<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C.
Form 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period to
Commission file number 0-27474
American Bancshares, Inc.
(Exact Name of Registrants Specified in its Charter)
Florida 65-0624640
(State or other Jurisdiction (IRS Emloyer Id. No.)
Incorporation or Organization)
4502 Cortez Road West, Bradenton, Florida 34210
(Address of Principal Executive Offices)
(941) 795-3050
(Registrants telephone number including area code)
4702 Cortez Road West, Bradenton, Florida 34210
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer has(1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for 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 .
--- ---
Number of shares outstanding of the issuer's Common Stock, par value $1.175 as
of March 31, 1999: 5,028,584 shares.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Part I FINANCIAL INFORMATION
Item 1
-Financial Statements 1-3
-Notes to Consolidated Condensed Financial Statements 4-6
Item 2
-Management's Discussion and Analysis
of Financial Condition and Results of
Operations 7-8
Item 2.A
-Year 2000 Compliance 9
Item 3
-Quantitative and Qualitative Disclosure 10
About Market Risk
Part II OTHER INFORMATION
Item 1 Legal Proceedings
(Not applicable) n/a
Item 2 Changes in Securities
(Not applicable) n/a
Item 3 Defaults Upon Senior Securities
(Not applicable) n/a
Item 4 Submission of Matters to a Vote
of Security Holders
(Not applicable) n/a
Item 5 Other Information
(Not applicable) n/a
Item 6 Exhibits and Reports on Form 8-K 11
</TABLE>
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
American Bancshares, Inc. and Subsidiaries
Consolidated Condensed Balance Sheets
(unaudited, $ in thousands)
<TABLE>
<CAPTION>
March 31, December 31, % $
Assets 1999 1998 Change Change
------------- ------------ -------- ----------
<S> <C> <C> <C> <C>
Cash and due from banks 19,212 20,215 (4.96) (1,003)
Interest bearing deposits in banks 25 104 (75.96) (79)
Mortgage loans held for sale 104,928 88,158 19.02 16,770
Investment securities, available for sale 43,983 48,323 (8.98) (4,340)
Mortgage-backed securities, available for sale 37,966 28,755 32.03 9,211
Loans (net of allowance for credit losses and
deferred loan fees of $1,692 as of
March 31, 1999 and $1,620 as of
December 31, 1998) 262,981 248,808 5.70 14,173
Premises and equipment, net 13,196 12,894 2.34 302
Other real estate owned, net 506 1,003 (49.55) (497)
Goodwill 73 74 (1.35) (1)
Other assets 7,565 6,830 10.76 735
--------- --------- --------- --------
Total assets 490,435 455,164 7.75 35,271
========= ========== ========= ========
Liabilities and shareholders' equity
Liabilities
Deposits 356,841 344,845 3.48 11,996
Securities sold under agreements to repurchase 31,249 29,592 5.60 1,657
Federal funds purchased and FHLB borrowings 55,510 34,900 59.05 20,610
Guaranteed Preferred Beneficial Interests in
the Company's Junior Subordinated Debentures 16,249 16,249 0.00 0
Other liabilities 2,834 2,151 31.75 683
--------- --------- --------- --------
Total liabilities 462,683 427,737 8.17 34,946
Shareholders' equity
Preferred shares, 5,000,000 shares authorized,
0 shares issued and outstanding as of
March 31,1999 0 0 0.00 0
Common shares, $1.175 par value, 20,000,000
shares authorized, 5,028,584 shares issued
and outstanding as of March 31, 1999
and 4,994,984 as of December 31, 1998 5,910 5,870 0.68 40
Additional paid in capital 15,687 15,551 0.87 136
Accumulated other comprehensive income, net (396) (143) 176.92 (253)
Retained earnings 6,551 6,149 6.54 402
--------- --------- --------- --------
Total shareholders' equity 27,752 27,427 1.18 325
--------- --------- --------- --------
Total liabilities and shareholders' equity 490,435 455,164 7.75 35,271
========= ========= ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 1
<PAGE>
American Bancshares, Inc. and Subsidiaries
Consolidated Condensed Statements of Income
(unaudited, $ in thousands)
<TABLE>
<CAPTION>
Three Month's Ended March 31, % $
1999 1998 Change Change
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans 7,233 5,810 24.49 1,423
Interest on mortgage backed securities, taxable 449 98 358.16 351
Interest on investment securities, taxable 734 1,033 (28.94) (299)
Interest on investment securities, nontaxable 23 17 35.29 6
Other interest income 4 143 (97.20) (139)
-------- -------- --------- ---------
Total interest income 8,443 7,101 18.90 1,342
Interest expense
Deposits 3,195 3,240 (1.39) (45)
Securities sold under agreements to repurchase 285 233 22.32 52
Federal funds purchased and FHLB advances 518 85 509.41 433
Trust preferred securities 354 0 100.00 354
Other borrowed money (1) 25 (104.00) (26)
-------- -------- --------- ---------
Total interest expense 4,351 3,583 21.43 768
Net interest income 4,092 3,518 16.32 574
Provision for loan losses 315 124 154.03 191
-------- -------- --------- ---------
Net interest income after loan loss 3,777 3,394 11.28 383
Noninterest income
Service charges & fees 610 421 44.89 189
Gain on sale of mortgage loans 343 158 117.09 185
Gain on sale of securities 10 122 (91.80) (112)
Gain on sale of servicing 7 22 (68.18) (15)
Broker loan fees 22 54 (59.26) (32)
Merchant fees 274 187 46.52 87
Other income 79 139 (43.17) (60)
-------- -------- --------- ---------
Total noninterest income 1,345 1,103 21.94 242
Noninterest expense
Salaries & employee benefits 1,968 1,510 30.33 458
Net occupancy expense 283 195 45.13 88
Furniture and equipment expenses 320 239 33.89 81
Data processing fees 265 351 (24.50) (86)
Interchange fee expenses 176 116 51.72 60
Legal fees 90 237 (62.03) (147)
Other expense 1,400 1,228 17.26 232
-------- -------- --------- ---------
Total noninterest expense 4,502 3,876 16.15 626
Income before income taxes 620 621 (0.16) (1)
Provision for income taxes 217 217 0.00 0
-------- -------- --------- ---------
Net income 403 404 (0.25) (1)
======== ======== ========= =========
Earnings per share (actual $'s)
Basic 0.08 0.08
Diluted 0.08 0.08
Average number of shares outstanding
Basic 5,010,291 4,994,484
Diluted 5,020,985 5,023,442
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 2
<PAGE>
American Bancshares, Inc. and Subsidiaries
Consolidated Condensed Statement of Cashflows
(unaudited, $ in thousands)
<TABLE>
<CAPTION>
Three Months ended March 31,
1999 1998
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income 403 404
-------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 315 124
Net gain on sale of investment securities (10) (120)
Net gain on sale of loans (344) (158)
Net gain on sale of mortgage servicing rights (7) (22)
Depreciation 306 205
Origination of loans held for sale (net of repayments) (25,271) (19,689)
Proceeds from sales of loans held for sale 8,951 9,559
Net amortization of premiums and accretion of
discounts on investment securities 10 (15)
Increase in other liabilities 683 1,443
(Increase) decrease in other assets (411) (1,204)
-------- --------
Total adjustments (15,778) (9,877)
-------- --------
Net cash provided by operating activities (15,375) (9,473)
-------- --------
Cash flows from investing activities:
Loan originations, net of repayments (14,494) (17,192)
Purchases of bank premises and equipment (608) (1,034)
Proceeds from sales and maturities of available for
sale investment securities 5,297 19,534
Purchases of available for sale investment
securities, net of repayments (10,421) (13,107)
Recoveries on loans charged off 81 0
--------- --------
Net cash used in investing activities (20,145) (11,799)
--------- --------
Cash flows from financing activities:
Net increase in demand deposits, NOW
and savings accounts 13,310 18,656
Net increase (decrease) in time deposits (1,314) (4,807)
Net increase in securities sold under agreements to
repurchase 1,657 8,737
Net proceeds from advances (repayments)from the
FHLB and Federal Funds purchased 20,610 950
Proceeds from issuance of stock 175 0
--------- ---------
Net cash provided by financing activities 34,438 23,536
--------- ---------
Net increase (decrease) in cash and cash equivalents (1,082) 2,264
Cash and cash equivalents at beginning of period 20,319 18,396
--------- ---------
Cash and cash equivalents at end of period 19,237 20,660
========= =========
Supplemental disclosures:
Interest paid 4,289 3,486
========= =========
Income taxes paid 20 120
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3
<PAGE>
AMERICAN BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1. Holding Company and Subsidiaries Background Information
American Bancshares, Inc. (Company), is a one bank holding company, operated
under the laws of the state of Florida. Its wholly-owned banking subsidiary is
American Bank (Bank), a state chartered bank. The Holding Company, a Florida
corporation organized June 30, 1995, is a registered holding company under the
Bank Holding Company Act of 1956, as amended, and on December 1, 1995 became the
bank holding company for the Bank. The Bank was incorporated on December 6, 1988
and opened for business on May 8, 1989. The Bank is a general commercial bank
with all the rights, powers, privileges granted and conferred by the Florida
Banking Code. Although the Holding Company was not formed until June 30,1995 and
did not acquire the Bank until December 1, 1995, the financial statements have
been presented as if the Company had been in existence since the Bank was formed
in 1988 and as if the Bank was it's wholly owned subsidiary since that time.
The Company organized a wholly-owned Florida subsidiary corporation, Freedom
Finance Company, ("Finance Company"), pursuant to which it engages in full
service consumer financing. The Finance Company was incorporated on March 26,
1997 and opened for business on March 31, 1998. The Finance Company offers
consumer-driven products and services ranging from mortgages to automobile
loans, home equity loans and education financing. The Finance Company has the
ability to extend financing to individuals and entities which may not be able to
satisfy the Bank's underwriting requirements or loan standards.
ABI Capital Trust ("ABICT"), a Delaware statutory trust, was created on May
21,1998. The ABICT exists for the exclusive purpose of (i) issuing and selling
Common Securities and Preferred Securities of ABICT (together the "Trust
Securities"), (ii) using the proceeds of the sale of Trust Securities to acquire
Deferrable Interest Debentures ("Junior Subordinated Debentures") issued by the
Company, and (iii) engaging only in those other activities necessary,
convenient, or incidental thereto (such as registering the transfer of Trust
Securities). Accordingly the Junior Subordinated Debentures will be the sole
assets of the ABICT. The Company owns all of the Common Securities of ABICT, the
only voting security, and as a result it is a subsidiary of the Company.
Note 2. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements, in the
opinion of management, include all adjustments, consisting only of normal
recurring adjustments necessary for a fair presentation of the results for the
interim periods. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to SEC rules and
regulations, although the Company believes that the disclosures included herein
are adequate to make the information presented not misleading. The results of
operations for the three period ended March 31, 1999 is not necessarily
indicative of the results expected for the full year.
The organization and business of the Company, accounting policies followed by
the Company and other information are contained in the Company's December 31,
1998 Form 10-K. This quarterly report should be read in conjunction with such
annual report.
Note 3. Investments
The Company's investments and mortgage-backed securities are classified as
available for sale and recorded at fair value as required by the provisions of
Statement of Financial Accounting Standards No. 115. Unrealized gains and losses
are reflected as a separate component of shareholders' equity on the
consolidated statement of condition. At March 31, 1999, an unrealized loss, net
of tax, of $396,000 was reflected as a decrease of shareholders' equity.
Page 4
<PAGE>
AMERICAN BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 4. Earnings Per Share
Basic earnings per common share is calculated by dividing net income by the
sum of the weighted average number of shares of common stock outstanding.
Diluted earnings per common share is calculated by dividing net income by the
weighted average number of shares of common stock outstanding, assuming the
exercise of stock options and warrants using the treasury stock method. Such
adjustments to the weighted average number of shares of common stock outstanding
are made only when such adjustments dilute earnings per common share. The
diluted earnings per share is summarized as follows:
<TABLE>
<CAPTION>
Three Months
ended March 31,
1999 1998
--------- ---------
<S> <C> <C>
Weighted average common shares outstanding............ 5,010,291 4,994.484
Weighted average common shares equivalents............ 10,694 28,958
--------- ---------
Shares used in diluted earnings per share
calculation......................................... 5,020,985 5,023,442
========= =========
</TABLE>
Note 5. Comprehensive Income
Effective January 1, 1998 the Company has adopted Financial Accounting Standards
("FAS") No. 130 "Reporting Comprehensive Income," which requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in the financial statements. Prior periods will
be reclassified as required. The Company's total comprehensive earnings are as
follows:
<TABLE>
<CAPTION>
Comprehensive Earnings (unaudited, $ in thousands)
Three months ended March 31,
1999 1998
---- ----
<S> <C> <C>
Net income (loss) 403 404
Other comprehensive earnings (losses):
Unrealized gains (losses) on securities (253) 106
----- -----
Comprehensive income 150 510
</TABLE>
Note 6. Impact of Recently Issued Accounting Standards
Financial Accounting Standards Board Statement (FAS) No. 134, "Accounting for
Mortgage-Backed Securities retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Entity," amends FAS No. 65 allowing
mortgage-backed securities or other retained interests arising from the
securitization of mortgage loans to be classified based on the mortgage banking
entities' ability and intent to sell of hold those securities. Previously these
securities had to be held within a trading account. This statement became
effective this quarter and had no impact on the financial statements.
FAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
requires all derivatives to be recorded on the balance sheet at fair value and
establishes standard accounting methodologies for hedging activities. The
standard will result in the recognition of offsetting changes in value or cash
flows of both the hedge and the hedged item in earnings or comprehensive income
in the same period. The statement is effective for the Company's fiscal year
ending December 31, 2000. Because the Company does not currently hold any
derivative investments, the adoption of this statement is not expected to have
an impact on the financial statements.
Page 5
<PAGE>
AMERICAN BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 7. Subsequent Events
On April 27, 1999 the Bank charged-off $458,000 of bad debt that was part of a
loan relationship totaling approximately $1 million. Management is currently
reviewing the remaining balances to determine if additional charge-offs are
warranted. Management uses a procedure on a monthly basis for evaluating the
adequacy of the allowance for loan loss. Based on that review management
considers the allowance sufficient to cover expected loan losses.
Effective April 30, 1999, Mr. Gerald L. Anthony resigned his position as Chief
Executive Officer and President of the Company, pursuant to the terms of a
severance agreement. Under the terms of the severance agreement, the Company has
agreed to a severance package providing for the payment of $190,000.
Consequently the Company has expensed the full amount of the severance payment
in the second quarter. The Company anticipates that second quarter 1999 after
tax earnings will be reduced by approximately $124,000 as a result of the
severance payment.
Page 6
<PAGE>
PART 1
ITEM 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
American Bancshares, Inc. and Subsidiaries
Forward Looking Statements
This Quarterly Report on Form 10-Q (including the Exhibits hereto) contains
certain "forward-looking statements" within the meaning of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995, such as
statements relating to, among other things, the financial condition and
prospects, results of operations, plans for future business development
activities, capital spending and financing sources, capital structure, the
effects of regulation and competition, year 2000 readiness, and the business of
the Company and its subsidiaries. Where used in this filing, the words
"anticipate", "believe", "estimate", "expect", "intend", "plan", and similar
words and expressions, as they relate to the Company, or the management of the
Company, identify forward-looking statements. Such forward-looking statements
reflect the current views of the Company and are based on information currently
available to the management of the Company and upon current expectations,
estimates, and projections about the Company and its industry, management's
beliefs with respect thereto, and certain assumptions made by management. These
forward-looking statements are not guarantees of future performance and are
subject to risks, uncertainties, and other factors which could cause actual
results to differ materially from those expressed or implied by such
forward-looking statements as a result of various factors. Potential risks and
uncertainties include, but are not limited to: (i) competitive pressure in the
banking and financial services industries increasing significantly; (ii) changes
in the interest rate environment which reduce margins; (iii) changes in
political conditions or changes occurring in the legislative or regulatory
environment; (iv) general economic conditions, either nationally or regionally,
becoming less favorable than expected resulting in, among other things, a
deterioration in credit quality; (v) changes occurring in business conditions
and inflation; (vi) acquisitions and integration of acquired businesses or
assets; (vii) changes in technology; (viii) changes in monetary and tax
policies; (ix) changes occurring in the securities markets; (x) year 2000
related issues and (xi) other risks and uncertainties detailed from time to time
in the filings of the Company with the Commission including the report on Form
10-K for the year ended December 31, 1998.
Liquidity and Capital Resources
Total assets of the Company increased by 7.75% to $490,435,000 as of March 31,
1999, from $455,164,000 as of December 31, 1998 and 29.3% from $379,179,000 as
of March 31, 1998. The increase in assets from December 31, 1998, was primarily
the result of increases in net loans of $30,943,000 to $367,909,000 and mortgage
backed securities of $9,211,000 to $37,966,000. The increases in assets were
funded through increases in deposits of $11,966,000 to $356,841,000, increases
in Securities Sold Under Agreements to Repurchase of $1,657,000 to $31,249,000
and increases in borrowings of $20,610,000 to $55,510,000.
As of March 31, 1999, the Bank's Tier 1 leverage ratio was 8.19%, Tier 1 to risk
weighted assets was 11.19% and total risk based capital was 11.90%, resulting in
a classification of "Well Capitalized" under FDIC guidelines. The Bank, through
its Asset/Liability Committee, monitors, among other things, the Bank's capital
and liquidity position, making adjustments to deposit, loan, and investment
strategies as necessary. The Bank continues to maintain adequate liquidity
levels with a liquidity ratio at March 31, 1999 of 41.23%. The Bank is a member
of the Federal Home Loan Bank of Atlanta (FHLB). FHLB has approved a line of
credit totaling $75,000,000 collateralized by qualifying mortgages and all of
the Bank's FHLB stock. As of March 31, 1999, advances totaling $55,510,000 were
outstanding. The Bank also maintains Federal Funds Purchased agreements with
several correspondent banks to provide sources of overnight funds. As of March
31, 1999, the Bank had no federal funds purchased.
Management believes that there are adequate funding sources to meet its future
liquidity needs for the foreseeable future. Primary among these funding sources
are the repayment of principal and interest on loans, the renewal of time
deposits, and the growth in the deposit base. Management does not believe that
the terms and conditions that will be present at the renewal of these funding
sources will significantly impact the Company's operations, due to its
management of the maturities of its assets and liabilities.
Page 7
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
PART 1.
ITEM 2. (continued)
Results of Operations
The Company's net income for the quarter ended March 31, 1999 was $403,000 or
$.08 per share, compared to net income of $404,000 or $.08 per share for the
same period for 1998. Net interest income increased $383,000 to $3,777,000 for
the quarter ended March 31, 1998, over the same quarter in 1998, as a result of
the increase in interest earning assets. Non-interest income increased from
$1,103,000 for the quarter ended March 31, 1998 to $1,345,000 for the same
period in 1999. The increase in non-interest income is primarily attributable to
increases in service charges and fees on deposits of $189,000; an increase in
gain on the sale of mortgage loans of $186,000 and credit card merchant services
fee income of $87,000 partially offset by decreases in gain on sale of
securities of $112,000; other income of $61,000; broker loan fees of $32,000 and
$15,000 in gain on sale of servicing.
Total general and administrative expense for the quarter ended March 31, 1999,
increased $626,000 over the same period of 1998. This increase resulted
primarily from increases in other operating expenses related to the growth in
the Company's assets, the number of Bank branches, and the operation of the
Finance Company. Specifically, salary expense increased by $458,000 and other
expense increased by $172,000 primarily due to increased telephone expenses of
$37,000 and increased stationery and supplies expenses of $49,000.
For the three months ended March 31,1999, net interest income increased $383,000
to $3,777,000, compared to $3,394,000 for the same period in 1998, as a result
of the 29% asset growth. Loan loss provision increased from $124,000 for the
three month period ended March 31, 1998 to $315,000 for the same period in 1999.
Management uses a procedure on a monthly basis for evaluating the adequacy of
the allowance for loan loss. Based on that review management considers the
allowance sufficient to cover expected loan losses.
On April 27, 1999 the Bank charged-off $458,000 of bad debt that was part of a
loan relationship totaling approximately $1 million. Management is currently
reviewing the remaining balances to determine if additional charge-offs are
warranted.
Effective April 30, 1999, Mr. Gerald L. Anthony resigned his position as Chief
Executive Officer and President of the Company, pursuant to the terms of a
severance agreement. Under the terms of the severance agreement, the Company has
agreed to a severance package providing for the payment of $190,000.
Consequently the Company has expensed the full amount of the severance payment
in the second quarter. The Company anticipates that second quarter 1999 after
tax earnings will be reduced by approximately $124,000 as a result of the
severance payment.
Page 8
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
PART 1.
ITEM 2.A Year 2000 Compliance
Year 2000 issues and state of readiness: The Company is aware of the issues
associated with existing computer-controlled systems properly recognizing and
processing information relating to dates in and after the Year 2000. Systems
that cannot adequately process dates beyond the year 1999 could generate
erroneous data or cause a system to fail. Because the Year 2000 issue poses an
unprecedented enterprise wide challenge for every organization, the Company
formed a Year 2000 Committee ("Y2K Committee"). The Y2K Committee developed a
Year 2000 Project Plan ("Y2K Plan") which addresses both internal and external
technology. The data processing systems and software include those developed and
maintained by the Company's third-party data processing vendors and purchased
software which is run on in-house computer networks.
In 1997 the Company, through the Y2K Committee, initiated a review and
assessment of all hardware and software to confirm that it will function
properly in the Year 2000. Each system was evaluated for its degree of
significance to the operations of the Company and detailed test plans were
developed for those systems determined to be of a critical nature.
Third-party data processing vendors (primarily M&I Data Services, Inc. for its
general ledger, deposits, and portfolio loans; Essex Home Mortgage Servicing
Corp. for its loans held for sale; Compass Bank for its investment portfolio,
and Contour, Inc. for its mortgage loan processing systems) have been contacted
and the Company has obtained verification from these vendors that these systems
will function properly in the Year 2000.
With respect to purchased software and electronic hardware devices currently in
use, the Company has inventoried these items to determine which of these devices
rely on a valid date in order to function. The Company has contacted those
vendors identified through this inventory, who have indicated that their
hardware and software is or will be Year 2000 compliant in time frames that meet
regulatory requirements.
Non-information technology embedded systems consisting primarily of security
systems, HVAC controls and elevators have also been reviewed. These systems were
found to be generally year 2000 compliant.
The Company also has relationships with suppliers and other companies. The
Company has contacted key suppliers of goods or services regarding their Year
2000 readiness. They are in the process of reviewing their systems. The Company
will continue to monitor these suppliers as to their Year 2000 readiness.
Risks associated with year 2000 and contingency plan: Based on information
currently available to the Company, the Company believes that the most
reasonably likely worst case Year 2000 scenario with respect to the Company
relate to the potential failure of third party data processing vendors to become
Year 2000 compliant. The inability of these third party data processing vendors
to complete their Year 2000 remediation processes in a timely fashion could
result in delays in processing daily transactions and could result in a material
and adverse effect on the Company's results of operations and financial
condition. The Company has developed a contingency plan to address potential
failures in these systems. The Company believes that modifications to existing
systems, conversion to new systems, and vendor compliance upgrades will be
resolved on a timely basis.
Expenses related to year 2000 compliance. The Company's current assessment of
cost associated with the completion of its Y2K Plan is not considered by
management to be material to the Company's future operations. Through March 31,
1999, the Company has expended $37,000 on its Y2K Plan and anticipates
additional costs of approximately $143,000, to be incurred in 1999. The cost of
completing the Company's Y2K Plan and the dates on which all procedures will be
completed are based on management's best estimates. These estimates were derived
utilizing various assumptions about future events, including the continued
availability of resources, external technology, modification plans and other
significant factors. However, there can be no guarantee that these estimates
will be achieved and actual results could differ materially from those currently
anticipated.
Page 9
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
PART 1.
ITEM 3. Quantitative and Qualitative Disclosure About Market Risk
MARKET RISK
One of the Company's primary objectives is to control fluctuations in the
Economic Value of Equity ("EVE") caused by changes in interest rates. The Bank's
Asset/Liability Committee ("ALCO") is responsible for addressing fluctuations in
the EVE. The ALCO utilizes a model that takes into account and evaluates the
market risk of the Bank's financial position. Market risk represents possible
risk of loss from adverse changes in market prices and interest rates. ALCO
monitors the impact of changes in the interest rates through the use of an EVE
model. EVE is the net present value of the balance sheet cash flows. This
measures a sudden increase or decrease in interest rates in 100 basis point
increments and the effect of such change on the net present value of equity. The
following table sets forth the estimated impact of immediate changes in interest
rates as of March 31, 1999:
<TABLE>
<CAPTION>
RATE CHANGE EVE % CHANGE
----------- --------- --------
<S> <C> <C>
- 400 $ 47,487 - 8.58%
- 300 43,641 - 9.79
- 200 41,095 - 9.82
- 100 40,236 - 6.33
0 41,688 0.00
+ 100 43,647 7.92
+ 200 45,736 15.66
+ 300 47,902 23.19
+ 400 50,113 30.50
</TABLE>
The preceding table indicates that at March 31, 1999, in the event of a sudden
and sustained increase in market rates the EVE would be expected to increase and
given a decrease in market rates the EVE would be expected to decrease
initially, for the first 200 basis point decline, then increase, for the next
200 basis point decline. These changes are the result of repricing opportunities
inherent in the balance sheet. Computations of forecasted efforts of interest
rates are based on numerous assumptions, such as market interest rates, loan
growth and prepayment, deposit maturities and retention and should not be relied
upon as indicative of future results. Also, the computations do not take into
effect any actions that the ALCO could undertake in response to changes in
interest rates.
Page 10
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable this filing.
Item 2. Changes in Securities
Not applicable this filing.
Item 3. Defaults Upon Senior Securities
Not applicable this filing.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable this filing.
Item 5. Other Information
Not applicable this filing.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
none this period
(b) Reports on Form 8-K
On February 16, 1999 the Company filed a report on Form 8-K announcing the
resignation of Mr. Gerald L. Anthony as President and Chief Executive Officer of
American Bank and the appointment of Mr. Jerry Neff to serve as the interim
President and Chief Executive Officer of the Bank.
On March 12, 1999 the Company filed a report on Form 8-K announcing that it
will increase by $400,000 the allowance for loan losses of its wholly owned
banking subsidiary, American Bank, to be charged against the Company's 1998
fiscal year end financial results.
On May 5, 1999 the Company filed a report on Form 8-K announcing the
resignation of Mr. Gerald L. Anthony as Chief Executive Officer and President of
the Company pursuant to the terms of a Severance Agreement approved by
the Board of Directors of the Company, which agreement modifies and clarifies
the terms of Mr. Anthony's Employment Agreement as it relates to his separation
from the Company and its subsidiaries.
Page 11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
/s/ Jerry L. Neff
-----------------------------------
Jerry L. Neff, President and
Chief Executive Officer
Date: May 13, 1999
-------------------
/s/ Brian M. Watterson
-----------------------------------
Brian M. Watterson
Senior Vice President and
Chief Financial Officer
Date: May 13, 1999
-------------------
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA FROM THE COMPANY'S
GENERAL LEDGER AND BOARD OF DIRECTORS FINANCIAL REPORT PACKAGE AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Dec-31-1998
<PERIOD-END> Mar-31-1999
<CASH> 19,212
<INT-BEARING-DEPOSITS> 25
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 81,949
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 370,377
<ALLOWANCE> (2,468)
<TOTAL-ASSETS> 490,435
<DEPOSITS> 356,841
<SHORT-TERM> 29,510
<LIABILITIES-OTHER> 50,332
<LONG-TERM> 26,000
0
0
<COMMON> 5,910
<OTHER-SE> 21,842
<TOTAL-LIABILITIES-AND-EQUITY> 490,435
<INTEREST-LOAN> 7,233
<INTEREST-INVEST> 1,206
<INTEREST-OTHER> 4
<INTEREST-TOTAL> 8,443
<INTEREST-DEPOSIT> 3,195
<INTEREST-EXPENSE> 4,351
<INTEREST-INCOME-NET> 4,092
<LOAN-LOSSES> 315
<SECURITIES-GAINS> 10
<EXPENSE-OTHER> 4,502
<INCOME-PRETAX> 620
<INCOME-PRE-EXTRAORDINARY> 403
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 403
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
<YIELD-ACTUAL> 8.02
<LOANS-NON> 1,158
<LOANS-PAST> 411
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 4,499
<ALLOWANCE-OPEN> 2,323
<CHARGE-OFFS> 293
<RECOVERIES> 81
<ALLOWANCE-CLOSE> 2,423
<ALLOWANCE-DOMESTIC> 2,423
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
