<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
AMENDMENT NO. 1 TO FORM 8-K ON FORM 8-K/A
Current Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report August 1, 1996
-----------------------------------------------------------------
CROGHAN BANCSHARES, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
0-20159
- -------------------------------------------------------------------------------
(Commission File Number)
Ohio 31-1073048
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Indentification No.)
323 Croghan Street, Fremont, Ohio 43420
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(419)-332-7301
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
This document contains 22 pages. The Exhibit Index is on page 3.
<PAGE> 2
CROGHAN BANCSHARES, INC.
Item 2 - Acquisition or Disposition of Assets
- ----------------------------------------------
On August 1, 1996, Croghan Bancshares, Inc. (the "Corporation") acquired all of
the outstanding shares of Union Bancshares Corp. ("Union"), the sole shareholder
of The Union Bank and Savings Company, an Ohio banking corporation, for
$20,226,868 cash pursuant to a Plan and Agreement of Reorganization dated
February 15, 1996, and an Agreement of Merger dated March 27, 1996. The purchase
price is deemed representative of the fair market value of Union and was subject
to final adjustment based upon the results of an audit of Union's financial
statements as of July 31, 1996. The Corporation funded the acquisition with
internally-generated cash (primarily through the available undistributed income
of its wholly-owned subsidiary, The Croghan Colonial Bank) and with $4,500,000
borrowed from NBD Bank for up to three years at prime rate less 1/2 percent. The
loan is payable in quarterly installments of principal plus interest, with the
principal payments calculated based upon a ten year amortization schedule. Any
remaining principal balance due at the end of the three-year term will either be
refinanced or paid with cash available at that time. This transaction will be
accounted for as a purchase with Union's assets and liabilities stated at their
fair values and included in the Corporation's balance sheets issued subsequent
to August 1, 1996. Goodwill arising from the purchase of $9,568,723 will be
amortized over a period of 15 years. The acquisition will have no effect on the
Corporation's operating results for periods prior to August 1, 1996.
The purchase was consummated following the approvals of the shareholders of
Union, the Board of Governors of the Federal Reserve System, and the Ohio
Division of Financial Institutions.
To the knowledge of the Corporation, prior to the closing, neither the
Corporation nor any of its affiliates, directors, officers, or any associate of
a director or officer had any material relationship with Union or its
shareholders, directors, officers, or other affiliates.
Premises and equipment acquired in the transaction were valued at $3,738,985 on
the acquisition date. These assets consist primarily of Union's main banking
office (at One Union Square, Bellevue, Ohio) and three branch office locations
(at 114 Sandusky Street, Bellevue, Ohio; 106 South Main Street, Clyde, Ohio; and
11 Monroe Street, Monroeville, Ohio). There is no duplication of facilities and
the Corporation plans to operate the acquired facilities into the foreseeable
future.
Immediately after closing the purchase transaction, the Corporation merged The
Union Bank and Savings Company with and into The Croghan Colonial Bank.
Item 7(a) - Financial Statements
- ---------------------------------
The audited financial statements of Union as of and for the years ended December
31, 1995 and 1994 were included in the original Form 8-K filing as Exhibit No.
99.1 and are incorporated herein by reference. In lieu of providing Union's
unaudited interim financial statements as of June 30, 1996, Union's audited
financial statements as of July 31, 1996 are attached hereto as Exhibit 99.2.
<PAGE> 3
CROGHAN BANCSHARES, INC.
Item 7(b) - Pro Forma Financial Information
- --------------------------------------------
The unaudited pro forma consolidated balance sheet as of July 31, 1996 gives
effect to the Purchase which occurred on August 1, 1996. The unaudited pro forma
consolidated statement of operations for the seven months ended July 31, 1996
gives effect to the Purchase as if it occurred on January 1, 1996. The unaudited
pro forma consolidated statement of operations for the year ended December 31,
1995 gives effect to the Purchase as if it occurred on January 1, 1995. The
unaudited pro forma financial statements were prepared utilizing available
information and certain assumptions that management believes are reasonable. The
unaudited pro forma financial statements may not be indicative of the
Corporation's financial position or results of operations had the Purchase
actually occurred on the dates indicated.
Item 7(c) - Exhibits
The following exhibits are filed with or incorporated by reference in this
filing:
Regulation S-B Page
Exhibit Number Document Number
-------------- -------- ------
2.1 Plan and Agreement of Reorganization *
dated February 15, 1996 between
Croghan Bancshares, Inc. and Union
Bancshares Corp.
2.2 Agreement of Merger dated March 27, **
1996 between Croghan Bancshares,
Inc. and Union Bancshares Corp.
99.1 Financial statements of Union **
Bancshares Corp. and Subsidiaries
- December 31, 1995 and 1994
99.2 Financial statements of Union 5 - 19
Bancshares Corp. and Subsidiaries
- July 31, 1996
99.3 Pro forma information for Croghan 20 - 22
Bancshares, Inc. and Subsidiary
- July 31, 1996 and
December 31, 1995
* Indicates the document was previously filed as a part of the Issuer's
December 31, 1995 annual report Form 10-KSB pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934. This document is hereby
incorporated herein by reference in accordance with Item 601 of Regulation
S-B.
** Indicates the document was previously filed as a part of the Issuer's
original August 1, 1996 Form 8-K that is amended hereby. This document is
hereby incorporated herein by reference in accordance with Item 601 of
Regulation S-B.
<PAGE> 4
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 hereunto duly authorized.
CROGHAN BANCSHARES, INC.
---------------------------
Registrant
Date: October 10, 1996 by: /s/ Thomas F. Hite
-------------------------- ------------------------
Thomas F. Hite, President
Date: October 10, 1996 by: /s/ Allan E. Mehlow
-------------------------- ------------------------
Allan E. Mehlow, Treasurer and
Principal Financial Officer
<PAGE> 1
EXHIBIT 99.2
------------
WELDON JORDAN & ASSOCIATES
Certified Public Accountants
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Union Bancshares Corp.
Bellevue, Ohio
We have audited the accompanying consolidated balance sheet of Union Bancshares
Corp. and Subsidiaries as of July 31, 1996 and the related consolidated
statements of income, changes in shareholders' equity and cash flows for the ten
months ended July 31, 1996. These financial statements are the responsibility of
the Corporation's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Union Bancshares
Corp. and Subsidiaries as of July 31, 1996 and the results of its operations and
cash flows for the ten months ended July 31, 1996 in conformity with generally
accepted accounting principles.
As discussed in Note 12 to the financial statements, the Corporation has agreed
to a merger effective August 1, 1996.
/s/ Weldon Jordan and Associates
--------------------------------
Weldon Jordan and Associates
August 9, 1996
<PAGE> 2
UNION BANCSHARES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
July 31, 1996
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Cash and due from banks (Note 2) $ 2,558,318
Federal funds sold 3,655,000
-------------
Cash and cash equivalents (Note 1) 6,213,318
Investment securities (Note 3) 30,244,093
Loans and lease receivables (Note 4) 61,553,026
Less: allowance for loan loss (Note 5) (710,605)
-------------
Net loans and lease receivables 60,842,421
Premises and equipment (Note 6) 1,442,478
Other real estate owned (Note 1) 15,320
Accrued interest receivable 918,154
Other assets (Note 9) 426,634
-------------
Total assets $ 100,102,418
==============
LIABILITIES
Deposits
Non-interest bearing demand $ 4,913,832
Interest-bearing demand 25,572,563
Savings 15,150,068
Time deposits, $100,000 and greater 13,937,234
Other time 30,337,743
-------------
Total deposits 89,911,440
Accrued interest payable 314,386
Other liabilities (Note 7) 141,831
-------------
Total liabilities 90,367,657
-------------
SHAREHOLDERS' EQUITY
Common stock, $5 par value; 300,000 shares authorized;
224,901 shares issued 1,124,505
Capital surplus 1,229,152
Retained earnings (Note 2) 7,483,188
Unrealized loss on available for sale securities (98,424)
-------------
Total before treasury stock 9,738,421
Less treasury stock, at cost; 183 shares (3,660)
-------------
Total shareholders' equity 9,734,761
-------------
Total liabilities and shareholders' equity $ 100,102,418
=============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 3
UNION BANCSHARES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Ten Months ended July 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Interest income
Interest and fees on loans and leases $4,673,538
Interest and dividends on taxable securities 1,189,377
Interest on tax exempt securities 273,571
Other interest 183,285
----------
Total interest income 6,319,771
----------
Interest expense
Interest on demand deposits 535,384
Interest on savings deposits 359,047
Interest on time deposits 2,022,073
----------
Total interest expense 2,916,504
----------
Net interest income 3,403,267
Provision for loan loss (Note 5) 20,000
----------
Net interest income after provision for loan loss 3,383,267
----------
Non-interest income
Service charges and fees 199,224
Security gains, net 13,613
Other income 79,944
----------
Total non-interest income 292,781
----------
Non-interest expense
Salaries and employee benefits (Note 9) 1,190,468
Occupancy, furniture and equipment 321,510
Data processing expense 167,181
Other taxes 130,714
Insurance 21,616
Professional services 190,348
Other expenses 398,278
----------
Total non-interest expense 2,420,115
----------
Income before income taxes 1,255,933
Provision for income tax (Note 7) 416,706
----------
Net income $ 839,227
==========
Earnings per common share (Note 1) $ 3.73
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
UNION BANCSHARES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Ten months ended July 31, 1996
<TABLE>
<CAPTION>
Unrealized Gain Total
Common Capital Retained (Loss) on Available Treasury Shareholders'
Stock Surplus Earnings for Sale Securities Stock Equity
----- ------- -------- ------------------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1995 $ 1,124,505 $ 1,229,152 $ 6,756,320 $ 130,644 $ (3,660) $ 9,236,961
Net income - ten months 839,227 839,227
Cash dividends ($.50 per share) (112,359) (112,359)
Change in unrealized gain
(loss), net of taxes (229,068) (229,068)
----------- ----------- ----------- --------- -------- -----------
Balance, July 31, 1996 $ 1,124,505 $ 1,229,152 $ 7,483,188 $ (98,424) $ (3,660) $ 9,734,761
=========== =========== =========== ========= ======== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
UNION BANCSHARES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Ten months ended July 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities
Net income $ 839,227
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 135,083
Net investment amortization 17,270
Net deferred loan fees (24,281)
Net gains on securities (13,613)
Deferred taxes (8,728)
Provision for loan loss 20,000
Changes in:
Accrued interest receivable 190,406
Accrued interest payable 59,426
Other assets and liabilities 64,450
------------
Total adjustments 440,013
------------
Net cash from operating activities 1,279,240
------------
Cash flows from investing activities
Proceeds from sales and maturities of investment securities 8,887,833
Purchase of held to maturity investment securities (854,586)
Purchase of available for sale investment securities (12,018,151)
Net decrease in loans 1,895,124
Loans purchased (1,227,700)
Property and equipment expenditures (255,878)
------------
Net cash from investing activities (3,573,358)
------------
Cash flows from financing activities
Net increase in deposit accounts 5,445,639
Principal payment on note (120,000)
Dividends paid (112,359)
------------
Net cash from financing activities 5,213,280
------------
Net change in cash and cash equivalents 2,919,162
Cash and cash equivalents at beginning of year 3,294,156
------------
Cash and cash equivalents at end of year $ 6,213,318
============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 6
UNION BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of the Corporation are based on generally
accepted accounting principles and conform to general practices within the
banking industry. The following is a description of the more significant
accounting policies followed by the Corporation.
CONSOLIDATION: The consolidated financial statements include the accounts of the
Corporation and its wholly-owned subsidiaries, The Union Bank & Savings Company
(Bank), Union Ohio Brokerage, Inc. and Union Ohio Leasing Corp. Farmers and
Citizens, a wholly-owned subsidiary of The Union Bank & Savings Company, is a
real estate company which leases a branch office to the Bank. All significant
intercompany accounts and transactions have been eliminated.
ESTIMATES: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
INVESTMENT SECURITIES, AVAILABLE FOR SALE: Available for sale securities are
reported at fair value. Unrealized holding gains and losses, net of tax, are
reported as a separate component of shareholders' equity until realized. Gains
and losses on the sale of available for sale securities are determined using the
specific identification method. Premiums and discounts are recognized in
interest income over the period to maturity using the effective yield method.
INVESTMENT SECURITIES, HELD TO MATURITY: Securities held to maturity are stated
at cost, adjusted for amortization of premiums and accretion of discounts.
Management has the ability and intent to hold these securities until maturity.
Premium amortization is deducted from, and discount accretion is added to,
interest income on investment securities using the effective yield method.
INTEREST AND FEES ON LOANS: Interest income from loans is computed using the
simple interest method and is credited to income daily. The accrual of interest
on impaired loans is discontinued, in management's opinion, when the borrower
may be unable to meet payments as they become due. When interest accrual is
discontinued, all unpaid accrued interest is reversed. Interest income is
subsequently recognized only to the extent cash payments are received.
Loan origination fees and certain loan origination costs are deferred and
recognized in interest income over the lives of the related loans or leases.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Bank, in the normal
course of business, makes commitments to extend credit and guarantees which are
not reflected in the financial statements. See Note 8 for a summary of these
financial instruments.
(Continued)
<PAGE> 7
UNION BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
CONCENTRATION OF CREDIT RISK: The Bank grants lease financing, commercial, real
estate and installment loans to customers mainly in north central Ohio. Real
estate mortgages make up approximately 72% of the loan portfolio and are secured
primarily by first and second mortgages on residential real estate, business
real estate and agricultural real estate. Commercial loans include loans secured
by business assets and agricultural loans secured by crops and equipment.
Commercial loans make up approximately 12% of the loan portfolio and these loans
are expected to be repaid from cash flow from operations of the borrower. At
July 31, 1996, approximately 10% of the total loans relate to the agriculture
industry.
ALLOWANCE FOR LOAN LOSS: The allowance for loan loss, which is reported as a
deduction from loans, is available for loan charge-offs. This allowance is
increased by provisions charged to earnings and is reduced by loan charge-offs,
net of recoveries. The adequacy of the allowance is based on management's
evaluation of several key factors, including information about specific borrower
situations, their financial position and collateral values, current economic
conditions, changes in the mix and levels of the various types of loans, past
charge-off experience and other pertinent information. The allowance for loan
loss is based on estimates using currently available information. Ultimate
losses may vary from current estimates due to changes in circumstances. These
estimates are reviewed periodically and, as adjustments become necessary, they
are reported in earnings in the periods in which they become known. Charge-offs
are made against the allowance for loan loss when management concludes that loan
amounts are likely to be uncollectible.
PREMISES AND EQUIPMENT: Premises and equipment are stated at cost less
accumulated depreciation. Depreciation is provided principally on the
straight-line method over the estimated useful lives of the assets. Upon the
sale or other disposal of the assets, the costs and related accumulated
depreciation are removed from the accounts and the resulting gain or loss is
recognized. Maintenance and repairs are charged to expense as incurred while
major additions and improvements are capitalized.
OTHER REAL ESTATE: Real estate owned, other than that used in the normal course
of business, is carried at the lower of cost or fair market value. Any reduction
to fair market value at the time of acquisition is accounted for as a loan loss.
Any subsequent reduction in fair market value is recorded as a loss on other
assets.
PENSION PLAN: A trusteed, non-contributory defined benefit pension plan covers
substantially all employees. Funding of the Plan equals or exceeds the minimum
funding requirements as determined by the actuary.
(Continued)
<PAGE> 8
UNION BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
INCOME TAXES: The Corporation files a consolidated federal income tax return.
Deferred income taxes are provided using the liability method for temporary
differences between the financial statement and tax basis of assets and
liabilities. The differences relate primarily to depreciation on premises and
equipment, allowance for loan loss, leases, deferred loan fees and pension
expense.
EARNINGS PER SHARE: Earnings per share are calculated on the basis of the
weighted average number of shares outstanding. The earnings per share were $3.73
in the ten months ended July 31, 1996.
STATEMENT OF CASH FLOWS: The Corporation considers cash and due from banks and
federal funds sold to be "cash equivalents." The Corporation reports net cash
flows for customer loan transactions and deposit transactions. Cash paid for
interest totaled $2,855,063 and cash paid for income taxes totaled $250,000 in
the ten months ended July 31, 1996.
NOTE 2 - REGULATION AND RESTRICTIONS
Union Bancshares Corp. is regulated and supervised by the Federal Reserve Bank.
Funds for the payment of cash dividends by Union Bancshares Corp. are obtained
from dividends received from its subsidiary bank.
Regulations require the approval of the Superintendent of Banks for the Bank's
declaration of dividends that exceed the total of the Bank's net profit for the
year, combined with its retained net profits of the preceding two years, less
any required transfers to surplus. Bank dividends at July 31, 1996 were
restricted to approximately $1,905,000. In addition to these restrictions, as a
practical matter, dividend payments cannot reduce regulatory capital levels
below minimum regulatory guidelines. These restrictions do not presently limit
the Bank from paying normal dividends to the Corporation.
Banking regulations require the Corporation's bank subsidiary to maintain cash
reserves which are unavailable for investment. The amounts of such reserves,
which are included in cash and due from banks in the consolidated balance sheet,
were $657,000 at July 31, 1996.
(Continued)
<PAGE> 9
UNION BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1996
NOTE 3 - INVESTMENT SECURITIES
Debt and equity securities have been classified according to management's
intent. The amortized cost and approximate fair value of investment securities
at July 31, 1996 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Available for sale securities Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury obligations $ 8,494,826 $ 18,881 $ 78,147 $ 8,435,560
Obligations of federal agencies 2,521,420 55,265 2,466,155
States and political subdivisions 508,862 5,316 503,546
Mortgage-backed securities 9,336,902 22,509 85,251 9,274,160
Other debt securities 2,210,051 49,798 16,335 2,243,514
------------ -------- --------- ------------
Total debt securities 23,072,061 91,188 240,314 22,922,935
Equity investments 459,400 459,400
------------ -------- --------- ------------
Total investment securities $ 23,531,461 $ 91,188 $ 240,314 $ 23,382,335
============ ======== ========= ============
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity securities Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Obligations of federal agencies $ 612,394 $ 4,302 $ 7,573 $ 609,123
States and political subdivisions 5,876,616 56,821 37,407 5,896,030
Mortgage-backed securities 372,748 68 372,816
----------- -------- -------- -----------
Total debt securities $ 6,861,758 $ 61,191 $ 44,980 $ 6,877,969
=========== ======== ======== ===========
</TABLE>
The amortized cost and estimated fair value of debt securities at July 31, 1996,
by contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
---Held to Maturity--- ---Available for Sale---
Amortized Fair Amortized Fair
Cost Value Cost Value
---- ----- ---- -----
<S> <C> <C> <C> <C>
Due in one year or less $ 2,199,534 $ 2,208,070 $ 3,498,399 $ 3,514,851
Due in one through five years 2,945,025 2,963,603 5,396,427 5,315,980
Due in five through ten years 1,344,451 1,333,480 2,521,420 2,466,155
Due after ten years 108,862 108,275
Mortgage-backed securities 372,748 372,816 9,336,902 9,274,160
Other debt securities 2,210,051 2,243,514
------------ ----------- ------------ ------------
Total debt securities $ 6,861,758 $ 6,877,969 $ 23,072,061 $ 22,922,935
============ =========== ============ ============
</TABLE>
(Continued)
<PAGE> 10
UNION BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1996
NOTE 3 - INVESTMENT SECURITIES (Continued)
At July 31, 1996, investment securities with an amortized cost of $16,957,231
were pledged to secure deposits.
Proceeds from the sale of investment securities available for sale were
$3,013,465 for the ten months ended July 31, 1996, resulting in gross gains of
$42,274 and gross losses of $28,661.
At July 31, 1996, a net unrealized holding loss of $98,424, net of $50,702 of
federal income taxes, was recognized.
Included in the July 31, 1996 investment securities is one structured note
security with an amortized cost of $184,971 and a fair value of $188,154. This
security was purchased to assist the Corporation in managing interest rate risk.
During December 1995, as permitted by the Financial Accounting Standards Board,
the Corporation transferred investment securities with an amortized cost of
$3,418,959 and an unrealized loss of $17,759 from held to maturity securities to
available for sale securities.
NOTE 4 - LOANS AND LEASE RECEIVABLES
Loans and lease receivables at July 31, 1996 are summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Real Estate $ 44,414,079
Installment 8,569,689
Credit card 460,905
Commercial 7,632,000
Lease finance receivables 467,547
Overdrafts 8,806
-------------
Total loans and lease receivables $ 61,553,026
============
</TABLE>
There were no impaired or non-accrual loans at July 31, 1996.
At July 31, 1996, certain officers, directors and related parties were indebted
to the Bank in the aggregate amount of $311,316.
(Continued)
<PAGE> 11
UNION BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1996
NOTE 5 - ALLOWANCE FOR LOAN LOSS
Changes in the allowance for loan loss are as follows:
<TABLE>
<CAPTION>
<S> <C>
Beginning balance, September 30, 1995 $ 685,343
Provision for loan loss 20,000
Loans charged off (5,155)
Recoveries 10,417
---------
Ending balance, July 31, 1996 $ 710,605
=========
</TABLE>
NOTE 6 - PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, less accumulated depreciation. A
summary of the accounts as of July 31, 1996 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Land and buildings $ 1,898,853
Furniture and equipment 1,179,739
-----------
Total cost 3,078,592
Accumulated depreciation (1,636,114)
----------
Premises and equipment, net $ 1,442,478
===========
</TABLE>
NOTE 7 - INCOME TAX
The federal income tax provision for the period ended July 31, 1996 consists of
the following:
<TABLE>
<CAPTION>
<S> <C>
Current taxes $ 425,434
Deferred taxes (8,728)
---------
Total $ 416,706
=========
</TABLE>
The Corporation's provision for income tax differs from the statutory rates as
follows:
<TABLE>
<CAPTION>
<S> <C>
Tax at statutory rate (34%) $ 427,017
Increase (reduction) in tax resulting from:
Tax-exempt income (93,014)
Non-deductible interest expense 13,022
Other 69,681
--------
Total $ 416,706
=========
</TABLE>
(Continued)
<PAGE> 12
UNION BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1996
NOTE 7 - INCOME TAX (Continued)
The tax effects of each significant temporary difference included in the
deferred taxes are presented below:
<TABLE>
<CAPTION>
<S> <C>
Deferred tax assets:
Allowance for loan loss $ 60,570
Deferred loan fees 39,103
Unrealized loss on available for sale securities 50,702
---------
Total 150,375
---------
Deferred tax liabilities:
Depreciation (31,914)
Leases (36,383)
Pension costs (46,676)
Discount accretion on investment securities (23,295)
Stock dividends (17,374)
Other (23,500)
---------
Total (179,142)
---------
Net deferred tax liability $ (28,767)
=========
</TABLE>
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Bank is a party to financial instruments with off-balance sheet risk in the
normal course of business to meet financial needs of its customers. These
financial instruments include commitments to make loans and lines of credit. The
Bank's exposure to credit loss, in the event of non-performance by the other
party to the financial instrument, for commitments to make loans and lines of
credit is represented by the contractual amount of those instruments. The Bank
follows the same credit policy to make such commitments as is followed for those
loans recorded in the financial statements.
As of July 31, 1996, the Bank had commitments to extend credit approximating
$10,093,478. Since many commitments to make loans expire without being used,
this amount does not necessarily represent future cash commitments. The credit
risk involved is essentially the same as that involved in extending loans to
customers.
The Bank is a defendant in legal actions arising from normal business
activities. Management believes that those actions are without merit or that the
ultimate liability, if any, resulting from these actions will not materially
affect the Bank's financial position.
(Continued)
<PAGE> 13
UNION BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1996
NOTE 9 - PENSION PLAN
The Bank has a defined benefit pension plan covering substantially all
employees. Eligibility requirements are age 20 and one half, with six months of
service. The Bank's funding policy is to contribute annually an amount that can
be deducted for federal income tax purposes using a different actuarial cost
method and different assumption from those used for financial reporting. Plan
assets primarily include U.S. Government obligations, listed stocks and cash
surrender value of life insurance policies.
The unrecognized transition asset is being amortized on a straight-line basis
over the estimated average remaining service period of plan participants of
16.94 years. The unrecognized prior service cost originated in 1990 by an
amendment to the benefit formula which increased the benefit percentage. Prior
service costs are to be amortized over the average remaining service period of
active employees.
The weighted average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the projected benefit
obligations were 7% and 4%, respectively. The expected long-term rate of return
on assets was 7%. A contribution of $156,281 was made to the Plan for the plan
year beginning October 1, 1995.
The funded status and the prepaid pension cost recognized in the Corporation's
balance sheet at July 31 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Actuarial present value of benefit obligations:
Vested benefits $ 1,237,200
Nonvested benefits 4,000
-----------
Accumulated benefit obligations $ 1,241,200
===========
Projected benefit obligation $ 1,764,100
Plan assets at fair value 1,664,400
-----------
Plan assets less than projected benefit obligation (99,700)
Unrecognized net loss 161,500
Unrecognized transition asset (91,700)
Unrecognized prior service cost 167,200
-----------
Prepaid pension $ 137,300
===========
</TABLE>
(Continued)
<PAGE> 14
UNION BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1996
NOTE 9 - PENSION PLAN (Continued)
Net pension expense for the seven month period ending July 31, 1996 is comprised
of the following components:
<TABLE>
<CAPTION>
<S> <C>
Service cost for benefits earned during the year $ 40,034
Interest cost on projected benefit obligation 62,157
Return on plan assets (62,305)
Net amortization of deferred items (3,906)
---------
Net pension cost $ 35,980
=========
</TABLE>
NOTE 10 - EMPLOYMENT CONTRACTS
The Corporation has employment contracts with certain officers which extend
until September 1998. The approximate minimum payments under these contracts are
as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 229,000
1997 238,000
1998 185,000
---------
$ 652,000
=========
</TABLE>
As a result of the merger described in Note 12, the contracts were accepted by
Croghan Bancshares, Inc. The contracts can be terminated if certain specific
events occur.
NOTE 11 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments at July 31, 1996:
CASH AND CASH EQUIVALENTS: The carrying amounts of cash and cash equivalents
approximate the fair value.
INVESTMENT SECURITIES: Fair values of investment securities are based on quoted
market prices. If a quoted market price is not available, fair value is
estimated using quoted market prices for similar instruments.
(Continued)
<PAGE> 15
UNION BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1996
NOTE 11 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
LOANS: For certain homogeneous categories of variable rate loans and short-term
single payment notes, the outstanding balance is a reasonable estimate of fair
value. The fair value of other types of loans is estimated by discounting future
cash flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining maturities.
DEPOSIT LIABILITIES: The fair value of demand deposits, savings accounts and
certain money market deposits is the amount payable on demand at July 31, 1996.
The fair value of fixed maturity time deposits is estimated using the rates
currently offered for deposits of similar remaining maturities.
OTHER: The fair value of commitments to extend credit is determined to be the
contract amount since these financial instruments generally represent
commitments at existing rates.
The estimated fair values of financial instruments at July 31, 1996 are as
follows:
<TABLE>
<CAPTION>
Carrying Fair
Value Value
----- -----
<S> <C> <C>
Financial Assets:
Cash and cash equivalents $ 6,213,318 $ 6,213,318
Investment securities 30,244,093 30,260,304
Loans, net 60,842,421 60,840,575
----------- -----------
Total $97,299,832 $97,314,197
=========== ===========
Financial Liabilities:
Deposits $89,911,440 $90,475,054
=========== ===========
Unrecognized Financial Instruments:
Commitments to extend credit $10,093,478 $10,093,478
=========== ===========
</TABLE>
The fair value estimates of financial instruments do not reflect any premium or
discount that could result from offering for sale at one time the entire
holdings of a particular financial instrument. The fair values also do not
reflect the value of anticipated future business or the value of assets and
liabilities not considered financial instruments.
NOTE 12 - MERGER AGREEMENT
Under the terms of a definitive agreement approved by the Board of Directors of
each corporation in February 1996, Union Bancshares Corp. agreed to merge with a
newly formed subsidiary of Croghan Bancshares, Inc. The merger occurred on
August 1, 1996. Under the agreement, each outstanding share of common stock of
Union Bancshares Corp. will be exchanged for $90.01 in cash from Croghan
Bancshares, Inc.
<PAGE> 1
<TABLE>
EXHIBIT 99.3
CROGHAN BANCSHARES, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
July 31, 1996
<CAPTION>
PRO FORMA
CROGHAN UNION ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents........................ $ 14,482,661 $ 6,213,318 $ (3,399,906)(1) $ 17,296,073
Investment securities:
Available-for-sale............................ 25,994,293 23,382,335 (6,300,000)(1) 43,076,628
Held-to-maturity.............................. 34,838,310 6,861,758 16,211 (2) 41,716,279
Loans and leases receivable...................... 163,313,853 61,553,026 (1,846)(2) 224,865,033
Less allowance for possible loan losses....... (2,596,959) (710,605) -- (3,307,564)
Premises and equipment, net...................... 4,229,490 1,442,478 2,296,507 (2) 7,968,475
Accrued interest receivable...................... 2,009,021 918,154 -- 2,927,175
Goodwill......................................... -- -- 9,568,723 (2) 9,568,723
Other............................................ 1,215,962 441,954 (237,342)(2) 1,420,574
------------ ------------ ------------ ------------
TOTAL ASSETS........................................ $243,486,631 $100,102,418 $ 1,942,347 $345,531,396
============ ============ ============ ============
LIABILITIES
Deposits......................................... $209,326,612 $ 89,911,440 $ 6,100,000 (1) $305,901,666
563,614 (2)
Note payable..................................... -- -- 4,500,000 (1) 4,500,000
Borrowed funds................................... 3,636,910 -- -- 3,636,910
Accrued interest, taxes and
other expenses................................ 1,542,362 456,217 513,494 (2) 2,512,073
------------ ------------ ------------ ------------
Total liabilities.......................... 214,505,884 90,367,657 11,677,108 316,550,649
------------ ------------ ------------ ------------
STOCKHOLDERS' EQUITY
Common stock..................................... 7,931,575 1,124,505 (1,124,505)(2) 7,931,575
Surplus.......................................... 8,989,295 1,229,152 (1,229,152)(2) 8,989,295
Retained earnings................................ 12,042,606 7,483,188 (7,483,188)(2) 12,042,606
Net unrealized gain (loss)
on AFS securities............................. 17,271 (98,424) 98,424 (2) 17,271
Less treasury stock.............................. -- (3,660) 3,660 (2) --
------------ ------------ ------------ ------------
Total stockholders' equity................. 28,980,747 9,734,761 (9,734,761) 28,980,747
------------ ------------ ------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY............................. $243,486,631 $100,102,418 $ 1,942,347 $345,531,396
============ ============ ============ ============
<FN>
Notes:
(1) Decrease in cash and cash equivalents represents cash paid to Union shareholders ($20,226,868) and acquisition costs
($73,038), less $6,300,000 proceeds from sale of securities, $4,500,000 proceeds from note payable, and estimated
$6,100,000 to be deposited by shareholders with Union.
(2) Adjustment of Union assets and liabilities to fair value, elimination of Union's equity and recognition of goodwill. The
following table summarizes the goodwill computation.
Purchase price - cash $20,299,906
Net fair value of Union's assets 10,731,183
-----------
Goodwill $ 9,568,723
===========
</TABLE>
<PAGE> 2
<TABLE>
CROGHAN BANCSHARES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Seven months ended July 31, 1996
<CAPTION>
PRO FORMA
CROGHAN UNION ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net interest income................................. $ 6,231,113 $ 2,374,907 $ (673,923)(1) $ 7,932,097
Provision for loan losses........................... (45,000) (5,000) -- (50,000)
Non-interest income................................. 747,307 203,102 -- 950,409
(71,766)(2)
Non-interest expenses............................... (4,167,651) (1,725,340) (345,784)(3) (6,310,541)
------------ ------------ ------------ ------------
Income before income taxes.................... 2,765,769 847,669 (1,091,473) 2,521,965
Income taxes........................................ (861,109) (289,241) 253,534 (4) (896,816)
------------ ------------ ------------ ------------
Net income.......................................... $ 1,904,660 $ 558,428 $ (837,939) $ 1,625,149
============ ============ ============ ============
Income per common share............................. $ 3.00 $ 2.56
======= =======
Weighted average common
shares outstanding............................... 634,526 634,526
======= =======
<FN>
Notes:
(1) Elimination of interest income on the portion of purchase price resulting from payment of cash and sale of investment
securities ($317,620), increased interest expense from $4,500,000 note payable borrowing from NBD Bank and additional
deposits left at Union ($339,623), plus the net amortization of the loan, investment securities and deposit market value
adjustments ($16,680).
(2) Recognition of additional depreciation expense on premises and equipment.
(3) Recognition of goodwill amortization over a period of 15 years.
(4) Income taxes provided at the rate of 34% for all adjustments except goodwill.
</TABLE>
<PAGE> 3
<TABLE>
CROGHAN BANCSHARES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year ended December 31, 1995
<CAPTION>
PRO FORMA
CROGHAN UNION ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net interest income................................. $ 10,666,951 $ 4,019,255 $ (961,626)(1) $ 13,724,580
Provision for loan losses........................... (120,000) (60,056) -- (180,056)
Non-interest income................................. 1,126,032 274,673 -- 1,400,705
(127,530)(2)
Non-interest expenses............................... (6,960,013) (2,684,362) (536,993)(3) (10,308,898)
------------ ------------ ------------ ------------
Income before income taxes.................... 4,712,970 1,549,510 (1,626,149) 4,636,331
Income taxes........................................ (1,443,732) (423,446) 370,313 (4) (1,496,865)
------------ ------------ ------------ ------------
Net income.......................................... $ 3,269,238 $ 1,126,064 $ (1,255,836) $ 3,139,466
============ ============ ============ ============
Income per common share............................. $ 5.15 $ 4.95
======= =======
Weighted average common
shares outstanding............................... 634,526 634,526
======= =======
<FN>
Notes:
(1) Elimination of interest income on the portion of purchase price resulting from payment of cash and sale of investment
securities ($467,035), increased interest expense from $4,500,000 note payable borrowing from NBD Bank and additional
deposits left at Union ($575,925), reduced by the net amortization of the loan, investment securities and deposit
market value adjustments ($81,334).
(2) Recognition of additional depreciation expense on premises and equipment.
(3) Recognition of goodwill amortization over a period of 15 years.
(4) Income taxes provided at the rate of 34% for all adjustments except goodwill.
</TABLE>
