1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
=============
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
COMMISSION FILE NUMBER 0-10161
FIRST BANCORPORATION OF OHIO
(Exact name of registrant as specified in its charter)
OHIO 34-1339938
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
800 FIRST NATIONAL TOWER, AKRON, OHIO 44308 (216) 384-8000
(Address of principal executive offices) (Zip code) (Telephone Number)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
(Title of Class)
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 the
filing requirements for at least the past 90 days. YES [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
K or any amendment to this Form 10-K. [X]
State the approximate aggregate market value of the voting stock
held by non-affiliates of the registrant as of February 11, 1994: $533,573,281.
Indicate the number of shares outstanding of registrant's common
stock as of February 11, 1994: 25,249,166 Shares of Common Stock, No Par Value.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Proxy Statement of First Bancorporation of
Ohio, dated February 22, 1994, in Part III.
2
PART I
ITEM 1. BUSINESS
Registrant, First Bancorporation of Ohio ("Bancorporation"), is a bank
holding company organized in 1981 under the laws of the State of Ohio and
registered under the Bank Holding Company Act of 1956, as amended.
Bancorporation holds all of the outstanding common stock of First National Bank
of Ohio (formerly First National Bank of Akron), a national banking
association, Akron, Ohio ("First National"), The Old Phoenix National Bank of
Medina, a national banking association, Medina, Ohio ("Old Phoenix"), Elyria
Savings & Trust National Bank, a national banking association, Elyria, Ohio
("EST"), The First National Bank in Massillon, a national banking association,
Massillon, Ohio ("FNM") (collectively, the "Banks"), Peoples Federal Savings
Bank, a federally-chartered stock savings bank, Wooster, Ohio ("Peoples
Federal"), Peoples Savings Bank, Ashtabula, Ohio, an Ohio savings and loan
association, Ashtabula, Ohio ("Peoples Savings"), Life Savings Bank, FSB, a
federally-chartered stock savings bank ("Life Savings"), Bancorp Trust Company,
National Association, a national trust company, Naples, Florida ("Bancorp
Trust") and FBOH Credit Life Insurance Company ("FBOH Insurance") (all
collectively, the "Subsidiaries"). Although principally a regional banking
organization, Bancorporation through the Subsidiaries provides a wide range of
banking, fiduciary, financial and investment services to corporate,
institutional and individual customers throughout Northern Ohio and Southern
Florida.
Bancorporation's principal business consists of owning and supervising
its Subsidiaries which primarily operate in Ashtabula, Cuyahoga, Erie, Geauga,
Knox, Lake, Lorain, Medina, Portage, Richland, Stark, Summit and Wayne
counties, Ohio. Life Savings operates in Pinellas County, Florida.
Bancorporation directs the overall policies and financial resources of the
Subsidiaries, but the day-to-day affairs, including lending practices,
services, and interest rates, are managed by their own officers and directors,
some of whom are also officers and directors of Bancorporation. Through
Bancorp Trust, with its principal office in Naples, Florida, Bancorporation
offers trust services to customers in the Naples and Ft. Myers areas of
Florida. FBOH Insurance was formed in 1985 to engage in underwriting of credit
life and credit accident and health insurance directly related to the extension
of credit by the Banks to their customers.
Presented in the following schedule is further specific
information concerning each of the financial institution Subsidiaries:
COUNTIES DATE OF DATE OF TYPE NUMBER
SUBSIDIARY OF ORGANI- AFFILI- OF OF
INSTITUTION OPERATION ZATION BUSINESS ATION CHARTER OFFICES
First National Stark, 1947 Commercial 12/31/81 Federal 65
Bank of Ohio Summit, bank with
Cuyahoga trust services
and
Portage
The Old Phoenix Medina 1873 Commercial 12/31/81 Federal 14
National Bank and bank with
of Medina Cuyahoga trust services
3
Elyria Savings Lorain, 1901 Commercial 12/12/83 Federal 23
& Trust National Cuyahoga bank with
Bank and trust services
Erie
Peoples Federal Knox, 1892 Savings 10/26/88 Federal 12
Savings Bank Medina, Association
Richland,
Summit
and Wayne
The First Stark 1933 Commercial 3/21/89 Federal 8
National Bank bank with
in Massillon trust services
Bancorp Trust Collier 1990 National 2/17/90 Federal 2
Company and Lee, Trust
Florida Company
Peoples Savings Ashtabula, 1890 Savings 9/30/90 State 17
Bank Geauga, Association
and Lake
Life Savings Pinellas, 1994 Savings 3/11/94 Federal 3
Bank, FSB Florida Association
Each Bank is engaged in commercial banking in its respective
geographical market. Commercial banking includes the acceptance of demand,
savings and time deposits and the granting of commercial and consumer loans for
the financing of both real and personal property. Other services include
automated banking programs, credit cards, the rental of safe deposit boxes,
letters of credit, leasing, discount brokerage and credit life insurance. The
Banks also operate trust departments which offer estate and trust services.
Each Bank offers its services primarily to consumers and small and medium size
businesses in its respective geographical market. None of the Banks are
engaged in lending outside the continental United States. None of the Banks
are dependent upon any one significant customer or a specific industry.
Peoples Federal, Peoples Savings and Life Savings operate as savings
associations in their geographical markets. As savings associations, their
business includes the acceptance of demand, savings and time deposit accounts
and the granting of consumer and commercial loans primarily secured by real
property. Peoples Federal and Peoples Savings offer their services principally
to consumers and small businesses located in their geographical markets. They
are not engaged in lending outside the continental United States and are not
dependent upon any one significant customer or a specific industry.
Bancorporation filed in 1993 applications with the necessary regulatory agencies
to convert both Peoples Federal and Peoples Savings from federal and state
savings associations, respectively, to national banks. Bancorporation believes
it will receive the approvals needed to effect the conversions in early 1994.
Bancorp Trust is engaged in providing personal trust services in its
geographical markets. These services include acting as trustee in personal
trusts, custodial and investment agency services, guardianships and service as
personal representative in decedent estates.
Bancorporation chartered Life Savings on March 11,1994, for the purpose
of acquiring the assets and deposit liabilities of Life Federal Savings Bank, a
federal savings association under the conservatorship of the Resolution Trust
Corporation. Life Federal Savings Bank was the successor entity of Life Savings
Bank, a failed Florida savings association.
4
First National is the parent corporation of two wholly-owned
Ohio corporations organized in 1993 -- FBOH Leasing Company ("FBOH
Leasing") and FBOH Investor Services, Inc. ("Investor Services").
FBOH Leasing primarily provides equipment lease financing and
related services, while Investor Services primarily provides
discount brokerage services to customers of First National and the
other Subsidiaries.
The financial services industry is highly competitive.
Bancorporation and its Subsidiaries compete with other local,
regional and national providers of financial services such as other
bank holding companies, commercial banks, savings associations,
credit unions, consumer and commercial finance companies, equipment
leasing companies, brokerage institutions, money market funds and
insurance companies. The Subsidiaries' primary financial
institution competitors include Bank One, National City Bank, and
Society National Bank. Mergers between financial institutions
within Ohio and in neighboring states have added competitive
pressure. Bancorporation competes by offering quality and
innovative services at competitive prices.
Bancorporation and all of its Subsidiaries employ
approximately 2,800 persons.
Earnings for Bancorporation reached a record level as
$55,205,000 was reported for 1993. The earnings reported reflect
a $4,505,000 increase, or 8.9% over the prior year's earnings,
which also were an all time high.
During the third quarter of 1993, the Board of Directors
elected to declare a two-for-one stock split as well as to increase
the amount of the cash dividend to $.235 per share. The total cash
dividend paid to a shareholder for the entire year was $.90 per
share. The cash dividend, coupled with a market value increase
from $23.00 to $26.00, created a total return of $3.90 or 16.9% for
shares held the full year. All per share data is restated to
reflect the stock split.
Based on an average 25,219,035 shares outstanding, 1993
earnings per share was $2.19, up from the $2.02 reported for 1992.
The cash dividend increased $.08 per share, or 9.8% over the
previously stated annual payment of $.82.
Interest income from both loans and investments continued to
decline during the year due almost entirely to lower interest
rates. Even though deposits increased during the year, total
interest expense continued to decline, resulting in a net interest
income improvement of 2%.
As net interest remains vulnerable to movements in market
interest rates, Bancorporation continues to look at additional
sources of non-interest income. Other income increased from
$50,792,000 in 1992 to $54,347,000 in 1993, an increase of 7.0%.
Shareholders' equity which amounted to $391,641,000 or 9.80%
of total assets, increased by 9.30% compared to one year ago. Over
the years, additional measures of capital adequacy have been added
including guidelines by which regulatory agencies consider a
banking institution to be well capitalized. These measures are a
Tier 1 capital ratio, a risk-based capital ratio, and a leverage
ratio. At December 31, 1993, Bancorporation had a Tier 1 capital
ratio of 15.22%,
5
compared to the guideline of 6%; a risk-based capital ratio of 16.46% compared
to the guideline of 10%; and a leverage ratio of 9.53% compared to the
guideline of 5%.
A favorable trend related to the decline in charge-offs and
non-performing assets continued in 1993. Total charge-offs
amounted to .19% of average outstanding loans, well below the .57%
reported for 1992. Also reflecting an improving trend was the
marked reduction in non-performing assets from 1.40% of total loans
at the end of 1992 to .74% for 1993. Both improvements can be
attributed to the continued emphasis on professionalism in the
credit granting process and in the involvement with customers as
their financial circumstances change. The improvement in asset
quality can also be noted in the substantial reduction in the
provision for loan losses which declined from $17,363,000 to
$6,594,000 during 1993.
Bancorporation executed on September 28, 1993, a definitive
agreement for the acquisition of the common stock of Great Northern
Financial Corporation, the holding company for Great Northern
Savings Co., an Ohio savings association located in Barberton, Ohio
with assets of approximately $385 million. It is anticipated the
transaction will be completed early in the second quarter of 1994,
following approval by the shareholders of Great Northern Financial
Corporation and receipt of all necessary approvals from the
regulatory agencies. At that time, Great Northern Financial
Corporation will be merged into Bancorporation and Great Northern
Savings Co. will be merged into First National.
Another activity undertaken in 1993 by Bancorporation was a
request to the Federal Reserve Bank of Cleveland to approve the
creation of a Community Development Corporation ("CDC"). The
establishment of a CDC is essential to Bancorporation's
Subsidiaries in meeting the requirements of the Community
Reinvestment Act ("CRA"). Congress enacted CRA to assure that
banks and savings associations meet the deposit and credit needs of
their communities. Through a CDC, financial institutions can meet
these needs by non-traditional activities such as acquiring,
rehabilitating, or investing in real estate in low to moderate
income neighborhoods, and promoting the development of small
business. Bancorporation has committed to provide through the CDC
up to $2,000,000 over three years by funding individual projects
that meet its standards as well as the spirit of the CRA.
6
ITEM 2. PROPERTIES
FIRST BANCORPORATION OF OHIO. Bancorporation owns no real
property. Its executive offices and certain holding company
operational facilities, totalling 52,305 square feet, are leased
from First National.
During 1993, Bancorporation acquired a leasehold interest in
III Cascade, a seven-story office building located in downtown
Akron, Ohio. Bancorporation intends to relocate its executive
offices to III Cascade in 1994. The leasehold interest was
acquired by an assignment of a long-term sublease of the property
to FNR Holdings I, an Ohio general partnership (the "Partnership"),
the general partners of which are Bancorporation and Asset Holdings
Corporation I, a Delaware corporation and subsidiary of Banc One
Capital Corporation. Bancorporation does not control the
Partnership. The City of Akron is the lessor of the property.
First National has subleased all of the premises of III Cascade
from the Partnership, and Bancorporation intends to sublease a
portion of the premises from First National for its executive
offices. Neither Bancorporation nor First National presently
occupy any of the premises.
The facilities owned or leased by Bancorporation and its
Subsidiaries are considered by management to be adequate, and
neither the location nor unexpired term of any lease is deemed
material to the business of Bancorporation.
FIRST NATIONAL BANK OF OHIO. The principal executive offices of First
National are located in its 28-story main office building located at 106 South
Main Street, Akron, Ohio, which is owned by First National. First National is
the principal tenant of the building occupying approximately one-half of a
total of 200,000 square feet of the building, with the remaining portion leased
to tenants unrelated to First National. The properties occupied by 32 of First
National's branches are owned by First National, while the properties occupied
by its remaining 33 branches are leased with various expiration dates. There
is no mortgage debt owing on any of the above property owned by First National.
First National also owns automated teller machines, on-line teller terminals
and other computers and related equipment for use in its business.
First National owns 19.5 acres near downtown Akron, on which
is located the FBOH Operations Center. The Operations Center is
occupied and operated by FBOH Services Division, an operating
division of Bancorporation. The Operations Center primarily
provides computer and communications technology-based services to
Bancorporation and the Subsidiaries, and also markets its services
to non-affiliated institutions. There is no mortgage debt owing on
the Operations Center property.
The Trust Department of First National relocated in 1993 from
the main office building of First National to Main Place, a four-
story office building located in downtown Akron. The Trust
Department occupies 16,650 square feet of leased space in Main Place.
7
THE OLD PHOENIX NATIONAL BANK OF MEDINA. The principal
executive offices of Old Phoenix are located in its main office
building at 39 Public Square, Medina, Ohio. The building which
houses its executive offices is leased by Old Phoenix. The
properties occupied by four of Old Phoenix's branches are owned by
Old Phoenix, while the properties occupied by its remaining ten
branches are the subject of various lease obligations having
various expiration dates. These facilities are leased from IRT
Properties, a publicly-held real estate investment trust. Old
Phoenix also owns automated teller machines, on-line teller
terminals and other related equipment. The computer operations of
Old Phoenix are provided through First National.
ELYRIA SAVINGS & TRUST NATIONAL BANK. The principal executive
offices of EST are located in its main office building at 105 Court
Street, Elyria, Ohio, which is owned by EST. EST occupies
approximately one-half of the total available space in the
building. EST owns the land and buildings occupied by 18 of its
banking offices. The remaining five banking offices are the
subject of lease obligations with various lessors and varying lease
terms and expiration dates. EST also has automated teller machines
and on-line teller terminals. The computer operations of EST are
provided through First National.
PEOPLES FEDERAL SAVINGS BANK. The principal executive offices of
Peoples Federal are located in its main office building at 121 North Market
Street, Wooster, Ohio, which is owned by Peoples Federal. The properties
occupied by seven of Peoples Federal branches are owned by Peoples Federal,
while the properties occupied by its remaining five branches are leased at
various expiration dates. No mortgage debt exists on the above property owned
by Peoples Federal. Peoples Federal also has automated teller machines and
on-line terminals.
THE FIRST NATIONAL BANK IN MASSILLON. The principal executive offices
of FNM are located at One First National Plaza, Massillon, Ohio, in the center
of downtown Massillon. The building was constructed in 1976, is owned by FNM
and is not subject to mortgage debt. FNM owns the properties occupied by four
of its other banking offices, while the properties occupied by the remaining
four are leased under different leases with various expiration dates.
PEOPLES SAVINGS BANK. The principal executive offices of Peoples
Savings are located in its main office at 4200 Park Avenue, Ashtabula, Ohio,
which is owned by Peoples Savings. Peoples Savings owns the properties
occupied by seven of its branches, while the properties occupied by its
remaining nine branches are leased at various expiration dates. Peoples
Savings also leases the property occupied by a loan production office. No
mortgage debt exists on the above property owned by Peoples Savings. Peoples
Savings also has automated teller machines and on-line terminals.
LIFE SAVINGS BANK, FSB. The principal executive offices of Life
Savings are located at 21649 U.S. Highway 19 north, Clearwater, Florida. Life
Savings presently leases the property occupied by its executive offices and its
two branches.
BANCORP TRUST COMPANY. Bancorp Trust has its principal executive
offices at The Plaza on Third Street, Naples, Florida under a short-term lease
with a renewal option at the election of Bancorp Trust. Bancorp Trust leases
one additional office in Ft. Myers, Florida.
8
ITEM 3. LEGAL PROCEEDINGS
The nature of Bancorporation's business results in a certain
amount of litigation. Accordingly, Bancorporation and its
subsidiaries are subject to various pending and threatened lawsuits
in which claims for monetary damages are asserted. Management,
after consultation with legal counsel, is of the opinion that the
ultimate liability of such pending matters would not have a
material effect on Bancorporation's financial condition.
During 1991, a suit was filed in federal court against First
National alleging conversion and negligence in the deposit of
funds. The suit sought actual damages against First National plus
punitive damages, interest, costs, attorneys fees and other relief.
State law suits brought by other claimants based on the same
deposits have been stayed. During 1993, the federal court granted
First National's motion for summary judgment. As a result, that
suit was dismissed. The plaintiff in that suit subsequently filed
a notice of appeal. First National is vigorously seeking to have
the favorable federal judgment affirmed on appeal, and
Bancorporation continues to believe First National has meritorious
defenses to all claims. After consultation with legal counsel,
Management believes that the possibility of a multiple recovery by
both the federal court and state court plaintiffs is unlikely and
that the maximum exposure for damages approximates $7,300,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of 1993 to
a vote of security holders of Bancorporation.
EXECUTIVE OFFICERS OF REGISTRANT
The following persons are the executive officers of
Bancorporation as of December 31, 1993. Unless otherwise
designated, they are officers of Bancorporation, and unless
otherwise stated, they have held their indicated positions for the
past five years.
DATE APPOINTED
NAME AGE TO BANCORPORATION POSITION AND BUSINESS EXPERIENCE
Howard L. Flood 59 12-31-81 President and Chief Executive Officer
Richard L. Hardgrove 55 04-12-89 Senior Executive Vice President and
Chief Operating Officer since January
1, 1993; previously Executive Vice
President; President and Chief
Executive Officer of First National
since January 1, 1992; previously
President and Chief Executive Officer
of FNM
9
DATE APPOINTED
NAME AGE TO BANCORPORATION POSITION AND BUSINESS EXPERIENCE
Phillip E. Becker 49 02-13-92 Executive Vice President; President and
Chief Executive Officer of FNM since
January 1, 1992; previously Executive
Vice President of FNM
C. Donald Bramley 58 12-31-81 Executive Vice President;
President and Chief Executive Officer
of EST
Robert P. Brecht 44 08-09-91 Executive Vice President; President and
Chief Executive Officer of Peoples Sav-
ings since August 1, 1991; previously
Executive Vice President and Senior
Vice President of Peoples Savings
David B. Jones 58 12-31-81 Executive Vice President; President and
Chief Executive Officer of Old Phoenix
John R. Macso 47 11-08-90 Executive Vice President; previously
President and Chief Executive Officer
of Peoples Savings
Bill F. Nash 63 05-12-83 Executive Vice President; Senior Execu-
tive Vice President of First National
until January 1, 1993
W. Daniel Waldron 53 04-11-84 Executive Vice President; President and
Chief Executive Officer of Peoples Fed-
eral
Gregory R. Bean 43 04-10-91 Senior Vice President; Senior Vice
President and Senior Trust Officer of
First National; Executive Vice
President and Chief Operating Officer
of Bancorp Trust since 1990
Gary J. Elek 42 02-11-88 Senior Vice President and Treasurer;
Senior Vice President and Controller of
First National until January 1, 1992
Scott A. Lyons, Jr. 48 05-28-91 Senior Vice President; Executive Vice
President of First National since May
28, 1991; previously partner with KPMG
Peat Marwick
Terry E. Patton 45 04-10-85 Senior Vice President, Counsel and
Secretary; Senior Vice President,
Counsel and Secretary of First National
10
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The outstanding shares of Bancorporation Common Stock are quoted
on the NASDAQ National Market System. The following table contains bid and
cash dividend information for Bancorporation Common Stock for the two most
recent fiscal years:
STOCK PERFORMANCE AND DIVIDENDS
Bids Per Share
---------------- -------------------------------
Quarter Dividend
ending High Low rate Book value*
-------- ------- ------- --------- -----------
3-31-92 19 3/8 17 7/8 .20 1/4 13.32
6-30-92 23 18 1/8 .20 1/4 13.60
9-30-92 22 1/4 19 3/4 .20 1/4 13.90
12-31-92 23 1/2 20 .21 1/2 14.22
-------- ------- ------- --------- -----------
3-31-93 25 1/8 23 1/4 .21 1/2 14.54
6-30-93 24 1/4 20 3/4 .21 1/2 14.89
9-30-93 29 22 1/4 .23 1/2 15.22
12-31-93 30 3/4 25 1/4 .23 1/2 15.51
-------- ------- ------- --------- -----------
<FN>
Number of shareholders at Dec. 31, 1993 -- 6,673
*Based upon number of shares outstanding at the end of each quarter.
This table sets forth the high and low closing bid quotations, dividend
rates and book values per share for the calendar periods indicated. All
of the statistics are adjusted to reflect the two-for-one stock split of
August 30,1993. These quotations, furnished by the National Quotations Bureau
Incorporated, represent prices between dealers, do not include retail markup,
markdowns, or commissions, and may not represent actual transactions.
On December 31, 1993 there were approximately 6,673 shareholders
of record of Bancorporation Common Stock.
11
ITEM 6. SELECTED FINANCIAL DATA
FIRST BANCORPORATION OF OHIO AND SUBSIDIARIES
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE DATA) Years ended December 31,
- -----------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988
---------- --------- --------- --------- --------- ---------
RESULTS OF OPERATIONS
Interest income $ 277,720 294,884 315,573 326,456 321,687 268,867
Conversion to fully-tax equivalent 5,245 5,638 6,934 9,059 10,178 11,525
---------- ---------- --------- ---------- ---------- ----------
Interest income* 282,965 300,522 322,507 335,515 331,865 280,392
Interest expense 93,231 114,905 163,665 185,933 183,965 143,813
---------- ---------- --------- ---------- ---------- ----------
Net interest income* 189,734 185,617 158,842 149,582 147,900 136,579
Provision for possible loan losses 6,594 17,363 11,373 11,659 8,793 6,028
Other income 54,347 50,792 44,575 38,264 37,433 33,394
Other expense 151,517 140,314 130,137 121,059 126,562 104,311
---------- ---------- --------- ---------- ---------- ----------
Income before federal income taxes* 85,970 78,732 61,907 55,128 49,978 59,634
Federal income taxes 25,520 22,394 15,415 11,157 12,706 7,710
Fully-tax equivalent adjustment 5,245 5,638 6,934 9,059 10,178 11,525
---------- ---------- --------- ---------- ---------- ----------
Federal income taxes* 30,765 28,032 22,349 20,216 22,884 19,235
---------- ---------- --------- ---------- ---------- ----------
Net income $ 55,205 50,700 39,558 34,912 27,094 40,399
========== ========== ========= ========== =========== =========
Per share:
Net income $ 2.19 2.02 1.58 1.39 1.08 1.61
Cash dividends .90 .82 .80 .74 .69 .63
Dividend payout ratio 41.09% 40.80% 50.91% 53.31% 64.36% 38.86%
---------- ---------- --------- ---------- ---------- ----------
AVERAGE RATIOS
Return on total assets 1.39% 1.34% 1.07% 0.97% 0.77% 1.27%
Return on shareholders' equity 14.69% 14.80% 12.50% 11.66% 9.27% 15.05%
Shareholders' equity to total assets 9.49% 9.05% 8.56% 8.29% 8.29% 8.46%
---------- ---------- --------- ---------- ---------- ----------
BALANCE SHEET DATA
Total assets (at December 31) $3,996,728 3,916,198 3,765,739 3,722,137 3,618,017 3,542,726
Daily averages:
Total assets $3,958,233 3,784,274 3,696,022 3,610,330 3,525,302 3,170,823
Earning assets 3,594,791 3,457,071 3,372,469 3,281,859 3,189,356 2,870,700
Deposits and other funds 3,543,704 3,400,803 3,339,568 3,268,673 3,192,493 2,867,674
Shareholders' equity 375,714 342,655 316,354 299,438 292,259 268,354
<FN>
* Fully-tax equivalent basis
12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following commentary presents Management's discussion and analysis
of the Corporation's financial condition and results of operations. The
review highlights the principal factors affecting earnings and the
significant changes in balance sheet items for years 1993, 1992 and 1991.
Financial information for prior years is presented when appropriate. The
objective of this financial review is to enhance the reader's understanding
of the accompanying tables and charts, the consolidated financial statements,
notes to the financial statements and financial statistics appearing
elsewhere in this report. Where applicable, this discussion also reflects
Management's insights of known events and trends that have or may reasonably
be expected to have a material effect on the Corporation's operations and
financial condition.
All financial data has been restated to give effect to acquisitions
accounted for on a pooling of interest basis and stock splits in previous
periods. The results of other bank and branch acquisitions, accounted for as
purchases, have been included effective with the respective dates of
acquisition.
EARNINGS SUMMARY
First Bancorporation of Ohio's net income for 1993 totaled $55.2
million. This represents an 8.9% increase over 1992 and a record high for the
Corporation. Net income was favorably affected by a strong net-interest
margin, improved asset quality and increased non-interest income. Net income
for 1993 of $55.2 million compares to $50.7 million in 1992 and $39.6 million
in 1991.
The return on average assets for the Corporation equaled 1.39% in 1993
compared to 1.34% in 1992 and 1.07% in 1991. The Corporation's return on
average equity, which is largely affected by its strong capital base, equaled
14.69% in 1993 compared to 14.80% and 12.50% in 1992 and 1991, respectively.
On August 19, 1993 the Corporation's Board of Directors declared a
2-for-1 split of the Corporation's common stock, to shareholders of record as
of August 30, 1993. The per share data is restated to reflect the stock split.
Net income on a per share basis totaled $2.19 compared to $2.02 in 1992
and $1.58 in 1991. The following table summarizes the changes in earnings
per share for 1993 and 1992.
13
(DOLLARS) 1993/ 1992/
1992 1991
----- ----
CHANGES IN EARNINGS
PER SHARE
Net income for 1992 and
1991, respectively $2.02 1.58
Increases (decreases)
attributable to:
Net interest income-
taxable equivalent .16 1.06
Provision for possible
loan losses .42 (.24)
Trust services .03 .02
Service charges on
deposit accounts .02 .09
Credit card fees .02 --
Securities gains, net (.05) .04
Other income .12 .10
Salaries and employee
benefits (.27) (.32)
Net occupancy expense (.04) --
Equipment expense (.02) .02
Other expenses (.11) (.11)
Federal income taxes-
taxable equivalent (.11) (.22)
----- ----
Net change in net income .17 .44
----- ----
Net income $2.19 2.02
===== ====
NET INTEREST INCOME
Net interest income, the difference between interest and loan fee
income on earning assets and the interest paid on deposits and borrowed funds,
is the principal source of earnings for the Corporation. Throughout this
discussion net interest income is presented on a fully taxable equivalent (FTE)
basis which restates interest on tax-exempt securities and loans as if such
interest was subject to federal income tax at the statutory rate.
Net interest income is affected by market interest rates on both
earning assets and interest bearing liabilities, the level of earning assets
being funded by interest bearing liabilities, non-interest bearing liabilities
and equity and the growth in earning assets. The following table shows the
allocation to assets, the source of funding and their respective interest
spreads.
14
(DOLLARS IN THOUSANDS) 1993
-----------------------------------------
AVERAGE NET
EARNING INTEREST INTEREST
ASSETS SPREAD INCOME
---------- --------- ---------
Interest-bearing liabilities $2,904,439 4.66% 135,393
Non-interest-bearing liabilities and equity 690,352 7.87%* 54,341
---------- ---- -------
$3,594,791 189,734
========== ==== =======
1992
-----------------------------------------
Average Net
Earning Interest Interest
Assets Spread Income
---------- --------- ---------
Interest-bearing liabilities $2,862,891 4.68% 133,895
Non-interest-bearing liabilities and equity 594,990 8.69%* 51,722
---------- ---- -------
$3,457,071 185,617
========== ==== =======
1991
-----------------------------------------
Average Net
Earning Interest Interest
Assets Spread Income
---------- --------- ---------
Interest-bearing liabilities $2,859,591 3.84% 109,796
Non-interest-bearing liabilities and equity 512,878 9.56%* 49,046
---------- ---- -------
$3,372,469 158,842
========== ==== =======
<FN>
* Yield on earning assets
15
Net interest income totaled $189.7 million in 1993, an increase of
$4.1 million or 2.2% compared to 1992. Net interest income in 1993 continued
to be affected by market interest rates, as lower rates impacted both average
earning assets as well as interest-bearing liabilities. The yield on earning
assets fell 82 basis points, or 7.87% in 1993 compared to 8.69% in 1992, while
the Corporation's cost of funds dropped from 4.01% in 1992 to 3.21% in 1993, or
a total of 80 basis points.
In addition to changes in market interest rates, the funding of earning
assets with non-interest bearing liabilities and equity increased to 19.2% of
earning assets in 1993 compared to 17.2% in 1992. Average earning assets
grew 4.0% compared to one year ago.
The table below provides an analysis of the effect of changes in
interest rates and volumes on net interest income in 1993 and 1992.
CHANGES IN NET INTEREST DIFFERENTIAL -- FULLY-TAX EQUIVALENT RATE/VOLUME
ANALYSIS
(DOLLARS IN THOUSANDS) Years ended December 31,
---------------------------------------------------------
1993 AND 1992 1992 and 1991
-------------------------- --------------------------
INCREASE (DECREASE) IN Increase (Decrease) In
INTEREST INCOME/EXPENSE Interest Income/Expense
-------------------------- --------------------------
YIELD/ Yield/
VOLUME RATE TOTAL Volume Rate Total
--------------------------------------------------------
INTEREST INCOME
Investment securities:
Taxable $ 3,308 (10,690) (7,382) 3,478 (7,915) (4,437)
Tax-exempt (11) (635) (646) (854) (938) (1,792)
Loans 8,047 (17,060) (9,013) 8,906 (19,864) (10,958)
Federal funds sold (125) (391) (516) (1,609) (3,189) (4,798)
------- ------ ------ ------ ------ ------
Total interest income 11,219 (28,776) (17,557) 9,921 (31,906) (21,985)
------- ------ ------ ------ ------ ------
INTEREST EXPENSE
Interest on deposits:
Demand--interest bearing 579 (1,385) (806) 917 (3,075) (2,158)
Savings 3,615 (6,273) (2,658) 4,420 (14,058) (9,638)
Certificates and other time deposits (4,804) (13,062) (17,866) (8,056) (25,987) (34,043)
Federal funds purchased, securities sold
under agreements to repurchase and other borrowings 125 (469) (344) (97) (2,824) (2,921)
------- ------ ------ ------ ------ ------
Total interest expense (485) (21,189) (21,674) (2,816) (45,944) (48,760)
------- ------ ------ ------ ------ ------
Net interest income $11,704 (7,587) 4,117 12,737 14,038 26,775
======= ====== ====== ====== ====== ======
<FN>
Note: The rate volume variance has been allocated entirely to volume.
16
Total interest income decreased by $17.6 million or 5.8% in 1993
compared to 1992. Lower interest rates accounted for $28.8 million of the
decrease which was offset by a $11.2 million increase due to increased volumes.
Interest income from taxable investment securities increased $3.3 million due
to increased volume while income from tax-exempt securities was down slightly
due to maturities within the portfolio. The overall increase in interest
income due to increases in the investment portfolio was offset by a combined
decrease due to interest rates of $11.3 million.
Interest income from loans and leases increased $8.0 million as a result
of a 4.4% increase in outstandings, while lower interest rates decreased
interest income $17.1 million for a net decrease of $9.0 million.
Lower market interest rates not only reduced interest expense but also
continued to affect the mix of interest bearing liabilities as depositors
moved funds to more liquid deposits. Overall, interest expense decreased
$21.7 million compared to one year ago or 18.9%. Lower interest rates
accounted for virtually all of the drop as the decrease due to rate changes
was $21.2 million compared to $.5 million due to volume. As noted above,
lower market rates resulted in a shift to more liquid deposits as lower
outstandings reduced interest expense on certificates and other time
deposits. The interest expense on savings and interest bearing demand
accounts increased due to higher volumes.
The $4.1 million increase in net interest income in 1993 resulted from
an $11.7 million increase due to changes in volume which was offset by a $7.6
million decrease due to changes in interest rates.
The net interest margin is calculated by dividing net interest income
FTE by average earning assets. As with net interest income, the net interest
margin is affected by the level and mix of earning assets, the proportion of
earning assets funded by non-interest bearing liabilities and the interest rate
spread.
In addition, the net interest margin is also impacted by changes in
federal income tax rates and regulations as they affect the tax equivalent
adjustment.
The net interest margin was 5.28% in 1993 compared to 5.37% in 1992 and
4.71% in 1991. As interest rates continued their decline in 1993, the yield
on earning assets ended the year at 7.87% down from 8.69% in 1992. The cost
of funding the earning assets during 1993 fell 73 basis points to 2.59%
compared to 3.32% in 1992.
(DOLLARS IN THOUSANDS)
1993 1992 1991
---------- --------- ---------
Net interest income $ 184,489 179,979 151,908
Tax equivalent adjustment 5,245 5,638 6,934
---------- --------- ---------
Net interest income-FTE $ 189,734 185,617 158,842
========== ========= =========
Average earning assets $3,594,791 3,457,071 3,372,469
========== ========= =========
Net interest margin 5.28% 5.37% 4.71%
==== ==== ====
The mix of earning assets continued to be affected by economic
uncertainty during 1993 as average loans outstanding increased 4.1% compared
to one year ago. Average loans equalled 65.9% of average earning assets
compared to 65.8% and 64.6% in 1992 and 1991, respectively.
The amount of average earning assets funded by non-interest bearing
liabilities and equity totaled 19.2% in 1993 compared to 17.2% in 1992 and
15.2% in 1991.
17
NON-INTEREST INCOME
Non-interest income totaled $54.3 million, an increase of 7.0% compared
to 1992. This follows a 13.9% increase for 1992 compared to 1991.
(DOLLARS IN THOUSANDS)
1993 1992 1991
------- ------ ------
Trust fees $ 9,907 9,103 8,515
Service charges on deposit accounts 20,362 19,837 17,686
Credit card fees 7,987 7,317 7,286
Service fees-other 4,372 4,296 4,116
Mortgage sale and loan servicing 4,680 3,821 1,084
Securities gains, net 29 1,368 469
Other income 7,010 5,050 5,419
------- ------ ------
$54,347 50,792 44,575
======= ====== ======
Service charges on deposit accounts increased 2.6% compared to 1992 and
accounted for 37.5% of non-interest income compared to 39.1% and 39.7% in
1992 and 1991, respectively. Trust fees increased 8.8% compared to one year
ago and represent 18.2% of non-interest income. Credit card fees accounted
for 14.7% of non-interest income while increasing 9.2% compared to one year
ago.
Lower market interest rates continued to have a significant impact on
mortgage lending activities throughout 1992 and into 1993. Mortgage sales and
loan servicing fees increased from $3.8 million in 1992 to $4.7 million in
1993, an increase of 22.5%. The Corporation's policy is to sell all fixed
rate thirty year residential mortgage loans originated while retaining the
servicing for these loans.
Non-interest income covered 35.9% of non-interest expense in 1993,
compared to 36.2% in 1992 and 34.3% in 1991. The Corporation continues to
pursue new business opportunities which generate fee income and are not
subject to interest rate volatility.
18
NON-INTEREST EXPENSE
Non-interest expense increased 7.9% in 1993 compared to 1992 after a
7.8% increase for 1992 compared to 1991.
(DOLLARS IN THOUSANDS)
1993 1992 1991
-------- ------- -------
Salaries and wages $ 58,251 55,017 49,066
Pension and benefits 18,541 14,865 12,850
-------- ------- -------
Salaries, wages, pension and benefits 76,792 69,882 61,916
Net occupancy expense 11,239 10,341 10,350
Equipment expense 10,301 9,757 10,230
Taxes, other than federal income taxes 4,923 4,962 4,772
Stationery, supplies and postage 6,831 6,204 6,546
Bankcard, loan processing and other fees 10,978 8,797 8,573
Advertising 2,631 2,342 2,405
Professional services 3,986 3,176 2,761
Telephone 2,408 2,153 2,217
FDIC assessment 7,380 7,197 6,655
Amortization of intangibles 3,325 3,345 3,419
Other operating expenses 10,723 12,158 10,293
-------- ------- -------
Total other expenses $151,517 140,314 130,137
======== ======= =======
Salaries and wages increased 5.9% in 1993 compared to 1992 and
represent 38.4% of non-interest expense compared to 39.2% one year ago.
Employee benefit expense increased $3.7 million or 24.7% in 1993.
Approximately $3.0 million of the increased employee benefit expense was a
result of a change made to the Corporation's benefit plan for postretirement
medical and life insurance discussed below.
19
During 1993 the Corporation adopted the Financial Accounting Standards
Board Statement No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions." SFAS No. 106 requires that the cost of all
postretirement benefits expected to be provided by an employer to current and
future retirees be accrued over those employees' service periods. In
addition to recognizing the cost of benefits for the current service period,
SFAS No. 106 also provides for the recognition of the cost for postretirement
benefits earned in prior service periods as well as for employees currently
retired (the transition obligation). This Statement became effective for the
Corporation on January 1, 1993.
The Corporation has a benefit plan which presently provides
postretirement medical and life insurance for retired employees. Effective
January 1, 1993 the Corporation made significant plan changes for future
retired participants. For employees who retire after January 1, 1993 the
Corporation's medical contribution is capped at 200% of the 1993 level while
the medical portion for employees retired prior to January 1, 1993
anticipates the Corporation's contribution to continue to increase as a
proportion of the cost of the plan. The Corporation reserves the right to
terminate or make additional plan changes at any time.
As of January 1, 1993 the Corporation's accumulated postretirement
benefit obligation (APBO) totaled $19.0 million, and the annual
postretirement benefit cost amounted to $2.1 million. The Corporation has
elected to amortize the APBO over twenty years at an annual cost of $.9
million, bringing the total expense to $3.0 million for 1993.
During 1991, Congress passed the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"). FDICIA mandated the FDIC to develop a
risk-based assessment system no later than January 1, 1994. During 1993, the
FDIC issued regulations that will take effect on January 1, 1994 and that
will adopt, with few changes, the transitional assessment system that was in
effect in 1993 as the final assessment system. Under the final system, the
annual assessment rate for each insured institution is determined on the
basis of both capital and supervisory measures, and can range from $.23 per
$100.00 of deposits to $.31 per $100.00 of deposits, depending on the capital
and supervisory strength of the institution. At December 31, 1993, all the
subsidiaries of the Corporation would be assessed at the rate of $.23 per
$100.00 of deposits. Total premiums paid by the Corporation during 1993 were
$7.4 million compared to $7.2 million and $6.7 million in 1992 and 1991,
respectively.
20
Various legislative proposals concerning the banking industry and
regulatory reform are pending in Congress. Given the uncertainty of the
legislative process, Management cannot assess the impact of such legislation
on the Corporation's financial condition or results of operations.
In November of 1992 the Financial Accounting Standards Board issued
Statement No. 112, "Employers' Accounting for Postemployment Benefits." SFAS
No. 112 establishes standards of financial accounting and reporting for the
estimated cost of benefits provided by an employer to former or inactive
employees after employment, but before retirement. Currently the Corporation
does not provide any postemployment benefits to employees which would have
any material impact on the Corporation's results of operations or capital
level.
FEDERAL INCOME TAX
On August 10, 1993 Congress enacted the Omnibus Budget Reconciliation
Act of 1993 which included among its provisions an increase in the statutory
rate from 34% to 35%. Other provisions which will impact the Corporation
include changes in the deductibility of certain business expenses, changes in
determining benefits and contributions under its qualified retirement plan, and
the ability to depreciate future intangible assets.
Federal income tax expense totaled $25.5 million in 1993 compared to
$22.4 million in 1992 and $15.4 million in 1991. The effect of the increase
in the statutory rate, which was retroactive to the beginning of the year,
totaled $.5 million. The remainder of the increase for 1993 over the prior
periods resulted from increased income before federal income taxes and
increases in the Corporation's effective federal income tax rate.
In 1993 the effective federal income tax rate for the Corporation
equaled 31.6% compared to 30.6% in 1992 and 28.0% in 1991. One of the factors
which continues to affect the effective tax rate was the Tax Reform Act of 1986
which raised the disallowance of interest cost on funds employed to carry most
tax-exempt securities and loans acquired after August 7, 1986 from 20% to 100%.
The result is that a greater proportion of pre-tax earnings are subject to
federal income tax. The Corporation continues to invest in obligations of the
local communities it serves.
During 1993 the Corporation adopted the Financial Accounting Standards
Board Statement No. 109, "Accounting for Income Taxes." The objective of
SFAS No. 109 is to recognize the amount of taxes payable or refundable for
the current year as well as to recognize deferred tax liabilities and assets
for the future tax consequences of events that have been recognized in the
financial statements or tax returns. The Corporation had accounted for
income taxes in accordance with SFAS No. 96. As a result the adoption of
SFAS No. 109 did not have a material impact on the Corporation's results of
operations or level of capital.
INVESTMENT SECURITIES
The investment portfolio is maintained by the Corporation to provide
liquidity, earnings, and a means of diversifying risk. Investment securities
are purchased with the ability and the intent to hold them to maturity and,
therefore, are carried at amortized cost.
At December 31, 1993 investment securities totaled $1,209.7 million
compared to $1,167.2 million one year ago, an increase of 3.6%. Investment
securities totaled $1,119.3 million at December 31, 1991.
During 1993 approximately $20.6 million of investment securities were
sold for which a $29 thousand net gain was realized.
A summary of investment securities' book value is presented below as of
December 31, 1993, 1992 and 1991. Presented with the summary is a maturity
distribution schedule with corresponding weighted average yields. The
schedule reflects the liquidity within the investment securities portfolio as
15.6% of the total securities have maturities of one year or less.
BOOK VALUE OF INVESTMENT SECURITIES
(DOLLARS IN THOUSANDS) December 31,
---------------------------------------
1993 1992 1991
--------- --------- ---------
U.S. Treasury securities $ 293,970 340,100 328,233
U.S. Government agency obligations 480,671 270,350 210,207
Obligations of states and political subdivisions 147,673 133,687 137,983
Mortgage-backed securities 217,142 337,703 305,734
Other securities 70,220 85,395 137,169
----------- --------- ---------
$1,209,676 1,167,235 1,119,326
========== ========= =========
MATURITIES OF THE INVESTMENT SECURITIES AT DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)
OVER ONE YEAR OVER FIVE YEARS
ONE YEAR OR LESS THROUGH FIVE YEARS THROUGH TEN YEARS OVER TEN YEARS
---------------------- ------------------- -------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
AMOUNT YIELDS AMOUNT YIELDS AMOUNT YIELDS AMOUNT YIELDS
--------- ----------- ---------- -------- --------- --------- --------- ---------
U.S. Treasury securities $131,693 6.29% 162,277 5.17% -- -- -- --
U.S. Government agency obligations 8,235 7.05% 197,303 6.05% 21,568 5.29% 253,565 5.49%
Obligations of states and
political subdivisions 45,396 7.77%* 75,253 8.28%* 20,767 7.70%* 6,257 7.78%*
Mortgage-backed securities -- -- 41,353 5.75% 38,622 7.92% 137,167 6.73%
Other securities 2,739 7.43% 23,917 6.78% 2,159 5.13% 41,405 6.40%
-------- ------ ------- ----- ------ ------ ------- -------
$188,063 6.70% 500,103 6.11% 83,116 7.11% 438,394 6.00%
======== ====== ======= ===== ====== ====== ======= ======
Percent of total 15.55% 41.34% 6.87% 36.24%
===== ===== ====== ======
<FN>
* Fully-taxable equivalent based upon federal income tax structure applicable at December 31, 1993.
21
As a result of lower market interest rates and the impact of Tax Reform
Act of 1986, noted in the discussion of federal income taxes, the Corporation
continued to increase its investment in U.S. Government agencies, mortgage-
backed securities and other securities helping to maximize the yield of the
investment portfolio while maintaining its soundness. At December 31, 1993
these securities represented 63.5% of the total portfolio compared to 59.4%
and 58.3% in 1992 and 1991, respectively. At December 31, 1993 the
investment portfolio had a book value of $1,209.7 million compared to a
market value of $1,224.7 million for an unrealized net gain of $15.0 million.
The yield on the portfolio fell to 6.67% in 1993 compared to 7.69% in
1992 and 8.52% in 1991. Continued low market interest rates in 1993 will
further impair re-investment opportunities going forward.
In May 1993, the Financial Accounting Standards Board issued Statement
No. 115, "Accounting for Certain Investments in Debt and Equity Securities."
The statement requires debt and equity securities to be classified as held-
to-maturity, available-for-sale, or trading. Securities classified as held-
to-maturity are measured at amortized or historical cost, securities
available-for-sale and trading at current market. Adjustment to fair value of
the securities available-for-sale, in the form of unrealized holding gains and
losses, is excluded from earnings and reported as a net amount in a separate
component of shareholders' equity. Adjustment to fair value of securities
classified as trading is included in earnings. This statement becomes
effective in 1994.
22
Management is continuing to analyze the investment securities portfolio
in order to determine the appropriate classification of held-to-maturity and
available-for-sale. Current analysis indicates approximately 70% of the
portfolio would be held-to-maturity and 30% available-for-sale. At this time
the Corporation does not foresee any securities being classified as trading.
While the adoption of SFAS No. 115 should not have a material impact on
results of operations or level of capital, the above mentioned analysis
would result in an adjustment to capital of approximately $12.0 million based
upon a 300 basis point movement in current market interest rate at year end.
LOANS
Total loans outstanding at December 31, 1993 increased 3.2% compared to
one year ago or $2,396.5 million compared to $2,321.8 million. A breakdown
by category follows along with a maturity summary of commercial, financial,
and agricultural loans.
(DOLLARS IN THOUSANDS) December 31,
----------------------------------------------------------------
1993 1992 1991 1990 1989 1988
---------- ---------- --------- ---------- ---------- ----------
Commercial, financial and agricultural $ 430,118 423,170 403,238 408,403 478,165 477,325
Installments to individuals 597,875 520,318 517,976 529,802 565,607 524,465
Real estate 1,311,788 1,359,289 1,310,914 1,202,619 1,086,393 1,021,002
Lease financing 56,682 19,001 16,249 13,664 15,367 10,286
---------- ---------- --------- ---------- ---------- ----------
Total loans 2,396,463 2,321,778 2,248,377 2,154,488 2,145,532 2,033,078
Less allowance for possible loan losses 31,221 29,193 24,829 23,563 21,063 18,609
---------- ---------- --------- ---------- ---------- ----------
Net loans $2,365,242 2,292,585 2,223,548 2,130,925 2,124,469 2,014,469
========== ========== ========= ========== ========== ==========
DECEMBER 31,
---------------
1993
---------------
COMMERCIAL, FINANCIAL AND AGRICULTURAL
--------------------------------------
Due in one year or less $262,159
Due after one but within five years 109,347
Due after five years 58,612
--------
Total $430,118
========
Loans due after one year with interest at a predetermined fixed rate $ 72,764
Loans due after one year with interest at a floating rate 95,195
--------
Total $167,959
========
23
Real estate loans at December 31, 1993 totaled $1,311.8 million or 54.7%
of total loans outstanding compared to 58.5% one year ago. Residential loans
(1-4 family dwellings) totaled $726.8 million, home equity loans $87.5
million, construction loans $35.2 million and commercial real estate loans
$462.3 million.
Commercial real estate loans include both commercial loans where real
estate has been taken as collateral as well as loans for commercial real
estate. The majority of the commercial real estate loans look to the
tenants' business for cash flow to service the debt and not to rents of the
building itself. These loans are generally a part of an overall relationship
with existing customers primarily within northeast Ohio.
There are no loans outstanding which in total could be considered a
concentration of lending in any particular industry or group of industries.
Most of the Corporation's business activity is with customers located within
the state of Ohio.
ASSET QUALITY
Credit risk is managed through the Corporation's loan policy which
provides the Credit Risk Management Division of the Parent Company the
responsibility for managing asset quality. The Division's responsibilities
include the development of credit policies to ensure sound credit decisions,
loan review, early identification of problem loans, and overseeing loan
workouts in subsidiary banks.
The Corporation's credit policies and review procedures are meant to
minimize the risk and uncertainties inherent in lending. In following these
policies and procedures, Management must rely upon estimates, appraisals, and
evaluations of loans and the possibility that changes in such estimates,
appraisals and evaluations could occur quickly because of changing economic
conditions and the economic prospects of borrowers.
NON-PERFORMING ASSETS
Non-performing assets consist of loans on non-accrual, loans which have
been restructured and other real estate, which are defined as follows:
bullet Non-accrual loans are loans which are 90 days past due and with
respect to which, in Management's opinion, collection of interest
is doubtful. These loans no longer accrue interest and are
accounted for on a cash basis.
bullet Loans are classified as restructured when, due to the deterioration
of a customer's financial ability, the original terms have been
favorably modified or either principal or interest has been
forgiven.
bullet Other real estate consists of real estate acquired through
foreclosure as satisfaction of debt and loans for which, in
Management's opinion, in-substance foreclosure has occurred.
Loans which are 90 days or more past due but continue to accrue interest
are loans which, in Management's opinion, are well secured and are in the
process of collection.
Non-performing assets at December 31, 1993 totaled $17.7 million down,
from $32.5 million in 1992 and $34.2 million in 1991. As a percent of total
loans outstanding, non-performing assets were .74% in 1993 compared to 1.40%
in 1992 and 1.52% in 1991.
24
At December 31, 1993 other real estate owned included $4.3 million of
loans which have been classified as in-substance foreclosures and have been
charged down to their fair value.
For the year ended December 31, 1993 interest income that would have
been earned had these loans not been classified as non-accrual or restructured
amounted to $646,000. The interest income actually earned on these loans
amounted to $594,000.
In addition to the loans classified as non-performing or past due 90
days or more accruing interest, there were $36.9 million at December 31, 1993
that Management believes to be potential problem loans. The loans are closely
monitored by the Credit Risk Management Division to assess the borrowers'
ability to comply with the terms of the loans. Management's most recent review
indicates that a charge against the allowance for possible loan losses or
classification as non-performing is not warranted for these loans at this time.
(DOLLARS IN THOUSANDS) December 31,
--------------------------------------------------------------------
1993 1992 1991 1990 1989 1988
Non-accrual loans $ 9,495 17,608 19,716 25,234 21,632 11,368
Restructured loans 3,926 3,146 6,522 12,603 8,525 12,588
------- ------- ------- ------- ------- -------
Total non-performing loans 13,421 20,754 26,238 37,837 30,157 23,956
Other real estate owned 4,280 11,744 7,952 4,715 7,298 12,539
------- ------- ------- ------- ------- -------
Total non-performing assets $17,701 32,498 34,190 42,552 37,455 36,495
======= ======= ======= ======= ======= =======
Loans past due 90 days or more accruing interest $ 2,830 6,583 5,808 8,923 8,013 8,291
======= ======= ======= ======= ======= =======
Total non-performing assets
as a percent of total loans 0.74% 1.40% 1.52% 1.98% 1.75% 1.80%
======= ======= ======= ======= ======= =======
25
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The Corporation's policy is to maintain the allowance for possible loan
losses at a level considered by Management to be adequate for potential
future losses. The evaluation performed by the Credit Risk Management
Division of the Parent Company is based upon a continuous review of
delinquency trends; the amount of non-performing loans (non-accrual,
restructured, and other real estate owned); loans past due 90 days or more
and classified loans; historical and present trends in loans charged-off;
changes in the composition and level of various loan categories; and current
economic conditions.
At December 31, 1993, the allowance for possible loan losses was $31.2
million or 1.30% of loans outstanding compared to $29.2 million or 1.26% in
1992 and $24.8 million or 1.10% in 1991. The allowance for loan losses
coverage of non-performing assets equalled 176.38% and 6.84 times 1993 net
charge-offs.
Net charge-offs for 1993 were $4.6 million, down from $13.0 million and
$10.1 million in 1992 and 1991, respectively. As a percent of average loans
outstanding, net charge-offs dropped from .57% and .46% in 1992 and 1991,
respectively, to .19% in 1993. Management continues to believe that loans
should be charged against the allowance for possible loan losses as soon as
losses are identified.
26
A six year summary of loan losses follows:
(DOLLARS IN THOUSANDS) December 31,
1993 1992 1991 1990 1989 1988
---------- --------- ---------- ---------- ---------- ---------
Allowance for possible loan losses
at beginning of year $ 29,193 24,829 23,563 21,063 18,609 16,769
Loans charged off:
Commercial, financial and
agricultural 1,686 5,873 3,131 3,559 2,164 2,845
Installment to individuals 1,794 7,938 7,174 8,302 5,877 5,084
Real estate 5,057 3,248 2,741 518 458 415
Lease financing 28 79 146 153 19 22
---------- --------- ---------- ---------- ---------- ---------
Total 8,565 17,138 13,192 12,532 8,518 8,366
---------- --------- ---------- ---------- ---------- ---------
Recoveries:
Commercial, financial and
agricultural 1,334 1,068 711 1,062 840 1,103
Installment to individuals 2,548 2,518 2,250 2,165 1,261 1,436
Real estate 84 528 104 90 75 379
Lease financing 33 25 20 56 3 18
---------- --------- ---------- ---------- ---------- ---------
Total 3,999 4,139 3,085 3,373 2,179 2,936
---------- --------- ---------- ---------- ---------- ---------
Net charge-offs 4,566 12,999 10,107 9,159 6,339 5,430
---------- --------- ---------- ---------- ---------- ---------
Increase resulting from acquisitions -- -- -- -- -- 1,242
---------- --------- ---------- ---------- ---------- ---------
Provision for possible loan losses 6,594 17,363 11,373 11,659 8,793 6,028
---------- --------- ---------- ---------- ---------- ---------
Allowance for possible loan losses
at end of year $ 31,221 29,193 24,829 23,563 21,063 18,609
========== ========= ========== ========== ========== =========
Average loans outstanding $2,369,361 2,275,063 2,179,130 2,155,274 2,099,660 1,802,275
========== ========= ========== ========== ========== =========
Ratio to average loans:
Net charge-offs 0.19% 0.57% 0.46% 0.42% 0.30% 0.30%
Provision for possible loan losses 0.28% 0.76% 0.52% 0.54% 0.42% 0.33%
Allowance for possible loan losses
at end of year 1.32% 1.28% 1.14% 1.09% 1.00% 1.03%
========== ========= ========== ========== ========== =========
Loans outstanding at end of year $2,396,463 2,321,778 2,248,377 2,154,488 2,145,532 2,033,078
========== ========= ========== ========== ========== =========
Allowance for possible loan losses:
As a percent of loans outstanding
at end of year 1.30% 1.26% 1.10% 1.09% 0.98% 0.92%
As a multiple of net charge-offs 6.84x 2.25x 2.46x 2.57x 3.32x 3.43x
==== ==== ==== ==== ==== ====
Allocation of the Allowance for Loan Losses
(DOLLARS IN THOUSANDS) As of December 31, 1993
-----------------------
CATEGORY
OF
LOANS AS
PERCENT OF
AMOUNT OUTSTANDINGS
-------- ------------
Commercial, financial, and agricultural $16,935 54.2%
Real estate 7,911 25.3%
Installment 3,388 10.9%
Lease financing 2,986 9.6%
------- -----
$31,221 100.0%
======= =====
27
DEPOSITS
Average deposits in 1993 increased 4.2% compared to 1992 as market
interest rates continued at their lowest level in over 30 years. Total
deposits averaged $3,394.9 million compared to $3,256.7 million and $3,192.2
million in 1992 and 1991, respectively.
As market interest rates continued their downward trend throughout the
year, the mix of deposits continued to shift toward the more liquid types of
deposits. The average yield on certificates and other time deposits dropped
from 6.76% in 1991 and 5.00% in 1992 to 4.01% in 1993 as the percent of
certificates and other time deposits to total deposits fell to 35.3% in 1993
compared to 46.3% in 1991.
Savings deposits increased 11.7% compared to one year ago and represent
37.3% of total deposits. Interest bearing demand deposits also increased
9.2%, totaling 8.6% of deposits as the average rate dropped to 2.35%. Non-
interest bearing demand deposits totaled $639.3 million, an increase of 18.7%,
and represent 18.8% of total deposits.
The average cost of deposits was down 77 basis points compared to one
year ago, or 2.63% compared to 3.40%.
Based upon prior interest rate cycles, deposits tend to move back into
certificates of deposits as interest rates rise, to obtain a premium for
investing in longer term certificates.
(DOLLARS IN THOUSANDS) Years ended December 31,
----------------------------------------------------------------------
1993 1992 1991
------------------- ------------------ -------------------
AVERAGE AVERAGE Average Average Average Average
BALANCE RATE Balance Rate Balance Rate
------------------------------------------------------------------------------------------------------------
Demand deposits -- non-interest bearing $ 639,265 -- 538,722 -- 479,977 --
Demand deposits -- interest bearing 293,153 2.35% 268,549 2.87% 236,589 4.17%
Savings deposits 1,265,424 2.72% 1,132,599 3.28% 997,661 4.68%
Certificates and
other time deposits 1,197,040 4.01% 1,316,879 5.00% 1,477,992 6.76%
---------- ---- ---------- ---- ---------- ----
$3,394,882 3,256,749 3,192,219
========== ========== ==========
The following table summarizes the certificates and other time deposits in
amounts of $100,000 or more as of December 31, 1993, by time remaining until
maturity.
(DOLLARS IN THOUSANDS) Amount
---------
Maturing in:
Under 3 months $ 73,049
3 to 6 months 19,282
6 to 12 months 10,617
Over 12 months 14,189
---------
$117,137
========
INTEREST RATE SENSITIVITY
Interest rate sensitivity measures the potential exposure of earnings
and capital to changes in market interest rates. The Corporation has a policy
which provides guidelines in the management of interest rate risk. This policy
is reviewed periodically to ensure it complies with trends within the financial
markets and within the industry.
28
The analysis presented below divides interest bearing assets and
liabilities into maturity categories and measures the "GAP" between maturing
assets and liabilities in each category. The analysis shows that liabilities
maturing within one year exceed assets maturing within the same period by a
moderate amount. The Corporation uses the GAP analysis and other tools to
monitor rate risk.
At December 31, 1993 the Corporation was in a moderate liability-
sensitive position as illustrated in the following table:
1-30 31-60 61-90 91-180 181-365 Over 1
(DOLLARS IN THOUSANDS) Days Days Days Days Days Year Total
--------- --------- --------- --------- --------- ---------- ----------
Interest Earning Assets:
Loans and leases $778,467 79,192 73,407 127,197 234,954 1,106,040 2,399,257
Investment securities 151,433 66,961 32,415 112,535 214,511 631,821 1,209,676
Federal funds sold 58,750 -- -- -- -- -- 58,750
-------- --------- --------- --------- --------- ---------- ----------
Total Interest Earning Assets $988,650 146,153 105,822 239,732 449,465 1,737,861 3,667,683
-------- --------- --------- --------- --------- ---------- ----------
Interest-Bearing Liabilities:
Demand -- Interest bearing $ 29,812 6,523 2,041 10,605 16,581 248,603 314,165
Savings 83,837 32,543 266,098 53,932 92,978 770,579 1,299,967
Certificates and other time deposits 296,694 115,355 70,948 197,722 209,262 235,428 1,125,409
Securities sold under agreement to
repurchase and other borrowings 148,889 -- -- -- -- -- 148,889
-------- -------- -------- -------- -------- --------- ---------
Total Interest Bearing Liabilities $559,232 154,421 339,087 262,259 318,821 1,254,610 2,888,430
-------- -------- -------- -------- -------- --------- ---------
Total GAP $429,418 (8,268) (233,265) (22,527) 130,644 483,251 779,253
======== ======== ======== ======== ======== ========= =========
Cumulative GAP 421,150 187,885 165,358 296,002 779,253
======== ======== ======== ======== =========
CAPITAL RESOURCES
Shareholders' equity at December 31, 1993 totaled $391.6 million
compared to $358.3 million at December 31, 1992, an increase of 9.3%.
The following table reflects the various measures of capital:
(DOLLARS IN THOUSANDS) As of December 31,
----------------------------------------------------------------
1993 1992 1991
------------------ ------------------ ------------------
Total equity $391,641 9.80% 358,265 9.15% 327,433 8.70%
Common equity 391,641 9.80% 358,265 9.15% 327,433 8.70%
Tangible common equity (a.) 372,709 9.37% 336,007 8.63% 301,831 8.07%
Tier 1 capital (b.) 381,356 15.22% 346,123 14.10% 313,414 13.19%
Total risk-based capital (c.) 412,577 16.46% 375,316 15.29% 338,243 14.24%
Leverage (d.) 381,356 9.53% 346,123 9.02% 313,414 8.38%
------- ---- ------- ---- ------- ----
<FN>
a) Common equity less all intangibles; computed as a ratio to total
assets less intangible assets.
b) Shareholders' equity less goodwill; computed as a ratio to risk-
adjusted assets, as defined in the 1992 risk-based capital
guidelines.
c) Tier 1 capital plus qualifying loan loss allowance, computed as
a ratio to risk-adjusted assets, as defined in the 1992 risk-based
capital guidelines.
d) Tier 1 capital; computed as a ratio to the latest quarter's
average assets less goodwill.
29
The risk-based capital guidelines issued by the Federal Reserve Bank in
1988 require banks to maintain capital equal to 8% of risk-adjusted assets
effective December 31, 1992. At December 31, 1993 the Corporation's risk-
based capital equalled 16.46% of risk-adjusted assets, far exceeding the
minimum guidelines.
As noted earlier, the Corporation's Board of Directors declared a
2-for-1 split of the Corporation's common stock on August 19, 1993. The split
was paid to shareholders of record as of August 30, 1993.
In addition to the stock split, the Directors of First Bancorporation
of Ohio increased the quarterly cash dividend, marking the twelfth consecutive
year of annual increases since the Corporation's formation in 1981. The
cash dividend of $.235 paid has an indicated annual rate of $.94 per share.
Over the past five years the dividend has increased at an annual rate of
7.4%.
LIQUIDITY
The Corporation's primary source of liquidity is its strong core
deposit base, raised through its retail branch system, along with a strong
capital base. These funds, along with investment securities, provide the
ability to meet the needs of depositors while funding new loan demand and
existing commitments.
The banking subsidiaries individually maintain sufficient liquidity in
the form of temporary investments and a short-term maturity structure within
the investment portfolio, along with cash flow from loan repayment. Asset
growth in the banking subsidiaries is funded by the growth of core deposits.
The liquidity needs of the Parent Company, primarily cash dividends and
other corporate purposes, are met through cash, short-term investments and
quarterly dividends from banking subsidiaries.
Management is not aware of any trend or event which will result in or
that is reasonably likely to occur that would result in a material increase
or decrease in the Corporation's liquidity.
REGULATION AND SUPERVISION
FDICIA, which was enacted on December 19, 1991, substantially revised
the regulation of financial institutions, including the creation of a strict
uniform system of capital-based regulation, which became effective on December
19, 1992. FDICIA established five different levels of capitalization of
financial institutions, with "prompt corrective actions" and significant
operational restrictions imposed on institutions that are capital deficient
under the categories. The five categories are: well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized and critically
undercapitalized.
To be considered well capitalized an institution must have a total
risk-based capital ratio of at least 10%, a Tier 1 risk-based capital ratio of
at least 6%, a leverage capital ratio of 5%, and must not be subject to any
order or directive requiring the institution to improve its capital level. An
institution falls within the adequately capitalized category if it has a total
risk-based capital ratio of at least 8%, a Tier 1 risk-based capital ratio of
at least 4% and a leverage capital ratio of at least 4%. Institutions with
lower capital levels are deemed to be undercapitalized, significantly
undercapitalized or critically undercapitalized, depending on their actual
capital levels. The appropriate federal regulatory agency may also downgrade
an institution to the next lower capital category upon a determination that the
institution is in an unsafe or unsound condition or is engaged in an unsafe or
unsound practice. Institutions are required under FDICIA to monitor closely
their capital levels and to notify their appropriate regulatory agency of any
basis for a change in capital category. On December 31, 1993, the Parent
Company and its subsidiaries all exceeded the minimum capital levels of the
well capitalized category.
30
Regulatory oversight of an institution becomes more stringent with each
lower capital category, with certain "prompt corrective actions" imposed
depending on the level of capital deficiency. For example, under "prompt
corrective action" the regulators may restrict dividends and management fees,
require capital restoration plans, require parent guarantees of capital
restoration plans and limit senior executive compensation. In addition to
these actions, further restrictions may be applied to institutions which fail
to provide a capital undercapitalized restoration plan or which are categorized
as significantly or critically undercapitalized. Among these remedies are
selling or liquidating the institution, dismissing directors or senior
executive officers, and restricting transactions.
EFFECTS OF INFLATION
The assets and liabilities of the Corporation are primarily monetary in
nature and are more directly affected by the fluctuation in interest rates
than inflation. Movement in interest rates is a result of the perceived
changes in inflation as well as monetary and fiscal policies. Interest rates
and inflation do not move with the same velocity or within the same time
frame; therefore, a direct relationship to the inflation rate cannot be
shown. The financial information presented in this annual report, based on
historical data, has a direct correlation to the influence of market levels
of interest rates. Therefore, Management believes that there is no material
benefit in presenting a statement of financial data adjusted for inflationary
changes.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and accompanying notes, and the
reports of management and independent auditors, are set forth immediately
following Item 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Bancorporation has had no disagreement with its accountants on
accounting and financial disclosure matters and has not changed accountants
during the two year period ending December 31, 1993.
31
CONSOLIDATED BALANCE SHEETS
FIRST BANCORPORATION OF OHIO AND SUBSIDIARIES
(IN THOUSANDS) December 31,
----------------------------
ASSETS 1993 1992
---------- ---------
Investment securities, market value $1,224,650
and $1,193,849, respectively $1,209,676 1,167,235
Federal funds sold 58,750 95,282
Loans 2,396,463 2,321,778
Less allowance for possible loan losses 31,221 29,193
---------- ---------
Net loans 2,365,242 2,292,585
---------- ---------
Total earning assets 3,633,668 3,555,102
---------- ---------
Cash and due from banks 222,260 210,890
Premises and equipment, net 69,804 67,451
Accrued interest receivable and other assets 70,996 82,755
---------- ---------
$3,996,728 3,916,198
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand -- non-interest bearing $ 687,672 638,985
Demand -- interest bearing 314,165 295,817
Savings 1,299,967 1,216,029
Certificates and other time deposits 1,125,409 1,233,282
---------- ---------
Total deposits 3,427,213 3,384,113
---------- ---------
Securities sold under agreements to repurchase
and other borrowings 148,889 135,533
Accrued taxes, expenses, and other liabilities 28,985 38,287
---------- ---------
Total liabilities 3,605,087 3,557,933
---------- ---------
Commitments and contingencies -- --
Shareholders' equity:
Preferred stock, without par value:
authorized and unissued 3,500,000 shares -- --
Common stock, without par value:
authorized 40,000,000 shares;
issued 25,249,166 and 12,597,784
shares, respectively 83,218 41,993
Surplus -- 40,371
Retained earnings 308,423 275,901
---------- ---------
Total shareholders' equity 391,641 358,265
---------- ---------
$3,996,728 3,916,198
========== =========
<FN>
See accompanying notes to consolidated financial statements.
32
CONSOLIDATED STATEMENTS OF INCOME
FIRST BANCORPORATION OF OHIO AND SUBSIDIARIES
Years ended December 31,
------------------------------
(IN THOUSANDS EXCEPT PER SHARE DATA) 1993 1992 1991
Interest income:
Interest and fees on loans $200,848 209,524 219,638
Interest and dividends on investment securities:
Taxable 66,475 73,856 78,294
Exempt from federal income taxes 7,801 8,392 9,731
-------- -------- --------
74,276 82,248 88,025
Interest on federal funds sold 2,596 3,112 7,910
-------- -------- --------
Total interest income 277,720 294,884 315,573
-------- -------- --------
Interest expense:
Interest on deposits:
Demand -- interest bearing 6,903 7,709 9,867
Savings 34,440 37,098 46,736
Certificates and other time deposits 47,983 65,849 99,892
Interest on securities sold under agreements
to repurchase and other borrowings 3,905 4,249 7,170
-------- -------- --------
Total interest expense 93,231 114,905 163,665
-------- -------- --------
Net interest income 184,489 179,979 151,908
Provision for possible loan losses 6,594 17,363 11,373
-------- -------- --------
Net interest income after provision
for possible loan losses 177,895 162,616 140,535
-------- -------- --------
Other income:
Trust department 9,907 9,103 8,515
Service charges on deposits 20,362 19,837 17,686
Credit card fees 7,987 7,317 7,286
Investment securities gains, net 29 1,368 469
Other operating income 16,062 13,167 10,619
-------- -------- --------
Total other income 54,347 50,792 44,575
-------- -------- --------
232,242 213,408 185,110
-------- -------- --------
Other expenses:
Salaries and wages 58,251 55,017 49,066
Pension and employee benefits 18,541 14,865 12,850
Net occupancy expense 11,239 10,341 10,350
Equipment expense 10,301 9,757 10,230
Other operating expenses 53,185 50,334 47,641
-------- -------- --------
Total other expenses 151,517 140,314 130,137
-------- -------- --------
Income before federal income taxes 80,725 73,094 54,973
Federal income taxes 25,520 22,394 15,415
-------- -------- --------
Net income $ 55,205 50,700 39,558
======== ======== ========
Weighted average number of common shares outstanding 25,219 25,158 25,110
======== ======== ========
Net income per share $ 2.19 2.02 1.58
======== ======== ========
<FN>
See accompanying notes to consolidated financial statements.
33
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FIRST BANCORPORATION OF OHIO AND SUBSIDIARIES
(IN THOUSANDS EXCEPT PER SHARE DATA)
Years ended December 31, 1993, 1992 and 1991
--------------------------------------------
Total
Common Retained shareholders'
stock Surplus earnings equity
------- -------- -------- -------------
Balance at December 31, 1990 $41,848 39,611 226,467 307,926
Net income -- -- 39,558 39,558
Cash dividends ($.80 per share) -- -- (20,137) (20,137)
Stock options exercised 23 63 -- 86
------- ------- ------- -------
Balance at December 31, 1991 41,871 39,674 245,888 327,433
Net income -- -- 50,700 50,700
Cash dividends ($.82 per share) -- -- (20,687) (20,687)
Stock options exercised 122 697 -- 819
------- ------- ------- -------
Balance at December 31, 1992 41,993 40,371 275,901 358,265
Net income -- -- 55,205 55,205
Cash dividends ($.90 per share) -- -- (22,683) (22,683)
Stock options exercised 854 -- -- 854
Elimination of par value 40,371 (40,371) -- --
------- ------- ------- -------
Balance at December 31, 1993 $83,218 -- 308,423 391,641
======= ======= ======= =======
<FN>
On April 14, 1993, the shareholders of the Corporation approved
amendments to its Articles of Incorporation to increase the authorized
common stock from 20 million to 40 million shares, to eliminate the
designation of par value from the common stock, and to increase the
authorized preferred stock from 1 million to 3.5 million shares.
See accompanying notes to consolidated financial statements.
34
CONSOLIDATED STATEMENTS OF CASH FLOWS
FIRST BANCORPORATION OF OHIO AND SUBSIDIARIES
(IN THOUSANDS)
Years ended December 31,
---------------------------------
1993 1992 1991
-------- ------- -------
OPERATING ACTIVITIES
Net income $ 55,205 50,700 39,558
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 6,594 17,363 11,373
Depreciation and amortization 6,475 6,771 7,032
Amortization of investment securities premiums, net 5,174 4,985 3,433
Amortization of income for lease financing (2,620) (1,649) (1,473)
Investment securities gains, net (29) (1,368) (469)
Deferred federal income taxes 130 (3,819) (115)
Decrease in interest receivable 2,596 4,159 3,804
Decrease in interest payable (1,064) (7,019) (2,722)
Amortization of values ascribed to acquired intangibles 3,325 3,345 3,419
Other increases (decreases) (2,530) 5,952 159
-------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 73,256 79,420 63,999
-------- ------- -------
INVESTING ACTIVITIES
Proceeds from sales of investment securities 27,257 96,912 69,309
Proceeds from maturities of investment securities 540,932 362,938 278,453
Purchases of investment securities (615,775) (511,376) (424,496)
Net (increase) decrease in federal funds sold 36,532 (13,419) 92,369
Net increase in loans (41,570) (83,648) (101,411)
Purchases of assets to be leased (45,521) (9,276) (7,954)
Principal payments received under leases 10,460 8,173 6,842
Purchases of premises and equipment (10,406) (5,487) (10,550)
Sales of premises and equipment 1,578 1,070 2,548
-------- ------- -------
NET CASH USED BY INVESTING ACTIVITIES (96,513) (154,113) (94,890)
-------- ------- -------
FINANCING ACTIVITIES
Net increase in demand, NOW and
savings deposits 150,973 312,277 93,451
Net decrease in time deposits (107,873) (195,983) (54,809)
Net increase (decrease) in short-term borrowings 13,356 (1,525) (12,178)
Cash dividends (22,683) (20,687) (20,137)
Proceeds from exercise of stock options 854 819 86
-------- ------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 34,627 94,901 6,413
-------- ------- -------
Increase (decrease) in cash and cash equivalents 11,370 20,208 (24,478)
Cash and cash equivalents at beginning of year 210,890 190,682 215,160
-------- ------- -------
Cash and cash equivalents at end of year $222,260 210,890 190,682
======== ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest, net of amount capitalized $ 60,760 74,091 103,209
Income taxes 27,555 23,444 14,572
======== ======= =======
<FN>
See accompanying notes to consolidated financial statements.
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIRST BANCORPORATION OF OHIO AND SUBSIDIARIES
December 31, 1993, 1992 and 1991
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of First Bancorporation of Ohio and
its subsidiaries (the "Corporation") conform to generally accepted
accounting principles and to general practices within the banking industry.
The Corporation's activities are considered to be a single industry segment
for financial reporting purposes. The following is a description of the
more significant accounting policies:
(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of First
Bancorporation of Ohio (the "Parent Company") and its wholly owned
subsidiaries: First National Bank of Ohio, The Old Phoenix National
Bank of Medina, Elyria Savings & Trust National Bank, The First
National Bank in Massillon, Peoples Federal Savings Bank, Peoples
Savings Bank, FBOH Credit Life Insurance Company and Bancorp Trust Co.,
N.A. All significant intercompany balances and transactions have been
eliminated in consolidation.
(b) INVESTMENT SECURITIES
Investment securities are carried at cost adjusted for amortization of
premiums and accretion of discounts as the Corporation has the ability
to hold investment securities to maturity and it is Management's
intention to hold such securities to maturity. In 1994 this policy
will be reevaluated in connection with the required adoption of
Statement of Financial Accounting Standards No. 115 which will
probably result in a portion of the investment portfolio being
classified as available-for-sale and accounted for at fair value. The
Corporation does not maintain a trading account. Gains or losses on
the sales of investment securities are recognized upon realization and
are determined by the specific identification method.
(c) CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand, balances on deposit
with correspondent banks and checks in the process of collection.
(d) PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation is computed on the straight-line and
declining-balance methods over the estimated useful lives of the
assets. Amortization of leasehold improvements is computed on the
straight-line method based on lease terms or useful lives, whichever is
less.
(e) INTEREST AND FEES ON LOANS
Interest income on loans is generally accrued on the principal balances
of loans outstanding using the "simple-interest" method. Loan
origination fees and certain direct origination costs are deferred and
amortized, generally over the contractual life of the related loans
using a level yield method. Interest is not accrued on loans for which
circumstances indicate collection is questionable.
(f) PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses charged to operating expenses is
determined based on Management's evaluation of the loan portfolios and
the adequacy of the allowance for possible loan losses under current
economic conditions and such other factors which, in Management's
judgment, deserve current recognition.
(g) LEASE FINANCING
The Corporation leases equipment to customers on both a direct and
leveraged lease basis. The net investment in financing leases includes
the aggregate amount of lease payments to be received and the estimated
residual values of the equipment, less unearned income and non-recourse
debt pertaining to leveraged leases. Income from lease financing is
recognized over the lives of the leases on an approximate level rate of
return on the unrecovered investment. Residual values of leased assets
are reviewed on an annual basis for reasonableness. Declines in
residual values judged to be other than temporary are recognized in the
period such determinations are made.
35
36
(h) FEDERAL INCOME TAXES
The Corporation follows the asset and liability method of accounting
for income taxes as prescribed by Statement of Financial Accounting
Standards No. 109. Deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying enacted statutory
tax rates applicable to future years to differences between the
financial statement carrying amounts and the tax bases of existing
assets and liabilities. The effect of a change in tax rates is
recognized in income in the period of the enactment date.
(i) VALUE ASCRIBED TO ACQUIRED INTANGIBLES
The value ascribed to acquired intangibles, including core deposit
premiums, results from the excess of cost over fair value of net assets
acquired in acquisitions of financial institutions. Such values are
being amortized over periods ranging from 10 to 25 years, which
represent the estimated remaining lives of the long-term interest
bearing assets acquired. Amortization is generally computed on an
accelerated basis based on the expected reduction in the carrying value
of such acquired assets. If no significant amount of long-term
interest bearing assets is acquired, such value is amortized over the
estimated life of the acquired deposit base, with amortization periods
ranging from 10 to 15 years.
(j) TRUST DEPARTMENT ASSETS AND INCOME
Property held by the Corporation in a fiduciary or other capacity for
trust customers is not included in the accompanying consolidated
financial statements, since such items are not assets of the
Corporation. Trust income is reported generally on a cash basis which
approximates the accrual basis of accounting.
(k) PER SHARE DATA
The per share data is based on the weighted average number of shares of
common stock and common stock equivalents outstanding during each year,
adjusted to reflect the two-for-one stock split of August 30, 1993.
(l) RECLASSIFICATIONS
Certain previously reported amounts have been reclassified to conform
to the current reporting presentation.
2. ACQUISITION
On September 28,1993 First Bancorporation of Ohio signed a definitive
agreement to acquire Great Northern Financial Corporation located in
Barberton, Ohio. The agreement provides that all outstanding shares and
stock options will be acquired in exchange for a maximum of 1,882,440
shares of First Bancorporation of Ohio common stock. The transaction is to
be accounted for as a pooling of interests. The acquisition is subject to
the approval of Great Northern Financial Corporation's shareholders and
regulatory and governmental authorities.
3. INVESTMENT SECURITIES
The book value and market value of investment securities are as follows:
December 31,
-----------------------------------------------------------------------------------------
1993 1992
--------------------------------------------- -----------------------------------------
GROSS GROSS Gross Gross
BOOK UNREALIZED UNREALIZED MARKET Book Unrealized Unrealized Market
VALUE GAINS LOSSES VALUE Value Gains Losses Value
--------- ---------- ---------- ------ ----- ---------- ---------- ------
U.S. Treasury securities
and U.S. Government agency
obligations $ 774,641 7,380 2,164 779,857 610,450 12,967 831 622,586
Obligations of state
and political subdivisions 147,673 2,768 250 150,191 133,687 5,907 121 139,473
Mortgage-backed securities 217,142 6,292 485 222,949 337,703 8,437 706 345,434
Other securities 70,220 1,542 109 71,653 85,395 1,199 238 86,356
---------- ------ ----- --------- --------- ------ ----- ---------
$1,209,676 17,982 3,008 1,224,650 1,167,235 28,510 1,896 1,193,849
========== ====== ===== ========= ========= ====== ===== =========
The book value and market value of investment securities including
mortgage-backed securities and derivatives at December 31, 1993, by
contractual maturity, are shown below. Expected maturities will differ
from contractual maturities based on the issuers' right to call or
prepay obligations with or without call or prepayment penalties.
BOOK MARKET
VALUE VALUE
----------- ---------
Due in one year or less $ 188,063 190,424
Due after one year through five years 500,103 508,295
Due after five years through ten years 83,116 84,713
Due after ten years 438,394 441,218
----------- ---------
$ 1,209,676 1,224,650
=========== =========
Proceeds from sales of investment securities during the years ended
December 31, 1993 and 1992 were $27,257 and $96,912, respectively.
Gross gains of $109 and $1,486, and gross losses of $80 and $118 were
realized on these sales, respectively.
The book value of investment securities pledged as collateral for
trust and public deposits and other purposes required or permitted
by law amounted to $602,694 and $549,918 at December 31, 1993
and 1992, respectively.
4. LOANS
Loans consist of the following:
December 31,
--------------------
1993 1992
--------- ---------
Commercial, financial and agricultural $ 430,118 423,170
Loans to individuals, net of
unearned income of $590 and $1,401, respectively 597,875 520,318
Real estate 1,311,788 1,359,289
Lease financing 56,682 19,001
---------- ---------
$2,396,463 2,321,778
========== =========
At December 31, 1993 and 1992, the Corporation serviced loans for others
aggregating $388,548 and $306,459, respectively.
The Corporation grants loans principally to customers located within the
state of Ohio.
The Corporation makes loans to officers and directors on substantially
the same terms and conditions as transactions with other parties. An
analysis of loan activity with related parties for the year ended
December 31, 1993 is summarized as follows:
Aggregate amount at beginning of year $ 43,735
Additions (deductions):
New loans 42,018
Repayments (40,577)
Changes in directors and their affiliations (3,606)
-------
Aggregate amount at end of year $ 41,570
=======
5. ALLOWANCE FOR POSSIBLE LOAN LOSSES
Transactions in the allowance for possible loan losses are summarized
as follows:
37
Years ended December 31,
----------------------------
1993 1992 1991
------- ------- -------
Balance at beginning of year $29,193 24,829 23,563
Additions (deductions):
Provision for possible loan losses 6,594 17,363 11,373
Loans charged off (8,565) (17,138) (13,192)
Recoveries on loans
previously charged off 3,999 4,139 3,085
------- ------- -------
Balance at end of year $31,221 29,193 24,829
======= ======= =======
6. RESTRICTIONS ON CASH AND DIVIDENDS
The average balance on deposit with the Federal Reserve Bank to satisfy
reserve requirements amounted to $17,920 during 1993. The level of
this balance is based upon amounts and types of customers' deposits
held by the banking subsidiaries of the Corporation. In addition,
deposits are maintained with other banks at levels determined by
Management based upon the volumes of activity and prevailing interest
rates to compensate for check-clearing, safekeeping, collection and
other bank services performed by these banks. At December 31, 1993,
cash and due from banks included $9,078 deposited with the Federal
Reserve Bank and other banks for these reasons.
Dividends paid by the subsidiaries are the principal source of funds
to enable the payment of dividends by the Corporation to its
shareholders. These payments by the subsidiaries in 1994 are
restricted by the regulatory agencies principally to the total of 1994
net income plus $14,460, representing the undistributed net income of
the past two calendar years. Regulatory approval must be
obtained for the payment of dividends of any greater amount.
7. PREMISES AND EQUIPMENT
The components of premises and equipment are as follows:
December 31, Estimated
----------------- useful
1993 1992 lives
-------- ------- ---------
Land $ 10,100 9,487 --
Buildings 69,770 66,428 10-50 yrs
Equipment 55,683 52,000 3-50 yrs
Leasehold improvements 10,809 9,915 1-40 yrs
-------- ------- ---------
146,362 137,830
Less accumulated depreciation
and amortization 76,558 70,379
-------- -------
$ 69,804 67,451
======== =======
Amounts included in other expenses for depreciation and amortization
aggregated $6,475, $6,771 and $7,032 for the years ended
December 31, 1993, 1992 and 1991, respectively.
38
At December 31, 1993, the Corporation was obligated for rental
commitments under noncancellable operating leases on branch
offices and equipment as follows:
Years ending Lease
December 31, commitments
------------- ----------------
1994 $5,062
1995 3,776
1996 2,972
1997 2,702
1998 2,252
1999-2013 9,597
--------- ------
$26,361
=======
Rentals paid under noncancellable operating leases amounted to $4,631,
$3,632 and $3,054 in 1993, 1992 and 1991, respectively.
8. CERTIFICATES AND OTHER TIME DEPOSITS
The aggregate amount of certificates and other time deposits of
$100 and over at December 31, 1993 and 1992 was $117,137 and
$129,011, respectively. Interest expense on these certificates
and deposits amounted to $4,868 in 1993, $5,856 in 1992, and
$21,862 in 1991.
9. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER
BORROWINGS
The average balance of securities sold under agreements to
repurchase and other borrowings for the years ended December 31,
1993 and 1992, amounted to $148,822 and $144,054, respectively. In
1993 the weighted average annual interest rate amounted to 2.62%,
compared to 2.95% in 1992. The maximum amount of these borrowings at
any month end amounted to $176,768 in 1993 and $174,102 in 1992.
10. FEDERAL INCOME TAXES
Federal income taxes are comprised of the following:
Years ended December 31,
------------------------------
1993 1992 1991
------- ------- -------
Taxes currently payable $25,390 26,213 15,530
Deferred expense (benefit) 345 (3,819) (115)
Adjustment to deferred taxes as a
result of the 1993 rate increase (215) -- --
------- ------- -------
$25,520 22,394 15,415
======= ====== ======
The effective federal income tax rate differs from the statutory
federal income tax rate as shown below:
39
Years ended December 31,
--------------------------
1993 1992 1991
------ ------ ------
Statutory rate 35% 34% 34%
Decrease (increase) in rate
due to:
Interest income on tax-exempt
securities and tax-free
loans, net 4 5 8
Other (1) (2) (2)
---- ---- -----
Effective tax rate 32% 31% 28%
==== ==== =====
For 1993, 1992 and 1991 the deferred federal income tax provision
(benefit) results from temporary differences in the
recognition of income and expense for federal income tax and financial
reporting purposes. The sources and tax effects of
these temporary differences are presented below:
Years ended December 31,
---------------------------
1993 1992 1991
-------- -------- --------
Loan loss provision $ (672) (1,474) (648)
Deferred loan fees, net (7) (421) (450)
Leasing 1,172 136 (100)
SFAS No. 87 pension expense 686 (635) 412
SFAS No. 106 postretirement
benefits (834) (20) --
Other, net -- (1,405) 671
------- ------- -------
$ 345 (3,819) (115)
======= ======= =======
Principal components of the Corporation's net deferred tax asset are
summarized as follows:
December 31,
---------------
1993 1992
------- -------
Excess of book loan provision over tax loan provision $9,398 8,477
Excess of tax depreciation over book depreciation (3,002) (2,944)
Leasing book basis income over tax basis (3,226) (1,995)
Deferred loan fees tax basis income over book basis 2,329 2,256
Postretirement book basis expense over tax basis 854 20
Other (143) 526
------ ------
$6,210 6,340
====== ======
40
11. BENEFIT PLANS
The Corporation has a defined benefit pension plan covering
substantially all of its employees. In general, benefits are based on
years of service and the employee's compensation. The Corporation's
funding policy is to contribute annually the maximum amount that can
be deducted for federal income tax reporting purposes. Contributions
are intended to provide not only for benefits attributed to service
to date but also for those expected to be earned in the future.
A supplemental non-qualified, non-funded pension plan for
certain officers is also maintained and is being provided for by
charges to earnings sufficient to meet the projected benefit
obligation. The pension cost for this plan is based on substantially
the same actuarial methods and economic assumptions as those used for
the defined benefit pension plan.
The following table sets forth the plans' funded status and amounts
recognized in the Corporation's consolidated financial statements:
December 31,
-----------------------------
1993 1992 1991
------- ------ ------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $40,586, $33,980 and
$30,118, respectively $(43,988) (35,663) (31,422)
======== ====== =======
Projected benefit obligation $(59,541) (52,048) (45,684)
Plan assets at fair value, primarily U.S.
government obligations, corporate bonds
and investments in equity funds 61,919 54,424 51,912
-------- ------ -------
Plan assets in excess of projected
benefit obligation 2,378 2,376 6,228
Unrecognized net gains (3,288) (3,837) (7,528)
Unrecognized prior service cost 3,399 1,858 1,953
Remaining unrecognized net asset
being amortized over employees'
average remaining service life (2,226) (2,892) (2,604)
-------- ------ -------
Prepaid (accrued) pension cost $ 263 (2,495) (1,951)
======== ====== =======
Expected long-term rate of return on assets 9.0% 8.5% 8.5%
Weighted-average discount rate 7.5% 8.5% 8.5%
Rate of increase in future compensation levels 5.0% 6.5% 6.5%
======== ====== =======
Net pension cost consists of the following components:
Years ended December 31,
---------------------------
1993 1992 1991
------- ------- -------
Service cost $2,536 2,199 2,101
Interest cost on projected benefit
obligation 4,088 3,975 3,483
Actual return on plan assets (6,750) (4,324) (8,215)
Net total of other components 2,196 (41) 4,163
------ ------ ------
Net periodic pension cost $2,070 1,809 1,532
====== ====== ======
The Corporation maintains a savings plan under Section 401(k) of the Internal
Revenue Code, covering substantially all full-time employees after one year of
continuous employment. Under the plan, employee contributions are partially
matched by the Corporation. Such matching becomes vested when the employee
reaches three years of credited service. Total savings plan expense was
$1,684, $1,900 and $790 for 1993, 1992 and 1991, respectively.
41
12. POSTRETIREMENT MEDICAL AND LIFE INSURANCE PLAN
The Corporation has a benefit plan which presently provides
postretirement medical and life insurance for retired employees.
Effective January 1,1993 the plan was changed to limit the
Corporation's medical contribution to 200% of the 1993 level for
employees who retire after January 1,1993. The Corporation reserves
the right to terminate or amend the plan at any time.
On January 1,1993, the Corporation implemented Statement of Financial
Accounting Standards (SFAS) No. 106 "Employers Accounting for
Postretirement Benefits Other Than Pensions". This statement requires
that the cost of postretirement benefits expected to be provided to
current and future retirees be accrued over those employees' service
periods. In addition to recognizing the cost of benefits for the
current period, SFAS No. 106 requires recognition of the cost of
benefits earned in prior service periods (the transition obligation).
Prior to 1993, postretirement benefits were accounted for on a cash
basis. As of January 1,1993, the Corporation's accumulated
postretirement benefit obligation (also its transition obligation)
totalled approximately $19 million. The Corporation, as permitted by
SFAS No. 106, has elected to amortize the transition obligation by
charges to income over a twenty year period on a straight line basis.
The following table sets forth the plan's status and amounts recognized
in the Corporation's consolidated financial statements.
December 31,
------------
1993
Accumulated postretirement benefit obligation: --------
Retirees $(13,484)
Fully eligible actives (3,275)
Other actives (5,778)
---------
Total accumulated postretirement benefit obligation (22,537)
Unrecognized prior net loss 2,473
Unrecognized prior service costs --
Unrecognized transition obligation 18,057
---------
Accrued postretirement benefit cost $ (2,007)
=========
Year ended December 31,
-----------------------
1993
---------
Service cost $ 494
Interest cost 1,573
Actual return on plan assets --
Amortization of transition obligation 950
Net of other amortization and deferrals --
------
Net periodic postretirement cost $3,017
======
42
The following actuarial assumptions affect the determination of these
amounts:
Plan year January 1,
-------------------------------
1993 1994
----------- ---------
Expected long-term rate of return on assets N/A N/A
Weighted-average discount rate 8.50% 7.50%
Medical trend rates:
Pre-65 14.3%-6.0% 14.3%-6.0%
Post-65 13.5%-6.1% 13.5%-6.1%
========= =========
Shown below is the impact of a 1% increase in the medical trend rates
(i.e., pre-65, 15.3% for 1993 grading down to 7.0% in 2002; post-65
grading down to 7.1% in 2007). This information is required
disclosure under SFAS 106.
Current Trend %
Trend +1% Change
------- ------- -------
Aggregate of the service and interest
components of net periodic postretirement
health care benefit cost $ 1,937 2,027 +4.6%
Accumulated postretirement benefit obligation
for health care benefits $20,309 21,568 +6.2%
13. STOCK OPTIONS
The 1992 Stock Option Program provides incentive and non-qualified
options to certain key employees for up to 1,000,000 common shares of
the Corporation. In addition, the 1992 Directors Stock Option Program
provides for the granting of non-qualified stock options to certain
non-employee directors of the Corporation for which 100,000 common
shares of the Corporation have been reserved. Options under these 1992
Programs are not exercisable for at least six months from date of grant.
Options continue to be outstanding under the 1982 Incentive Stock
Options Plan as amended in 1986; and these options are all fully
exercisable.
Options under these plans are granted at 100% of the fair market value.
Options granted as incentive stock options must be exercised within ten
years, options granted as non-qualified stock options shall have terms
established by a committee of the Board. Options are cancellable within
defined periods of time based upon the reason for termination of
employment.
A summary of stock option activity for the years ended December 31,
1993, 1992 and 1991 follows:
Shares
-------------------------------------
Available Out- Range of Option
for Grant standing Price per Share
--------- --------- ---------------
Balance
December 31, 1990 85,150 319,320 $ 7.42-16.54
Cancelled -- (14,800) 12.63-16.54
Exercised -- (9,300) 7.42-13.32
Granted (6,000) 6,000 13.32
--------- ------- ------------
Balance
December 31, 1991 79,150 301,220 8.59-16.54
Add'l shares reserved 1,100,000 --
Cancelled -- (5,480) 10.82-16.54
Exercised -- (78,060) 8.59-19.13
Granted (88,700) 88,700 18.50-19.13
--------- ------- ------------
Balance
December 31, 1992 1,090,450 306,380 8.59-19.13
Cancelled -- (1,400)
Exercised -- (53,600) 8.59-24.13
Granted (80,080) 80,080 24.13-24.19
--------- ------- ------------
Balance
December 31, 1993 1,010,370 331,460 $10.82-24.19
========= ======= ============
The Employee Stock Purchase Plan provides full-time employees of the
Corporation the opportunity to acquire common shares on a payroll
deduction basis. Of the 200,000 shares available under the Plan, there
were 10,946 shares issued in 1993.
43
14. PARENT COMPANY
Condensed financial information of First Bancorporation of Ohio
(Parent Company only) is as follows:
December 31,
--------------
CONDENSED BALANCE SHEETS 1993 1992
-------- -------
ASSETS
Cash and due from banks $ 8,391 1,144
Investment securities 1,390 1,818
Loans to subsidiaries 49,566 28,214
Investment in subsidiaries, at equity in
underlying value of their net assets 330,990 326,912
Goodwill 974 1,386
Other assets 5,117 2,490
-------- -------
$396,428 361,964
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued and other liabilities $ 4,787 3,699
Shareholders' equity 391,641 358,265
-------- -------
$396,428 361,964
======== =======
CONDENSED STATEMENTS OF INCOME Years ended December 31,
--------------------------
1993 1992 1991
------- ------- -------
Income:
Cash dividends from subsidiaries $55,200 50,775 21,150
Other income 17,314 13,788 653
------- ------ ------
72,514 64,563 21,803
Interest and other expenses 23,466 19,296 2,345
------- ------ ------
Income before federal income tax benefit
and equity in undistributed income
of subsidiaries 49,048 45,267 19,458
Federal income tax benefit (2,079) (1,780) (518)
------- ------ ------
51,127 47,047 19,976
Equity in undistributed income of
subsidiaries 4,078 3,653 19,582
------- ------ ------
Net income $55,205 50,700 39,558
======= ====== ======
44
CONDENSED STATEMENTS OF CASH FLOWS Years ended December 31,
-------------------------------------------------------------------------------------------
1993 1992 1991
------- ------ ------
Operating activities:
Net income $55,205 50,700 39,558
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in undistributed income
of subsidiaries (4,078) (3,653) (19,582)
Other (1,127) 2,387 (28)
------- ------ ------
Net cash provided by operating
activities 50,000 49,434 19,948
------- ------ ------
Investing activities:
Proceeds from maturities of investment securities 428 -- --
Loans to subsidiaries (21,352) (28,214) --
Purchases of investment securities -- (568) --
------- ------ ------
Net cash used by investing
activities (20,924) (28,782) --
------- ------ ------
Financing activities:
Cash dividends (22,683) (20,687) (20,137)
Proceeds from exercise of stock options 854 819 86
------- ------ ------
Net cash used by financing
activities (21,829) (19,868) (20,051)
------- ------ ------
Net increase (decrease) in cash and cash equivalents 7,247 784 (103)
Cash and cash eqivalents at beginning of year 1,144 360 463
------- ------ ------
Cash and cash equivalents at end of year $ 8,391 1,144 360
======= ====== ======
15. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires disclosures of fair value
information about certain financial instruments, whether or not
recognized in the consolidated balance sheets. Instruments for which
quoted market prices are not available are valued based on estimates
using present value or other valuation techniques whose results are
significantly affected by the assumptions used, including discount rates
and future cash flows. Accordingly, the values so derived, in many
cases, may not be indicative of amounts that could be realized in
immediate settlement of the instrument. Also, certain financial
instruments and all nonfinancial instruments are excluded from these
disclosure requirements. For these and other reasons, the aggregate
fair value amounts presented below are not intended to represent the
underlying value of the Corporation.
45
The following methods and assumptions were used to estimate the fair
values of each class of financial instrument presented:
Investment securities -- Fair values are based on quoted market
prices, or for certain fixed maturity securities not actively traded
estimated values are obtained from independent pricing services.
Federal funds sold -- The carrying amount is considered a
reasonable estimate of fair value.
Net loans -- Fair value for loans with interest rates that fluctuate as
current rates change are generally valued at carrying amounts with an
appropriate discount for any credit risk. Fair values of other types
of loans are estimated by discounting the future cash flows using the
current rates for which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities.
Cash and due from banks -- The carrying amount is considered a
reasonable estimate of fair value.
Accrued interest receivable -- The carrying amount is considered a
reasonable estimate of fair value.
Deposits -- The carrying amount is considered a reasonable estimate of
fair value for demand and savings deposits and other variable rate
deposit accounts. The fair values for fixed maturity certificates of
deposit and other time deposits are estimated using the rates currently
offered for deposits of similar remaining maturities.
Securities sold under agreements to repurchase and other
borrowings -- Fair values are estimated using rates currently available
to the Corporation for similar types of borrowing transactions.
Accrued interest payable -- The carrying amount is considered a
reasonable estimate of fair value.
Commitments to extend credit -- The fair value of commitments to
extend credit is estimated using the fees currently charged to enter
into similar arrangements, taking into account the remaining terms of
the agreements, the creditworthiness of the counterparties, and the
difference, if any, between current interest rates and the committed
rates.
Standby letters of credit and financial guarantees written -- Fair
values are based on fees currently charged for similar agreements or on
the estimated cost to terminate or otherwise settle the obligations.
Loans sold with recourse -- Fair value is estimated based on
the present value of the estimated future liability in the event of
default.
46
The estimated fair values of the Corporation's financial instruments
based on the assumptions described above are as follows:
December 31,
--------------------------------------------------------------
1993 1992
-------------------- ---------------------
CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
---------- --------- ---------- ---------
Financial assets:
Investment securities $1,209,676 1,224,650 1,167,235 1,193,849
Federal funds sold 58,750 58,750 95,282 95,282
Net loans 2,365,242 2,418,452 2,292,585 2,345,891
Cash and due from banks 222,260 222,260 210,890 210,890
Accrued interest receivable 24,822 24,822 27,198 27,198
Financial liabilities:
Deposits 3,427,213 3,440,157 3,384,113 3,398,715
Securities sold under agreements to
repurchase and other borrowings 148,889 148,889 135,533 135,533
Accrued interest payable 5,830 5,830 6,914 6,914
Unrecognized financial instruments:
Commitments to extend credit -- -- -- --
Standby letters of credit and
financial guarantees written -- -- -- --
Loans sold with recourse -- -- -- --
16. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Corporation is a party to financial instruments with
off-balance-sheet risk in the normal course of business to meet the
financing needs of its customers. These financial instruments include
commitments to extend credit, standby letters of credit, financial
guarantees, and loans sold with recourse.
These instruments involve, to varying degrees, elements recognized in
the consolidated balance sheets. The contract or notional amount of
these instruments reflect the extent of involvement the Corporation
has in particular classes of financial instruments.
The Corporation's exposure to credit loss in the event of
nonperformance by the other party to the financial instrument for
commitments to extend credit and standby letters of credit and
financial guarantees written is represented by the contractual
notional amount of those instruments. The Corporation uses the same
credit policies in making commitments and conditional obligations as
it does for on-balance-sheet instruments.
Unless noted otherwise, the Corporation does not require collateral or
other security to support financial instruments with credit risk. The
following table sets forth financial instruments whose contract
amounts represent credit risk:
December 31,
-----------------------------
1993 1992
--------- -----------
Commitments to extend credit $799,717 729,961
========= ===========
Standby letters of credit and financial guarantees written $ 51,784 58,043
======== ==========
Loans sold with recourse $ 2,434 3,721
========= ===========
47
Commitments to extend credit are agreements to lend to a customer
provided there is no violation of any condition established in the
contract. Commitments generally are extended at the then prevailing
interest rates, have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash
requirements. The Corporation evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral
obtained if deemed necessary by the Corporation upon extension of
credit is based on Management's credit evaluation of the
counterparty. Collateral held varies but may include accounts
receivable, inventory, property, plant and equipment, and
income-producing commercial properties. Standby letters of credit and
financial guarantees written are conditional commitments issued by the
Corporation to guarantee the performance of a customer to a third
party. Those guarantees are primarily issued to support public and
private borrowing arrangements, including commercial paper, bond
financing and similar transactions. Except for short-term guarantees
of $22,635 and $27,290 at December 31, 1993 and 1992, respectively,
the remaining guarantees extend in varying amounts through 2008. The
credit risk involved in issuing letters of credit is essentially the
same as that involved in extending loan facilities to customers.
Collateral held varies, but may include marketable securities,
equipment and real estate. In recourse arrangements, the Corporation
accepts 100% recourse. By accepting 100% recourse, the Corporation is
assuming the entire risk of loss due to borrower default. The
Corporation's exposure to credit loss, if the borrower completely
failed to perform and if the collateral or other forms of credit
enhancement all prove to be of no value, is represented by the
notional amount less any allowance for possible loan losses. The
Corporation uses the same credit policies originating loans which
will be sold with recourse as it does for any other type of loan.
17. CONTINGENCIES
The nature of the Corporation's business results in a certain amount of
litigation. Accordingly, the Corporation and its subsidiaries are
subject to various pending and threatened lawsuits in which claims for
monetary damages are asserted. Management, after consultation with
legal counsel, is of the opinion that the ultimate liability of such
pending matters would not have a material effect on the Corporation's
financial condition.
During 1991, a federal suit was filed against First National Bank of
Ohio (Bank), a subsidiary of the Parent Company, alleging conversion
and negligence in the deposit of funds. The suit sought actual
damages against the Bank plus punitive damages, interest, costs,
attorneys' fees and other relief. State lawsuits brought by other
claimants based on the same deposits have been stayed. Management,
after consultation with legal counsel, believes that the possibility
of a multiple recovery by both the federal court and state court
plaintiffs is unlikely and the maximum exposure for damages
approximates $7.3 million.
During 1993, the court granted the Bank's motion for summary judgment
in the federal lawsuit. As a result, that suit was dismissed. The
plaintiff in that suit subsequently filed a notice of appeal. The
Bank is vigorously seeking to have the favorable federal judgment
affirmed on appeal. The Corporation continues to believe the Bank has
meritorious defenses to all claims.
48
18. QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial and per share data for the years ended December 31,
1993 and 1992 are summarized as follows:
In thousands (except per share data)
-----------------------------------------
Quarters
-----------------------------------------
First Second Third Fourth
---------- ---------- --------- ---------
Total interest income 1993 $70,319 70,459 68,859 68,083
==== ======= ====== ====== ======
1992 $75,043 74,013 73,406 72,422
==== ======= ====== ====== ======
Net interest income 1993 $45,686 46,799 45,793 46,211
==== ======= ====== ====== ======
1992 $43,123 44,461 45,879 46,516
==== ======= ====== ====== ======
Provision for possible
loan losses 1993 $ 1,920 1,869 1,641 1,164
==== ======= ====== ====== ======
1992 $ 4,164 4,097 3,358 5,744
==== ======= ====== ====== ======
Income before federal
income taxes 1993 $19,168 20,588 21,113 19,856
==== ======= ====== ====== ======
1992 $17,579 17,284 18,528 19,703
==== ======= ====== ====== ======
Net income 1993 $13,179 14,266 14,132 13,628
==== ======= ====== ====== ======
1992 $12,228 12,122 12,692 13,658
==== ======= ====== ====== ======
Net income per share 1993 $ .52 .57 .56 .54
==== ======= ====== ====== ======
1992 $ .49 .48 .51 .54
==== ======= ====== ====== ======
19. SHAREHOLDER RIGHTS PLAN
On October 21, 1993 the Board of Directors of the Corporation adopted
a shareholder rights plan ("Plan"). To implement the Plan, the Board
declared a dividend of one purchase right ("Right") per share of
Common Stock which dividend was distributed on November 5, 1993. The
Plan provides that each share of Common Stock issued after November 1,
1993, shall also have one Right attached.
Under the Plan, the Rights would be distributed on the 10th business
day after either of the following events would occur: (1) a person
acquires 15% or more of the outstanding shares of common stock of the
Corporation, except if pursuant to a tender offer for all shares on
terms determined by a majority of the "Continuing Directors" to be
fair; or (2) the commencement of a tender or exchange offer that would
result in a change in the ownership of 15% or more of the outstanding
shares of Common Stock. After such an event, each Right would entitle
the holder to purchase shares of Series A Preferred Stock of the
Corporation. Any Rights held by an "acquiring person," however, would
be void. If the Corporation is acquired in a merger, or there is a
transfer of 50% or more of the Corporation's assets or earning power,
each Right holder would be entitled to receive common shares of the
acquiring company worth two times the exercise price of the Right.
The Corporation may redeem the Rights for $0.01 per Right at any time
prior to the 10th business day (subject to extension) following the
date when a person acquires 15% of the outstanding shares of common
stock.
49
MANAGEMENT'S REPORT
The management of First Bancorporation of Ohio is responsible for the
preparation and accuracy of the financial information presented in this annual
report. These consolidated financial statements were prepared in accordance
with generally accepted accounting principles, based on the best estimates and
judgment of management.
The Corporation maintains a system of internal controls designed to
provide reasonable assurance that assets are safeguarded, that transactions are
executed in accordance with the Corporation's authorization and policies, and
that transactions are properly recorded so as to permit preparation of
financial statements that fairly present the financial position and results of
operations in conformity with generally accepted accounting principles. These
systems and controls are reviewed by our internal auditors and independent
auditors.
The Audit Committee of the Board of Directors is composed of only
outside directors and has the responsibility for the recommendation of the
independent auditors for the Corporation. The Audit Committee meets regularly
with management, internal auditors and our independent auditors to review
accounting, auditing and financial matters. The independent auditors and the
internal auditors have free access to the Audit Committee.
/s/ Howard L. Flood /s/ Gary J. Elek
HOWARD L. FLOOD GARY J. ELEK
President and Chief Senior Vice President
Executive Officer and Treasurer
50
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
First Bancorporation of Ohio:
We have audited the accompanying consolidated balance sheets of First
Bancorporation of Ohio and subsidiaries as of December 31, 1993 and 1992, and
the related consolidated statements of income, changes in shareholders' equity
and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. The consolidated statements of income, changes
in shareholders' equity and cash flows of First Bancorporation of Ohio and
subsidiaries for the year ended December 31, 1991 were audited by other
auditors whose report dated January 19, 1992, except as to Note 16 which was
as of February 13, 1992, expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the 1993 and 1992 consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of First Bancorporation of Ohio and subsidiaries as of December 31,
1993 and 1992, and the results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand
Akron, Ohio
January 18, 1994
51
AVERAGE CONSOLIDATED BALANCE SHEETS,
Fully-tax Equivalent Interest Rates and Interest Differential
FIRST BANCORPORATION OF OHIO AND SUBSIDIARIES
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------------
1993 1992 1991
(DOLLARS IN THOUSANDS) ----------------------------- ------------------------- --------------------------
AVERAGE AVERAGE Average Average Average Average
BALANCE INTEREST RATE Balance Interest Rate Balance Interest Rate
---------- ------ ---- --------- ------- ---- --------- ------- ----
ASSETS
Investment securities:
U.S. Treasury securities and U.S.
Government agency obligations (taxable) $ 931,837 60,301 6.47% 835,300 63,024 7.55% 791,123 65,977 8.34%
Obligations of states and political
subdivisions (tax-exempt) 140,550 11,691 8.32 140,682 12,337 8.77 150,418 14,129 9.39
Other securities 99,656 6,174 6.20 144,870 10,833 7.48 142,896 12,317 8.62
---------- ------ ---- --------- ------- ---- --------- ------- ----
Total investment securities 1,172,043 78,166 6.67 1,120,852 86,194 7.69 1,084,437 92,423 8.52
Federal funds sold 84,077 2,596 3.09 88,135 3,112 3.53 133,701 7,910 5.92
Loans 2,369,361 202,203 8.53 2,275,063 211,216 9.28 2,179,130 222,174 10.20
Less allowance for possible loan losses 30,690 -- -- 26,979 -- -- 24,799 -- --
---------- ------ ---- --------- ------- ---- --------- ------- ----
Net loans 2,338,671 202,203 8.65 2,248,084 211,216 9.40 2,154,331 222,174 10.31
---------- ------ ---- --------- ------- ---- --------- ------- ----
Total earning assets 3,594,791 282,965 7.87 3,457,071 300,522 8.69 3,372,469 322,507 9.56
------ ------- -------
Cash and due from banks 214,963 180,256 172,776
Other assets 148,479 146,947 150,777
---------- ------ ---- --------- ------- ---- --------- ------- ----
Total assets $3,958,233 3,784,274 3,696,022
========== ====== ==== ========= ======= ==== ========= ======= ====
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand--
non-interest bearing $ 639,265 -- -- 538,722 -- -- 479,977 -- --
Demand--interest bearing 293,153 6,903 2.35 268,549 7,709 2.87 236,589 9,867 4.17
Savings 1,265,424 34,440 2.72 1,132,599 37,098 3.28 997,661 46,736 4.68
Certificates and other time deposits 1,197,040 47,983 4.01 1,316,879 65,849 5.00 1,477,992 99,892 6.76
---------- ------ ---- --------- ------- ---- --------- ------- ----
Total deposits 3,394,882 89,326 2.63 3,256,749 110,656 3.40 3,192,219 156,495 4.90
Federal funds purchased, securities sold
under agreements to repurchase and
other borrowings 148,822 3,905 2.62 144,054 4,249 2.95 147,349 7,170 4.87
---------- ------ ---- --------- ------- ---- --------- ------- ----
Total interest bearing liabilities 2,904,439 93,231 3.21 2,862,081 114,905 4.01 2,859,591 163,665 5.72
------ ------- -------
Other liabilities 38,814 40,816 40,100
Shareholders' equity 375,715 342,655 316,354
---------- ------ ---- --------- ------- ---- --------- ------- ----
Total liabilities and shareholders'
equity $3,958,233 3,784,274 3,696,022
========== ====== ==== ========= ======= ==== ========= ======= ====
Net yield on earning assets 189,734 5.28 185,617 5.37 158,842 4.71
========== ====== ==== ========= ======= ==== ========= ======= ====
Interest rate spread 4.66 4.68 3.84
========== ====== ==== ========= ======= ==== ========= ======= ====
Income on tax-exempt securities
and loans 10,454 12,061 15,372
========== ====== ==== ========= ======= ==== ========= ======= ====
<FN>
Notes: Interest income on tax-exempt securities and loans have been adjusted to a fully-taxable equivalent basis.
Non-accrual loans have been included in the average balances.
52
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information about the Directors of Bancorporation, see "Election of
Directors" on pages 1 through 6 of Bancorporation's Proxy Statement dated
February 22, 1994 ("Proxy Statement"), which is incorporated herein by
reference.
Information about the Executive Officers of Bancorporation appears in
Part I of this report.
Disclosures by Bancorporation with respect to compliance with Section
16(a) appear on page 6 of the Proxy Statement, and are incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
See "Executive Compensation and Other Information" on pages 7 through 16
of the Proxy Statement, which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See "Principal Shareholders" and "Election of Directors" at page 16, and
pages 1 through 6, respectively, of the Proxy Statement, which are incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Certain Relationships and Related Transactions" at pages 15 and 16
of the Proxy Statement, which is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) The following Financial Statements appear in Part II of this
Report:
Independent Auditors' Report
Management's Report
Consolidated Balance Sheets
December 31, 1993 and 1992
Consolidated Statements of Income
Years ended December 31, 1993, 1992 and 1991
Consolidated Statements of Changes in Shareholders' Equity
Years ended December 31, 1993, 1992 and 1991
Consolidated Statements of Cash Flows
Years ended December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
Years ended December 31, 1993, 1992 and 1991
(a)(2) Financial Statement Schedules
All schedules are omitted as the required information is
inapplicable or the information is presented in the
consolidated financial statements or related notes which
appear in Part II of this report.
53
(a)(3) Executive Compensation Plans and Arrangements
PLAN OR ARRANGEMENT REFERENCE LOCATION
- ----------------------------------- ----------------------------------
1982 Incentive Stock Option Plan of Registration Statement on Form S-8
First Bancorporation of Ohio No. 33-7266, Exhibit 4.2
1992 Stock Option Program of First Form 10-K for fiscal year ended
Bancorporation of Ohio December 31, 1991, Exhibit 10(c)
Employee Stock Purchase Plan of First Form 10-K for fiscal year ended
Bancorporation of Ohio December 31, 1991, Exhibit 10(f)
1992 Directors Stock Option Program Form 10-K for fiscal year ended
December 31, 1991, Exhibit 10(g)
First Bancorporation of Ohio Executive Form 10-K for fiscal year ended
Supplemental Retirement Plan December 31, 1991, Exhibit 10(i)
Form of First Bancorporation of Ohio Form 10-K for fiscal year ended
Unfunded Supplemental Benefit Plan December 31, 1991, Exhibit 10(j)
First Bancorporation of Ohio Directors' Form 10-K for fiscal year ended
Deferral Fee Plan December 31, 1989, Exhibit 10(e)
Termination Agreement of Howard L. Form 10-K for fiscal year ended
Flood December 31, 1991, Exhibit 10(l)
Form of Termination Agreement with Form 10-K for fiscal year ended
certain of the chief executive officers of December 31, 1993, Exhibit 10(m)
the Subsidiaries of First Bancorporation
of Ohio
Addendum to Termination Agreement of Form 10-K for fiscal year ended
Richard L. Hardgrove December 31, 1993, Exhibit 10(r)
Membership Agreement of Howard L. Form 10-K for fiscal year ended
Flood with respect to the First December 31, 1991, Exhibit 10(o)
Bancorporation of Ohio Executive
Supplemental Retirement Plan
Membership Agreement of Scott A. Form 10-K for fiscal year ended
Lyons, Jr. with respect to the First December 31, 1991, Exhibit 10(q)
Bancorporation of Ohio Executive
Supplemental Retirement Plan
Supplemental Pension Agreement of Form 10-K for fiscal year ended
John R. Macso December 31, 1991, Exhibit 10(r)
54
PLAN OR ARRANGEMENT REFERENCE LOCATION
- --------------------------------------- --------------------------------
First Bancorporation of Ohio Executive Form 10-K for fiscal year ended
Post-Retirement Death Benefit Plan December 31, 1992, Exhibit 10(q)
First Amendment to the First Form 10-K for fiscal year ended
Bancorporation of Ohio Executive December 31, 1993, Exhibit 10(s)
Supplemental Retirement Plan
First Amendment to the First Form 10-K for fiscal year ended
Bancorporation of Ohio Executive Post- December 31, 1993, Exhibit 10(t)
Retirement Death Benefit Plan
Second Amendment to the First Form 10-K for fiscal year ended
Bancorporation of Ohio Executive Post- December 31, 1993, Exhibit 10(u)
Retirement Death Benefit Plan
<FN>
(b) Report on Form 8-K
On November 4, 1993, Bancorporation filed a report on Form
8-K relating to the adoption of a Shareholder Rights
Agreement dated October 21, 1993, between Bancorporation and
First National.
(c) Exhibits
See the Exhibit Index which appears following the Signatures
section of this report.
(d) Financial Statements
See subparagraph (a)(1) above.
(signatures begin on next page)
55
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the
City of Akron, State of Ohio, on the 16th day of March, 1994.
FIRST BANCORPORATION OF OHIO
By: /s/ Howard L. Flood
--------------------------
Howard L. Flood, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed on the 16th day of March, 1994 by the
following persons (including a majority of the Board of Directors of the
registrant) in the capacities indicated.
SIGNATURE TITLE
/s/ Howard L. Flood
- -------------------------------------------- President and Chief Executive Officer
Howard L. Flood (Principal Executive Officer) and
Director
/s/ Gary J. Elek
- -------------------------------------------- Senior Vice President and Treasurer
Gary J. Elek (Principal Financial Officer and
Principal Accounting Officer)
- -------------------------------------------- Director
John C. Blickle
/s/ C. Donald Bramley
- -------------------------------------------- Director
C. Donald Bramley
/s/ Robert M. Carter
- -------------------------------------------- Director
Robert M. Carter
- -------------------------------------------- Director
Richard A. Chenoweth
/s/ Elizabeth A. Dalton
- -------------------------------------------- Director
Elizabeth A. Dalton
(signatures continued on next page)
56
(signatures continued from previous page)
SIGNATURE TITLE
- -------------------------------------------- Director
Harold Graves, Jr.
/s/ Terry L. Haines
- -------------------------------------------- Director
Terry L. Haines
/s/ Richard L. Hardgrove
- -------------------------------------------- Director
Richard L. Hardgrove
/s/ Clifford J. Isroff
- -------------------------------------------- Director
Clifford J. Isroff
- -------------------------------------------- Director
David B. Jones
- -------------------------------------------- Director
Donald M. Lambert
/s/ Philip A. Lloyd, II
- -------------------------------------------- Director
Philip A. Lloyd, II
/s/ Robert G. Merzweiler
- -------------------------------------------- Director
Robert G. Merzweiler
/s/ Stephen E. Myers
- -------------------------------------------- Director
Stephen E. Myers
/s/ Gilbert H. Neal
- -------------------------------------------- Director
Gilbert H. Neal
/s/ Roger T. Read
- -------------------------------------------- Director
Roger T. Read
- -------------------------------------------- Director
Justin T. Rogers, Jr.
- -------------------------------------------- Director
Dale W. Smucker
- -------------------------------------------- Director
Del Spitzer
57
EXHIBIT NUMBER EXHIBIT INDEX
(2 )1 Agreement to Affiliate and Plan of Merger by and
between First Bancorporation of Ohio and Great
Northern Financial Corporation dated September 28,
1993
(3)(a)2 Amended and Restated Articles of Incorporation of First
Bancorporation of Ohio
(3)(b)3 Code of Regulations, as amended, of First
Bancorporation of Ohio
(3)(c)4 Shareholders Rights Agreement dated October 21, 1993
between First Bancorporation of Ohio and First
National Bank of Ohio
(4) Description of Shares contained in Exhibit 3(a) above
(10)(a)5 1982 Incentive Stock Option Plan of First
Bancorporation of Ohio
(10)(b)6 Incentive Stock Option Agreement relating to 1982
Incentive Stock Option Plan of First Bancorporation of
Ohio
(10)(c)7 1992 Stock Option Program of First Bancorporation of
Ohio
(10)(d)8 Incentive Stock Option Agreement relating to the 1992
Stock Option program of First Bancorporation of Ohio
<FN>
- ---------------
1 Incorporated by reference to Appendix A to the Prospectus and Proxy Statement included in First Bancorporation of Ohio's
("Bancorporation") Registration Statement on Form S-4 (No. 33-51401) filed with the Commission on December 10, 1993.
2 Incorporated by reference to Exhibit 3 to Bancorporation's Form 8-K filed with the Commission on November 4, 1993.
3 Incorporated by reference to Exhibit 3(a) of Bancorporation's Registration Statement on Form S-4 (No. 33-24925) filed with the
Commission on October 17, 1988.
4 Incorporated by reference to Exhibit 4 to Bancorporation's Registration Statement on Form 8-A filed with the Commission on
November 4, 1993.
5 Incorporated by reference to Exhibit 4.2 of Bancorporation's Registration Statement on Form S-8 (No. 33-7266), filed with the
Commission on July 15, 1986.
6 Incorporated by reference to Exhibit 4.3 of Bancorporation's Registration Statement on Form S-8 (No. 33-7266), filed with the
Commission on July 15, 1986.
7 Incorporated by reference to Exhibit 10(c) of Bancorporation's Form 10-K for the fiscal year ended December 31, 1991, filed with
the Commission on March 16, 1992.
8 Incorporated by reference to Exhibit (10)(d) of Bancorporation's Form 10-K for the fiscal year ended December 31, 1991, filed with
the Commission on March 16, 1992.
58
EXHIBIT NUMBER EXHIBIT INDEX
(10)(e)9 Non-Qualified Stock Option Agreement relating to the
1992 Stock Option Program of First Bancorporation of
Ohio
(10)(f)10 Employee Stock Purchase Plan of First Bancorporation
of Ohio
(10)(g)11 1992 Directors Stock Option Program
(10)(h)12 Directors Stock Option Agreement relating to the 1992
Directors Stock Option Program of First Bancorporation
of Ohio
(10)(i)13 First Bancorporation of Ohio Executive Supplemental
Retirement Plan
(10)(j)14 Form of First Bancorporation of Ohio Unfunded
Supplemental Benefit Plan
(10)(k)15 First Bancorporation of Ohio Directors' Deferral Fee
Plan
(10)(l)16 Termination Agreement of Howard L. Flood
(10)(m)17 Form of Termination Agreement with certain of the
chief executive officers of the Subsidiaries of First
Bancorporation of Ohio
<FN>
- ---------------
9 Incorporated by reference to Exhibit 10(e) of Bancorporation's Form 10-K for the fiscal year ended December 31, 1991, filed with
the Commission on March 16, 1992.
10 Incorporated by reference to Exhibit 10(f) of Bancorporation's Form 10-K for the fiscal year ended December 31, 1991, filed with
the Commission on March 16, 1992.
11 Incorporated by reference to Exhibit 10(g) of Bancorporation's Form 10-K for the fiscal year ended December 31, 1991, filed with
the Commision on March 16, 1992.
12 Incorporated by reference to Exhibit 10(h) of Bancorporation's Form 10-K for the fiscal year ended December 31, 1991, filed with
the Commission on March 16, 1992.
13 Incorporated by reference to Exhibit 10(i) of Bancorporation's Form 10-K for the fiscal year ended December 31, 1991, filed with
the Commission on March 16, 1992.
14 Incorporated by reference to Exhibit 10(j) of Bancorporation's Form 10-K for the fiscal year ended December 31, 1991, filed with
the Commission on March 16, 1992.
15 Incorporated by reference to Exhibit 10(e) of Bancorporation's Form 10-K for the fiscal year ended December 31, 1989, filed with
the Commission on March 13, 1990.
16 Incorporated by reference to Exhibit 10(l) of Bancorporation's Form 10-K for the fiscal year ended December 31, 1991, filed with
the Commission on March 16, 1992.
17 Incorporated by reference to Exhibit 10(m) of Bancorporation's Form 10-K for the fiscal year ended December 31, 1992, filed with
the Commission on March 15, 1993.
59
EXHIBIT NUMBER EXHIBIT INDEX
(10)(n)18 Membership Agreement of Howard L. Flood with respect
to the First Bancorporation of Ohio Executive
Supplemental Retirement Plan
(10)(o)19 Membership Agreement of Scott A. Lyons, Jr. with
respect to the First Bancorporation of Ohio Executive
Supplemental Retirement Plan
(10)(p)20 Supplemental Pension Agreement of John R. Macso
(10)(q)21 First Bancorporation of Ohio Executive Post-Retirement
Death Benefit Plan
(10)(r) Addendum to Termination Agreement of Richard L.
Hardgrove
(10)(s) First Amendment to the First Bancorporation of Ohio
Executive Supplemental Retirement Plan
(10)(t) First Amendment to the First Bancorporation of Ohio
Executive Post-Retirement Death Benefit Plan
(10)(u) Second Amendment to the First Bancorporation of Ohio
Executive Post-Retirement Death Benefit Plan
(13) Independent Auditors' Report by KPMG Peat Marwick
(21) Subsidiaries of Bancorporation
(23)(a) Consent of Coopers & Lybrand
(23)(b) Consent of KPMG Peat Marwick
<FN>
- ---------------
18 Incorporated by reference to Exhibit 10(o) of Bancorporation's Form 10-K for the fiscal year ended December 31, 1991, filed with
the Commission on March 16, 1992.
19 Incorporated by reference to Exhibit 10(q) of Bancorporation's Form 10-K for the fiscal year ended December 31, 1991, filed with
the Commission on March 16, 1992.
20 Incorporated by reference to Exhibit 10(r) of Bancorporation's Form 10-K for the fiscal year ended December 31, 1991, filed with
the Commission on March 16, 1992.
21 Incorporated by reference to Exhibit 10(q) of Bancorporation's Form 10-K for the fiscal year ended December 31, 1992, filed with
the Commission on March 15, 1993.