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1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998. Commission File Number: 0-20159
CROGHAN BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Ohio 31-1073048
(State of Incorporation) (I.R.S. Employer Identification No.)
323 Croghan Street, Fremont, Ohio 43420
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (419) 332-7301
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered under Section 12(g) of the Act:
Common Stock, Par Value $12.50 Per Share
(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 pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the 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. [ ]
The aggregate market value of the voting stock held by non-affiliates was
$47,174,708 as of January 31, 1999.
The number of shares outstanding for the registrant's sole class of common
equity as of February 28, 1999 is 1,904,045 shares of common stock, par value
$12.50 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Shareholders for the fiscal year ended December 31, 1998 - PART
II of Form 10-K.
Proxy Statement dated March 26, 1999 for the 1999 Annual Meeting of Shareholders
- - PART III of Form 10-K.
This document contains 64 pages. The Exhibit Index is on pages 19 and 20.
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INDEX
PART I
Item 1. Description of business 3 - 14
Item 2. Description of property 15
Item 3. Legal proceedings 15
Item 4. Submission of matters to a vote of security holders 15
PART II
Item 5. Market for registrant's common equity and related
stockholder matters 16
Item 6. Selected financial data 16
Item 7. Management's discussion and analysis 16
Item 7A. Quantitative and qualitative disclosures about
market risk 16
Item 8. Financial statements and supplementary data 16
Item 9. Changes in and disagreements with accountants on
accounting and financial disclosure 17
PART III
Item 10. Directors and executive officers of the registrant 18
Item 11. Executive compensation 18
Item 12. Security ownership of certain beneficial owners
and management 18
Item 13. Certain relationships and related transactions 18
PART IV
Item 14. Exhibits, financial statement schedules, and reports
on Form 8-K 19 - 21
Signatures 22
2
3
PART I
ITEM 1. Description of Business
Croghan Bancshares, Inc. (the "Corporation") was organized under the laws of the
State of Ohio on September 27, 1983, and is registered as a bank holding company
under the Bank Holding Company Act of 1956, as amended. The Corporation, as the
result of a merger and reorganization effective in 1984, acquired all of the
voting shares of The Croghan Colonial Bank (the "Bank"), an Ohio chartered bank
organized in 1888. The Bank is the only subsidiary of the Corporation, and
substantially all of the Corporation's operations are conducted through the
Bank. The principal offices of both the Corporation and the Bank are located at
323 Croghan Street, Fremont, Ohio. The Bank also operates eight Ohio branch
offices: two in Bellevue, one in Clyde, three in Fremont, one in Green Springs,
and one in Monroeville. The Corporation and the Bank had total consolidated
assets of $350,144,000 at December 31, 1998.
The Corporation, through its subsidiary, the Bank, operates in one industry
segment, the commercial banking industry.
General
The Bank conducts a general banking business embracing the usual functions of
commercial, retail, and savings banking, including time, savings, money market
and demand deposits; commercial, industrial, agricultural, real estate, consumer
installment and credit card lending; safe deposit box rental; automatic teller
machines; trust department services; and other services tailored for individual
customers. The Bank makes and services secured and unsecured loans to
individuals, firms and corporations. The Bank makes direct loans to individuals
and purchases installment obligations from retailers, both with and without
recourse. The Bank makes a variety of residential, industrial, commercial and
agricultural loans secured by real estate, including interim construction
financing. Additionally, investment products bearing no FDIC insurance are
offered through the Bank's Specialized Investment Division.
On a parent company only basis, the Corporation's only source of funds is the
receipt of dividends paid by the Bank subsidiary. The ability of the Bank to pay
dividends is subject to limitations under various laws and regulations, and to
prudent and sound banking principles. Generally, subject to certain minimum
capital requirements, the Bank may declare a dividend without the approval of
the State of Ohio Division of Financial Institutions, unless the total of the
dividends in a calendar year exceeds the total of its net profits for the year
combined with its retained profits of the two preceding years. Management
believes that the future earnings of the Bank will be sufficient to support
anticipated asset growth at the Bank and at the same time provide funds to the
Corporation to service debt and continue dividends at their current level.
On August 1, 1996, the Corporation acquired all of the outstanding shares of
Union Bancshares Corp. ("Union"), the sole shareholder of The Union Bank and
Savings Company, an Ohio banking corporation, for $20,227,000 cash plus $73,000
in acquisition costs pursuant to a Plan and Agreement of Reorganization dated
February 15, 1996, and an Agreement of Merger dated March 27, 1996. The purchase
price was deemed representative of the fair market value of Union and was
subject to final adjustment based upon the results of an audit of Union's
financial statements as of July 31, 1996. The Corporation funded the acquisition
with internally-generated cash (primarily through the available undistributed
income of the Bank) and with $4,500,000 borrowed from NBD Bank. The transaction
was accounted for as a purchase with Union's assets and liabilities stated at
their fair values. The fair values of the assets acquired totalled $102,276,000
and the fair values of the liabilities assumed totalled $91,545,000. Goodwill
arising from the purchase of $9,569,000 is being amortized on a straight-line
basis over a period of 15 years.
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4
ITEM 1. Description of Business, Continued
Regulation and Supervision
The Corporation, as a registered bank holding company, is subject to regulation
by the Board of Governors of the Federal Reserve System under the Bank Holding
Company Act of 1956, as amended (the "Act"). The Act limits the activities in
which the Corporation and the Bank may engage to those activities that the
Federal Reserve Board finds, by order or regulation, to be so closely related to
banking or managing or controlling banks as to be a proper incident thereto. A
favorable determination by the Federal Reserve Board as to whether any such new
activity by the Corporation or the Bank is in the public interest, taking into
account both the likely adverse effects and the likely benefits, is also
necessary before any such activity may be engaged in. A bank holding company is
prohibited from acquiring direct or indirect ownership or control of any company
that is not a bank or bank holding company unless its business and activities
would be acceptable for the bank holding company itself. The Federal Reserve
Board, however, is empowered to differentiate between activities which are
initiated de novo by a bank holding company or a subsidiary and activities
commenced by acquisition of a going concern. The Act also requires every bank
holding company to obtain the prior approval of the Federal Reserve Board before
acquiring all or substantially all of the assets of any bank, or acquiring
ownership or control of any voting shares of any other bank, if after such
acquisition, it would own or control such bank. In making such determinations,
the Federal Reserve Board considers the effect of the acquisition on
competition, the financial and managerial resources of the holding company and
the convenience and needs of the affected communities.
The Federal Reserve Board possesses cease and desist powers over bank holding
companies and their non-bank subsidiaries for activities that are deemed by the
Board of Governors to constitute a serious risk to the financial safety,
soundness or stability of a bank holding company, that are inconsistent with
sound banking principles, or that are in violation of law. Further, under
Section 106 of the 1970 Amendments to the Board's regulations, bank holding
companies and their subsidiaries are prohibited from engaging in certain tie-in
arrangements in connection with any extension of credit or lease or sale of any
property or the furnishing of services.
The Bank, as an Ohio chartered bank, is supervised by the State of Ohio Division
of Financial Institutions. The Bank is also a member of the Federal Reserve
System and subject to its supervision. As such, the Bank is subject to periodic
examinations by both the Ohio Division of Financial Institutions and the Federal
Reserve Board. These examinations are designed primarily for the protection of
the Bank's depositors and not for its shareholders. The Bank must file
prescribed periodic reports with the Ohio Division of Financial Institutions
containing a full and accurate statement of its affairs.
The Corporation and the Bank are subject to the Community Reinvestment Act of
1977, as amended (the "CRA"), which is designed to encourage financial
institutions to give special attention to the needs of low and moderate income
areas in meeting the credit needs of the communities in which they operate. If
the CRA regulatory evaluation of a bank's activities is less than satisfactory,
regulatory approval of proposed acquisitions, branch openings and other
applications requiring Federal Reserve Board approval may be delayed until a
satisfactory CRA evaluation is achieved. The Bank currently has a CRA regulatory
evaluation of outstanding.
The Corporation and Bank are subject to various regulatory capital requirements
administered by the federal and state banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory, and possibly additional
discretionary, actions by regulators that, if undertaken, could have a direct
material effect on the Corporation's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt
4
5
ITEM 1. Description of Business, Continued
corrective action, the Corporation and Bank must meet specific capital
guidelines that involve quantitative measures of assets, liabilities, and
certain off-balance sheet items as calculated under regulatory accounting
practices. The capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings, and
other factors. Quantitative measures established by regulation to ensure capital
adequacy require the Corporation and Bank to maintain minimum amounts and ratios
of total and Tier I capital to risk-weighted assets, and of Tier I capital to
average assets. Management believes that the Corporation and Bank meet all
capital adequacy requirements to which they are subject.
The Corporation's only source of funds are dividends paid by the Bank. The
ability of the Bank to pay dividends is subject to limitations under various
laws and regulations, and to prudent and sound banking principles. Generally,
subject to certain minimum capital requirements, the Bank may declare a dividend
without the approval of the State of Ohio Division of Financial Institutions,
unless the total dividends in a calendar year exceed the total of its net
profits for the year combined with its retained profits of the two preceding
years. The Board of Governors of the Federal Reserve System generally considers
it to be an unsafe and unsound banking practice for a bank holding company to
pay dividends except out of current operating income, although other factors
such as overall capital adequacy and projected income may also be relevant in
determining whether dividends should be paid.
Effects of Government Monetary Policy
The earnings of the Bank are affected by general and local economic conditions
and by the policies of various governmental regulatory authorities. In
particular, the Federal Reserve Board regulates money and credit conditions and
interest rates in order to influence general economic conditions, primarily
through open market acquisitions or dispositions of United States Government
securities, varying the discount rate on member bank borrowings, and setting
reserve requirements against member and nonmember bank deposits. Federal Reserve
Board monetary policies have had a significant effect on the interest income and
interest expense of commercial banks, including the Bank, and are expected to
continue to do so in the future.
Competition
The Corporation's wholly-owned subsidiary, the Bank, has active competition in
all areas in which it engages. The Bank competes for commercial and individual
deposits and/or loans with other commercial banks in Huron, Sandusky, and Seneca
counties in Northwestern Ohio, as well as with savings and loan associations in
the trade area, credit unions, brokerage firms, mutual funds, and financial
units of non-local bank holding companies. The Bank focuses on personalized
service, convenience of facilities, pricing of products, community stature, and
its local ownership and control in meeting its competition.
Employees
The Corporation has no employees and conducts its business through its
wholly-owned subsidiary, the Bank.
As of December 31, 1998, the Bank employed 175 full-time employees and 31
part-time employees to whom it provides a variety of benefits and with whom it
believes relationships are excellent.
The following pages present various statistical disclosures required for bank
holding companies. The information represents only domestic information since
the Corporation has no foreign operations or foreign loans.
5
6
ITEM 1. Description of Business, Continued
Distribution of Assets, Liabilities and Stockholders' Equity;
Interest Rates and Interest Differential
The following table sets forth, for the years ended December 31, 1998, 1997 and
1996, the distribution of assets, liabilities and stockholders' equity,
including interest amounts and average rates of major categories of
interest-earning assets and interest-bearing liabilities:
1998 1997 1996
------------------------ -------------------------- --------------------------
Average Yield Average Yield Average Yield
balance Interest /rate balance Interest /rate balance Interest /rate
Assets
(dollars in thousands)
Interest-earning assets:
Loans receivable(1)(2) $232,977 20,639 8.86% $227,900 20,440 8.97% $187,126 16,700 8.92%
Taxable investment securities 56,618 3,439 6.07% 58,576 3,735 6.38% 61,315 3,843 6.27%
Non-taxable investment securities 14,000 616 4.40% 14,187 636 4.48% 12,743 576 4.52%
Federal funds sold 8,545 457 5.35% 4,417 245 5.55% 3,148 166 5.27%
-------- ------- -------- ------- -------- ------
Total interest-earning assets 312,140 25,151 8.06% 305,080 25,056 8.21% 264,332 21,285 8.05%
-------- ------- -------- ------- -------- ------
Non-interest-earning assets:
Cash and due from banks 9,050 9,083 8,140
Bank premises and equipment, net 8,073 7,951 5,762
Other assets 11,744 12,287 7,322
Less allowance for loan losses (3,514) (3,522) (2,889)
-------- -------- --------
Total $337,493 25,151 $330,879 25,056 $282,667 21,285
======== ======= ======== ======= ======== ======
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Savings, NOW and Money Market deposits $110,491 2,771 2.51% $109,158 2,584 2.37% $91,385 2,161 2.36%
Time deposits 151,644 8,222 5.42% 150,976 8,169 5.41% 125,026 6,736 5.39%
Federal funds purchased and securities
sold under repurchase agreements 5,418 241 4.45% 3,515 136 3.88% 2,206 92 4.17%
Borrowed funds 2,614 186 7.12% 4,386 339 7.73% 4,129 315 7.63%
-------- ------- -------- ------- -------- ------
Total interest-bearing liabilities 270,167 11,420 4.23% 268,035 11,228 4.19% 222,746 9,304 4.18%
-------- ------- -------- ------- -------- ------
Non-interest-bearing liabilities:
Demand deposits 32,090 29,745 28,890
Other liabilities 2,564 2,579 2,202
-------- -------- --------
34,654 32,324 31,092
-------- -------- --------
Stockholders' equity 32,672 30,520 28,829
-------- -------- --------
Total $337,493 11,420 $330,879 11,228 $282,667 9,304
======== ======= ======== ======= ======== =======
Net interest income $13,731 $13,828 $11,981
======= ======= =======
Net yield on interest-earning assets 4.40% 4.53% 4.53%
==== ==== ====
(1) Included in loan interest income are loan fees of $446,556 in 1998,
$422,894 in 1997, and $335,960 in 1996.
(2) Non-accrual loans are included in loan totals and do not have a material
impact on the analysis presented.
6
7
ITEM 1. Description of Business, Continued
Changes in Interest Income and Interest Expense
Resulting from Changes in Volume and Changes in Rate
The following table sets forth, for the periods indicated, a summary of the
changes in interest income and interest expense resulting from changes in volume
and changes in rate:
1998 compared to 1997 1997 compared to 1996
Increase (decrease) Increase (decrease)
due to volume/rate (1) due to volume/rate (1)
---------------------- -----------------------
Volume Rate Net Volume Rate Net
(dollars in thousands)
Interest income:
Loans receivable $ 450 (251) 199 $ 3,657 83 3,740
Taxable investment securities (122) (174) (296) (177) 69 (108)
Non-taxable investment securities (8) (12) (20) 65 (5) 60
Federal funds sold 221 (9) 212 70 9 79
------- ---- --- ------- --- -----
Total interest-earning assets 541 (446) 95 3,615 156 3,771
------- ---- --- ------- --- -----
Interest expense:
Savings, NOW and Money Market deposits 32 155 187 421 2 423
Time deposits 36 17 53 1,404 29 1,433
Federal funds purchased and securities
sold under repurchase agreements 82 23 105 50 (6) 44
Borrowed funds (128) (25) (153) 20 4 24
------- ---- --- ------- --- -----
Total interest-bearing liabilities 22 170 192 1,895 29 1,924
------- ---- --- ------- --- -----
Net interest income $ 519 (616) (97) $ 1,720 127 1,847
======= ==== === ======= === =====
(1) The change in interest income and interest expense due to changes in both
volume and rate, which cannot be segregated, has been allocated
proportionately to the absolute dollar change due to volume and the change
due to rate.
7
8
ITEM 1. Description of Business, Continued
Investment Portfolio
The following table sets forth the carrying amount of investment securities at
December 31, 1998, 1997 and 1996:
December 31,
--------------------------------
1998 1997 1996
(dollars in thousands)
U.S. Treasury securities and obligations of U.S.
Government agencies and corporations $58,857 54,713 57,235
Obligations of states and political subdivisions(1) 15,141 12,307 15,696
Other securities 2,237 2,644 3,550
------- ------- -------
$76,235 69,664 76,481
======= ======= =======
(1) There are no investment securities of an "issuer" where the aggregate
carrying value of such securities exceeded ten percent of stockholders'
equity.
(2) All amounts are presented on the basis of Statement of Financial Accounting
Standards No. 115.
The following table sets forth the maturities of investment securities at
December 31, 1998 and the weighted average yields of such securities:
Maturing
---------------------------------------------------------------------
After one After five
Within but within but within After
one year five years ten years ten years
-------------- ------------- ------------- -------------
Amount Yield Amount Yield Amount Yield Amount Yield
(dollars in thousands)
U.S. Treasury securities and obligations of U.S.
Government agencies and corporations $17,099 5.95% $39,367 5.44% $ 1,803 6.81% $ 588 7.21%
Obligations of states and political subdivisions(1) 2,633 6.42% 10,445 6.43% 1,312 6.90% 751 7.05%
Other securities(2) 100 5.71% - - - - - -
------- ---- ------- ---- ------- ---- ------- ----
$19,832 6.01% $49,812 5.65% $ 3,115 6.85% $ 1,339 7.12%
======= ==== ======= ==== ======= ==== ======= ====
(1) Weighted average yields on non-taxable obligations have been computed
on a fully tax-equivalent basis assuming a tax rate of 34%.
(2) Excludes equity investments of $2,137,000 which have no stated
maturity.
8
9
ITEM 1. Description of Business, Continued
Loan Portfolio
Types of Loans
The amounts of gross loans outstanding at December 31, 1998, 1997, 1996, 1995
and 1994 are shown in the following table according to types of loans:
December 31,
-----------------------------------------------------
1998 1997 1996 1995 1994
(dollars in thousands)
Commercial, financial and agricultural $ 32,161 32,739 33,574 24,830 24,545
Real estate - mortgage 155,431 156,717 156,846 105,484 99,612
Real estate - construction 903 3,478 1,239 2,585 796
Consumer 48,327 43,609 36,440 25,150 27,960
Credit card and other 2,537 2,533 2,548 1,921 1,948
-------- ------- ------- ------- -------
$239,359 239,076 230,647 159,970 154,861
======== ======= ======= ======= =======
Commercial loans are those made for commercial, industrial, and professional
purposes to sole proprietorships, partnerships, corporations, and other business
enterprises. Financial loans are those made to banks, depository institutions,
other associations and financial intermediaries whose business is to accept
deposits and extend credit. Agricultural loans are for the purpose of financing
agricultural production, including all costs associated with growing crops or
raising livestock. These loans may be secured, other than by real estate, or
unsecured, requiring one single repayment or on an installment repayment
schedule. The loans involve certain risks relating to changes in local and
national economic conditions and the resulting effect on the borrowing entities.
Real estate - mortgage loans are secured wholly or substantially by a lien on
real property. Real estate - mortgage loans generally pose the least risk
exposure to the Bank.
Real estate - construction loans are made to finance land development prior to
erecting new structures and the construction of new buildings or additions to
existing buildings. Real estate - construction loans pose more risk than real
estate-mortgage loans, but generally afford adequate security upon completion of
the construction project.
Consumer loans are made to individuals for household, family, and other personal
expenditures. These often include the purchase of vehicles or furniture,
educational expenses, medical expenses, taxes, or vacation expenses. Consumer
loans may be secured, other than by real estate, or unsecured, generally
requiring repayment on an installment repayment schedule. Consumer loans pose
relatively higher risk and are also influenced by local and national economic
conditions.
Credit card and other loans are made to individuals for personal expenditures
and principally arise from bank credit cards. Such loans generally pose the most
risk as they are most frequently unsecured.
There are no foreign loans and lease financing receivables, included in
commercial, financial and agricultural, were $128,000 in 1998, $511,000 in 1997,
and $515,000 in 1996 (none in years prior to 1996).
9
10
ITEM 1. Description of Business, Continued
Loan Portfolio
Maturities and Sensitivities of Loans to Changes in Interest Rates
The following table shows the amount of commercial, financial and agricultural
loans outstanding as of December 31, 1998 which, based on the contract terms for
repayments of principal, are due in the periods indicated. Also, the amounts due
after one year are classified according to their sensitivity to changes in
interest rates.
Maturing
-------------------------------------------
After one
Within but within After
one year five years five years Total
-------- ---------- ---------- -----
(dollars in thousands)
Commercial, financial and agricultural $5,680 10,579 15,902 32,161
====== ====== ====== ======
Interest
Sensitivity
-------------------
Fixed Variable
rate rate
(dollars in thousands)
Due after one but within five years $ 4,405 6,174
Due after five years 1,693 14,209
------- ------
$ 6,098 20,383
======= ======
The above maturity information is based on the contract terms at December 31,
1998 and does not include any possible "rollover" at maturity date. In the
normal course of business, the Bank considers and acts upon the borrower's
request for renewal of a loan at maturity. Evaluation of such a request includes
a review of the borrower's credit history, the collateral securing the loan, and
the purpose for such request.
10
11
ITEM 1. Description of Business, Continued
Loan Portfolio
Risk Elements
The following table presents information concerning the amount of loans at
December 31, 1998, 1997, 1996, 1995, and 1994 which contain certain risk
elements:
December 31,
---------------------------------------------------
1998 1997 1996 1995 1994
(dollars in thousands)
Loans accounted for on a nonaccrual basis(1) $ 315 212 649 845 604
Loans contractually past due 90 days or more
as to principal or interest payments(2) 1,086 582 764 477 845
Loans whose terms have been renegotiated
to provide a reduction or deferral of
interest or principal because of a deterioration in the
financial position of the borrower(1)(3) - - 471 - -
====== === === === ===
(1) Loans are placed on nonaccrual status when, in the opinion of management,
full collection of principal and interest is unlikely. Interest is then
recognized on a cash basis where future collections of principal are
probable. The amount of interest income that would have been recorded had
all nonaccrual and renegotiated (of the type specified above) loans been
current in accordance with their terms approximated $48,000 in 1998,
$100,000 in 1997, $167,000 in 1996, $89,000 in 1995, and $77,000 in 1994.
Actual interest included in income on these loans amounted to approximately
$25,000 in 1998, $84,000 in 1997, $130,000 in 1996, $27,000 in 1995, and
$16,000 in 1994.
(2) Excludes loans accounted for on a nonaccrual basis.
(3) Excludes loans accounted for on a nonaccrual basis and loans contractually
past due 90 days or more as to principal or interest payments.
In addition to the loan amounts identified above, there were approximately
$1,275,000 of potential problem loans at December 31, 1998, none of which relate
to any concentrated risk elements common to all the loans. While these loans are
all currently performing, management has some doubt about the ability of the
borrowers to continue to comply with all of their present loan repayment terms.
As of December 31, 1998 there was no concentration of loans that exceeded 10% of
total loans.
11
12
ITEM 1. Description of Business, Continued
Summary of Loan Loss Experience
Analysis of the Allowance for Loan Losses
The following table shows the daily average loan balances, for the periods
indicated, and changes in the allowance for possible loan losses for such years:
Year ended December 31,
---------------------------------------------------------------------
1998 1997 1996 1995 1994
(dollars in thousands)
Daily average amount of loans $ 232,977 227,900 187,126 155,253 148,544
========= ======= ======= ======= =======
Allowance for loan losses at beginning of year $ 3,518 3,368 2,614 2,357 2,238
Acquisition of Union Bancshares Corp. - - 711 - -
--------- ------- ------- ------- -------
3,518 3,368 3,325 2,357 2,238
--------- ------- ------- ------- -------
Loan charge-offs:
Commercial, financial and agricultural (6) - (97) (2) -
Real estate - mortgage (58) (111) - (25) (117)
Real estate - construction - - (198) - -
Consumer (389) (159) (116) (99) (148)
Credit card and other (22) (17) (17) (12) (7)
--------- ------- ------- ------- -------
(475) (287) (428) (138) (272)
--------- ------- ------- ------- -------
Recoveries of loans previously charged-off:
Commercial, financial and agricultural 15 16 80 154 7
Real estate - mortgage 15 193 - 88 11
Real estate - construction - 1 187 - -
Consumer 101 45 40 32 41
Credit card and other 4 2 4 1 2
--------- ------- ------- ------- -------
135 257 311 275 61
--------- ------- ------- ------- -------
Net recoveries (charge-offs)(2) (340) (30) (117) 137 (211)
--------- ------- ------- ------- -------
Additions to allowance charged to expense(1) 240 180 160 120 330
--------- ------- ------- ------- -------
Allowance for loan losses at end of year $ 3,418 3,518 3,368 2,614 2,357
========= ======= ======= ======= =======
Allowance for loan losses as a percent of year-end loans 1.43% 1.47% 1.46% 1.63% 1.52%
==== ==== ==== ==== ====
Ratio of net charge-offs (recoveries) during the year to
average loans outstanding .15% .01% .06% (.09)% .14%
=== === === ==== ===
(1) The determination of the balance of the allowance for loan losses is based
upon an analysis of the loan portfolio and reflects an amount which, in
management's judgment, is adequate to provide for possible loan losses.
Such analysis is based on the character of the loan portfolio, current
economic conditions, past loan loss experience, and such other factors as
management believes require current recognition in estimating possible loan
losses.
(2) The amount of charge-offs and recoveries fluctuates from year to year due
to factors relating to the condition of the general economy and specific
business segments. The 1994 charge-offs included one real estate-mortgage
loan write-down of $116,946. The 1995 recoveries included one real
estate-mortgage loan recovery of $63,465 and one commercial loan recovery
of $122,700. The 1996 charge-offs included one real estate-construction
loan write-off of $197,452 and the recoveries included a $186,769 recovery
on the same loan. The 1997 real estate-mortgage recoveries included a
$191,782 recovery. The 1998 charge-offs included one real estate-mortgage
loan write-off of $57,836.
12
13
ITEM 1. Description of Business, Continued
Summary of Loan Loss Experience
Allocation of Allowance for Loan Losses
The following table allocates the allowance for loan losses for the periods
indicated to each loan category. The allowance has been allocated to the
categories of loans noted according to the amount deemed to be reasonably
necessary to provide for the possibility of losses being incurred based on
specific credit analyses and the proration of the unallocated allowance to the
loan categories based on actual loss experience:
December 31, 1998 December 31, 1997
---------------------- ------------------------
Percentage Percentage
of loans to of loans to
Allowance total loans Allowance total loans
(dollars in thousands) (dollars in thousands)
Commercial, financial and agricultural $ 585 13.4% $ 635 13.7%
Real estate - mortgage 1,415 64.9% 1,517 65.5%
Real estate - construction - .4% - 1.5%
Consumer 1,322 20.2% 1,264 18.2%
Credit card and other 96 1.1% 102 1.1%
------ ------ ------ ------
$3,418 100.0% $3,518 100.0%
====== ===== ====== =====
December 31, 1996 December 31, 1995
---------------------- ------------------------
Percentage Percentage
of loans to of loans to
Allowance total loans Allowance total loans
(dollars in thousands) (dollars in thousands)
Commercial, financial and agricultural $ 647 14.6% $1,161 15.5%
Real estate - mortgage 1,216 68.0% 682 66.0%
Real estate - construction - .5% - 1.6%
Consumer 1,350 15.8% 682 15.7%
Credit card and other 155 1.1% 89 1.2%
------ ----- ------ -----
$3,368 100.0% $2,614 100.0%
====== ===== ====== =====
December 31, 1994
-------------------------
Percentage
of loans to
Allowance total loans
(dollars in thousands)
Commercial, financial and agricultural $ 933 15.8%
Real estate - mortgage 889 64.3%
Real estate - construction - .5%
Consumer 482 18.1%
Credit card and other 53 1.3%
------ -----
$2,357 100.0%
====== =====
13
14
ITEM 1. Description of Business, Continued
Deposits
The average daily amount of deposits (all in domestic offices) and average rates
paid on such deposits is summarized for the years 1998, 1997 and 1996 in the
following table :
1998 1997 1996
------------------ ------------------- -------------------
Average Average Average Average Average Average
balance rate paid balance rate paid balance rate paid
(dollars in thousands)
Non-interest bearing demand deposits $ 32,090 -% $ 29,745 -% $ 28,890 -%
Interest-bearing demand deposits 37,186 1.97% 35,034 2.02% 25,186 2.07%
Savings, including Money Market deposits 73,305 2.77% 74,124 2.53% 66,199 2.48%
Time deposits 151,644 5.42% 150,976 5.41% 125,026 5.39%
-------- -------- --------
$294,225 $289,879 $245,301
======== ======== ========
Maturities of time deposits of $100,000 or more outstanding at December 31, 1998
are summarized as follows (dollars in thousands):
3 months or less $ 6,256
Over 3 through 6 months 6,278
Over 6 through 12 months 6,967
Over 12 months 4,986
-------
$24,487
=======
Return on Equity and Assets
The ratio of net income to daily average total assets and average stockholders'
equity, and certain other ratios, for the periods noted are as follows:
Year ended December 31,
----------------------
1998 1997 1996
Percentage of net income to:
Average total assets .94% .94% 1.08%
Average stockholders' equity 9.67% 10.18% 10.60%
Percentage of cash dividends declared per common
share to net income per common share 36.14% 36.76% 37.38%
Percentage of average stockholders' equity to
average total assets 9.68% 9.22% 10.20%
14
15
ITEM 2. Description of Property
The Corporation neither owns nor leases any properties. The Bank maintains its
main office at 323 Croghan Street, Fremont, Ohio. In addition, the Bank operates
two branch offices in Bellevue, one in Clyde, three in Fremont, one in Green
Springs, and one in Monroeville. The Bank's operations center is also located in
Fremont, Ohio. All of such premises are owned by the Bank, are in satisfactory
condition, and are suitable for their intended use.
ITEM 3. Legal Proceedings
Corporation management is aware of no material pending or threatened litigation
in which the Corporation or its subsidiary Bank faces potential loss or exposure
which could materially affect the consolidated financial statements. The
Corporation is not aware of any proceedings involving the Corporation that a
governmental authority is contemplating.
ITEM 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of shareholders, through the solicitation of
proxies or otherwise, during the quarter ended December 31, 1998.
15
16
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters
The number of holders of record of the Corporation's common stock at December
31, 1998 is 736.
Information relating to dividend restrictions is contained on pages 31 and 32 in
Financial Statement Footnote No. 13 captioned "Regulatory Matters" of the 1998
Annual Report to Shareholders of Croghan Bancshares, Inc. and is incorporated
herein by reference.
Other information required by this Item is contained on page 4 under the caption
"Market Price and Dividends on Common Stock" of the 1998 Annual Report to
Shareholders of Croghan Bancshares, Inc. and is incorporated herein by
reference.
ITEM 6. Selected Financial Data
Information required by this Item is contained on page 5 under the caption "Five
Year Summary of Selected Financial Data" of the 1998 Annual Report to
Shareholders of Croghan Bancshares, Inc. and is incorporated herein by
reference.
ITEM 7. Management's Discussion and Analysis
Information required by this Item is contained on pages 6 through 14 under the
caption "Management's Discussion and Analysis of Financial Condition and Results
of Operations" of the 1998 Annual Report to Shareholders of Croghan Bancshares,
Inc. and is incorporated herein by reference.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
Information required by this Item is contained on pages 12 and 13 under the
caption "Management's Discussion and Analysis of Financial Condition and Results
of Operations - Interest Rate Risk " of the 1998 Annual Report to Shareholders
of Croghan Bancshares, Inc. and is incorporated herein by reference.
ITEM 8. Financial Statements and Supplementary Data
The following information required by this Item is contained on pages 15 through
35 in the 1998 Annual Report to Shareholders of Croghan Bancshares, Inc. and is
incorporated herein by reference:
Independent Auditor's Report
Consolidated Balance Sheets - December 31, 1998 and 1997
Consolidated Statements of Operations - Years ended December 31, 1998, 1997
and 1996
Consolidated Statements of Stockholders' Equity - Years ended December 31,
1998, 1997 and 1996
Consolidated Statements of Cash Flows - Years ended December 31, 1998, 1997 and
1996
Summary of Significant Accounting Policies
Notes to Consolidated Financial Statements
16
17
PART II
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
There were no changes in or disagreements with accountants during the years
ended December 31, 1998 or 1997.
17
18
PART III
ITEM 10. Directors and Executive Officers of the Registrant
Information concerning Directors and Executive Officers of the Corporation is
contained on pages 2 and 3 under the caption "Election of Directors", and on
pages 4 and 5 under the caption "Executive Officers" in the Corporation's
Definitive Proxy Statement dated March 26, 1999, for the Annual Meeting of
Shareholders to be held on May 11, 1999, and is incorporated herein by
reference. Information concerning the failure of a director of the Corporation
to comply with share beneficial ownership reporting requirements under Section
16(a) of the Securities Exchange Act of 1934, as amended, is contained on page 7
under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" in
the Corporation's Definitive Proxy Statement dated March 26, 1999, for the
Annual Meeting of Shareholders to be held on May 11, 1999, and is incorporated
herein by reference.
ITEM 11. Executive Compensation
Information concerning compensation of directors and executive compensation is
contained on page 4 under the caption "Election of Directors", on pages 5 and 6
under the captions "Executive Compensation" and "Compensation Committee Report",
and on page 6 under the caption "Performance Graph" in the Corporation's
Definitive Proxy Statement dated March 26, 1999, for the Annual Meeting of
Shareholders to be held on May 11, 1999, 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 1, 2, and 3 under the captions "Voting
Securities and Principal Holders Thereof" and "Election of Directors" in the
Corporation's Definitive Proxy Statement dated March 26, 1999, for the Annual
Meeting of Shareholders to be held on May 11, 1999, and is incorporated herein
by reference.
ITEM 13. Certain Relationships and Related Transactions
Information concerning related party transactions is contained on page 7 under
the caption "Indebtedness Of and Transactions with Officers and Directors" in
the Corporation's Definitive Proxy Statement dated March 26, 1999, for the
Annual Meeting of Shareholders to be held on May 11, 1999, and is incorporated
herein by reference.
18
19
PART IV
ITEM 14. (a) Exhibits and Financial Statement Schedules
The following financial statements are filed as a part of this report and are
contained on pages 15 through 35 of Exhibit 13 (the 1998 Annual Report to
Shareholders of Croghan Bancshares, Inc.):
Independent Auditor's Report
Consolidated Balance Sheets - December 31, 1998 and 1997
Consolidated Statements of Operations - Years ended December 31, 1998,
1997 and 1996
Consolidated Statements of Stockholders' Equity - Years ended December 31,
1998, 1997 and 1996
Consolidated Statements of Cash Flows - Years ended December 31, 1998, 1997
and 1996
Summary of Significant Accounting Policies
Notes to Consolidated Financial Statements
Financial statement schedules have been omitted because they are not applicable
or because the required information is provided in the Consolidated Financial
Statements, including the Notes thereto.
The following exhibits are filed with or incorporated by reference (in
accordance with Item 601 of Regulation S-K) in this filing:
Reference to
Prior Filing
Regulation of Exhibit or of the
S-K Exhibit Exhibit's Inclusion
Number Document in this Filing
3(i) Amended Articles of Incorporation of Croghan (1)
Bancshares, Inc.
3(ii) Code of Regulations of Croghan Bancshares, Inc. (2)
4.1 Certificate of Registrant's Common Stock (3)
4.2 Articles Fourth, Fifth and Eighth of (1)
Registrant's Articles of Incorporation
4.3 Articles II, III, V, VII and VIII of (2)
Registrant's Code of Regulations
13 Annual Report to Shareholders - 1998 Included with
this filing
21 Subsidiaries of the Registrant Included with
this filing
23 Consent of Independent Auditor Included with
this filing
27 Financial Data Schedule Included with
this filing
19
20
ITEM 14. (a) Exhibits and Financial Statement Schedules, continued
(1) This document was previously filed as Exhibit 3(i) to the
Registrant's June 30, 1997 quarterly report on Form 10-QSB and is
incorporated herein by reference.
(2) This document was previously filed as Exhibit 2 to the Registrant's
Form 10 registration statement pursuant to Section 12(g) of the
Securities Exchange Act of 1934 and is incorporated herein by
reference.
(3) This document was previously filed as Exhibit 3 to the Registrant's
Form 10 registration statement pursuant to Section 12(g) of the
Securities Exchange Act of 1934 and is incorporated herein by
reference.
20
21
ITEM 14. (b) Reports on Form 8-K
None were filed during the quarter ended December 31, 1998.
21
22
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.
CROGHAN BANCSHARES, INC.
Date: March 9, 1999 /s/ Thomas F. Hite
------------- -------------------------
Thomas F. Hite, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities and on the date indicated:
/s/ Allan E. Mehlow /s/ Robert H. Moyer
- --------------------------------- ---------------------------------
Allan E. Mehlow, Treasurer/ Robert H. Moyer, Director
Principal Financial Officer
/s/ Janet E. Burkett /s/ Albert C. Nichols
- --------------------------------- ---------------------------------
Janet E. Burkett, Director Albert C. Nichols, Director
/s/ Thomas F. Hite /s/ K. Brian Pugh
- ---------------------------------- ---------------------------------
Thomas F. Hite, Director/President K. Brian Pugh, Director
- --------------------------------- ---------------------------------
John P. Keller, Director Clemens J. Szymanowski, Director
/s/ Stephen A. Kemper /s/ J. Terrence Wolfe
- --------------------------------- ---------------------------------
Stephen A. Kemper, Director J. Terrence Wolfe, Director
/s/ Daniel W. Lease
- --------------------------------- ---------------------------------
Daniel W. Lease, Director Claude E. Young, Director
Date: March 9, 1999 /s/ Gary L. Zimmerman
- --------------------------------- ---------------------------------
Gary L. Zimmerman, Director
22