AMERICAN BANCORPORATION
1995 ANNUAL REPORT
American Bancorporation and Subsidiaries
FINANCIAL HIGHLIGHTS
(In thousands, except per share) 1995 1994 1993
Statement of Operations:
Net Income. . . . . . . . $ 3,052 $ 1,696 $ 1,770
Net Income per share. . . 1.95 1.13 1.18
Balance Sheet:
Assets. . . . . . . . . . . $ 353,995 $ 338,116 $ 276,390
Deposits. . . . . . . . . . 292,665 292,341 248,040
Loans - net . . . . . . . . 246,518 225,129 146,979
Stockholders' equity. . . 28,012 26,193 24,158
Book Value per share . . 17.90 16.74 16.03
QUARTERLY STOCK PRICE RANGES
1995: High Low
Fourth. . . . . . . . . 23 1/2 20 1/2
Third . . . . . . . . . . 23 1/2 19 1/2
Second. . . . . . . . . . 21 1/2 14 3/4
First . . . . . . . . . . 15 1/2 13 1/2
1994: High Low
Fourth. . . . . . . . . . 18 13
Third . . . . . . . . . . 18 1/2 16
Second. . . . . . . . . . 18 1/2 15 1/2
First . . . . . . . . . . 19 15 1/2
American Bancorporation is traded on the Nasdaq Stock Market under the ticker
symbol AMBC.Per share data and stock prices have been retroactively restated
to reflect a two for one stock split, which became effective March 16, 1994.
CORPORATE PROFILE
American Bancorporation (the "Company") is a registered Ohio bank holding
company with its headquarters located in Wheeling, West Virginia. The Company
was organized in 1966 for the purpose of developing a network of community
oriented banks and companies engaged in activities closely related to
commercial banking. At December 31, 1995, the Company owned two affiliate
banks. The Wheeling National Bank ("WNB") serves its customers through seven
full service offices located in Ohio County, Hancock County and Wetzel County,
West Virginia. Columbus National Bank, ("CNB") serves its customers through
eleven full service offices located in Belmont County, Harrison County, Guernsey
County, Jefferson County and Franklin County, Ohio. CNB will be merged into WNB
as of March 29, 1996.
In addition to the Banks, the Company operates three non-bank subsidiaries:
American Bancdata Corporation which provides electronic data processing
services to the Company and the affiliate Banks, American Bancservices, Inc.,
which provides the Company's transfer agent services and American Mortgages,
Inc. which originates and services mortgage loans.
The approximate number of common stockholders of record was 2,645 on January
31, 1996.
CONTENTS
Financial Highlights. . . . . . . . See above
Quarterly Stock Price Ranges. . . . See above
Corporate Profile . . . . . . . . . See above
Chairman's Letter . . . . . . . . . 1
Financial Statements. . . . . . . . 2 - 26
Independent Auditors' Report . . 27
Five Year Selected Financial Data . 28
Management's Discussion and Analysis . . 29 - 42
THE CHAIRMAN'S LETTER
TO OUR SHAREHOLDERS:
For the year 1995 American Bancorporation recognized net income of
$3,052,000 or $1.95 per share, compared to net income of $1,696,000 or $1.13
per share in 1994.
Total assets at December 31, 1995 were $354 million, compared to $338
million at December 31, 1994.
At December 31, 1995 total capital was $28,012,000, compared to
$26,193,000 at December 31, 1994 and book value per common share at year end
1995 was $17.90, compared to $16.74 at year end 1994.
At December 31, 1995 the allowance for loan losses to loans outstanding
was 1.5%.
At December 31, 1995 total nonperforming loans as a percentage of total
loans stood at 0.8%.
1995 was again a year of growth and accomplishment.
At Columbus National Bank, on February 9, 1996, we closed the purchase of
the Bank One deposits at Flushing and the Ohio Valley Mall.
At Wheeling National Bank we again saw solid growth, an historic high in
profits and historic lows in delinquencies and nonperforming assets.
At the holding company we settled the Declaratory Judgment action in the
U.S. Federal Court and are finishing the recalculation of benefits due retired
employees.
The merger of Columbus National Bank into Wheeling National Bank will be
completed at the close of business Friday, March 29, 1996.
We expect 1996 to be an excellent profit year.
We deeply appreciate your continued strong support.
Sincerely,
Jeremy C. McCamic
Chairman and Chief Executive Officer
CONSOLIDATED BALANCE SHEET American Bancorporation and Subsidiaries
December 31, 1995 and 1994
ASSETS 1995 1994
Cash and due from banks. . . . . . . . . . . . .$ 10,887,718 $ 10,704,396
Federal funds sold . . . . . . . . . . . . . . 11,469,000 3,924,000
Investment securities available for sale . . . 68,014,533 3,484,431
Investment securities held to maturity
Market value 1994 - $74,419,000 . . - 78,189,252
Loans
Commercial, financial and agricultural. . . 64,951,306 52,929,805
Real estate mortgage. . . . . . . . . . . . 128,709,317 119,629,269
Installment - net of unearned income. . . . 56,711,400 56,306,670
250,372,023 228,865,744
Less allowance for loan losses. . . . . . 3,853,633 3,736,994
246,518,390 225,128,750
Premises and equipment - net . . . . . . . . 8,947,284 8,672,714
Accrued interest receivable. . . . . . . . . 2,065,832 2,018,778
Excess of cost over net assets acquired. . . 1,830,170 2,065,475
Other assets . . . . . . . . . . . . . . . . 4,261,848 3,927,839
TOTAL ASSETS. . . . . . . . . . . . . . .$353,994,775 $338,115,635
LIABILITIES
Deposits
Demand - non-interest bearing . . . . . . . $ 31,792,609 $ 31,208,913
Demand - interest bearing . . . . . . . . . 27,286,771 25,041,613
Savings . . . . . . . . . . . . . . . . . . 98,977,637 117,684,912
Time - under $100,000 . . . . . . . . . . . 116,370,529 104,302,859
Time - over $100,000. . . . . . . . . . . . 18,237,061 14,102,360
TOTAL DEPOSITS. . . . . . . . . . . . . 292,664,607 292,340,657
Short-term borrowings. . . . . . . . . . . . . 27,522,666 13,398,181
Accrued interest payable . . . . . . . . . . . 1,033,315 1,011,323
Other liabilities. . . . . . . . . . . . . . . 3,714,641 3,172,455
Notes payable and other long term debt . . . . 1,047,124 2,000,000
TOTAL LIABILITIES . . . . . . . . . . . 325,982,353 311,922,616
STOCKHOLDERS' EQUITY
Preferred stock. . . . . . . . . . . - -
Common stock without par value, stated value $5
a share, authorized 6,500,000 shares, issued and
outstanding 1,564,837 in 1995 and 1994. . . . . 7,824,185 7,824,185
Additional paid-in capital . . . . . . . . 10,301,982 10,301,982
Retained earnings. . . . . . . . . . . . . 9,763,633 7,806,852
Unrealized gain on securities
available for sale, net. . . . . . . . . . . 122,622 260,000
TOTAL STOCKHOLDERS' EQUITY. . . . . . . . 28,012,422 26,193,019
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY. $353,994,775 $338,115,635
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF OPERATIONS
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
INTEREST INCOME
Loans . . . . . . . . . . . . . . $ 21,929,265 $ 14,902,482 $ 14,590,143
Investment securities
Taxable interest income . . . . . 3,844,393 4,410,109 5,158,483
Non-taxable interest income . . 144,316 163,039 212,519
Dividends . . . . . . . . . . . . 207,773 148,027 142,479
4,196,482 4,721,175 5,513,481
Short-term investments. . . . . . 370,332 511,494 466,737
Total interest income. . . . . 26,496,079 20,135,151 20,570,361
INTEREST EXPENSE
Deposits
Interest bearing demand . . . . 618,035 586,563 664,620
Savings . . . . . . . . . . . . . 2,872,553 2,690,109 3,018,910
Time - under $100,000 . . . . . . 5,303,309 3,368,774 3,877,336
Time - over $100,000. . . . . . . 1,003,706 384,872 384,225
9,797,603 7,030,318 7,945,091
Borrowings
Short-term borrowings . . . . . . . 1,275,187 145,622 63,737
Notes payable and
other long-term debt. . . 97,872 13,059 -
Total interest expense. . . . . 11,170,662 7,188,999 8,008,828
NET INTEREST INCOME . . . . . . . . 15,325,417 12,946,152 12,561,533
PROVISION FOR LOAN LOSSES. . . . . . 105,000 215,000 844,361
Net interest income after provision
for loan losses. . . . . . . . . .15,220,417 12,731,152 11,717,172
OTHER INCOME
Service charges on
deposit accounts . . . 735,514 661,492 689,656
Insurance commissions . . . . . 119,017 113,619 123,925
Net securities gains. . . . . . 3,261 2,634 219,030
Other income. . . . . . . . . . . 822,467 284,122 416,452
Total other income . . . . . . 1,680,259 1,061,867 1,449,063
OTHER EXPENSE
Salaries and employee benefits. . 5,318,929 4,932,526 4,427,945
Occupancy expense . . . . . . . . 1,048,541 843,095 792,907
Furniture and equipment expense . 1,067,046 1,032,268 1,026,620
Other expenses. . . . . . . . . . 4,656,170 4,407,160 4,149,160
Total other expense. . . . . . 12,090,686 11,215,049 10,396,632
INCOME BEFORE INCOME TAXES . . . . . . 4,809,990 2,577,970 2,769,603
PROVISION FOR INCOME TAXES . . . . . . 1,757,823 881,651 999,152
NET INCOME . . . . . . . . . . . . . .$ 3,052,167 $ 1,696,319 $ 1,770,451
Per Share:
NET INCOME. . . . . . . . . $ 1.95 $ 1.13 $ 1.18
The accompanying notes are an integral part of these financial statements.
<TABLE>
American Bancorporation and Subsidiaries
CONSOLIDATED STATEMENT
OF STOCKHOLDERS' EQUITY
Years ended December 31, 1995, 1994 and 1993
<CAPTION>
Unrealized gain
Additional on securities
Common paid-in Retained available for
stock capital earnings sale, net Total
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1993. . . . $ 7,533,060 $ 9,753,871 $ 5,853,972 $ - $ 23,140,903
Net Income. . . . - - 1,770,451 - 1,770,451
Cash Dividends ($0.50 per share). . - - (753,306) - (753,306)
Balance at December 31, 1993 . . . 7,533,060 9,753,871 6,871,117 - 24,158,048
Net Income. . . . - - 1,696,319 - 1,696,319
Cash Dividends ($0.50 per share). - - (760,584) - (760,584)
Proceeds from stockholder rights
offering (58,225 shares). . . . 291,125 548,111 - - 839,236
Change in unrealized gain on
securities available for sale, net - - - 260,000 260,000
Balance at December 31, 1994 . . . 7,824,185 10,301,982 7,806,852 260,000 26,193,019
Net Income. . . . - - 3,052,167 - 3,052,167
Cash Dividends ($0.70 per share). . - - (1,095,386) - (1,095,386)
Change in unrealized gain on
securities available for sale, net - - - (137,378) (137,378)
Balance at December 31, 1995 . . . $ 7,824,185 $ 10,301,982 $ 9,763,633 $ 122,622 $ 28,012,422
The accompanying notes are an integral part of these financial statements.
</TABLE>
American Bancorporation and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
Years ended December 31, 1995, 1994 and 1993
Operating Activities: 1995 1994 1993
Net income. . . . . . . . . . . . . $ 3,052,167 $ 1,696,319 $ 1,770,451
Adjustments to reconcile net
income to net cash from operating activities:
Depreciation . . . . . . . . . . 603,798 555,372 563,397
Amortization of intangibles. . . 315,490 128,300 120,801
Net amortization (accretion) of
investment securities (74,137) 100,355 146,316
Provision for loan losses. . . . 105,000 215,000 844,360
Gain on sale of premises & equipment . - (2,975) (92,295)
Net gains on sale of
investment securities (3,261) (2,634) (219,030)
Change in assets and liabilities net of
effects from the purchase of branch assets:
Net (increase) decrease in accrued
interest receivable . . . . . (47,054) (323,175) 481,340
Net increase (decrease) in accrued
interest payable. 21,992 45,159 (254,603)
Net (increase) decrease in other assets.(472,525) (538,102) 670,667
Net increase in other liabilities 414,762 1,449,798 108,279
Net decrease from other
operating activities 106,740 346,907 350,619
Net cash provided by
operating activities. . . . 4,022,972 3,670,324 4,490,302
Investing Activities:
Purchase of branch assets,
net of cash acquired. - (4,487,905) -
Investment securities held to maturity:
Proceeds from maturities
and repayments. 19,607,659 33,151,514 39,721,032
Proceeds from sales. - - 19,205,084
Purchases. . . . . . . . . . (8,272,273) (22,380,352)(56,527,280)
Investment securities available for sale:
Proceeds from maturities
and repayments 6,692,533 106,400 -
Proceeds from sales. . . . . 8,088,052 3,017,375 -
Purchases. . . . . . . . . . . (12,555,150) (1,303,231) -
Net (increase) decrease in loans . . (21,494,640) (15,034,412) 7,473,266
Purchase of loans. . . . . - (14,036,899) -
Purchase of premises and equipment (828,810) (1,323,607) (586,989)
Proceeds from sale of
premises and equipment . . - 290,468 428,835
Net cash provided (used)
by investing activities . (8,762,629) (22,000,649) 9,713,948
Financing Activities:
Net increase in non-interest
bearing demand deposits . 583,696 2,038,122 288,329
Net increase (decrease) in interest
bearing demand and savings deposits (16,462,117) (9,384,462) 2,420,230
Net increase (decrease) in
time deposits . . . 16,202,371 4,596,371 (15,669,736)
Net increase (decrease)
in short-term borrowings . . . . 14,124,485 11,789,434 (480,962)
Principal repayment of
long-term debt. . . . . (1,002,433) - -
Proceeds from issuance of
long-term debt - 2,000,000 -
Proceeds from stockholder
rights offering - 839,236 -
Cash dividends paid. . . . . . . . (978,023) (753,306) (753,306)
Net cash provided by (applied to)
financing activities . . . . 12,467,979 11,125,395 (14,195,445)
Net Increase (Decrease) in Cash
and Cash Equivalents . . 7,728,322 (7,204,930) 8,805
Cash and Cash Equivalents
Beginning Balance. . . . $14,628,396 $21,833,326 $21,824,521
Cash and Cash Equivalents
Ending Balance . . . . . $22,356,718 $14,628,396 $21,833,326
Supplemental schedule of noncash investing and financing activities:
The Company purchased certain branch assets and assumed
certain liabilities. In conjunction with the acquisition,
the assets acquired and the liabilities assumed were as follows:
Fair value of assets acquired. . $ - $51,015,184 $ -
Cash paid in the acquisition . . . - (4,782,680) -
Liabilities assumed. . - (47,148,594) -
Excess of liabilities assumed
over net assets acquired $ - $ (916,090)$ -
Cash paid during the year for:
Interest. . . . . . . . . . . . . $11,148,670 $ 7,046,161 $ 8,263,431
Income taxes. . . . . . . . . . $ 1,331,100 $ 1,228,000 $ 661,490
Non-cash investing and financing activities:
Loan foreclosures and
repossessions . . . . $ 149,810 $ 281,603 $ 1,036,707
Transfer of other real estate
owned to premises and equipment $ - $ - $ 279,263
Transfer of premises and equipment
to other real estate owned $ - $ 549,566 $ -
The accompanying notes are an integral part of these financial statements.
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
Note A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
American Bancorporation (the "Company"), which was organized in 1966, is a
registered Ohio bank holding company with its headquarters located in
Wheeling, West Virginia. The Company's wholly owned subsidiaries are Wheeling
National Bank, Columbus National Bank, American Bancdata Corporation,
American Bancservices, Inc. and American Mortgages, Inc. The Company's
subsidiaries primarily engage in commercial banking and mortgage banking.
The subsidiary banks branch offices are primarily located in the northern
panhandle of West Virginia, and central and eastern Ohio.
The accounting and reporting policies of American Bancorporation and
Subsidiaries (the "Company") conform to generally accepted accounting
principles and with general practice within the banking industry. The
following is a description of the significant policies.
Principles of Consolidation
The consolidated financial statements include the accounts of American
Bancorporation and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated. Subsidiaries acquired in purchase
transactions are included in the consolidated financial statements from the
date of acquisition.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash
and due from banks and federal funds sold. Generally, federal funds are sold
for one-day periods.
Investment Securities
The Company has adopted a methodology for the classification of securities at
the time of their purchase as either held to maturity or available for sale.
If it is management's intent and the Company has the ability to hold such
securities until their maturity, these securities are classified as held to
maturity and are carried on the Company's books at cost, adjusted for
amortization of premium and accretion of discount on a level yield basis.
Alternatively, if it is management's intent at the time of purchase to hold
securities for an indefinite period of time and/or to use such securities as
part of its asset/liability management strategy, the securities are classified
as available for sale and are carried at fair value, with net unrealized gains
and losses excluded from earnings and reported as a separate component of
stockholder's equity, net of applicable income taxes. Investment securities
available for sale include securities which may be sold in response to
changes in interest rates, resultant prepayment risk and other factors related
to interest rate or prepayment risk. Gains and losses on sales of securities
are recognized using the specific identification method.
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 115, "Accounting for Certain Investments in Debt and Equity Securities" in
1994. The initial effect of adopting SFAS No. 115 in 1994 was an increase in
shareholders' equity of $468,000, representing the net unrealized gain on
securities available for sale.
In October 1994, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 119, "Disclosures about Financial Instruments and Fair Value of
Financial Instruments". The Company adopted SFAS No. 119 as of January 1,
1995. The adoption of SFAS No. 119 had no material impact to the Company's
financial position or results of operations.
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 1995, 1994 and 1993
On December 1, 1995, the Company reclassified $66,965,000 of investment
securities held to maturity to investment securities available for sale. The
reclassification was in accordance with the FASB's special report "A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities" that permitted this one-time reassessment.
Loans
Loans are reported at their principal amounts, net of unearned income and the
allowance for loan losses. Interest on loans is computed primarily on the
principal balance outstanding. For loans not primarily secured by real estate
or in the process of collection, the Company discontinues the accrual of
interest when a loan is 90 days past due or collection of the interest is
doubtful. Real estate loans are placed on nonaccrual status when, in
management's judgement, collection is in doubt or when foreclosure proceedings
are initiated, which is generally 180 days past the due date. Income on
discounted loans is principally recognized on the sum-of-the-months digits
method, which approximates a level yield. Loan origination and commitment
fees, as well as certain direct loan origination costs, are deferred and
amortized as a yield adjustment over the lives of the related loans via a
method which approximates a level yield.
The Company grants commercial and industrial loans, commercial and residential
mortgages and consumer loans to customers primarily in the northern panhandle
of West Virginia, southwestern Pennsylvania and central and eastern Ohio. The
Company's loan portfolio can be adversely impacted by downturns in the local
economic and real estate markets as well as employment conditions.
On January 1, 1995, the Company adopted SFAS No. 114, "Accounting by Creditors
for Impairment of a Loan," and SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan--Income Recognition and Disclosures." SFAS No. 114
provided guidelines for measuring impairment losses on loans. A loan is
considered to be impaired when it is probable that the Company will be unable
to collect all principal and interest amounts due according to the contractual
terms of the loan agreement. All of the Company's nonaccrual loans, which
totalled $790,000 at December 31, 1995, are considered to be impaired loans.
Average impaired loans during 1995 were $818,000. Under SFAS No. 114,
impaired loans subject to the statement are required to be measured based upon
the present value of expected future cash flows, discounted at the loan's
initial effective interest rate, or at the loan's market price or fair value
of the collateral if the loan is collateral dependent. If the loan valuation
is less than the recorded value of the loan, an impairment reserve must be
established for the difference. The impairment reserve is established by
either an allocation of the reserve for credit losses or by a provision for
credit losses, depending on the adequacy of the reserve for credit losses.
Included in impaired loans at December 31, 1995 were $489,000 that had a
related impairment reserve of $172,000, and $301,000 that did not have a
related reserve as a result of interest payments applied to reduce principal
or credit losses previously taken on these loans. SFAS No. 118 permits
existing income recognition practices to continue. During the year, the
Company recognized $21,000 of interest revenue on impaired loans, all of which
was recognized using the cash basis method of income recognition.
Allowance for Loan Losses
The determination of the balance in the allowance for loan losses is based on
an analysis of the portfolio and reflects an amount which, in management's
judgement, is adequate to provide for potential losses after giving
consideration to the character of the portfolio, current economic conditions,
past loss experience and such other factors that deserve current recognition.
The regulatory examiners may require the Company to recognize additions to the
allowances based upon their judgements about information available to them at
the time of their examinations. The provision for loan losses is charged to
current operations.
Mortgage Loan Servicing
Mortgage servicing fees received from permanent investors for servicing their
loan portfolios are recorded on the accrual basis. Mortgage loan servicing
includes collecting monthly mortgagor payments, forwarding payments and
related accounting reports to investors, collecting escrow deposits for the
payment of mortgagor property taxes and insurance, and paying taxes and
insurance from escrow funds when due.
Purchased mortgage servicing rights are capitalized and amortized, as a
reduction of servicing income, in proportion to, and over the period of,
estimated net servicing revenue (undiscounted servicing revenues in excess of
undiscounted servicing costs). In estimating future servicing revenues,
management takes into consideration a number of factors including the
current rate of anticipated prepayments of the underlying mortgage loans.
Changes in the assumptions used could significantly affect management's
estimates. If actual results differ significantly from those estimated by
management, adjustments to the carrying value of purchased mortgage servicing
rights could occur.
In May, 1995 the FASB issued SFAS No. 122, "Accounting for Mortgage Servicing
Rights". SFAS No. 122 amends SFAS No. 65, "Accounting for Certain Mortgage
Banking Activities" by requiring that a mortgage banking enterprise that
acquires mortgage servicing rights through either the purchase or origination
of mortgage loans recognize those rights as separate assets by allocating the
total cost of the mortgage loans to the mortgage servicing rights and the
loans (without the mortgage servicing rights) based on their relative fair
values. In addition, SFAS No. 122 requires that a mortgage banking
enterprise assess its capitalized mortgage servicing rights for impairment
based on the fair value of those rights. This pronouncement is to be applied
prospectively in fiscal years beginning after December 15, 1995. The Company
currently estimates that the effects of the adoption of SFAS No. 122 will not
be material to the Company's financial condition or results of operations.
Premises and Equipment
Premises and equipment are stated at cost, less accumulated depreciation and
amortization. Depreciation is provided on the straight-line method,
distributing the cost of premises over an estimated useful life of twenty to
fifty years and the cost of equipment over an estimated useful life of three
to fifteen years.
Excess of Cost over Net Assets Acquired
Excess of cost over net assets acquired include both goodwill and core deposit
intangibles. Goodwill is being amortized on a straight-line basis over a
period of twelve to thirty years. Core deposit intangibles are being amortized
over a period of five to twelve years.
Other Real Estate Owned
Other real estate owned in connection with loan settlements, including real
estate acquired, is stated at the lower of estimated fair value less estimated
costs to sell, or the carrying amount of the loan. Declines in market value
that might occur between appraisal dates are charged directly to operations.
Decreases in fair value between annual appraisals, net gains or losses on the
sale of other real estate owned, and net direct operating expense attributable
to these assets are included in other income/other expense. Other real estate
owned is included in other assets.
Income Taxes
The Company and its subsidiaries file a consolidated Federal income tax
return. The Company retroactively adopted SFAS No. 109, "Accounting for
Income Taxes" in 1993. SFAS No.109 required a change from the deferred
method of accounting for income taxes of Accounting Principles Bulletin
("APB") Opinion 11 to the asset and liability method of accounting for income
taxes. Under the asset and liability method of SFAS No. 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under SFAS No. 109, the effect on
deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Pension Plan
Pension costs, based on actuarial computations, are charged to expense and
funded as incurred. (See Note R "Pension Plan and Profit Sharing 401(k)
Savings Plan").
Per Share Data
Per share data is computed based upon the weighted average number of common
shares outstanding. The weighted average number of shares used in the
calculation was 1,564,837 for 1995, 1,506,771 in 1994 and 1,506,612 in 1993.
Earnings per share, dividends per share and book values per share have been
restated to reflect a two for one stock split which was approved by the Board
of Directors in February, 1994, and became effective March 16, 1994.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amount of revenues and expenses during the reporting period.
Actual results could differ from these estimates. Estimates are used when
accounting for allowance for loan losses, realization of deferred tax assets,
fair values of certain assets and liabilities, determination and carrying
value of impaired loans, carrying value of other real estate, carrying value
and amortization of intangibles, and employee benefit plans.
Reclassifications
Certain prior year financial information has been reclassified to conform to
the presentation in 1995.
Note B-BRANCH ACQUISITION
On December 8, 1994, the Company, through its subsidiaries Columbus National
Bank ("CNB") and American Mortgages, Inc., ("AMI"), acquired certain assets
and assumed certain liabilities of Buckeye Savings Bank ("Buckeye"), a wholly
owned subsidiary of Crown Bank, F.S.B., headquartered in Casselberry, Florida.
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 1995, 1994 and 1993
CNB assumed liabilities totalling $46.5 million, including deposits totalling
$46.4 million, and purchased the premises and equipment of the St. Clairsville
and Steubenville, Ohio branch offices of Buckeye. CNB also acquired assets
with a fair value of $50.2 million, including loans (primarily mortgage loans)
totalling $47.9 million, including $0.4 million allowance for loan losses.
CNB paid a $916,000 premium based on core deposits. The premium based on core
deposits is being amortized over a period of eight years.
AMI acquired the mortgage servicing rights to loans totalling $81.6 million
for $570,000 and certain fixed assets totalling $210,000.
Note C-CASH AND DUE FROM BANKS
The subsidiary banks of the Company are required to maintain with a Federal
Reserve bank reserve balances based principally on deposits outstanding.
Balances maintained are included in cash and due from banks. The required
reserves were approximately $300,000 at December 31, 1995 and December 31,
1994.
Note D-INVESTMENT SECURITIES
Securities Available for Sale
The amortized cost and approximate market value of investment securities
available for sale at December 31, 1995 and 1994 is summarized as follows:
1995
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
United States Treasury . . . . . .$18,405,901 $ 37,418 $ 73,818 $18,369,501
United States Federal agencies . . 16,800,763 66,736 88,762 16,778,737
United States agency mortgage-
backed securities. 25,891,941 21,305 356,091 25,557,155
States and political subdivisions. 1,882,261 276,089 141 2,158,209
Other. . . . . . . . . . . . . . . . 10,000 - - 10,000
Total Debt Securities . . . . . 62,990,866 401,548 518,812 62,873,602
Equity securities. . . . . . . . . .4,939,431 201,500 - 5,140,931
Total Securities
Available for Sale . . $67,930,297 $603,048 $518,812 $68,014,533
1994
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
Equity securities. . . . . . . . $ 3,224,431 $ 260,000 $ - $ 3,484,431
Total Securities
Available for Sale . . . . $ 3,224,431 $ 260,000 $ - $ 3,484,431
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 1995, 1994 and 1993
Securities Held to Maturity
The amortized cost and approximate market value of investment securities held
to maturity at December 31, 1994 is summarized below. There were no
securities held to maturity at December 31, 1995.
1994
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
United States Treasury . . . . $27,585,550 $ 1,073 $ 959,981 $26,626,642
United States Federal agencies . . 12,594,218 692 641,548 11,953,362
United States agency mortgage-
backed securities 35,907,079 1,533 2,328,772 33,579,840
States and political subdivisions. .2,092,405 163,856 6,522 2,249,739
Other. . . . . . . . . . . . . . . 10,000 - 664 9,336
Total Investment Securities . .$78,189,252 $167,154 $3,937,487 $74,418,919
The amortized cost and approximate market value of debt securities at December
31, 1995, by contractual maturity, are shown below. 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.
Amortized Market
Cost Value
Due in one year or less . . $11,321,585 $11,365,400
Due after one year through five years 20,644,627 20,551,239
Due after five years through ten years. 15,816,984 15,874,219
Due after ten years . . . . 15,207,670 15,082,744
$62,990,866 $62,873,602
Proceeds from the sale of securities available for sale for the years ended
December 31, 1995 and 1994 were $8,088,052 and $3,017,375, respectively. Gross
realized gains on the sale of securities available for sale were $33,171 in
1995 and $6,915 in 1994. Gross realized losses on the sale of securities
available for sale were $29,910 in 1995 and $4,281 in 1994.
There were no sales of investment securities held to maturity in 1995 and 1994.
Proceeds from the sale of investment securities held to maturity, gross
realized gains and gross realized losses for the year ended December 31, 1993
were $19,205,084, $335,565 and $116,535, respectively.
At December 31, 1995 the book value of securities pledged to secure public
deposits or for other purposes required or permitted by law aggregated
$17,370,000.
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 1995, 1994 and 1993
Note E-NONPERFORMING ASSETS
Nonperforming assets consist of nonaccrual loans, restructured loans, past due
loans and other real estate owned. Nonaccrual loans are loans on which
interest recognition has been suspended until realized because of doubts as to
the borrowers' ability to repay principal or interest. Restructured loans are
loans where the terms have been altered to provide a reduction or deferral of
interest or principal because of a deterioration in the financial position of
the borrower. Past due loans are accruing loans which are contractually past
due 90 days or more as to interest or principal payments. The following
summarizes the nonperforming assets at December 31:
1995 1994 1993
Nonperforming loans
Nonaccrual. . . . . . . $ 790,000 $ 1,214,000 $ 2,188,000
90 days past due. . . . 609,000 766,000 601,000
Restructured. . . . . . 666,000 610,000 709,000
$ 2,065,000 $ 2,590,000 $ 3,498,000
Other real estate owned. 575,000 682,000 699,000
Total. . . . . . . . . . .$ 2,640,000 $ 3,272,000 $ 4,197,000
There were no commitments to advance additional funds to such borrowers at
December 31, 1995. Gross interest income that would have been recorded if
nonaccrual loans and restructured loans had been current and in accordance
with their original terms approximated $85,000, $140,000 and $211,000 for the
years ended December 31, 1995, 1994 and 1993, respectively. Interest
recognized on such loans approximated $21,000, $8,000 and $18,000 for the
years ended December 31, 1995, 1994 and 1993, respectively.
Note F-RELATED PARTY TRANSACTIONS
At December 31, 1995, receivables, both direct and indirect, from persons
related to the Company and subsidiaries as directors, executive officers or
principal shareholders, exclusive of loans to such persons which in the
aggregate do not exceed $60,000, approximated $1,750,000. Other changes
reflect loans to persons which no longer exceed $60,000. The following is an
analysis of the activity with respect to such loans for the year ended
December 31, 1995:
Aggregate outstanding balance at January 1, 1995 $ 1,466,000
Additions . . . . . . . . . . . . . . 390,000
Retirements . . . . . . . . . . . . . (200,000)
Other changes . . . . . . . . . . . . 94,000
Aggregate outstanding balance at December 31, 1995 $ 1,750,000
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 1995, 1994 and 1993
Note G-ALLOWANCE FOR LOAN LOSSES
An analysis of the allowance for loan losses follows:
Years ended December 31, 1995 1994 1993
Balance at beginning of year. . . . . $3,736,994 $3,543,743 $3,681,120
Allowance acquired in loan
purchase (see Note B) . - 410,763 -
Provision for loan losses. . . . . 105,000 215,000 844,361
Loans charged-off. . . . . . . . . (363,381) (837,667) (1,333,960)
Less recoveries. . . . . . . . . . 375,020 405,155 352,222
Net loans (charged-off) recovered 11,639 (432,512) (981,738)
Balance at end of year. . . . . . . . $3,853,633 $3,736,994 $3,543,743
Note H-MORTGAGE LOAN SERVICING
The unamortized cost of purchased mortgage servicing rights totalled $490,000
and $570,000 at December 31, 1995 and 1994, respectively.
At December 31, 1995 and 1994 the Company was servicing loans for others
amounting to $74,586,000 and $80,374,000, respectively. In connection with
these loans serviced for others, the Company held advances by borrowers for
taxes and insurance in the amount of $1,311,000 at December 31, 1995 and
$1,357,000 at December 31, 1994.
Note I-PREMISES AND EQUIPMENT
A summary of premises and equipment and accumulated depreciation and
amortization follows:
December 31, 1995 1994
Premises and Equipment
Buildings . . . . . . . . . . . . $ 6,664,298 $ 6,695,479
Equipment . . . . . . . . . . . . 4,681,706 4,282,489
Leasehold improvements. . . . . 743,464 479,556
12,089,468 11,457,524
Less accumulated depreciation
and amortization . . . . . . . 5,779,089 5,262,285
6,310,379 6,195,239
Land. . . . . . . . . . . . . . . 2,636,905 2,477,475
$ 8,947,284 $ 8,672,714
Depreciation and amortization of premises and equipment charged to expense for
the years ended December 31, 1995, 1994 and 1993 was $604,000, $555,000 and
$563,000 respectively.
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 1995, 1994 and 1993
At December 31, 1995 the Company and certain subsidiaries were obligated under
various noncancellable operating leases for premises and equipment. The
leases, expiring at various dates to 2005, generally provide options to renew
and to purchase at fair value and require payment of taxes, insurance and
maintenance costs. Total rental expense for all operating leases for the years
ended December 31, 1995, 1994 and 1993 was $643,000, $477,000 and $408,000
respectively. Future minimum payments under operating leases were as follows
at December 31, 1995:
1996. . . . . . . . . . . . $ 535,000
1997. . . . . . . . . . . . 288,000
1998. . . . . . . . . . . . 270,000
1999. . . . . . . . . . . . 144,000
2000. . . . . . . . . . . . 78,000
After 2000. . . . . . . . . 622,000
Total minimum lease payments . . .$1,937,000
Note J-NOTE PAYABLE, SHORT TERM AND LONG TERM BORROWINGS
Short Term Borrowings
The following summarizes the short term borrowings at December 31:
1995 1994
Securities sold under
repurchase ageeements . . . $ 2,355,000 $ -
Treasury tax and loan notes . . . . 167,666 998,181
Federal Home Loan Bank advances . . . 25,000,000 12,400,000
Total short term borrowings . . . . . $27,522,666 $13,398,181
Securities subject to repurchase agreements are retained by the Company's
custodian under written agreements that recognize the customer's interests in
the securities. The subsidiary banks have agreements with their respective
Federal Reserve district banks to be authorized treasury tax and loan
depositories. The subsidiary banks, Wheeling National Bank ("WNB") and
Columbus National Bank ("CNB") are members of the Federal Home Loan Bank (the
"FHLB") in the Pittsburgh and Cincinnati districts, respectively. The FHLB
advances mature in January, 1996.
The following table summarizes information regarding the Federal Home Loan
Bank advances:
Years ended December 31, 1995 1994
Balance, end of year. . . . . . . . . . $25,000,000 $12,400,000
Weighted average interest rate, end of year . 5.76% 6.45%
Average amount outstanding during the year. . . 20,277,006 2,270,137
Weighted average interest rate during the year. . . . 6.08% 5.28%
Maximum amount outstanding at any month end . . 25,000,000 12,400,000
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 1995, 1994 and 1993
Notes Payable and Other Long Term Borrowings
The following summarizes notes payable and other long term borrowings at
December 31:
1995 1994
Variable rate note, due December 1996 . $ 1,000,000 $ 2,000,000
Capitalized lease obligations . . . 47,124 -
$ 1,047,124 $ 2,000,000
The variable rate term note had a weighted average interest rate of 7.76% and
9.93% at December 31, 1995 and 1994, respectively.
Note K-FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
In the normal course of business the Company enters into contractual
commitments involving financial instruments with off-balance-sheet risk.
These financial instruments include commitments to extend credit, commercial
letters of credit and standby letters of credit. These instruments involve, to
varying degrees, elements of credit and interest rate risk in excess of the
amount recognized in the balance sheet.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instruments for commitments to extend credit,
commercial letters of credit and standby letters of credit is represented by
the contractual amount of those instruments. The Company uses the same credit
policies in making commitments and conditional obligations as it does for
on-balance-sheet instruments.
Unless noted otherwise, the Company does not require collateral or other
security to support financial instruments with off-balance-sheet risk. A
summary of off-balance-sheet financial instruments at December 31, 1995 and
December 31, 1994 is as follows:
Financial instruments whose contract amounts represent credit risk:
Contract Amounts
1995 1994
Commitments to extend credit. . . $30,721,000 $21,045,000
Standby letters of credit . . 96,000 96,000
Commercial letters of credit. 778,000 533,000
Commitments to extend credit, approximately $453,000 at December 31, 1995 and
$1,013,000 at December 31, 1994, of which are dealer floor plan lines, are
agreements to lend to a customer as long as there is no violation of any
condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a
fee. Since many of the commitments, except dealer floor plan lines, are
expected to expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. The Company evaluates
each customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by the Company upon extension of
credit, is based on management's credit evaluation of the counterparty. A
majority of the commitments extended by the Company have either variable
interest rates or are revolving credit card commitments which have a fixed
interest rate. An adverse movement in market interest rates is not deemed to
be a significant risk on the outstanding commitments at December 31, 1995.
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 1995, 1994 and 1993
Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Commercial letters
of credit are issued by the Company specifically to facilitate trade or
commerce. The credit risk involved in issuing letters of credit is
essentially the same as that in extending loan facilities to customers.
Note L-FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 "Disclosures about Fair Value of Financial Instruments",
requires that the Company disclose estimated fair values for its financial
instruments. Fair value estimates, methods and assumptions are set forth
below for the Company's financial instruments.
Securities and Federal Funds Sold
The carrying amounts for federal funds sold approximate fair value as they
mature in 90 days or less. The fair value of investment and mortgage-backed
securities is based on quotations from an independent investment portfolio
accounting service.
Loans
Fair values are estimates for portfolios of loans with similar financial
characteristics. Loans are segregated by type and include commercial, real
estate mortgage and installment loans. Each loan category is further
segmented into fixed and adjustable rate terms, for purposes of estimating
their fair value.
The carrying values approximate fair value for variable rate loans which
reprice frequently, provided there has been no change in credit quality since
origination. Book value also approximates fair value for loans with a
relatively short term to maturity, provided there is little or no risk of
default before maturity and the disparity between the current rate and market
rate is small. Any mark-to-market adjustment for these short-term loans would
be insignificant. This estimation methodology is applied to the Company's
demand loans, lines of credit and credit card portfolios.
The fair value of all other performing loans is calculated by discounting
scheduled cash flows through the estimated maturity using the rates currently
offered for loans of similar remaining maturities. The estimate of maturity
is based on the Company's historical experience with repayments for each loan
classification, modified, as required, by an estimate of the effect of current
economic and lending conditions. The fair value reflects market prepayment
estimates.
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 1995, 1994 and 1993
The fair value of nonperforming loans is calculated by discounting carrying
values adjusted for specific reserve allocations through anticipated maturity
using estimated market discount rates that reflect the credit and interest
rate risk inherent in the loan.
The installment loan portfolio includes credit card loans. The fair value
estimate of credit card loans is based on the value of existing loans at
December 31, 1995. This estimate does not include the value that relates to
estimated cash flows from new loans generated from existing cardholders over
the remaining life of the portfolio.
Deposits and Other Liabilities
Under SFAS No. 107, the fair value of deposits with no stated maturity, such
as demand and savings accounts, is equal to the amount payable on demand as of
December 31, 1995. The fair value of time deposits is based on the discounted
value of contractual cash flows. The discount rate is estimated using the
rates currently offered for deposits of similar remaining maturities.
Borrowings
The Company's short-term and long-term borrowings are variable rate, thus fair
values are based on carrying amounts since these borrowings reprice frequently
as market rates change.
Off-Balance-Sheet Financial Instruments
The Company's off-balance-sheet financial instruments are comprised of
commitments to extend credit, 90% of which are lines of credit and credit
cards. These commitments to extend credit generally are not sold or traded
and estimated fair values are not readily available. The fair value of
commitments to extend credit can be estimated by discounting the remaining
contractual fees over the term of the commitment using the fees currently
charged to enter into similar agreements. Considering the current economic
environment and the creditworthiness of the counterparties in the portfolio,
the Company believes that such a calculation would not indicate a material
calculated fair value.
Limitations
Fair value estimates are made at a specific point in time, based on relevant
market data and information about each financial instrument. These estimates
do not reflect any premium or discount that could result from offering for
sale at one time the Company's entire holdings of a particular instrument.
Because no market exists for a significant portion of the Company's financial
instruments, fair value estimates are based on judgments regarding future
expected loss experience, current economic conditions, risk characteristics
of various financial instruments and other factors. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
Fair value estimates are based on existing financial instruments without
attempting to estimate the value of anticipated future business and the value
of assets and liabilities that are not considered financial instruments.
Other significant assets that are not considered financial assets include
property, plant and equipment.
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 1995, 1994 and 1993
The following table represents carrying values and estimated fair values of
the Company's financial instruments as of December 31, 1995 and 1994:
1995 1994
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
FINANCIAL ASSETS
Federal Funds Sold. . . $ 11,469,000 $ 11,469,000 $ 3,924,000 $ 3,924,000
Investment Securities
available for sale . 68,014,533 68,014,533 3,484,431 3,484,431
Investment Securities
held to maturity . . . . - - 78,189,252 74,418,919
Loans Receivable:
Commercial . . . . . . 64,951,306 64,410,657 52,929,805 51,997,428
Real Estate Mortgage . 128,709,317 128,561,576 119,629,269 119,113,157
Installment. . . . . . 56,711,400 55,552,463 56,306,670 55,499,243
Total Loans. . . . . 250,372,023 248,524,696 228,865,744 226,609,828
Allowance for
Loan Losses. . . . (3,853,633) - (3,736,994) -
Net Loans . . . . . 246,518,390 248,524,696 225,128,750 226,609,828
FINANCIAL LIABILITIES
Fixed Maturity Deposits (1)
Time Deposits . . . . 134,607,590 135,642,531 118,405,219 118,646,212
Short-term Borrowings . . 27,522,666 27,522,666 13,398,181 13,398,181
Notes payable and other
long-term debt. 1,047,124 1,047,124 2,000,000 2,000,000
(1) SFAS No. 107 defines the estimated fair value of deposits with no stated
maturity, which included demand deposits, money market and other savings
accounts, to be equal to the amount payable on demand. Therefore, the
balances of the Company's $158.1 million and $173.9 million of such deposits
at December 31, 1995, respectively, are not included in this table.
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 1995, 1994 and 1993
Note M-STOCKHOLDERS' EQUITY
The Company has authorized 200,000 shares of $100 par value preferred stock
issuable in series. No shares of preferred stock were issued or outstanding
at December 31, 1995 and 1994.
On December 31, 1994, the Company issued 58,225 shares of common stock through
a stockholder rights offering with net proceeds to the Company of $839,000.
Note N-DIVIDEND RESTRICTIONS
Dividends declared by the Company may be substantially provided from
subsidiary bank dividends. The payment of dividends by bank subsidiaries is
subject to various restrictions imposed under banking regulations. For
national banks, surplus in an amount equal to capital stock is not available
for dividends and prior approval of the Comptroller of the Currency is required
if total dividends declared exceed the total (defined) net profits from the
beginning of the current year to the date of declaration, combined with the
retained net profits of the preceding two years.
Note O-INCOME TAXES
Total income tax provision (benefit) for the three years ended December 31,
1995 was allocated as follows:
1995 1994 1993
Income from operations . . . . . . $1,757,823 $ 881,651 $ 999,152
Shareholders' equity for the tax effect
of net unrealized losses on securities
available for sale . . . . . . ( 38,349) - -
$1,719,474 $ 881,651 $ 999,152
The composition of the provision for income taxes from operations for the
three years ended December 31, 1995 follows:
1995 1994 1993
Federal Income Taxes
Current . . . . . . . . . . . . $1,216,425 $1,023,837 $ 914,387
Deferred. . . . . . . . . . . 301,680 (302,380) (102,027)
Provision for federal income taxes. . . 1,518,105 721,457 812,360
State. . . . . . . . . . . . . . . 239,718 160,194 186,792
Provision for income taxes $1,757,823 $ 881,651 $ 999,152
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 1995, 1994 and 1993
The following is a reconciliation of federal income tax expense to the
amount computed at the statutory rate:
1995 1994 1993
Pre-tax income at statutory rate . . $1,635,397 $ 876,510 $ 941,665
Increase (decrease) resulting from:
Tax exempt income . . . . . . . . (45,476) (51,385) (69,066)
Dividends received deduction. . . (30,940) (30,940) (30,940)
Amortization of goodwill and
other intangibles. 40,627 41,161 32,442
State tax provision (net of
federal tax benefit) . . . . (81,503) (54,466) (61,741)
Other . . . . . . . . . . . - (59,423) -
Provision for federal income taxes. $1,518,105 $ 721,457 $ 812,360
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities as of December 31, 1995, 1994
and 1993 consist of the following:
1995 1994 1993
Deferred tax assets:
Loan loss reserves. . . . . . . . $ 772,573 $ 822,621 $ 896,030
Equity securities . . . . . . . 236,980 217,090 305,490
Investment securities . . . . . 38,349 - -
Pension plan. . . . . . . . . . 242,799 207,599 47,799
Cash basis accounting . . . - 55,157 -
Real estate owned . . . . . . . 6,967 83,842 -
1,297,668 1,386,309 1,249,319
Deferred tax liabilities:
Fixed assets. . . . . . . . . . 169,040 174,513 229,515
Cash basis accounting . . . . . . 125,640 - 7,870
Other . . . . . . . . . . . . . 43,199 8,566 22,684
337,879 183,079 260,069
Net deferred tax asset before
valuation allowance . . . . . . . 959,789 1,203,230 989,250
Valuation allowance. . . . . . . 236,980 217,090 305,490
Net deferred tax asset . . . . . . $ 722,809 $ 986,140 $ 683,760
The net deferred tax asset recorded under SFAS No. 109 is expected to be
realized through carryback to taxable income in prior years, future reversals
of existing taxable temporary differences, and, to a lesser extent, future
taxable income. The valuation allowance increased in 1995 by $19,890 as a
result of the decrease in equity securities market value. In 1994, the
valuation allowance decreased by $88,400 as a result of the increase in equity
securities market value. Since no net deferred tax benefit was recorded on
the initial writedown of the asset, due to its capital nature, no tax expense
was recorded in 1994 on its recovery.
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 1995, 1994 and 1993
Note P-OTHER EXPENSES
Amounts included in other expenses are as follows for the years ended
December 31, 1995, 1994 and 1993:
1995 1994 1993
Credit card expenses . . . $ 315,340 $ 281,433 $ 203,519
Data processing. . . . . . 389,533 246,397 277,802
FDIC assessment. . . . . . 429,066 615,326 710,427
Other real estate. . . . . 4,497 387,797 144,232
Postage. . . . . . . . . . 312,186 261,615 247,183
Professional fees. . . . . 640,832 556,158 548,882
Stationery and supplies. . 380,237 309,588 337,541
Taxes other than on income 356,259 266,140 293,922
Telephone. . . . . . . . . 272,546 225,583 216,354
Other (each less than
1% of income) . . . . . 1,555,674 1,257,123 1,169,298
$4,656,170 $4,407,160 $4,149,160
Note Q-CONTINGENCIES
The undercapitalized status of the Savings Association Insurance Fund ("SAIF")
of the Federal Deposit Insurance Corporation ("FDIC") has resulted in the
introduction of federal legislation to recapitalize the SAIF. If enacted, the
legislation would require Bank Insurance Fund ("BIF") members like CNB, who
have participated in FDIC Act Section 5(d)(3) ("Oakar") transactions, to pay
a one-time charge of between 75 and 85 basis points on 80% of Oakar deposits
as of March 31, 1995. This could result in a one-time assessment, based on
total Oakar deposits of $46.5 million at March 31, 1995, of approximately
$279,000 to $316,000, which would reduce net income by approximately $184,000
to $209,000.
NOTES TO CONSOLIDATED American Bancorporation & Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 1995, 1993 and 1992
Note R-PENSION PLAN AND PROFIT SHARING 401(K) SAVINGS PLAN
Effective January 1, 1989, the Company established the American Bancorporation
Pension Plan (the "Plan"). This non-contributory defined benefit plan covers
all eligible employees of the Company and its banking and non-banking
subsidiaries. Benefits are based on employees' years of service and
compensation. The following table sets forth the Plan's funded status as of
December 31, 1995 and 1994:
1995 1994
Actuarial present value of
accumulated benefits obligation:
Vested. . . . . . . . . . . . . . .$ 1,476,327 $ 935,656
Non-vested. . . . . . . . . . . . - -
$ 1,476,327 $ 935,656
Plan assets at fair value;
primarily marketable securities . . . $ 1,078,502 $ 1,173,289
Projected benefit obligation . . . . . . .1,476,327 935,656
Plan assets (less than) in excess
of projected benefit obligation. . . . . (397,825) 237,633
Unrecognized net transition asset. . . - -
Prior service cost not yet recognized
in net periodic pension cost . . . . . . . . . .- -
Unrecognized net loss. . . . . . . . . - 109,419
(Accrued) prepaid pension costs . .$ (397,825) $ 347,052
Net pension costs, for the three years ended December 31, 1995, included the
following components:
1995 1994 1993
Service cost - benefits earned
during the period . . $ - $ - $ -
Interest cost on projected
benefit obligation 66,253 65,832 72,392
Actual return on plan assets . . . (41,162) 821 362
Net amortization and deferral. . . (39,854) (83,867) (111,121)
Net periodic pension cost. . . . . . $(14,763) $(17,214) $ (38,367)
The discount rate used in determining the projected benefit obligation in
1995, 1994 and 1993 was 6.25%, 5.75% and 5.75%, respectively. The expected
long-term rate of return on plan assets for each of the years ending in 1995,
1994 and 1993 was 7.00%.
The 1994 prepaid pension cost reflects the impact of a plan curtailment, as
determined without consideration of any additional benefit obligation due Plan
participants as a result of the claim discussed below, resulting from the
Company's freezing of benefits of the Plan. Recognition of the prepaid
pension cost and any related impact on the Statement of Operations resulting
from the curtailment was deferred through December 31, 1994.
NOTES TO CONSOLIDATED American Bancorporation & Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 1995, 1993 and 1992
In 1993, due to the continuation of the claim noted below, the Company
notified the plan participants that the planned termination of the Plan was
rescinded; however, the amendment to freeze all benefit accruals and fully
vest all participants in the benefits accrued to them as of December 31, 1992
remains in effect at December 31, 1995.
A claim was made against the Plan during 1992 by a former employee (the
"Claimant"), alleging additional benefits due him under the Plan. The
Administrator of the Plan denied the claim. The Claimant filed an appeal
which was also denied by the Administrator. Because a dispute existed over the
computation of benefits, the Plan Administrator commenced a civil action in
the United States District Court, seeking a declaratory judgment that the
determination of the Plan Administrator that additional benefits were not due
under the terms of the Plan was correct. The Claimant filed a Motion for
Summary Judgment asserting a claim for additional benefits. The District Court
granted the Claimant's Motion for Summary Judgment. The Plan Administrator
appealed this decision. Prior to the Court ruling on the appeal, all parties
agreed as to the method of computing the benefit due the claimant. The Court
found that the computation was made pursuant to the pertinent Plan provisions
and approved a joint motion by the parties to dismiss the action. As a result,
during 1995 the Plan Administrator disbursed $141,135 to the Claimant to
settle the aforementioned claim. No amount of the disbursement was recognized
in the 1995 statement of operations as the Company recorded a reserve of
$500,000 in 1994 to recognize the liability for additional benefits due to
Plan participants as determined based on the application of the Court's
decision regarding the method of computing benefits to affected Plan
participants. The 1994 funded status as per the preceding table omitted the
obligation for the additional liability pending the Court's final ruling. The
1995 funded status includes the obligation for the additional benefits due the
remaining effected Plan benefits based on the application of the Court's final
ruling. Management believes appropriate liabilities, as reflected in the 1995
funded status have been established to recognize the application of the
Court's decision and expects to incur no further expense for this situation.
The Company sponsors a profit sharing 401(k) savings plan to which eligible
employees are permitted to contribute up to fifteen percent of their salary to
the plan each year. The plan provides for matching contributions of the
Company equal to 50% of employee contributions up to the first 6% of
compensation. The Company may, at its discretion, make profit sharing
contributions to the plan. Plan participants are fully and immediately vested
in Company matching contributions and fully vested in Company profit sharing
contributions after 5 years of service. Company matching contributions for the
years ended December 31, 1995, 1994 and 1993 amounted to $67,000, $49,000 and
$52,000, respectively.
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 1995, 1994 and 1993
Note S-PARENT COMPANY CONDENSED FINANCIAL INFORMATION
AMERICAN BANCORPORATION (Parent Company Only)
BALANCE SHEET
December 31, 1995 and 1994 1995 1994
ASSETS
Cash and short-term investments . $ 1,528,487 $ 1,090,778
Due from subsidiaries . . . . . 56,428 107,255
Investment in subsidiaries
Banking. . . . . . . . . . . . . 26,732,262 25,508,021
Non-banking. . . . . . . . . . 1,191,487 1,762,945
27,923,749 27,270,966
Premises and equipment - net. . 19,483 15,619
Other assets. . . . . . . . . . 152,855 159,118
Total Assets. . . . . . . . . . .$29,681,002 $28,643,736
LIABILITIES
Due to subsidiaries. . . . . . $ 339,251 $ 190,439
Other liabilities. . . . . . . 329,329 260,278
Notes payable . . . . . . . . 1,000,000 2,000,000
Total Liabilities. . . . . . 1,668,580 2,450,717
STOCKHOLDERS' EQUITY. . . . . . . 28,012,422 26,193,019
Total Liabilities and
Stockholders' Equity . . . . . $29,681,002 $28,643,736
STATEMENT OF OPERATIONS (Parent Company)
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
INCOME
Dividends from banking subsidiaries $2,000,000 $ - $ 470,925
Reimbursement from subsidiaries . 357,984 354,000 327,250
Interest income . . . . . . . . . 25,028 40,481 48,038
Other income . . . . . . . . 443 326 505
Total income. . . . . . . . . . 2,383,455 394,807 846,718
EXPENSE
Interest expense . . . . . . . . . 96,363 13,059 -
Other expenses . . . . . . . . . . 589,176 682,508 577,218
Total expense . . . . . . . . . 685,539 695,567 577,218
1,697,916 (300,760) 269,500
Credit for income taxes . . . . . (86,863) (81,443) (52,661)
1,784,779 (219,317) 322,161
Equity in undistributed net income
of subsidiaries. . . . . . 1,267,388 1,915,636 1,448,290
NET INCOME . . . . . . . . . . . . . $3,052,167 $1,696,319 $1,770,451
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 1995, 1994 and 1993
STATEMENT OF CASH FLOWS (Parent Company)
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
Operating Activities:
Net income. . . . . . . . . . . . . . .$3,052,167 $1,696,319 $1,770,451
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization. . . 51,803 52,305 53,263
Equity in undistributed net income
of subsidiaries after dividends . . (1,267,388) (1,915,636) (1,448,290)
Net decrease in due from
subsidiaries . . . 50,827 (69,219) (1,379)
Net change in other assets
and other liabilities.. . . . 106,762 24,874 (127,420)
Net cash provided (used) by
operating activities . . . 1,994,171 (211,357) 246,625
Investing Activities:
Purchase of premises and equipment (10,439) (4,266) -
Net change in investment
in subsidiaries . . . 432,000 (2,570,000) (195,000)
Net cash provided (used) by
investing activities.. . 421,561 (2,574,266) (195,000)
Financing Activities:
Cash dividends paid. . . . . . . . . (978,023) (753,306) (753,306)
Proceeds from stockholder
rights offering - 839,236 -
Net increase (decrease) in
notes payable . . . (1,000,000) 2,000,000 -
Net cash provided by
(applied to) financing
activities. . . . . (1,978,023) 2,085,930 (753,306)
Net increase (decrease) in
Cash and Cash Equivalents . . . 437,709 (699,693) (701,681)
Cash and Cash Equivalents
Beginning Balance. . . 1,090,778 1,790,471 2,492,152
Cash and Cash Equivalents
Ending Balance $1,528,487 $1,090,778 $1,790,471
Cash paid during the year for:
Interest. . . . . . . . . . . . . . . $ 96,363 $ 13,059 $ -
The Parent Company paid no income taxes during 1995, 1994 or 1993.
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
Note T-SUMMARIZED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarters Ended (In thousands, except per share)
Mar 31 June 30 Sept 30 Dec 31 Year
1995
Interest income. . . . . . . . .$ 6,425 $ 6,679 $ 6,660 $ 6,732 $ 26,496
Interest expense . . . . . . . . 2,621 2,801 2,855 2,894 11,171
Net interest income . . . . . . 3,804 3,878 3,805 3,838 15,325
Provision for loan losses. . . . 45 45 15 - 105
Net interest income after
provision for loan losses. . . 3,759 3,833 3,790 3,838 15,220
Other operating income . . . . . 381 420 441 438 1,680
Other operating expense. . . . . 3,082 3,052 2,925 3,031 12,090
Income before income taxes. . . .1,058 1,201 1,306 1,245 4,810
Provision for income taxes . . 388 439 478 453 1,758
Net income. . . . . . . . . .$ 670 $ 762 $ 828 $ 792 $ 3,052
Per common share
Net income . . . . . . . . .$ 0.43 $ 0.49 $ 0.53 $ 0.50 $ 1.95
1994
Interest income. . . . . . . . .$ 4,732 $ 4,800 $ 5,126 $ 5,477 $ 20,135
Interest expense . . . . . . . . 1,718 1,685 1,778 2,008 7,189
Net interest income . . . . . . 3,014 3,115 3,348 3,469 12,946
Provision for loan losses. . . . 80 45 45 45 215
Net interest income after
provision for loan losses. . . 2,934 3,070 3,303 3,424 12,731
Other operating income . . . . . 256 238 251 317 1,062
Other operating expense. . . . . 2,535 2,507 2,658 3,515 11,215
Income before income taxes. . . 655 801 896 226 2,578
Provision (credit)
for income taxes. . 243 300 344 (5) 882
Net income. . . . . . . . . $ 412 $ 501 $ 552 $ 231 $ 1,696
Per common share
Net income . . . . . . . . $ 0.27 $ 0.33 $ 0.37 $ 0.16 $ 1.13
KPMG Peat Marwick LLP
Certified Public Accountants
One Mellon Bank Center Telephone 412 391 9710 Telefax 412 391 8963
Pittsburgh, PA 15219 Telex 7106642199 PMM & CO PGH
Independent Auditors' Report
To the Board of Directors and Shareholders of
American Bancorporation:
We have audited the accompanying consolidated balance sheets of American
Bancorporation and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1995.
These consolidated financial statements are the responsibility of the
Company'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 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, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of American
Bancorporation and subsidiaries at December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles.
As discussed in note A to the consolidated financial statements, the Company
adopted the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," in 1994.
Pittsburgh, Pennsylvania
March 26, 1996
Member Firm of
Klynveld Peat Marwick Goerdeler
<TABLE>
American Bancorporation and Subsidiaries
Five Year Selected Financial Data
($ in thousands, except per share data)
Consolidated Statement of Operations
<CAPTION>
For the years ended 1995 1994 1993 1992 1991
Interest income
<S> <C> <C> <C> <C> <S>
Interest and fees on loans. . . $ 21,929 $ 14,902 $ 14,590 $ 16,903 $ 20,893
Interest on securities. . . . 4,197 4,721 5,513 6,034 5,518
Interest on other short-term investments. . 370 512 467 578 1,090
26,496 20,135 20,570 23,515 27,501
Interest expense
Interest on deposits and borrowed funds 11,171 7,189 8,009 11,370 15,307
Net interest income . . . . 15,325 12,946 12,561 12,145 12,194
Provision for loan losses. . . 105 215 844 3,159 2,250
Net interest income
after provision for loan losses. . 15,220 12,731 11,717 8,986 9,944
Service charges and other income . . . 1,680 1,062 1,449 1,124 842
Other expenses
Salaries and employee benefits 5,319 4,933 4,428 4,368 3,887
Other operating expenses. . . 6,771 6,282 5,969 6,452 6,022
12,090 11,215 10,397 10,820 9,909
Income (loss) before income taxes. . . 4,810 2,578 2,769 (710) 877
Provision (credit) for income taxes . 1,758 882 999 (269) 528
Net income (loss) . . . . $ 3,052 $ 1,696 $ 1,770 $ (441) $ 349
Per common share*:
Net income (loss) . . . . $ 1.95 $ 1.13 $ 1.18 $ (0.29) $ 0.23
Cash dividends. . . . . . $ 0.70 $ 0.50 $ 0.50 $ 0.50 $ 0.50
Average common shares outstanding (000's). . 1,565 1,507 1,507 1,507 1,507
Consolidated Balance Sheet Data
Balance at year end
Total Assets. . . . . . . . . . $353,995 $338,116 $276,390 $288,962 $294,176
Earning Assets. . . . . . . . . 330,136 314,463 256,967 266,748 269,939
Loans, net of unearned income . 250,372 228,866 150,523 158,978 176,965
Deposits. . . . . . . . . . . . 292,665 292,341 248,040 261,001 262,264
Notes payable and other long-term debt. . . 1,047 2,000 - - 1,200
Stockholders' equity. . . . . 28,012 26,193 24,158 23,141 24,336
Average Balances for years ended
Total Assets. . . . . . . . . . 348,655 284,845 278,669 293,383 293,937
Earning Assets. . . . . . . . . 323,750 263,178 257,455 270,008 270,401
Loans, net of unearned income . 243,043 164,405 153,277 165,024 182,636
Deposits. . . . . . . . . . . . 293,415 252,916 250,504 262,957 262,215
Long-term debt. . . . . . . . 1,091 167 - 800 1,200
Stockholders' equity. . . . . 27,248 25,188 23,778 24,127 24,524
Consolidated Financial Ratios (as a Percent)
Net income to average assets 0.88% 0.60% 0.64% N/A 0.12%
Net income to average equity. 11.20 6.73 7.44 N/A 1.42
Dividends to net income . . . 35.89 44.84 42.57 N/A 215.90
Average equity to average assets. . 7.82 8.84 8.53 8.22 8.34
Average debt to average equity. . . 4.00 0.66 0.00 3.32 4.89
<F1>
*(Per share data has been retroactively restated for a two for one stock split
which became effective March 16, 1994.)
</TABLE>
<TABLE>
Average Balances, Income and Expense, Yields and Rates
<CAPTION>
($ in thousands) 1995 1994 1993
Average Revenue/ Yield/ Average Revenue/ Yield/ Average Revenue/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
INTEREST EARNING ASSETS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans
Commercial . . . . . . $ 59,497 $ 5,839 9.81% $ 48,161 $ 4,052 8.41% $ 44,827 $ 3,531 7.88%
Real estate. . . . . . 127,107 10,457 8.23 64,114 5,416 8.45 50,956 4,764 9.35
Installment-net. . . 56,439 5,215 9.24 52,130 4,880 9.36 57,494 5,937 10.33
Fees . . . . . . - 418 - - 554 - - 358 -
Total loans . . . . . 243,043 21,929 9.02 164,405 14,902 9.06 153,277 14,590 9.52
Investment securities
Taxable. . . . . . . 73,644 4,052 5.50 85,509 4,558 5.33 87,918 5,301 6.03
Tax-exempt . . . . . 1,979 145 7.29 2,246 163 7.26 2,603 212 8.16
Total investment securities . 75,623 4,197 5.55 87,755 4,721 5.38 90,521 5,513 6.09
Other short-term investments 5,084 370 7.28 11,018 512 4.64 13,657 467 3.42
Total earning assets. 323,750 26,496 8.18 263,178 20,135 7.65 257,455 20,570 7.99
Non-interest Earning Assets
Cash and due from banks . . 10,823 11,024 10,050
Premises and equipment - net. . 8,752 7,992 7,989
Other assets . . . . . 5,330 2,651 3,175
24,905 21,667 21,214
TOTAL ASSETS. . . . . $348,655 $284,845 $278,669
INTEREST BEARING LIABILITIES
Deposits
NOW, Savings and MMDA . $130,741 $ 3,491 2.67% $127,626 $ 3,277 2.57% $125,950 $ 3,684 2.92%
Time. . . . . . . . . 130,742 6,307 4.82 96,392 3,753 3.89 100,270 4,261 4.25
Total deposits. . . 261,483 9,798 3.75 224,018 7,030 3.14 226,220 7,945 3.51
Short-term borrowings. 21,736 1,275 5.87 3,942 146 3.69 1,948 64 3.27
Notes payable and
other long-term debt 1,091 98 8.97 167 13 7.84 - -
Total interest
bearing liabilities. 284,310 11,171 3.93 228,127 7,189 3.15 228,168 8,009 3.51
Non-interest bearing
Demand non-interest bearing 31,932 28,898 24,284
Other liabilities . 5,165 2,632 2,439
37,097 31,530 26,723
Stockholders' Equity. . 27,248 25,188 23,778
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY . . . $348,655 $284,845 $278,669
Net interest income $15,325 $12,946 $12,561
Interest rate spread . 4.25% 4.50% 4.48%
MARGIN ANALYSIS
(as a % of Earning Assets)
Interest income 8.18% 7.65% 7.99%
Interest expense. 3.45 2.73 3.11
Net interest income . . 4.73% 4.92% 4.88%
<F1>
Averages stated are month end average balances. Installment loans are stated
net of unearned income. Average loans include nonaccrual loans. Yields do not
reflect tax equivalent adjustments.
</TABLE>
MANAGEMENT'S DISCUSSION AND American Bancorporation and Subsidiaries
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
December 31, 1995, 1994 and 1993
Introduction
The discussion and analysis, when read in conjunction with the consolidated
financial statements and accompanying notes, is designed to provide
information relevant to an assessment of financialperformance and management's
perception of significant events.
Summary
American Bancorporation recognized net income of $3,052,000 ($1.95 per share)
in 1995, compared to net income of $1,696,000 ($1.13 per share) in 1994.
The increase was the result of increases in net interest income and other
income and a decrease in the provision for loan losses which were partially
offset by an increase in other expenses.
At year end, the Company's assets totalled $353,995,000. Deposits totalled
$292,665,000 at year end. Stockholders equity aggregated $28,012,000.
On December 8, 1994 the Company, through its subsidiaries CNB and AMI, acquired
certain assets and assumed certain liabilities of Buckeye Savings Bank, a
wholly owned subsidiary of Crown Bank, F.S.B., headquartered in Casselberry,
Florida. (See Note B "Branch Acquisition").
<TABLE>
MANAGEMENT'S DISCUSSION AND American Bancorporation and Subsidiaries
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
December 31, 1995, 1994 and 1993
RESULTS OF OPERATIONS
The discussion and analysis of the results of operations is focused on the
three years ended December 31, 1995 and uses a format of consecutive year
comparisons. Volume and rate variances contributing to change in net interest
income are analyzed using adjusted month end average balances. Tax equivalency
is not imputed in the calculation of yields.
<CAPTION>
($ in thousands)
Years ended December 31 Change
1995 1994 1993 1995 - 1994 1994 - 1993
Amount % Amount %
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income. . . . . . $ 26,496 $ 20,135 $ 20,570 $ 6,361 31.59%
Interest expense . . . . 11,171 7,189 8,009 3,982 55.39 (820) (10.24)
Net interest income . . 15,325 12,946 12,561 2,379 18.38 385 3.06
Provision for loan losses. . . 105 215 844 (110) (51.16) (629) (74.54)
Net interest income after
provision for loan losses. . .15,220 12,731 11,717 2,489 19.55 1,014 8.65
Other operating income . 1,680 1,062 1,449 618 58.24 (387) (26.72)
Other operating expense. . 12,090 11,215 10,397 875 7.81 818 7.87
Income before income taxes. .$ 4,810 $ 2,578 $ 2,769 $ 2,232 86.58% $ (191) (6.92)%
Average Volume
Earning Assets. . . . . . . $323,750 $263,178 $257,455 $60,572 23.02% $5,723 2.22%
Interest Bearing Liabilities. 284,310 228,127 228,168 56,183 24.63 (41) (0.02)
Yield/Rate
Earning Assets. . . . 8.18% 7.65% 7.99%
Interest Bearing Liabilities. 3.93 3.15 3.51
Spread. . . . . . . . 4.25 4.50 4.48
Net Interest Margins. 4.73% 4.92% 4.88%
</TABLE>
<TABLE>
MANAGEMENT'S DISCUSSION AND American Bancorporation and Subsidiaries
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
December 31, 1995, 1994 and 1993
<CAPTION>
VOLUME AND RATE VARIANCES
1995 - 1994 1994 - 1993
Increase/ (decrease) due to Increase/ (decrease) due to
($ in thousands) Volume Rate Net Volume Rate Net
<S> <C> <C> <C> <C> <C> <C>
Interest Income
Loans . . . . . . . . . . $ 7,096 $ (69) $ 7,027 $ 1,029 $ (717) $ 312
Investment securities
Taxable. . . . . . . . (649) 143 (506) (142) (601) (743)
Tax-exempt . . . . . . (19) 1 (18) (27) (22) (49)
Other short-term investments. (352) 210 (142) (101) 146 45
Total interest income . 6,076 285 6,361 759 (1,194) (435)
Interest Expense
NOW, Savings and MMDA. . . 81 133 214 48 (455) (407)
Time . . . . . . . . . 1,529 1,024 2,553 (161) (347) (508)
Total interest expense 2,692 1,290 3,982 (27) (793) (820)
Net Interest Income. . . $ 3,384 $(1,005) $ 2,379 $ 786 $ (401) $ 385
<F1>
The rate-volume variance has been allocated in proportion to the absolute value
attributed to each change.
</TABLE>
Year ended December 31, 1995
Compared to Year Ended December 31, 1994
Net Income. Net income for the year ended December 31, 1995 amounted to
$3,052,000, compared to net income of $1,696,000 for the year ended December
31, 1994. The increase was the result of increases in net interest income and
other income and a decrease in the provision for loan losses which were
partially offset by an increase in other expenses.
Net Interest Income. Net interest income before provision for loan losses for
the year ended December 31, 1995 amounted to $15,325,000, an increase of
$2,379,000 or 18.4%, as compared to the year ended December 31, 1994. The
increase resulted primarily from a $60,572,000 or 23.0% increase in average
interest earning assets, which was partially offset by a 19 basis point
decrease in the Company's margin. The increase in average interest earning
assets was primarily the result of assets acquired from Buckeye.
Interest Income. Total interest income for the year ended December 31, 1995
amounted to $26,496,000, an increase of $6,361,000 or 31.6% as compared to the
year ended December 31, 1994. The increase resulted primarily from a
$60,572,000 increase in the average volume of earning assets and a 53 basis
point increase in the average yield on earning assets. Average loans
outstanding increased $78,638,000 or 47.8% with average real estate loans
increasing $62,993,000 or 98.3%, average commercial loans increasing
$11,336,000 or 23.5% and average consumer installment loans increased
$4,309,000 or 8.3%. The average yield on loans decreased from 9.06% in 1994
to 9.02% in 1995. Average investment securities and other short-term
investments outstanding decreased $18,066,000 or 18.3% while the average yield
increased from 5.30% in 1994 to 5.66% in 1995.
Interest Expense. Total interest expense for the year ended December 31, 1995
amounted to $11,171,000, an increase of $3,982,000 or 55.4%, as compared to
the year ended December 31, 1994. The increase resulted primarily from a
$56,183,000 or 24.6% increase in the average volume of interest bearing
liabilities and a 78 basis point increase in interest rates paid on such
liabilities. The increase in average interest bearing liabilities was
primarily the result of liabilities acquired from Buckeye. Average NOW, money
market and savings accounts increased $3,116,000 or 2.4%. Average time
deposits increased $34,350,000 or 35.6%. Average non-interest bearing
accounts increased $3,034,000 or 10.5% and represented 10.9% of average total
deposits for the year ended December 31, 1995.
Provision for Loan Losses. The provision for loan losses for the year ended
December 31, 1995 was $105,000, compared to $215,000 for the year ended
December 31, 1994. Net loans recovered were $12,000 in 1995, compared to net
loans charged-off of $433,000 in 1994.
Other Income. Other income for the year ended December 31, 1995 amounted to
$1,680,000, an increase of $618,000 or 58.2%, as compared to the year ended
December 31, 1994. Net gains on sale of investment securities totalled
$3,000 in 1995 and 1994. Other (miscellaneous) income increased by $618,000,
primarily due to increases in customer service fees and fees from mortgage
loan servicing.
Other Expense. Total other expense for the year ended December 31, 1995
amounted to $12,091,000, an increase of $876,000 or 7.8%, as compared to the
year ended December 31, 1994. Salaries and employee benefits increased
$387,000, or 7.8%. Occupancy and equipment expense increased $240,000 or
12.8%. Other (miscellaneous) expenses increased $249,000 or 5.7%.
Provision for Income Taxes. The provision for income taxes for the year ended
December 31, 1995 was $1,758,000, compared to $882,000 for the year ended
1994. The increase was due to the increase in the Company's pre-tax income.
MANAGEMENT'S DISCUSSION AND American Bancorporation and Subsidiaries
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
December 31, 1995, 1994 and 1993
Year ended December 31, 1994
Compared to Year Ended December 31, 1993
Net Income. Net income for the year ended December 31, 1994 amounted to
$1,696,000, compared to net income of $1,770,000 for the year ended December
31, 1993. The decrease was the result of an increase in other expenses,
primarily due to a reserve established for probable pension expense (See Note
R "Pension Plan and Profit Sharing 401(k) Savings Plan"), and a decrease in
other income which were partially offset by a decrease in the provision for
loan losses and an increase in net interest income.
Net Interest Income. Net interest income before provision for loan losses for
the year ended December 31, 1994 amounted to $12,946,000, an increase of
$385,000 or 3.1%, as compared to the year ended December 31, 1993. The
increase resulted primarily from a $5,723,000 increase in average interest
earning assets.
Interest Income. Total interest income for the year ended December 31, 1994
amounted to $20,135,000, a decrease of $435,000 or 2.2% as compared to the
year ended December 31, 1993. The decrease resulted primarily from a 34 basis
point decline in the average yield on earning assets, which was partially
offset by a $5,723,000 increase in the average volume of earning assets.
Average loans outstanding increased $11,128,000 or 7.3% with average real
estate loans increasing $13,158,000 or 25.8% and average commercial loans
increasing $3,334,000 or 7.4%, while average consumer installment loans
decreased $5,364,000 or 9.3%, The average yield on loans decreased from 9.52%
in 1993 to 9.06% in 1994. Average investment securities and other short-term
investments outstanding decreased $5,405,000 or 5.2%, and the average yield
decreased from 5.74% in 1993 to 5.30% in 1994.
Interest Expense. Total interest expense for the year ended December 31, 1994
amounted to $7,189,000, a decrease of $820,000 or 10.2%, as compared to the
year ended December 31, 1993. The decrease resulted primarily from a 36 basis
point decline in interest rates paid on interest bearing liabilities. Average
NOW, money market and savings accounts increased $1,676,000 or 1.3%. Average
time deposits decreased $3,878,000 or 3.9%. Average non-interest bearing
accounts increased $4,614,000 or 19.0% and represented 11.4% of average total
deposits for the year ended December 31, 1994.
Provision for Loan Losses. The provision for loan losses for the year ended
December 31, 1994 was $215,000, compared to $844,000 for the year ended
December 31, 1993. Net charged-off loans were $433,000 in 1994, compared to
$982,000 in 1993, a decrease of 55.9%. Net installment loans charged-off
decreased $466,000 and net real estate loans charged-off decreased $123,000
while commercial loans charged-off increased $41,000.
MANAGEMENT'S DISCUSSION AND American Bancorporation and Subsidiaries
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
December 31, 1995, 1994 and 1993
Other Income. Other income for the year ended December 31, 1994 amounted to
$1,062,000, a decrease of $387,000 or 26.7%, as compared to the year ended
December 31, 1993. Net gains on sale of investment securities totalled $3,000
in 1994, compared to $219,000 in 1993. Other (miscellaneous) income declined
by $132,000, primarily due to gains on sale of assets recorded in 1993.
Other Expense. Total other expense for the year ended December 31, 1994
amounted to $11,215,000, an increase of $818,000 or 7.9%, as compared to the
year ended December 31, 1993. Salaries and employee benefits increased
$505,000, or 11.4%, primarily due to the establishment of a $500,000 reserve
for probable pension costs as previously discussed (See Note R "Pension Plan
and Profit Sharing 401(k) Plan"). Occupancy and equipment expense increased
$56,000 or 3.1%. Other (miscellaneous) expenses increased $258,000 or 6.2%.
Provision for Income Taxes. The provision for income taxes for the year ended
December 31, 1994 was $882,000, compared to $999,000 for the year ended 1993.
The decrease was due to the decrease in the Company's pre-tax income.
<PAGE>
MANAGEMENT'S DISCUSSION AND American Bancorporation and Subsidiaries
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
December 31, 1995, 1994 and 1993
FINANCIAL CONDITION
Loans
The Company's primary earning assets are loans, representing 70.7% of the
total assets at December 31, 1995. Loans increased $21,506,000 or 9.4%
between 1994 and 1995 primarily due to improved demand in the commercial and
real estate lending segments of the portfolio. Loans increased $78,343,000 or
52.0% between 1993 and 1994, primarily due to loans acquired from Buckeye. At
December 31, 1995 there were no concentrations of loans in any particular
industry or in a group of related industries exceeding 10% of total loans.
It is the policy of the Company to review each prospective credit in order to
determine an adequate level of security or collateral to obtain prior to
making the loan. The type of collateral will vary and ranges from liquid
assets to real estate. Commercial business loans are made based on the
financial ability of the borrower to repay the obligation and the appraised
value of assets used as collateral. Real estate construction loans are made
with loan-to-value ratios generally below 75%. Real estate mortgage loans
are made with loan-to-value ratios generally below 80% of the appraised value.
The real estate is appraised at the time the loan is originated and is
reappraised if the loan is placed on a classified status. All consumer
installment loan requests are evaluated to determine the prospective borrowers
ability and willingness to repay the obligation and their stability as a
borrower. Ability to repay is determined by comparing an applicant's monthly
debt payment including the proposed loan payment with net monthly income. The
resulting debt service to income ratio generally must be below 40%. In
addition, for consumer installment loans which require collateral, the Company
will make advances up to 90% of the value on certain types of collateral.
The table below sets forth loans by category at December 31, 1991 through 1995.
TYPES OF LOANS
($ in thousands) 1995 1994 1993 1992 1991
Commercial . . . . . . . . $ 63,082 $ 51,818 $ 42,488 $ 44,697 $ 53,658
Real estate construction . . . 1,869 1,112 1,751 1,795 1,741
Real estate mortgage . . 128,709 119,629 53,417 49,524 50,186
Installment. . . . . . . 56,712 56,307 52,867 62,962 71,380
$250,372 $228,866 $150,523 $158,978 $176,965
Scheduled repayment and rate sensitivity of commercial loans and real estate
construction loans is indicated as follows at December 31, 1995:
($ in thousands) One Year One to Over
or Less Five Years Five Years Total
Commercial . . . . . . . $48,757 $ 4,020 $10,305 $ 63,082
Real estate construction . . 1,402 467 - 1,869
Total . . . . . . . . . $50,159 $ 4,487 $10,305 $ 64,951
For the commercial and real estate construction loans due after one year,
$10,292,000 have a predetermined interest rate and $4,500,000 have a floating
or adjustable interest rate.
MANAGEMENT'S DISCUSSION AND American Bancorporation and Subsidiaries
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED
December 31, 1995, 1994 and 1993
Asset Quality
The following presents loans considered nonperforming and consequently
detracting from asset quality:
NONPERFORMING ASSETS
($ in thousands)
1995 1994 1993 1992 1991
Nonperforming loans
Nonaccrual. . . . . . . . . . $ 790 $1,214 $2,188 $4,058 $2,775
90 days past due. . . . . . . 609 766 601 886 4,107
Restructured. . . . . . . . . 666 610 709 509 311
Total nonperforming loans. . $2,065 $2,590 $3,498 $5,453 $7,193
Other nonperforming assets
Other real estate owned . . . 575 682 699 1,049 1,540
Total nonperforming assets . $2,640 $3,272 $4,197 $6,502 $8,733
Nonperforming loans as
a percent of loans . 0.8% 1.1% 2.3% 3.4% 4.1%
Nonperforming assets
as a percent of total assets . 0.7% 1.0% 1.5% 2.3% 3.0%
The nonaccrual category represents loans on which interest recognition has
been suspended until realized because the borrower's ability to repay
principal or interest is in doubt. For loans not primarily secured by real
estate or in the process of collection, the Company discontinues accrual when
a loan is 90 days past due. Real estate loans are placed on nonaccrual status
when, in management's judgement, collection is in doubt or when foreclosure
proceedings are initiated, which is generally 180 days past the due date.
Although nominally performing, nonaccrual treatment may also be accorded on
loans when information becomes available which suggests that more than normal
risk of collection exists. Restructured loans are loans, the terms of which
have been altered, to provide a reduction or deferral of interest or principal
because of deterioration in the financial position of the borrower. Past due
loans are loans contractually past due 90 days or more and not included
elsewhere.
Total nonperforming loans were $2,065,000 at December 31, 1995, as compared to
$2,590,000 at December 31, 1994. Nonaccrual loans, restructured loans and
loans 90 days past due, decreased by $525,000, $974,000 and $157,000,
respectively. The largest recovered loan at December 31, 1995 was $140,000.
Of the $575,000 total other real estate owned, $570,000 represents former
banking facilities.
<TABLE>
MANAGEMENT'S DISCUSSION AND American Bancorporation and Subsidiaries
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED
December 31, 1995, 1994 and 1993
Allowance for Loan Losses
The Company's loan loss experience for the five years ended December 31, 1995
is summarized as follows:
<CAPTION>
SUMMARY OF LOAN LOSS EXPERIENCE
($ in thousands) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Balance at beginning of year . . $ 3,737 $ 3,544 $ 3,681 $ 2,463 $ 1,850
Allowance acquired in loan
purchase (See Note B) . . - 411 - - -
Provision for loan losses . . 105 215 844 3,159 2,250
Loans charged-off
Commercial . . . . . . . . . 63 205 110 798 328
Real estate mortgage . . . . 21 141 283 288 336
Installment. . . . . . . . . 279 491 941 1,093 1,217
Total loans charged-off . . 363 837 1,334 2,179 1,881
Loans recovered
Commercial . . . . . . . . . 101 93 39 43 5
Real estate mortgage . . . . 108 25 44 12 27
Installment. . . . . . . . . 166 286 270 183 212
Total loans recovered . . . 375 404 353 238 244
Net loans charged-off (recovered). (12) 433 981 1,941 1,637
Balance at end of year . . . . . $ 3,854 $ 3,737 $ 3,544 $ 3,681 $ 2,463
Loans outstanding at December 31,. $250,372 $228,866 $150,523 $158,978 $176,965
Average loans for the year ended . 243,043 164,405 153,277 165,024 182,636
Ratio of net charge-offs
to average loans. . . 0.00% 0.26% 0.64% 1.18% 0.90%
Ratio of allowance to loans outstanding 1.54% 1.63% 2.35% 2.32% 1.39%
Ratio of provision to average loans. . 0.04% 0.13% 0.55% 1.91% 1.23%
The allowance for loan losses was equal to 1.54% of loans outstanding at year
end 1995 and in management's judgment is adequate to absorb potential loan
losses. While management's on-going analysis includes, among other factors,
the financial position of particular borrowers, results of internal loan
reviews, past due loans and the Company's historical loss experience, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, federal regulatory agencies, as an integral part of
their examination process, periodically review the Company's allowance for
loan losses. Such agencies may require the bank to recognize additions to the
allowance based on their judgments about information available to them at the
time of their examination.
</TABLE>
<TABLE>
MANAGEMENT'S DISCUSSION AND American Bancorporation and Subsidiaries
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED
December 31, 1995, 1994 and 1993
Securities
The following table summarizes the carrying value and weighted average yield
of securities by type and maturity range at December 31, 1995:
<CAPTION>
After After
One Year Five Years
Within But Within But Within After
One Year Five Years Ten Years Ten Years Total
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
Securities Available for Sale
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities . $ 8,913 5.07% $ 9,457 5.16% $ - -% $ - -% $18,370 5.12%
Federal agency obligations . . . 2,056 5.54 10,675 5.67 14,926 5.63 14,679 5.49 42,336 5.58
State and Municipal securities 391 8.65 414 6.24 948 9.78 405 8.28 2,158 8.56
Other. . . . . . 5 5.50 5 5.50 - - 5,141 5.61 5,151 5.61
Total Carrying Value. . $11,365 5.28% $20,551 5.45% $15,874 5.88% $20,225 5.58% $68,015 5.55%
The after ten year range of Federal agency obligations represents holdings of
certificates of participation in pools of residential mortgages. Principal
repayment prior to maturity has not been reflected. The after ten year range
of equity securities includes securities with no stated maturity. Yields do
not reflect tax equivalent adjustments.
</TABLE>
<TABLE>
Deposits
Summarized below are average deposit balances by type for the years ended
December 31, 1995, 1994 and 1993. Also presented is the maturity distribution
of time deposits in excess of $100,000 at each year end.
<CAPTION>
AVERAGE DEPOSITS 1995 1994 1993
($ in thousands) Amount % Rate Amount % Rate Amount % Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Demand noninterest bearing $ 31,932 10.9% -% $ 28,898 11.4% -% $ 24,284 9.7% -%
Interest bearing deposits
NOW Accounts. . . . . 26,409 9.0 2.34 24,849 9.8 2.36 24,791 9.9 2.68
MMDA and savings accounts 104,332 35.6 2.75 102,777 40.7 2.62 101,159 40.4 2.98
Time . . . . . . . . 130,742 44.5 4.82 96,392 38.1 3.89 100,270 40.0 4.25
261,483 89.1 3.75 224,018 88.6 3.14 226,220 90.3 3.51
Total. . . . . . . . . $293,415 100.0% 3.34% $252,916 100.0% 2.78% $250,504 100.0% 3.17%
</TABLE>
MATURITY OF TIME DEPOSITS OVER $100,000 1995 1994 1993
($ in thousands)
Within three months. . . . . . . . $ 2,814 $ 2,844 $ 1,943
Three to six months. . . . . . . . 5,745 3,586 2,892
Six months to one year . . . . . . 5,625 3,461 2,320
After one year . . . . . . . . . 4,053 4,211 1,871
Total . . . . . . . . . . . . . . $18,237 $14,102 $ 9,026
MANAGEMENT'S DISCUSSION AND American Bancorporation and Subsidiaries
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED
December 31, 1995, 1994 and 1993
Capital
Capital resources represent funds obtained externally through issuance of
securities and internally through the retention of earnings. Federal
regulatory authorities define core ("Tier 1") capital to include common
stockholders' equity and non-cumulative perpetual preferred stock, less
certain intangible assets. Supplementary ("Tier 2") capital includes core
capital, allowance for loan losses, perpetual preferred stock and qualifying
notes and debentures. Capital adequacy is determined after consideration of
a range of factors including organizational size, asset quality, consistency
of earnings, risk diversification, management expertise and internal controls.
Banking organizations are required to meet capital adequacy guidelines
established by federal regulators. The Company and the Banks are subject to
a risk-based capital framework and a minimum leverage ratio. The regulatory
minimum risk-based capital ratio is 8.0% (of which at least 4.0% should be a
core component consisting of common stockholders' equity). In addition, the
Company and the Banks must meet a leverage capital ratio of 3.0% Tier 1
capital to adjusted total assets. The percentages established are minimums
and most banks are required to maintain ratios at levels 100 to 200 basis
points above the minimum and under certain circumstances may be required by
federal regulators to maintain ratios at higher levels.
At December 31, 1995 the Company's total risk-based capital ratio was 12.9%
and its Tier 1 risk-based capital ratio was 11.6%, while total risk-based
capital ratios for WNB and CNB were 13.6% and 10.9%, respectively, with Tier 1
risk-based capital ratios of 12.3% and 9.6%, respectively. At December 31,
1995 the Company's leverage capital ratio was 7.4%, while the leverage capital
ratios for WNB and CNB were 7.9% and 6.1%, respectively.
Liquidity
In banking, liquidity refers to the ability of an institution to procure or
generate cash in order to fund operations, satisfy commitments, provide credit
to customers and withstand contraction of deposits during varying economic
conditions without disruption of service capabilities.
Liquidity depends upon confidence of customers and financial intermediaries
and confidence is engendered by financial strength as demonstrated by
profitability, asset quality and capitalization. The primary source of funds
are deposits and to a lesser extent, amortization and prepayment of
outstanding loans, maturing investment securities and borrowings from the FHLB
of Pittsburgh and Cincinnati. At December 31, 1995, money market assets and
investment securities maturing in one year or less totalled $22.8 million.
Short-term borrowings outstanding at December 31, 1995 totalled $27.5 million
and certificates of deposit in excess of $100,000, which mature within one
year or less, totalled $14.2 million or 4.8% of total deposits.
MANAGEMENT'S DISCUSSION AND American Bancorporation and Subsidiaries
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED
December 31, 1995, 1994 and 1993
At December 31, 1995, the Parent Company had outstanding debt totalling
$1,000,000 and had $1.5 million in liquid assets. Dividends declared by the
Company and funds to support parent company operations may be substantially
provided from subsidiary bank dividends. Various legal restrictions limit the
ability of a bank subsidiary to finance or otherwise supply funds to its
parent or certain of its affiliates (See Note N "Dividend Restrictions" to
the consolidated financial statements). Management believes that liquidity
in banking and nonbanking operations is sufficient.
Asset/Liability Management (Interest Rate Sensitivity)
The objective of asset/liability management is to insulate an institution's
rate spread from changes in interest rates and thus enable the institution to
maintain satisfactory levels of net interest income in both rising and falling
interest rate environments. In order to meet this objective, the Company
actively monitors the maturity or repricing relationship between its interest
earning assets and interest bearing liabilities and endeavors to control the
difference between such assets and liabilities maturing or repricing within
one year to less than ten percent of its total assets.
The difference between rate sensitive assets and rate sensitive liabilities
that mature or reprice within a given time period is referred to as the
interest rate sensitivity gap. A positive gap exists when rate sensitive
assets exceed rate sensitive liabilities. This mismatch generally will
enhance earnings in a rising interest rate environment and inhibit earnings
when rates decline. Conversely, a negative gap exists when rate sensitive
liabilities exceed rate sensitive assets. In this case, a rising interest
rate environment generally will inhibit earnings and declining rates generally
will enhance earnings. The Company's interest rate sensitivity analysis at
December 31, 1995, is presented in the table below. In evaluating the
Company's exposure to interest rate risk certain shortcomings inherent in this
method of analysis must be considered. For example, although certain assets
and liabilities may have similar maturities or periods of repricing, they may
react in different degrees to change in market interest rates. Interest
bearing demand deposits and savings deposits are presented as repricing within
the earliest period as they are subject to immediate withdrawal and rate
change. However, these types of deposits have historically shown relatively
stable balances and rates have generally changed in lesser degrees than other
interest earning assets and interest bearing liabilities.
<TABLE>
MANAGEMENT'S DISCUSSION AND American Bancorporation and Subsidiaries
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
December 31, 1995, 1994 and 1993
Days Total
INTEREST RATE SENSITIVITY 31 61 91 181 One Year Over
($ in thousands) 30 60 90 180 1 Year or Less One Year Total
December 31, 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS
Loans. . . . . . . . . $ 69,709 $ 8,214 $ 3,763 $ 11,906 $ 25,429 $ 119,021 $131,351 $250,372
Investment securities. . 998 801 2,017 1,995 5,555 11,366 56,649 68,015
Other short-term
investments . . 11,469 - - - - 11,469 - 11,469
Total interest
earning assets . . 82,176 9,015 5,780 13,901 30,984 141,856 188,000 329,856
INTEREST BEARING LIABILITIES
Deposits
Interest bearing demand .27,287 - - - - 27,287 - 27,287
Savings deposits. . 98,978 - - - - 98,978 - 98,978
Time deposits . . . 13,440 7,874 11,196 32,582 38,380 103,472 31,136 134,608
Short-term borrowings 27,523 - - - - 27,523 - 27,523
Long-term debt . . . 1,000 - - - - 1,000 47 1,047
Total interest bearing
liabilities . 168,228 7,874 11,196 32,582 38,380 258,260 31,183 289,443
Non Interest Bearing
Sources-net. . - - - - - - 40,413 40,413
Total Funding sources . 168,228 7,874 11,196 32,582 38,380 258,260 71,596 329,856
INTEREST SENSITIVITY GAP $(86,052) $ 1,141 $ (5,416) $ (18,681) $ (7,396) $(116,404) $116,404 $ -
CUMULATIVE INTEREST
SENSITIVITY GAP . .$(86,052) $(84,911) $(90,327) $(109,008) $(116,404) $(116,404) $ - $ -
GAP/INTEREST EARNING ASSETS (26.09)% 0.35% (1.64)% (5.66)% (2.24)% (35.29)% 35.29% -
CUMULATIVE GAP/INTEREST
EARNING ASSETS . . (26.09) (25.74) (27.38) (33.05) (35.29) (35.29) - -
<F1>
At December 31, 1995, there were no outstanding financial futures, options or
interest rate swap agreements.
</TABLE>
DIRECTORS
Jack O. Cartner, President
Motrim Inc., Cambridge, OH
Paul W. Donahie, President
American Bancorporation, Wheeling, WV
The Honorable John J. Malik, Jr.
Probate Court Judge, Belmont County, OH
Jay T. McCamic, Attorney at Law
McCamic & McCamic, Wheeling, WV
Jeremy C. McCamic, Attorney at Law
McCamic & McCamic, Wheeling, WV
Jolyon W. McCamic, Attorney at Law
McCamic & McCamic, Wheeling, WV
Robert C. Mead, President
American Mortgages, Inc.
John E. Wait, President
Columbus National Bank, St. Clairsville, OH
OFFICERS
Jeremy C. McCamic, Chairman & CEO
Jolyon W. McCamic, Vice Chairman/Administration
Paul W. Donahie, President
Robert C. Mead, Chief Operating Officer
Brent E. Richmond, Executive Vice President, Secretary/Treasurer and
Chief Financial Officer
Jeffrey A. Baran, CPA, Assistant Controller
Linda M. Woodfin, Assistant Secretary
Paul W. Donahie, President
Wheeling National Bank
John E. Wait, President
Columbus National Bank
Robert C. Mead, President
American Mortgages, Inc.
Gail D. Haun, President
American Bancdata Corporation
CORPORATE INFORMATION
Annual Meeting
The annual meeting of shareholders will be held in Wheeling, West
Virginia at the corporate offices 1025 Main Street - Suite 800 Wheeling,
West Virginia. The meeting will convene at 10:00 A.M. (E.D.S.T.) May 15,
1996. All shareholders are invited to attend.
Stock Transfer Agent
American Bancservices, Inc.
1025 Main Street - Suite 800
Wheeling, WV 26003
Stock Listing
NASDAQ Symbol: AMBC
Shares of American Bancorporation common stock are traded on the Nasdaq
Stock Market - National List.
Primary Market Makers
Legg Mason Wood Walker, Inc. Herzog, Heine, Geduld, Inc.
Wheat First Securities, Inc. Ferris Baker Watts, Inc.
F. J. Morrissey & Co., Inc.
Form 10K
Stockholders may receive a copy of American Bancorporation's 1995 10K Annual
Report as filed with the Securities and Exchange Commission upon written
request to Treasurer, American Bancorporation, 1025 Main Street, Suite 800,
Wheeling, WV 26003.
Independent Certified Public Accountants
KPMG Peat Marwick LLP
Pittsburgh, PA
