<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM _______________TO _______________.
COMMISSION FILE NUMBER 0-13166.
COBANCORP INC.
------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 34-1465382
------------------------------- -------------------------------
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1530 WEST RIVER ROAD, NORTH
ELYRIA, OHIO 44035
------------------------------- -------------------------------
(ADDRESS OF PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES)
Registrant's telephone number, including area code: 440-329-8000
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
COMMON STOCK, NO PAR VALUE
------------------------------------------------------------------------
(TITLE OF CLASS)
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. [ ]
1 of 62
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The aggregate market value, computed using the closing bid quotation as reported
by the NASDAQ National Market System, of the voting stock held by nonaffiliates
of the registrant (exclusive of 215,398 shares held by the CoBancorp Inc.
Employee Stock Ownership Plan and 279,056 non-ESOP shares held by directors and
executive officers of the Corporation) as of January 20, 1998:
Common Stock, no par value--$128,380,800
The number of shares outstanding of the issuer's classes of common stock as of
January 20, 1998:
Common Stock, no par value--3,480,054 shares
DOCUMENTS INCORPORATED BY REFERENCE
The index to exhibits in this filing begins on page 61.
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<TABLE>
<CAPTION>
COBANCORP INC.
FORM 10-K REPORT
TABLE OF CONTENTS
ITEM PAGE
- ---- ----
PART I
<S> <C>
1. BUSINESS..................................................................... 4
Description of Business...................................................... 4
Acquisitions................................................................. 5
Competition.................................................................. 5
Regulation................................................................... 6
Examination and Supervision.................................................. 7
Federal Reserve System....................................................... 7
Insurance of Deposits........................................................ 7
Community Reinvestment Act................................................... 7
Executive Officers of the Registrant......................................... 7
Supplemental Financial Data.................................................. 8
2. PROPERTIES................................................................... 9
3. LEGAL PROCEEDINGS............................................................ 12
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ......................... 12
PART II
5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS...................................................................... 12
6. SELECTED FINANCIAL DATA...................................................... 13
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS................................................................ 15
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ................................. 31
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE......................................................... 52
PART III
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT........................... 53
11. EXECUTIVE COMPENSATION....................................................... 55
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............... 59
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................... 60
PART IV
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K ............. 60
SIGNATURES
SIGNATURES................................................................... 62
</TABLE>
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PART I
ITEM 1. BUSINESS
DESCRIPTION OF BUSINESS
CoBancorp Inc. (the "Corporation"), headquartered in Elyria, Ohio, is a
bank holding company registered with the Federal Reserve System whose principal
asset is the common stock of its wholly owned commercial bank subsidiary,
PremierBank & Trust ("Premier") and its wholly owned savings bank subsidiary,
Jefferson Savings Bank ("Jefferson").
The Corporation was organized under Ohio law in November 1983 and
remained inactive until September 8, 1984. On that date, the Premier's
shareholders became Corporation shareholders in a tax-free and regulatory
reorganization.
On November 2, 1997, the Corporation entered into a definitive
agreement to be acquired by FirstMerit Corporation (FMER). Under the terms of
the agreement, each share of CoBancorp Inc. stock will be exchanged for $44.50
in cash or for shares of common stock of FirstMerit with a market value per
share of $44.50. The shareholders of CoBancorp may elect to exchange their
common stock for either common stock of FirstMerit, or $44.50 in cash, provided
that no less than 30 percent and no more than 49 percent of the total
transaction will be paid in cash. The Company recorded in 1997 $724,000 of
legal, investment advisory and accounting expenses incurred in 1997 related to
the business combination with FirstMerit. Such expenses were recorded as an
extraordinary item in the consolidated statements. The acquisition is expected
to be completed during the second quarter of 1998 and was approved by CoBancorp
Inc.'s shareholders on March 3, 1998. Approval has been received from the
Federal Reserve Board of Cleveland and approval from the Office of the
Comptroller of the Currency is expected by mid April, 1998.
As a bank holding company, the Corporation is exclusively engaged in
the management of its two subsidiaries, Premier and Jefferson. Premier was
chartered by the State of Ohio in 1926 and is a member bank of the Federal
Reserve System. Jefferson was chartered in 1870 and holds the oldest saving and
loan charter in the state of Ohio. As of December 31, 1997, Premier operates
thirty-seven (37) banking offices throughout its market area of Lorain County
and portions of Cuyahoga, Erie, Richland, Huron, Delaware, Franklin and Crawford
Counties. As of December 31, 1997, Jefferson operates four branch offices, three
located in Madison County, Ohio and the fourth located in Lorain County, Ohio.
Premier has 47 automated teller machines ("ATMs") and is a member of the MAC and
Plus ATM networks. As a member bank of the Federal Reserve System, Premier's
deposits are insured by the Federal Deposit Insurance Corporation (the "FDIC")
to the extent permitted by law. Premier is subject to primary regulation by the
Federal Reserve and the Ohio Department of Commerce, Division of Banking as well
as the FDIC. Jefferson is governed by the regulatory mandates of the Office of
Thrift Supervision (the "OTS"). The Corporation's activities as a bank holding
company are regulated by the Federal Reserve, and the Corporation's corporate
governance is determined by Ohio law.
The Corporation provides commercial and retail banking services to
individual, business, institutional and governmental customers. These services
include personal and commercial checking accounts, savings and time deposit
accounts, personal and business loans, and safe deposit facilities. CoBancorp
Inc. operates in markets that are diverse in their economic base, ranging from
service, governmental and educational orientation in the Columbus, Ohio MSA, to
heavy and light industrial activity in the Cleveland/Elyria markets and
agricultural orientation in the geographical area between Lorain and Columbus.
Consistent with formally approved Loan Policy, the Corporation offers a
variety of commercial loans involving differing characteristics depending on
purpose, intent, maturity and collateral; real estate loans structured to
include traditional and nonresidential lending activities; and consumer loans
designed to meet a multitude of credit needs on both a secured and unsecured
basis. As guidance in underwriting criteria for each category of loans
referenced above, loan-to-value ratios and lien positions are considered as
components to structures and designs. They will vary based on characteristics
contained in the respective loan category.
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The Trust Department of Premier performs complete trust administrative
functions and offers agency and trust services to individuals, partnerships,
corporations, institutions and municipalities.
As of December 31, 1997, in the opinion of management, the Corporation
did not have any concentration of loans to similarly situated borrowers. There
were no foreseeable losses relating to other interest-earning nonloan assets.
Growth of the Corporation's commercial loan portfolio has originated in the
nontraditional part of its operating franchise, i.e. Columbus MSA and Cleveland,
thus permitting geographical diversification in its lending processes. This is
perceived by management as being an appropriate risk diversification strategy
attempting to balance its portfolio and guard against cyclical cycles of certain
industry classifications.
The Corporation is not significantly affected by seasonal activity or
large deposits of individual customers. The Corporation is not engaged in
operations in any foreign country.
On December 31, 1997, the Corporation and its subsidiaries employed
approximately 359 full-time and 70 part-time employees. None of the employees is
represented by a union or collective bargaining group. Management considers its
relations with employees to be satisfactory. Employee benefit programs are
considered by management to be competitive with benefits provided by other
financial institutions and major employers within the normal operating area.
ACQUISITIONS
On February 16, 1996, the Registrant and its banking subsidiary,
PremierBank & Trust completed the acquisition of eleven branches of Bank One,
Cleveland, N.A. ("Bank One") located in Lorain County, Ohio. The branches
acquired by Premier had total deposits of approximately $111 million. The
branches were acquired by the Bank for total consideration of $5,526,681,
representing a premium of 5% on core deposits.
Under the terms of the transaction, the Bank acquired the branches and
associated assets such as furniture, fixtures and equipment and approximately
$283,000 of certain deposit account-related loans, and the Bank assumed the
deposit account liabilities of Bank One associated with these branches. Eight of
the branches are situated on real estate acquired by the Bank, and the other
three are leased. During 1996, three of the branches acquired from Bank One were
consolidated into existing PremierBank branch locations.
On February 27, 1997, CoBancorp acquired all of the 3,535 outstanding
shares of Jefferson Savings Bank, an Ohio-chartered savings association located
in Jefferson, Ohio, for cash in the amount of $6,733,000, with additional
consideration of $649,000 attributable to certain favorable tax benefits
(confirmed by an IRS Private Letter Ruling dated May 31, 1996). The transaction
was accounted for under the purchase method of accounting. The purchase price
allocation resulted in a write-up of assets to estimated fair value of
approximately $2,432,000. This amount included approximately $965,000 which was
assigned to goodwill. Jefferson's results of operations are included in the
Corporation's consolidated results of operations since the date of acquisition.
Pro forma results of operations have not been presented because the effect of
the acquisition is not material to the consolidated results of operations. The
terms of the sale, including the purchase price and form of consideration were
the result of arms'-length negotiations between the parties. Prior to this
transaction, there was no material relationship between Jefferson and CoBancorp,
its affiliates, any officer or director of CoBancorp or any of their affiliates.
In connection with the acquisition, CoBancorp acquired all of the equipment and
other physical property used in Jefferson's banking business.
COMPETITION
The Corporation actively competes with other financial institutions in
its market area. Competition for deposits comes principally from other
commercial banks, savings and loan associations, credit unions and brokerage
house "money market funds" located in its primary market area. The primary
factors in competing for deposits are interest rates paid on deposits and
convenience of office hours and locations. During periods when money market
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rates are relatively high, obligations offered by governments, government
agencies and other entities seeking funds add significantly to competition for
deposits.
The Corporation's principal competition for loans is provided by other
commercial banks, savings and loan associations, mortgage companies and credit
unions. The primary factors in loan competition are interest rates, extent and
time interval of interest rate adjustments, origination charges and convenience
of office location for applications, closing and servicing.
REGULATION
The Corporation is subject to regulation under the Bank Holding Company
Act of 1956, as amended (the "Act"). The Act requires the prior approval of the
Federal Reserve Board for a bank holding company to acquire or hold more than a
5 percent voting interest in any bank, and restricts interstate banking
activities.
The Act restricts the Corporation's non-banking activities to those
which are closely related to banking. The Federal Reserve Board has determined
by regulation that the following activities are permissible for bank holding
companies and their subsidiaries: making, acquiring or servicing loans or other
extensions of credit; trust company functions; leasing personal or real
property; courier services; management and consulting for other depository
institutions; and real estate appraising. Other than for Jefferson, the
Corporation has no significant non-banking activities.
The Corporation's cash revenues are derived primarily from dividends
paid by Premier, one of its subsidiaries. These dividends are subject to various
legal and regulatory restrictions. Reference is made to Note H of the
Registrant's 1997 Audited Financial Statements, which are contained under Item 8
of this filing.
Under the Act and regulations of the Federal Reserve Board pursuant
thereto, a bank holding company and its subsidiaries are prohibited from
engaging in certain tie-in arrangements in connection with the extension of
credit.
Premier is a stock-form commercial bank and Jefferson is a savings
association, both organized under the laws of the State of Ohio, and their
deposits are insured by the FDIC. Both subsidiaries derive their lending,
investment and other powers from the applicable provisions of Ohio law and the
regulations of the Ohio Department of Banking (the "Banking Department"),
subject to limitation or other modification under applicable federal laws and
regulations of such agencies as the FDIC, the Federal Reserve Board and the
Office of Thrift Supervision. Premier is subject to periodic examination and
supervision by the Federal Reserve Board and Jefferson is subject to periodic
examination and supervision by the OTS. Both are subject to the supervision of
the Banking Department.
The Banking Department regulates Premier's and Jefferson's internal
organizations as well as their deposit, lending and investment activities. The
Superintendent of the Banking Department must approve changes to Premier's or
Jefferson's Certificates of Incorporation, establishing or relocating branch
offices, mergers and the issuance of additional stock. Many of the areas
regulated by the Banking Department are subject to similar regulation by the
Federal Reserve Board. Approval for the Agreement of Affiliation and Plan of
Merger dated November 2, 1997, by and between FirstMerit Corporation and
CoBancorp Inc., has been received from the Federal Reserve Bank of Cleveland.
Approval from the Office of the Comptroller of the Currency ("OCC") is expected
by mid April, 1998.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the
"FDIC Improvement Act") covers a wide expanse of banking regulatory issues. The
FDIC Improvement Act deals with the recapitalization of the Bank Insurance Fund
(the "BIF"), with deposit insurance reform, including requiring the FDIC to
establish a risk-based premium assessment system, and with a number of other
regulatory and supervisory matters.
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EXAMINATION AND SUPERVISION
The Banking Department, the Federal Reserve Board and the Office of
Thrift Supervision issue regulations and require the filing of reports
describing the activities and financial condition of banks under their
jurisdiction. Each regulatory body conducts periodic examinations to test
compliance with various regulatory requirements and generally supervises the
operations of such banks. This supervision and regulation is intended primarily
for the protection of depositors.
The Corporation, Premier and Jefferson are subject to various
regulatory capital requirements. Further discussion is included in Note Q to the
Notes to the Registrant's Audited Financial Statements, contained under Item 8
of this filing.
FEDERAL RESERVE SYSTEM
Under Federal Reserve Board regulations, Premier is required to
maintain reserves against its transaction accounts (primarily checking and NOW
accounts), and non-personal time deposits. The current reserve requirement for
transaction accounts is 3 percent for the first $47.8 million, and 10 percent of
any additional deposits in transaction accounts. No reserves must be maintained
on time deposits, which include borrowings with original maturities of less than
one and one-half years. These amounts and percentages are subject to adjustment
by the Federal Reserve Board. Money market deposit accounts are subject to the
reserve requirement applicable to time deposits when held by an entity other
than a natural person.
INSURANCE OF DEPOSITS
Deposits of Premier and Jefferson are insured by the Federal Deposit
Insurance Corporation (the "FDIC"), to the legal maximum. Under FIRREA, the
deposits of commercial and savings banks continue to be insured to a maximum of
$100,000 for each insured depositor. As of December 31, 1997, the Corporation
had approximately $80 million of deposits which were insured by the FDIC in the
Savings Association Insurance Fund (SAIF); $27 million which had been acquired
by Premier from Savings and Loan institutions and $53 which are deposits held at
Jefferson Savings Bank.
COMMUNITY REINVESTMENT ACT
Ratings of depository institutions under the Community Reinvestment Act
of 1977 ("CRA") must be disclosed. The disclosure includes both a four-unit
descriptive rating for all CRA examinations at banks and thrifts, using terms
such as satisfactory and unsatisfactory, and a written evaluation of each
institution's performance. At its most recent CRA performance evaluation,
Premier received an outstanding evaluation of its CRA performance.
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS OF THE REGISTRANT
(AS OF JANUARY 20, 1998)
Executive
Officer
Name Age Position Since
---- --- -------- -----
<S> <C> <C> <C>
John S. Kreighbaum 51 Chairman, President and Chief Executive Officer 1991
Timothy W. Esson 48 Executive Vice President and Treasurer 1980
James R. Bryden 55 Regional President/North Central District 1987
Robert J. Scott 49 Senior Vice President/Director of Investment Management and
Trust Services 1993
Bruce E. Stevens 49 Senior Vice President/Director of Lending 1993
</TABLE>
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Each of the above executive officers of the Corporation has been an
officer of the Registrant or its subsidiary, Premier, during the past five
years. Mr. Bryden has been an officer of Jefferson Savings Bank since February,
1997.
There are no family relationships between any of the above executive
officers of the Corporation.
SUPPLEMENTAL FINANCIAL DATA
Numeric disclosure regarding the Corporation's business and
supplemental financial data concerning the Corporation, Premier and Jefferson,
as described below is incorporated herein by reference to the pages of this
report set forth opposite each specific caption:
<TABLE>
<CAPTION>
CAPTION PAGE
- ------- ----
<S> <C>
Return on Equity and Assets 15
Average Consolidated Balance Sheets, Net Interest Income and Rates 17
Summary of Changes in Net Interest Income 20
Loan Portfolio 22
Loan Maturities and Sensitivity to Changes in Interest Rates 23
Investment Securities Carrying Value and Yield by Maturity Date 24
Deposits 25
Short-Term Funds 25
Credit Quality and Experience 26
</TABLE>
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ITEM 2. PROPERTIES
The principal office of CoBancorp Inc. and PremierBank & Trust is
located at 1530 West River Road North, Elyria, Ohio. The principal office of
Jefferson Savings Bank is located at One East Main Street, West Jefferson, Ohio.
At December 31, 1997, Premier owned twenty-nine and leased eighteen of its
banking and ATM facilities and also had a land-leasing agreement for one remote
ATM facility and one banking facility. Jefferson owned two of its four banking
facilities and leased the land of the remaining two as of December 31, 1997.
Currently, three of Premier's full-service branches are located in supermarkets.
Through Premier, the Corporation owns and operates a total of 47 ATMs
at various branch offices and at nine remote locations and is a member of the
MAC Network, which provides its members with regional ATM access, and the Plus
System ATM network, which provides its members with international access.
The following table sets forth certain information regarding the
properties of the Corporation, Premier and Jefferson. Neither the Corporation
nor its subsidiaries has any mortgage indebtedness on any of its properties.
<TABLE>
<CAPTION>
OWNED OR LEASE
OFFICE LOCATION LEASED EXPIRATION
- --------------- ------ ----------
<S> <C> <C>
ELYRIA
1530 West River Road North Owned
124 Middle Avenue Owned
230 East Broad Street Owned
248 North Abbe Road Leased March 2008
1000 North Abbe Road Owned
38473 Chestnut Ridge Road Land Lease July 1998
Elyria United Methodist Home
807 West Avenue Leased December 1999
672 Oberlin Road Owned
*8703 West Ridge Road Leased June 1999
*Elyria Memorial Hospital
630 East River Street Leased July 2001
AMHERST
160 Cleveland Avenue Owned
938 North Leavitt Road Owned
AVON
36000 Detroit Road Leased May 2011
AVON LAKE
33388 Walker Road (Jefferson) Land Lease April 1999
*33388 Walker Road (Premier) Land Lease April 1999
CLEVELAND
200 Public Square Leased November 2000
CRESTLINE
350 North Seltzer Street Owned
DELAWARE
95 East William Street Owned
*1760 Columbus Pike (Wal-Mart) Leased March 1999
*561 W. Central Drive (Grady Memorial
Hospital) Leased May 1998
</TABLE>
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<TABLE>
<CAPTION>
OWNED OR LEASE
OFFICE LOCATION LEASED EXPIRATION
- --------------- ------ ----------
<S> <C> <C>
GRAFTON
432 North Main Street Owned
GREENWICH Owned
13 Main Street
HURON
410 Cleveland Road East Owned
KIPTON
299 State Street Owned
LONDON (JEFFERSON)
101 West High Street Owned
LORAIN
3903 Pearl Avenue Leased November 2000
1619 Kansas Avenue Owned
4200 Tower Boulevard Owned
*Oberlin Avenue Owned
301 West Erie Avenue Owned
2808 W. 21st Street Owned
MOUNT STERLING (JEFFERSON)
299 Yankeetown Drive Land Lease monthly
NORTH RIDGEVILLE
38659 Center Ridge Road Owned
34210 Center Ridge Road Owned
NORTH OLMSTED
**4700 Great Northern Boulevard Leased June 2001
OBERLIN
49 South Main Street Owned
5 South Main Street Owned
*Oberlin College (Wilder Hall) Leased monthly
*291 South Main Street (Station Square) Leased March 1999
*56 South Pleasant Street Owned
15181 State Route 58 (Lorain Co. JVS) Leased December 1999
POWELL
9494 Wedgewood Boulevard Leased September 2016
SHEFFIELD LAKE
**4100 Ivanhoe Drive Leased monthly
SHEFFIELD VILLAGE
**5231 Detroit Road Leased monthly
SHILOH
23 West Main Street Owned
</TABLE>
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<TABLE>
<CAPTION>
OWNED OR LEASE
OFFICE LOCATION LEASED EXPIRATION
- --------------- ------ ----------
<S> <C>
SOUTH AMHERST
107 N. Lake Street Owned
VERMILION
4530 Liberty Avenue Owned
WELLINGTON
216 N. Main Street Owned
WEST JEFFERSON (JEFFERSON)
One East Main Street Owned
WESTLAKE
801 Crocker Road Owned
WORTHINGTON
2182 West Dublin-Granville Road Owned
* Remote ATM only
** Full-service branch located on premises of a supermarket.
</TABLE>
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ITEM 3. LEGAL PROCEEDINGS
There is no pending litigation of a material nature in which the
Corporation, Premier or Jefferson is involved at December 31, 1997, and no such
legal proceeding was terminated during the forth quarter of 1997. Furthermore,
there is no material proceeding in which any director, officer, or affiliate of
the Registrant, or any associate of any such director or officer, is a party, or
has a material interest, adverse to the Corporation or its subsidiaries.
As a part of its ordinary course of business, the Corporation, Premier
and Jefferson are each a party to lawsuits (such as garnishment proceedings)
involving claims to the ownership of funds in particular accounts and involving
the collection of delinquent accounts. All such litigation is incidental to the
business of Premier, Jefferson and the Corporation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On March 3, 1998, a special meeting of shareholders of CoBancorp Inc.
was held to ask shareholders to adopt the Agreement of Affiliation and Plan of
Merger dated November 2, 1997 by and between FirstMerit Corporation and
CoBancorp. At that meeting, the merger was approved by CoBancorp Inc.'s
shareholders.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
All common shares of CoBancorp Inc. are voting shares and are traded on
the NASDAQ National Market System (COBI). There are 3,475,527 shares
outstanding, held among approximately 1,542 shareholders of record as of
December 31, 1997. Prices are the high and low closing prices as reported by
NASDAQ.
<TABLE>
<CAPTION>
Trading Ranges of Common Stock
Bid Prices Dividends Per Share
------------------------------------------------------------ ----------------------------
1997 1997 1996 1996
Low High Low High 1997 1996
--------------------------- --------------------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
First Quarter $21.00 $24.75 $18.63 $20.50 $0.17 $0.15
Second Quarter 23.25 28.50 18.25 20.63 0.18 0.16
Third Quarter 27.00 30.00 18.75 20.00 0.18 0.16
Fourth Quarter 29.00 44.25 19.13 23.50 0.18 0.16
------------ -----------
$0.71 $0.63
============ ===========
</TABLE>
On November 2, 1997, the Corporation entered into an agreement to
merge with FirstMerit Corporation, as discussed in Item I.
Reference is made to Note H to the Consolidated Financial Statements
which is contained in the Registrant's 1997 Audited Financial Statements for
information concerning dividend restrictions.
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<TABLE>
<CAPTION>
ITEM 6. SELECTED FINANCIAL DATA
COBANCORP INC. AND SUBSIDIARIES
Consolidated Financial
Highlights
- --------------------------------------------------------------------------------------------
Dollars in thousands, except 1997 1996 1995 1994 1993
per share amounts
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Common Share
Net income before
extraordinary item......... $1.60 $2.07 $1.86 $1.68 $1.58
Effect of extraordinary
item....................... (.21)
Net income.................. 1.39 2.07 1.86 1.68 1.58
Net income before
extraordinary item,
assuming dilution.......... $1.58 $2.05 $1.85 $1.66 $1.56
Effect of extraordinary
item....................... (.21)
Net income assuming
dilution................... 1.37 2.05 1.85 1.66 1.56
Cash dividends.............. 0.71 0.63 0.58 0.51 0.40
Book value.................. 16.93 15.82 14.70 12.02 11.80
- --------------------------------------------------------------------------------------------
Operations for the Year
Interest
income...................... $48,141 $43,181 $39,829 $35,357 $34,729
Interest
expense..................... 19,087 16,799 15,795 11,528 12,609
----------- ---------- ---------- ---------- ----------
Net interest
income...................... 29,054 26,382 24,034 23,829 22,120
Provision for loan
losses...................... 225 (1,775) 180 208 920
----------- ---------- ---------- ---------- ----------
Net interest income after
provision for loan losses... 28,829 28,157 23,854 23,621 21,200
Other
income...................... 8,204 6,430 4,719 4,411 4,468
Other
expense..................... (29,941) (25,792) (21,059) (21,090) (19,287)
----------- ---------- ---------- ---------- ----------
Income before income
taxes and extraordinary
item........................ 7,092 8,795 7,514 6,942 6,381
Federal income tax
expense..................... (1,568) (1,663) (1,112) (1,256) (1,100)
----------- ---------- ---------- ---------- ----------
Net income before
extraordinary item.......... 5,524 7,132 6,402 5,686 5,281
Extraordinary
item--merger costs.......... (724)
----------- ---------- ---------- ---------- ----------
Net $4,800 $7,132 $6,402 $5,686 $5,281
income......................
=========== ========== ========== ========== ==========
- --------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
COBANCORP INC. AND SUBSIDIARIES
Consolidated Financial
Highlights (con't)
- --------------------------------------------------------------------------------------------
Dollars in thousands, except 1997 1996 1995 1994 1993
per share amounts
- --------------------------------------------------------------------------------------------
Balance Sheet Data at December 31
<S> <C> <C> <C> <C> <C>
Assets....................... $645,183 $598,918 $529,530 $531,727 $491,801
Cash and due from
banks........................ 34,183 30,555 26,611 29,271 29,051
Investment
securities................... 154,739 188,786 159,415 149,807 152,934
Loans........................ 414,196 340,454 320,509 330,133 288,649
Deposits..................... 560,796 514,747 452,135 465,837 427,586
Employee stock ownership
plan obligation.............. 0 0 430 780 1,105
Shareholders'
equity....................... 58,827 54,645 50,672 40,982 39,733
- --------------------------------------------------------------------------------------------
Key Ratios
Return on average
assets....................... 0.74% 1.20% 1.20% 1.15% 1.10%
Return on average
equity....................... 8.42% 13.81% 13.98% 14.28% 14.60%
Total equity to
assets....................... 9.12% 9.12% 9.57% 7.71% 8.08%
Tier 1 risk-based
capital...................... 12.11% 13.74% 14.87% 13.04% 13.34%
Total risk-based
capital...................... 13.09% 14.88% 16.12% 14.29% 14.60%
Nonperforming loans to
total assets................. 0.43% 0.30% 0.18% 0.08% 0.29%
Net charge-offs to total
loans........................ 0.16% 0.00% (0.02)% (0.06)% 0.28%
Delinquencies to total
loans........................ 0.80% 1.14% 0.54% 0.44% 0.95%
- --------------------------------------------------------------------------------------------
All per share amounts have been adjusted for a three percent stock dividend in
1995 and four-for-three stock splits in 1994 and 1993.
</TABLE>
14
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CoBancorp Inc. is a bank holding company with total consolidated assets
at year-end 1997 of $645 million. PremierBank & Trust maintains offices in
Lorain County, as well as Cuyahoga, Erie, Huron, Richland, Delaware, Crawford
and Franklin Counties while Jefferson Savings Bank maintains offices in Madison
and Lorain Counties.
This section of the report provides a narrative discussion and analysis
of the consolidated financial condition and results of operations of CoBancorp
Inc. for the past three years. The supplemental financial data included in this
section should be read in conjunction with the consolidated financial statements
and related disclosures included in the Registrant's 1997 Audited Financial
Statements, presented under Item 8 of this filing. All shares outstanding and
per share data have been adjusted for a three percent stock dividend in 1995.
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 and related disclosures included in
the Registrant's 1997 Audited Financial Statements found under Item 8 of this
filing. In connection with any forward looking statements made by the
Registrant, the following disclosure is made: Actual results could differ
materially from any such forward looking statements for a variety of factors
including sharp and/or rapid changes in interest rates, significant changes in
the economy, or significant changes in accounting, tax or regulatory practices
or requirements. On November 2, 1997, CoBancorp reached an agreement to merge
with FirstMerit Corporation. CoBancorp's shareholders approved the proposed
merger on March 3, 1998, and the transaction is expected to close in May 1998.
PERFORMANCE OVERVIEW
Net income for 1997 was $5,524,000, or $1.60 per share exclusive of an
extraordinary item of $724,003 for costs associated with the acquisition by
FirstMerit Corporation, compared to $7,132,000, or $2.07 per share in 1996, and
$6,402,000 or $1.86 per share in 1995. Two key measures of performance in the
banking industry are return on average equity (ROE) and return on average assets
(ROA). ROE is the ratio of income earned to average shareholders' equity. ROE
for 1997 was 9.69 percent, compared to 13.81 percent in 1996 and 13.98 percent
in 1995. ROA measures how effectively a corporation uses its assets to produce
earnings. For 1997, return on average assets was .85 percent. ROA was 1.20
percent in 1996 and 1995.
The following table sets forth operating and capital ratios of the
Corporation. 1997 calculations exclude the effects of an extraordinary item of
merger and acquisition costs of $724,003 as of December 31, 1997.
<TABLE>
<CAPTION>
RETURN ON EQUITY AND ASSETS
DECEMBER 31
-----------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Return on average assets .85% 1.20% 1.20%
Return on average equity 9.69 13.81 13.98
Dividend payout ratio 44.41 30.47 31.28
Ratio of average equity to average assets 8.80 8.67 8.56
</TABLE>
15
<PAGE> 16
RESULTS OF OPERATIONS
NET INTEREST INCOME
The Corporation's primary source of earnings is net interest income,
which is the difference between revenue generated from earning assets and the
interest cost of funding those assets. For discussion, net interest income is
adjusted to reflect the effect of the tax benefits of certain tax-exempt
investments and loans to compare with other sources of interest income. Net
interest income on a fully taxable-equivalent basis grew to $30,696,000 in 1997,
from $28,276,000 in 1996 and $26,199,000 in 1995. Reference is made to the
"Summary of Changes in Net Interest Income" on page 19 of this report for a
detailed analysis of factors affecting this trend in net interest income. Net
interest margin, which is net interest income divided by average earning assets,
was 5.31 percent in 1997 compared with 5.24 percent in 1996 and 5.31 percent for
1995.
Average earning assets, as a percentage of total average assets,
decreased to 89.3 percent this year compared to 90.5 percent in 1996 and 92.7
percent in 1995.
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 tables.
16
<PAGE> 17
<TABLE>
<CAPTION>
AVERAGE CONSOLIDATED BALANCE SHEETS, NET INTEREST INCOME AND RATES
FULLY TAXABLE EQUIVALENT (IN THOUSANDS OF DOLLARS)
1997
AVERAGE
DAILY YIELD/
BALANCE INTEREST RATE
------- -------- ----
<S> <C> <C> <C>
Assets
Interest-earning assets
Loans (including fees)
Taxable $407,731 $37,692 9.25%
Tax-exempt 2,143 195 9.10%
Investment securities
Taxable 97,774 6,570 6.72%
Tax-exempt 57,803 4,634 8.02%
Federal funds sold and
other short-term funds 12,843 691 5.38%
------------- -------------
Total interest-earning
assets 578,294 49,782 8.61%
Noninterest-earning assets:
Cash and due from banks 30,337
Bank premises and equipment 20,195
Other assets 23,295
Less allowance for loan losses (4,460)
-------------
Total assets $647,661
=============
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing transaction
accounts $69,516 $1,118 1.61%
Savings 172,531 4,274 2.48%
Time deposits 237,616 13,084 5.50%
Short-term funds 21,887 611 2.79%
------------- -------------
Total interest-bearing
liabilities 501,550 19,087 3.81%
-------------
Noninterest-bearing liabilities:
Demand deposits 82,427
Other liabilities 6,702
Shareholders' equity 56,982
-------------
Total liabilities and
shareholders' equity $647,661
=============
Net interest income $30,696
=============
Net yield/rate on interest-earning
assets 5.31%
============
Notes: Nonaccrual loans are included in average loan balances.
Interest income and yields/rates are presented on a fully
taxable-equivalent basis using a tax rate of 34% in 1997, 1996 and
1995.
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
AVERAGE CONSOLIDATED BALANCE SHEETS, NET INTEREST INCOME AND RATES
FULLY TAXABLE EQUIVALENT (IN THOUSANDS OF DOLLARS)
1996
AVERAGE
DAILY YIELD/
BALANCE INTEREST RATE
------- -------- ----
<S> <C> <C> <C>
Assets
Interest-earning assets:
Loans (including fees)
Taxable $327,872 $30,286 9.24%
Tax-exempt 2,432 189 7.77%
Investment securities
Taxable 134,024 8,830 6.59%
Tax-exempt 68,541 5,382 7.85%
Federal funds sold and other
short-term funds 6,602 388 5.88%
------------- --------------
Total interest-earning 539,471 45,075 8.35%
assets
Noninterest-earning assets:
Cash and due from banks 27,501
Bank premises and equipment 14,760
Other assets 20,255
Less allowance for loan losses (5,988)
-------------
Total assets $595,999
=============
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing transaction
accounts $63,051 1,142 1.81%
Savings 176,077 4,235 2.40%
Time deposits 201,112 10,789 5.36%
Short-term borrowings 21,549 633 2.94%
------------- --------------
Total interest-bearing
liabilities 461,789 16,799 3.64%
--------------
Noninterest-bearing liabilities:
Demand deposits 77,597
Other liabilities 4,953
Shareholders' equity 51,660
-------------
Total liabilities and
shareholders' equity $595,999
=============
Net interest income $28,276
==============
Net yield/rate on interest-earning
assets 5.24%
============
Notes: Nonaccrual loans are included in average loan balances.
Interest income and yields/rates are presented on a fully
taxable-equivalent basis using a tax rate of 34% in 1997, 1996 and
1995.
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
AVERAGE CONSOLIDATED BALANCE SHEETS, NET INTEREST INCOME AND RATES
FULLY TAXABLE EQUIVALENT (IN THOUSANDS OF DOLLARS)
1995
AVERAGE
DAILY YIELD/
BALANCE INTEREST RATE
------- -------- ----
<S> <C> <C> <C>
Assets
Interest-earning assets:
Loans (including fees)
Taxable $325,524 $29,670 9.11%
Tax-exempt 2,756 289 10.49%
Investment securities
Taxable 85,486 5,789 6.77%
Tax-exempt 75,338 6,080 8.07%
Federal funds sold and other
short-term funds 2,837 166 4.14%
------------- --------------
Total interest-earning 491,941 41,994 8.54%
assets
Noninterest-earning assets:
Cash and due from banks 23,808
Bank premises and equipment 11,013
Other assets 14,601
Less allowance for loan losses (5,756)
-------------
43,666
=============
Total assets $535,607
=============
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing transaction
accounts $51,056 1,044 2.05%
Savings 153,721 3,529 2.30%
Time deposits 193,854 10,390 5.36%
Short-term borrowings 23,144 832 3.59%
------------- --------------
Total interest-bearing
liabilities 421,775 15,795 3.75%
--------------
Noninterest-bearing liabilities:
Demand deposits 63,613
Other liabilities 4,419
Shareholders' equity 45,800
-------------
Total liabilities and
shareholders' equity $535,607
=============
Net interest income $26,199
==============
Net yield/rate on interest-earning
assets 5.31%
============
Notes: Nonaccrual loans are included in average loan balances.
Interest income and yields/rates are presented on a fully
taxable-equivalent basis using a tax rate of 34% in 1997, 1996 and
1995.
</TABLE>
19
<PAGE> 20
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 (in thousands of dollars):
<TABLE>
<CAPTION>
SUMMARY OF CHANGES IN NET INTEREST INCOME
1997 VS. 1996 1996 VS. 1995
INCREASE (DECREASE) DUE TO (1) INCREASE (DECREASE) DUE TO (1)
------------------------------------ -------------------------------------
VOLUME RATE NET VOLUME RATE NET
------------ ------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Loans, net of unearned
income (2) $6,630 $780 $7,410 $306 $207 $513
Securities (3,271) 265 (3,006) 2,741 (398) 2,343
Federal funds sold 366 (62) 304 221 3 224
------------ ------------ ----------- ------------ ------------ -----------
Total interest-earning
assets 3,725 983 4,708 3,268 (188) 3,080
Interest expense:
Interest-bearing transaction
accounts 114 (138) (24) (249) 152 (97)
Savings 10 27 37 (852) 145 (707)
Time deposits 1,924 373 2,297 (179) (218) (397)
Short-term funds 14 (36) (22) 144 54 198
------------ ------------ ----------- ------------ ------------ -----------
Total interest-bearing
liabilities 2,062 226 2,288 (1,136) 133 (1,003)
------------ ------------ ----------- ------------ ------------ -----------
Change in net interest income $1,663 $757 $2,420 $2,132 $(55) $2,077
============ ============ =========== ============ ============ ===========
<FN>
(1) Changes in interest income not arising solely from rate or volume variances
are included in rate variances. (2) Nonaccrual loans are included in average
loan balances.
</FN>
</TABLE>
PROVISION FOR LOAN LOSSES
The expense related to the total provision for loan and real estate
losses was $225,000 in 1997, $(1,775,000) in 1996 and $180,000 in 1995.
Additional discussion regarding the provision for loan losses and the allowance
for loan losses is contained in this report in the section entitled "Credit
Quality and Experience" on pages 25 and 26.
NONINTEREST INCOME
Total noninterest income, exclusive of securities gains, increased
$1,688,000, or 28.03% in 1997 when compared to 1996. 1996 noninterest income
represented an increase of $1,586,000, or 35.8% over 1995. In 1997, service
charges on deposit accounts increased $58,000 or 1.96 percent. This increase was
primarily due to the acquisition of Jefferson Savings Bank in early 1997, as
well as an ongoing evaluation of service charges. In 1996, service charges
increased $944,000 primarily as a result of the acquisition of eleven Bank One
branches. In 1995, the Corporation completed a comprehensive internal and
competitive review of service charges. As a result, service charges on deposits
increased $174,000 that year. Income from trust activities has increased each
year, to $1,736,000 in 1997 from $1,424,000 in 1996 and $1,360,000 in 1995.
Total assets managed by the Trust Department aggregated $240,000,000,
$204,000,000 and $181,300,000 at December 31, 1997, 1996 and 1995, respectively.
20
<PAGE> 21
Other noninterest income for 1997, $2,976,000, increased from
$1,659,000 in 1996 by $1,317,000 or 79.4 percent. This increase is attributable
to several factors including ATM surcharge income which increased by $359,000
over the previous year, from $116,000 in 1996 to $475,000 in 1997. Additionally,
Premier recognized a gain of approximately $400,000 on the sale of its credit
card portfolio (approximately $2,605,000 of loans) in June of 1997. During
September and November of 1997, Premier sold approximately $30 million of
mortgage loans and recognized a combined gain of approximately $658,000 related
to the two sale transactions. Premier elected to retain servicing rights to
these mortgage loans and recognized a mortgage servicing asset of approximately
$463,000 (the balance was $436,000 as of December 31, 1997) under the guidelines
set forth by the Financial Accounting Standards Board, Statement Number 125.
Amortization of this servicing asset will be recognized over the average
remaining life of the pools of loans sold. During the third quarter of 1997,
Premier also sold its office building located at 124 Middle Avenue, Elyria,
Ohio, and accounted for the transaction as a sales-leaseback agreement. A gain
of approximately $1,009,000 is being recognized over the life of the five year
lease. Gains and losses on the sale of investment securities also impact
comparisons. Security transactions resulted in gains of $494,000, $409,000 and
$284,000 in 1997, 1996 and 1995 respectively.
NONINTEREST EXPENSES
For the year ended December 31, 1997, salaries and wages increased by
$1,534,000 to $10,623,000 from $9,089,000 in 1996. Of this increase,
approximately 28% or $425,000, is attributable to the acquisition of Jefferson
in early 1997. The remainder is a result of an increase in staff for the opening
of new branch offices throughout the year as well as normal salary adjustments.
Full-time equivalent staff was 394 at December 31, 1997, compared to 373 and 313
at the same dates in 1996 and 1995. During 1996, approximately 45 full-time
employees were added as a result of the Bank One acquisition. Total salaries and
wages were level in 1995 compared with 1994. As a result of the full repayment
of the 1986 $2,680,260 Employee Stock Ownership Plan loan obligation during
1996, the Corporation was not required to make any additional contributions to
the Employee Stock Ownership Plan during 1997, thus attributing to the $324,000
decrease in the cost of employee benefits, from $2,117,000 in 1996 to $1,793,000
in 1997. In 1996, the cost of employee benefits increased as a result of
increased employment taxes associated with the increased number of employees.
The cost of employee benefits increased $229,000 in 1995, due primarily to
pension and Employee Stock Ownership Plan costs.
Data processing costs increased approximately $1,393,000, or 62
percent, in 1997 when compared to 1996. This increase is the result of
increased costs associated with Premier's change to a new data processing
services provider, as well as the costs of Jefferson's data processing. The
increase of $619,000 from 1995 to 1996 was primarily the result of added
accounts and branches associated with the acquisition of eleven branches from
Bank One in February 1996.
FDIC insurance expense decreased significantly in both 1997 and 1996,
to $106,000 and $254,000 respectively, from $560,000 in 1995. In September 1995,
the Federal Deposit Insurance Corporation (FDIC) reduced the annual premium from
$0.23 per $100 of insured deposits to approximately $0.04 per $100 deposits
insured in the Bank Insurance Fund (BIF). In December 1995, the FDIC lowered the
rate for BIF insured deposits to zero. As of December 31, 1997, the Corporation
had approximately $80 million of deposits which were insured by the FDIC in the
Savings Association Insurance Fund (SAIF); $27 million which had been acquired
by Premier from Savings and Loan institutions and $53 which are deposits held at
Jefferson Savings Bank. These deposits were assessed at $0.23 per $100 per year
through September 30, 1996. On September 30, 1996, the FDIC imposed a one-time
assessment of approximately $0.657 per $100 of SAIF insured deposits, which
resulted in a one-time cost of $190,000 in the third quarter of 1996. Going
forward, BIF deposits will be assessed at $0.013 per $100, and SAIF deposits
will be assessed at $0.0648 per $100.
INCOME TAXES
The Corporation employs various strategies in investments and loans to
maximize after-tax profits. This ongoing process considers the levels of
tax-exempt securities and loans, investment securities gains or losses and
allowable loan loss deductions. The Corporation's effective income tax rate
(income tax expense divided by income before income taxes) was 24.6% in 1997,
compared to 18.9% in 1996 and 14.8% in 1995. The effective tax rate is lower
than the statutory rate primarily due to the effect of income on tax-exempt
securities and loans. The income tax provision was $1,568,000 in 1997, compared
with $1,663,000 in 1996 and $1,112,000 in 1995. For the year ended December 31,
1997, no valuation allowance is required on any of the deferred tax assets
recorded due primarily to the earnings history of the Corporation and the
significant amount of federal income taxes paid in prior years.
EXTRAORDINARY ITEM
In the fourth quarter, the Corporation recorded as an extraordinary
item $724,003 of expenses incurred through December 31, 1997, related to legal,
investment, and accounting advisory services related to the pending merger with
FirstMerit Corporation. These expenses are generally not tax-deductible.
21
<PAGE> 22
FINANCIAL CONDITION
The consolidated financial condition of the Corporation as of December
31, 1997 and 1996 is presented in the comparative balance sheets contained in
this filing under Item 8. The following discussions address key elements of
financial condition, including earning assets, the source of funds supporting
earnings assets, credit quality and experience, asset and liability management
and capital adequacy.
EARNING ASSETS
LOANS
Loans comprise the majority of the Corporation's earning assets,
representing 70.5 percent of average earning assets in 1997, and 61.2 percent in
1996. At year-end 1997, total loans were $414,196,000 which was an increase of
$73,742,000 or 21.7% from $340,454,000 at year-end 1996. Of this large increase,
$52,102,000 is attributable to loans acquired through Jefferson. The remainder
being a result of increased loan demand in the Corporation's defined market
areas, especially for commercial loan products.
The largest categories in the loan portfolio are residential real
estate mortgage loans, which comprised 36.7 percent of total loans at the end of
1997 and commercial and collateral loans which totaled 50.6 percent of the
portfolio. Installment loans comprised 12.7 percent of the portfolio. All other
loans were less than one percent of the portfolio. In 1996, real estate
mortgages were 42.7 percent of the loan portfolio, commercial and collateral
loans were 42.9 percent, installment loans were 13.4 percent and other loans
were 1.0 percent.
The mix within the commercial loan portfolio is diverse and represents
loans to a broad range of business interests, located primarily within the
Bank's defined market area, with no significant industry concentration. The
installment loan portfolio is composed principally of financing to individuals
for vehicles and consumer assets, as well as other personal purposes. The real
estate portfolio is primarily residential first mortgages that can qualify for
sale into the secondary market. At December 31, 1997, and 1996, there were
approximately $23,789,000 and $20,172,000, respectively, in home equity loans.
During 1997, approximately $54,081,000 of residential real estate mortgage loans
were sold in the secondary market, which provided a source of fee income and
additional funds for new lending.
Loans by major category at the end of the last five years were as
follows (in thousands of dollars):
<TABLE>
<CAPTION>
LOAN PORTFOLIO
DECEMBER 31
----------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Real estate $152,062 $145,467 $138,664 $152,695 $132,589
Installment 52,582 45,600 41,155 38,364 31,229
Commercial and collateral 209,486 146,167 137,702 136,187 122,699
All other 66 3,220 2,988 2,887 2,932
------------- ------------- ------------- ------------- ------------
Total (net of unearned income) $414,196 $340,454 $320,509 $330,133 $289,449
============= ============= ============= ============= ============
</TABLE>
The maturity distribution and sensitivity to interest rates of the loan
portfolio are two factors in management's evaluation of the risk characteristics
of the portfolio and the future profitability of the portfolio. Loans at
December 31, 1997, reported at maturity for fixed rate loans, and repricing
interval for variable rate loans, are as follows (in thousands of dollars):
22
<PAGE> 23
<TABLE>
<CAPTION>
LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
WITHIN 1-5 AFTER
1 YEAR YEARS 5 YEARS TOTAL
------ ----- ------- -----
<S> <C> <C> <C> <C>
Loans secured by real estate $94,673 $47,796 $61,098 $203,567
Loans to individuals 5,783 32,611 6,343 44,737
Commercial and collateral 94,191 62,366 9,269 165,826
All other 0 66 0 66
------------- ------------- ------------- -------------
$194,647 $142,839 $76,710 $414,196
============= ============= ============= =============
</TABLE>
Of the loans due or repricing after one year, approximately $85,081,000
have variable interest rates, and $134,468,000 have fixed interest rates.
INVESTMENT SECURITIES
The investment portfolio is comprised of U.S. Treasury and other U.S.
Government agency-backed securities, collateralized mortgage-backed securities,
tax-exempt obligations of states and political subdivisions, and certain other
investments. The quality of obligations of states and political subdivisions
will be A, AA, or AAA, the majority of which will be AA or AAA, as rated by a
nationally recognized service. As a matter of policy, in support of our service
areas, we may purchase certain unrated bank-qualified bonds of local schools,
townships and municipalities, provided they are a sound credit risk.
The investment portfolio represented 26.9 percent of average earning
assets in 1997 and 37.5 percent in 1996. The tax-equivalent yield on the entire
portfolio was 7.20, 7.01 and 7.32 percent in 1997, 1996 and 1995, respectively.
These investments provide a stable yet diversified income stream and serve
useful roles in liquidity and interest rate sensitivity management. In addition,
the investment portfolio serves as a source of collateral for low-cost funding.
The decision to purchase securities is based upon the assessment of current
economic and financial trends.
As discussed in Note C of the Registrant's 1997 Audited Financial
Statements, which are found under Item 8 of this filing, in accordance with the
Financial Accounting Standards Board's special report issued on November 15,
1995, the Corporation reclassified approximately $48,706,000 of securities from
the held-to-maturity to the available-for-sale category in a single transaction
in December 1995.
The portfolio accounting designations are made in order to attain the
objectives of the Corporation's investment portfolio, which are to generate
interest income, serve as a liquidity source and play an important role in the
management of the interest rate sensitivity of the Corporation. Accordingly,
securities purchased for the available-for-sale category are those which may be
sold prior to their maturity for purposes of bank asset allocations, rate
sensitivity or liquidity and, hence, tend to be more liquid. Securities in the
held-to-maturity category are purchased with the intent and ability to hold them
to maturity and are, therefore, carried at amortized cost.
23
<PAGE> 24
Summary information with respect to the securities portfolio at
December 31 follows (in thousands of dollars):
<TABLE>
<CAPTION>
1997 1996 1995
Held to Available 1997 Carrying Carrying
Maturity for Sale Yield Value Value
------------- ------------- ------------- -------------- --------------
U.S. Treasury and other
U.S. Government agencies
<S> <C> <C> <C> <C> <C>
Under 1 year $ 0 $ 34,156 6.71% $37,932 $18,937
1 to 5 years 0 6,883 6.89% 14,770 11,705
5 to 10 years 0 1,783 6.72% 1,146 1,009
Over 10 years 0 0 2,986 0
------------- ------------- -------------- --------------
Total 0 42,822 6.72% 56,834 31,651
States of the U.S. and political
subdivisions
Under 1 year 10,516 280 5.46% 30,943 2,927
1 to 5 years 7,387 20,241 5.28% 21,962 34,116
5 to 10 years 992 17,616 5.29% 7,190 41,699
Over 10 years 0 2,537 5.31% 6,750 1,133
------------- ------------- -------------- --------------
Total 18,895 40,674 5.32% 66,845 79,875
Collateralized mortgage-backed
securities
Under 1 year 0 21,416 6.08% 7,191 10,883
1 to 5 years 0 11,684 6.17% 33,379 16,857
5 to 10 years 0 8,788 7.18% 20,961 16,826
Over 10 years 0 6,848 7.27% 889 1,010
------------- ------------- -------------- --------------
Total 0 48,736 6.47% 62,420 45,576
Other
Under 1 year 0 3,613 6.50% 2,687 0
------------- ------------- -------------- --------------
Total $18,895 $135,845 $188,786 $157,102
============= ============= ============== ==============
</TABLE>
The yield at December 31, 1997, was the combined rate for the
held-to-maturity and available-for-sale securities portfolios.
Mortgage-backed securities and other securities which may have
prepayment provisions are assigned to a maturity category based on estimated
average life. Securities with a call provision are assigned to a maturity
category based on call date. Yield represents the weighted average yield to
maturity. The yield on obligations of states and political subdivisions has been
calculated on a fully taxable equivalent basis, assuming a 34% tax rate.
FEDERAL FUNDS SOLD
Short-term federal funds sold are used to manage interest rate
sensitivity and to meet liquidity needs. During 1997, 1996 and 1995, these funds
represented approximately 2.2 percent, 1.0 percent and .4 percent, respectively,
of average earning assets.
SOURCES OF FUNDS
DEPOSITS
The Corporation's major source of investable funds is core deposits
from retail and business customers. These core deposits consist of
interest-bearing and noninterest-bearing demand deposits, savings and other time
deposits, excluding certificates of deposit over $100,000. Average
interest-bearing core deposits, comprised of interest-bearing checking accounts,
savings, money market and other time deposit accounts, decreased by 7.7 percent
in 1997 to 85.3 percent, of average deposits as compared to 93.6 percent in 1996
and 87.8 percent in 1995.
24
<PAGE> 25
<TABLE>
<CAPTION>
The following table presents the average amount of and the average rate
paid on each of the following deposit categories (dollar amounts in thousands).
AVERAGE DEPOSITS
YEARS ENDED DECEMBER 31
----------------------------------------------------
1997 1996 1995
----------------- ---------------- -----------------
AMOUNT
<S> <C> <C> <C>
Noninterest-bearing demand deposits $ 82,427 $ 77,597 $ 63,613
Interest bearing transaction accounts 69,516 63,051 51,056
Savings deposits 172,531 176,077 153,721
Time deposits 237,616 201,112 193,854
------- ------- -------
$562,090 $517,837 $462,244
======== ======== =======
AVERAGE RATE FOR THE YEAR
Interest bearing transaction accounts 1.61% 1.81% 2.05%
Savings deposits 2.48% 2.40% 2.30%
Time deposits 5.50% 5.36% 5.36%
</TABLE>
The maturity distribution of certificates of deposit of $100,000 or
more at December 31, 1997, was (in thousands of dollars):
<TABLE>
<CAPTION>
CERTIFICATES OF DEPOSIT OVER $100,000
<S> <C>
Three months or less $10,729
Over three through six months 5,929
Over six through twelve months 7,703
Over twelve months 2,174
--------------
$26,535
==============
</TABLE>
There were six other time deposits of $100,000 or more, aggregating
$669,295, at December 31, 1997, which will mature within the next four years.
SHORT-TERM FUNDS
Other interest-bearing liabilities include securities sold under
agreements to repurchase, sweep accounts, federal funds purchased and notes
payable, treasury tax and loan. During 1997, these funds represented 3.8 percent
of average earning assets, compared to 4.0 percent in 1996 and 4.7 percent in
1995.
The Corporation enters into sales of securities under agreements to
repurchase for periods up to 29 days, which are treated as financings and
reflected in the consolidated balance sheet as a liability.
The following table presents information related to short-term funds
(in thousands of dollars).
<TABLE>
<CAPTION>
SHORT-TERM FUNDS
DECEMBER 31
-----------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balance at December 31 $18,121 $25,521 $22,454
Maximum outstanding at any month-end 33,228 27,527 30,013
Average amount outstanding 23,359 21,549 23,144
Weighted average interest rate 2.79% 2.94% 3.59%
Weighted rate at December 31 2.27% 2.72% 2.80%
</TABLE>
25
<PAGE> 26
CREDIT QUALITY AND EXPERIENCE
NONPERFORMING LOANS
Inherent in the business of providing financial services is the risk
involved in extending credit. Management believes the objective of a sound
credit policy is to extend quality loans to customers while reducing risk
affecting shareholders' and depositors' investments. Risk reduction is achieved
through diversity of the loan portfolio as to type, borrower, and industry
concentration as well as sound credit policy guidelines and procedures.
Nonperforming loans include loans accounted for on a nonaccrual basis,
as well as accruing loans which are contractually past due 90 days or more as to
principal or interest payments. Total nonperforming assets (including other real
estate owned) at December 31, 1997, were $2,776,000, compared to $1,792,000 at
December 31, 1996 and $965,000 at December 31, 1995. Total nonperforming loans
as a percentage of total loans were 0.67 percent at December 31, 1997, compared
to 0.53 percent at December 31, 1996 and 0.30 percent at December 31, 1995.
<TABLE>
<CAPTION>
The following table summarizes nonaccrual and past due loans (in
thousands of dollars).
DECEMBER 31
-----------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Accruing loans past due
90 days or more as to principal or interest:
Loans secured by real estate $ 0 $ 0 $ 35 $ 3 $ 58
Loans to individuals 0 85 67 48 57
Commercial and industrial loans 0 0 0 0 26
All other 64 0 0 0 0
------- ------ ----- ----- -----
$64 $ 85 $102 $ 51 $ 141
==== ==== === ==== ======
Nonaccrual loans:
Loans secured by real estate $2,206 $1,529 $654 $358 $ 518
Commercial and collateral 352 178 76 0 77
All other 26 0 0 0 723
--------- -------- ----- ----- ------
$2,584 $1,707 $730 $358 $1,318
====== ====== ==== === =====
As of December 31, 1997, there were no past-due restructured loans.
</TABLE>
<TABLE>
<CAPTION>
The effect of nonaccrual loans, on a fully taxable-equivalent basis,
for the year ended December 31 was as follows (in thousands of dollars):
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
Interest income that would have been recorded under original terms $207
Interest income recorded during the period 108
----------------------
Net reduction in interest income $99
======================
</TABLE>
Loans other than installment loans on which interest and/or principal
is 90 days or more past due are placed in nonaccrual status and any previously
accrued but uncollected interest is reversed. Such loans remain on a cash basis
for recognition of income until both interest and principal are current.
Installment loans past due greater than 120 days will be charged off and
previously accrued but uncollected interest is reversed from income.
As discussed in Note D in the Registrant's 1997 Annual Report to
Shareholders, the Corporation adopted Statement of Financial Accounting
Standards (SFAS) No. 114 and 118 effective January 1, 1995. The adoption did not
have a material impact on the allowance for loan losses. As of December 31, 1997
and 1996, there were no loans
26
<PAGE> 27
outstanding which met the Standards' definition of an impaired loan for which a
valuation allowance is required.
ALLOWANCE FOR LOAN LOSSES AND LOAN CHARGE-OFFS
The allowance for loan losses is the reserve maintained to cover losses
that may be incurred in the normal course of lending. 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.
In determining the adequacy of the allowance for loan losses,
management on a regular basis evaluates and gives consideration to the following
factors: estimated future losses of significant loans including identified
problem credits; historical loss experience based on volume and types of loans;
trends in portfolio volume, maturity and composition; off-balance sheet credit
risk; volume and trends in delinquencies and nonaccruals; economic conditions in
the market area; and any other relevant factors that may be pertinent.
During the fourth quarter of 1996, the Allowance for Loan Losses was
reduced by $1,775,000. This reversal of the provision was deemed appropriate in
light of management's extensive review of the following factors: historical loss
experience, including a three year pattern of net recoveries, current watch list
loans, estimated future losses, geographic diversification and industry mix of
the portfolio, and current economic conditions.
The Allowance for Loan Losses had been supplemented by $2,000,000 for
1990 as a result of a regularly-scheduled regulatory exam. After the additional
provision, the allowance stood at $4,644,000, or 1.94% of outstanding loans.
Since that time, the Bank's charge-off and recovery history would suggest that
the additional provision was not necessary.
Potential problem loans are those loans which are on the Corporation's
"watch list." These loans exhibit characteristics that could cause the loans to
become nonperforming or require restructuring in the future. Periodically, and
at a minimum monthly, this "watch list" is reviewed and adjusted for changing
conditions. As of December 31, 1997, there were loans with principal balances of
approximately $6.4 million on Premier's watch list, none of which were
classified as "doubtful" or "loss."
27
<PAGE> 28
<TABLE>
<CAPTION>
The following table contains information relative to loan loss
experience for each of the five years in the period ended December 31, 1997 (in
thousands of dollars).
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Allowance for loan losses at beginning
of year $4,092 $5,850 $5,617 $5,226 $5,215
Jefferson allowance acquired 501
Loans charged off:
Real estate 36 21 2 31 198
Installment 593 446 510 297 471
Credit card 82 82 85 61 91
Other 175 4 4 5 2
Commercial and collateral 209 163 27 38 1,384
------------ ----------- ------------ ------------ -----------
1,095 716 628 432 2,146
Recoveries on loans charged off:
Real estate 146 5 3 33 51
Installment 197 311 318 246 330
Credit card 35 22 16 32 16
Other 2 1 2 1 12
Commercial and collateral 65 395 342 303 928
------------ ----------- ------------ ------------ -----------
445 733 681 615 1,337
------------ ----------- ------------ ------------ -----------
Net (recoveries) charge-offs 650 (17) (53) (183) 809
Provision (credit) for loan losses 225 (1,775) 180 208 820
------------ ----------- ------------ ------------ -----------
Allowance for loan losses at end of year $4,168 $4,092 $5,850 $5,617 $5,226
============ =========== ============ ============ ===========
Ratio of net (recoveries) charge-offs
during the year to average loans
outstanding during the year .16% (.01)% (.02)% (.06)% .31%
============ =========== ============ ============ ===========
Ratio of allowance for loan losses to
total loans at December 31 1.01% 1.20% 1.82% 1.70% 1.81%
============ =========== ============ ============ ===========
Additionally, $100,000 was provided in 1993 for possible losses on
other real estate owned.
</TABLE>
<TABLE>
<CAPTION>
The following table shows an allocation of the allowance for loan
losses at December 31 for each of the loan categories (dollar amounts in
thousands).
PERCENT OF LOANS IN EACH
AMOUNT CATEGORY TO TOTAL LOANS
------------------------------------------------ ---------------------------------------------
1997 1996 1995 1994 1993 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate $510 $241 $337 $400 $406 37% 43% 43% 46% 46%
Installment 757 1,287 1,480 1,204 732 13% 13% 13% 12% 11%
Commercial and
collateral 2,720 2,152 2,741 2,749 2,270 50% 43% 43% 41% 42%
All other 6 375 327 190 124 0% 1% 1% 1% 1%
Unallocated 175 37 965 1,074 1,694 n/a n/a n/a n/a n/a
------ ------ ------ ----- ----- --- --- --- --- ---
$4,168 $4,092 $5,850 $5,617 $5,226 100% 100% 100% 100% 100%
====== ====== ===== ===== ===== ==== ==== === === ===
</TABLE>
28
<PAGE> 29
ASSET AND LIABILITY MANAGEMENT AND CAPITAL ADEQUACY
INTEREST RATE SENSITIVITY
Balance sheet structure and interest rate changes play important roles
in the growth of net interest income. PremierBank & Trust's Asset/Liability
Committee manages the overall interest rate sensitivity and mix of the balance
sheet to anticipate and minimize the effects of interest rate fluctuations and
maintain a consistent net interest margin. Refer to the following tables for
additional information regarding interest rate sensitivity:
<TABLE>
<CAPTION>
CAPTION PAGE
<S> <C>
Loan Maturities and Sensitivity to Changes in Interest Rates 23
Investment Securities Yield by Maturity Date 24
Certificates of Deposit Over $100,000 25
</TABLE>
LIQUIDITY
Liquidity management ensures that funds are available to meet the cash
flow needs of borrowers, depositors and the Corporation. Funds for short-term
liquidity are provided through maturing securities, the Corporation's extensive
core deposit base, repayments received on loans and the acquisition of new
deposits. The Corporation also has access to short-term borrowings, if needed,
through arrangements with several of its correspondent banks. The Corporation's
liquidity is considered by management to be adequate to meet current and
projected levels of need.
CAPITAL ADEQUACY
Shareholders' equity is a stable, noninterest-bearing source of funds
which provides support for asset growth and is the primary component of capital.
Capital adequacy refers to the level of capital required to sustain capital
growth over time and to absorb losses on risk assets. It is management's intent
to maintain a level of capitalization that allows the flexibility to take
advantage of opportunities that may arise. Shareholders' equity at December 31,
1997, was $58.8 million, or $16.93 per share, compared with $54.6 million or
$15.82 per share at December 31, 1996 and $50.7 million or $14.70 per share at
December 31, 1995. At December 31, 1997, the Corporation's Tier 1 leverage ratio
was 7.87 percent. The Corporation's risk-based capital ratios based on Federal
Reserve Board guidelines were 12.11 percent for Tier 1, or "core" capital, and
13.09 percent for total qualifying capital.
These ratios substantially exceed the Federal Reserve Board's capital
guidelines for well-capitalized institutions, which are 6.00 percent for Tier 1
capital, 10.00 percent for total qualifying capital, and 5.00 percent for
leverage ratio. It is management's intent to maintain a level of capitalization
that allows the flexibility to take advantage of opportunities that may arise in
the future.
The Corporation is not aware of any recommendations by the regulatory
authorities which, if implemented, would have a material effect on the
Corporation's liquidity, capital, resources or results of operations.
For additional discussion, see "Examination and Supervision," on page 6
of this report, and Note Q to the Corporation's 1997 Audited Financial
Statements.
29
<PAGE> 30
COMMON STOCK AND RELATED MARKET DATA
COMMON STOCK
Reference is made to the table "Market and Dividend Information" which
is included under Item 5 of this filing, Market for the Registrant's Common
Stock and Related Stockholder Matters.
DIVIDENDS
CoBancorp Inc.'s dividend policy balances shareholders' return with the
need to retain an adequate capital level to support future growth opportunities.
Dividend payout has ranged from 25.5 to 44.4 percent of earnings over the last
five years, exclusive of an extraordinary item of $724,003 as of December 31,
1997, for costs associated with the acquisition by FirstMerit Corporation.
Dividends declared in 1997 were $0.71 per share, compared to the $0.63 of
dividends declared in 1996. Dividends for 1995 were $0.58 per share.
FINANCIAL REPORTING AND CHANGING PRICES
Although inflation can have a significant effect on the financial
condition and operating results of banks, it is difficult to measure the impact
as neither the timing nor the magnitude of interest rate changes necessarily
coincide with changes in the consumer price index or any other index of
inflation. Inflation can impact the growth of total assets and result in a need
to increase capital at a faster than normal rate in order to maintain an
appropriate equity to assets ratio. This can result in a smaller proportion of
earnings paid out in the form of dividends.
The results of operations can also be affected by the impact of
inflation on current interest rates. Intermediate to long-term interest rates
tend to increase in an inflationary environment, thereby affecting the market
value of long-term fixed rate assets. Higher short-term rates tend to increase
funding costs. In addition, noninterest expenses are more directly impacted by
current inflation rates.
INTEREST RATE RISK AND INTEREST RATE SENSITIVITY
The operations of the Corporation are subject to risk in the form of
interest rate risk, which is the effect on net interest income of fluctuations
in interest rates, arising from the relationship between earning assets and
interest-bearing liabilities which may reprice, mature or be prepaid or
withdrawn in a given time frame. Balance sheet structure plays an important
role in the management of interest rate risk. The Corporation's asset/liability
management activities are undertaken to optimize net interest income while
maintaining acceptable levels of interest rate risk and liquidity. The
Corporation uses the services of a nationally-recognized company which provides
asset/liability modeling, which management can use to assist in monitoring the
level and magnitude of interest rate risk contained in the balance sheet. The
model uses certain key assumptions, including prepayment speeds of various
loans and investments, cash flows and maturities of financial instruments,
changes in market conditions, loan volumes and pricing, deposit sensitivity and
customer preferences. These assumptions are inherently uncertain in a dynamic
environment and, as a result, the model cannot precisely predict the impact of
changes in interest rates on net interest income. Actual results will differ
from simulated results due to timing, magnitude and frequency of interest rate
changes and changes in market conditions and management strategies, among other
factors. At December 31, 1997, the Corporation had slightly more assets than
liabilities subject to repricing within one year (a positive "GAP" position).
Therefore, if rates rise, this asset surplus would most likely have a positive
effect on net income. In a declining rate environment, the effect would most
likely be unfavorable. It should be noted that other factors, such as the
timing, magnitude and frequency of interest rate changes, as well as market
conditions and management strategies, may affect net interest income as well.
Rate forecast risk estimates are also used to assess risk. Alternative
rate scenarios are derived from economic forecasts. The model suggests that in a
gradually rising rate environment, net interest income would increase
approximately 5.5. percent, while in a declining rate environment it would
decrease approximately 7.7 percent.
YEAR 2000 DISCLOSURE
The Corporation uses outside providers for most of its data processing
services. In 1997, the Corporation formed an internal committee to address Year
2000 issues and their potential impacts on the Corporation's business. On
November 2, 1997, the Corporation entered into an agreement with FirstMerit
Corporation, whereby CoBancorp will merge into FirstMerit, with FirstMerit being
the surviving corporation. It is expected that all of the Corporation's systems
will be converted to FirstMerit's systems. The transaction is expected to close
in May 1998.
30
<PAGE> 31
[ERNST & YOUNG LLP LETTERHEAD]
Report of Independent Auditors
Board of Directors
CoBancorp Inc.
We have audited the accompanying consolidated balance sheets of CoBancorp Inc.
as of December 31, 1997 and 1996, and the related statements of consolidated
income, stockholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the 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, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of CoBancorp Inc. at
December 31, 1997 and 1996, and the consolidated results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Ernst & Young LLP
January 23, 1998
31
<PAGE> 32
<TABLE>
<CAPTION>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CoBancorp Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31
1997 1996
-------------- --------------
<S> <C> <C>
Assets Cash and due from banks...................................... $34,182,853 $30,555,396
Investment securities available-for-sale .................... 135,844,913 162,460,918
Investment securities held-to-maturity ...................... 18,894,513 26,324,836
Federal funds sold........................................... 6,350,000 4,300,000
Loans........................................................ 414,196,081 340,454,390
Less allowance for loan losses............................... 4,167,136 4,091,592
-------------- --------------
Net loans................................................ 410,028,945 336,362,798
Bank premises and equipment, net............................. 19,410,126 18,787,316
Accrued income and prepaid expenses.......................... 4,935,600 4,840,787
Other assets................................................. 15,536,208 15,285,663
-------------- --------------
Total Assets......................................... $645,183,158 $598,917,714
============== ==============
Liabilities Liabilities
and Deposits
Shareholders' Demand-noninterest bearing............................... $88,455,431 $82,842,548
Equity Demand-interest bearing.................................. 67,945,399 63,196,979
Savings and other time................................... 404,394,900 368,706,984
-------------- --------------
Total deposits......................................... 560,795,730 514,746,511
Short-term funds........................................... 18,120,541 25,520,820
Other liabilities.......................................... 7,439,908 4,005,766
-------------- --------------
Total liabilities...................................... 586,356,179 544,273,097
Shareholders' equity
Capital stock, no par value
5,000,000 shares authorized
3,475,527 shares issued and outstanding
(3,453,824 in 1996)....................................... 6,566,517 5,975,066
Capital surplus............................................ 18,553,553 18,553,553
Retained earnings.......................................... 32,642,995 30,296,473
Unrealized gain (loss) on available-for-sale
investment securities (net of income tax)................ 1,063,914 (180,475)
-------------- --------------
Total shareholders' equity............................. 58,826,979 54,644,617
-------------- --------------
Total Liabilities and Shareholders' Equity.. $645,183,158 $598,917,714
============== ==============
See accompanying notes to consolidated financial statements.
</TABLE>
32
<PAGE> 33
<TABLE>
<CAPTION>
CoBancorp Inc. and Subsidiaries
CONSOLIDATED INCOME STATEMENTS
Years Ended December 31
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Interest Income
Loans (including fees)
Taxable ................................... $ 37,692,116 $ 30,286,754 $ 29,669,860
Tax-exempt ................................ 128,905 124,400 190,612
Investment securities
Taxable ................................... 6,569,895 8,829,554 5,789,178
Tax-exempt ................................ 3,058,749 3,552,320 4,012,945
Federal funds sold and other short-term funds 691,480 387,834 166,290
------------ ------------ ------------
Total interest income ................... 48,141,145 43,180,862 39,828,885
Interest Expense
Deposits .................................... 18,475,218 16,165,718 14,963,571
Short-term funds ............................ 611,574 633,159 831,670
------------ ------------ ------------
Total interest expense .................. 19,086,792 16,798,877 15,795,241
------------ ------------ ------------
Net interest income ................... 29,054,353 26,381,985 24,033,644
Provision for Loan and Real Estate Losses ..... 225,000 (1,775,000) 180,000
------------ ------------ ------------
Net Interest Income After Provision for
Loan and Real Estate Losses .......... 28,829,353 28,156,985 23,853,644
Other Income
Service charges on deposit accounts ......... 2,996,260 2,938,593 1,994,693
Trust fees .................................. 1,736,401 1,424,000 1,360,000
Other ....................................... 2,976,482 1,658,683 1,080,559
Security gains .............................. 494,253 409,341 284,274
------------ ------------ ------------
Total other income ...................... 8,203,396 6,430,617 4,719,526
Other Expenses
Salaries, wages and benefits ................ 12,415,817 11,206,299 9,541,034
Occupancy-net ............................... 2,731,898 1,928,293 1,501,004
Furniture and equipment ..................... 1,265,031 872,443 764,318
Taxes, other than income and payroll ........ 677,087 672,876 599,523
Data processing ............................. 3,461,777 2,142,445 1,523,536
Supplies, printing and postage .............. 1,260,343 1,458,683 1,183,638
Outside services ............................ 1,353,443 1,138,165 852,405
Telephone ................................... 783,273 659,046 508,548
Amortization of intangibles ................ 589,433 501,452 261,799
FDIC insurance .............................. 105,800 253,707 559,675
Other ....................................... 5,297,293 4,958,801 3,763,736
------------ ------------ ------------
Total other expenses .................... 29,941,195 25,792,210 21,059,216
------------ ------------ ------------
Income Before Income Taxes and
Extraordinary Item ................. 7,091,554 8,795,392 7,513,954
Income Tax Expense (Benefit)
Current ..................................... 1,301,381 1,309,000 1,298,000
Deferred .................................... 266,233 354,000 (186,000)
------------ ------------ ------------
Total income tax expense ................ 1,567,614 1,663,000 1,112,000
------------ ------------ ------------
Income Before Extraordinary Item ...... 5,523,940 7,132,392 6,401,954
Extraordinary Item--merger costs .............. 724,003
------------ ------------ ------------
Net Income ..................... $ 4,799,937 $ 7,132,392 $ 6,401,954
============ ============ ============
Net Income Per Share Before Extraordinary Item $ 1.60 $ 2.07 $ 1.86
Effect of Extraordinary Item .................. (0.21)
Net Income Per Share .......................... 1.39 2.07 1.86
Net Income Per Share Before Extraordinary
Item--Assuming Dilution ................... 1.58 2.05 1.85
Effect of Extraordinary Item .................. (0.21)
Net Income Per Share--Assuming Dilution ....... 1.37 2.05 1.85
See accompanying notes to consolidated financial statements.
</TABLE>
33
<PAGE> 34
<TABLE>
<CAPTION>
CoBancorp Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Operating Activities
Net income ..................................................... $ 4,799,937 $ 7,132,391 $ 6,401,954
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan and real estate losses .................. 225,000 (1,775,000) 180,000
Provision for depreciation and amortization ................ 2,764,910 1,886,644 1,433,910
Accretion of discounts on purchased loans .................. (22,316) (101,688) (103,702)
Amortization of premiums, less accretion of
discounts on investment securities ....................... 118,742 194,700 (347,707)
(Increase) in refundable taxes ............................. (31,743) (141,886) (212,340)
Realized securities (gains) on available-for-sale securities (494,253) (409,341) (284,274)
Realized (gains) on sale of loans .......................... (1,101,993) 0 0
Realized (gains) on sale of fixed assets ................... (66,887) 0 0
Provision (credit) for deferred income taxes ............... 266,233 354,000 (186,000)
(Increase) decrease in interest receivable ................ 108,544 (475,779) (340,943)
Increase (decrease) in interest payable ................... (345,072) 324,642 95,686
(Increase) decrease in other assets ........................ 1,235,757 (5,936,365) (212,947)
Increase (decrease) in other liabilities .................. 1,450,172 485,507 290,567
------------- ------------- -------------
Net Cash Provided By
Operating Activities ..................................... 8,907,031 1,537,825 6,714,204
Investing and Lending Activities
Proceeds from sales of available-for-sale
investment securities ........................................ 56,574,607 64,300,477 32,727,163
Proceeds from sales of held-to-maturity
investment securities
Maturities of available-for-sale investment securities ......... 7,299,500 12,012,171 8,481,652
Maturities of held-to-maturity investment securities ........... 14,330,347 3,441,897 7,387,123
Purchases of available-for-sale investment securities .......... (38,697,616) (111,177,268) (40,793,428)
Purchases of held-to-maturity investment securities ............ 0 0 (10,371,621)
Purchase of Jefferson Savings, net of cash received ............ (5,531,007) 0 0
Net (increase) decrease in credit card receivables ............. 3,553,570 (232,055) (101,434)
Net (increase) decrease in longer-term loans ................... (20,014,516) (19,595,020) 9,882,205
Purchases of premises and equipment,
net of retirements ........................................... (1,937,216) (8,528,141) (2,217,265)
------------- ------------- -------------
Net Cash (Used in) Provided By
Investing Activities ..................................... 15,577,669 (59,777,939) 4,994,395
Deposit and Financing Activities
Net increase (decrease) in demand deposits
and savings accounts ......................................... (6,562,943) 57,131,927 (35,513,764)
Net increase in certificates of deposit ........................ 1,017,942 5,479,890 21,811,582
Net increase (decrease) in short-term funds .................... (11,400,279) 3,066,840 1,096,752
Increase in long-term debt ..................................... 1,353,322 0 0
(Decrease) in long-term debt ................................... (1,353,322) 0 0
Cash dividends ................................................. (2,453,415) (2,173,411) (2,003,182)
Dividend investment plan ....................................... 0 0 380,423
Restricted stock vested ........................................ 63,281 0 0
Long-term incentive plan ....................................... 528,170 78,968 259,442
------------- ------------- -------------
Net Cash (Used in) Provided By
Financing Activities ..................................... (18,807,244) 63,584,214 (13,968,747)
------------- ------------- -------------
Increase (decrease) In
Cash and Cash Equivalents ................................ 5,677,456 5,344,100 (2,260,148)
Cash and cash equivalents at beginning of year ................... 34,855,396 29,511,296 31,771,444
------------- ------------- -------------
Cash and cash equivalents at end of year ................. $ 40,532,852 $ 34,855,396 $ 29,511,296
============= ============= =============
See accompanying notes to consolidated financial statements.
</TABLE>
34
<PAGE> 35
<TABLE>
<CAPTION>
CoBancorp Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended December 31, 1997, 1996 and 1995
UNREALIZED
GAINS (LOSSES) EMPLOYEE
ON AVAILABLE- STOCK OWNER-
CAPITAL CAPITAL RETAINED FOR-SALE SHIP PLAN
STOCK SURPLUS EARNINGS SECURITIES OBLIGATION
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 ................. $ 5,182,737 $ 16,623,320 $ 22,868,953 ($ 2,913,038) ($ 780,260)
Net income ............................... 6,401,954
Cash dividends-$0.577 per share .......... (2,003,182)
Reduction in employee stock ownership
plan obligation ......................... 350,000
Shares issued (17,278) under dividend
investment plan ......................... 380,423
Shares issued (21,184) under
long-term incentive plan ................ 332,938
Three percent stock dividend ............ 1,930,233 (1,930,233)
Adjustment to unrealized gains (losses) on
available-for-sale securities, net of tax 4,228,376
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1995 ............... 5,896,098 18,553,553 25,337,492 1,315,338 (430,260)
Net income ............................... 7,132,392
Cash dividends-$0.63 per share ........... (2,173,411)
Reduction in employee stock ownership
plan obligation ......................... 430,260
Shares issued (6,664) under
long-term incentive plan ................ 78,968
Adjustment to unrealized gains (losses) on
available-for-sale securities, net of tax (1,495,813)
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1996 ............... 5,975,066 18,553,553 30,296,473 (180,475)
Net income ............................... 4,799,937
Cash dividends-$0.71 per share ........... (2,453,415)
Shares issued (21,703) under
long-term incentive plan ................ 528,170
Shares issued (4,500) under
restricted stock plan ................... 63,281
Adjustment to unrealized gains (losses) on
available-for-sale securities, net of tax 1,244,389
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1997 ............... $ 6,566,517 $ 18,553,553 $ 32,642,995 $ 1,063,914
============ ============ ============ ============ ============
<CAPTION>
CoBancorp Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended December 31, 1997, 1996 and 1995
TOTAL
------------
<S> <C>
Balance at January 1, 1995 ................. $ 40,981,712
Net income ............................... 6,401,954
Cash dividends-$0.577 per share .......... (2,003,182)
Reduction in employee stock ownership
plan obligation ......................... 350,000
Shares issued (17,278) under dividend
investment plan ......................... 380,423
Shares issued (21,184) under
long-term incentive plan ................ 332,938
Three percent stock dividend ............
Adjustment to unrealized gains (losses) on
available-for-sale securities, net of tax 4,228,376
------------
Balance at December 31, 1995 ............... 50,672,221
Net income ............................... 7,132,392
Cash dividends-$0.63 per share ........... (2,173,411)
Reduction in employee stock ownership
plan obligation ......................... 430,260
Shares issued (6,664) under
long-term incentive plan ................ 78,968
Adjustment to unrealized gains (losses) on
available-for-sale securities, net of tax (1,495,813)
------------
Balance at December 31, 1996 ............... 54,644,617
Net income ............................... 4,799,937
Cash dividends-$0.71 per share ........... (2,453,415)
Shares issued (21,703) under
long-term incentive plan ................ 528,170
Shares issued (4,500) under
restricted stock plan ................... 63,281
Adjustment to unrealized gains (losses) on
available-for-sale securities, net of tax 1,244,389
------------
Balance at December 31, 1997 ............... $ 58,826,979
============
*Restated for a three percent stock dividend in 1995.
See accompanying notes to consolidated financial statements.
</TABLE>
35
<PAGE> 36
NOTE A - ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include the
accounts of CoBancorp Inc. (the Corporation) and its wholly-owned subsidiaries,
PremierBank & Trust (Premier) and Jefferson Savings Bank (Jefferson). All
material intercompany accounts and transactions have been eliminated.
Acquisitions: On February 27, 1997, the Corporation acquired all of the
outstanding shares of Jefferson, an Ohio-chartered savings association located
in Jefferson, Ohio, for cash in the amount of $6,733,000, with additional
consideration of $649,000 attributable to certain favorable tax benefits
(confirmed by an I.R.S. Private Letter Ruling dated May 31, 1996). The
transaction was accounted for under the purchase method of accounting. The
purchase price allocation resulted in a write-up of assets to estimated fair
value of approximately $2,432,000. This amount included approximately $965,000
which was assigned to goodwill. Jefferson's results of operations are included
in the Corporation's consolidated results of operations since the date of
acquisition. Pro forma results of operations have not been presented because the
effect of the acquisition is not material to the consolidated results of
operations.
Cash Equivalents: Cash equivalents include amounts due from banks and federal
funds sold. Generally, federal funds are purchased and sold for periods less
than thirty days.
Securities Held-to-Maturity and Available-for-Sale: Management determines the
appropriate classification of debt securities at the time of purchase. Debt
securities are classified as held-to-maturity when the Corporation has the
positive intent and ability to hold the securities to maturity. Held-to-maturity
securities are stated at amortized cost.
Debt securities not classified as held-to-maturity are classified as
available-for-sale. Available-for-sale securities are stated at fair value with
the unrealized gains and losses, net of tax, reported as a separate component of
shareholders' equity. There are no securities classified as trading.
The amortized cost of debt securities classified as held-to-maturity or
available-for-sale is adjusted for amortization of premiums and accretion of
discounts to maturity or, in the case of mortgage-backed securities, over the
estimated life of the security. Such amortization is included in interest income
from investments. Interest and dividends are included in interest income from
investments. Realized gains and losses are included in net securities gains
(losses). The cost of securities sold is based on the specific identification
method.
Financial Instruments: The Corporation invests only in on-balance sheet
financial instruments as part of the overall asset and liability management
process. The Corporation does not buy and sell financial instruments for the
purpose of earning a profit due to changes in the market price of the
instruments. No off-balance sheet financial instruments, other than those
disclosed in Note M, have been used by the Corporation.
Loans: Interest on loans is credited to earnings based upon the principal amount
outstanding. Interest on nonaccrual loans is recognized on a cash basis.
Depreciation and Amortization: Bank premises and equipment are stated at cost
less accumulated depreciation. Depreciation is computed on straight-line and
declining-balance methods, based on the following ranges of lives:
Years
-----
Buildings 10-40
Equipment and leasehold improvements 3-20
Intangible assets are amortized using the straight-line method over the assets'
estimated lives, generally ten to twenty years.
The asset account is relieved of the cost of the item and the allowance for
depreciation is relieved of accumulated depreciation when property is retired or
otherwise disposed. Any resulting gain or loss is reflected in operations
concurrently. Costs of major additions and improvements are capitalized.
Expenditures for maintenance and repairs are charged to operations as incurred.
36
<PAGE> 37
Allowance for Loan Losses: The provision for loan losses charged to operating
expense and the adequacy of the allowance for loan losses is based upon a
continuing evaluation of the loan portfolio, prior years' loss experience,
current economic conditions and other pertinent factors.
Income Taxes: Certain items of income and expense are recognized in taxable
years other than those in which such amounts are recognized in the financial
statements. Provisions are made in the financial statements for any deferred
taxes that arise in recognition of these temporary differences in accordance
with FASB Statement No. 109, "Accounting for Income Taxes."
Fair Values of Financial Instruments: FASB Statement No. 107, "Disclosures about
Fair Value of Financial Instruments," requires disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate that value. In cases
where quoted market prices are not available, fair values are based on estimates
using present value or other valuation techniques. Those techniques are
significantly affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair value estimates
cannot be substantiated by comparison to independent markets and, in many cases,
could not be realized in immediate settlement of the instrument. FASB Statement
No. 107 excludes certain financial instruments and all nonfinancial instruments
from its disclosure requirement. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Corporation.
The following methods and assumptions were used by the Corporation in estimating
its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts reported in the balance
sheet for cash and short-term instruments approximate those assets'
fair values.
Investment securities (including mortgage-backed 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 receivable: For variable-rate loans that reprice frequently and
with no significant change in credit risk, fair values are based on
carrying values. The fair values for certain mortgage loans (e.g.,
one-to-four family residential) and other consumer loans are based on
quoted market prices of similar loans sold in conjunction with
securitization transactions, adjusted for differences in loan
characteristics. The fair values for other loans (e.g., commercial real
estate and rental property mortgage loans, commercial and industrial
loans, financial institution loans, and agricultural loans) are
estimated using discounted cash flow analyses, using interest rates
currently being offered for loans with similar terms to borrowers of
similar credit quality. The carrying amount of accrued interest
approximates its fair value.
Deposit liabilities: The fair values disclosed for demand deposits
(e.g., interest and noninterest checking, passbook savings, and certain
types of money market accounts) are, by definition, equal to the amount
payable on demand at the reporting date (i.e., their carrying amounts).
The carrying amounts for variable-rate, fixed-term money market
accounts and certificates of deposit approximate their fair values at
the reporting date. Fair values for fixed-rate 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 expected monthly maturities on time deposits.
Short-term funds: The carrying amounts of the funds under repurchase
agreements and other short-term funds approximate their fair values.
Long-term borrowings: The carrying amounts of the Corporation's
long-term borrowings (other than deposits) approximate their fair
values.
Postretirement and Postemployment Benefits: The Corporation does not provide
postretirement or postemployment benefits except as provided by the defined
benefit plan discussed in Note J.
37
<PAGE> 38
Stock-Based Compensation: The Corporation accounts for the CoBancorp Inc.
Long-Term Incentive Plan under the provisions of Accounting Principles Board
(APB) Opinion No. 25, "Accounting for Stock Issued to Employees." Additional pro
forma disclosures required by Financial Accounting Standards Board (FASB)
Statement No. 123, "Accounting and Disclosure of Stock-Based Compensation" are
discussed in Note O.
Segment of Business: The Corporation operates in the single industry of banking.
While the Corporation offers a wide range of services, they are all deemed to be
a part of commercial banking. Premier operates 37 branch offices in 8 counties
in Northeast and North Central Ohio. Jefferson operates four branch offices in
two counties in Ohio; three in North Central Ohio and one in Northeast Ohio.
Per Share Amounts: The Corporation adopted Financial Accounting Standards Board
("FASB") Statement Number 128, "Earnings Per Share" effective December 31, 1997.
Under FASB Number 128, earnings per share computations are based on the average
number of shares of capital stock outstanding during the year. Statement 128
replaced the calculation of primary and fully diluted earnings per share with
basic and diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been presented, and where appropriate, restated to conform to
Statement 128 requirements. All per share amounts have been adjusted to reflect
a three percent stock dividend in 1995.
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Accounting for Transfers and Servicing of Financial Assets: During 1997, the
Corporation adopted the requirements of FASB Statement No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities,"
for various transfers of receivables and other financial assets that occurred
during the year.
Reporting Comprehensive Income and Disclosing Segment Information: FASB
Statement Numbers 130 and 131 require the Corporation to report comprehensive
income and make disclosures about segments meeting specific criteria for fiscal
years beginning after December 15, 1997. The Corporation will adopt Statement
Numbers 130 and 131 as of January 1, 1998. The impact of adopting these
statements is not expected to be material.
Reclassifications: Certain amounts in the 1996 and 1995 financial statements
have been reclassified to conform to the 1997 presentation.
NOTE B - RESTRICTIONS ON CASH AND DUE FROM BANKS
Premier is required to maintain reserve balances with the Federal Reserve Bank.
The average amount of those reserve balances for the year ended December 31,
1997, was $3,747,000.
38
<PAGE> 39
NOTE C - INVESTMENT SECURITIES
<TABLE>
<CAPTION>
The following is a summary of available-for-sale and held-to-maturity
securities:
December 31, 1997 Available-for-Sale Securities
----------------------------------------------------------------------------
Gross Gross
Unrealized Unrealized Estimated Fair
Cost Gains Losses Value
--------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
U.S. Treasury and other U.S.
Government agencies $42,816,128 $184,692 $178,627 $42,822,193
Collateralized mortgage-backed
securities 48,656,691 299,941 220,853 48,735,779
States of the U.S. and political
subdivisions 39,158,456 1,526,713 11,255 40,673,914
Other 3,601,648 11,379 0 3,613,027
--------------- ---------------- ---------------- ----------------
$134,232,923 $2,022,725 $410,735 $135,844,913
=============== ================ ================ ================
December 31, 1997 Held-to-Maturity Securities
----------------------------------------------------------------------------
Gross Gross
Unrealized Unrealized Estimated Fair
Cost Gains Losses Value
--------------- ---------------- ---------------- ----------------
States of the U.S. and political
subdivisions $18,894,513 $346,085 $5,258 $19,235,340
=============== ================ ================ ================
December 31, 1996 Available-for-Sale Securities
----------------------------------------------------------------------------
Gross Gross
Unrealized Unrealized Estimated Fair
Cost Gains Losses Value
--------------- ---------------- ---------------- ----------------
U.S. Treasury and other U.S.
Government agencies $57,423,276 $158,760 $747,913 $56,834,123
Collateralized mortgage-backed
securities 67,699,905 210,377 1,064,952 66,845,330
States of the U.S. and political
subdivisions 34,923,960 1,254,101 83,290 36,094,771
Other 2,687,223 4,394 4,923 2,686,694
--------------- ---------------- ---------------- ----------------
$162,734,364 $1,627,632 $1,901,078 $162,460,918
=============== ================ ================ ================
Held-to-Maturity Securities
----------------------------------------------------------------------------
Gross Gross
Unrealized Unrealized Estimated Fair
Cost Gains Losses Value
--------------- ---------------- ---------------- ----------------
States of the U.S. and political
subdivisions $26,324,836 $570,795 $48,194 $26,847,437
=============== ================ ================ ================
Gross proceeds from sales of investment securities during 1997, 1996 and 1995
were $56,574,607, $64,300,477 and $32,727,163, respectively. For the same
periods, gross gains of $802,526, $589,964 and $345,715 and gross losses of
$308,273, $180,624 and $61,441 were realized, respectively. The net adjustment
to unrealized gains (losses) on available-for-sale securities, net of tax,
included as a separate component of shareholders' equity totaled $1,244,389 in
1997, $(1,495,813) in 1996 and $4,228,376 in 1995.
</TABLE>
39
<PAGE> 40
The amortized cost and estimated fair value of debt and marketable equity
securities at December 31, 1997, by contractual maturity, are shown below.
Mortgage-backed securities that may have prepayment provisions are assigned to a
maturity category based on estimated average life. Expected maturities will
differ from contractual maturities because the issuers of securities may have
the right to prepay obligations without prepayment penalties.
<TABLE>
<CAPTION>
Available-for-Sale Securities
-------------------------------------
Estimated
Fair
Cost Value
---------------- ----------------
<S> <C> <C>
Due in 1 year or less $59,332,356 $59,278,883
Due in 1 to 5 years 38,345,870 38,993,665
Due in 5 to 10 years 27,347,522 28,187,123
Due after 10 years 9,207,177 9,385,243
================ ================
$134,232,925 $135,844,913
================ ================
<CAPTION>
Held-to-Maturity Securities
-------------------------------------
Estimated
Fair
Cost Value
---------------- ----------------
<S> <C> <C>
Due in 1 year or less $10,515,669 $10,615,143
Due in 1 to 5 years 7,386,515 7,583,455
Due in 5 to 10 years 992,329 1,036,742
================ ================
$18,894,513 $19,235,340
================ ================
</TABLE>
At December 31, 1997 and 1996, investment securities with a carrying value of
approximately $86,649,597 and $87,822,534, respectively, were pledged as
collateral to secure public deposits and for other purposes.
On November 15, 1995, the FASB staff issued a special report, "A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities." In accordance with provisions in that special report,
management chose to reclassify certain securities classified as held-to-maturity
to available-for-sale in a single transaction in December 1995. The amortized
cost of those securities was $48,705,886 and the net unrealized gain on those
securities was $1,757,891.
NOTE D - LOANS
<TABLE>
<CAPTION>
The composition of the loan portfolio at December 31 was:
1997
-------------------------------------
Estimated
Carrying Fair
Amount Value
---------------- ----------------
<S> <C> <C>
Real Estate $152,062,497 $153,580,000
Installment 52,699,041 52,792,000
Commercial and collateral 209,368,128 209,372,000
All other 66,415 66,415
---------------- ----------------
$414,196,081 $415,810,415
================ ================
</TABLE>
40
<PAGE> 41
<TABLE>
<CAPTION>
1996
-------------------------------------
Estimated
Carrying Fair
Amount Value
---------------- ----------------
<S> <C> <C>
Real Estate $145,466,930 $144,083,189
Installment 45,600,114 44,948,195
Commercial and collateral 146,166,900 141,450,264
All other 3,220,446 3,220,446
================ ================
$340,454,390 $333,702,094
================ ================
</TABLE>
Included in commercial and collateral loans for 1997 and 1996 are $1,952,579 and
$2,349,839, respectively, of tax-exempt industrial revenue development bonds.
<TABLE>
<CAPTION>
Transactions in the allowance for loan losses were:
1997 1996 1995
------------------ ------------------ -----------------
<S> <C> <C> <C>
Balance at January 1 $4,091,592 $5,849,689 $5,616,859
Jefferson Allowance Acquired 500,805
Provision for loan losses 225,000 (1,775,000) 180,000
Recoveries on loans charged off 444,684 733,188 680,655
------------------ ------------------ -----------------
5,262,081 4,807,877 6,477,514
Loans charged off (1,094,945) (716,285) (627,825)
------------------ ------------------ -----------------
Balance at December 31 $4,167,136 $4,091,592 $5,849,689
================== ================== =================
</TABLE>
At December 31, 1997 and 1996, nonperforming loans were $2,648,000 and
$1,792,785, respectively. Additionally, the Corporation had approximately
$128,000 of other real estate owned as of December 31, 1997, and $0 at December
31, 1996.
Management continually reviews the adequacy of the allowance for loan losses.
During the fourth quarter of 1996, based on asset quality, a three-year history
of net recoveries, and an evaluation of the level of the allowance as compared
to outstanding loans, management reduced the allowance by $1,775,000.
Effective January 1, 1995, the Corporation adopted Statement of Financial
Accounting Standards (SFAS) No. 114, "Accounting by Creditors for Impairment of
a Loan" as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a
Loan--Income Recognition and Disclosures." These standards address the
accounting for certain loans when it is probable that all amounts due pursuant
to the contractual terms of the loan will not be collected. Impairment is
measured based on either the present value of expected future cash flows using
the initial effective interest rate on the loan, the observable market price of
the loan, or the fair value of the collateral if the loan is collateral
dependent. If the recorded investment in the loan exceeds the measure of fair
value, a valuation allowance is established as a component of the allowance for
loan losses. The adoption of these accounting standards did not have a material
impact on the overall allowance for loan losses and did not affect the
Corporation's charge-off or income recognition policies. At December 31, 1997,
the Corporation did not have any impaired loans outstanding for which a
valuation allowance is required.
41
<PAGE> 42
NOTE E - PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
Premises and equipment at December 31 were:
1997 1996
------------------- -------------------
<S> <C> <C>
Land and improvements $3,575,962 $3,334,859
Buildings 12,991,000 14,708,969
Equipment and leasehold
improvements 17,727,742 15,073,391
------------------- -------------------
34,294,704 33,117,219
Less accumulated depreciation
and amortization (14,884,578) (14,329,903)
------------------- -------------------
$19,410,126 $18,787,316
=================== ===================
</TABLE>
During the third quarter of 1997, Premier sold its office building located at
124 Middle Avenue, Elyria, Ohio, and accounted for the transaction as a
sales-leaseback agreement. A gain of approximately $1,009,000 is being
recognized over the life of the five year lease.
NOTE F - DEPOSITS
Time certificates of deposit with balances of $100,000 or more, principally
public and corporate funds, were $29,860,215 and $27,288,742 at December 31,
1997 and 1996, respectively. Interest expense on these deposits amounted to
$2,213,611, $1,723,692 and $3,402,732 for 1997, 1996 and 1995, respectively.
Total interest paid on deposits in 1997, 1996 and 1995 was $19,086,792,
$16,798,877 and $14,877,688, respectively.
The carrying amounts and fair values of deposits consisted of the following at
December 31. For deposits with no defined maturities, FASB Statement No. 107
defines fair value as the amount payable on demand.
<TABLE>
<CAPTION>
1997
-------------------------------------
Estimated
Carrying Fair
Amount Value
---------------- ----------------
Demand - noninterest bearing $ 88,455,431 $ 88,455,000
Demand - interest bearing 67,945,399 67,945,000
Savings 171,921,964 171,928,000
Certificates of deposit/IRAs 232,472,936 232,777,000
---------------- ----------------
$560,795,730 $561,105,000
================ ================
<CAPTION>
1996
-------------------------------------
Estimated
Carrying Fair
Amount Value
---------------- ----------------
<S> <C> <C>
Demand - noninterest bearing $82,842,548 $82,842,548
Demand - interest bearing 63,196,979 63,196,979
Savings 178,665,023 178,665,023
Certificates of deposit/IRAs 190,041,961 184,136,095
---------------- ----------------
$514,746,511 $508,840,645
================ ================
</TABLE>
42
<PAGE> 43
NOTE G - CAPITAL STOCK
On July 17, 1995, the Corporation declared a three percent stock dividend,
payable on September 1, 1995, to shareholders of record August 22, 1995. The
increase in the number of shares outstanding as a result of the stock dividend
was 99,431. The dividend was recorded at fair market value. Cash was paid for
any resulting fractional shares.
During 1995, a total of 17,278 shares were issued under CoBancorp Inc.'s
dividend investment plan. Beginning in November of 1995, shares for the plan
were acquired in the market, rather than issued from the Corporation's
authorized but unissued shares.
In accordance with the merger agreement with FirstMerit Corporation dated
November 3, 1997, as discussed in Note R, the dividend investment plan was
terminated for all shareholders of record as of November 1, 1997.
NOTE H - DIVIDEND RESTRICTION
The payment of dividends by member banks of the Federal Reserve System, without
prior Federal regulatory approval, is limited to the current year's net profits
as defined and the retained net profits for the two preceding years. At December
31, 1997, approximately $3,625,000 was available to Premier for the payment of
dividends without prior regulatory approval.
NOTE I - INCOME TAXES
Significant components of the Corporation's deferred tax assets and liabilities
as of December 31, are as follows:
<TABLE>
<CAPTION>
1997 1996
---------------- ----------------
<S> <C> <C>
Deferred Tax Assets:
Net unrealized loss on
available-for-sale securities $ 92,792
Provision for loan losses $1,113,728 863,216
Deferred compensation 656,516 690,853
Alternative Minimum Tax credit 234,442 257,110
Net operating losses 99,859
Other 96,591 122,275
---------------- ----------------
2,201,136 2,026,246
Deferred Tax Liabilities:
Purchase accounting related to
acquisition of Jefferson 697,536
Tax depreciation 336,016 358,385
Net unrealized gain on
available-for-sale securities 546,792
Pension costs 255,978 224,908
Prepaid expenses 131,563 126,033
Federal Home Loan Bank stock
dividends 255,725 85,884
Other 236,407 109,773
---------------- ----------------
2,460,017 904,983
---------------- ----------------
Net deferred tax
asset/(liability) $ (258,881) $1,121,263
================ ================
</TABLE>
43
<PAGE> 44
<TABLE>
<CAPTION>
The reasons for the difference between tax expense based on the statutory rate
of 34 percent in 1997, 1996 and 1995 and the effective tax rates were:
1997 1996 1995
---------------- ---------------- ----------------
<S> <C> <C> <C>
Tax expense at statutory rates $2,411,128 $2,990,000 $2,555,000
Increase (reduction) in taxes
resulting from:
Tax-exempt interest (1,083,802) (1,250,000) (1,274,000)
Other 240,288 (77,000) (169,000)
---------------- ---------------- ----------------
$1,567,614 $1,663,000 $1,112,000
================ ================ ================
</TABLE>
There was no reduction in income taxes resulting from the merger costs recorded
as an extraordinary item of $724,000 as of December 31, 1997.
The Corporation made income tax payments of approximately $1,220,000, $1,550,000
and $1,525,000 during 1997, 1996 and 1995, respectively.
NOTE J - PENSION PLAN
The Corporation has a trusteed, noncontributory retirement plan covering
eligible employees. Pension benefits are based on employees' career average
compensation. The Corporation's funding policy is to contribute sufficient
amounts to meet minimum funding requirements set forth by required laws plus
such additional amounts as the Corporation may determine appropriate. During
1997 and 1996, the Corporation's pension contribution was $315,355 and $241,222,
respectively.
<TABLE>
<CAPTION>
A summary of the components of pension expense is as follows:
1997 1996 1995
---------------- ---------------- ----------------
<S> <C> <C> <C>
Service cost benefits earned
during the period $294,717 $239,492 $219,506
Interest cost on projected benefit
obligation 233,975 211,199 185,495
Return on plan assets (257,446) (230,513) (200,715)
Net amortization and deferral (47,273) (41,363) (24,286)
---------------- ---------------- ----------------
Net pension expense $223,973 $178,815 $180,000
================ ================ ================
</TABLE>
<TABLE>
<CAPTION>
The funded status of the plan at December 31, 1997 and 1996 was as follows:
1997 1996
---------------- ----------------
<S> <C> <C>
Actuarial present value of
accumulated benefit obligation
Vested $2,307,698 $2,378,206
Nonvested 291,831 224,636
---------------- ----------------
$2,599,529 $2,602,842
================ ================
Actuarial present value of
projected benefit obligation (3,841,689) $(3,440,487)
Plan assets at fair value 4,063,423 3,616,862
---------------- ----------------
Plan assets in excess of projected
benefit obligation 221,734 176,375
Unrecognized transition asset, net
of amortization (465,167) (558,201)
Unrecognized net loss 996,309 1,043,370
---------------- ----------------
Net pension asset included in
other assets $752,876 $661,544
================ ================
</TABLE>
44
<PAGE> 45
The long-term rate of return used to determine the expected return on plan
assets included in net pension expense is 7.0 percent. The projected benefit
obligation was determined using an assumed discount rate of 7.0 percent, and an
annual compensation increase of 5.0 percent. At December 31, 1997 and 1996, plan
assets consisted primarily of money market, equity and fixed income funds.
NOTE K - EMPLOYEE STOCK OWNERSHIP PLAN
The Corporation has a noncontributory employee stock ownership plan (ESOP) that
covers substantially all employees. In 1986, the ESOP borrowed $2,680,260. The
remaining balance of the loan was paid in full in 1996. Interest incurred on the
loan obligation was $22,480 and $54,926 in 1996 and 1995, respectively.
Contributions by the Corporation and its subsidiaries to the ESOP are reviewed
by the Board of Directors and are expensed in the year the contribution is
approved. These contributions were $345,000 and $291,350 in 1996 and 1995,
respectively. No contributions were made for 1997.
Dividends received for shares owned by the ESOP amounted to $157,511, $151,200
and $149,613 in 1997, 1996 and 1995, respectively, and were used in 1996 and
1995 to service the loan obligation.
Under the terms of the merger agreement with FirstMerit, the Corporation will
terminate the ESOP. As a result, all participants are fully vested in their
ESOP accounts as of December 31, 1997.
NOTE L - RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Corporation makes loans and enters into
other transactions with its directors, officers and entities having a specified
relationship to such directors and officers. Transactions entered into between
the Corporation and such related parties have been and are in the ordinary
course of business made on substantially the same terms and conditions as
transactions with other parties. As of December 31, 1997 and 1996, the
Corporation had loans outstanding to related parties of approximately $5,496,053
and $5,800,853, respectively.
NOTE M - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
Loan commitments are made to accommodate the financial needs of the
Corporation's customers. Standby letters of credit commit the Corporation to
make payments on behalf of customers when certain specified future events occur.
Both arrangements have credit risk essentially the same as that involved in
extending loans to customers and are subject to the Corporation's normal credit
policies. Collateral (e.g., securities, receivables, inventory or equipment) is
obtained based on management's credit assessment of the customer.
The Corporation's maximum potential obligation to extend credit for loan
commitments (unfunded loans and unused lines of credit) and standby letters of
credit at December 31, 1997 and 1996 was:
<TABLE>
<CAPTION>
1997 1996
---------------- ----------------
<S> <C> <C>
Real estate $27,347,000 $20,711,000
Commercial and collateral 53,117,000 49,885,000
All other 22,946,000 20,420,000
---------------- ----------------
$103,410,000 $91,016,000
================ ================
</TABLE>
Most of the Corporation's business activity is with customers located within the
Corporation's defined market area of Northeast and Central Ohio. As of December
31, 1997, the Corporation had no significant concentrations of credit risk in
its loan portfolio. The Corporation also has no exposure to highly leveraged
transactions and no foreign credits in its loan portfolio.
45
<PAGE> 46
NOTE N - SERVICE AGREEMENT
In 1995, the Corporation renegotiated its agreement to purchase information
technology services from a data processing company. The agreement provided for
payment of a monthly charge based on the number of application and transaction
accounts maintained. These payments were partially offset by amounts received by
the Corporation for the use of certain facilities by the processor. The amount
included in "other expenses" in connection with the service agreement was
$1,539,505 for 1996 and $1,261,213 for 1995. Management terminated this
agreement in 1996 and does not believe additional charges will be incurred under
this contract.
During 1996, the Corporation entered into an agreement with a new provider of
data processing services. Under the new service agreement, effective on February
1, 1997, minimum annual base charges will be $389,000. The term of this
agreement is eight years. The amount included in "other expenses" in connection
with this service agreement was $2,256,118 in 1997.
Additionally, in 1995 the Corporation entered into an agreement to lease certain
equipment from a different company. The agreement has an original term of seven
years. The annual lease fee in connection with this agreement is approximately
$355,000.
NOTE O - LONG-TERM INCENTIVE PLAN
On January 21, 1992, the Board of Directors of the Corporation adopted a
long-term incentive plan ("Plan") for officers and key employees of the
Corporation. Under the terms of the Plan, eligible employees may be granted
stock options, restricted stock or long-term performance awards based on certain
conditions. There were 190,435 shares of stock reserved and available for
distribution under the Plan. Stock options are exercisable at the fair market
value of the stock at the time of the grant. All options granted have 10 year
terms and vest and become fully exercisable at the end of one year of continued
employment. All shares and per share amounts have been restated for a three
percent stock dividend in 1995, four-for-three stock splits in 1994 and 1993 and
a four percent stock dividend in 1992.
In 1995, the Financial Accounting Standards Board (FASB) issued FASB Statement
No. 123, "Accounting and Disclosure of Stock-Based Compensation." The statement
is effective for fiscal years beginning after December 15, 1995. As permitted by
FASB Statement No. 123, the Corporation has elected to account for the Plan
under the provisions of Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees." Under APB 25, because the exercise
price of the Corporation's employee stock options equals the market price on the
underlying stock on the date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is required by
Statement 123, and has been determined as if the Corporation had accounted for
its employee stock options under the fair value method of that Statement. The
fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for options granted in 1996: risk-free interest rate of 6.58%;
dividend yield of 3.00%; a volatility factor of the expected market price of the
Corporation's common stock of 20.6%; and a weighted-average expected life of the
options of five years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of
subjective assumptions including the expected stock price volatility. Because
the Corporation's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
46
<PAGE> 47
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting periods. The Corporation's pro
forma information follows:
<TABLE>
<CAPTION>
1997 1996
---------------- -----------------
<S> <C> <C>
Pro forma net income $4,777,617 $7,089,912
Pro forma earnings per share:
Basic $1.38 $2.06
Diluted $1.37 $2.04
</TABLE>
<TABLE>
<CAPTION>
A summary of the Corporation's stock option activity, and related information
for the years ended December 31 follows:
1997 1996
------------------------------------ ------------------------------------
Weighted-Average Weighted-Average
Exercise Price Exercise Price
Options Options
--------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 129,044 $16.52 120,708 $15.87
Granted 0 15,000 19.69
Exercised (21,703) 18.32 (6,664) 11.85
Forfeited 0
--------------- ----------------
Outstanding at end of year 107,341 16.16 129,044 16.52
=============== ================
Exercisable at end of year 107,341 16.16 114,044 16.11
Weighted-average fair value of options
granted during the year n/a $4.32
</TABLE>
Exercise prices for options outstanding as of December 31, 1997 ranged from
$11.85 to $22.09. The weighted-average contractual life of those options is 5.5
years.
NOTE P - COBANCORP INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION
<TABLE>
<CAPTION>
BALANCE SHEETS (Parent Company Only)
December 31
1997 1996
---------------- ----------------
<S> <C> <C>
Assets
Cash $1,474,200 $7,397,366
Investment securities available-
for-sale 186,379 238,944
Investment in bank subsidiary - Premier 49,003,924 46,771,239
Investment in bank subsidiary - Jefferson 7,932,654
Other assets 356,626 237,068
---------------- ----------------
Total Assets $58,953,783 $54,644,617
================ ================
Liabilities and Shareholders'
Equity
Total Liabilities $ 126,804
Shareholders' Equity 58,826,979 $54,644,617
---------------- ----------------
Total Liabilities and
Shareholders' Equity $58,953,783 $54,644,617
================ ================
</TABLE>
47
<PAGE> 48
<TABLE>
<CAPTION>
STATEMENTS OF INCOME (Parent Company Only)
Years Ended December 31
1997 1996 1995
---------------- ---------------- -----------------
<S> <C> <C> <C>
Income
Dividends from bank subsidiaries $4,003,825 $9,837,415 $1,340,089
Other income 578,130 186,063 75,885
---------------- ---------------- -----------------
Total income 4,581,955 10,023,478 1,415,974
Expenses 472,674 271,735 259,644
---------------- ---------------- -----------------
Income Before Income Taxes, Extraordinary
Item and Equity in Undistributed Net
Income of Subsidiaries 4,109,281 9,751,743 1,156,330
Income taxes 31,905
---------------- ---------------- -----------------
Income Before Extraordinary Item and
Equity in Undistributed Net Income
of Subsidiaries 4,077,376 9,751,743 1,156,330
Equity in Undistributed Net
Income of Bank Subsidiaries 1,446,564 (2,619,351) 5,245,624
---------------- ---------------- -----------------
Income Before Extraordinary Item 5,523,940 7,132,392 6,401,954
Extraordinary item--merger costs 724,003
---------------- ---------------- -----------------
Net Income $4,799,937 $7,132,392 $6,401,954
================ ================ =================
</TABLE>
48
<PAGE> 49
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS (Parent Company Only)
Years Ended December 31
1997 1996 1995
---------------- ---------------- ----------------
<S> <C> <C> <C>
Operating Activities
Net Income $3,353,373 $9,751,743 $1,156,330
Provision for depreciation 8,812 1,180
Realized securities gains on
available-for-sale securities (394,659)
(Increase) in other assets (106,699) (21,323) (16,075)
Increase in other liabilities 122,935
---------------- ---------------- ----------------
Net Cash Provided by
Operating Activities 2,983,762 9,731,600 1,140,255
Investing Activities
Proceeds from sales of
available-for-sale securities 2,535,896
Purchases of available-for-sale
securities (2,076,764) (239,473)
Purchase of Jefferson Savings (7,482,245)
Purchases of equipment (21,851) (1,240)
---------------- ---------------- ----------------
Net Cash Used by
Investing Activities (7,044,964) (240,713)
Financing Activities
Increase in long-term debt 1,353,322
Decrease in long-term debt (1,353,322)
Cash Dividends (2,453,415) (2,172,777) (2,003,182)
Dividend Investment Plan 380,423
Restricted Stock Vested 63,281
Long-term Incentive Plan 528,170 78,968 259,441
---------------- ---------------- ----------------
Net Cash Used by Financing
Activities (1,861,964) (2,093,809) (1,363,318)
---------------- ---------------- ----------------
Increase (Decrease) in
Cash and Cash Equivalents (5,923,166) 7,397,078 (223,063)
Cash and cash equivalents at beginning
of year 7,397,366 288 223,351
---------------- ---------------- ----------------
Cash and Cash Equivalents at
End of Year $1,474,200 $7,397,366 $288
================ ================ ================
</TABLE>
NOTE Q - REGULATORY MATTERS
CoBancorp Inc., Premier and Jefferson are subject to various regulatory capital
requirements administered by federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory, and possibly additional
discretionary, actions by regulators that, if undertaken, could have a direct
material effect on the Corporation's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Corporation must meet specific capital guidelines that involve quantitative
measures of the Corporation's assets, liabilities, and certain off-balance-sheet
items as calculated under regulatory accounting practices. The Corporation's
capital amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Corporation to maintain minimum amounts and ratios (set forth in the
following table) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined).
49
<PAGE> 50
Management believes, as of December 31, 1997, that the Corporation meets all
capital adequacy requirements to which it is subject.
As of December 31, 1997, the most recent notification from the Federal Reserve
Bank categorized CoBancorp Inc. as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized,
the Corporation must maintain minimum total risk-based, Tier I risk based and
Tier I leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the
institution's category.
<TABLE>
<CAPTION>
The Corporation's actual capital amounts and ratios are presented in the
following table:
Minimums
Minimums To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
--------------------------- -------------------------- ---------------------------
As of December 31, 1997: Amount Ratio Amount Ratio Amount Ratio
------------- --------- -------------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Total Risk-Based Capital
- ------------------------
to $55,654,000 13.09% $34,006,000 8.0% $42,507,000 10.0%
Risk Weighted Assets
Tier I Capital to Risk
- --------------
Weighted Assets 51,486,000 12.11 17,003,000 4.0 25,504,000 6.0
Tier I Capital to Average
- --------------
Assets
- ------
51,486,000 7.87 26,175,000 4.0 32,719,000 5.0
</TABLE>
NOTE R - PROPOSED MERGER AGREEMENT
On November 2, 1997, the Corporation entered into a definitive agreement to be
acquired by FirstMerit Corporation (FMER). Under the terms of the agreement,
each share of CoBancorp Inc. stock will be exchanged for $44.50 in cash or for
shares of common stock of FirstMerit with a market value per share of $44.50.
The shareholders of CoBancorp may elect to exchange their common stock for
either common stock of FirstMerit, or $44.50 in cash, provided that no less than
30 percent and no more than 49 percent of the total transaction will be paid in
cash. The Company recorded in 1997 $724,000 of legal, investment advisory and
accounting expenses incurred in 1997 related to the business combination with
FirstMerit. Such expenses were recorded as an extraordinary item in the
consolidated statements. The acquisition is expected to be completed during the
second quarter of 1998 and was approved by CoBancorp Inc.'s shareholders on
March 3, 1998. Approval has been received from the Federal Reserve Board of
Cleveland and approval from the Office of the Comptroller of the Currency is
expected by mid April, 1998.
50
<PAGE> 51
NOTE S - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Quarterly Financial Information
The following is a summary of unaudited quarterly results of operations for the
years 1997, 1996 and 1995:
First Second Third Fourth Full Year
------------ ------------ ------------ ------------ ------------
1997
<S> <C> <C> <C> <C> <C>
Interest income $ 11,137,066 $ 12,240,016 $ 12,474,920 $ 12,295,143 $ 48,147,145
Interest expense 4,239,380 4,841,141 5,090,104 4,916,167 19,086,792
Net interest income 6,897,686 7,398,875 7,384,816 7,378,976 29,060,353
Provision for loan losses 75,000 75,000 0 75,000 225,000
Security gains (losses) (13,231) 187,347 64,203 255,934 494,253
Net overhead 5,242,231 5,379,003 5,738,614 5,878,204 22,238,052
Income before income taxes and extraordinary item 1,567,224 2,132,219 1,710,405 1,681,706 7,091,554
Net income before extraordinary item 1,286,582 1,676,224 1,310,207 1,250,927 5,523,940
Extraordinary item--merger costs 724,003 724,003
Net income 1,286,582 1,676,224 1,310,207 526,924 4,799,937
Earnings per common share:
Before extraordinary item 0.37 0.49 0.38 0.36 1.60
Effect of extraordinary item (0.21) (0.21)
Earnings per common share 0.37 0.49 0.38 0.15 1.39
Earnings per common share--assuming dilution:
Before extraordinary item 0.37 0.48 0.37 0.36 1.58
Effect of extraordinary item (0.21) (0.21)
Earnings per common share 0.37 0.48 0.37 0.15 1.37
Dividends paid per common share 0.17 0.18 0.18 0.18 0.71
1996
Interest income $ 10,237,766 $ 11,062,294 $ 10,893,080 $ 10,987,722 $ 43,180,862
Interest expense 4,124,992 4,340,014 4,227,981 4,105,890 16,798,877
Net interest income 6,112,774 6,722,280 6,665,099 6,881,832 26,381,985
Provision (credit) for loan losses 60,000 40,000 0 (1,875,000) (1,775,000)
Security gains (losses) 295,029 4,565 (5,304) 115,051 409,341
Net overhead 4,824,315 4,879,524 5,067,879 4,999,216 19,770,934
Income before income taxes 1,523,488 1,807,321 1,591,916 3,872,667 8,795,392
Net income 1,285,488 1,634,321 1,309,200 2,903,383 7,132,392
Earnings per common share 0.380 0.474 .373 0.842 2.069
Earnings per common share--assuming dilution 0.377 0.471 0.370 0.836 2.054
Dividends paid per common share 0.15 0.16 0.16 0.16 0.63
1995
Interest income $ 9,760,554 $ 10,098,322 $ 10,043,559 $ 9,926,450 $ 39,828,885
Interest expense 3,598,738 4,101,478 4,175,916 3,919,109 15,795,241
Net interest income 6,161,816 5,996,844 5,867,643 6,007,341 24,033,644
Provision for loan losses 60,000 60,000 60,000 0 180,000
Security gains (losses) (4,118) 7,623 240,607 40,162 284,274
Net overhead 4,327,341 4,235,406 4,026,569 4,034,648 16,623,964
Income before income taxes 1,770,357 1,709,061 2,021,681 2,012,855 7,513,954
Net income 1,460,357 1,421,061 1,661,681 1,858,855 6,401,954
Earnings per common share 0.426 0.413 0.483 0.539 1.861
Earnings per common share--assuming dilution 0.422 0.410 0.479 0.536 1.847
Dividends paid per common share 0.1359 0.1456 0.1456 0.1500 0.5772
<FN>
The 1995, 1996 and first three quarters of 1997 earnings per share amounts have
been restated to comply with Statement of Financial Accounting Standards No.
128, "Earnings per Share."
All share and per-share amounts have been adjusted for a three percent stock
dividend in 1995.
</FN>
</TABLE>
51
<PAGE> 52
NOTE T - EARNINGS PER SHARE
<TABLE>
<CAPTION>
The following table sets forth the computation of basic and diluted earnings per
share:
Years Ended December 31
1997 1996 1995
---------------- ---------------- -----------------
<S> <C> <C> <C>
Numerator:
Income before extraordinary item $5,523,940 $7,132,392 $6,401,954
Extraordinary item (724,003)
---------------- ---------------- -----------------
Net income $4,799,937 $7,132,392 $6,401,954
================ ================ =================
Denominator:
Denominator for basic earnings per share--
weighted-average shares 3,455,010 3,448,161 3,439,738
Effect of dilutive employee stock options 42,140 23,556 26,418
---------------- ---------------- -----------------
Denominator for diluted earnings per
share--adjusted weighted-average shares
and assumed conversions 3,497,150 3,471,717 3,466,156
================ ================ =================
Basic earnings per share:
Before extraordinary item $1.60 $2.07 $1.86
Effect of extraordinary item (.21)
---------------- ---------------- -----------------
Earnings per common share $1.39 $2.07 $1.86
================ ================ =================
Diluted earnings per share:
Before extraordinary item $1.58 $2.05 $1.85
Effect of extraordinary item (.21)
---------------- ---------------- -----------------
Earnings per common share $1.37 $2.05 $1.85
================ ================ =================
For additional disclosures regarding the employee stock options, see Note O.
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
52
<PAGE> 53
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Percentage of
Shares of Stock Common
Name and Principal CoBancorp Inc. Beneficially Stock
Occupation for the Director Owned as of (no par value)
Past Five Years (1) Age Since January 20, 1998 Outstanding
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Theodore S. Altfeld 54 1988 9,516 (9)
Vice President 5,417 (3)
EBM Group Corp.
(industrial supplies, steel
service center and scrap
recycling)
Robert S. Cook 63 1984 53,123 1.53%
Executive Vice President
R. W. Beckett Corporation
(manufacturer of oil burners)
Maureen M. Cromling 49 1992 1,079 (9)
President and
Chief Executive Officer
Ross Environmental Services, Inc.
Garis F. Distelhorst 56 1988 5,225 (9)
President and 1,606 (5)
Chief Executive Officer 444 (7)
NACSCORP
(Higher education book
and software distribution)
Michael B. Duffin 49 1984 4,613 (9)
President 797 (3)
Duffin Manufacturing Company 428 (8)
(manufacturer of screw machine
products)
Timothy W. Esson 48 1996 39,300 (2) (4) 1.13%
Executive Vice President
and Treasurer
CoBancorp Inc.
President
PREMIERBank & Trust
Thomas E. Haywood 48 1993 385 (9)
President and 124 (5)
Chief Executive Officer
Brandau Jewelers, Inc.
</TABLE>
53
<PAGE> 54
<TABLE>
<CAPTION>
Percentage of
Shares of Stock Common
Name and Principal CoBancorp Inc. Beneficially Stock
Occupation for the Director Owned as of (no par value)
Past Five Years (1) Age Since January 20, 1998 Outstanding
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Larry D. Jones 48 1993 457 (9)
President and 458 (6)
Chief Executive Officer
Erie Shores Computer, Inc.
John S. Kreighbaum 51 1991 54,530 (2) (4) 2.71%
Chairman, President and 39,775 (3)
Chief Executive Officer 1 (7)
CoBancorp Inc.
Chairman and Chief
Executive Officer
PREMIERBank & Trust
Richard J. Stewart 69 1989 13,116 (9)
Chairman 1,413 (3)
Stewart Appliances, Inc.
A. E. Szambecki 50 1992 2,236 (9)
President and 728 (5)
Chief Executive Officer
Hallrich, Incorporated
(Pizza Hut restaurants)
Richard A. Van Auken 63 1991 9,387 (9)
President and
Chief Executive Officer
Jennings and Churella
Construction Company
<FN>
(1) Mr. Kreighbaum was advanced to Chairman, President and Chief Executive
Officer of the Corporation and Chairman and Chief Executive Officer of
the Bank January 1, 1996, while Mr. Esson was advanced to President of
the Bank at that time also. There has been no other change in principal
occupation or employment during the past five years.
(2) Includes shares owned directly and options which are exercisable.
(3) Owned by spouse.
(4) Includes allocated vested shares held in Employee Stock Ownership Plan
(ESOP).
(5) Held as custodian for minor child(ren).
(6) Joint tenant with spouse.
(7) Owned by child(ren).
(8) Held in trust.
(9) Less than 1%.
</FN>
</TABLE>
54
<PAGE> 55
ITEM 11. EXECUTIVE COMPENSATION
(B) COMPENSATION OF EXECUTIVE OFFICERS
The following table is a summary of certain information concerning the
compensation awarded or paid to, or earned by, certain Executive Officers during
each of the last three fiscal years.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation All Other
Annual Compensation Awards Compensation
------------------------- --------------- ------------
Securities
Name and Principal Underlying
Position Year Salary ($) Bonus ($) Options (#) ($)
-------------------------- ---- ---------- --------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
John S. Kreighbaum 1997 250,008 0 0 275,537 (1)(2)(3)
Chairman, President 1996 210,012 20,000 10,000 20,761 (1)(2)
and Chief Executive 1995 200,004 60,000 0 19,710 (1)(2)
Officer
Timothy W. Esson 1997 165,000 0 0 83,704 (1)(2)
Executive Vice President 1996 150,000 20,000 5,000 14,520 (1)(2)
and Treasurer 1995 110,256 45,500 0 6,836 (1)
James R. Bryden 1997 120,000 0 0 13,350 (1)(2)
Regional President/ 1996 102,301 20,000 0 8,889 (1)
North Central District 1995 94,008 38,200 0 8,081 (1)
PremierBank & Trust
Robert J. Scott 1997 107,004 0 0 20,511 (1)
Senior Vice President 1996 102,773 7,500 0 810 (1)
Director of Investment 1995 98,808 20,000 0 736 (1)
Management and Trust
Services - PremierBank &
Trust
<FN>
(1) The Bank established an Executive Supplemental Income Plan (the "ESI" )
in 1985. All officers of the Bank are covered by the ESI. The ESI was
established to bring officer retirement to a more appropriate level of
compensation. The cost is offset by proceeds from a life insurance
contract of which the Bank is beneficiary.
(2) Includes director's fees paid by subsidiaries.
(3) Includes payment of a defined contribution reserve liability account.
</FN>
</TABLE>
55
<PAGE> 56
<TABLE>
<CAPTION>
(D) AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
Number of Unexercised
Options Securities
Underlying at Fiscal
Year-End (#) (1) Value of Unexercised
Shares Acquired on Exercisable (E)/ In-the-Money Options at
Name Exercise (#) Unexercisable (U) Fiscal Year-End ($)(2)
- ---------------------------- -------------------------- ------------------------- ---------------------------
<S> <C> <C> <C>
John S. Kreighbaum 3,500 44,586 (E) $897,747
Timothy W. Esson 4,500 26,247 (E) $674,105
James R. Bryden 0 14,281 (E) $452,003
Robert J. Scott 2,138 4,527 (E) $96,923
<FN>
(1) Adjusted for a three percent stock dividend in 1995, four-for-three
stock splits in 1994 and 1993, and a four percent stock dividend in
1992.
(2) Values are calculated by subtracting the exercise price(s) from the
fair market value of the stock as of year-end.
</FN>
</TABLE>
(F) PENSION PLAN
PremierBank & Trust's Pension Plan was amended and restated as of January 1,
1994, to comply with technical requirements of ERISA. The Plan is a trusteed
noncontributory defined benefit pension plan covering all officers and employees
who become eligible for entry in the plan upon the basis of age and one year of
service. Retirement benefits under the provisions of the Bank's retirement plan
are computed by a formula, the factors of which include compensation, years of
service and the Social Security taxable wage base. Normal retirement is at 65
years of age and the plan provides for benefit payments for life in the amount
of 37.5 percent of average monthly compensation reduced proportionately for less
than 15 years of credited service plus 12.5 percent of such compensation in
excess of the maximum average monthly wage, as defined for the Social Security
taxable wage base, which is (reduced proportionately for less than 20 years of
credited service) at normal retirement age.
Assuming the employee selects the normal form of benefit payable, the
following annual benefits are payable under the formula to an employee retiring
at such date in specified average compensation and years of service
classification:
<TABLE>
<CAPTION>
Career Average Years of Credited Service
-----------------------------------------------------------
Compensation (1) 10 20 30 35
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$125,000 37,188 58,750 58,750 58,750
150,000 45,000 71,250 71,250 71,250
175,000 48,125 76,250 76,250 76,250
200,000 48,125 76,250 76,250 76,250
225,000 48,125 76,250 76,250 76,250
250,000 48,125 76,250 76,250 76,250
300,000 48,125 76,250 76,250 76,250
400,000 48,125 76,250 76,250 76,250
450,000 48,125 76,250 76,250 76,250
500,000 48,125 76,250 76,250 76,250
<FN>
(1) The average annual compensation includes the participant's salary and
bonus. The years of credited service for individuals listed in the
Summary Compensation Table are seven years for John S. Kreighbaum,
seventeen years for Timothy W. Esson, five years for Robert J. Scott
and ten years for James R. Bryden.
</FN>
</TABLE>
56
<PAGE> 57
(G) DIRECTORS' FEES
During 1997, no salaries or fees were paid by CoBancorp Inc. to its
directors or executive officers. All of the directors of the Corporation are
also directors of Premier. Directors of Premier received $600 for each board
meeting attended. Non-officer directors of Premier received $200 for each
committee meeting attended.
(H) EMPLOYMENT AGREEMENTS
CoBancorp Inc. and PremierBank & Trust have separate employment agreements
with each of Messrs. Kreighbaum and Esson for their employment.
On November 16, 1990, the Corporation and the Bank entered into an
employment agreement with Mr. John S. Kreighbaum. The employment agreement
provides for a term of five years, commencing January 1, 1991. The agreement is
automatically extended (absent Board objection) for an additional year
commencing on January 1, 1994. The effect of this provision is that the contract
will then have a three-year term. Under the terms of his employment agreement,
Mr. Kreighbaum receives a base salary of $136,000 per year, subject to annual
adjustment by the Board of Directors of the Bank. Additionally, in the event
that (i) Mr. Kreighbaum is involuntarily terminated within two years following a
change in control of the Corporation, (ii) Mr. Kreighbaum voluntarily terminates
his employment for good reason within two years after a change in control of the
Corporation or (iii) Mr. Kreighbaum is terminated for any reason other than
cause, Mr. Kreighbaum will receive his base salary for the remaining term of the
agreement.
On December 31, 1993, the Corporation and the Bank entered into an
employment agreement with Mr. Timothy W. Esson. The employment agreement
provides for a term of two years, commencing December 31, 1993. The agreement is
automatically extended (absent Board objection) for an additional year
commencing on December 31, 1994. The effect of this provision is that the
contract will then have a two-year term. Under the terms of his employment
agreement, Mr. Esson receives a base salary of $106,000 per year, subject to
annual adjustment by the Board of Directors of the Bank. Additionally, in the
event that (i) Mr. Esson is involuntarily terminated within two years following
a change in control of the Corporation, or (ii) Mr. Esson voluntarily terminates
his employment for good reason within one year after a change in control of the
Corporation, Mr. Esson will receive a payment equal to two years' base salary.
In the event Mr. Esson is terminated for any reason other than cause, Mr. Esson
will receive his base salary for the remaining term of the agreement.
On June 16, 1997, the Corporation amended Mr. Esson's contract to provide
that if Mr. Esson's employment is terminated as a result of a change in
control, subject to certain time lines, a severance payment in the amount of
299% of Mr. Esson's then current salary would be provided.
57
<PAGE> 58
(J)&(K) SALARY AND BENEFITS COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation packages for certain executive officers consists of base salary
and discretionary performance bonuses. Amounts of compensation are determined by
the Salary and Benefits Committee of the Board of Directors. The Committee is
composed entirely of nonemployee directors who are "disinterested persons" under
SEC regulations and who have no "interlocking" relationship with the
Corporation. The Committee is of the belief that a strong link should exist
between executive compensation and the value delivered to shareholders. This
link should be seen as enhanced shareholder value and return as represented by
positive return on assets (ROA) and return on equity (ROE) trends. Additionally,
it is the Committee's belief that base salary should be carefully balanced with
long- and short-range financial and nonfinancial objectives.
Base Salary: Base salary levels are established by the Committee to be
competitive in the market in order to attract and retain qualified executives.
Long-Term Incentive Plan: The purpose of the Long-Term Incentive Plan is to
enable the Corporation to attract and retain officers and key employees of the
Corporation and any subsidiary and to provide such persons incentives and
rewards for performance. The Plan is designed to encourage such persons to
become owners of common stock of the Corporation to increase their interest in
the Corporation's long-term success, to provide incentive equity opportunities
that are competitive with other similarly situated corporations and to stimulate
employees by recognizing their achievements. The Plan provides for grants of
Incentive Stock Options, Nonqualified Stock Options, Performance Awards and
Restricted Stock to selected employees.
Management Incentive Compensation Plan: The Management Incentive
Compensation Plan was adopted by the Board of Directors of the Corporation,
effective January 1, 1994, and was designed to promote shareholder interests
through the maximization of profitability of the Bank, consistent with the
Bank's policies. Bank performance is measured in terms of return on assets
(ROA). The Management Incentive Compensation Plan provides cash incentives for
those members of management who most directly affect the success and
profitability of the Bank and who cause the Bank to attain and sustain high
levels of performance based on safe and sound operating strategies.
The 1997 compensation paid to the Chairman and Chief Executive Officer (Mr.
John S. Kreighbaum) consisted of base salary as described above. In reviewing
Mr. Kreighbaum's performance as Chairman and Chief Executive Officer, the Salary
and Benefits Committee favorably considered Mr. Kreighbaum's performance
relative to a number of factors (without, however, assigning any specific
weights to such factors) including but not limited to profitability, asset
quality, earnings per share, expansion and strategic positioning. The Committee
seeks to establish compensation for Mr. Kreighbaum at a level commensurate with
the Bank's corporate performance, peer group competitors and the individual
officer's performance.
58
<PAGE> 59
(L) COBANCORP INC. COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN COBANCORP
INC., S&P 500 AND S&P BANKS COMPOSITE (WITH DIVIDENDS REINVESTED)
The following graph sets forth the cumulative total shareholder return (assuming
reinvestment of dividends) to CoBancorp Inc.'s shareholders during the five-year
period ended December 31, 1997, as well as an overall stock market index (S&P
500) and CoBancorp Inc.'s peer group index (S&P Banks Composite).
<TABLE>
<CAPTION>
[OBJECT OMITTED]
1/1/93 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
----------- ------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
COBANCORP INC. $100 $161 $178 $153 $175 $363
S&P 500 $100 $110 $112 $153 $189 $252
S&P BANKS COMPOSITE $100 $110 $105 $167 $236 $341
THE STOCK PERFORMANCE GRAPH ASSUMES $100 WAS INVESTED ON JANUARY 1, 1993.
</TABLE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(A) BENEFICIAL OWNERSHIP
Persons and groups owning in excess of 5 percent of the Corporation's stock
are required to file certain reports regarding such ownership with the
Corporation and the Securities and Exchange Commission (the "SEC"). A person who
has or shares voting or investment power, or who has the right to acquire
ownership at any time within 60 days, is considered the beneficial owner of the
Corporation's stock.
Listed in the following table are those, as of January 20, 1998, who are
known to the Corporation to be the beneficial owners of more than five percent
(5%) of the Corporation's outstanding common stock, no par value per share, and
the number of shares owned by directors and executive officers as a group. The
stock ownership of each director is set forth under the caption "Election of
Directors."
59
<PAGE> 60
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
First Southern Trust Company
as Trustee
CoBancorp Inc. Employee
Stock Ownership Plan (ESOP)
Corporate Center
1530 West River Road North
Elyria, Ohio 44035-2714 215,398 shares 6.19%
All directors and executive
officers as a group
(15 people) 279,056 shares (1) 8.02%
<FN>
(1) Includes allocated vested shares held in Employee Stock Ownership Plan (ESOP)
and options which are exercisable within 60 days.
</FN>
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Corporation has had, and expects to have in the future, banking
transactions in the ordinary course of its business with directors, officers,
principal shareholders and their associates, on the same terms, including
interest rates and collateral on loans, as those prevailing at the time for
comparable transactions with others.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements and Schedules
The following consolidated financial statements appear in the Registrant's 1997
Audited Financial Statements which are included in this filing under Item 8.
Consolidated Balance Sheets at December 31, 1997 and 1996
Consolidated Statements of Income for the Years Ended December
31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Shareholders' Equity for the Years
Ended December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
Report of Independent Auditors
Quarterly Financial Information
Consolidated Financial Highlights
Schedules I and II are not required under the related instructions or are
inapplicable and, therefore, have been omitted.
60
<PAGE> 61
<TABLE>
<CAPTION>
(3) LISTING OF EXHIBITS
REG. S-K
EXHIBIT PAGE
NUMBER EXHIBIT HEREOF
------ ------- ------
<S> <C> <C>
2 Agreement of Affiliation and Plan of Merger dated N/A
November 2, 1997, by and between FirstMerit
Corporation and CoBancorp Inc. (filed as Exhibit
2.1 to the Form 8-K of the Registrant dated November
2, 1997, and incorporated herein by reference)
3 Second Amended and Restated Articles of Incorporation N/A
and Code of Regulations of CoBancorp Inc. (filed as
Exhibit 3 to the Form 10-Q of the Registrant for the
quarter ended June 30, 1995, and incorporated herein
by reference)
10a Executive Supplemental Income Agreement (filed as N/A
Exhibit 10 to the Form 10-K of the Registrant
for the year ended December 31, 1985, incorporated
herein by reference)
10b Directors Deferred Income Plan (filed as Exhibit N/A
10b to the Form 10-K of the Registrant for the
year ended December 31, 1986, incorporated herein
by reference)
10d Employment Agreement Among LCB Bancorp, Inc., N/A
Lorain County Bank and John S. Kreighbaum
(filed as Exhibit 10d to the Form 10-K of the
Registrant for the year ended December 31, 1990,
incorporated herein by reference)
10k LCB Bancorp, Inc. 1992 Long-Term Incentive Plan N/A
(filed as Exhibit 10k to the Form 10-K of the Registrant
for the year ended December 31, 1992, and incorporated
herein by reference)
10l Employment Agreement Dated December 31, 1993, Among N/A
CoBancorp Inc., PremierBank & Trust and Timothy W.
Esson (filed as Exhibit 10l to the Form 10-K of
the Registrant for the year ended December 31,
1993, and incorporated herein by reference)
10o Agreement for Information Technology Services Between N/A
Electronic Data Systems Corporation and CoBancorp, Inc.,
dated February 15, 1995 with Addenda (filed as
Exhibit 10o to the Form 10-K of the Registrant for the
year ended December 31, 1995, incorporated herein by
reference)
10p Data Processing Services Agreement Between M & I Data N/A
Services and PremierBank and Trust, dated July 3, 1996,
with Addenda (filed as Exhibit 10p to the Form 10-K
of the Registrant for the year ended December 31, 1996,
and incorporated herein by reference)
10q Second Amendment to Employment Agreement dated June N/A
16, 1997, among CoBancorp Inc., PremierBank & Trust
and Timothy W. Esson (filed as Exhibit 10q to
the Form 10-Q of the Registrant for the quarter
ended September 30, 1997, and incorporated herein
by reference)
10r Severance Agreement Due to Change in Control of N/A
CoBancorp Inc. dated June 16, 1997, among CoBancorp
Inc., PremierBank & Trust, Jefferson Savings
Bank and James R. Bryden (filed as Exhibit 10r to
the Form 10-Q of the Registrant for the Quarter
ended September 30, 1997, and incorporated herein
by reference)
21 Subsidiaries of the Registrant
23 Consent of Independent Auditors
27 Financial Data Schedule
</TABLE>
(B) REPORTS ON FORM 8-K
Form 8-K was filed by CoBancorp Inc. on November 14, 1997 with an
effective date of November 2, 1997 at which time CoBancorp Inc. and FirstMerit
Corporation entered into an Agreement of Affiliation and Plan of Merger,
pursuant to which CoBancorp will merge with an into FirstMerit, with First Merit
as the surviving corporation.
61
<PAGE> 62
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 16, 1998 By: Timothy W. Esson
Executive Vice President & Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report on Form 10-K has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the date indicated.
SIGNATURE CAPACITY WITH REGISTRANT DATE
- --------- ------------------------ ----
/s/ John S. Kreighbaum Chairman, President and Chief March 16, 1998
Executive Officer, Director
/s/ Timothy W. Esson Executive Vice President March 16, 1998
and Treasurer, Director
/s/ Theodore S. Altfeld Director March 16, 1998
/s/ Garis F. Distelhorst Director March 16, 1998
/s/ Michael B. Duffin Director March 16, 1998
/s/ Thomas E. Haywood Director March 16, 1998
/s/ Larry D. Jones Director March 16, 1998
/s/ Richard J. Stewart Director March 16, 1998
/s/ Anthony E. Szambecki Director March 16, 1998
/s/ Richard A. Van Auken Director March 16, 1998
62
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
NAME STATE OF INCORPORATION
- ---- ----------------------
PREMIERBank & Trust Ohio
Jefferson Savings Bank Ohio
63
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-56464) pertaining to the CoBancorp Inc. 1992 Long-Term Incentive Plan
of our report dated January 23, 1998, with respect to the consolidated financial
statements of CoBancorp Inc., incorporated by reference in the Annual Report
(Form 10-K) for the year ended December 31, 1997.
/s/ Ernst & Young LLP
Ernst & Young LLP
Cleveland, Ohio
March 23, 1998
64
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF COBANCORP INC. AND ITS SUBSIDIARIES AS OF
DECEMBER 31, 1997, AND THE RELATED STATEMENTS OF INCOME, CASH FLOWS AND
SHAREHOLDERS' EQUITY FOR THE PERIOD THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000745276
<NAME> COBANCORP INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 34,183
<INT-BEARING-DEPOSITS> 1,867
<FED-FUNDS-SOLD> 6,350
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 135,845
<INVESTMENTS-CARRYING> 18,895
<INVESTMENTS-MARKET> 19,235
<LOANS> 414,196
<ALLOWANCE> 4,167
<TOTAL-ASSETS> 645,183
<DEPOSITS> 560,796
<SHORT-TERM> 18,121
<LIABILITIES-OTHER> 7,440
<LONG-TERM> 0
0
0
<COMMON> 6,567
<OTHER-SE> 52,260
<TOTAL-LIABILITIES-AND-EQUITY> 645,183
<INTEREST-LOAN> 37,821
<INTEREST-INVEST> 9,629
<INTEREST-OTHER> 691
<INTEREST-TOTAL> 48,141
<INTEREST-DEPOSIT> 18,475
<INTEREST-EXPENSE> 19,087
<INTEREST-INCOME-NET> 29,054
<LOAN-LOSSES> 225
<SECURITIES-GAINS> 494
<EXPENSE-OTHER> 29,941
<INCOME-PRETAX> 7,092
<INCOME-PRE-EXTRAORDINARY> 5,524
<EXTRAORDINARY> 724
<CHANGES> 0
<NET-INCOME> 4,800
<EPS-PRIMARY> 1.39<F1>
<EPS-DILUTED> 1.37
<YIELD-ACTUAL> 5.31
<LOANS-NON> 2,584
<LOANS-PAST> 64
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,593
<CHARGE-OFFS> 1,095
<RECOVERIES> 445
<ALLOWANCE-CLOSE> 4,168
<ALLOWANCE-DOMESTIC> 3,993
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 175
<FN>
EPS-BASIC
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF COBANCORP INC. AND ITS SUBSIDIARIES AS OF
SEPTEMBER 30, 1997, AND THE RELATED STATEMENTS OF INCOME, CASH FLOWS AND
SHAREHOLDERS' EQUITY FOR THE PERIOD THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000745276
<NAME> COBANCORP INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 29,811
<INT-BEARING-DEPOSITS> 1,999
<FED-FUNDS-SOLD> 38,300
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 116,447
<INVESTMENTS-CARRYING> 22,068
<INVESTMENTS-MARKET> 22,430
<LOANS> 420,832
<ALLOWANCE> 4,385
<TOTAL-ASSETS> 666,186
<DEPOSITS> 580,516
<SHORT-TERM> 19,137
<LIABILITIES-OTHER> 8,437
<LONG-TERM> 0
0
0
<COMMON> 5,975
<OTHER-SE> 52,120
<TOTAL-LIABILITIES-AND-EQUITY> 666,186
<INTEREST-LOAN> 28,138
<INTEREST-INVEST> 7,428
<INTEREST-OTHER> 286
<INTEREST-TOTAL> 35,852
<INTEREST-DEPOSIT> 13,680
<INTEREST-EXPENSE> 14,171
<INTEREST-INCOME-NET> 21,681
<LOAN-LOSSES> 150
<SECURITIES-GAINS> 238
<EXPENSE-OTHER> 21,835
<INCOME-PRETAX> 5,410
<INCOME-PRE-EXTRAORDINARY> 5,140
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,273
<EPS-PRIMARY> 1.24<F1>
<EPS-DILUTED> 1.22
<YIELD-ACTUAL> 5.27
<LOANS-NON> 2,973
<LOANS-PAST> 35
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,593
<CHARGE-OFFS> 662
<RECOVERIES> 364
<ALLOWANCE-CLOSE> 4,385
<ALLOWANCE-DOMESTIC> 4,350
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 35
<FN><F1>EPS-BASIC
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF COBANCORP INC. AND ITS SUBSIDIARIES AS OF JUNE
30, 1997, AND THE RELATED STATEMENTS OF INCOME, CASH FLOWS AND SHAREHOLDERS'
EQUITY FOR THE QUARTER THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000745276
<NAME> COBANCORP INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 32,101
<INT-BEARING-DEPOSITS> 1,637
<FED-FUNDS-SOLD> 3,100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 125,315
<INVESTMENTS-CARRYING> 23,916
<INVESTMENTS-MARKET> 24,430
<LOANS> 431,016
<ALLOWANCE> 4,567
<TOTAL-ASSETS> 654,365
<DEPOSITS> 571,455
<SHORT-TERM> 20,139
<LIABILITIES-OTHER> 5,991
<LONG-TERM> 0
0
0
<COMMON> 5,975
<OTHER-SE> 50,805
<TOTAL-LIABILITIES-AND-EQUITY> 654,365
<INTEREST-LOAN> 18,056
<INTEREST-INVEST> 5,259
<INTEREST-OTHER> 62
<INTEREST-TOTAL> 23,377
<INTEREST-DEPOSIT> 8,706
<INTEREST-EXPENSE> 9,080
<INTEREST-INCOME-NET> 14,297
<LOAN-LOSSES> 150
<SECURITIES-GAINS> 174
<EXPENSE-OTHER> 14,098
<INCOME-PRETAX> 3,699
<INCOME-PRE-EXTRAORDINARY> 3,699
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,963
<EPS-PRIMARY> .86<F1>
<EPS-DILUTED> .85
<YIELD-ACTUAL> 5.30
<LOANS-NON> 2,503
<LOANS-PAST> 85
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,593
<CHARGE-OFFS> 444
<RECOVERIES> 268
<ALLOWANCE-CLOSE> 4,567
<ALLOWANCE-DOMESTIC> 4,533
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 34
<FN>
<F1>EPS-BASIC
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF COBANCORP INC. AND ITS SUBSIDIARIES AS OF MARCH
31, 1997, AND THE RELATED STATEMENTS OF INCOME, CASH FLOWS AND SHAREHOLDERS'
EQUITY FOR THE QUARTER THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000745276
<NAME> COBANCORP INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 35,855
<INT-BEARING-DEPOSITS> 1,938
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 145,030
<INVESTMENTS-CARRYING> 24,818
<INVESTMENTS-MARKET> 25,224
<LOANS> 412,591
<ALLOWANCE> 4,649
<TOTAL-ASSETS> 657,861
<DEPOSITS> 566,488
<SHORT-TERM> 31,578
<LIABILITIES-OTHER> 5,299
<LONG-TERM> 0
0
0
<COMMON> 5,975
<OTHER-SE> 48,520
<TOTAL-LIABILITIES-AND-EQUITY> 657,861
<INTEREST-LOAN> 8,317
<INTEREST-INVEST> 2,783
<INTEREST-OTHER> 37
<INTEREST-TOTAL> 11,137
<INTEREST-DEPOSIT> 4,038
<INTEREST-EXPENSE> 4,239
<INTEREST-INCOME-NET> 6,897
<LOAN-LOSSES> 75
<SECURITIES-GAINS> (13)
<EXPENSE-OTHER> 6,729
<INCOME-PRETAX> 1,567
<INCOME-PRE-EXTRAORDINARY> 1,567
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,287
<EPS-PRIMARY> 0.37<F1>
<EPS-DILUTED> 0.37
<YIELD-ACTUAL> 5.30
<LOANS-NON> 3,092
<LOANS-PAST> 155
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,593
<CHARGE-OFFS> 184
<RECOVERIES> 165
<ALLOWANCE-CLOSE> 4,649
<ALLOWANCE-DOMESTIC> 4,392
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 257
<FN>
<F1>EPS-BASIC
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF COBANCORP INC. AND SUBSIDIARY AS OF DECEMBER 31,
1996, AND THE RELATED STATEMENTS OF INCOME, CASH FLOWS AND SHAREHOLDERS' EQUITY
FOR THE TWELVE MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000745276
<NAME> COBANCORP INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 28,318
<INT-BEARING-DEPOSITS> 2,237
<FED-FUNDS-SOLD> 4,300
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 162,461
<INVESTMENTS-CARRYING> 26,325
<INVESTMENTS-MARKET> 26,847
<LOANS> 340,454
<ALLOWANCE> 4,092
<TOTAL-ASSETS> 598,918
<DEPOSITS> 514,746
<SHORT-TERM> 25,521
<LIABILITIES-OTHER> 4,006
<LONG-TERM> 0
0
0
<COMMON> 5,975
<OTHER-SE> 48,670
<TOTAL-LIABILITIES-AND-EQUITY> 598,918
<INTEREST-LOAN> 30,411
<INTEREST-INVEST> 12,382
<INTEREST-OTHER> 388
<INTEREST-TOTAL> 43,181
<INTEREST-DEPOSIT> 16,166
<INTEREST-EXPENSE> 16,799
<INTEREST-INCOME-NET> 26,382
<LOAN-LOSSES> (1,775)
<SECURITIES-GAINS> 409
<EXPENSE-OTHER> 25,792
<INCOME-PRETAX> 8,795
<INCOME-PRE-EXTRAORDINARY> 8,795
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,132
<EPS-PRIMARY> 2.07<F1>
<EPS-DILUTED> 2.05
<YIELD-ACTUAL> 5.24
<LOANS-NON> 1,707
<LOANS-PAST> 85
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,850
<CHARGE-OFFS> 716
<RECOVERIES> 733
<ALLOWANCE-CLOSE> (1,775)
<ALLOWANCE-DOMESTIC> 4,055
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 37
<FN>
<F1>EPS-BASIC
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF COBANCORP INC. AND SUBSIDIARY AS OF SEPTEMBER 30,
1996, AND THE RELATED STATEMENTS OF INCOME, CASH FLOWS AND SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000745276
<NAME> COBANCORP INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 28,536
<INT-BEARING-DEPOSITS> 2,699
<FED-FUNDS-SOLD> 1,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 166,241
<INVESTMENTS-CARRYING> 28,384
<INVESTMENTS-MARKET> 29,910
<LOANS> 333,734
<ALLOWANCE> 5,994
<TOTAL-ASSETS> 594,297
<DEPOSITS> 515,351
<SHORT-TERM> 23,759
<LIABILITIES-OTHER> 4,415
<LONG-TERM> 0
0
0
<COMMON> 5,896
<OTHER-SE> 44,876
<TOTAL-LIABILITIES-AND-EQUITY> 594,297
<INTEREST-LOAN> 22,619
<INTEREST-INVEST> 9,250
<INTEREST-OTHER> 324
<INTEREST-TOTAL> 32,193
<INTEREST-DEPOSIT> 12,208
<INTEREST-EXPENSE> 12,693
<INTEREST-INCOME-NET> 19,500
<LOAN-LOSSES> 100
<SECURITIES-GAINS> 294
<EXPENSE-OTHER> 19,307
<INCOME-PRETAX> 5,409
<INCOME-PRE-EXTRAORDINARY> 5,409
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,550
<EPS-PRIMARY> 1.23<F1>
<EPS-DILUTED> 1.22
<YIELD-ACTUAL> 5.14
<LOANS-NON> 611
<LOANS-PAST> 72
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,850
<CHARGE-OFFS> 607
<RECOVERIES> 651
<ALLOWANCE-CLOSE> 5,994
<ALLOWANCE-DOMESTIC> 5,223
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 771
<FN>
<F1>EPS-BASIC
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF COBANCORP INC. AND SUBSIDIARY AS OF JUNE 30, 1996,
AND THE RELATED STATEMENTS OF INCOME, CASH FLOWS AND SHAREHOLDERS' EQUITY FOR
THE SIX MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000745276
<NAME> COBANCORP INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 28,979
<INT-BEARING-DEPOSITS> 2,116
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 186,356
<INVESTMENTS-CARRYING> 29,111
<INVESTMENTS-MARKET> 29,524
<LOANS> 331,200
<ALLOWANCE> 6,012
<TOTAL-ASSETS> 611,083
<DEPOSITS> 534,032
<SHORT-TERM> 23,941
<LIABILITIES-OTHER> 4,175
<LONG-TERM> 0
0
0
<COMMON> 5,896
<OTHER-SE> 43,039
<TOTAL-LIABILITIES-AND-EQUITY> 611,083
<INTEREST-LOAN> 14,876
<INTEREST-INVEST> 6,136
<INTEREST-OTHER> 288
<INTEREST-TOTAL> 21,300
<INTEREST-DEPOSIT> 8,145
<INTEREST-EXPENSE> 8,465
<INTEREST-INCOME-NET> 12,835
<LOAN-LOSSES> 100
<SECURITIES-GAINS> 300
<EXPENSE-OTHER> 12,762
<INCOME-PRETAX> 3,331
<INCOME-PRE-EXTRAORDINARY> 3,331
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,920
<EPS-PRIMARY> .85<F1>
<EPS-DILUTED> .85
<YIELD-ACTUAL> 5,12
<LOANS-NON> 596
<LOANS-PAST> 140
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,850
<CHARGE-OFFS> 312
<RECOVERIES> 374
<ALLOWANCE-CLOSE> 6,012
<ALLOWANCE-DOMESTIC> 5,187
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 825
<FN>
<F1>EPS-BASIC
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF COBANCORP INC. AND SUBSIDIARY AS OF MARCH 31,
1996, AND THE RELATED STATEMENTS OF INCOME, CASH FLOWS AND SHAREHOLDERS' EQUITY
FOR THE QUARTER THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000745276
<NAME> COBANCORP INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 28,322
<INT-BEARING-DEPOSITS> 1,259
<FED-FUNDS-SOLD> 15,900
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 190,637
<INVESTMENTS-CARRYING> 29,753
<INVESTMENTS-MARKET> 30,436
<LOANS> 327,105
<ALLOWANCE> 6,050
<TOTAL-ASSETS> 622,192
<DEPOSITS> 546,449
<SHORT-TERM> 21,369
<LIABILITIES-OTHER> 4,520
<LONG-TERM> 0
0
0
<COMMON> 5,896
<OTHER-SE> 43,958
<TOTAL-LIABILITIES-AND-EQUITY> 622,192
<INTEREST-LOAN> 7,337
<INTEREST-INVEST> 2,713
<INTEREST-OTHER> 188
<INTEREST-TOTAL> 10,238
<INTEREST-DEPOSIT> 3,959
<INTEREST-EXPENSE> 4,125
<INTEREST-INCOME-NET> 6,113
<LOAN-LOSSES> 60
<SECURITIES-GAINS> 295
<EXPENSE-OTHER> 6,037
<INCOME-PRETAX> 1,523
<INCOME-PRE-EXTRAORDINARY> 1,523
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,285
<EPS-PRIMARY> .38<F1>
<EPS-DILUTED> .38
<YIELD-ACTUAL> 5.15
<LOANS-NON> 291
<LOANS-PAST> 62
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,850
<CHARGE-OFFS> 152
<RECOVERIES> 292
<ALLOWANCE-CLOSE> 6,050
<ALLOWANCE-DOMESTIC> 5,060
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 990
<FN>
<F1>EPS-BASIC
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF COBANCORP INC. AND SUBSIDIARY AS OF DECEMBER 31,
1995, AND THE RELATED STATEMENTS OF INCOME, CASH FLOWS AND SHAREHOLDER'S EQUITY
FOR THE YEAR THEN ENDED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000745276
<NAME> COBANCORP INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 25,368
<INT-BEARING-DEPOSITS> 1,243
<FED-FUNDS-SOLD> 2,900
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 129,466
<INVESTMENTS-CARRYING> 29,948
<INVESTMENTS-MARKET> 30,737
<LOANS> 320,509
<ALLOWANCE> 5,850
<TOTAL-ASSETS> 529,530
<DEPOSITS> 452,135
<SHORT-TERM> 22,454
<LIABILITIES-OTHER> 4,269
<LONG-TERM> 0
0
0
<COMMON> 5,896
<OTHER-SE> 44,776
<TOTAL-LIABILITIES-AND-EQUITY> 529,530
<INTEREST-LOAN> 29,861
<INTEREST-INVEST> 9,802
<INTEREST-OTHER> 166
<INTEREST-TOTAL> 39,829
<INTEREST-DEPOSIT> 14,964
<INTEREST-EXPENSE> 15,795
<INTEREST-INCOME-NET> 24,034
<LOAN-LOSSES> 180
<SECURITIES-GAINS> 284
<EXPENSE-OTHER> 21,059
<INCOME-PRETAX> 7,514
<INCOME-PRE-EXTRAORDINARY> 7,514
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,402
<EPS-PRIMARY> 1.86<F1>
<EPS-DILUTED> 1.85
<YIELD-ACTUAL> 5.31
<LOANS-NON> 859
<LOANS-PAST> 106
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,617
<CHARGE-OFFS> 628
<RECOVERIES> 681
<ALLOWANCE-CLOSE> 5,850
<ALLOWANCE-DOMESTIC> 4,885
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 965
<FN>
<F1>EPS-BASIC
</FN>
</TABLE>
