Jemison
Retired Supervisor, Ormet Corporation
Paul E. Jemison
Retired Supervisor, P.P.G. Industries
David L. Mendenhall
President & Chief Executive Officer,
Bank of Paden City
William E. Mildren, Jr.
Chairman,
Commercial BancShares, Inc.
Harry S. Peters
Retired Supervisor,Union Carbide Corp.
Owner, Peters Realty Co.
Robert C. Sellers
Retired Supervisor,
LCP Chemicals of WV, Inc.
J. Allen Woodburn
Retired Colonel,
State of West Virginia
Department of Natural Resources
[Annual Report Page 31]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Officers
- ------------------------------------------------------------------------------
Commercial BancShares, Inc.
William E. Mildren, Jr.
Chairman, President &
Chief Executive Officer
Thomas N. Webster
Vice-Chairman
Larry G. Johnson
Executive Vice President &
Chief Financial Officer
Patricia A. Tucker
Assistant Vice President
Daniel N. Canada
Assistant Vice President &
Director of Human Resources
Data Processing Department
- --------------------------
Leo P. Mallamaci
Vice President &
Senior Data Processing Officer
Peter G. Gallo
Systems & Programming Manager
Faith J. Smith
Data Center Operations Manager
Auditing Department
- -------------------
W. Bryan Pennybacker, CPA
Senior Audit Manager
Marcia S. Westfall, CPA
Auditor
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
Commercial Banking
and Trust Company
William E. Mildren, Jr.
Chairman
Donald L. Scothorn
President & Chief Executive Officer
Thomas N. Webster
Vice-Chairman
Commercial Loan Department
- --------------------------
David M. Righter
Senior Vice President
Douglass J. Swearingen
Senior Vice President
Debra V. Miller
Loan Officer
Mortgage Loan Department
- ------------------------
Henry D. Sassi
Senior Vice President
Carolyn S. Calhoun
Vice President
Consumer Loan Department
- ------------------------
Ronald L. Buchanan
Senior Vice President
Sallie A. Fankhauser
Mortgage Loan & Consumer Officer
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
Senior Vice President of
Branch Operations
Jack D. Carr
Vice President
Paul R. Mancuso, Jr.
Vice President
John O. Stewart
Vice President
Trust Department
- ----------------
C. Randall Law
Senior Vice President
& Senior Trust Officer
Charlotte J. Potter
Vice President & Trust Officer
Linda L. Daggett
Trust Operations Officer
Pamela S. Robinson
Assistant Trust Operations 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
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
Patricia A. Norris
Assistant Vice President &
Branch Manager
[Annual Report Page 32]
<PAGE>
Commercial BancShares, Inc. and Subsidiaries
Officers
- ------------------------------------------------------------------------------
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
Sabrina Hanlon
Assistant Vice President
Jackson County Bank
Thomas M. Lookabaugh
President & Chief Executive Officer
B. Scott Miller
Executive Vice President
Betty L. Mathew
Assistant Vice President
Chad R. Matics
Cashier
Donna R. McCoy
Loan Officer
Union Bank of Tyler County
Gary R. Davis
Chairman & 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
[Annual Report Page 33]
<PAGE>
Annual Meeting
The Annual Meeting of Shareholders will take place at 3:00 P.M. on Wednesday,
May 8, 1996 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 shareholders after March 29,
1996, on request to Larry G. Johnson, Secretary-Treasurer, Commercial
BancShares, Inc., P.O. Box 1427, Parkersburg, WV 26102-1427.
[Annual Report Page 34]
<PAGE>
[Logo of Commercial BancShares, Inc.]
Commercial BancShares, Inc.
415 Market Street
Parkersburg, West Virginia 26101
[Annual Report - Back Cover]
<PAGE>
CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23
Commercial BancShares, Inc.
[LOGO OF HARMAN, THOMPSON, MALLORY & ICE, A.C.]
HARMAN, THOMPSON, MALLORY & ICE, A.C.
Ceritified 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 February 9,
1996, relating to the consolidated balance sheet of Commercial BancShares, Inc.
and Subsidiaries as of December 31, 1995 and 1994 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, 1995 which appears in
the Company's Form 10-K 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 28, 1996
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-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 16,743
<INT-BEARING-DEPOSITS> 785
<FED-FUNDS-SOLD> 1,680
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 86,836
<INVESTMENTS-MARKET> 88,041
<LOANS> 263,731
<ALLOWANCE> 3,516
<TOTAL-ASSETS> 385,656
<DEPOSITS> 340,584
<SHORT-TERM> 2,134
<LIABILITIES-OTHER> 4,735
<LONG-TERM> 0
0
0
<COMMON> 7,348
<OTHER-SE> 30,855
<TOTAL-LIABILITIES-AND-EQUITY> 372,223
<INTEREST-LOAN> 24,588
<INTEREST-INVEST> 5,243
<INTEREST-OTHER> 594
<INTEREST-TOTAL> 30,425
<INTEREST-DEPOSIT> 12,161
<INTEREST-EXPENSE> 12,552
<INTEREST-INCOME-NET> 17,873
<LOAN-LOSSES> 418
<SECURITIES-GAINS> (1)
<EXPENSE-OTHER> 13,553
<INCOME-PRETAX> 6,921
<INCOME-PRE-EXTRAORDINARY> 4,745
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,745
<EPS-PRIMARY> 3.24
<EPS-DILUTED> 3.24
<YIELD-ACTUAL> 5.19
<LOANS-NON> 821
<LOANS-PAST> 990
<LOANS-TROUBLED> 1,399
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,430
<CHARGE-OFFS> 428
<RECOVERIES> 96
<ALLOWANCE-CLOSE> 3,516
<ALLOWANCE-DOMESTIC> 3,516
<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 8, 1996, 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, 1996; and
(3) To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on Wednesday,
March 20, 1996, 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
April 1, 1996
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, 1996
-------------------------
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, 1996, 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 Wednesday,
March 20, 1996, as the record date for the determination of stockholders
entitled to notice of and to vote at the Annual Meeting. On the record date
1,469,670 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 20, 1996:
<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) 130,366 Direct 8.9%
Parkersburg, WV
Common Mary S. Goodwin as Trustee of the
Mary S. Goodwin Living Trust 73,329 Direct 5.0%
Waynesburg, PA
</TABLE>
[Proxy - Page 2]
<PAGE>
As of March 20, 1996, 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> <C>
Common Stock 265,600 18.072%
</TABLE>
/1/ Included are 22,165 shares owned by Commercial BancShares Employee Stock
Ownership Trust (with 401(k) provisions) and allocated to Directors and
Executive Officers.
---------------------------------------
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 66 1985 Common 10,648 0.724%
Ravenswood, West Virginia
</TABLE>
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 48 1983 Common 12,267 0.834%
Marietta, Ohio and Vero Beach, Florida
</TABLE>
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 41 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 51 1994 Common 24,738 1.683%
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 72 1994 Common 10,975 0.746%
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 72 1987 Common 3,774 0.256%
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. 50 1992 Common 4,732 0.321%
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 52 1994 Common 10,836 0.737%
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. 51 1983 Common 57,159 3.889%
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, Dime and
UBTC. He became a Director of CB&T in 1977, Chairman in 1987.
<TABLE>
<S> <C> <C> <C> <C> <C>
Jack F. Poe 73 1983 Common 5,210 0.354%
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. 81 1992 Common 12,287 0.836%
Marietta, Ohio
</TABLE>
Mr. Richardson is Chairman 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. 68 1985 Common 5,359 0.364%
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 52 1983 Common 2,000 0.136%
Vienna, West Virginia
</TABLE>
Mrs. Ross is the former Chairman of Storck Baking Company, Inc., and was a
Director of CB&T from 1982-1988.
<TABLE>
<S> <C> <C> <C> <C> <C>
Donald L. Scothorn 66 1994 Common 15,177 1.032%
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 and of Paden City in 1994.
<TABLE>
<S> <C> <C> <C> <C> <C>
James L. Wahle 59 1994 Common 440 0.029%
Vienna, West Virginia
</TABLE>
Mr. Wahle has been President and Chief Executive Officer 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 76 1983 Common 2,754 0.187%
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 71 1987 Common 36,549 2.486%
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 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.
Christy, Frank L.
Of the 12,267 shares of Common Stock beneficially owned by Mr. Christy,
3,666 are owned by a company of which Mr. Christy is an officer.
[Proxy - Page 5]
<PAGE>
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.
Davis, Gary R.
Of the 24,738 shares of Common Stock beneficially owned by Mr. Gary Davis,
685 are owned by Commercial BancShares, Inc. Employee Stock Ownership
Trust.
Meagle, James A. Jr.
Of the 4,732 shares of Common Stock beneficially owned by Mr. Meagle, 832
are owned by Commercial BancShares, Inc. Employee Stock Ownership Trust.
Mendenhall, David L.
Of the 10,836 shares of Common Stock beneficially owned by Mr. Mendenhall,
663 are owned by Commercial BancShares, Inc. Employee Stock Ownership
Trust.
Mildren, William E. Jr.
Of the 57,159 shares of Common Stock beneficially owned by Mr. Mildren, 362
are held in trust for members of his immediate family, and 6,643 shares are
owned by Commercial BancShares, Inc. Employee Stock Ownership Trust.
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 Chairman.
Scothorn, Donald L.
Of the 15,177 shares of Common Stock beneficially owned by Mr. Scothorn,
2,908 are owned by Commercial BancShares, Inc. Employee Stock Ownership
Trust.
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 four times in 1995. All directors
attended 75% or more of the board and committee meetings held except Mr.
Wilkins, whose other business interests limited his attendance to 50% of the
meetings.
The Executive Committee is composed of Directors Mildren, Jr., Christy,
Gary Davis, Dollman, Poe, Scothorn, and Webster. In 1995 there were 8 meetings
of the Committee, which provides advice and counsel to the official staff of
BancShares and acts for the Board of Directors upon delegated authority between
meetings of the Board.
The Audit Committee of Commercial consists of Mr. Poe as Chairman, Director
Criss and eight outside Directors of Commercial subsidiaries: Orville Bonnell,
Robert Doak, Peyton J. Dudley, Robert Feldmeier, 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 twelve times during 1995.
The Mergers and Acquisitions Committee of Commercial met twice during 1995.
The members were Directors Christy (who served as chairman), Gary Davis,
Dollman, Mildren, Jr., 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
[Proxy - Page 6]
<PAGE>
were Directors Ross and Wahle and outside directors of Commercial subsidiaries:
Robert L. Hartley, Neil R. Wynn, and George G. Couch. The Committee met four
times in 1995.
An EDP Steering Committee consists of the Presidents and members of the
Boards of Directors of the subsidiary Banks. Members included: Mr. Mildren,
Jr., Timothy Aiken of UBTC, 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, and Larry Tracey
of Paden City. There were five meetings in 1995. 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.
Along with 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.
For 1995, an adjustment of $1,953 in addition to regular Board and Committee
Fees was paid to Commercial's directors who were not active officers of
Commercial.
During 1995 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, Jackson and Paden City have established Directors
Deferred Income Plans with certain Directors which defers payment of directors'
fees until the directors reach 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 to seven 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 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
[Proxy - Page 7]
<PAGE>
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 of each bank 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.
Along with 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 compensation for 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 that 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.
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 1995. 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.
[Proxy - Page 8]
<PAGE>
EXECUTIVE OFFICERS
A description of the executive officers of Commercial and its subsidiaries as of
March 20, 1996, follows.
<TABLE>
<CAPTION>
Name Age Position Business Experience
- ---- --- -------- -------------------
<S> <C> <C> <C>
William E. Mildren, Jr. 51 Chairman, President, and President and Chief
Chief Executive Officer Executive Officer,
of Commercial Commercial and CB&T
Gary R. Davis 51 Chairman & Chief Executive Chairman and President,
Officer of UBTC; Executive Hometown; President & CEO,
Vice Pres., Commercial UBTC
Thomas M. Lookabaugh 45 President and Chief Executive President and Chief Executive
Officer, Jackson Officer, Jackson
James A. Meagle, Jr. 50 President and Chief Executive President and Chief Executive
Officer, Dime Officer, Dime
David L. Mendenhall 52 President and Chief Vice President, Hometown;
Executive Officer, Paden City President and CEO, Paden City
Donna L. Perine 41 President and Chief Executive President and Chief Executive
Officer, F&M Officer, F&M
Patty S. Poling 62 Cashier and Chief Executive Cashier and Chief Executive
Officer, Community Officer, Community
Donald L. Scothorn 66 President and Chief Executive Executive Vice President
Officer, CB&T; and Chief Lending
Chairman, F&M Officer, CB&T
Larry G. Johnson 48 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 officers, who are not directors of Commercial,
are beneficial owners of shares of the indicated class of stock as of March 20,
1996:
<TABLE>
<CAPTION>
Common No. of Shares Percentage
<S> <C> <C>
Thomas M. Lookabaugh 3,631 0.247%
Ravenswood, West Virginia
Donna L. Perine 1,923 0.130%
Harrisville, West Virginia
Patty S. Poling 1,220 0.083%
Pennsboro, West Virginia
Larry G. Johnson 8,413 0.572%
Parkersburg, West Virginia
</TABLE>
[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,
1993, 1994 and 1995, 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. 1995 $130,020 $51,584 $30,207 $ 3,113
Chairman, President 1994 $108,840 $75,723 $24,803 $12,013
and CEO, Commercial 1993 $103,620 $29,210 $16,525 $11,343
Donald L. Scothorn 1995 $ 92,520 $66,145 $13,760 $ 2,912
President and CEO, 1994 $ 89,280 $74,134 $12,851 $11,238
CB&T 1993 $ 85,020 $49,287 $ 8,400 $ 8,976
Larry G. Johnson 1995 $ 71,100 $41,628 $ 9,510 $ 2,243
Exec. Vice Pres. & 1994 $ 68,340 $56,792 $ 8,301 $ 9,212
CFO, Commercial 1993 $ 64,440 $34,912 $ 8,400 $ 7,657
Thomas M. Lookabaugh 1995 $ 60,000 $41,054 $ 6,810 $ 1,618
President & CEO, 1994 $ 51,450 $34,286 $ 5,222 $ 5,741
Jackson 1993 $ 49,000 $21,380 $ 4,200 5,409
</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 1993 and 1994 only, as 1995
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, 1996.
Harman, Thompson, Mallory & Ice, A.C., examined the financial
statements of Commercial in 1995, 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 was made, it might not become effective
until 1997 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 according to 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 14, 1997
Proposals which stockholders intend to present at next year's annual
meeting, to be held Wednesday, May 14, 1997, 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, 1996. 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 according to their best
judgment.
By order of the Board of Directors,
Larry G. Johnson
Secretary-Treasurer
Parkersburg, West Virginia
April 1, 1996
[Proxy - Page 11]
