-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QxfGCYHPb76/xGYgSakzuLFPkT5xaVZgM/TCPwJZ44dqBU2fqeujmoXPGPdOnieT 9GkXppz3Lc++uo9RN5S0/g== 0000950152-96-004110.txt : 19960816 0000950152-96-004110.hdr.sgml : 19960816 ACCESSION NUMBER: 0000950152-96-004110 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANCFIRST OHIO CORP CENTRAL INDEX KEY: 0000868572 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 311294136 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18840 FILM NUMBER: 96611865 BUSINESS ADDRESS: STREET 1: 422 MAIN ST CITY: ZANESVILLE STATE: OH ZIP: 43702 BUSINESS PHONE: 6144528444 MAIL ADDRESS: STREET 1: 422 MAIN STREET CITY: ZANESVILLE STATE: OH ZIP: 43701 FORMER COMPANY: FORMER CONFORMED NAME: BANCFIRST CORP /OH/ DATE OF NAME CHANGE: 19600201 10-Q 1 BANCFIRST OHIO CORPORATION QUARTERLY REPORT 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________________ to _______________________ Commission File Number 0-18840 BancFirst Ohio Corp. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 31-1294136 - ------------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 422 Main Street Zanesville, Ohio 43701 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (614) 452-8444 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) N/A - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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_____ Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. Class Outstanding as of August 10, 1996 - ------------------------------------- ------------------------------------ Common Stock, $10.00 Par Value 2,976,642 -1 of - 28 2 INDEX BANCFIRST OHIO CORP. PART I. FINANCIAL INFORMATION PAGE NO. Item 1. Financial Statements Consolidated Balance Sheet ....................................... 3 Consolidated Statement of Income ................................. 4-5 Consolidated Statement of Cash Flows ............................. 6 Notes to Consolidated Financial Statements ....................... 7-11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation ..................................................... 12-25 PART II. OTHER INFORMATION Other Information ................................................ 26-27 Item 1 Legal Proceedings Item 2 Changes in Securities Item 3 Defaults upon Senior Securities Item 4 Submission of Matters to a Vote of Security Holders Item 5 Other Information Item 6 Exhibits and Reports on Form 8-K (a) Exhibits on Item 601 of Regulation S-K (b) Reports on Form 8-K Signatures ....................................................... 28 2 3 PART I: FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS BANCFIRST OHIO CORP. CONSOLIDATED BALANCE SHEET (Unaudited) (dollars in thousands, except share data)
June 30 December 31 1996 1995 --------- ----------- ASSETS: Cash and due from banks $ 19,317 $ 14,102 Federal funds sold 326 2,600 Securities held-to-maturity, at amortized cost (approximate fair value of $8,583 and $8,548 in 1996 and 1995, respectively) 8,542 8,392 Securities available-for-sale, at fair value 160,502 169,860 --------- --------- Total securities 169,044 178,252 --------- --------- Loans, net of unearned income 282,943 268,818 Allowance for possible loan losses (3,544) (3,307) --------- --------- Net loans 279,399 265,511 --------- --------- Bank premises and equipment, net 4,612 4,120 Accrued interest receivable 3,397 3,458 Other assets 4,187 8,386 --------- --------- Total assets $ 480,282 $ 476,429 ========= ========= LIABILITIES: Deposits: Noninterest-bearing deposits $ 42,171 $ 41,835 Interest-bearing deposits 316,568 306,710 --------- --------- Total deposits 358,739 348,545 Short-term borrowings 1,199 7,400 Long-term borrowings 66,525 66,735 Accrued interest payable 1,547 1,261 Other liabilities 1,780 2,478 --------- --------- Total liabilities 429,790 426,419 --------- --------- SHAREHOLDERS' EQUITY: Common stock, $10 par value, 7,500,000 shares authorized, and 3,033,919 shares issued 30,340 30,340 Capital in excess of par value 6,922 6,889 Retained earnings 14,943 13,022 Unrealized holdings gains (losses) on securities available -for-sale, net (580) 942 Treasury stock, 60,465 and 62,923 shares, at cost, in 1996 and 1995, respectively (1,133) (1,183) --------- --------- Total shareholders' equity 50,492 50,010 --------- --------- Total liabilities and shareholders' equity $ 480,282 $ 476,429 ========= =========
The accompanying notes are an integral part of the financial statements. 3 4 BANCFIRST OHIO CORP. CONSOLIDATED STATEMENT OF INCOME (Unaudited) (dollars in thousands)
Three Months Ended Six Months Ended June 30 June 30 1996 1995 1996 1995 ------ ------ ------- ------- Interest income: Interest and fees on loans $6,176 $5,609 $12,363 $10,943 Interest and dividends on securities: Taxable 2,429 2,246 4,966 4,438 Tax-exempt 330 282 659 548 Other interest income 30 33 118 90 ------ ------ ------- ------- Total interest income 8,965 8,170 18,106 16,019 ------ ------ ------- ------- Interest expense: Time deposits, $100 and over 790 603 1,500 1,140 Other deposits 2,591 2,460 5,259 4,650 Federal Home Loan Bank Advances 856 871 1,694 1,715 Short-term borrowings 211 31 403 98 ------ ------ ------- ------- Total interest expense 4,448 3,965 8,856 7,603 ------ ------ ------- ------- Net interest income 4,517 4,205 9,250 8,416 Provision for possible loan losses 318 201 610 402 ------ ------ ------- ------- Net interest income after provision for possible loan losses 4,199 4,004 8,640 8,014 ------ ------ ------- ------- Other income: Trust and custodian fees 351 313 726 627 Customer service fees 432 441 843 888 Gain on sale of loans 450 333 1,046 576 Other 202 119 384 229 Investment securities gains, net 3 17 3 17 ------ ------ ------- ------- Total other income 1,438 1,223 3,002 2,337 ------ ------ ------- ------- Other expense: Salaries and employee benefits 1,856 1,701 3,743 3,431 Net occupancy expense 182 184 387 367 Other 1,455 1,359 2,750 2,656 ------ ------ ------- ------- Total other expense 3,493 3,244 6,880 6,454 ------ ------ ------- ------- Income before income taxes 2,144 1,983 4,762 3,987 Provision for federal income taxes 592 581 1,355 1,162 ------ ------ ------- ------- Net income $1,552 $1,402 $ 3,407 $ 2,735 ====== ====== ======= =======
The accompanying notes are an integral part of the financial statements. 4 5 BANCFIRST OHIO CORP. CONSOLIDATED STATEMENT OF INCOME (Unaudited) (dollars in thousands, except per share data)
Three Months Ended Six Months Ended June 30 June 30 1996 1995 --------------------------- --------------------------- Net income per common share $ 0.52 $ 0.47 $ 1.15 $ 0.92 ========== ========== ========== ========== Weighted average common shares outstanding 2,973,486 2,973,127 2,972,883 2,972,264 ========== ========== ========== ========== Cash dividends per common share $ 0.25 $ 0.23 $ 0.50 $ 0.46 ========== ========== ========== ========== Total cash dividends paid $ 743 $ 647 $ 1,486 $ 1,295 ========== ========== ========== ==========
The accompanying notes are an integral part of the financial statements. 5 6 BANCFIRST OHIO CORP. CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (dollars in thousands)
Six Months Ended June 30 1996 1995 -------- -------- Cash flows from operating activities: Net income $ 3,407 $ 2,735 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 1,106 989 Provision for possible loan losses 610 402 Deferred taxes payable (126) 27 Disposal of other assets, gains (1,046) (576) Decrease (increase) in interest receivable 61 (34) Decrease in other assets 4,105 2,615 Increase in interest payable 286 286 Increase in other liabilities 214 959 FHLB stock dividend (154) (380) -------- -------- Net cash provided by operating activities 8,463 7,023 Cash flows from investing activities: Decrease in short-term borrowings (6,201) (10,650) Increase (decrease) in federal funds sold 2,274 (4,777) Proceeds from maturities of securities held -to-maturity 497 1,913 Proceeds from maturities and sales of securities available-for-sale 26,778 13,812 Purchase of securities held-to-maturity (652) (3,963) Purchase of securities available-for-sale (20,061) (15,137) Increase in loans, net (23,449) (21,314) Increase (decrease) in other borrowings (210) 4,063 Purchases of equipment and other assets (871) (275) Proceeds from sale of loans and assets 9,855 6,364 -------- -------- Net cash used in investing activities (12,040) (29,964) Cash flows from financing activities: Net increase in deposits 10,194 25,216 Cash dividends paid (1,486) (1,295) Sale of treasury stock, net 84 84 -------- -------- Net cash provided by financing activities 8,792 24,005 -------- -------- Net decrease in cash and due from banks 12,986 1,064 Cash and due from banks, beginning of period 14,102 18,831 -------- -------- Cash and due from banks, end of period $ 19,317 $ 19,895 ======== ======== Supplemental cash flow disclosures: Income taxes paid $ 1,305 $ 1,085 ======== ======== Interest paid $ 8,570 $ 7,317 ======== ========
The accompanying notes are an integral part of the financial statements. 6 7 BANCFIRST OHIO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1996 (UNAUDITED) The consolidated financial statements for interim periods are unaudited; however, in the opinion of the management of BancFirst Ohio Corp. ("Corporation"), all material adjustments (consisting of only normal recurring adjustments) necessary to a fair statement of the results of operations and changes in financial position have been included. Certain reclassifications have been made to the 1995 consolidated financial statements to conform to the 1996 presentation. (1) BASIS OF PRESENTATION: The consolidated financial statements include the accounts of BancFirst Ohio Corp. and each of its wholly owned subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation. Effective June 30, 1995, the Corporation completed its acquisition of Bellbrook Bancorp., Inc. ("BBI") whereby Bellbrook Bancorp., Inc. was merged into the Corporation and Bellbrook Community Bank became a separate, wholly owned subsidiary of the Corporation. In connection with the transaction, the Corporation issued approximately 159,000 common shares. The transaction was accounted for under the pooling-of-interests method of accounting and accordingly all prior financial information has been restated. Notes to the financial statements contained in the Corporation's Annual Report to Shareholders and Form 10-K for the year ended December 31, 1995, should be read in conjunction with these financial statements. The accompanying financial statements have been prepared in accordance with the 7 8 instructions for Form 10-Q and therefore, do not include all information and footnotes normally required by generally accepted accounting principles. (2) INVESTMENT SECURITIES: The amortized cost and estimated market value of investment securities are as follows:
June 30, 1996 December 31, 1995 ----------------------- ----------------------- Securities Held-for-Investment Book Market Book Market ------------------------------ -------- -------- -------- -------- (In thousands) Other U.S. government agencies $ 311 $ 325 $ 400 $ 407 State and political subdivisions 7,177 7,204 6,751 6,886 Mortgage-backed securities 121 135 Other 1,054 1,054 1,120 1,120 -------- -------- -------- -------- $ 8,542 $ 8,583 $ 8,392 $ 8,548 ======== ======== ======== ========
June 30, 1996 December 31, 1995 ----------------------- ----------------------- Securities Available-for-Sale Book Market Book Market ----------------------------- -------- -------- -------- -------- (In thousands) U.S. treasury securities $ 13,764 $ 13,914 $ 17,949 $ 18,303 Other U.S. government agencies 16,874 16,718 11,247 11,390 State and political subdivisions 18,367 18,429 17,453 17,848 Mortgage-backed securities 106,634 105,702 116,507 117,043 Other 5,743 5,739 5,276 5,276 -------- -------- -------- -------- $161,382 $160,502 $168,432 $169,860 ======== ======== ======== ========
3) LOANS AND LEASES BY CATEGORIES:
June 30, 1996 December 31, 1995 ------------- ----------------- (In thousands) Commercial, financial and agricultural $ 113,410 $ 107,015 Real estate - mortgage 105,353 105,604 Real estate - construction 7,737 2,859 Consumer installment 56,443 53,340 ---------- ---------- Total $ 282,943 $ 268,818 =========== ===========
8 9 (4) ALLOWANCE FOR POSSIBLE LOAN LOSSES: The level of the allowance for possible loan and lease losses is based on management's evaluation of the loan portfolio, past loan loss history, and current, as well as anticipated, economic conditions. An analysis of the allowance for possible loan and lease losses follows:
Six Months Ended Year Ended June 30, 1996 December 31, 1995 ------------- ----------------- (In thousands) Balance at beginning of period $ 3,307 $ 3,095 Additions: Provision charged to operations 610 967 Deductions: Loans charged off (496) (862) Loan recoveries 123 107 ------- -------- Net charge-offs (373) (755) ------- -------- Balance at end of period $ 3,544 $ 3,307 ======= ========
On January 1, 1995, the Corporation adopted Statement of Financial Accounting Standard (SFAS) No. 114, "Accounting by Creditors for Impairment of a Loan" as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures". Under this standard, loans considered to be impaired are reduced to the present value of expected future cash flows, and secured loans that are in foreclosure are recorded at the fair value of the underlying collateral securing the loan. The difference between the recorded investment in the loan and the impaired valuation is the amount of impairment. A specific allocation of the allowance for loan losses is assigned to such loans. If these allocations require an increase to the allowance, the increase is reported as bad debt expense. Adopting this standard during the first quarter of 1995 did not require an adjustment to the provision for possible loan losses. 9 10 At June 30, 1996, the Corporation's non-performing loans considered to be impaired under SFAS No. 114 was $122,000 (all of which was on a nonaccrual basis). The related allocation of the allowance for possible loan losses for these impaired loans was $3,000. The average recorded investment in impaired loans for the quarter ended June 30, 1996, was approximately $122,000. For the quarter ended June 30, 1996, the Corporation recognized no interest income on these impaired loans. Interest income of approximately $3,000 would have been recorded on these loans according to the original terms. At December 31, 1995, the Corporation had nonperforming loans totaling $801,000, all of which was considered impaired under SFAS No. 114. The Corporation recorded $4,000 in interest income on these loans in 1995. Interest income in the amount of $30,000 would have been recorded on these loans according to the original terms. 5) LONG-TERM BORROWINGS Long-term borrowings as of June 30, 1996, and December 31, 1995, were as follows:
June 30, December 31, ` 1996 1995 ------- ------- (In thousands) Term reverse repurchase agreement (5.95%) due 1997 $ 5,000 $ 5,000 Term reverse repurchase agreement (6.05%) due 1998 5,000 5,000 Federal Home Loan Bank Advances 56,525 56,735 ------- ------- $66,525 $66,735 ======= =======
10 11 Minimum annual retirements on long-term borrowings for the next five years consisted of the following:
June 30, 1996 December 31, 1995 --------------------- -------------------- (Dollars in thousands) Weighted Weighted Average Average Maturity (Years Interest Principal Interest Principal Ending December 31) Rate Repayment Rate Repayment ------------------- -------- --------- -------- --------- 1996 6.17% $ 9,773 6.17% $ 9,983 1997 5.89% 32,991 5.89% 32,991 1998 5.86% 10,524 5.86% 10,524 1999 5.88% 1,559 5.88% 1,559 2000 6.29% 597 6.29% 597 2001 and thereafter 6.81% 11,081 6.61% 11,081 -------- -------- TOTAL 6.10% $ 66,525 6.08% $ 66,735 ======== ========
Federal Home Loan Bank ("FHLB") advances must be secured by eligible collateral as specified by the FHLB. Accordingly, the Corporation has a blanket pledge of its first mortgage loan portfolio as collateral for the advances outstanding, with a required minimum ratio of collateral to advances of 150%. Additionally, the stock of the FHLB owned by the Corporation (book value at June 30, 1996, of $ 4.5 million) is pledged as collateral for these borrowings. The Corporation has no commitments to borrow additional funds from the FHLB as of June 30, 1996. 11 12 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS BANCFIRST OHIO CORP. (UNAUDITED) Selected Financial Data
1996 1995 ------------------------- ---------------------------------------- June 30 March 31 Dec 31 Sept 30 June 30 -------- -------- -------- -------- -------- (Dollars in thousands) NET EARNINGS $ 1,552 $ 1,855 1,639 $ 1,838 $ 1,402 ======== ======== ======== ======== ======== AVERAGE CONSOLIDATED BALANCE SHEET ITEMS: Loans Less Unearned Income $279,338 $276,582 $265,665 $266,705 $260,625 Investment Securities 176,403 176,985 176,240 172,261 159,305 Other Earning Assets 1,956 6,918 3,894 4,989 1,837 -------- -------- -------- -------- -------- TOTAL EARNING ASSETS $457,697 $460,485 $445,799 $443,955 $421,767 Total Assets $478,239 $480,885 $466,962 $463,676 $441,049 Deposits 352,515 356,807 337,242 342,239 343,743 Shareholders' Equity 49,048 49,850 49,608 47,861 46,680 KEY RATIOS: Average Equity to Average Total Assets 10.26% 10.43% 10.62% 10.32% 10.58% Return on Average Total Assets 1.43% 1.52% 1.39% 1.57% 1.29% Return on Average Equity 12.69% 14.93% 13.11% 15.24% 12.19% Net Interest Margin (Fully Tax Equivalent) 4.13% 4.28% 4.36% 4.21% 4.19%
Overview The reported results of the Corporation primarily reflect the operations of the Corporation's wholly-owned bank subsidiaries ("Bank Subsidiaries"). The Corporation's results of operations are dependent on a variety of factors, including the general interest rate environment, competitive conditions in the industry, governmental policies and regulations and conditions in the markets for financial assets. Like most financial institutions, the primary contributor to the Corporation's income is net interest income, which is defined as the difference between the interest the Corporation earns on interest-earning assets, such as loans and securities, and the interest the 12 13 Corporation pays on interest-bearing liabilities, such as deposits and borrowings. The Corporation's operations are also affected by non-interest income, such as checking account and trust fees and gains from sales of loans. The Corporation's principal operating expenses, aside from interest expense, consist of salaries and employee benefits, occupancy costs, federal deposit insurance assessments, and other general and administrative expenses. On June 30, 1995, the Corporation acquired BBI in a transaction accounted for under the pooling-of-interests method of accounting for business combinations. Accordingly, the Corporation's consolidated financial statements have been restated for the periods prior to the transaction to include BBI. Comparison of June 30, 1996 and December 31, 1995 Financial Condition Total assets amounted to $480.3 million at June 30, 1996, as compared to $476.4 million at December 31, 1995, an increase of $3.9 million, or .8%. The increase in assets was funded with deposit growth of $10.2 million and an increase in shareholders' equity of $482,000, and was partially offset by a decrease in FHLB advances and other borrowings of $6.4 million. Total investment securities decrease by $9.2 million or 5.2%, to $169.0 million. The Corporation's investment strategy is to manage the portfolio to include rate sensitive assets, matched against interest sensitive liabilities to reduce interest rate risk. In recognition of this strategy, as well as to provide a secondary source of liquidity to accommodate heavy loan demand and possible deposit withdrawals, the Corporation has chosen to classify the majority of its investment securities as available-for-sale. At June 30, 1996, 94.9% of the total investment portfolio was classified as available-for-sale, while those securities which the Corporation intends to hold to 13 14 maturity represented the remaining 5.1%. This compares to 95.3% and 4.7% classified as available-for-sale and held to maturity, respectively, at December 31, 1995. See "Liquidity and Capital Resources." Total loans increased $14.1 million, or 5.2%, to $282.9 million at June 30, 1996. This increase was primarily a result of an increase of $6.4 million in the commercial loan portfolio. The increase in commercial loans was due to the Corporation's continued emphasis on small business lending. Residential mortgage loans decreased $251,000 while real estate construction loans increased $4.8 million and consumer loans increased $3.1 million. The overall increase in the loan portfolio was consistent with the Corporation's strategy of increasing assets while adhering to prudent underwriting standards. Premises and equipment increased $492,000, or 11.9%, to $4.6 million at June 30, 1996. This increase was a direct result of the Corporation's continued expansion of markets and services. Deposits totaled $358.7 million at June 30, 1996, an increase of $10.2 million, or 2.9%, over the balance at December 31, 1995. The increase resulted from management's marketing efforts and continued growth at newer branch offices. Total interest-bearing deposits accounted for 88.2% of total deposits at June 30, 1996 as compared to 88.0% at December 31, 1995. Total borrowings decreased $6.4 million to $67.7 million at March 31, 1996, as compared to $74.1 million at December 31, 1995. The majority of this decline resulted from a $6.2 million decrease in short-term borrowings. Based on the lower cost of deposits, management chose to fund a larger portion of its asset growth with deposits as opposed to borrowings. 14 15 Asset Quality The allowance for possible loan losses for the six months ended June 30, 1996, totaled $3.5 million, which represented 1.25% of total loans. This compares to a prior year-end allowance of $3.3 million, or 1.23% of total loans. Year-to-date net loan charge-offs were $373,000, compared to net charge-offs of $309,000 for the same period of the prior year and net charge-offs of $755,000 for the year ended December 31, 1995. Charge-offs have been made in accordance with the Corporation's standard policy and have occurred primarily in the commercial and consumer loan portfolios. 15 16 Allowance for Possible Loan Losses
1996 1995 --------------------------- --------------------------------------------- June 30 March 31 Dec 31 Sept 30 June 30 --------- --------- --------- --------- --------- (Dollars in thousands) Balance at Beginning of Period $ 3,406 $ 3,307 $ 3,180 $ 3,188 $ 3,199 Provision for Possible Loan Losses 318 292 359 206 201 Loans Charged Off (241) (255) (270) (237) (242) Recoveries of Loans Previously Charged Off 61 62 38 23 30 --------- --------- --------- --------- --------- Net Charge Offs (180) (193) (232) (214) (212) --------- --------- --------- --------- --------- Balance at End of Period $ 3,544 $ 3,406 $ 3,307 $ 3,180 $ 3,188 ========= ========= ========= ========= ========= Loans Outstanding $ 282,943 $ 277,715 $ 268,818 $ 271,165 $ 262,857 Allowance as a Percentage of Loans Outstanding 1.25% 1.23% 1.23% 1.17% 1.21% Net Charge Offs to Average Loans 0.06% 0.07% 0.08% 0.08% 0.08% Recoveries to Charge Offs 25.31% 24.31% 14.07% 9.70% 12.40% Allowance as a Multiple of Net Charge Offs 19.69x 17.55x 14.25x 14.86x 15.04x
Non-performing loans totaled $841,000, or 0.3% of total loans, at June 30, 1996, compared to $1.0 million or, 0.4%, at year-end 1995. The following is an analysis of the composition of non-performing loans:
1996 1995 ------------------------ ---------------------------------------- June 30 March 31 Dec 31 Sept 30 June 30 -------- -------- -------- -------- -------- (Dollars in thousands) Nonaccrual Loans $ 348 $ 846 $ 440 $ 505 $ 177 Accruing Loans 90 Days or More Past Due 473 493 584 476 247 -------- -------- -------- -------- -------- Total Non-performing Loans 821 1,339 1,000 981 424 Other Real Estate Owned 20 24 -------- -------- -------- -------- -------- Total Non-performing Assets $ 841 $ 1,339 $ 1,024 $ 981 $ 424 ======== ======== ======== ======== ======== Total Loans Outstanding $282,943 $277,715 $268,818 $271,165 $262,857 ======== ======== ======== ======== ======== Non-performing Loans to Total Loans 0.29% 0.48% 0.37% 0.36% 0.16% Allowance for possible Loan Losses to Non-performing Loans 431.67% 254.37% 330.70% 324.16% 751.89% Non-performing Assets to Total Assets 0.18% 0.28% 0.22% 0.21% 0.09%
16 17 As a percentage of non-performing loans, the allowance for possible loan losses was 431.7% at June 30, 1996, compared to 330.7% at December 31, 1995, and 751.9% at June 30, 1995. Although used as a general indicator, this percentage is not a primary factor in the determination of the adequacy of the allowance by management. This percentage is somewhat higher than at December 31, 1995, primarily due to a 37.2% decrease in non-performing loans. Total non-performing loans as a percentage of total loans remained relatively low at 0.3% of total loans. Comparison of Operating Results for the Six Months Ended June 30, 1996 and 1995 NET INCOME Consolidated net income for the six month period ended June 30, 1996 totaled $3.4 million, or $1.15 per share, compared to consolidated net income of $2.7 million, or $.92 per share, for the same period of 1995. This represents an earnings increase of $700,000, or 25.9%, and $.23, or 25.0%, on a per share basis. On an annualized basis, net income produced a return on average assets of 1.42% and 1.26% for 1996 and 1995, respectively. Increases in net interest income of $834,000 and non-interest income of $665,000 more than offset a $208,000 higher provision for possible loan losses and increases in non-interest expense totaling $426,000. NET INTEREST INCOME Net interest income for the first half of 1996 was $9.3 million ($9.6 million on a fully taxed equivalent (FTE) basis), which was an increase of $834,000 or 9.9% ($891,000, or 10.3% on an FTE basis) over the first half of 1995. Net interest income increased as the result of a higher volume in average earning assets. Year-to-date average earning assets totaled $459.1 million compared to 1995 year-to-date average earning assets of $415.9 million, a difference of $43.2 million, or 10.4%. The Corporation has continued to utilize FHLB advances as a means of achieving growth to effectively deploy and utilize its capital. In addition, the Corporation's growth in earning assets was partially funded by strong deposit growth by remaining competitive in its markets. 17 18 Net interest margin (NIM) on earning assets is net interest income earned on a fully tax-equivalent basis as a percentage of average earning assets. NIM for the six month period ended June 30, 1996 was 4.21% compared to 4.23% for the six months ended June 30, 1995. During the last year, the Corporation has experienced a migration of deposits from lower cost demand and savings deposits into higher cost time deposits. This resulted in an increase in cost of funds that more than offset increased yields of the loan portfolio. This negatively impacted net interest margin. PROVISION FOR POSSIBLE LOAN LOSSES The Corporation provides as an operating expense an amount necessary to maintain the allowance for possible loan losses at a level sufficient to provide for potential future credit losses. Growth of the loan portfolio, loss experience, economic conditions, delinquency levels, credit mix and analysis of selected credits are factors that affect judgments concerning the adequacy of the allowance. Actual losses on loans are charged against the allowance provided on the consolidated balance sheet through the provision for possible loan losses. During the first six months of 1996, the provision for possible loan losses was $610,000, compared to a prior year six month provision of $402,000, an increase of $208,000, or 51.7%. The higher provision was a result of strong loan growth in new markets and products for which the Corporation has limited loan loss experience, coupled with a higher level of net charge-offs. NON-INTEREST INCOME Non-interest income, excluding net investment securities gains, increased $679,000, or 29.3% over the same period of the prior year. During the first six months of 1996, the Corporation sold approximately $12.4 million of the guaranteed portion of its SBA portfolio into the secondary market, realizing a gain of $1.0 million. This compares to gains of $576,000 on loans sold totaling $7.5 million for the six months ended June 30, 1995. 18 19 NON-INTEREST EXPENSE Non-interest expense for the six months ended June 30, 1996 was $6.9 million compared to $6.5 million for the prior year, which was an increase of approximately $426,000 or 6.6%. Federal Deposit Insurance Corporation ("FDIC") assessment decreased approximately $327,000 or 89.1%. This FDIC expense savings was more than offset by the costs associated with the Corporation's expanded volume of business activities. The effective federal income tax rate for the first six months of 1996 was 28.5%, compared to a prior year rate of 29.1%. Comparison of Operating Results for the Three Months Ended June 30, 1996 and 1995 NET INCOME Consolidated net income for the three months ended June 30, 1996 was $1.6 million, or $.52 on a per share basis, compared to consolidated net income of $1.4 million, or $.47 on a per share basis, for the same period of 1995. This represented an earnings increase of $150,000, or 10.7%, and $.05, or 10.6% on a per share basis. Increases in net interest income of $312,000 and non-interest income of $215,000 were partially offset by a higher provision for possible loan losses of $117,000 and increases in non-interest expense of $249,000. NET INTEREST INCOME Net interest income for the second quarter of 1996 was $4.5 million ($4.7 million on a fully tax-equivalent (FTE) basis), which was an increase of $312,000 or 7.4% ($337,000, or 7.8% on an FTE basis) over the same period in 1995. Net interest income increased as a result of a higher volume in average earning assets. Average earning assets for the second quarter totaled $457.7 million compared to 1995 second quarter average earning assets of 19 20 $421.8 million, an increase of $35.9 million, or 8.5%. The Corporation's growth in earning assets was partially funded by strong deposit growth. NIM for the quarter ended June 30, 1996, was 4.13% compared to 4.14% for the second quarter of 1995. While the annualized yield on the loan portfolio has increased approximately 0.17%, the Corporation's cost of deposit funds has increased at a slightly faster rate than interest earning assets. Yields on the investment portfolio have remained relatively stable. PROVISION FOR POSSIBLE LOAN LOSSES For the second quarter of 1996, the provision for possible loan losses was $318,000, compared to a prior year second quarter provision of $201,000, an increase of $117,000, or 58.2%. The higher provision was a result of strong loan growth in new markets and products for which the Corporation has limited loan loss experience. NON-INTEREST INCOME Non-interest income, excluding net investment securities gains, increased $231,000, or 19.2%, over the same period of the prior year. During the second quarter of 1996, the Corporation sold approximately $3.8 million of the guaranteed portion of its SBA portfolio into the secondary market, realizing a gain of $450,000. This compared to 1995 quarterly gains of $333,000 on loans sold totaling $3.1 million. NON-INTEREST EXPENSE Non-interest expense for the quarter ended June 30, 1996 was $3.5 million compared to $3.2 million for the corresponding period of the prior year, which was an increase of approximately $300,000 or 9.4%. FDIC assessments decreased approximately $145,000. This FDIC expense savings was more than offset by the cost associated with the Corporation's expanded volume of business activities. 20 21 The effective federal income tax rate for the second quarter of 1996 was 27.6%, compared to a prior year rate of 29.3%. Liquidity and Capital The Corporation's principal source of satisfying short-term liquidity needs comes from cash, due from banks and federal funds sold. These sources constituted 3.9% of average total assets for the first six months of 1996, compared to 3.6% for the same period of 1995. Changes in the balance of cash and due from banks are due to changes in volumes of federal funds sold and the float and reserves related to deposit accounts, which may fluctuate significantly on a day-to-day basis. The investment portfolio serves as an additional source of liquidity for the Corporation. At June 30, 1996, held-to-maturity securities with a book value of $1.1 million, and available-for-sale securities with a market value of $10.8 million, were scheduled to mature within one year. In total, this represented 7.0% of the investment portfolio and 2.5% of quarter-end total assets. Securities with a market value of $160.5 million were classified as available-for-sale as of June 30, 1996. This represents 95.0% of the total investment portfolio. These securities were carried at fair market value and were classified as available-for-sale to provide for flexibility in managing net interest margin, interest rate risk, and liquidity. Cash flows from operating activities amounted to $8.5 million and $7.0 million for the six months ended June 30, 1996 and 1995, respectively. The Corporation's subsidiary banks are members of the FHLB. Membership provides an opportunity to enhance shareholder value through the utilization of FHLB advances to control the bank's cost of funds by providing alternative funding sources, to provide flexibility in the management of interest rate risk through the wide range of available funding sources, to manage liquidity via immediate access to such funds, and to provide flexibility through utilization of customized funding products to fund various loan and investment products and strategies. 21 22 Shareholders' equity at June 30, 1996 was $50.5 million, compared to shareholders' equity of $50.0 million at December 31, 1995, an increase of $482,000, or 1.0%. Statement of Financial Accounting Standards No. 115 requires that certain debt and equity instruments held as available-for-sale must be marked to their market value. This standard had a negative impact on equity for the first half of 1996, but had a positive impact on equity at December 31, 1995. This change in the impact on equity is attributable to changes in interest rates. At June 30, 1996, securities with a book value of $161.4 million were recorded at their fair value of $160.5 million, which resulted in a negative after-tax equity adjustment of $580,000, a decline of $1.5 million since December 31, 1995. Under the risk-based capital guidelines, a minimum capital to risk-weighted assets ratio of 8.0% is required, of which, at least 4.0% must consist of Tier 1 capital (equity capital net of goodwill). Additionally, a minimum leverage ratio (Tier 1 capital to total assets) of 3.0% must be maintained. At June 30, 1996, the Company had a total risk capital ratio of 17.94%, of which 17.91% consisted of Tier 1 capital. The leverage ratio for the Corporation at June 30, 1996, was 10.62%. These ratios were 18.89%, 17.70%, and 10.49%, respectively at December 31, 1995. Consummation of the pending acquisition discussed below will significantly reduce the capital ratios of the Corporation. Cash dividends declared to shareholders of the Corporation totaled $1,486,000, or $.50 per share, during the first half of 1996. This compared to dividends of $1,294,000, or $.46 per share, for the same period of the prior year. Cash dividends paid as a percentage of net income amounted to 43.6% and 47.3% for the first six months of 1996 and 1995, respectively. Considering the Corporation's capital adequacy, profitability, and reputation, the available liquidity sources and the anticipated funding sources for the currently contemplated acquisition are considered by management to be 22 23 adequate to meet current and projected needs. The Corporation is not aware of any current specific recommendations by regulatory authorities which, if implemented, would have a material effect on its liquidity. BancFirst's Board of Directors and management have identified various corporate, business and financial objectives. One such objective is growth of the organization through the acquisition of banks and/or savings and loan associations to, among others: increase the opportunity for quality earning asset growth, deposit generation and fee-based income opportunities; diversify the earning assets portfolio and core deposit base through expansion into new geographic markets; and improve the potential profits from its combined operations through economies of scale. In furtherance of such objectives, BancFirst intends to continue its pursuit of business combinations which fit its strategic objective of growth, diversification and market expansion. BancFirst continues to explore opportunities to acquire banks and holding companies permitted by the Bank Holding Company Act of 1956. Discussions are on-going related to the acquisition of certain banks and/or bank holding companies. As of the date of this report, except for the agreement to acquire the stock of County Savings Bank, such discussions have not resulted in an agreement for acquisition. It is not presently known whether, or on what terms, such discussions will result in further acquisitions. BancFirst's acquisition strategy is flexible in that it does not require BancFirst to effect specific acquisitions so as to enter certain markets or to attain specified growth levels. Rather than being market driven or size motivated, BancFirst's acquisition and growth strategy, which is focused on financial institutions located within the State of Ohio and surrounding area, reflects BancFirst's willingness to consider potential acquisitions wherever and whenever such opportunities arise based on the then-existing market conditions and other circumstances. Financial institutions to be acquired should be of sufficient size to support and justify having management of a caliber capable of making lending and other management decisions at the local level under the BancFirst operating philosophy. Following the consummation of the pending acquisition of County Savings Bank, the Corporation expects any acquisition in the foreseeable future would need to be structured as a stock exchange. 23 24 On August 9, 1996, the Corporation received notification that the Securities Exchange Commission ordered effective the Corporation's registration statement for the sale of 1,000,000 shares (1,150,000 if the underwriters over-allotment is exercised) of its common stock at an initial offering price of $28.00 per share, with estimated net proceeds of $25.9 million ($29.8 million if the underwriters' over-allotment option is exercised). The offering is expected to close on August 14, 1996. The Corporation anticipates closing the acquisition of County Savings Bank as soon as practicable after the close of the offering. Although the registration is effective, the necessary approvals have been attained, all material conditions have been satisfied and an underwriting agreement has been signed, there can be no assurance that either the offering or the acquisition of County Savings Bank will close. Pending Acquisition and Negotiations As previously disclosed, on March 27, 1996, the Corporation entered into a Stock Purchase Agreement to acquire all of the outstanding capital stock of County Savings Bank. The Corporation has agreed to a purchase price, payable in cash, of approximately $47.8 million, subject to adjustment. The acquisition has received the necessary regulatory approvals. The Corporation intends to fund the purchase price with cash from operations, proceeds from the sale of an equity offering discussed above and the proceeds from a $15.0 million loan. If the acquisition is consummated, the Corporation believes that its capitalization and/or liquidity could be significantly changed; however, the Corporation cannot predict the extent of any such change. In addition, the acquisition could significantly change the future results of operations of the Corporation, but the extent and manner of any such change cannot be predicted. The Corporation is in negotiations to acquire a financial institution with total assets of approximately $60 million. If these negotiations result in a definitive agreement, it is anticipated that it will be structured as a merger with the shareholders of the institution receiving shares of the Corporation's Common Stock, and will be subject to the 24 25 approval of certain regulatory agencies and the shareholders of the institution. It is not presently known whether, or on what terms, these negotiations will result in an acquisition of such institution by the Corporation. New Accounting Pronouncements and Regulatory Matters The Financial Accounting Standards Board (FASB) recently released Statement of Financial Accounting Standards No. 122 "Accounting for Mortgage Servicing Rights". SFAS No. 122 statement provides guidance on accounting for originated mortgage servicing rights and purchased mortgage servicing rights related to normal servicing (this statement does not change the accounting guidance relative to excess servicing). This statement must be applied prospectively for fiscal years beginning after December 15, 1995, to transactions in which an enterprise sells or securities mortgage loans with servicing rights retained. The Corporation adopted SFAS No. 122 January 1, 1996. The impact of the Corporation implementing SFAS No. 122 was not significant. 25 26 PART II - OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities Not Applicable Item 4. Submission of Matters to a Vote of Security Holders On May 7, 1996, the Corporation held its Annual Meeting of Shareholders, the results of which follows: 1. Election of three Class III directors:
Votes Against, Abstaining, Withheld, or Name Term Votes For Broker Non-Votes ---- ---- --------- ---------------- Milman H. Linn 3 Years 1,622,621 2,273 John W. Straker, Jr. 3 Years 1,622,621 2,273 Lynn H. Willett 3 Years 1,622,621 2,273
Election of one Class I director:
Votes Against, Abstaining, Withheld, or Name Term Votes For Broker Non-Votes ---- ---- --------- ---------------- Philip E. Burke 1 Year 1,622,621 2,273
26 27 2. To approve and ratify the appointment of Coopers & Lybrand, L.L.P. as independent auditors for the fiscal year ending December 31, 1996: (Approved) Abstaining/ Votes for Withheld Broker Non-Votes 1,595,842 1,306 27,586 Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits on Item 601 of Regulation S-K Exhibit 11: Computation of Per Share Earnings
Six Months Ended June 30 ------------------------------ 1996 1995 ---------- ---------- Gross Weighted Average Common Shares Outstanding 3,034,092 3,034,092 Weighted Average Treasury Shares Outstanding 61,209 61,828 ---------- ---------- Net Weighted Average Common Shares Outstanding 2,972,883 2,972,264 ========== ========== Net Income $3,407,000 $2,735,000 ========== ========== Net Income Per Common Share $ 1.15 $ .92 ========== ==========
(b) Reports on Form 8-K A current report on Form 8-K dated May 1, 1996, reporting "Item 5. Other Events." was filed during the quarter in which this quarterly report is filed, in connection with Gary N. Fields' election as President and Chief Executive Officer of the Corporation. 27 28 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. BancFirst Ohio Corp. (Registrant) Date ____________________________ (Signed) /s/ Gary N. Fields ------------------------------------------- Gary N. Fields President and Chief Executive Officer Date ____________________________ (Signed) /s/ James H. Nicholson ------------------------------------------- James H. Nicholson Secretary and Treasurer (Principal Financial and Accounting officer) 28 EX-27 2 EXHIBIT 27
9 1,000 U.S. DOLLARS 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 1 19,317 0 326 0 160,502 8,542 8,583 282,943 (3,544) 480,282 358,739 1,199 4,526 66,525 0 0 30,340 20,152 480,282 12,363 5,625 118 18,106 6,759 8,856 9,250 610 3 6,880 4,762 3,407 0 0 3,407 1.15 1.15 8.08 348 473 0 0 3,307 (496) 123 3,544 3,544 0 0
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