FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the period ended March 31, 1998
Commission File Number: 0-5893
American Bancorporation
(Exact name of registrant as specified in its charter)
Ohio 31-0724349
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1025 Main Street, Suite 800, Wheeling, WV 26003
(Address of principal executive offices) (Zip Code)
(304) 233-5006
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
April 6, 1998: 3,129,674 shares of Common stock without par value
Number of pages comprising this report. . . . . . . . . 13
1
<PAGE>
AMERICAN BANCORPORATION FORM 10-Q Quarterly Report
March 31, 1998
TABLE OF CONTENTS
Part I FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Balance Sheet................... 3
Condensed Consolidated Statement of Income............. 4
Condensed Consolidated Statement of
Cash Flows.................................. 5
Condensed Consolidated Statement of
Changes in Stockholders' Equity............. 6
Notes to the Financial Statements......................... 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 8
Item 3 Quantitative and Qualitative Disclosures about Market Risk.. 12
Part II OTHER INFORMATION
Item 1 Legal Proceedings..........................................None
Item 2 Changes in Securities......................................None
Item 3 Defaults Upon Senior Securities............................None
Item 4 Submission of Matters to a
Vote of Security Holders.......................None
Item 5 Other Information..........................................None
Item 6 Exhibits and Reports on Form 8-K...........................None
SIGNATURES 13
2
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AMERICAN BANCORPORATION FORM 10-Q Quarterly Report
March 31, 1998
<TABLE>
<CAPTION>
American Bancorporation and Subsidiaries
CONSOLIDATED BALANCE SHEET
March 31, December 31,
1998 1997 1997
-------------- ------------- ------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks ...................... $ 12,096,053 $ 12,323,152 $ 11,027,692
Federal funds sold ........................... 6,291,000 10,671,259 2,414,812
Investment securities available for sale ..... 192,433,075 140,457,032 169,175,987
Loans, net of unearned income ................ 287,828,127 275,627,811 286,691,051
Less allowance for loan losses ............. 3,218,426 3,455,969 3,284,338
------------- ------------- -------------
284,609,701 272,171,842 283,406,713
Premises and equipment - net ................. 9,981,773 9,871,897 10,070,377
Accrued interest receivable .................. 3,350,624 3,785,600 2,713,240
Excess of cost over net assets purchased ..... 1,885,071 2,220,547 1,968,940
Other assets ................................. 4,787,968 9,515,869 3,828,711
------------- ------------- -------------
TOTAL ASSETS ............................ $ 515,435,265 $ 461,017,198 $ 484,606,472
============= ============= =============
LIABILITIES
Deposits
Non-interest bearing ...................... $ 33,494,284 $ 34,940,131 $ 33,512,712
Interest bearing .......................... 349,756,791 293,560,988 322,221,620
------------- ------------- -------------
TOTAL DEPOSITS ........................ 383,251,075 328,501,119 355,734,332
Short-term borrowings ....................... 88,257,113 94,528,431 87,574,152
Accrued interest payable .................... 1,808,684 1,515,819 1,782,668
Other liabilities ........................... 5,351,214 5,487,609 4,396,674
Long-term debt .............................. 2,020,541 933,763 1,424,800
------------- ------------- -------------
TOTAL LIABILITIES ........................ 480,688,627 430,966,741 450,912,626
STOCKHOLDERS' EQUITY
Preferred stock ............................ -- -- --
Common stock without par value, stated value
$5, authorized 6,500,000 shares, issued
and outstanding 3,129,674 ................. 7,824,185 7,824,185 7,824,185
Additional paid-in capital ................. 10,301,982 10,301,982 10,301,982
Retained earnings .......................... 15,827,526 12,660,051 14,965,228
Accumulated other comprehensive income,
net of income tax ...................... 792,945 (735,761) 602,451
------------- ------------- -------------
TOTAL STOCKHOLDERS' EQUITY ............... 34,746,638 30,050,457 33,693,846
------------- ------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY ........... $ 515,435,265 $ 461,017,198 $ 484,606,472
============= ============= =============
</TABLE>
3
<PAGE>
AMERICAN BANCORPORATION FORM 10-Q Quarterly Report
March 31, 1998
American Bancorporation and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
Three Months ended March 31,
1998 1997
---------- ----------
INTEREST INCOME
Loans ............................. $6,305,911 $5,974,954
Investment securities
Taxable interest income .......... 2,917,727 2,552,804
Non-taxable interest income ...... 22,771 24,201
---------- ----------
2,940,498 2,577,005
Short-term investments ............ 81,445 109,716
---------- ----------
Total interest income ........... 9,327,854 8,661,675
INTEREST EXPENSE
Deposits .......................... 3,843,092 2,941,737
Borrowed funds .................... 1,221,436 1,416,710
---------- ----------
Total interest expense .......... 5,064,528 4,358,447
---------- ----------
NET INTEREST INCOME ........... 4,263,326 4,303,228
PROVISION FOR LOAN LOSSES .......... 60,000 --
---------- ----------
Net interest income after
provision for loan losses ...... 4,203,326 4,303,228
OTHER INCOME
Service charges on deposit accounts 166,980 187,351
Securities gains .................. 156,000 4,337
Net gains on sale of loans ........ 459,055 214,371
Insurance commissions ............. 20,148 23,380
Other income ...................... 194,231 159,961
---------- ----------
Total other income .............. 996,414 589,400
OTHER EXPENSE
Salaries and employee benefits .... 1,595,115 1,413,493
Occupancy and equipment expense ... 580,955 586,732
Other expenses .................... 1,215,706 1,253,897
---------- ----------
Total other expense ............. 3,391,776 3,254,122
---------- ----------
INCOME BEFORE INCOME TAXES ......... 1,807,964 1,638,506
PROVISION FOR INCOME TAXES ......... 554,457 608,504
---------- ----------
NET INCOME ......................... $1,253,507 $1,030,002
========== ==========
Average Shares Outstanding ....... 3,129,674 3,129,674
BASIC EARNINGS PER SHARE ....... $ 0.40 $ 0.33
4
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AMERICAN BANCORPORATION FORM 10-Q Quarterly Report
March 31, 1998
<TABLE>
<CAPTION>
American Bancorporation and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
Three months ended March 31,
1998 1997
<S> <C> <C>
-------------- ------------
Operating Activities:
Net Income................................................................ $ 1,253,507 $ 1,030,002
Charges to operations not using
cash in the current period.......................................... (182,583) (2,830,153)
-------------- -------------
Net cash provided by (applied to) operating activities.............. 1,070,924 (1,800,151)
Investing Activities:
Investment securities available for sale:
Proceeds from maturities and repayments............................ 33,682,122 2,085,192
Proceeds from sales.............................................. 576,000 43,462,484
Purchases.......................................................... (57,406,903) (44,280,218)
Net increase in loans................................................... (1,262,988) (4,285,783)
Purchase of premises and equipment..................................... (119,842) (334,807)
Proceeds from sale of premises and equipment......................... 1,000 -
---------------- --------------------
Net cash used by investing activities................................ (24,530,611) (3,353,132)
Financing Activities:
Net decrease in non-interest
bearing demand deposits............................................ (18,428) (1,804,184)
Net increase (decrease) in interest bearing
demand and savings deposits.......................................... 1,646,547 (3,492,761)
Net increase in time deposits........................................... 25,888,624 13,987,247
Net increase (decrease) in short-term borrowings....................... 682,961 (9,567,612)
Issuance (principal repayment) of long-term debt........................ 595,741 (3,920)
Cash dividends paid.................................................... (391,209) (391,209)
-------------- --------------
Net cash provided by (applied to) financing activities............... 28,404,236 (1,272,439)
------------ -------------
Net Increase (Decrease) in Cash and Cash Equivalents..................... 4,944,549 (6,425,722)
Cash and Cash Equivalents Beginning Balance.................................. 13,442,504 29,420,133
------------ ------------
Cash and Cash Equivalents Ending Balance...................................... $18,387,053 $22,994,411
=========== ===========
</TABLE>
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<PAGE>
AMERICAN BANCORPORATION FORM 10-Q Quarterly Report
March 31, 1998
American Bancorporation and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Three months ended March 31, 1998
and 1997
1998 1997
------------ ------------
Balance at January 1, ..................... $ 33,693,846 $ 30,422,694
Net Income ............................... 1,253,507 1,030,002
Dividends declared ($0.125 per share 1998,
$0.125 per share 1997) .............. (391,209) (391,209)
Other comprehensive income (loss) ........ 190,494 (1,011,030)
------------ ------------
Balance at March 31, ...................... $ 34,746,638 $ 30,050,457
============ ============
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The unaudited interim condensed consolidated financial statements reflect
all adjustments which, in the opinion of management, are necessary to a fair
presentation of the financial position and results of operations. All
adjustments are of a normal recurring nature. The notes to the financial
statements contained in the 1997 Annual Report to Stockholders should be read in
conjunction with these statements.
NOTE A - ADOPTION OF FINANCIAL ACCOUNTING STANDARDS
On January 1, 1998 the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 129, " Disclosure of Information about Capital
Structure." SFAS No. 129 summarizes previously issued disclosure guidance
contained with Accounting Principles Board ("APB") Opinion Nos. 10 and 15 as
well as SFAS No. 47. There were no material changes to the Company's disclosures
pursuant to the adoption of SFAS No. 129.
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AMERICAN BANCORPORATION FORM 10-Q Quarterly Report
March 31, 1998
On January 1, 1998 the Company adopted SFAS No. 130, "Reporting
Comprehensive Income". SFAS No.130 established 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 is required to be disclosed prominently as
part of the notes to the financial statements. Only the impact of unrealized
gains or losses on securities available for sale is disclosed as an additional
component of the Company's income under the requirements of SFAS No. 130.
Amounts included in comprehensive income are as follows for the three
months ended March 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
-------------- ------------
<S> <C> <C>
Net Income .............................................. $ 1,253,507 $ 1,030,002
Other comprehensive income (loss), net of tax
Unrealized gains (losses) on securities:
Unrealized holding gain (loss)
arising during the period........................ 236,994 (759,654)
Reclassification adjustment for
gains included in net income................... (46,500) (251,376)
-------------- ------------
Other comprehensive income (loss)......................... 190,494 (1,011,030)
------------- ------------
Comprehensive income......................................... $ 1,444,001 $ 18,972
=========== ============
</TABLE>
7
<PAGE>
AMERICAN BANCORPORATION FORM 10-Q Quarterly Report
March 31, 1998
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL POSITION AND RESULTS OF OPERATIONS
INTRODUCTION
The discussion and analysis, when read in conjunction with the consolidated
financial statements and accompanying notes, is designed to provide information
relevant to an assessment of financial performance and management's perception
of significant events.
The following is a discussion of significant factors influencing operating
performance and change in financial position during the interim periods
presented. The discussion should be read in connection with the 1997 Annual
Report and the financial statements appearing elsewhere herein.
SUMMARY
American Bancorporation (the "Company") recognized net income of $1,254,000
or $0.40 basic earnings per share, for the three months ended March 31, 1998,
compared to net income of $1,030,000 or $0.33 basic earnings per share, for the
three months ended March 31, 1997. Return on average assets and return on
average equity were 1.00% and 14.52%, respectively, for the three months ended
March 31, 1998 compared to 0.89% and 13.45%, respectively, for the three months
ended March 31, 1997.
Total assets at March 31, 1998 increased to $515,425,000, from $461,017,000
at March 31, 1997, an increase of 11.8%. Deposits increased to $383,251,000 at
March 31, 1998, from $328,501,000 at March 31, 1997, an increase of 16.7%. Total
stockholders' equity was $34,747,000 at March 31, 1998, which represents a 15.6%
increase over total stockholders' equity of $30,050,000 at March 31, 1997.
RESULTS OF OPERATIONS
QUARTER COMPARISON
Net Income. Net income for the three months ended March 31, 1998 amounted
to $1,254,000, or $0.40 basic earnings per share, compared to net income of
$1,030,000 or $0.33 basic earnings per share, for the three months ended March
31, 1997. The increase was the result of an increase in other income which was
partially offset by increases in other expense and provision for loan losses and
a decrease in net interest income.
Net Interest Income. Net interest income before provision for loan losses
for the three months ended March 31, 1998 amounted to $4,263,000, a decrease of
$40,000 or 0.93%, compared to the three months ended March 31, 1997. The
decrease resulted primarily from a 37 basis point decrease in the Company's
margin, which was partially offset by a $39,564,000 or 9.1% increase in average
interest earning assets.
Total interest income for the three months ended March 31, 1998 amounted to
$9,328,000, an increase of $666,000 or 7.7%, compared to the three months ended
March 31, 1997. The increase resulted primarily from the increase in the average
interest earning assets which was partially offset by a 11 basis point decrease
in the average yield on earning assets. Average loans outstanding increased
$10,321,000
8
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AMERICAN BANCORPORATION FORM 10-Q Quarterly Report
March 31, 1998
or 3.7% with average real estate loans increasing $5,711,000 or 4.2%, average
commercial loans increasing $4,066,000 or 4.5% and average consumer installment
loans increasing $544,000 or 1.1%, primarily due to increased demand. The
average yield on loans increased from 8.65% in 1997 to 8.80% in 1998. Average
investment securities and other short-term investments outstanding increased
$29,243,000 or 18.6% while the average yield decreased from 6.83% in 1997 to
6.48% in 1998.
Total interest expense for the three months ended March 31, 1998 amounted
to $5,065,000, an increase of $706,000 or 16.2%, compared to the three months
ended March 31, 1997. The increase resulted primarily from a $32,599,000 or 8.3%
increase in average interest bearing liabilities and a 33 basis point increase
in interest rates paid on such liabilities. Average NOW, money market and
savings accounts decreased $5,684,000 or 4.5%. Average time deposits increased
$55,181,000 or 33.7%, primarily the result of increased marketing efforts.
Average non-interest bearing accounts decreased $929,000 or 2.8% and represented
8.7% of average total deposits for the three months ended March 31, 1998.
Average short-term borrowings decreased $17,918,000 or 17.3%, while the average
rate paid on short-term borrowings increased from 5.39% in 1997 to 5.46% in
1998.
Provision for Loan Losses. The loan loss provision for the three months
ended March 31, 1998 was $60,000. There was no loan loss provision for the three
months ended March 31, 1997.
Other Income. Other income for the three months ended March 31, 1998
amounted to $996,000, an increase of $407,000 or 69.1%. Net gains on sale of
loans increased $245,000 or 114.1%, 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 $156,000 in
1998, compared to $4,000 in 1997.
Other Expense. Total other expense for the three months ended March 31,
1998 amounted to $3,392,000, an increase of $138,000 or 4.2%, compared to the
three months ended March 31, 1997. Salaries and employee benefits increased
$182,000 or 12.8%. Occupancy and equipment expense decreased $6,000 or 1.0%.
Other (miscellaneous) expenses decreased $38,000 or 3.0%.
Provision for Income Taxes. The provision for income taxes for the three
months ended March 31, 1998 was $554,000, compared to $609,000 for the three
months ended March 31, 1997.
9
<PAGE>
AMERICAN BANCORPORATION FORM 10-Q Quarterly Report
March 31, 1998
ASSET QUALITY
Nonperforming loans totalled $2,389,000 or 0.8% of total loans at
March 31, 1998, compared to $2,658,000 or 0.9% at December 31, 1997.
Nonperforming loans at March 31, 1998 consisted of nonaccrual loans totalling
$713,000, 90 day delinquent loans of $1,121,000, and restructured loans
aggregating $555,000. Other real estate held totalled $762,000 at March 31,
1998, compared to $236,000 at December 31, 1997.
CAPITAL RESOURCES
Stockholders' equity totalled $34,747,000 at March 31, 1998. The
Company's risk-based capital ratio was 12.6%, of which 11.5% constituted common
stockholder equity, while the risk-based capital ratio for the Company's bank
subsidiary, Wheeling National Bank, was 13.0%, with common stockholders' equity
of 11.9%. At March 31, 1998 the Company's leverage capital ratio was 6.4%, while
the leverage ratio for Wheeling National Bank was 6.8%.
10
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AMERICAN BANCORPORATION FORM 10-Q Quarterly Report
March 31, 1998
<TABLE>
<CAPTION>
Three months ended March 31,
1998 1997
Average Yield/ Average Yield/
Balance Rate Balance Rate
INTEREST EARNING ASSETS (000's) (000's)
<S> <C> <C> <C> <C>
Loans
Commercial................................. $ 95,206 9.11% $ 91,140 8.91%
Real estate................................ 141,910 8.33 136,199 8.01
Installment-net........................... 49,481 8.42 48,937 8.86
--------- --------
Total loans ............................ 286,597 8.80 276,276 8.65
Investment securities
Taxable.................................... 181,246 6.44 151,578 6.74
Tax-exempt............................... 1,089 8.37 1,178 8.22
---------- -----------
Total investment securities ............ 182,335 6.45 152,756 6.75
Other short-term investments.............. 4,207 7.74 4,543 9.66
----------- ----------
Total interest earning assets............. $473,139 7.88 $433,575 7.99
======== ========
INTEREST BEARING LIABILITIES
Deposits
NOW, Savings and MMDA...................... $120,130 2.63% $125,814 2.62%
Time...................................... 218,797 5.58 163,616 5.17
---------- ---------
Total deposits........................... 338,927 4.54 289,430 4.07
Short-term borrowings...................... 85,766 5.46 103,684 5.39
Long-term debt........................... 1,955 10.17 935 7.97
----------- -----------
Total interest
bearing liabilities................... $426,648 4.75 $394,049 4.42
======== ========
MARGIN ANALYSIS
(as a % of earning assets)
Interest income...................... 7.88% 7.99%
Interest expense...................... 4.28 4.02
---- ----
Net interest income.................. 3.60% 3.97%
==== ====
<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>
11
<PAGE>
AMERICAN BANCORPORATION FORM 10-Q Quarterly Report
March 31, 1998
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Quantitative and qualitative disclosures about market risk are
presented at December 31, 1997 in Item 7a of the Company's Annual Report on Form
10-K filed with the SEC on March 31, 1998. Management believes there have been
no material changes in the Company's market risk since December 31, 1997.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
B. Reports on Form 8-K:
Date Item Description
None
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN BANCORPORATION
(Registrant)
Date May 15, 1998 /s/ Jeremy C. McCamic
---------------------------- ------------------------
Jeremy C. McCamic
Chairman and
Chief Executive Officer
Date May 15, 1998 /s/ Brent E. Richmond
---------------------------- --------------------------
Brent E. Richmond
Chief Financial and
Accounting Officer
13
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<S> <C>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-TYPE> 3-MOS
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 12,003,940
<INT-BEARING-DEPOSITS> 92,113
<FED-FUNDS-SOLD> 6,291,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 192,433,075
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 287,828,127
<ALLOWANCE> 3,218,426
<TOTAL-ASSETS> 515,435,265
<DEPOSITS> 383,251,075
<SHORT-TERM> 88,257,113
<LIABILITIES-OTHER> 7,159,898
<LONG-TERM> 2,020,541
<COMMON> 7,824,185
0
0
<OTHER-SE> 26,922,453
<TOTAL-LIABILITIES-AND-EQUITY> 515,435,265
<INTEREST-LOAN> 6,305,911
<INTEREST-INVEST> 2,940,498
<INTEREST-OTHER> 81,445
<INTEREST-TOTAL> 9,327,854
<INTEREST-DEPOSIT> 3,843,092
<INTEREST-EXPENSE> 5,064,528
<INTEREST-INCOME-NET> 4,263,326
<LOAN-LOSSES> 60,000
<SECURITIES-GAINS> 156,000
<EXPENSE-OTHER> 3,391,776
<INCOME-PRETAX> 1,807,964
<INCOME-PRE-EXTRAORDINARY> 1,253,507
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,253,507
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.40
<YIELD-ACTUAL> 0360
<LOANS-NON> 713,000
<LOANS-PAST> 1,121,000
<LOANS-TROUBLED> 555,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
