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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended December 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from______________to__________
Commission File No. 0-27894
COMMERCIAL BANCSHARES, INC.
---------------------------
(Name of Registrant in Its Charter)
OHIO 34-1787239
- ------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
118 S. SANDUSKY AVENUE UPPER SANDUSKY, OHIO 43351
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(Address of principal executive offices)
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(419) 294-5781
(Registrant's telephone number) (Zip code)
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Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
None
Securities registered under Section 12(g) of the Exchange Act:
Common Shares, 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
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers in response 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]
At March 9, 2001, the aggregate market value of the voting stock held by
nonaffiliates of the registrant, based on a share price of $24.75 per share
(such price being the average of the bid and asked prices on such date) was
$24,676,294.50.
At March 9, 2001, there were issued and outstanding 1,050,778 of the
registrant's Common Shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's 2000 Annual Report to Shareholders is incorporated
by reference into Part I and Part II of this Form 10-K.
Portions of Registrant's Definitive Proxy Statement for the April 11, 2001
Annual Meeting of Shareholders is incorporated by reference into Part III of
this Form 10-K.
INDEX
FORM 10-K
Page
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PART I
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Item 1. Description of Business 3
Item 2. Properties 5
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
PART II
- -------
Item 5. Market for Common Equity and Related Shareholder Matters 6
Item 6. Selected Financial Data 7
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operation 7
Item 7A. Quantitative and Qualitative Disclosures about
Market Risk 7
Item 8. Financial Statements and Supplementary Data 7
Item 9. Changes in and Disagreements with Accountants on 7
Accounting and Financial Disclosure
PART III
- --------
Item 10. Directors and Executive Officers of the Registrant 7
Item 11. Executive Compensation 7
Item 12. Security Ownership of Certain Beneficial Owners
and Management 8
Item 13. Certain Relationships and Related Transactions 8
PART IV
- -------
Item 14. List of Exhibits and Reports on Form 8-K 8
Signatures 9
Exhibits 10
PART I
ITEM 1 - DESCRIPTION OF BUSINESS
General
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In February 1995, Commercial Bancshares, Inc. (The "Corporation") received
approval from the Board of Governors of the Federal Reserve System to become
a bank holding corporation by acquiring all the voting shares of common
stock of The Commercial Savings Bank (the "Bank"). The principal business of
the Corporation presently is to operate the Bank, which is a wholly-owned
subsidiary, and its principal asset. The Corporation and the main office of
the Bank are located at 118 South Sandusky Avenue, Upper Sandusky, Ohio
43351. In May 1997, the Board of Directors approved the establishment of
the Corporation's second wholly owned subsidiary, a consumer finance
company, and thereby chartered a new Ohio corporation by the name of
"Advantage Finance, Inc." (the "Finance Company"). On December 24, 1997,
approval was granted by the Ohio Division of Financial Institutions for the
Finance Company to do business in Ohio. On April 13, 1998 the Finance
Company opened for business at 117 North Greenwood, Marion, Ohio providing
finance company services to customers in the Marion area. In January 1999,
the Corporation received regulatory approval from the Ohio Department of
Financial Institutions to establish the Finance Company as a subsidiary of
the Bank to facilitate its future operations.
Although wholly owned by the Corporation, the Bank functions as an
independent community bank. The Bank was organized on April 20, 1920 as a
state-chartered Bank and incorporated as "The Lewis Bank & Trust
Corporation" under the laws and statutes of the State of Ohio. An amendment
to the articles of incorporation on February 8, 1929 changed the name of the
Bank to its present name. The Bank provides customary retail and commercial
banking services to its customers, including acceptance of deposits for
demand, savings and time accounts and servicing of such accounts;
commercial, consumer and real estate lending, including installment loans,
individual retirement accounts (IRA's), safe deposit facilities and night
depository facilities. The Bank is a nonmember of the Federal Reserve
System, is insured by the Federal Deposit Insurance Corporation and is
regulated by the Ohio Division of Financial Institutions.
The Bank grants residential, installment and commercial loans to customers
located primarily in the Ohio counties of Wyandot, Marion, Hancock and Union
and the surrounding area. Commercial loans are primarily variable rate and
include operating lines of credit and term loans made to small businesses
primarily based on the ability to repay the loan from the cash flow of the
business. Such loans are typically secured by business assets, such as
equipment and inventory, and occasionally by the business owner's personal
residence. When the borrower is not an individual, the Bank generally
obtains personal guarantees of the business owner. Commercial real estate
loans are primarily secured by borrower-occupied business real estate, and
are dependent on the ability of the related business to generate adequate
cash flow to service the debt. Such loans primarily carry adjustable
interest rates. Residential real estate loans are made with primarily fixed
rates and are secured by the borrower's residence. Such loans are made
based on the borrower's ability to make repayment from employment and other
income. The Bank generally makes these loans in amounts of 95% or less of
the value of collateral. An appraisal is obtained from a qualified real
estate appraiser for substantially all loans secured by real estate.
Construction loans are secured by residential and business real estate that
primarily will be borrower-occupied upon completion. The Bank usually makes
the permanent loan at the end of the construction phase. Installment loans
to individuals include loans secured by automobiles and other consumer
assets, including second mortgages on personal residences. Loans secured by
automobiles are generated both by direct application from the customer and
from the Bank's purchase of indirect retail installment contracts from the
dealers. Credit card and overdraft protection loans are unsecured personal
lines of credit to individuals. The Finance Company specializes in direct
and indirect lending for consumer goods, 90-day and six-month same-as-cash
loans, second mortgage and home equity loans, and installment loans.
The general economic conditions in the Corporation's market area have
generally been consistent with the nation as a whole. Unemployment
statistics have generally been consistent with the State of Ohio as a whole
and real estate values have been stable to rising. The Corporation is not
aware of any exposure to material costs associated with environmental
hazardous waste cleanup. Bank loan procedures require state and federal
environmental regulatory studies be obtained by Bank management before
approving any commercial real estate loan with such potential risk.
The Corporation is anticipating pursuing opportunities to expand into other
areas of the financial services industry, including, but not limited to,
insurance underwriting, made available by the passage of the Financial
Modernization Act of 1999, although no specific transactions are currently
contemplated.
Competition in Financial Services
- ---------------------------------
Both the Bank and the Finance Company compete for business in the Ohio
counties of Wyandot, Hancock, Marion, and Union. The Company's competitors
for business come from two primary sources: large regional firms and
independent community banks and thrifts. The Bank also competes,
particularly for deposit dollars, with insurance companies, brokerage firms
and investment companies. The Bank finds that it competes favorably with
the large regional banks by its ability to maintain decision-making officers
within branch locations rather than centralizing decision-making in a
corporate headquarters. Competition with the independent community banks is
enhanced by creating product niches so as not to resort solely to pricing as
a means to attract business. Examples of the Bank's product niches include
horse and cargo trailer financing, small-business lending and low-fee demand
deposit accounts. The Finance Company has found a niche in indirect
financing of retail consumer goods from regional retailers.
Employees
- ---------
Currently the Bank has 108 full-time employees and 18 part-time employees.
The Finance Company has 5 full-time employees. Officers of the Corporation
are also employees of the Bank and have been included in these totals. The
Corporation does not have any full- or part-time employees.
Supervision and Regulation
- --------------------------
Regulation of the Corporation: The Corporation is a registered bank holding
company organized under the laws of the State of Ohio on March 22, 1994. As
such, the Corporation is subject to the laws of the State of Ohio and is
under the jurisdiction of the Securities Act of 1933, as amended, and
various Securities and Exchange Commission rules and regulations relating to
the offering and sale of its securities. The Corporation is also subject to
regulation under the Bank Holding Company Act of 1956, as amended. The
Federal Reserve Board regulates financial holding companies and may examine
or inspect the books and records of the Corporation and the Bank.
The Corporation is not aware of any current recommendations by regulatory
authorities that, if they were to be implemented, would have a material
effect on the Corporation.
Regulation of the Bank: The Bank is chartered in the State of Ohio and
regulated by the Ohio Division of Financial Institutions. Further, the
Federal Deposit Insurance Corporation insures the Bank's depositors. These
regulatory agencies have the authority to examine the books and records of
the Bank, and the Bank is subject to their rules and regulations.
Regulation of the Finance Company: The Finance Company is chartered in the
State of Ohio and regulated by the Ohio Division of Financial Institutions,
the Federal Deposit Insurance Corporation, and the Federal Reserve Board.
These regulatory agencies have the authority to examine the books and
records of the Finance Company and the Finance Company is subject to their
rules and regulations.
The following schedules present, for the periods indicated, certain
financial and statistical information of the Corporation as required under
the Securities and Exchange Commission's Industry Guide 3, or a specific
reference as to the location of required disclosures in the Corporation's
2000 Annual Report to Shareholders (the "Annual Report"), which is included
as Exhibit 13 to this document and incorporated herein by reference.
Statistical Disclosures
- -----------------------
The following statistical information for 2000, 1999, and 1998, included in
the Annual Report is incorporated herein by reference.
Pages of Annual Report
----------------------
Distribution of Assets, Liabilities and
Shareholders, Equity; Interest Rates and
Interest Differential 5-6
Investment Portfolio 11
Loan Portfolio 8
Summary of Loan Loss Experience 9
Deposits 12
Return on Equity and Assets 3
Short-term Borrowings 27
ITEM 2 - PROPERTIES
The Corporation's headquarters and the Bank's main office are located at 118
South Sandusky Avenue, Upper Sandusky, Ohio, in Wyandot County. The
building is used exclusively by the Corporation and the Bank.
All of the offices listed below are owned by the Bank and are free and clear
of any encumbrances:
Location Description
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1. Main Office Two story building built in the early
118 S. Sandusky Ave. 1900's and remodeled in 1991.
Upper Sandusky, Ohio 43351
2. Carey Office One story building built and opened in 1973.
128 S. Vance Street
Carey, OH 43316
3. Harpster Office One story building purchased in 1978.
17480 Cherokee Street
Harpster, OH 43323
4. North Drive-In Office One story drive in office opened in 1981.
400 N. Sandusky Avenue
Upper Sandusky, OH 43351
5. Marion Barks Road Office One story building purchased,
170 Barks Road East renovated, and opened in 1988.
Marion, OH 43302
6. Findlay Tiffin Avenue Office One story building purchased from Savings
1600 Tiffin Avenue of America in 1992. The building was
Findlay, OH 45840 renovated in 1999 to add additional offices.
7. Marion Jamesway Office One story building constructed and opened
279 Jamesway in 1997.
Marion, OH 43302
8. Bellefontaine Office One story building purchased, renovated,
1245 Bellefontaine Ave. and opened in 1999.
Marion, OH 43302
9. Findlay Lincoln Street Office One story building purchased in
1660 Tiffin Ave. 1999 and opened in 2000.
Findlay, OH 45840
10. Richwood Office One story building purchased and opened
335 East Blagrove Street in 2000.
Richwood, OH 43344
11. Westerville Office Two story building purchased in 2000.
17 N. State Street Scheduled to open in 2001.
Westerville, OH 43081
The Bank also operates an intermittent office inside the Rotary Towers
Nursing Facility in Marion, Ohio, which was opened in 1991. The Bank's
Lincoln Street building is used as a banking office and to house the Bank's
Real Estate Mortgage Department.
The Finance Company operates offices at 141 S. Main Street, Marion, Ohio and
1239 Bellefontaine Avenue, Marion, Ohio. The Main Street office is owned by
Advantage and the Bellefontaine office is leased from the Bank.
The Bank considers its physical properties to be in good operating condition
(subject to reasonable wear and tear) and suitable for the purposes for
which they are being used.
ITEM 3 - LEGAL PROCEEDINGS
There is no pending litigation, other than routine litigation incidental to
the business of the Corporation and Bank, of a material nature involving or
naming the Company or Bank as a defendant. Further, there are no material
legal proceedings in which any director, officer, principal shareholder,
affiliate of the Corporation, or security holder owning five percent of the
Corporation's common stock; or any associates of such persons is a party or
has a material interest that is adverse to the Corporation or Bank. None of
the routine litigation in which the Company or Bank is involved is expected
to have a material adverse impact on the financial position or results of
operations of the Corporation or Bank.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of 2000.
PART II
ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The information set forth under the heading "Shareholder Information" on
page 38 of the Annual Report is incorporated herein by reference.
ITEM 6 - SELECTED FINANCIAL DATA
The information set forth under the heading "Comparative Summary of Selected
Financial Data" on page 3 of the Annual Report is incorporated herein by
reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The information set forth under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 4
through 15, inclusive, of the Annual Report is incorporated herein by
reference.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information set forth under the heading "Quantitative and Qualitative
Disclosures about Market Risk" on pages 13 and 14 of the Annual Report to
Shareholders is incorporated herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information contained in the consolidated financial statements and
related notes and the report of independent auditors thereon, on pages 16
through 37, inclusive, of the Annual Report to Shareholders is incorporated
herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
No changes in or disagreements with the Corporation's independent
accountants on accounting and financial disclosure have occurred.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning Directors and Executive Officers of the Corporation
appears on pages 4 through 8 inclusive under the captions "Information
relating to Nominees and other Directors", and "Executive Officers" in the
Corporation's Definitive Proxy Statement dated March 9, 2001 for the Annual
Meeting of Shareholders to be held on April 11, 2001 and is incorporated
herein by reference.
ITEM 11 - EXECUTIVE COMPENSATION
Information concerning executive compensation appears on pages 3 and 10
through 16, inclusive, under the captions "Compensation of Directors",
"Report of the Executive Compensation Committee of the Board of Directors on
Executive Compensation", "Compensation Committee Interlocks and Insider
Participation in Compensation Decisions", "Executive Compensation",
"Deferred Compensation Plan", "Executive Incentive Stock Option Plan",
"Supplemental Executive Retirement Plan", "Employment Contracts", and
"Performance Graph" in the Corporation's Definitive Proxy Statement dated
March 9, 2001 for the Annual Meeting of Shareholders to be held on April 11
2001 and is incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information concerning security ownership of certain beneficial owners and
management is contained on pages 2 and 4 through 6 under the captions
"Voting Securities and Principal Holders Thereof" and "Information Relating
to Nominees and other Directors" in the Corporation's Definitive Proxy
Statement dated March 9, 2001 for the Annual Meeting of Shareholders to be
held on April 11, 2001 and is incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions is
contained on page 3 under the caption "Related Transactions" in the
Corporation's Definitive Proxy Statement dated March 9, 2001 for the Annual
Meeting of Shareholders to be held on April 11, 2001 and is incorporated
herein by reference.
ITEM 14 - LIST OF EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit Number Description of Document
3.1 *Amended Articles of Incorporation of the Corporation
(incorporated by reference to Registrant's Form 8-K dated
April 27, 1995)
3.2 Code of Regulations of the Corporation
(incorporated by reference to Registrant's Form 8-K dated
April 27, 1995)
4 Form of Certificate of Common Shares of the
Corporation (incorporated by reference to Registrant's Form
8-K dated April 27, 1995)
10 Material Contracts
(incorporated by reference to Registrant's Forms S-8 dated
August 1, 1997 and March 17, 1999)
13 Annual Report to Shareholders for the Year Ended 2000
21 Subsidiaries of the Registrant
23.1 Consent of Crowe, Chizek and Company, LLP
23.2 Consent of Shumaker, Loop & Kendrick, LLP
(incorporated by reference to Registrant's Forms S-8 dated
August 1, 1997 and March 17, 1999)
All of such previously filed documents are hereby incorporated by reference
in accordance with Item 601 of Regulation S-K. Such documents are available
to shareholders without charge upon request from the Issuer.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the under signed, thereunto
duly authorized.
COMMERCIAL BANCSHARES, INC.
Date
By: /s/RAYMOND E. GRAVES
----------------------------
Raymond E. Graves, President
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities
indicated on _________________.
Signatures Signatures
---------- ----------
/s/RAYMOND E. GRAVES /s/EDWIN G. EMERSON
- --------------------------------------- -------------------------------
Raymond E. Graves Edwin G. Emerson
President (Principal Executive Officer) Director
and Director
/s/JAMES A. DEER /s/HAZEL FRANKS
- --------------------------------------- -------------------------------
James A. Deer Hazel Franks
Secretary, Principal Financial Officer, Director
Principal Accounting Officer
and Director
/s/RICHARD SHEAFFER/s/ /s/ DEBORAH J. GRAFMILLER
- --------------------------------------- -------------------------------
Richard Sheaffer Deborah J. Grafmiller
Director, Chairman of the Board Director
/s/DANIEL E. BERG /s/MICHAEL A. MASTRO
- --------------------------------------- -------------------------------
Daniel E. Berg Michael A. Mastro
Director Director
/s/LOREN H. DILLON /s/WILLIAM E. RUSE
- --------------------------------------- -------------------------------
Loren H. Dillon William E. Ruse
Director Director
/s/MARK DILLON /s/DOUGLAS C. SMITH
- --------------------------------------- -------------------------------
Mark Dillon Douglas C. Smith
Director Director
INDEX TO EXHIBITS
Page
Reference to Number in
Prior Filing or This
Exhibit Number Form 10-K
Exhibit Number Description of Document Attached Hereto Report
- -------------- ----------------------- --------------- ---------
3.3 Amended Articles of Incorporation 1 Not Applicable
of the Corporation
3.4 Code of Regulations of 2 Not Applicable
the Corporation
4 Form of Certificate of
Common Shares 3 Not Applicable
of the Corporation
10 Material Contracts 4 Not Applicable
13 Annual Report to Shareholders 5 1
for the Year Ended 2000
21 Subsidiaries of the Registrant 6 42
23.1 Consent of Crowe, Chizek and Company LLP 7 43
23.2 Consent of Shumaker, Loop & Kendrick, LLP 8 Not Applicable