<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
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
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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)
This document contains 25 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 $3,500,000
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, estimated at
approximately $9,300,000 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 approximately
$3,700,000 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 are attached hereto as Exhibit No. 99.1. In lieu of providing
Union's unaudited interim financial statements as of June 30, 1996, the
Corporation intends to file Union's audited financial statements as of July 31,
1996. The Corporation believes that it is impracticable to provide the July 31,
1996 interim financial statements by the due date of this filing and, in
accordance with Item 7(a)(4) of Form 8-K, the Corporation intends to file such
information as an amendment to this Form 8-K as soon as practicable, but not
later than October 15, 1996 (i.e., no later than 60 days from the due date of
this Form 8-K filing).
<PAGE> 3
CROGHAN BANCSHARES, INC.
ITEM 7(b) - PRO FORMA FINANCIAL INFORMATION
The Corporation believes that it is impracticable to provide the required pro
forma information by the due date of this filing. In accordance with Item
7(a)(4) of Form 8-K, the Corporation intends to file such information as an
amendment to this Form 8-K as soon as practicable, but not later than October
15, 1996 (i.e., no later than 60 days from the due date of this Form 8-K
filing).
ITEM 7(c) - EXHIBITS
The following exhibits are filed with or incorporated by reference in this
filing:
<TABLE>
<CAPTION>
Regulation S-B Page
Exhibit Number Document Number
-------------- -------- ------
<C> <C> <C>
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, 5 - 9
1996 between Croghan Bancshares,
Inc. and Union Bancshares Corp.
99.1 Financial statements of Union 10 - 25
Bancshares Corp. and Subsidiaries
- December 31, 1995 and 1994
<FN>
* 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.
</TABLE>
<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: August 12, 1996 by: /s/ Thomas F. Hite
----------------- -------------------------------
Thomas F. Hite, President
Date: August 12, 1996 by: /s/ Allan E. Mehlow
----------------- -------------------------------
Allan E. Mehlow, Treasurer and
Principal Financial Officer
<PAGE> 1
EXHIBIT 2.2
-----------
AGREEMENT OF MERGER
-------------------
This Agreement of Merger (sometimes hereinafter called
the "MERGER AGREEMENT"), made to be effective as of March 27, 1996, by and among
Croghan Bancshares, Inc., an Ohio corporation (sometimes hereinafter called
"CROGHAN"); Union Bancshares Corp., an Ohio corporation (sometimes hereinafter
called "UNION"); and Croghan Acquisition Corp., an Ohio corporation (sometimes
hereinafter called "ACQUISITION CORP.") (UNION and ACQUISITION CORP. sometimes
hereinafter collectively referred to as the "CONSTITUENT CORPORATIONS");
WITNESSETH:
WHEREAS, CROGHAN is the sole shareholder of ACQUISITION
CORP.; and
WHEREAS, the Boards of Directors of CROGHAN and each of
the CONSTITUENT CORPORATIONS deem it advisable and in the best interests of
their respective corporations and their shareholders that the CONSTITUENT
CORPORATIONS be merged in a transaction through which UNION would be the
surviving corporation; ACQUISITION CORP. would cease to have a separate
corporate existence; and persons presently holding shares of UNION would receive
cash in substitution therefor; and
WHEREAS, the Boards of Directors of CROGHAN and of each
of the CONSTITUENT CORPORATIONS have approved this MERGER AGREEMENT by
resolutions adopted by them;
NOW, THEREFORE, in consideration of the premises and of
their mutual covenants and agreements, it is hereby agreed by and among CROGHAN
and the CONSTITUENT CORPORATIONS that the terms of the merger contemplated by
this MERGER AGREEMENT (sometimes hereinafter called the "MERGER") and the mode
of carrying the MERGER into effect shall be as follows:
ARTICLE ONE
The Surviving Corporation
-------------------------
SECTION 1.01. At the time when the MERGER shall become
effective (sometimes hereinafter called the "MERGER DATE"), ACQUISITION CORP.
will merge into UNION and UNION will be the continuing and surviving corporation
in the MERGER, will continue to exist under the laws of the State of Ohio, and
will be the only one of the CONSTITUENT CORPORATIONS to continue its separate
corporate existence after the MERGER DATE. As used in this MERGER AGREEMENT,
the term "SURVIVING CORPORATION" refers to UNION at and after the MERGER DATE.
SECTION 1.02. The name of the SURVIVING CORPORATION
shall be Union Bancshares Corp.
SECTION 1.03. The articles of ACQUISITION CORP. existing
at the MERGER DATE shall be the articles of the SURVIVING CORPORATION until
amended in accordance with law.
SECTION 1.04. The regulations of ACQUISITION CORP.
existing at the MERGER DATE shall be the regulations of the SURVIVING
CORPORATION until amended in accordance with law.
SECTION 1.05. The number of directors of the SURVIVING
CORPORATION shall be 4. The following persons:
Thomas F. Hite
Albert C. Nichols
James K. Walter
Allan E. Mehlow
<PAGE> 2
shall be the only directors of the SURVIVING CORPORATION until changed in
accordance with law.
ARTICLE TWO
Distributions To Shareholders
-----------------------------
SECTION 2.01. The manner and basis of making
distributions to shareholders of UNION and ACQUISITION CORP. in extinguishment
of and in substitution for their shares of UNION and ACQUISITION CORP. shall be
as set forth in this Article Two.
SECTION 2.02. At the MERGER DATE and as a result of the
MERGER, each of the 100 common shares of ACQUISITION CORP., par value $1.00 per
share ("ACQUISITION CORP. Common Shares"), issued and outstanding immediately
prior to the MERGER DATE shall, automatically and without further act of the
CONSTITUENT CORPORATIONS or the holder thereof, be extinguished. In substitution
for all of the ACQUISITION CORP. Common Shares, CROGHAN as the sole shareholder
of ACQUISITION CORP. shall be entitled to receive from the SURVIVING CORPORATION
all of the COMMON SHARES of the SURVIVING CORPORATION.
SECTION 2.03. (a) At the MERGER DATE and as a result of
the MERGER, each of the issued common shares, par value $5.00 per share ("Common
Shares"), of UNION shall, automatically and without further act of either of the
CONSTITUENT CORPORATIONS or of the holder thereof, be extinguished. In
substitution for each such Common Share of UNION, upon compliance with Section
2.03 and, where applicable, Sections 2.04 and 2.05 of this MERGER AGREEMENT, the
holder of each Common Share of UNION so extinguished shall be entitled to
receive from CROGHAN cash in the amount calculated as follows ("CASH PAYMENTS"):
(i) The total amount of cash to be paid by
CROGHAN to former holders of UNION Common
Shares shall equal: (a) $19,500,000; (b)
plus the amount equal to UNION's net income
or minus the amount equal to UNION's net
loss (determined in accordance with
generally accepted accounting principles but
excluding any taxes resulting from the
MERGER) after September 30, 1995, and
through the effective date of the MERGER set
forth in Article Four ("Effective Date");
and (c) minus the amount equal to the
aggregate amount of dividends paid by UNION
after September 30, 1995 and on or prior to
the Effective Date to shareholders of UNION
or dividends declared by UNION payable to
shareholders of record on or before the
Effective Date.
(ii) The amount to be paid by CROGHAN for each
Common Share of UNION so extinguished shall
equal the total amount of cash calculated in
accordance with the preceding paragraph (i)
divided by the total number of issued and
outstanding Common Shares of UNION on the
Effective Date (not including any UNION
Common Shares held in its treasury).
(b) Within ten (10) days after the Effective Date,
CROGHAN shall send a transmittal form ("TRANSMITTAL FORM") to each person who,
as a result of the MERGER, holds of record one or more certificates which
theretofore represented one or more UNION Common Shares that have been
extinguished as a result of the MERGER. The TRANSMITTAL FORM must be returned to
CROGHAN (or to an agent designated for such purpose by it) along with the
surrender of each UNION Common Share certificate held by such holder. Within ten
(10) days after such surrender, CROGHAN shall deliver to such holder in exchange
therefor the CASH PAYMENTS (without interest) that such person is entitled to
receive upon such surrender in accordance with the terms of this MERGER
<PAGE> 3
AGREEMENT.
SECTION 2.04. If there shall be delivered to CROGHAN (or to
an agent designated for such purpose by it) by any person who is unable to
produce any such certificate for UNION Common Shares for surrender to CROGHAN
(or to such agent) in accordance with Section 2.03:
(a) Evidence to the satisfaction of CROGHAN that such
certificate has been lost, wrongfully taken, or
destroyed;
(b) Such security or indemnity as may be requested by
CROGHAN to save it harmless; and
(c) Evidence to the satisfaction of CROGHAN that such
person was the owner of the shares theretofore
represented by each such certificate claimed by him
to be lost, wrongfully taken or destroyed and that he
is the person who would be entitled to present such
certificate for exchange pursuant to this MERGER
AGREEMENT;
then CROGHAN, in the absence of actual notice to it that any shares of UNION
theretofore represented by any such certificate have been acquired by a bona
fide purchaser, shall deliver to such person the amount in cash that such person
would have been entitled to receive upon surrender of each such lost, wrongfully
taken, or destroyed certificate.
SECTION 2.05. If any CASH PAYMENTS as provided in Section 2.03
of this MERGER AGREEMENT are to be delivered to a person other than the person
in whose name such surrendered certificate was registered on the books of UNION
at the MERGER DATE, is shall be a condition precedent to the delivery of such
amount that such surrendered certificate shall be properly endorsed and
otherwise in proper form for transfer and accompanied by such documents as may
reasonably be required by CROGHAN, in its discretion, and that the person
surrendering such certificate pay to CROGHAN, (or to an agent designated for
such purpose by it) any transfer or other taxes required by reason of the
related payment of such amount (or transfer of UNION Common Shares prior to the
MERGER) to a person other than the registered holder of such surrendered
certificate or establish to the satisfaction of CROGHAN (or of such agent)
that such tax has been paid or is not payable.
SECTION 2.06. CROGHAN may from time to time, in the case of
one or more persons, waive one or more of the rights provided to it in this
Article Two of this MERGER AGREEMENT to withhold certain payments, deliveries
and distributions; and no such waiver shall constitute a waiver of its rights
thereafter to withhold any such payment, delivery or distribution in the case of
any person.
SECTION 2.07. Anything contained in this MERGER AGREEMENT or
elsewhere to the contrary notwithstanding, if any person shall perfect
dissenters' rights in respect of one or more Common Shares of UNION in
accordance with Ohio Revised Code 1701.85 (sometimes hereinafter called the
"STATUTE"), then:
(a) Each such UNION Common Share shall nevertheless be
deemed to be extinguished at the MERGER DATE as
provided elsewhere in this MERGER AGREEMENT;
(b) Each person perfecting such dissenter's rights shall
thereafter have only such rights (and shall have such
obligations) as are provided in the STATUTE, and
[unless such rights and such obligations of such
person are terminated in accordance with division (D)
of 1701.85] CROGHAN shall not be required to deliver
any CASH PAYMENTS
<PAGE> 4
to such person in substitution for each such Common
Share of UNION in accordance with this MERGER
AGREEMENT.
No person entitled to relief as a dissenting shareholder shall be entitled to
submit a TRANSMITTAL FORM and any TRANSMITTAL FORM submitted by a dissenting
shareholder shall be invalid.
SECTION 2.08. No CASH PAYMENTS deliverable by CROGHAN as
provided elsewhere in this MERGER AGREEMENT shall be delivered by CROGHAN until
the holder of such Common Shares or person entitled to such payment shall have
complied with Section 2.03 and, where applicable, Sections 2.04 and 2.05 of this
MERGER AGREEMENT.
ARTICLE THREE
Termination And Abandonment And Amendment
-----------------------------------------
SECTION 3.01. The MERGER shall be terminated and abandoned at
any time prior to the MERGER DATE without notice of such action to the
CONSTITUENT CORPORATIONS if the Plan and Agreement of Reorganization, dated
February 15, 1996, between UNION and CROGHAN is terminated.
SECTION 3.02. From time to time and at any time prior to the
MERGER DATE, this MERGER AGREEMENT may be amended by an agreement in writing
executed in the same manner as this MERGER AGREEMENT, after authorization of
such action by the Boards of Directors of CROGHAN and the CONSTITUENT
CORPORATIONS; but no such amendment shall materially and adversely alter or
change the rights and obligations of shareholders of the CONSTITUENT
CORPORATIONS without their approval or be prohibited by law.
ARTICLE FOUR
Effective Date Of Merger
------------------------
SECTION 4.01. The MERGER shall become effective at the close
of regular business hours of UNION on the date of the filing in the office of
the Secretary of State of Ohio of a Certificate of Merger in the form required
by Ohio Revised Code 1701.81.
ARTICLE FIVE
Accounting Provision
--------------------
SECTION 5.01. The assets, liabilities, stated capital, capital
surplus, and undivided profits of the SURVIVING CORPORATION shall be determined
in accordance with the purchase method of accounting.
SECTION 5.02. The assets and liabilities of the SURVIVING
CORPORATION shall be adjusted to fair values at the MERGER DATE.
SECTION 5.03. The results of operations of the SURVIVING
CORPORATION after the MERGER DATE shall be reflected prospectively in its
financial statements and on a consolidated basis in the consolidated financial
statements of CROGHAN.
ARTICLE SIX
Miscellaneous
-------------
SECTION 6.01. No director, officer, agent, or employee of
either of the CONSTITUENT CORPORATIONS shall receive any fee, commission,
compensation, or other valuable consideration whatsoever for aiding, promoting,
or assisting the MERGER except that accountants and attorneys retained by either
of the CONSTITUENT CORPORATIONS shall receive reasonable fees for their
professional services.
SECTION 6.02. This MERGER AGREEMENT may be executed in one or
more counterparts, each of which shall be deemed to be a duplicate original
<PAGE> 5
but all of which taken together shall be deemed to constitute a single
instrument.
SECTION 6.03. The captions contained in this MERGER AGREEMENT
are included only for convenience of reference and do not define, limit,
explain, or modify this MERGER AGREEMENT or its interpretation, construction, or
meaning and are in no way to be construed a part of this MERGER AGREEMENT.
SECTION 6.04. This MERGER AGREEMENT shall inure to the benefit
of and be binding upon the respective successors and assigns (including
successive, as well as immediate, successors and assigns) of the parties hereto.
SECTION 6.05. The number and gender of each pronoun used in
this MERGER AGREEMENT shall be construed to mean such number and gender as the
context, circumstances, or its antecedent may require.
SECTION 6.06. This MERGER AGREEMENT shall be governed by and
construed in accordance with the laws of the State of Ohio.
IN WITNESS WHEREOF, this MERGER AGREEMENT has been executed on
behalf of the CONSTITUENT CORPORATIONS by their officers duly authorized in the
premises.
ATTEST: UNION BANCSHARES CORP.
By: /s/ Rosemary Schaffer BY: /s/ J.R. Pollock
---------------------------- ---------------------------
Rosemary Schaffer, Secretary J.R. Pollock, President
ATTEST: CROGHAN BANCSHARES, INC.
By: /s/ James K. Walter By: /s/ Thomas Hite
---------------------------- ---------------------------
James K. Walter, Secretary Thomas Hite, President
ATTEST: CROGHAN ACQUISITION CORP.
By: /s/ James K. Walter By: /s/ Thomas Hite
---------------------------- ---------------------------
James K. Walter, Secretary Thomas Hite, President
<PAGE> 1
EXHIBIT 99.1
------------
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 sheets of Union Bancshares
Corp. and Subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for the years then ended. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Union Bancshares
Corp. and Subsidiaries as of December 31, 1995 and 1994, and the results of its
operations and cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ Weldon Jordan and Associates
--------------------------------
Weldon Jordan and Associates
January 19, 1996
<PAGE> 2
UNION BANCSHARES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks (Note 2) $ 3,401,519 $ 2,851,292
Federal funds sold 3,100,000
------------ ------------
Cash and cash equivalents (Note 1) 6,501,519 2,851,292
Investment securities (Note 3) 27,579,683 24,224,646
Loans and lease receivables (Note 4) 60,967,441 61,529,272
Less: allowance for loan loss (Note 5) (697,149) (688,051)
------------ ------------
Net loans and lease receivables 60,270,292 60,841,221
Premises and equipment (Note 6) 1,538,136 1,425,506
Other real estate owned (Note 1) 31,320 31,320
Accrued interest receivable 986,734 879,931
Other assets 435,745 129,168
------------ ------------
Total assets $ 97,343,429 $ 90,383,084
============ ============
LIABILITIES
Deposits
Non-interest bearing demand $ 6,443,757 $ 5,534,965
Interest-bearing demand 23,033,117 23,682,302
Savings 15,806,417 15,726,488
Time deposits, $100,000 and greater 12,476,749 9,378,743
Other time 29,754,586 26,491,396
------------ ------------
Total deposits 87,514,626 80,813,894
Note payable 120,000
Federal funds purchased 950,000
Accrued interest payable 318,481 199,882
Other liabilities (Note 7,9) 106,940 53,386
------------ ------------
Total liabilities 87,940,047 82,137,162
------------ ------------
SHAREHOLDERS' EQUITY
Common stock, $5 par value; 300,000 shares authorized;
224,901 shares issued 1,124,505 1,124,505
Capital surplus 1,229,152 1,229,152
Retained earnings (Note 2) 6,917,421 6,016,075
Unrealized gain (loss) on available for sale securities 135,964 (120,150)
------------ ------------
Total before treasury stock 9,407,042 8,249,582
Less treasury stock, at cost; 183 shares (3,660) (3,660)
------------ ------------
Total shareholders' equity 9,403,382 8,245,922
------------ ------------
Total liabilities and shareholders' equity $ 97,343,429 $ 90,383,084
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 3
UNION BANCSHARES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Interest income
Interest and fees on loans and leases $ 5,550,986 $5,049,002
Interest and dividends on taxable securities 1,164,161 1,045,527
Interest on tax exempt securities 339,044 295,577
Other interest 183,991 48,985
----------- ----------
Total interest income 7,238,182 6,439,091
----------- ----------
Interest expense
Interest on demand deposits 671,016 615,425
Interest on savings deposits 440,560 452,038
Interest on time deposits 2,089,781 1,574,159
Interest on borrowed funds 17,570 19,358
----------- ----------
Total interest expense 3,218,927 2,660,980
----------- ----------
Net interest income 4,019,255 3,778,111
Provision for loan loss (Note 5) 60,056 35,000
----------- ----------
Net interest income after provision for loan loss 3,959,199 3,743,111
----------- ----------
Non-interest income
Service charges and fees 223,327 215,334
Security gains (losses), net (39,928) 23,195
Other income 91,274 67,918
----------- ----------
Total non-interest income 274,673 306,447
----------- ----------
Non-interest expense
Salaries and employee benefits (Note 9) 1,336,322 1,270,208
Occupancy, furniture and equipment 357,171 370,816
Data processing expense 175,105 165,675
Other taxes 138,481 133,372
Insurance 115,795 212,657
Professional services 71,778 59,956
Other expenses 489,710 487,822
----------- ----------
Total non-interest expense 2,684,362 2,700,506
----------- ----------
Income before income taxes 1,549,510 1,349,052
Provision for income tax (Note 7) 423,446 364,664
----------- ----------
Net income $ 1,126,064 $ 984,388
=========== ==========
Earnings per common share (Note 1) $ 5.01 $ 4.38
=========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
<TABLE>
UNION BANCSHARES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended December 31, 1995 and 1994
<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> <C>
Balance, January 1, 1994 $ 1,124,505 $ 1,229,152 $ 5,233,933 $ -0- $ (3,660) $ 7,583,930
Net income 984,388 984,388
Cash dividends ($.90 per share) (202,246) (202,246)
Unrealized loss, net of taxes (120,150) (120,150)
----------- ---------- ----------- --------- -------- -----------
Balance, December 31, 1994 1,124,505 1,229,152 6,016,075 (120,150) (3,660) 8,245,922
Net income 1,126,064 1,126,064
Cash dividends ($1.00 per share) (224,718) (224,718)
Change in unrealized gain (loss),
net of taxes 256,114 256,114
----------- ---------- ----------- --------- -------- -----------
Balance, December 31, 1995 $ 1,124,505 $1,229,152 $ 6,917,421 $ 135,964 $ (3,660) $ 9,403,382
=========== ========== =========== ========= ======== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE> 5
UNION BANCSHARES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities
Net income $ 1,126,064 $ 984,388
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 144,927 144,728
Net investment amortization (accretion) (11,551) 126,953
Net deferred loan fees (20,245) (8,674)
Net (gains) losses on securities 39,928 (23,195)
Deferred taxes 58,231 52,129
Provision for loan loss 60,056 35,000
Changes in:
Accrued interest receivable (106,803) (88,060)
Accrued interest payable 118,599 37,614
Other assets and liabilities (442,543) (133,849)
----------- ------------
Total adjustments (159,401) 142,646
----------- ------------
Net cash from operating activities 966,663 1,127,034
----------- ------------
Cash flows from investing activities
Proceeds from sales and maturities of investment
securities 6,430,601 13,475,497
Purchase of held to maturity investment securities (1,385,094) (7,323,509)
Purchase of available for sale investment securities (8,041,518) (3,085,918)
Net decrease (increase) in loans 929,705 (4,873,243)
Loans purchased (705,100) (4,478,949)
Loans sold 306,513 646,876
Property and equipment expenditures (257,557) (120,886)
----------- ------------
Net cash from investing activities (2,722,450) (5,760,132)
----------- ------------
Cash flows from financing activities
Net increase in deposit accounts 6,700,732 3,957,266
Principal payment on note (120,000) (100,000)
Increase (decrease) in federal funds purchased (950,000) 950,000
Dividends paid (224,718) (202,246)
----------- ------------
Net cash from financing activities 5,406,014 4,605,020
----------- ------------
Net change in cash and cash equivalents 3,650,227 (28,078)
Cash and cash equivalents at beginning of year 2,851,292 2,879,370
----------- ------------
Cash and cash equivalents at end of year $ 6,501,519 $ 2,851,292
=========== ============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 6
UNION BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
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 a method which approximates
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 a method which approximates 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 when, in management's opinion, 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
December 31, 1995 and 1994
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 71% 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 14% of the loan portfolio and these loans
are expected to be repaid from cash flow from operations of the borrower. At
December 31, 1995, approximately 11% 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
December 31, 1995 and 1994
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, 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 $5.01
in 1995 and $4.38 in 1994 using 224,718 weighted average shares.
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 $3,100,328 and $2,623,366 and cash paid for income taxes
totaled $360,000 and $326,800 during 1995 and 1994, respectively.
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 December 31, 1995 were
restricted to approximately $2,021,000. 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 $655,000 at December 31, 1995.
(Continued)
<PAGE> 9
UNION BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
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 December 31, are as follows:
<TABLE>
<CAPTION>
1995
----
Gross Gross
Amortized Unrealized Unrealized Fair
Available for sale securities Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury obligations $ 9,009,717 $ 80,461 $ 6,636 $ 9,083,542
Obligations of federal agencies 3,161,494 46,622 43,901 3,164,215
States and political subdivisions 509,923 6,380 516,303
Mortgage-backed securities 6,053,923 79,723 6,133,646
Other debt securities 1,298,159 42,386 1,340,545
----------- -------- ---------- -----------
Total debt securities 20,033,216 255,572 50,537 20,238,251
Equity investments 448,500 448,500
----------- -------- ---------- -----------
Total investment securities $20,481,716 $255,572 $ 50,537 $20,686,751
=========== ======== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
1995
----
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity securities Cost Gains Losses Value
---------- -------- -------- ----------
<S> <C> <C> <C> <C>
Obligations of federal agencies $ 610,586 $ 1,736 $ 7,933 $ 604,389
States and political subdivisions 5,870,147 139,988 230 6,009,905
Mortgage-backed securities 412,199 11,184 423,383
---------- -------- -------- ----------
Total debt securities $6,892,932 $152,908 $ 8,163 $7,037,677
========== ======== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
1994
----
Gross Gross
Amortized Unrealized Unrealized Fair
Available for sale securities Cost Gains Losses Value
----------- -------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury obligations $ 3,491,614 $ $ 76,059 $ 3,415,555
Obligations of federal agencies 2,747,708 884 40,438 2,708,154
States and political subdivisions 600,000 18,182 581,818
Mortgage-backed securities 4,489,724 14 66,701 4,423,037
Other debt securities 1,338,682 18,436 1,357,118
----------- -------- ---------- -----------
Total debt securities 12,667,728 19,334 201,380 12,485,682
Equity investments 497,886 497,886
----------- -------- ---------- -----------
Total investment securities $13,165,614 $ 19,334 $ 201,380 $12,983,568
=========== ======== ========== ===========
</TABLE>
(Continued)
<PAGE> 10
UNION BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 3 - INVESTMENT SECURITIES (Continued)
<TABLE>
<CAPTION>
1994
----
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity securities Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury obligations $ 2,520,933 $ $ 126,398 $ 2,394,535
Obligations of federal agencies 2,066,807 92,491 1,974,316
States and political subdivisions 6,185,985 32,062 116,943 6,101,104
Mortgage-backed securities 467,353 21,567 445,786
----------- ------- ---------- -----------
Total debt securities $11,241,078 $32,062 $ 357,399 $10,915,741
=========== ======= ========== ===========
</TABLE>
The amortized cost and estimated fair value of debt securities at December 31,
1995, 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 $1,369,541 $1,384,530 $ 2,760,513 $ 2,774,610
Due in one through five years 3,731,136 3,813,578 8,809,842 8,832,776
Due in five through ten years 1,380,056 1,416,186 1,000,856 1,044,060
Due after ten years 109,923 112,614
Mortgage-backed securities 412,199 423,383 6,053,923 6,133,646
Other debt securities 1,298,159 1,340,545
---------- ---------- ----------- -----------
Total debt securities $6,892,932 $7,037,677 $20,033,216 $20,238,251
========== ========== =========== ===========
</TABLE>
At December 31, 1995 and 1994, investment securities with an amortized cost of
$15,506,643 and $12,522,867, respectively, were pledged to secure deposits.
Proceeds from the sale of investment securities available for sale were
$2,732,498 in 1995, resulting in gross gains of $1,880 and gross losses of
$41,808.
At December 31, 1995, a net unrealized holding gain of $135,964, net of $69,071
of federal income taxes, was recognized. At December 31, 1994, a net unrealized
holding loss of $120,150, net of $61,896 of federal income taxes was recognized.
(Continued)
<PAGE> 11
UNION BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 3 - INVESTMENT SECURITIES (Continued)
Included in the December 31, 1995 investment securities are four structured note
securities with an amortized cost of $2,093,879 and a fair value of $2,042,045.
These securities were 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 December 31, 1995 and 1994 are summarized as
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Real Estate $43,416,191 $45,011,411
Installment 8,504,293 6,463,572
Credit card 547,078 539,241
Commercial 8,039,310 9,385,072
Lease finance receivables 431,452 84,380
Overdrafts 29,117 45,596
----------- -----------
Total loans and lease receivables $60,967,441 $61,529,272
=========== ===========
</TABLE>
Nonaccrual loans and loans whose terms have been modified because of the
borrowers' inability to comply with the original repayment terms totaled
$259,819 at December 31, 1994. The reduction of interest income associated with
these loans totaled approximately $24,000 for the year ended December 31, 1994.
There were no impaired loans at December 31, 1995.
At December 31, 1995, certain officers, directors and related parties were
indebted to the Bank in the aggregate amount of $662,539.
NOTE 5 - ALLOWANCE FOR LOAN LOSS
Changes in the allowance for loan loss are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Beginning balance $ 688,051 $ 701,515
Provision for loan loss 60,056 35,000
Loans charged off (62,603) (58,017)
Recoveries 11,645 9,553
--------- ---------
Ending balance $ 697,149 $ 688,051
========= =========
</TABLE>
(Continued)
<PAGE> 12
UNION BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 6 - PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, less accumulated depreciation. A
summary of the accounts as of December 31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Land and buildings $ 1,889,572 $ 1,888,348
Furniture and equipment 1,111,354 909,940
Leasehold improvements 9,281 9,281
----------- -----------
Total cost 3,010,207 2,807,569
Accumulated depreciation (1,472,071) (1,382,063)
----------- -----------
Premises and equipment, net $ 1,538,136 $ 1,425,506
=========== ===========
</TABLE>
NOTE 7 - INCOME TAX
The federal income tax provision for the years ended December 31, 1995 and 1994,
consists of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Current taxes $365,215 $312,535
Deferred taxes 58,231 52,129
-------- --------
Total $423,446 $364,664
======== ========
</TABLE>
The Corporation's provision for income tax differs from the statutory rates as
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Tax at statutory rate (34%) $ 526,833 $ 458,678
Increase (reduction) in tax resulting from:
Tax-exempt income (118,305) (101,341)
Non-deductible interest expense 16,553 10,631
Other (1,635) (3,304)
--------- ---------
Total $ 423,446 $ 364,664
========= =========
</TABLE>
(Continued)
<PAGE> 13
UNION BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 7 - INCOME TAX (Continued)
The tax effects of each significant temporary difference included in the
deferred taxes are presented below:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax assets:
Allowance for loan loss $ 58,869 $ 55,776
Deferred loan fees 47,603 55,828
Unrealized loss on available for sale securities 61,896
Non-accrual loans 8,366
--------- ---------
Total 106,472 181,866
--------- ---------
Deferred tax liabilities:
Depreciation (28,970) (37,002)
Lease temporary differences (17,919) (617)
Pension costs (58,909) (29,474)
Discount accretion on investment securities (20,610) (8,365)
Unrealized gain on available for sale securities (69,071)
Other (6,211) (12,428)
--------- ---------
Total (201,690) (87,886)
--------- ---------
Net deferred tax asset (liability) $ (95,218) $ 93,980
========= =========
</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 December 31, 1995, the Bank had commitments to extend credit approximating
$10,241,865. 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> 14
UNION BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
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 for 1995 and 1994. The expected
long-term rate of return on assets was 7% for 1995 and 1994. A contribution of
$160,977 was made to the Plan for the plan year ended September 30, 1995 and a
contribution of $151,684 was made for the plan year ended September 30, 1994.
The funded status and the prepaid pension cost recognized in the Corporation's
balance sheet at December 31 are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $ 1,116,888 $ 876,077
Nonvested benefits 3,652 3,508
----------- -----------
Accumulated benefit obligations $ 1,120,540 $ 879,585
=========== ===========
Projected benefit obligation $ 1,522,213 $ 1,346,556
Plan assets at fair value 1,445,829 1,135,632
----------- -----------
Plan assets less than projected benefit obligation (76,384) (210,924)
Unrecognized net loss 161,850 212,459
Unrecognized transition asset (97,379) (107,172)
Unrecognized prior service cost 28,891 31,348
Contributions for plan years ending September 30,
1996 and 1995, respectively 156,281 160,977
----------- -----------
Prepaid pension $ 173,259 $ 86,688
=========== ===========
</TABLE>
(Continued)
<PAGE> 15
UNION BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 9 - PENSION PLAN (Continued)
Net pension expense for 1995 and 1994 is comprised of the following components:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Service cost for benefits earned during the year $ 62,918 $ 58,799
Interest cost on projected benefit obligation 94,259 81,568
Return on plan assets (152,250) (72,058)
Net amortization of deferred items 64,783 (6,366)
--------- --------
Net pension cost $ 69,710 $ 61,943
========= ========
</TABLE>
NOTE 10 - 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 December 31, 1995:
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.
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 December 31,
1995. 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.
(Continued)
<PAGE> 16
UNION BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 10 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
The estimated fair values of financial instruments at December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
Carrying Fair
Value Value
----- -----
<S> <C> <C>
Financial Assets:
Cash and cash equivalents $ 6,501,519 $ 6,501,519
Investment securities 27,579,683 27,724,428
Loans, net 60,270,292 60,564,984
----------- -----------
Total $94,351,494 $94,790,931
=========== ===========
Financial Liabilities:
Deposits $87,514,626 $87,984,427
=========== ===========
Unrecognized Financial Instruments:
Commitments to extend credit $10,241,865 $10,241,865
=========== ===========
</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 11 - SUBSEQUENT EVENT - MERGER AGREEMENT
Union Bancshares Corp. has agreed to merge with Croghan Bancshares, Inc. under
the terms of a definitive agreement approved by the Board of Directors of each
corporation in February 1996. Under the agreement, the outstanding shares of
common stock of Union Bancshares Corp. will be exchanged for cash from Croghan
Bancshares, Inc. calculated as follows:
The sum of $19,500,000 plus the amount of Union Bancshares Corp. net
income or minus the amount of Union Bancshares Corp. net loss from
September 30, 1995 through the effective date of the merger, excluding
any taxes resulting from the merger, and minus the amount of dividends
declared by Union Bancshares Corp. after September 30, 1995 and prior
to the effective date of the merger.
The merger agreement is subject to the approval of the Union Bancshares Corp.
shareholders and various regulatory agencies.
