Exhibit #13.1
AMERICAN BANCORPORATION
1997 ANNUAL REPORT
<PAGE>
AMERICAN BANCORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS
(In thousands, except per share) 1997 1996 1995
----------- ----------- --------
STATEMENT OF INCOME:
Net Income................................... $ 4,509 $ 3,666 $
Basic Earnings Per Share.................... 1.44 1.17 0.98
BALANCE SHEET:
Assets.......................................... $ 484,606 $ 461,632 $ 353,995
Deposits...................................... 355,734 319,811 292,665
Loans - net................................... 283,407 267,886 246,518
Stockholders' equity......................... 33,694 30,423 28,012
Book Value per share......................... 10.77 9.72 8.95
QUARTERLY COMMON STOCK PRICE RANGES AND DIVIDENDS
1997: HIGH LOW DIVIDENDS
---- --- ---------
FOURTH................................. 30 1/2 20 1/2 $0.125
THIRD.................................. 24 1/2 16 1/8 0.125
SECOND................................. 16 3/4 14 1/2 0.125
FIRST................................. 15 5/16 12 1/8 0.125
1996: High Low
---- ---
Fourth................................. 13 3/8 11 7/8 $0.125
Third.................................. 12 3/4 9 7/8 0.125
Second................................. 12 1/4 9 5/8 0.10
First.................................. 12 1/2 10 3/4 0.10
</TABLE>
American Bancorporation is traded on the Nasdaq Stock Market under the ticker
symbol AMBC.
Per share data, stock prices and dividends have been retroactively restated to
reflect a two for one stock split, which became effective October 23, 1997.
CORPORATE PROFILE
American Bancorporation (the "Company"), is a registered Ohio bank holding
company headquartered in Wheeling, West Virginia. The Company was organized in
1966. At December 31, 1997, the Company owned one affiliate bank, Wheeling
National Bank , which serves its customers through twenty full service offices
located in Ohio County, Hancock County and Wetzel County, West Virginia and
Belmont County, Harrison County, Guernsey County, Jefferson County and Franklin
County, Ohio.
In addition to the banking offices, the Company operates three non-bank
subsidiaries: American Mortgages, Inc. which originates and services mortgage
loans, American Bancdata Corporation which provides electronic data processing
services to the Company and WNB and American Bancservices, Inc., which provides
the Company's transfer agent services.
The approximate number of common stockholders of record was 2,775 on January 31,
1998.
CONTENTS
Financial Highlights.............................................See above
Quarterly Stock Price Ranges.....................................See above
Corporate Profile................................................See above
Chairman's Letter................................................1 - 2
Financial Statements.............................................3 - 27
Independent Auditors' Report ..................................28
Five Year Selected Financial Data................................29
Management's Discussion and Analysis.............................30 - 46
THE CHAIRMAN'S LETTER
TO OUR SHAREHOLDERS:
I am pleased to report that 1997 was a year of TREMENDOUS GROWTH AND
PROGRESS for your Company. This was reflected in increased earnings, assets and
capital, as well as a number of innovative changes for our customers. This
calendar year looks just as promising and I am proud to report that as of March,
1998 we have reached a significant milestone. WE NOW HAVE OVER ONE HALF BILLION
DOLLARS IN ASSETS.
In 1997 we achieved a 23% GROWTH IN EARNINGS ($843,000) to $4.5 million
($1.44 basic earnings per share) from $3.7 million ($1.17 basic earnings per
share) in 1996. The primary reason for this increase was an approximate $1.2
million increase in net interest income as compared to the prior year. This
resulted from a 17.6% increase in average interest earning assets with the
average loans outstanding increasing 10.7%.
<PAGE>
As of year end 1997 our TOTAL ASSETS INCREASED 5% to $485 million from
$462 million at year end 1996. TOTAL CAPITAL OF THE COMPANY INCREASED 10.8%
($3.3 million) to $33.7 million for a book value of $10.77 per share from $30.4
million and a book value of $9.72 per share at year end 1996.
These results were achieved for a number of reasons, not the least of
which, are our dedicated employees and customers. Your Company is on the LEADING
EDGE OF TECHNOLOGY FOR CUSTOMER CONVENIENCE. In 1997 Wheeling National Bank
became one of the first banks in the country to offer customers a Windows based
"check imaging processing system". Check image processing, which has reached
nearly a 100% customer acceptance, is a radical change in how customers receive
a return of their checks.
CHECK IMAGE PROCESSING provides WNB customers with a customized notebook
with monthly dividers for sorting and retrieving their check activity. The
customer receives laser printed images of their checks each month with up to 18
images on a page. This gives customers convenient access to their checks, while
WNB saves on labor, storage and postage. Checks are stored by the bank on a file
server for easy research and recovery. These images have the same legal
acceptance as the original checks. Eventually this program will facilitate WNB
customers daily access to their own records via the internet.
As you know, in 1996 we completed a MAJOR STRATEGIC COMBINATION of the
separate banks of the holding company by merging Columbus National Bank into
Wheeling National Bank. This move provided certain economies that your Company
is now realizing, but more importantly it is giving us a competitive asset. The
Wheeling National Bank name enables us to EMPHASIZE OUR LOCAL AND NEIGHBORHOOD
BANKING to our customers with a name that is recognizable as a local financial
institution which knows its customers versus the larger and less customer
friendly regional and national banks. In fact, WNB's new slogan is: "THE SMALL
BANK FOR BIG DREAMS".
We are sensitive to our customer and community needs. In 1998, following
the closure of the Wheeling Wharf parking garage, for the convenience of WNB's
customers, the Company increased its downtown parking facilities by over 100
spaces to ENHANCE ACCESS TO ITS MAIN OFFICE and downtown businesses.
Your Company has made further enhancements already in 1998. WE HAVE
DOUBLED OUR LOAN OFFICE FACILITIES IN COLUMBUS, OHIO because our loan demand
outgrew our available office space. In January 1998 we INSTALLED 6 ATM MACHINES
AT LOCAL CONVENIENT FOOD MART STORES in Ohio and West Virginia and we PLAN TO
ADD 4 ADDITIONAL ATM'S in April 1998.
In 1998 we also have begun offering depositors a NEW VISA DEBIT CARD
which enables customers to utilize this Visa card in lieu of writing a check or
paying cash. The debit card gives customers easy access to their checking
accounts and a record of their financial transactions.
Over the last eight years your Company's stock has shown impressive
gains. Since August 1989, there has been a 200% GROWTH IN DIVIDENDS and two
splits of 2 for 1 (March 1994 and October 1997). A shareholder who purchased 100
shares in August 1989 at $25 per share or $2,500 would have experienced a 489%
GROWTH IN MARKET VALUE to $12,200 represented by 400 shares as of December 1997.
A shareholder who took advantage of the December 1994 rights offering at $15.50
per share and purchased 100 shares for $1,550 would have experienced a 393%
GROWTH IN MARKET VALUE to $6,100 represented by 200 shares as of December 1997.
0
<PAGE>
During this same eight year period the TOTAL MARKET CAPITALIZATION OF
YOUR COMPANY HAS GROWN 591% ($81.6 million) from approximately $13.8 million on
553,000 shares at $25 per share in August 1989 to $95.4 million on 3.1 million
shares at $30.50 per share in December 1997. While our price per share dropped
to $26.00 as of March, 1998, we anticipate it will improve in the near future.
Our long term corporate strategy has been to EXPAND OUR BANKING NETWORK
ALONG THE INTERSTATE 70 CORRIDOR. Currently we have 20 full service branch
banking offices in 12 Ohio and 8 West Virginia locations. We plan to expand into
neighboring Pennsylvania in 1998.
The future looks bright and we welcome the challenges we will face. Your
management plans to continue doing what it has been doing, namely growing the
Company's assets and increasing its earnings on a steady upward curve.
We deeply appreciate your continued strong support.
Sincerely,
Jeremy C. McCamic
Chairman and Chief Executive Officer
2
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET AMERICAN BANCORPORATION AND SUBSIDIARIES
DECEMBER 31, 1997 AND 1996
<S> <C> <C>
ASSETS 1997 1996
------------------ -------------
Cash and due from banks...........................................................$ 11,027,692 $ 11,550,133
Federal funds sold............................................................. 2,414,812 17,870,000
Investment securities available for sale......................................... 169,175,987 143,473,608
Loans
Commercial, financial and agricultural....................................... 93,318,923 84,608,068
Real estate mortgage.......................................................... 144,179,037 136,488,358
Installment.................................................................. 49,193,091 50,353,407
-------------- -------------
286,691,051 271,449,833
Less allowance for loan losses.............................................. 3,284,338 3,563,774
--------------- --------------
283,406,713 267,886,059
Premises and equipment - net.................................................... 10,070,377 9,730,880
Accrued interest receivable.................................................... 2,713,240 2,985,322
Excess of cost over net assets acquired........................................ 1,968,940 2,304,416
Other assets................................................................... 3,828,711 5,832,008
--------------- ---------------
TOTAL ASSETS............................................................... $484,606,472 $461,632,426
============ ============
LIABILITIES
Deposits
Demand - non-interest bearing................................................. $ 33,512,712 $ 36,744,316
Demand - interest bearing.................................................... 26,893,378 27,568,710
Savings....................................................................... 92,608,169 101,823,009
Time - under $100,000.......................................................... 157,985,640 126,726,720
Time - over $100,000......................................................... 44,734,433 26,948,063
--------------- ----------------
TOTAL DEPOSITS............................................................ 355,734,332 319,810,818
Short-term borrowings............................................................ 87,574,152 104,096,043
Accrued interest payable........................................................ 1,782,668 1,488,999
Other liabilities............................................................... 4,396,674 4,876,191
Notes payable and other long term debt......................................... 1,424,800 937,681
---------------- ----------------
TOTAL LIABILITIES......................................................... 450,912,626 431,209,732
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock..................................................... - -
Common stock without par value, stated value $5 a
share, authorized 6,500,000 shares, issued and outstanding
3,129,674 in 1997 and 1996................................................. 7,824,185 7,824,185
Additional paid-in capital.................................................. 10,301,982 10,301,982
Retained earnings........................................................... 14,965,228 12,021,258
Unrealized gain on securities available for sale, net...................... 602,451 275,269
---------------- ----------------
TOTAL STOCKHOLDERS' EQUITY................................................. 33,693,846 30,422,694
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................................... $484,606,472 $461,632,426
============ ============
<FN>
<F1>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
3
<PAGE>
AMERICAN BANCORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME
Years ended December 31, 1997, 1996 and 1995
<S> <C> <C> <C>
1997 1996 1995
----------------- ----------------- ------------
INTEREST INCOME
Loans............................................................ $24,890,709 $22,500,530 $21,929,265
Investment securities
Taxable interest income...................................... 9,718,745 6,377,858 3,844,393
Non-taxable interest income................................ 90,386 127,880 144,316
Dividends................................................... 491,420 461,557 207,773
-------------- -------------- -------------
10,300,551 6,967,295 4,196,482
Short-term investments........................................ 347,905 417,703 370,332
-------------- -------------- -------------
Total interest income...................................... 35,539,165 29,885,528 26,496,079
INTEREST EXPENSE
Deposits
Interest bearing demand..................................... 628,799 630,275 618,035
Savings...................................................... 2,686,435 2,783,607 2,872,553
Time - under $100,000........................................ 7,767,168 6,269,821 5,303,309
Time - over $100,000......................................... 2,101,660 1,247,259 1,003,706
------------- ------------- -------------
13,184,062 10,930,962 9,797,603
Borrowings
Short-term borrowings.......................................... 5,005,959 2,782,434 1,275,187
Notes payable and other long-term debt....................... 87,634 88,714 97,872
--------------- --------------- --------------
Total interest expense...................................... 18,277,655 13,802,110 11,170,662
------------ ------------ ------------
NET INTEREST INCOME............................................. 17,261,510 16,083,418 15,325,417
PROVISION FOR LOAN LOSSES.................................. - - 105,000
--------------------------------------- -------------
Net interest income after provision for loan losses............... 17,261,510 16,083,418 15,220,417
OTHER INCOME
Service charges on deposit accounts......................... 749,680 864,557 735,514
Insurance commissions...................................... 87,592 106,990 119,017
Net gains on sale of loans.................................. 1,303,363 511,171 93,118
Net securities gains (losses)............................. 34,336 (922) 3,261
Other income............................................... 750,873 910,302 729,349
------------- -------------- -------------
Total other income........................................ 2,925,844 2,392,098 1,680,259
OTHER EXPENSE
Salaries and employee benefits............................... 5,910,116 5,589,526 5,318,929
Occupancy expense............................................ 1,261,026 1,137,334 1,048,541
Furniture and equipment expense.............................. 1,128,188 1,117,577 1,067,046
Other expenses............................................... 4,801,750 4,862,734 4,656,170
------------- ------------- ------------
Total other expense........................................ 13,101,080 12,707,171 12,090,686
------------ ------------ -----------
INCOME BEFORE INCOME TAXES ....................................... 7,086,274 5,768,345 4,809,990
PROVISION FOR INCOME TAXES........................................ 2,577,467 2,102,367 1,757,823
------------- ------------- ------------
NET INCOME......................................................... $ 4,508,807 $ 3,665,978 $ 3,052,167
============ ============ ===========
Basic Earnings Per Share............................... $ 1.44 $ 1.17 $ 0.98
================= ================ ===============
<FN>
<F1>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
AMERICAN BANCORPORATION AND SUBSIDIARIES
4
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT
OF STOCKHOLDERS' EQUITY
Years ended December 31, 1997, 1996 and 1995
<S> <C> <C> <C> <C> <C>
UNREALIZED GAIN
ADDITIONAL ON SECURITIES
COMMON PAID-IN RETAINED AVAILABLE FOR
STOCK CAPITAL EARNINGS SALE, NET TOTAL
Balance at January 1, 1995................. 7,824,185 10,301,982 7,806,852 260,000 26,193,019
Net Income.......................... - - 3,052,167 - 3,052,167
Dividends ($0.35 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
Net Income.......................... - - 3,665,978 - 3,665,978
Dividends ($0.45 per share)......... - - (1,408,353) - (1,408,353)
Change in unrealized gain on
securities available for sale, net.. - - - 152,647 152,647
------------------------------------------------------------------------------------
Balance at December 31, 1996............... 7,824,185 10,301,982 12,021,258 275,269 30,422,694
Net Income.......................... - - 4,508,807 - 4,508,807
Dividends ($0.50 per share)......... - - (1,564,837) - (1,564,837)
Change in unrealized gain on
securities available for sale, net. - - - 327,182 327,182
-------------------------------------------------------------------------------------
Balance at December 31, 1997.................$ 7,824,185 $10,301,982 $14,965,228 $ 602,451 $33,693,846
=========== =========== =========== =========== ===========
<FN>
<F1>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
5
<PAGE>
AMERICAN BANCORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS Years ended December 31, 1997, 1996 and
1995
OPERATING ACTIVITIES:
<S> <C> <C> <C>
1997 1996 1995
-------------- ------------- -----------
Net income............................................................ $ 4,508,807 $ 3,665,978 $ 3,052,167
Adjustments to reconcile net income to net cash from operating activities:
Depreciation....................................................... 805,499 658,103 603,798
Amortization of intangibles........................................ 335,476 327,130 315,490
Net amortization (accretion) of investment securities............. 336,384 250,869 (74,137)
Provision for loan losses.................................... - - 105,000
Net (gain) loss on sale of investment securities................. (34,336) 922 (3,261)
Net gain on sale of loans....................................... (1,303,363) (511,171) (93,118)
Change in assets and liabilities net of effects from the purchase of branch
assets:
Net (increase) decrease in accrued interest receivable............. 272,082 (917,883) (47,054)
Net increase in accrued interest payable.......................... 293,669 335,941 21,992
Net (increase) decrease in other assets............................. 1,632,174 (1,584,158) (472,525)
Net increase (decrease) in other liabilities...................... (697,637) 1,044,189 414,762
Net decrease from other operating activities...................... 449,035 255,996 106,740
--------------- ---------------- ---------------
Net cash provided by operating activities..................... 6,597,790 3,525,916 3,929,854
INVESTING ACTIVITIES:
Purchase of branch assets, net of cash acquired............. - 14,171,001 -
Investment securities held to maturity:
Proceeds from maturities and repayments................ - - 19,607,659
Purchases.............................................. - - (8,272,273)
Investment securities available for sale:
Proceeds from maturities and repayments....................... 39,638,162 22,998,696 6,692,533
Proceeds from sales........................................... 54,567,143 16,474,939 8,088,052
Purchases...................................................... (119,664,429) (114,944,324) (12,555,150)
Net increase in loans............................................... (14,217,291) (20,606,716) (21,401,522)
Purchase of premises and equipment................................ (1,222,909) (1,686,300) (828,810)
-------------- --------------- ---------------
Net cash used by investing activities......................... (40,899,324) (83,592,704) (8,669,511)
FINANCING ACTIVITIES:
Net increase (decrease) in non-interest bearing demand deposits.... (3,231,604) 3,974,744 583,696
Net decrease in interest bearing demand and savings deposits....... (9,890,172) (4,338,517) (16,462,117)
Net increase in time deposits........................................ 49,045,290 12,360,154 16,202,371
Net increase (decrease) in short-term borrowings.................... (16,521,891) 76,573,377 14,124,485
Principal repayment of long-term debt............................ (11,931) (109,442) (1,002,433)
Proceeds from issuance of long-term debt........................... 499,050 - -
Cash dividends paid................................................. (1,564,837) (1,330,113) (978,023)
------------- --------------- ---------------
Net cash provided by financing activities..................... 18,323,905 87,130,203 12,467,979
------------- -------------- -------------
Net Increase (Decrease) in Cash and Cash Equivalents.................. (15,977,629) 7,063,415 7,728,322
Cash and Cash Equivalents Beginning Balance............................ $ 29,420,133 $ 22,356,718 $ 14,628,396
------------ ------------- ------------
Cash and Cash Equivalents Ending Balance............................... $ 13,442,504 $ 29,420,133 $ 22,356,718
============ ============= ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
BUSINESS ACQUISITIONS:
Fair value of assets acquired............................. $ - $ 1,098,572 $ -
Cash received in the acquisition......................... - 14,171,001 -
--------------------- ---------------------------------
Liabilities assumed....................................... $ - $ 15,269,573 $ -
==================== ============ ===================
CASH PAID DURING THE YEAR FOR:
Interest.............................................................. $ 17,983,986 $ 13,346,426 $ 11,148,670
Income taxes...........................................................$ 2,630,000 $ 1,883,000 $ 1,331,100
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Loan foreclosures and repossessions....................................$ 427,339 $ 324,539 $ 149,810
Transfer of premises and equipment to other real estate owned..........$ 77,913 $ 287,774 $ -
<FN>
<F1>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
NOTESTO CONSOLIDATED
AMERICAN BANCORPORATION AND SUBSIDIARIES FINANCIAL
STATEMENTS
6
<PAGE>
DECEMBER 31, 1997, 1996 AND 1995
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 ("WNB"), American Bancdata Corporation, American Bancservices, Inc. and
American Mortgages, Inc. ("AMI"). The Company's subsidiaries primarily engage in
commercial banking and mortgage banking. The subsidiary bank 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 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
stockholders' 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.
NOTES TO CONSOLIDATED AMERICAN BANCORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENTS-CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
7
<PAGE>
LOANS
Loans are reported at their principal amounts, net of any deferred
origination fees and costs 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.
A loan is considered to be impaired, as defined by Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment
of a Loan", 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, excluding consumer and
single family residential loans, are considered to be impaired loans. Large
groups of smaller homogenous loans, such as loans secured by first and second
liens on residential properties and other consumer loans, are evaluated
collectively for impairment. 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. Interest receipts on nonaccrual and impaired
loans are recognized as interest revenue or are applied to principal when
management believes the ultimate collectibility of principal is in doubt.
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.
NOTES TO CONSOLIDATED AMERICAN BANCORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENTS-CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
MORTGAGE LOAN SERVICING
On January 1, 1996 the Company adopted SFAS No. 122 "Accounting for Mortgage
Servicing
8
<PAGE>
Rights", which requires 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 costs of
the mortgage loans to the mortgage servicing rights and the loans (without the
mortgage servicing rights) based on their relative fair values. Purchased
mortgage servicing rights are recorded at cost.
On January 1, 1997 the Company adopted SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities."
SFAS No. 125 establishes the criteria for distinguishing transfers of financial
assets that are sales from transfers that are secured borrowings. SFAS No. 125
supersedes several accounting standards including SFAS No. 122, "Accounting for
Mortgage Servicing Rights." Adoption of this statement was immaterial to the
Company's financial position and results of operations.
The Company measures the impairment of the mortgage servicing rights based
on their current fair value. Current fair value is determined through the
discounted present value of the estimated future net servicing cashflows using a
risk-based discount rate and assumptions based upon market estimates for future
servicing revenues and expenses (including prepayment expectations, servicing
costs, default rates and interest earnings on escrows). For impairment
measurement purposes, servicing rights are stratified by interest rate. If the
carrying value of an individual stratum were to exceed its fair value, a
valuation allowance would be established. The adoption of SFAS No. 122 resulted
in an increase in income and net income of $402,000 and $242,000, respectively,
for the year ended December 31, 1996.
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 eight years. Such assets are periodically evaluated for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable.
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. 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.
NOTES TO CONSOLIDATED AMERICAN BANCORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENTS-CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
INCOME TAXES
Deferred tax assets and liabilities are recognized for the expected future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases using enacted tax laws and rates.
9
<PAGE>
PENSION PLAN
Pension costs, based on actuarial computations, are charged to expense and
funded as required by minimum Internal Revenue Service standards. (See Note R
"Pension Plan and Profit Sharing 401(k) Savings Plan").
EARNINGS PER COMMON SHARE
Effective December 31, 1997, the Company adopted SFAS No. 128 "Earnings per
Share". This statement establishes standards for computing and presenting basic
and diluted earnings per common share ("EPS"). It supersedes Accounting
Principles Board ("APB") Opinion No. 15 that required the presentation of both
primary and fully diluted EPS.
Basic EPS is computed by dividing net income applicable to common stock by
the weighted average number of common shares outstanding during the period,
without considering any dilutive items. Diluted EPS is computed by dividing net
income applicable to common stock by the weighted average number of common
shares and common stock equivalents for items that are dilutive, net of shares
assumed to be repurchased using the treasury stock method using the average
share price for the Company's common stock during the period. Common stock
equivalents arise from the assumed conversion of outstanding stock options,
warrants and convertible capital notes. At December 31, 1997 the Company had no
common stock equivalents. The weighted average number of shares used in the
calculation of basic earnings per share was 3,129,674 for 1997, 1996 and 1995.
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, employee benefit plans and other areas.
RECLASSIFICATIONS
Certain prior year financial information has been reclassified to conform to
the presentation in 1997.
NOTE B-BRANCH ACQUISITIONS
On February 9, 1996, the Company acquired certain assets and assumed certain
liabilities of Bank One, Wheeling-Steubenville, N.A. The Company acquired
liabilities totalling $15.3 million, with deposits totalling $15.1 million and
purchased the equipment of the St. Clairsville and Flushing, Ohio branch offices
of Bank One. The Company paid a $801,000 premium based on core deposits which is
being amortized over a period of eight years. NOTES TO CONSOLIDATED AMERICAN
BANCORPORATION AND SUBSIDIARIES FINANCIAL STATEMENTS-CONTINUED DECEMBER 31,
1997, 1996 AND 1995
NOTE C-CASH AND DUE FROM BANKS
The Company's banking subsidiary is 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 $150,000 at December 31, 1997 and 1996.
10
<PAGE>
<TABLE>
<CAPTION>
NOTE D-INVESTMENT SECURITIES
SECURITIES AVAILABLE FOR SALE
The amortized cost and approximate market value of investment securities
available for sale at December 31, 1997 and 1996 is summarized as follows:
<S> <C> <C> <C> <C>
1997
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
United States Treasury..........................................$ 5,275,484 $ 11,990 $ 1,686 $ 5,285,788
United States Federal agencies.................................. 69,328,084 390,638 44,224 69,674,498
United States agency mortgage-backed securities................ 86,925,102 340,130 106,619 87,158,613
States and political subdivisions............................. 972,966 78,022 - 1,050,988
Other....................................................... 5,000 - - 5,000
--------------- -------------- ----------- --------------
Total Debt Securities........................................ 162,506,636 820,780 152,529 163,174,887
Equity securities.............................................. 5,799,600 201,500 - 6,001,100
--------------- ------------ ----------- --------------
Total Securities Available for Sale ......................$168,306,236 $1,022,280 $152,529 $169,175,987
============ ========== ======== ============
1996
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
United States Treasury........................................ $ 8,243,186 $ - $ 44,237 $ 8,198,949
United States Federal agencies................................. 105,135,857 616,973 423,583 105,329,247
United States agency mortgage-backed securities............... 17,105,590 9,296 144,517 16,970,369
States and political subdivisions............................ 1,125,926 109,070 53 1,234,943
Other..................................................... 5,000 - - 5,000
-------------- ------------ --------- -------------
Total Debt Securities....................................... 131,615,559 735,339 612,390 131,738,508
Equity securities............................................. 11,533,600 201,500 - 11,735,100
------------- ------------ --------- -------------
Total Securities Available for Sale .................... $143,149,159 $936,839 $612,390 $143,473,608
============ ======== ======== ============
</TABLE>
NOTES TO CONSOLIDATED AMERICAN BANCORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENTS-CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
Included in equity securities at December 31, 1997 are Federal Home Loan
Bank and Federal Reserve Bank stock of $3,700,000 and $279,600, respectively. At
December 31, 1996 these stock investments were $9,434,500 and $279,600,
respectively.
The amortized cost and approximate market value of debt securities at
December 31, 1997, 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.................... $ 4,616,092 $ 4,627,943
Due after one year through five years...... 3,498,059 3,574,596
Due after five years through ten years...... 67,965,902 68,341,554
Due after ten years......................... 86,426,583 86,630,794
-------------- --------------
$162,506,636 $163,174,887
Proceeds from the sale of securities available for sale for the years
ended December 31, 1997, 1996
11
<PAGE>
and 1995 were $54,567,143, $16,474,939 and $8,088,052, respectively. Gross
realized gains on the sale of securities available for sale were $156,591 in
1997, $41,070 in 1996 and $33,171 in 1995. Gross realized losses on the sale of
securities available for sale were $122,255 in 1997, $41,992 in 1996 and $29,910
in 1995.
At December 31, 1997 the book value of securities pledged to secure public
deposits or for other purposes required or permitted by law aggregated
$46,781,000.
NOTES TO CONSOLIDATED AMERICAN BANCORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENTS-CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
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:
1997 1996 1995
--------------- --------------- ----------
Nonperforming loans
Nonaccrual.............. $ 815,000 $ 547,000 $ 790,000
90 days past due....... 1,277,000 744,000 609,000
Restructured........... 566,000 672,000 666,000
------------- ------------- -------------
$ 2,658,000 $ 1,963,000 $ 2,065,000
Other real estate owned.... 236,000 607,000 575,000
------------- ------------- -------------
Total......................$ 2,894,000 $ 2,570,000 $ 2,640,000
=========== =========== ===========
There were no commitments to advance additional funds to such borrowers at
December 31, 1997. 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 $72,000, $49,000 and $85,000 for the years
ended December 31, 1997, 1996 and 1995, respectively. Interest recognized on
such loans approximated $33,000, $6,000 and $21,000 for the years ended December
31, 1997, 1996 and 1995, respectively.
12
<PAGE>
Impaired loans totalled $815,000 and $547,000 at December 31, 1997 and 1996,
respectively. Impaired loans totalling $642,000 and $341,000 at the end of 1997
and 1996, respectively, had a corresponding specific allowance for credit losses
of $115,000 and $148,000. The average balance of impaired loans was $558,000 in
1997 and $691,000 in 1996. Interest income recognized on impaired loans totalled
$33,000, $6,000 and $21,000 in 1997, 1996 and 1995, respectively.
NOTE F-RELATED PARTY TRANSACTIONS
At December 31, 1997, 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 $1,220,000. 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, 1997:
Aggregate outstanding balance at January 1, 1997...... ....... $ 1,577,000
Additions.................................................... 141,000
Retirements.................................................. (447,000)
Other changes................................................ (51,000)
-------------
Aggregate outstanding balance at December 31, 1997............ $ 1,220,000
===========
NOTES TO CONSOLIDATED AMERICAN BANCORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENTS-CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
NOTE G-ALLOWANCE FOR LOAN LOSSES
An analysis of the allowance for loan losses follows:
Years ended December 31, 1997 1996 1995
--------------- ----------- ----------
Balance at beginning of year....... $ 3,563,774 $ 3,853,633 $ 3,736,994
Provision for loan losses........... - - 105,000
Loans charged-off................... (578,184) (427,602) (363,381)
Less recoveries..................... 298,748 137,743 375,020
----------- ------------ -------------
Net loans (charged-off) recovered... (279,436) (289,859) 11,639
----------- ------------ -------------
Balance at end of year............$ 3,284,338 $ 3,563,774 $ 3,853,633
=========== =========== ===========
NOTE H-MORTGAGE LOAN SERVICING
At December 31, 1997, 1996 and 1995, the Company was servicing approximately
1,700, 1,600 and 1,500 mortgage loans for various investors with aggregate
balances of approximately $109,647,000, $92,228,000 and $74,586,000,
respectively.
Originated mortgage servicing rights capitalized during 1997 and 1996
totalled $426,000 and $427,000, respectively. At December 31, 1997 and 1996, the
Company had capitalized mortgage servicing rights of $1,095,000 and $816,000,
respectively, which related to approximately $107 million and $89 million,
respectively, of the aggregate $110 million and $92 million, respectively, in
loans serviced. The mortgage servicing rights associated with the remaining $3
million in loans serviced at December 31, 1997 and 1996 are not subject to
capitalization because the loans were originated and sold prior to the Company's
adoption of SFAS No. 122 on January 1, 1996 (See Note A "Summary of Significant
Accounting Policies").
13
<PAGE>
In connection with these loans serviced for others, the Company held
advances by borrowers for taxes and insurance in the amount of $1,550,000,
$1,294,000 and $1,311,000 at December 31, 1997, 1996 and 1995, respectively.
The fair value of the capitalized mortgage servicing rights at December 31,
1997 and 1996 approximated $1,340,000 and $1,042,000, respectively. The fair
value of the mortgage servicing rights not subject to capitalization due to the
loans being originated or sold prior to the adoption of SFAS No. 122
approximated $28,000 and $42,000 at December 31, 1997 and 1996, respectively.
Based on management's estimate of the fair value of the designated strata, no
impairment valuation allowance is necessary.
The Company amortizes the capitalized mortgage servicing rights in
proportion to, and over the period of, the estimated net servicing income. The
amortization for the years ending December 31, 1997, 1996 and 1995 was $147,000,
$101,000 and $80,000, respectively.
NOTES TO CONSOLIDATED AMERICAN BANCORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENTS-CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
NOTE I-PREMISES AND EQUIPMENT
A summary of premises and equipment and accumulated depreciation and
amortization follows:
December 31, 1997 1996
-------------- ----------
Premises and Equipment
Buildings...................................... $ 7,117,053 $ 6,412,998
Equipment...................................... 6,255,086 5,753,211
Leasehold improvements....................... 853,763 830,397
-------------- ------------
14,225,902 12,996,606
Less accumulated depreciation
and amortization........................... 6,845,736 6,106,753
------------- ------------
7,380,166 6,889,853
Land......................................... 2,690,211 2,841,027
------------- ------------
$10,070,377 $ 9,730,880
=========== ===========
Depreciation and amortization of premises and equipment charged to expense
for the years ended December 31, 1997, 1996 and 1995 was $807,000, $658,000 and
$604,000 respectively.
At December 31, 1997 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, 1997, 1996 and 1995 was $715,000, $709,000 and $643,000
respectively. Future minimum payments under operating leases were as follows at
December 31, 1997:
14
<PAGE>
1998......................................... $ 321,000
1999........................................ 211,000
2000........................................ 114,000
2001....................................... 43,000
2002....................................... 35,000
After 2002.................................. 573,000
------------
Total minimum lease payments ................ $1,297,000
NOTE J - DEPOSITS
At December 31, 1997, the scheduled maturity of time deposits for the years
1998 through 2002 and thereafter are as follows: $132,141,000, $49,472,000,
$14,497,000, $4,897,000 and $1,713,000, respectively.
15
<PAGE>
NOTES TO CONSOLIDATED AMERICAN BANCORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENTS-CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
NOTE K-NOTE PAYABLE, SHORT TERM AND LONG TERM BORROWINGS
SHORT TERM BORROWINGS
The following summarizes the short term borrowings at December 31:
1997 1996
------------ ------------
Securities sold under repurchase agreements....$ 7,912,220 $ 2,609,535
Treasury tax and loan notes....................... 2,260,236 1,486,508
Warehouse revolving line of credit............... 3,401,696 -
Federal Home Loan Bank advances.................. 74,000,000 100,000,000
------------ ------------
Total short term borrowings....................$87,574,152 $104,096,043
=========== ============
AMI utilizes a warehouse revolving line of credit with a regional bank for
purposes of funding loan originations. Under the terms of this loan, AMI may
borrow up to $6,000,000 at any one time at an interest rate of prime (8.50% at
December 31, 1997). AMI pledges a security interest in the originated mortgage
loans as collateral. AMI uses the proceeds from the sale of the originated
mortgage loans in the secondary market to repay the warehouse loan which expires
in 1998, subject to extension.
Securities sold under repurchase agreements are retained by the Company's
custodian under written agreements that recognize the customer's interests in
the securities. The subsidiary bank has an agreement with its Federal Reserve
district bank to be an authorized treasury tax and loan depository.
WNB is a member of the Federal Home Loan Bank of Pittsburgh (the "FHLB").
Membership in the FHLB makes available short-term and long-term borrowing
capacity in the form from collateralized advances. In addition to the
$74,000,000 outstanding at December 31, 1997 from the FHLB, WNB had
approximately $109,937,000 of available borrowing capacity in the form of
collateralized advances from the FHLB at prevailing interest rates. Included in
the available borrowings is a revolving line of credit with a committed amount
of $13,705,000 with no current outstandings, which is renewable annually,
provided WNB is in compliance with all terms of FHLB credit policies.
Interest expense on FHLB advances was $4,491,000, $2,606,000 and $1,233,000
for the years ended December 31, 1997, 1996 and 1995, respectively.
The following table summarizes information regarding the Federal Home Loan
Bank advances at December 31:
1997 1996
------------- -----------
Balance, end of year $74,000,000 $100,000,000
Weighted average interest rate, end of year 5.76% 5.50%
Average amount outstanding during the year 81,616,301 47,356,557
Weighted average interest rate during the year 5.50% 5.53%
Maximum amount outstanding at any month end 105,000,000 100,000,000
NOTES TO CONSOLIDATED AMERICAN BANCORPORATION AND SUBSIDIARIES
16
<PAGE>
FINANCIAL STATEMENTS-CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
NOTES PAYABLE AND OTHER LONG TERM BORROWINGS
The following summarizes notes payable and other long term borrowings at
December 31:
1997 1996
----------- ----------
Variable rate note, due December 2002 $1,399,050 $900,000
Capitalized lease obligations 25,750 37,681
---------- --------
$1,424,800 $937,681
========== ========
The variable rate term note had an interest rate of 8.28% and 8.31% at
December 31, 1997 and 1996, respectively.
NOTE L-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, 1997 and 1996 is as
follows:
Financial instruments whose contract amounts represent credit
risk:
Contract Amounts
1997 1996
Commitments to extend credit $37,041,000 $36,106,000
Standby letters of credit -- --
Commercial letters of credit 852,000 736,000
Commitments to extend credit, approximately $470,000 at December 31, 1997
and $626,000 at December 31, 1996, 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, 1997. NOTES TO CONSOLIDATED AMERICAN
BANCORPORATION AND SUBSIDIARIES FINANCIAL STATEMENTS-CONTINUED DECEMBER 31,
1997, 1996 AND 1995
17
<PAGE>
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 M-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.
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, 1997 and 1996. 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, 1997 and 1996. The fair value of time
NOTES TO CONSOLIDATED AMERICAN BANCORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENTS-CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
18
<PAGE>
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, 66% 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. The following table represents carrying values and
estimated fair values of the Company's financial instruments as of December 31,
1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C> <C> <C>
CARRYING ESTIMATED Carrying Estimated
VALUE FAIR VALUE Value Fair Value
FINANCIAL ASSETS
Federal Funds Sold.......................$ 2,415,000 $ 2,415,000 $ 17,870,000 $ 17,870,000
Investment Securities available for sale. 169,176,000 169,176,000 143,474,000 143,474,000
Loans Receivable, net of allowance.........283,407,000 284,864,000 267,886,000 267,710,000
FINANCIAL LIABILITIES
Fixed Maturity Deposits (1)
Time Deposits........................... 202,720,000 202,902,000 153,675,000 153,530,000
Short-term Borrowings..................... 87,574,000 87,574,000 104,096,000 104,096,000
Long-term Borrowings..................... 1,425,000 1,425,000 938,000 938,000
<FN>
<F1>
(1) SFAS No. 107 defines the estimated fair value of deposits with no stated
maturity, which includes demand deposits, money market and other savings
accounts, to be equal to the amount payable on demand. Therefore, the
balances of the Company's $153.0 million and $166.1 million of such
deposits at December 31, 1997, respectively, are not included in this
table.
</FN>
</TABLE>
NOTES TO CONSOLIDATED AMERICAN BANCORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENTS-CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
NOTE N-STOCKHOLDERS' EQUITY
The Company has authorized 200,000 shares of $100 par value preferred stock
issuable in series. No shares
19
<PAGE>
of preferred stock were issued or outstanding at December 31, 1997 and 1996.
NOTE O-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 P-INCOME TAXES
Total income tax provision (benefit) for the three years ended December
31, 1997 was allocated as follows:
1997 1996 1995
----------- ------------ ---------
Income from operations $2,577,467 $2,102,367 $1,757,823
Shareholders' equity for the tax effect
of net unrealized gain (loss) on
securities available for sale 225,560 80,090 (38,349)
---------- ---------- -----------
$2,803,027 $2,182,457 $1,719,474
========== ========== ===========
The composition of the provision for income taxes from operations for
the three years ended December 31, 1997 follows:
1997 1996 1995
---------- ---------- ----------
Federal Income Taxes
$1,216,425 $2,260,156 $
Deferred 38,551 67,382 301,680
---------- ---------- ----------
Provision for federal income taxes 2,298,707 1,844,386 1,518,105
State 278,760 257,981 239,718
---------- ---------- ----------
Provision for income taxes $2,577,467 $2,102,367 $1,757,823
========== ========== ==========
NOTES TO CONSOLIDATED AMERICAN BANCORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENTS-CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
The following is a reconciliation of federal income tax expense to the amount
computed at the statutory rate:
1997 1996 1995
---------- ---------- ----------
Pre-tax income at statutory rate $2,409,334 $1,961,237 $1,635,397
20
<PAGE>
Increase (decrease) resulting from:
Tax exempt income (25,487) (38,784) (45,476)
Dividends received deduction (30,940) (30,940) (30,940)
Amortization of goodwill and
other intangibles 40,579 40,586 40,627
State tax provision (net of
federal tax benefit) (94,777) (87,713) (81,503)
------------- ----------- -----------
Provision for federal income taxes $2,298,709 $1,844,386 $1,518,105
=========== =========== ===========
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities as of December 31, 1997, 1996
and 1995 consist of the following:
1997 1996 1995
---------- ---------- ----------
Deferred tax assets:
Loan loss reserves $746,960 $764,711 $772,573
Equity securities 236,980 236,980 236,980
Investment securities -- -- 38,349
Pension plan 199,753 239,369 242,799
Real estate owned 10,597 7,818 6,967
Other 163,554 40,914 --
---------- ---------- ----------
1,357,844 1,289,792 1,297,668
Deferred tax liabilities:
Fixed assets 252,384 201,467 169,040
Cash basis accounting 22,012 99,623 125,640
Mortgage servicing rights 267,941 134,644 --
Investment securities 267,301 41,741 --
Other -- -- 43,199
---------- ---------- ----------
809,638 477,475 337,879
Net deferred tax asset
before valuation allowance 548,206 812,317 959,789
Valuation allowance 236,980 236,980 236,980
---------- ---------- ----------
Net deferred tax asset $311,226 $575,337 $722,809
========== ========== ==========
The deferred tax assets recorded under SFAS No. 109 are 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. Since no net deferred tax benefit
was recorded on the initial writedown of the asset, due to its capital nature,
no tax expense or benefit was recorded in 1995 on its recovery.
NOTES TO CONSOLIDATED AMERICAN BANCORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENTS-CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
NOTE Q-OTHER EXPENSES
Amounts included in other expenses are as follows for the years ended
December 31, 1997, 1996 and 1995:
21
<PAGE>
1997 1996 1995
---------- ---------- ----------
Advertising $302,031 $398,101 $245,096
Credit card expenses 307,047 320,868 315,340
Data processing 467,963 362,593 389,533
FDIC assessment 171,218 428,724 429,066
Postage 276,092 340,696 312,186
Professional fees 601,638 588,320 640,832
Stationery and supplies 368,439 519,435 380,237
Taxes other than on income 375,516 405,673 356,259
Other (each less than
1% of income) 1,931,806 1,498,324 1,587,621
---------- ---------- ----------
$4,801,750 $4,862,734 $4,656,170
========== ========== ==========
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, 1997 and 1996:
<TABLE>
<CAPTION>
Actuarial present value of accumulated benefits obligation:
<S> <C> <C>
1997 1996
Vested....................................................................... $ 917,286 $ 1,051,701
Non-vested............................................................ - -
-----------------------------------
$ 917,286 $ 1,051,701
========== ===========
Plan assets at fair value; primarily marketable securities........................ $ 744,832 $ 802,224
Projected benefit obligation..................................................... 917,286 1,051,701
----------- ----------
Projected benefit obligation in excess of plan assets............................ (172,454) (249,477)
Unrecognized net transition asset........................................... - -
Prior service cost not yet recognized in net periodic pension cost.......... - -
Unrecognized net loss...................................................... - -
-----------------------------------
Accrued pension costs........................................................ $ (172,454) $ (249,477)
========== ===========
</TABLE>
NOTES TO CONSOLIDATED AMERICAN BANCORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENTS-CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
Net pension costs, for the three years ended December 31, 1997, included the
following components:
1997 1996 1995
-------- -------- --------
Service cost - benefits earned during
the period $ - $ - $ -
Interest cost on projected benefit
obligation 74,306 65,620 66,253
Actual return on plan assets (28,443) (44,141) (41,162)
Net amortization and deferral (30,258) (47,068) (39,854)
--------- -------- --------
Net periodic pension cost (benefit) $15,605 $(25,589) $(14,763)
======== ======== ========
22
<PAGE>
The discount rate used in determining the projected benefit obligation in
1997, 1996 and 1995 was 6.50%, 7.25% and 6.25%, respectively. The expected
long-term rate of return on plan assets for each of the years ending in 1997,
1996 and 1995 was 7.00%.
In 1993, due to the continuation of a claim discussed below, the Company
notified the Plan participants that the planned termination of the Plan was
rescinded; however, an 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, 1997 due to an additional claim made against the Plan
during 1996.
A claim was made against the Plan during 1992 by a former employee (the
"Claimant"), alleging additional benefits due him under the Plan and litigation
between the parties ensued. Prior to the Court's final ruling, 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,
the Plan Administrator disbursed $141,135 to the Claimant during 1995 to settle
the claim and approximately $215,000 in 1996 to other affected Plan participants
as determined based on the application of the Court's final ruling. No amount of
the disbursements were recognized in the 1996 or 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. Management believes appropriate liabilities have
been established to recognize the application of the Court's decision and
expects to incur no further expense for this situation.
An additional claim was made against the Plan during 1996 by former
employees alleging further additional benefits due them under the Plan. The
Administrator of the Plan denied the claim and the claimants' subsequent appeal
and believes the former employees have no further rights to appeal the denial of
the claim. The Company does not expect that any additional provision need be
made in the consolidated financial statements for this matter.
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
NOTES TO CONSOLIDATED AMERICAN BANCORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENTS-CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
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, 1997, 1996 and 1995 amounted to $76,000, $68,000 and
$67,000, respectively.
NOTE S - REGULATORY CAPITAL REQUIREMENTS
The Company and WNB are subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain actions by regulators that, if undertaken,
could have a direct material effect on the Company's financial statements.
23
<PAGE>
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the entities must meet specific capital guidelines that
involve quantitative measures of their assets, liabilities and certain
off-balance sheet items as calculated under regulatory accounting practices. The
entities' capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings and other factors.
Tier I and Total capital are expressed as a percentage of risk-adjusted
assets which include various credit risk-weighted percentages of on-balance
sheet exposures. The Leverage capital ratio evaluates capital adequacy on the
basis of the ratio of Tier I capital to quarterly average total assets as
reported on the Company's regulatory financial statements, net of the loan loss
reserve, goodwill and certain other intangibles. To be categorized
well-capitalized, the Company's banking subsidiary must maintain minimum Tier I,
Total and Leverage capital ratios of 6%, 10% and 5%, respectively. At December
31, 1997, the Company and its subsidiary bank, WNB, exceeded the regulatory
minimums and met the regulatory definition of well capitalized.
The following table summarizes the Company's and WNB's actual consolidated
capital amounts and ratios as of December 31, 1997 and 1996.
<TABLE>
<CAPTION>
COMPANY WNB
WELL- DECEMBER 31,
MINIMUM CAPITALIZED 1997 1996 1997 1996
------- ----------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Tier I Capital.................... $ 31,185 $ 27,872 $ 31,907 $ 26,885
Total Qualifying Capital........... $ 34,469 $ 31,190 $ 35,191 $ 30,188
Risk-Adjusted Assets............... $278,240 $265,159 $276,306 $263,986
Capital Basis
Ratios
Tier I Capital Ratio............ 4.00% 6.00% 11.21% 10.51% 11.55% 10.18%
Total Capital Ratio.............. 8.00 10.00 12.39 11.76 12.74 11.44
Leverage Capital Ratio........... 3.00 5.00 6.53 6.49 6.79 6.32
</TABLE>
24
<PAGE>
NOTES TO CONSOLIDATED AMERICAN BANCORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENTS-CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
NOTE T-PARENT COMPANY CONDENSED FINANCIAL INFORMATION
AMERICAN BANCORPORATION (PARENT COMPANY ONLY)
BALANCE SHEET
December 31, 1997 and 1996 1997 1996
----------- -----------
ASSETS
Cash and short-term investments $36,534 $1,275,791
Due from subsidiaries 2,731 70,795
Investment in subsidiaries
Banking 34,420,693 29,405,758
Non-banking 1,241,776 1,207,863
----------- -----------
35,662,469 30,613,621
Premises and equipment - net 12,999 17,205
Other assets 298,727 180,220
----------- -----------
Total Assets $36,013,460 $32,157,632
=========== ===========
LIABILITIES
Due to subsidiaries $369,183 $392,689
Other liabilities 551,381 442,249
Notes payable 1,399,050 900,000
----------- -----------
Total Liabilities 2,319,614 1,734,938
STOCKHOLDERS' EQUITY 33,693,846 30,422,694
----------- -----------
Total Liabilities and Stockholders' Equity $36,013,460 $32,157,632
=========== ===========
STATEMENT OF INCOME (PARENT COMPANY) Years ended December 31, 1997, 1996 and
1995
1997 1996 1995
----------- ----------- -----------
INCOME
Dividends from banking
subsidiaries $ -- $1,250,000 $2,000,000
Dividends from non-banking
subsidiaries 100,000 100,000 --
Reimbursement from subsidiaries 355,000 324,000 357,984
Interest income 16,747 45,464 25,028
Other income 521 814 443
----------- ----------- -----------
Total income 472,268 1,720,278 2,383,455
EXPENSE
Interest expense 84,842 82,386 96,363
Other expenses 801,955 690,164 589,176
----------- ----------- -----------
Total expense 886,797 772,550 685,539
----------- ----------- -----------
(414,529) 947,728 1,697,916
Credit for income taxes (156,442) (135,797) (86,863)
----------- ----------- -----------
(258,087) 1,083,525 1,784,779
Equity in undistributed net
income of subsidiaries 4,766,894 2,582,453 1,267,388
----------- ----------- -----------
NET INCOME $4,508,807 $3,665,978 $3,052,167
=========== =========== ===========
NOTES TO CONSOLIDATED AMERICAN BANCORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENTS-CONTINUED
25
<PAGE>
DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS (PARENT COMPANY)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<S> <C> <C> <C>
1997 1996 1995
--------------- -------------- ------------
Operating Activities:
Net income........................................................... $ 4,508,807 $ 3,665,978 $ 3,052,167
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization.................................... 50,503 51,455 51,803
Equity in undistributed net income of subsidiaries................ (4,766,894) (2,582,453) (1,267,388)
Net (increase) decrease in due from subsidiaries................. 68,064 (14,367) 50,827
Net change in other assets and other liabilities................ (32,881) 60,753 106,762
--------------- -------------- -------------
Net cash provided (used) by operating activities............. (172,401) 1,181,366 1,994,171
Investing Activities:
Purchase of premises and equipment.............................. (1,069) (3,949) (10,439)
Net change in investment in subsidiaries.................... - - 432,000
------------------- ------------------- -------------
Net cash provided (used) by investing activities............ (1,069) (3,949) 421,561
Financing Activities:
Cash dividends paid............................................... (1,564,837) (1,330,113) (978,023)
Net increase (decrease) in notes payable.......................... 499,050 (100,000) (1,000,000)
------------- ------------- ------------
Net cash applied to financing activities...................... (1,065,787) (1,430,113) (1,978,023)
------------ ------------ ------------
Net increase (decrease) in Cash and Cash Equivalents................. (1,239,257) (252,696) 437,709
Cash and Cash Equivalents Beginning Balance.......................... 1,275,791 1,528,487 1,090,778
------------ ------------ ------------
Cash and Cash Equivalents Ending Balance............................ $ 36,534 $ 1,275,791 $ 1,528,487
============= =========== ===========
Cash paid during the year for:
Interest........................................................... $ 84,842 $ 82,386 $ 96,363
<FN>
<F1>
The Parent Company paid no income taxes during 1997, 1996 or 1995.
</FN>
</TABLE>
NOTES TO CONSOLIDATED AMERICAN BANCORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENTS-CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
26
<PAGE>
NOTE U-SUMMARIZED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarters Ended (In thousands, except per share)
1997 MAR 31 JUNE 30 SEPT 30 DEC 31 YEAR
------ ------ ------ ------ -------
Interest income $8,662 $8,671 $9,007 $9,199 $35,539
Interest expense 4,358 4,374 4,647 4,899 18,278
------ ------ ------ ------ -------
Net interest income 4,304 4,297 4,360 4,300 17,261
Provision for loan losses -- -- -- -- --
------- ------ ------- ------- -------
Net interest income after
provision for loan losses 4,304 4,297 4,360 4,300 17,261
Other operating income 589 703 770 864 2,926
Other operating expense 3,254 3,273 3,314 3,260 13,101
------ ------ ------ ------ -------
Income before income taxes 1,639 1,727 1,816 1,904 7,086
Provision for income taxes 609 641 651 676 2,577
------ ------ ------ ------ -------
Net income $1,030 $1,086 $1,165 $1,228 $4,509
====== ====== ====== ====== =======
Basic earnings per share $0.33 $0.35 $0.37 $0.39 $1.44
1996
Interest income $6,875 $7,104 $7,890 $8,016 $29,885
Interest expense 3,018 3,256 3,694 3,834 13,802
------ ------ ------ ------ -------
Net interest income 3,857 3,848 4,196 4,182 16,083
Provision for loan losses -- -- -- -- --
------ ------ ------ ------ -------
Net interest income after
provision for loan losses 3,857 3,848 4,196 4,182 16,083
Other operating income 499 639 683 571 2,392
Other operating expense 2,982 3,085 3,394 3,246 12,707
------ ------ ------ ------ -------
Income before income taxes 1,374 1,402 1,485 1,507 5,768
Provision for income taxes 503 511 552 536 2,102
------ ------ ------ ------ -------
Net income $871 $891 $933 $971 $3,666
====== ====== ====== ====== =======
Basic earnings per share $0.28 $0.28 $0.30 $0.31 $1.17
27
<PAGE>
KPMG PEAT MARWICK LLP
One Mellon Bank Center
Pittsburgh, PA 15219
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, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the years in the three-year period ended December 31, 1997. 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, 1997 and 1996, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1997, 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. 122, "Accounting for Mortgage Servicing
Rights", effective January 1, 1996.
Pittsburgh, Pennsylvania
March 26, 1997
|X||X||X||X| Member Firm of
Klynveld Peat Marwick Goerdeler
AMERICAN BANCORPORATION AND SUBSIDIARIES
FIVE YEAR SELECTED FINANCIAL DATA
28
<PAGE>
<TABLE>
<CAPTION>
($ in thousands, except per share data)
CONSOLIDATED STATEMENT OF INCOME
<S> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED 1997 1996 1995 1994 1993
----------- ---------- --------- --------- ---------
Interest income
Interest and fees on loans......................... $ 24,891 $ 22,500 $ 21,929 $ 14,902 $ 14,590
Interest on securities............................. 10,300 6,967 4,197 4,721 5,513
Interest on other short-term investments......... 348 418 370 512 467
------------ ----------- ------------ ------------ ------------
35,539 29,885 26,496 20,135 20,570
Interest expense
Interest on deposits and borrowed funds........... 18,278 13,802 11,171 7,189 8,009
---------- --------- ----------- ----------- -----------
Net interest income........................... 17,261 16,083 15,325 12,946 12,561
Provision for loan losses..................... - - 105 215 844
--------------- ------------------------- ------------ ------------
Net interest income
after provision for loan losses.............. 17,261 16,083 15,220 12,731 11,717
Service charges and other income.................. 2,926 2,392 1,680 1,062 1,449
Other expenses
Salaries and employee benefits................... 5,910 5,590 5,319 4,933 4,428
Other operating expenses......................... 7,191 7,117 6,771 6,282 5,969
----------- ---------- ----------- ----------- -----------
13,101 12,707 12,090 11,215 10,397
---------- --------- ---------- ---------- ----------
Income before income taxes........................ 7,086 5,768 4,810 2,578 2,769
Provision for income taxes....................... 2,577 2,102 1,758 882 999
----------- ----------- --------- ---------- -----------
Net income .................................... $ 4,509 $ 3,666 $ 3,052 $ 1,696 $ 1,770
========== ========= ========== ========== ==========
Per common share*:
Basic earnings per share...................... $ 1.44 $ 1.17 $ 0.98 $ 0.56 $ 0.59
Dividends..................................... $ 0.50 $ 0.45 $ 0.35 $ 0.25 $ 0.25
Average common shares outstanding (000's)......... 3,130 3,130 3,130 3,013 3,013
CONSOLIDATED BALANCE SHEET DATA
Balance at year end
Total Assets......................................... $484,606 $461,632 $353,995 $338,116 $276,390
Earning Assets...................................... 458,282 432,793 330,136 314,463 256,967
Loans............................................... 286,691 271,450 250,372 228,866 150,523
Deposits............................................ 355,734 319,811 292,665 292,341 248,040
Short-term borrowings.............................. 87,574 104,096 27,523 13,398 1,609
Notes payable and other long-term debt........... 1,425 938 1,047 2,000 -
Stockholders' equity............................... 33,694 30,423 28,012 26,193 24,158
Average Balances for years ended
Total Assets........................................ 468,163 400,866 348,655 284,845 278,669
Earning Assets...................................... 439,549 373,874 323,750 263,178 257,455
Loans............................................... 281,738 254,397 243,043 164,405 153,277
Deposits............................................ 337,684 310,746 293,415 252,916 250,504
Short-term borrowings.............................. 90,676 54,644 21,736 3,942 1,948
Notes payable and other long-term debt............ 1,055 1,033 1,091 167 -
Stockholders' equity............................... 31,866 29,045 27,248 25,188 23,778
CONSOLIDATED FINANCIAL RATIOS (as a Percent)
Net income to average assets.................... 0.96% 0.91% 0.88% 0.60% 0.64%
Net income to average equity...................... 14.15 12.62 11.20 6.73 7.45
Dividends to net income........................... 34.71 38.42 35.89 44.84 42.55
Average equity to average assets................. 6.81 7.25 7.82 8.84 8.53
Average debt to average equity................... 3.31 3.56 4.00 0.66 0.00
<FN>
<F1>
*(Per share data has been retroactively restated for two for one stock splits
which became effective March 16, 1994 and October 23, 1997.)
</FN>
</TABLE>
<TABLE>
<CAPTION>
AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES
29
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
($ in thousands) 1997 1996 1995
--------------------------- ----------------------------- ---------------------------
AVERAGE REVENUE/ YIELD/ Average Revenue/ Yield/ Average Revenue/ Yield/
BALANCE EXPENSE RATE Balance Expense Rate Balance Expense Rate
-------- -------- ------- -------- --------- --------- --------- -------- -------
INTEREST EARNING ASSETS
Loans
Commercial.......................... $ 91,729 $ 8,560 9.33% $ 73,366 $ 6,723 9.16% $ 59,497 $ 5,839 9.81%
Real estate......................... 141,642 11,495 8.12 128,361 10,533 8.21 127,107 10,457 8.23
Installment-net.................... 48,367 4,259 8.81 52,670 4,734 8.99 56,439 5,215 9.24
Fees.......................... - 577 - - 510 - - 418 -
-------- -------- --------- -------- --------- -------
Total loans........................ 281,738 24,891 8.83 254,397 22,500 8.84 243,043 21,929 9.02
Investment securities
Taxable............................. 153,658 10,210 6.64 111,530 6,839 6.13 73,644 4,052 5.50
Tax-exempt........................ 1,083 90 8.35 1,903 128 6.72 1,979 145 7.29
----------------- --------- -------- --------- --------
Total investment securities........ 154,741 10,300 6.66 113,433 6,967 6.14 75,623 4,197 5.55
Other short-term investments....... 3,070 348 11.33 6,044 418 6.91 5,084 370 7.28
-------- -------- ---------- -------- ----------- --------
Total earning assets............... 439,549 35,539 8.09 373,874 29,885 7.99 323,750 26,496 8.18
Non-interest Earning Assets
Cash and due from banks............. 11,164 10,592 10,823
Premises and equipment - net........ 10,053 9,091 8,752
Other assets........................ 7,397 7,309 5,330
---------- ---------- ----------
28,614 26,992 24,905
---------- ---------- ----------
TOTAL ASSETS...................... $468,163 $400,866 $348,655
======== ======== ========
INTEREST BEARING LIABILITIES
Deposits
NOW, Savings and MMDA............... $123,879 $ 3,315 2.68% $129,408 $ 3,414 2.64% $130,741 $ 3,491 2.67%
Time............................... 180,561 9,869 5.47 148,545 7,517 5.06 130,742 6,307 4.82
-------- -------- -------- ------- -------- --------
Total deposits................... 304,440 13,184 4.33 277,953 10,931 3.93 261,483 9,798 3.75
Short-term borrowings.............. 90,676 5,006 5.52 54,644 2,782 5.09 21,736 1,275 5.87
Notes payable and
other long-term debt ........... 1,055 88 8.30 1,033 89 8.59 1,091 98 8.97
--------- -------- --------- ------- --------- ------
Total interest
bearing liabilities............... 396,171 18,278 4.62 333,630 13,802 4.14 284,310 11,171 3.93
Non-interest bearing
Demand non-interest bearing....... 33,244 32,793 31,932
Other liabilities................ 6,882 5,398 5,165
----------- ----------- -----------
40,126 38,191 37,097
Stockholders' Equity................ 31,866 29,045 27,248
---------- ---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY............. $468,163 $400,866 $348,655
======== ======== ========
Net interest income........ $17,261 $16,083 $15,325
======= ======= =======
Interest rate spread...... 3.47% 3.85% 4.25%
==== ==== ====
MARGIN ANALYSIS
(as a % of Earning Assets)
Interest income................ 8.09% 7.99% 8.18%
Interest expense............... 4.16 3.69 3.45
---- ---- ----
Net interest income............ 3.93% 4.30% 4.73%
==== ==== ====
<FN>
<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.
</FN>
</TABLE>
MANAGEMENT'S DISCUSSION AND AMERICAN BANCORPORATION AND SUBSIDIARIES
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DECEMBER 31, 1997, 1996 AND 1995
INTRODUCTION
31
<PAGE>
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 financial performance and management's perception
of significant events.
When used in filings by the Company with the Securities and Exchange
Commission, in the Company's press releases or other public or shareholder
communications, or in oral statements made with the approval of an authorized
executive officer, the words or phrases "will likely result", "are expected to",
"will continue", "is anticipated", "estimate", "project" or similar expressions
are intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
certain risks and uncertainties including changes in economic conditions in the
Company's market area, changes in policies by regulatory agencies, fluctuations
in interest rates, demand for loans in the Company's market area and competition
that could cause actual results to differ materially from historical earnings
and those presently anticipated or projected. The Company wishes to caution
readers not to place undue reliance on any such forward- looking statements,
which speak only as of the date made. The Company wishes to advise readers that
the factors listed above could affect the Company's financial performance and
could cause the Company's actual results for future periods to differ materially
from any opinions or statements expressed with respect to future periods in any
current statements.
SUMMARY
American Bancorporation recognized net income of $4,509,000 or $1.44 basic
earnings per share, in 1997, compared to net income of $3,666,000 or $1.17 basic
earnings per share, in 1996. The 23.0% increase in net income was primarily the
result of increases in net interest income and other income which were partially
offset by an increase in other expenses. Net income for the year ended December
31, 1995 totalled $3,052,000 or $0.98 basic earnings per share. Return on
average assets and return on average equity were 0.96% and 14.15%, respectively,
for the year ended December 31, 1997 compared to 0.91% and 12.62%, respectively,
for the year ended December 31, 1996 and 0.88% and 11.20%, respectively for the
year ended December 31, 1995.
Total assets at December 31, 1997 increased to $484,606,000 from
$461,632,000 at December 31, 1996, an increase of 5.0%. Deposits increased to
$355,734,000 at December 31, 1997 from $319,811,000 at December 31, 1996, an
increase of 11.2%. Total stockholders' equity was $33,694,000 at December 31,
1997 which represents a 10.8% increase over total stockholders' equity of
$30,423,000 at December 31, 1996.
31
<PAGE>
MANAGEMENT'S DISCUSSION AND AMERICAN BANCORPORATION AND SUBSIDIARIES
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
RESULTS OF OPERATIONS
The discussion and analysis of the results of operations is focused on the
three years ended December 31, 1997 and uses a format of consecutive year
comparisons. Volume and rate variances contributing to change in net interest
income are analyzed using adjusted month end average balances. Tax equivalency
is not imputed in the calculation of yields.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
($ in thousands)
Years ended December 31 CHANGE
1997 1996 1995 1997 - 1996 1996 - 1995
-------- -------- -------- -------------------- ----------------------
Amount % Amount %
Interest income.......................... $ 35,539 $ 29,885 $ 26,496 $ 5,654 18.92% $ 3,389 12.79%
Interest expense........................ 18,278 13,802 11,171 4,476 32.43 2,631 23.55
---------- ---------- ---------- --------- ---------
Net interest income.................... 17,261 16,083 15,325 1,178 7.32 758 4.95
Provision for loan losses.......... - - 105 - - (105) (100.00)
--------- ----------- ----------- ----------- ----------
Net interest income after
provision for loan losses............. 17,261 16,083 15,220 1,178 7.32 863 5.67
Other operating income................. 2,926 2,392 1,680 534 22.32 712 42.36
Other operating expense................. 13,101 12,707 12,090 394 3.10 617 5.10
---------- ---------- ---------- ---------- ----------
Income before income taxes............. $ 7,086 $ 5,768 $ 4,810 $ 1,318 22.85% $ 958 19.92%
AVERAGE BALANCE
Earning Assets........................... $439,549 $373,874 $323,750 $65,675 17.57% $50,124 15.48%
Interest Bearing Liabilities............ 396,171 333,630 284,310 62,541 18.75 49,320 17.35
YIELD/RATE
Earning Assets...................... 8.09% 7.99% 8.18%
Interest Bearing Liabilities......... 4.62 4.14 3.93
Interest Rate Spread................. 3.47 3.85 4.25
Net Interest Margin.................. 3.93 4.30 4.73
</TABLE>
MANAGEMENT'S DISCUSSION AND AMERICAN BANCORPORATION AND SUBSIDIARIES
ANALYSIS OF FINANCIAL CONDITION
32
<PAGE>
AND RESULTS OF OPERATIONS - CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
VOLUME AND RATE VARIANCES
1997 VS 1996 1996 vs 1995
INCREASE/ (DECREASE) DUE TO Increase/ (decrease) due to
($ in thousands) VOLUME RATE NET Volume Rate Net
------ ----- ------- ------- ----- -------
INTEREST INCOME
Loans $2,416 $ (25) $2,391 $1,010 $(439) $571
Investment securities
Taxable 2,760 611 3,371 2,280 507 2,787
Tax-exempt (64) 26 (38) (6) (11) (17)
Other short-term
investments (263) 193 (70) 67 (19) 48
------- ----- ------- ------- ----- -------
Total interest income 4,849 805 5,654 3,351 38 3,389
INTEREST EXPENSE
NOW, Savings and MMDA (147) 49 (98) (36) (41) (77)
Time 1,714 637 2,351 890 320 1,210
Short-term borrowings 1,972 252 2,224 1,696 (189) 1,507
Long-term debt 2 (3) (1) (5) (4) (9)
------- ----- ------- ------- ----- -------
Total interest expense 3,541 935 4,476 2,545 86 2,631
------- ----- ------- ------- ----- -------
Net Interest Income $1,308 $(130) $1,178 $806 $(48) $758
======= ===== ======= ======= ===== =======
The rate-volume variance has been allocated in proportion to the absolute
value attributed to each change.
YEAR ENDED DECEMBER 31, 1997
COMPARED TO YEAR ENDED DECEMBER 31, 1996
NET INCOME. Net income for the year ended December 31, 1997 amounted to
$4,509,000 or $1.44 basic earnings per share, compared to net income of
$3,666,000 or $1.17 basic earnings per share for the year ended December 31,
1996. The increase was the result of increases in net interest income and other
income which was partially offset by an increase in other expenses.
NET INTEREST INCOME. Net interest income represents the amount by which
interest income on interest-earning assets, including investment securities and
loans, exceeds interest paid on interest-bearing liabilities, including deposits
and other borrowed funds. Net interest income is the principal source of the
Company's earnings. Interest rate fluctuations, as well as changes in the amount
and type of interest earning assets and liabilities, combine to effect net
interest income.
Net interest income before provision for loan losses for the year ended
December 31, 1997 amounted to $17,261,000, an increase of $1,178,000 or 7.32%,
compared to the year ended December 31, 1996. The increase resulted primarily
from a $65,675,000 or 17.6% increase in average interest earning assets, which
was partially offset by a 37 basis point decrease in the Company's margin.
Total interest income for the year ended December 31, 1997 amounted to
$35,539,000, an increase of $5,654,000 or 18.9%, compared to the year ended
December 31, 1996. The increase resulted primarily from the increase in the
average interest earning assets and a 10 basis point increase in the average
yield on earning assets. Average loans outstanding increased $27,341,000 or
10.7% with average commercial loans increasing $18,363,000 or 25.0% and average
real estate loans increased $13,281,000 MANAGEMENT'S DISCUSSION AND AMERICAN
BANCORPORATION AND SUBSIDIARIES ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - CONTINUED DECEMBER 31, 1997, 1996 AND 1995
33
<PAGE>
or 10.3%, primarily due to increased demand. Average consumer installment loans
decreased $4,303,000 or 8.2%. The average yield on loans decreased from 8.84% in
1996 to 8.83% in 1997. Average investment securities and other short-term
investments outstanding increased $38,335,000 or 32.1% and the average yield
increased from 6.18% in 1996 to 6.75% in 1997. The increase in investment
securities is primarily due to growth strategies utilizing increases in both
FHLB advances and time deposits. These strategies leveraged the Company's
capital thereby enhancing its return on equity and earnings.
Total interest expense for the year ended December 31, 1997 amounted to
$18,278,000, an increase of $4,476,000 or 32.4%, compared to the year ended
December 31, 1996. The increase resulted primarily from a $62,540,000 or 18.7%
increase in average interest bearing liabilities and a 48 basis point increase
in interest rates paid on such liabilities. Average NOW, money market and
savings accounts decreased $5,528,000 or 4.3%. Average time deposits increased
$32,016,000 or 21.6%, primarily the result of increased marketing efforts.
Average non-interest bearing accounts increased $452,000 or 1.4% and represented
9.8% of average total deposits for the year ended December 31, 1997. Average
short-term borrowings increased $36,031,000 or 65.9% due to the Company's
leveraging strategy. The average rate paid on short-term borrowings increased
from 5.09% in 1996 to 5.52% in 1997.
PROVISION FOR LOAN LOSSES. There was no loan loss provision for the years
ended December 31, 1997 or 1996. Net loans charged-off totalled $279,000 in
1997, compared to net loans charged-off of $290,000 in 1996.
OTHER INCOME. Other income for the year ended December 31, 1997 amounted to
$2,926,000, an increase of $534,000 or 22.3%, compared to the year ended
December 31, 1996. Net gains on sale of loans increased $792,000 or 155.0%, the
result of increased residential mortgage loans generated for sale to secondary
markets by the Company's mortgage banking operations. Net gains on sale of
investment securities totalled $34,000 in 1997 compared to net losses on sale of
investment securities totalling $1,000 in 1996. Other miscellaneous income
decreased by $159,000 or 17.5%.
OTHER EXPENSE. Total other expense for the year ended December 31, 1997
amounted to $13,101,000, an increase of $394,000 or 3.1%, compared to the year
ended December 31, 1996. Salaries and employee benefits increased $321,000, or
5.7%. Occupancy and equipment expense increased $134,000 or 6.0%. Other
(miscellaneous) expenses decreased $61,000 or 1.3%. Included in 1996 results was
a one-time charge of $245,000 as a result of Federal legislation enacted to
recapitalize the Savings Association Insurance Fund ("SAIF"). The one-time
assessment applied to approximately $46 million in thrift deposits the Company
acquired in recent years. Without the one-time SAIF assessment in 1996, total
other expenses increased $639,000 or 5.1% and other (miscellaneous) expense
increased $184,000 or 4.0% in 1997. The increase in salaries and employee
benefits, occupancy and equipment expense and other (miscellaneous) expense are
primarily due to increased costs associated with the mortgage banking
operations.
MANAGEMENT'S DISCUSSION AND AMERICAN BANCORPORATION AND SUBSIDIARIES
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
PROVISION FOR INCOME TAXES. The provision for income taxes for the year ended
December 31, 1997
34
<PAGE>
was $2,577,000, compared to $2,102,000 for the year ended 1996. The increase was
due to the increase in the Company's pre-tax income.
YEAR ENDED DECEMBER 31, 1996
COMPARED TO YEAR ENDED DECEMBER 31, 1995
NET INCOME. Net income for the year ended December 31, 1996 amounted to
$3,666,000 or $1.17 basic earnings per share, compared to net income of
$3,052,000 or $0.98 basic earnings per share for the year ended December 31,
1995. 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, 1996 amounted to $16,083,000, an increase of
$758,000 or 4.9%, compared to the year ended December 31, 1995. The increase
resulted primarily from a $50,124,000 or 15.5% increase in average interest
earning assets, which was partially offset by a 43 basis point decrease in the
Company's net interest margin.
Total interest income for the year ended December 31, 1996 amounted to
$29,885,000, an increase of $3,389,000 or 12.8% compared to the year ended
December 31, 1995. The increase resulted primarily from the increase in average
interest earning assets which was partially offset by a 19 basis point decrease
in the average yield on earning assets. Average loans outstanding increased
$11,354,000 or 4.7% with average commercial loans increasing $13,869,000 or
23.3% and average real estate loans increased $1,254,000 or 0.9% while average
consumer installment loans decreased $3,769,000 or 6.7%. The average yield on
loans decreased from 9.02% in 1995 to 8.84% in 1996. Average investment
securities and other short-term investments outstanding increased $38,770,000 or
48.0% and the average yield increased from 5.66% in 1995 to 6.18% in 1996. The
increase is investment securities is primarily due to growth strategies
utilizing increases in both FHLB advances and time deposits. These strategies
leveraged the Company's capital thereby enhancing its return on equity and
earnings.
Total interest expense for the year ended December 31, 1996 amounted to
$13,802,000, an increase of $2,631,000 or 23.6%, compared to the year ended
December 31, 1995. The increase resulted primarily from the 17.3% increase in
average interest bearing liabilities and a 21 basis point increase in interest
rates paid on such liabilities. Average NOW, money market and savings accounts
decreased $1,333,000 or 1.0%. Average time deposits increased $17,803,000 or
13.6%. Average non-interest bearing accounts increased $861,000 or 2.7% and
represented 10.6% of average total deposits for the year ended December 31,
1996. Average borrowings increased $32,850,000 or 143.9%, due to the Company's
leveraging strategy. The average rate paid on borrowings decreased from 6.02% in
1995 to 5.16% in 1996.
MANAGEMENT'S DISCUSSION AND AMERICAN BANCORPORATION AND SUBSIDIARIES
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
PROVISION FOR LOAN LOSSES. There was no loan loss provision for the year ended
December 31,
35
<PAGE>
1996, compared to $105,000 for the year ended December 31, 1995. Net loans
charged-off were $290,000 in 1996, compared to net loans recovered of $12,000 in
1995.
OTHER INCOME. Other income for the year ended December 31, 1996 amounted to
$2,392,000, an increase of $712,000 or 42.4%, compared to the year ended
December 31, 1995. Net gains on sale of loans increased $418,000 or 448.9%,
primarily as a result of the implementation of SFAS No. 122 in 1996. Net losses
on sale of investment securities totalled $1,000 in 1996 compared to net gains
on sale of investment securities totalling $3,000 in 1995. Other (miscellaneous)
income increased by $181,000 or 24.8%.
OTHER EXPENSE. Total other expense for the year ended December 31, 1996
amounted to $12,707,000, an increase of $616,000 or 5.1%, compared to the year
ended December 31, 1995. Salaries and employee benefits increased $271,000, or
5.1%. Occupancy and equipment expense increased $139,000 or 6.6%. Other
(miscellaneous) expenses increased $206,000 or 4.4%, including a one-time charge
of $245,000 as a result of Federal legislation enacted to recapitalize the SAIF.
The one-time assessment applied to approximately $46 million in thrift deposits
the Company acquired in recent years. Without the one-time SAIF assessment,
total other expenses were $12,462,000 in 1996, an increase of $371,000 or 3.1%,
while other (miscellaneous) expenses were $4,618,000, a decrease of $38,000 or
0.8% compared to 1995.
PROVISION FOR INCOME TAXES. The provision for income taxes for the year
ended December 31, 1996 was $2,102,000, compared to $1,758,000 for the year
ended 1995. The increase was due to the increase in the Company's pre-tax
income.
36
<PAGE>
MANAGEMENT'S DISCUSSION AND AMERICAN BANCORPORATION AND SUBSIDIARIES
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
FINANCIAL CONDITION
LOANS
The Company's primary earning assets are loans, representing 59.2% of the
total assets at December 31, 1997. Loans outstanding were $286,691,000 at
December 31, 1997, an increase of $15,241,000 or 5.6% between 1996 and 1997. The
increase was primarily due to improved demand in the commercial and real estate
lending segments of the portfolio. Loans increased $78,343,000 or 52.0% between
1993 and 1994, primarily due to loans acquired through branch acquisitions. At
December 31, 1997 there were no concentrations of loans in any particular
industry or in a group of related industries exceeding 10% of total loans. The
table below sets forth loans by category at December 31, 1993 through 1997.
TYPES OF LOANS
($ in thousands) 1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
Commercial $92,295 $82,792 $63,082 $51,818 $42,488
Real estate construction 1,024 1,816 1,869 1,112 1,751
Real estate mortgage 144,179 136,488 128,709 119,629 53,417
Installment 49,193 50,353 56,712 56,307 52,867
-------- -------- -------- -------- --------
$286,691 $271,449 $250,372 $228,866 $150,523
======== ======== ======== ======== ========
It is the policy of the Company to review each prospective credit in order
to determine an adequate level of security or collateral to obtain prior to
making the loan. The type of collateral will vary and ranges from liquid assets
to real estate. Commercial business loans are made based on the financial
ability of the borrower to repay the obligation and the appraised value of
assets used as collateral. Real estate construction loans are made with
loan-to-value ratios generally below 75%. Real estate mortgage loans are made
with loan-to-value ratios generally below 80% of the appraised value. The real
estate is appraised at the time the loan is originated and is reappraised if the
loan is placed on a classified status. All consumer installment loan requests
are evaluated to determine the prospective borrowers ability and willingness to
repay the obligation and their stability as a borrower. Ability to repay is
determined by comparing an applicant's monthly debt payment including the
proposed loan payment with net monthly income. The resulting debt
service-to-income ratio generally must be below 40%. In addition, for consumer
installment loans which require collateral, the Company will make advances up to
90% of the value on certain types of collateral.
Scheduled maturity of commercial loans and real estate construction loans
is indicated as follows at December 31, 1997:
($ in thousands) ONE YEAR ONE TO OVER
OR LESS FIVE YEARS FIVE YEARS TOTAL
Commercial $24,077 $24,438 $43,780 $92,295
Real estate construction 814 210 -- 1,024
------- ------- ----------- -------
Total $24,891 $24,648 $43,780 $93,319
======= ======= =========== =======
For the commercial and real estate construction loans due after one year,
$25,935,000 have a predetermined interest rate and $42,493,000 have a floating
or adjustable interest rate.
MANAGEMENT'S DISCUSSION AND AMERICAN BANCORPORATION AND SUBSIDIARIES
ANALYSIS OF FINANCIAL CONDITION
37
<PAGE>
AND RESULTS OF OPERATIONS-CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
ASSET QUALITY
Total nonperforming loans were $2,658,000 at December 31, 1997, compared to
$1,963,000 at December 31, 1996. Nonaccrual loans increased by $268,000 while
loans 90 days past due increased $533,000, and restructured loans decreased by
$106,000. Of the $236,000 total other real estate owned, $78,000 represents
former branch office facilities.
The following presents loans considered nonperforming:
NONPERFORMING ASSETS
($ in thousands)
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
Nonperforming loans
Nonaccrual $815 $547 $790 $1,214 $2,188
90 days past due 1,277 744 609 766 601
Restructured 566 672 666 610 709
------ ------ ------ ------ ------
Total nonperforming loans $2,658 $1,963 $2,065 $2,590 $3,498
Other nonperforming assets
Other real estate owned 236 607 575 682 699
------ ------ ------ ------ ------
Total nonperforming assets $2,894 $2,570 $2,640 $3,272 $4,197
====== ====== ====== ====== ======
Nonperforming loans as a
percent of loans 0.9% 0.7% 0.8% 1.1% 2.3%
Nonperforming assets
as a percent of total assets 0.6% 0.6% 0.7% 1.0% 1.5%
The nonaccrual category represents loans on which interest recognition has
been suspended until realized because the borrower's ability to repay principal
or interest is in doubt. For loans not primarily secured by real estate or in
the process of collection, the Company discontinues accrual when a loan is 90
days past due. Real estate loans are placed on nonaccrual status when, in
management's judgement, collection is in doubt or when foreclosure proceedings
are initiated, which is generally 180 days past the due date. Although nominally
performing, nonaccrual treatment may also be accorded on loans when information
becomes available which suggests that more than normal risk of default exists.
Restructured loans are loans, the terms of which have been altered, to provide a
reduction or deferral of interest or principal because of deterioration in the
financial position of the borrower. Past due loans are loans contractually past
due 90 days or more and are not on nonaccrual status or restructured.
MANAGEMENT'S DISCUSSION AND AMERICAN BANCORPORATION AND SUBSIDIARIES
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
38
<PAGE>
<TABLE>
<CAPTION>
ALLOWANCE FOR LOAN LOSSES
The Company's loan loss experience for the five years ended December 31, 1997
is summarized as follows:
SUMMARY OF LOAN LOSS EXPERIENCE
($ in thousands) 1997 1996 1995 1994 1993
-------- -------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Balance at beginning of year............................ $ 3,564 $ 3,854 $ 3,737 $ 3,544 $ 3,681
Allowance acquired in loan
purchase........................................ - - - 411 -
Provision for loan losses.......................... - - 105 215 844
Loans charged-off
Commercial......................................... 26 54 63 205 110
Real estate mortgage................................ 111 66 21 141 283
Installment......................................... 441 308 279 491 941
------------ ------------ ---------- ----------- -----------
Total loans charged-off............................ 578 428 363 837 1,334
Loans recovered
Commercial.......................................... 162 3 101 93 39
Real estate mortgage................................ 16 16 108 25 44
Installment......................................... 120 119 166 286 270
------------ ------------ ---------- ------------ ------------
Total loans recovered.............................. 298 138 375 404 353
------------ ------------ ---------- ------------ ------------
Net loans charged-off (recovered)................. 280 290 (12) 433 981
------------ ------------ ---------- ----------- ------------
Balance at end of year.................................. $ 3,284 $ 3,564 $ 3,854 $ 3,737 $ 3,544
========== ========== =========== =========== ============
Loans outstanding end of year............................. $286,691 $271,450 $250,372 $228,866 $150,523
Average loans for the year ended......................... 281,738 254,397 243,043 164,405 153,277
Ratio of net charge-offs to average loans............ 0.10% 0.11% 0.00% 0.26% 0.64%
Ratio of allowance to loans outstanding.............. 1.15% 1.31% 1.54% 1.63% 2.35%
Ratio of provision to average loans.................. 0.00% 0.00% 0.04% 0.13% 0.55%
</TABLE>
The allowance for loan losses was equal to 1.15% of loans outstanding at
year end 1997 and in management's judgment is adequate to absorb potential loan
losses. The Company did not make a provision for loan losses during 1997 or 1996
primarily due to the level of the allowance for loan losses, in management's
judgment, being 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.
MANAGEMENT'S DISCUSSION AND AMERICAN BANCORPORATION AND SUBSIDIARIES
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
SECURITIES
39
<PAGE>
<TABLE>
<CAPTION>
The following table summarizes the carrying value and weighted average
yield of securities by type and maturity range at December 31, 1997:
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 MOUNT YIELD AMOUNT YIELD AMOUNT YIELD
SECURITIES AVAILABLE FOR SALE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities........ $3,496 6.08% $1,789 5.59% $ - -% $ - -% $ 5,285 5.91%
Federal agency obligations..... 1,112 5.86 1,168 6.52 68,247 6.85 86,307 6.75 156,834 6.79
State and Municipal securities 15 3.74 617 9.99 95 5.97 324 9.00 1,051 9.18
Other....................... - - 5 5.50 - - 6,001 5.85 6,006 5.85
----------- ------------ ------------ --------- ---------------
Total Carrying Value..........$4,623 6.02% $ 3,579 6.65% $68,342 6.85% $92,632 6.70% $169,176 6.74%
====== ======== ======= ======= ======== ====
<FN>
<F1>
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
other securities includes securities with no stated maturity. Yields do not
reflect tax equivalent adjustments.
</FN>
</TABLE>
<TABLE>
<CAPTION>
DEPOSITS
Summarized below are average deposit balances by type for the years ended
December 31, 1997, 1996 and 1995. Also presented is the maturity distribution of
time deposits in excess of $100,000 at each year end.
AVERAGE DEPOSITS 1997 1996 1995
------------------------------- ----------------------------- ------------------------
($ in thousands) AMOUNT % RATE Amount % Rate Amount % Rate
-------- ----- ----- -------- ------ ------ -------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Demand noninterest bearing.......... $ 33,244 9.8% -% $ 32,793 10.6% -% $ 31,932 10.9% -%
Interest bearing deposits
NOW Accounts...................... 26,648 7.9 2.36 26,615 8.5 2.37 26,409 9.0 2.34
MMDA and savings accounts.......... 97,231 28.8 2.76 102,793 33.1 2.71 104,332 35.6 2.75
Time .............................. 180,561 53.5 5.47 148,545 47.8 5.06 130,742 44.5 4.82
--------- ----- -------- ----- ---------- -----
304,440 90.2 4.33 277,953 89.4 3.93 261,483 89.1 3.75
--------- ------ --------- ----- --------- -----
Total................................ $337,684 100.0% 3.90% $310,746 100.0% 3.52% $293,415 100.0% 3.34%
======== ===== ======== ===== ======== =====
</TABLE>
MATURITY OF TIME DEPOSITS OVER $100,000 1997 1996 1995
------- ------- -------
($ in thousands)
Within three months $13,753 $8,511 $2,814
Three to six months 6,447 2,813 5,745
Six months to one year 11,727 7,656 5,625
After one year 12,807 7,968 4,053
------- ------- -------
Total $44,734 $26,948 $18,237
======= ======= =======
MANAGEMENT'S DISCUSSION AND AMERICAN BANCORPORATION AND SUBSIDIARIES
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
CAPITAL
40
<PAGE>
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 Bank are subject to a
risk-based capital framework and a minimum leverage ratio. Bank regulatory
authorities in the United States have issued risk-based capital standards by
which all bank holding companies and banks will be evaluated in terms of capital
adequacy. These guidelines relate to banking company's capital to the risk
profile of its assets. Tier 1 capital includes common stockholder's equity and
qualifying perpetual preferred stock together with related surpluses and
retained earnings. Tier 2 capital may be comprised of limited life preferred
stock, qualifying debt instruments, and the reserves for credit losses. Banking
regulators have also issued leverage ratio requirements. The leverage ratio
requirement is measured as the ratio of Tier 1 capital to adjusted 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.
<TABLE>
<CAPTION>
The following table summarizes the Company's and WNB's actual consolidated
capital amounts and ratios as of December 31, 1997 and 1996.
COMPANY WNB
WELL- DECEMBER 31,
MINIMUM CAPITALIZED 1997 1996 1997 1996
------- ----------- ---------- ----------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Tier I Capital.................... $ 31,185 $ 27,872 $ 31,907 $ 26,885
Total Qualifying Capital........... $ 34,469 $ 31,190 $ 35,191 $ 30,188
Risk-Adjusted Assets............... $278,240 $265,159 $276,306 $263,986
Capital Basis
Ratios
Tier I Capital Ratio............ 4.00% 6.00% 11.21% 10.51% 11.55% 10.18%
Total Capital Ratio.............. 8.00 10.00 12.39 11.76 12.74 11.44
Leverage Capital Ratio........... 3.00 5.00 6.53 6.49 6.79 6.32
</TABLE>
41
<PAGE>
MANAGEMENT'S DISCUSSION AND AMERICAN BANCORPORATION AND SUBSIDIARIES
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
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 advances from the FHLB
of Pittsburgh.
Core deposits, representing the Company's largest, most stable source of
funds, totalled $311,000,000 at December 31, 1997, an increase of $18,137,000 or
6.2% as compared to December 31, 1996. At December 31, 1997 core deposits
represented 108.5% of loans, compared to 107.9% at December 31, 1996. Such
deposits generally represent a more stable alternative to more volatile money
market sources such as short-term borrowings and time deposits over $100,000.
The Company has no brokered deposits.
Cash and cash equivalents (cash and due from banks and Federal funds
sold), are the Company's most liquid assets. At December 31, 1997, cash and cash
equivalents totalled $13,443,000, a decrease of $15,978,000 or 54.3% from
December 31, 1996. Additionally, the Company has secondary sources of liquidity
in investment securities available for sale totalling $169,176,000 at December
31, 1997, compared to $143,474,000 at December 31, 1996, as well as maturities
and repayments of loans.
The Company utilizes FHLB advances as a low cost funding source for
implementing investment security growth strategies. FHLB advances totalled
$74,000,000 at December 31, 1997. Management views FHLB advances as a stable
secondary funding source.
Management believes that the Company's liquidity position is sufficient
based on its level of cash, cash equivalents, core deposits and the stability of
its other funding.
42
<PAGE>
MANAGEMENT'S DISCUSSION AND AMERICAN BANCORPORATION AND SUBSIDIARIES
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
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.
The Company uses financial modeling to measure the impact of changes in
interest rates on the net interest margin. Modeling techniques are a more
relevant method of measuring interest rate risk than the less sophisticated
interest rate sensitivity gap table shown on page 44. Assumptions are made
regarding loan prepayments and amortization rates of passbook and NOW account
withdrawal rates. Because it is difficult to accurately project the market
reaction of depositors and borrowers, the effects of actual changes in interest
on these assumptions may differ from simulated results.
The Company has established the following guidelines for assuming interest
rate risk:
Net interest margin simulation. Given a 200 basis point increase or decrease
in interest rates, the estimated net interest margin may not change by more than
10% for a one-year period.
Market value of equity simulation. The market value of the Company's equity
is the net present value of the Company's assets and liabilities. Given a 200
basis point increase or decrease in interest rates, equity may not change by
more than 30% of total stockholder equity.
The following table illustrates the simulated analysis of the impact of a
200 basis point upward or downward movement in interest rates on net interest
revenue, return on common stockholders' equity and basic earnings per share. The
analysis was prepared assuming that interest-earning assets at December 31, 1997
remain constant. The impact of the rate movements was computed by simulating the
effect of an immediate and sustained shift in interest rates over a twelve-month
period from the December 31, 1997 levels.
INTEREST RATE SIMULATION SENSITIVITY ANALYSIS
Movements in interest rates from December 31, 1997 rates
Simulated impact in the next twelve months Increase Decrease
200bp 200bp
------------ -----------
Compared with December 31, 1997:
Net interest income increase/(decrease) (5.66)% 4.04%
Return on average equity increase/(decrease) (193)bp 138bp
Basic earnings per share increase/(decrease) $(0.20) $0.14
MANAGEMENT'S DISCUSSION AND AMERICAN BANCORPORATION AND SUBSIDIARIES
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED
43
<PAGE>
The difference between rate sensitive assets and rate sensitive liabilities
that mature or reprice within a given time period is referred to as the interest
rate sensitivity gap. A positive gap exists when rate sensitive assets exceed
rate sensitive liabilities. This mismatch generally will enhance earnings in a
rising interest rate environment and inhibit earnings when rates decline.
Conversely, a negative gap exists when rate sensitive liabilities exceed rate
sensitive assets. In this case, a rising interest rate environment generally
will inhibit earnings and declining rates generally will enhance earnings. The
Company's interest rate sensitivity analysis at December 31, 1997, is presented
in the following table. In evaluating the Company's exposure to interest rate
risk certain shortcomings inherent in this method of analysis must be
considered. For example, although certain assets and liabilities may have
similar maturities or periods of repricing, they may react in different degrees
to change in market interest rates. Interest bearing demand deposits and savings
deposits are presented as repricing within the earliest period as they are
subject to immediate withdrawal and rate change. However, these types of
deposits have historically shown relatively stable balances and rates have
generally changed in lesser degrees than other interest earning assets and
interest bearing liabilities.
<TABLE>
<CAPTION>
At December 31, 1997, there were no outstanding financial futures,
options or interest rate swap agreements.
DECEMBER 31, 1997 DAYS TOTAL
-----------------------------------------------------------------------------------
INTEREST RATE SENSITIVITY 31 61 91 181 ONE YEAR OVER
($ in thousands) 0 TO 30 TO 60 TO 90 TO 180 TO 1 YEAR OR LESS ONE YEAR TOTAL
---------- ---------- --------- ------- ------ --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS
Loans...............................$ 58,605 $ 3,605 $ 6,078 $ 9,513 $ 22,181 $ 99,982 $ 186,709 $ 286,691
Investment securities......... - 1,005 - 499 3,124 4,628 164,548 169,176
Other short-term investments..... 2,415 - - - - 2,415 - 2,415
------------ ---------- --------- --------- ---------- -------- ---------- ----------
Total interest earning assets..... 61,020 4,610 6,078 10,012 25,305 107,025 351,257 458,282
INTEREST BEARING LIABILITIES
Deposits
Interest bearing demand........... 26,893 - - - - 26,893 - 26,893
Savings deposits.................. 92,608 - - - - 92,608 - 92,608
Time deposits.................... 15,065 12,689 10,749 35,114 58,524 132,141 70,579 202,720
Short-term borrowings.............. 62,574 25,000 - - - 87,574 - 87,574
Long-term debt................... 1,399 - - - - 1,399 26 1,425
------------ --------- --------- --------- ---------- ------- ---------- ----------
Total interest bearing liabilities.... 198,539 37,689 10,749 35,114 58,524 340,615 70,605 411,220
Non Interest Bearing Sources-net - - - - - - 47,062 47,062
------------ ---------- -------- ---------- ---------- --------- ---------- ---------
Total Funding sources...............$ 198,539 $ 37,689 $ 10,749 $ 35,114 $ 58,524 $340,615 $117,667 458,282
-------- ----------- --------- ---------- ---------- -------- -------- ---------
INTEREST SENSITIVITY GAP..............$ (137,519) $ (33,079) $ (4,671) $(25,102) $(33,219) $(233,590) $233,590 $ -
CUMULATIVE INTEREST
SENSITIVITY GAP................$ (137,519) $(170,598) $(175,269) $(200,371) $(233,590) $(233,590) $ - $ -
GAP/INTEREST EARNING ASSETS....... (30.01)% (7.22)% (1.02)% (5.48)% (7.25)% (50.97)% 50.97% -
CUMULATIVE GAP/INTEREST
EARNING ASSETS............. (30.01) (37.23) (38.24) (43.72) (50.97) (50.97) - -
</TABLE>
MANAGEMENT'S DISCUSSION AND AMERICAN BANCORPORATION AND SUBSIDIARIES
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB") released
SFAS No. 129, "Disclosure of Information about Capital Structure". SFAS No. 129
summarizes previously issued disclosure guidance contained with APB Opinion Nos.
10 and 15 as well as SFAS No. 47. There will be no changes to the Company's
disclosures pursuant to the adoption of SFAS No. 129. This statement is
effective for financial statements for periods ending after December 15, 1997.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
Comprehensive income is defined as "the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from nonowner sources. It includes all changes in equity during a period except
those resulting from investments by owners and distributions to owners." The
comprehensive income and related cumulative equity impact of comprehensive
income items will be required to be disclosed prominently as part of the
44
<PAGE>
notes to the financial statements. Only the impact of unrealized gains or losses
on securities available for sale is expected to be disclosed as an additional
component of the Company's income under the requirements of SFAS No. 130. This
statement is effective for fiscal years beginning after December 15, 1997.
In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," was issued and supersedes SFAS No. 14, "Financial
Reporting for Segments of a Business Enterprise." This statement established
standards for reporting information about segments of a business in the
footnotes to annual financial statements and also requires selected segment
information in interim reports. The statement requires disclosure on a business
segment basis, as defined by the Company, to include a description of products
and services, interest income and expense, profit or loss as measured by the
Company's management in assessing segment performance and geographic information
on assets and revenue, if material. This statement is effective January 1, 1998,
and need not be applied to interim periods during 1998.
45
<PAGE>
MANAGEMENT'S DISCUSSION AND AMERICAN BANCORPORATION AND SUBSIDIARIES
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
YEAR 2000 COMPLIANCE
The Company is exposed to potential losses due to business interruption or
errors which could result if any of its computer systems are not modified to
ensure that dates beginning in January, 2000 are not misinterpreted by the
system as January, 1900. This is commonly referred to as the Year 2000 Problem
("Y2K"). A number of computer systems which are affected by Y2K are utilized by
the Company to operate its day-to-day business. Most of these systems use
software developed by and licensed from third party vendors, some of which have
been customized by the Company, while others have been developed internally.
Management has established a task force to identify all instances where the
Company is not currently Y2K compliant, and to ensure that those systems are
brought into compliance before the end of 1998. For software licensed from third
party vendors, software upgrades will be forthcoming from those vendors and
testing has been scheduled for the second quarter of 1998.
The Company has estimated that direct costs for Y2K compliance will not be
material.
Y2K problems which are inherent in the regional, national and global banking
and payments system are expected to be brought into compliance, but are
completely beyond the Company's control.
46
<PAGE>
DIRECTORS
Jack O. Cartner, President
Motrim Inc., Cambridge, OH
Paul W. Donahie, President
American Bancorporation, Wheeling, WV
Abigail McCamic Feinknopf
Columbus, 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
OFFICERS
Jeremy C. McCamic, Chairman & CEO
Jolyon W. McCamic, Vice Chairman/Administration
Paul W. Donahie, President
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 J. Rataiczak, President
American Mortgages, Inc.
CORPORATE INFORMATION
47
<PAGE>
ANNUAL MEETING
The annual meeting of shareholders will be held in Wheeling, West Virginia
at the corporate offices, located at Suite 800, Mull Center, 1025 Main Street.
The meeting will convene at 10:00 A.M. (E.D.S.T.) May 20, 1998. 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 1997 Annual
Report on Form 10K, as filed with the Securities Exchange Commission, upon
written request to Treasurer, American Bancorporation, 1025 Main Street,
Wheeling, WV 26003.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP
Pittsburgh, PA
SECURITIES COUNSEL
Maloney & Knox
Washington, DC
<PAGE>
