-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GfbnP5b6rGIXxFFtAU7xIzB2PUEa20krSG/uY2o0iepcdKL/CS+CfelzCrjTqHVP ouUvJEnb6OyO+ITiKlf77A== 0000941965-96-000012.txt : 19960401 0000941965-96-000012.hdr.sgml : 19960401 ACCESSION NUMBER: 0000941965-96-000012 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMBANC CORP CENTRAL INDEX KEY: 0000702904 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 351525227 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-10710 FILM NUMBER: 96541130 BUSINESS ADDRESS: STREET 1: 302 MAIN ST STREET 2: P O BOX 438 CITY: VINCENNES STATE: IN ZIP: 47591 BUSINESS PHONE: 8128823050 MAIL ADDRESS: STREET 1: 302 MAIN STREET CITY: VINCENNES STATE: IN ZIP: 47591 10-K405 1 ANNUAL REPORT OF FORM 10-K FOR 1995 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission File No. 0-10710 AMBANC CORP. (Exact name of Registrant as specified in its charter) INDIANA 35-1525227 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 302 Main Street, Vincennes, Indiana 47591 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (812) 885-6418 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 pursuant to Section 12(g) of the Act: Common Shares, $10.00 par value (Title of Class) 2 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 (Section 229.405 of this chapter) 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] The aggregate market value of the voting shares held by non-affiliates of the Registrant is $86,060,599. Solely for purposes of this computation, it has been assumed that officers and directors are "affiliates" and the price of $30.50 as reported on NASDAQ as the last trade on March 22, 1996, was the fair market value of the shares. Number of Common Shares outstanding at March 22, 1996: 3,158,961 DOCUMENTS INCORPORATED BY REFERENCE PORTIONS OF PARTS II AND IV ARE INCORPORATED BY REFERENCE FROM THE REGISTRANT'S 1995 ANNUAL REPORT TO SHAREHOLDERS; AND A PORTION OF PART III IS INCORPORATED BY REFERENCE FROM THE REGISTRANT'S PROXY STATEMENT PURSUANT TO REGULATION 14A DATED MARCH 25, 1996, FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 19, 1996. EXCEPT FOR THOSE PORTIONS OF THE 1995 ANNUAL REPORT INCORPORATED BY REFERENCE, THE ANNUAL REPORT IS NOT DEEMED FILED AS PART OF THIS REPORT. 3 AMBANC CORP. VINCENNES, INDIANA ANNUAL REPORT TO SECURITIES AND EXCHANGE COMMISSION DECEMBER 31, 1995 PART I ITEM 1. BUSINESS GENERAL AMBANC Corp. (the "Corporation") is a registered bank holding company whose principal subsidiaries are The American National Bank of Vincennes, Indiana ("ANB"), Citizens' National Bank of Linton, Indiana ("CNB"), Bank of Casey, Illinois ("BOC"), and The First National Bank in Robinson, Illinois ("FNB") (collectively ANB, CNB, BOC and FNB are referred to herein as the "Banks"). The Corporation was organized as an Indiana corporation on January 7, 1982. Since October 1, 1982, the Corporation's principal business has been the ownership of the stock of its banking subsidiaries, ANB (since October 1, 1982), CNB (since August 1, 1990), BOC (since June 1, 1994), and FNB (since November 1, 1995). The Corporation's Common Stock is listed on the NASDAQ Small Cap Market and is traded under the symbol "AMBK." Effective November 1, 1995, the Corporation acquired First Robinson Bancorp ("Robinson"), the holding company for FNB, by merging a wholly owned subsidiary of the Corporation (which had been formed solely for the purposes of facilitating the acquisition) into Robinson, with the subsidiary surviving the merger. Immediately subsequent to the first merger, the subsidiary was merged into the Corporation, with the Corporation surviving the second merger. Also, as part of the acquisition, Farmers' State Bank of Palestine, Illinois ("FSB"), a wholly owned subsidiary of the Corporation, was merged into FNB with FNB surviving the merger. As a consequence of the mergers, FNB became a direct subsidiary of the Corporation and the former main office of FSB became a branch office of FNB. The Corporation issued 636,504 shares of its Common Stock in exchange for all of the issued and outstanding shares of Robinson (this number has not been adjusted to reflect the November 30, 1995, five percent stock dividend because the shares were issued before the declaration and payment of the dividend). As a bank holding company, the Corporation engages in commercial banking through its banking subsidiaries and can engage in certain non-banking businesses closely related to banking and own certain other 4 business corporations that are not banks, subject to applicable laws and regulations. In addition to the Banks, the Corporation has as a subsidiary American National Realty Corp., which owns various real estate, which is leased to ANB for normal banking activities, and Lincolnland Insurance Agency & Investments, Inc., which is a non-operating shell corporation that was acquired in connection with the BOC acquisition. ANB was chartered as a national bank under the name "German-National Bank" in 1888. CNB was chartered as a national bank in 1934. BOC was chartered as an Illinois banking association in 1963. FNB was chartered as a national bank in 1932. The Corporation, ANB and CNB have entered into an agreement, dated February 27, 1996, which provides for the merger of CNB into ANB, with ANB surviving the merger. Currently it is anticipated that the merger will become effective on or about July 1, 1996. The Corporation's principal executive offices are located at 302 Main Street, Vincennes, Indiana 47591, and its telephone number is (812) 885-6418. OPERATIONS The Banks engage in a wide range of commercial and personal banking activities, including accepting demand deposits; accepting savings and time deposits and money market accounts; making secured and unsecured loans to corporations, individuals and others; issuing letters of credit; offering safekeeping services; and providing financial counseling for institutions and individuals. The Banks' lending services include commercial, real estate, installment loans and credit cards. Revenues from the Banks' lending activities comprise the largest component of the Banks' operating revenues. ANB provides a wide range of personal and corporate trust and trust-related services, including serving as executor of estates, as trustee under testamentary and inter vivos trusts and various pension and other employee benefit plans, as guardian of the estates of minors and incompetents, as escrow agent under various agreements, and as financial advisor to and custodian for individuals, corporations and others. BOC and FNB also provide certain trust and trust- related services. EMPLOYEES At December 31, 1995, the Corporation and the Banks had 309 full-time equivalent employees. Neither the Corporation nor the Banks are a party to any collective bargaining agreement, and employee relations are considered to be good. 5 REGULATION AND SUPERVISION The Corporation is subject to the Bank Holding Company Act of 1956, as amended (the "BHC Act"), and is required to file with the Board of Governors of the Federal Reserve System ("FRB") annual reports and such additional information as the FRB may require. The FRB also may make examinations or inspections of the Corporation. The BHC Act prohibits a bank holding company from engaging in, or acquiring direct or indirect control of more than 5 percent of the voting shares of any company engaged in, non-banking activities. One of the principal exceptions to this prohibition is for activities deemed by the FRB to be "closely related to banking." Under current regulations, bank holding companies and their subsidiaries are permitted to engage in such banking-related business ventures as sales and consumer finance, equipment leasing, computer service bureau and software operations, and mortgage banking. The BHC Act and Indiana law govern banking expansion by banks and bank holding companies. Under current Indiana law, banks may establish an unlimited number of branches anywhere within the State of Indiana. A holding company may establish non-banking offices without geographical limitation. Under the BHC Act, the Corporation must receive the prior written approval of the FRB or its delegate before it may acquire ownership or control of more than five percent of the voting shares of another bank, and under Indiana law it may not acquire 25 percent or more of the voting shares of another bank without the prior approval of the Indiana Department of Financial Institutions. Furthermore, the Corporation's acquisition of a bank located outside the State of Indiana is not permitted unless the acquisition is specifically authorized by the laws of the state in which such bank is located. Illinois law expressly authorizes the acquisition of an Illinois bank by bank holding companies in other states, such as Indiana, the laws of which expressly authorize Illinois bank holding companies to acquire banks in such other states. Since July 1, 1992, bank holding companies outside of Indiana have been permitted under Indiana law to acquire Indiana banks and bank holding companies, subject to certain restrictions such as the existence of reciprocal legislation in the state of the acquiring bank holding company. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 provides for nationwide interstate banking and branching. Since September 30, 1995, well-capitalized bank holding companies have been 6 authorized, pursuant to the legislation, to acquire banks and bank holding companies in any state. The legislation also permits banks to merge across state lines, thereby creating a main bank in one state with branches in other states. Interstate branching by merger provisions will become effective on June 1, 1997, unless a state takes legislative action prior to that date. States may pass laws to either "opt in" before June 1, 1997 or to "opt-out" by expressly prohibiting merger transactions involving out-of-state banks, providing the legislative action is taken before June 1, 1997. Indiana has not yet taken any legislative action with respect to such interstate mergers. Illinois has adopted legislation that will permit interstate branching by acquisition effective June 1, 1997. As national banks, ANB, CNB and FNB are under the supervision of and subject to examination by the Comptroller of the Currency. BOC is an Illinois state- chartered bank subject to regulation by the Illinois Commissioner of Banks and Trust Companies. Regulation and examination by banking regulatory agencies are primarily for the benefit of depositors rather than shareholders. The Corporation is a legal entity separate and distinct from the Banks. Substantially all of the Corporation's cash income, including funds for the satisfaction of the Corporation's debt service requirements, for the payment of its operating expenses, and for the payment of Corporation dividends, is derived from dividends paid by the Banks. There are statutory and regulatory limitations on the amount of dividends that may be paid to the Corporation by the Banks. The prior approval of appropriate regulatory authorities is required if the total of all dividends declared by ANB, CNB or FNB in any calendar year would exceed net income for the preceding two calendar years. The payment of dividends and other distribution by BOC is subject to restrictions imposed by Illinois state banking laws which prohibit the payment of dividends in an amount greater than BOC's net profits less losses and bad debts. At December 31, 1995, approximately $8,814,000 was available for distribution from the Banks to the Corporation. For discussion of the Banks' ability to pay dividends to the Corporation, see Note 16 of the Notes to the Consolidated Financial Statements. The Banks also are subject to certain restrictions imposed by federal law on extensions of credit to the Corporation and other "affiliates" (as the term is defined by such laws) and on investments in or purchases of the securities of the Corporation and other affiliates. Such restrictions prevent the Corporation and other affiliates from borrowing from 7 the Banks unless the loans are secured by certain types and amounts of collateral. Further, all secured loans to, or investments by any of the Banks in, the Corporation or any affiliate are limited in amount to 10 percent of such Bank's capital and surplus, and all secured loans and investments with respect to all affiliates as a group are limited, in the aggregate, to 20 percent of such Bank's capital and surplus. These laws also limit the Banks with respect to taking securities of the Corporation as collateral for loans. EFFECTS OF GOVERNMENT MONETARY POLICIES The earnings of commercial banks are affected not only by general economic conditions but also by the policies of various governmental regulatory authorities. In particular, the FRB regulates money and credit conditions and interest rates in order to influence general economic conditions, primarily through open-market operations in U.S. Government securities, varying the discount rate on bank borrowings, and setting reserve requirements against bank deposits. These policies have a significant influence on overall growth and distribution of bank loans, investments and deposits, and affect interest rates charged on loans and earned on investments or paid for deposits. FRB monetary policies have had a significant effect on the operating results of commercial banks in the past and such policies are expected to continue to have a significant effect in the future. The general effect, if any, of such policies upon the future business and earnings of the Corporation and the Banks cannot accurately be predicted. COMPETITION The banking business is highly competitive. The Banks' market area consists principally of Knox, Greene, Gibson and Eastern Sullivan Counties in Indiana, and Crawford, Clark, Lawrence and Wabash Counties in Illinois, although the Banks also compete with other financial institutions in those counties and in surrounding counties in Indiana and Illinois in obtaining deposits and providing many types of financial services. The Banks compete with larger banks in other areas for the business of local and regional offices of companies located in the Banks' market area and are aggressively seeking and have acquired commercial loan customers from the Indianapolis, Indiana and Evansville, Indiana areas. Recent changes in federal and state law have resulted in and are expected to continue to result in increased competition. Banks other than ANB, CNB, BOC and FNB located in the Banks' market area have been acquired by larger bank holding companies from other parts of Indiana and Illinois. As a consequence of the Riegle-Neal legislation, substantially all state legal barriers to the acquisition of banks by out-of-state 8 bank holding companies were eliminated beginning September 30, 1995. The Corporation anticipates that the Riegle-Neal legislation will have the effect of further increasing the competition in the markets in which the Banks operate, although it is not possible to predict the extent or timing of such increased competition. The Banks also compete with savings and loan associations, credit unions, production credit associations and federal land banks and with finance companies, personal loan companies, money market funds and other non-depository financial intermediaries. Many of these financial institutions have resources many times greater than those of the Banks. In addition, new financial intermediaries such as money-market mutual funds and large retailers are not subject to the same regulations and laws that govern the operation of traditional depository institutions. RECENT AND PROPOSED LEGISLATION The Federal Reserve Board, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, each has issued similar risk-based capital guidelines for all U.S. banks and bank holding companies. The guidelines include a definition of capital and provide a framework for calculating weighted risk assets by assigning assets and off-balance sheet items to broad risk categories. The guidelines also provide a schedule for achieving a minimum supervisory standard for the ratio of qualifying capital to weighted risk assets. All banks must have a minimum ratio of total capital to risk- weighted assets of 8.0 percent. As of December 31, 1995, the Corporation was in compliance with the risk-based capital guidelines. The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), which was enacted into law on December 19, 1991, among other changes, requires the federal banking agencies periodically to review and revise capital standards. Pursuant to FDICIA, the Federal Reserve Board issued new regulations in 1992 that define five categories of financial institutions for purposes of implementing prompt corrective action and supervisory enforcement requirements. The category to which the most highly capitalized institutions are assigned is termed "Well Capitalized." Institutions falling into this category must have a total risk-based capital ratio (the ratio of total capital to risk-weighted assets) of at least 10 percent, a Tier 1 risk-based capital ratio (the ratio of Tier 1, or "core," capital to risk-weighted assets) of at least 6 percent, a leverage ratio (the ratio of Tier 1 capital to total assets) of at least 5 percent, and must not be subject to any written agreement, order or directive from its 9 regulator relative to meeting and maintaining a specific capital level. As of December 31, 1995, each of the Banks was considered by federal regulatory authorities to be "well capitalized." On August 8, 1995, the Board of Directors of the FDIC approved a reduction in the deposit insurance premiums paid by banks. Under the new premium schedule, institutions insured through the Bank Insurance Fund ("BIF") pay insurance premiums ranging from 4 to 31 cents per $100 of domestic deposits. Before the change, the lowest premium rate was 23 cents per $100 of domestic deposits. Institutions that are insured through the Savings Association Insurance Fund ("SAIF") would continue to pay premiums ranging from 23 to 31 cents per $100 of deposits. All of the Corporation's banking subsidiaries are BIF-insured institutions (the deposits ANB acquired from the Princeton branch of First Indiana Bank on March 17, 1995, however, remain insured through SAIF). Under the risk-based insurance assessment system that became effective January 1, 1994, the FDIC places each bank into one of nine risk categories based on the bank's capital ratios and other risk measures. The insurance premium paid by a bank depends upon the category in which the bank is placed, with the healthiest banks paying a deposit insurance premium of 4 cents per $100 of insured deposits and the most troubled banks paying 31 cents per $100 of insured deposits. Under this system, all the Banks fall into the lowest risk category and, therefore, are required to pay a premium of 4 cents on all deposits (except for the SAIF-insured deposits held by ANB). 10 ITEM 2. PROPERTIES The Banks conduct their operations from 24 banking offices located in Vincennes, Bicknell, Sandborn, Monroe City, Linton, Patoka and Princeton in Indiana, and Robinson, Palestine, Casey, Mt. Carmel, Flat Rock, Martinsville, Westfield and West Union in Illinois. In addition, the Banks have a total of 23 automated teller machines. ANB's main banking office is located at 302 Main Street, Vincennes. The main office building contains approximately 80,000 square feet and the Corporation occupies approximately 80 percent of the space. The remaining space is leased to third parties. All of the parcels of real estate and buildings utilized as banking offices of ANB are owned by either ANB or American National Realty Corp. The ANB branches in Patoka and Princeton were acquired on January 1, 1992, when PNB was merged into ANB. The Corporation also owns the main offices and branch locations of CNB, BOC and FNB, except that the CNB branch office is leased from a Director of CNB and the FNB Westgate Branch facility is leased from the grocery store in which it is located. 11 ITEM 3. LEGAL PROCEEDINGS Other than ordinary routine litigation incidental to the business, there are no material pending legal proceedings to which the Corporation or its subsidiaries are a party or of which any of their property is the subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable. SPECIAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth certain information relating to the executive officers of the Corporation as of March 1, 1996.
NAME AGE OFFICES HELD Robert G. Watson 60 Chairman of the Board, President and Chief Executive Officer of the Corporation and ANB Richard E. Welling 50 Secretary, Treasurer, and Chief Financial Officer of the Corporation Judith K. Adams 53 Senior Vice President, Trust Officer and Director of FNB Richard A. Fox 53 Director of Human Resources of the Corporation Chris D. Melton 46 Senior Vice President of ANB David K. Milligan 40 Senior Vice President and Cashier of ANB Raymond E. Mott 56 Senior Vice President of ANB William F. Perry 47 Senior Vice President of ANB and a Director of BOC 12 Dan J. Robinson 48 Executive Vice President of ANB and a Director of CNB Mark J. Robinson 39 Chairman, President and C.E.O. of CNB Troy D. Stoll 30 Senior Auditor of the Corporation Officers are elected annually by the Board of Directors and serve for a one-year period and until their successors are elected. No officers have employment contracts except Robert G. Watson, whose employment contract is incorporated by reference as Exhibit 10-A to this Report. There are no family relationships between or among the persons named. Except as indicated below, each of the officers has held the same or similar position with the Corporation or the Banks for the past five years. Mr. Welling was appointed Secretary and Chief Financial Officer of the Corporation in 1991. Ms. Adams served as President of Farmers' State Bank of Palestine ("Farmers'") from January 1, 1995, until Farmers' merger into FNB effective November 1, 1995. Prior to 1995, she had served as Executive Vice President of Farmers'. Mr. Milligan, who had been employed by ANB since 1986, was named a Senior Vice President and Cashier of ANB in April 1991. Mr. Fox has been employed as the Corporation's Director of Human Resources since 1993. Prior to that date he had served as General Manager and Corporate Secretary of Green Construction of Indiana, Inc. Mr. Melton has been employed by ANB since October 1994. From September 1978 to August 1994, he was employed by The National City Bank of Evansville, Evansville, Indiana. Mr. Mott has been employed by ANB since 1987 and has served as Senior Vice President since 1993. He served as a Director of the Corporation from 1989 through 1990 and as a Director of ANB from 1989 through 1993. 13 Mr. Perry has been employed by ANB since September 1986, serving as Senior Loan Officer. He was elected Senior Vice President of ANB in April 1987. He was elected a Director of BOC in 1994. Mr. Dan Robinson was in charge of the Administrative Division of ANB until 1993 when he was elected Executive Vice President. He was elected a Director of CNB in 1991. Mr. Mark Robinson had served as Vice President of CNB prior to being named President in April 1995. Mr. Stoll has been employed as Senior Auditor of the Corporation since December 1993. He served as Senior Auditor of ANB from October 1991 until December 1993, Staff Accountant in the ANB Accounting Department from May 1990 until August 1991. For information concerning the Directors of the Corporation, see the Corporation's Proxy Statement. 14 PART II Information for Items 5 through 8 of this Report appears in the 1995 Annual Report to Shareholders as indicated in the following tables and is incorporated herein by reference from the Annual Report to Shareholders: ITEM 5. MARKET FOR THE CORPORATION'S COMMON SHARES AND RELATED SECURITY HOLDER MATTERS Annual Report to Shareholders Page (a) Market 46 (b) Holders 46 (c) Dividends 46 ITEM 6. SELECTED FINANCIAL DATA Annual Report to Shareholders Page Selected Financial Data 48 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Annual Report to Shareholders Page Management's Discussion and Analysis 29-46 and 48 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Annual Report to Shareholders Page Financial Statements and Supplementary Data 8-27 ITEM 9. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE The information required in response to this item has been previously reported on a Current Report on Form 8-K. 15 PART III Except as set forth below in "Directors and Executive Officers of the Corporation," the information for Items 10 through 13 of this Report is incorporated herein by reference from the Corporation's definitive Proxy Statement for its Annual Meeting of Shareholders to be held April 19, 1996, which was filed with the Commission pursuant to Regulation 14A on March 25, 1996. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE CORPORATION The information required by this item relating to Executive Officers is found under the heading "Special Item. Executive Officers of the Registrant" in Part I of this Report and the information required by this item relating to Directors is included under the caption "Election of Directors" in the Corporation's definitive Proxy Statement for its Annual Meeting of Shareholders to be held April 19, 1996, which has been filed with the Commission and is incorporated herein by reference in this Form 10-K. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is included under the caption "Executive Compensation" in the Corporation's definitive Proxy Statement for its Annual Meeting of Shareholders to be held April 19, 1996, which has been filed with the Commission and is incorporated by reference in this Form 10-K. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is included under the caption "Election of Directors" in the Corporation's definitive Proxy Statement for its Annual Meeting of Shareholders to be held April 19, 1996, which has been filed with the Commission and is incorporated by reference in this Form 10-K. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is included under the caption "Certain Transactions" in the Corporation's definitive Proxy Statement for its Annual Meeting of Shareholders to be held April 19, 1996, which has been filed with the Commission and is incorporated by reference in this Form 10-K. 16 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K The documents listed below are either filed as a part of this Report or incorporated by reference from the Annual Report to Shareholders or the Corporation's Registration Statement as indicated. (a)1. Financial Statements Annual Report to Shareholders Page Independent Auditors' Report 6 Consolidated Balance Sheets as of December 31, 1995 and 1994 8 Consolidated Statements of Income for the years ended December 31, 1995, 1994 and 1993 9 Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 1995, 1994 and 1993 10 Consolidated Statements of Cash Flows for the years ended December 31, 1995 and 1994 and 1993 11 Notes to Consolidated Financial Statements 12-27 All other schedules have been omitted because the required information is either inapplicable or has been included in the Corporation's consolidated financial statement or notes thereto. (a)2. Exhibits. The following exhibits are filed as part of this Report: 3-A Restated Articles of Incorporation of the Corporation. The copy of this Exhibit filed as Exhibit 3.1 to the Registration Statement Under the Securities Act of 1933 on Form S-4 filed by the Corporation on January 22, 1993 (File No. 33-57296), is incorporated herein by reference. 17 3-B Bylaws of the Corporation, as amended to date. The copy of this Exhibit filed as Exhibit 3-B to the Corporation's Annual Report on Form 10-K for the year ended December 31, 1993, is incorporated herein by reference. 10-A Employment Agreement executed January 15, 1985, and re-executed December 21, 1988, between the Corporation and Robert G. Watson. The copy of this Exhibit filed as Exhibit 10.1 to the Corporation's Registration Statement on Form S-4 (File No. 33-61065) filed July 17, 1995, is incorporated herein by reference. 10-B 1988 AMBANC Corp. Nonqualified Stock Option Plan, as amended. The copy of this Exhibit filed as Exhibit 10.2 to the Corporation's Registration Statement on Form S-4 (File No. 33-61065) filed July 17, 1995, is incorporated herein by reference. 10-C Letter from AMBANC to Robert G. Watson, dated November 8, 1988, granting a stock option. The copy of this Exhibit filed as Exhibit 10.3 to the Corporation's Registration Statement on Form S-4 (File No. 33-61065) filed July 17, 1995, is incorporated herein by reference. 10-D Letter from AMBANC to Robert G. Watson, dated May 16, 1989, granting stock appreciation rights. The copy of this Exhibit filed as Exhibit 10.4 to the Corporation's Registration Statement on Form S-4 (File No. 33-61065) filed July 17, 1995, is incorporated herein by reference. 10-E Letter from AMBANC to Raymond E. Mott, dated November 8, 1988, granting a stock option. The copy of this Exhibit filed as Exhibit 10.5 to the Corporation's Registration Statement on Form S-4 (File No. 33-61065) filed July 17, 1995, is incorporated herein by reference. 10-F Letter from AMBANC to Raymond E. Mott, dated May 16, 1989, granting stock appreciation rights. The copy of this Exhibit filed as Exhibit 10.6 to the Corporation's Registration Statement on Form S-4 (File No. 33-61065) filed July 17, 1995, is incorporated herein by reference. 18 10-G Amended and Restated Supplemental Retirement Benefits Agreement between the Corporation and Robert G. Watson dated March 16, 1995. 10-H List of Executive Compensation Plans and Arrangements. 11 Statement of Computation of per share earnings. 13 Copy of the portions of the Corporation's Annual Report to Shareholders for the year ended December 31, 1995 that are incorporated by reference herein. This exhibit, except for portions thereof that have expressly been incorporated by reference into this Report, is furnished for the information of the Commission and shall not be deemed "filed" as part hereof. 22 List of Subsidiaries. 23.1 Consent of Deloitte & Touche LLP. 23.2 Consent of Kemper CPA Group L.L.C. 23.3 Consent of McGladrey & Pullen, LLP. 27 Financial Data Schedule. 99.1 Report of Crowe, Chizek & Company. 99.2 Reports of Kemper CPA Group L.L.C. 99.3 Report of McGladrey & Pullen, LLP (b) Reports on Form 8-K. A Current Report on Form 8-K was filed on November 13, 1995, to report the effectiveness as of November 1, 1995 of the Corporation's acquisition of First Robinson Bancorp, and the merger of Farmers' State Bank of Palestine into The First National Bank in Robinson. 19 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMBANC CORP. Date: March 28, 1996 By /s/ Robert G. Watson Robert G. Watson, Chairman of the Board, President & Chief Executive Officer, and Director Date: March 28, 1996 /s/ Richard E. Welling Richard E. Welling, Secretary, Treasurer and Chief Financial Officer Date: March __, 1996 Glen G. Apple, Director Date: March 28, 1996 /s/ Paul E. Brocksmith Paul E. Brocksmith, Director Date: March 28, 1996 /s/ Christina M. Ernst Christina M. Ernst, Director Date: March __, 1996 Robert D. Green, Director Date: March 28, 1996 /s/ Rolland L. Helmling Rolland L. Helmling, Director Date: March 28, 1996 /s/ Gerry M. Hippensteel Gerry M. Hippensteel, Director Date: March __, 1996 Rebecca A. Kaley, Director 20 Date: March __, 1996 Owen M. Landrith, Director Date: March 28, 1996 /s/ Bernard G. Niehaus Bernard G. Niehaus, Director Date: March 28, 1996 /s/ Richard H. Schaffer Richard H. Schaffer, Director Date: March 28, 1996 /s/ Robert E. Seed Robert E. Seed, Director Date: March __, 1996 John A. Stachura, Jr. Director Date: March 28, 1996 /s/ Phillip M. Summers Phillip M. Summers, Director Date: March __, 1996 Frank J. Weber, Director Date: March 28, 1996 /s/ Howard R. Wright Howard R. Wright, Director 21
EXHIBIT INDEX
EXHIBITS 3-A Restated Articles of Incorporation of the Corporation. The copy of this Exhibit filed as Exhibit 3.1 to the Registration Statement Under the Securities Act of 1933 on Form S-4 filed by the Corporation on January 22, 1993 (File No. 33-57296), is incorporated herein by reference. 3-B Bylaws of the Corporation, as amended to date. The copy of this Exhibit filed as Exhibit 3-B to the Corporation's Annual Report on Form 10-K for the year ended December 31, 1993, is incorporated herein by reference. 10-A Employment Agreement executed January 15, 1985, and re-executed December 21, 1988, between the Corporation and Robert G. Watson. The copy of this Exhibit filed as Exhibit 10.1 to the Corporation's Registration Statement on Form S-4 (File No. 33-61065) filed July 17, 1995, is incorporated herein by reference. 10-B 1988 AMBANC Corp. Nonqualified Stock Option Plan, as amended. The copy of this Exhibit filed as Exhibit 10.2 to the Corporation's Registration Statement on Form S-4 (File No. 33-61065) filed July 17, 1995, is incorporated herein by reference. 10-C Letter from AMBANC to Robert G. Watson, dated November 8, 1988, granting a stock option. The copy of this Exhibit filed as Exhibit 10.3 to the Corporation's Registration Statement on Form S-4 (File No. 33-61065) filed July 17, 1995, is incorporated herein by reference. 10-D Letter from AMBANC to Robert G. Watson, dated May 16, 1989, granting stock appreciation rights. The copy of this Exhibit filed as Exhibit 10.4 to the Corporation's Registration Statement on Form S-4 (File No. 33-61065) filed July 17, 1995, is incorporated herein by reference. 10-E Letter from AMBANC to Raymond E. Mott, dated November 8, 1988, granting a stock option. The copy of this Exhibit filed as Exhibit 10.5 to the Corporation's Registration Statement on Form S-4 (File No. 33-61065) filed July 17, 1995, is incorporated herein by reference. 10-F Letter from AMBANC to Raymond E. Mott, dated May 16, 1989, granting stock appreciation rights. The copy of this Exhibit filed as Exhibit 10.6 to the Corporation's Registration Statement on Form S-4 (File No. 33-61065) filed July 17, 1995, is incorporated herein by reference. 22 10-G Amended and Restated Supplemental Retirement Benefits Agreement between the Corporation and Robert G. Watson dated March 16, 1995. 10-H List of Executive Compensation Plans and Arrangements. 11 Statement of Computation of per share earnings. 13 Copy of the portions of the Corporation's Annual Report to Shareholders for the year ended December 31, 1995 that are incorporated by reference herein. This exhibit, except for portions thereof that have expressly been incorporated by reference into this Report, is furnished for the information of the Commission and shall not be deemed "filed" as part hereof. 22 List of Subsidiaries. 23.1 Consent of Deloitte & Touche LLP. 23.2 Consent of Kemper CPA Group L.L.C. 23.3 Consent of McGladrey & Pullen, LLP. 27 Financial Data Schedule. 99.1 Report of Crowe, Chizek & Company. 99.2 Reports of Kemper CPA Group L.L.C. 99.3 Report of McGladrey & Pullen, LLP
EX-10 2 EXHIBIT 10-G EXHIBIT 10-G AMENDED AND RESTATED SUPPLEMENTAL RETIREMENT BENEFITS AGREEMENT This Agreement is made and entered into as of the 16th day of March, 1995, by and among Robert G. Watson, Jr. (the "Employee"), The American National Bank of Vincennes, a national banking association with its principal office in Vincennes, Indiana (the "Bank"), and AMBANC Corp. (the "Company"), an Indiana corporation that owns all of the outstanding capital stock of the Bank. (The Company and the Bank are collectively referred to herein as the "Employer"). WHEREAS, the Employer, in recognition of the invaluable contribution of the Employee's services to its success, and in recognition of the Employee's considerable and unique knowledge and experience relating to its business, affairs and operations, desires and believes it to be in its best interest and the best interest of its shareholders to secure the continuation of the Employee's services as an employee of the Employer; and WHEREAS, to induce the Employee to continue to serve as an employee of the Employer, the Employer desires to provide the Employee additional compensation in the event of the termination of his employment with both the Company and the Bank. NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the Employee and the Employer hereby enter into this Agreement and agree to be bound by its terms and conditions. ARTICLE I Definitions Section 1.01. Account Balance. "Account Balance" means the Employee's account balance under the AMBANC Corp. Retirement and Savings Plan as amended (the "401(k) Plan") that is derived from Employer contributions including matching contributions and including any adjustments the 401(k) Plan administrator deems necessary to account for any early withdrawals by the Employee from such Employer contributions. Section 1.02. Beneficiary. "Beneficiary" means the person(s) designated in writing by the Employee to the Employer to receive any Supplemental Retirement Benefits that may be payable hereunder after the Employee's death. 2 Section 1.03. Commencement Date. "Commencement Date" means the date on which the payment of Supplemental Retirement Benefits to the Employee begins and shall be the first day of the month following the Termination Date. Section 1.04. Termination. "Termination" means termination of the Employee's employment for any reason (including discharge, resignation, retirement, disability or death) with both the Company and the Bank (or termination of employment with the last of the two if termination of the Employee's employment with the Company and the Bank does not occur simultaneously). Section 1.05. Termination Date. "Termination Date" means the date and time at which the Employee's employment with both the Company and the Bank terminates (or the date and time at which the Employee's employment with the last of the two terminates if termination of the Employee's employment with both the Company and the Bank does not occur simultaneously) by reason of a Termination. ARTICLE II Supplemental Retirement Benefits Section 2.01. Fifteen Year Certain Annuity. Upon a Termination the Employee shall be entitled to receive from the Employer a monthly annuity payment (the "Annuity Payment") in an amount determined in accordance with Sections 2.02 and 2.03 hereof payable to the Employee during his lifetime, but in any event payable for a period of not less than one hundred eighty (180) months (the "Fifteen Year Certain Annuity"). Payment of such monthly Annuity Payments to the Employee shall begin on the Commencement Date and shall be payable on the first day of each month thereafter during the Employee's lifetime and, if the Employee dies prior to receiving one hundred eighty (180) Annuity Payments, shall continue to be paid after the Employee's death as provided in Section 2.04 below until an aggregate total of one hundred eighty (180) such monthly Annuity Payments have been paid to the Employee and the Beneficiary (or other successor to whom such Annuity Payments are made after the Employee's death). Section 2.02. Amount of Annuity Payments. Subject to adjustment pursuant to Section 2.03 (if applicable), the amount of each Annuity Payment payable to the Employee pursuant to Section 2.01 hereof shall be determined as follows: 3 (a) If the Termination Date occurs after March 31, 2000, the amount of each Annuity Payment shall be Seven Thousand Two Hundred Dollars ($7,200). (b) If the Termination Date occurs prior to April 1, 2000, the amount of each Annuity Payment shall be (i) One Thousand Nine Hundred Forty-eight Dollars and Eighty Cents ($1,948.80), plus (ii) the product obtained by multiplying Eighty-seven Dollars and Fifty-two Cents ($87.52) times the number of full calendar months from March 31, 1995 to the Termination Date (excluding the month in which the Termination Date occurs, and not exceeding 60 months in any event). Section 2.03. Adjustment Based on Retirement and Savings Plan. The Employee is a participant in the 401(k) Plan. Dependent upon the balance of the Employer's contributions to the Account Balance under the 401(k) Plan as of the Termination Date, an adjustment shall be made to the amount of each Annuity Payment as follows: (a) If the Termination Date occurs after June 30, 1999 and the Account Balance as of December 31, 1999 is less than $235,000, the Annuity Payment will be increased by $10 for each $1,000 that $235,000 exceeds the Account Balance. If the Account Balance exceeds $235,000, the Annuity Payment will be decreased by $10 for each $1,000 that the Account Balance exceeds $235,000. (b) If the Termination Date occurs after June 30, 1998 and before July 1, 1999 and the Account Balance as of December 31, 1998 is less than $205,000, the Annuity Payment will be increased by $9.10 for each $1,000 that $205,000 exceeds the Account Balance. If the Account Balance exceeds $205,000, the Annuity Payment will be decreased by $9.10 for each $1,000 that the Account Balance exceeds $205,000. (c) If the Termination Date occurs after June 30, 1997 and before July 1, 1998 and the Account Balance as of December 31, 1997 is less than $177,000, the Annuity Payment will be increased by $8.40 for each $1,000 that $177,000 exceeds the Account Balance. If 4 the Account Balance exceeds $177,000, the Annuity Payment will be decreased by $8.40 for each $1,000 that the Account Balance exceeds $177,000. (d) If the Termination Date occurs after June 30, 1996 and before July 1, 1997 and the Account Balance as of December 31, 1996 is less than $151,000, the Annuity Payment will be increased by $7.80 for each $1,000 that $151,000 exceeds the Account Balance. If the Account Balance exceeds $151,000, the Annuity Payment will be decreased by $7.80 for each $1,000 that the Account Balance exceeds $151,000. (e) If the Termination Date occurs after June 30, 1995 and before July 1, 1996 and the Account Balance as of December 31, 1995 is less than $127,000, the Annuity Payment will be increased by $7.10 for each $1,000 that $127,000 exceeds the Account Balance. If the Account Balance exceeds $127,000, the Annuity Payment will be decreased by $7.10 for each $1,000 that the Account Balance exceeds $127,000. Section 2.04. Payments After Employee's Death. If the Employee dies at any time after the effective date of this Agreement, the Employer shall make any and all payments to which the Employee would have been entitled if not for the Employee's death to the Employee's Beneficiary. Absent a valid beneficiary designation, the Employer shall pay such sums to the Employee's surviving spouse or, in the absence of a surviving spouse, to the Employee's estate. ARTICLE III Miscellaneous Section 3.01. Succession. This Agreement shall inure to the benefit of and be binding upon and may be enforced by the Employer, its legal representatives, successors and assigns, including without limitation, any corporation which may acquire all or substantially all of the Employer's assets and business or into which the Employer may be consolidated or merged, and shall be binding on the Employee and inure to the benefit of and may be enforced by the Employee, his legal representatives, heirs, executors, and administrators. 5 Section 3.02. Legal Expenses. In the event that the Employee or his successors institute any legal action to enforce their rights under, or to recover damages for breach of, this Agreement, the Employee or his successors, if the prevailing party, shall be entitled to recover from the Employer actual expenses (including attorneys' fees) incurred in connection with such legal action. Section 3.03. Titles. The titles of sections hereof are intended solely for convenience, and no provision hereof is to be construed by reference to any such title. Section 3.04. Amendment or Modification. No provision hereof may be amended, modified or waived unless such amendment, modification or waiver is agreed to in writing and signed by the Employee and the Employer. Section 3.05. Severability. In the event that any provision or portion hereof is determined to be invalid or unenforceable for any reason, the remaining provisions and portions hereof shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law; provided, however, that if the remaining provisions and portions hereof are so essentially and inseparably connected, and so depended upon, the provision or portion declared invalid that they are incomplete and incapable of being given effect without such provision or portion, then this entire Agreement shall be deemed to be invalid and unenforceable. Section 3.06. No Employee Interest or Trust. Neither anything contained herein nor any action taken pursuant to the provisions hereof shall create or be construed to create an interest of the Employee in any insurance or annuity policy purchased and owned by the Employer for the purposes of paying the retirement benefits payable hereunder, and neither anything contained herein nor any such action shall create or be construed to create a trust of any kind or a fiduciary relationship between the Employer and the Employee, his beneficiary or any other person. Any funds that may be set aside or invested by the Employer for the purpose of paying the Supplemental Retirement Benefits payable hereunder shall continue for all purposes to be a part of the general funds of the Employer, and no person other than the Employer shall, by virtue of the provisions hereof, have any interest in such funds. To the extent that any person acquires a right to receive payments from the Employer hereunder, such right shall 6 be no greater than the right of any unsecured general creditor of the Employer. Section 3.07. Other Benefits. Nothing contained herein shall be deemed to exclude the Employee from any supplemental compensation, bonus, pension, insurance, severance pay or other benefit to which he might otherwise be or become entitled as an employee of the Employer. Section 3.08. Governing Law. This Agreement contains the entire understanding between the parties with respect to the subject matter hereof, and shall be governed by the laws of the State of Indiana. ARTICLE V Effective Date This Agreement is effective as of March 16, 1995. This Agreement amends and completely restates the Supplemental Retirement Benefits Agreement, which became effective on June 20, 1989. IN WITNESS WHEREOF, the Company, the Bank and the Employee have executed this Agreement as of the date and year first above written. COMPANY: AMBANC CORP. By: /s/ Howard R. Wright BANK: THE AMERICAN NATIONAL BANK OF VINCENNES By: /s/ Howard R. Wright EMPLOYEE: /s/ Robert G. Watson, Jr. Robert G. Watson, Jr. EX-10 3 EXHIBIT 10-H EXHIBIT 10-H LIST OF EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS The Corporation's Chief Executive Officer, Robert G. Watson, who is the only named executive officer, participates in the following compensatory plans and arrangements: EMPLOYMENT AGREEMENT. Employment Agreement executed January 15, 1985, and re-executed December 21, 1988, between the Corporation and Robert G. Watson. This document was filed as Exhibit 10.1 to the Corporation's Registration Statement on Form S-4 (File No. 33-61065) filed July 17, 1995. STOCK OPTION PLAN AND OPTION/SAR GRANTS. 1988 AMBANC Corp. Nonqualified Stock Option Plan, as amended. This document was filed as Exhibit 10.2 to the Corporation's Registration Statement on Form S-4 (File No. 33-61065) filed July 17, 1995. Letter from AMBANC to Robert G. Watson, dated November 8, 1988, granting a stock option. This document was filed as Exhibit 10.3 to the Corporation's Registration Statement on Form S-4 (File No. 33-61065) filed July 17, 1995. Letter from AMBANC to Robert G. Watson, dated May 16, 1989, granting stock appreciation rights. This document was filed as Exhibit 10.4 to the Corporation's Registration Statement on Form S-4 (File No. 33-61065) filed July 17, 1995. AMENDED AND RESTATED SUPPLEMENTAL RETIREMENT BENEFITS AGREEMENT. Amended and Restated Supplemental Retirement Benefits Agreement among the Corporation, The American National Bank of Vincennes, and Robert G. Watson dated March 16, 1995. EX-11 4 EXHIBIT 11 EXHIBIT 11 AMBANC Corp. Computation of Per Share Earnings with Common Stock Options Outstanding (Treasury Stock Method)
1995(a) 1994(a) 1993(a) Fully Fully Fully Primary Diluted Primary Diluted Primary Diluted Average shares Outstanding Common Stock 3,158,958 3,158,961 3,156,410 3,158,578 3,156,190 3,156,190 Common Stock Equivalents: Stock Options 25,200 25,200 25,200 25,200 25,200 25,200 Assumed Repurchase of Treasury Shares (15,569) (15,569)(b) (15,449) (15,449)(b) (14,715) (13,714) Average Common and Common Equivalent Shares Outstanding 3,168,589 3,168,592 3,166,161 3,168,329 3,166,675 3,167,676 Net Income in $1,000 7,045 7,045 6,502 6,502 6,162 6,162 Earnings Per Common and Common Equivalent Share $ 2.22 $ 2.22 $ 2.05 $ 2.05 $ 1.95 $ 1.95
(a) -- The above schedule has been restated to reflect AMBANC Corp. shares issue in merger transactions of 414,845 on June 1, 1993, 569,454 on June 1 1994, and 668,235 on November 1, 1995, and the effect on net income of these merger transactions booked under the pooling of interests method of accounting, and a 5% stock dividend issued to shareholders on November 30, 1995. (b) -- Because it was higher, average price not ending price was used for repurchase assumption. EX-13 5 EXHIBIT 13 AMBANC Corp. 1995 Annual Report to Shareholders Pages 6, 8 through 27 and 29 through 46 and 48 are incorporated by reference 1 BOARD OF DIRECTORS AND SHAREHOLDERS OF AMBANC CORP. VINCENNES, INDIANA We have audited the consoldiated balance sheet of AMBANC Corp. as of December 31, 1995, and the related consolidated statements of income, changes in shareholders' equity, and cash flows for the year ended December 31, 1995. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of AMBANC Corp. as of December 31, 1995, and the results of their operations and their cash flows for the year ended, in conformity with generally accepted accounting principles. The accompanying consolidated financial statements give retroactive effect to the merger of AMBANC Corp. and First Robinson Bancorp (FRB), which has been accounted for as a pooling of interests as described in Note 2 to the consolidated financial statements. Other auditors previously audited and reported on the consolidated balance sheet of AMBANC Corp. as of December 31, 1994, and the related consolidated statements of income, changes in shareholders' equity and cash flows for the years ended December 31, 1994 and 1993, prior to their restatement for the 1995 pooling of interests, and their report dated January 27, 1995, expressed an unqualified opinion on those statements and included an explanatory paragraph concerning a change in method of accounting for income taxes, postretirement benefits and certain securities 2 and an explanatory paragraph that described the restatement of the 1994 and 1993 financial statements to reflect the 1994 pooling of interests described in Note 2 to the consolidated financial statements. The financial statements of FRB for the years ended December 31, 1994 and 1993, were audited by other auditors, whose report dated January 20, 1995, expressed an unqualified opinion. We audited the combination of the accompanying consolidated balance sheet as of December 31, 1994, and the related consoldiated statements of income, changes in shareholders' equity and cash flows for the years ended December 31, 1994 and 1993, after restatement for the 1995 pooling of interests; in our opinion, such consolidated statements have been properly combined on the basis described in Note 2 to the consolidated financial statements. DELOITTE & TOUCHE LLP Indianapolis, Indiana January 18, 1996 3 AMBANC CORP. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1995 AND 1994 (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1995 1994 ASSETS Cash and due from banks.............................. $ 20,520 $ 22,531 Federal funds sold................................... 22,653 7,000 Total cash and cash equivalents.................... 43,173 29,531 Interest bearing deposits in other banks............. 692 1,193 Securities available for sale-at market (amortized cost 1995-$171,744 and 1994-$152,177)... 173,469 146,680 Securities held to maturity (market value of $39,177 in 1994).................. - 40,195 Loans held for sale.................................. 6,727 2,664 Loans, net of unearned income........................ 442,657 388,657 Allowance for loan losses............................ (5,022) (4,531) Loans, net......................................... 437,635 384,126 Premises, furniture and equipment, net............... 9,398 8,888 Accrued interest receivable and other assets......... 11,253 11,963 Total assets................................... $ 682,347 $ 625,240 LIABILITIES Noninterest bearing deposits......................... $ 63,116 $ 62,269 Interest bearing deposits............................ 536,953 488,118 Total deposits..................................... 600,069 550,387 Short-term borrowings................................ 6,788 9,294 Long-term debt....................................... 2,677 3,189 Accrued interest payable and other liabilities.................................. 5,101 4,160 Total liabilities.............................. 614,635 567,030 SHAREHOLDERS' EQUITY Preferred stock, $10 par value, 200,000 shares authorized, no shares issued or outstanding........ - - Common stock, $10 par value, 5,000,000 shares authorized, 3,158,961 and 3,008,587 shares issued and outstanding at December 31, 1995 and 1994............................................... 31,590 30,086 Retained earnings.................................... 35,009 31,612 Unrealized gain/(loss) on securities available for sale, net of deferred tax of $612 and ($2,009)..... 1,113 (3,488) Total shareholders' equity..................... 67,712 58,210 Total liabilities and shareholders' equity..... $ 682,347 $ 625,240
See accompanying notes to consolidated financial statements. 4 AMBANC CORP. CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
1995 1994 1993 INTEREST INCOME Interest and fees on loans........................... $ 37,959 $ 30,676 $ 27,237 Interest and fees on loans held for sale............. 326 536 1,280 Interest on securities Taxable............................................ 7,680 8,629 9,789 Tax exempt......................................... 2,759 2,842 2,952 Other interest....................................... 739 370 500 Total interest income.............................. 49,463 43,053 41,758 INTEREST EXPENSE Interest on deposits................................. 23,593 18,568 18,712 Interest on short-term borrowings.................... 437 409 263 Interest on long-term debt........................... 161 177 32 Total interest expense............................. 24,191 19,154 19,007 Net interest income.............................. 25,272 23,899 22,751 Provision for loan losses.............................. 1,182 338 1,492 Net interest income after provision for loan losses...................... 24,090 23,561 21,259 NONINTEREST INCOME Income from fiduciary activities..................... 602 546 561 Service charges on deposit accounts.................. 1,454 1,274 1,325 Net realized gain on securities...................... 41 29 93 Other operating income............................... 1,016 1,035 1,120 Total noninterest income........................... 3,113 2,884 3,099 NONINTEREST EXPENSE Salaries and employee benefits....................... 9,450 8,777 8,413 Occupancy expenses, net.............................. 1,051 1,107 1,014 Equipment expenses................................... 1,096 1,038 1,043 Data processing expenses............................. 430 442 583 FDIC insurance....................................... 690 1,225 1,191 Other operating expenses............................. 4,816 4,730 4,130 Total noninterest expense.......................... 17,533 17,319 16,374 INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE......... 9,670 9,126 7,984 Income taxes........................................... 2,625 2,624 2,074 INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE.............................. 7,045 6,502 5,910 Cumulative effect of change in accounting for deferred income taxes................................ - - 252 NET INCOME....................................... $ 7,045 $ 6,502 $ 6,162 5 EARNINGS PER SHARE Income per share before cumulative effect of accounting change........................ $ 2.23 $ 2.06 $ 1.87 Cumulative effect of accounting change............... - - .08 Net income per share............................. $ 2.23 $ 2.06 $ 1.95 See accompanying notes to consolidated financial statements.
6 AMBANC CORP. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
UNREALIZED GAIN/(LOSS) TOTAL COMMON RETAINED TREASURY ON SHAREHOLDERS' STOCK EARNINGS STOCK SECURITIES EQUITY BALANCE, JANUARY 1, 1993 AS PREVIOUSLY REPORTED............ $ 23,698 $ 20,663 $ - $ (28) $ 44,333 Adjusted for pooling of interests with FRB............. 6,364 1,926 (15) (56) 8,219 BALANCE, JANUARY 1, 1993 AS RESTATED....................... 30,062 22,589 (15) (84) 52,552 Net income for 1993.............. 6,162 6,162 Cash dividends ($.54 per common share)......................... (1,701) (1,701) Net change in unrealized gain on securities available for sale.. 733 733 Purchased treasury stock......... (22) (22) Fractional shares paid for acquisition.................... (2) (2) BALANCE, DECEMBER 31, 1993....... 30,062 27,048 (37) 649 57,722 Net income for 1994.............. 6,502 6,502 Cash dividends ($.62 per common share)......................... (1,947) (1,947) Net change in unrealized loss on securities available for sale....................... (4,137) (4,137) Issuance of stock for dividend reinvestment and stock purchase plan.................. 24 50 74 Fractional shares paid for acquisition.................... (4) (4) BALANCE, DECEMBER 31, 1994....... 30,086 31,649 (37) (3,488) 58,210 Net income for 1995.............. 7,045 7,045 Cash dividends ($.68 per common share)......................... (2,144) (2,144) Net change in unrealized gain on securities available for sale....................... 4,601 4,601 Issuance of stock for dividend reinvestment and stock purchase plan.................. 4 8 12 Fractional shares paid for acquisition and stock dividend. (12) (12) Retired treasury stock........... (37) 37 - 5% stock dividend................ 1,500 (1,500) - BALANCE, DECEMBER 31, 1995....... $ 31,590 $ 35,009 $ - $ 1,113 $ 67,712 See accompanying notes to consolidated financial statements. /TABLE 7 AMBANC CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (DOLLAR AMOUNTS IN THOUSANDS)
1995 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES Net income......................................... $ 7,045 $ 6,502 $ 6,162 Adjustments to reconcile net income to net cash from operating activities: Net premium amortization and discount accretion on securities...................... 374 443 496 Depreciation................................... 987 1,072 1,163 Provision for loan losses...................... 1,182 338 1,492 Deferred income tax provision.................. (621) 365 (365) Gain on securities............................. (41) (29) (93) Proceeds from sales of loans held for sale..... 16,231 35,676 39,591 Loans held for sale made to customers, net of payments collected.................... (20,294) (21,421) (44,957) Accrued interest receivable and other assets............................. (1,290) (4,047) 149 Accrued interest payable and other liabilities........................ 941 2,436 (399) Deferred loan fees, net of costs............... (81) (33) (119) Net cash from operating activities........... 4,433 21,302 3,120 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales of securities available for sale............................... 4,559 14,999 - Proceeds from sales of securities held to maturity. - - 7,420 Proceeds from maturities and calls of securities available for sale............................... 31,453 40,783 - Proceeds from maturities and calls of securities held to maturity................................. 4,037 3,232 69,549 Purchases of securities available for sale......... (15,816) (38,136) Purchases of securities held to maturity........... (3,938) (4,020) (75,552) Net change in interest bearing deposits in other banks................................... 501 (303) (8) Loans made to customers, net of payments collected. (54,028) (51,206) (37,640) Loans purchased.................................... (7,386) (1,187) (1,150) Proceeds from sales of loans....................... 6,804 6,845 5,633 Property and equipment expenditures................ (1,497) (1,295) (1,028) Net cash from investing activities........... (35,311) (30,288) (32,776) /TABLE 8 AMBANC CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (DOLLAR AMOUNTS IN THOUSANDS)
1995 1994 1993 CASH FLOWS FROM FINANCING ACTIVITIES Net change in deposits............................. 49,682 494 5,583 Net change in short-term borrowings................ (2,506) (527) 490 Payments on long-term debt......................... (597) (338) (200) Proceeds from long-term debt....................... 85 2,527 1,000 Purchase of treasury stock......................... - - (23) Payment for fractional shares and dissenter's shares............................... (12) (4) (2) Issuance of stock for dividend reinvestment and stock purchase plan.......................... 12 74 Dividends paid..................................... (2,144) (1,947) (1,701) Net cash from financing activities....... 44,520 279 5,147 NET CHANGE IN CASH AND CASH EQUIVALENTS.............. 13,642 (8,707) (24,509) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR....... 29,531 38,238 62,747 CASH AND CASH EQUIVALENTS AT END OF YEAR............. $ 43,173 $ 29,531 $ 38,238 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for: Interest......................................... $ 22,371 $ 18,976 $ 19,396 Income taxes..................................... 2,981 2,722 2,186
Noncash activities occurred consisting of the reclassification of $40,080 from the held to maturity securities portfolio to the available for sale securities portfolio in 1995. See accompanying notes to consolidated financial statements. 9 AMBANC CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF REPORTING The consolidated financial statements include the accounts of AMBANC Corp. (Corporation), and its wholly owned subsidiaries, The American National Bank of Vincennes (ANB), Citizens' National Bank of Linton (CNB), Bank of Casey (BOC), The First National Bank in Robinson (FNB), American National Realty Corp. (ANR) and Lincolnland Insurance Agency & Investments, Inc. (LIA). Upon consolidation, all significant intercompany accounts and transactions have been eliminated. As discussed in Note 2, AMBANC Corp. acquired BOC on June 1, 1994, and FNB on November 1, 1995, both under the pooling of interests method of accounting. These consolidated financial statements have been restated to reflect the accounts of BOC and FNB for all periods presented. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. DESCRIPTION OF BUSINESS ANB, CNB, BOC and FNB operate primarily in the banking industry, which accounts for more than 90 percent of the Corporation's revenues, operating income and assets. ANB, CNB, BOC and FNB generate commercial, real estate mortgage and installment loans and receive deposits from customers located in Greene, Knox, Gibson, Vigo and surrounding counties in Indiana and Crawford, Clark, Wabash and surrounding counties in Illinois. Although the overall loan portfolio is diversified, the economy of these counties is heavily dependent upon the agricultural industry. The majority of the loans are secured by specific items of collateral including business assets, real property and consumer assets. ANR owns various real estate, which is leased to ANB for normal banking activities, such as parking, drive-in banking and branch banking facilities. 10 SECURITIES Statement of Financial Accounting Standards (FAS) 115, "Accounting for Certain Investments in Debt and Equity Securities", requires securities to be classified as held to maturity, available for sale or trading. Only those securities classified as held to maturity, which management has the intent and ability to hold to maturity, are reported at amortized cost. Available for sale securities are reported at fair value with unrealized after tax gains and losses included in shareholders' equity. The Corporation does not maintain any securities classified as trading. Realized securities gains or losses are reported in the Consolidated Statements of Income. The cost of securities sold is based on the specific identification method. In November 1995 the Financial Accounting Standards Board allowed a one time reclassification of all securities. In December 1995 the Corporation reclassified all held to maturity securities to available for sale securities. LOANS HELD FOR SALE Loans held for sale consist of fixed rate mortgage loans conforming to established guidelines and held for sale to the secondary mortgage market. Mortgage loans held for sale are carried at the lower of cost or market value determined on an aggregate basis. Gains and losses on the sale of these mortgage loans are included in other noninterest income. LOANS Interest on real estate, commercial and installment loans is accrued over the term of the loans on a level yield basis. The recognition of interest income is discontinued when, in management's judgment, the interest will not be collectible in the normal course of business. The Corporation adopted FAS 114 and 118, "Accounting by Creditors for Impairment of a Loan and Income Recognition and Disclosures", as amended, effective January 1, 1995. These statements require that impaired loans be measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or the fair value of the underlying collateral, and specifies alternative methods for recognizing interest income on loans that are impaired or for which there are credit concerns. For purposes of applying this standard, impaired loans 11 have been defined as all nonaccrual loans. The Corporation's policy for income recognition was not affected by adoption of the standard. The adoption of FAS 114 and 118 did not have any effect on the total reserve for credit losses or related provision. LOAN FEES AND COSTS The Corporation defers loan fees, net of certain direct loan origination costs. The net amount deferred is reported on the balance sheets as part of loans and is recognized into interest income over the term of the loan on a level yield basis. ALLOWANCE FOR LOAN LOSSES The balance in the allowance and the amount of the annual provision charged to expense are judgmentally determined based upon a number of factors. The allowance is maintained by management at a level considered adequate to cover possible losses that are currently anticipated based on past loss experience, general economic conditions, information about specific borrower situations, including their financial position and collateral values, and other factors that are particularly susceptible to changes that could result in a material adjustment in the near term. While management endeavors to use the best information available in making its evaluations, future allowance adjustments may be necessary if economic conditions change substantially from the assumptions used in making the evaluations. While management may periodically allocate portions of the allowance for specific problem loan situations, the entire allowance is available for any loan charge-offs which occur. Increases to the allowance are recorded by a provision for possible loan losses charged to expense. A loan is charged off by management as a loss when deemed uncollectible, although collection efforts continue and future recoveries may occur. PREMISES, FURNITURE AND EQUIPMENT Premises, furniture and equipment are stated at cost less accumulated depreciation. Premises, furniture and equipment are depreciated over the estimated useful lives of the assets ranging from 3 to 40 years, principally on the straight-line method. Maintenance and repairs are expensed, and major improvements are capitalized. 12 INTANGIBLE ASSETS Goodwill and other intangible assets are amortized on a straight-line basis generally over a period of 15 years. Management reviews intangible assets for possible impairment if there is a significant event that detrimentally affects operations. Impairment is measured using estimates of the future earnings potential of the entity or assets acquired. OTHER REAL ESTATE Real estate acquired through foreclosure or acceptance of a deed in lieu of foreclosure is recorded at the lower of cost (fair value at date of foreclosure) or fair value less estimated selling costs. The costs of holding the real estate are charged to operations while major improvements are capitalized. INCOME TAXES Effective January 1, 1993, the Corporation adopted FAS 109, "Accounting for Income Taxes", which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. The cumulative effect of the accounting change on years prior to January 1, 1993, of $252 is shown on the 1993 income statement. The Corporation and its subsidiaries file consolidated tax returns. Each entity is charged or credited for taxes as if separate returns were filed. FIDUCIARY ACTIVITIES Trust Department income is recognized on the cash basis method, which in this circumstance does not materially differ from the accrual method. STATEMENTS OF CASH FLOWS Cash and cash equivalents is defined to include cash on hand, noninterest bearing amounts due from other banks and federal funds sold. Generally, federal funds are sold for one-day periods. The Corporation reports net 13 cash flows for loans held for sale, customer loan transactions, deposit transactions and deposits made with other financial institutions. NEW ACCOUNTING PRONOUNCEMENTS FAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", is effective for fiscal years beginning after December 15, 1995. This statement establishes accounting standards for the impairment of long-lived assets, certain liabilities, certain intangibles and goodwill. The effects of FAS 121 on the future financial position and results of operations of the Corporation cannot be readily determined. FAS 122, "Accounting for Mortgage Servicing Rights - an Amendment of FASB Statement No. 65", is effective for fiscal years beginning after December 15, 1995. This Statement specifies conditions under which mortgage servicing rights should be accounted for separately from the underlying mortgage loans. The effects of FAS 122 on the future financial position and results of operations of the Corporation cannot be readily determined. FAS 123, "Accounting for Stock-Based Compensation", was issued in October 1995 and defines a new method of accounting for stock options. Companies can either elect the new method of accounting or disclose in a note to the financial statements the pro forma effect of adopting the standard. This will not have an impact on results of operations of the Corporation since no current plan exists for issuing stock options. FINANCIAL STATEMENT PRESENTATION Certain items in the 1994 and 1993 financial statements have been reclassified to correspond with the 1995 presentation. 14 NOTE 2 - BUSINESS COMBINATIONS
COMMON SHARES METHOD OF DATE COMPLETED ISSUED ACCOUNTING First Robinson Bancorp (FRB) November 1, 1995 668,235 Pooling Lincolnland Bancshares, Inc. (LBI) June 1, 1994 569,454 Pooling
The Consolidated Financial Statements have been restated to include the accounts and operations of FRB, parent holding company of FNB, and LBI, parent holding company of BOC and LIA for all periods presented. FRB and LBI were merged into the Corporation and ceased to exist at the conclusion of these mergers. The contributions of FRB and LBI to consolidated interest income, net interest income and net income for the periods prior to the merger were as follows.
TEN MONTHS ENDED YEAR ENDED YEAR ENDED OCTOBER 31, DECEMBER 31, DECEMBER 31, 1995 1994 1993 Interest income Previously reported... $ 33,967 $ 35,023 $ 27,701 LBI................... N/A N/A 6,336 FRB................... 6,826 8,030 7,721 Total............... $ 40,793 $ 43,053 $ 41,758 Net interest income Previously reported... $ 17,362 $ 19,423 $ 15,002 LBI................... N/A N/A 3,315 FRB................... 3,624 4,476 4,434 Total............... $ 20,986 $ 23,899 $ 22,751 Net income Previously reported... $ 5,042 $ 5,443 $ 4,557 LBI................... N/A N/A 862 FRB................... 678 1,059 743 Total............... $ 5,720 $ 6,502 $ 6,162
15 NOTE 3 - SECURITIES The amortized cost and estimated market value of securities are as follows.
DECEMBER 31, 1995 GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED MARKET COST GAINS LOSSES VALUE SECURITIES AVAILABLE FOR SALE U.S. Government and its agencies..... $ 101,483 $ 891 $ (664) $ 101,710 States and political subdivisions.... 50,216 1,705 (84) 51,837 Corporate obligations................ 3,550 43 (3) 3,590 Collateralized mortgage obligations.. 15,544 45 (73) 15,516 Mutual funds......................... 951 - (135) 816 Total.............................. $ 171,744 $ 2,684 $ (959) $ 173,469
The one-time reclassification under FAS 115 occurred in December 1995 and reclassified securities with amortized cost of $40,080 from held to maturity to available for sale. The unrealized gain at the time of the transfer was $1,628.
DECEMBER 31, 1994 GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED MARKET COST GAINS LOSSES VALUE SECURITIES AVAILABLE FOR SALE U.S. Government and its agencies.................. $ 116,633 $ 114 $ (4,740) $ 112,007 States and political subdivisions.................. 11,175 179 (88) 11,266 Corporate obligations........... 4,985 24 (44) 4,965 Collateralized mortgage obligations................... 17,995 7 (712) 17,290 Mutual funds.................... 1,389 - (237) 1,152 Total......................... $ 152,177 $ 324 $ (5,821) $ 146,680 SECURITIES HELD TO MATURITY U.S. Government and its agencies.................. $ 500 $ - $ (30) $ 470 Nontaxable states and political subdivisions........ 39,695 433 (1,421) 38,707 Total......................... $ 40,195 $ 433 $ (1,451) $ 39,177
16 Investments in states and political subdivisions and corporate obligations are made within policy standards, which call for these securities to be investment grade or better as established by national rating organizations. These securities are actively traded and have a readily available market valuation. Ratings and market values of these securities are reviewed monthly with market values being obtained from an independent rating service or broker. The amortized cost and estimated market value of securities at December 31, 1995, by contractual maturity are shown in the following schedule. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
AVAILABLE FOR SALE ESTIMATED AMORTIZED MARKET COST VALUE Due in 1 year or less.................... $ 29,068 $ 29,145 Due after 1 year through 5 years......... 59,286 59,507 Due after 5 years through 10 years....... 32,044 33,096 Due after 10 years....................... 7,252 7,397 Subtotal............................... 127,650 129,145 Collateralized mortgage obligations...... 15,544 15,516 U.S. agency mortgage-backed securities............................. 27,599 27,992 Mutual funds............................. 951 816 Total.................................. $ 171,744 $ 173,469
Proceeds from sales of securities available for sale were $4,559 in 1995, $14,999 in 1994 and $0 in 1993. Proceeds from sales of securities held to maturity were $0 in 1995 and 1994 and $7,420 in 1993. Sales and calls of securities available for sale resulted in gross gains of $21 and gross losses of $3 in 1995 and gross gains of $78 and gross losses of $49 in 1994. Sales and calls of securities held to maturity resulted in gross gains and gross losses of $24 and $1 in 1995, $0 and $0 in 1994, and $147 and $54 in 1993, respectively. Securities with a carrying value of $47,631 and $45,694 at December 31, 1995 and 1994, were pledged to secure public deposits and for other purposes required or permitted by law. 17 NOTE 4 - LOANS Loans as presented on the balance sheets are comprised of the following.
1995 1994 Commercial and agricultural.... $ 213,077 $ 180,403 Real estate.................... 132,067 116,611 Installment.................... 98,506 93,651 Total loans.................. 443,650 390,665 Unearned income................ (993) (2,008) Total loans, net............. $ 442,657 $ 388,657
At December 31, 1995, 1994 and 1993, non-accrual loans totaled $983, $650 and $1,078. Income recorded on these loans during 1995, 1994 and 1993 totaled $18, $17 and $17. Income which would have been recorded on these loans during 1995, 1994 and 1993, had they been accruing all year, was $41, $55 and $105. Certain loans have been restructured in a manner that grants a concession to the borrower because of the borrower's financial difficulties. At December 31, 1995, 1994 and 1993, these loans totaled $45, $490 and $565. Interest income recorded on these loans was $3, $39 and $40 during 1995, 1994 and 1993. Interest income which would have been recorded under the original terms of the loans was $4, $44 and $48 during 1995, 1994 and 1993. Directors and executive officers of the Corporation and its wholly owned subsidiaries were customers of, and had other transactions with, the banking subsidiaries in the ordinary course of business. A schedule of the aggregate activity involving loans to related parties follows. Balance, January 1, 1995.................... $ 11,307 New loans................................... 15,076 Loan reductions............................. (7,074) Balance, December 31, 1995.................. $ 19,309 18 NOTE 5 - ALLOWANCE FOR LOAN LOSSES The activity in the allowance for loan losses is as follows.
1995 1994 1993 Balance, January 1.............. $ 4,531 $ 4,238 $ 4,168 Provision charged to operations. 1,182 338 1,492 Loans charged off............... (1,019) (808) (1,754) Recoveries...................... 328 763 332 Balance, December 31............ $ 5,022 $ 4,531 $ 4,238
The recorded investment in loans considered impaired at December 31, 1995, under FAS 114 and 118, was $983 of which $160 related to loans with a specific valuation reserve of $50 and $823 related to loans with no valuation reserve. For the year ended December 31, 1995, the average recorded investment in impaired loans was approximately $1,146. NOTE 6 - PREMISES, FURNITURE AND EQUIPMENT Premises, furniture and equipment as presented on the balance sheets are comprised of the following.
1995 1994 Land and improvements....................... $ 1,346 $ 1,346 Buildings and improvements.................. 10,751 9,997 Furniture and equipment..................... 8,973 8,570 Total cost.............................. 21,070 19,913 Accumulated depreciation.................... (11,672) (11,025) Total, net.............................. $ 9,398 $ 8,888
Depreciation expense for the years ended December 31, 1995, 1994 and 1993, totaled $987, $1,072 and $1,163. NOTE 7 - INTEREST BEARING DEPOSITS Interest bearing deposits issued in denominations of $100 or greater totaled $66,647 and $57,149 at December 31, 1995 and 1994. 19 NOTE 8 - SHORT-TERM BORROWINGS Short-term borrowings included:
1995 1994 Federal funds purchased and repurchase agreements................. $ 5,385 $ 7,207 Demand notes issued to the U.S. Treasury.... 1,403 2,087 Total..................................... $ 6,788 $ 9,294
Federal funds purchased generally mature daily. Borrowings under the Federal Reserve Bank note option plan are collateralized by certain securities and are reduced at the discretion of the U.S. Treasury. NOTE 9 - LONG-TERM DEBT Long-term debt is comprised of a deferred compensation plan of $102 and $27 in 1995 and 1994 as discussed in Note 10 and two Federal Home Loan Bank Mortgage Advances (Advances) totaling $2,575 and $3,162 in 1995 and 1994. The Advances have an average rate of 5.68%, interest payable monthly and principal payable in annual installments with the final payment due March 15, 2004, and are secured by various securities. The principal maturities of these Advances in each of the five years after December 31, 1995, will be $484, $400, $332, $211 and $188. NOTE 10 - EMPLOYEE BENEFITS The Corporation maintains retirement savings plans (Plans) covering substantially all employees. To be eligible to participate, the Plans require employees to complete one year of service and be 21 years of age. The first of these Plans covers all employees except FNB employees and allows for the matching of 50% of the first 4% of employee salary contributions and an annual discretionary contribution. The FNB Plan allowed for the matching of 50% of the first 6% of employee salary contributions and an annual discretionary contribution of which there has been none during the last three years. FNB employees were eligible to participate in a defined contribution money purchase pension plan that provided for a contribution of 5% of eligible compensation. The Corporation's contributions to all Plans are vested by employees at 20% per year starting with the second year of service and become 100% vested after six years. The Corporation's total contributions to the Plans were $473, $435 and $368 for 1995, 1994 and 1993. 20 Prior to December 31, 1994, BOC sponsored a defined benefit pension plan covering substantially all employees. Benefits were based primarily on years of service and on the employees' average compensation during their period of employment. BOC's funding policy was to contribute the minimum amount required by applicable regulations. Plan assets consist primarily of investments in interest bearing balances with financial institutions, U.S. government bonds and marketable equity mutual funds. In 1994 a curtailment occurred which was accounted for in accordance with FAS 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits". The effect of curtailing the Plan was to recognize a decrease in the 1994 projected benefit obligation of $215, to recognize the transition obligation of $472 in 1994 and to recognize an additional gain of $208 at December 31, 1994. The net $49 curtailment loss is included with pension costs in the 1994 consolidated statement of income. 21 Summary of the Plan's funded status at December 31:
1995 1994 Actuarial present value of accumulated benefit obligations Vested.................................... $ (928) $ (1,090) Nonvested................................. - (13) Projected benefit obligation for services rendered to date............. (928) (1,103) Plan assets at fair value................... 958 925 Plan assets over/(under) projected benefit obligation.................... 30 (178) Items not yet recognized in income Unrecognized loss......................... 72 81 Prepaid/(accrued) pension cost.......... $ 102 $ (97)
Net pension expense for the years ended December 31:
1995 1994 1993 Service cost-benefits earned................ $ - $ 93 $ 76 Interest cost on projected benefit obligation........................ 50 84 79 Actual return on plan assets................ (69) (35) (43) Net amortization and deferral............... 8 6 (4) Effect of curtailment loss.................. - 49 - Net pension (benefit)/expense............. $ (11) $ 197 $ 108
The weighted-average discount rate used in determining the actuarial present value of projected benefit obligations was 5% in 1995 and 1994 and 8% in 1993. Additionally, the rate of increase in future compensation assumed was 0% for 1995 and 4% for 1994 and 1993. The expected long-term rate of return on plan assets was 6% in 1995 and 8% in 1994 and 1993. The Corporation has a deferred compensation plan for the benefit of certain executive officers. In return for the officers' relinquishing the right to a portion of their current compensation, the Corporation agrees to pay the participants at retirement or termination, in the form of 120 monthly payments or one lump-sum payment, the amount deferred plus any interest earned during the deferral period. Interest is paid annually at prime rate and the liability of $102 and $27 is included with long-term debt on the December 31, 1995 and 1994, balance sheets. During 1995 and 1994 the Corporation accrued approximately $6 and $1 of interest expense towards its obligation under the plan. 22 NOTE 11 - POSTRETIREMENT BENEFITS The Corporation sponsors an unfunded postretirement benefit plan which provides defined medical and death benefits to certain eligible employees. Retirees as of December 31, 1992, receive postretirement medical benefits and death benefits for themselves and medical benefits for their spouses. These medical expenses were fixed in 1992 and all future increases are passed onto the retirees. Employees hired before April 1990 who retire after January 1, 1993, are eligible to receive a postretirement medical benefit for themselves, if they have completed 20 years of service and attained age 62. This benefit is sixty dollars per month to pay up to fifty percent of the retirees medical benefits provided under the Corporation's group major medical insurance plan until age 65 and then under a medicare supplement plan. Accumulated postretirement benefit obligations at December 31:
1995 1994 Retirees................................. $ (350) $ (318) Fully eligible active participants....... (28) (7) Other active plan participants........... (261) (131) Accumulated postretirement benefit obligation......................... (639) (456) Unrecognized prior service cost.......... 74 - Unrecognized loss........................ (20) - Unrecognized transition obligation....... 494 398 Accrued postretirement benefit liability.................. $ (91) $ (58)
Net periodic postretirement benefit cost for the years ended December 31:
1995 1994 1993 Service cost-benefits attributed to service during the period.............. $ 13 $ 11 $ 10 Interest cost on accumulated postretirement benefit obligation...... 39 40 41 Amortization of transition obligation over 20 years............... 29 29 29 Postretirement benefit cost.......... $ 81 $ 80 $ 80
Benefit payments of $48, $45 and $57 were made for postretirement medical benefits in 1995, 1994 and 1993. 23 For measurement purposes, the annual rate of increase in the per capita cost of covered health care benefits was assumed to be 9.5% for 1995 and 16% for 1994 and 1993 with the rate gradually decreasing to 6% after 15 years. The health care cost trend assumption has a significant effect on the amounts reported. An increase in the assumed health care cost trend rates by 1% in each year would increase the accumulated postretirement benefit obligation as of December 31, 1995, 1994 and 1993, by approximately $14 and would have virtually no effect on the aggregate of the service and interest cost components of net periodic postretirement benefit cost for 1995, 1994 and 1993. The weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 7%, 6% and 7% at December 31, 1995, 1994 and 1993. NOTE 12 - STOCK OPTION PLAN The Corporation had a Nonqualified Stock Option Plan which expired in April 1993. Under the terms of the plan, options were granted at amounts not less than the fair market value of the shares at the date of the grant and any options granted must be exercised within ten years of the grant. As of December 31, 1995, 1994 and 1993, fully vested options for 25,200 shares at an option price of $19.05 per share were outstanding. Additionally, under provisions of the Nonqualified Stock Option Plan, stock appreciation rights have been granted coinciding with the number of stock options ranted. The value of each stock appreciation right at any time is equal to 50% of the excess of the fair market value of one share of common stock of the orporation over the exercise price of the option to which it relates. Employee benefits charged/(credited) to operations in 1995, 1994 and 1993 includes $12, $69) and $60 related to stock appreciation rights. NOTE 13 - INCOME TAXES Income taxes consist of the following.
1995 1994 1993 Income taxes Current payable........................... $ 3,246 $ 2,259 $ 2,439 Deferred income taxes/(benefits).......... (409) 365 (365) Change in valuation allowance............. (212) - - Income taxes............................ $ 2,625 $ 2,624 $ 2,074
Income taxes applicable to security transactions were $14, $17 and $36 in 1995, 1994 and 1993. 24 The following is a reconciliation of income tax expense and the amount computed by applying the statutory federal income tax rate of 34% to income before income taxes.
1995 1994 1993 Statutory rate applied to income............ $ 3,288 $ 3,103 $ 2,715 Adjustments Tax exempt interest income................ (1,048) (1,086) (1,146) Non-deductible interest................... 144 156 153 Merger expenses........................... 111 66 48 State income taxes........................ 374 333 306 Alternative minimum tax................... - (27) 97 Surtax exemption and other................ (32) 79 (99) Change in valuation allowance............. (212) - - Total income taxes...................... $ 2,625 $ 2,624 $ 2,074
The Corporation's deferred income tax assets and liabilities consist of the following.
1995 1994 Deferred tax assets Allowance for loan losses................. $ 563 $ 231 Accrued employee benefits................. 392 284 Unrealized loss on securities available for sale...................... - 2,009 Alternative minimum tax carryforward...... 258 253 Other..................................... 5 43 Valuation allowance....................... - (212) 1,218 2,608 Deferred tax liabilities Depreciation.............................. 605 552 Unrealized gain on securities available for sale...................... 612 - Market to market adjustment on loans held for sale..................... 1 92 Accretion of securites discount........... 112 76 1,330 720 Net deferred tax asset/(liability)...... $ (112) $ 1,888
NOTE 14 - COMMITMENTS AND CONTINGENT LIABILITIES The Corporation leases various facilities and equipment. These leases expire at various times during the years 1996 through 2008 with renewal options through the year 2038. Certain of these leases are with companies controlled by directors of the Corporation and its subsidiaries and had total lease payments of $42, $41 and $22 in 1995, 1994 and 1993. Total rental expense for all leases for the years 25 1995, 1994 and 1993, was $166, $94 and $71. The following is a schedule of future minimum lease payments. 1996............ $ 270 1997............ 270 1998............ 191 1999............ 91 2000............ 94 Thereafter...... 1,002 Total......... $ 1,918 In the ordinary course of business, the Corporation's banking subsidiaries have loans, commitments and contingent liabilities, such as guarantees and commitments to extend credit, which are not reflected in the consolidated balance sheets. The Corporation's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to make loans and standby letters of credit is represented by the contractual amount of those instruments. The Corporation uses the same credit policy to make such commitments as is used for on-balance sheet items. Outstanding loan commitments and customers' unused lines of credit amounted to $74,779 and $69,791 at December 31, 1995 and 1994. Outstanding standby letters of credit were $6,058 and $6,417 at December 31, 1995 and 1994. Since many commitments to make loans expire without being used, the outstanding amount of commitments does not necessarily represent future cash commitments. Collateral obtained upon exercise of the commitment is determined using management's credit evaluation of the borrower and may include accounts receivable, inventory, property, land and other items. The Corporation was required to have $7,018 and $6,988 at December 31, 1995 and 1994, on deposit with the Federal Reserve or as cash on hand or on deposit with other banks. These reserves do not earn interest. NOTE 15 - SHAREHOLDERS' EQUITY All share and per share amounts have been retroactively adjusted to reflect the effect of the shares issued in the business combinations discussed in Note 2 as though these shares had been outstanding for all periods presented. A 5% stock dividend was paid on November 30, 1995, and all average share and per share amounts have been retroactively adjusted to reflect this stock dividend. Earnings per share amounts are based on average outstanding shares of 3,158,958 for 1995, 3,156,410 for 1994 and 3,156,190 for 1993. 26 In 1993 the directors of the Corporation approved the establishment of a Dividend Reinvestment and Stock Purchase Plan (Plan) to provide shareholders a method of purchasing additional shares of the Corporation's common stock by reinvesting their cash dividends or making optional cash payments into the Plan. Shares are credited to the participant's account at the market value of the Corporation's stock at the date of the monthly purchase by the Plan. The directors of the Corporation reserved 50,000 shares for the Plan and issued 383 shares in 1995 and 2,388 shares in 1994 to the Plan. The Plan was changed to a market only plan during the second quarter of 1995 and no more shares of common stock are reserved or will be issued by the Corporation through this Plan. The Corporation is subject to various regulatory capital requirements administered by federal 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 corrective action, the Corporation must meet specific capital guidelines that involve quantitative measures of the Corporation's assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Corporation's capital amounts and classification are also subject to qualitative judgments by the regulators about omponents, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Corporation to maintain minimum amounts and ratios (set forth in the table to follow) of Total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Leverage capital (as defined) to average assets (as defined). Management believes, as of December 31, 1995 and 1994, that the Corporation meets all capital adequacy requirements to which it is subject. The most recent notification from federal banking agencies categorized the Corporation as well capitalized under the regulatory framework for prompt corrective action. To be categorized as adequately capitalized the Corporation must maintain minimum Leverage capital, Tier 1 risk-based capital and Total risk-based capital ratios as set forth in the table. Since that notification there have been no conditions or events that management believes have changed the Corporation's category. 27
To be Well Capitalized Under Adequacy Prompt Corrective Actual Purposes Action Provisions Amount Ratio Amount Ratio Amount Ratio As of December 31, 1995 Leverage capital............. $ 64,572 10.01% $ 25,805 4.00% $ 32,256 5.00% Tier 1 risk-based capital.... 64,577 13.61 18,981 4.00 28,471 6.00 Total risk-based capital..... 64,577 14.67 37,961 8.00 47,452 10.00 As of December 31, 1994 Leverage capital............. $ 61,263 9.87% $ 24,826 4.00% $ 31,032 5.00% Tier 1 risk-based capital.... 61,272 14.25 17,201 4.00 25,802 6.00 Total risk-based capital..... 65,803 15.30 34,402 8.00 43,003 10.00
NOTE 16 - DIVIDEND RESTRICTIONS The Corporation and its wholly owned subsidiary banks are subject to regulations which require the maintenance of certain capital levels and, as a result, limit the amount of dividends which may be paid by the banks. ANB, CNB and FNB are regulated by the Comptroller of the Currency, BOC is regulated by the Commissioner of Banks and Trust Companies in Illinois, while the Corporation is regulated by the Federal eserve Board. The most restrictive of the regulations generally requires the banks to maintain a minimum leverage capital to total asset ratio. As a result of this limitation, approximately $32,310 of the $66,901 equity of the banks was restricted and unavailable for the payment of dividends to the Corporation at December 31, 1995. Additionally, the amount of dividends the banks may pay to the Corporation in a single year without approval from regulators is limited by regulation. Under the most restrictive regulations, approximately $8,814 of undistributed earnings of the banks was available for distribution to the Corporation at December 31, 1995. As a practical matter dividends are ordinarily restricted to a lesser amount because of he need to maintain an adequate capital structure. NOTE 17 - FAIR VALUES OF FINANCIAL INSTRUMENTS The following table shows the carrying amount and estimated fair value of financial instruments held by the Corporation at December 31, 1995 and 1994. 28
DECEMBER 31, 1995 DECEMBER 31, 1994 CARRYING ESTIMATED CARRYING ESTIMATED AMOUNT FAIR VALUE AMOUNT FAIR VALUE Cash and cash equivalents..... $ 43,173 $ 43,173 $ 29,531 $ 29,531 Interest bearing deposits in other banks.............. 692 692 1,193 1,193 Securities available for sale. 173,469 173,469 146,680 146,680 Securities held to maturity... - - 40,195 39,177 Loans held for sale........... 6,727 6,727 2,664 2,664 Loans, less allowance for loan losses................. 437,635 429,848 384,126 383,597 Demand and savings deposits... 275,087 275,087 281,165 281,165 Time deposits................. 324,982 320,921 269,222 271,016 Short-term borrowings......... 6,788 6,788 9,294 9,294 Long-term debt................ 2,677 2,677 3,189 2,997
For purposes of the above disclosures of estimated fair value, the following assumptions were used as of December 31, 1995 and 1994. The estimated fair value for cash and cash equivalents is considered to approximate cost. The estimated fair value for securities is based on quoted market values for the individual securities or for equivalent securities. The estimated fair value for commercial loans is based on estimates of the difference in interest rates the bank would charge the borrowers for similar loans with similar maturities applied for an estimated time period until the loan is assumed to reprice or be paid. The estimated fair value for other loans is based on estimates of the rates the bank would charge for similar such loans applied for the time period until estimated repayment. The estimated fair value for demand and savings deposits is based on their carrying value. The estimated fair value for time deposits is based on estimates of the rates the bank would pay on such deposits applied for the time period until maturity. The estimated fair value for short-term borrowings is considered to approximate cost. Rates currently available to the Corporation for debt with similar terms and remaining maturities are used to estimate the fair value of existing long-term debt. The estimated fair value for other financial instruments and off-balance sheet loan commitments approximate cost and are not considered significant to this presentation because the majority of these items are primarily at variable rates and are not made for long term periods. While these estimates of fair value are based on management's judgment of the most appropriate factors, there is no assurance that were the Corporation to have disposed of such items at December 31, 1995 and 1994, the estimated fair values would necessarily have been achieved at that date, since market values may differ depending on various circumstances. The estimated fair 29 values at December 31, 1995 and 1994, should not necessarily be considered to apply at subsequent dates. In addition, other assets and liabilities of the Corporation that are not defined as financial instruments are not included in the above disclosures, such as property and equipment. Also, non-financial instruments typically not recognized in financial tatements nevertheless may have value but are not included in the above disclosures. These include, among other items, the estimated earnings power of core deposit accounts, the earnings potential of loan servicing rights, the earnings potential of trust departments, a trained work force, customer goodwill and similar items. NOTE 18 - PARENT COMPANY STATEMENTS Presented below are condensed balance sheets, statements of income and cash flows for the parent company.
CONDENSED BALANCE SHEETS DECEMBER 31, 1995 AND 1994 1995 1994 ASSETS Cash on deposit with subsidiaries................... $ 673 $ 645 Investment in bank subsidiaries..................... 66,648 56,999 Investment in non-bank subsidiaries................. 454 197 Premises, furniture and equipment, net.............. 158 30 Other assets........................................ 529 542 Total assets...................................... $ 68,462 $ 58,413 LIABILITIES Other liabilities................................... $ 750 $ 203 SHAREHOLDERS' EQUITY Common stock........................................ 31,590 30,086 Retained earnings................................... 35,009 31,612 Unrealized gain/(loss) on securities available for sale, net of deferred tax........... 1,113 (3,488) Total shareholders' equity........................ 67,712 58,210 Total liabilities and shareholders' equity........ $ 68,462 $ 58,413
30
Condensed Statements Of Income For the years ended December 31, 1995, 1994 and 1993 1995 1994 1993 OPERATING INCOME Dividends received from bank subsidiaries.... $ 2,678 $ 3,526 $ 2,396 Rental income................................ - 240 240 Other income................................. 35 32 27 Total operating income..................... 2,713 3,798 2,663 OPERATING EXPENSE Other expenses............................... 2,315 1,003 723 INCOME BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES... 398 2,795 1,940 Income tax credit.............................. (351) (181) (119) INCOME BEFORE EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES................. 749 2,976 2,059 Equity in undistributed earnings of subsidiaries.............................. 6,296 3,526 4,103 NET INCOME................................. $ 7,045 $ 6,502 $ 6,162
Condensed Statements Of Cash Flows For the years ended December 31, 1995, 1994 and 1993 1995 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES Net income..................................... $ 7,045 $ 6,502 $ 6,162 Adjustments to reconcile net income to net cash from operating activities Depreciation............................... 19 100 198 Equity in undistributed income of subsidiaries............................. (2,678) (3,526) (4,103) Other liabilities.......................... 547 (11) 282 Other assets............................... 13 78 (249) Net cash from operating activities....... 4,946 3,143 2,290 CASH FLOWS FROM INVESTING ACTIVITIES Investment in subsidiaries..................... (2,664) (893) - Purchase of furniture and equipment............ (147) (33) - Net cash from investing activities........ (2,811) (926) - CASH FLOWS FROM FINANCING ACTIVITIES Payments on long-term debt..................... - - (392) Dividends paid................................. (2,144) (1,947) (1,701) Fractional shares paid for acquisitions and stock dividend............................... (12) (4) (2) Treasury stock................................. 37 - (23) Issuance of stock for dividend reinvestment and stock purchase plan...................... 12 74 - Net cash from financing activities....... (2,107) (1,877) (2,118) NET CHANGE IN CASH AND CASH EQUIVALENTS.......... 28 340 172 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR... 645 305 133 CASH AND CASH EQUIVALENTS AT END OF YEAR......... $ 673 $ 645 $ 305 /TABLE PAGE>31 The management of AMBANC Corp. is responsible for the integrity of all information contained in the accompanying financial statements and other sections of this annual report. The statements have been prepared in conformity with generally accepted accounting principles and include amounts that are based on management's best estimates and judgment. In meeting its responsibility, management relies on the systems of internal control which are designed to provide reasonable assurance that assets are safeguarded and that transactions are properly executed and recorded. The development and dissemination of written policies and procedures, appropriate segregation of duties and responsibilities and the conducting of a continuing comprehensive program of internal audits provide further enhancements to the systems of internal control. The Audit Committee of the Board of Directors, consisting solely of outside Directors, meets periodically with management, the internal auditors and the independent auditors to review audits, financial reporting and other related matters. The internal auditors and the independent auditors have full and free access to the Audit Committee to further assure their independence. The financial statements have been audited by Deloitte & Touche LLP, independent auditors for the year ended December 31, 1995. They were engaged to audit the financial statements and to express an opinion thereon. Their audit was conducted in accordance with generally accepted auditing standards. Robert G. Watson Richard E. Welling, CPA Chairman of the Board, Secretary, Treasurer and President and C.E.O. C.F.O. 32 AMBANC CORP. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section presents an analysis of the consolidated financial condition of AMBANC Corp. (Corporation) and its wholly-owned subsidiaries, The American National Bank of Vincennes (ANB), Citizens' National Bank of Linton (CNB), Bank of Casey (BOC), The First National Bank in Robinson (FNB), (collectively, the Banks), American National Realty Corp. and Lincolnland Insurance Agency & Investments, Inc. (LIA) at December 31, 1995 and 1994, and the consolidated results of operations for the years ended December 31, 1995, 1994 and 1993. This review should be read in conjunction with the consolidated financial statements, notes to consolidated financial statements and other financial data presented elsewhere in this Annual Report. On November 1, 1995, the Corporation issued 668,235 shares of its common stock in exchange for all of the outstanding common stock of First Robinson Bancorp (FRB), the parent holding company of FNB. FRB was then merged into the Corporation. On June 1, 1994, the Corporation issued 569,454 shares of its common stock in exchange for all of the outstanding common stock of Lincolnland Bancshares, Inc. (LBI), the parent holding company of BOC and LIA. LBI was then merged into the Corporation. These acquisitions were accounted for under the pooling of interests method. Accordingly, the Corporation's financial statements and financial data have been retroactively restated to include the accounts and operations of LBI and FRB for all periods presented. Certain reclassifications have been made to LBI's and FRB's historical financial statements to conform to the Corporation's presentation. A 5% stock dividend was paid on November 30, 1995. All share and per share amounts have been retroactively restated to reflect the 5% stock dividend and the shares issued for FRB and LBI. Earnings per share amounts are based on average outstanding shares of 3,158,958 for 1995, 3,156,410 for 1994 and 3,156,190 for 1993. RESULTS OF OPERATIONS (Dollar amounts in thousands, except share and per share data) Net income for 1995 was $7,045 or $2.23 per share compared to $6,502 or $2.06 per share in 1994 and $6,162 or $1.95 per share in 1993. Included in net income for 1993 was an adjustment of $252, resulting 33 from the adoption of Financial Accounting Standard (FAS) 109, "Accounting for Income Taxes". This adjustment is shown on the income statement as the cumulative effect on prior years of changing to a different method of accounting for income taxes. Earnings per share for 1993 before this accounting change was $1.87. Earnings expressed as a percent of average assets and average equity were:
TABLE I PERCENT OF PERCENT OF AVERAGE ASSETS AVERAGE EQUITY 1995 1994 1993 1995 1994 1993 Income before cumulative effect of accounting change. 1.09 % 1.05 % .98 % 11.30 % 11.19 % 10.75 % Cumulative effect of accounting change........... - - .04 - - .46 Net income.................. 1.09 % 1.05 % 1.02 % 11.30 % 11.19 % 11.21 %
RESULTS OF OPERATIONS - Continued (Dollar amounts in thousands, except share and per share data) The following is an analysis of the critical components of net income for the years 1995, 1994 and 1993 with discussion and analysis of the contrasts between these periods and the effect of previous trends on anticipated future earnings performance. NET INTEREST INCOME Net interest income is the principal source of the Corporation's earnings and represents the difference between interest income on interest earning assets and the interest cost of interest bearing liabilities. Income on certain interest earning assets is exempt from federal income tax and, as is customary in the banking industry, changes in net interest income are analyzed on a fully tax equivalent basis. Under this method, and throughout this discussion, nontaxable income on loans and securities is adjusted to an amount which represents the equivalent earnings if such earnings were subject to federal tax. The marginal tax 34 rate used to restate nontaxable income was 34% for 1995, 1994 and 1993. The yield on average interest earning assets and the rate paid on average interest bearing liabilities is based upon three major factors: the yield/rate received or paid, the mix of the individual components and the volume of interest earning assets and interest bearing liabilities. While the national prime rate is not the only indicator for yields received on assets or the rates paid on liabilities by the Corporation, it does indicate a general trend of current rates being received on assets and paid on liabilities. The national prime rate averaged 6.00% all during 1993, increased to an average of 7.14% during 1994 and increased to an average of 8.83% during 1995. Yields received and rates paid by the Corporation are a blend of current and past year's interest rates due to the lag effect of the repricing of both long-term assets and long-term liabilities. Tables II, III and IV illustrate the components of net interest income for the last three years. Table II shows the average balances, interest income or expense and average yields and rates on interest earning assets and interest bearing liabilities by type. It also shows the calculation of net interest margin for 1995, 1994 and 1993. Table III shows the change from year to year for average interest earning assets and average interest bearing liabilities and the resulting net interest earning assets. Table IV shows the change in net interest income from year to year and the allocation of that yearly change between volume and rate by type of interest earning asset and interest bearing liability. 35 RESULTS OF OPERATIONS - CONTINUED Table II Consolidated Average Balance Sheets and Interest Rates Years ended December 31, 1995, 1994 and 1993 (Dollar amounts in thousands, except share and per share data)
1995 Interest Average Income/ Balance Expense Average (Note A) (Note B) Rate ASSETS Interest earning assets Securities U.S. Government $107,553 $ 6,166 5.73% State and municipal obligations 50,112 4,298 8.58 Other 22,113 1,396 6.31 Total securities 179,778 11,860 6.60 Interest bearing deposits n other banks 914 54 5.91 Loans held for sale 4,307 326 7.57 Total loans, less unearned (Notes A and C) 416,489 38,144 9.16 Federal funds sold 11,842 685 5.78 Total interest earning assets and interest income 613,330 $ 51,069 8.33% Noninterest earning assets Cash and due from banks 18,372 Premises and equipment, net 8,877 Other assets 10,906 Allowance for loan losses (4,636) Unrealized loss on securities available for sale (2,393) Total assets $644,456 LIABILITIES AND SHAREHOLDERS' EQUITY Interest bearing liabilities Savings and demand deposits $212,092 $ 6,662 3.14% Time deposits 299,794 16,931 5.65 Total savings and time deposits 511,886 23,593 4.61 Short-term borrowings 8,129 437 5.38 Long-term debt 2,804 161 5.74 Total interest bearing liabilities and interest expense 522,819 $ 24,191 4.63% Noninterest bearing liabilities Demand deposits 55,527 Other 3,766 Shareholders' equity 62,344 Total liabilities and shareholders' equity $644,456 Interest margin recap Interest income/ interest earning assets $ 51,069 8.33% Interest expense/ interest earning assets 24,191 3.95 Net interest income/ interest earning assets $ 26,878 4.38%
[following is the middle section of the table above]
1994 Interest Average Income/ Balance Expense Average (Note A) (Note B) Rate ASSETS Interest earning assets Securities U.S. Government $125,846 $ 6,864 5.45% State and municipal obligations 51,211 4,474 8.74 Other 29,126 1,597 5.48 Total securities 206,183 12,935 6.27 Interest bearing deposits in other banks 1,548 75 4.85 Loans held for sale 6,849 536 7.83 Total loans, less unearned (Notes A and C) 368,198 30,882 8.39 Federal funds sold 7,424 2953.97 Total interest earning assets and interest income 590,202 $ 44,723 7.58% Noninterest earning assets Cash and due from banks 17,326 Premises and equipment, net 9,044 Other assets 8,864 Allowance for loan losses (4,377) Unrealized loss on securities available for sale (1,519) Total assets $619,540 LIABILITIES AND SHAREHOLDERS' EQUITY Interest bearing liabilities Savings and demand deposits $225,280 $ 6,485 2.88% Time deposits 266,698 12,083 4.53 Total savings and time deposits 491,978 18,568 3.77 Short-term borrowings 9,649 409 4.24 Long-term debt 2,924 177 6.05 Total interest bearing liabilities and interest expense 504,551 $ 19,154 3.80% Noninterest bearing liabilities Demand deposits 53,415 Other 3,461 Shareholders' equity 58,113 Total liabilities and shareholders' equity $619,540 Interest margin recap Interest income/ interest earning assets $ 44,723 7.58% Interest expense/ interest earning assets 19,154 3.25 Net interest income/ interest earning assets $ 25,569 4.33%
[following is the right-hand side of the table above]
1994 Interest Average Income/ Balance Expense Average (Note A) (Note B) Rate ASSETS Interest earning assets Securities U.S. Government $125,578 $ 7,517 5.99% State and municipal obligations 49,352 4,636 9.39 Other 39,395 2,103 5.34 Total securities 214,325 14,256 6.65 Interest bearing deposits in other banks 838 58 6.92 Loans held for sale 15,133 1,280 8.46 Total loans, less unearned (Notes A and C) 325,544 27,460 8.44 Federal funds sold 14,734 442 3.00 Total interest earning assets and interest income 570,574 $ 43,496 7.62% Noninterest earning assets Cash and due from banks 17,528 Premises and equipment, net 8,960 Other assets 8,322 Allowance for loan losses (4,152) Unrealized loss on securities available for sale - Total assets $601,232 LIABILITIES AND SHAREHOLDERS' EQUITY Interest bearing liabilities Savings and demand deposits $219,975 $ 6,572 2.99% Time deposits 264,276 12,148 4.60 Total savings and time deposits 484,251 18,720 3.87 Short-term borrowings 7,139 255 3.57 Long-term debt 674 32 4.75 Total interest bearing liabilities and interest expense 492,064 $ 19,007 3.86% Noninterest bearing liabilities Demand deposits 50,197 Other 4,004 Shareholders' equity 54,967 Total liabilities and shareholders' equity $601,232 Interest margin recap Interest income/ interest earning assets $ 43,496 7.62% Interest expense/ interest earning assets 19,007 3.33 Net interest income/ interest earning assets $ 24,489 4.29%
41 Note A - Included in total loans are nonaccrual loans. Note B - Interest income includes the effects of tax equivalent adjustments using a marginal federal tax rate of 34% for 1995, 1994 and 1993. The total adjustment to convert tax exempt loans and securities to a fully tax equivalent basis was $1,606, $1,670 and $1,738 for 1995, 1994 and 1993. Note C - Net loan fees and costs included in interest income on loans amounted to $937, $769 and $482, for the years 1995, 1994 and 1993. RESULTS OF OPERATIONS - Continued (Dollar amounts in thousands, except share and per share data) Table III Changes in Net Interest Earning Assets
1995 change 1994 change from 1994 from 1993 1995 Dollar Percent 1994 Dollar Percent 1993 Average interest earning assets............. $613,330 $23,128 3.92% $590,202 $19,628 3.44% $570,574 Average interest bearing liabilities................ 522,819 18,268 3.62 504,551 12,487 2.54 492,064 Net interest earning assets...... $ 90,511 $ 4,860 5.67% $ 85,651 $ 7,141 9.10% $ 78,510
42 Table IV Changes in Net Interest Income
1995 compared to 1994 1994 compared to 1993 increase/(decrease) increase/(decrease) due to change in due to change in Volume Rate Total Volume Rate Total Interest income Loans....................... $4,423 $ 2,839 $ 7,262 $3,577 $ (155) $ 3,422 Loans held for sale......... (192) (18) (210) (648) (96) (744) Interest bearing deposits with other banks.......... (37) 16 (21) 34 (17) 17 Securities U.S. Government........... (1,049) 351 (698) 15 (668) (653) State and municipal obligations............. (94) (82) (176) 162 (324) (162) Other..................... (443) 242 (201) (563) 57 (506) Total securities........ (1,586) 511 (1,075) (386) (935) (1,321) Federal funds sold.......... 256 134 390 (290) 143 (147) Total interest income... 2,864 3,482 6,346 2,287 (1,060) 1,227 Interest expense Savings and demand deposits. (414) 591 177 153 (240) (87) Time deposits............... 1,869 2,979 4,848 110 (175) (65) Short-term borrowings....... (82) 110 28 106 48 154 Long-term debt.............. (7) (9) (16) 136 9 145 Total interest expense.. 1,366 3,671 5,037 505 (358) 147 Net interest income... $1,498 $ (189) $ 1,309 $1,782 $ (702)$ 1,080
RESULTS OF OPERATIONS - Continued (Dollar amounts in thousands, except share and per share data) Net interest income in 1995 increased $1,309 or 5.12% from 1994, and the percent of net interest margin, or net interest income to average interest earning assets, increased to 4.38% in 1995 from 4.33% in 1994. This increase in net interest income was due to an increase of $4,860 or 5.67% in net interest earning assets during 1995 from 1994 and the increase in rates for both interest earning assets and interest bearing liabilities. The allocation of the yearly difference shows that $1,498 of the 1995 increase was due to 43 volume changes while rate changes reduced the net interest income by $189. Rates on both interest earning assets and interest bearing liabilities increased in 1995, but the rate allocation shows the increase in the rates on interest bearing liabilities exceeded the increase in rates on interest earning assets. Net interest income in 1994 increased $1,080 or 4.41% from 1993, and the percent of net interest margin increased to 4.33% in 1994 from 4.29% in 1993. This increase in net interest income was due to an increase of $7,141 or 9.10% in net interest earning assets during 1994 from 1993 and the decrease in rates for both average interest earning assets and average interest bearing liabilities. The allocation of the yearly difference shows that $1,782 of the 1994 increase was due to volume changes while rate changes reduced the net interest income by $702. Rates on both interest earning assets and interest bearing liabilities decreased in 1994, but the decrease in rates on interest earning assets was greater than the decrease in rates on interest bearing liabilities. PROVISION AND ALLOWANCE FOR LOAN LOSSES The provision for loan losses expense on the income statement provides a reserve called the allowance for loan losses (a contra asset on the balance sheet) to which loan losses are charged as those losses become evident. Management of each bank determines the appropriate level of the allowance for loan losses on a quarterly basis utilizing a report containing loans with a more than normal degree of risk. This report is the by-product of an ongoing loan review process, the purpose of which is to determine the level of credit risk within the portfolio and to ensure proper adherence to underwriting and documentation standards. Utilizing this report, a specific portion of the reserve is allocated to those loans which are considered to represent significant exposure to risk. In addition, estimates are made for potential losses on consumer loans, residential mortgage loans and commercial loans not specifically reviewed based on historical loan loss experience and other factors and trends. Table V shows the provision and allowance for loan losses for the last five years. Table VI includes the specific allocation for loan losses at year end for the last five years. 44 RESULTS OF OPERATIONS - Continued (Dollar amounts in thousands, except share and per share data) Table V Analysis of Allowance for Loan Losses
1995 1994 1993 1992 1991 Balance at beginning of year................. $ 4,531 $ 4,238 $ 4,168 $ 3,957 $ 4,227 Loans charged off Commercial and agricultural......... 349 352 1,327 777 1,351 Real estate............ 11 32 112 315 245 Installment............ 537 365 266 460 525 Other.................. 122 59 49 50 59 Total charge-offs.. 1,019 808 1,754 1,602 2,180 Charge-offs recovered Commercial and agricultural......... 193 548 177 152 198 Real estate............ 6 71 43 45 41 Installment............ 117 136 105 115 172 Other.................. 12 8 7 6 2 Total recoveries... 328 763 332 318 413 Net loans charged off...... 691 45 1,422 1,284 1,767 Current year provision... 1,182 338 1,492 1,495 1,497 Balance at end of year...... $ 5,022 $ 4,531 $ 4,238 $ 4,168 $ 3,957 Loans at year end........ $442,657 $388,657 $342,950 $311,097 $305,130 Ratio of allowance to loans at year end... 1.13 % 1.17 % 1.24 % 1.34 % 1.30 % Average loans............ $416,489 $368,198 $325,544 $311,523 $309,935 Ratio of net loans charged off to average loans.......... .17 % .01 % .44 % .41 % .57 %
45 Table VI Allocation of Allowance for Loan Losses
1995 1994 1993 1992 1991 Commercial and agricultural............. $ 1,639 $ 1,118 $ 1,245 $ 1,354 $ 1,681 Real estate............... 228 235 261 133 382 Installment............... 469 699 474 426 662 Unallocated............... 2,686 2,479 2,258 2,255 1,232 Total.................. $ 5,022 $ 4,531 $ 4,238 $ 4,168 $ 3,957
RESULTS OF OPERATIONS - Continued (Dollar amounts in thousands, except share and per share data) NONPERFORMING ASSETS Nonperforming assets are defined as nonaccrual loans for which the ultimate collectibility of interest is uncertain, but for which the principal is considered collectible; restructured loans which have had an alteration to the original interest rate, repayment terms or principal balance because of a deterioration in the financial condition of the borrower; and loans past due over 90 days but still accruing interest because the interest is ultimately considered collectible. Impaired loans covered in FAS 114 and 118 are defined by the Corporation to be nonaccrual loans. Nonperforming assets also include other real estate owned which has been acquired through foreclosure or acceptance of a deed in lieu of foreclosure. Other real estate owned is carried at the lower of cost or fair value less estimated selling costs, and is actively being marketed for sale. Table VII sets forth the components of nonperforming assets and their percentage to loans and the allowance for loan losses as a percent of nonperforming assets at December 31, for the past five years. 46 Table VII Nonperforming Assets at December 31,
1995 1994 1993 1992 1991 Nonaccrual loans........ $ 983 $ 650 $ 1,078 $ 1,612 $ 2,655 Restructured............ 45 490 565 265 447 90 days or more past due.................... 1,272 1,325 837 1,179 1,542 Total nonperforming loans.............. $ 2,300 $ 2,465 $ 2,480 $ 3,056 $ 4,644 Percent of loans........ .52 % .63 % .72 % .98 % 1.52 % Percent of allowance for loan losses 218 % 184 % 171 % 136 % 85 % Other real estate owned. $ 280 $ 72 $ 145 $ 215 $ 212 Percent of loans........ .06 % .02 % .04 % .07 % .07 %
Assets considered to be nonperforming are reviewed more frequently by management for repayment probability and residual collateral values. All restructured loans shown above have been performing within the terms of their restructured agreements. In addition to the nonperforming loans, there are other loans in the portfolio that have been identified by management or through an ongoing loan review process as having more than a normal degree of risk. These loans are reviewed quarterly by management and totaled $9,106 or 2.06% of total loans at December 31, 1995. The provision for loan losses for 1995, 1994 and 1993 was $1,182, $338 and $1,492 while net charge-offs were $691, $45 and $1,422. The increase in the provision in 1995 was due to the increase of loans outstanding rather than anticipated credit problems in the loan portfolio. Loans at December 31, 1995, were up $54,000 or 13.89% to $442,657 while nonperforming loans showed a decrease in both amount and percent of ending loans. Nonperforming loans at December 31, 1995, were down $165 or 6.69% to $2,300 from $2,465 at December 31, 1994. Nonperforming loans were also down to .52% of loans at December 31, 1995, from .63% at December 31, 1994. This improvement in nonperforming loans at December 31, 1995, was also helped by an increase of loans charged off in 1995 over 1994. Net loan charge- offs increased $646 to $691 in 1995 from an unusual low 47 of $45 in 1994. With a steady to improving economy in the market areas served by the Corporation, the percent of nonperforming loans to loans has shown a steady improvement during each of the last five years. The percent of allowance for loan losses to nonperforming loans has also shown a steady improvement over the last five years. Based upon the Corporation's review, considering remaining collateral and/or financial condition of identified loans with a more than normal degree of risk, including nonperforming loans, historical loan loss percentages and economic conditions, it is management's belief that the $1,182 of provision for loan losses during 1995 and the $5,022 of allowance for loan losses at December 31, 1995, is adequate to cover future possible losses. RESULTS OF OPERATIONS - Continued (Dollar amounts in thousands, except share and per share data) NONINTEREST INCOME Table VIII Changes in Noninterest Income 1995 change 1994 change from 1994 from 1993 1995 Dollar Percent 1994 Dollar Percent 1993 Fiduciary income............ $ 602 $ 56 10.26 % $ 546 $ (15) (2.67)% $ 561 Deposit service charges..... 1,454 180 14.13 1,274 (51) (3.85) 1,325 Other operating income...... 1,016 (19) (1.84) 1,035 (85) (7.59) 1,120 Security gains/(losses)..... 41 12 41.38 29 (64) (68.82) 93 Total noninterest income.. $3,113 $ 229 7.94 % $2,884 $ (215) (6.94)% $3,099
A bank typically generates noninterest income through fees and service charges. As shown in Table VIII noninterest income in 1995 was up in all areas except other operating income. Fiduciary income was up due to the increase in the market value of the investments managed. This same explanation in reverse was the reason for the decrease in trust fees in 1994 from 1993. Deposit service charges increased the largest 48 dollar amount in 1995 and was due to large increases in fees from nonsufficient and returned check charges. Other operating income was down in 1995 and was due to the reduction of gains on sales of loans held for sale. Loans held for sale (see loan discussion) realized net gains of $191, $229 and $265 in the years 1995, 1994 and 1993. Other operating income also included nonrecurring gains from sales of excess land in 1993 that were not in 1994 or 1995. RESULTS OF OPERATIONS - Continued (Dollar amounts in thousands, except share and per share data) NONINTEREST EXPENSE Table IX Changes in Noninterest Expense
1995 change 1994 change from 1994 from 1993 1995 Dollar Percent 1994 Dollar Percent 1993 Salaries and employee benefits......... $ 9,450 $ 673 7.67 % $ 8,777 $ 364 4.33 % $ 8,413 Occupancy expenses.......... 1,051 (56) (5.06) 1,107 93 9.17 1,014 Equipment expenses.......... 1,096 58 5.59 1,038 (5) (.48) 1,043 Data processing expenses.... 430 (12) (2.71) 442 (141) (24.19) 583 FDIC insurance.............. 690 (535) (43.67) 1,225 34 2.85 1,191 Other operating expenses.... 4,816 86 1.82 4,730 600 14.53 4,130 Total noninterest expense. $17,533 $ 214 1.24 % $17,319 $ 945 5.77 % $16,374
The largest component of noninterest expense is salaries and employee benefits which increased $466 in 1995 due to salary increases and $207 due to increases in fringe benefits with the major increases being in payroll taxes, medical insurance and pension expense. Occupancy expense is down in 1995 after increasing in 1994. The Corporation opened a new branch and made major repairs to several other branches in 1994. During the later part of 1995 the Corporation opened two new branches and the expense of their operations will be more evident with a whole year of operation starting in 1996. The Corporation anticipates opening 49 two more new branches in 1996 which should also increase occupancy expense in future years. Two of these new branches, one in 1995 and one in 1996, are instore retail operations in Wal-Mart stores. Equipment expense increased in 1995 and is due in part to the new branches and to expenses related to the continued increase in the use of technology. The Corporation will install a marketing customer information file system in early 1996 which will add additional equipment expenses in 1996. The centralization of the data processing by the Corporation has caused a decrease in data processing expenses in 1995 and 1994. Due to increased demands, a new computer system was installed in 1995, and although data processing expenses are expected to increase in the next year, the Corporation will see long term data processing costs decrease due to the complete centralization of all bank subsidiaries in the near future. FNB was converted to the Corporation's data processing system in February of 1996. The FDIC deposit insurance premium rate paid by the Corporation to provide insurance on customers deposits was .23% through May 31, 1995, and for 1994 and 1993. The FDIC deposit insurance rate was lowered to .04% effective June 1, 1995, and will go to a rate of 0% with a minimum annual payment of $2 per subsidiary bank starting in 1996. The Banks have all been assigned the classification of least risk by the FDIC and as such are subject to the lowest deposit insurance rates available from the Bank Insurance Fund (BIF). This 0% rate for FDIC insurance will exist as long as BIF remains at or above the 1.25% of total insured deposits as set by law. The Corporation does have $36,122 of deposits as of December 31, 1995, purchased from savings and loans by two of its subsidiary banks. These deposits (adjusted to a consistent percent of current deposits) remain insured by the Savings Association Insurance Fund (SAIF) rather than BIF. The cost of SAIF to the Corporation for these savings and loan deposits will remain at .23% for the foreseeable future. However Congress is currently considering a special one-time assessment on SAIF insured deposits. If enacted, this assessment could result in a one-time, pre-tax charge of up to $309, which could be offset by lower ongoing insurance costs in the future. Other operating expenses increased both in 1995 and 1994 with the largest increases in both years being due to audit, legal and other professional expenses related to acquisition activities. The acquisitions of FRB and 50 LBI during 1995 and 1994 were more expensive than acquisitions occurring in previous years. The 1995 increase also includes significant increases in advertising related to the use of a consistent Corporate logo and the opening of new branches and new amortization of goodwill related to deposits purchased in 1995. RESULTS OF OPERATIONS - Continued (Dollar amounts in thousands, except share and per share data) INCOME TAX Effective January 1, 1993, the Corporation adopted FAS 109, "Accounting for Income Taxes". FAS 109 is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. In estimating future tax consequences, FAS 109 generally considers all expected future events other than enactments of changes in the tax law or rates. The effect of adopting FAS 109 in 1993 was to increase net income by $252 which is shown as the cumulative effect on prior years of changing to a different method of accounting for income taxes on the 1993 income statement. The Corporation's effective tax rate was 27.15%, 28.75% and 25.98% in 1995, 1994 and 1993. The 1995 effective tax rate was lower due to the reversal of an allowance relating to the realization of alternative minimum tax credits of $212. Management has determined that such credits will be realized, accordingly, the allowance was reversed. The major differences between the effective tax rate on the financial statements and the federal statutory rate of 34% is interest income on tax exempt securities and loans offset by nondeductible interest, nondeductible merger expenses and state taxes. The Corporation had tax exempt income of $3,118, $3,218 and $3,395 for 1995, 1994 and 1993. Note 13 to the consolidated financial statements contains additional details of the differences between the statutory taxes and taxes shown on the consolidated financial statements. 51 FINANCIAL CONDITION (Dollar amounts in thousands, except share and per share data) INVESTMENTS The Corporation's holdings of short-term investments and securities serve as a source of liquidity to meet depositor and borrower funding requirements, in addition to being a significant element of total interest income. Short-term investments, defined as federal funds sold and interest bearing deposits in other banks, had combined average outstanding balances of $12,756, $8,972 and $15,572 for the years 1995, 1994 and 1993. The year end outstanding balances of short-term investments were $23,345, $8,193 and $19,936 for 1995, 1994 and 1993. The significant changes in the amounts in short-term investments from year to year is due to large fluctuations in deposits from public and governmental institutions which are invested in federal funds sold at year end. These deposits were being kept liquid to fund commercial loan commitments at year end 1995 and for possible liquidity needs of institutional deposits. Effective December 31, 1993, the Corporation adopted FAS 115, "Accounting for Certain Investments in Debt and Equity Securities". With the adoption of FAS 115, all securities were classified by management into one of two categories, available for sale or held to maturity. The Corporation does not maintain any securities that are held for trading. Securities classified as available for sale are securities that the Corporation intends to hold for an indefinite period of time, but not necessarily until maturity. Securities available for sale are carried at market value with market adjustments, net of related deferred taxes, being recorded in shareholders' equity as unrealized gain or loss on securities. Securities classified as held to maturity are carried at amortized cost, calculated by using the level yield method. In November 1995, the Financial Accounting Standards Board allowed a one time reclassification of all securities without calling into question the intent of an enterprise to hold other securities to maturity in the future. The Corporation reclassified all held to maturity securities to available for sale securities in December 1995. This reclassification was made to allow for all securities to be sold in response to changes in interest rates, changes in prepayment risk or other requirements of liquidity. Since the original adoption of FAS 115, and starting in December 1994, the equity 52 adjustment for mark to market of available for sale securities has been deleted from inclusion in the regulatory capital ratio calculations. The mark to market for available for sale securities at December 31, 1995, included market gains of $2,684 and market losses of $959 for a net increase due to the mark to market of $1,725 on securities with an amortized cost of $171,744. The after tax effect of these available for sale securities accounted for $1,113 of the total equity at December 31, 1995. The mark to market for available for sale securities at December 31, 1994, included market gains of $324 and market losses of $5,821 for a net decrease due to the mark to market of $5,497 on securities with an amortized cost of $152,177 at December 31, 1994. The after tax effect on these available for sale securities accounted for a negative $3,488 of the total equity at December 31, 1994. The effect on the total change in equity of the Corporation at December 31, 1995, from December 31, 1994, was a total increase of $4,601 due to this mark to market of available for sale securities. The drastic difference between the mark to market adjustment at December 31, 1995 and 1994, is due to the difference in the market yields at these two year ends when compared to the yields on the investments of the Corporation classified as available for sale. The decline in market rates at December 31, 1995, resulted in rates on the Corporation's available for sale securities being mostly better than market rates. This was in contrast to the higher market rates at December 31, 1994, causing a negative mark to market adjustment for the Corporation's available for sale securities. Sales of available for sale securities in 1995 were $4,559 and resulted in net gains of $18 while sales of $14,999 resulted in net gains of $29 in 1994. Calls and maturities of held to maturity securities accounted for net gains of $23 in 1995 and had no gain or loss in 1994. Other than U.S. Government securities, there are no concentrations of securities over 10% of shareholders' equity to any single issuer. 53 FINANCIAL CONDITION - Continued (Dollar amounts in thousands, except share and per share data) Table X Securities at December 31,
1995 1994 1993 Securities available for sale U.S. Government and its agencies................ $101,710 $112,007 $101,649 States and political subdivisions............... 51,837 11,266 2,471 Corporate obligations........................... 3,590 4,965 7,620 Collateralized mortgage obligations............. 15,516 17,290 25,341 Mutual funds.................................... 816 1,152 359 Total securities available for sale.......... 173,469 146,680 137,440 Securities held to maturity U.S. Government and its agencies................ - 500 22,730 States and political subdivisions............... - 39,695 48,036 Corporate obligations........................... - - 1,388 Collateralized mortgage obligations............. - - 243 Mutual funds.................................... - - 937 Total securities held to maturity............ - 40,195 73,334 Total securities............................. $173,469 $186,875 $210,774
The market value of securities held to maturity was $0, $39,177 and $76,601 for 1995, 1994 and 1993. LOANS The loan portfolio constitutes the major earning asset of most bank holding companies and typically offers the best alternative for obtaining the maximum interest spread above the cost of funds. The overall economic strength of any bank holding company generally parallels the quality and yield of its loan portfolio. The Corporation's total average loans were $416,489 in 1995, an increase of $48,291 or 13.12% from 1994. The Corporation had total average loans of $368,198 in 1994, an increase of $42,654 or 13.10% from the 1993 total average loans of $325,544. Table XI presents loans outstanding at year end for the preceding five years. 54 Table XI Loans at December 31,
1995 1994 1993 1992 1991 Commercial and agricultural....... $213,077 $180,403 $165,331 $149,443 $151,614 Real estate....................... 132,067 116,611 95,921 94,859 90,701 Installment....................... 98,506 93,651 83,948 68,536 64,003 Total loans..................... 443,650 390,665 345,200 312,838 306,318 Unearned income................... (993) (2,008) (2,250) (1,741) (1,188) Total loans, net................ $442,657 $388,657 $342,950 $311,097 $305,130 Loans held for sale $ 6,727 $ 2,664 $ 16,919 $ 11,553 $ 12,198 Composition of loan portfolio at December 31, Commercial and agricultural....... 48.14 % 46.42 % 48.21 % 48.04 % 49.69 % Real estate....................... 29.83 30.00 27.97 30.49 29.72 Installment....................... 22.03 23.58 23.82 21.47 20.59
FINANCIAL CONDITION - Continued (Dollar amounts in thousands, except share and per share data) The economy rebounded in late 1992 and has continued steady to strong through 1995. The Corporation has placed added efforts to take advantage of the increased demand in commercial and agricultural loans. Commercial and agricultural loans increased $32,674 or 18.11% in 1995 from 1994, increased $15,072 or 9.12% in 1994 from 1993 and increased $15,888 or 10.63% in 1993 from 1992. Real estate loans shown in Table XI are variable rate loans. These loans have increased $15,456 or 13.25% in 1995 from 1994 and $20,690 or 21.57% in 1994 from 1993. During these years the Corporation has placed added emphasis on serving the real estate mortgage needs of our customers. The balance of real estate loans is directly effected by the current rates on variable and fixed rate mortgages. As rates increase customers tend to prefer variable rate mortgages and as rates decreased customers tend to prefer fixed rate loans. The Corporation also makes conforming fixed rate mortgage loans that can be sold into the secondary market with the Corporation retaining more than 95% of the servicing rights. These fixed rate mortgage loans are shown separately in Table XI and on the balance sheet as loans held for sale. The Corporation's strategy has been to hold fixed rate loans during periods of decreasing rates and sell them during 55 periods of increasing rates to realize a gain. The balance of loans held for sale at year end fluctuates a great deal depending upon the variations of rates during the year and the amount of these loans that are sold into the secondary market. Sales of loans held for sale have been $16,231, $35,676 and $39,591 for 1995, 1994 and 1993 with corresponding net gains of $191, $229 and $265. At December 31, 1995, the Corporation services $79,990 of loans sold into the secondary market. Installment loans increased $4,855 or 5.18% in 1995 over 1994, $9,703 or 11.56% in 1994 over 1993 and $15,412 or 22.49% in 1993 over 1992. Consumer lending normally relates directly to consumer confidence in the economy, but the Corporation has seen increased charge- offs of installment loans in 1995 and 1994 over 1993. A lag effect does exist in charge-offs and the Corporation has increased its lending criteria for consumer loans during 1995. The makeup of installment loans at December 31, 1995, is $88,310 of vehicle and other secured loans, $4,934 of money lines tied to second mortgages on real estate, $3,722 of credit card loans and $1,540 of unsecured loans. The loan portfolio contains no loans to foreign governments, foreign enterprises or foreign operations of domestic corporations. Other than loans for real estate, equipment and operating lines to farmers engaged in the agricultural industry, the Corporation has no concentrations of loans in the same or similar industries that exceed 10% of total loans. DEPOSITS The deposit base provides the major funding source for earning assets of most bank holding companies. Generally, demand, savings and time certificates less than $100 are recognized as the core base of deposits while certificates in excess of $100 and public funds are more subject to interest variations and, thus, are not included in the core deposit base. Because of these factors, management views the growth of demand, savings and time certificates less than $100 as more stable growth. The Corporation's total average core deposits were $519,453 in 1995, $500,103 in 1994 and $484,976 in 1993. Total average deposits were $567,413, $545,393 and $534,448 during 1995, 1994 and 1993. Table XII indicates the mix and levels of deposits at year end for the preceding five years. 56 Table XII Deposits at December 31,
1995 1994 1993 1992 1991 Noninterest bearing............... $ 63,116 $ 62,269 $ 62,145 $ 58,484 $ 48,528 Interest bearing demand and savings..................... 211,971 218,896 226,030 217,633 177,118 Time, less than $100.............. 258,335 212,073 208,716 217,801 228,235 Time, $100 or more................ 66,647 57,149 53,459 50,180 56,622 Total deposits................. $600,069 $550,387 $550,350 $544,098 $510,503
FINANCIAL CONDITION - Continued (Dollar amounts in thousands, except share and per share data) The Corporation purchased $25,462 of deposits from a savings and loan association in March 1995. These purchased deposits plus lower interest rates and the general trend of consumers returning deposits to banks from nonbanking institutions saw total deposits increase $49,682 or 9.03% in 1995 from 1994 after remaining almost flat in 1994 from 1993. The largest growth in 1995 from 1994 was in time deposits both under and over $100 and accounted for $39,337 of the increase. Time deposits had also increased $7,047 in 1994 from 1993. Interest bearing demand and savings deposits actually decreased $6,925 in 1995 and have shown a decrease in both 1995 and 1994 after peaking in 1993. Noninterest bearing deposits remained almost constant in 1995, 1994 and 1993. LIQUIDITY AND CAPITAL RESOURCES (Dollar amounts in thousands, except share and per share data) LIQUIDITY AND RATE SENSITIVITY Cash flows for the Corporation occur within the operating, investing and financing categories as follows: Cash flows from operating activities emanate primarily from interest income and fees reduced by interest expense and overhead expense. Investing activities generate or use cash flows through the origination, purchase and principal collection of loans; the purchase, maturity and sale of investments; and the acquisition of property and equipment for the Corporation. Cash flows from financing activities occur from deposits and withdrawals of deposit accounts, increases or decreases in short-term 57 borrowings and long-term debt, and dividends paid by the Corporation. The Corporation's use and source of funds can be determined by the changes in average balances of assets and liabilities. Table XIII summarizes funding uses and sources for 1995 and 1994, showing average balances, amount of dollar change from prior year and the percent change from the prior year. Table XIII
1995 Average Increase/(decrease) Balance Dollar Percent Funding uses Loans held for sale $ 4,307 $ (2,542) (37.12)% Taxable loans, net of unearned income 410,846 49,053 13.56 Tax exempt loans 5,643 (762) (11.90) Taxable securities 128,846 (17,882) (12.19) Tax exempt securities 48,539 (9,397) (16.22) Interest bearing deposits in other banks 914 (634) (40.96) Federal funds sold 11,842 4,418 59.51 Total uses. $ 610,937 $ 22,254 3.78 % Funding sources Noninterest bearing deposits $ 55,527 $ 2,112 3.95 % Interest bearing demand and savings deposits 212,092 (13,188) (5.85) Time deposits 299,794 33,096 12.41 Short-term borrowings 8,129 (1,520) (15.75) Long-term debt 2,804 (120) (4.10) Other 32,591 1,874 6.10 Total sources $ 610,937 $ 22,254 3.78 % /TABLE [the following is the right-hand side of the table above]
1994 Average Increase/(decrease) Balance Dollar Percent Funding uses Loans held for sale $ 6,849 $ (8,284) (54.74)% Taxable loans, net of unearned income 361,793 43,900 13.81 Tax exempt loans 6,405 (1,246) (16.29) Taxable securities 146,728 (20,193) (12.10) Tax exempt securities 57,936 10,532 22.22 Interest bearing deposits in other banks 1,548 710 84.73 Federal funds sold 7,424 (7,310) (49.61) Total uses $ 588,683 $ 18,109 3.17 % Funding sources Noninterest bearing deposits $ 53,415 $ 3,218 6.41 % Interest bearing demand and savings deposits 225,280 5,305 2.41 Time deposits. 266,698 2,422 .92 Short-term borrowings 9,649 2,510 35.16 Long-term debt 2,924 2,250 333.83 Other 30,717 2,404 8.49 Total sources $ 588,683 $ 18,109 3.17 %
Total average loans increased $48,291 or 13.12% to $416,489 in 1995 from $368,198 in 1994. Commercial loans averaged $198,599, real estate loans averaged $95,448 and installment loans averaged $122,442 in 1995. The average increase in loans during 1995 was funded mainly by reductions in average securities of $27,279 and increases of $22,020 in average deposits. The 1995 reduction in average securities was achieved mainly by normal maturities of securities. Average deposits in 1995 increased partially through the purchase of deposits and partially because of deposit growth due to the offering by the Corporation of more 59 competitive rates. With more competitive rates, deposits were returned to the Banks that had previously been taken to nonbanking institutions. The opening of the new branch in the Wal-Mart during late 1995 has also proven that a pure retail branch location can be successful to bring in new deposits. LIQUIDITY AND CAPITAL RESOURCES - Continued (Dollar amounts in thousands, except share and per share data) The Corporation anticipates a gradual increase in loan demand for 1996 but expects to be able to meet this demand with the increase in deposits as discussed. Other than this, the Corporation does not foresee any unusual demands on funds for capital outlays or liquidity needs in the foreseeable future. Outstanding loan commitments and customers' unused lines of credit totaled $74,779 at December 31, 1995, which was a decrease of $1,142 or 1.50% from $75,921 at December 31, 1994. Standby letters of credit outstanding at December 31, 1995, decreased $359 or 5.59% to $6,058 from $6,417 at December 31, 1994. Letters of credit typically are not funded. To the extent, however, that letters of credit, loan commitments and customers' unused lines of credit require funding, these obligations will be met by the normal conversion of short-term investments, which totaled $23,345 at December 31, 1995, and one year or less maturities of investments which totaled $29,644 at December 31, 1995, the sale of loans held for sale plus the increase in deposits discussed. Further liquidity, if required, would be provided by conversion of securities available for sale or other assets into cash or accessing sources of incremental funding such as repurchase agreements or federal funds purchased. Interest rate sensitivity occurs when assets or liabilities are subject to rate and yield changes within a designated time period. The rate sensitivity position, or gap, is determined by the difference in the amount of rate sensitive assets and rate sensitive liabilities at various maturity intervals. The management of this gap position is required to protect the net interest rates and to assure a greater degree of earnings stability. Provided in Tables XIV through XVI are various repricing information relative to securities, loans and deposits at December 31, 1995. 60 Table XIV Maturities and Average Yields at December 31, 1995
1 Year and Less 1 - 5 Years 5 - 10 Years Dollar Yield Dollar Yield Dollar Yield U.S. Treasury............. $ 11,149 5.57 % $ 10,315 5.73 % $ - - % Federal agencies.......... 13,751 5.50 36,585 4.80 9,568 7.62 State and municipal....... 3,012 8.59 16,336 8.71 26,376 8.10 Corporate obligations..... 1,700 6.83 634 7.03 - - Collateralized mortgage obligations.... 32 6.93 6,048 6.21 2,371 5.58 Mutual funds.............. - - - - - - Total.................. $ 29,644 5.91 % $ 69,918 5.96 % $ 38,315 7.82%
[following is the right-hand side of the table above]
Over 10 Years Total Dollar Yield Dollar Yield U.S. Treasury............. $ - - % $ 21,464 5.65 % Federal agencies.......... 20,342 6.07 80,246 5.57 State and municipal....... 6,113 7.78 51,837 8.28 Corporate obligations..... 1,256 7.46 3,590 7.09 Collateralized mortgage obligations.... 7,065 6.26 15,516 6.13 Mutual funds.............. 816 6.46 816 6.45 Total.................. $35,592 6.46 % $173,469 6.46 %
Table XV Maturity Ranges of Time Deposits with Balances of $100 or More at December 31,
1995 1994 1993 Three months or less.................... $ 29,372 $ 24,437 $ 20,603 Over three through six months........... 11,460 12,558 8,428 Over six through twelve months.......... 9,315 8,333 9,115 Over twelve months...................... 16,500 11,821 15,313 Total................................ $ 66,647 $ 57,149 $ 53,459
LIQUIDITY AND CAPITAL RESOURCES - Continued (Dollar amounts in thousands, except share and per share data) Table XVI Loan Maturities at December 31, 1995
1 Year 1 - 5 Over 5 and Less Years Years Total Commercial and agricultural...... $158,089 $ 49,148 $ 5,840 $213,077
There were no material real estate construction loans outstanding at December 31, 1995. 62 Interest Rate Sensitivity of Above Loans Maturing After One Year Fixed rate.......................... $ 25,057 Variable rate....................... 29,931 Total selected loans................ $ 54,988 Table XVII Liquidity and Interest Rate Sensitivity at December 31, 1995
0 - 90 91 - 365 1 - 5 Days Days Years Interest earning assets Loans...................................... $ 121,257 $ 122,549 $ 178,149 Securities................................. 43,025 29,813 43,404 Other...................................... 23,903 101 591 Total................................... $ 188,185 $ 152,463 $ 222,144 Interest bearing liabilities Savings and demand deposits................ $ 211,971 $ - $ - Time, less than $100....................... 80,645 76,953 99,311 Time, $100 or more......................... 27,925 22,180 15,974 Other...................................... 7,083 184 1,131 Total................................... $ 327,624 $ 99,317 $ 116,416 Rate sensitive gap............................ $(139,439) $ 53,146 $ 105,728 Rate sensitive cumulative gap................. (139,439) (86,293) 19,435 Percent to total assets....................... (20.44)% (12.65)% 2.85 %
Rate sensitive gap as shown in Table XVII is defined as the difference between the repricing of interest earning assets and the repricing of interest bearing liabilities within certain defined time frames. Rate sensitive gap is also expressed as a percentage of total assets based upon the accumulation of the defined time frame gap calculation. Rate sensitive gaps constantly change as funds are acquired and invested and the Corporation's analysis as of December 31, 1995, is shown above. As of December 31, 1995, the Corporation had a negative gap of $86,293 and 12.65% during the next one year period with a negative gap of $139,439 and 20.44% relating to the first quarter of 1996. The effect of these negative gaps may result in a negative impact on earnings in 1996 if interest rates 63 increase, but could result in a positive impact on earnings if interest rates decline in 1996. The above rate sensitivity analysis is significantly impacted by the inclusion of savings and demand deposits in the first quarter of the gap analysis. These deposits have historically not exhibited the same degree of sensitivity to rate changes as other liabilities because deposit rates are set by the Corporation. If the above analysis were changed to reflect the Corporation's actual historical results, the savings and demand deposits would be moved to the one to five year time frame. With this change the Corporation would have a positive gap of $125,678 or 18.42% during the next one year period and a positive gap of $72,532 or 10.63% relating to the first quarter of 1996. LIQUIDITY AND CAPITAL RESOURCES - Continued (Dollar amounts in thousands, except share and per share data) SHAREHOLDERS' EQUITY Total shareholders' equity at December 31, 1995, increased $9,502 or 16.32% to $67,712 from $58,210 at December 31, 1994. As noted previously the Corporation included more investments as available for sale at December 31, 1995, than at December 31, 1994. This reclassification together with the favorable movement in the market rates provided an unrealized gain on securities available for sale of $1,113 at December 31, 1995, compared to an unrealized loss on securities available for sale of $3,488 at December 31, 1994. Thus, securities available for sale provided $4,601 of the increase in total shareholders' equity in 1995. The Corporation's regulators have issued guidelines stating that this unrealized gain or loss on securities, other than those related to mutual funds, should not be included in shareholders' equity for capital ratio calculations. See Note 15 to the financial statements for further explanation of capital adequacy. By all measurements the Corporation is considered well capitalized at December 31, 1995, and has a Leverage capital ratio of 10.01%, a Tier 1 risk- based capital ratio of 13.61% and a Total risk-based capital ratio of 14.67%. 64 INTERIM FINANCIAL DATA Table XVIII sets forth the quarterly results of operations and per share information for the years ended December 31, 1995 and 1994. Table XVIII
Quarter Ended December September June March 31 30 30 31 1995 Interest income....................... $ 13,020 $ 12,676 $ 12,217 $ 11,550 Interest expense...................... 6,609 6,329 5,960 5,293 Net interest income................. 6,411 6,347 6,257 6,257 Provision for loan losses............. 535 361 140 146 Noninterest income.................... 792 855 678 788 Noninterest expense................... 4,423 4,090 4,454 4,566 Income before income taxes.......... 2,245 2,751 2,341 2,333 Income taxes.......................... 397 868 667 693 Net income.......................... $ 1,848 $ 1,883 $ 1,674 $ 1,640 Per share Net income.......................... $ .58 $ .60 $ .53 $ .52 Stock price (Note A)................ 30.50 30.48 31.25 29.52 Weighted average shares............... 3,158,961 3,158,961 3,158,961 3,158,948 1994 Interest Income....................... $ 11,308 $ 10,939 $ 10,559 $ 10,247 Interest expense...................... 5,048 4,910 4,693 4,503 Net interest income................. 6,260 6,029 5,866 5,744 Provision for loan losses............. 102 96 42 98 Noninterest income.................... 586 732 735 831 Noninterest expense................... 4,356 4,262 4,347 4,354 Income before income taxes.......... 2,388 2,403 2,212 2,123 Income taxes.......................... 693 715 544 672 Net income.......................... $ 1,695 $ 1,688 $ 1,668 $ 1,451 Per share Net income.......................... $ .54 $ .53 $ .53 $ .46 Stock price (Note A)................ 29.52 30.00 30.71 30.71 Weighted average shares............... 3,156,756 3,156,491 3,156,190 3,156,190
65 Note A - The stock price above represents the sales price of the last actual trade in each respective quarter as reported in the Wall Street Journal restated for the 5% stock dividend paid on November 30, 1995. (Dollar amounts in thousands, except share and per share data) INFLATION For a financial institution, effects of price changes and inflation vary considerably from an industrial organization. Changes in the prices of goods and services are the primary determinant of an industrial company's profit, whereas changes in interest rates have a major impact on a financial institution's profitability. Inflation affects the growth of total assets, but it is difficult to assess its impact because neither the timing nor the magnitude of the changes in the consumer price index directly coincide with changes in interest rates. During periods of high inflation there are normally corresponding increases in the money supply. During such times financial institutions often experience above average growth in loans and deposits. Also, general increases in the price of goods and services will result in increased operation expenses. Over the past few years the rate of inflation has been relatively low, and its impact on the growth in the balance sheets and increased levels of income and expense has been nominal. MARKET PRICE OF AMBANC CORP. COMMON STOCK AND RELATED SHAREHOLDER MATTERS The Corporation's common stock is traded on The Nasdaq Small-Cap Market (NASDAQ) under the symbol AMBK. The quarterly range of the low and high bid prices per share of the Corporation's common stock, as reported by NASDAQ, is shown in Table XIX. This information represents prices between dealers and does not include adjustments for mark-ups, mark-downs or commissions and does not necessarily represent actual prices on transactions. 66 Table XIX
1995 1994 Stock Range Stock Range 1st Quarter............. $ 28.81 - 31.43 $ 31.19 - 35.24 2nd Quarter............. 29.52 - 31.43 28.81 - 31.43 3rd Quarter............. 29.05 - 32.38 28.81 - 31.43 4th Quarter............. 30.00 - 32.25 28.81 - 30.95
As of December 31, 1995, there were approximately 1,419 shareholders of record. The Corporation pays cash dividends on a quarterly basis. Cash dividends paid by the Corporation were $.80 per share in 1995 and 1994 and $.76 per share in 1993. Cash dividends, as restated to reflect the acquisitions of LBI and FRB under the pooling of interests method of accounting, were $.68, $.62 and $.54 for the years 1995, 1994 and 1993. Refer to Note 16 to the consolidated financial statements for information concerning restrictions on dividends. 67 FIVE YEAR SUMMARY (Dollar amounts in thousands, except per share data)
1995(a) 1994(a) 1993(a) 1992 1991 AT PERIOD END Actual balances Assets..................... $ 682,347 $ 625,240 $ 622,568 $ 610,407 $ 573,892 Securities................. 173,469 186,875 210,774 211,196 201,515 Loans...................... 442,657 388,657 342,950 311,097 305,130 Allowance for loan losses.. 5,022 4,531 4,238 4,168 3,957 Deposits................... 600,069 550,387 550,350 544,098 510,503 Shareholders' equity....... 67,712 58,210 57,722 52,552 48,203 Daily averages Assets..................... $ 644,456 $ 619,540 $ 601,232 $ 582,603 $ 563,213 Securities................. 177,385 204,664 214,325 210,847 197,385 Loans...................... 416,489 368,198 325,544 311,523 309,935 Allowance for loan losses.. 4,636 4,377 4,152 3,966 4,003 Deposits................... 567,413 545,393 534,448 520,034 501,878 Shareholders' equity....... 62,344 58,113 54,967 50,615 45,982 OPERATING RESULTS Interest income.............. $ 49,463 $ 43,053 $ 41,758 $ 44,722 $ 50,211 Net interest income.......... 25,272 23,899 22,751 22,335 20,936 Provision for loan losses.... 1,182 338 1,492 1,495 1,497 Income before cumulative effect of accounting change 7,045 6,502 5,910 5,818 5,409 Net income................... 7,045 6,502 6,162 5,818 5,409 Dividends paid on common stock............... 2,144 1,947 1,701 1,581 1,498 PER SHARE DATA Income before cumulative effect of accounting change $ 2.23 $ 2.06 $ 1.87 $ 1.84 $ 1.71 Cumulative effect of accounting change.......... - - .08 - - Net income................... 2.23 2.06 1.95 1.84 1.71 Cash dividends before pooling of interests....... .80 .80 .76 .76 .76 Cash dividends restated for pooling of interests....... .68 .62 .54 .50 .47 Book value at end of period.. 21.43 18.43 18.29 16.65 15.27 Book value at end of period before FAS 115............. 21.08 19.53 18.05 16.65 15.27 Tangible book value at end of period.............. 20.82 18.34 18.24 16.59 15.25 Tangible book value at end of period before FAS 115... 20.47 19.45 18.00 16.59 15.25 Weighted average shares outstanding......... 3,158,958 3,156,410 3,156,190 3,156,190 3,156,190 68 RATIOS Return on average assets..... 1.09 % 1.05 % 1.02 % 1.00 % .96 % Return on average equity..... 11.30 11.19 11.21 11.50 11.76 Dividends paid as a percent of net income...... 30.43 29.95 27.61 27.17 27.70 Leverage capital (Tier 1 equity/average tangible assets)............ 10.01 9.87 9.45 8.99 8.55 Efficiency ratio............. 61.77 64.66 67.56 64.38 62.51 (a) - reflects FAS 115 adjustments.
EX-22 6 EXHIBIT 22 EXHIBIT 22 AMBANC CORP. LIST OF SUBSIDIARIES 1. The American National Bank of Vincennes, Indiana is a wholly- owned subsidiary of AMBANC Corp. and is a national banking association. 2. Citizens' National Bank of Linton, Indiana is a wholly-owned subsidiary of AMBANC Corp. and is a national banking association. 3. Bank of Casey, Illinois, is a wholly-owned subsidiary of AMBANC Corp. and is an Illinois state-chartered banking association. 4. The First National Bank in Robinson is a wholly-owned subsidiary of AMBANC Corp. and is a national banking association. 5. American National Realty Corp. is a wholly-owned subsidiary of AMBANC Corp. and is incorporated under the laws of the State of Indiana. 6. Lincolnland Insurance Agency & Investments, Inc., is a wholly- owned, non-operating subsidiary of AMBANC Corp., which was acquired in connection with the Bank of Casey acquisition. EX-23 7 EXHIBIT 23.1 EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 33-42949 of AMBANC Corp. on Form S-8 of our report dated January 18, 1996, appearing in this Annual Report on Form 10-K of AMBANC Corp. for the year ended December 31, 1995. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Indianapolis, Indiana March 29, 1996 EX-23 8 EXHIBIT 23.2 Exhibit 23.2 March 18, 1996 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS We consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-8 of AMBANC Corp. of our report dated January 20, 1995 and 1994, 1993 and 1992 consolidated financial statements of First Robinson Bancorp which report is incorporated by reference in this Form 10-K. We also consent to the reference to us under the heading "Experts" in the Prospectus. KEMPER CPA GROUP, L.L.C. Certified Public Accountants Robinson, Illinois 62454 EX-23 9 EXHIBIT 23.3 Exhibit 23.3 [Logo] McGladrey & Pullen, LLP Certified Public Accountants and Consultants INDEPENDENT AUDITOR'S CONSENT We consent to our report dated January 7, 1994 on the consolidated statement of income, stockholders' equity and cash flows for the year ended December 31, 1993 of Lincolnland Bancshares, Inc. appearing in the annual report on Form 10-K of AMBANC Corp. for the year ended December 31, 1995. /s/ McGladrey & Pullen, LLP McGLADREY & PULLEN, LLP Champaign, Illinois March 27, 1996 EX-27 10
9 0000702904 AMBANC CORP. 1,000 12-MOS DEC-31-1995 DEC-31-1995 20,520 692 22,653 0 173,469 0 0 442,657 5,022 682,347 600,069 6,788 5,101 2,677 0 0 31,590 36,122 682,347 37,959 10,439 739 49,463 23,593 24,191 25,272 1,182 41 17,533 9,670 9,670 0 0 7,045 2.22 2.22 4.12 983 1,272 45 0 4,531 1,019 328 5,022 2,336 0 2,686
EX-99 11 EXHIBIT 99.1 Exhibit 99.1 [Logo] Crowe Chizek REPORT OF INDEPENDENT AUDITORS Board of Directors and Shareholders AMBANC Corp. Vincennes, Indiana We have audited the consolidated balance sheet of AMBANC Corp. as of December 31, 1994, and the related consolidated statements of income, changes in shareholders' equity and cash flows for the years ended December 31, 1994 and 1993, prior to the subsequent restatement for the 1995 pooling of interests. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. The consolidated statements of income, changes in shareholders' equity, and cash flows for the year ended December 31, 1993 have been restated to reflect the pooling of interests in 1994. Separate financial statements for the other companies included in the 1993 restated financial statements were audited and reported on by other auditors, which statements reflect net income of $862 for the year ended December 31, 1993. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, based on our audits and the reports of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of AMBANC Corp. as of December 31, 1994, and the results of its operations and its cash flows for the years ended December 31, 1994 and 1993, prior to the subsequent restatement for the 1995 pooling of interests, in conformity with generally accepted accounting principles. 2 As disclosed in the Notes to the consolidated financial statements, in 1993 the Corporation changed its method of accounting for income taxes, postretirement benefits and certain securities. /s/ Crowe, Chizek and Company LLP Crowe, Chizek and Company LLP Indianapolis, Indiana January 27, 1995 EX-99 12 EXHIBIT 99.2 EXHIBIT 99.2 INDEPENDENT AUDITOR'S REPORT To the Board of Directors and Shareholders of First Robinson Bancorp Robinson, Illinois We have audited the accompanying consolidated statements of condition of First Robinson Bancorp (an Illinois corporation) and Subsidiary as of December 31, 1993 and 1992, and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the years then ended. These financial statements are the responsibility of the Bank's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of First Robinson Bancorp and Subsidiary at December 31, 1993 and 1992, and the consolidated results of their operations and their cash flows for each of the years then ended, in conformity with generally accepted accounting principles. KEMPER CPA GROUP Certified Public Accountants January 20, 1994 INDEPENDENT AUDITOR'S REPORT To the Board of Directors and Shareholders of First Robinson Bancorp Robinson, Illinois We have audited the accompanying consolidated statements of financial condition of First Robinson Bancorp (The Bank) and Subsidiary as of December 31, 1994 and 1993, and the related consolidated statements of income, changes in shareholders' equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Bank's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principals used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a responsible basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First Robinson Bancorp and Subsidiary as of December 31, 1994 and 1993, and the results of their operations and cash flows for the years then ended in conformity with generally accepted accounting principles. KEMPER CPA GROUP L.L.C. Certified Public Accountants January 20, 1995 EX-99 13 EXHIBIT 99.3 Exhibit 99.3 [Logo] McGladrey & Pullen, LLP Certified Public Accountants and Consultants INDEPENDENT AUDITOR'S REPORT To the Board of Directors LINCOLNLAND BANCSHARES, INC. Casey, Illinois We have audited the related consolidated statements of income, stockholders' equity, and cash flows of LINCOLNLAND BANCSHARES, INC. and subsidiaries for the year ended December 31, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows for LINCOLNLAND BANCSHARES, INC. and subsidiaries for the year ended December 31, 1993, in conformity with generally accepted accounting principles. As described in Note 4 to the financial statements, the Company changed its method of accounting for investment securities in 1993. /s/ McGladrey & Pullen LLP Champaign, Illinois January 7, 1994 -----END PRIVACY-ENHANCED MESSAGE-----