<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1997
0-20159
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(Commission File Number)
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) Identification No.)
323 Croghan Street, Fremont, Ohio 43420
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(Address of principal executive offices) (Zip Code)
(419)-332-7301
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
634,526 Common shares were outstanding as of March 31, 1997.
This document contains 11 pages.
<PAGE> 2
CROGHAN BANCSHARES, INC.
<TABLE>
<CAPTION>
Index
PART I. Page(s)
<S> <C> <C>
Item 1. Financial Statements 3 - 6
Item 2. Management's Discussion and Analysis 7 - 9
PART II.
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 - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibit 27 - Financial data schedule 11
(b) None
Signatures 10
</TABLE>
<PAGE> 3
CROGHAN BANCSHARES, INC.
Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
March 31 December 31
ASSETS 1997 1996
(Dollars in thousands, except par value)
<S> <C> <C>
CASH AND CASH EQUIVALENTS
Cash and due from banks $ 11,550 $ 11,543
Interest-bearing deposits in other banks -- 1
Federal funds sold 1,300 4,550
--------- ---------
Total cash and cash equivalents 12,850 16,094
--------- ---------
INVESTMENT SECURITIES
Available-for-sale, at market value 37,408 39,798
Held-to-maturity, at amortized cost,
market value of $39,035 in 1997
and $36,716 in 1996 39,321 36,683
--------- ---------
Total investment securities 76,729 76,481
--------- ---------
LOANS 222,699 230,647
Less: Allowance for possible loan losses 3,408 3,368
--------- ---------
Net Loans 219,291 227,279
--------- ---------
BANK PREMISES AND EQUIPMENT, NET 7,640 7,769
ACCRUED INTEREST RECEIVABLE 2,691 2,580
OTHER ASSETS 693 655
INTANGIBLE ASSETS 9,151 9,310
--------- ---------
TOTAL ASSETS $ 329,045 $ 340,168
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand, non-interest bearing $ 28,766 $ 31,575
Savings, including NOW and Money
Market Deposit accounts 109,095 110,664
Time 150,363 153,071
--------- ---------
Total deposits 288,224 295,310
Federal funds purchased and securities
sold under repurchase agreements 2,433 6,039
Borrowed funds 5,825 6,563
Dividends payable 285 285
Accrued interest, taxes and other expenses 2,444 2,331
--------- ---------
Total liabilities 299,211 310,528
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STOCKHOLDERS' EQUITY
Common stock, $12.50 par value
Authorized 3,000,000 shares; issued and
outstanding 634,526 shares 7,932 7,932
Surplus 8,989 8,989
Retained earnings 13,040 12,622
Net unrealized holding gain (loss) on
securities available-for-sale, net of
related income taxes (127) 97
--------- ---------
Total stockholders' equity 29,834 29,640
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 329,045 $ 340,168
========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 4
CROGHAN BANCSHARES, INC.
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31
1997 1996
---- ----
(Dollars in thousands,
except per share data)
INTEREST INCOME
<S> <C> <C>
Interest and fees on loans $ 4,915 $ 3,520
Interest and dividends on investment securities:
U.S. Treasury securities 489 542
Obligations of U.S. Government agencies and corporations 422 305
Obligations of states and political subdivisions 166 120
Other securities 54 79
Interest on federal funds sold 83 9
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Total interest income 6,129 4,575
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INTEREST EXPENSE
Interest on deposits 2,673 1,848
Interest on other borrowings 138 74
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Total interest expense 2,811 1,922
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Net interest income 3,318 2,653
PROVISION FOR LOAN LOSSES 45 15
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Net interest income after provision
for loan losses 3,273 2,638
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NON-INTEREST INCOME
Trust income 72 67
Service charges on deposit accounts 176 136
Gain (loss) on sale of investment securities (6) 16
Other operating income 140 88
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Total non-interest income 382 307
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NON-INTEREST EXPENSES
Salaries, wages and employee benefits 1,423 1,058
Net occupancy expense of bank premises 164 97
Amortization of goodwill and other intangible asset 159 --
Other operating expenses 844 611
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Total non-interest expenses 2,590 1,766
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Income before federal income taxes 1,065 1,179
FEDERAL INCOME TAXES 362 367
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NET INCOME $ 703 $ 812
======= =======
Net income per share, based on 634,526 shares $ 1.11 $ 1.28
======= =======
Dividends declared,based on 634,526 shares $ .45 $ .45
======= =======
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
CROGHAN BANCSHARES, INC.
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31
1997 1996
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 703 $ 812
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 262 85
Provision for loan losses 45 15
Deferred federal income taxes (33) 93
FHLB stock dividend (20) (14)
Net amortization of investment security premiums
and discounts 20 21
Loss (gain) on sale of investment securities 6 (16)
Loss (gain) on sale of equipment -- 6
Decrease (increase) in accrued interest receivable (111) (85)
Decrease (increase) in other assets (38) (218)
Increase (decrease) in accrued interest, taxes and
other expenses 262 157
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Net cash provided by operating activities 1,096 856
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities:
Available-for-sale (4,984) (2,997)
Held-to-maturity (6,070) (1,302)
Proceeds from maturities of investment securities 9,485 5,733
Proceeds from sales of available-for-sale investment securities 993 1,015
Net decrease (increase) in loans 7,943 2,785
Capital expenditures (26) (100)
Proceeds from sale of equipment -- 2
-------- --------
Net cash provided by (used in)
investing activities 7,341 5,136
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in total deposits (7,051) (3,996)
Increase (decrease) in federal funds purchased and
securities sold under repurchase agreements (3,606) (2,916)
Increase (decrease) in borrowed funds (738) --
Cash dividends paid (286) (285)
-------- --------
Net cash provided by (used in)
financing activities (11,681) (7,197)
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,244) (1,205)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 16,094 7,819
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 12,850 $ 6,614
======== ========
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for:
Interest $ 2,918 $ 2,047
======== ========
Federal income taxes $ -- $ 61
======== ========
Transfer of loans to other real estate $ -- $ --
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 6
CROGHAN BANCSHARES, INC.
Notes to Consolidated Financial Statements
March 31, 1997
(Unaudited)
(1) Consolidated Financial Statements
The consolidated financial statements 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, results of operations and changes in cash flows have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. The results of operations for the period
ended March 31, 1997 are not necessarily indicative of the operating
results for the full year.
The consolidated balance sheets include the assets and liabilities of Union
Bancshares Corp. ("Union") as discussed in Note (2). The consolidated
statements of operations and cash flows for the quarter ended March 31,
1996 do not include the operations of Union since the purchase took place
on August 1, 1996.
(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 $20,227,000 cash plus $73,000 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 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 $102,276,000 and the fair
values of the liabilities assumed totalled $91,545,000. Goodwill arising
from the purchase of $9,569,000 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
PERFORMANCE SUMMARY
Assets at March 31, 1997 totalled $329,045,000 compared to $340,168,000 at 1996
year end. Total deposits decreased to $288,224,000 from $295,310,000 at year end
and total loans decreased to $222,699,000 from $230,647,000 at year end.
Net income for the quarter ended March 31, 1997 was $703,000 or $1.11 per common
share compared to $812,000 or $1.28 per common share for the same period in
1996. The operating results for the quarter ended March 31, 1997 were negatively
impacted by an increase in the provision for loan losses, costs associated with
operating the offices acquired in the August 1, 1996 purchase of Union
Bancshares Corp., and an increase in the Corporation's effective federal income
tax rate (due primarily to the non-deductibility of goodwill amortization
expense).
DEPOSITS, LOANS, INVESTMENT SECURITIES, AND STOCKHOLDERS' EQUITY
Total deposits at March 31, 1997 decreased $7,086,000 or 2.4 percent from 1996
year end. The liquid deposit category (demand, savings, NOW and money market
deposit accounts) decreased $4,378,000 while the time deposit category decreased
$2,708,000. Total loans decreased $7,948,000 or 3.4 percent from 1996 year end.
Total investment securities increased $248,000 from 1996 year end.
Stockholders' equity at March 31, 1997 increased to $29,834,000 or $47.02 book
value per common share compared to $29,640,000 or $46.71 book value per common
share at December 31, 1996. The balance in stockholders' equity at March 31,
1997 included a net unrealized holding loss on securities classified as
available-for-sale of $127,000 (net of deferred income taxes totalling $65,000).
At December 31, 1996, stockholders' equity included a net unrealized holding
gain on securities classified as available-for-sale of $97,000 (net of deferred
income taxes totalling $50,000). Consistent with the Corporation's quarterly
dividend policy, a dividend of $.45 per share was declared on March 11, 1997 to
be distributed on April 30, 1997.
NET INTEREST INCOME
Net interest income, which represents the excess revenue generated from earning
assets over the interest cost of funding those assets, increased $665,000 for
the quarter ended March 31, 1997 compared to the same period in 1996. Net
interest income for the 1997 quarter includes the operations of the former Union
Bancshares Corp. and thus the comparability of the amounts presented is
significantly affected. The net interest yield (net interest income divided by
average earning assets) was 4.35 for the quarter ended March 31, 1997 compared
to 4.64 percent for the same period in 1996.
PROVISION FOR LOAN LOSSES AND THE ALLOWANCE FOR POSSIBLE LOAN LOSSES
The following table details factors relating to the provision and allowance for
the three and twelve month periods:
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, December 31,
1997 1996
(Dollars in thousands)
<S> <C> <C>
Provision for loan losses charged
to expense $ 45 $ 160
Net loan charge-offs 5 117
Net loan charge-offs as a percent of
average outstanding net loans .00% .06%
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
<S> <C> <C>
Nonaccrual loans $ 310 $ 649
Loans past due 90 days or more 1,094 764
Restructured loans 462 471
Potential problem loans, other than those
past due 90 days or more, nonaccrual,
or restructured 2,123 1,738
Allowance for possible loan losses 3,408 3,368
Allowance for possible loan losses as a
percent of period-end loans 1.53% 1.46%
</TABLE>
The first quarter 1997 provision for loan losses appearing in the Consolidated
Statements of Operations totalled $45,000. This provision compares to $15,000
expensed in the first quarter of 1996. Actual net loan charge offs were $5,000
for the first three months of 1997 compared to $37,000 during the same period in
1996.
Nonaccrual loans decreased from $649,000 at December 31, 1996 to $310,000 at
March 31, 1997. This positive trend was offset by a $330,000 increase in loans
past due 90 days or more and a $385,000 increase in other potential problem
loans from the December 31, 1996 figures. All asset quality trends will continue
to be monitored throughout 1997 to ensure adequate provisions are calculated and
expensed. The Corporation's allowance for possible loan losses as a percentage
of outstanding loans improved to 1.53 percent at March 31, 1997 compared to 1.46
percent at December 31, 1996.
It is the Corporation's policy to maintain the allowance for possible loan
losses at a level to provide for reasonably foreseeable losses. To accomplish
this objective, a loan review process is employed to facilitate the early
identification of problem loans and to ensure sound credit decisions. Management
considers the balance at March 31, 1997 to be adequate to provide for losses
inherent to the loan portfolio.
NON-INTEREST INCOME
Total non-interest income increased $75,000 or 24.4 percent for the quarter
ended March 31, 1997 compared to the same period in 1996. Non-interest income
for the quarter ended March 31, 1997 includes the operations of the former Union
Bancshares Corp. and thus the comparability of the amounts presented is
significantly affected.
Included in non-interest income for the quarter ended March 31, 1997 are
realized losses of $6,000 on the sale of investment securities that were
classified as available-for-sale. This compares to realized gains of $16,000 on
the sale of investment securities during the same period in 1996. Trust
department fee income increased $5,000 between quarterly periods and service
charges on deposit accounts increased $40,000 between quarterly periods.
Other operating income increased $52,000 between quarterly periods. Included in
other operating income for the first three months of 1997 are $39,000 in fees
generated from the Specialized Investments Division which markets products that
are not FDIC insured (e.g., mutual funds and annuities). This compares to
$24,000 in fees earned during the period in 1996.
NON-INTEREST EXPENSES
Total non-interest expenses increased $824,000 or 46.7 percent for the quarter
ended March 31, 1997 compared to the same period in 1996. Non-interest expenses
for the quarter ended March 31, 1997 include the operations of the former Union
Bancshares Corp. and thus the comparability of the amounts presented is
significantly affected. Salaries, wages and employee benefits increased $365,000
between quarterly periods and net occupancy expense of bank premises increased
$67,000 between quarterly periods.
Other operating expenses increased $233,000 between quarterly periods. Goodwill
<PAGE> 9
amortization associated with the August 1, 1996 purchase of Union Bancshares
Corp. totalled $159,000 for the quarter ended March 31, 1997 with no such
amortization expense included in results for the same quarter in 1996.
FEDERAL INCOME TAX EXPENSE
Federal income tax expense decreased $5,000 or 1.4 percent between quarterly
periods. The Corporation's effective tax rate for the quarter ended March 31,
1997 increased to 34.0 percent compared to 31.1 percent for the quarter ended
March 31, 1996. The increase in the effective tax rate for the 1997 quarterly
period is attributable to decreased earnings and the inability to deduct the
amortization of goodwill.
LIQUIDITY AND CAPITAL RESOURCES
An average federal funds sold position of $6,063,000 was maintained for the
quarterly period ended March 31, 1997. Short-term borrowings of federal funds
purchased and repurchase agreements averaged $2,638,000 for the quarterly
period.
Long-term borrowings due to the Federal Home Loan Bank in 1999 totalled
$2,500,000 at March 31, 1997 and throughout the quarterly period ended March 31,
1997. Additionally, borrowings from NBD Bank advanced to fund the purchase of
Union Bancshares Corp. totalled $3,325,000 at March 31, 1997. 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.
Capital expenditures for bank premises and equipment totalled $26,000 for the
quarter ended March 31, 1997. This compares to $100,000 for same period in 1996.
Projected 1997 capital expenditures total $900,000 with a majority of that
amount budgeted for the purchase of new computer processing equipment. A
significant portion of the equipment is scheduled for delivery in July, with the
remainder of the equipment to be installed prior to the end of the year.
<PAGE> 10
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 thereunto duly authorized.
CROGHAN BANCSHARES, INC
-----------------------
Registrant
Date: April 14, 1997 /s/ Thomas Hite
---------------------- ---------------------------
Thomas F. Hite, President
Date: April 14, 1997 /s/ Allan E. Mehlow
---------------------- ---------------------------
Allan E. Mehlow, Treasurer/
Principal Financial Officer
<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>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 11,550
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,300
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 37,408
<INVESTMENTS-CARRYING> 39,321
<INVESTMENTS-MARKET> 39,035
<LOANS> 222,699
<ALLOWANCE> 3,408
<TOTAL-ASSETS> 329,045
<DEPOSITS> 288,224
<SHORT-TERM> 2,433
<LIABILITIES-OTHER> 2,729
<LONG-TERM> 5,825
<COMMON> 7,932
0
0
<OTHER-SE> 21,902
<TOTAL-LIABILITIES-AND-EQUITY> 329,045
<INTEREST-LOAN> 4,915
<INTEREST-INVEST> 1,131
<INTEREST-OTHER> 83
<INTEREST-TOTAL> 6,129
<INTEREST-DEPOSIT> 2,673
<INTEREST-EXPENSE> 2,811
<INTEREST-INCOME-NET> 3,318
<LOAN-LOSSES> 45
<SECURITIES-GAINS> (6)
<EXPENSE-OTHER> 2,590
<INCOME-PRETAX> 1,065
<INCOME-PRE-EXTRAORDINARY> 703
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 703
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.11
<YIELD-ACTUAL> 4.35
<LOANS-NON> 310
<LOANS-PAST> 1,094
<LOANS-TROUBLED> 462
<LOANS-PROBLEM> 2,123
<ALLOWANCE-OPEN> 3,368
<CHARGE-OFFS> 25
<RECOVERIES> 20
<ALLOWANCE-CLOSE> 3,408
<ALLOWANCE-DOMESTIC> 3,408
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
