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, 1999
--------------------------------------------------------
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 2, 1999: 3,129,674 shares of Common stock without par value
Number of pages comprising
this report. . . . . . . . . 12
<PAGE>
AMERICAN BANCORPORATION FORM 10-Q Quarterly Report
March 31, 1999
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..................... 7
Item 3 Quantitative and Qualitative Disclosures about Market Risk... 11
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 12
2
<PAGE>
AMERICAN BANCORPORATION FORM 10-Q Quarterly Report
March 31, 1999
American Bancorporation and Subsidiaries
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
March 31, December 31,
1999 1998 1998
<S> <C> <C> <C>
ASSETS
Cash and due from banks ................... $ 15,208,281 $ 12,096,053 $ 12,316,176
Federal funds sold ........................ 8,096,025 6,291,000 17,747,025
Investment securities available for sale .. 300,929,464 192,433,075 263,827,239
Loans, net of unearned income ............. 307,900,341 287,828,127 300,621,884
Less allowance for loan losses .......... 3,028,522 3,218,426 3,042,269
------------- ------------- -------------
304,871,819 284,609,701 297,579,615
Due from broker ........................... 17,081,291 -- --
Premises and equipment - net .............. 9,700,257 9,981,773 9,735,582
Accrued interest receivable ............... 4,064,177 3,350,624 3,393,337
Excess of cost over net assets purchased .. 1,564,013 1,885,071 1,633,464
Other assets .............................. 6,684,211 4,787,968 5,173,024
------------- ------------- -------------
TOTAL ASSETS ......................... $ 668,199,538 $ 515,435,265 $ 611,405,462
============= ============= =============
LIABILITIES
Deposits
Non-interest bearing ................... $ 36,682,582 $ 33,494,284 $ 39,497,617
Interest bearing ....................... 393,648,852 349,756,791 391,742,578
------------- ------------- -------------
TOTAL DEPOSITS ..................... 430,331,434 383,251,075 431,240,195
Short-term borrowings .................... 165,223,065 88,257,113 123,891,183
Due to broker ............................. 16,026,227 -- --
Accrued interest payable ................. 2,375,242 1,808,684 2,306,854
Other liabilities ........................ 5,240,622 5,351,214 4,858,495
Long-term debt ........................... 7,609 2,020,541 11,242
Company obligated mandatorily redeemable
trust preferred securities of subsidiary
trust holding solely junior subordinated
debentures of the Company 12,650,000 -- 12,650,000
------------- ------------- ------------
TOTAL LIABILITIES ...................... 631,854,199 480,688,627 574,957,969
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 ........................ 19,245,310 15,827,526 18,430,141
Accumulated other comprehensive income,
(loss) net of income tax ............. (1,026,138) 792,945 (108,815)
------------- ------------- -------------
TOTAL STOCKHOLDERS' EQUITY ............. 36,345,339 34,746,638 36,447,493
------------- ------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY ......... $ 668,199,538 $ 515,435,265 $ 611,405,462
============= ============= =============
</TABLE>
3
<PAGE>
AMERICAN BANCORPORATION FORM 10-Q Quarterly Report
March 31, 1999
American Bancorporation and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
Three Months ended March 31,
1999 1998
----------- -----------
INTEREST INCOME
Loans ............................. $ 6,486,015 $ 6,305,911
Investment securities
Taxable interest income .......... 3,756,007 2,917,727
Non-taxable interest income ...... 545,879 22,771
----------- -----------
4,301,886 2,940,498
Short-term investments ............ 123,373 81,445
----------- -----------
Total interest income ........... 10,911,274 9,327,854
INTEREST EXPENSE
Deposits .......................... 4,445,526 3,843,092
Borrowed funds .................... 2,162,026 1,221,436
----------- -----------
Total interest expense .......... 6,607,552 5,064,528
----------- -----------
NET INTEREST INCOME ........... 4,303,722 4,263,326
PROVISION FOR LOAN LOSSES .......... 75,000 60,000
----------- -----------
Net interest income after
provision for loan losses ...... 4,228,722 4,203,326
OTHER INCOME
Service charges on deposit accounts 172,265 166,980
Securities gains .................. 267,812 156,000
Net gains on sale of loans ........ 185,582 459,055
Insurance commissions ............. 19,044 20,148
Other income ...................... 354,937 194,231
----------- -----------
Total other income .............. 999,640 996,414
OTHER EXPENSE
Salaries and employee benefits .... 1,772,794 1,595,115
Occupancy and equipment expense ... 633,692 580,955
Other expenses .................... 1,235,864 1,215,706
----------- -----------
Total other expense ............. 3,642,350 3,391,776
----------- -----------
INCOME BEFORE INCOME TAXES ......... 1,586,012 1,807,964
PROVISION FOR INCOME TAXES ......... 301,392 554,457
----------- -----------
NET INCOME ......................... $ 1,284,620 $ 1,253,507
=========== ===========
Average Shares Outstanding ....... 3,129,674 3,129,674
BASIC EARNINGS PER SHARE ....... $ 0.41 $ 0.40
4
<PAGE>
AMERICAN BANCORPORATION FORM 10-Q Quarterly Report
March 31, 1999
American Bancorporation and Subsidiaries
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
Three months ended March 31,
1999 1998
<S> <C> <C>
Operating Activities:
Net Income ................................................. $ 1,284,620 $ 1,253,507
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation .............................................. 216,623 207,446
Amortization of intangibles ............................... 69,451 83,869
Net amortization of premium on investment securities ...... 337,493 152,850
Provision for loan losses ................................. 75,000 60,000
Net gain on sale of investment securities ................. (267,812) (156,000)
Net gain on sale of loans ................................. (185,582) (459,055)
Change in assets and liabilities net of effects
from the purchase of branch assets:
Net increase in accrued interest receivable ............... (670,840) (637,384)
Net increase in accrued interest payable .................. 68,388 26,016
Real estate mortgage loans originated for sale ............ (26,493,845) (29,691,971)
Proceeds from sale of real estate mortgage loans .......... 26,138,924 30,147,069
Net increase in other assets .............................. (737,288) (433,486)
Net increase in other liabilities ......................... 382,127 1,039,876
Net decrease from other operating activities .............. (162,966) (525,770)
------------ ------------
Net cash provided by operating activities ............. 54,293 611,869
Investing Activities:
Investment securities available for sale:
Proceeds from maturities and repayments .............. 27,988,859 33,682,122
Proceeds from sales .................................. -- 576,000
Purchases ............................................ (67,744,083) (57,406,903)
Change in loans, net of real estate mortgage
loans originated for sale ............................... (6,826,701) (1,259,031)
Purchase of premises and equipment ..................... (181,298) (119,842)
Proceeds from sale of premises and equipment ............... -- 1,000
------------ ------------
Net cash used by investing activities .................. (46,763,223) (24,071,556)
Financing Activities:
Net decrease in non-interest bearing demand deposits ....... (2,815,035) (18,428)
Net increase in interest bearing demand and savings deposits 73,875 1,646,547
Net increase in time deposits .............................. 1,832,399 25,888,624
Net increase (decrease) in short-term borrowings ........... 41,331,882 682,961
Issuance (principal repayment) of long-term debt ........... (3,633) 595,741
Cash dividends paid ........................................ (469,453) (391,209)
------------ ------------
Net cash provided by financing activities ............. 39,950,035 28,404,236
------------ ------------
Net Increase (Decrease) in Cash and Cash Equivalents ........ (6,758,895) 4,944,549
Cash and Cash Equivalents Beginning Balance .................. 30,063,201 13,442,504
------------ ------------
Cash and Cash Equivalents Ending Balance ..................... $ 23,304,306 $ 18,387,053
============ ============
Supplemental disclosure of cash-flow information:
Non-cash investing and financial activities:
Securities purchased not settled .......................... 16,026,227 --
Securities sold not settled ............................... 16,813,479 --
</TABLE>
5
<PAGE>
AMERICAN BANCORPORATION FORM 10-Q Quarterly Report
March 31, 1999
American Bancorporation and Subsidiaries
CONSOLIDATED STATEMENT OF
CHANGES IN STOCKHOLDERS' EQUITY
Three months ended March 31, 1999 and 1998
1999 1998
------------ ------------
Balance at January 1, .................... $ 36,447,493 $ 33,693,846
Comprehensive results:
Net Income .............................. 1,284,620 1,253,507
Other comprehensive income, net of tax .. (719,971) 236,994
Reclassification adjustment, net of tax . (197,352) (46,500)
------------ ------------
Total comprehensive results ............. 367,297 1,444,001
Dividends declared ($0.15 per share 1999,
$0.125 per share 1998) ............. (469,451) (391,209)
------------ ------------
Balance at March 31, ..................... $ 36,345,339 $ 34,746,638
============ ============
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 1998 Annual Report to Stockholders should be read in
conjunction with these statements. Certain prior period amounts have been
reclassified to conform to the current period classification.
6
<PAGE>
AMERICAN BANCORPORATION FORM 10-Q Quarterly Report
March 31, 1999
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 1998 Annual
Report and the financial statements appearing elsewhere herein.
SUMMARY
American Bancorporation (the "Company") recognized net income of $1,285,000
or $0.41 basic earnings per share, for the three months ended March 31, 1999,
compared to net income of $1,254,000 or $0.40 basic earnings per share, for the
three months ended March 31, 1998. Return on average assets and return on
average equity were 0.80% and 14.02%, respectively, for the three months ended
March 31, 1999 compared to 1.00% and 14.52%, respectively, for the three months
ended March 31, 1998.
Total assets at March 31, 1999 increased to $652,173,000, from $515,435,000
at March 31, 1998, an increase of 26.5%. Deposits increased to $430,331,000 at
March 31, 1999, from $383,251,000 at March 31, 1998, an increase of 12.3%. Total
stockholders' equity was $36,345,000 at March 31, 1999, which represents a 4.6%
increase over total stockholders' equity of $34,747,000 at March 31, 1998.
RESULTS OF OPERATIONS
QUARTER COMPARISON
Net Income. Net income for the three months ended March 31, 1999 amounted
to $1,285,000, or $0.41 basic earnings per share, compared to net income of
$1,254,000 or $0.40 basic earnings per share, for the three months ended March
31, 1998. The increase was the result of an increase in net interest income and
a decrease in income taxes which was partially offset by increases in other
expense and provision for loan losses.
Net Interest Income. Net interest income before provision for loan losses
for the three months ended March 31, 1999 amounted to $4,304,000, an increase of
$40,000 or 0.9%, compared to the three months ended March 31, 1998. The increase
resulted primarily from a $135,645,000 increase in average interest earning
assets , which was partially offset by a 77 basis point decrease in the
Company's margin.
Total interest income for the three months ended March 31, 1999 amounted to
$10,911,000, an increase of $1,583,000 or 17.0%, compared to the three months
ended March 31, 1998. The increase resulted primarily from the increase in the
average interest earning assets which was partially offset by a 72 basis point
decrease in the average yield on earning assets. Average loans outstanding
increased $18,720,000 or 6.5% with average commercial loans increasing
$26,519,000 or 27.9%, while average real estate loans decreased $6,031,000 or
4.3% and average consumer installment loans decreased $1,767,000 or 3.6%. The
average yield on loans decreased from 8.80% in 1998 to 8.50% in 1999. Average
investment securities and other short-term investments outstanding increased
$116,924,000 or 62.7% while the average yield decreased from 6.48% in 1998 to
5.83% in 1999.
7
<PAGE>
AMERICAN BANCORPORATION FORM 10-Q Quarterly Report
March 31, 1999
Total interest expense for the three months ended March 31, 1999 amounted
to $6,608,000, an increase of $1,543,000 or 30.5%, compared to the three months
ended March 31, 1998. The increase resulted primarily from a $131,526,000
or30.83% increase in average interest bearing liabilities. Average NOW, money
market and savings accounts decreased $2,114,000 or 1.8%. Average time deposits
increased $55,387,000 or 25.3%, primarily the result of increased marketing
efforts. Average non-interest bearing accounts increased $4,232,000 or 13.1% and
represented 8.5% of average total deposits for the three months ended March 31,
1999. Average short-term borrowings increased $67,549,000 or 78.8%, while the
average rate paid on short-term borrowings decreased from 5.46% in 1998 to 4.92%
in 1999.
Provision for Loan Losses. The loan loss provision for the three months
ended March 31, 1999 was $75,000, compared to $60,000 for the same period in
1998.
Other Income. Other income for the three months ended March 31, 1999
amounted to $1,000,000, an increase of $3,000 or 0.3% compared to the three
months ended March 31, 1998. Net gains on sale of loans decreased $53,000 or
11.6%. Net gains on sale of investment securities totalled $268,000 in 1999,
compared to $156,000 in 1998.
Other Expense. Total other expense for the three months ended March 31,
1999 amounted to $3,642,000, an increase of $251,000 or 7.4%, compared to the
three months ended March 31, 1998. Salaries and employee benefits increased
$178,000 or 11.1%. Occupancy and equipment expense increased $53,000 or 9.1%.
Other (miscellaneous) expenses increased $20,000 or 1.7%.
Provision for Income Taxes. The provision for income taxes for the three
months ended March 31, 1999 was $301,000, compared to $554,000 for the three
months ended March 31, 1998. The decrease is primarily the result of additional
tax-exempt income in 1999.
8
<PAGE>
AMERICAN BANCORPORATION FORM 10-Q Quarterly Report
March 31, 1999
ASSET QUALITY
Nonperforming loans totalled $2,730,000 or 0.9% of total loans at March
31, 1999, compared to $2,960,000 or 1.0% at December 31, 1998. Nonperforming
loans at March 31, 1999 consisted of nonaccrual loans totalling $1,087,000, 90
day delinquent loans of $1,318,000, and restructured loans aggregating $325,000.
Other real estate held totalled $346,000 at March 31, 1999, compared to $183,000
at December 31, 1998.
CAPITAL RESOURCES
Stockholders' equity totalled $36,345,000 at March 31, 1999. The
Company's risk-based capital ratio was 16.1%, of which 15.0% constituted common
stockholder equity, while the risk-based capital ratio for the Company's bank
subsidiary, Wheeling National Bank, was 14.7%, with common stockholders' equity
of 13.7%. At March 31, 1999 the Company's leverage capital ratio was 7.6%, while
the leverage ratio for Wheeling National Bank was 7.0%.
YEAR 2000 COMPLIANCE
The Company may be 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
Issue. A number of computer systems which are affected by Year 2000 are utilized
by the Company to operate its day-to-day business.
Management has established a task force to develop and maintain a Year
2000 Compliance Plan. The Company's Year 2000 Compliance Plan has been prepared
in accordance with the Federal Financial Institutions Examination Council
("FFIEC") guidelines on Year 2000 Compliance and involves the following five
phases: awareness, assessment, renovation, validation and implementation. To
date, the Company has completed the awareness, assessment and renovation phases
of the Year 2000 Compliance Plan.
The validation/testing phase of mission critical third party hardware
and software systems required by the FFIEC has been completed, noting no Year
2000 compliance issues. The Company is expected to complete the Year 2000
project no later than June 30, 1999.
The Company has contacted large commercial customers and significant
suppliers to determine their capability to resolve the Year 2000 issues and
attain compliance. Risk ratings have been assigned to customers and suppliers.
Further contact will occur based on survey results.
The Company has prepared general contingency plans to address unforeseen
Year 2000 issues. Contingency plans will be continuously monitored and updated
as conditions change throughout 1999 and into the Year 2000.
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.
9
<PAGE>
AMERICAN BANCORPORATION FORM 10-Q Quarterly Report
March 31, 1999
Three months ended March 31,
1999 1998
---------------- ---------------
Average Yield/ Average Yield/
Balance Rate Balance Rate
INTEREST EARNING ASSETS (000's) (000's)
Loans
Commercial........................ $121,725 8.57% $ 95,206 9.11%
Real estate....................... 135,878 8.14 141,910 8.33
Installment-net.................. 47,714 8.39 49,481 8.42
-------- --------
Total loans ................... 305,317 8.50 286,597 8.80
Investment securities
Taxable........................... 247,215 6.08 181,246 6.44
Tax-exempt....................... 47,244 4.62 1,089 8.37
-------- ---------
Total investment securities ... 294,459 5.84 182,335 6.45
Other short-term investments...... 9,007 5.48 4,207 7.74
-------- ---------
Total interest earning assets... $608,784 7.17 $473,139 7.88
======== ========
INTEREST BEARING LIABILITIES
Deposits
NOW, Savings and MMDA............. $118,016 2.26% $120,130 2.63%
Time............................. 274,184 5.51 218,797 5.58
--------- --------
Total deposits.................. 392,200 4.53 338,927 4.54
Short-term borrowings............. 153,315 4.92 85,766 5.46
Long-term debt.................... 12,659 8.71 1,955 10.17
--------- --------
Total interest
bearing liabilities.......... $558,173 4.74 $426,648 4.75
======== ========
MARGIN ANALYSIS
(as a % of earning assets)
Interest income.................... 7.17% 7.88%
Interest expense.................... 4.34 4.28
---- ----
Net interest income................ 2.83% 3.60%
==== ====
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.
10
<PAGE>
AMERICAN BANCORPORATION FORM 10-Q Quarterly Report
March 31, 1999
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Quantitative and qualitative disclosures about market risk are
presented at December 31, 1998 in Item 7a of the Company's Annual Report on Form
10-K filed with the SEC on March 31, 1999. Management believes there have been
no material changes in the Company's market risk since December 31, 1998.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
B. Reports on Form 8-K:
Date Item Description
None
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN BANCORPORATION
(Registrant)
Date May 14, 1999 /s/ Jeremy C. McCamic
---------------------------- ------------------------
Jeremy C. McCamic
Chairman and
Chief Executive Officer
Date May 14, 1999 /s/ Brent E. Richmond
---------------------------- ------------------------
Brent E. Richmond
Executive Vice
President and
Chief Operating Officer
Date May 14, 1999 /s/ Jeffrey A. Baran
------------------------------ -------------------------
Jeffrey A. Baran
Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<S> <C>
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-TYPE> 3-MOS
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 14,742,876
<INT-BEARING-DEPOSITS> 465,405
<FED-FUNDS-SOLD> 8,096,025
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 300,929,464
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 307,900,341
<ALLOWANCE> 3,028,522
<TOTAL-ASSETS> 668,199,538
<DEPOSITS> 430,331,434
<SHORT-TERM> 165,223,065
<LIABILITIES-OTHER> 23,642,091
<LONG-TERM> 12,657,609
<COMMON> 7,824,185
0
0
<OTHER-SE> 28,521,154
<TOTAL-LIABILITIES-AND-EQUITY> 668,199,538
<INTEREST-LOAN> 6,486,015
<INTEREST-INVEST> 4,301,886
<INTEREST-OTHER> 123,373
<INTEREST-TOTAL> 10,911,274
<INTEREST-DEPOSIT> 4,445,526
<INTEREST-EXPENSE> 6,607,552
<INTEREST-INCOME-NET> 4,303,722
<LOAN-LOSSES> 75,000
<SECURITIES-GAINS> 267,812
<EXPENSE-OTHER> 3,642,350
<INCOME-PRETAX> 1,586,012
<INCOME-PRE-EXTRAORDINARY> 1,284,620
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,284,620
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0.41
<YIELD-ACTUAL> 0283
<LOANS-NON> 1,087,000
<LOANS-PAST> 1,318,000
<LOANS-TROUBLED> 325,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
