<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1996
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Commission File Number 0-20159
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CROGHAN BANCSHARES, INC.
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(Exact name of registrant as specified in its charter)
Ohio 31-1073048
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Indentification No.)
323 Croghan Street, Fremont, Ohio 43420
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(Address of principal executive offices) (Zip Code)
(419)-332-7301
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
------- ------.
634,526 Common shares were outstanding as of September 30, 1996.
This document contains 15 pages.
<PAGE> 2
CROGHAN BANCSHARES, INC.
Index Page
PART I. Financial Information: No.
Item 1. Financial Statements:
Consolidated Balance Sheets for September 30, 1996
(Unaudited) and December 31, 1995 3
Consolidated Statements of Operations for the three and
nine months ended September 30, 1996 and 1995 (Unaudited) 4
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1996 and 1995 (Unaudited) 5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7 - 10
PART II. Other Information:
Item 1. Legal Proceedings - None.
Item 2. Changes in Securities - None.
Item 3. Defaults Upon Senior Securities - None.
Item 4. Submission of Matters to a Vote of Security Holders - None.
Item 5. Other Information - None.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibit 10 - Material employment contract with Rosemary
L. Schaffer, an executive officer 12 - 14
Exhibit 27 - Financial data schedule 15
(b) Reports on Form 8-K - (1) Form 8-K was filed on August
14, 1996, reporting the acquisition of Union Bancshares
Corp. which occurred on August 1, 1996; included in the
filing were the audited Consolidated Financial Statements
for Union Bancshares Corp. for December 31, 1995 and 1994
and (2) Form 8-K/A was filed on October 10, 1996,
amending the Form 8-K filed on August 14, 1996; included
in the filing were the audited Consolidated Financial
Statements for Union Bancshares Corp. for July 31, 1996
and various pro-forma schedules relating to the
acquisition.
Signatures 11
<PAGE> 3
CROGHAN BANCSHARES, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
ASSETS September 30, 1996 December 31
------ (unaudited) 1995
----------- ----
<S> <C> <C>
CASH AND CASH EQUIVALENTS
Cash and due from banks $ 13,387,876 $ 7,818,432
Interest-bearing deposits in other banks 535 237
Federal funds sold -- --
------------- -------------
Total cash and cash equivalents 13,388,411 7,818,669
------------- -------------
INVESTMENT SECURITIES
Available-for-sale, at market value 40,859,997 29,340,619
Held-to-maturity, at amortized cost, market value
of $40,465,772 in 1996 and $43,791,878 in 1995 40,592,787 43,610,163
------------- -------------
Total investment securities 81,452,784 72,950,782
------------- -------------
LOANS 226,596,250 159,970,641
Less: Allowance for possible loan losses (3,337,517) (2,614,190)
------------- -------------
Net Loans 223,258,733 157,356,451
------------- -------------
BANK PREMISES AND EQUIPMENT, NET 7,870,654 4,215,129
ACCRUED INTEREST RECEIVABLE 3,092,093 2,205,162
OTHER REAL ESTATE OWNED 15,320 --
OTHER ASSETS 1,095,343 972,177
INTANGIBLE ASSETS 9,469,891 --
------------- -------------
TOTAL ASSETS $ 339,643,229 $ 245,518,370
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand, non-interest bearing $ 32,050,741 $ 24,937,925
Savings, including NOW and Money Market Deposit accounts 110,782,648 77,622,368
Time 155,268,517 105,315,319
------------- -------------
Total deposits 298,101,906 207,875,612
Federal funds purchased and securities sold under
repurchase agreements 2,575,584 5,511,891
Borrowed funds 7,000,000 2,500,000
Dividends payable 285,537 285,537
Accrued interest, taxes and other expenses 2,461,621 1,447,731
------------- -------------
Total liabilities 310,424,648 217,620,771
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STOCKHOLDERS' EQUITY
Common stock, $12.50 par value. Authorized 3,000,000 shares
in 1996 and 650,000 in 1995; issued and outstanding
634,526 shares 7,931,575 7,931,575
Surplus 8,989,295 8,989,295
Retained earnings 12,270,546 10,709,020
Net unrealized holding gain (loss) on securities
available-for-sale, net of related income taxes 27,165 267,709
------------- -------------
Total stockholders' equity 29,218,581 27,897,599
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 339,643,229 $ 245,518,370
============= =============
</TABLE>
See notes to consolidated financial statements.
<PAGE> 4
CROGHAN BANCSHARES, INC.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 4,574,372 $3,567,456 $11,636,520 $ 10,261,068
Interest and dividends on investment securities:
U.S. Treasury securities 558,515 529,004 1,604,260 1,607,457
Obligations of U.S. Government agencies and corporations 408,197 281,772 989,823 766,592
Obligations of states and political subdivisions 160,873 128,447 394,685 384,901
Other securities 76,120 88,175 227,262 264,048
Interest on federal funds sold 46,483 46,533 89,200 112,732
Interest on deposits in other banks 5 1 11 8
----------- ---------- ------------ ------------
Total interest income 5,824,565 4,641,388 14,941,761 13,396,806
----------- ---------- ------------ ------------
INTEREST EXPENSE
Interest on deposits 2,445,925 1,829,257 6,101,957 5,284,934
Interest on other borrowings 118,683 64,701 254,001 174,786
----------- ---------- ------------ ------------
Total interest expense 2,564,608 1,893,958 6,355,958 5,459,720
----------- ---------- ------------ ------------
Net interest income 3,259,957 2,747,430 8,585,803 7,937,086
PROVISION FOR LOAN LOSSES 55,000 -- 85,000 70,000
----------- ---------- ------------ ------------
Net interest income after provision for loan losses 3,204,957 2,747,430 8,500,803 7,867,086
----------- ---------- ------------ ------------
NON-INTEREST INCOME
Trust income 65,217 56,013 198,166 175,106
Service charges on deposit accounts 172,972 138,924 447,002 397,189
Gain (loss) on sale of investment securities (32,089) 4,716 (13,739) (49,925)
Other operating income 102,643 84,079 313,289 210,326
----------- ---------- ------------ ------------
Total non-interest income 308,743 283,732 944,718 732,696
----------- ---------- ------------ ------------
NON-INTEREST EXPENSES
Salaries, wages and employee benefits 1,242,344 1,011,521 3,390,094 2,971,207
Net occupancy expense of bank premises 136,408 89,558 321,744 302,388
Intangible amortization 106,299 -- 106,299 --
Other operating expenses 847,038 546,544 2,037,788 1,903,248
----------- ---------- ------------ ------------
Total non-interest expenses 2,332,089 1,647,623 5,855,925 5,176,843
----------- ---------- ------------ ------------
Income before federal income taxes 1,181,611 1,383,539 3,589,596 3,422,939
FEDERAL INCOME TAXES 420,359 429,904 1,171,459 1,044,295
----------- ---------- ------------ ------------
NET INCOME $ 761,252 $ 953,635 $ 2,418,137 $ 2,378,644
=========== ========== ============ ============
Income per share, based on 634,526 shares $ 1.20 $ 1.50 $ 3.81 $ 3.75
=========== ========== ============ ============
Dividends declared, based on $634,526 shares $ .450 $ .430 $ 1.350 $ 1.205
=========== ========== ============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
CROGHAN BANCSHARES, INC.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,418,137 $ 2,378,644
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 419,989 258,212
Provision for loan losses 85,000 70,000
Deferred federal income taxes 47,710 29,627
FHLB stock dividend (48,100) (65,625)
Net amortization of investment security premiums and discounts 65,861 102,910
Loss (gain) on sale of investment securities 13,739 49,925
Loss (gain) on sale of equipment 8,983 (1,125)
Decrease (increase) in accrued interest receivable 31,223 (307,799)
Decrease (increase) in other real estate owned and other assets (28,267) (91,076)
Increase (decrease) in accrued interest, taxes and other expenses 320,692 479,539
------------ ------------
Net cash provided by operating activities 3,334,967 2,903,232
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Union Bancshares Corp., net of $6,213,318 cash acquired (14,086,588) --
Purchases of investment securities:
Available-for-sale (6,993,675) (10,978,204)
Held-to-maturity (1,803,555) (10,316,285)
Proceeds from maturities of investment securities 17,788,384 16,953,000
Proceeds from sales of available-for-sale investment securities 12,312,418 6,938,125
Net decrease (increase) in loans (5,224,802) (3,384,291)
Capital expenditures (241,535) (276,294)
Proceeds from sale of equipment 2,323 1,715
------------ ------------
Net cash provided by (used in) investing activities 1,752,970 (1,062,234)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in total deposits (225,278) (1,138,303)
Increase(decrease) in federal funds purchased and securities
sold under repurchase agreements (2,936,307) (1,019,459)
Increase (decrease) in borrowed funds 4,500,000 --
Cash dividends paid (856,610) (713,842)
------------ ------------
Net cash provided by (used in) financing activities 481,805 (2,871,604)
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,569,742 (1,030,606)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,818,669 8,043,598
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 13,388,411 $ 7,012,992
============ ============
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for:
Interest $ 6,363,486 $ 5,291,928
============ ============
Federal income taxes $ 1,061,246 $ 949,217
============ ============
Transfer of loans to other real estate $ 78,834 $ --
============ ============
See notes to consolidated financial statements.
</TABLE>
<PAGE> 6
CROGHAN BANCSHARES, INC.
Notes to Consolidated Financial Statements
September 30, 1996
(Unaudited)
(1) Consolidated Financial Statements
---------------------------------
The consolidated balance sheet as of September 30, 1996, the consolidated
statements of operations for the three-month and nine-month periods ended
September 30, 1996 and 1995, and the consolidated statements of cash flows
for the nine-month periods ended September 30, 1996 and 1995 have been
prepared by Croghan Bancshares, Inc. (the "Corporation") without audit. In
the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the Corporation's
financial position as of September 30, 1996 and its results of operations
and changes in cash flows for the periods ended September 30, 1996 and 1995
have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. The results of operations for the period
ended September 30, 1996 are not necessarily indicative of the operating
results for the full year.
The September 30, 1996 consolidated balance sheet includes the assets and
liabilities of Union Bancshares Corp. ("Union") and the consolidated
statements of operations and cash flows include the operations of Union
Bancshares Corp. from August 1, 1996, as discussed in Note (2).
(2) Acquisition of Union Bancshares Corp.
-------------------------------------
On August 1, 1996, the Corporation acquired all of the outstanding shares
of Union, the sole shareholder of The Union Bank and Savings Company, an
Ohio banking corporation, for $20,226,868 cash plus $73,038 in acquisition
costs pursuant to a Plan and Agreement of Reorganization dated February 15,
1996, and an Agreement of Merger dated March 27, 1996. The purchase price
was 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 was accounted for as a purchase with
Union's assets and liabilities stated at their fair values. The fair values
of the assets acquired totalled $102,275,648 and the fair values of the
liabilities assumed totalled $91,544,465. Goodwill arising from the
purchase of $9,568,723 is being amortized over a period of 15 years.
<PAGE> 7
CROGHAN BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPLETED ACQUISITION TRANSACTION
- ---------------------------------
On August 1, 1996, the Corporation completed its acquisition of Union Bancshares
Corp. (Union) of Bellevue, Ohio. Union was the parent holding company of The
Union Bank and Savings Company, Union Ohio Leasing Corp., and Union Ohio
Brokerage, Inc. The Union Bank and Savings Company was merged with The Croghan
Colonial Bank and the assets and liabilities of Union Ohio Leasing Corp. and
Union Ohio Brokerage, Inc. were transferred to The Croghan Colonial Bank
effective on August 1, 1996. All remaining assets of Union were then transferred
to the Corporation. Union, along with all of its subsidiaries, are currently in
the process of being dissolved.
The acquisition transaction was accounted for using the purchase method of
accounting. This resulted in Union's assets and liabilities being recorded at
their fair values as of the acquisition date. The fair value of the assets
acquired totalled $102,275,648 and the fair value of the liabilities assumed
totalled $91,544,465 (resulting in a net book value of $10,731,183).
The total purchase price amounted to $20,299,906 (with $20,226,868 paid directly
to Union shareholders plus an additional $73,038 in acquisition costs). Goodwill
of $9,568,723 (the purchase price of $20,299,906 less the net book value of
assets acquired of $10,731,183) created by the transaction is being amortized
over a period of 15 years. As a result of this acquisition, the Corporation now
operates two banking offices in Bellevue, Ohio (at One Union Square and 114
Sandusky Street), an office in Clyde, Ohio (at 106 S. Main Street), and an
office in Monroeville, Ohio (at 11 Monroe Street) in addition to its offices in
Fremont and Green Springs, Ohio.
GENERAL
- -------
Following the acquisition of Union, assets at September 30, 1996 totalled
$339,643,229 compared to $245,518,370 at 1995 year end. Total deposits increased
to $298,101,906 from $207,875,612 at year end, and total loans increased to
$226,596,250 from $159,970,641 at year end.
Net income for the quarter ended September 30, 1996 was $761,252 or $1.20 per
common share compared to $953,635 or $1.50 per common share for the same period
in 1995. Net income for the nine-month period ended September 30, 1996 was
$2,418,137 or $3.81 per common share compared to $2,378,644 or $3.75 per common
share for the same period in 1995. The operating results for the quarter ended
September 30, 1996 were adversely impacted by costs incidental to the
acquisition of Union. Operating results for 1996 have been favorably impacted by
the 1995 reduction in Federal Deposit Insurance Corporation premiums. Such
reduction amounted to $142,270 (net of income taxes) or $.22 per common share
for the nine-month period ended September 30, 1996.
DEPOSITS, LOANS, INVESTMENT SECURITIES, AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------
Total deposits at September 30, 1996, net of the effect of the Union
acquisition, decreased $225,278 from 1995 year end. The liquid deposit category
(demand, savings, NOW and money market deposit accounts) decreased $5,363,367
while the time deposit category increased $5,138,089.
Total loans, net of the effect of the Union acquisition, increased $5,073,690 or
3.2 percent from 1995 year end. Total investment securities increased $8,502,002
or 11.7 percent from 1995 year end. The available-for-sale investment security
portfolio was actively managed following the Union acquisition and used
extensively to fund payments to Union shareholders.
Stockholders' equity at September 30, 1996 increased to $29,218,581 or $46.05
<PAGE> 8
CROGHAN BANCSHARES, INC.
book value per common share compared to $27,897,599 or $43.97 book value per
common share at December 31, 1995. The balance in stockholders' equity at
September 30, 1996 included a net unrealized holding gain on securities
classified as available-for-sale of $27,165 (net of deferred income taxes
totalling $13,994). At December 31, 1995, stockholders' equity included a net
unrealized holding gain on securities classified as available-for-sale of
$267,709 (net of deferred income taxes totalling $137,911). Consistent with the
Corporation's quarterly dividend policy, dividends of $.45 per share were
declared on September 10, 1996 to be distributed on October 31, 1996.
NET INTEREST INCOME
- -------------------
Net interest income, which represents the excess revenue generated from earning
assets over the interest cost of funding those assets, increased $512,527 for
the quarter ended September 30, 1996 compared to the same period in 1995, and
increased $648,717 for the nine-month period ended September 30, 1996 compared
to the same period in 1995. Net interest income for the quarter and nine-month
periods ended September 30, 1996 include the operations of the former Union
since August 1, 1996 and thus the comparability of the amounts presented are
significantly impacted. The net interest yield (net interest income divided by
average earning assets) was 4.53 percent for the quarter ended September 30,
1996 compared to 4.79 percent for the same period in 1995, and was 4.61 percent
for the nine-month period ended September 30, 1996 compared to 4.69 percent for
the same period in 1995.
PROVISION FOR POSSIBLE LOAN LOSSES
- ----------------------------------
The provision charged to expense totalled $55,000 for the quarter ended
September 30, 1996 compared to no provision for the same period in 1995, and
totalled $85,000 for the nine-month period ended September 30, 1996 compared to
$70,000 for the same period in 1995. Actual net loan charge offs were $72,277
for the first nine months of 1996 compared to $151,677 in net recoveries for the
same period in 1995 (the 1995 recoveries included $119,400 in funds received on
a 1991 charge-off). An allowance for possible loan losses of $710,605 was
reported by Union at August 1, 1996 on its total loans of $61,551,180. The
Corporation's allowance for possible loan losses as a percentage of outstanding
loans was 1.47 percent at September 30, 1996 compared to 1.63 percent at
December 31, 1995.
It is the Corporation's policy to maintain the allowance for possible loan
losses at a level to provide for reasonably foreseeable losses. To accomplish
this objective, a loan review process is employed to facilitate the early
identification of problem loans and to ensure sound credit decisions. Management
considers the balance at September 30, 1996 to be adequate to provide for losses
inherent to the loan portfolio.
NON-INTEREST INCOME
- -------------------
Total non-interest income increased $25,011 or 8.8 percent for the quarter ended
September 30, 1996 compared to the same period in 1995, and increased $212,022
or 28.9 percent for the nine-month period ended September 30, 1996 compared to
the same period in 1995. Non-interest income for the quarter and nine-month
periods ended September 30, 1996 include the operations of the former Union
since August 1, 1996 and thus the comparability of the amounts presented are
significantly impacted. Included in non-interest income for the nine months
ended September 30, 1996 were realized losses totalling $13,739 on the sale of
investment securities that were classified as available-for-sale. This compares
to realized losses of $49,925 on the sale of investment securities during the
same period in 1995.
Trust department fee income increased $9,204 between comparable quarterly
periods, and $23,060 between comparable nine-month periods. Service charges on
deposit accounts increased $34,048 between comparable quarterly periods,
<PAGE> 9
CROGHAN BANCSHARES, INC.
and $49,813 between comparable nine-month periods.
Other operating income increased $18,564 between comparable quarterly periods,
and $102,963 between comparable nine-month periods. Included in other operating
income for the first nine months of 1996 are $86,696 in fees generated by the
Specialized Investments Division which markets products that are not FDIC
insured (e.g., mutual funds and annuities). The department began operations in
1995 and $16,775 in fees were earned during the nine-month period ended
September 30, 1995.
NON-INTEREST EXPENSES
- ---------------------
Total non-interest expenses increased $684,466 or 41.5 percent for the quarter
ended September 30, 1996 compared to the same period in 1995, and increased
$679,082 or 13.1 percent for the nine-month period ended September 30, 1996.
Non-interest expenses for the quarter and nine-month periods ended September 30,
1996 include the operations of the former Union since August 1, 1996 and also
include the amortization of goodwill totalling $106,242 relating to the purchase
of Union and thus significantly impact the comparability of the amounts
presented. Salaries, wages and employee benefits increased $230,823
between comparable quarterly periods, and $418,887 between comparable nine-month
periods. Net occupancy expense of bank premises increased $46,850 between
comparable quarterly periods, and $19,356 between comparable nine-month periods.
Other operating expenses increased $300,494 between comparable quarterly
periods, and $135,540 between comparable nine-month periods. As previously
noted, FDIC insurance costs, which are included in other operating expenses,
decreased significantly in 1996. These costs totalled $1,667 during the first
nine months of 1996 as compared to $217,227 during the comparable period in
1995. Additionally, significant costs incidental to the acquisition of Union
(i.e., stationery, signs, brochures, forms, advertising, promotion, etc.) are
included in the September 30, 1996 quarterly and year-to-date results and are
responsible for a portion of the 1996 earnings slow down.
FEDERAL INCOME TAX EXPENSE
- --------------------------
Federal income tax expense decreased $9,545 or 2.2 percent between comparable
quarterly periods, and increased $127,164 or 12.2 percent between comparable
nine-month periods. The Corporation's effective tax rate for the quarter ended
September 30, 1996 increased to 35.6 percent compared to 31.1 percent for the
quarter ended September 30, 1995. The effective tax rate for the nine-month
period ended September 30, 1996 increased to 32.6 percent compared to 30.5
percent for the nine-month period ended September 30, 1995. The increases in
expense and effective tax rate for the comparable nine-month periods are
primarily attributable to improved earnings, less tax-exempt interest income,
and the inability to deduct the amortization of goodwill.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Average federal funds sold positions of $3,228,696 and $2,125,420 were
maintained for the quarterly and nine-month periods ended September 30, 1996,
respectively. Short-term borrowings of federal funds purchased and repurchase
agreements averaged $2,007,316 and $2,081,652 for the quarterly and nine-month
periods, respectively.
Long-term borrowings due to the Federal Home Loan Bank in 1999 totalled
$2,500,000 at September 30, 1996 and throughout the nine-month period ended
September 30, 1996. Additionally, the Corporation borrowed $4,500,000 from NBD
Bank during August 1996 to facilitate its purchase of Union. The loan is due on
July 31, 1999 and is repayable in quarterly installments of principal plus
interest, with the principal payments based upon a ten-year amortization
schedule.
<PAGE> 10
CROGHAN BANCSHARES, INC.
Capital expenditures for bank premises and equipment totalled $241,535 for the
nine-month period ended September 30, 1996. This compares to $276,294 for same
period in 1995. Projected 1996 capital expenditures total $325,000.
<PAGE> 11
SIGNATURES
----------
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CROGHAN BANCSHARES, INC
-------------------------------
Registrant
Date: November 1, 1996 /s/ Thomas F. Hite
------------------------ ------------------------------
Thomas F. Hite, President
Date: November 1, 1996 /s/ Allan E. Mehlow
------------------------ ------------------------------
Allan E. Mehlow, Treasurer/
Principal Financial Officer
<PAGE> 1
EXHIBIT 10
----------
EMPLOYMENT CONTRACT
THIS AGREEMENT, is made by and between UNION BANCSHARES CORP., the parent
company, together with the UNION BANK AND SAVINGS COMPANY, a subsidiary, both
Ohio Corporations with the principal place of business being, One Union Square,
Bellevue, Ohio 44811 (hereinafter called the "Company") and Rosemary L. Schaffer
an individual residing at 824 Kilbourne Street, Bellevue, Ohio (hereinafter
called the "Executive").
1. Employment and Duties
The Company hereby employs the Executive to perform such duties as normally
undertaken by executive officers of corporations similar in type and size
to the company, and as outlined in the Codes of Regulation and other duties
as may be assigned him or her from time to time by the Board of Directors
of the Company.
2. Performance
The Executive agrees to devote his or her full time and efforts to the
performance of such duties as are assigned him or her from time to time by
the Board of Directors of the Company and shall not, during the term of
this agreement, be engaged in any other business activity, whether or not
such business activity is pursued for gain, profit, or other pecuniary
advantage, but this shall not be construed as preventing Executive from
investing his or her assets in such form or manner as will not require any
services on the part of Executive in the operation of the affairs of the
business activity in which such investments are made.
3. Term
Except in the case of earlier termination as hereinafter specifically
provided, the term of this agreement shall extend from the date hereof
until September 30, 1998, when it may be renewed upon terms mutually agreed
upon and at the sole option of the Company. In the event the Company does
not intend to renew the contract, it will give the Executive written notice
not later than 60 days prior to the expiration date. Notwithstanding the
foregoing term, Company by terminate this agreement at any time without
notice to Executive if and when:
(a) Executive accepts any other employment, or engages in any other
business activity which is directly or indirectly in competition with
the business activities of Company, or which require personal services
by Executive;
(b) Executive breaches any other material obligations under this
agreement, either express or implied;
(c) Executive is dishonest or commits any dishonest act.
4. Compensation
For all of the services by the Executive in any capacity during his or her
employment by the Company, the Company agrees to pay the Executive an
annual salary of not less than $94,500.00. Said Executive's annual salary
is to be reviewed and fixed not less than annually by the Board of
Directors of the Company. The Executive shall be entitled to receive or
defer for future payment, any increases that represent cost of living
(COLA) or merit adjustments provided Executive makes a prior request which
is accepted and agreed to by the Board of Directors. It is agreed that a
COLA adjustment shall be paid to the Executive, effective September 30,
1995, in the amount of five percent (5 %) of his or her annual salary and
each September 30 thereafter for the term of this contract.
<PAGE> 2
5. Pension Benefits
It is agreed that the Company will make all contributions to the Company's
current pension plan based on the Executive's annual compensation,
including bonuses or profit sharing. It is further agreed that, in the
event the Company's pension plan is changed or discontinued for any reason,
including the merger or sale of the Company, or if the Executive exercises
his or her rights under paragraph 8 entitled: "Merger, Sale of Company,"
the Company will make, at the option of the Executive, an immediate cash
payment to the Executive for the amount that he would receive under the
single cash payment option, as of the date of termination by the Executive,
under the Company's currently existing pension plan. It is further
understood and agreed that the cash payment option is subject to the then
existing Internal Revenue Service rules governing cash option payments.
6. Insurance Benefits
The Company will provide family medical coverage and maintain all life
insurance, disability insurance and other insurance coverages now in effect
and which the Executive is currently insured thereunder. Said coverages are
to remain in effect for the term of this contract and thereafter at the
option of the Company.
7. Disability and Disability Benefits
If during the term of this agreement and before retirement, the Executive
shall become unable to perform his or her duties hereunder by reason of his
or her total and permanent disability for a period of six (6) months, the
Company shall have the right to terminate the contract with respect to
paragraph four (4) entitled: "Compensation". All other paragraphs shall
remain in effect based upon the Executive's then current salary at the time
of total and permanent disability until such time as this contract shall
expire. If the Company elects to terminate said paragraph four (4), as
hereinbefore stated, it will give the Executive 30 days written notice.
8. Merger; Sale of Company
If the Company shall at any time be merged or consolidated into or with any
other corporation, at the Executive's option this agreement may be
terminated upon 30 days written notice by the Executive to the Company's
Board of Directors. If the Executive elects not to terminate this
agreement, then the provisions of this agreement shall be binding upon and
inure to the benefit of the Corporation resulting from such merger or
consolidation and this provision shall apply in the event of any subsequent
merger, consolidation or transfer.
9. Waiver of Breach
Failure to insist upon strict compliance with any of the terms, promises or
conditions of this agreement shall not be deemed waiver of such term,
promise or condition, nor shall any waiver or relinquishment of any right
or power hereunder at any one time or more times be deemed a waiver or
relinquishment of such power at any other time or times.
10. Effect of Waiver
The waiver by either party of a breach of any provision of this agreement
shall not operate as or be construed as a waiver of any subsequent breach.
<PAGE> 3
11. Arbitration
Any controversy or claim arising out of or relating to this agreement or
breach thereof shall be settled by arbitration in the City of Bellevue in
accordance with the rules then obtaining of the American Arbitration
Association and judgment upon the award rendered may be entered in any
court having jurisdiction thereof.
12. Governing Law
The agreement and the performance of this agreement shall be governed by
the laws of the State of Ohio.
13. Captions
It is understood and agreed by the Executive and the Company that the
captions at the beginning of the several sections and paragraphs of this
agreement are not part of the context thereof, but are only there as guides
or labels to assist in locating and reading such sections and paragraphs.
14. Heirs and Assigns
It is understood and agreed by the Executive and the Company that in the
event of the death of the Executive, all deferred cash payments or other
benefits due the Executive at the time of death shall immediately become
due and payable to the Executive's estate and that the contract shall
become null and void as it shall pertain to all other benefits contained
herein. In the event of a sale or merger, the right and obligations of
Company under this agreement shall inure to the benefit of and shall be
binding upon, its successors and assigns.
15. Valuable Consideration
The parties, acknowledge that there is valuable consideration being given
by both parties, including, but not limited to, the mutual promises
contained herein, constituting new and adequate consideration for the
execution of this agreement and the enforcement thereof.
Dated this 15th day of November, 1995
Witnesses: NO. 1:
THE UNION BANK AND SAVINGS COMPANY
/s/ Cheryl L. Most BY: /s/ Robert C. Wagner, Vice Chairman
- ------------------------------- ------------------------------------
/s/ Dee A. Blackburn
- -------------------------------
NO. 2:
UNION BANCSHARES CORP.
/s/ Cheryl L. Most BY: /s/ J. R. Pollock, President
- ------------------------------- ------------------------------------
/s/ Dee A. Blackburn
- -------------------------------
NO.3
EXECUTIVE
/s/ Cheryl L. Most /s/ Rosemary L. Schaffer
- ------------------------------- -----------------------------------
/s/ Dee A. Blackburn
- -------------------------------
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 13,387,876
<INT-BEARING-DEPOSITS> 535
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 40,859,997
<INVESTMENTS-CARRYING> 40,592,787
<INVESTMENTS-MARKET> 40,465,772
<LOANS> 226,596,250
<ALLOWANCE> 3,337,517
<TOTAL-ASSETS> 339,643,229
<DEPOSITS> 298,101,906
<SHORT-TERM> 2,575,584
<LIABILITIES-OTHER> 2,747,158
<LONG-TERM> 7,000,000
<COMMON> 7,931,575
0
0
<OTHER-SE> 21,287,006
<TOTAL-LIABILITIES-AND-EQUITY> 339,643,229
<INTEREST-LOAN> 11,636,520
<INTEREST-INVEST> 3,216,030
<INTEREST-OTHER> 89,211
<INTEREST-TOTAL> 14,941,761
<INTEREST-DEPOSIT> 6,101,957
<INTEREST-EXPENSE> 6,355,958
<INTEREST-INCOME-NET> 8,585,803
<LOAN-LOSSES> 85,000
<SECURITIES-GAINS> (13,739)
<EXPENSE-OTHER> 5,855,925
<INCOME-PRETAX> 3,589,596
<INCOME-PRE-EXTRAORDINARY> 2,418,137
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,418,137
<EPS-PRIMARY> 3.81
<EPS-DILUTED> 3.81
<YIELD-ACTUAL> 4.61
<LOANS-NON> 658,709
<LOANS-PAST> 1,197,306
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<LOANS-PROBLEM> 1,212,207
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</TABLE>
