<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, 2000
0-20159
- --------------------------------------------------------------------------------
(Commission File Number)
CROGHAN BANCSHARES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-1073048
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
323 Croghan Street, Fremont, Ohio 43420
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(419)-332-7301
- --------------------------------------------------------------------------------
(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 [ ]
1,909,215 Common shares were outstanding as of March 31, 2000.
This document contains 11 pages.
<PAGE> 2
CROGHAN BANCSHARES, INC.
Index
<TABLE>
<CAPTION>
PART I. Page(s)
<S> <C> <C>
Item 1. Financial Statements 3 - 6
Item 2. Management's Discussion and Analysis 7 - 9
Item 3. Quantitative and Qualitative Disclosures About Market
Risk - There have been no material changes from the
information provided in the December 31, 1999 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 of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibit 27 - Financial data schedule 11
(b) A Form 8-K dated February 16, 2000 was filed on
February 16, 2000 reporting the retirement of
Albert C. Nichols, Chairman of the Board.
Signatures 10
</TABLE>
<PAGE> 3
CROGHAN BANCSHARES, INC.
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
March 31 December 31
ASSETS 2000 1999
(Dollars in thousands, except par value)
<S> <C> <C>
CASH AND CASH EQUIVALENTS
Cash and due from banks $ 11,534 $ 13,579
Interest-bearing deposits in other banks - 14
Federal funds sold 4,000 2,200
--------- ---------
Total cash and cash equivalents 15,534 15,793
--------- ---------
INVESTMENT SECURITIES
Available-for-sale, at fair value 35,179 37,336
Held-to-maturity, at amortized cost, fair value of $38,238 in 2000
and $39,556 in 1999 39,088 40,096
--------- ---------
Total investment securities 74,267 77,432
--------- ---------
LOANS RECEIVABLE 240,956 239,409
Less: Allowance for loan losses 3,158 3,196
--------- ---------
Net loans receivable 237,798 236,213
--------- ---------
PREMISES AND EQUIPMENT, NET 7,135 7,203
ACCRUED INTEREST RECEIVABLE 2,532 2,606
OTHER REAL ESTATE OWNED - -
GOODWILL, NET 7,229 7,389
OTHER ASSETS 4,002 3,950
--------- ---------
TOTAL ASSETS $ 348,497 $ 350,586
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand, non-interest bearing $ 39,787 $ 34,040
Savings, NOW and Money Market deposits 120,207 122,143
Time 137,495 138,404
--------- ---------
Total deposits 297,489 294,587
Federal funds purchased and securities sold under repurchase agreements 9,013 11,762
Borrowed funds 4,000 7,000
Dividends payable 382 363
Other liabilities 2,172 1,835
--------- ---------
Total liabilities 313,056 315,547
--------- ---------
STOCKHOLDERS' EQUITY
Common stock, $12.50 par value. Authorized 3,000,000 shares; issued and
outstanding 1,909,215 shares in 2000 and 1,908,208 in 1999 23,865 23,853
Surplus 86 74
Retained earnings 11,939 11,477
Accumulated other comprehensive income (loss) (449) (365)
--------- ---------
Total stockholders' equity 35,441 35,039
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 348,497 $ 350,586
========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 4
CROGHAN BANCSHARES, INC.
Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31
2000 1999
(Dollars in thousands,
except per share data)
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans receivable $5,083 $4,937
Interest and dividends on investment securities:
U.S. Treasury securities 252 387
Obligations of U.S. Government agencies and corporations 501 443
Obligations of states and political subdivisions 160 171
Other securities 74 41
Interest on federal funds sold 18 69
------ ------
Total interest income 6,088 6,048
------ ------
INTEREST EXPENSE
Interest on deposits 2,333 2,589
Interest on other borrowings 170 103
------ ------
Total interest expense 2,503 2,692
------ ------
Net interest income 3,585 3,356
PROVISION FOR LOAN LOSSES 75 60
------ ------
Net interest income after provision for loan losses 3,510 3,296
------ ------
NON-INTEREST INCOME
Trust income 117 108
Service charges on deposit accounts 222 183
Gain (loss) on sale of investment securities - -
Gain (loss) on sale of loans - 1
Other operating income 215 127
------ ------
Total non-interest income 554 419
------ ------
NON-INTEREST EXPENSES
Salaries, wages and employee benefits 1,560 1,468
Net occupancy expense of premises 173 163
Amortization of goodwill 160 160
Other operating expenses 901 863
------ ------
Total non-interest expenses 2,794 2,654
------ ------
Income before federal income taxes 1,270 1,061
FEDERAL INCOME TAXES 426 365
------ ------
NET INCOME $ 844 $ 696
====== ======
Net income per share, based on 1,908,696 shares in 2000 and 1,903,878 shares in 1999 $ .44 $ .37
====== ======
Dividends declared, based on 1,909,215 shares in 2000 and 1,904,091 shares in 1999 $ .20 $ .17
====== ======
COMPREHENSIVE INCOME $ 760 $ 603
====== ======
</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
2000 1999
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 844 $ 696
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 315 316
Provision for loan losses 75 60
Deferred federal income taxes (24) 50
FHLB stock dividends (26) (24)
Increase in cash value of life insurance policies (42) -
Net amortization of investment security premiums and discounts 27 20
Loss (gain) on sale of investment securities - -
Loss (gain) on sale of loans - (1)
Loss (gain) on disposal of equipment 1 1
Decrease (increase) in accrued interest receivable 74 98
Decrease (increase) in other assets (10) (68)
Increase (decrease) in other liabilities 405 337
-------- --------
Net cash provided by operating activities 1,639 1,485
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities:
Available-for-sale (3,000) (10,785)
Held-to-maturity - (6,096)
Proceeds from maturities of investment securities 6,036 12,237
Proceeds from sales of available-for-sale investment securities - -
Proceeds from sale of loans receivable - 112
Net decrease (increase) in loans receivable (1,660) 7,394
Capital expenditures (124) (75)
Proceeds from sale of equipment - -
-------- --------
Net cash provided by (used in) investing activities 1,252 2,787
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 2,936 (4,351)
Increase (decrease) in federal funds purchased and securities sold
under repurchase agreements (2,748) (5,130)
Increase (decrease) in borrowed funds (3,000) (335)
Proceeds from issuance of common stock 25 10
Cash dividends paid (363) (286)
-------- --------
Net cash provided by (used in) financing activities (3,150) (10,092)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (259) (5,820)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 15,793 18,634
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 15,534 $ 12,814
======== ========
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Interest $ 2,593 $ 2,813
======== ========
Federal income taxes $ - $ -
======== ========
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, 2000
(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, 2000 are not necessarily indicative of the operating
results for the full year.
(2) NEW ACCOUNTING PRINCIPLE
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities", which
establishes accounting and reporting standards for derivative instruments
and hedging activities. Under Statement 133, derivatives are recognized on
the balance sheet at fair value as an asset or liability. Changes in the
fair value of derivatives is reported as a component of other comprehensive
income or recognized as earnings through the income statement depending on
the nature of the instrument. Statement 137 was issued in June 1999, and
deferred the effectiveness of Statement 133 to all quarters of fiscal years
beginning after June 15, 2000, with earlier adoption permitted. The
Corporation has not yet adopted Statement 133, but it is not expected to
have a material impact on the consolidated financial statements.
<PAGE> 7
CROGHAN BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
When or if used in the Corporations's Securities and Exchange Commission filings
or, other public or shareholder communications, or in oral statements made with
the approval of an authorized executive officer, the words or phrases:
"anticipate", "would be", "will allow", "intends to", "will likely result", "are
expected to", "will continue", "is anticipated", "is estimated", "is projected",
or similar expressions are intended to identify "forward looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Any
such statements are subject to risks and uncertainties that include but are not
limited to: changes in economic conditions in the Corporation's market area,
changes in policies by regulatory agencies, fluctuations in interest rates,
demand for loans in the Corporation's market area, and competition. All or some
of these factors could cause actual results to differ materially from historical
earnings and those presently anticipated or projected.
The Corporation cautions readers not to place undue reliance on any such forward
looking statements, which speak only as of the date made, and advises readers
that various factors including regional and national economic conditions,
substantial changes in the levels of market interest rates, credit and other
risks associated with lending and investing activities, and competitive and
regulatory factors could affect the Corporation's financial performance and
could cause the Corporation's actual results for future periods to differ
materially from those anticipated or projected. The Corporation does not
undertake, and specifically disclaims any obligation, to update any
forward-looking statements to reflect occurrences or unanticipated events or
circumstances after the date of such statements.
PERFORMANCE SUMMARY
Assets at March 31, 2000 totalled $348,497,000 compared to $350,587,000 at 1999
year end. Total deposits increased to $297,489,000 from $294,588,000 at year end
and total loans increased to $240,956,000 from $239,409,000 at year end.
Net income for the quarter ended March 31, 2000 was $844,000 or $.44 per common
share compared to $696,000 or $.37 per common share for the same period in 1999.
Operating results for the quarter ended March 31, 2000 were positively impacted
by an increase in the net interest margin resulting from an increase in loans of
$9,194,000 as well as a decrease in the cost of funds as compared to the quarter
ended March 31, 1999.
DEPOSITS, LOANS, INVESTMENT SECURITIES, AND STOCKHOLDERS' EQUITY
Total deposits at March 31, 2000 increased $2,902,000 or 1.0 percent from 1999
year end. The liquid deposit category (demand, savings, NOW and money market
deposit accounts) increased $3,811,000 while the time deposit category decreased
$909,000. Total loans increased $1,547,000 or .6 percent from 1999 year end.
Total investment securities decreased $3,165,000 or 4.1 percent from 1999 year
end.
Stockholders' equity at March 31, 2000 increased to $35,441,000 or $18.56 book
value per common share compared to $35,039,000 or $18.36 book value per common
share at December 31, 1999. Stockholders' equity at March 31, 2000 included
accumulated other comprehensive loss consisting of the net unrealized loss on
investment securities classified as available-for-sale. At March 31, 2000,
Croghan held $35,179,000 of available-for-sale securities with a net unrealized
loss of $449,000 net of income taxes. This compares to 1999 year-end holdings of
$37,336,000 with a net unrealized loss of $365,000 net of income taxes.
Consistent with the Corporation's quarterly dividend policy, a dividend of $.20
per share was declared on March 14, 2000 to be distributed on April 29, 2000.
<PAGE> 8
NET INTEREST INCOME
Net interest income, which represents the excess revenue generated from earning
assets over the interest cost of funding those assets, increased $229,000 for
the quarter ended March 31, 2000 compared to the same period in 1999. The net
interest yield (net interest income divided by average earning assets) was 4.58
percent for the quarter ended March 31, 2000 compared to 4.23 percent for the
quarter ended March 31, 1999.
PROVISION FOR LOAN LOSSES AND THE ALLOWANCE FOR LOAN LOSSES
The following table details factors relating to the provision and allowance for
loan losses for the periods noted:
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, December 31,
2000 1999
(Dollars in thousands)
<S> <C> <C>
Provision for loan losses charged
to expense $ 75 $ 240
Net loan charge-offs 113 462
Net loan charge-offs as a percent of
average outstanding net loans .05% .20%
Nonaccrual loans $ 301 $ 392
Loans past due 90 days or more 1,650 2,144
Potential problem loans, other than those
past due 90 days or more, nonaccrual,
or restructured 1,028 1,176
Allowance for loan losses 3,158 3,196
Allowance for loan losses as a
percent of period-end loans 1.31% 1.33%
</TABLE>
The first quarter 2000 provision for loan losses appearing in the Consolidated
Statements of Operations and Comprehensive Income totalled $75,000. This
provision compares to $60,000 for the first quarter of 1999. Actual net loan
charge offs were $113,000 for the first three months of 2000 compared to $92,000
during the same period in 1999.
Nonaccrual loans totalled $301,000 at March 31, 2000 compared to $392,000 at
December 31, 1999. Loans past due 90 days or more decreased $494,000 and other
potential problem loans decreased $148,000 from the December 31, 1999 figures.
The asset quality trends will continue to be monitored throughout 2000 to ensure
adequate provisions are calculated and expensed. The Corporation's allowance for
loan losses as a percentage of outstanding loans declined to 1.31 percent at
March 31, 2000 compared to 1.33 percent at December 31, 1999.
It is the Corporation's policy to maintain the allowance for loan losses at a
level to provide for reasonably foreseeable losses. To accomplish this
objective, a loan review process is conducted by an outside consulting firm
which facilitates the early identification of problem loans and ensures sound
credit decisions. Management considers the allowance at March 31, 2000 to be
adequate to provide for losses inherent to the loan portfolio.
NON-INTEREST INCOME
Total non-interest income increased $135,000 or 32.2 percent for the quarter
ended March 31, 2000. Trust department fee income increased $9,000 between
quarterly periods and service charges on deposit accounts increased $39,000
between comparable quarterly periods. Gains on the sale of loans to the Federal
Home Loan Mortgage Corporation (Freddie Mac) totalled $1,000 for the first
quarter of 1999 compared to no such gains in 2000.
Other operating income increased $88,000 between quarterly periods. Included in
other operating income for the first three months of 2000 were $34,000 in fees
<PAGE> 9
generated from the Invest Division which markets products that are not FDIC
insured (e.g., mutual funds and annuities). This compares to $11,000 in fees
earned during the same period in 1999. Also included in other operating income
for the first three months of 2000 was $42,000 relating to the increase in cash
value of split dollar life insurance (none for the same period in 1999).
NON-INTEREST EXPENSES
Total non-interest expenses increased $140,000 or 5.3 percent for the quarter
ended March 31, 2000 compared to the same period in 1999. Salaries, wages and
employee benefits increased $92,000 between quarterly periods and net occupancy
expense of bank premises increased $10,000 between quarterly periods.
Goodwill amortization associated with the August 1, 1996 purchase of Union
Bancshares Corp. was unchanged for the two comparable quarterly periods while
other operating expenses increased $38,000 or 4.4 percent between quarterly
periods.
FEDERAL INCOME TAX EXPENSE
Federal income tax expense increased $61,000 or 16.7 percent between quarterly
periods due primarily to higher income before federal income taxes. The
Corporation's effective tax rate for the quarter ended March 31, 2000 decreased
to 33.6 percent compared to 34.4 percent for the quarter ended March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
An average federal funds sold position of $1,259,000 was maintained for the
quarterly period ended March 31, 2000. Short-term borrowings of federal funds
purchased and securities sold under repurchase agreements averaged $9,538,000
for the same quarterly period.
Borrowings from the Federal Home Loan Bank totalled $4,000,000 at March 31,
2000, with $2,000,000 due in September 2000 and $2,000,000 due in October 2005.
Capital expenditures for bank premises and equipment totalled $124,000 for the
quarter ended March 31, 2000. This compares to $75,000 for same period in 1999.
Projected 2000 capital expenditures total $350,000.
<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 7, 2000 /s/ Thomas Hite
------------------------ -------------------------------
Thomas F. Hite, President
Date: April 7, 2000 /s/ Allan E. Mehlow
------------------------ -------------------------------
Allan E. Mehlow, Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATION 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-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 11,534
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 35,179
<INVESTMENTS-CARRYING> 39,088
<INVESTMENTS-MARKET> 38,238
<LOANS> 240,956
<ALLOWANCE> 3,158
<TOTAL-ASSETS> 348,497
<DEPOSITS> 297,489
<SHORT-TERM> 11,013
<LIABILITIES-OTHER> 2,554
<LONG-TERM> 2,000
0
0
<COMMON> 23,865
<OTHER-SE> 11,576
<TOTAL-LIABILITIES-AND-EQUITY> 348,497
<INTEREST-LOAN> 5,083
<INTEREST-INVEST> 987
<INTEREST-OTHER> 18
<INTEREST-TOTAL> 6,088
<INTEREST-DEPOSIT> 2,333
<INTEREST-EXPENSE> 2,503
<INTEREST-INCOME-NET> 3,585
<LOAN-LOSSES> 75
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,794
<INCOME-PRETAX> 1,270
<INCOME-PRE-EXTRAORDINARY> 1,270
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 844
<EPS-BASIC> .44
<EPS-DILUTED> .44
<YIELD-ACTUAL> 4.58
<LOANS-NON> 301
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,196
<CHARGE-OFFS> 211
<RECOVERIES> 98
<ALLOWANCE-CLOSE> 3,158
<ALLOWANCE-DOMESTIC> 3,158
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
