<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1996
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Commission File Number 0-20159
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CROGHAN BANCSHARES, INC.
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(Exact name of registrant as specified in its charter)
Ohio 31-1073048
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Indentification No.)
323 Croghan Street, Fremont, Ohio 43420
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(Address of principal executive offices) (Zip Code)
(419)332-7301
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(Registrant's telephone number, including area code)
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
------. ------.
634,526 Common shares were outstanding as of March 31, 1996.
This document contains 10 pages.
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CROGHAN BANCSHARES, INC.
<TABLE>
<CAPTION>
Index
<S> <C>
PART I. Financial Information:
Item 1. Financial Statements:
Consolidated Balance Sheets for March 31, 1996 (Unaudited)
and December 31, 1995 3
Consolidated Statements of Operations for the three months
ended March 31, 1996 and 1995 (Unaudited) 4
Consolidated Statements of Cash Flows for the three months
ended March 31, 1996 and 1995 (Unaudited) 5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition 7 - 9
and Results of Operations.
PART II. Other Information:
Item 1. Legal Proceedings - None.
Item 2. Changes in Securities - None.
Item 3. Defaults Upon Senior Securities - None.
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 - None.
(b) Reports on Form 8-K - None.
Signatures 10
</TABLE>
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CROGHAN BANCSHARES, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
ASSETS March 31, 1996 December 31
------ (Unaudited) 1995
--------- ----
<S> <C> <C>
CASH AND CASH EQUIVALENTS
Cash and due from banks $ 6,614,059 $ 7,818,432
Interest-bearing deposits in other banks 364 237
------------ ------------
Total cash and cash equivalents 6,614,423 7,818,669
------------ ------------
INVESTMENT SECURITIES
Available-for-sale, at market value 30,119,990 29,340,619
Held-to-maturity, at amortized cost, market value of $40,037,126 in 1996
and $43,791,878 in 1995 40,154,043 43,610,163
------------ ------------
Total investment securities 70,274,033 72,950,782
------------ ------------
LOANS 157,149,580 159,970,641
Less: Allowance for possible loan losses (2,592,628) (2,614,190)
------------ ------------
Net Loans 154,556,952 157,356,451
------------ ------------
BANK PREMISES AND EQUIPMENT, NET 4,221,953 4,215,129
ACCRUED INTEREST RECEIVABLE 2,290,587 2,205,162
OTHER ASSETS 1,177,217 972,177
------------ ------------
TOTAL ASSETS $239,135,165 $245,518,370
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES
Deposits: $ 24,500,538 $ 24,937,925
Demand, non-interest bearing 75,577,636 77,622,368
Savings, including NOW and Money Market Deposit accounts 103,801,504 105,315,319
Time ------------ ------------
Total deposits 203,879,678 207,875,612
Federal funds purchased and securities sold under repurchase agreements 2,596,353 5,511,891
Borrowed funds 2,500,000 2,500,000
Dividends payable 285,537 285,537
Accrued interest, taxes and other expenses 1,605,130 1,447,731
------------ ------------
Total liabilities 210,866,698 217,620,771
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, $12.50 par value. Authorized 650,000 shares; issued and
outstanding 634,526 shares 7,931,575 7,931,575
Surplus 8,989,295 8,989,295
Retained earnings 11,235,472 10,709,020
Net unrealized holding gain (loss) on securities available-for-sale, net of
related income taxes 112,125 267,709
------------ ------------
Total stockholders' equity 28,268,467 27,897,599
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $239,135,165 $245,518,370
============ ============
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 4
CROGHAN BANCSHARES, INC.
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31
--------
1996 1995
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<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $3,519,639 $3,261,297
Interest and dividends on investment securities:
U.S. Treasury securities 542,113 552,803
Obligations of U.S. Government agencies and corporations 305,425 230,659
Obligations of states and political subdivisions 119,712 128,694
Other securities 78,876 88,652
Interest on federal funds sold 9,084 20,462
Interest on deposits in other banks 3 4
---------- ----------
Total interest income 4,574,852 4,282,571
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INTEREST EXPENSE
Interest on deposits 1,847,622 1,655,376
Interest on other borrowings 73,839 54,201
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Total interest expense 1,921,461 1,709,577
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Net interest income 2,653,391 2,572,994
PROVISION FOR LOAN LOSSES 15,000 42,000
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Net interest income after provision for loan losses 2,638,391 2,530,994
---------- ----------
NON-INTEREST INCOME
Trust income 66,726 57,841
Service charges on deposit accounts 135,925 124,345
Gain (loss) on sale of investment securities 16,324 (37,635)
Other operating income 87,724 38,671
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Total non-interest income 306,699 183,222
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NON-INTEREST EXPENSES
Salaries, wages and employee benefits 1,058,416 974,434
Net occupancy expense of bank premises 96,468 100,930
Other operating expenses 611,333 652,857
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Total non-interest expenses 1,766,217 1,728,221
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Income before federal income taxes 1,178,873 985,995
FEDERAL INCOME TAXES 366,884 296,211
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NET INCOME $ 811,989 $ 689,784
========== ==========
Income per share, based on 634,526 shares $ 1.28 $ 1.09
========== ==========
Dividends declared, based on 634,526 shares $ .450 $ .375
========== ==========
</TABLE>
See notes to consolidated financial statements.
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CROGHAN BANCSHARES, INC.
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31
--------
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 811,989 $ 689,784
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 84,977 84,267
Provision for loan losses 15,000 42,000
Deferred federal income taxes 93,428 46,236
FHLB stock dividend (13,800) (21,275)
Net amortization of investment security premiums and discounts 21,067 40,818
Loss (gain) on sale of investment securities (16,324) 37,635
Loss (gain) on sale of equipment 6,409 (666)
Decrease (increase) in accrued interest receivable (85,425) 234,834
Decrease (increase) in other real estate owned and other assets (218,318) (251,509)
Increase (decrease) in accrued interest, taxes and other expenses 157,399 225,088
---------- ----------
Net cash provided by operating activities 856,402 1,127,212
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities:
Available-for-sale (2,996,533) (4,988,761)
Held-to-maturity (1,302,005) (1,257,982)
Proceeds from maturities of investment securities 5,733,454 8,290,000
Proceeds from sales of available-for-sale investment securities 1,015,156 1,951,094
Net decrease (increase) in loans 2,784,499 1,369,858
Capital expenditures (99,990) (170,558)
Proceeds from sale of equipment 1,780 835
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Net cash provided by (used in) investing activities 5,136,361 5,194,486
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in total deposits (3,995,934) (2,710,980)
Increase (decrease) in federal funds purchased and securities sold under repurchase agreements (2,915,538) (4,251,825)
Cash dividends paid (285,537) (222,084)
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Net cash provided by (used in) financing activities (7,197,009) (7,184,889)
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,204,246) (863,191)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 7,818,669 8,043,598
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $6,614,423 $7,180,407
========== ==========
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for:
Interest $2,047,326 $1,756,049
========== ==========
Federal income taxes $ 61,246 $ 64,217
========== ==========
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 6
CROGHAN BANCSHARES, INC.
Notes to Consolidated Financial Statements
March 31, 1996
(Unaudited)
(1) Consolidated Financial Statements
---------------------------------
The consolidated balance sheet as of March 31, 1996, the consolidated
statements of operations for the three-month periods ended March 31, 1996
and 1995, and the consolidated statements of cash flows for the
three-month periods ended March 31, 1996 and 1995 have been prepared
by the Corporation without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the Corporation's financial position as of March 31, 1996
and its results of operations and changes in cash flows for the periods
ended March 31, 1996 and 1995 have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. The results of operations for
the period ended March 31, 1996 are not necessarily indicative of the
operating results for the full year.
(2) Changes in Accounting Principles
--------------------------------
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a
Loan" in May, 1993, which addresses accounting and reporting for impaired
loans. In October, 1994, Statement 114 was amended by Statement 118 with
respect to income recognition and required disclosures in financial
statements. Statements 114 and 118 are effective for fiscal years
beginning after December 15, 1994 and require the Corporation to measure
its investment in an impaired loan based on one of the following three
methods: the observable market price of the loan, the fair value of the
collateral if the loan is collateral dependent, or the present value of
expected future cash flows discounted at the loan's effective interest
rate. The Corporation adopted Statement 114, effective January 1, 1995,
and such adoption did not have a significant effect on the consolidated
financial statements.
(3) Per Share Data
--------------
On May 9, 1995, the Board of Directors approved a two-for-one stock split
of the Corporation's common stock. As a result, a total of 317,263
additional shares were issued on June 2, 1995, resulting in a total of
634,526 shares issued and outstanding. Since the par value of the shares
was not changed, a transfer of $3,965,787 from surplus to common stock was
required. All per share data has been restated to reflect the stock
split.
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<PAGE> 7
CROGHAN BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
- - -------
Assets at March 31, 1996 totalled $239,135,165 compared to $245,518,370 at 1995
year end. Total deposits decreased to $203,879,678 from $207,875,612 at year
end, and total loans decreased to $157,149,580 from $159,970,641 at year end.
Net income for the quarter ended March 31, 1996 was $811,989 or $1.28 per
common share compared to $689,784 or $1.09 per common share for the same period
in 1995. Operating results for 1996 were favorably impacted by a reduction in
Federal Deposit Insurance Corporation premiums amounting to $75,743 (net of
income taxes totalling $39,019) or $.12 per common share. All per share data
has been restated for the 2-for-1 stock split paid on June 2, 1995.
PENDING TRANSACTION
- - --------------------
As noted in the 1995 Annual Report to Shareholders, the Corporation executed a
definitive agreement on February 15, 1996, to acquire Union Bancshares Corp.
("Union") of Bellevue, Ohio for $19,500,000 in cash plus the undistributed
earnings of Union from September 30, 1995. The transaction is expected to
close during the third quarter of 1996, and is subject to approval by the
regulatory agencies and Union's shareholders.
Union is the parent holding company of The Union Bank and Savings Company which
operates offices in Bellevue, Clyde, and Monroeville, Ohio. Union had total
consolidated assets of $97,343,429 at December 31, 1995, and stockholders'
equity of $9,403,382 at 1995 year-end.
DEPOSITS, LOANS, INVESTMENT SECURITIES, AND STOCKHOLDERS' EQUITY
- - ----------------------------------------------------------------
Total deposits at March 31, 1996 decreased $3,995,934 or 1.9 percent from 1995
year end. The liquid deposit category (demand, savings, NOW and money market
deposit accounts) decreased $2,482,119 while the time deposit category
increased $1,513,815.
Total loans decreased $2,821,061 or 1.8 percent from 1995 year end.
Commercial, credit card, and real estate loans experienced decreases from year
end levels, while consumer loans increased from their year end level.
Total investment securities decreased $2,676,749 or 3.7 percent from 1995 year
end. Securities are classified into one of three categories: held-to-maturity,
available-for-sale, or trading. Securities are designated as held-to-maturity
when the Corporation has the positive intent and ability to hold such
securities until final maturity. These securities are stated at amortized cost
in the Consolidated Balance Sheets. Securities that are not designated as
held-to- maturity are classified as available-for-sale (the Corporation has no
trading securities). These securities are stated at fair value with unrealized
holding gains and losses, net of income taxes, reported as a separate component
of stockholders' equity.
Stockholders' equity at March 31, 1996 increased to $28,268,467 or $44.55 book
value per common share compared to $27,897,599 or $43.97 book value per common
share at December 31, 1995. The balance in stockholders' equity at March 31,
1996 included a net unrealized holding gain on securities classified as
available-for-sale of $112,125 (net of deferred income taxes totalling
$57,761). At December 31, 1995, stockholders' equity included a net unrealized
holding gain on securities classified as available-for-sale of $267,709.
Consistent
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<PAGE> 8
CROGHAN BANCSHARES, INC.
with the Corporation's quarterly dividend policy, dividends of $.45 per share
were declared on March 12, 1996 to be distributed on April 30, 1996.
NET INTEREST INCOME
- - -------------------
Net interest income, which represents the excess revenue generated from earning
assets over the interest cost of funding those assets, increased $80,397 for
the quarter ended March 31, 1996 compared to the same period in 1995. The net
interest yield (net interest income divided by average earning assets) was 4.64
percent for the quarter ended March 31, 1996 compared to 4.62 percent for the
same period in 1995.
PROVISION FOR POSSIBLE LOAN LOSSES
- - ----------------------------------
The provision charged to expense totalled $15,000 for the quarter ended March
31, 1996 compared to $42,000 for the same period in 1995. Actual net loan
charge offs were $36,562 for the first three months of 1996 compared to $9,436
for the same period in 1995. The allowance for possible loan losses as a
percentage of outstanding loans was 1.65 percent at March 31, 1996 compared to
1.63 percent at December 31, 1995.
It is the Corporation's policy to maintain the allowance for possible loan
losses at a level to provide for reasonably foreseeable losses. To accomplish
this objective, a loan review process is employed to facilitate the early
identification of problem loans and to ensure sound credit decisions.
Management considers the balance at March 31, 1996 to be adequate to provide
for losses inherent to the loan portfolio.
NON-INTEREST INCOME
- - -------------------
Total non-interest income increased $123,477 or 67.4 percent for the quarter
ended March 31, 1996 compared to the same period in 1995. Included in non-
interest income for the quarter ended March 31, 1996 were realized gains
totalling $16,324 on the sale of investment securities that were classified as
available-for-sale. This compares to losses of $37,635 on the sale of
investment securities during the same period in 1995.
Trust department fee income increased $8,885 between comparable quarterly
periods. Service charges on deposit accounts increased $11,580 between
comparable quarterly periods.
Other operating income increased $49,053 between comparable quarterly periods.
Included in other operating income for the first three months of 1996 are
$23,974 in fees generated by the Specialized Investments Division which markets
products that are not FDIC insured (e.g., mutual funds and annuities). The
department began operations in June 1995 and hence there were no fees generated
during the comparable period in 1995.
NON-INTEREST EXPENSES
- - ---------------------
Total non-interest expenses increased $37,996 or 2.2 percent for the quarter
ended March 31, 1996 compared to the same period in 1995. Salaries, wages and
employee benefits increased $83,982 between comparable quarterly periods. Net
occupancy expense of bank premises decreased $4,462 between comparable
quarterly periods.
Other operating expenses decreased $41,524 between comparable quarterly
periods. As previously noted, FDIC insurance costs, which are included in
other operating expenses, decreased significantly in 1996. These costs
totalled $667 during the
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<PAGE> 9
CROGHAN BANCSHARES, INC.
first three months of 1996 as compared to $115,429 during the comparable period
in 1995.
FEDERAL INCOME TAX EXPENSE
- - --------------------------
Federal income tax expense increased $70,673 or 23.9 percent between comparable
quarterly periods. The Corporation's effective tax rate for the quarter ended
March 31, 1996 increased to 31.1 percent compared to 30.0 percent for the
quarter ended March 31, 1995. The increases in expense and effective tax rate
are primarily attributable to improved income and less tax-exempt interest
income.
The Corporation's taxable income for federal income tax purposes has totalled
approximately $9,009,600 for the three years ended December 31, 1995.
Consequently, the Corporation believes it is more likely than not that the
benefit from deferred tax assets totalling $695,321 at March 31, 1996 will be
realized. Therefore, no valuation allowance is deemed necessary.
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
An average federal funds sold position of $397,537 was maintained for the
quarter ended March 31, 1996. Short-term borrowings of federal funds purchased
and repurchase agreements averaged $2,586,175 for the quarter. Long-term
borrowings due to the Federal Home Loan Bank in 1999 totalled $2,500,000 at
March 31, 1996.
In connection with the pending acquisition of Union, the Corporation is
finalizing arrangements to borrow up to $9,000,000 on the day of closing with
up to $4,000,000 of that amount to be advanced over a five to ten year period.
Capital expenditures for bank premises and equipment totalled $99,990 for the
three months ended March 31, 1996. This compares to $170,558 for same period
in 1995. Projected 1996 capital expenditures total $275,000.
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<PAGE> 10
SIGNATURES
----------
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CROGHAN BANCSHARES, INC.
-------------------------------
Registrant
Date: April 22, 1996 /s/ Thomas F. Hite
------------------------ -------------------------------
Thomas F. Hite, President
Date: April 22, 1996 /s/ Allan E. Mehlow
------------------------ -------------------------------
Allan E. Mehlow, Treasurer and
Principal Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 6,614,059
<INT-BEARING-DEPOSITS> 364
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 30,119,990
<INVESTMENTS-CARRYING> 40,154,043
<INVESTMENTS-MARKET> 40,037,126
<LOANS> 157,149,580
<ALLOWANCE> 2,592,628
<TOTAL-ASSETS> 239,135,165
<DEPOSITS> 203,879,678
<SHORT-TERM> 2,596,353
<LIABILITIES-OTHER> 1,890,667
<LONG-TERM> 2,500,000
<COMMON> 7,931,575
0
0
<OTHER-SE> 20,336,892
<TOTAL-LIABILITIES-AND-EQUITY> 239,135,165
<INTEREST-LOAN> 3,519,639
<INTEREST-INVEST> 1,046,126
<INTEREST-OTHER> 9,087
<INTEREST-TOTAL> 4,574,852
<INTEREST-DEPOSIT> 1,847,622
<INTEREST-EXPENSE> 1,921,461
<INTEREST-INCOME-NET> 2,653,391
<LOAN-LOSSES> 15,000
<SECURITIES-GAINS> 16,324
<EXPENSE-OTHER> 1,766,217
<INCOME-PRETAX> 1,178,873
<INCOME-PRE-EXTRAORDINARY> 811,989
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 811,989
<EPS-PRIMARY> 1.28
<EPS-DILUTED> 1.28
<YIELD-ACTUAL> 4.64
<LOANS-NON> 841,872
<LOANS-PAST> 531,154
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 737,503
<ALLOWANCE-OPEN> 2,614,190
<CHARGE-OFFS> 48,770
<RECOVERIES> 12,208
<ALLOWANCE-CLOSE> 2,592,628
<ALLOWANCE-DOMESTIC> 2,592,628
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
