<PAGE> 1
Page 1 of _________
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarter ended June 30, 1997
Commission File Number 0-18209
CITIZENS BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Ohio 34-1372535
- ---- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 East Main Street, Salineville, Ohio 43945
- -------------------------------------- -------
(Address of principal executive offices)
Registrant's telephone number, 330/679-2328
------------
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 period that the registrant
was required to file such report(s) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- ------
On July 22, 1997 there were 5,897,540 shares of Common Stock, without par value,
of Citizens Bancshares, Inc., outstanding.
<PAGE> 2
CITIZENS BANCSHARES, INC.
FORM 10-Q
QUARTER ENDED June 30, 1997
Part I - Financial Information
ITEM 1 FINANCIAL STATEMENTS
- ----------------------------
Interim Financial Information required by Rule 10-01 of Regulation S-X is
included in this Form 10-Q as referenced below:
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Financial Statements
- --------------------
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Condensed Consolidated Statements of Changes in
Shareholders' Equity 5
Condensed Consolidated Statements of
Cash Flows 6
Notes to the Consolidated Financial
Statements 7 - 13
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ---------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS 14 - 18
-----------------------------------
PART II - OTHER INFORMATION 19 - 21
- ---------------------------
Exhibit Index 20 - 21
Signatures 22
</TABLE>
2
<PAGE> 3
CITIZENS BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, December 31,
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) 1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks ...................................... $ 29,718 $ 25,467
Federal funds sold ........................................... 700 1,900
----------- -----------
Total cash and cash equivalents ......................... 30,418 27,367
Interest-bearing deposits with financial institutions ........ 208 364
Securities available for sale (Note 2) ....................... 299,697 240,375
Securities held to maturity (estimated market value of $51,113
at June 30 and $65,454 at December 31 (Note 2) ............. 50,954 65,230
Total loans (Note 3) ......................................... 623,494 595,247
Less allowance for loan losses (Note 4) .................... (11,759) (11,350)
----------- -----------
Net loans ............................................... 611,735 583,897
Premises and equipment, net .................................. 15,601 15,316
Accrued interest receivable and other assets ................. 37,109 15,381
----------- -----------
Total assets ............................................ $ 1,045,722 $ 947,930
=========== ===========
LIABILITIES
Deposits
Noninterest-bearing deposits ................................. $ 68,741 $ 67,817
Interest-bearing deposits .................................... 648,728 641,775
----------- -----------
Total deposits .......................................... 717,469 709,592
Securities sold under repurchase agreements and
Federal funds purchased .................................... 137,426 87,939
Federal Home Loan Bank advances .............................. 86,206 49,923
Accrued interest payable and other liabilities ............... 8,901 9,163
Obligation under employee stock ownership plan ............... 350 413
----------- -----------
Total liabilities ....................................... 950,352 857,030
----------- -----------
MINORITY INTEREST IN SUBSIDIARY ................................... 627 1,188
SHAREHOLDERS' EQUITY
Serial preferred stock, $10.00 par value; authorized
200,000 shares; none issued
Common stock, no par value; 12,000,000 shares
authorized; 5,899,790 shares issued ........................ 16,514 16,514
Retained earnings ............................................ 78,075 72,818
Less treasury stock, 2,250 shares at cost .................... (5) (5)
ESOP obligations and unearned shares ......................... (350) (413)
Unrealized gain on securities available for sale ............. 509 798
----------- -----------
Total shareholders' equity .............................. 94,743 89,712
----------- -----------
Total liabilities and shareholders' equity .............. $ 1,045,722 $ 947,930
=========== ===========
</TABLE>
See notes to the consolidated financial statements
3
<PAGE> 4
CITIZENS BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
For the three months For the six months
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) ended June 30, ended June 30,
1997 1996 1997 1996
-------- -------- ------- -------
INTEREST INCOME
<S> <C> <C> <C> <C>
Loans, including fees ........................... $ 14,847 $ 14,614 $29,111 $28,540
Securities
Taxable ....................................... 5,495 3,760 10,209 7,348
Nontaxable .................................... 281 298 553 595
Federal funds sold and other .................... 20 106 57 296
-------- -------- ------- -------
Total interest income ....................... 20,643 18,778 39,930 36,779
-------- -------- ------- -------
INTEREST EXPENSE
Deposits ........................................ 6,977 6,691 13,769 13,378
Federal Home Loan Bank advances ................. 1,166 686 1,917 1,507
Federal funds and repurchase agreements and other 1,816 260 3,088 575
-------- -------- ------- -------
Total interest expense ...................... 9,959 7,637 18,774 15,460
-------- -------- ------- -------
NET INTEREST INCOME ................................ 10,684 11,141 21,156 21,319
PROVISION FOR LOAN LOSSES (NOTE 4) ................. 407 469 825 856
-------- -------- ------- -------
INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES ....................... 10,277 10,672 20,331 20,463
-------- -------- ------- -------
OTHER INCOME
Service charges and fees on deposits ............ 639 567 1,214 1,037
Other income .................................... 1,007 659 1,784 1,237
Investment losses (Note 2) ..................... (12) (12)
-------- -------- ------- -------
Total other income .......................... 1,646 1,214 2,998 2,262
-------- -------- ------- -------
OTHER EXPENSE
Salaries and employee benefits .................. 2,978 2,746 5,800 5,498
Occupancy expense ............................... 377 358 765 779
Equipment expense ............................... 539 616 1,032 1,106
Merger, integration, and restructuring expense .. 425 425
Other operating expense ......................... 1,633 1,800 3,180 3,651
-------- -------- ------- -------
Total other expense ......................... 5,527 5,945 10,777 11,459
-------- -------- ------- -------
INCOME BEFORE INCOME TAXES ........................ 6,396 5,941 12,552 11,266
INCOME TAXES ...................................... 2,063 1,963 4,110 3,690
-------- -------- ------- -------
NET INCOME ........................................ $ 4,333 $ 3,978 $ 8,442 $ 7,576
======== ======== ======= =======
EARNINGS PER COMMON SHARE ......................... $ .73 $ .67 $ 1.43 $ 1.28
======== ======== ======= =======
</TABLE>
See notes to the consolidated financial statements
4
<PAGE> 5
CITIZENS BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
---------------------------------
1997 1996
-------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Balances at January 1 $ 89,712 $ 80,111
Net income 8,442 7,576
Change in employee stock ownership plan obligation
and shares earned 63 44
Cash paid for fractional shares (1) (8)
Cash dividends declared ($.54 per share in 1997 and
$.38 in 1996) (3,184) (2,268)
Change in unrealized gain (loss) on securities
available for sale (289) (2,693)
-------- --------
Balances at June 30 $ 94,743 $ 82,762
======== ========
</TABLE>
See notes to the consolidated financial statements
5
<PAGE> 6
CITIZENS BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
---------------------------------
1997 1996
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES ........................... $ 8,962 $ 9,533
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Sales of other real estate ...................................... 125 193
Securities available for sale:
Proceeds from sales ........................................... 2,674
Proceeds from paydowns, maturities ............................ 27,001 22,984
Purchases ..................................................... (87,449) (61,739)
Securities held to maturity:
Proceeds from paydowns, maturities ............................ 28,010 27,353
Purchases ..................................................... (13,725) (21,678)
Net (increase) in loans ......................................... (30,727) (9,183)
Proceeds from commercial and student loans sold ................. 2,000 4,362
Net change in interest-bearing deposits
with financial institutions .................................... (156) (501)
Proceeds from premises and equipment sold ....................... 434
Purchases of premises and equipment ............................. (1,442) (1,527)
Purchases of life insurance contracts ........................... (20,000)
-------- --------
Net cash from investing activities ............................ (95,929) (37,062)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends and fractional shares paid ....................... (3,068) (2,722)
Net increase in deposit accounts ................................ 7,877 7,278
Net increase in repurchase agreements and Federal funds purchased 49,487 13,210
Net change in short-term FHLB advances .......................... 18,000
Proceeds from long-term FHLB advances ........................... 40,400 2,250
Repayment of long-term FHLB advances ............................ (4,117) (16,049)
Redemption of minority interest in subsidiary ................... (561) (25)
-------- --------
Net cash from financing activities .......................... 90,018 21,942
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS ............................ 3,051 (5,587)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ..................... 27,367 40,926
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ......................... $ 30,418 $ 35,339
======== ========
</TABLE>
See notes to the consolidated financial statements
6
<PAGE> 7
CITIZENS BANCSHARES, INC.
-------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------------------------
(Dollars in thousands, except per share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Citizens
Bancshares, Inc., ("Bancshares") and its wholly-owned subsidiaries, The Citizens
Banking Company ("Citizens"), Freedom Financial Life Insurance Company
("Insurance Company"), Freedom Express, Inc. and First National Bank of Chester
("FNB"). All significant inter-company transactions have been eliminated in
consolidation. Bancshares' consolidated financial statements have been restated
for prior periods due to the October 11, 1996 merger of The Navarre Deposit Bank
Company of Ohio, Navarre, Ohio, ("Navarre") into Citizens.
These interim consolidated financial statements are prepared without audit and
reflect all adjustments which, in the opinion of management, are necessary to
present fairly the consolidated financial position of Bancshares at June 30,
1997 and its results of operations and cash flows for the periods presented. All
such adjustments are of a normal, recurring nature. The consolidated financial
statements do not purport to contain all the necessary financial disclosures
required by generally accepted accounting principles that might otherwise be
necessary under the circumstances and should be read in conjunction with the
1996 consolidated financial statements and notes thereto of Bancshares included
in its Annual Report to Shareholders for the year ended December 31, 1996.
The provision for income taxes is based upon the effective tax rate expected to
be applicable for the entire year.
For the six months ended June 30, 1997 and 1996, Bancshares paid interest in the
amount of $18,084 and $15,549 respectively, and taxes in the amount of $4,549
and $4,313, respectively.
Bancshares' non-cash transactions resulting from transfers from loans to other
real estate owned were $0 and $12 for each of the six months ended June 30, 1997
and 1996, respectively.
Statement of Financial Accounting Standards (SFAS) No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities",
revises accounting treatment for transfers of financial assets, such as loans
and securities, and for distinguishing between sales and secured borrowings.
SFAS No. 125 did not materially impact Bancshares' financial statements for the
quarter or six month period ended June 30, 1997.
In March 1997, the accounting requirements for calculating earnings per share
were revised. Basic earnings per share for 1997 and later will be calculated
solely on average common shares outstanding. Diluted earnings per share will
reflect the potential dilution of stock options and other common stock
equivalents. All prior calculations will be restated to be comparable to the new
methods. As Bancshares has not had significant dilution from stock options, the
new calculation methods are not expected to significantly affect future basic
earnings per share and diluted earnings per share.
Earnings per share are calculated on the basis of the weighted average number of
shares outstanding after considering the Bancshares common shares issued in the
merger discussed above. The weighted average number of shares used in the
computation for 1997 and 1996 was 5,897,540. Fully diluted and primary weighted
shares outstanding at June 30, 1997 were 5,904,412 and 5,893,886, respectively.
Earnings per share remain at $.73 and $1.43 for the quarter and six month period
ended June 30, 1997 for fully diluted, primary and basic earnings per share.
7
<PAGE> 8
CITIZENS BANCSHARES, INC.
-------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------------------------
(Dollars in thousands, except per share data)
NOTE 2 - INVESTMENT AND MORTGAGE-BACKED SECURITIES
The amortized costs, unrealized gains and losses and estimated fair values are
as follows:
<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE:
U.S. Treasury securities $ 11,002 $ 48 $ $ 11,050
U.S. Government agencies
and corporations 67,476 40 (375) 67,141
Obligations of states and political
subdivisions 100 (1) 99
Corporate and other securities 4,000 24 4,024
Mortgage-backed securities
GNMA, FHLMC and FNMA certificates 178,791 798 (856) 178,733
Agency collateralized mortgage obligations 18,297 32 (200) 18,129
Other 5,515 15 (5) 5,525
-------- ------- ------- --------
Total debt securities available for sale 285,181 957 (1,437) 284,701
Marketable equity securities 13,733 1,326 (63) 14,996
-------- ------- ------- --------
Total investment securities available for sale $298,914 $ 2,283 $(1,500) $299,697
======== ======= ======= ========
SECURITIES HELD TO MATURITY:
U.S. Treasury securities $ 28,324 $ 101 $ (34) $ 28,391
U.S. Government agencies and corporations 100 (4) 96
Obligations of states and political
subdivisions 22,525 192 (96) 22,621
Corporate and other 5 5
-------- ------- ------- --------
Total investment securities held to maturity $ 50,954 $ 293 $ (134) $ 51,113
======== ======= ======= ========
</TABLE>
8
<PAGE> 9
CITIZENS BANCSHARES, INC.
-------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------------------------
(Dollars in thousands, except per share data)
NOTE 2 - INVESTMENT AND MORTGAGE-BACKED SECURITIES - CONTINUED
The amortized costs, unrealized gains and losses and estimated fair values are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE:
U.S. Treasury securities $ 11,001 $ 80 $ (9) $ 11,072
U.S. Government agencies
and corporations 27,279 379 (77) 27,581
Obligations of states and
political subdivisions 100 100
Corporate and other securities 14 14
Mortgage-backed securities
GNMA, FHLMC and FNMA certificates 164,027 838 (641) 164,224
Agency collateralized mortgage obligations 19,200 (269) 18,931
Other 6,076 7 (7) 6,076
-------- ------- -------- --------
Total debt securities available for sale 227,697 1,304 (1,003) 227,998
Marketable equity securities 11,452 943 (18) 12,377
-------- ------- -------- --------
Total investment securities available for sale $239,149 $ 2,247 $ (1,021) $240,375
======== ======= ======== ========
SECURITIES HELD TO MATURITY:
U.S. Treasury securities $ 42,342 $ 132 $ (13) $ 42,461
U.S. Government agencies and corporations 100 (2) 98
Obligations of states and political
subdivisions 22,783 189 (82) 22,890
Other 5 5
-------- ------- -------- --------
Total investment securities held to maturity $ 65,230 $ 321 $ (97) $ 65,454
======== ======= ======== ========
</TABLE>
9
<PAGE> 10
CITIZENS BANCSHARES, INC.
-------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------------------------
(Dollars in thousands, except per share data)
NOTE 2 - INVESTMENT AND MORTGAGE-BACKED SECURITIES - CONTINUED
The amortized cost and estimated market value of debt securities at June 30,
1997 by contractual maturity are shown below. Expected maturities will likely
differ from contractual maturities because some issuers have the right to call
or repay obligations at any time with or without penalty.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
<S> <C> <C>
DEBT SECURITIES AVAILABLE FOR SALE:
Due in one year or less $ 7,498 $ 7,505
Due after one year through five years 7,754 7,755
Due after five years through ten years 62,826 62,542
Due after ten years 4,500 4,512
Mortgage-backed securities 202,603 202,387
-------- --------
Total debt securities available for sale $285,181 $284,701
======== ========
DEBT SECURITIES HELD TO MATURITY:
Due in one year or less $ 9,702 $ 9,763
Due after one year through five years 29,329 29,378
Due after five years through ten years 11,338 11,373
Due after ten years 585 599
-------- --------
Total debt securities held to maturity $ 50,954 $ 51,113
======== ========
</TABLE>
There were no sales of securities for the quarter or six month periods ended
June 30, 1997. For the quarter and six month periods ended June 30, 1996,
securities available for sale with an amortized cost of $2,686 were sold. These
securities had related gross realized losses of $20 and gross realized gains of
$8.
10
<PAGE> 11
CITIZENS BANCSHARES, INC.
-------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------------------------
(Dollars in thousands, except per share data)
NOTE 3 - LOANS
The loan portfolio at June 30, 1997 and December 31, 1996 was as follows:
<TABLE>
<CAPTION>
JUNE 30, December 31,
1997 1996
-------- ------------
<S> <C> <C>
Commercial, financial and agricultural $162,522 $140,977
Residential real estate mortgage 280,132 280,779
Commercial real estate 115,727 113,327
Construction 4,108 4,704
Consumer 49,462 48,269
Real estate mortgage loans held for sale 11,543 7,191
-------- --------
Total loans $623,494 $595,247
======== ========
</TABLE>
Nonaccrual and past due loans:
<TABLE>
<CAPTION>
JUNE 30, December 31,
1997 1996
-------- ------------
<S> <C> <C>
Loans accounted for on a nonaccrual basis $ 929 $ 1,158
Loans past due more than 90 days and
still accruing interest 3,278 674
-------- --------
$ 4,207 $ 1,832
======== ========
</TABLE>
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
A summary of the activity in the allowance for loan losses for the six months
ended June 30, 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
1997 1996
-------- ------------
<S> <C> <C>
Balance at January 1 $ 11,350 $ 10,895
Provision for loan losses 825 856
Recoveries 495 632
Loans charged-off (911) (1,111)
-------- --------
Balance at June 30 $ 11,759 $ 11,272
======== ========
</TABLE>
Information regarding impaired loans is as follows:
<TABLE>
<CAPTION>
Six months ended
JUNE 30, June 30,
1997 1996
---- ----
<S> <C> <C>
Average investment in impaired loans $2,764 $4,464
Interest income recognized on impaired loans 130 190
Interest income received on impaired loans 123 137
</TABLE>
11
<PAGE> 12
CITIZENS BANCSHARES, INC.
-------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------------------------
(Dollars in thousands, except per share data)
NOTE 4 - ALLOWANCE FOR LOAN LOSSES - CONTINUED
<TABLE>
<CAPTION>
JUNE 30, December 31,
1997 1996
---- ----
<S> <C> <C>
Balance of impaired loans $2,557 $3,116
Specific allocation associated with
impaired loans $ 259 $ 416
</TABLE>
The balance of impaired loans includes certain delinquent and nonaccrual loans
previously disclosed in Note 3 in the aggregate amount of $484 and $981 at June
30, 1997 and December 31, 1996, respectively.
NOTE 5 - CONCENTRATIONS OF CREDIT RISK
Bancshares, through its subsidiary banks, grants residential, consumer and
commercial loans to customers located primarily in the eastern Ohio counties of
Columbiana, Jefferson, Stark, Mahoning and Carroll and in the West Virginia
county of Hancock.
Real estate mortgage loans, including construction loans and loans held for
sale, totaled $295,783 of loans at June 30, 1997, and are secured primarily by 1
- - 4 family residences. Commercial real estate loans comprised 18.56% of loans at
June 30, 1997, and represent borrowings secured by commercial buildings and real
estate primarily in the Citizens and FNB market areas.
Also at June 30, 1997, 12.3% of total loans were to a group of related
enterprises involved in purchasing pools of one-to-four family residential, home
equity and other consumer loans. The primary repayment source for the latter is
the underlying pools of consumer and mortgage debt that represent diverse loan
types and geographic distribution.
Citizens and FNB are parties to financial instruments which involve off-balance
sheet risk. These instruments are entered into in the normal course of business
to meet the financing needs of their customers. These financial instruments
include commitments to make loans. There were $48,200 in variable rate
commitments and $6,898 in fixed rate commitments at June 30, 1997. The fixed
rate commitments have an interest rate range of 6.375% to 8.750%. There were
$45,450 in variable rate commitments and $3,237 in fixed rate commitments at
year end 1996. The fixed rate commitments have an interest rate range of 6.50%
to 8.75%. All fixed rate mortgage real estate commitments expire after sixty
days. Since many expire without being used, these amounts do not necessarily
represent future cash commitments.
The exposure to credit loss in the event of nonperformance by the other party to
the financial instrument for commitments to make loans and lines and letters of
credit is represented by the contractual amount of those instruments. Citizens
and FNB follow the same credit policy to make such commitments as is followed
for those loans recorded in the financial statements. In management's opinion,
these commitments represent normal banking transactions and no material losses
are expected to result therefrom. Collateral obtained upon exercise of the
commitments is determined using management's credit evaluation of the borrower
and may include real estate and/or business assets.
12
<PAGE> 13
CITIZENS BANCSHARES, INC.
-------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------------------------
(Dollars in thousands, except per share data)
NOTE 6 - COMMITMENTS AND CONTINGENCIES
Citizens and FNB are involved in various legal actions arising in the ordinary
course of business. In the opinion of management, the outcome of these matters
will not have a material effect on Bancshares.
Bancshares' subsidiary banks were required to have approximately $8,843 of cash
on hand or on deposit with the Federal Reserve Bank to meet regulatory reserve
requirements at June 30, 1997. These balances do not earn interest.
NOTE 7 - FEDERAL HOME LOAN BANK ADVANCES
Bancshares' Federal Home Loan Bank advances at June 30, 1997 were:
<TABLE>
<CAPTION>
Maturity or first
Amount Rate repricing date
------ ---- --------------
<S> <C> <C>
$59,956 5.66% 1997
2,750 5.66 1998
8,500 6.53 1999
15,000 5.93 2002
-------
$86,206
=======
</TABLE>
13
<PAGE> 14
CITIZENS BANCSHARES, INC.
-------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------------------------------------------------------------------------
RESULTS OF OPERATIONS.
- ----------------------
(Dollars in thousands, except per share data)
The purpose of this discussion is to focus on information concerning the
consolidated financial condition of Bancshares at June 30, 1997, compared to
December 31, 1996, and the results of operations for the quarter and six months
ended June 30, 1997, as compared to the same periods in 1996, which is not
otherwise apparent from the financial statements. This discussion should be read
in conjunction with the interim consolidated financial statements and the
footnotes thereto included elsewhere in this Form 10-Q. Forward-looking
statements contained in this discussion involve risks and uncertainties and are
subject to change based on various important factors. Actual results could
differ from those expressed or implied.
RESULTS OF OPERATIONS
Net income for the quarter ended June 30, 1997, was $4,333, an 8.9% increase
from the $3,978 earned for the quarter ended June 30, 1996. Earnings per share
for the second quarter of 1997 were $.73, representing an increase of 9.0% over
the $.67 earned in the comparable period for 1996.
Net income for the six months ended June 30, 1997 was $8,442, compared to $7,576
for the same period in 1996. Bancshares' 11.4% increase in net income for the
six months ended June 30, 1997, compared to the same period in 1996, was due
primarily to a 32.5% increase in other income. Service charges and fees on
deposits have risen due to product fee increases, and other fees associated with
credit products have contributed $250 for the quarter and $550 for the six
months ended June 30, 1997. Additionally, other expense decreased 5.95% for the
six months ended June 30, 1997 as compared to the same period in 1996. For the
quarter and six months ended June 30, 1996, merger, integration and
restructuring expense totaled $425.
Earnings per common share for the six months ended June 30, 1997 were $1.43, up
11.7% over the same period in 1996.
Net income for the quarter and six months ended June 30, 1996 included net
nonrecurring after tax income discussed below of $259 or $.04 per common share.
Core earnings for the quarter and six months ended June 30, 1996 were $3,719 and
$7,317, respectively. Since net income for the quarter and six months ended June
30, 1997 included no nonrecurring income or expense, the result was an increase
in core earnings of 16.5% for the second quarter of 1997, and an increase in
core earnings of 15.3% for the six months ended June 30, 1997, compared to the
comparable periods in 1996.
The nonrecurring items for the quarter and six months ended June 30, 1996 were a
$422 after tax loan discount recognized as loan income upon prepayment, a $112
after tax other income FHLMC remittance settlement and a $276 after tax
restructuring charge related to an acquisition.
The provision for loan losses of $825 for the six months ended June 30, 1997
decreased $31 from the comparable period in 1996. The provision of $407 for the
quarter ended June 30, 1997 decreased $62 from the quarter ended June 30, 1996.
These decreases are a result of lower net loan losses and increased coverage of
loan losses as the provision for loan losses to actual losses increased from
178.71% at June 30, 1996 to 198.32% at June 30, 1997.
14
<PAGE> 15
CITIZENS BANCSHARES, INC.
-------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
- --------------------------------------------------------------------------
OPERATIONS (CONTINUED).
- -----------------------
(Dollars in thousands, except per share data)
RESULTS OF OPERATIONS - CONTINUED
Return on average shareholders' equity for the first six months of 1997 was
18.54%, as compared to 18.61% for the same period in 1996. Return on average
assets for the first six months of 1997 was 1.71%, as compared to 1.74% for the
same period in 1996.
<TABLE>
<CAPTION>
NET INTEREST INCOME
Six months ended
------------------------------
JUNE 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
Net interest income $21,156 $21,319
Taxable equivalent adjustment 433 424
------- -------
Net interest income taxable equivalent $21,589 $21,743
======= =======
Net interest margin 4.50% 5.02%
Taxable equivalent adjustment .09 .10
------- -------
Net interest margin taxable equivalent 4.59% 5.12%
======= =======
</TABLE>
Net interest income of $21,156 for the six months ended June 30, 1997 decreased
$163 from the comparable period in 1996. Included in total interest income for
the six months ended June 30, 1996 was $650 nonrecurring income which was loan
discount recognized as loan income upon prepayment. This prepayment resulted in
an increase in the net interest margin, fully taxable equivalent for the six
months ended June 30, 1996 of approximately 10 basis points.
The net interest margin, fully taxable equivalent of 4.59% for the first half of
1997 decreased from 5.12% for the comparable period in 1996. The yield on
average earning assets was 8.50% for the first half of 1997 compared to 8.79%
for the comparable period in 1996. The cost of interest bearing liabilities was
4.56% for the first half of 1997 compared to 4.29% for the comparable period in
1996. Increases in interest rates paid on Federal Home Loan Bank advances and
securities sold under repurchase agreements have contributed to the increase in
the cost of interest bearing liabilities for the first half of 1997 compared to
the same period in 1996.
Average gross earning assets increased $29,793 during the second quarter of
1997, while the average rate earned on these assets decreased from 8.67% at
December 31, 1996 to 8.50% at June 30, 1997.
CHANGES IN FINANCIAL CONDITION
Total assets of $1,045,722 at June 30, 1997 increased $97,792 or 10.3% compared
to year-end 1996. Total deposits and repurchase agreements at June 30, 1997 of
$717,469 and $137,426 increased $7,877, and $49,487, respectively, from December
31, 1996. These lower cost sources of funds were used to purchase investment and
mortgage-backed securities available for sale. Net loans totaled $611,735 at
June 30, 1997, representing an increase of $27,838 or 4.8% since year-end 1996.
15
<PAGE> 16
CITIZENS BANCSHARES, INC.
-------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- -----------------------------------------------------------------------
OF OPERATIONS (CONTINUED).
- --------------------------
(Dollars in thousands, except per share data)
CHANGES IN FINANCIAL CONDITION - CONTINUED
During the quarter ended March 31, 1997, there were $25,000 in variable rate
mortgaged-backed securities purchased, with rates to change annually, initially
yielding 6.64%. There were $40,000 in fixed rate callable agencies purchased
with call dates from one to three years in the future, and final maturity dates
between five and eight years. Yields on these callable bonds ranged from 7.13%
to 7.47%. The variable rate securities were purchased with variable rate
borrowings. The callable bonds were purchased with like Federal Home Loan Bank
advances. Net interest rate spreads on the purchases approximated 110-113 basis
points.
During the quarter ended June 30, 1997, $15,900 in securities were purchased.
There were $5,300 in short term fixed rate treasuries, $5,000 fixed rate
callable agencies with call dates two years in the future and $4,000 fixed rate
corporate debt securities. The treasuries and callable agencies replaced like
maturities of similar investments.
During the six months ended June 30, 1997, Citizens implemented a Bank Owned
Life Insurance Program ("BOLI"). Single premium policies totaling $20,000 were
purchased on employees. The BOLI is included in line item accrued interest
receivable and other assets. This is the primary reason for the increase in the
balance sheet line since December 31, 1996. Citizens will realize accrued income
on its financial statement, in the line titled other income, based on the
interest crediting rates in the insurance policies.
NONPERFORMING ASSETS
Nonperforming loans as a percentage of total loans were .67% at June 30, 1997,
as compared to .31% at December 31, 1996. The allowance for loan losses as a
percentage of total loans at June 30, 1997 was 1.89% compared to 1.91% at
December 31, 1996. Nonperforming loans as a percentage of the allowance for loan
losses increased to 35.78% at June 30, 1997, from 16.14% at December 31, 1996.
Other real estate totaled $93 at June 30, 1997 and $214 at December 31, 1996.
Bancshares continues to analyze the adequacy of its allowance for loan losses as
a percentage of total loans on a quarterly basis. Annualized net charge-offs
constituted .14% of average loans for the six months ended June 30, 1997, as
compared to .20% for the year ended December 31, 1996.
LIQUIDITY
Bancshares' liquidity position remained strong during the second quarter of
1997. Core deposits, representing Bancshares' largest most stable and generally
least costly source of funds, totaled $661,372 and were 108.1% of total loans at
June 30, 1997. The core deposit levels at June 30, 1997 approximated the levels
at year-end 1996.
Cash and cash equivalents, interest-bearing time deposits and securities
available for sale are Bancshares' most liquid assets. At June 30, 1997, these
assets totaled $330,323, an increase of $62,217 or 23.2% from December 31, 1996.
16
<PAGE> 17
CITIZENS BANCSHARES, INC.
-------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- -----------------------------------------------------------------------
OF OPERATIONS (CONTINUED).
- --------------------------
(Dollars in thousands, except per share data)
LIQUIDITY - CONTINUED
Management believes that Bancshares' liquidity position is strong based on its
high level of cash, cash equivalents, core deposits, the stability of its other
funding sources and its capital base.
CAPITAL RESOURCES
Shareholders' equity totaled $94,743 at June 30, 1997, compared to $89,712 at
December 31, 1996. The ratio of shareholders' equity to assets was 9.06% at June
30, 1997 and 9.5% at December 31, 1996, respectively.
<TABLE>
<CAPTION>
JUNE 30, 1997 December 31, 1996
------------- -----------------
AMOUNT PERCENT Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Tier 1 risk-based capital
Actual $ 93,594 15.26% $88,753 16.23%
Required 24,532 4.00 21,876 4.00
Total risk-based capital
Actual $101,307 16.52% $95,645 17.49%
Required 49,064 8.00 43,753 8.00
</TABLE>
The following table summarizes Bancshares' consolidated leverage capital ratio
and required amounts at June 30, 1997 and December 31, 1996.
<TABLE>
<CAPTION>
JUNE 30, 1997 December 31, 1996
------------- -----------------
Leverage Ratio AMOUNT PERCENT Amount Percent
- -------------- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Actual $93,594 9.42% $88,753 9.91%
Minimum required 29,812 3.00 26,879 3.00
Maximum required 49,686 5.00 44,799 5.00
</TABLE>
The unrealized gain on securities available for sale, net of tax effect, was
$509 at June 30, 1997, compared to an unrealized gain of $798 at December 31,
1996. The decrease of $289 was primarily attributable to the changing interest
rate environment.
GENERAL
Bancshares' common stock closed at an all-time high of $55 on June 30, 1997. The
share price has increased 65.41% since December 31, 1996. Management believes
that the value of the shares has increased due to the Corporation's continued
solid performance and investors' strong demand for the financial institution
sector. Part of this increase may also stem from the recent inclusion of the
Corporation's stock in the Russell 2000 and Russell 3000 indices, which are
indices of "small cap" stocks.
17
<PAGE> 18
CITIZENS BANCSHARES, INC.
-------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- -----------------------------------------------------------------------
OF OPERATIONS (CONTINUED).
- --------------------------
(Dollars in thousands, except per share data)
GENERAL - CONTINUED
The Corporation recently received national recognition by placing second in U.S.
Banker magazine's 1997 ranking of the 200 mid-sized publicly traded bank holding
companies. The ranking was based on each bank's 1996 performance in five areas:
capitalization, asset quality, two measures of profitability and efficiency. We
are very proud of this accomplishment.
Progress continues toward the acquisition of the Belmont County branches of
Metropolitan Savings Bank of Ohio, an affiliate of F.N.B. Corporation,
Hermitage, Pennsylvania. The branch offices are located in Martins Ferry, St.
Clairsville and Barnsville. Citizens will acquire approximately $66 million in
deposits and $26 million in loans for a 9% premium on the deposits in connection
with this transaction. The value of the transaction is approximately $6 million.
In our first quarter 10-Q, we announced the Corporation's intentions to offer
trust and investment services, and the hiring of three individuals to manage
these activities. During the second quarter, Bancshares began to offer
comprehensive services, including personal trust, estate administration, IRA and
employee benefit accounts and investment services through our wholly-owned
subsidiary, First National Bank of Chester. The Trust Department personnel are
operating from the Citizens' office at 80 Boardman-Poland Road (Route 224) in
Boardman, Ohio. Trust and investment services will be marketed throughout the
Corporation's market area in the near future. Management projects that the
long-term prospects for the Trust Company will add fee income to Bancshares
while providing a valuable service. Bancshares' 1997 core earnings will be
reduced by approximately $.03 per common share due to the after tax impact of
planned Trust Company expenses.
18
<PAGE> 19
CITIZENS BANCSHARES, INC.
-------------------------
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS.
- ----------------------------
There is no pending litigation, other than routine litigation
incidental to the business of Bancshares and its affiliates, or of a
material nature involving or naming Bancshares or any of its affiliates
as a defendant. Further, there are no material legal proceedings in
which any director, executive officer, principal shareholder or
affiliate of Bancshares is a party or has a material interest which is
adverse to Bancshares or any of its affiliates. None of the routine
litigation in which Bancshares or any of its affiliates are involved is
expected to have a material adverse impact upon the financial position
or results of operations of Bancshares or any of its affiliates.
ITEM 2. CHANGES IN SECURITIES.
- --------------------------------
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
- ------------------------------------------
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- --------------------------------------------------------------
Not applicable.
ITEM 5. OTHER INFORMATION.
- ---------------------------
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
- -------------------------------------------
(a) The following Exhibits are included in this Form 10-Q or are
incorporated by reference as noted in the following index:
19
<PAGE> 20
CITIZENS BANCSHARES, INC.
PART II - OTHER INFORMATION - CONTINUED
EXHIBIT INDEX
EXHIBIT 3 Articles of Incorporation, By laws
(1) Registrant's Fourth Amended Articles of Incorporation,
(incorporated by reference in Exhibit 3 (1) to the Form 10-K
of Citizens Bancshares, Inc. for the quarter ended December
31, 1996).
(2) Registrant's Regulations, as amended (incorporated by
reference in Exhibit 3 (2) to the Form S-4 Registration
Statement No. 0-18209 of Citizens Bancshares, Inc.).
EXHIBIT 10 Material Contracts
(1) The Citizens Bancshares Inc. Profit-Sharing Plan and Trust
(formerly known as the CBC Salineville Profit Sharing Plan and
Trust) (incorporated by reference in Exhibit 10 (2) to the
Form S-4 Registration Statement No. 0-18209 of Citizens
Bancshares, Inc.).
(2) Citizens Bancshares, Inc. Employee Stock Ownership Plan
(incorporated by reference in Exhibit 10 (3) to the Form S-4
Registration Statement No. 0-18209 of Citizens Bancshares,
Inc.).
(3) Form of Indemnification Agreement between Citizens Bancshares,
Inc. and Individual Directors, Officers or Representatives
(incorporated by reference in Exhibit 10 (4) to the Form 10-K
of Citizens Bancshares, Inc. for the fiscal year ended
December 31, 1989).
(4) Employment Agreement by and among Citizens Bancshares, Inc.,
The Citizens Banking Company and Marty E. Adams (incorporated
by reference in Exhibit 10 (5) to the Form 10-K of Citizens
Bancshares, Inc. for the fiscal year ended December 31, 1992).
(5) Amendment to Executive Employment Agreement by and among
Citizens Bancshares, Inc., The Citizens Banking Company and
Marty E. Adams. (incorporated by reference in Exhibit 10 (8)
to the Form 10-K of Citizens Bancshares, Inc. for the fiscal
year ended December 31, 1993).
(6) Agreement by and among Citizens Bancshares, Inc., The Citizens
Banking Company and Frank J. Koch. (incorporated by reference
in Exhibit 10 (9) to the Form 10-K of Citizens Bancshares,
Inc. for the fiscal year ended December 31, 1993).
(7) Citizens Bancshares, Inc. Non-Statutory Stock Option and Stock
Appreciation Rights Plan.(incorporated by reference in Exhibit
10 (11) to the Form 10-Q of Citizens Bancshares, Inc. for the
quarter ended June 30, 1995).
20
<PAGE> 21
CITIZENS BANCSHARES, INC.
-------------------------
PART II - OTHER INFORMATION
---------------------------
EXHIBIT INDEX (CONTINUED)
-------------------------
(8) The Employee Retirement Plan for Citizens Bancshares, Inc.
(incorporated by reference in Exhibit 10 (12) to the Form 10-Q
of Citizens Bancshares, Inc. for the quarter ended June 30,
1995).
(9) Affiliation Agreement by and among Citizens Bancshares, Inc.,
The Citizens Banking Company, Western Reserve Bank of Ohio
(incorporated by reference in Exhibit 2 (1) to the Form S-4
Registration Statement No.33-99036 of Citizens Bancshares,
Inc.).
(10) Agreement of Merger by and among Citizens Bancshares, Inc.,
The Citizens Banking Company and Western Reserve Bank of Ohio
(incorporated by reference in Exhibit 10 (12) to the Form 10-K
of Citizens Bancshares, Inc. for the fiscal year ended
December 31, 1995).
(11) Plan and Agreement of Merger by and among Citizens Bancshares,
Inc., The Citizens Banking Company and the Navarre Deposit
Bank Company (incorporated by reference in Exhibit 10 (13) to
the Form 10-Q of Citizens Bancshares, Inc. for the quarter
ended March 31, 1996).
(12) Purchase and Assumption agreement between The Metropolitan
Savings Bank of Ohio and The Citizens Banking Company
(incorporated by reference in Exhibit 10 (12) to the Form 10-Q
of Citizens Bancshares, Inc. for the quarter ended June 30,
1997).
EXHIBIT 11
Statement regarding Computation of Per Share Earnings
(included in Note 1 to the Consolidated Financial Statements).
EXHIBIT 27 Financial Data Schedule
REPORTS ON FORM 8-K
-------------------
None
21
<PAGE> 22
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Citizens Bancshares, Inc.
Date: July 22, 1997 Marty E. Adams
------------- --------------
Marty E. Adams
President & Chief Executive Officer
Vice Chairman
Date: July 22, 1997 William L. White III
------------- --------------------
William L. White III
Senior Vice President
Chief Financial Officer
22
<PAGE> 1
Execution Copy
PURCHASE AND ASSUMPTION AGREEMENT
BETWEEN
THE METROPOLITAN SAVINGS BANK OF OHIO
AND
THE CITIZENS BANKING COMPANY
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
ARTICLE I - DEFINITIONS ..........................................................................................1
ARTICLE II - PURCHASE OF ASSETS AND ASSUMPTION
OF LIABILITIES.................................................................................2
2.1 Effective Date...........................................................................................2
2.2 Transfer and Consideration...............................................................................3
2.3 Cash Payment.............................................................................................4
2.4 Adjustment to Cash Premium...............................................................................5
2.5 Allocation of Consideration..............................................................................5
2.6 Purchase of Loans........................................................................................6
2.7 Additional Obligations of the Seller.....................................................................7
2.8 Additional Obligations of the Purchaser.................................................................11
2.9 Certain Transitional Matters............................................................................11
2.10 Indemnification.........................................................................................14
2.11 Pro-Rata Adjustment of Expenses.........................................................................16
2.12 Settlement Procedure....................................................................................16
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE SELLER.......................................................17
3.1 Corporate Organization..................................................................................17
3.2 No Violation............................................................................................17
3.3 Corporate Authority and Validity........................................................................18
3.4 Deposit Liability Records...............................................................................18
3.5 Loan Records............................................................................................19
3.6 Leases; Title to Property; Encumbrances.................................................................19
3.7 Litigation..............................................................................................20
3.8 Assignment of Credit Insurance..........................................................................20
3.9 Certificates of Deposit.................................................................................21
3.10 Quality of Representatives and Warranties...............................................................21
3.11 Limitation of Warranties................................................................................21
3.12 Consultant's Fees.......................................................................................21
3.13 Environmental...........................................................................................22
3.14 Representations and Warranties as to each Qualified Loan................................................23
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV - REPRESENTATION AND WARRANTIES OF PURCHASER..........................................................26
4.1 Corporate Organization..................................................................................27
4.2 No Violation............................................................................................27
4.3 Corporate Authority and Validity........................................................................27
4.4 Consultant's Fees.......................................................................................28
ARTICLE V - CONDUCT OF BUSINESS PENDING THE EFFECTIVE DATE.......................................................28
5.1 Activity in the Ordinary Course.........................................................................28
5.2 Insurance and Casualty..................................................................................29
ARTICLE VI - OBLIGATION OF PARTIES PRIOR TO AND AFTER THE
EFFECTIVE DATE.................................................................................30
6.1 Full Access.............................................................................................30
6.2 Requirements to Obtain Approval of Regulatory Authorities...............................................31
6.3 Further Assurance.......................................................................................31
6.4 Employees...............................................................................................32
6.5 Non-Solicitation Clause.................................................................................32
6.6 Restriction on New Branches.............................................................................33
ARTICLE VII - CONDITIONS TO PURCHASER'S OBLIGATIONS..............................................................33
7.1 Representations and Warranties True.....................................................................33
7.2 Obligations Performed...................................................................................34
7.3 No Adverse Litigation...................................................................................34
7.4 Regulatory Approval.....................................................................................34
7.5 Certificate of Compliance...............................................................................34
7.6 Comfort by Purchaser....................................................................................35
7.7 Payment of Branches Employee Obligations................................................................35
7.8 Delivery by Seller......................................................................................36
7.9 Material Adverse Change.................................................................................36
7.10 Satisfactory Environmental Audit........................................................................36
ARTICLE VIII - CONDITIONS TO THE SELLER'S OBLIGATIONS............................................................36
8.1 Representations and Warranties True.....................................................................37
8.2 Obligations Performed...................................................................................37
8.3 No Adverse Litigation...................................................................................37
8.4 Regulatory Approval.....................................................................................37
8.5 Certificate of Compliance...............................................................................38
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE IX - TERMINATION.........................................................................................38
9.1 Methods of Termination..................................................................................38
9.2 Procedure Upon Termination..............................................................................39
ARTICLE X - MISCELLANEOUS PROVISIONS.............................................................................39
10.1 Amendment and Modification..............................................................................39
10.2 Waiver or Extension.....................................................................................39
10.3 Assignment..............................................................................................40
10.4 Survival of Representations and Warranties..............................................................40
10.5 Payment of Expenses.....................................................................................40
10.6 Notice to Branches Customers and the Public.............................................................41
10.7 Addresses for Notice, et................................................................................42
10.8 Confidentiality.........................................................................................43
10.9 Counterparts............................................................................................43
10.10 Headings.......................................................................................43
10.11 Governing Law..................................................................................43
SIGNATURE PAGE...................................................................................................44
EXHIBIT A - Branches
EXHIBIT B - Deposit Liabilities Assumed
EXHIBIT C - Cash on Hand
EXHIBIT D - Assignment of Certain Assets and Assumption of Certain Liabilities
EXHIBIT E - Preliminary and Adjusting Settlement Worksheets
EXHIBIT F - Loans
EXHIBIT G - Employees
EXHIBIT H - Deposit Premium Allocation
EXHIBIT I - Special Warranty Deed
</TABLE>
iii
<PAGE> 5
EXHIBIT J Brokered Deposits
EXHIBIT K Personal Property Leases
EXHIBIT L Contracts
EXHIBIT M Bill of Sale
-iv-
<PAGE> 6
THIS PURCHASE AND ASSUMPTION AGREEMENT made as of this 10th day of
June, 1997, between THE METROPOLITAN SAVINGS BANK OF OHIO ("SELLER"), a savings
bank chartered and existing under the laws of the State of Ohio and having its
executive offices in Youngstown, Ohio, and THE CITIZENS BANKING COMPANY,
(Purchaser"), a commercial bank chartered and existing under the laws of the
State of Ohio and having its executive offices in Salineville, Ohio;
WHEREAS, the Seller desires to sell certain assets and assign certain
liabilities associated with its branch offices listed on attached Exhibit "A"
(the "Branches"); and
WHEREAS, the Purchaser desires to purchase such assets and assume such
liabilities of the Branches upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, agree as follows:
ARTICLE I
---------
DEFINITIONS
-----------
As used in this Agreement, the following terms have the definitions
indicated:
"Agreement" means this Purchase and Assumption Agreement between The
Metropolitan Savings Bank of Ohio ("Seller") and The Citizens Banking Company
("Purchaser").
"Branches" means the three (3) branch offices listed on Exhibit "A",
including the real property and improvements attendant thereto.
"Cash On Hand" means all vault cash, teller cash, and prepaid postage
located at the Branches, as listed on Exhibit "C".
"Cash Premium" means Nine Percent (9%) of the Deposit Liabilities as of
the Effective Date.
-1-
<PAGE> 7
"Deposit Liabilities" means all deposit liabilities as of the Effective
Date domiciled at the Branches, as listed on Exhibit "B".
"Excluded Deposit Liabilities" means all deposit liabilities identified
on "Exhibit "J".
"Effective Date" shall have the meaning assigned to it in Section 2.1
of the Agreement.
"FDIC" means the Federal Deposit Insurance Corporation.
"Leases" means the personal property lease agreements identified on
Exhibit "K".
"Loans" means certain loans, domiciled at the Branches on the Effective
Date, that are listed on Exhibit "F" that, on the Effective Date, satisfy the
criteria set forth in Section 2.6(e).
"Net Book Value" means the value recorded on the financial records of
Seller as of the thirtieth (30th) day prior to the Effective Date.
"Purchaser" means The Citizens Banking Company.
"Seller" means The Metropolitan Savings Bank of Ohio.
"Superintendent" means the Ohio Superintendent of Financial
Institutions. Any of the terms defined in the singular above may also be used
in the plural.
ARTICLE II
----------
PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES
------------------------------------------------
2.1 EFFECTIVE DATE.
---------------
Except as otherwise provided herein, the closing date for the purchase
and assumption herein described shall be on a date mutually agreed to by the
parties hereto, which date shall be no later than December 31, 1997.
-2-
<PAGE> 8
2.2 TRANSFER AND CONSIDERATION.
---------------------------
(a) The Seller agrees, subject to the terms and conditions of this
Agreement, to validly sell, assign, transfer, convey and deliver to the
Purchaser, on the Effective Date the following assets (the "Assets"):
(i) (a) any and all equipment (e.g., ATM machines, etc.),
at the Net Book Value on the books of the Seller on
the Effective Date, and (b) all of its right, title
and interest in and to such of the furniture,
fixtures and equipment owned or, to the extent of
Seller's interest as lessee, leased by the Seller and
situate in the Branches, as shall be agreed upon
between Seller and Purchaser prior to the Effective
Date, at the Net Book Value;
(ii) all of its right, title and interest in and to the
safe deposit box agreements relating to safety
deposit boxes at the Branches;
(iii) all of the right, servicing rights, title and
interest to the Loans;
(iv) all of its right, title and interest to such
contracts pertaining to the operation of the Branches
(the "Contracts") as identified at Exhibit "L";
(v) all of its right, title and interest to the real
estate comprising Branches, as shown on Exhibit A
attached hereto and made a part hereof together with
all fixtures and improvements thereon (the
"Premises");
(vi) all of its right, title and interest to the credit
insurance, and unearned commissions related thereto,
with respect to the Loans; and
(vii) all of its right, title and interest in and to the
Cash On Hand.
(b) The Purchaser agrees that on the Effective Date, subject to the
terms and conditions of this Agreement and as consideration for the aforesaid
sale, assignment, transfer, conveyance and delivery, to assume the following
liabilities (the "Liabilities"):
(i) the Deposit Liabilities;
(ii) all duties and obligations of Seller under the Leases
and the Contracts;
-3-
<PAGE> 9
(iii) all duties and obligations of Seller with respect to
the safe deposit box business.
2.3 CASH PAYMENT.
-------------
In consideration for the transfer of the Assets by Seller pursuant to
Section 2.2(a) and the assumption of the Liabilities pursuant to Section 2.2(b),
on the Effective Date Seller shall transfer to Purchaser by wire transfer of
immediately available funds (the "Cash Payment") an amount equal to: (a) the sum
of (i) the aggregate balance of the Deposit Liabilities and Excluded Deposit
Liabilities including accrued and unpaid interest thereon assumed by Purchaser
under paragraph (b)(i) of Section 2.2, and (ii) any collected but unearned fees
or rentals paid in advance for safe deposit boxes, less (b) the sum of (i) the
Cash Premium, (ii) the Loan Purchase Price pursuant to Section 2.6(b), (iii) Net
Book Value of the Branches, (iv) Net Book Values of the leasehold improvements
and furniture, fixtures and equipment transferred pursuant to this Agreement,
and (v) the Cash On Hand, (c) giving effect to any adjustments required under
Section 2.11 hereof.
2.4 ADJUSTMENT TO CASH PREMIUM.
---------------------------
Subject to the provisions of Section 2.9(d) hereof, an appropriate
adjustment to the Cash Premium shall be made in the event an error in
calculating the amount of Deposit Liabilities listed on Exhibit B, as updated to
and including the close of business on the Effective Date, is discovered by the
Purchaser or Seller within ninety (90) days after the Effective Date. If such an
error is found by the Purchaser or the Seller, the Purchaser or Seller will
notify the other party immediately and will provide proper documentation to
substantiate its position. In the event of an error, upon mutual agreement of
the parties, the adjusting payment shall be made within two (2) business days
after notice of such error and the amount of adjustments has been given.
-4-
<PAGE> 10
2.5 ALLOCATION OF CONSIDERATION.
----------------------------
Purchaser and Seller agree that the Cash Premium shall be allocated in
accordance with Exhibit H. In connection with the preparation of such allocation
the parties acknowledge that one of the principal effects of the Agreement is
the transfer of an additional asset (known in the financial community as a "Core
Deposit Intangible"), the value of which is the primary reason Purchaser has
agreed to pay the Cash Premium. In addition, the parties acknowledge that
another important corollary asset transferred to Purchaser hereunder are the
covenants not to compete required under Sections 6.5 and 6.6. Accordingly, the
parties agree that, in the preparation of any asset allocation statement, the
existence and transfer of the Core Deposit Intangible, the corollary covenants
not to compete, and any other intangible shall be taken into account and each
shall be assigned a fair market value by Purchaser. (In the event final Treasury
regulations are promulgated which do not treat a covenant not to compete as a
Section 1060 asset under the Internal Revenue Code of 1986, as amended, the
consideration deemed paid for such covenant shall be equal to the fair market
value thereof, determined as set forth above.)
2.6 PURCHASE OF LOANS.
------------------
(a) The Purchaser shall have the right to purchase from the Seller on
the Effective Date all loans associated with the Branches. The Purchaser shall
be afforded the opportunity to conduct reasonable due diligence with respect to
the loans, and shall have the right to reject any loan that fails to meet any of
the criteria identified in Section 2.6(e) as of the Effective Date.
(b) The purchase price for the Loans shall be an amount equal to: (i)
the book value of each Loan, plus accrued and unpaid interest and fees owed on
each Loan, each as of the close of business on the day prior to the Effective
Date; (ii) less any unearned commission with regard to credit insurance related
to any Loan, less prepaid interest on each
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<PAGE> 11
Loan, and less any unearned discount on each Loan, each as of the close of
business on the day prior to the Effective Date (the "Loan Purchase Price").
(c) In connection with the Loans transferred to Purchaser hereunder,
Seller agrees to assign and transfer to Purchaser all credit life insurance
policies applicable to such Loans. Purchaser agrees to provide any required
notice of transfer of such policies to customers, to assume and accept all
privileges, benefits, liabilities and obligations in connection with such
transfer of such policies, and Seller and Purchaser shall execute all such
instruments as may be required by the issuer of such policies in connection with
such transfer.
(d) All Loans transferred to Purchaser on the Effective Date pursuant
to Section 2.5 shall be transferred without any warranties or representations as
to the creditworthiness or the solvency of any obligors.
(e) With respect to each of the Loans, Seller represents as
follows:
(i) NOT CLASSIFIED: The loan is not classified by Seller
or by any regulatory authority as special mention,
substandard, doubtful or loss under applicable asset
classification guidelines;
(ii) DELINQUENCY STATUS: The loan is not more than 60 days
past due or has not been 30 days past due three times
within the previous 18 months under the original
terms of the loan agreement..
(iii) ACCRUAL STATUS: The loan is not on non-accrual status
and is not a potential problem loan as described in
Part III. C.2. of Guide 3 of the Securities and
Exchange Commission (the "SEC");
(iv) RESERVE STATUS: No specific allocation exists in
Seller's loan loss reserve with respect to any
portion of the loan;
(v) INTEREST RESERVE: No portion of the interest payment
on the loan is being paid from an interest reserve
account.
(f) In addition, those other Loans ("Other Loans") that are not
rejected by Purchaser on the basis of any of the criteria set
forth in Section 2.6 (f) hereunder, but are proposed to be
rejected by Purchaser for other
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<PAGE> 12
creditworthiness reasons, the Other Loans shall be identified
to Seller along with the Purchaser's explanation of the
creditworthiness deficiencies of the Other Loans. The Other
Loans mutually agreed to by Seller and Purchaser will not be
transferred to Purchaser on Effective Date of this Agreement.
2.7 ADDITIONAL OBLIGATIONS OF THE SELLER.
-------------------------------------
(a) On the Effective Date, the Seller shall:
(i) deliver to Purchaser good and marketable title to the
Assets and deliver to Purchaser such of the assets
purchased as shall be capable of physical delivery,
including, without limitation, all assets and related
records comprising the safe deposit box business and
safekeeping business at the Branches;
(ii) execute, acknowledge and deliver to Purchaser Limited
Warranty Deeds, in the form of Exhibit I hereto, with
respect to the Premises, and an Assignment and
Assumption Agreement, in the form of Exhibit D
hereto, and all such endorsements, assignments,
deeds, conveyances, bills of sale, and other
instruments of conveyance, assignment and transfer as
shall be reasonably necessary or advisable to
consummate the sale and transfer of the Assets and
Liabilities to Purchaser;
(iii) seller and Purchaser will equally bear the cost of
all taxes and charges assessed on the transfer of the
deeds associated with the Branches;
(iv) seller will convey the real estate by Limited
Warranty Deeds for the Premises and provide such
marketable title as shall be insurable by a reputable
title insurance company licensed to do business in
the State of Ohio, at Seller's expense;
(v) execute and deliver a Bill of Sale for personal
property in the form as set forth in Exhibit "M";
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<PAGE> 13
(vi) assign, transfer and deliver to Purchaser such of the
following records pertaining to the Deposit
Liabilities:
(A) signature cards, certificate of deposit file
copies, orders and contracts between the Seller and
branch depositors (including but not limited to stop
payment orders and I.R.A. documentation), and records
of similar character;
(B) records of account on electronic data files
and/or paper reports including, (I) with respect to
each deposit account, name(s) of account holder(s),
mailing address, social security number(s), account
type, account balance, amount of accrued interest,
taxpayer identification number, income tax
withholding information, transactions occurring after
December 31, 1996 and prior to the Effective Date,
and any special information or remarks, (II)
electronic subfiles containing I.R.A. information and
data and (III) information about Automated Clearing
House ("ACH") transactions relating to each deposit
account, including the amount and date of recurring
payments and financial transactions; and
(C) If requested by Purchaser, a master deposit
account file on microfiche including all transactions
occurring after December 31, 1996 and prior to the
Effective Date with respect to the deposit accounts,
and specifically setting forth the amount of interest
paid or credited during such period;
(iv) assign, transfer and deliver to Purchaser all
collateral security of any nature whatsoever as
collateral for any Loans acquired by Purchaser
pursuant to Section 2.6, including without
limitation: (A) duly executed assignments of all
mortgages in recordable form; (B) UCC-3 financing
statement forms assigning any security interests,
properly completed and executed; and
-8-
<PAGE> 14
(C) any other document necessary to assign any lien
on, or a security interest in, any motor vehicle or
other asset collateralizing any Loan;
(v) assign, transfer and deliver to Purchaser completed
loan files and records (in whatever form or medium is
maintained by Seller) pertaining to the Loans
acquired by Purchaser pursuant to Section 2.6;
(vi) assign, transfer and deliver to Purchaser complete
and accurate records pertaining to the safe deposit
operations at the Branches, (in whatever form or
medium is maintained by Seller) including all
relevant safe deposit contracts; and
(vii) transfer and deliver to Purchaser all securities and
papers held by the Seller in safekeeping for its
customers at the Branches, together with complete and
accurate records relating thereto (in whatever form
or medium is maintained by Seller).
(b) Prior to the Effective Date, Seller agrees to secure all necessary
consents for the assignment of the Leases and Contracts relating to the
operation of the Branches and credit insurance policies with respect to the
Loans.
(c) Effective as of the close of business on the day prior to the
Effective Date, Seller agrees to process for each deposit account, the account
holders of which receive a periodic statement of account activity, a statement
setting forth all activity occurring since the last statement was issued.
(d) If requested to do so by Purchaser, Seller agrees to provide to
holders of deposit accounts Forms 1099 with respect to interest paid or credited
prior to the Effective Date, and any other tax forms required to be provided to
the customer or the Internal Revenue Service with respect to transactions
related to deposit accounts and occurring prior to the Effective Date.
The Purchaser agrees that it will preserve and safely keep,
for as long as may be required by applicable law, all of the files, books of
account and the records referred to
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<PAGE> 15
above for the joint benefit of itself and the Seller, and that it will permit
the Seller or its representatives, at any reasonable time and at the Seller's
expense, to inspect, and make extracts from or copies of, any such files, books
of account, or records as the Seller shall reasonably deem necessary for the
sole purpose of enforcing this Agreement; provided, however, nothing herein
shall require the Purchaser to breach any obligation of confidentiality to any
depositor or borrower.
From and after the Effective Date the Seller agrees that it will
preserve and safely keep, for as long as may be required by applicable law, all
of the historical books and records of account pertaining to the Deposit
Liabilities assumed by the Purchaser for the joint benefit of itself and the
Purchaser, and that it will permit the Purchaser or its representatives, at any
reasonable time and at the Purchaser's expense, to inspect, and make extracts
from or copies of, any such books and records as the Purchaser shall reasonably
deem necessary; provided, however, nothing herein shall require the Seller to
breach any obligation of confidentiality to any depositor or borrower.
2.8 ADDITIONAL OBLIGATIONS OF THE PURCHASER.
----------------------------------------
(a) To evidence the assumption by the Purchaser of the Deposit
Liabilities and obligations of the Seller assumed pursuant to this Agreement,
the Purchaser shall execute, acknowledge and deliver to the Seller, on the
Effective Date, an instrument of assumption in the form attached hereto as
Exhibit D.
(b) Purchaser agrees to assume and discharge the duties and obligations
of the Seller, from and after the Effective Date, with respect to the safe
deposit box business at the Branches, and to maintain all necessary facilities
at a location or locations designated by Purchaser for the use of safe deposit
boxes by the renters of safe deposit boxes at the Branches and during the period
for which such persons had paid rent therefor in advance to the Seller, subject
to the provisions of the rental agreements between it and the respective renters
of such boxes.
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<PAGE> 16
2.9 CERTAIN TRANSITIONAL MATTERS.
-----------------------------
Following the Effective Date:
(a) The Purchaser agrees to pay in accordance with law and customary
banking practices all properly drawn and presented checks, drafts and withdrawal
orders presented to the Purchaser by mail, over the counter or through the check
clearing system of the banking industry, by depositors of the Deposit
Liabilities (but in no event in an amount in excess of the collected balance of
the respective deposit account), whether drawn on the checks, drafts or
withdrawal order forms provided by the Seller or by the Purchaser, and in all
other respects to discharge, in the usual course of the banking business, the
duties and obligations of the Seller with respect to the balances due and owing
to the depositors whose accounts are assumed by the Purchaser. The Purchaser's
obligation under this paragraph to honor checks, drafts and withdrawal orders on
forms provided by the Seller and carrying its imprint (including name and
transit routing number) shall not apply to any such check, draft or withdrawal
order presented to Purchaser more than sixty (60) days following the Effective
Date.
(b) If any depositor draws a check, draft or withdrawal order against
the Deposit Liabilities which is presented or charged to the Seller within sixty
(60) days after the Effective Date, the Seller shall pay the same and the
Purchaser agrees to reimburse the Seller for any such payments or charges,
provided there are sufficient funds in the depositor's account. The Seller shall
not be deemed to have made any representation or warranty to the Purchaser with
respect to any such checks, drafts or withdrawal orders of depositors whose
accounts have been assumed by the Purchaser, and any such representations or
warranties implied by law are hereby disclaimed. The Purchaser will settle with
the Seller, on a weekly basis, any such checks, drafts or orders of withdrawal
presented by Seller to Purchaser for reimbursement. In order to reduce the
continuing charges to the Seller through the check clearing system of the
banking industry which will result from check forms of the Seller
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<PAGE> 17
being used after the Effective Date by the depositors whose accounts are
assumed, the Purchaser agrees, at its cost and expense, and without charge to
such depositors, to notify such depositors, within thirty (30) days following
the Effective Date, of the Purchaser's assumption of Deposit Liabilities and to
furnish each depositor of an assumed checking account with checks on the forms
of the Purchaser with instructions to utilize the Purchaser's checks and to
destroy unused checks of the Seller. In addition, subsequent to regulatory
approval of the transactions contemplated hereunder, the Seller will notify its
affected depositors by letter, in a form mutually acceptable to the Seller and
the Purchaser, of the pending assignment to the Purchaser of the Deposit
Liabilities and business operations at the Branches which notice shall be at the
Seller's cost and expense.
(c) The Purchaser will pay to the Seller, on a weekly basis, an amount
equivalent to the amount of any checks, drafts or withdrawal orders credited to
an account which has been assumed by the Purchaser which are returned to the
Seller after the Effective Date and require that such account be debited, to the
extent that sufficient funds exist in such account.
(d) Manifest errors in calculation or data entry relating to any
amounts supplied hereunder may be corrected by notice to the other party within
forty-five (45) days after the Effective Date. Each party hereunder agrees to
take any action, including the payment of money or the amendment of any records,
necessary to reflect such correction within five (5) business days after
receiving such notice from the other party.
(e) Seller shall forward to Purchaser:
(i) by facsimile on the day received by Seller, (A) any
ACH debit or credit to a deposit account, (B) any
returned check related to a deposit account, in each
case with any information related thereto, (C) checks
drawn against deposit accounts and paid by Seller in
accordance with (b) above and (D) any payments which
are accepted by the Seller on or after the Effective
Date that relate in any way to the Loans, with
sufficient information so that any such payments may
be properly applied;
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<PAGE> 18
(ii) by overnight courier, within two (2) business days of
receipt by Seller the original physical item referred
to in (i) above;
(iii) by facsimile, on the day received by Seller, followed
by the original, by overnight courier, within two (2)
business days after received by Seller, any notices
or other correspondence received on or after the
Effective Date that relate to (A) transactions
occurring on or after the Effective Date or (B)
general customer issues, in each case with respect to
the Loans or deposit accounts.
(f) Purchaser shall pay to Seller no later than the start of the second
business day after the original item is received by Purchaser, (i) an amount
equal to 100% of any uncollected item deposited into a deposit account prior to
the Effective Date which is returned on or after the Effective Date for any
reason as not collected, (ii) the amount of any checks drawn against a deposit
account paid by Seller in accordance with (b) above and (iii) ACH debits to
deposit accounts paid by Seller in accordance with (b) above, net of Loan
payments received by Seller on or after the Effective Date and ACH credits
relating to a deposit account received by Seller on or after the Effective Date.
(g) From and after the Effective Date Seller agrees to promptly respond
to all inquiries, notices or correspondence by deposit account or Loan customers
regarding any account transaction occurring prior to the Effective Date,
affording to such persons the same level of customer service as Seller provides
to its own customers. If any such inquiry, notice or correspondence is received
by Purchaser, Purchaser agrees to forward such inquiry, notice or correspondence
to Seller, by facsimile on the day received by Purchaser, and forward the
original inquiry to Seller, by overnight courier, within two (2) business days
following receipt thereof by Purchaser.
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<PAGE> 19
2.10 INDEMNIFICATION.
----------------
(a) The Seller shall indemnify the Purchaser and hold it harmless from
and against any losses (including loss of revenues or profits), liabilities,
damages or expenses (collectively, "Losses") that the Purchaser may sustain or
become subject to as a result of (i) any breach of any representation, warranty
or agreement of Seller contained in this Agreement, (ii) any claim, legal action
or administrative proceeding based on any conduct of Seller or resulting from or
arising in connection with the operation of the Branches or the administration
of the Loans prior to the Effective Date or ownership by Seller of the Branches
or any of the Assets transferred hereunder, or (iii) the assertion against
Purchaser of any liability or obligation with respect to Taxes (as defined
below) attributable to the Assets or operations of the Branches prior to the
Effective Date or that Seller is obligated to pay hereunder; provided, however,
Seller shall have no obligation to indemnify Purchaser against any Losses for
which a claim for indemnification has not been made by Purchaser prior to the
expiration of the statute of limitations applicable to that class or type of
claim. "Taxes" shall include, but not be limited to, any federal, state, local,
foreign and other income, franchises, capital stock, real property, personal
property, sales, use, excise, transfer, business privilege, loans and other
taxes or governmental fees or charges directly involving or benefitting the
Branches, including any interest, penalties or additions to tax on the
foregoing.
(b) The Purchaser shall indemnify the Seller and hold it harmless from
and against any losses that the Seller may sustain or become subject to as a
result of (i) any breach of any representation, warranty or agreement of
Purchaser contained in this Agreement, or (ii) the assertion against Seller of
any liability or obligation with respect to Taxes (as defined below)
attributable to the Assets or operations of the Branches after the Effective
Date or that Purchaser is obligated to pay hereunder; provided, however,
Purchaser shall have no obligation to indemnify Seller against any losses for
which a claim for indemnification has not been made by Seller prior to the
expiration of the statute of limitations applicable to that
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<PAGE> 20
class or type of claim. "Taxes" shall include, but not be limited to, any
federal, state, local, foreign and other income, franchise, capital stock, real
property, personal property, sales, use, excise, transfer, business privilege,
loans and other taxes or governmental fees or charges directly involving or
benefitting the Branches, including any interest, penalties or additions to tax
on the foregoing.
(c) The indemnified party shall, within fifteen (15) days after
receiving notice, notify the indemnifying party that any claim or liability has
been asserted, shall advise the indemnifying party of all facts relating thereto
within the knowledge of the indemnified party, and shall afford the indemnifying
party the opportunity, at the indemnifying party's sole cost and expense, to
defend against such claim or liability (in which event the indemnified party may
participate in the defense at its own sole expense). The indemnified party shall
have the right to settle or compromise any such claim or liability and to be
indemnified from and against all losses resulting therefrom, unless the
indemnifying party, within thirty (30) days after receiving notice of the claim
or liability in accordance with this Section , notifies the indemnified party
that it intends to defend against such claim or liability and undertakes such
defense. Failure to promptly give notice required by this Section shall not
relieve either party of its indemnification requirements hereunder.
2.11 PRO-RATA ADJUSTMENT OF EXPENSES.
--------------------------------
All FDIC insurance expense accrued or prepaid, relating to the Deposit
Liabilities, and similar expenses directly relating to the Assets or Liabilities
being transferred, including Real Estate Taxes and Personal Property Taxes,
shall be pro-rated on a daily basis and settled between the parties as of the
Effective Date.
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<PAGE> 21
2.12 SETTLEMENT PROCEDURE.
---------------------
Notwithstanding the transactions herein described occurring on the
Effective Date, the settlement for the purchase and assumption and the transfer
of the Branches shall occur in two phases as follows:
(a) On or prior to the Effective Date, the parties will conduct a
preliminary settlement using settlement sheet data accumulated through the close
of business at the Branches as of the third business day prior to the Effective
Date using settlement sheet data as set forth on Exhibit E. The Cash Payment
required by Section 2.3 will be based upon such preliminary settlement sheet
data.
(b) Within thirty (30) business days following the Effective Date, once
all of the Branches data up to and including the close of business on the day
immediately preceding the Effective Date is available, the parties will conduct
an adjusting settlement using updated settlement sheet data as set forth on
Exhibit E and the Cash Payment formula set forth in Section 2.3. An appropriate
adjusting settlement payment from the Seller to the Purchaser or from the
Purchaser to the Seller, as the case may be, will be made together with accrued
interest thereon calculated at the Federal Funds rate.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF THE SELLER
--------------------------------------------
The Seller hereby represents and warrants to the Purchaser as follows:
3.1 CORPORATE ORGANIZATION.
-----------------------
The Seller is a savings bank validly existing and in good standing
under the laws of the State of Ohio. The Seller has the corporate power and
authority to own the Assets being transferred, to carry on its business as
presently conducted and to effect the transactions
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<PAGE> 22
contemplated hereunder. The Seller's Deposit Liabilities are insured by the FDIC
to the maximum extent permitted by law.
3.2 NO VIOLATION.
-------------
The execution and delivery of this Agreement by Seller does not, and
the consummation of the transaction contemplated hereby will not constitute (i)
a breach or violation of, or a default under, any law, rule, regulation,
judgment decree, order, governmental permit or license, agreement, indenture or
instrument of the Seller or to which Seller is subject, which breach, violation
or default would have a material adverse effect on the financial condition,
business or result of operation of Seller and its subsidiaries taken a whole or
(ii) a breach or violation of, or a default under, Seller's articles of
incorporation or by-laws; and the consummation of the transactions contemplated
hereby will not require any consent or approval under such law, rule,
regulation, judgment, decree, order, governmental permit or license or the
consent or approval of any other party to any such agreement, indenture or
instrument, other than the approval of applicable regulatory authorities, which
shall have been obtained prior to the Effective Date.
3.3 CORPORATE AUTHORITY AND VALIDITY.
---------------------------------
The execution and delivery of this Agreement and consummation of the
transactions contemplated hereunder have been duly authorized by all necessary
corporate action and no further corporate authorization on the part of the
Seller is necessary to consummate such transactions. This Agreement is a valid
and binding agreement of the Seller enforceable against it in accordance with
its terms, subject as to enforcement to conservatorship or receivership,
insolvency, moratorium and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
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<PAGE> 23
3.4 DEPOSIT LIABILITY RECORDS.
--------------------------
The Seller has provided the Purchaser with access to all current
records of account pertaining to Deposit Liabilities of the Branches to be
assumed by the Purchaser pursuant to this Agreement in such form or medium as is
maintained by the Seller, which form or medium is recognized by the regulatory
authorities as being appropriate. All such records of account are complete and
accurate. The records assigned, transferred and delivered to the Purchaser
pursuant to Section 2.7 hereof will, at the Effective Date, be in a form or
medium which has been recognized by the regulatory authorities as being
appropriate, will be accurate and will constitute all such records as are
required by such regulatory authorities to be necessary to lawfully conduct the
business of taking deposits at the Branches except for those historical books
and records of account retained by the Seller for the joint benefit of the
Seller and the Purchaser pursuant to Section 2.7 hereof.
3.5 LOAN RECORDS.
-------------
The Seller has provided the Purchaser with access to all current
records of account pertaining to the Loans which are to be purchased by the
Purchaser pursuant to this Agreement in such form or medium as is maintained by
the Seller, which form or medium is recognized by the regulatory authorities as
being appropriate. All such records are complete and accurate. The records
assigned, transferred and delivered to the Purchaser pursuant to Section 2.7
hereof will, at the Effective Date, be accurate and will constitute all such
records necessary to lawfully conduct the business of holding the Loans. Seller
represents and warrants that documentation relating to the creation of all Loans
is legally enforceable by Purchaser, and that all required signatures,
authorizing resolutions, security instruments and related items and documents
are genuine and complete.
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<PAGE> 24
3.6 LEASES; TITLE TO PROPERTY; ENCUMBRANCES.
----------------------------------------
(a) Except as otherwise noted in this Agreement or the attachments
hereto, the Seller is the owner of and has good and marketable title to the
Assets and Liabilities to be transferred to Purchaser pursuant to this
Agreement. In no case are such Assets and Liabilities subject to any mortgage,
pledge, lien, adverse interest, conditional sales agreement, lease, encumbrance
or charge of any nature whatsoever, except as noted herein or in the Exhibits
hereto.
(b) The Seller has delivered to Purchaser complete and accurate copies
of the Leases, if any, of real property or personal property used at the
Branches. All such leases are valid and enforceable against the lessor, and
there does not exist with respect to the Seller's obligations thereunder or with
respect to the obligation of the lessor thereunder, any material default or any
event which, after notice or lapse of time or both, would constitute a material
default, and, to the knowledge of the Seller without having made any specific
investigation for this representation there is no condemnation proceeding
pending or threatened which would preclude or impair the use of the Branches
currently being used in the conduct of the business of the Seller.
(c) The leasehold improvements, banking equipment, furniture and
fixtures being offered for sale are substantially all of the material assets
owned or leased by the Seller and used by it to conduct the business of the
Branches, as of the date hereof. The banking equipment which is part of the
Assets being sold is, to the Seller's best knowledge and belief, in good
operating condition and repair, giving consideration to its age and use and
subject to ordinary wear and tear.
(d) No notice of any violation of zoning laws, building or fire codes,
or other statutes, ordinances or regulations relating to the Branches has been
received by the Seller.
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<PAGE> 25
(e) Seller has no actual knowledge of any pending notice of any
violation of zoning laws, building or fire codes, or other statutes, ordinances,
or regulations relating to the Branches, except as disclosed by letter to
Purchaser prior to the execution of this Agreement.
3.7 LITIGATION.
-----------
There is no investigation, action, arbitration, suit, proceeding or
claim pending or threatened against Seller with respect to, or materially,
adversely affecting, the Branches or the Assets being purchased hereunder or the
Liabilities being assumed hereunder before or by any federal, state, municipal
or other governmental department, commission, board, agency, or instrumentality
domestic or foreign, nor does there exist any basis or grounds for any such
investigation, action, arbitration, suit, proceeding or claim.
3.8 ASSIGNMENT OF CREDIT INSURANCE.
-------------------------------
Each credit insurance policy transferred by Seller to Purchaser
hereunder is assignable by Seller without the consent of any Loan obligor to
which such insurance relates.
3.9 CERTIFICATES OF DEPOSIT.
------------------------
The terms of each certificate of deposit transferred to Purchaser by
Seller under this Agreement contain customary early withdrawal penalties.
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<PAGE> 26
3.10 QUALITY OF REPRESENTATIONS AND WARRANTIES.
------------------------------------------
No representation or warranty made by Seller in this Agreement contains
any untrue statement of a material fact or, to the best of Seller's knowledge,
omits to state a material fact necessary to make the statements not made
misleading.
3.11 LIMITATION OF WARRANTIES.
-------------------------
Except as may be expressly represented or warranted in this Agreement
by the Seller, the Seller makes no representations or warranties whatsoever with
regard to any assets being transferred, assigned or delivered to the Purchaser
or any liability or obligation being assumed by the Purchaser.
3.12 CONSULTANT'S FEES.
------------------
The Seller represents and warrants to Purchaser that it has dealt with
no consultant, broker, or finder in connection with any of the transactions
contemplated by this Agreement, and that no action has been taken that would
give rise to any valid claim for brokerage commission, finder's fee or other
like commission. Seller and Purchaser each undertake to indemnify and hold
harmless the other and its affiliates against any loss, liability, damage, cost,
claim or expense incurred by reason of any brokerage commission or finder's fee
alleged to be payable because of any act, omission or statement of the
indemnifying party.
3.13 ENVIRONMENTAL.
--------------
The Seller is not aware of any fact evidencing that the Branches are
contaminated with any Hazardous Substance (as defined herein); Seller has not
caused and will not cause, and to the best of Seller's knowledge, there never
has occurred, the release of any Hazardous
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<PAGE> 27
Substance on the Branches. To the best of the Seller's knowledge there is no (i)
friable asbestos on the Branches or (ii) underground storage tanks on the
Premises. Additionally, to the best of the Seller's knowledge, Purchaser will
not incur or be subjected to any "superfund" liability for the clean up, removal
or remediation of any Hazardous Substance from the Premises or any liability,
cost or expense for the removal of any friable asbestos or underground storage
tank from the Premises as a result of the purchase of the Branches. The terms
"Hazardous Substance," "release" and "removal" as used herein shall have the
same meaning and definition as set forth in paragraphs (14), (22) and (23),
respectively, of Title 42 U.S.C. Section 9601 provided, however, that the term
"Hazardous Substance" as used herein also shall include "hazardous waste" as
defined in paragraph (5) of 42 U.S.C. Section 6903, "petroleum" as defined in
paragraph 8 of 42 U.S.C. Section 6991 and petroleum products, including crude
oil and any fraction thereof. The term "superfund" as used herein means the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, (42 U.S.C. Section 9601 et. seq.), and all rules and regulations
promulgated, administered and enforced by any governmental agency or authority
pursuant thereto. The term "underground storage tank" as used herein shall have
the same meaning and definition as set forth in paragraph (1) of 42 U.S.C.
Section 6991. In the event of the breach of this warranty, Seller shall have the
right, at Seller's sole option, to either conduct remedial action to cure the
breach, at Seller's sole expense, or to repurchase the affected branch office,
at the price paid by Purchaser, plus any improvements thereon, made by
Purchaser.
3.14 REPRESENTATIONS AND WARRANTIES AS TO EACH LOAN.
-----------------------------------------------
(a) COMPLIANCE WITH LAW: Except for those requirements where failure to
comply would not adversely affect enforcement of any such Loan in accordance
with the terms thereof or enforcement of any security interest securing such
Loan, each Loan, at the time it was originated and made, and the servicing of
each Loan complies in all material respects with all requirements of applicable
Federal and state laws and regulations thereunder,
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<PAGE> 28
including, without limitation, consumer credit, equal credit opportunity,
disclosure laws (including the Truth in Lending Act and the regulations
promulgated thereunder) and usury laws.
(b) BINDING OBLIGATION: Each Loan constitutes the genuine, legal,
valid, and binding payment obligation in writing of the obliger, enforceable by
the holder thereof in accordance with its terms, subject, as to enforcement, to
applicable bankruptcy, insolvency reorganization, liquidation and other similar
laws and equitable principles relating to or affecting the enforcement of
creditor's rights generally, but in any event, with respect to any
collateralized loan, contains rights and remedies that shall permit the ultimate
realization against the collateral of the benefit of the security.
(c) LOAN FILES: The note or equivalent document executed in connection
with each Loan is in the related loan file of Seller to be delivered to
Purchaser pursuant to Section 2.7(a). The original security agreement, the
original recorded mortgage, original recorded chattel or ship mortgage, the
receipt copies of all filed financing statements, the original motor vehicle
title or any equivalent document related to each Loan is in the related loan
file of Seller and establishes in Seller a valid, subsisting and enforceable
lien and security interest on the property described therein in the position of
priority as set forth in the loan documents. Except as disclosed in writing by
Seller, or as approved by Purchaser in writing, since December 31, 1996 no Loan
has been satisfied, subordinated, or rescinded, no guarantor or surety of any
Loan has been released (in whole or in part), and no collateral has been
released from the lien granted by the obligor, guarantor or surety of any Loan,
in whole or in part.
(d) NO AMENDMENT OR WAIVER: No Loan, or any provision thereof, has been
amended or waived by Seller, except pursuant to an instrument, writing or entry
included in the file relating to that loan or otherwise appropriately reflected
in the records of Seller and no such amendment or waiver causes any Loan not to
conform to the other warranties
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<PAGE> 29
contained in this Section. Except as disclosed in writing by seller, or as
approved by Purchaser in writing, no Loan, or any provision thereof, has been
amended or waived since December 31, 1996.
(e) NO DEFENSES: No fact exists which would give rise to any valid and
enforceable right of rescission, setoff, counterclaim or defense and no such
right of rescission, setoff, counterclaim or defense has been asserted with
respect to any Loan.
(f) NO LIENS: There are no liens or claims for work, labor or
materials, or unpaid state or federal taxes or judicial liens relating to the
collateral for any Loan and which are liens prior to, or equal or coordinate
with, the lien securing such Loan.
(g) COMPLIANCE WITH LOAN DOCUMENTS: Seller is not in material breach of
any representation, warranty or covenant contained in any document relating to
any Loan.
(h) NO DEFAULT: No event of default, breach, violation, or event
permitting acceleration under the terms of any Loan has occurred or any
continuing condition that with notice or lapse of time would constitute a
default, breach, violation, or event permitting acceleration under the terms of
any Loan has arisen, whether or not waived, that materially and adversely
affects the interest of Seller in any Loan.
(i) VALID TRANSFER: No Loan has been sold, assigned or pledged by
Seller to any other person or entity, and on the Effective Date Seller will have
good and marketable title to each Loan, free and clear of all liens or other
encumbrances, will be the sole owner thereof and will have the full right and
power to transfer and assign the Loans to Purchaser without any consent by any
obligor and, immediately upon the transfer thereof in accordance with this
Agreement, Purchaser will have good and marketable title to the Loans, free and
clear of all liens or other encumbrances.
(j) LAWFUL ASSIGNMENT: Each Loan was originated in a jurisdiction under
the laws of which the sale, transfer, and assignment of such Loan under this
Agreement will not be unlawful, void or voidable.
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<PAGE> 30
(k) ALL FILINGS MADE: All filings, including UCC filings and mortgage
recordations, necessary in any jurisdiction to create a perfected security
interest or mortgage lien against the collateral applicable to each
collateralized Loan have been made.
(l) CAPACITY OF PARTIES: All parties to each Loan had capacity to
execute the loan documents relating thereto.
(m) CREDIT INSURANCE: Each policy of credit insurance is in full force
and effect and each such credit insurance policy is assignable by Seller without
the consent of the Loan obligor to which such policy relates.
(n) TAXES, ASSESSMENTS, INSURANCE PREMIUMS AND OTHER CHARGES: All
taxes, governmental assessments, insurance premiums, water charges, sewer
charges, municipal charges, ground rents, or other outstanding charges affecting
property securing any Loan which previously became due and owing in respect of
such property have been paid, or an escrow of funds in an amount sufficient to
cover such payments has been established.
(o) NO CONDEMNATION, DAMAGE OR WASTE: There is no proceeding pending or
threatened for the total or partial condemnation of the property securing any
Loan and such property is in good repair and free and clear of any damage or
waste that would adversely affect the value of such property as security for the
Loan or the use for which the premises were intended and, without limitation of
the foregoing, no such property is adversely affected by any environmental
problem of the kind contemplated under Section 3.13 hereof.
(p) NO ADVERSE CIRCUMSTANCES OR CONDITIONS: Seller has no knowledge of
any circumstances or condition with respect to any Loan, the obligor or the
obligor's credit standing that can reasonably be expected to cause private
institutional investors to regard the Loan as an unacceptable investment, cause
the Loan to become delinquent, or adversely affect the value or marketability of
the Loan.
(q) HAZARD INSURANCE: If the Loan is a mortgage loan, all buildings
upon the related mortgaged property are insured by a generally acceptable
insurer against loss by fire, hazards or extended coverage and such other
hazards as are customary in the area where such mortgaged property is located.
All such insurance policies contain a standard mortgagee
-25-
<PAGE> 31
clause naming the originator of the mortgage loan, its successors and assigns,
as mortgagee and all premiums thereon have been paid. The related mortgage
obligates the mortgagor thereunder to maintain all such insurance at mortgagor's
cost and expense and to seek reimbursement therefor from the mortgagor. The
hazard insurance policy is the valid and binding obligation of the insurer, is
in full force and effect, and will be in full force and effect and inure to the
benefit of Purchaser or its assignee upon the consummation of the transactions
contemplated by this Agreement. Seller has not engaged in, and has no knowledge
of the mortgagor's having engaged in, any act or omission which would impair the
coverage of any such policy, the benefits of the endorsement provided for
herein, or the validity and binding effect of either.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
The Purchaser hereby represents and warrants to the Seller as follows:
4.1 CORPORATE ORGANIZATION.
-----------------------
The Purchaser is a commercial bank duly organized, validly existing and
in good standing under the laws of the State of Ohio. The Purchaser has the
corporate power and authority to assume the liabilities being transferred, and
to effect the transactions contemplated hereunder.
4.2 NO VIOLATION.
-------------
The execution and delivery of this Agreement by Purchaser does not, and
the consummation of the transactions contemplated hereby will not constitute (i)
a breach or violation of, or a default under, any law, rule, regulation,
judgment, decree, order,
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<PAGE> 32
governmental permit or license, agreement, indenture or instrument of Purchaser
or to which Purchaser is subject, which breach, violation or default would have
a material adverse effect on the financial condition, business or results of
operation of Purchaser and its subsidiaries taken as a whole or (ii) a breach or
violation of, or a default under, Purchaser's articles of incorporation or
by-laws; and the consummation of the transactions contemplated hereby will not
require any consent or approval under any such law, rule, regulation, judgment,
decree, order, governmental permit or license or the consent or approval of any
other party to any such agreement, indenture or instrument, other than the
approval of applicable regulatory authorities, which shall have been obtained
prior to the Effective Date.
4.3 CORPORATE AUTHORITY AND VALIDITY.
---------------------------------
The execution and delivery of this Agreement, and consummation of the
transactions contemplated hereunder, have been duly authorized by all necessary
corporate action and no further corporate authorization on the part of the
Purchaser is necessary to consummate the transactions contemplated hereunder.
The Agreement is a valid and binding agreement of the Purchaser enforceable
against the Purchaser in accordance with its terms, subject as to enforcement to
conservatorship or receivership, insolvency, moratorium and other laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
4.4 CONSULTANT'S FEES.
------------------
The Purchaser represents and warrants to Seller that it has dealt with
no consultant, broker, or finder in connection with any of the transactions
contemplated by this Agreement, and that no action has been taken that would
give rise to any valid claim for brokerage commission, finder's fee or other
like commission. Purchaser and Seller each undertake to
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<PAGE> 33
indemnify and hold harmless the other and its affiliates against any loss,
liability, damage, cost, claim or expense incurred by reason of any brokerage
commission or finder's fee alleged to be payable because of any act, omission or
statement of the indemnifying party.
ARTICLE V
---------
CONDUCT OF BUSINESS PENDING THE EFFECTIVE DATE
----------------------------------------------
5.1 ACTIVITY IN THE ORDINARY COURSE.
--------------------------------
(a) The Seller shall conduct the business of the Branches in
substantially the same manner as heretofore conducted, and the Seller shall not,
with regard to the Branches, engage in any activities or transactions outside
its ordinary course of business as conducted as of the date hereof; provided,
however, that the Seller need not, in its sole discretion, advertise or promote
new or substantially new customer services in the principal market area of the
Branches; and
(b) The Seller shall use its best efforts to preserve its business
operation as presently conducted at the Branches, to preserve for the Purchaser
the goodwill of the Seller's customers and others doing business with the
Branches, and shall cooperate with and assist the Purchaser in assuring the
orderly transition of such business from the Seller to the Purchaser. Nothing in
this paragraph (b) shall be construed as requiring the Seller to engage in any
activities or efforts outside the ordinary course of business as presently
conducted.
5.2 INSURANCE AND CASUALTY.
-----------------------
Following the execution of this Agreement and prior to the Effective
Date, Seller shall maintain its insurance, including but not limited to fidelity
bond coverage, covering the operations and properties associated with the
Branches. Seller shall cancel its insurance coverage of the Branches on or after
the Effective Date.
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<PAGE> 34
In the event of damage to the personal property at the Branches or in
the event of damage to the Branches, Seller shall proceed to use the insurance
proceeds to repair such damage. If such damage is so substantial as to require
major repairs, Seller shall advise Purchaser as to the timing and manner of such
repairs and shall consult with Purchaser in connection with the contracts
relating thereto. If such repairs are not commenced or completed prior to the
Effective Date, Purchaser shall be entitled to the insurance proceeds plus the
deductible, limited to actual damages, except for proceeds already disbursed or
accrued and payable by the insurer or Seller for repair work, and Purchaser
shall assume all of sellers obligations under the contracts executed by Seller,
if any, in connection with the repairs.
If the reconstruction of the Branches is not completed by the Effective
Date, Seller shall assign to Purchaser its rights to the lease of a trailer or
other equivalent temporary facility.
ARTICLE VI
----------
OBLIGATION OF PARTIES PRIOR TO AND AFTER THE EFFECTIVE DATE
-----------------------------------------------------------
6.1 FULL ACCESS.
------------
The Seller shall afford to the officers and authorized representatives
of the Purchaser, upon prior notice, access to the properties, books and records
pertaining to the Branches, at reasonable times during normal business hours
without interfering with the normal business and operations of the Branches, in
order that the Purchaser may have full opportunity to make reasonable
investigations of the affairs of the Seller relating to the Branches, and to
conduct reasonable due diligence relating to the Loans, and the officers of the
Seller shall furnish the Purchaser with such additional financial and operating
data and other information as to its business operations at the Branches as may
be reasonably necessary for the orderly transfer of the business operations of
the Branches, including, without limitation, information
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<PAGE> 35
required for inclusion in all governmental applications necessary to effect the
transactions contemplated hereunder. The Seller agrees to provide to Purchaser
monthly reports, as generated in the ordinary course of business, of current
deposit balances and rates, maintained at the Branches. Nothing in this Section
shall be deemed to require the Seller to breach any obligation of
confidentiality or to reveal any proprietary information, trade secrets or
marketing or strategic plans. The Seller shall, in addition, afford the
Purchaser the opportunity to inspect the Branches being purchased, during normal
business hours or at such other time as shall be mutually agreed upon by the
Seller and the Purchaser. The Purchaser shall further be afforded the
opportunity to conduct environmental assessments or audits of the Premises, at
such times and in such manner as shall be mutually agreed upon by the Seller and
the Purchaser. In addition thereto, the Purchaser shall be provided opportunity
to inspect and copy personnel files of the employees of the Branches.
6.2 REQUIREMENTS TO OBTAIN APPROVAL OF REGULATORY AUTHORITIES.
----------------------------------------------------------
(a) PURCHASER'S REQUIREMENTS. In order to consummate the transactions
contemplated by this Agreement, the Purchaser will require the approval of the
Superintendent and of the FDIC. No later than thirty (30) days after the
execution of this Agreement, the Purchaser shall prepare and file an application
with the Superintendent and with the FDIC for approval to consummate the
transactions contemplated hereunder and thereafter shall (i) comply with the
normal and usual requirements imposed by the Superintendent and with the FDIC
applicable to effectuate the transactions contemplated hereunder and (ii) use
its good faith efforts on a priority basis to obtain any required permission of
the Superintendent and the FDIC to consummate such transactions. The Purchaser
agrees to provide the Seller promptly with copies of any application as filed
(except for any confidential portions thereof) and all notices, orders,
opinions, correspondence and other documents with respect thereto.
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<PAGE> 36
6.3 FURTHER ASSURANCES
------------------
The parties hereto agree to execute and deliver such instruments and to
take such other actions as the other party may reasonably require in order to
carry out the intent of this Agreement. The Seller agrees to duly execute and
deliver such bills of sale, acknowledgments and other instruments of conveyance
and transfer as, in the reasonable judgment of the Purchaser, shall be necessary
and appropriate to vest in the Purchaser the legal and equitable title to the
assets of the Seller being sold hereunder, free and clear of all liens and
encumbrances except as otherwise noted in the Exhibits hereto. Purchaser and
Seller shall share equally Seller's payment of all state or local sales, use or
transfer taxes payable in connection with the transactions contemplated
hereunder, other than any tax or portion thereof calculated directly or
indirectly with respect to the income of Seller or the real estate (Belmont
County) conveyance fee.
6.4 EMPLOYEES.
----------
(a) Purchaser will retain all employees of Seller in the Branches as
identified by Exhibit G for a period of at least six months beginning at 5:00
p.m. on the Effective Date unless discharged for cause (as determined in sole
discretion of Purchaser consistent with Purchaser established personnel
practices, procedures and policies). Purchaser agrees to compensate such
employees at a minimum, at the levels as listed on Exhibit G. Purchaser agrees
to provide comparable benefit levels to Seller's employees as Purchaser provides
to its employees, subject nevertheless to the terms of its existing benefit
plans. Such benefits shall be effective with their date of employment with
Purchaser, and shall include credit for past employment with Seller with respect
to eligibility and vesting, not for benefit accrual and only to the extent
provided for by Purchaser pursuant to the Purchaser's employee benefit plans
(including defined benefit plans, profit sharing plan and vacation plan).
Purchaser shall not be liable for payments made or required to be made to the
employees'
-31-
<PAGE> 37
benefit plan(s) prior to the Effective Date, and all funded pension benefits
relating to the employees will be distributed to the employees or to the
Purchaser. Nothing contained in this Section shall prevent Purchaser from
discharging such employees for cause during the six month period described
herein.
(b) Nothing in this Agreement shall obligate or require Purchaser to
hire or employ any employee of the Branches not listed on Exhibit "G" after the
initial six (6) month period following the Effective Date. For two (2) years
after the Effective Date, the acquired Branches employees who become employees
of Purchaser by virtue of the consummation of the Agreement on the Effective
Date and those former employees of the acquired branches who are terminated,
without cause, after the Effective Date, shall be entitled to bid on any job
positions posted at Seller and Purchaser. During the two (2) year period after
the Effective Date, Purchaser shall notify Seller of any employees of the
Branches who are terminated. However, nothing in this Agreement shall obligate
Seller to hire such persons bidding on such positions.
6.5 NON-SOLICITATION CLAUSE.
------------------------
The Seller will not, for five (5) years following the Effective Date,
intentionally solicit customers whose deposit accounts are included in the
deposits shown on Exhibit B (as it may be amended to and including the Effective
Date to include additional customers of the Branches) or Loan customers except
as may occur in connection with advertising or solicitations directed to the
public generally, using print, television or radio, and not targeted to
depositors at the Branches. The Purchaser recognizes that the Seller cannot
control telemarketing and mass mailings nor distribution of "statement stuffer"
materials to customers who hold accounts or maintain banking relationships at
other branches of the Seller notwithstanding the fact that some of such
customers may also be depositors at the \
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<PAGE> 38
Branches, and agrees to permit the Seller to engage in such activities. Where
operationally feasible, Seller will use reasonable efforts to prevent any mass
mailings from being sent to customers whose Deposit Liabilities or Loans are
being transferred to Purchaser.
6.6 RESTRICTION ON NEW BRANCHES.
----------------------------
Seller shall not open a new (or relocate or expand any existing)
banking branches or other physical facility, including ATMs, which offers
products or services that compete with the deposit or loan business of the
Branches within Belmont County for the period beginning upon the execution of
this Agreement and ending five (5) years after the Effective Date. The
restriction contained in this Section shall not preclude Seller from acquiring
or merging with or into an institution which has branches within the area
referred to herein.
ARTICLE VII
-----------
CONDITIONS TO PURCHASER'S OBLIGATIONS
-------------------------------------
The obligation of the Purchaser to consummate the transactions provided
for in this Agreement is conditioned upon fulfillment, at or before the
Effective Date, of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES TRUE.
------------------------------------
Each of the representations and warranties contained herein of the
Seller shall be true in all respects on the Effective Date as if made on and as
of such date, except for any changes permitted by the terms hereof or consented
to by the Purchaser in writing.
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<PAGE> 39
7.2 OBLIGATIONS PERFORMED.
----------------------
The Seller shall have performed and complied in all material respects
with all obligations and agreements contained herein of the Seller required to
be performed or complied with by it prior to or at the Effective Date.
7.3 NO ADVERSE LITIGATION.
----------------------
On the Effective Date, no action, suit or proceeding shall be pending
or threatened against the Seller which (a) might reasonably be expected to
materially and adversely affect the business, results of operations or financial
condition of the Branches, or (b) challenges the validity or consummation of the
transactions contemplated by this Agreement.
7.4 REGULATORY APPROVAL.
--------------------
The Purchaser shall have received from the appropriate regulatory
authorities (e.g., the Superintendent and the FDIC) approval to effect the
transactions contemplated hereunder. In relation to the Branches, the Seller
agrees that it shall, at its own expense, provide appropriate notice to
regulatory authorities, customers and such others as may be necessary to satisfy
the requirements of the Superintendent and the FDIC.
7.5 CERTIFICATE OF COMPLIANCE.
--------------------------
(a) The Seller shall have delivered to the Purchaser a certificate of a
duly authorized officer, dated the Effective Date, certifying to the best of
such officer's knowledge after reasonable investigation, the fulfillment of all
the foregoing conditions.
(b) The Seller shall have delivered to the Purchaser an opinion of
counsel dated the Effective Date, to the effect that Seller is duly organized
and existing, has the authority
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<PAGE> 40
to make the sale, has taken all corporate action necessary to authorize the sale
and that the sale will not violate its Articles of Association, By-Laws, or
other document or agreement to which it is a party or by which it is obligated.
7.6 COMFORT BY PURCHASER.
---------------------
Nothing shall have come to the attention of the Purchaser, the effect
of which reasonably leads the Purchaser to believe that title to any of the
Assets being transferred hereunder is impaired or the Deposit Liabilities to be
assumed by the Purchaser are not currently at the Branches.
7.7 PAYMENT OF BRANCH EMPLOYEE OBLIGATIONS.
---------------------------------------
As of the Effective Date, all compensation and employee benefits of the
branch employees listed on Exhibit G (including but not limited to regular
compensation and enumeration, holiday pay, sick pay, fringe benefits,
contributions due for or under any funded and/or insured employee pension and/or
welfare benefit plans, and other accrued or accruing benefits under any other
employee benefit plans, but excluding accrued vacation pay) due or payable by
Seller to or for the branch employees shall be fully paid and satisfied or
adequate provision shall have been made therefore, and all employment taxes and
similar amounts with respect to the branch employees (including but not limited
to federal, state and local income withholding taxes, social security
contributions (FICA), federal unemployment taxes (FUTA), state unemployment
contributions or taxes, workmen's compensation costs, and all other payroll or
compensation deductions required by law or authorized by any of said employees)
shall have been properly and fully deducted and withheld, and have been or will
be (in the ordinary course of business) remitted to the applicable payees or
depositories.
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<PAGE> 41
7.8 DELIVERY BY SELLER.
-------------------
Seller has complied with the provisions of Section 2.7 hereof.
7.9 MATERIAL ADVERSE CHANGE.
------------------------
No material adverse change shall have occurred, in the aggregate, with
respect to the Branches or the Assets and Liabilities to be transferred to
Purchaser pursuant to this Agreement.
7.10 SATISFACTORY ENVIRONMENTAL AUDIT.
---------------------------------
The Purchaser shall have the right, within thirty (30) days of the date
of this Agreement, and at Purchaser's sole expense, to conduct environmental
audits of the Premises being purchased. The results of environmental audits
conducted by Purchaser at such branches premises shall be communicated to Seller
within five (5) days after their receipt by Purchaser and shall satisfy the
criteria set-forth in Section 3.13; provided that, in the event that the results
of any environmental audits conducted by Purchaser at the premises do not
satisfy such criteria, then, notwithstanding anything to the contrary in this
Agreement, Purchaser shall have no obligation to purchase or lease the premises
related thereto, should Seller elect not to cure, at Seller's expense, and prior
to the Effective Date, the environmental defects.
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<PAGE> 42
ARTICLE VIII
------------
CONDITIONS TO THE SELLER'S OBLIGATIONS
--------------------------------------
The obligation of the Seller to consummate the transactions provided
for in this Agreement is conditioned upon fulfillment, at or before the
Effective Date, of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES TRUE.
------------------------------------
Each of the representations and warranties contained herein of the
Purchaser shall be true in all respects on the Effective Date as if made on and
as of such date, except for any changes permitted by the terms hereof or
consented to by the Seller in writing.
8.2 OBLIGATIONS PERFORMED.
----------------------
The Purchaser shall have performed and complied in all material
respects with all obligations and agreements contained herein of the Purchaser
required to be performed or complied with by it prior to or at the Effective
Date.
8.3 NO ADVERSE LITIGATION.
----------------------
On the Effective Date, no action, suit or proceeding shall be pending
or threatened against the Purchaser which challenges the validity or
consummation of the transactions contemplated under this Agreement.
-37-
<PAGE> 43
8.4 REGULATORY APPROVAL.
--------------------
The Purchaser shall have received from appropriate regulatory
authorities approval to effect the transactions contemplated hereunder.
8.5 CERTIFICATE OF COMPLIANCE.
--------------------------
(a) The Purchaser shall have delivered to the Seller a certificate of a
duly authorized officer, dated the Effective Date, certifying, to the best of
such officer's knowledge after reasonable investigation, the fulfillment of all
of the foregoing conditions.
(b) The Purchaser shall have delivered to the Seller an opinion of
counsel dated the Effective Date, to the effect that Purchaser is duly organized
and existing, has the authority to make the purchase, has taken all corporate
action necessary to authorize the purchase and that the purchase will not
violate its Articles of Incorporation, By-Laws, any material indenture or other
document or agreement to which it is a party or by which it is obligated.
ARTICLE IX
----------
TERMINATION
-----------
9.1 METHODS OF TERMINATION.
---------------
This Agreement may be terminated prior to the Effective Date:
(a) By the mutual consent, in writing, of Seller and Purchaser;
(b) By Purchaser, in the event of a material breach by Seller of any
representation, warranty or agreement contained herein, which cannot be cured or
is not cured by 5:00 p.m. on the fifth (5th) business day after written notice
of such breach is given to Seller;
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<PAGE> 44
(c) By Seller, in the event of a material breach by Purchaser of any
representation, warranty or agreement contained herein, which cannot be cured or
is not cured by 5:00 p.m. on the fifth (5th) business day after written notice
of such breach is given to Purchaser;
(d) By Seller or Purchaser, in the event that the Effective Date does
not occur by December 31, 1997.
(e) By Seller or Purchaser in the event the Superintendent or FDIC deny
approval of application of Purchaser for the transaction contemplated under this
Agreement.
9.2 PROCEDURE UPON TERMINATION.
---------------------------
In the event of termination pursuant to Section 9.1 hereof, written
notice thereof shall forthwith be given to the other party, and this Agreement
shall terminate immediately upon receipt of such notice unless an extension is
consented to by the party having the right to terminate. If this Agreement is
terminated as provided herein:
(a) each party will return all documents, work papers and other
materials of the other party relating to this Agreement whether obtained before
or after the execution hereof, to the party furnishing the same; and
(b) all information received by either party hereto with respect to the
business of the other party (other than information which is a matter of public
knowledge or which has heretofore been or is hereafter published in any
publication for public distribution or filed as public information with any
government authority) shall not at any time be used for any purpose by such
party or disclosed by such party to third persons.
-39-
<PAGE> 45
ARTICLE X
---------
MISCELLANEOUS PROVISIONS
------------------------
10.1 AMENDMENT AND MODIFICATION.
---------------------------
The parties hereto, by mutual consent of their duly authorized
officers, may amend, modify or supplement this Agreement in such manner as may
be agreed upon by them in writing.
10.2 WAIVER OR EXTENSION.
--------------------
Except with respect to required approvals of the applicable
governmental authorities, either party, by written instrument signed by a duly
authorized executive officer, may extend the time for the performance of any of
the obligations or other acts of the other party and may waive (a) any
inaccuracies in the representations or warranties in any document delivered
pursuant hereto or (b) compliance with any of the undertakings, obligations,
covenants or the acts contained herein.
10.3 ASSIGNMENT.
-----------
This Agreement and all of the provisions hereof shall be binding upon,
and shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned, prior to the
Effective Date, by either of the parties hereto without the prior written
consent of the other.
-40-
<PAGE> 46
10.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
-------------------------------------------
Subject to the provisions of Section 3.14, the representations
warranties, conditions and obligations set out in this Agreement shall be
continuing, and shall survive for a period of one (1) year following the
effective date.
10.5 PAYMENT OF EXPENSES.
--------------------
Except as otherwise specifically provided in this Agreement, each party
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder. Except as otherwise
provided herein, any expenses, fees, and costs necessary for any approvals of
the appropriate regulatory authorities, or for any notice to depositors of the
assumption of Deposit Liabilities provided for in this Agreement shall be paid
by the party seeking such approval or giving such notice.
10.6 NOTICES TO BRANCHES CUSTOMERS AND THE PUBLIC.
---------------------------------------------
(a) Unless otherwise mutually agreed to by the parties in writing,
after all applicable regulatory approvals have been received, Purchaser may mail
a notice to all customers of the Branches for the purpose of advising deposit
account owners and Loan customers of Purchaser's impending purchase of the
Branches and notifying deposit account owners and Loan customers that,
immediately after the Effective Date, Purchaser will provide them, as
applicable, with (i) forms of Purchaser's checks to be used in lieu of Seller's
forms, which the deposit account owners and Loan customers, as applicable, shall
be instructed to destroy upon receipt of Purchaser's forms and (ii) cards issued
by the A.T.M. (Automatic Teller Machines) network to which Purchaser belongs, to
be used in lieu of the MAC cards previously issued by Seller. Additionally,
Purchaser may (a) mail notice to deposit account owners whose Deposit Accounts
are located at the Branches notifying such
-41-
<PAGE> 47
persons of the transfer of their Deposit Account to The Citizens Banking Company
Branch and (b) mail to Loan customers any notice of transfer of servicing
required under the Real Estate Settlement Procedures Act, or any other
applicable federal or state law.
Prior to mailing, Purchaser shall submit the proposed form of notice to
Seller for Seller's review and approval, which approval shall not be
unreasonably withheld. Promptly upon receipt thereof Seller shall review said
notice, which review shall be completed within five (5) days of receipt.
Promptly thereafter Purchaser shall, at its own expense, send such notice to the
deposit account owners or Loan customers, as applicable.
(b) In the event that any notice to deposit account holders may be
required by law or by deposit contract, the party required to give such notice
shall give said notice at the party's sole expense and provide the other party
with a copy of said notice.
(c) After all applicable regulatory approvals have been received Seller
shall mail a notice to all Branches customers for the purpose of advising said
customers of the transactions contemplated by this Agreement.
(d) Purchaser and Seller agree to issue a joint press release
immediately after the execution of this Agreement. Such press release shall be
approved by both Seller and Purchaser in advance of its issuance.
(e) Until consummation of this Agreement the Purchaser will not
intentionally solicit customer's whose deposit accounts are included in the
deposits shown on Exhibit "B' (as may be amended to and including the Effective
Date to include additional customers of the Branches) or Loan customers except
as may occur in connection with advertising or solicitations directed to the
public generally, using print, television or radio, and not targeted
specifically to depositors at the Branches identified on Exhibit "A". The Seller
recognizes that the Purchaser cannot control telemarketing and mass mailings nor
distribution of "statement stuffer" materials to customers who hold accounts or
maintain banking relationships at other branches of the Purchaser not
withstanding the fact that some of such customers may also be depositors at
Branches and agreed to permit the Purchaser to engage in such activities. Where
operationally feasible Purchaser will use reasonable efforts to
-42-
<PAGE> 48
prevent any mass mailings from being sent to customers who maintain deposits and
have loans or are otherwise customers of the Seller.
10-7 ADDRESSES FOR NOTICES, ETC.
---------------------------
All notices, requests, demands, consents and other communications
provided for hereunder and under the related documents shall be in writing
(including facsimile communication) and mailed (by registered or certified mail)
or telegraphed or delivered to the applicable party at the addresses indicated
below:
If to the Seller:
The Metropolitan Savings Bank of Ohio
1 Federal Plaza West
Youngstown, Ohio 44503
Attention: Samuel K. Sollenberger, Chairman,
President and Chief Executive Officer
With a Copy to:
F.N.B. Corporation
Hermitage Square
Hermitage, Pennsylvania 16148
Attention: James G. Orie, Corporate Counsel
If to the Purchaser:
The Citizens Banking Company
10 E. Main Street, Box 247
Salineville, Ohio 43945
Attention: Marty E. Adams, President and Chief Executive Officer
With a Copy to:
Citizens Bancshares, Inc.
66 East Main Street
Salineville, Ohio 43945
Attention: Rick L. Hull, General Counsel
-43-
<PAGE> 49
or, as to each party, at such other address as shall be designated by such party
in written notice to the other party complying as to delivery with the terms of
this Section.
10.8 CONFIDENTIALITY.
----------------
The Purchaser and Seller agree that it is necessary to maintain the
confidentiality of this transaction. Both parties agree to limit the
distribution of information to certain employees on a need-to-know basis.
10.9 COUNTERPARTS.
-------------
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.10 HEADINGS.
---------
The headings of the Sections and Articles of this Agreement are
inserted for convenience only and shall not constitute a part hereof.
10.11 GOVERNING LAW.
--------------
This Agreement shall be governed by, and construed in accordance with,
the substantive law of the State of Ohio.
-44-
<PAGE> 50
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers and their corporate seals to be
affixed as of the date first written above.
<TABLE>
<CAPTION>
<S> <C>
[SEAL] THE METROPOLITAN SAVINGS BANK OF OHIO
Attest: By: /s/ Samuel K. Sollenberger
----------------------------------
Samuel K. Sollenberger
Chairman, President and Chief Executive Officer
/s/ Joanne C. Knapp
- ----------------------------
Secretary
[SEAL] THE CITIZENS BANKING COMPANY
Attest: By: /s/ Marty E. Adams
----------------------------------
Marty E. Adams
President and Chief Executive Officer
/s/ Tracey L. Reeder
- ----------------------------
Secretary
</TABLE>
-45-
<PAGE> 51
"EXHIBIT "A"
Branches
124 East Main Street, Barnesville, Ohio 43713
22 South 4th Street, Martins Ferry, Ohio 43925
142 West Main Street, St. Clairsville, Ohio 43950
<PAGE> 52
Exhibit "B"
(1 of 4 Pages)
The Metropolitan Savings Bank of Ohio
___________, ____, 19___
ALL OFFICES
<TABLE>
<CAPTION>
Percent Associated Accrued Percent Number of Percent Average
Account Type Balance of Total Yield Interest of Total Accounts of Total Balance
- ------------ ------- -------- ----- -------- -------- -------- -------- -------
($000) (%) (%) ($000) (%) (#) (%) ($000)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Transaction Accounts:
Demand Deposits
NOW Accounts
Money Market
TOTAL:
Savings Accounts
Time Deposits
TOTAL DEPOSITS:
</TABLE>
<PAGE> 53
Exhibit "B"
The Metropolitan Savings Bank of Ohio
___________, ____, 19___
124 East Main Street, Barnesville, Ohio 43713
<TABLE>
<CAPTION>
Percent Associated Accrued Percent Number of Percent Average
Account Type Balance of Total Yield Interest of Total Accounts of Total Balance
- ------------ ------- -------- ----- -------- -------- -------- -------- -------
($000) (%) (%) ($000) (%) (#) (%) ($000)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Transaction Accounts:
Demand Deposits
NOW Accounts
Money Market
TOTAL:
Savings Accounts
Time Deposits
TOTAL DEPOSITS:
</TABLE>
<PAGE> 54
Exhibit "B"
The Metropolitan Savings Bank of Ohio
___________, ____, 19___
22 South 4th Street, Martins Ferry, Ohio 43925
<TABLE>
<CAPTION>
Percent Associated Accrued Percent Number of Percent Average
Account Type Balance of Total Yield Interest of Total Accounts of Total Balance
- ------------ ------- -------- ----- -------- -------- -------- -------- -------
($000) (%) (%) ($000) (%) (#) (%) ($000)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Transaction Accounts:
Demand Deposits
NOW Accounts
Money Market
TOTAL:
Savings Accounts
Time Deposits
TOTAL DEPOSITS:
</TABLE>
<PAGE> 55
Exhibit "B"
The Metropolitan Savings Bank of Ohio
___________, ____, 19___
142 West Main Street, St. Clairsville, Ohio 43950
<TABLE>
<CAPTION>
Percent Associated Accrued Percent Number of Percent Average
Account Type Balance of Total Yield Interest of Total Accounts of Total Balance
- ------------ ------- -------- ----- -------- -------- -------- -------- -------
($000) (%) (%) ($000) (%) (#) (%) ($000)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Transaction Accounts:
Demand Deposits
NOW Accounts
Money Market
TOTAL:
Savings Accounts
Time Deposits
TOTAL DEPOSITS:
</TABLE>
<PAGE> 56
"EXHIBIT "C"
Cash On Hand
(To be provided on Effective Date)
<PAGE> 57
"EXHIBIT "D"
Form of Assignments and Assumptions
Four Documents
ASSIGNMENT OF DEPOSIT LIABILITIES
---------------------------------
The Metropolitan Savings Bank of Ohio ("Metropolitan"), pursuant to
terms of the Purchase and Assumption Agreement dated ___________, ___, 1997 (the
"Agreement"), hereby transfers and assigns to The Citizens Banking Company
liabilities of Metropolitan to the holders of deposit accounts in the amount of
the deposit accounts, including interest accrued thereon through ___________,
1997, issued by Metropolitan and domiciled at the branch offices previously
operated by Metropolitan as listed on Exhibit "A" of the Agreement.
This without recourse to Metropolitan, except as may otherwise be
provided by the terms and conditions of the Agreement.
ATTEST: THE METROPOLITAN SAVINGS BANK OF
OHIO
- ----------------------- --------------------------------------------
Secretary Samuel K. Sollenberger
Chairman, President and Chief Executive Officer
<PAGE> 58
ASSIGNMENT OF LOANS
-------------------
The Metropolitan Savings Bank of Ohio ("Metropolitan") pursuant to
terms of the Purchase and Assumption Agreement dated ___________ ___, 1997 (the
"Agreement"), hereby transfers and assigns to The Citizens Banking Company all
Loans (as defined in the Agreement) issued by Metropolitan through the close of
business on ________ ___, 1997 and domiciled at the Barnesville Office, Martins
Ferry Office and St. Clairsville Office that are sold branch offices previously
operated by Metropolitan as listed on Exhibit "A" of the Agreement.
This assignment is subject to the terms and conditions of the Agreement
and is without recourse to Metropolitan, except as may otherwise be provided by
the terms and conditions of the Agreement.
ATTEST: THE METROPOLITAN SAVINGS BANK OF
OHIO
- -------------------------- ---------------------------------------------
Secretary Samuel K. Sollenberger
Chairman, President and Chief Executive Officer
<PAGE> 59
ASSUMPTION OF CERTAIN LIABILITIES
---------------------------------
KNOWN ALL MEN BY THESE PRESENTS THAT:
WHEREAS, The Metropolitan Savings Bank of Ohio, a savings bank
chartered and existing under the laws of the State of Ohio (the "Seller"), and
The Citizens Banking Company, a commercial bank chartered and existing under the
laws of the State of Ohio (the "Purchaser"), are parties to a certain Purchase
and Assumption Agreement dated as of _____________ ___ 1997 (the "Agreement"),
pursuant to which for the consideration and upon other terms and conditions
therein prescribed, the Seller is this day transferring, conveying, assigning
and delivering to the Purchaser certain of the Seller's assets and liabilities
associated with the branch office of the Seller listed on Exhibit "A" of the
Agreement; and
WHEREAS, the Agreement requires that, in connection with the transfer,
assignment, conveyance and delivery to the Purchaser of such assets and
liabilities, the Purchaser shall assume and agree to pay, perform and discharge
certain liabilities and duties of the Seller;
NOW THEREFORE, in consideration of the premises and in accordance with
the provisions of the Agreement and for other good and valuable consideration,
the receipt of which is hereby acknowledged, the Purchaser hereby agrees to pay,
perform and discharge such liabilities and obligations of the Seller as the same
exist at the time of the delivery of this instrument as follows:
(a) The deposit liabilities of the Seller attributed on the records of
account of the Seller to the Branch, as listed on Exhibit "A" to the Agreement
updated as of the close of business on the business day immediately preceding
the date hereof, a copy of which Exhibit is attached hereto;
(b) All other liabilities and obligations of the Seller with respect to
the Branch to the extent described in the Agreement transferred and delivered to
the Purchaser.
<PAGE> 60
IN WITNESS WHEREOF, the Purchaser has caused this instrument to be
executed on its behalf by duly authorized officers and its corporate seal to be
affixed hereto, this ______ day of ________________________, 1997.
PURCHASER:
ATTEST: THE CITIZENS BANKING COMPANY
- ------------------------ ---------------------------------------------
Secretary Marty E. Adam
Chairman and Chief Executive Officer
[SEAL]
AGREED:
SELLER:
ATTEST: THE METROPOLITAN SAVINGS BANK OF
OHIO
- ------------------------ ----------------------------------------------
Secretary Samuel K. Sollenberger
Chairman, President and Chief Executive Officer
[SEAL]
<PAGE> 61
ASSIGNMENT OF MORTGAGES
-----------------------
KNOWN ALL MEN BY THESE PRESENTS THAT:
WHEREAS, The Metropolitan Savings Bank of Ohio, a savings bank
organized and existing under the laws of the State of Ohio, having its principal
office and place of business in Youngstown, Mahoning County, Ohio, and certain
branch offices that have been sold pursuant to a certain Purchase and Assumption
Agreement dated ________, ___, 1997, located in Belmont County, Ohio, the
Mortgagee below named, for and in consideration of the sum of One ($1.00) Dollar
lawful money of the United States of America and other good and valuable
consideration to it in hand paid by The Citizens Banking Company, a commercial
bank chartered and existing under the laws of the State of Ohio, having its
principal office located in Salineville, Columbiana County, Ohio, the receipt of
which is hereby acknowledged, has granted, bargained, sold, assigned,
transferred and set over, and by these presents does grant, bargain, sell,
assign, transfer and set over unto The Citizens Banking Company, its successors
and assigns, the mortgages attached hereto as Exhibit "A" and made a part
hereof, together with all the rights, remedies, estates and incidents, contained
therein and created thereby; together with the bond or obligation mentioned in
said mortgages, and thereby intended to be secured, and warrant of attorney to
confess judgment therein contained, if any, and all money due and to become due
therefrom.
TO HAVE AND TO HOLD the same unto The Citizens Banking Company, its
successors and assigns, to them and their proper use and behoof, and hereby
direct the Recorder of Deeds of Mahoning County and Belmont County, Ohio to note
upon the margin
<PAGE> 62
of the record of each Mortgage, this Assignment thereof.
IN WITNESS WHEREOF, The Metropolitan Savings Bank of Ohio has caused
its corporate seal to be affixed to this instrument by the hand of its Chairman,
President and Chief Executive Officer and the same to be duly attested by its
Secretary this _____ day of _______, 1997.
ATTEST: THE METROPOLITAN SAVINGS BANK OF
OHIO
- ----------------------- -----------------------------------------------
Secretary Samuel K. Sollenberger
Chairman, President and Chief Executive Officer
[SEAL]
<PAGE> 63
"EXHIBIT "E"
BRANCH INFORMATION MEMORANDUM
EXAMPLE OF SETTLEMENT SCHEDULE FOR BRANCH OFFICE PURCHASE
Sum of :
- --------
Total deposit liabilities assumed $__________
(Including accrued interest)
Uncollected fees or rentals
on sale deposit boxes $__________
Minus:
- ------
Premium due Seller $__________
Net book value of real estate $__________
Loan Purchase Price $__________
Carrying value of FF&E $__________
Cash on Hand $___________
Adjustment to prorate expenses (1):
Plus: Accrued expenses $__________
Minus: Prepaid expenses $__________
Net expenses adjustment $__________
Equals:
- -------
Cash due Buyer at closing $__________
(1) Typically includes adjustments for property taxes, insurance, FDIC deposit
insurance Lease payments, and maintenance contracts.
<PAGE> 64
"EXHIBIT "F"
LOANS
-----
<TABLE>
<CAPTION>
Loan by Type:
Application Balance
Amount Number Sheet
------ ------ --------
<S> <C> <C>
Business Loans $ $
Credit Lines $ $
Personal Loans $ $
Real Estate Loans $ $
$ $
+ Overdrafts $
TOTAL LOANS: $____________
</TABLE>
<PAGE> 65
"EXHIBIT "G"
Employees
<TABLE>
<CAPTION>
Branch Name Position Assigned/Branch Date of Employ Salary
- ----------- -------- --------------- -------------- ------
<S> <C> <C> <C> <C>
Barnesville Office
- --------------------------------------------------------------------------------
Martins Ferry Office
- --------------------------------------------------------------------------------
St. Clairsville Office
</TABLE>
<PAGE> 66
"EXHIBIT "H"
Deposit Premium Allocation
(To be provided by Purchaser)
<PAGE> 67
"EXHIBIT "I"
Limited Warranty Deed
(To be provided at closing)
<PAGE> 68
"EXHIBIT "J"
Brokered Deposits
(To be furnished at closing)
<PAGE> 69
"EXHIBIT "K"
Personal Property Leases
(To be provided at closing)
<PAGE> 70
"EXHIBIT "L"
Contracts
(To be provided at closing)
<PAGE> 71
"EXHIBIT "M"
Bill of Sale
In consideration of the Deposit Premium set forth in the June ___, 1997
Purchase and Assumption Agreement, receipt of which is hereby acknowledged, The
Metropolitan Savings Bank of Ohio sells, assigns, and transfers to The Citizens
Banking Company the following described property: All the furniture, fixtures,
equipment and other personalty of the three (3) Branches described on Exhibit
"A", attached hereto.
Executed on this ____ day of ____________, 1997.
THE METROPOLITAN SAVINGS BANK OF OHIO
--------------------------------------------
Samuel K. Sollenberger
Chairman, President and Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000855876
<NAME> CITIZENS BANCSHARES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 29,718
<INT-BEARING-DEPOSITS> 208
<FED-FUNDS-SOLD> 700
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 299,697
<INVESTMENTS-CARRYING> 50,954
<INVESTMENTS-MARKET> 51,113
<LOANS> 623,494
<ALLOWANCE> 11,759
<TOTAL-ASSETS> 1,045,722
<DEPOSITS> 717,469
<SHORT-TERM> 170,117
<LIABILITIES-OTHER> 8,901
<LONG-TERM> 53,865
<COMMON> 16,514
0
0
<OTHER-SE> 78,229
<TOTAL-LIABILITIES-AND-EQUITY> 1,045,722
<INTEREST-LOAN> 29,111
<INTEREST-INVEST> 10,762
<INTEREST-OTHER> 57
<INTEREST-TOTAL> 39,930
<INTEREST-DEPOSIT> 13,769
<INTEREST-EXPENSE> 18,774
<INTEREST-INCOME-NET> 21,156
<LOAN-LOSSES> 825
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 10,777
<INCOME-PRETAX> 12,552
<INCOME-PRE-EXTRAORDINARY> 12,552
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,442
<EPS-PRIMARY> 1.43
<EPS-DILUTED> 1.43
<YIELD-ACTUAL> 8.50
<LOANS-NON> 929
<LOANS-PAST> 3,278
<LOANS-TROUBLED> 413
<LOANS-PROBLEM> 1,659
<ALLOWANCE-OPEN> 11,350
<CHARGE-OFFS> 911
<RECOVERIES> 495
<ALLOWANCE-CLOSE> 11,759
<ALLOWANCE-DOMESTIC> 2,203
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 9,556
</TABLE>
