FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended March 31, 1994 Commission file number: 0-13166
CoBancorp Inc.
(Exact name of registrant as specified in its charter)
Ohio 34-1465382
(State or other jurisidiction of (IRS Employer
incorporation or organization) Identification No.)
124 Middle Avenue, Elyria, Ohio 44035
(Address of principal executive offices) (Zip Code)
(216) 329-8000
Registrant's telephone number, including area code
Not applicable
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter periods 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
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
As of March 31, 1994, there were 3,274,083 outstanding common shares, with
no par value, of the Registrant.
page 1 of 13
INDEX
COBANCORP INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
Consolidated balance sheets--March 31, 1994 and
December 31, 1993 3
Consolidated statements of income--Three months ended
March 31, 1994 and 1993 4
Consolidated statements of cash flows--Three months
ended March 31, 1994 and 1993 5
Notes to consolidated financial statements--
March 31, 1994 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION 12
SIGNATURES 13
-2-
PART I. FINANCIAL INFORMATION
COBANCORP INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MARCH 31, 1994
March 31 December 31
1994 1993
ASSETS
Cash and due from banks $ 27,522,213 $ 29,051,488
Investment securities (market value
$143,755,000 at March 31, 1994 and
$156,485,000 at December 31, 1993) 142,511,717 152,933,745
Federal funds sold 100,000 3,000,000
Loans 298,281,202 289,448,687
Less allowance for loan losses 5,373,384 5,226,401
------------ ------------
Net loans 292,907,818 284,222,286
Bank premises and equipment 10,694,232 10,563,830
Accrued income and prepaid expenses 3,986,952 3,433,018
Other assets 9,010,174 8,596,377
------------ ------------
TOTAL ASSETS $486,733,106 $491,800,744
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Demand--noninterest bearing $ 55,663,813 $ 59,208,379
Demand--interest bearing 57,772,258 58,858,055
Savings and other time 312,926,356 309,519,183
------------ ------------
Total deposits 426,362,427 427,585,617
Short-term funds 17,026,668 20,245,028
Other liabilities 2,679,163 3,131,672
Employee stock ownership plan
obligation 1,024,010 1,105,260
------------ ------------
Total liabilities 447,092,268 452,067,577
Shareholders' equity
Capital stock, without par value
3,500,000 shares authorized
3,274,083 shares outstanding
3,268,488 at December 31, 1993 4,430,367 4,304,345
Capital surplus 16,623,320 16,623,320
Retained earnings 19,611,161 19,910,762
Employee stock ownership plan
obligation (1,024,010) (1,105,260)
------------ ------------
Total shareholders' equity 39,640,838 39,733,167
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $486,733,106 $491,800,744
============ ============
See notes to consolidated financial statements.
-3-
COBANCORP INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
MARCH 31, 1994
Three months ended March 31
1994 1993
Interest Income
Loans (including fees)
Taxable $6,187,532 $5,573,228
Tax-exempt 40,194 46,107
Investment securities
Taxable 1,289,233 2,367,333
Tax exempt 853,856 584,094
Federal funds sold 23,589 43,435
---------- ----------
Total interest income 8,394,404 8,614,197
Interest Expense
Deposits 2,625,936 2,992,610
Short-term funds 116,995 192,765
---------- ----------
Total interest expense 2,742,931 3,185,375
---------- ----------
Net interest income 5,651,473 5,428,822
Provision for Loan and Real Estate Losses 125,000 600,000
---------- ----------
Net interest income after provision
for loan and real estate losses 5,526,473 4,828,822
Other Income
Service charges on deposit accounts 401,766 365,770
Trust fees 324,999 282,450
Other 130,923 201,672
Securities gains 291,131 140,716
---------- ----------
Total other income 1,148,819 990,608
Other Expenses
Salaries, wages and benefits 2,313,056 1,898,123
Occupancy--net 358,196 301,750
Furniture and equipment 136,700 139,500
Taxes, other than income and payroll 156,308 132,875
FDIC insurance 239,196 219,549
Other 2,004,845 1,910,228
---------- ----------
Total other expenses 5,208,301 4,602,025
---------- ----------
Income before income taxes 1,466,991 1,217,405
Income Tax Expense 250,000 211,000
---------- ----------
Net Income $1,216,991 $1,006,405
========== ==========
Net Income Per Share $0.36 $0.31
===== =====
See notes to consolidated financial statements.
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COBANCORP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
MARCH 31, 1994
Three months ended March 31
1994 1993
Operating Activities
Net income $ 1,216,991 $ 1,006,405
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for loan and real estate losses 125,000 600,000
Provision for depreciation and amortization 279,699 251,683
Amortization of premiums less accretion of
discounts on securities 1,156 60,358
Realized securities (gains) (291,131) (140,716)
(Increase) in interest receivable (304,889) (215,980)
(Decrease) in interest payable (20,327) (115,487)
(Increase) decrease in other assets (709,030) 102,985
Increase in other liabilities 127,011 159,366
----------- -----------
Net Cash Provided
by Operating Activities 424,480 1,708,614
Investing Activities
Proceeds from sales of investment securities 12,406,524 14,458,456
Paydowns and maturities of investment
securities 7,490,121 11,003,840
Purchases of investment securities (10,829,323) (22,498,973)
Net decrease in credit card receivables 211,011 258,415
Net (increse) in longer-term loans (9,021,544) (6,731,386)
Purchases of premises and equipment,
net of retirement (363,913) (205,646)
----------- -----------
Net Cash (Used)
by Investing Activities (107,124) (3,715,294)
Financing Activities
Net (decrease) increase in demand deposits,
NOW accounts and savings accounts (3,571,955) 9,717,611
Net increase (decrease) in certificates
of deposit 2,348,764 (4,956,105)
Net (decrease) increase in short-term funds (3,218,360) 8,854,938
Cash dividends (431,102) (292,087)
Dividend investment plan 92,180 61,242
Long-term incentive plan 33,842
----------- -----------
Net Cash (Used) Provided
by Financing Activities (4,746,631) 13,385,599
----------- -----------
(Decrease) Increase in
Cash and Cash Equivalents (4,429,275) 11,378,919
Cash and Cash Equivalents at Beginning of Period 32,051,488 28,968,842
----------- -----------
Cash and Cash Equivalents at
End of Period $27,622,213 $40,347,761
=========== ===========
See notes to consolidated financial statements.
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COBANCORP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1994
NOTE A
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements
include the accounts of CoBancorp Inc. and its wholly-owned subsidiary,
PremierBank & Trust. All material intercompany accounts and transactions have
been eliminated.
BASIS OF PRESENTATION: The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. It is the opinion of
management that all adjustments made to the unaudited interim financial
statements were of a normal recurring nature.
CASH EQUIVALENTS: For purposes of the Statements of Cash Flows, cash
equivalents include amounts due from banks and federal funds sold.
Generally, federal funds are purchased and sold for periods of less than
thirty days.
PER SHARE AMOUNTS: All per share amounts have been adjusted to reflect
the four-for-three stock split in February 1994 and the four-for-three
stock split in July 1993.
RECLASSIFICATIONS: Certain amounts in the 1993 consolidated financial
statements have been reclassified to conform to the 1994 presentation.
-6-
COBANCORP INC.
MARCH 31, 1994
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion focuses on information about CoBancorp Inc.'s
financial condition and results of operations which is not otherwise
apparent from the consolidated financial statements attached.
EARNINGS RESULTS Net income increased 20.9 percent to $1,217,000 for the
first three months of 1994, from the $1,006,000 earned in the same period
of 1993. Earnings per share increased to $.36, up from $.31 per share in
the first three months of the prior year.
NET INTEREST INCOME The net interest margin on a fully taxable-equivalent
basis was 5.50 percent for the first three months of 1994, compared to
5.46 percent one year ago. Net interest income for the first three months
of 1996 amounted to $6,112,000 compared to $5,753,000 in 1993. These
amounts reflect net interest income adjusted to a fully taxable-equivalent
basis by recognizing the tax effect of interest earned on tax-exempt
securities and loans.
The increase in net interest income of $359,000 is attributable primarily
to an increase in earning assets and to lower interest rates on
interest-bearing deposits. These factors were partially offset by a
decrease in the yield on earning assets and, to a lesser extent, an
increase in interest-bearing deposits.
The following table sets forth for the periods indicated a summary of the
changes in interest income and interest expense on a fully
taxable-equivalent basis resulting from changes in volume and changes in
rates for the major components of interest-earning assets and
interest-bearing liabilities:
-7-
<TABLE>
SUMMARY OF NET INTEREST INCOME CHANGES
(RATE/VOLUME VARIANCE)
Three months ended 3/31/94 vs. 3/31/93
(in thousands of dollars)
<CAPTION>
Change in interest
Current Current Old Old
income/expense due to
volume rate volume rate
Volume Rate Both Total
<S> <C> <C> <C> <C> <C>
<C> <C> <C>
Taxable securities $ 82,106 6.29% $129,736 7.22%
$(860) $(303) $ 86 $(1,077)
Nontaxable securities 63,942 8.09 40,540 9.09 532
(101) (22) 409
Federal funds sold 3,077 3.07 5,911 2.98
(21) 1 (20)
Taxable loans:
Real estate loans 136,668 8.32 101,375 9.04 787
(182) (29) 576
Commercial loans 119,722 7.63 106,589 8.07 261
(117) 15 159
Installment loans 30,826 10.80 32,781 11.94
(58) (92) 7 (142)
Overdrafts 192 147
0
Quickline loans 108 18.76 41 19.54 3
0 3
Credit card loans 2,739 35.28 3,093 29.37
(26) 45 (2) 17
Nontaxable loans:
IRBs 3,955 6.16 4,490 6.22
(8) (1) (9)
-------- -------- -----
----- ----- -------
TOTAL INTEREST-EARNING ASSETS 443,334 8.01 424,702 8.50 611
(750) 55 (84)
Interest-bearing transaction
accounts:
NOW 26,009 2.09 27,062 2.57
(7) (32) 1 (38)
Advantage 50 28,927 2.01 24,207 2.58 30
(34) (7) (10)
Savings accounts:
Savings 144,405 2.42 117,719 3.03 200
(179) (41) (20)
IMMAs 30,142 2.17 33,183 2.64
(20) (39) 4 (55)
Time deposits:
Christmas/vaction clubs 2,087 4.04 411 3.94 16
17
CDs under $100,000 87,318 3.96 92,204 4.44
(53) (109) 6 (157)
CDs over $100,000 (regular) 4,612 4.16 8,036 4.06
(34) 2 (1) (33)
CDs over $100,000 (public fund) 10,719 3.16 16,804 3.08
(46) 3 (1) (44)
IRAs 30,089 4.36 27,143 5.22 38
(58) (6) (26)
Short-term funds:
Repurchase agreements 3,156 2.68 15,278 3.15
(94) (18) 14 (98)
Federal funds purchased 748 3.52 78 3.62 6
6
Sweep accounts 12,513 2.98 7,796 2.84
1 2
Notes payable TT&L 3,216 2.12 3,146 2.66 31
(11) (6) 14
-------- -------- -----
----- ---- -------
TOTAL INTEREST-BEARING
LIABILITIES 383,940 2.90 373,067 3.46 67
(473) (37) (443)
-----
----- ---- -------
NET INTEREST INCOME 5.50 5.46 $ 544
$(277) $ 92 $ 359
=====
===== ==== =======
YTD FTE net interest income (current year) $ 6,112
YTD FTE net interest income (prior year) 5,753
-------
Change in FTE net interest income $ 359
=======
<FN>
Presented on a fully-taxable equivalent basis, using year-to-date average
balances.
</TABLE>
-8-
<TABLE>
The trends in various components of the balance sheet and their respective
yields and rates which affect interest
income and expense are shown in the following table:
AVERAGE CONSOLIDATED BALANCE SHEETS, NET INTEREST INCOME AND RATES
<CAPTION>
Three Months Ended March 31, 1994 Three
Months Ended March 31, 1993
Average Interest
Average Interest
Daily (Annual- Yield/ Daily
(Annual- Yield/
Balance ized) Rate
Balance ized) Rate
<S> <S> <S> <S> <S>
<S> <S>
ASSETS
Interest-earning assets:
Loans (including fees) (1)
Taxable $290,247 $24,812 8.55%
$244,026 $22,603 9.26%
Tax-exempt (2) 3,954 243 6.15
4,489 279 6.22
Investment securities
Taxable 82,106 5,165 6.29
129,736 9,373 7.22
Tax-exempt (2) 63,942 5,175 8.09
40,540 3,686 9.09
Federal funds sold 3,077 94 3.07
5,911 176 2.98
Total interest-earning -------- -------
- -------- -------
assets (2) 443,326 35,849 8.01
424,702 36,117 8.50
Noninterest-earning assets:
Cash and due from banks 23,159
21,877
Bank premises and equipment 10,595
8,315
Other assets 11,994
12,074
Less allowance for loan losses (5,291)
(5,347)
--------
- --------
TOTAL ASSETS $483,783
$461,621
========
========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing transaction
accounts $ 54,935 $ 1,125 2.05 $
51,270 $ 1,321 2.58
Savings 174,547 4,145 2.37
150,902 4,448 2.95
Time deposits 134,825 5,379 3.99
144,598 6,367 4.40
Short-term funds 19,633 472 2.40
26,298 782 2.97
Total interest-bearing --------- -------
- -------- -------
liablities 383,940 11,121 2.90
373,068 12,918 3.46
Noninterest-bearing liabilities: -------
- --------
Demand deposits 55,471
48,749
Other liabilities 4,731
5,326
Shareholders' equity 39,641
34,478
TOTAL LIABILITIES AND --------
- --------
SHAREHOLDERS' EQUITY $483,783
$461,621
========
========
NET INTEREST INCOME $24,368
$23,199
=======
=======
NET YIELD/RATE ON INTEREST-
EARNING ASSETS (2) 5.50%
5.46%
<FN>
(1) Nonaccrual loans are included in average loan balance.
(2) Presented on a fully tax equivalent basis using a tax rate of 34%.
Average interest-earning assets were $443,326,000 and $424,702,000 for the
first three months of 1994 and 1993,
respectively.
</TABLE> -9-
NET OTHER EXPENSES Total net other expense (total other expense less
total other income) has increased $448,000, to $4,059,000 for the first
three months of 1994, compared to $3,611,000 the previous year. Salaries,
wages and benefits, occupancy, and taxes other than income and payroll
have increased compared to last year. The Corporation has also
experienced increases in professional fees, insurance expense (including
FDIC insurance) and data processing costs. These increased expenses have
been partially offset by a decrease in the provision for loan losses.
Expense containment remains a focus of the bank, in addition to enhancing
productivity.
NONPERFORMING LOANS Nonaccrual loans were slightly above year-end 1993
levels, and at March 31, 1994, totaled $1,438,000, compared to $1,318,000
at December 31, 1993. The category of accruing loans past due 90 days or
more totaled $157,000 at March 31, 1994, and $141,000 at December 31,
1993. The balance in the allowance for loan losses was $5,373,000 at
March 31, 1994, compared to $5,226,000 at December 31, 1993.
Except for installment and credit cards, loans on which interest and/or
principal is 90 days or more past due are placed on nonaccrual status and
any previously accrued but uncollected interest is reversed from income.
Such loans remain on a cash basis for recognition of income until both
interest and principal are current. Installment and credit card loans
past due greater than 120 days are charged off and previously accrued but
uncollected interest is reversed from income.
The following table summarizes nonaccrual, past due and restructured loans
(in thousands of dollars).
March 31 December 31
1994 1993
Accruing loans past due
90 days or more as to
principal or interest:
Loans secured by real estate $ 84 $ 58
Loans to individuals 73 57
Commercial and industrial loans 26
------ ------
$ 157 $ 141
====== ======
Nonaccrual loans:
Loans secured by real estate $ 702 $ 518
Commercial and industrial loans 19 77
All other 717 723
------ ------
$1,438 $1,318
====== ======
Restructured loans included above:
Commercial and collateral $ 0 $ 0
====== ======
-10-
ALLOWANCE FOR LOAN LOSSES AND LOAN CHARGE-OFFS In determining the
adequacy of the allowance for loan losses, management evaluates past loan
loss experience, present and anticipated economic conditions and the
credit worthiness of its borrowers. The allowance for loan losses is
increased by provisions charged against income and recoveries of loans
previously charged off. The allowance is decreased by loans that are
determined uncollectible by management and charged against the allowance.
Potential problem loans are those loans which are on the Bank's "watch
list." These loans exhibit characteristics that could cause the loans to
become nonperforming or require restructuring in the future. This "watch
list" is reviewed monthly and adjusted for changing conditions.
At the end of the first three months, the allowance for loan losses as a
percentage of loans was 1.80 percent in 1994, and 2.17 percent in 1993.
The provision for loan losses was $125,000 in the three months ended March
31, 1994, and $500,000 for the same period of 1993. Additionally,
$100,000 was provided in the first quarter of 1993 to establish an
allowance for possible losses in other real estate owned.
The following table contains information relative to loan loss experience
for the three months ended March 31, 1994, and the year ended December 31,
1993.
Three months ended Year ended
March 31, 1994 December 31, 1993
Allowance for loan losses
at beginning of period $5,226 $5,215
Loans charged off:
Real estate 7 198
Installment 71 471
Credit card 12 91
Other 2
Commercial and collateral 11 1,384
------ ------
101 2,146
Recoveries on loans charged off:
Real estate 5 51
Installment 60 330
Credit card 4 16
Other 12
Commercial and collateral 54 928
------ ------
123 1,337
------ ------
Net loans charged off (22) 809
Provision for loan losses 125 820
------ ------
Allowance for loan losses
at end of period $5,373 $5,226
====== ======
Ratio of allowance for loan
losses to total loans at
end of period 1.80% 1.81%
====== ======
-11-
CAPITAL At March 31, 1994, the Corporation's Tier 1 leverage ratio was 8.16
percent. The Corporation's risk-based capital ratios based on Federal
Reserve Board guidelines were as follows:
Tier 1 "core" capital to risk-weighted assets 13.53 percent
Total capital to risk-weighted assets 14.79 percent
These ratios substantially exceed the minimums which are in effect for
bank holding companies after the end of 1992.
Return on average assets was 0.98 percent for the first quarter of 1994,
compared to 0.87 percent for the same period in 1993. Return on average
equity was 11.97 percent for the first three months of 1994, compared to
11.68 percent for the first three months of 1993.
PART II. OTHER INFORMATION
Except as set forth below, the items of Part II are inapplicable or the
answers thereto are negative and, accordingly, no reference is made to
said items in this report.
Item 4--Submission of matters to a vote of security holders
None.
Item 6--Exhibits and Reports on Form 8-K
(a) No exhibits were required to be filed as part of
this report.
(b) The registrant was not required to file any reports on Form
8-K during the quarter ended March 31, 1994.
-12-
COBANCORP INC.
MARCH 31, 1994
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COBANCORP INC.
(Registrant)
5/11/94
Date Timothy W. Esson
Executive Vice President
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