-----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, WkXG8ps7gxTCXfiG2sNERWHiQLEC6Mu3B1/UD0wpA0I8oZqPcTP0YQj+Gf73b6yo HTSHv9g7vINA2ZqtKPxzvA== 0000950152-96-006108.txt : 19961118 0000950152-96-006108.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950152-96-006108 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 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: 96663962 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 CORP. 10-Q 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 September 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 November 12, 1996 ----- ----------------------------------- Common Stock, $10.00 Par Value 3,980,163 -1 of - 24 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 .................... 7-9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation ................................................ 10-21 PART II. OTHER INFORMATION - --------------------------- Other Information ............................................. 22-23 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..................................................... 24
2 3 PART I: FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS BANCFIRST OHIO CORP. CONSOLIDATED BALANCE SHEET (Unaudited) (dollars in thousands, except share data)
September 30 December 31 ASSETS: 1996 1995 ----------- --------- Cash and due from banks $ 18,153 $ 14,102 Federal funds sold 2,951 2,600 Securities held-to-maturity, at amortized cost (approximate fair value of $48,280 and $8,548 in 1996 and 1995, respectively) 48,877 8,392 Securities available-for-sale, at fair value 226,734 169,860 ----------- --------- Total securities 275,611 178,252 ----------- --------- Loans, net of unearned income 709,616 268,818 Allowance for possible loan losses (6,532) (3,307) ----------- --------- Net loans 703,084 265,511 ----------- --------- Bank premises and equipment, net 8,161 4,120 Accrued interest receivable 6,658 3,458 Intangible assets 14,362 Other assets 7,482 8,386 ----------- --------- Total assets $ 1,036,462 $ 476,429 =========== ========= LIABILITIES: Deposits: Non-interest-bearing deposits $ 50,735 $ 41,835 Interest-bearing deposits 663,754 306,710 ----------- --------- Total deposits 714,489 348,545 Short-term borrowings 153,631 7,400 Long-term borrowings 81,418 66,735 Accrued interest payable 2,337 1,261 Other liabilities 9,010 2,478 ----------- --------- Total liabilities 960,885 426,419 ----------- --------- SHAREHOLDERS' EQUITY: Common stock, $10 par value, 7,500,000 shares authorized, 4,033,919 and 3,033,919 shares issued in 1996 and 1995, respectively 40,340 30,340 Capital in excess of par value 22,781 6,889 Retained earnings 13,995 13,022 Unrealized holdings gains (losses) on securities available-for-sale, net (463) 942 Treasury stock, 57,263 and 62,923 shares, at cost, in 1996 and 1995, respectively (1,076) (1,183) ----------- --------- Total shareholders' equity 75,577 50,010 ----------- --------- Total liabilities and shareholders' equity $ 1,036,462 $ 476,429 =========== =========
The accompanying notes are an integral part of the financial statements. 3 4 BANCFIRST OHIO CORP. CONSOLIDATED STATEMENT OF INCOME (Unaudited) (In thousands)
Three Months Ended Nine Months Ended September 30 September 30 1996 1995 1996 1995 ------------ ------------ ------------ ------------ Interest income: Interest and fees on loans $ 10,826 $ 5,879 $ 23,189 $ 16,822 Interest and dividends on securities: Taxable 3,498 2,583 8,464 7,021 Tax-exempt 344 283 1,003 831 Other interest income 97 55 215 145 ------------ ------------ ------------ ------------ Total interest income 14,765 8,800 32,871 24,819 ------------ ------------ ------------ ------------ Interest expense: Time deposits, $100 and over 1,159 649 2,659 1,789 Other deposits 4,764 2,622 10,023 7,272 Federal Home Loan Bank advances 1,817 874 3,511 2,589 Short-term borrowings 413 165 816 263 ------------ ------------ ------------ ------------ Total interest expense 8,153 4,310 17,009 11,913 ------------ ------------ ------------ ------------ Net interest income 6,612 4,490 15,862 12,906 Provision for possible loan losses 316 206 926 608 ------------ ------------ ------------ ------------ Net interest income after provision for possible loan losses 6,296 4,284 14,936 12,298 ------------ ------------ ------------ ------------ Other income: Trust and custodian fees 334 314 1,060 941 Customer service fees 466 448 1,309 1,336 Gain on sale of loans 448 558 1,494 1,134 Other 330 132 684 361 Investment securities gains, net 36 63 39 80 ---------------- ------------ ------------ ------------ Total other income 1,584 1,515 4,586 3,852 ------------ ------------ ------------ ------------ Other expense: Salaries and employee benefits 2,768 1,697 6,511 5,128 Net occupancy expense 339 189 726 556 Other 4,856 1,238 7,606 3,894 ------------ ------------ ------------ ------------ Total other expense 7,963 3,124 14,843 9,578 ------------ ------------ ------------ ------------ Income (loss) before income taxes (83) 2,675 4,679 6,572 Provision (benefit) for federal income taxes (129) 837 1,226 1,999 ------------ ------------ ------------ ------------ Net income $ 46 $ 1,838 $ 3,453 $ 4,573 ============= ============= ============= =============
The accompanying notes are an integral part of the financial statements. 4 5 BANCFIRST OHIO CORP. CONSOLIDATED STATEMENT OF INCOME (Unaudited) (In thousands, except per share data)
Three Months Ended Nine Months Ended September 30 September 30 1996 1995 1996 1995 -------------- -------------- -------------- ---------- Net income per common share $ 0.01 $ 0.62 $ 1.10 $ 1.54 ============= ============= ============= ============= Weighted average common shares outstanding 3,487 2,975 3,146 2,973 ============ ============ ============ ============ Cash dividends per common share $ 0.25 $ 0.23 $ 0.75 $ 0.69 ============= ============= ============= ============= Total cash dividends paid $ 994 $ 679 $ 2,480 $ 1,973 ============= ============= ============= =============
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)
Nine Months Ended September 30 1996 1995 ---------------- ------------- Cash flows from operating activities: Net income $ 3,453 $ 4,573 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 1,758 1,510 Provision for possible loan losses 926 608 Deferred taxes payable (126) 281 Disposal of other assets, gains (1,496) (1,129) Decrease (increase) in interest receivable 9 (772) Decrease in other assets 4,531 2,419 Increase in interest payable 475 573 Increase in other liabilities 3,538 989 FHLB stock dividend (154) (235) ---------------- ------------- Net cash provided by operating activities 12,914 8,817 Cash flows from investing activities: (Increase) decrease in federal funds sold (351) 1,726 Proceeds from maturities of securities held-to-maturity 788 10,693 Proceeds from maturities and sales of securities available-for-sale 47,188 19,918 Purchase of securities held-to-maturity (663) (5,703) Purchase of securities available-for-sale (28,422) (45,483) Increase in loans, net (32,324) (33,188) Purchase of loans (9,914) Acquisition of County Savings Bank, net of cash acquired (43,907) Purchases of equipment and other assets (1,403) (1,048) Proceeds from sale of loans and assets 15,131 10,124 ---------------- ------------ Net cash used in investing activities (53,877) (42,961) Cash flows from financing activities: Net proceeds from issuance of common stock 25,824 Increase in short-term borrowings 5,424 2,150 Increase (decrease) in other borrowings (317) 3,962 Proceeds from acquisition debt 15,000 Net increase in deposits 1,388 27,037 Cash dividends paid (2,480) (1,973) Gain (loss) on Sale (purchase)of treasury stock, net 175 (111) ---------------- ------------- Net cash provided by financing activities 45,014 31,065 ---------------- ------------ Net increase (decrease) in cash and due from banks 4,051 (3,079) Cash and due from banks, beginning of period 14,102 18,831 ---------------- ------------ Cash and due from banks, end of period $ 18,153 $ 15,752 ================= ============= Supplemental cash flow disclosures: Income taxes paid $ 2,005 $ 1,597 ================= ============= Interest paid $ 14,786 $ 11,340 ================= =============
The accompanying notes are an integral part of the financial statements 6 7 BANCFIRST OHIO CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (UNAUDITED) The consolidated financial statements for interim periods are unaudited; however, in the opinion of the management of BancFirst Ohio Corp. ("Company"), the accompanying consolidated financial statements contain all material adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position and results of operations and cash flows for the periods presented. The unaudited financial statements are presented in accordance with the requirements of Form 10-Q and do not include all disclosures normally required by generally accepted accounting principles. Reference should be made to the Company's consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1995 for additional disclosures, including a summary of the Company's accounting policies. The results of operations for the nine month period ended September 30, 1996 are not necessarily indicative of the results to be expected for the full year. 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 the Company and each of its wholly owned subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation. On August 14, 1996, the Company acquired County Savings Bank ("County") in a transaction accounted for under the purchase method of accounting for business combinations. Accordingly, the Company's consolidated financial statements include the operating results of County from the date of acquisition. At the time of acquisition, County had approximately $554 million in total assets, $411 million in loans and $365 million in total deposits. The Company also recorded goodwill and other intangible assets of $14.5 million as a result of the application of purchase accounting. Funding for the acquisition was provided by proceeds from the issuance of 1 million shares of common stock, $15 million of bank borrowings and approximately $7 million of available cash. The following summarizes the pro-forma results of operations for the nine months ended September 30, 1996 and 1995 as if County had been acquired at the begining of each period presented:
Nine Months Ended September 30, 1996 1995 ---- ---- Net Interest income $24,414 $22,456 Net Income $ 4,604 $ 6,271 Net Income per share 1.16 $1.58
7 8 2) INVESTMENT SECURITIES: The amortized cost and estimated market value of investment securities are as follows:
September 30, 1996 December 31, 1995 -------------------------- -------------------------- Securities Held-to-Maturity Book Market Book Market --------------------------- ------------ ------------ ------------ ------------ (In thousands) Other U.S. government agencies $ 2,206 $ 2,205 $ 400 $ 407 State and political subdivisions 7,173 7,239 6,751 6,886 Mortgage-backed and related securities 36,603 36,856 121 135 Other 2,895 1,980 1,120 1,120 ---------- ---------- ---------- ---------- $ 48,877 $ 48,280 $ 8,392 $ 8,548 =========== =========== =========== =========== September 30, 1996 December 31, 1995 -------------------------- -------------------------- Securities Available-for-sale Book Market Book Market ----------------------------- ------------ ------------ ------------ ------------ (In thousands) U.S. treasury securities $ 13,744 $ 13,870 $ 17,949 $ 18,303 Other U.S. government agencies 15,850 15,688 11,247 11,390 State and political subdivisions 16,444 16,577 17,453 17,848 Mortgage-backed and related securities 167,597 167,004 116,507 117,043 Other 13,595 13,595 5,276 5,276 ---------- ---------- ---------- ---------- $ 227,230 $ 226,734 $ 168,432 $ 169,860 =========== =========== =========== ===========
3) LOANS AND LEASES BY CATEGORIES:
September 30, 1996 December 31, 1995 -------------------------- ---------------------- (In thousands) Commercial, financial and agricultural $ 295,961 $ 107,015 Real estate - mortgage 329,925 105,604 Real estate - construction 11,359 2,859 Consumer installment 72,371 53,340 ---------------- ---------------- Total $ 709,616 $ 268,818 ================= =================
8 9 4) LONG-TERM BORROWINGS Long-term borrowings as of September 30, 1996 and December 31, 1995 were as follows:
September 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 56,418 56,735 Term debt with a Financial Institution (LIBOR + 1.35%) 15,000 --------------- -------------- $ 81,418 $ 66,735 =============== ==============
Minimum annual retirements on long-term borrowings for the next five years consisted of the following:
September 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 6.14% $ 6,109 6.17% $ 9,983 1997 5.89% 32,954 5.89% 32,991 1998 5.95% 11,734 5.86% 10,524 1999 6.35% 7,516 5.88% 1,559 2000 6.69% 3,051 6.29% 597 2001 and thereafter 6.81% 20,054 6.61% 11,081 ------- ---------- TOTAL 6.22% $81,418 6.08% $ 66,735 ======= ==========
Federal Home Loan Bank ("FHLB") advances must be secured by eligible collateral as specified by the FHLB. Accordingly, the Company 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 Company (book value at September 30, 1996 of $12.3 million) is pledged as collateral for these borrowings. The Company has no commitments to borrow additional funds from the FHLB as of September 30, 1996. 9 10 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS BANCFIRST OHIO CORP. For a comprehensive understanding of the Company's financial condition and performance, this discussion should be considered in conjunction with the Company's Consolidated Financial Statements, accompanying notes, and other information contained elsewhere herein.
SELECTED FINANCIAL DATA: For the Three Months At or For the Nine Months Ended September 30, Ended September 30, 1996 1995 1996 1995 ----------- ---------- ---------- ----------- (Dollars in thousands, except per share data) Statement of Income Data: Interest income $ 14,765 $ 8,800 $ 32,871 $ 24,819 Interest expense 8,153 4,310 17,009 11,913 ----------- ---------- ---------- ----------- Net interest income 6,612 4,490 15,862 12,906 Provision for possible loan losses 316 206 926 608 Non-interest income 1,584 1,515 4,586 3,852 Non-interest expense 7,963 3,124 14,843 9,578 ----------- ---------- ------------ ----------- Income (loss) before income taxes (83) 2,675 4,679 6,572 Provision (benefit)for federal income tax (129) 837 1,226 1,999 ---------- ---------- ------------ ----------- Net income $ 46 $ 1,838 $ 3,453 $ 4,573 =========== ========== ========== =========== Per Share Data: Net income $ 0.01 $ 0.62 $ 1.10 $ 1.54 Dividends 0.25 0.23 0.75 0.69 Book value 19.02 16.31 Tangible book value 15.40 16.31 Balance Sheet Data: Total assets $ 1,036,462 $ 469,302 Loans 709,616 271,165 Allowance for possible loan losses 6,532 3,180 Securities 275,611 173,550 Goodwill and other intangible assets 14,362 0 Deposits 714,489 347,873 Borrowings 235,049 69,637 Shareholders' equity 75,577 48,524 Performance Ratios:(2) Return on average assets 0.02 % 1.57 % 0.80 % 1.37 % Return on average equity 0.29 % 15.24 % 8.54 % 13.03 % Net interest margin 3.61 % 4.19 % 3.95 % 4.22 % Interest rate spread 3.03 % 3.46 % 3.29 % 3.51 % Non-interest income to average assets 0.81 % 1.30 % 1.06 % 1.16 % Non-interest expense to average assets 4.09 % 2.67 % 3.43 % 2.88 % Efficiency ratio(1) 63.13 % 52.57 % 58.95 % 57.43 % Asset Quality Ratios: Nonperforming loans to total loans 0.25 % 0.36 % Nonperforming assets to total assets 0.23 % 0.21 % Allowance for possible loan losses to total loans 0.92 % 1.17 % Allowance for possible loan losses to nonperforming loans 366 % 324 % Net charge-offs to average loans(2) 0.15 % 0.32 % 0.21 % 0.27 % Capital Ratios: Shareholders' equity to total assets 7.29 % 10.34 % Tier 1 capital to total assets 6.03 % 10.97 % Tier 1 capital to risk-weighted assets 10.08 % 18.19 %
10 11 (1) THE EFFICIENCY RATIO IS EQUAL TO NON-INTEREST EXPENSE (EXCLUDING NON RECURRING CHARGES TOTALING $2,632,000 IN THE 1996 PERIODS) LESS AMORTIZATION OF INTANGIBLE ASSETS DIVIDED BY NET INTEREST INCOME PLUS NON-INTEREST INCOME LESS GAINS OR LOSSES ON SECURITIES TRANSACTIONS. (2) RATIOS ARE STATED ON AN ANNUALIZED BASIS. Overview - -------- The reported results of the Company primarily reflect the operations of the Company's bank and thrift subsidiaries. The Company'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 Company's income is net interest income, which is defined as the difference between the interest the Company earns on interest-earning assets, such as loans and securities, and the interest the Company pays on interest-bearing liabilities, such as deposits and borrowings. The Company's operations are also affected by non-interest income, such as checking account and trust fees and gains from sales of loans. The Company'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. ACQUISITIONS On August 14, 1996, the Company acquired County Savings Bank ("County") in a transaction accounted for under the purchase method of accounting for business combinations. Accordingly, the Company's consolidated financial statements include the operating results of County from the date of acquisition. At the time of acquisition, County had approximately $554 million in total assets, $411 million in loans and $365 million in total deposits. The Company also reported goodwill and other intangible assets of $14.5 million as a result of the application of purchase accounting. Funding for the acquisition was provided by proceeds from the issuance of 1 million shares of common stock, $15 million of bank borrowings and approximately $7 million of available cash. AVERAGE BALANCES AND YIELDS The following table presents, for each of the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and percentage rates, and the net interest margin. Net interest margin is calculated on a fully tax equivalent basis ("FTE"), and refers to net interest income divided by total interest-earning assets and is influenced by the level and relative mix of interest-earning assets and interest-bearing liabilities. FTE income includes tax exempt income, restated to a pre-tax equivalent, based on the statutory federal income tax rate. All average balances are daily average balances. Non-accruing loans are included in average loan balances. 11 12
Three Months Ended September 30, Nine Months Ended September 30, ...........1996.......... ...........1995........... ...........1996.......... ...........1995........... Average Yield/ Average Yield/ Average Yield/ Average Yield/ Balance Interest Cost Balance Interest Cost Balance Interest Cost Balance Interest Cost ------- -------- ---- ------- -------- ---- ------- -------- ---- ------- ------------- Securities: Taxable $209,417 $ 3,567 6.78% $149,818 $ 2,583 6.84% $170,908 $ 8,533 6.67% $ 140,082 $ 7,021 6.70% Tax-exempt 26,268 484 7.33 22,444 428 7.57 25,593 1,482 7.73 21,314 1,259 7.90 ------ --- ------ --- ------ ----- ------ ----- Total securities 235,685 4,051 6.84 172,262 3,011 6.93 196,501 10,015 6.81 161,396 8,280 6.86 Loans : Commercial 213,295 5,058 9.43 108,190 2,621 9.61 147,512 10,687 9.68 107,983 7,751 9.60 Real estate 227,143 4,172 7.31 111,323 2,165 7.72 148,899 8,467 7.60 105,265 6,198 7.87 Consumer 66,666 1,609 9.60 47,192 1,123 9.44 58,488 4,091 9.34 47,122 2,946 8.36 ------ ----- ------ ----- ------ ----- ------ ----- Total loans 507,104 10,839 8.50 266,705 5,909 8.79 354,899 23,245 8.75 260,370 16,895 8.68 Federal funds sold 2,611 34 5.18 4,989 66 5.25 3,824 152 5.31 3,381 145 5.73 ----- ---- ---- ----- ---- ---- ----- ---- ---- ------ ---- ---- Total earning assets 745,400 14,924 7.97% 443,956 8,986 8.03% 555,224 33,412 8.04% 425,147 25,320 7.96% ------- ------ ---- ------- ----- ---- ------- ------ ---- ------- ------ ---- Non-interest-earning assets 29,031 19,720 23,345 19,697 ------ ------ ------ ------ Total assets $774,431 $463,676 $578,569 $ 444,844 ======= ======= ======= ======== Interest-bearing deposits: Demand and savings deposits $171,592 $1,147 2.66% $154,594 $1,101 2.83% $157,350 $ 3,189 2.71% $ 155,902 $ 3,300 2.83% Time deposits 332,079 4,776 5.72 151,142 2,169 5.69 222,402 9,493 5.70 139,570 5,761 5.52 ------- ----- ------- ----- ------- ----- ------- ----- Total 503,670 5,923 4.68 305,736 3,270 4.24 379,752 12,682 4.46 295,472 9,061 4.10 Borrowings 153,994 2,231 5.76 67,507 1,029 6.05 98,156 4,328 5.89 62,234 2,851 6.12 ------- ----- ---- ------ ----- ---- ------ ----- ---- ------ ----- ---- Total interest- bearing liabilities 657,665 8,154 4.93% 373,243 4,299 4.57% 477,908 17,010 4.75% 357,706 11,912 4.45% ------- ----- ---- ------- ----- ---- ------- ------ ---- ------- ------ ---- Non-interest-bearing deposits 45,432 36,698 40,196 37,820 ------ ------ ------ ------ Total interest- bearing liabilities and non-interest- bearing deposits 703,097 409,941 518,104 395,526 Accrued expenses and other 8,390 5,874 6,485 2,397 ----- ------ ----- ------ Total liabilities 711,487 415,815 524,589 397,923 Shareholders' equity 62,944 47,861 53,980 46,921 -------- -------- -------- ------- Total liabilities and shareholders' equity $774,431 $ 463,676 $ 578,569 $ 444,844 ========= ========= ========= ======== Net interest income and interest rate spread $ 6,770 3.03% $4,687 3.46% $16,402 3.29% $ 13,408 3.51% ======== ==== ====== ==== ======= ==== ======== ==== Net interest margin 3.61% 4.19% 3.95 % 4.22%. ==== ==== ==== ==== Average interest-earning assets to average interest-bearing liabilities 113.3 % 118.9 % 116.2 % 118.9 % (1) Interest income is on a fully tax equivalent (FTE) basis.
Rate and Volume Variances. Net interest income may also be analyzed by segregating the volume and rate components of interest income and interest expense. The following table discloses the dollar changes in the Company's net interest income attributable to changes in levels of interest-earning assets or interest-bearing liabilities (volume), changes in average yields on interest-earning assets and average rates on interest-bearing liabilities (rate) and the combined volume and rate effects (total). For the purposes of this table, the change in interest due to both rate and volume has been allocated to volume and rate change in proportion to the relationship of the dollar amounts of the change in each. In general, this table provides an analysis of the effect on income of balance sheet changes which occurred during the periods and the changes in interest rate levels. 12 13
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, 1996 VS. 1995 1995 VS. 1994 VOLUME RATE TOTAL VOLUME RATE TOTAL ------ ---- ----- ------ ---- ----- (IN THOUSANDS) Interest-earning assets: Securities: Taxable $ 1,008 $ (24) $ 984 $ 1,546 $ (34) $ 1,512 Non-taxable 70 (14) 56 249 (26) 223 --------- --------- --------- --------- ---------- --------- Total securities 1,078 (38) 1,040 1,795 (60) 1,735 Loans: Commercial $ 2,486 $ (49) $ 2,437 $ 2,870 $ 66 $ 2,936 Real estate 2,127 (120) 2,007 2,494 (225) 2,269 Consumer 467 19 486 769 376 1,145 --------- --------- --------- --------- ---------- --------- Total loans 5,080 (150) 4,930 6,133 217 6,350 Fed funds sold (30) (2) (32) 18 (11) 7 --------- --------- --------- --------- ---------- --------- Total interest-earning assets 6,128 (190) 5,938 7,946 146 8,092 --------- --------- --------- --------- ---------- --------- Interest-bearing liabilities: Deposits: Demand and savings deposits 114 (68) 46 31 (142) (111) Time deposits 2,596 11 2,607 3,535 197 3,732 --------- --------- --------- --------- ---------- --------- Total interest-bearing deposits 2,710 (57) 2,653 3,566 55 3,621 Borrowings 1,253 (51) 1,202 1,590 (113) 1,477 --------- --------- --------- --------- ----------- --------- Total interest-bearing liabilities 3,963 (108) 3,855 5,156 (58) 5,098 --------- --------- --------- --------- ----------- --------- Net interest income $ 2,165 $ (82) $ 2,083 $ 2,790 $ 204 $ 2,994 =========== =========== =========== =========== ============ ===========
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 Net Income. Net income for the three months ended September 30, 1996 decreased 97.5% to $46,000, compared to net income of $1.8 million for the three months ended September 30, 1995. Earnings per share in the third quarter of 1996 equaled $0.01, compared to $0.62 for the same period in 1995. Operating results in the third quarter of 1996 include after tax charges of $1.5 million for the one-time special assessment to recapitalize the Savings Association Insurance Fund (SAIF) and $213,000 after tax for restructuring costs anticipated in connection with the consolidation of overlapping operations of the Company's banking and thrift subsidiaries. Net interest income and non-interest income increased 47.3% and 4.6%, respectively, in the three months ended September 30, 1996, as compared to the same period in 1995 while the provision for possible loan losses and non-interest expense increased 53.4% and 154.9%, respectively. The Company's net interest margin decreased to 3.61% for the third quarter of 1996, compared to 4.19% for the same period in 1995, reflecting the lower net interest margin on County's interest-earning assets. Increases in non-interest income resulting from the inclusion of County's operating results and higher levels of fee income were partially offset by lower gains on sales of the guaranteed portion of SBA loans. The provision for possible loan losses increased primarily due to an increase in the loan portfolio as well as a slight increase in loan delinquencies. Non-interest expense increased due to the nonrecurring charges noted above as well as the inclusion of County's operating expenses and higher costs associated with the expansion of trust and other operating activities. The Company's return on average assets and return on average equity were .02% and .29%, respectively, in the third quarter of 1996, compared to 1.57% and 15.24%, respectively, in the third quarter of 1995. Interest Income. Total interest income increased 67.8% to $14.8 million for the three months ended September 30, 1996, compared to $8.8 million for the third quarter of 1995. This increase resulted from a $301.4 million, or 67.9%, increase in average interest-earning assets between the two periods. The average balance of loans increased $240.4 13 14 million, or 90.1%. These increases resulted primarily from the acquisition of County which contributed $285.2 million of the increase in average earning assets and $218.1 million of the increase in average loans. The weighted average yield on interest-earning assets decreased slightly to 7.97% during the three months ended September 30, 1996, compared to 8.03% during the same three month period in 1995. The Company's yield on average loans decreased from 8.79% during the three months ended September 30, 1995 to 8.50% during the three months ended September 30, 1996. This resulted primarily from a slightly lower yield on County's loan portfolio due to a higher portion of such loans consisting of lower yielding residential mortgage loans. Yields on the investment portfolio remained relatively stable, decreasing from 6.93% during the third quarter of 1995 to 6.84% during the third quarter of 1996. Interest Expense. Total interest expense increased 89.2% to $8.2 million for the three months ended September 30, 1996, compared to $4.3 million for the three months ended September 30, 1995. Interest expense increased due to a higher average balance of interest-bearing liabilities outstanding and due to a higher cost of funds during the third quarter of 1996, as compared to the same period in 1995. The average balance of deposit accounts increased $197.9 million, or 64.7%, from the third quarter in 1995 to the third quarter in 1996. Average interest-bearing liabilities increased 76.2%, from $373.2 million to $657.7 million. These increases also primarily resulted from the acquisition of County which contributed $266.4 million to the increase in average interest-bearing liabilities and $187.4 million to the increase in total deposits. The Company's cost of funds increased to 4.93% in the three months ended September 30, 1996 compared to 4.57% in the same period of 1995, primarily due to a higher cost of funds associated with County's interest-bearing liabilities. The cost of funds was also affected by the continued shift by customers into higher yielding certificates of deposit. Provision for Possible Loan Losses. The provision for possible loan losses increased 53.4% to $316,000 for the three months ended September 30, 1996, compared to $206,000 in the third quarter of 1995. The increase in the provision for possible loan losses was affected by increases in total loans during the three months ended September 30, 1996 as well as a higher level of nonperforming loans. Total nonperforming loans increased 81.8% to $1.8 million at September 30, 1996, from $981,000 at September 30, 1995, with County adding $540,000 to the 1996 total. The allowance for possible loan losses at September 30, 1996 was $6.5 million, or .92% of total loans and 366.3% of nonperforming loans compared to $3.2 million, or 1.17% of total loans and 324.2% of nonperforming loans at September 30, 1995. Management's estimate of the adequacy of its allowance for possible loan losses is based upon its continuing review of prevailing national and local economic conditions, changes in the size and composition of the portfolio and individual problem credits. Growth of the loan portfolio, loss experience, economic conditions, delinquency levels, credit mix and selected credits are factors that affect judgments concerning the adequacy of the allowance. Non-Interest Income. Total non-interest income increased 4.6% to $1.6 million in the three months ended September 30, 1996, compared to $1.5 million in the three months ended September 30, 1995. The increase in 1996 was a result of a $206,000 increase in fee and other income, $88,000 of which was provided by County. This increase was partially offset by a $137,000 decrease in gains on sales of loans and investment securities. During the third quarter of 1996, the Company sold approximately $3.4 million of the guaranteed portion of its SBA loan originations in the secondary market compared to $4.4 million in the third quarter of 1995, realizing gains of $440,000 in 1996, compared to gains of $558,000 1995. Customer service fees, representing service charges on deposits and fees from other banking services, increased 4.0% in the third quarter of 1996, to $466,000, from $448,000 in the third quarter of 1995. This increase resulted from fee income contributed by County to the 1996 results. Trust income increased 6.4% to $334,000 in the third quarter of 1996, from $314,000 in the third quarter of 1995. The slight growth in trust and custodian fees resulted primarily from the expansion of the customer base and higher asset values. The $168,000 increase in other income to $300,000 in the third quarter of 1996 compared to $132,000 in the third quarter of 1995 was primarily attributed to County's loan service fee and related income and an increase in net service fee income on SBA loans. 14 15 The following table sets forth the Company's non-interest income for the periods indicated:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1996 1995 1996 1995 ----------------- ----------------- ----------------- ---------- Trust and custodian fees $ 334 $ 314 $ 1,060 $ 941 Customer service fees 466 448 1,309 1,336 Investment securities gains 36 63 39 80 Gains on sales of loans 448 558 1,494 1,134 Other 300 132 684 361 -------------- -------------- -------------- ----------------- TOTAL $ 1,584 $ 1,515 $ 4,586 $ 3,852 ================ ================ ================ ================
Non-Interest Expense. Total non-interest expense increased $4.8 million to $8.0 million in the three months ended September 30, 1996, compared to $3.1 million in the three months ended September 30, 1995. Included in the third quarter 1996 totals are pretax charges of $2.3 million for the one time special SAIF assessment and $323,000 for restructuring costs in connection with the consolidation of overlapping operations, previously discussed. In addition, other-non interest expenses provided by or resulting from the acquisition of County that are included in the third quarter results totaled $1.4 million. Excluding nonrecurring charges and expenses resulting from the County acquisition, total non-interest expenses were $3.9 million in the third quarter of 1996 compared to $3.1 million in the third quarter of 1995, representing an increase of $793,000 or 25.4%. This increase generally resulted from expansion of the Company's operating activities over the past year. The following table sets forth the Company's non-interest expense for the periods indicated:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1996 1995 1996 1995 ----------------- ----------------- ----------------- ---------- Salaries and employee benefits $ 2,768 $ 1,697 $ 6,511 $ 5,128 Occupancy expense 339 189 726 556 Furniture, fixtures and equipment 149 75 358 281 Data processing 253 163 567 473 Taxes other than income taxes 200 152 494 418 Federal deposit insurance 2,453 7 2,493 379 Amortization 180 0 180 0 Other 1,621 841 3,514 2,343 -------------- -------------- -------------- -------------- TOTAL $ 7,963 $ 3,124 $ 14,843 $ 9,578 ================ ================ ================ ================
The efficiency ratio is one method used in the banking industry to assess profitability. It is defined as non-interest expense less amortization expense divided by the net revenue stream, which is the sum of net interest income on a tax-equivalent basis and non-interest income excluding net investment securities gains or losses. The Company's efficiency ratio (excluding nonrecurring charges) was 63.1% for the third quarter of 1996, compared to 52.6% for the comparable period in 1995. Controlling costs and improving productivity, as measured by the efficiency ratio, is considered by management a primary factor in enhancing performance. As expected, operating expense levels have increased in 1996 as a result of the Company's expansion into new markets, increased growth and volume of activities, and overall inflation. Also, operating results of County contributed to the higher efficiency ratio in the third quarter of 1996. Provision for Income Taxes. The Company recorded a benefit for Federal income taxes of $129,000 for the three months ended September 30, 1996 compared to a provision of $837,000 for the three months ended September 15 16 30, 1995. The effective tax rate for each period differed from the federal statutory rate of 34% principally as a result of tax-exempt income from obligations of states and political subdivisions and non-taxable loans. COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 Net Income. Net income of the Company totaled $3.5 million for the nine months ended September 30, 1996, a decrease of $1.1 million, or 24.5%, from the same period in 1995. Earnings per share in 1996 equaled $1.10, compared to $1.54 in 1995, a 28.6% decrease. The lower earnings during 1996 resulted from after tax charges totaling $1.5 million for the special one-time SAIF assessment and $213,000 for restructuring costs, discussed previously. Excluding these nonrecurring charges, net income was $5.2 million for the nine months ended September 30, 1996, an increase of $617,000 from the same period in 1995. This increase resulted primarily from additional earnings provided by the County acquisition as well as additional gains from sales of SBA loans. The Company's net interest margin declined to 3.95% for the nine months ended September 30, 1996 as compared to 4.22% for the same period in 1995, largely as a result of a lower net interest margin associated with County's interest-earning assets. The provision for possible loan losses increased primarily due to an increase in the Company's loan portfolio as well as nonperforming loans. Non-interest expense increased due to the nonrecurring charges previously discussed, the County acquisition and the general expansion of operations. The Company's return on average assets and return on average equity were .80% and 8.54%, respectively, for the nine months ended September 30, 1996, compared to 1.37% and 13.03%, respectively, for the nine months ended September 30, 1995. Interest Income. Total interest income increased 32.4% to $32.9 million for the first nine months of 1996, compared to $24.8 million for the first nine months of 1995. Average interest-earning assets increased $130.1 million, or 30.6%, while the average balance of loans increased $94.5 million, or 36.3% in 1996. These increases resulted primarily from additional interest-earning assets provided by the County acquisition. The weighted average yield on interest-earning assets increased to 8.04% during the nine months ended September 30, 1996, compared to 7.96% during the comparable period in 1995. The Company's yield on average loans increased from 8.68% during 1995 to 8.75% during 1996. The average yield on investment securities decreased slightly from 6.86% in 1995 to 6.81% during 1996. The improved overall yield on the loan portfolio primarily resulted from higher yields on consumer loans. Interest Expense. Total interest expense increased 42.8% to $17.0 million for the nine months ended September 30, 1996, compared to $11.9 million for the nine months ended September 30, 1995. Interest expense increased due to a higher average balance of interest-bearing liabilities outstanding and due to a higher cost of funds during 1996. Average interest-bearing liabilities increased $120.2 million, or 33.6%, to $477.9 million during 1996. The average balance of deposit accounts increased $84.3 million, or 28.5%, to $379.8 million in 1996 compared to $295.5 million in 1995. Average borrowings increased $35.9 million, or 57.7%, from $62.2 million to $98.2 million. The foregoing increases reflect the Company's continued efforts to leverage its capital position which, during 1996, resulted primarily from the County acquisition as well as growth initiatives by the Company. The Company's cost of funds increased to 4.75% in 1996 from 4.45% in 1995, generally due the relative increases in higher cost borrowings and time deposits as a percentage of total interest-bearing liabilities. During the nine months ended September 30, 1996, borrowings and time deposits represented 67.1% of total interest bearing liabilities compared to 56.4% in 1995. This change in the composition of interest-bearing liabilities resulted from the County acquisition and the nature of its funding sources as well as from a slight shift in the Company's deposit accounts from transaction accounts to certificates of deposit. Provision for Possible Loan Losses. The provision for possible loan losses increased 52.3% to $926,000 for the nine months ended September 30, 1996 compared to $608,000 for the comparable period in 1995. The increase reflected overall loan growth coupled with higher levels of nonperforming loans, discussed previously. Non-Interest Income. Total non-interest income increased 19.1% to $4.6 million for the nine months ended September 30, 1996, compared to $3.9 million for the nine months ended September 30, 1995 primarily due to an increase in gains on sales of loans from $1.1 million in 1995 to $1.5 million in 1996. The increase was primarily due to 16 17 the Company's activities in SBA lending programs. Customer service fees, representing service charges on deposits and fees from other banking services remained virtually unchanged, approximating $1.3 million in both periods. Trust income increased 12.6% to $1.1 million in 1996, from $941,000 in 1995. Growth in trust income resulted primarily from the continued expansion of the Company's customer base and higher asset values. Net investment securities gains amounted to $39,000 in 1996, compared to $80,000 in 1995, a decrease of $41,000. Other sources of income totaled $684,000 in 1996, an increase of 89.5% from $361,000 in 1995. The increase was principally the result of expanded fee-based product offerings to businesses and individuals and increased net servicing fee income on SBA loans. The acquisition of County also contributed $71,000 of other income, which primarily represented loan servicing fees and related income. Non-Interest Expense. Total non-interest expense increased 55.0% to $14.8 million for the nine months ended September 30, 1996, compared to $9.6 million in 1995. As discussed previously, nonrecurring charges totaling $2.6 million were recorded during the third quarter of 1996. Excluding these charges, year to date non-interest expense increased $2.6 million, or 27.5%, with $1.2 million of this increase relating to County's operating costs included in the year to date results and $180,000 resulting from goodwill and other intangible amortization. Increases in general and administrative expenses have occurred in 1996 as a result of the Company's expansion of operating hours at certain locations, small business lending operations, trust services and other consumer products and services. The Company's efficiency ratio, excluding nonrecurring charges, was 58.9% for the nine months ended September 30, 1996 compared to 57.4% for the comparable period in 1995. Salaries and employee benefits represented approximately 54.1% of total non-interest expense in 1996 (excluding nonrecurring charges and amortization expense), compared to 53.5% in 1995. Salaries and employee benefits increased 27.0%, from $5.1 million in 1995 to $6.5 million in 1996. County's salary and employee benefits represented $706,000 of the total increase of $1.4 million with the remainder resulting from the Company's market expansion, new product offerings and salary increases. Net occupancy expense increased $170,000, or 30.6%, from $556,000 in 1995 to $726,000 in 1996. In addition to occupancy costs of $131,000 incurred by County, higher net occupancy expenses were primarily the result of costs associated with expansion of the Company's small business lending centers and the opening of a supermarket branch location in July 1996. Furniture and equipment expense increased $77,000, or 27.4% in 1996. In addition to expenses of $38,000 added by County, the increase in furniture and fixture expense in 1996 was due principally to higher depreciation expense. The Company's data processing expenses increased $94,000, or 19.9%, in 1996 to $567,000 from $473,000. In addition to expenses of $37,000 added by County, higher costs resulted from the expansion of technology throughout the Company to enhance customer service, increase efficiencies and improve information management systems. Excluding the special one time SAIF assessment of $2.3 million, Federal deposit insurance expense decreased $195,000 to $184,000 during the nine months ended September 30, 1996 compared to $379,000 during the nine months ended September 30, 1995, reflecting lower Bank Insurance Fund premium assessment rates that took effect during the second quarter of 1995. Amortization of goodwill and other intangibles resulting from the application of purchase accounting in connection with the County acquisition totaled $180,000 during the period from August 14, 1996 to September 30, 1996. Increases in other non-interest expenses, excluding nonrecurring charges of $323,000 and expenses of $150,000 added by County, were primarily related to the expanded volume of business activities. 17 18 Provision for Income Taxes. The provision for federal income taxes for the nine months ended September 30, 1996 was $1.2 million, or 26.2% of pretax earnings, compared to $2.0 million, or 30.4% of pretax earnings for the nine months ended September 30, 1995. The decrease in expense in 1996 relative to pretax earnings resulted from a higher portion of such earnings consisting of tax-exempt income from obligations of states and political subdivisions and non-taxable loans. ASSET QUALITY NonPerforming Assets. To maintain the level of credit risk of the loan portfolio at an appropriate level, management sets underwriting standards and internal lending limits and provides for proper diversification of the portfolio by placing constraints on the concentration of credits within the portfolio. In monitoring the level of credit risk within the loan portfolio, management utilizes a formal loan review process to monitor, review, and consider relevant factors in evaluating specific credits in determining the adequacy of the allowance for possible loan losses. The Company's banking and thrift subsidiaries formally document their evaluation of the adequacy of the allowance for possible loan losses on a quarterly basis and the evaluations are reviewed and discussed with their respective boards of directors. Failure to receive principal and interest payments when due on any loan results in efforts to restore such loan to current status. Loans are classified as non-accrual when, in the opinion of management, full collection of principal and accrued interest is in doubt. Continued unsuccessful collection efforts generally lead to initiation of foreclosure or other legal proceedings. Property acquired by the Company as a result of foreclosure or by deed in lieu of foreclosure is classified as "other real estate owned" until such time as it is sold or otherwise disposed of. The Company owned $554,000 of such property at September 30, 1996 and $24,000 at December 31, 1995. No such property was owned at September 30, 1995. Nonperforming loans totaled $1.8 million, or 0.25% of total loans, at September 30, 1996, compared to $1.0 million, or .37% of total loans at year end 1995 and $981,000, or 0.36% of total loans, at September 30, 1995. Nonperforming assets totaled $2.3 million, or 0.23% of total assets at September 30, 1996, compared to $1.0 million, or 0.22% of total assets, at December 31, 1995 and $981,000, or .21% of total assets at September 30, 1995. Management of the Company is not aware of any material amounts of loans outstanding, not disclosed in the table below, for which there is significant uncertainty as to the ability of the borrower to comply with present payment terms. The following is an analysis of the composition of nonperforming assets:
September 30 December 31 September 30 1996 1995 1995 --------------------- --------------------- ------------- Non-accrual loans $ 1,077 $ 440 $ 505 Accruing loans 90 days or more past due 704 584 476 --------------- -------------- --------------- Total nonperforming loans 1,781 1,024 981 Other real estate owned 554 24 0 --------------- -------------- --------------- Total nonperforming assets $ 2,335 $ 1,048 $ 981 ================= ================ ================= Nonperforming loans to total loans 0.25 % 0.38 % 0.36 % Nonperforming assets to total assets 0.23 % 0.22 % 0.21 %
Nonperforming loans considered to be impaired under Statement of Financial Accounting Standards No. 114 totaled $118,000 and $801,000 at September 30, 1996 and December 1995, respectively, The Company recorded no interest income on these loans in 1996 and $4,000 in interest income on these loans in 1995. Interest income that would have been recorded on these loans according to their original terms was $9,000 in 1996 and $30,000 in 1995. The related allocation of the allowance for possible loan losses for these impaired loans is $2,000 at September 30, 1996. 18 19 Allowance for Possible Loan Losses. The Company records a provision necessary to maintain the allowance for possible loan losses at a level sufficient to provide for potential future credit losses. The provision is charged against earnings when it is established. An allowance for possible loan losses is established based on management's best judgment, which involves continuing review of prevailing national and local economic conditions, changes in the size and composition of the portfolio and review of individual problem credits. Growth of the loan portfolio, loss experience, economic conditions, delinquency levels, credit mix, and selected credits are factors that affect judgments concerning the adequacy of the allowance. Actual losses on loans are charged against the allowance. The following table summarizes the Company's loan loss experience, and provides a breakdown of the allowance for possible loan losses at the dates indicated.
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1996 1995 1996 1995 ------------------- -------------------- ----------------- ---------- Balance at beginning of period $ 3,544 $ 3,188 $ 3,307 $ 3,095 Provision charged to expense 316 206 926 608 Addition due to acquisition 2,861 2,861 Loans charged-off (267) (237) (763) (592) Recoveries of loans previously charged off 78 23 201 69 -------------- -------------- ---------- ---------- Balance at end of period $ 6,532 $ 3,180 $ 6,532 $ 3,180 ================ ================ ============ ============ Loans outstanding at end of period 709,616 271,165 Allowance as a percentage of loans outstanding 0.92% 1.17% Allowance for possible loan losses to nonperforming loans 366.35% 324.16% Average loans outstanding 507,104 266,705 354,899 260,370 NET CHARGE-OFFS TO AVERAGE LOANS (ANNUALIZED) 0.15% 0.32% 0.21% 0.27% ============== ============== =============== ===============
The allowance for possible loan losses totaled $6.5 million at September 30, 1996, representing .92% of total loans, compared to $3.3 million at December 31, 1995, or 1.23% of total loans and $3.2 million at September 30, 1995, or 1.17% of total loans. The acquisition of County provided for substantially all of the $2.9 million increase in such allowances. Charge-offs represent the amount of loans actually removed as earning assets from the balance sheet due to uncollectibility. Amounts recovered on previously charged-off assets are netted against charge-offs, resulting in net charge-offs for the period. Net loan charge-offs for the nine months ended September 30, 1996 were $562,000, compared to net charge-offs of $523,000 for the same period in 1995 and net charge-offs of $755,000 for the year ended December 31, 1995. Charge-offs have been made in accordance with the Company's standard policy and have occurred primarily in the commercial and consumer loan portfolios. The allowance for possible loan losses as a percentage of nonperforming loans ("coverage ratio"), was 366.4% at September 30, 1996, compared to 323.0% at the end of 1995 and 324.2% at September 30, 1995. Although used as a general indicator, the coverage ratio is not a primary factor in the determination of the adequacy of the allowance by management. Total nonperforming loans as a percentage of total loans remained a relatively low 0.25% of total loans at September 30, 1996. The increase in total nonperforming loans resulted from County's nonperforming loans of $540,000 as well as from increases in the volume of consumer installment and single family residential real estate loans. 19 20 COMPARISON OF SEPTEMBER 30, 1996 AND DECEMBER 31, 1995 FINANCIAL CONDITION Total assets amounted to $1.0 billion at September 30, 1996, compared to $476.4 million at December 31, 1995, an increase of $560 million, or 117.5%. The acquisition of County provided $554.9 million of asset growth while internal growth amounted to $5.1 million, or 1.1%. Total investment securities increased by $97.3 million to $275.6 million. The acquisition of County added $111.3 million of investment securities while the remainder of the Company's securities portfolio decreased $14.0 million primarily to fund the County acquisition as well as loan growth. The Company's general 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 loan demand and possible deposit withdrawals, the Company has chosen to classify the majority of its investment securities as available-for-sale. At September 30, 1996, 82.3% of the total investment portfolio was classified as available-for-sale, while those securities which the Company intends to hold to maturity represented the remaining 17.3%. This compares to 95.3% and 4.7% classified as available-for-sale and held to maturity, respectively, at December 31, 1995. Total loans increased $437.6 million, or 265.2%, to $704.1 million at September 30, 1996. The acquisition of County provided $419.4 million of growth while internal growth totaled $18.2 million, or 6.8% from year end 1995. This increase was consistent with the Company's continued strategy of increasing the loan portfolio while adhering to prudent underwriting standards in order to improve the overall yield on earning assets. Premises and equipment increased $4.0 million to $8.2 million at September 30, 1996 with $3.3 million of this increase provided by County. Also, increases occurred as a result of the Company's continued expansion of markets and services. Deposits totaled $714.4 million at September 30, 1996, an increase of $365.9 million over the balance at December 31, 1995. The acquisition of County provided $352.3 million of deposit growth while internal growth amounted to $13.6 million, or 3.9%. The internal growth increase resulted from marketing efforts and continued growth at newer branch offices. Total interest-bearing deposits accounted for 92.9% of total deposits at September 30, 1996, compared to 88.0% at December 31, 1995. Total borrowings increased $160.9 million to $235.0 million at September 30, 1996, compared to $74.1 million at December 31, 1995. This increase resulted from County's total borrowings of $153.0 million at September 30, 1996 as well as $15.0 million of new borrowings obtained by the Company to partially fund the acquisition of County. LIQUIDITY AND CAPITAL RESOURCES The objective of liquidity management is to ensure the availability of funds to accommodate customer loan demand as well as deposit withdrawals while continuously seeking higher yields from longer term lending and investing opportunities. This is accomplished principally by maintaining sufficient cash flows and liquid assets along with consistent stable core deposits and the capacity to maintain immediate access to funds. These immediately accessible funds may include federal funds sold, unpledged marketable securities, reverse repurchase agreements or available lines of credit from the FRB, FHLB, or other financial institutions. An important factor in the preservation of liquidity is the maintenance of public confidence, as this facilitates the retention and growth of a large, stable supply of core deposits in funds. The Company's principal source of funds to satisfy short-term liquidity needs comes from cash, due from banks and federal funds sold. These sources constituted 4.3% of average total assets for the third quarter of 1996, unchanged from 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 Company. Securities with a market value of $227.0 million were classified as available-for-sale as of September 30, 1996, representing 82.7% of the total investment portfolio. Classification of securities as available-for-sale provides for flexibility in managing net interest 20 21 margin, interest rate risk, and liquidity. Cash flows from operating activities amounted to $12.9 million and $8.8 million for the nine months ended September 30, 1996 and 1995, respectively. The Company's bank and thrift subsidiaries are members of FHLB. Membership provides an opportunity 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. The Company obtained a term loan with a financial institution in order to partially fund the acquisition of County. Under terms of the loan agreement, the Company is required to make quarterly interest payments commencing 90 days from the funding date and annual principal payments, based on a ten year amortization, commencing 18 months from the funding date. The unpaid loan balance is due in full September 1, 2003. The loan agreement also contains certain financial covenants all of which the Company was in compliance with at September 30, 1996. Shareholders' equity at September 30, 1996 was $75.6 million, compared to prior year-end shareholders' equity of $50.0 million, an increase of $25.6 million, or 51.1%. This increase resulted from the Company's 1,000,000 common share offering that was completed in connection with the acquisition of County and netted the Company proceeds of $25.8 million. Partially offsetting this increase were unrealized losses on available-for-sale securities of $463,000 at September 30, 1996 compared to net gains of $942,000 at December 31, 1995. This change in the effect on equity was attributable to changes in interest rates. 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 September 30, 1996, the Company had a total risk-based capital ratio of 12.44%, of which 10.08% consisted of Tier 1 capital. The leverage ratio for the Company at September 30, 1996, was 6.03%. Cash dividends declared to shareholders of the Company totaled $2.5 million, or $0.75 per share, during the first three quarters of 1996. This compares to dividends of $2.0 million, or $0.69 per share, for the same period in 1995. Cash dividends paid as a percentage of net income amounted to 71.8% and 43.1% for the nine months ended September 30, 1996 and 1995, respectively. Considering the Company's capital adequacy, profitability, available liquidity sources and funding sources, the Company's liquidity is considered by management to be adequate to meet current and projected needs. 21 22 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. NONE ---- 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 ---------------------------------------------
Nine Months Ended September 30 -------------------------- 1996 1995 --------------- --------------- Gross Weighted Average Common Shares Outstanding 3,206,000 3,034,000 Weighted Average Treasury Shares Outstanding 60,000 61,000 ---------------- ---------------- Net Weighted Average Common Shares Outstanding 3,146,000 2,973,000 ================ ================ Net Income $ 3,453,000 $ 4,573,000 ================ ================ Net Income Per Common Share $ 1.10 $ 1.54 ================ ================
(b) Exhibit 27: Financial Data Schedule (c) Reports on Form 8-K A current report on Form 8-K dated August 29, 1996, reporting "Item 5. Other Events." was filed during the quarter in which this quarterly report is filed, in connection with the August 14, 1996 purchase of all of the issued and 22 23 outstanding stock of County Savings Bank ("County) pursuant to a Stock Purchase Agreement between BancFirst Ohio Corp. and First Financial Group, Inc. ("FFG) dated March 27, 1996. The acquisition was partially funded with proceeds from a 1,000,000 secondary common share offering that was also completed on August 14, 1996. 23 24 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/Kim M. Taylor --------------------- --------------------------------- Kim M. Taylor Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) 24 EX-27 2 EXHIBIT 27
9 1,000 U.S.DOLLARS 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 1 18,153 0 2,951 0 226,734 48,877 48,280 709,616 (6,532) 1,036,462 714,489 153,631 11,347 81,418 40,340 0 0 35,237 1,036,462 23,189 9,467 215 32,871 12,682 17,009 15,862 926 39 14,843 4,679 3,453 0 0 3,453 1.10 1.10 8.04 1,077 704 0 0 3,307 (763) 201 6,532 6,532 0 0
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