<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, 1998
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, 1998.
This document contains 11 pages.
<PAGE> 2
CROGHAN BANCSHARES, INC.
Index
PART I. Page(s)
Item 1. Financial Statements 3 - 6
Item 2. Management's Discussion and Analysis 7 - 9
Itsm 3. Quantitative and Qualitative Disclosures About Market
Risk - There have been no material changes from the
information provided in the December 31, 1997 Form 10-K
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
<PAGE> 3
<TABLE>
<CAPTION>
CROGHAN BANCSHARES, INC.
Consolidated Balance Sheets (Unaudited)
March 31 December 31
ASSETS 1998 1997
(Dollars in thousands, except par value)
<S> <C> <C>
CASH AND CASH EQUIVALENTS
Cash and due from banks $ 10,374 $ 9,735
Interest-bearing deposits in other banks - -
Federal funds sold 8,000 -
-------- --------
Total cash and cash equivalents 18,374 9,735
-------- --------
INVESTMENT SECURITIES
Available-for-sale, at market value 36,452 34,197
Held-to-maturity, at amortized cost, market value of $33,186 in 1998
and $35,588 in 1997 33,073 35,467
-------- --------
Total investment securities 69,525 69,664
-------- --------
LOANS 232,887 239,076
Less: Allowance for possible loan losses 3,551 3,518
-------- --------
Net Loans 229,336 235,558
-------- --------
BANK PREMISES AND EQUIPMENT, NET 8,098 8,119
ACCRUED INTEREST RECEIVABLE 2,494 2,613
OTHER REAL ESTATE OWNED 92 140
INTANGIBLE ASSETS 8,517 8,672
OTHER ASSETS 777 539
--------- --------
TOTAL ASSETS $337,213 $335,040
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand, non-interest bearing $ 29,821 $ 30,753
Savings, NOW and Money Market deposits 108,531 106,836
Time 155,697 151,464
-------- --------
Total deposits 294,049 289,053
Federal funds purchased and securities sold under repurchase agreements 5,876 8,663
Borrowed funds 2,475 3,200
Dividends payable 285 285
Accrued interest, taxes and other expenses 2,507 2,249
-------- --------
Total liabilities 305,192 303,450
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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 15,028 14,587
Net unrealized holding gain (loss) on securities available-for-sale, net of
related income taxes 72 82
-------- --------
Total stockholders' equity 32,021 31,590
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $337,213 $335,040
======== ========
</TABLE>
See note to consolidated financial statements.
<PAGE> 4
CROGHAN BANCSHARES, INC.
Consolidated Statements of Operations and Comprehensive Income (Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31
1998 1997
(Dollars in thousands,
except per share data)
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $5,139 $4,915
Interest and dividends on investment securities:
U.S. Treasury securities 427 489
Obligations of U.S. Government agencies and corporations 376 422
Obligations of states and political subdivisions 142 166
Other securities 43 54
Interest on federal funds sold 76 83
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Total interest income 6,203 6,129
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INTEREST EXPENSE
Interest on deposits 2,749 2,673
Interest on other borrowings 110 138
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Total interest expense 2,859 2,811
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Net interest income 3,344 3,318
PROVISION FOR LOAN LOSSES 60 45
------ ------
Net interest income after provision for loan losses 3,284 3,273
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NON-INTEREST INCOME
Trust income 87 72
Service charges on deposit accounts 168 176
Gain (loss) on sale of investment securities - (6)
Gain (loss) on sale of loans 12 -
Other operating income 154 140
------ ------
Total non-interest income 421 382
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NON-INTEREST EXPENSES
Salaries, wages and employee benefits 1,402 1,423
Net occupancy expense of bank premises 160 164
Amortization of goodwill and other intangible asset 160 159
Other operating expenses 872 844
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Total non-interest expenses 2,594 2,590
------ ------
Income before federal income taxes 1,111 1,065
FEDERAL INCOME TAXES 384 362
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NET INCOME $ 727 $ 703
====== ======
Net income per share, based on 634,526 shares $ 1.15 $ 1.11
====== ======
Dividends declared, based on 634,526 shares $ .45 $ .45
====== ======
COMPREHENSIVE INCOME $ 717 $ 479
====== ======
</TABLE>
See note to consolidated financial statements.
<PAGE> 5
<TABLE>
<CAPTION>
CROGHAN BANCSHARES, INC.
Consolidated Statements of Cash Flows (Unaudited)
Three months ended
March 31
1998 1997
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 727 $ 703
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 295 262
Provision for loan losses 60 45
Deferred federal income taxes (45) (33)
FHLB stock dividend (23) (20)
Net amortization of investment security premiums and discounts 8 20
Loss (gain) on sale of investment securities - 6
Loss (gain) on sale of loans (12) -
Loss (gain) on sale of equipment 3 -
Decrease (increase) in accrued interest receivable 119 (111)
Decrease (increase) in other assets (190) (38)
Increase (decrease) in accrued interest, taxes and other expenses 309 262
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Net cash provided by operating activities 1,251 1,096
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities:
Available-for-sale (4,998) (4,984)
Held-to-maturity (5,361) (6,070)
Proceeds from maturities of investment securities 10,515 9,485
Proceeds from sales of available-for-sale investment securities - 993
Proceeds from sale of loans 300 -
Net decrease (increase) in loans 5,869 7,943
Capital expenditures (170) (26)
Proceeds from sale of equipment - -
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Net cash provided by (used in) investing activities 6,155 7,341
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in total deposits 5,031 (7,051)
Increase (decrease) in federal funds purchased and securities sold under repurchase agreements (2,787) (3,606)
Repayments of borrowed funds (725) (738)
Cash dividends paid (286) (286)
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Net cash provided by (used in) financing activities 1,233 (11,681)
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 8,639 (3,244)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 9,735 16,094
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $18,374 $12,850
======= =======
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for:
Interest $ 2,836 $ 2,918
======= =======
Federal income taxes $ - $ -
======= =======
Transfer of loans to other real estate $ - $ -
======= =======
</TABLE>
See note to consolidated financial statements.
<PAGE> 6
CROGHAN BANCSHARES, INC.
Note to Consolidated Financial Statements
March 31, 1998
(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, 1998 are not necessarily indicative of the operating results for
the full year.
<PAGE> 7
CROGHAN BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PERFORMANCE SUMMARY
Assets at March 31, 1998 totalled $337,213,000 compared to $335,040,000 at 1997
year end. Total deposits increased to $294,049,000 from $289,053,000 at year end
and total loans decreased to $232,887,000 from $239,076,000 at year end.
Net income for the quarter ended March 31, 1998 was $727,000 or $1.15 per common
share compared to $703,000 or $1.11 per common share for the same period in
1997. Operating results for the quarter ended March 31, 1998 include increases
in the provision for loan losses and interest on deposits (primarily interest on
money market accounts as Croghan implemented a more competitive rate structure
in an effort to maintain the market share of its core deposit base).
DEPOSITS, LOANS, INVESTMENT SECURITIES, AND STOCKHOLDERS' EQUITY
Total deposits at March 31, 1998 increased $4,996,000 or 1.7 percent from 1997
year end. The liquid deposit category (demand, savings, NOW and money market
deposit accounts) increased $763,000 while the time deposit category increased
$4,233,000. Total loans decreased $6,189,000 or 2.6 percent from 1997 year end.
Total investment securities decreased $139,000 from 1997 year end.
Stockholders' equity at March 31, 1998 increased to $32,021,000 or $50.46 book
value per common share compared to $31,590,000 or $49.79 book value per common
share at December 31, 1997. The balance in stockholders' equity at March 31,
1998 included a net unrealized holding gain on securities classified as
available-for-sale of $72,000 (net of deferred income taxes totalling $37,000).
At December 31, 1997, stockholders' equity included a net unrealized holding
gain on securities classified as available-for-sale of $82,000 (net of deferred
income taxes totalling $42,000). Consistent with the Corporation's quarterly
dividend policy, a dividend of $.45 per share was declared on March 17, 1998 to
be distributed on April 30, 1998.
NET INTEREST INCOME
Net interest income, which represents the excess revenue generated from earning
assets over the interest cost of funding those assets, increased $26,000 for the
quarter ended March 31, 1998 compared to the same period in 1997. The net
interest yield (net interest income divided by average earning assets) was 4.35
percent for the quarters ended March 31, 1998 and 1997.
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,
1998 1997
(Dollars in thousands)
<S> <C> <C>
Provision for loan losses charged
to expense $ 60 $ 180
Net loan charge-offs 27 30
Net loan charge-offs as a percent of
average outstanding net loans .01% .01%
Nonaccrual loans $ 211 $ 212
Loans past due 90 days or more 1,307 582
Potential problem loans, other than those
past due 90 days or more, nonaccrual,
or restructured 2,344 1,992
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
<S> <C> <C>
Allowance for possible loan losses 3,551 3,518
Allowance for possible loan losses as a
percent of period-end loans 1.52% 1.47%
</TABLE>
The first quarter 1998 provision for loan losses appearing in the Consolidated
Statements of Operations and Comprehensive Income totalled $60,000. This
provision compares to $45,000 expensed in the first quarter of 1997. Actual net
loan charge offs were $27,000 for the first three months of 1998 compared to
$5,000 during the same period in 1997.
Nonaccrual loans totalled $211,000 at March 31, 1998 compared to $212,000 at
December 31, 1997. Loans past due 90 days or more increased $725,000 and other
potential problem loans increased $352,000 from the December 31, 1997 figures.
These negative asset quality trends will continue to be monitored throughout
1998 to ensure adequate provisions are calculated and expensed. The
Corporation's allowance for possible loan losses as a percentage of outstanding
loans improved to 1.52 percent at March 31, 1998 compared to 1.47 percent at
December 31, 1997. 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 consulting firm conducts a loan review process that
is used to facilitate the early identification of problem loans and to ensure
sound credit decisions. Management considers the allowance at March 31, 1998 to
be adequate to provide for losses inherent to the loan portfolio.
NON-INTEREST INCOME
Total non-interest income increased $39,000 or 10.2 percent for the quarter
ended March 31, 1998 compared to the same period in 1997. Included in non-
interest income for the quarter ended March 31, 1997 were realized losses of
$6,000 on the sale of investment securities that were classified as available-
for-sale. There were no such losses during the same period in 1998.
Trust department fee income increased $15,000 between quarterly periods and
service charges on deposit accounts decreased $8,000 between comparable
quarterly periods. Gains on the sale of loans to the Federal Home Loan Mortgage
Corporation (Freddie Mac) totalled $12,000 in 1998. There were no such gains
during the same period in 1997.
Other operating income increased $14,000 between quarterly periods. Included in
other operating income for the first three months of 1998 were $54,000 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
$39,000 in fees earned during the same period in 1997.
NON-INTEREST EXPENSES
Total non-interest expenses increased $4,000 for the quarter ended March 31,
1998 compared to the same period in 1997. Salaries, wages and employee benefits
decreased $21,000 between quarterly periods and net occupancy expense of bank
premises decreased $4,000 between quarterly periods.
Goodwill amortization associated with the August 1, 1996 purchase of Union
Bancshares Corp. was basically unchanged for the two comparable quarterly
periods while other operating expenses increased $28,000 or 3.3 percent between
quarterly periods.
FEDERAL INCOME TAX EXPENSE
Federal income tax expense increased $22,000 or 6.1 percent between quarterly
periods due primarily to improved income before taxes. The Corporation's
effective tax rate for the quarter ended March 31, 1998 increased to 34.6
percent compared to 34.0 percent for the quarter ended March 31, 1997.
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
An average federal funds sold position of $5,789,000 was maintained for the
quarterly period ended March 31, 1998. Short-term borrowings of federal funds
purchased and repurchase agreements averaged $5,318,000 for the quarterly
period.
Long-term borrowings due to the Federal Home Loan Bank in 1999 totalled
$1,000,000 at March 31, 1998 and throughout the quarterly period ended March 31,
1998. Additionally, borrowings from NBD Bank advanced to fund the 1996 purchase
of Union Bancshares Corp. totalled $1,475,000 at March 31, 1998. 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 $170,000 for the
quarter ended March 31, 1998. This compares to $26,000 for same period in 1997.
Projected 1998 capital expenditures total $550,000. Of the projected 1998
expenditure amount, approximately $200,000 is allocated to the relocation and
furnishing of the Trust Department within the Main Office complex.
<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, 1998 /s/ Thomas Hite
------------------------ -------------------------------
Thomas F. Hite, President
Date: April 14, 1998 /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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 10,374
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 8,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 36,452
<INVESTMENTS-CARRYING> 33,073
<INVESTMENTS-MARKET> 33,186
<LOANS> 232,887
<ALLOWANCE> 3,551
<TOTAL-ASSETS> 337,213
<DEPOSITS> 294,049
<SHORT-TERM> 5,876
<LIABILITIES-OTHER> 2,792
<LONG-TERM> 2,475
0
0
<COMMON> 7,932
<OTHER-SE> 24,089
<TOTAL-LIABILITIES-AND-EQUITY> 337,213
<INTEREST-LOAN> 5,139
<INTEREST-INVEST> 988
<INTEREST-OTHER> 76
<INTEREST-TOTAL> 6,203
<INTEREST-DEPOSIT> 2,749
<INTEREST-EXPENSE> 2,859
<INTEREST-INCOME-NET> 3,344
<LOAN-LOSSES> 60
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,594
<INCOME-PRETAX> 1,111
<INCOME-PRE-EXTRAORDINARY> 727
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 727
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.15
<YIELD-ACTUAL> 4.35
<LOANS-NON> 211
<LOANS-PAST> 1,307
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,344
<ALLOWANCE-OPEN> 3,518
<CHARGE-OFFS> 49
<RECOVERIES> 22
<ALLOWANCE-CLOSE> 3,551
<ALLOWANCE-DOMESTIC> 3,551
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
