<PAGE> 1
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 EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-18840
BancFirst Ohio Corp.
(Exact name of registrant as specified in its charter)
Ohio 31-1294136
---- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
422 Main Street Zanesville, Ohio 43701
(Address of principal executive offices)
(Zip Code)
(740) 452-8444
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Class Outstanding as of May 11, 2000
----- ------------------------------
Common Stock, No Par Value 7,455,000
1
<PAGE> 2
INDEX
BANCFIRST OHIO CORP.
PART I. FINANCIAL INFORMATION PAGE NO.
--------
Item 1. Financial Statements
Consolidated Balance Sheet............................ 3
Consolidated Statement of Income...................... 4
Consolidated Statement of Cash Flows.................. 5
Notes to Consolidated Financial Statements............ 6-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 8-19
Item 3. Quantitative and Qualitative Disclosures About Market Risk..... 20
PART II. OTHER INFORMATION
Other Information.............................................. 21
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits on Item 601 of Regulation S-K
(b) Exhibit 27: Financial Data Schedule
(c) Reports on Form 8-K
Signatures.............................................................. 22
2
<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
<TABLE>
BANCFIRST OHIO CORP.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<CAPTION>
March 31,
2000
(Unaudited) December 31, 1999
----------- -----------------
<S> <C> <C>
ASSETS:
Cash and due from banks $ 26,657 $ 32,191
Federal funds sold 193 183
Securities held-to-maturity, at amortized cost (approximate fair
value of $19,809 and $20,601 in 2000 and 1999, respectively) 20,033 20,786
Securities available-for-sale, at fair value 330,017 310,449
---------- ----------
Total securities 350,050 331,235
---------- ----------
Loans, net of unearned income 881,911 849,767
Allowance for possible loan losses (7,761) (7,431)
---------- ----------
Net loans 874,150 842,336
---------- ----------
Bank premises and equipment, net 14,997 14,789
Accrued interest receivable 8,565 8,260
Intangible assets 12,255 12,606
Other assets 34,169 32,606
---------- ----------
Total assets $1,321,036 $1,274,206
========== ==========
LIABILITIES:
Deposits:
Non-interest-bearing deposits $ 66,445 $ 65,086
Interest-bearing deposits 740,922 734,090
---------- ----------
Total deposits 807,367 799,176
Federal funds purchased 26,200 24,100
Federal Home Loan Bank advances and other borrowings 396,898 361,398
Accrued interest payable 3,960 3,618
Other liabilities 7,525 5,806
---------- ----------
Total liabilities 1,241,950 1,194,098
SHAREHOLDERS' EQUITY:
Common stock, no par value, 20,000,000 shares authorized,
8,180,033 and 8,164,807 shares issued in 2000 and 1999, respectively 66,313 66,318
Retained earnings 37,798 35,795
Accumulated other comprehensive income - unrealized holding losses
on securities available-for-sale, net (8,466) (8,334)
Treasury stock, 712,537 and 569,628 shares, at cost, in 2000 and
1999, respectively (16,559) (13,671)
---------- ----------
Total shareholders' equity 79,086 80,108
---------- ----------
Total liabilities and shareholders' equity $1,321,036 $1,274,206
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
<TABLE>
BANCFIRST OHIO CORP.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATE)
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
2000 1999
------- -------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $18,025 $16,192
Interest and dividends on securities:
Taxable 5,606 4,744
Tax-exempt 421 412
Other interest income 3 23
------- -------
Total interest income 24,055 21,371
------- -------
Interest expense:
Deposits 8,256 8,051
Borrowings 6,188 3,919
------- -------
Total interest expense 14,444 11,970
------- -------
Net interest income 9,611 9,401
Provision for possible loan losses 450 350
------- -------
Net interest income after
provision for possible loan losses 9,161 9,051
------- -------
Other income:
Trust and custodian fees 650 566
Customer service fees 528 530
Gain on sale of loans 615 604
Other 1,180 459
Investment securities gains, net -- 124
------- -------
Total other income 2,973 2,283
------- -------
Other expense:
Salaries and employee benefits 4,417 4,054
Net occupancy expense 527 410
Amortization of intangibles 351 339
Other 2,390 2,374
------- -------
Total other expense 7,685 7,177
------- -------
Income before income taxes 4,449 4,157
Provision for Federal income taxes 1,375 1,316
------- -------
Net income $ 3,074 $ 2,841
======= =======
Basic and diluted earnings per share $ 0.41 $ 0.36
======= =======
Weighted average common shares outstanding:
Basic 7,560 7,881
======= =======
Diluted 7,574 7,893
======= =======
Cash dividends per common share $ 0.145 $ 0.140
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
<TABLE>
BANCFIRST OHIO CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,074 $ 2,841
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization 1,407 1,315
Provision for possible loan losses 450 350
Gain on sale of assets (694) (728)
Increase in interest receivable (305) (462)
Increase in other assets (1,820) (698)
Increase in interest payable 342 38
Increase in other liabilities 1,719 1,154
FHLB stock dividend (279) (296)
-------- --------
Net cash provided by operating activities 3,894 3,514
-------- --------
Cash flows from investing activities:
(Increase) decrease in federal funds sold and short term investments (10) 155
Proceeds from maturities of securities held-to-maturity 757 1,860
Proceeds from maturities and sales of securities available-for-sale 4,359 25,776
Purchase of securities available-for-sale (24,067) (18,179)
Increase in loans, net (42,022) (31,241)
Purchases of equipment and other assets (535) (1,066)
Proceeds from sale of loans 10,263 21,758
-------- --------
Net cash used in investing activities (51,255) (937)
-------- --------
Cash flows from financing activities:
Increase in federal funds purchased 2,100 --
Increase (decrease) in Federal Home Loan Bank advances and other borrowings 35,500 (6,500)
Net increase (decrease) in deposits 8,191 (1,038)
Cash dividends paid (1,095) (1,102)
Issuance (purchase) of stock, net (2,869) (1,010)
-------- --------
Net cash provided by (used in) financing activities 41,827 (9,650)
-------- --------
Net decrease in cash and due from banks (5,534) (7,073)
Cash and due from banks, beginning of period 32,191 28,731
-------- --------
Cash and due from banks, end of period $ 26,657 $ 21,658
======== ========
Supplemental cash flow disclosures:
Income taxes paid $ -- $ --
======== ========
Interest paid $ 14,102 $ 11,932
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements
5
<PAGE> 6
BANCFIRST OHIO CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 (UNAUDITED)
The consolidated financial statements for interim periods are unaudited;
however, in the opinion of management of BancFirst Ohio Corp. ("Company"), the
accompanying consolidated financial statements contain all material adjustments
(consisting of only normal recurring adjustments) necessary to present fairly
the financial position and results of operations and cash flows for the periods
presented. The unaudited financial statements are presented in accordance with
the requirements of Form 10-Q and do not include all disclosures normally
required by generally accepted accounting principles. Reference should be made
to the Company's consolidated financial statements and notes thereto included in
the Company's annual report on Form 10-K for the year ended December 31, 1999
for additional disclosures, including a summary of the Company's accounting
policies. The results of operations for the three-month period ended March 31,
2000 are not necessarily indicative of the results to be expected for the full
year.
1) BASIS OF PRESENTATION:
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany
transactions and accounts have been eliminated in consolidation.
2) NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, SFAS No., 133, "Accounting for Derivative Instruments and
Hedging Activities" was issued. SFAS No. 133 is effective for fiscal
years beginning after June 15, 2000 and establishes accounting and
reporting standards for derivative instruments and for hedging
activities. The provisions of this statement will primarily impact the
accounting for the Company's interest rate swap transactions which had
a total notional amount of $54,375 at March 31, 2000. The Company does
not anticipate that this standard will have a significant impact on its
financial statements.
3) PENDING ACQUISITION
On January 13, 2000 the Company entered into an agreement to acquire
Milton Federal Financial Corporation ("Milton") whereby Milton would be
merged into the Company. Under the terms of the agreement, the Company
will exchange .444 shares of its common stock and $6.80 for each of the
issued and outstanding shares of Milton. It will also redeem Milton's
outstanding stock options for cash equal to the acquisition price per
share less the exercise price of the options prior to closing. Based on
the Company's closing price of $20.375 per share on January 12, 2000,
the transaction would be valued at approximately $33 million. The
Company will account for the merger as a purchase and expects to
consummate the merger in the second quarter of 2000, pending approval
by Milton's shareholders and other customary conditions of closing.
Regulatory approvals of this acquisition have been obtained.
6
<PAGE> 7
4) COMPUTATION OF EARNINGS PER SHARE
The computation of earnings per share is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------------------
2000 1999
------ ------
(In thousands, expect per share data)
<S> <C> <C>
Actual weighted average common
shares outstanding 7,560 7,881
Dilutive common stock equivalents:
Stock options -- 6
Bonus shares - Company match 14 6
------ ------
Weighted average common shares
outstanding adjusted for dilutive common
stock equivalents 7,574 7,893
====== ======
Net income $3,074 $2,841
====== ======
Basic earnings per share $ 0.41 $ 0.36
====== ======
Diluted earnings per share $ 0.41 $ 0.36
====== ======
</TABLE>
5) COMPREHENSIVE INCOME
The Company's comprehensive income, determined in accordance with SFAS
No. 130, was $2,942 and $2,832 for the three months ended March 31,
2000 and 1999, respectively.
7
<PAGE> 8
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
BANCFIRST OHIO CORP.
For a comprehensive understanding of the Company's financial condition and
performance, this discussion should be considered in conjunction with the
Company's Consolidated Financial Statements, accompanying notes, and other
information contained elsewhere herein.
This discussion contains forward-looking statements under the Private Securities
Litigation Reform Act of 1995 that involves risks and uncertainties. Although
the Company believes that the assumptions underlying the forward-looking
statements contained herein are reasonable, any of the assumptions could be
inaccurate, and therefore, there can be no assurance that the forward-looking
statements included herein will prove to be accurate. Factors that could cause
actual results to differ from the results discussed in the forward-looking
statements include, but are not limited to: economic conditions (both generally
and more specifically in the markets in which the Company and its Banking
Subsidiary operate); competition for the Company's customers from other
providers of financial services; government legislation and regulation (which
changes from time to time and over which the Company has no control); changes in
interest rates; prepayments of loans and securities; material unforeseen changes
in the liquidity, results of operations, or other financial position of the
Company's customers; and other risks detailed in the Company's Form 10-K for the
year ended December 31, 1999 and its other filings with the Securities and
Exchange Commission, all of which are difficult to predict and many of which are
beyond the control of the Company.
8
<PAGE> 9
<TABLE>
BANCFIRST OHIO CORP.
SELECTED FINANCIAL DATA:
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
AT OR FOR THE THREE MONTHS
ENDED MARCH 31,
2000 1999
---------- ----------
<S> <C> <C>
STATEMENT OF INCOME DATA
Interest Income $ 24,055 $ 21,371
Interest expense 14,444 11,970
---------- ----------
Net interest income 9,611 9,401
Provision for possible loan losses 450 350
Non-interest income 2,973 2,283
Non-interest expense 7,685 7,177
---------- ----------
Income before income taxes 4,449 4,157
Provision for Federal Income taxes 1,375 1,316
---------- ----------
Net income $ 3,074 $ 2,841
========== ==========
PER SHARE DATA:
Basic earnings per share 0.41 $ 0.36
Diluted earnings per share 0.41 0.36
Dividends 0.15 0.14
Book value 10.59 11.23
Tangible book value 8.95 9.76
BALANCE SHEET DATA:
Total assets $1,321,036 $1,175,380
Loans 881,911 786,985
Allowance for possible loan losses 7,761 6,701
Securities 350,050 318,216
Deposits 807,367 788,584
Borrowings 423,098 290,250
Shareholders' equity 79,086 88,255
PERFORMANCE RATIOS (1):
Return on average assets 0.96% 0.97%
Return on average equity 15.52 13.02
Tangible return on average tangible equity 20.14 16.50
Net interest margin 3.30 3.51
Interest rate spread 3.01 3.14
Non-interest income to average assets 0.93 0.74
Non-interest expense to average assets 2.30 2.35
Efficiency ratio (2) 57.19 57.96
ASSET QUALITY RATIOS:
Non-performing loans to total loans 0.73% 0.47%
Non-performing assets to total assets 0.51 0.36
Allowance for possible loan losses to total loans 0.88 0.85
Allowance for possible loan losses to non-performing
loans 119.9 181.4
Net charge-offs to average loans (1) 0.06 0.15
CAPITAL RATIOS:
Shareholders' equity to total assets 5.99% 7.51%
Tier 1 capital to total assets 7.48 6.57
Tier 1 capital to risk-weighted assets 10.74 10.06
</TABLE>
(1) Ratios are stated on an annualized basis.
(2) The efficiency ratio is equal to non-interest expense (excluding
amortization expense) divided by net interest income on a fully tax
equivalent basis plus non-interest income excluding gains on sales of
securities.
9
<PAGE> 10
OVERVIEW
The reported results of the Company primarily reflect the
operations of the Company's bank subsidiary. The Company's results of operations
are dependent on a variety of factors, including the general interest rate
environment, competitive conditions in the industry, governmental policies and
regulations and conditions in the markets for financial assets. Like most
financial institutions, the primary contributor to the Company's income is net
interest income, which is defined as the difference between the interest the
Company earns on interest-earning assets, such as loans and securities, and the
interest the Company pays on interest-bearing liabilities, such as deposits and
borrowings. The Company's operations are also affected by non-interest income,
such as checking account and trust fees and gains from sales of loans. The
Company's principal operating expenses, aside from interest expense, consist of
salaries and employee benefits, occupancy costs, and other general and
administrative expenses.
AVERAGE BALANCES AND YIELDS
The following table presents, for each of the periods
indicated, the total dollar amount of interest income from average
interest-earning assets and the resultant yields, as well as the interest
expense on average interest-bearing liabilities, expressed both in dollars and
percentage rates, and the net interest margin. Net interest margin is calculated
on a fully tax equivalent basis ("FTE") by total interest-earning assets. The
net interest margin is influenced by the level and relative mix of
interest-earning assets and interest-bearing liabilities. FTE income includes
tax-exempt income, restated to a pre-tax equivalent, based on the statutory
federal income tax rate. All average balances are daily average balances.
Non-accruing loans are included in average loan balances.
10
<PAGE> 11
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
2000 1999
------------------------------------- -------------------------------------
Average Income/ Yield/ Average Income/ Yield/
Balance Expenses Cost (1) Balance Expenses Cost (1)
---------- -------- -------- ---------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
SECURITIES:
Taxable $ 303,849 $ 5,605 7.42% $ 294,713 $ 4,744 6.53%
Tax-exempt (3) 29,869 647 8.71% 32,673 633 7.86%
---------- ------- ---------- -------
Total securities 333,718 6,252 7.53% 327,386 5,377 6.66%
LOANS (2):
Commercial 425,356 9,466 8.95% 339,845 7,802 9.31%
Real Estate 336,158 6,362 7.61% 352,503 6,535 7.52%
Consumer 104,302 2,212 8.53% 92,070 1,873 8.25%
---------- ------- ---------- -------
Total loans 865,816 18,040 8.38% 784,418 16,210 8.38%
Federal funds sold 163 3 7.40% 2,065 23 4.52%
---------- ------- ---------- -------
Total earning assets (3) 1,199,697 $24,295 8.14% 1,113,869 $21,610 7.87%
------- -------
Non-interest earning assets 85,005 68,675
---------- ---------
Total assets $1,284,702 $1,182,544
========== ==========
INTEREST-BEARING DEPOSITS:
Demand and savings deposits $ 230,144 $ 1,614 2.82% $ 231,884 $ 1,464 2.56%
Time deposits 492,702 6,642 5.42% 499,127 6,587 5.35%
---------- ------- ---------- -------
Total deposits 722,846 8,256 4.59% 731,011 8,051 4.47%
Borrowings 409,548 6,188 6.08% 294,642 3,919 5.39%
---------- ------- ---------- -------
Total interest-bearing liabilities 1,132,394 14,444 5.13% 1,025,653 11,970 4.73%
------- -------
Non interest-bearing deposits 63,743 61,376
---------- ----------
Subtotal 1,196,137 1,087,029
Accrued expenses and other
liabilities 8,881 7,016
---------- ----------
Total liabilities 1,205,018 1,094,045
Shareholders' equity 79,684 88,499
---------- ----------
Total liabilities and shareholders'
equity 1,284,702 $1,182,544
========== ==========
Net interest income and interest
rate spread (4) $ 9,851 3.01% $ 9,640 3.14%
======= ==== ======= ====
Net interest margin (5) 3.30% 3.51%
==== ====
Average interest-earning assets to
average interest-bearing
liabilities 105.9% 108.6%
========== ==========
</TABLE>
(1) Calculated on an annualized basis.
(2) Non-accrual loans are included in the average loan balances.
(3) Interest income is computed on a fully tax equivalent (FTE) basis,
using a tax rate of 35%.
(4) Interest rate spread represents the difference between the average
yield on interest-earning assets and the average cost of
interest-bearing liabilities.
(5) The net interest margin represents net interest income as a percentage
of average interest-earning assets.
11
<PAGE> 12
RATE AND VOLUME VARIANCES
Net interest income may also be analyzed by segregating the volume and rate
components of interest income and interest expense. The following table
discloses the dollar changes in the Company's net interest income attributable
to changes in levels of interest-earning assets or interest-bearing liabilities
(volume), changes in average yields on interest-earning assets and average rates
on interest-bearing liabilities (rate) and the combined volume and rate effects
(total). For the purposes of this table, the change in interest due to both rate
and volume has been allocated to volume and rate change in proportion to the
relationship of the dollar amounts of the change in each. In general, this table
provides an analysis of the effect on income of balance sheet changes which
occurred during the periods and the changes in interest rate levels.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
2000 VS. 1999
(IN THOUSANDS)
INCREASE (DECREASE)
-----------------------------------
------ ----- ------
VOLUME RATE TOTAL
------ ----- ------
<S> <C> <C> <C>
Interest-earning assets:
Securities:
Taxable $ 159 $ 702 $ 861
Non-taxable (55) 69 14
------ ----- ------
Total securities 104 771 875
------ ----- ------
Loans:
Commercial 1,971 (307) 1,664
Real estate (266) 93 (173)
Consumer 270 69 339
------ ----- ------
Total loans 1,975 (145) 1,830
------ ----- ------
Federal funds sold (29) 9 (20)
------ ----- ------
Total interest-earning assets (1) 2,050 635 2,685
------ ----- ------
Interest-bearing liabilities:
Deposits:
Demand and savings deposits (10) 160 150
Time deposits (59) 114 55
------ ----- ------
Total interest-bearing deposits (69) 274 205
Borrowings 1,713 556 2,269
------ ----- ------
Total interest-bearing liabilities 1,644 830 2,474
------ ----- ------
Net interest income $ 406 $(195) $ 211
====== ===== ======
</TABLE>
(1) Computed on a fully tax-equivalent basis, assuming a tax rate of 35%.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND
1999
Net Income. Net income for the three months ended March 31, 2000
increased 8.2% to $3.1 million compared to net income of $2.8 million for the
three months ended March 31, 1999. Basic and diluted earnings per share in the
first quarter of 2000 equaled $0.41, compared to $0.36 for the same period in
1999. Net interest income increased 2.2% in the three months ended March 31,
2000, as compared to the same period in 1999 while the provision for possible
loan losses and non-interest expense increased 28.6% and 7.1%, respectively.
Non-interest income increased 30.2% from the comparative period. The Company's
net interest margin decreased to 3.30% for the first quarter of 2000, compared
to 3.51% for the same period in 1999. The increase in non-interest income
related primarily to higher levels of trust and custodian fees and other fee
income. Non-interest expense increased primarily due to additional loan
production and other fee income generating activities. The Company's return on
average assets and return on average equity were 0.96% and 15.52%, respectively,
in the first quarter of 2000, compared to 0.97% and 13.02%, respectively, in the
first quarter of 1999.
12
<PAGE> 13
Interest Income. Total interest income increased 12.6% to $24.1 million
for the three months ended March 31, 2000, compared to $21.4 million for the
first quarter of 1999. This increase was attributed to an $85.8 million, or
7.7%, increase in average earning assets as well as a 27 basis point increase in
the average yield on interest-earning assets. The Company's yield on average
loans was 8.38% for both periods. Increases in yields resulting from higher
market interest rates have been offset by competitive pressures on loan rates.
Yields on the investment portfolio increased from 6.66% during the first quarter
of 1999 to 7.53% during the first quarter of 2000, benefiting primarily from
increased market interest rates.
Interest Expense. Total interest expense increased 20.7% to $14.4
million for the three months ended March 31, 2000, compared to $12.0 million for
the three months ended March 31, 1999. Interest expense increased due to a 10.4%
increase in the average balance of interest-bearing liabilities as well as a 40
basis point increase in the Company's cost of funds.
The Company's cost of funds increased to 5.13% in the three months
ended March 31, 2000 compared to 4.73% in the same period of 1999. The increase
in the cost of funds resulted from increases in short-term interest rates and
the repricing of maturing certificates of deposit at higher rates. Also, higher
cost borrowings represented 36.2% of interest-bearing liabilities during the
first quarter of 2000 compared to 28.7% during the year ago period.
Provision for Possible Loan Losses. The provision for possible loan
losses was $450,000 for the three months ended March 31, 2000, compared to
$350,000 in the first quarter of 1999. The provision for possible loan losses
was considered sufficient by management for maintaining an adequate allowance
for possible loan losses. The increased provision in 2000 resulted primarily
from continued increases in, as well as a change in the mix of, the loan
portfolio.
Non-Interest Income. Total non-interest income increased $690,000 for
the three months ended March 31, 2000, compared to the same period a year ago.
The following table sets forth the Company's non-interest income for the periods
indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
2000 1999
------ ------
<S> <C> <C>
Trust and custodian fees $ 650 $ 566
Customer service fees 528 530
Investment securities gains -- 124
Gains on sales of loans 615 604
Other 1,180 459
------ ------
Total $2,973 $2,283
====== ======
</TABLE>
Trust and custodian fees increased 14.8% to $650,000 in the first
quarter of 2000 from $566,000 in the first quarter of 1999. Growth in trust
income continued to result primarily from the expansion of the customer base as
well as higher asset values.
Customer service fees, representing service charges on deposits and
fees for other banking services, decreased slightly to $528,000 in the first
quarter of 2000 from $530,000 in the first quarter of 1999.
Gains on sales of loans totaled $615,000 for the three months ended
March 31, 2000 compared to $604,000 for the three months ended March 31, 1999.
During the first quarter of 2000, the Company sold $8.6 million of the
guaranteed portion of its SBA and other government guarantee loan originations
in the secondary market compared to $4.4 million during the first quarter of
1999, realizing gains of $600,000 in 2000 compared to $342,000 in 1999. Also,
the Company recorded gains of $15,000 from the sales of residential loans during
the first quarter of 2000 compared to $262,000 in 1999. Loan origination and
sale activity during 2000 has declined due to the higher interest rate
environment.
The Company intends to continue to place emphasis on its small business
lending activities, including the evaluation of expansion into new markets. The
nature of the political climate in Washington, D.C. may subject existing
government programs to much scrutiny and possible cutbacks. It is not currently
known whether the SBA program will be impacted. Management believes that any
such cutbacks could negatively affect the Company's activities in the SBA
lending programs as well as the planned expansion of such activities.
13
<PAGE> 14
Other income increased $721,000 to $1.2 million in the first quarter of
2000 compared to $459,000 in the first quarter of 1999. This increase was
primarily attributed to financial planning fee income which totaled $347,000 in
2000 with no comparable amount in 1999, SBA net servicing income which increased
$120,000 due primarily to a decrease in amortization of servicing assets caused
by lower prepayment levels and a $99,000 increase in earnings on bank-owned life
insurance.
Non-Interest Expense. Total non-interest expense increased $507,000 to
$7.7 million in the three months ended March 31, 2000, compared to $7.2 million
in the three months ended March 31, 1999. The following table sets forth the
Company's non-interest expense for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
2000 1999
------ ------
(IN THOUSANDS)
<S> <C> <C>
Salaries and employee benefits $4,417 $4,054
Net occupancy expense 527 410
Furniture, fixtures and equipment 242 223
Data processing 314 312
Taxes other than income taxes 238 244
Federal deposit insurance 42 69
Amortization of goodwill and other intangibles 351 339
Other 1,554 1,526
------ ------
Total $7,685 $7,177
====== ======
</TABLE>
Salaries and employee benefits increased 9.0% to $4.4 million and
represented approximately 60.2% of total operating expenses (non-interest
expense less amortization of intangibles) in the three months ended March 31,
2000 compared to 59.3% in the first quarter of 1999. The average full time
equivalent staff decreased 2% from 386 in 1999 to 378 in 2000.
Net occupancy expense increased to $117,000 in the first quarter of
2000 from $410,000 in the first quarter of 1999. This increase resulted from
higher costs associated with a new branch facility opened in May 1999 and rent
expense associated with the Company's training and technology center which
commenced in November 1999.
Furniture, fixtures and equipment expense increased $19,000, for the
first quarter of 2000. The increase was due principally to higher depreciation
and maintenance costs.
Federal deposit insurance expense decreased $27,000 to $42,000 in 2000
from $69,000 in the first quarter of 1999, reflecting lower premium rates in
effect for 2000.
Amortization of goodwill and other intangible assets increased $12,000
in the first quarter of 2000 compared to the year ago period as a result of
additional amortization resulting from the acquisition of a financial planning
company in April 1999.
Other non-interest expenses increased 1.8% to $1.6 million during the
first quarter of 2000 compared to $1.5 million in the first quarter of 1999.
The efficiency ratio is one method used in the banking industry to
assess profitability. It is defined as non-interest expense less amortization
expense divided by the net revenue stream, which is the sum of net interest
income on a tax-equivalent basis and non-interest income excluding net
investment securities gains or losses. The Company's efficiency ratio was 57.2%
for the first quarter of 2000, compared to 58.0% for the comparable period in
1999. Controlling
14
<PAGE> 15
costs and improving productivity, as measured by the efficiency ratio, is
considered by management a primary factor in enhancing performance.
Provision for Income Taxes. The Company's provision for Federal income
taxes was $1.4 million, or 30.9% of pretax income, for the three months ended
March 31, 2000 compared to $1.3 million, or 31.7% of pretax income, for the
three months ended March 31, 1999. The effective tax rate for each period
differed from the federal statutory rate principally as a result of tax-exempt
income from obligations of states and political subdivisions and non-taxable
loans, the non-deductibility, for tax purposes, of goodwill and core deposit
intangible amortization expense, and earnings on bank owned life insurance.
ASSET QUALITY
Non-performing Assets. To maintain the level of credit risk of the loan
portfolio at an appropriate level, management sets underwriting standards and
internal lending limits and provides for proper diversification of the portfolio
by placing constraints on the concentration of credits within the portfolio. In
monitoring the level of credit risk within the loan portfolio, management
utilizes a formal loan review process to monitor, review, and consider relevant
factors in evaluating specific credits in determining the adequacy of the
allowance for possible loan losses. The Company's banking subsidiary formally
documents its evaluation of the adequacy of the allowance for possible loan
losses on a quarterly basis and the evaluation is reviewed and discussed with
its board of directors.
Failure to receive principal and interest payments when due on any loan
results in efforts to restore such loan to current status. Loans are classified
as non-accrual when, in the opinion of management, full collection of principal
and accrued interest is in doubt. Continued unsuccessful collection efforts
generally lead to initiation of foreclosure or other legal proceedings. Property
acquired by the Company as a result of foreclosure or by deed in lieu of
foreclosure is classified as "other real estate owned" until such time as it is
sold or otherwise disposed of. The Company owned $240,000 of such property at
March 31, 2000 compared to $545,000 at March 31, 1999.
Non-performing loans totaled $6.5 million, or 0.73% of total loans, at
March 31, 2000, compared to $3.7 million, or 0.47% of total loans, at March 31,
1999. Non-performing assets totaled $6.7 million, or 0.51% of total assets at
March 31, 2000, compared to $4.2 million, or 0.36% of total assets at March 31,
1999. The increase in non-performing loans from March 31, 1999 resulted
primarily from increases in non-performing single-family residential mortgage
loans and one matured commercial loan totaling $625,000 that is expected to be
renewed at prevailing market terms. The following is an analysis of the
composition of non-performing assets and restructured loans:
15
<PAGE> 16
<TABLE>
<CAPTION>
MARCH 31, 2000 MARCH 31, 1999
-------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Non-accrual $3,234 $1,195
Accruing loans 90 days or more past due 3,240 2,500
------ ------
Total non-performing loans 6,474 3,695
Other real estate owned 240 545
------ ------
Total non-performing assets $6,714 $4,240
====== ======
Restructured loans $2,988 $ --
====== ======
Non-performing loans to total loans 0.73% 0.47%
Non-performing assets to total assets 0.51% 0.36%
Non-performing loans plus restructured loans
to total loans 1.07% 0.47%
</TABLE>
Restructured loans consist of one loan that was restructured in May
1999. At March 31, 2000, this loan was performing in accordance with its
restructured terms.
Allowance for Possible Loan Losses. The Company records a provision
necessary to maintain the allowance for possible loan losses at a level
sufficient to provide for potential future credit losses. The provision is
charged against earnings when it is established. An allowance for possible loan
losses is established based on management's best judgment, which involves a
continuing review of prevailing national and local economic conditions, changes
in the size and composition of the portfolio and review of individual problem
credits. Growth of the loan portfolio, loss experience, economic conditions,
delinquency levels, credit mix, and selected credits are factors that affect
judgments concerning the adequacy of the allowance. Actual losses on loans are
charged against the allowance.
The following table summarizes the Company's loan loss experience, and
provides a breakdown of the charge-off, recovery and other activity for the
periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
2000 1999
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Balance at beginning of period $ 7,431 $ 6,643
Provision charged to expense 450 350
Loans charged-off (252) (441)
Recoveries of loans previously charged-off 132 149
-------- --------
Balance at end of period $ 7,761 $ 6,701
======== ========
Loans outstanding at end of period $881,911 $786,985
Average loans outstanding 865,816 784,418
Allowance as a percent of loans outstanding 0.88% 0.85%
Net charge-offs to average loans (annualized) 0.06% 0.15%
Allowance for possible loans losses to non-
performing loans 119.9% 181.4%
</TABLE>
The allowance for possible loan losses totaled $7.8 million at March
31, 2000, representing 0.88% of total loans, compared to $6.7 million at March
31, 1999, or 0.85% of total loans. Charge-offs represent the amount of loans
actually removed as earning assets from the balance sheet due to
uncollectibility. Amounts recovered on previously charged-off assets are netted
against charge-offs, resulting in net charge-offs for the period. Net loan
charge-offs for the three months ended March 31, 2000 were $120,000, compared to
net charge-offs of $292,000 for the same period in 1999.
16
<PAGE> 17
Charge-offs have been made in accordance with the Company's standard policy and
have occurred primarily in the commercial and consumer loan portfolios.
The allowance for possible loan losses as a percentage of
non-performing loans ("coverage ratio"), was 119.9% at March 31, 2000, compared
to 181.4% at March 31, 1999. Although used as a general indicator, the coverage
ratio is not a primary factor in the determination of the adequacy of the
allowance by management. Total non-performing loans as a percentage of total
loans remained a relatively low 0.73% of total loans at March 31, 2000.
COMPARISON OF MARCH 31, 2000 AND DECEMBER 31, 1999 FINANCIAL CONDITION
Total assets amounted to $1.32 billion at March 31, 2000, an increase
of $46.8 million, or 3.7%, from December 31, 1999.
Total investment securities increased by $18.8 million to $350.1
million. The Company's general investment strategy is to manage the portfolio to
include rate sensitive assets, matched against interest sensitive liabilities to
reduce interest rate risk. In recognition of this strategy, as well as to
provide a secondary source of liquidity to accommodate loan demand and possible
deposit withdrawals, the Company has chosen to classify the majority of its
investment securities as available-for-sale. At March 31, 2000, 94.3% of the
total investment portfolio was classified as available-for-sale, while those
securities which the Company intends to hold to maturity represented the
remaining 5.7%. This compares to 93.7% and 6.3% classified as available-for-sale
and held to maturity, respectively, at December 31, 1999.
Total loans increased $32.2 million to $881.9 million at March 31,
2000. This increase reflects the Company's continued emphasis on increasing the
loan portfolio in order to improve overall earning asset yields.
Premises and equipment increased from $14.8 million at December 31,
1999 to $15.0 million at March 31, 2000.
Other assets increased from $32.6 million at December 31, 1999 to $34.2
million at March 31, 2000 primarily as a result of increases in loan servicing
assets, prepaid expenses and cash surrender value of bank owned life insurance.
Total deposits increased to $807.4 million at March 31, 2000 from
$799.2 million at December 31, 1999. The Company continues to emphasize growth
in its existing retail deposit base provided incremental deposit growth is cost
effective compared to alternative funding sources. Total interest-bearing
deposits accounted for 91.7% of total deposits at March 31, 2000, compared to
91.9% at December 31, 1999.
Total borrowings, including federal funds purchased, increased $37.6
million to $423.1 million at March 31, 2000, compared to $385.5 million at
December 31, 1999. This increase resulted primarily from funding needs
associated with increases in the loan portfolio.
LIQUIDITY AND CAPITAL RESOURCES
The objective of liquidity management is to ensure the availability of
funds to accommodate customer loan demand as well as deposit withdrawals while
continuously seeking higher yields from longer term lending and investing
opportunities. This is accomplished principally by maintaining sufficient cash
flows and liquid assets along with consistent stable core deposits and the
capacity to maintain immediate access to funds. These immediately accessible
funds may include federal funds sold, unpledged marketable securities, reverse
repurchase agreements or available lines of credit from the Federal Reserve
Bank, Federal Home Loan Bank (FHLB), or other financial institutions. An
important factor in the preservation of liquidity is the maintenance of public
confidence, as this facilitates the retention and growth of a large, stable
supply of core deposits in funds.
The Company's principal source of funds to satisfy short-term liquidity
needs comes from cash, due from banks, federal funds sold and borrowing
capabilities through the FHLB as well as other sources. Changes in the balance
of cash and due from banks are due to changes in volumes of federal funds sold,
and the float and reserves related to deposit accounts, which may fluctuate
significantly on a day-to-day basis. The investment portfolio serves as an
additional source of liquidity for the Company. Securities with a market value
of $330.0 million were classified as available-for-sale as of March 31, 2000,
representing 94.3% of the total investment portfolio. Classification of
securities as available-for-sale provides for flexibility in managing net
interest margin, interest rate risk, and liquidity.
17
<PAGE> 18
The Company's bank subsidiary is a member of the FHLB. Membership
provides an opportunity to control the bank's cost of funds by providing
alternative funding sources, to provide flexibility in the management of
interest rate risk through the wide range of available funding sources, to
manage liquidity via immediate access to such funds, and to provide flexibility
through utilization of customized funding products to fund various loan and
investment products and strategies.
The Company obtained a $15 million term loan with a financial
institution in order to partially fund the acquisition of County Savings Bank.
This loan had an outstanding balance of $3.8 million at March 31, 2000. Under
the terms of the loan agreement, the Company is required to make quarterly
interest payments and annual principal payments, based on a ten-year
amortization, which commenced in February 1998. The unpaid loan balance is due
in full September 1, 2003. At March 31, 2000, the Company has pledged 67% of the
stock of FNB as security for the loan. The loan agreement contains certain
financial covenants which requires that (i) the Company maintain a minimum ratio
of total capital to risk-weighted assets of 10%; (ii) each of the Company's
banking subsidiaries, which represent greater than 10% of the Company's
consolidated capital, maintain a minimum ratio of Tier 1 capital to
risk-weighted assets of 6.0%, Tier 1 capital to average assets of 5.0% and total
capital to risk-weighted assets of 10.0%; (iii) the Company maintain, on a
consolidated basis, a minimum annualized return on average assets of not less
than 0.75%, and (iv) the Company maintain, on a consolidated basis, a ratio of
non-performing loans to equity capital of less than 25.0% and a minimum ratio of
allowance for possible loan losses to non-performing loans of 75.0%. At March
31, 2000, the Company was in compliance with each of these financial covenants.
The loan agreement also restricts the Company's ability to sell assets, grant
security interests in the stock of its banking subsidiaries, merge or
consolidate, and engage in business activity unrelated to banking.
Shareholders' equity at March 31, 2000 was $79.1 million, compared to
shareholders' equity at December 31, 1999 of $80.1 million, a decrease of $1.0
million. This decrease resulted primarily from purchases of treasury stock (net)
totaling $2.9 million, offset in part by the retention of earnings (net of
dividends paid).
Under the risk-based capital guidelines, a minimum capital to
risk-weighted assets ratio of 8.0% is required, of which, at least 4.0% must
consist of Tier 1 capital (equity capital net of goodwill). Additionally, a
minimum leverage ratio (Tier 1 capital to total assets) of 3.0% must be
maintained. At March 31, 2000, the Company had a total risk-based capital ratio
of 11.6%, of which 10.7% consisted of Tier 1 capital. The leverage ratio for the
Company at March 31, 2000, was 7.5%.
Cash dividends declared to shareholders of the Company totaled $1.1
million, or $0.145 per share, during the first three months of 2000. This
compares to dividends of $1.1 million, or $0.14 per share, for the same period
in 1999. Cash dividends paid as a percentage of net income amounted to 35.4% and
38.8% for the three months ended March 31, 2000 and 1999, respectively.
On October 18, 1999, the Company completed an offering of $20.0 million
aggregate liquidation amount of 9.875% Capital Securities, Series A, due 2029.
These securities represent preferred beneficial interests in BFOH Capital Trust
I, a special purpose trust formed for the purpose of the offering. The proceeds
from the offering were used by the Trust to purchase Junior Subordinated
Deferrable Interest Debentures ("Debentures") from the Company. Under Federal
Reserve Board regulations, these Capital Securities may represent up to 25% of
a bank holding company's Tier 1 capital. The holders of the Capital Securities
are entitled to receive cumulative cash distributions at the annual rate of
9.875% of the liquidation amount. Distributions are payable semi-annually on
April 15 and October 15 of each year, beginning on April 15, 2000. The Company
has fully and unconditionally guaranteed the payment of the Capital Securities,
and payment of distributions on the Capital Securities. The Trust is required to
redeem the Capital Securities on or, in certain circumstances, prior to October
15, 2029. There are no significant covenants or limitations with respect to the
business of the Company that are contained in the instruments which govern the
Capital Securities and the Debentures.
The Company's Board of Directors and management intend to seek
continued controlled growth of the organization through selective acquisitions
which fit the Company's strategic objectives of growth, diversification and
market expansion and which provide the potential for enhanced shareholder value.
At the present time, the Company does not have any understanding or agreements
for any acquisition or combination, except for the acquisition of Milton,
previously discussed.
Considering the Company's capital adequacy, profitability, available
liquidity sources and funding sources, the Company's liquidity is considered by
management to be adequate to meet current and projected needs.
18
<PAGE> 19
CONTINGENCIES AND UNCERTAINTIES - YEAR 2000
During the periods leading up to January 1, 2000, the Company addressed
the potential problems associated with the possibility that the computers that
control or operate the Company's information technology system and
infrastructure may not have been programmed to read four-digit date codes and,
upon arrival of the year 2000, may have recognized the two-digit code "00" as
the year 1900, causing systems to fail to function or generate erroneous data.
The Company experienced no significant problems related to its information
technology systems upon arrival of the Year 2000, nor was there any interruption
in service to its customers of any kind. The Company could incur losses if Year
2000 issues adversely affect its depositors or borrowers. Such problems could
include delayed loan payments due to Year 2000 problems affecting any
significant borrowers or impairing the payroll systems of large employers in the
Company's primary market areas. Because the company's loan portfolio is highly
diversified with regard to individual borrowers and types of businesses, the
Company does not expect, and to date has not realized, any significant or
prolonged difficulties that will affect net earnings or cash flow.
19
<PAGE> 20
ITEM 3:
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For a discussion of the Company's asset and liability management policies as
well as the potential impact of interest rate changes upon the market value of
the Company's portfolio equity, see "Management's Discussion and Analysis -
Interest Rate Risk Management" in the Company's 1999 Form 10-K for the year
ended December 31, 1999. The following summarizes the Company's simulations of
net interest income and net present value (NPV) as of December 31, 1999, the
most recent period for which this information is available:
<TABLE>
<CAPTION>
PROJECTED CHANGE FROM % CHANGE FROM
CHANGE IN INTEREST RATES AMOUNT BASE BASE
<S> <C> <C> <C>
Net Interest Income:
200 basis point increase $39,754 $ (1,756) (4.2)%
Base scenario-no change 41,509 N/A N/A
200 basis point decrease 43,011 1,502 3.6
NPV:
200 basis point increase 60,310 (26,049) (30.2)
Base scenario 86,359 N/A N/A
200 basis point decrease 93,335 6,976 8.1
</TABLE>
20
<PAGE> 21
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits on Item 601 of Regulation S-K
Exhibit 3(a) - Articles of Incorporation, as amended (incorporated by
reference to Exhibit 3.1 to Company's Form 10-K for year ended December
31, 1991, Exhibit 3.3 to the Company's Form 10-K for the year ended
December 31, 1992 and Exhibit 3.6 to the Company's Form 10-K for the
year ended December 31, 1994).
Exhibit 3(b) - Code of Regulations, as amended (incorporated by
reference to Exhibit 3.2 to the Company's Form 10-K for the year ended
December 3,1, 1991, Exhibit 3.4 to the Company's Form 10-K for the year
ended December 31, 1992 and Exhibit 3.5 to the Company's Form 10-K for
the year ended December 31, 1993).
Exhibit 10 - Form of BancFirst Ohio Corp. Executive Retension Plan,
effective August 19, 1999.
(b) Exhibit 27: Financial Data Schedule
(c) Reports on Form 8-K
Report on Form 8-K date January 13, 2000 regarding the Company
entering into an Agreement and Plan of Reorganization with
Milton Federal Financial Corporation ("MFFC") to merge MFFC
with and into the Company.
21
<PAGE> 22
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.
BancFirst Ohio Corp.
(Registrant)
Date May 11, 2000 (Signed) /s/ Gary N. Fields
-------------------- -------------------------------
Gary N. Fields
President and
Chief Executive Officer
Date May 11, 2000 (Signed) /s/ Kim M. Taylor
-------------------- -------------------------------
Kim M. Taylor
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
22
<PAGE> 1
BANCFIRST OHIO CORP.
EXECUTIVE RETENTION PLAN
Effective August 19, 1999, BancFirst Ohio Corp. adopts this Plan to provide
additional compensation to eligible management and highly compensated employees
whose employment is terminated under circumstances described in Section 2.01.
ARTICLE I
DEFINITIONS
Whenever used in this Plan, the following words and phrases will have the
meaning given below. Also, the form of each term will include any other form,
the singular form of any term will include the plural, the plural form will
include the singular, the masculine pronoun will include the feminine and the
feminine pronoun will include the masculine. Other words and phrases also may be
defined in the Plan text.
Affiliate means any entity which, together with the Company, is a member of a
controlled group of corporations or of a commonly controlled group of trades or
businesses [as defined in Code ss.ss.414(b) and (c), as modified by Code
ss.415(h)] or of an affiliated service group [as defined in Code ss.414(m)] or
other organization described in Code ss.414(o).
Beneficiary means the person designated by a Participant to receive any death
benefits payable under Section 2.02. This designation may be made in any form
acceptable to the Company. If a Participant does not name a Beneficiary, any
death benefit payable under this Plan will be distributed to the Participant's
surviving spouse or, if there is no surviving spouse, to the Participant's
estate.
Board of Directors or Board means the Company's board of directors.
Cause means:
(a) Any unauthorized disclosure by a Participant of the Company's
business practices or accounts to a competitor that results in
serious damage to the Company;
(b) Any willful and wrongful misappropriation by a Participant of
funds, property or rights of the Company that results in
serious damage to the Company;
(c) Any willful and wrongful destruction of business records or
other property by a Participant which results in serious
damage to the Company;
(d) The conviction of a Participant of a felony involving moral
turpitude or, as the result of a plea bargain, conviction of
the Participant of a misdemeanor, provided the Participant was
originally charged with a felony involving moral turpitude;
(e) Gross and willful misconduct by the Participant which results
in serious damage to the Company; or
1
<PAGE> 2
(f) The Participant's material breach of duties and
responsibilities associated with his or her employment.
Change of Control means:
(a) The acquisition by any entity or person ("Person") [within the
meaning of Rules 13d-3 or 14(d)(2) issued under the Securities
Exchange Act of 1934, as amended] of direct or beneficial
ownership of 25 percent or more of the combined voting power
of the Company's outstanding securities then entitled to vote
generally in the election of directors ("Voting Securities");
provided, however, that the following acquisitions will not
constitute a Change of Control: (i) any acquisition by the
Company, (ii) any acquisition by an employee benefit plan (or
related trust) sponsored or maintained by the Company or any
Affiliate or (iii) any acquisition by any Person who on the
Effective Date was the beneficial owner of 20 percent or more
of the combined voting power of the Voting Securities
outstanding on that date;
(b) The adoption of a plan of complete liquidation of the Company
or of an agreement for the sale or disposition by the Company
(in one transaction or a series of transactions) of all or
substantially all of the Company's assets;
(c) Adoption of any plan of reorganization, merger or
consolidation, other than a reorganization, merger or
consolidation after which the voting Securities outstanding
immediately before the plan is adopted continue to represent
at least 60 percent of the Voting Securities (or those of the
surviving entity) immediately after the reorganization, merger
or consolidation.
(d) A change in the majority of the Board of Directors within a
12-month period; provided, however, that any new director
whose nomination for election by the Company's shareholders
was approved, or who was appointed or elected to the Board of
Directors by, the vote of two-thirds of the directors then
still in office who were in office at the beginning of the 12
month period will not be counted when determining if there has
been a change in the majority of the Board of Directors.
Code means the Internal Revenue Code of 1986, as amended.
Company means BancFirst Ohio Corp.
Compensation means a Participant's annual base salary payable by the Company in
effect on or immediately before the date a Participant Terminates.
Effective Date means August 19, 1999.
Employee means an individual who is performing services for the Company or an
Affiliate on the date that a Change of Control occurs.
2
<PAGE> 3
Participant means an Employee to whom the Board extends the benefits described
in Section 2.01 of this Plan. The Board will notify each Participant of his or
her participation in this Plan and will give each Participant a copy of this
document and of any subsequent Plan amendments.
Plan means the BancFirst Ohio Corp. Executive Retention Plan, as described in
this document and any amendments to it that are subsequently adopted.
Termination means, after a Change of Control:
(a) A complete severance of the employment relationship between a
Participant and the Company;
(b) A reduction of the Participant's base salary for any reason other than
in connection with the complete severance of his or her employment
relationship with the Company;
(c) A material reduction of the value of the fringe benefits provided to
the Participant immediately before the Change of Control or below the
level of fringe benefits provided generally to other actively employed
similarly situated Employees, unless the Company agrees to fully
compensate the Participant for any this material reduction;
(d) Any material breach by the Company of any other employment related
agreement between it and the Participant, including the Company's
failure or inability to discharge its obligations to the Participant.
ARTICLE II
RETENTION BENEFITS
2.01 Amount of Benefit
A Participant whose employment is Terminated (other than for Cause) within 24
months after a Change of Control occurs will receive a benefit under this Plan
equal to the smaller of (a) 200 percent of his or her Compensation or (b) the
maximum amount that may be distributed without incurring an excise tax under
Code ss.ss.280G and 4999. This benefit will be in addition to any other benefits
or amounts to which the Participant is entitled on account of his or her
termination of employment.
2.02 Time and Method of Payment
The benefit described in Section 2.01 (and adjusted as described in Section
2.03) will be paid to the Participant in a single lump sum amount within five
days after it becomes due. However, if the Participant dies between the date
that he or she Terminates and the date that he or she receives the benefit
provided under Section 2.01, the benefit will be paid to the deceased
Participant's Beneficiary.
2.03 Payment of Taxes
3
<PAGE> 4
Before it is distributed, the Company will withhold any income and employment
taxes due from the Participant or Beneficiary on account of any benefit payable
under Section 2.01 and will pay those withheld taxes to the appropriate taxing
authority.
2.04 No Multiple Benefits
No Participant is entitled to multiple benefits under Section 2.01, even if
there have been multiple Changes of Control. However, the amount and entitlement
to a benefit under Section 2.01 will be calculated separately from each Change
of Control. If there have been multiple Changes of Control within a single
24-month period, the Participant will be entitled to the largest benefit
produced under Section 2.01 even if the amount of that benefit is larger than
the amount that would be due on account of another Change of Control occurring
during a single 24-month period.
ARTICLE III
ADMINISTRATION
3.01 Administration
This Plan will be administered by the Company. Subject to Section 3.02, all
actions taken by the Company in connection with this Plan (including the
exercise of any discretionary matters contemplated by the Plan) will be
conclusive, final and binding under all Participants and upon all persons,
including Beneficiaries, claiming any rights under the Plan.
3.02 Claims Procedure
(a) Any Participant or Beneficiary who believes that he or she is
entitled to a Plan benefit may file a claim with the Company.
(b) If a claim is wholly or partially denied, the Company will
send a written notice of denial to the claimant. This notice
must be written in a manner calculated to be understood by the
claimant and must include:
(i) The specific reason or reasons for which the claim
was denied;
(ii) Specific reference to pertinent Plan provisions,
rules, procedures or protocols upon which the Company
relied to deny the claim;
(iii) A description of any additional material or
information that the claimant may file to perfect the
claim and an explanation of why this material or
information is necessary; and
(iv) A description of the steps the claimant may take to
appeal an adverse determination
The Company will render its decision within 90 days of receiving a benefit
claim. However, if special circumstances (such as the need for more information)
require additional time, this decision will be rendered as soon as possible,
but, not later than 180 days after receipt of the claim and only if the Company
notifies the claimant, in writing, that it needs more time to
4
<PAGE> 5
review a claim and why that additional time is needed. If the Company does not
issue its decision within this period, the claim will be deemed to have been
denied.
(c) If a claim has been wholly or partially denied, the affected
claimant, or his or her authorized representative may:
(i) Request that the Company reconsider its initial
denial by filing a written appeal no more than 60
days after receiving written notice that all or part
of the initial claim was denied;
(ii) Review pertinent documents and other material upon
which the Company relied when denying the initial
claim; and
(iii) Submit a written description of the reasons for which
the claimant disagrees with the Company's initial
adverse decision.
An appeal of an initial denial of benefits and all supporting material must be
made in writing and directed to the Company. The Company is solely responsible
for reviewing all benefit claims and appeals and taking all appropriate steps to
implement its decision.
The Company's decision on review will be sent to the claimant in writing and
will include specific reasons for the decision, written in a manner calculated
to be understood by the claimant, as well as specific references to the
pertinent Plan provisions, rules, procedures or protocols upon which the Company
relied to deny the appeal.
The Company will render its decision within 60 days of receiving a benefit
appeal. However, if special circumstances (such as the need to hold a hearing on
any matter pertaining to the denied claim) require additional time, this
decision will be rendered as soon as possible, but not later than 120 days after
receipt of the claimant's written appeal and only if the Company notifies the
claimant, in writing, that it needs more time to review an appeal and why that
additional time is needed. If the Company does not issue its decision within
this period, the claim will be deemed to have been denied.
ARTICLE IV
AMENDMENT TO AND TERMINATION OF THE PLAN
4.01 Right to Amend
The Company may modify, alter or amend the Plan at any time. However, no
amendment may affect any Participant's or Beneficiary's right to receive the
benefit described in Article II without the Participant's (or Beneficiary's)
consent and the Plan may not be amended in any respect after a Change of
Control.
4.02 Right to Terminate
Unless it is renewed by the Board of Directors, this Plan will automatically
terminate at the end of the twelfth calendar month beginning after the Effective
Date ("Expiration Date") and on each anniversary of the Expiration Date. However
if a Change of Control occurs while the Plan is in effect, the Plan will
continue (with or without action by the Board) for the longer of 24 months after
the Change of Control or the date that all benefits due under Section 2.01 have
been paid.
5
<PAGE> 6
4.03 Plan Merger and Consolidation
If the Plan is merged into or consolidated with any other plan, each affected
Participant will be entitled to a benefit immediately after the merger,
consolidation or transfer (determined as if the surviving plan had then
terminated) at least equal to the benefit he or she had accrued immediately
before the merger or consolidation (determined as if the Plan terminated
immediately before that merger or consolidation).
4.04 Successor Employer
If the Company dissolves into, reorganizes, merges into or consolidates with
another business entity, provision may be made by which the successor will
continue the Plan, in which case the successor will be substituted for the
Company under the terms and provision of this Plan. The substitution of the
successor for the Company will constitute an assumption by the successor of all
Plan liabilities and the successor will have all of the powers, duties and
responsibilities of the Company under the Plan.
ARTICLE V
MISCELLANEOUS
5.01 Non-alienation of Benefits
The right of a Participant, Beneficiary or any other person to receive Plan
benefits may not be assigned, transferred, pledged or encumbered except as
provided in the Participant's Beneficiary designation, by will or by applicable
laws of descent and distribution. Any attempt to assign, transfer, pledge or
encumber a Plan benefit will be null and void and of no legal effect.
5.02 Inability to Receive Benefits
Any Plan benefit payable to a Participant or Beneficiary who is declared
incompetent will be paid to the guardian, conservator or other person legally
charged with the care of his or her person or estate. Also, if the Company, in
its sole discretion, concludes that a Participant or Beneficiary is unable to
manage his or her financial affairs, it may but is not required to, distribute
Plan benefits to the Participant's or Beneficiary's spouse, lineal ascendants or
descendants or other close living relatives who demonstrates to the satisfaction
of the Company the propriety of those distributions. Any payment made under this
Section will completely discharge the Plan's liability with respect to that
payment. This Company is not required to see to the application of any
distribution made to any person.
5.03 Lost Participants
Each participant is obliged to keep the Company apprised of his or her current
mailing address and that of his or her Beneficiary. The Company's obligation to
search for any Participant or Beneficiary is limited to sending a registered or
certified letter to the Participant's or Beneficiary's last known address. Any
amounts credited to the Accounts or any Participant or Beneficiary who does not
file a claim for benefits with the Company will be forfeited no later than 12
months after benefits are otherwise payable. However, this forfeited benefit
will be restored and paid if the Company subsequently approves a claim for
benefits under the procedures described in Section 3.02.
6
<PAGE> 7
5.04 Limitation of Rights
Nothing in the Plan, expressed or implied, is intended to confer, or may be
construed as conferring, upon or giving to any person, firm or association
(other than the Company, an Affiliate, Participants, their Beneficiaries and
their successors in interest) any right, remedy or claim under or by reason of
this Plan.
5.05 Invalid Provision
If any provision of this Plan is held to be illegal or invalid for any reason,
the Plan will be construed and enforced as if the offending provision has not
been included in the Plan. However, that determination will not affect the
legality or validity of the remaining parts of this Plan.
5.06 One Plan
This Plan may be executed in any number of counterparts, each of which will be
deemed to be an original.
5.07 Governing Law
The Plan will be governed by and construed in accordance with the laws of the
United States and, to the extent applicable, the laws of Ohio.
BANCFIRST OHIO CORP.
By:
-----------------------------------
Print Name:
---------------------------
Title:
--------------------------------
Date:
----------------
7
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