FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended June 30, 1994 Commission file number: 0-13166
CoBancorp Inc.
(Exact name of registrant as specified in its charter)
Ohio 34-1465382
(State or other jurisidiction of (IRS Employer
incorporation or organization) Identification No.)
124 Middle Avenue, Elyria, Ohio 44035
(Address of principal executive offices) (Zip Code)
(216) 329-8000
Registrant's telephone number, including area code
Not applicable
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 periods 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 practical date.
As of June 30, 1994, there were 3,281,331 outstanding common shares, with
no par value, of the Registrant.
page 1 of 13
INDEX
COBANCORP INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
Consolidated balance sheets--June 30, 1994 and
December 31, 1993 3
Consolidated statements of income--Three months ended
June 30, 1994 and 1993; six months ended June 30,
1994 and 1993 4
Consolidated statements of cash flows--Six months
ended June 30, 1994 and 1993 5
Notes to consolidated financial statements--
June 30, 1994 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION 12
SIGNATURES 13
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PART I. FINANCIAL INFORMATION
COBANCORP INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
JUNE 30, 1994
June 30 December 31
1994 1993
ASSETS
Cash and due from banks $ 30,174,455 $ 29,051,488
Investment securities (market value
$126,390,000 at June 30, 1994 and
$156,485,000 at December 31, 1993) 125,870,976 152,933,745
Federal funds sold 100,000 3,000,000
Loans 321,426,955 289,448,687
Less allowance for loan losses 5,466,849 5,226,401
------------ ------------
Net loans 315,960,106 284,222,286
Bank premises and equipment 10,742,166 10,563,830
Accrued income and prepaid expenses 3,796,607 3,433,018
Other assets 8,898,058 8,596,377
------------ ------------
TOTAL ASSETS $495,542,368 $491,800,744
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Demand--noninterest bearing $ 61,623,564 $ 59,208,379
Demand--interest bearing 54,522,309 58,858,055
Savings and other time 310,682,860 309,519,183
------------ ------------
Total deposits 426,828,733 427,585,617
Short-term funds 26,271,152 20,245,028
Other liabilities 1,915,229 3,131,672
Employee stock ownership plan
obligation 942,760 1,105,260
------------ ------------
Total liabilities 455,957,874 452,067,577
Shareholders' equity
Capital stock, without par value
5,000,000 shares authorized
3,281,331 shares outstanding
3,268,488 at December 31, 1993 4,527,247 4,304,345
Capital surplus 16,623,320 16,623,320
Retained earnings 19,376,687 19,910,762
Employee stock ownership plan
obligation (942,760) (1,105,260)
------------ ------------
Total shareholders' equity 39,584,494 39,733,167
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $495,542,368 $491,800,744
============ ============
See notes to consolidated financial statements.
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COBANCORP INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
JUNE 30, 1994
Three months ended June 30 Six months ended June 30
1994 1993 1994 1993
Interest Income
Loans (including fees)
Taxable $6,686,725 $5,707,179 $12,874,257 $11,280,407
Tax-exempt 40,293 44,584 80,487 90,691
Investment securities
Taxable 998,917 2,175,353 2,288,150 4,542,686
Tax exempt 885,678 697,444 1,739,534 1,281,538
Federal funds sold 8,829 82,380 32,418 125,815
---------- ---------- ----------- -----------
Total interest income 8,620,442 8,706,940 17,014,846 17,321,137
Interest Expense
Deposits 2,623,470 3,035,023 5,249,406 6,027,633
Short-term funds 160,941 158,032 277,936 350,797
---------- ---------- ----------- -----------
Total interest expense 2,784,411 3,193,055 5,527,342 6,378,430
---------- ---------- ----------- -----------
Net interest income 5,836,031 5,513,885 11,487,504 10,942,707
Provision for Loan and Real Estate Losses 83,333 250,000 208,333 850,000
---------- ---------- ----------- -----------
Net interest income after provision
for loan and real estate losses 5,752,698 5,263,885 11,279,171 10,092,707
Other Income
Service charges on deposit accounts 434,882 392,237 836,648 758,007
Trust fees 324,999 282,450 649,998 564,900
Other 226,012 243,763 356,935 445,435
Securities gains 117,394 340,756 408,525 481,472
---------- ---------- ----------- -----------
Total other income 1,103,287 1,259,206 2,252,106 2,249,814
Other Expenses
Salaries, wages and benefits 2,248,027 2,009,194 4,561,083 3,907,317
Occupancy--net 357,035 288,594 715,231 590,344
Furniture and equipment 142,339 139,500 279,039 279,000
Taxes, other than income and payroll 154,477 135,034 310,785 267,909
FDIC insurance 240,065 228,499 479,261 448,048
Other 2,194,693 1,905,998 4,199,538 3,816,226
---------- ---------- ----------- -----------
Total other expenses 5,336,636 4,706,819 10,544,937 9,308,844
---------- ---------- ----------- -----------
Income before income taxes 1,519,349 1,816,272 2,986,340 3,033,677
Income Tax Expense 242,000 383,000 492,000 594,000
---------- ---------- ----------- -----------
Net Income $1,277,349 $1,433,272 $ 2,494,340 $ 2,439,677
========== ========== =========== ===========
Net Income Per Share $0.38 $0.44 $0.75 $0.75
===== ===== ===== =====
<FN>
See notes to consolidated financial statements.
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COBANCORP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
JUNE 30, 1994
Six months ended June 30
1994 1993
Operating Activities
Net income $ 2,494,340 $ 2,439,677
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for loan and real estate losses 208,333 850,000
Provision for depreciation and amortization 492,489 513,241
Amortization of premiums less accretion of
discounts on securities 66,329 125,133
Realized securities (gains) (408,525) (481,472)
(Increase) in interest receivable (137,362) (12,507)
Increase (decrease) in interest payable 33,763 (83,563)
(Increase) in other assets (547,733) (530,642)
(Decrease) in other liabilities (131,459) (74,150)
----------- -----------
Net Cash Provided
by Operating Activities 2,070,175 2,745,717
Investing Activities
Proceeds from sales of investment securities 28,460,553 18,800,816
Paydowns and maturities of investment
securities 16,194,248 23,434,769
Purchases of investment securities (20,540,264) (57,258,922)
Net decrease in credit card receivables 188,810 434,739
Net (increase) in longer-term loans (32,134,963) (9,942,669)
Purchases of premises and equipment,
net of retirement (650,999) (1,755,551)
----------- -----------
Net Cash (Used)
by Investing Activities (8,482,615) (26,286,818)
Financing Activities
Net increase in demand deposits,
NOW accounts and savings accounts 675,283 24,549,816
Net (decrease) in certificates
of deposit (1,432,167) (6,646,424)
Net increase in short-term funds 6,026,123 5,933,185
Cash dividends (856,733) (602,852)
Dividend investment plan 92,180 128,194
Long-term incentive plan 130,721
----------- -----------
Net Cash Provided
by Financing Activities 4,635,407 23,361,919
----------- -----------
(Decrease) in
Cash and Cash Equivalents (1,777,033) (179,182)
Cash and Cash Equivalents at Beginning of Period 32,051,488 28,968,842
----------- -----------
Cash and Cash Equivalents at
End of Period $30,274,455 $28,789,660
=========== ===========
See notes to consolidated financial statements.
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COBANCORP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1994
NOTE A
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements
include the accounts of CoBancorp Inc. and its wholly-owned subsidiary,
PremierBank & Trust. All material intercompany accounts and transactions have
been eliminated.
BASIS OF PRESENTATION: The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. It is the opinion of
management that all adjustments made to the unaudited interim financial
statements were of a normal recurring nature.
CASH EQUIVALENTS: For purposes of the Statements of Cash Flows, cash
equivalents include amounts due from banks and federal funds sold.
Generally, federal funds are purchased and sold for periods of less than
thirty days.
PER SHARE AMOUNTS: All per share amounts have been adjusted to reflect
the four-for-three stock split in February 1994 and the four-for-three
stock split in July 1993.
RECLASSIFICATIONS: Certain amounts in the 1993 consolidated financial
statements have been reclassified to conform to the 1994 presentation.
NOTE B
ACQUISITIONS: On August 1, 1994, PremierBank & Trust announced it had
entered into an agreement with Charter One Bank, F.S.B., Cleveland,
whereby PremierBank & Trust will acquire two Lorain County branches of
Charter One Bank. The transaction is subject to approval of the
regulators and is expected to close early in the fourth quarter.
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COBANCORP INC.
JUNE 30, 1994
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion focuses on information about CoBancorp Inc.'s
financial condition and results of operations which is not otherwise
apparent from the consolidated financial statements attached.
EARNINGS RESULTS Net income increased 2.24 percent to $2,494,340 for the
first six months of 1994, from the $2,439,677 earned in the same period of
1993. Earnings per share were level at $0.75 for the first six months of
1994 and 1993.
NET INTEREST INCOME The net interest margin on a fully taxable-equivalent
basis was 5.56 percent for the first six months of 1994, compared to 5.41
percent one year ago. Net interest income for the first six months of
1994 amounted to $12,425,091 compared to $11,674,340 in 1993. These
amounts reflect net interest income adjusted to a fully taxable-equivalent
basis by recognizing the tax effect of interest earned on tax-exempt
securities and loans.
The increase in fully taxable-equivalent net interest income of $750,751
is attributable primarily to an increase in earning assets and to lower
interest rates on interest-bearing deposits. These factors were partially
offset by a decrease in the yield on earning assets and, to a lesser
extent, an increase in interest-bearing deposits.
The following table sets forth for the periods indicated a summary of the
changes in interest income and interest expense on a fully
taxable-equivalent basis resulting from changes in volume and changes in
rates for the major components of interest-earning assets and
interest-bearing liabilities:
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SUMMARY OF NET INTEREST INCOME CHANGES
(RATE/VOLUME VARIANCE)
Six months ended 6/30/94 vs. 6/30/93
(in thousands of dollars)
Change in interest
Current Current Old Old income/expense due to
volume rate volume rate Volume Rate Both Total
Taxable securities $ 75,375 6.08% $129,017 6.97% $(1,869) $ (574) $237 $(2,207)
Nontaxable securities 65,268 8.08 45,058 8.94 904 (195) (87) 621
Federal funds sold 2,049 3.15 8,669 2.93 (96) 9 (7) (93)
Taxable loans:
Real estate loans 141,832 8.26 103,195 9.18 1,759 (469) (132) 1,157
Commercial loans 122,611 7.91 107,315 8.01 608 (55) 57 610
Installment loans 31,263 10.72 31,733 11.86 (28) (180) 3 (204)
Overdrafts 212 604
Quickline loans 110 18.15 61 18.34 4 0 0 4
Credit card loans 2,703 34.98 3,014 29.97 (46) 75 (3) 26
Nontaxable loans:
IRBs 3,913 6.23 4,417 6.22 (16) 0 0 (15)
-------- -------- ------- ------- ----- -------
TOTAL INTEREST-EARNING ASSETS 445,336 8.06 433,083 8.38 1,220 (1,388) 68 (100)
Interest-bearing transaction
accounts:
NOW 24,145 2.10 27,940 2.59 (49) (69) 9 (108)
Advantage 50 29,206 2.02 25,110 2.55 52 (66) (11) (25)
Savings accounts:
Savings 145,599 2.38 122,901 2.98 336 (370) (68) (102)
IMMAs 29,765 2.17 33,028 2.61 (42) (72) 7 (107)
Time deposits:
Christmas/vaction clubs 2,539 4.01 560 3.91 38 0 1 40
CDs under $100,000 86,239 3.93 92,971 4.37 (146) (204) 15 (335)
CDs over $100,000 (regular) 4,987 4.17 7,926 4.29 (62) (5) 2 (65)
CDs over $100,000 (public fund) 11,641 3.35 14,036 3.05 (36) 21 (4) (19)
IRAs 30,041 4.31 28,043 5.02 50 (98) (7) (56)
Short-term funds:
Repurchase agreements 4,510 3.19 14,797 2.72 (139) 34 (23) (127)
Federal funds purchased 1,593 4.01 134 3.32 24 0 5 30
Sweep accounts 12,055 2.14 8,744 2.59 2 6 1 9
Notes payable TT&L 2,765 3.29 2,629 2.82 43 (20) (7) 15
-------- -------- ------- ------- ---- -------
TOTAL INTEREST-BEARING
LIABILITIES 385,085 2.89 378,819 3.40 70 (841) (80) (851)
------- ------- ---- -------
NET INTEREST INCOME 5.56 5.41 $ 1,150 $ (547) $148 $ 751
======= ======= ==== =======
YTD FTE net interest income (current year) $12,425
YTD FTE net interest income (prior year) 11,674
-------
Change in FTE net interest income $ 751
=======
<FN>
Presented on a fully-taxable equivalent basis, using year-to-date average balances.
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The trends in various components of the balance sheet and their respective yields and rates which affect interest
income and expense are shown in the following table:
AVERAGE CONSOLIDATED BALANCE SHEETS, NET INTEREST INCOME AND RATES
Six Months Ended June 30, 1994 Six Months Ended June 30, 1993
Average Interest Average Interest
Daily (Annaul- Yield/ Daily (Annual- Yield/
Balance ized) Rate Balance ized) Rate
ASSETS
Interest-earning assets:
Loans (including fees) (1)
Taxable $298,731 $25,732 8.61% $245,922 $22,748 9.25%
Tax-exempt (2) 3,913 244 6.23 4,417 275 6.23
Investment securities
Taxable 75,375 4,581 6.08 129,017 8,989 6.97
Tax-exempt (2) 65,268 5,271 8.08 45,058 4,029 8.94
Federal funds sold 2,049 65 3.15 8,669 254 2.93
Total interest-earning
assets (2) 445,336 35,893 8.06 433,083 36,295 8.38
Noninterest-earning assets:
Cash and due from banks 22,624 21,560
Bank premises and equipment 10,679 8,706
Other assets 12,590 12,093
Less allowance for loan losses (5,354) (5,455)
TOTAL ASSETS $485,875 $469,987
======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing transaction
accounts $ 53,351 $ 1,095 2.05 $ 53,050 $ 1,364 2.57
Savings 175,364 4,107 2.34 155,929 4,529 2.90
Time deposits 135,447 5,384 3.97 143,536 6,263 4.36
Short-term funds 20,923 556 2.66 26,304 707 2.69
Total interest-bearing
liablities 385,085 11,142 2.89 378,819 12,863 3.40
Noninterest-bearing liabilities:
Demand deposits 56,764 51,129
Other liabilities 4,502 5,082
Shareholders' equity 39,524 34,957
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $485,875 $469,987
======== ========
NET INTEREST INCOME $24,751 $23,432
======= =======
NET YIELD/RATE ON INTEREST-
EARNING ASSETS (2) 5.56% 5.41%
<FN>
(1) Nonaccrual loans are included in average loan balance.
(2) Presented on a fully tax equivalent basis using a tax rate of 34%.
Average interest-earning assets were $445,336,000 and $433,083,000 for the first six months of 1994 and 1993,
respectively.
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NET OTHER EXPENSES Total net other expense (total other expense less
total other income) has increased $1,233,801, to $8,292,831 for the first
six months of 1994, compared to $7,059,030 the previous year. Salaries,
wages and benefits, occupancy, and taxes other than income and payroll
have increased compared to last year. The Corporation has also
experienced increases in professional fees, insurance expense (including
FDIC insurance) and data processing costs. These increased expenses have
been partially offset by a decrease in the provision for loan losses.
Expense containment remains a focus of the bank, in addition to enhancing
productivity.
NONPERFORMING LOANS Nonaccrual loans were below year-end 1993 levels, and
at June 30, 1994, totaled $1,276,000, compared to $1,318,000 at December
31, 1993. The category of accruing loans past due 90 days or more totaled
$150,000 at June 30, 1994, and $141,000 at December 31, 1993. The balance
in the allowance for loan losses was $5,466,849 at June 30, 1994, compared
to $5,226,401 at December 31, 1993.
Except for installment loans and credit cards, loans on which interest
and/or principal is 90 days or more past due are placed on nonaccrual
status and any previously accrued but uncollected interest is reversed
from income. Such loans remain on a cash basis for recognition of income
until both interest and principal are current. Installment and credit
card loans past due greater than 120 days are charged off and previously
accrued but uncollected interest is reversed from income.
The following table summarizes nonaccrual, past due and restructured loans
(in thousands of dollars).
June 30 December 31
1994 1993
Accruing loans past due
90 days or more as to
principal or interest:
Loans secured by real estate $ 25 $ 58
Loans to individuals 125 57
Commercial and industrial loans 26
------ ------
$ 150 $ 141
====== ======
Nonaccrual loans:
Loans secured by real estate $ 274 $ 518
Commercial and industrial loans 285 77
All other 717 723
------ ------
$1,276 $1,318
====== ======
Restructured loans included above:
Commercial and collateral $ 0 $ 0
====== ======
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ALLOWANCE FOR LOAN LOSSES AND LOAN CHARGE-OFFS In determining the
adequacy of the allowance for loan losses, management evaluates past loan
loss experience, present and anticipated economic conditions and the
credit worthiness of its borrowers. The allowance for loan losses is
increased by provisions charged against income and recoveries of loans
previously charged off. The allowance is decreased by loans that are
determined uncollectible by management and charged against the allowance.
Potential problem loans are those loans which are on the Bank's "watch
list." These loans exhibit characteristics that could cause the loans to
become nonperforming or require restructuring in the future. This "watch
list" is reviewed monthly and adjusted for changing conditions.
At June 30, 1994, the allowance for loan losses as a percentage of loans
was 1.70, compared to 1.81 percent at December 31, 1993. The provision
for loan losses was $208,333 in the six months ended June 30, 1994, and
$750,000 for the same period of 1993. Additionally, $100,000 was provided
in the first quarter of 1993 to establish an allowance for possible losses
in other real estate owned.
The following table contains information relative to loan loss experience
for the six months ended June 30, 1994, and the year ended December 31,
1993.
Six months ended Year ended
June 30, 1994 December 31, 1993
Allowance for loan losses
at beginning of period $5,226 $5,215
Loans charged off:
Real estate 30 198
Installment 149 471
Credit card 29 91
Other 2
Commercial and collateral 24 1,384
------ ------
232 2,146
Recoveries on loans charged off:
Real estate 22 51
Installment 102 330
Credit card 15 16
Other 12
Commercial and collateral 126 928
------ ------
265 1,337
------ ------
Net loans charged off (33) 809
Provision for loan losses 208 820
------ ------
Allowance for loan losses
at end of period $5,467 $5,226
====== ======
Ratio of allowance for loan
losses to total loans at
end of period 1.70% 1.81%
====== ======
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CAPITAL At June 30, 1994, PremierBank & Trust's risk-based capital ratios
based on Federal Reserve Board guidelines were as follows:
Tier 1 "core" capital to risk-weighted assets 12.96 percent
Total capital to risk-weighted assets 14.22 percent
Tier 1 leverage ratio 8.18 percent
These ratios substantially exceed the minimums which are in effect for
banks after the end of 1992.
The Corporation's return on average assets was 1.03 percent for the
first six months of 1994, compared to 1.04 percent for the same period
in 1993. Return on average equity was 12.72 percent for the first six
months of 1994, compared to 13.96 percent for the first six months of 1993.
PART II. OTHER INFORMATION
Except as set forth below, the items of Part II are inapplicable or the
answers thereto are negative and, accordingly, no reference is made to
said items in this report.
Item 4--Submission of matters to a vote of security holders
The annual meeting of shareholders of CoBancorp Inc. was held
April 20, 1994, at 11:00 p.m., at the Ralph Neighbour Center of
the Church of the Open Door, 43275 Telegraph Road, Elyria, Ohio,
in accordance with the notice of meeting and proxy statement
mailed to shareholders.
All matters proposed by management in the proxy statement were
approved by the shareholders.
Item 6--Exhibits and Reports on Form 8-K
(a) No exhibits were required to be filed as part of
this report.
(b) The registrant was not required to file any reports on Form
8-K during the quarter ended June 30, 1994.
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COBANCORP INC.
JUNE 30, 1994
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COBANCORP INC.
(Registrant)
8/11/94 Timothy W. Esson
Date Timothy W. Esson
Executive Vice President
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