1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended September 30, 1997 Commission file number: 0-13166
CoBancorp Inc.
(Exact name of registrant as specified in its charter)
Ohio 34-1465382
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1530 West River Road North, Elyria, Ohio 44035
(Address of principal executive offices) (Zip Code)
(440) 329-8000
Registrant's telephone number, including area code
Not applicable
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter periods that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
As of September 30, 1997, there were 3,453,824 outstanding common shares, with
no par value, of the Registrant.
2
INDEX
COBANCORP INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Page
Consolidated balance sheets -- September 30, 1997 and December 31, 1996 3
Consolidated statements of income -- Three months and nine months ended
September 30, 1997 and 1996. 4
Consolidated statements of cash flows -- Nine months ended September
30, 1997 and 1996 5
Notes to consolidated financial statements -- September 30, 1997 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION 13
SIGNATURES 14
EXHIBITS 15
3
COBANCORP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30 DECEMBER 31
1997 1996
------------------- --------------
ASSETS
Cash and due from banks $ 31,809,568 $ 30,555,396
Investment securities available-for-sale 116,446,541 162,460,918
Investment securities held-to-maturity 22,067,717 26,324,836
(market value $22,429,771 and $26,847,437)
Federal funds sold 38,300,000 4,300,000
Loans 420,832,262 340,454,390
Less allowance for loan losses 4,384,579 4,091,592
------------- -------------
Net loans 416,447,683 336,362,798
Bank premises and equipment, net 19,658,262 18,787,316
Accrued income and prepaid expenses 5,683,673 4,840,787
Other assets 15,772,299 15,285,663
------------- -------------
TOTAL ASSETS $ 666,185,743 $ 598,917,714
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits
Demand-noninterest bearing $ 84,366,512 $ 82,842,548
Demand-interest bearing 72,342,732 63,196,979
Savings and other time 423,807,154 368,706,984
------------- -------------
Total deposits 580,516,398 514,746,511
Short-term funds 19,137,153 25,520,820
Other liabilities 8,437,446 4,005,766
------------- -------------
TOTAL LIABILITIES 608,090,997 544,273,097
Shareholders' equity
Capital stock, no par value
5,000,000 shares authorized
3,453,824 shares issued and outstanding 5,975,066 5,975,066
Capital surplus 18,553,553 18,553,553
Retained earnings 32,738,955 30,296,473
Net unrealized gains (losses) on available-for-sale
investment securities (net of income tax) 827,172 (180,475)
------------- -------------
TOTAL SHAREHOLDERS' EQUITY 58,094,746 54,644,617
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 666,185,743 $ 598,917,714
============= =============
See accompanying notes to consolidated financial statements.
4
COBANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
SEPTEMBER 30, 1997
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1997 1996 1997 1996
------------ ------------ ------------ ------------
INTEREST INCOME
Loans (including fees)
Taxable $ 10,050,871 $ 7,707,210 $ 28,039,545 $ 22,530,741
Tax-exempt 31,669 35,815 98,505 88,469
Investment securities
Taxable 1,419,006 2,313,507 5,124,560 6,519,094
Tax-exempt 749,457 800,155 2,303,313 2,730,830
Federal funds sold 223,917 36,393 286,079 324,006
------------ ------------ ------------ ------------
TOTAL INTEREST INCOME 12,474,920 10,893,080 35,852,002 32,193,140
INTEREST EXPENSE
Deposits 4,974,090 4,062,533 13,679,697 12,208,000
Short-term borrowed funds 116,014 165,448 490,928 484,987
------------ ------------ ------------ ------------
TOTAL INTEREST EXPENSE 5,090,104 4,227,981 14,170,625 12,692,987
------------ ------------ ------------ ------------
NET INTEREST INCOME 7,384,816 6,665,099 21,681,377 19,500,153
PROVISION FOR LOAN LOSSES 0 0 150,000 100,000
------------ ------------ ------------ ------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 7,384,816 6,665,099 21,531,377 19,400,153
OTHER INCOME
Service charges on deposit accounts 743,828 756,742 2,215,227 2,179,387
Trust fees 413,751 359,000 1,241,252 1,061,000
Other 840,833 361,688 2,018,394 1,295,310
Securities gains (losses) 64,203 (5,304) 238,319 294,290
------------ ------------ ------------ ------------
TOTAL OTHER INCOME 2,062,615 1,472,126 5,713,192 4,829,987
OTHER EXPENSES
Salaries, wages and benefits 3,170,489 2,806,366 9,237,766 8,247,753
Occupancy--net 709,316 460,922 1,937,506 1,324,414
Furniture and equipment 315,810 234,000 879,805 702,000
Taxes, other than income and payroll 167,689 143,127 492,945 504,046
Data processing 984,260 521,321 2,488,860 1,549,178
Supplies, printing and postage 351,625 269,089 1,053,362 1,144,118
Outside services 381,484 247,811 1,041,965 834,719
Telephone 192,806 172,425 596,398 456,186
Amortization of intangibles 234,202 204,624 610,877 544,790
Other 1,229,345 1,485,624 3,495,237 4,000,211
------------ ------------ ------------ ------------
TOTAL OTHER EXPENSES 7,737,026 6,545,309 21,834,721 19,307,415
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 1,710,405 1,591,916 5,409,848 4,922,725
INCOME TAX EXPENSE 400,198 282,716 1,136,835 693,716
------------ ------------ ------------ ------------
NET INCOME $ 1,310,207 $ 1,309,200 $ 4,273,013 $ 4,229,009
============ ============ ============ ============
NET INCOME PER SHARE $ 0.38 $ 0.38 $ 1.24 $ 1.23
DIVIDENDS PER SHARE $ 0.18 $ 0.16 $ 0.53 $ 0.47
See notes to consolidated financial statements.
5
COBANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30
1997 1996
------------------ --------------
OPERATING ACTIVITIES
Net income $ 4,273,013 $ 4,229,009
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 150,000 100,000
Provision for depreciation and amortization 1,895,853 1,570,565
Accretion of discounts on purchased loans (16,763) (61,850)
Amortization of premiums less accretion of
discounts on held-to-maturity investment securities 103,805 140,487
Amortization of premiums less accretion of
discounts on available-for-sale investment securities (381) 8,680
Realized securities (gains) on available-for-sale securities (238,320) (294,290)
Realized (gains) on sale of loans (687,633) 0
Realized (gains) on sale of fixed assets (14,930) 0
Decrease (increase) in interest receivable 79,210 (737,324)
Increase in interest payable 67,566 718,906
Decrease (increase) in other assets 160,880 (7,069,207)
Increase in other liabilities 1,525,806 173,513
------------- -------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 7,298,106 (1,221,511)
INVESTING AND LENDING ACTIVITIES
Proceeds from sales of available-for-sale
investment securities 54,600,611 53,017,230
Maturities of available-for-sale investment securities 4,153,314 1,423,808
Maturities of held-to-maturity investment securities 6,673,885 8,928,643
Purchases of available-for-sale investment securities (10,274,053) (103,067,893)
Purchase of Jefferson Savings, net of cash received (5,531,007) 0
Net decrease (increase) in credit card receivables 3,547,394 (6,863)
Net (increase) in longer-term loans (26,396,991) (13,121,572)
Purchases of premises and equipment,
net of retirements (1,528,013) (5,698,034)
------------- -------------
NET CASH PROVIDED BY (USED IN) INVESTING AND LENDING ACTIVITIES 25,245,102 (58,524,681)
DEPOSIT AND FINANCING ACTIVITIES
Net (decrease) increase in demand deposits and savings accounts (10,362,509) 50,645,513
Net increase in certificates of deposit 24,582,719 12,639,160
Net (decrease) increase in short-term funds (10,383,666) 1,305,031
Increase in borrowings 1,050,872 0
Repayment of borrowings (345,924) 0
Cash dividends (1,830,527) (1,620,165)
------------- -------------
NET CASH PROVIDED BY DEPOSIT AND FINANCING ACTIVITIES 2,710,965 62,969,539
------------- -------------
Increase In Cash and Cash Equivalents 35,254,173 3,223,347
Cash and cash equivalents at beginning of period 34,855,395 29,511,296
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 70,109,568 $ 32,734,643
============= =============
See accompanying notes to consolidated financial statements.
6
COBANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1997
NOTE A -- ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of CoBancorp Inc. (the "Corporation") and its wholly-owned
subsidiaries, PREMIERBank & Trust ("Premier") and Jefferson Savings Bank
("Jefferson"). All material intercompany accounts and transactions have been
eliminated.
BASIS OF PRESENTATION: The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. It is the opinion of management that all adjustments necessary for a
fair presentation have been made and that all adjustments were of a normal
recurring nature.
CASH EQUIVALENTS: For purpose of the Statements of Cash Flows, cash equivalents
include amounts due from banks and federal funds sold. Generally, federal funds
are purchased and sold for periods of less than thirty days.
RECLASSIFICATIONS: Certain amounts in the 1996 consolidated financial statements
have been reclassified to conform to the 1997 presentation.
NOTE B -- ACQUISITION
On February 27, 1997, the Corporation acquired all of the outstanding shares of
Jefferson, an Ohio-chartered savings association located in Jefferson, Ohio, for
cash in the amount of $6,733,000, with additional consideration of $649,000
attributable to certain favorable tax benefits (confirmed by an I.R.S. Private
Letter Ruling dated May 31, 1996). The transaction was accounted for under the
purchase method of accounting. The purchase price allocation, which may be
revised, resulted in a write-up of assets to estimated fair value of
approximately $2,432,000. This amount included approximately $965,000 which was
assigned to goodwill. Jefferson's results of operations are included in the
Corporation's consolidated results of operations since the date of acquisition.
Pro forma results of operations have not been presented because the effect of
the acquisition is not material to the consolidated results of operations.
Jefferson, with assets of approximately $62 million as of September 30, 1997,
operates four branch locations; three in Madison County, Ohio and one in Lorain
County, Ohio. Jefferson remains a separate savings association subsidiary of the
Corporation.
7
COBANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1997
NOTE C -- LOANS
The Corporation applies the provisions of FASB Statement No. 114, "Accounting by
Creditors for Impairment of a Loan" (as amended by FASB Statement No. 118). At
September 30, 1997, there were two loans aggregating $15,600 which were
classified as doubtful for which present value analyses were performed according
to the guidelines set forth by FASB Statement 114. The Corporation's standard
reserve methodology provided for a greater reserve amount than required by FASB
Statement 114. At December 31, 1996, there were no loans for which the
Corporation was required to establish a valuation allowance under Statement 114
criteria.
NOTE D -- EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings Per Share," which is required to be adopted on December 31, 1997.
At that time, the Corporation will be required to change the method currently
used to compute earnings per share and to restate all prior periods. Under the
new requirements for calculating basic earnings per share, the dilutive effect
of stock options will be excluded. The impact on basic and fully diluted
earnings per share is not expected to be material.
NOTE E -- REPORTING COMPREHENSIVE INCOME AND DISCLOSING SEGMENT
INFORMATION
In June 1997, the Financial Accounting Standards Board issued Statement No. 130,
"Reporting Comprehensive Income" and Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information," both of which will be
effective for fiscal years beginning after December 15, 1997. The Corporation
will adopt Statement No. 130 and Statement No. 131 as of January 1, 1998. The
impact of adopting these Statements is not expected to be material.
NOTE F -- SUBSEQUENT EVENT
On November 3, 1997, the Corporation entered into a definitive agreement to be
acquired by FirstMerit Corporation (FMER). Under the terms of the agreement,
each share of CoBancorp Inc. stock will be exchanged for $44.50 in cash or for
shares of common stock of FirstMerit with a market value per share of $44.50.
The shareholders of CoBancorp may elect to exchange their common stock for
either common stock of FirstMerit, or $44.50 in cash, provided that no less than
30 percent and no more than 49 percent of the total transaction will be paid in
cash. The acquisition is expected to be completed during the second quarter of
1998, subject to approval by CoBancorp Inc.'s shareholders and regulatory
authorities.
8
COBANCORP INC. AND SUBSIDIARIES
SEPTEMBER 30, 1997
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion focuses on information about CoBancorp Inc.'s financial
condition and results of operations which is not otherwise apparent from the
consolidated financial statements attached. In connection with any forward
looking statements made by the Registrant, the following disclosure is made:
Actual results could differ materially from any such forward looking statements
for a variety of factors including sharp and/or rapid changes in interest rates,
significant changes in the economy, or significant changes in accounting, tax or
regulatory practices or requirements.
EARNINGS RESULTS Net income remained relatively constant with a slight increase
over the prior year. For the first nine months of 1997, net income was
$4,273,000, compared to $4,229,000 for the same period in 1996. Earnings per
share were $1.24 for the first nine months of 1997 and $1.23 for the same period
in 1996. For the third quarter, net income was $1,310,000 or $0.38 per share
compared to $1,309,000 or $0.38 per share in the prior year. The changes
affecting net income are explained in detail in the following sections.
NET INTEREST INCOME The net interest margin on a fully taxable-equivalent basis
was 5.27 percent for the first nine months of 1997, compared to 5.14 percent for
the same period one year ago. Net interest income for the first nine months of
1997 amounted to $22,919,000, up significantly from $20,951,000 for the
comparable period in 1996. Third quarter net interest income was $7,787,000 and
$7,096,000 in 1997 and 1996, respectively. These amounts reflect net interest
income adjusted to a fully taxable-equivalent basis by recognizing the tax
effect of interest earned on tax-exempt securities and loans.
The increase in fully-taxable equivalent net interest income of $1,968,000, or
9.4 percent, is due primarily to an increase in interest-earning assets over the
same period in 1996. This increase was offset by an increase in interest-bearing
liabilities. The Corporation also benefited from an increase in the overall
yield on earning assets, however the cost of interest-bearing liabilities also
increased slightly.
Average interest-earning assets were $575,982,000 and $539,982,000 for the first
nine months of 1997 and 1996, respectively. Average interest-bearing liabilities
for the same periods were $500,752,000 and $463,792,000, respectively.
The following table sets forth for the periods indicated a summary of the
changes in interest income and interest expense on a fully taxable-equivalent
basis resulting from changes in volume and changes in rates for the major
components of interest-earning assets and interest-bearing liabilities:
9
SUMMARY OF NET INTEREST INCOME CHANGES
AND AVERAGE BALANCE SHEETS
(RATE/VOLUME VARIANCE)
NINE MONTHS ENDED 9/30/97 VS.9/30/96
(IN THOUSANDS OF DOLLARS)
|
1997 1996 | CHANGE IN
---------------------- ---------------------- | INTEREST INCOME/EXPENSE DUE TO
AVERAGE AVERAGE AVERAGE AVERAGE ------------------------------------
BALANCE RATE BALANCE RATE | VOLUME RATE BOTH TOTAL
------- ---- ------- ---- ------ ---- ---- -----
|
Taxable securities $101,815 6.71% $134,565 6.46% | (1,606) 254 (42) (1,394)
Nontaxable securities 58,054 8.01% 70,371 7.84% | (737) 92 (3) (648)
Federal funds sold & s/t funds 7,179 5.26% 7,171 5.94% | (1) (37) 0 (38)
Taxable loans: |
Real estate loans 184,630 8.11% 143,250 7.98% | 2,439 135 71 2,645
Commercial loans 167,998 9.52% 136,220 9.43% | 2,207 87 46 2,340
Installment loans 51,132 9.98% 41,747 10.24% | 707 (80) (17) 610
Overdrafts 720 0.00% 1,174 0.00% | 0 0 0 0
Checkmate loans 223 17.49% 193 16.58% | 4 1 0 5
Credit card loans 2,040 56.62% 2,835 44.97% | (271) 247 (66) (90)
Nontaxable loans: |
Industrial Revenue Bonds (IRBs) 2,190 9.09% 2,456 7.29% | (15) 33 (3) 15
----------- ------------ ----------- ------- ---------- ---------
TOTAL INTEREST-EARNING ASSETS 575,982 8.56% 539,982 8.27% | 2,727 732 (14) 3,445
|
Noninterest-earning assets: |
Cash and due from banks 30,514 27,933 |
Bank premises and equipment 20,353 14,014 |
Other assets 21,009 19,954 |
Less allowance for loan losses (4,482) (6,000) |
----------- ------------ |
Total noninterest-earning assets 67,394 55,901 |
----------- ------------ |
|
TOTAL ASSETS $643,376 $595,883 |
=========== ============ |
|
|
Interest-bearing transaction accts: |
NOW/Advantage 50 $69,474 1.59% $63,101 1.83% | 84 (111) (10) (37)
Savings accounts: |
Savings 137,491 2.21% 140,601 2.25% | (61) (40) 1 (100)
IMMAs 18,800 1.99% 22,910 2.02% | (63) (5) 0 (68)
Money Market Index accounts 16,252 4.95% 12,292 4.76% | 139 18 6 163
Time deposits: |
Christmas/vacation club 1,035 3.96% 1,205 3.90% | (5) 1 (1) (5)
CD under $100,000 163,927 5.48% 133,074 5.37% | 1,219 109 25 1,353
CD over $100,000 (regular) 14,933 5.32% 13,046 5.30% | 73 1 0 74
CD over $100,000 (public funds) 21,320 5.52% 20,626 5.32% | 25 30 1 56
IRAs 35,063 5.64% 35,827 5.37% | (36) 74 (2) 36
Short-term borrowings: |
Repurchase agreements 1,996 4.99% 3,024 4.73% | (37) 6 (3) (34)
Fed funds purchased 3,297 5.70% 2,181 5.41% | 45 5 2 52
Notes payable TT&L 2,280 5.44% 1,952 5.17% | 12 4 1 17
Sweep 14,884 1.61% 13,953 1.97% | 13 (37) (6) (30)
----------- ------------ | ----------- ------- ---------- ----------
TOTAL INTEREST-BEARING LIBILITIES 500,752 3.78% 463,792 3.64% | 1,408 55 14 1,477
----------- ------- ---------- ---------
|
Noninterest-bearing liabilities: |
Demand deposits 80,182 77,090 |
Other liabilities 6,303 4,479 |
Shareholders equity 56,139 50,522 |
----------- ------------
TOTAL LIABILITIES AND |
SHAREHOLDERS' EQUITY $643,376 $595,883 |
=========== ============
|
NET INTEREST INCOME 5.27% 5.14% | $ 1,319 $677 ($28) $ 1,968
========= ===== ========= =========
|
|
YTD FTE net interest income (current year) $22,919
YTD FTE net interest income (prior year) 20,951
-----------
Change in FTE net interest income $1,968
===========
Note: Jefferson's average balances and income are included for seven months in
1997. Presented on a fully taxable-equivalent basis, using year-to-date average
balances.
10
NONINTEREST INCOME Total noninterest income, exclusive of securities gains,
increased $939,000 or 20.7 percent for the first nine months of 1997 when
compared to the same period in 1996. The third quarter of 1997 represented an
increase of $521,000 or 35.3 percent over the prior year. Jefferson contributed
approximately $140,000 of noninterest income, exclusive of securities gains,
since it was acquired on February 28, 1997. Income from trust activities
increased to $1,241,000 for the nine months ended September 30, 1997, up 17
percent from the prior year. In June of 1997, Premier sold its credit card
portfolio (approximately $2,605,000 of loans) and realized a gain of
approximately $400,000. Security transactions resulted in net gains of $238,000
and $294,000 in the first three quarters of 1997 and 1996, respectively. The
comparable amounts for the third quarter were a net gain of $64,000 in 1997 and
a net loss of $5,000 in 1996, respectively. During the third quarter of 1997,
Premier sold approximately $20 million of its fixed and variable rate mortgage
loans and realized a gain of approximately $271,000. Premier elected to retain
servicing rights to these mortgage loans and recorded a mortgage servicing asset
of approximately $240,000 under the guidelines set forth by the Financial
Accounting Standards Board in Statement Number 125. Amortization of this
mortgage servicing asset will be recognized over the average remaining life of
the pools of loans sold. During the third quarter of 1997, Premier also sold its
office building located at 124 Middle Avenue, Elyria, Ohio, and accounted for
the transaction as a sales-leaseback agreement. A gain of approximately
$1,009,000 is being recognized on the installment basis over the life of the
five year lease.
NONINTEREST EXPENSE For the first nine months of 1997, salaries, wages and
benefits expense increased $990,000 over the same period for 1996. In the third
quarter of 1997, the increase was $364,000, of which approximately 41% was a
result of the Jefferson acquisition, while the remainder is a combination of
added staff for new offices and normal salary adjustments. The increase in
occupancy and furniture and equipment expenses of $2,026,000 over the previous
year was due to the addition of several Premier branches during the later half
of 1996, the acquisition of Jefferson in early 1997 and the opening of an
additional Jefferson facility during the third quarter of 1997.
LOANS AND ALLOWANCE FOR LOAN LOSSES In determining the adequacy of the allowance
for loan losses, management evaluates past loan loss experience, present and
anticipated economic conditions and the credit worthiness of its borrowers. The
allowance for loan losses is increased by provisions charged against income and
recoveries of loans previously charged off. The allowance is decreased by loans
that are determined uncollectable by management and charged against the
allowance.
Potential problem loans are those loans which are on the Corporation's "watch
list." These loans are, or could become, nonperforming. This "watch list" is
reviewed monthly and adjusted for changing conditions. Loans on the watch list
at September 30, 1997, totaled $7.5 million, or 1.7 percent of total outstanding
loans.
At September 30, 1997, there were two loans aggregating $15,600 which were
classified as doubtful for which present value analyses were performed according
to the guidelines set forth by FASB Statement 114. The Corporation's standard
reserve methodology provided for a greater reserve amount than required by FASB
Statement 114. At December 31, 1996, there were no loans for which the
Corporation was required to establish a valuation allowance under Statement 114
criteria.
11
At September 30, 1997, the allowance for loan losses as a percentage of loans
was 1.04 percent compared to 1.20 percent at December 31, 1996. The provision
for loan losses was $150,000 in the nine months ended September 30, 1997, and
$100,000 for the nine months ended September 30, 1996.
The following table contains information relative to the Corporation's loan loss
experience for the nine months ended September 30, 1997, and the year ended
December 31, 1996 (in thousands of dollars).
Nine months ended Year ended
September 30, 1997 December 31, 1996
----------------- ----------------------
Allowance for loan losses at beginning of period $ 4,092 $ 5,850
Jefferson allowance acquired 501
Loans charged off:
Real estate 1 21
Installment 445 446
Credit card and other 66 86
Commercial and collateral 150 163
------- -------
662 716
Recoveries on loans charged off:
Real estate 144 5
Installment 145 311
Credit card and other 29 23
Commercial and collateral 46 395
------- -------
364 733
Net charge-offs (recoveries) 308 (17)
Provision for loan losses 150 (1,775)
======= =======
Allowance for loan losses at end of period
$ 4,385 $ 4,092
======= =======
Ratio of allowance for loan losses to total
loans at end of period 1.04% 1.20%
======= =======
During the fourth quarter of 1996, the Corporation, based on significant
continued improvement in overall asset quality, and recoveries exceeding
charge-offs for the past three years, returned $1,775,000 of the allowance for
loan losses to income.
12
NONPERFORMING LOANS Nonaccrual loans at September 30, 1997, totaled $2,973,000,
compared to $1,707,000 at December 31, 1996. This increase includes $1,256,000
in nonaccruing loans attributable to Jefferson. The category of accruing loans
past due 90 days or more totaled $35,000 at September 30, 1997 and $85,000 at
December 31, 1996. Additionally, there was $62,000 in other real estate owned.
The balance in the allowance for loan losses was $4,385,000 at September 30,
1997 compared to $4,092,000 at December 31, 1996.
Loans other than installment loans on which interest and/or principal is 90 days
or more past due are placed on nonaccrual status and any previously accrued but
uncollected interest is reversed from income. Such loans remain on a cash basis
for recognition of income until both interest and principal are current.
Installment loans past due greater than 120 days are charged off and previously
accrued but uncollected interest is reversed from income.
The following table summarizes nonaccrual and past due loans (in thousands of
dollars).
September 30, 1997 December 31, 1996
------------------ ------------------
Accruing loans past due 90 days or more as
to principal or interest:
Loans secured by real estate $ 0 $ 0
Commercial and industrial 0 0
Loans to individuals 35 85
------ ------
$ 35 $ 85
====== ======
Nonaccrual loans:
Loans secured by real estate $2,518 $1,537
Commercial and industrial 379 170
Loans to individuals 76 0
------ ------
$2,973 $1,707
====== ======
CAPITAL At September 30 1997, Premier's and CoBancorp's risk-based capital
ratios based on Federal Reserve Board guidelines were as follows:
Well
PremierBank CoBancorp capitalized
& Trust Inc. minimums
----------- ---------- ------------
Tier 1 "core" capital to risk-weighted assets 10.86% 12.00% 6.00%
Total capital to risk-weighted assets 11.86% 13.03% 10.00%
Tier 1 leverage ratio 7.22% 7.80% 5.00%
These ratios substantially exceed the minimums which are in effect for banks and
bank holding companies, and also exceed the percentages required to be
considered "well-capitalized".
13
At September 30, 1997, Jefferson Savings' regulatory capital ratios based on the
Office of Thrift Supervision requirements were as follows:
Well-
Jefferson Required capitalized
Savings Minimums Minimums
--------- --------- ------------
Tangible Capital 9.68% 1.50% n/a
Tier 1 "core" capital to risk-weighted assets 17.63% n/a 6.00%
Core Capital 8.18% 3.00% 5.00%
Risk-based capital to risk weighted assets 18.77% 8.00% 10.00%
PART II. OTHER INFORMATION
Except as set forth below, the items of Part II are inapplicable or the answers
thereto are negative and, accordingly, no reference is made to said items in
this report.
Item 4--Submission of matters to a vote of security holders
None
Item 6--Exhibits and Reports on Form 8-K
(a) Exhibits:
10q Second Amendment to Employment Agreement Dated June
16, 1997 among CoBancorp Inc., PremierBank & Trust
and Timothy W. Esson
10r Severance Agreement Due to Change in Control of
CoBancorp Inc. Dated June 16, 1997 among CoBancorp
Inc., PremierBank & Trust, Jefferson Savings Bank and
James R. Bryden
11 Earnings per Share
27 Financial Data Schedule
(b) The registrant was not required to file any reports on Form
8-K during the quarter ended September 30, 1997.
14
COBANCORP INC. AND SUBSIDIARIES
SEPTEMBER 30, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COBANCORP INC.
(Registrant)
/s/ Timothy W. Esson
Timothy W. Esson
Executive Vice President and
Chief Financial Officer
November 14, 1997