UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _________________ to ___________________
.
Commission File Number 0-181227
AMERICAN BANCORP OF NEVADA
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(Exact Name of Registrant as Specified in its Charter)
Nevada 94-2792608
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(State of Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
4425 Spring Mountain Road, Las Vegas, Nevada 89102
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (702) 362-7222
Securities registered pursuant to Section 12 (b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
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None None
Securities registered pursuant to section 12(g) of the Act:
Common, $.05 par value
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(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X]
As of March 10, 1997, the aggregate market value of the voting shares
held by nonaffiliates of the Registrant was approximately $72,575,880 computed
using a price of $19.50 per share.
The number of shares of Common Stock, $.05 par value outstanding as of
March 10, 1997, according to the records of registrant's registrar and transfer
agent was 3,721,840. .
DOCUMENTS INCORPORATED BY REFERENCE
Part III - Portions of the registrant's proxy statement to be filed in
conjunction with the annual meeting of the stockholders of the registrant to be
held on April 21, 1997, are incorporated by reference into items 10 through 13
inclusive.
<PAGE>
PART I
ITEM 1 - BUSINESS
a. General Development of Business
American Bancorp of Nevada ("Bancorp") was organized and incorporated under the
laws of the State of Nevada on January 12, 1982, for the purpose of becoming a
bank holding company by acquiring all of the outstanding capital stock of
American Bank of Commerce ("Bank"). The reorganization of Bancorp was completed
on August 5, 1982. Bancorp has three subsidiaries: Bank, a Nevada
state-chartered bank headquartered in Las Vegas, Nevada; AmBank Financial, Inc.
("Financing Company") and AmBank Mortgage Company ("Mortgage Company").
Both Financing Company's and Mortgage Company's operations have been
substantially curtailed since 1985 and these entities are essentially inactive.
Bank was incorporated under the laws of the State of Nevada on June 8, 1979, and
was licensed by the Nevada State Banking Department and commenced operations as
a Nevada state-chartered bank on November 26, 1979. Bank is an insured bank
under the Federal Deposit Insurance Act, with deposits insured up to the
applicable limits thereof, but, like many state-chartered banks of its size, it
is not a member of the Federal Reserve System.
The primary services provided by the Bank include commercial, construction, and
real estate financing, and business loans to customers who are predominantly
small- and middle-market businesses. The bank also grants consumer loans to
individuals, offers a full array of depository accounts and provides full trust
and estate administration services.
The Company's business is concentrated in Southern Nevada and is subject to the
general economic conditions of this area.
Bank currently operates out of its head office at 4425 Spring Mountain Road, Las
Vegas, Nevada, 89102. It also operates out of four branch offices, all located
in Las Vegas, Nevada.
b. Financial Information About Industry Segments
Bancorp has no industry segments other than banking related operations.
c. Narrative Description of Business
Regulation and Supervision of the Holding Company
Upon the reorganization of Bank on August 5, 1982, Bancorp became a bank holding
company within the meaning of the Bank Holding Company Act of 1956, as amended,
(the "Act"), and is subject to the supervision and regulation of the Board of
Governors of the Federal Reserve System, (the "Board"). Bank is currently
subject to regulation by the Superintendent of Banks of Nevada and by the
Federal Deposit Insurance Corporation ("FDIC"). Bank will remain under the
supervision of these regulatory authorities.
As a bank holding company, Bancorp is required to file annual reports and other
information concerning its business operations and those of its subsidiaries as
the Federal Reserve Board may require pursuant to the Act.
Bancorp and its subsidiaries are also subject to examination by the Board.
Bancorp is required to obtain the prior approval of the Board before it may
acquire all or substantially all of the assets of any bank, or ownership or
control of voting securities of any bank, or ownership or control of voting
securities of any bank if, after giving effect to such acquisition, Bancorp
would own or control more than 5 percent of the voting shares of such bank.
Bancorp is prohibited from acquiring 5 percent or more of a bank's stock if the
bank is located outside the State of Nevada, unless such acquisition is
specifically authorized by the laws of the state in which the bank is located.
Furthermore, Bancorp is prohibited from engaging in or acquiring, directly or
indirectly, control of more than 5 percent of the voting shares of any company
which is engaged in non-banking activities. In making such determinations, the
Board considers whether the performance of such activities by a bank holding
company would offer advantages to the public which outweigh possible adverse
effects. One of the exceptions to this prohibition is the acquisition of shares
of a company, the activities of which the Board has determined to be so closely
related to banking, or managing or controlling banks, as to be a proper incident
thereof.
<PAGE>
A bank holding company and its subsidiaries are also prohibited from engaging in
certain tie-in arrangements in connection with extensions of credit, leases,
sales, or the furnishing of services. For example, the banking subsidiaries will
generally be prohibited from extending credit to a customer on the condition
that the customer also obtain other services furnished by the bank, the holding
company, or any of its subsidiaries, or on the condition that the customer
promise not to obtain financial services from a competitor.
Bancorp and any subsidiaries which it may acquire or organize after the
reorganization will be deemed "affiliates" within the meaning of the Federal
Reserve Act. Pursuant thereto, loans by the banking subsidiaries to affiliates,
investments by the Bank in affiliates' stock, and taking affiliates' stock by
the Bank as collateral for loans to any borrower will be generally limited to 10
percent of the Bank's capital, in the case of any one affiliate, and will be
limited to 20 percent of the Bank's capital, in the case of all affiliates.
Bancorp and its subsidiaries will also be subject to certain restrictions with
respect to engaging in the underwriting, public sale and distribution of
securities.
The Nevada Revised Statutes provide that a holding company and its subsidiaries
are subject to regular examination by and may be required to file reports with
the Superintendent of Banks.
The Board under Regulation "Y" permits bank holding companies to engage in
non-banking activities closely related to banking or managing or controlling
banks, subject to Board approval in certain cases.
Bancorp may also file applications to engage in or acquire businesses that are
not on the Board's list of non-banking activity closely related to banking or
managing or controlling banks. The Board will publish a notice of opportunity
for hearing only if it believes that there is a reasonable basis for concurring
in Bancorp's view that the activity applied for is closely related to banking.
There has been litigation from time to time challenging the validity of certain
activities authorized by the Board, and there are various regulations concerning
permissible activities under consideration by the Board.
Bank's operations include the acceptance of checking and savings deposits, and
the making of commercial, real estate, home improvement, construction,
automobile and other vehicle loans, and other consumer loans. Bank also offers
many customary services, including, but not limited to, cashier's checks,
bank-by-mail, automatic check deposit and traveler's checks.
In July of 1985, the Bank began operation of the Financial Services department.
This department has full trust powers, but has specialized in pension and profit
sharing plan administration. To date, the business development efforts in
obtaining accounts has been successful and the Bank anticipates future growth
and profitability from this operation.
The banking business in Nevada, and in the market served by Bank, is highly
competitive. Bank competes for loans and deposits with other commercial banks,
savings banks, finance companies, credit unions, and other financial
institutions. In addition, other entities (both governmental and private
industry) seeking to raise capital through the issuance and sale of debt or
equity securities, mutual funds, or tax deferred annuities also provide
competition for Bank in the acquisition of deposits. Larger commercial banks
have greater lending limits than Bank and may perform certain other functions
which Bank does not currently offer.
In order to compete with other financial institutions in its primary service
area, Bank relies principally upon local promotional activities, customer
referrals, personal contact by its officers, directors, employees and
shareholders, extended hours and specialized services. From 1994 through 1996, a
total of five new banks opened in Las Vegas which are targeting Bank's customer
market.
While there are twelve commercial banks in the service area, Bank believes its
emphasis on customer service and personal contact set it apart from its
competitors. Concentrating on the small to medium size business accounts
effectively limits Bank's direct competition to six other banks.
Regulation and Supervision of the Bank
Bank is a Nevada state-chartered bank with commercial banking powers, and its
deposits are insured up to the maximum legal limit by the FDIC. Bank is subject
to supervision, regulation and regular examination by the State of Nevada
Financial Institutions Division and the FDIC. Although Bank is not a member of
the Federal Reserve System, it is nevertheless, subject to certain regulations
of the Board of Governors of the Federal Reserve System. The statutes and rules
administered by these agencies regulate the investment activities of Bank,
loans, certain of its check-clearing activities, payments of dividends, the
establishment of new branches, as well as numerous other aspects of the banking
business.
<PAGE>
Recent Legislation and Other Changes
From time to time, legislation is enacted which has the effect of increasing the
cost of doing business, limiting or expanding permissible activities or
affecting the competitive balance between banks and other financial
institutions. Proposals to change the laws and regulations governing the
operations and taxation of banks and other financial institutions are frequently
made in Congress, in the Nevada legislature and before various bank regulatory
agencies. The likelihood of any major changes and the impact such changes might
have on the Bancorp and Bank are impossible to predict. Certain of the
potentially significant changes which have been enacted recently by Congress or
various regulatory or professional agencies are discussed below.
The Economic Growth and Regulatory Paperwork Reduction Act (the "1996 Act") as
part of the Omnibus Appropriations Bill was enacted on September 30, 1996 and
includes many banking related provisions. The most important banking provision
is the recapitalization of the Savings Association Insurance Fund ("SAIF"). The
1996 Act provides for a one time assessment of approximately 65 basis points per
$100 of deposits of SAIF insured deposits including Oakar deposits payable on
November 30, 1996. For the years 1997 through 1999 the banking industry will
assist in the payment of interest on FICO bonds that were issued to help pay for
the clean up of the savings and loan industry. Banks will pay approximately 1.3
cents per $100 of deposits for this special assessment, and after the year 2000,
banks will pay approximately 2.4 cents per $100 of deposits until the FICO bonds
mature in 2017. There is a three year moratorium on conversions of SAIF deposits
to Bank Insurance Fund ("BIF") deposits. The 1996 Act also has certain
regulatory relief provisions for the banking industry. Lender liability under
the Superfund is eliminated for lenders who foreclose on property that is
contaminated provided that the lenders were not involved with the management of
the entity that contributed to the contamination. There is a five year sunset
provision for the elimination of civil liability under the Truth in Savings Act.
The FRB and Department of Housing and Urban Development are to develop a single
format for Real Estate Settlement Procedures Act and Truth in Lending Act
("TILA") disclosures. TILA disclosures for adjustable mortgage loans are to be
simplified. Significant revisions are made to the Fair Credit Reporting Act
("FCRA") including requiring that entities which provide information to credit
bureaus conduct an investigation if a consumer claims the information to be in
error. Regulatory agencies may not examine for FCRA compliance unless there is a
consumer complaint investigation that reveals a violation or where the agency
otherwise finds a violation. In the area of the Equal Credit Opportunity Act,
banks that self-test for compliance with fair lending laws will be protected
from the results of the test provided that appropriate corrective action is
taken when violations are found.
Effective September 28, 1995, Nevada allows for early interstate banking and
authorizes out-of-state banks to enter Nevada by the acquisition of or merger
with a Nevada bank that was in existence at September 28, 1995 or has been in
existence for at least five years. Under the federally enacted Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 ("IBBEA"), discussed in
more detail below, individual states could "opt-out" of the federal law that
would allow banks on an interstate basis to engage in interstate branching by
merging out-of-state banks with host state banks after June 1, 1997. In addition
under IBBEA, individual states could also "opt-in" and allow out-of-state banks
to merge with host state banks prior to June 1, 1997. The host state is allowed
under IBBEA to impose certain nondiscriminatory conditions on the resulting
depository institution until June 1, 1997. Nevada in enacting NRS 666.400 et
seq. provides for the "opt-in" under IBBEA allowing interstate bank merger
transactions prior to July 1, 1997 of an out-of-state bank with a Nevada bank.
On September 29, 1994, IBBEA was enacted which has eliminated many of the
current restrictions to interstate banking and branching. The IBBEA permits full
nationwide interstate banking to adequately capitalized and adequately managed
bank holding companies beginning September 29, 1995 without regard to whether
such transaction is expressly prohibited under the laws of any state. The
IBBEA's branching provisions permit full nationwide interstate bank merger
transactions to adequately capitalized and adequately managed banks beginning
June 1, 1997. However, states retain the right to completely "opt out" of
interstate bank mergers and to continue to require that out-of-state banks
comply with the states' rules governing entry.
<PAGE>
The states that opt out must enact a law after September 29, 1994 and before
June 1, 1997 that (i) applies equally to all out-of-state banks and (ii)
expressly prohibits merger transactions with out-of-state banks. States which
opt out of allowing interstate bank merger transactions will preclude the
mergers of banks in the opting out state with banks located in other states. In
addition, banks located in states that opt out are not permitted to have
interstate branches. States can also "opt in" which means states can permit
interstate branching earlier than June 1, 1997.
The laws governing interstate banking and interstate bank mergers provide that
transactions, which result in the bank holding company or bank controlling or
holding in excess of ten percent of the total deposits nationwide or thirty
percent of the total deposits statewide, will not be permitted except under
certain specified conditions. However, any state may waive the thirty percent
provision for such state. In addition, a state may impose a cap of less than
thirty percent of the total amount of deposits held by a bank holding company or
bank provided such cap is not discriminatory to out-of-state bank holding
companies or banks.
On September 23, 1994, the Riegle Community Development and Regulatory
Improvement Act of 1994 (the "1994 Act") was enacted which covers a wide range
of topics including small business and commercial real estate loan
securitization, money laundering, flood insurance, consumer home equity loan
disclosure and protection as well as the funding of community development
projects and regulatory relief.
The major items of regulatory relief contained in the 1994 Act include an
examination schedule that has been eased for the top rated banks and will be
every 18 months for CAMEL 1 banks with less than $250 million in total assets
and CAMEL 2 banks with less than $100 million in total assets (the $100 million
amount was amended to $250 million by the 1996 Act discussed above). The 1994
Act amends Federal Deposit Insurance Corporation Improvement Act of 1991 with
respect to the Section 124, the mandate to the federal banking agencies to issue
safety and soundness regulations, including regulations concerning executive
compensation allowing the federal banking regulatory agencies to issue
guidelines instead of regulations.
Further regulatory relief is provided in the 1994 Act, as each of the federal
regulatory banking agencies including the National Credit Union Administration
Board is required to establish an internal regulatory appeals process for
insured depository institutions within 6 months. In addition, the Department of
Justice 30 day waiting period for mergers and acquisitions is reduced by the
1994 Act to 15 days for certain acquisitions and mergers.
In the area of currency transaction reports, the 1994 Act requires the Secretary
of the Treasury to allow financial institutions to file such reports
electronically. The 1994 Act also requires the Secretary of the Treasury to
publish written rulings concerning the Bank Secrecy Act, and staff commentary on
Bank Secrecy Act regulations must also be published on an annual basis.
On December 17, 1993, the President signed into law the Resolution Trust
Corporation Completion Act to provide additional funding for failed savings
associations under the jurisdiction of the Resolution Trust Corporation. In
addition to providing such funding, the legislation, among other things, makes
it more difficult for the federal banking agencies to obtain prejudgment
injunctive relief against depository institutions and parties affiliated with
such institutions, extends the moratorium on depository institutions converting
from Savings Association Insurance Fund insurance to Bank Insurance Fund
insurance or vice versa, and prohibits the FDIC from using any deposit insurance
funds to benefit the shareholders of a failed or failing depository institution.
The Omnibus Budget Reconciliation Act of 1993 (the "Budget Act"), which was
signed into law on August 10, 1993, contains numerous tax and other provisions
which may affect financial institutions and their businesses. The Budget Act
contains a provision that establishes a priority for depositors, or the FDIC as
subrogee thereof, in the event of a liquidation or other resolution of an
insured depository institution for which a receiver is appointed after August
10, 1993. In addition, under the existing cross-guarantee provisions of federal
banking law, the FDIC has the power to estimate the cost of the failure of an
insured depository institution and assess a charge against any financial
institution affiliated with the failed institution.
<PAGE>
On December 19, 1991, the FDIC Improvement Act of 1991 (the "1991 Act") was
signed into law. The 1991 Act provides for the recapitalization and funding of
the Bank Insurance Fund of the FDIC. In addition, the 1991 Act includes many
changes to banking law. Supervisory reforms provided under the 1991 Act include
annual on-site full scope examinations of most insured institutions, additional
audit and audit report requirements imposed on most insured institutions and a
new annual report requirement for most insured institutions. Accounting reforms,
including the prescription of accounting principles no less stringent than
generally accepted accounting principles, and prescription of standards for the
disclosure of off-balance sheet items, market value information and capital
adequacy, are also provided for in the 1991 Act. In addition, the 1991 Act
provides for a new rating system for insured institutions based on capital
adequacy. Institutions will be categorized as critically undercapitalized,
significantly undercapitalized, undercapitalized, adequately capitalized and
well capitalized.
The FDIC has adopted definitions of how institutions will be ranked for prompt
corrective action purposes. These definitions are as follows: (i) a well
capitalized institution is one that has a leverage ratio of 5%, a Tier 1
risk-based capital ratio of 6%, a total risk-based capital ratio of 10% and is
not subject to any written order or final directive by the FDIC to meet and
maintain a specific capital level; (ii) an adequately capitalized institution is
one that meets the minimum required capital adequacy levels but not that of a
well capitalized institution; (iii) an undercapitalized institution is one that
fails to meet any one of the minimum required capital adequacy levels but not as
undercapitalized as a significantly undercapitalized institution; (iv) a
significantly undercapitalized institution is one that has a total risk-based
capital ratio of less than 6% and/or a leverage ratio of less than 3%; and (v) a
critically undercapitalized institution is one with a leverage ratio of less
than 2%.
The banking regulators will have broad powers to regulate undercapitalized
institutions. Undercapitalized institutions must file capital restoration plans
and are automatically subject to restrictions on dividends, management fees and
asset growth. In addition, the institution is prohibited from opening new
branches, making acquisitions or engaging in new lines of business without the
approval of its appropriate banking regulator.
Holding companies with undercapitalized institutions will be prohibited from
capital distributions without the prior approval of the FRB. Definite drop dead
dates are mandated under the 1991 Act for when critically undercapitalized
insured institutions must go under receivership or conservator-ship.
The 1991 Act also requires the regulators to issue regulations in many areas of
banking including prescribing safety and soundness standards as to internal
controls, asset quality, earnings, stock valuation and executive compensation.
Least cost resolution is mandated by the 1991 Act which will require the FDIC to
use the least cost method case resolution. Beginning in 1995, the FDIC generally
will not be permitted to cover uninsured depositors or creditors unless the
President, Secretary of Treasury and the FDIC jointly determine that such is
necessary to avoid systemic risk.
The 1991 Act also contains miscellaneous provisions including additional
regulation of foreign banks, notification of branch closures, reduced
assessments for lifeline account products, FDIC affordable housing program,
Truth in Savings disclosure provisions, limitations on brokered deposits,
restrictions on state bank nonbanking activities, risk-based assessments and
deposit insurance limitations for certain accounts. The FDIC also adopted a
risk-based assessment system for purposes of determining the insurance premium
to be paid by a bank for FDIC deposit insurance. In addition, the 1991 Act
requires that federal banking regulators take into account risks other than
credit risks with respect to capital standards. On September 1, 1995, the
federal banking regulators (other than the Office of Thrift Supervision ("OTS"))
issued a final rule to take into account interest rate risk in calculating risk
based capital. On June 26, 1996, a joint agency policy statement was issued by
all of the federal banking regulators except the OTS to provide guidance on
sound practices for managing interest rate risk. The agencies did not in the
policy statement elect not to implement a standardized measure and quantitative
capital charge, though the matter was left open for future implementation.
Rather the policy statement provided standards for the banking agencies to
evaluate the adequacy and effectiveness of a bank's interest rate risk
management and guidance to bankers for managing interest rate risk.
Specifically, effective interest rate risk management requires that there be (I)
effective board and senior management oversight of the bank's interest rate risk
activities, (ii) appropriate policies and practices in place to control and
limit risks, (iii) accurate and timely identification and measurement of
interest rate risk, (iv) an adequate system for monitoring and reporting risk
exposures and (v) appropriate internal controls for effective interest rate risk
management.
<PAGE>
The Comprehensive Thrift and Bank Fraud Prosecution and Taxpayer Recovery Act of
1990 (the "Crime Bill"), signed into law on November 29, 1990, also expanded the
enforcement powers of regulatory authorities. The Crime Bill increases fines and
prison terms for various financial institution related crimes; appoints
additional prosecutors; establishes a system of rewards for people providing
information leading to the prosecution of financial institution crimes; mandates
prison terms of ten years to life for "kingpins" of financial institution
crimes; makes it a crime to obstruct the examination of a financial institution
to conceal assets from a conservator or to impede conservatorship operations;
provides for the forfeiture of assets obtained through bank crimes; prohibits
persons convicted of bank crimes from engaging in certain transactions with
financial institutions or regulatory agencies; and provides that liabilities
arising from a breach of fiduciary duty to a financial institution or the breach
of an agreement to maintain the institution's capital cannot be discharged in
bankruptcy. Further, the Crime Bill prohibits a financial institution from
prepaying the salary, liabilities or legal expenses of an affiliated party if
such prepayments are made in contemplation of an institution's insolvency or if
such prepayments will prevent normal payments from being made to the
institution's creditors. Golden parachute and indemnification payments can also
be prohibited by regulatory authorities in certain circumstances if the
institution is insolvent, is in conservatorship or receivership, is in troubled
condition, or has received a regulatory rating in one of the two lowest rating
categories (or in contemplation of such events).
On August 9, 1989, Financial Institutions Reform, Recovery, and Enforcement Act
of 1989 ("FIRREA") was signed into law. FIRREA provided funding in the range of
many billions of dollars for the so-called "bailout" of insolvent or seriously
undercapitalized savings and loans, reorganized the federal regulatory structure
of the financial institution industry, and expanded the enforcement authority of
banking supervisory agencies. Tighter regulatory standards are required under
FIRREA for the performance of real estate appraisals, and FIRREA provides for
greater examination and disclosure of an insured depository institution's
compliance with the Community Reinvestment Act which deals with the
institution's record of meeting the credit needs of its entire community
including low and moderate income neighborhoods.
It is likely that other bills affecting the business of banks may be introduced
in the future by the United States Congress or Nevada legislature.
A discussion of accounting changes is included under Management's Discussion and
Analysis.
Government Monetary Policies
The commercial banking business is affected not only by general economic
conditions, but also by the monetary policies of regulatory authorities,
including the Board of Governors of the Federal Reserve System and the FDIC.
These government monetary policies have had a significant effect on the
operating results of commercial banks in general, and are expected to continue
to do so in the future.
The Federal Reserve Board regulates the national supply of bank credit by open
market dealings in United States government securities and changes in the
discount rate on member bank borrowings. The monetary policies of these agencies
are influenced by various factors, including inflation, unemployment, short term
and long term changes in the international trade balance, and the fiscal
policies of the United States government. Future monetary policies, and the
affect of such policies on the future business and earnings of Bancorp and Bank,
cannot be predicted.
Lending Activities
The following represents the significant categories of loans originated at the
Bank and the related risks associated with each type of lending activity:
Construction Lending: Target market is the small and medium size local builder
developing entry-level or first move up type single family residence tracts.
Bank will typically finance in appropriately sized phases and have pre-sale
requirements. Bank will finance owner-builder single family residence properties
for qualified borrowers. Financing is available on a limited basis for
speculative properties to financially sound borrowers.
Voucher control is required.
Risks include over-advance on collateral, environmental hazards, mis-use of
construction funds, project location and quality, and general real estate market
conditions.
<PAGE>
Commercial Mortgages: Such loans are used to fund the re-finance or acquisition
of commercial property, which is typically owner occupied, or where the owner
occupies a significant portion of the property. These properties are usually of
the office-warehouse configuration. Funding of speculative or income properties
is very limited. Risks include, but not limited to, over-advance on collateral,
single-purpose structure, environmental hazards, and commercial real estate
market conditions.
Business Term: Used to fund equipment purchases and plant expansions. These
loans are usually structured on a fully amortizing basis for term of 3-5 years
and are generally secured by equipment financed. Risks include over-advance on
equipment purchased, insufficient debt service coverage, unique or
single-purpose equipment with a limited re-sale market.
Revolving Lines of Credit: Lines are used to fund short term working capital
needs, finance accounts receivable and inventory purchases. Lines can be secured
or unsecured. Risks include normal credit risks, improper usage, diversion of
funds and the risk of the lines not revolving properly.
Investment Policy
At December 31, 1996, Bancorp had approximately $121,876,000 in its investment
portfolio. As part of Bank's normal operation, deposits not used to fund loans
are invested in a variety of securities offered by the Federal Government and
certain of its agencies, as well as municipalities. The general philosophy of
the Bank is to invest for relatively short periods of time and not try to
outguess the market. The stated policy of the Bank is that 70% of the portfolio
must mature within three years. The policy also stipulates allowable levels of
investments and, in the case of municipal bonds, the acceptable ratings
required. While there is interest rate risk involved with any investment, the
short term nature of the portfolio minimizes Bank's exposure to substantial
fluctuations in interest rates. Additionally, management maintains the majority
of the investment portfolio on a fixed rate basis. When purchasing municipal
bonds, Bank attempts to offset the credit risk by demanding sufficient spreads
to government bonds to compensate for the risk of default. At December 31, 1996,
the portfolio is comprised of approximately 56% Treasuries and Agencies, 23%
Collateralized Mortgage Obligations issued by Government Agencies and 18%
Municipal Bonds.
Interest Rate Risk
Management attempts to protect earnings from wide shifts in interest rates by
employing the following strategies:
Loans: Approximately 95% of the Bank's loan portfolio is written on an
adjustable basis that floats with the Bank's base rate. Thus, approximately
$120,401,000 reprices immediately upon a change in the base rate.
Investments: Total investments represent approximately 38% of total assets at
December 31, 1996. In administering the investment portfolio, management adheres
to the Company's "Investment Portfolio Policy and Guidelines", "Asset/Liability
Policy" and "Interest Rate Risk Policy". These internal policy guidelines
dictate the average life of at least 70% of the investment portfolio to be no
greater than three years. The actual average life of the portfolio at December
31, 1996 was approximately 1.92 years. This strategy of maintaining short
maturities provides maximum flexibility in managing fluctuating interest rates.
Additionally, the majority of the investment portfolio is of a fixed rate
nature. This enables management to provide an underlying level of income,
irrespective of changes in interest rates. Diversification for all areas of
investments is a key element in interest rate risk. Management monitors the
investment portfolio to ensure that an appropriate balance is maintained in
terms of both maturity and type of investment instrument. Monitoring is aided by
the use of a computer program, specializing in Asset/Liability Management and
Interest Rate Risk.
Deposits: Management discourages use of long-term Certificates of Deposit by
consistently paying at or below market rates and not offering greater than
one-year maturities, with the exception of 18 month IRAs and SEPs. At December
31, 1996, approximately 61% of time deposits had a maturity of three months or
less. Due to the large concentration of business accounts, approximately 44% of
all deposits at December 31, 1996 are non-interest bearing.
The above factors provide management the opportunity to maintain favorable net
interest margins under most normal interest rate scenarios.
<PAGE>
Employees
Bancorp, together with its subsidiaries, had 116 full-time equivalent employees
as of January 1, 1997.
d. Financial Information About Foreign and Domestic Operations and
Export Sales
Not applicable.
ITEM 2 - PROPERTIES
Bancorp operates out of Bank's head office located at 4425 Spring Mountain Road,
Las Vegas, Nevada, 89102. The Bank also operates branch offices located at 727
South 9th Street, Las Vegas, Nevada, 89104, 1690 East Flamingo, Las Vegas,
Nevada, 89119, 2980 West Sahara Avenue, Las Vegas, Nevada, 89102 and at 4050
Losee Road, North Las Vegas, Nevada, 89030. The Spring Mountain, West Sahara and
Losee Road properties are owned by Bank, the construction of which was provided
by internal available funds. The premises for the South 9th and East Flamingo
branches are leased. The rental payments for 1996 made for all premises total
$206,456. Leases for the South 9th Street and East Flamingo offices terminate
August 31, 2001 and November 30, 2006, respectively.
During the third quarter of 1996, the Company completed construction on a
two-story 16,000 square foot office complex located adjacent to its corporate
headquarters site which now houses its Financial Services department. The
building also offers additional leasing opportunities with approximately 13,000
rentable square feet of class "A" office space. As of December 31, 1996, the
Company had finalized lease agreements with tenants for approximately 10,600
square feet. Negotiations to rent the remainder are ongoing. Management
anticipates having the building fully occupied by the second quarter of 1997.
Plans are underway for a third building at the Company's corporate headquarters
site. The building will be designed to accommodate the Check Processing and Data
Processing departments as well as drive-up windows. The Bank's newest branch
facility located in the industrial area of North Las Vegas was officially open
as of August 7, 1996 and is now serving customers located within that area. This
newest branch consists of approximately 5,000 square feet with two drive up
windows. The Bank now has a total of five branches throughout the Las Vegas
area. Construction of both facilities was funded by cash flows from operations
and had no significant impact on capital. During the fourth quarter of 1996 the
Company purchased approximately 2.22 acres of raw land in the southwest area of
Las Vegas and anticipates opening another branch office during 1997. This would
make a total of six branches in the Las Vegas Valley area. Construction of the
new processing center and branch will be funded through cash flows from
operations. The impact on capital is not expected to be significant.
ITEM 3 - LEGAL PROCEEDINGS
No material legal proceedings are pending against Bancorp or its subsidiaries
other than ordinary, routine litigation incidental to the business of Bancorp
and its subsidiaries.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
<PAGE>
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
a. Market Information
The Company's common stock trades on the NASDAQ National Market tier of the
NASDAQ stock market under the symbol:ABCN.
The following table sets forth certain stock quotations for each quarterly
period since January 1, 1995. Stock prices represent the range of high and low
quotations from the National Association of Securities Dealers, Inc. Such market
quotations may not represent actual transactions. Amounts have been adjusted to
reflect stock splits and stock dividends.
Stock Price
----------------------------
Quarter Ended High Low
- ------------------------------------------ --------- ---------
March, 1997 (through March 10, 1997) ..... $ 20.50 $ 15.25
December, 1996 ........................... $ 17.50 $ 15.00
September, 1996 .......................... $ 18.25 $ 13.00
June, 1996 ............................... $ 24.00 $ 16.50
March, 1996 .............................. $ 20.00 $ 15.00
December, 1995 ........................... $ 16.00 $ 12.75
September, 1995 .......................... $ 13.00 $ 12.25
June, 1995 ............................... $ 13.00 $ 12.00
March, 1995 .............................. $ 14.50 $ 12.25
b. Holders
The approximate number of holders of Bancorp's common stock is based on the
number of record holders as of December 31, 1996, and is 650.
c. Dividends
On March 18, 1996, the Board of Directors of the Company declared a 15% stock
dividend on the outstanding shares of common stock of the Company, effective on
April 9, 1996 to stockholders of record on April 2, 1996. On March 20, 1995 the
Board of Directors of the Company declared a four-for-three stock split on the
outstanding shares of common stock of the Company, effective on April 11, 1995
to stockholders of record on April 4, 1995. On March 21, 1994 the Board of
Directors of the Company declared a 15% stock dividend on the outstanding shares
of common stock of the company effective on April 12, 1994 to stockholders of
record on April 5, 1994.
It is the policy of Bancorp to pay cash dividends to shareholders only when it
is prudent to do so and Bancorp's performance justifies such action.
Accordingly, no assurance can be given that cash dividends will ever be declared
by Bancorp. At this time, it is not the intention of Bancorp to declare cash
dividends for the foreseeable future.
State of Nevada banking regulations restrict distribution of the net assets of
the Bank because such regulations require the sum of the Bank's stockholders'
equity and allowance for loan losses to be at least 6% of the average of the
Bank's total daily deposit liabilities for the preceding 60 days. As a result of
these regulations, approximately $14,175,000 and $12,367,500 of the Bank's
stockholders' equity was restricted at December 31, 1996 and 1995, respectively.
<PAGE>
ITEM 6 - SELECTED FINANCIAL DATA
<TABLE>
At Year-End 1996 1995 1994 1993 1992
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Total Securities (2) ..................... $ 121,875,695 $ 120,589,071 $ 115,800,375 $ 111,322,628 $ 83,301,300
Total Net Loans .......................... 125,426,641 93,244,167 75,378,085 65,057,540 56,123,073
Total Assets ............................. 317,854,123 276,690,628 227,419,250 210,463,073 178,243,042
Total Deposits ........................... 248,595,953 211,523,839 192,811,233 173,664,075 154,909,321
Total Stockholders' Equity (2) ........... 31,651,410 26,888,923 20,131,146 17,928,913 15,415,916
For the Year
Total Interest Income .................... $ 20,272,630 $ 19,408,247 $ 14,416,296 $ 11,298,826 $ 9,872,039
Total Interest Expense ................... 5,792,329 6,015,423 3,323,811 2,768,571 2,891,802
Net Interest Income ...................... 14,480,301 13,392,824 11,092,485 8,530,255 6,980,237
Provision for Loan Loss .................. 375,000 570,000 20,000 130,000 150,000
Securities Gain/(Loss) ................... 307,258 (19,922) (246,245) 349,066 399,772
Income before cumulative
effect of change in
accounting principle (1) ............... 4,877,378 4,107,091 3,314,281 2,222,168 1,831,252
Net Income ............................... 4,877,378 4,107,091 3,314,281 2,307,168 1,831,252
Per Share Data (4)
Income before cumulative
effect of change in
accounting principle (1) ................ $ 1.28 $ 1.10 $ .90 $ .63 $ .54
Net Income ............................... 1.28 1.10 .90 .65 .54
Cash Dividends (none paid)
Book value per share (2) (3) ............. 8.51 7.20 6.10 5.19 4.56
<FN>
(1) Federal Income Taxes
</FN>
</TABLE>
Effective January 1, 1993, Bancorp adopted Statement of Financial Accounting
Standards No. 109 ("SFAS 109"), Accounting for Income Taxes. The adoption of
SFAS 109 changed Bancorp's method of accounting for income taxes to an asset and
liability approach. Prior to 1993, Bancorp accounted for income taxes under
Statement of Financial Accounting Standards No. 96 (SFAS96).
(2) FAS 115
Book value for 1996, 1995 and 1994 is calculated exclusive of an adjustment to
total capital of $16,000, $284,000 and ($1,987,500) respectively, net of tax
effect, as a result of FAS 115, which requires banks to "Mark to Market" those
investment securities it has designated as "available-for-sale". All securities
within the Company's investment portfolio were classified as "available-
for-sale" at December 31, 1996 and 1995.
(3) Book value per share is based on the actual number of outstanding shares at
December 31.
(4) Amounts have been adjusted to reflect the effect of stock splits and stock
dividends.
<PAGE>
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES
I. DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY (In Thousands)
ASSETS 1996
-----------------------------------
Average
Balance Interest % Yield/Rate
--------- ---------- ------------
(1)
Loans (2)(3) ............................. $ 106,221 $ 12,592 11.85
Securities: (4)
Taxable - AFS (5) ................... 100,642 6,113 6.07
Non-taxable - AFS ................... 24,697 1,180 4.78
Federal Funds Sold ....................... 7,340 388 5.29
----------------------
Total Interest Earning Assets ............ 238,900 20,273 8.49
----------------------
Cash & Due From Banks .................... 27,105
Premises and Equipment, net .............. 11,516
Other .................................... 3,826
---------
Total Non-Interest Earning ............... 42,447
---------
Total Assets ............................. 281,347
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest Bearing Demand Deposit .......... $ 94,637 $ 3,429 3.62
Savings Deposits ......................... 15,462 530 3.43
Time Deposits ............................ 9,718 417 4.29
Repurchase Agreements .................... 37,627 1,416 3.76
----------------------
Total Interest Bearing Liabilities ....... 157,444 5,792 3.68
----------------------
Non-Interest Bearing Deposits ............ 92,188
Other .................................... 1,856
---------
Total Non-Interest Bearing Liabilities ... 94,044
Stockholders' Equity ..................... 29,859
---------
Total Liabilities and Stockholders' Equity 281,347
========
Net Interest Earned 14,481
======
Net Yield On Interest Earning Assets 6.06
(1) The yield/rate is calculated by dividing interest earned/paid by the
average balance. The presentation is not on a tax equivalent basis.
(2) Loan fees are included in the interest yield calculation. Loan fees for the
year ended December 31, 1996 are $1,715,000. The interest yield excluding
fees is 10.24%. (3) Non-accrual loans are included in the interest yield
calculation. The daily average of non-accrual loans for 1996 is $209,242.
(4) Yield is calculated by dividing the interest earned by the average
historical cost (not market value) of the securities. (5) Other interest
bearing accounts having an average balance of $5,500,000 are included in
taxable securities.
<PAGE>
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES
I. DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY (In Thousands)
ASSETS 1995
--------------------------------
Average
Balance Interest % Yield/Rate
--------- --------- ------------
(1)
Loans (2)(3)........................... $ 89,663 $ 11,564 12.90
Securities: (4)
Taxable - AFS (5) ................ 95,234 6,043 6.35
Taxable - HTM .................... 655 48 7.33
Non-taxable - AFS ................ 6,170 291 4.72
Non-taxable - HTM ................ 22,738 1,071 4.71
Federal Funds Sold .................... 6,735 391 5.81
--------------------
Total Interest Earning Assets ......... 221,195 19,408 8.77
--------------------
Cash & Due From Banks ................. 22,094
Premises and Equipment, net ........... 9,738
Other ................................. 3,113
----------
Total Non-Interest Earning ............ 34,945
Total Assets .......................... 256,140
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest Bearing Demand Deposit ....... $ 98,210 $ 3,889 3.96
Savings Deposits ...................... 17,709 632 3.57
Time Deposits ......................... 11,618 476 4.10
Repurchase Agreements ................. 24,217 1,018 4.20
--------------------
Total Interest Bearing Liabilities .... 151,754 6,015 3.96
--------------------
Non-Interest Bearing Deposits ......... 78,531
Other ................................. 1,524
---------
Total Non-Interest Bearing Liabilities. 80,055
Stockholders' Equity .................. 24,331
---------
Total Liabilities and Stockholders'
Equity .............................. 256,140
=========
Net Interest Earned 13,393
======
Net Yield On Interest Earning Assets 6.05
(1) The yield/rate is calculated by dividing interest earned/paid by the
average balance. The presentation is not on a tax equivalent basis.
(2) Loan fees are included in the interest yield calculation. Loan fees for the
year ended December 31, 1995 are $1,623,146. The interest yield excluding
fees is 11.09%.
(3) Non-accrual loans are included in the interest yield calculation. The daily
average of non-accrual loans for 1995 is $158,846.
(4) Yield is calculated by dividing the interest earned by the average
historical cost (not market value) of the securities.
(5) Other interest bearing accounts having an average balance of $6,400,000 are
included in taxable securities.
<PAGE>
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES
I. DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY (In Thousands)
ASSETS 1994
----------------------------------
Average
Balance Interest % Yield/Rate
--------- --------- ------------
(1)
Loans (2)(3) ............................. $ 69,084 $ 8,307 12.02
Securities: (4)
Taxable - AFS (5) ................... 79,328 4,270 5.38
Taxable - HTM ....................... 807 60 1.43
Non-taxable - AFS ................... 4,628 211 4.56
Non-taxable - HTM ................... 32,211 1,376 4.27
Federal Funds Sold ....................... 4,876 192 3.94
---------------------
Total Interest Earning Assets ............ $ 190,934 $ 14,416 7.55
---------------------
Cash & Due From Banks .................... 21,318
Premises and Equipment, net .............. 9,303
Other .................................... 2,605
---------
Total Non-Interest Earning ............... 33,226
---------
Total Assets ............................. $ 224,160
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest Bearing Demand Deposits ......... $ 83,469 $ 2,107 2.52
Savings Deposits ......................... 18,095 502 2.77
Time Deposits ............................ 10,814 331 3.06
Repurchase Agreements .................... 13,785 384 2.79
---------------------
Total Interest Bearing Liabilities ....... $ 126,163 $ 3,324 2.63
---------------------
Non-Interest Bearing Deposits ............ 76,594
Other .................................... 962
---------
Total Non-Interest Bearing Liabilities ... 77,556
---------
Stockholders' Equity ..................... 20,441
---------
Total Liabilities and Stockholders' Equity $ 224,160
=========
Net Interest Earned ...................... $ 11,092
=========
Net Yield On Interest Earning Assets ..... 5.81
(1) The yield/rate is calculated by dividing interest earned/paid by the
average balance. The presentation is not on a tax equivalent basis.
(2) Loan fees are included in the interest yield calculation. Loan fees for the
year ended December 31, 1994 are $1,613,131. The interest yield excluding
fees is 9.69%.
(3) Non-accrual loans are included in the interest yield calculation. The daily
average of non-accrual loans for 1994 is $96,073.
(4) Yield is calculated by dividing the interest earned by the average
historical cost (not market value) of the securities.
(5) Other interest bearing accounts having an average balance of $3,300,00 are
included in taxable securities.
<PAGE>
I. INTEREST DIFFERENTIAL (In Thousands)
ASSETS 1996 Compared to 1995
- ----------------------------------------------------------------------
Total Volume Yield/Rate
Change Variance Variance
------- -------- ----------
(2)
Loans (1) .......................... $ 1,028 $ 2,136 $(1,108)
Securities:
Taxable ....................... 22 302 (280)
Non-taxable ................... (182) (198) 16
Federal Funds Sold ................. (3) 35 (38)
------- ------- -------
Total Interest Earning Assets ...... $ 865 $ 2,275 $(1,410)
======= ======= =======
LIABILITIES
Interest Bearing Demand Deposits ... $ (460) $ (141) $ (319)
Savings Deposits ................... (102) (80) (22)
Time Deposits ...................... (59) (78) 19
Repurchase Agreements .............. 398 564 (166)
------- ------- -------
Total Interest Bearing Liabilities . $ (223) $ 265 $ (488)
======= ======= =======
(1) Interest accrued on all non-accruing loans has been reversed for the
current year and the income accounts adjusted accordingly.
(2) The rate/volume variance is included in the rate variance.
ASSETS 1995 Compared to 1994
- -----------------------------------------------------------------------
Total Volume Yield/Rate
Change Variance Variance
------- -------- ----------
(2)
Loans (1) ........................... $ 3,257 $ 2,475 $ 782
Securities:
Taxable - AFS .................. 1,773 856 917
Taxable - HTM .................. (12) (11) (1)
Non-taxable - AFS .............. 80 70 10
Non-taxable - HTM .............. (305) (405) 100
Federal Funds Sold and .............. 199 73 126
------- ------- -------
Total Interest Earning Assets ....... $ 4,992 $ 3,058 $ 1,934
======= ======= =======
LIABILITIES
Interest Bearing Demand Deposits .... $ 1,782 $ 372 $ 1,410
Savings Deposits .................... 130 (11) 141
Time Deposits ....................... 145 25 120
Repurchase Agreements ............... 634 291 343
------- ------- -------
Total Interest Bearing Liabilities .. $ 2,691 $ 677 $ 2,014
======= ======= =======
(1) Interest accrued on all non-accruing loans has been reversed for the
current year and the income accounts adjusted accordingly.
(2) The rate/volume variance is included in the rate variance.
<PAGE>
II. INVESTMENT PORTFOLIO
The following table shows the contractual maturity distribution by carrying
amount and weighted average yield to maturity of Bancorp's investment portfolio
at December 31, 1996.
Available for Sale
<TABLE>
Less than One Year One through Five Years Five through Ten Years Over Ten Years Total
Amount %Yield Amount %Yield Amount %Yield Amount %Yield Amount
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity securities (2) $ 3,000,000 4.98 $ 3,000,000
3,000,000
U.S. Treasury and
other U.S. govt.
agencies and
corporations (1) 34,286,270 6.00 33,090,389 6.19 405,510 9.73 0 0 67,782,169
Obligations of states
and political
subdivisions 6,317,090 4.62 13,345,882 4.87 2,843,098 5.05 0 0 22,506,070
Collateralized Mortgage
obligations 6,890,540 6.29 20,778,786 6.21 416,730 5.16 0 0 28,086,056
Other securities 501,400 5.87 0 0 0 0 0 0 501,400
----------- ----------- ---------- --------- ------------
Total $50,995,300 $67,215,057 $3,665,338 $ 0 $121,875,695
==========================================================================================================
</TABLE>
Maturities may differ from contractual maturities in collateralized mortgage
obligations because the mortgages underlying the securities may be called or
repaid without penalties. Yields on tax exempt securities are not calculated on
a tax equivalent basis.
(1) Structured notes with a balance of $8,279,949 at December 31, 1996 are
included in U.S. Treasury and other U.S. government agencies and
corporations.
(2) Equity securities consist of Dutch Auction rate preferred stocks which bear
interest and generally have an average maturity of 49 days from the date of
issuance.
The following table shows the carrying amount of the Company's investment
portfolio at December 31, 1995 and 1994.
1995 1994
Total Total
Amount Amount
------------ ------------
Available for Sale
---------------------------------
Equity securities .................... $ 5,479,711 $ 8,000,000
U.S. Treasury and other U.S. govt
agencies and corporations .......... 69,587,402 65,392,565
Obligations of states and political
subdivisions ....................... 25,909,258 4,692,411
Collateralized mortgage obligations .. 18,881,783 9,917,073
Other securities ..................... 730,917 1,195,121
------------ ------------
Total ................................ $120,589,071 $ 89,197,170
============ ============
Held to Maturity
----------------
Obligations of states and political
subdivisions ........................................ $26,603,205
-----------
Total ................................................. $26,603,205
===========
<PAGE>
III.LOAN PORTFOLIO
A. The composition of Bancorp's loan portfolio is as follows:
<TABLE>
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Real estate loans:
Construction .................................. $ 24,105,582 $ 15,113,573 $ 19,675,572 $ 12,391,794 $ 13,053,544
Residential ................................... 11,594,713 10,643,190 6,907,000 8,983,865 5,972,420
Commercial .................................... 48,274,044 34,627,184 28,164,512 24,716,731 17,175,380
----------------------------------------------------------------------------
Total Real Estate Loans ............................ 83,974,339 60,383,947 54,747,084 46,092,390 36,201,344
----------------------------------------------------------------------------
Commercial, financial and industrial loans ......... 35,428,680 24,875,838 17,875,351 16,742,024 18,134,842
Commercial receivables financing ................... 3,329,322 2,396,952 0 0 0
Loans to individuals ............................... 4,977,794 7,340,220 4,156,000 3,447,244 2,824,022
----------------------------------------------------------------------------
127,710,135 94,996,957 76,778,435 66,281,658 57,160,208
Less unearned net loans fees ....................... 972,058 510,170 673,451 574,866 512,693
----------------------------------------------------------------------------
Total Loans ........................................ $126,738,077 $ 94,486,787 $ 76,104,984 $ 65,706,792 $ 56,647,515
============================================================================
</TABLE>
B. Maturities and Sensitivity of Loans to Changes in Interest Rates
The following table shows the balances of commercial, financial and industrial
loans and real estate - construction loans outstanding as of December 31, 1996
by maturities, based on remaining scheduled repayments of principal. Also shown
are the balance of loans due after one year, classified according to sensitivity
to changes in interest rates.
MATURITY
<TABLE>
One Year or Less One Through Five Years After Five Years Total
---------------- ---------------------- ---------------- ----------
<S> <C> <C> <C> <C>
1996
- ----
Commercial, Financial and Industrial ....... $24,724,507 $10,092,199 $ 611,974 $35,428,680
Real Estate - Construction ................. 23,564,996 540,586 0 24,105,582
----------- ----------- ----------- -----------
Total ...................................... $48,289,503 $10,632,785 $ 611,974 $59,534,262
=========== =========== =========== ===========
</TABLE>
The maturity of certain loans may vary due to the Bank's rollover policy. The
Bank will consider extending the maturity of a loan upon receipt of current
financial information and evaluation of the loan performance, the financial
performance of the business, and overall economic conditions. Loans with
maturities so affected have been revised as appropriate in the above table.
INTEREST SENSITIVITY
The following table represents the total amount of commercial, financial
and industrial loans and real estate construction loans due after one year which
(a) have predetermined interest rates and (b) have floating or adjustable
interest rates.
Loans Due After One Year 1996
- --------------------------- -----------
Fixed or Predetermined Rate $ 1,257,948
Floating or Adjustable Rate 9,986,811
Total $11,244,759
<PAGE>
C. Risk Elements
1. The table below shows the aggregate amount of loans accounted for on a
non-accrual basis, accruing loans which are contractually past due 90 days
or more as to principal or interest and loans which are "troubled debt
restructurings" as defined in statement of Financial Accounting Standard
No. 15, "Accounting for Debtors and Creditors for Troubled Debt
Restructurings" as of year end for the past five years.
Non-Accrual Past Due 90 Troubled Debt
December 31 Amount Days or More Restructuring
----------- ----------------------------------------
1996 $700,171 $ 0 $ 0
1995 765,961 0 0
1994 0 5,000 0
1993 56,000 0 0
1992 705,000 525,174 0
Loans are placed on non-accrual status when they go over 90 days delinquent, or
when circumstances indicate that timely collection of interest is doubtful.
Loans over 90 days delinquent may be left on accrual status if a repayment plan
has been negotiated and it appears likely that all interest will be paid.
The gross interest income that would have been recorded on non-accrual loans for
the year ended December 31, 1996 if the loans had been current in accordance
with their original terms is $23,545. The amount of interest income on those
loans that was included in net income for the year ended December 31, 1996 is
$96,447.
2. Potential Problem Loans
As of December 31, 1996 there are no loans outstanding, excluding those
identified in Item III.C.1. above, which causes management to have serious
doubts as to the ability of the borrower to comply with the loan repayment
terms.
3. Foreign Outstandings
The Bancorp did not have any foreign loans outstanding for the years ended
December 31, 1996, 1995, or 1994.
4. Loan Concentrations
The loan portfolio is concentrated in the Southern Nevada area. Within the
portfolio there is a concentration in real estate lending, with commercial
real estate lending representing approximately 38% of total loans and
construction lending at 19%. All real estate loans are secured with 1st
trust deeds with conservative loan-to-value ratios supported by current
appraisals. Commercial real estate loans are on predominantly
owner-occupied properties, or where the owner occupies a significant
portion of the property. Land values in the Las Vegas area continue to
increase as the population of the area reflects strong growth. Construction
loans are primarily for small to medium tracts of SFRs in the $100M-$135M
range. Concentrations are reviewed quarterly to control lending on
speculative projects. Land loans represent a small portion of real estate
lending, are conservatively underwritten, and are often made in connection
with project development.
D. Other Interest Bearing Assets
As of December 31, 1996, Bancorp had no other interest bearing assets that
would be required to be disclosed under Item III.C.1 or III.C.2, if such
assets were loans.
IV. SUMMARY OF LOAN LOSS EXPERIENCE
A. Analysis of the Allowance for Loan Losses
The following table details the amount of loans charged to reserve and the
additions to the allowance for loan losses for the past five years.
<PAGE>
Each month, the Bank's allowance for loan losses is reviewed to determine the
adequacy of reserve balances. All loans whose principal balance is greater than
or equal to $10,000 and which are delinquent for 30 days or more for principal
or interest are selected for detailed study. The appropriate account officers
are notified, and each submits reports of borrowers' financial condition,
adequacy of collateral, and recommended reserves. Senior management then reviews
and determines the necessary adjustment to the allowance for loan loss.
<TABLE>
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Allowance for Loan Losses, January 1 ................ $ 1,242,620 $ 726,899 $ 649,252 $ 524,442 $ 452,923
Deduct:
Loans Charged Off During the Year .............. (315,889) (86,409) (14,684) (122,860) (92,595)
Less Recoveries of Losses Previously Charged-Off 9,705 32,130 72,331 117,670 14,114
----------- ----------- ----------- ----------- -----------
Net Loans Charged-Off .......................... 306,184 54,279 (57,647) 5,190 78,481
----------- ----------- ----------- ----------- -----------
Allowance Prior to Additions ........................ 936,436 672,620 706,899 519,252 374,442
----------- ----------- ----------- ----------- -----------
Additions to Allowance Charged to Operating Expense . 375,000 570,000 20,000 130,000 150,000
----------- ----------- ----------- ----------- -----------
Allowance for Loan Losses, December 31 .............. $ 1,311,436 $ 1,242,620 $ 726,899 $ 649,252 $ 524,442
=========== =========== =========== =========== ===========
Ratio of Net Charge-Offs to Average Loans Outstanding .29% .06% (08%) .01% .16%
=========== =========== =========== =========== ===========
</TABLE>
The schedule below shows the major categories of loan charge-offs and recoveries
for the years 1996, 1995, 1994, 1993 and 1992.
<TABLE>
NET CHARGE-OFFS 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Charge-Offs:
Real estate loans
Construction ............................. $ 0 $ 0 $ 0 $ 28,400
$ 0
Residential .............................. 0 0 0 0 0
Commercial ............................... 0 0 0 0 0
Commercial, financial and industrial .............. 309,939 64,348 12,049 23,875 90,043
Commercial receivables financing .................. 0 0 0 0 0
Loans to individuals .............................. 5,950 22,061 2,635 70,585 2,552
-------- -------- -------- --------- --------
Total ............................................. 315,889 86,409 14,684 122,860 92,595
-------- -------- -------- --------- --------
Less Recoveries:
Real estate loans
Construction ............................. $ 0$ 0$28,400 $ 80,000 $ 0
Residential .............................. 0 0 0 0 0
Commercial ............................... 0 0 0 0 1,753
Commercial, financial and industrial .......... 8,323 22,545 28,588 27,325 11,300
Commercial receivables financing .................. 0 0 0 0 0
Loans to individuals .............................. 1,382 9,585 15,343 10,345 1,061
-------- -------- -------- -------- --------
Total ............................................. 9,705 32,130 72,331 117,670 14,114
-------- -------- -------- -------- --------
Net Charge-Offs ........................................ $306,184 $ 54,279 $(57,647) $ 5,190 $ 78,481
======== ======== ======== ======== ========
</TABLE>
<PAGE>
B. Allocation of the allowance for loan losses
1996 REPORTED PERIOD
-------------------------
% Of Loans In
Balance at End of Each Category
Period Applicable to: Amount To Total Loans
---------- --------------
Real estate loans:
Construction ............................. $ 245,908 18.9%
Residential .............................. 39,607 9.1%
Commercial ............................... 511,984 37.8%
Commercial, financial and industrial loans .... 429,624 27.7%
Commercial receivables financing .............. 33,958 2.6%
Loans to individuals .......................... 50,355 3.9%
---------------------
Total ......................................... $1,311,436 100%
=====================
1995 REPORTED PERIOD
Real estate loans:
Construction ............................ $ 197,695 15.9%
Residential ............................. 139,220 11.2%
Commercial .............................. 452,944 36.5%
Commercial, financial and industrial loans ... 325,392 26.2%
Commercial receivables financing ............. 31,354 2.5%
Loans to individuals ......................... 96,015 7.7%
---------------------
Total ........................................ $1,242,620 100%
=====================
1994 REPORTED PERIOD
Real estate loans:
Construction ............................ $ 186,278 25.6%
Residential ............................. 65,392 9.0%
Commercial .............................. 266,647 36.7%
Commercial, financial and industrial loans ... 169,235 23.3%
Commercial receivables financing ............. 0 0.0%
Loans to individuals ......................... 39,347 5.4%
---------------------
Total ........................................ $ 726,899 100%
=====================
1993 REPORTED PERIOD
Real estate loans:
Construction ............................ $ 121,382 18.7%
Residential ............................. 88,000 13.6%
Commercial .............................. 242,109 37.3%
Commercial, financial and industrial loans ... 163,994 25.3%
Commercial receivables financing ............. 0 0.0%
Loans to individuals ......................... 33,767 5.1%
---------------------
Total ........................................ $ 649,252 100%
=====================
1992 REPORTED PERIOD
Real estate loans:
Construction ............................ $ 119,766 22.9%
Residential ............................. 54,797 10.4%
Commercial .............................. 157,583 30.0%
Commercial, financial and industrial loans ... 166,386 31.8%
Commercial receivables financing ............. 0 0.0%
Loans to individuals ......................... 25,910 4.9%
---------------------
Total ........................................ $ 524,442 100%
=====================
<PAGE>
V. DEPOSITS
A. The table below shows the average daily balance of deposits by type
for the years ended December 31, 1996, 1995 and 1994.
1996 Average Average
(In Thousands) Balance Rate Paid
------------ ---------
Non-Interest Bearing Demand Deposits ........... $ 92,188 0%
Interest Bearing Demand Deposits ............... 94,637 3.62%
Time Deposits .................................. 9,718 4.29%
Savings Deposits ............................... 15,462 3.43%
--------
Total .......................................... $212,005
========
1995 Average Average
Balance Rate Paid
------------ ---------
Non-Interest Bearing Demand Deposits ........... $ 78,531 0%
Interest Bearing Demand Deposits ............... 98,210 3.96%
Time Deposits .................................. 11,618 4.10%
Savings Deposits ............................... 17,709 3.57%
--------
Total .......................................... $206,068
========
1994 Average Average
Balance Rate Paid
------------ ---------
Non-Interest Bearing Demand Deposits ........... $ 76,594 0%
Interest Bearing Demand Deposits ............... 83,469 2.52%
Time Deposits .................................. 10,814 3.06%
Savings Deposits ............................... 18,095 2.77%
--------
Total .......................................... $188,972
========
The Bank's customer base is primarily comprised of small-to-mid-sized businesses
and professionals. The Bank is precluded by regulation from paying interest on a
majority of these business accounts. The Bank does, however, provide services in
the form of computer hardware and software, armored transport and other
ancillary services to certain depositors. During 1996, services of approximately
$218,886 were provided for customers with average balances of approximately
$91,745,732. The value of the services represented .24% of the customers'
average deposit balances. During 1995, services of approximately $197,553 were
provided for customers with average balances of approximately $83,327,935, which
represented .23% of the customers' average deposit balance.
B. Not applicable.
C. Not applicable.
D. Maturities of time certificates of deposit of $100,000 or more at December
31, 1996.
Maturity 1996
---------------------------------------------------------------
3 Months or Less $5,602,465
3 to 6 Months 1,035,681
6 to 12 Months 708,539
Over 12 Months 471,289
Total $7,817,974
E. Not applicable.
<PAGE>
VI. RETURN ON EQUITY AND ASSETS
The table below shows various key ratios including return on equity and
return on assets.
1996 1995 1994
- --------------------------------------------------------------------------------
Return on Assets
(Net Income Divided by Average Total Assets) ......... 1.73% 1.60% 1.48%
Return on Equity
(Net Income Divided by Average Equity) ............... 16.33% 16.88% 16.21%
Cash Dividend Payout Ratio ........................... 0% 0% 0%
Equity to Assets Ratio
(Average Equity Divided by Average Total Assets) ..... 10.61% 9.50% 9.12%
VII. SHORT-TERM BORROWINGS
At December 31, 1996, 1995 and 1994, short-term borrowings were in the form
of repurchase agreements with a one-day maturity.
Weighted-average Average Weighted-average
Balance interest rate balance interest rate
Dec. 31. Dec. 31. for year for year
--------------------------------------------------------------
1996 $36,440,370 4.01% $37,626,801 3.76%
1995 $36,748,550 4.16% $24,217,033 4.20%
1994 $13,779,992 3.30% $13,784,883 2.79%
The maximum amount of total outstanding repurchase agreements at any
month-end during the years ended December 31, 1996, 1995 and 1994 is as
follows:
Month Amount
-------- -----------
1996 November $45,488,185
1995 December $36,748,550
1994 August . $19,110,866
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
consolidated financial statements of American Bancorp of Nevada. The
consolidated financial statements include American Bancorp of Nevada (the
"Company"), and the accounts of its wholly-owned subsidiaries, American Bank of
Commerce (the "Bank"), AmBank Financial, Inc., and AmBank Mortgage Company.
Liquidity and Asset/Liability Management
Adequate liquidity and maintenance of an appropriate balance between rate
sensitive earning assets and liabilities are the principal functions of
asset/liability management of a banking organization. Liquidity management
involves the ability to meet the cash flow requirements of customers who are
depositors desiring to withdraw funds and borrowers requiring assurance that
sufficient funds will be available to meet their credit needs. The measures of
solid liquidity practices such as Total Deposits to Total Assets and Loans to
Deposits are constantly monitored for any adverse trends. Historically, the
Bank's loan to deposit ratio has been low when compared to industry norms and,
conversely, its liquidity ratio has been high. At December 31, 1996, the net
loan to deposit ratio was approximately 50%. The Bank's primary sources of
liquidity are total cash and due from banks, other interest bearing accounts,
federal funds sold, and its available-for-sale securities. The liquidity ratio,
which is comprised of total cash and cash equivalents and unpledged securities
as a percent of total demand deposits, stood at approximately 45.75% at December
31, 1996 and 57.93% at December 31, 1995.
<PAGE>
Management seeks to avoid fluctuating net interest margins and to enhance
consistent growth of net interest income during periods of changing interest
rates. Effective asset/liability management enabled the Bank to maintain desired
levels of liquidity and capital while protecting against the possible negative
impact of interest rate volatility. The Bank avoids the use of highly sensitive
short-term funds such as brokered deposits and believes its deposits represent
funding sources with safety in respect to both liquidity and earnings, and
permits the maintenance of an appropriate relationship between the cost and
maturity of liabilities and the yield and maturity of assets. Net cash flow from
operations continues to remain positive primarily due to favorable interest rate
yields and growth in the loan portfolio. As loan growth continues, the loan to
deposit ratio may rise but there is substantial room to increase the loan
portfolio without impeding the liquidity ratio. The increase in deposits
provided the major funding from financing activities. It is anticipated that
deposits will continue to steadily increase as the Bank opens additional
branches and the local economy continues its growth.
Capital Resources
Capital increases will continue to be provided by earnings. Capital growth,
exclusive of net unrealized gains/losses on available-for-sale securities, for
the year ended December 31, 1996 was 18.91% compared to 20.28% for the same
period of 1995. While there are no definite plans to issue additional common
stock, shareholders approved a 15% stock dividend during 1996, a four-for-three
stock split during 1995 and a 15% stock dividend during 1994. Neither stock
dividends nor stock splits have an effect on total capital. Stockholders'
equity, exclusive of net unrealized gains/losses on available-for-sale
securities, of the Company as a percentage of total assets at December 31, 1996
stood at 9.95%. At December 31, 1995 the ratio was 9.62%. Risk-based capital
guidelines require banks to maintain an underlying capital base of 8.00% of
"risk-weighted" assets. At December 31, 1996, the Bank was well above the
minimum requirement with a capital base of 15.67% (Tier 1).
During the third quarter of 1996, the Company completed construction on a
two-story 16,000 square foot office complex located adjacent to its corporate
headquarters site which now houses its Financial Services department. The
building also offers additional leasing opportunities with approximately 13,000
rentable square feet of class "A" office space. As of December 31, 1996, the
Company had finalized lease agreements with tenants for approximately 10,600
square feet. Negotiations to rent the remainder are ongoing. Management
anticipates having the building fully occupied by the second quarter of 1997.
Plans are underway for a third building at the Company's corporate headquarters
site. The building will be designed to accommodate the Check Processing and Data
Processing departments as well as drive-up windows. The Bank's newest branch
facility located in the industrial area of North Las Vegas was officially open
as of August 7, 1996 and is now serving customers located within that area. This
newest branch consists of approximately 5,000 square feet with two drive up
windows. The Bank now has a total of five branches throughout the Las Vegas
area. Construction of both facilities was funded by cash flows from operations
and had no significant impact on capital. During the fourth quarter of 1996 the
Company purchased approximately 2.22 acres of raw land in the southwest area of
Las Vegas and anticipates opening another branch office during 1997. This would
make a total of six branches in the Las Vegas Valley area. Construction of the
new processing center and branch will be funded through cash flows from
operations. The impact on capital is not expected to be significant.
On November 15, 1995, the Financial Accounting Standards Board ("FASB") released
a Special Report entitled "A Guide to Implementation of Statement 115 on
Accounting for Certain Investments in Debt and Equity Securities." This report
provided for a one-time opportunity to reclassify securities between
held-to-maturity ("HTM") and available-for-sale ("AFS") that would not call into
question an institution's future intent to hold other securities to maturity.
This one-time transfer was authorized to take place between November 15, 1995
and December 31, 1995. On November 27, 1995, the Bank elected to transfer all
securities classified as HTM to the AFS category. This transfer does not in any
way indicate that future purchases may not be placed in the HTM category. As of
December 31, 1996, the capital accounts were increased by $16,000, representing
the after tax effect of the AFS portfolio's increase in fair value above its
cost.
Asset Growth
The Company experienced an increase in total assets during 1996 of $41,163,495
or 14.88% and in 1995 of $49,271,378 or 21.67%. Stronger loan demand resulted in
a $32,251,290 or 34.13% increase in loans in 1996. Accompanying the increase in
loans was an increase of $1,286,624 or 1.07% in available-for-sale securities.
Bank premises and equipment increased $2,335,950 or 22.23% during the year ended
1996 which is the direct result of the new office complex and branch facility
previously discussed under Capital Resources. The increase in total assets was
primarily funded by increases in the deposit base of the Bank of $37,072,114 or
17.53%. It is anticipated that total assets will continue to increase during
1997, as the Southern Nevada economy remains strong and the Bank continues it
aggressive business development efforts and branch expansion activities.
<PAGE>
Interest Income
Total interest income for 1996 totaled $20,272,630 as compared to $19,408,247
for 1995. This increase of $864,383 or 4.45% followed the 1995 increase over
1994 of $4,991,951 or
34.63%.
The increase in interest income reflects the changes in the yield and volume of
earning assets when comparing one year to another. Average earning assets
increased by approximately $17,704,967 to $238,899,739 while the average yield
for those assets decreased to 8.49% from 8.77% in 1995. Average earning assets
in 1995 were $30,260,570 above 1994's level of $190,934,202. The 1994 yield was
7.55%. Management anticipates continued growth in earning assets. The individual
components comprising total interest income are interest and fees on loans,
interest on investment securities and interest on federal funds sold. The yields
and related volumes of these components changed individually as follows:
Interest and Fees on Loans: Income generated by the Company's loan portfolio
increased $1,027,764 or 8.89% for the year ended December 31, 1996. This
increase is the result of an increase in the average loan volume of
approximately $16,557,715 or 18.47% which was offset by a decrease in the yield
to 11.85% in 1996 from 12.90% in 1995. During the year ended December 31, 1995,
interest and fees on loans increased $3,256,671 or 39.2%. This increase is
attributable to an increase in the average volume of $20,578,519 or 29.79%
coupled with an increase in the yield of .88%.
Interest on Securities: Total income from the securities portfolio decreased
$159,884 or 2.15% for the year ended December 31, 1996 following an increase of
$1,536,279 or 25.97% during 1995. The nominal decrease in investment income for
the current year is the result of an increase in the average volume of $541,690
or .43% offset by a decrease in the yield to 5.82% in 1996 from 5.97% in 1995.
The tax equivalent yield decreased to 6.14% in 1996 from 6.34% in 1995. The
decline in the 1996 yield is attributable to an overall decrease in interest
rates. The average volume of investment securities increased by 6.69% for the
year ended December 31, 1995. Management attempts to maximize the benefit from
tax-free municipal bonds and will continue to do so. It is anticipated that any
purchases of investment securities in 1997 will have short-term maturities with
higher yields than those currently maturing.
Interest on Federal Funds Sold: Total interest on federal funds sold decreased
$3,497 or .89% in 1996 following a $199,001 or 103.48% increase in 1995. The
average volume increased $605,562 or 8.99% during the year ended December 31,
1996 which was offset by a decrease in the yield to 5.29% from 5.81% in 1995.
The increase for the year ended December 31, 1995 was a result of an increase in
the average volume of $1,858,917 or 38.13% coupled with an increase in the yield
of 1.87%.
Interest Expense
The major components of interest expense are interest on deposits and interest
on securities sold under agreements to repurchase. The average cost of funds
decreased to 3.68% in 1996 from 3.96% in 1995. The average cost of funds was
2.63% in 1994. The cost of funds and related volumes of these individual
components were as follows:
Interest on Deposits: Total interest on deposits decreased $621,364 or 12.43% in
1996. In 1995 interest on deposits increased $2,058,261 or 70.02%. The average
volume for interest bearing deposits decreased $7,718,845 or 6.05% during 1996
following an increase of $15,158,271 in 1995. The average rate decreased to
3.65% in 1996. The average rate was 3.92% in 1995 and 2.62 % in 1994.
Interest on Securities Sold Under Agreements to Repurchase: A repurchase
agreement is an agreement between the Bank and customer where the Bank sells
U.S. government securities to the customer. On the agreed date, usually the
following day, the Bank repurchases the securities at the same price plus
interest at a predetermined rate. Interest expense paid for the year ended
December 31, 1996 increased $398,270 or 39.13%. In 1995 interest expense
increased $633,351 or 164.74%. The average volume for this category increased
$13,409,768 or 55.37% to $37,626,801 in 1996 from $24,217,033 in 1995. The
average volume was $13,784,883 in 1994. Average rates decreased to 3.76% in 1996
from 4.20% in 1995. Rates for 1994 averaged 2.79%. Interest on these accounts
are individually negotiated at a rate based on the Bank's average federal funds
rate for the month. Average federal funds rates for 1996 were approximately .53%
lower than in 1995, while the 1995 rates were approximately 1.41% higher than in
1994.
<PAGE>
Interest Rate Risk
Management attempts to protect earnings from wide shifts in interest rates by
employing the following strategies:
Loans: Approximately 95% of the Bank's loan portfolio is written on an
adjustable basis that floats with the Bank's base rate. Thus, approximately
$120,401,000 reprices immediately upon a change in the base rate.
Securities: Total securities represent approximately 38.34% of total assets at
December 31, 1996. In administering the securities portfolio, management adheres
to the Company's "Investment Portfolio Policy and Guidelines", "Asset/Liability
Policy" and "Interest Rate Risk Policy". These internal policy guidelines
dictate the average life of at least 70% of the securities portfolio mature
within three years. The actual average life of the portfolio at December 31,
1996 was approximately 1.92 years. This strategy of maintaining short maturities
provides maximum flexibility in managing fluctuating interest rates.
Additionally, the majority of the securities portfolio is of a fixed rate
nature. This enables management to provide an underlying level of income,
irrespective of changes in interest rates. Diversification for all areas of
investments is a key element in interest rate risk. Management monitors the
securities portfolio to ensure that an appropriate balance is maintained in
terms of both maturity and type of security instrument. Monitoring is aided by
the use of a computer program, specializing in Asset/Liability Management and
Interest Rate Risk.
Deposits: Management discourages use of long-term Certificates of Deposit by
consistently paying at or below market rates and not offering greater than
one-year maturities, with the exception of 18 month IRAs and SEPs. At December
31, 1996, approximately 61% of time deposits had a maturity of three months or
less. Due to the large concentration of business accounts, approximately 44% of
all deposits at December 31, 1996 are non-interest bearing.
The above factors provide management the opportunity to maintain favorable net
interest margins under most normal interest rate scenarios.
Allowance for Loan Losses
The purpose of the allowance for loan losses is to maintain reserves at a level
sufficient to cover estimated future loan losses. Management exercises its
judgment in establishing loan loss reserves for existing loans which may become
uncollectible in the future. The Bank's current allowance for loan losses
reflects an ongoing evaluation of the known risks in the loan portfolio and
current economic conditions. The allowance for loan losses was $68,816 or 5.54%
more at December 31, 1996 than at December 31, 1995. Expenses for the provision
of loan losses were $375,000 in 1996 as compared to $570,000 in 1995. At
December 31, 1995 the allowance for loan losses was $515,721 or 70.95% more than
at December 31, 1994.
Net charged off loans in 1996 were $306,184 compared to $54,279 in 1995 and
($57,647) in 1994. Net loan losses increased $251,905 or 464% in 1996 and
increased $111,926 or 194% in 1995. Net loans at year end were $125,426,641 in
1996 and $93,244,167 in 1995. The allowance for loan losses at year end 1996 was
1.03% and in 1995 was 1.32% of loans outstanding. The allocated portion of the
allowance consists of 5 categories: substandard, doubtful, loss, accounts
receivable factoring, and pass credits. Additionally, special consideration was
given to adequately allocate allowances for the Bank's track-home borrowers.
Management believes construction loans for partially pre-sold track homes may
have the potential to be less risk tolerant than other types of construction
loans. Ongoing evaluation of the loan portfolio and new loan products are
determining factors in maintaining the allocated allowance for loan losses. The
allocated allowance at December 31, 1996 was $859,487 as compared to $592,000 at
December 31, 1995. This increase is primarily the result of two loans classified
as doubtful.
At December 31, 1996, the Company has two loans totaling approximately $700,000
classified as impaired in accordance with FASB Statement No. 114 as amended by
FASB Statement No. 118. Approximately $24,000 of interest income would have been
recorded for the year ended December 31, 1996 had the loans been current in
accordance with their original terms. No loans were accounted for as "troubled
debt restructurings as defined in SFAS No. 15. Loans are placed on non-accrual
status when they go over 90 days delinquent, or when circumstances indicate that
timely collection of interest is doubtful. Loans over 90 days delinquent may be
left on accrual status if a repayment plan has been negotiated and it appears
likely that all interest will be paid. At December 31, 1996, there are no other
loans outstanding which causes management serious doubts as to the ability of
the borrower to comply with the loan repayment terms.
The Company had approximately $195,000 classified as other real estate owned
("REO"), which is included in Other Assets on the Consolidated Balance Sheet at
December 31, 1996. This property consists of one single family residence which
was acquired through foreclosure. The Company recorded a loss of approximately
$50,000 during 1996 to reduce the recorded amount to fair value. At December 31,
1996, the Company was in negotiations to sell the property.
<PAGE>
The loan portfolio is concentrated in the Southern Nevada area. Of total loan
commitments, 58% are in real estate loans, and 44% of real estate loan
commitments are comprised of residential construction loans.
Management places greater emphasis on the entry-level and first move-up housing
market. Additionally, land loans are conservatively underwritten. Management
reviews concentrations in the real estate loan portfolio on a quarterly basis.
Management also performs an analysis of the allowance for loan losses on a
quarterly basis and appraisal reviews are performed to support the values at
which loans are carried in the portfolio. Risk percentages are assigned to all
classified loans to ensure that the reserve is adequate and an excess reserve is
provided for any unexpected problems that may arise within the portfolio. The
Federal Deposit Insurance Corporation (FDIC), as an integral part of their
examination process, periodically reviews the Bank's allowance for loan losses,
and may require the Bank to make additions to the allowance based on their
judgment about information available to them at the time of their examinations.
Management feels that the current allowance for loan losses of $1,311,436 is
adequate for the Bank to meet all anticipated loan losses.
Non-Interest Income
Total non-interest income increased $315,792 or 22.18% for the year ended
December 31, 1996 and increased $239,941 or 20.27% during 1995. The main
component of the 1996 increase is net realized gains recorded on the sale of
investment securities of $307,258 compared with a recorded loss of $19,922
during 1995. Additionally, trust operations revenue increased $84,200 or 26.03%
due to increased assets under management. Other accounts with significant
fluctuations include property rental income which increased $47,745 or 24.97%
due to the Company's new office complex and Voucher control fees which declined
by $82,896 or 30.78% due to the reduction in construction loans made during the
year.
Non-Interest Expense
Non-interest expenses are comprised of three major categories: salaries, wages
and employee benefits, occupancy expenses, and all other expenses. Total
non-interest expense increased by $360,982 or 4.12% in 1996 and by $856,470 or
10.82% in 1995. The three components of this category are analyzed as follows:
Salaries, Wages and Employee Benefits: Total salary, wages and employee benefit
expense increased $575,453 or 12.65% in 1996 while in 1995 there was an increase
of $557,187 or 13.96% over 1994. The increase in 1996 is primarily the result of
normal salary increases coupled with additional staffing of the North Las Vegas
branch. Full-time equivalent staff increased to 116 in 1996 from 113 in 1995 and
98 in 1994. Salary, wages and employee benefits expenses will increase in 1997
as more employees are added to staff planned branch expansion.
Occupancy Expenses: Occupancy expenses increased $203,331 or 13.53% as compared
to a decrease of $115,038 or 7.11% in 1995. The increase in 1996 is primarily
the result of additional depreciation expense of the Company's two new
facilities. The 1995 decrease is primarily the result of tenant improvements
becoming fully depreciated.
Other Expenses: Total expenses in this category decreased $417,802 or 15.38%
during 1996 compared to an increase of $414,321 or 17.99% in 1995. The majority
of the 1996 decrease is due to the reduction of FDIC assessments. The Banking
Insurance Fund (BIF) became fully funded during 1995 and as such, expenses were
$366,733 less than in 1995. Additionally, expense related to the 1995 Stock
Appreciation Rights Plan decreased $242,000. These decreases were offset by an
increase in REO expense of approximately $174,000.
Dividend Policy
It has been the policy of the Company to retain all earnings for the purpose of
supporting growth rather than pay cash dividends to shareholders. The Board of
Directors declared a 15% stock dividend on March 18, 1996, a four-for-three
stock split on March 20, 1995 and a 15% stock dividend on March 21, 1994.
New Accounting Pronouncements
Effective January 1, 1996, the Company adopted FASB Statement No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of. Statement No. 121 establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to these assets to be held and used for long-lived assets and certain
identifiable intangibles to be disposed of. There was no material effect on the
consolidated financial statements relating to this adoption.
<PAGE>
Effective January 1, 1996, the Company adopted FASB Statement No. 123,
Accounting for Stock-Based Compensation. Statement No. 123 establishes financial
accounting and reporting standards for stock-based employee compensation plans,
such as stock options and stock purchase plans. The statement generally suggests
but does not require stock-based compensation transactions for employees to be
accounted for based on the fair value of the consideration received or the fair
value of the equity instruments issued, whichever is more reliably measurable.
Transactions occurring after December 15, 1995 with non-employees shall be
accounted for based on the fair value of the consideration received or the fair
value of the equity instruments issued, whichever is more reliably measurable.
Companies that do not elect to change their accounting for stock-based
compensation are required to disclose the effect on net income and earnings per
share as if the accounting provisions of Statement No. 123 were applied. The
Company has decided not to adopt the accounting provisions of this statement.
The FASB has issued Statement No. 125 Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities (as amended by FASB No. 127
which defers implementation of certain provisions of FASB No. 125 to January 1,
1998), which becomes effective for transactions occurring after December 31,
1996. The Statement distinguishes transfers of financial assets that are sales
from transfers that are secured borrowings. The Statement also establishes
standards on the initial recognition and measurement of servicing assets and
other retained interests and servicing liabilities, and their subsequent
measurement. Management does not believe the application of this Statement to
transactions of the Company that have been typical in the past will materially
affect the Company's financial position or results of operations.
Emerging Issues Task Force (EITF) Issue No. 96-12 Recognition of Interest Income
and Balance Sheet Classification of Structured Notes, requires the use of the
retrospective interest method of recognizing income on certain structured note
securities. The application of this consensus applies prospectively to new
securities acquired after November 14, 1996. Management does not believe the
application of this consensus will materially affect the Company's financial
position or results of operations.
<PAGE>
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
<PAGE>
AMERICAN BANCORP OF NEVADA
CONSOLIDATED FINANCIAL REPORT
DECEMBER 31, 1996
<PAGE>
CONTENTS
- ----------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
- ----------------------------------------------------------------------------
FINANCIAL STATEMENTS
Consolidated balance sheets
Consolidated statements of income
Consolidated statements of stockholders' equity
Consolidated statements of cash flows
Notes to consolidated financial statements
- ----------------------------------------------------------------------------
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
American Bancorp of Nevada
Las Vegas, Nevada
We have audited the accompanying consolidated balance sheets of American Bancorp
of Nevada and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 Bancorp of
Nevada and subsidiaries as of December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ McGLADREY & PULLEN, LLP
McGLADREY & PULLEN, LLP
Las Vegas, Nevada
January 17, 1997
<PAGE>
AMERICAN BANCORP OF NEVADA
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
<TABLE>
ASSETS 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks (Note 2) 36,453,878 $ 36,375,727
Other interest bearing accounts 9,571,362 3,696,771
Federal funds sold 8,400,000 9,500,000
---------------------------------
Cash and cash equivalents 54,425,240 49,572,498
Available-for-sale securities (Notes 3 and 8) 121,875,695 120,589,071
Loans receivable (Note 4) 126,738,077 94,486,787
Less allowance for loan losses (Note 5) (1,311,436) (1,242,620)
---------------------------------
Net loans 125,426,641 93,244,167
Bank premises and equipment, net (Note 6) 12,845,741 10,509,791
Accrued interest receivable 2,008,949 2,051,124
Deferred taxes, net (Note 9) 465,499 307,500
Other assets 806,358 416,477
---------------------------------
Total assets $ 317,854,123 $ 276,690,628
================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------------
Deposits:
Non-interest bearing demand $ 108,555,716 $ 88,386,803
Interest bearing:
Checking 112,619,836 94,601,128
Savings 14,653,627 18,431,473
Time, $100,000 and over (Note 7) 7,817,974 5,354,883
Other time (Note 7) 4,948,800 4,749,552
---------------------------------
Total deposits 248,595,953 211,523,839
Securities sold under agreements to repurchase (Notes 3 and 8) 36,440,370 36,748,550
Accrued interest and other liabilities 1,166,390 1,529,316
---------------------------------
Total liabilities 286,202,713 249,801,705
---------------------------------
Commitments and Contingencies (Notes 10, 13 and 15)
Stockholders' Equity (Notes 3, 11, 12 and 13)
Common stock, $.05 par value, 5,000,000 shares authorized;
shares issued: (1996) 3,729,057, (1995) 3,229,877; shares
outstanding: (1996) 3,715,533, (1995) 3,213,803 186,453 161,494
Surplus 28,293,760 20,420,262
Retained earnings 3,264,478 6,156,314
Unrealized gain on available-for-sale securities, net of income taxes 16,000 284,000
---------------------------------
31,760,691 27,022,070
Less treasury stock, at cost (1996) 13,524 shares;
(1995) 16,074 shares (109,281) (133,147)
---------------------------------
Total stockholders' equity 31,651,410 26,888,923
---------------------------------
Total liabilities and stockholders' equity $ 317,854,123 $ 276,690,628
================================
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
AMERICAN BANCORP OF NEVADA
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
1996 1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income on:
Loans receivable $ 12,591,750 $ 11,563,986 $ 8,307,315
Securities:
Taxable 6,112,979 6,090,622 4,330,032
Nontaxable 1,180,097 1,362,338 1,586,649
-----------------------------------------------
Total interest on securities 7,293,076 7,452,960 5,916,681
Federal funds sold 387,804 391,301 192,300
-----------------------------------------------
Total interest income 20,272,630 19,408,247 14,416,296
Interest expense on:
Deposits 4,376,256 4,997,620 2,939,359
Securities sold under
agreements to repurchase 1,416,073 1,017,803 384,452
-----------------------------------------------
Total interest expense 5,792,329 6,015,423 3,323,811
Net interest income 14,480,301 13,392,824 11,092,485
Provision for loan losses (Note 5) 375,000 570,000 20,000
-----------------------------------------------
Net interest income after provision
for loan losses 14,105,301 12,822,824 11,072,485
-----------------------------------------------
Non-interest income:
Service charges on deposit accounts 179,479 162,916 176,576
Gain (loss) on sale of securities, net (Note 3) 307,258 (19,922) (246,245)
Other fees 307,110 307,648 312,276
Property rental 238,926 191,181 275,220
Trust operations (Note 14) 407,691 323,491 263,847
Voucher control fees 186,461 269,357 336,376
Other 112,790 189,252 65,932
-----------------------------------------------
Total non-interest income 1,739,715 1,423,923 1,183,982
-----------------------------------------------
Non-interest expense:
Salaries, wages and employee benefits (Note 15) 5,124,158 4,548,705 3,991,518
Occupancy (Note 10) 1,706,020 1,502,689 1,617,727
FDIC and state assessments 9,293 376,026 419,972
Customer service 218,886 193,828 193,568
Professional fees 400,510 465,193 386,834
Advertising and public relations 290,388 268,031 253,461
Directors' compensation 247,439 520,931 225,511
Other 1,132,944 893,253 823,595
-----------------------------------------------
Total non-interest expense $ 9,129,638 $ 8,768,656 $ 7,912,186
==============================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
AMERICAN BANCORP OF NEVADA
CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income before income taxes $ 6,715,378 $ 5,478,091 $ 4,344,281
Provision for income taxes (Note 9) 1,838,000 1,371,000 1,030,000
---------------------------------------------------
Net income $ 4,877,378 $ 4,107,091 $ 3,314,281
==================================================
Net income per common and
common equivalent share $ 1.28 $ 1.10 $ 0.90
==================================================
Weighted average common shares outstanding 3,802,500 3,739,768 3,646,802
==================================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
AMERICAN BANCORP OF NEVADA
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
Unrealized
Gain (Loss)
Common Stock on Securities
---------------------- Available
Outstanding Retained for Sale, Net Treasury
Shares Amount Surplus Earnings Income Taxes Stock Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 ............... 1,958,304 $ 98,736 $15,403,387 $2,562,649 $ -- $(135,859) $17,928,913
Net effect of change in accounting method. -- -- -- -- 374,000 -- 374,000
Net income ............................... -- -- -- 3,314,281 -- -- 3,314,281
15% stock dividend (Note 11) ............. 294,229 14,711 3,810,266 (3,824,977) -- -- --
Fractional shares issued in cash ......... -- -- -- (1,473) -- -- (1,473)
Stock options exercised (Note 13) ........ 112,950 5,648 696,646 -- -- -- 702,294
Tax effect of stock option transactions
(Note 13) ............................. -- -- 172,400 -- -- -- 172,400
Sales of treasury stock .................. 175 -- 875 -- -- 1,356 2,231
Net change in unrealized gain/ (loss) on
available-for-sale securities, net of
income taxes (Note 3).................. -- -- -- -- (2,361,500) -- (2,361,500)
---------------------------------------------------------------------------------------
Balance, December 31, 1994 ............... 2,365,658 119,095 20,083,574 2,050,480 (1,987,500) (134,503) 20,131,146
Net income ............................... -- -- -- 4,107,091 -- -- 4,107,091
Four-for-three stock split (Note 11) ..... 791,919 39,596 (39,596) -- -- -- --
Fractional shares issued in cash ......... -- -- -- (1,257) -- -- (1,257)
Stock options exercised (Note 13) ........ 56,051 2,803 237,386 -- -- -- 240,189
Tax effect of stock option transactions
(Note 13) ............................. -- -- 137,979 -- -- -- 137,979
Sales of treasury stock .................. 175 -- 919 -- -- 1,356 2,275
Net change in unrealized gain/(loss) on
available-for-sale securities, net of
income taxes (Note 3) ................. -- -- -- -- 2,271,500 -- 2,271,500
---------------------------------------------------------------------------------------
Balance, December 31, 1995 ............... 3,213,803 161,494 20,420,262 6,156,314 284,000 (133,147) 26,888,923
Net income ............................... -- -- -- 4,877,378 -- -- 4,877,378
15% stock dividend (Note 11) ............. 482,780 24,139 7,742,633 (7,766,772) -- -- --
Fractional shares issued in cash ......... -- -- -- (2,442) -- -- (2,442)
Stock options exercised (Note 13) ........ 16,400 820 84,055 -- -- -- 84,875
Tax effect of stock option transactions
(Note 13) ............................. -- -- 28,000 -- -- -- 28,000
Sales of treasury stock .................. 2,550 -- 18,810 -- -- 23,866 42,676
Net change in unrealized gain/(loss) on
available-for-sale securities, net of
income taxes (Note 3) ................. -- -- -- -- (268,000) -- (268,000)
---------------------------------------------------------------------------------------
Balance, December 31, 1996 ............... 3,715,533 $186,453 $28,293,760 $3,264,478 $ 16,000 $(109,281) $31,651,410
=======================================================================================
</TABLE>
<PAGE>
AMERICAN BANCORP OF NEVADA
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Interest and fees on loans $ 13,034,191 $ 11,192,886 $ 8,270,136
Interest on securities 7,470,112 7,144,454 5,490,177
Interest on federal funds sold 387,804 391,301 192,300
Other income 1,432,457 1,443,845 1,430,227
Interest paid on deposits (4,359,410) (4,969,663) (2,920,764)
Interest paid on securities sold under agreements
to repurchase (1,416,073) (1,017,803) (384,452)
Cash paid to suppliers and employees (8,793,933) (7,464,901) (6,908,629)
Income taxes paid (2,184,620) (1,158,000) (845,000)
------------------------------------------------
Net cash provided by operating activities 5,570,528 5,562,119 4,323,995
------------------------------------------------
Cash Flows From Investing Activities
Proceeds from maturities and sales of
available-for-sale securities (Note 3) 76,031,045 53,610,450 59,141,624
Proceeds from maturities of
held-to-maturity securities -- 32,483,201 37,978,620
Purchase of available-for-sale securities (77,531,822) (62,202,926) (75,384,827)
Purchase of held-to-maturity securities -- (25,000,000) (30,790,986)
Net increase in loans made to customers (33,019,364) (18,272,799) (10,340,545)
Purchase of bank premises and equipment (3,086,688) (1,607,926) (1,030,359)
------------------------------------------------
Net cash used in investing activities (37,606,829) (20,990,000) (20,426,473)
------------------------------------------------
Cash Flows From Financing Activities
Net increase in deposits 37,072,114 18,712,606 19,147,158
Net increase (decrease) in securities sold under
agreements to repurchase (308,180) 22,968,558 (4,265,570)
Proceeds from issuance of common stock 125,109 241,207 702,775
------------------------------------------------
Net cash provided by financing activities 36,889,043 41,922,371 15,584,363
------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 4,852,742 26,494,490 (518,115)
Cash and Cash Equivalents, Beginning of Year 49,572,498 23,078,008 23,596,123
------------------------------------------------
Cash and Cash Equivalents, End of Year $ 54,425,240 $ 49,572,498 $R 23,078,008
================================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
AMERICAN BANCORP OF NEVADA
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Net income $ 4,877,378 $ 4,107,091 $ 3,314,281
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of bank
premises and equipment 750,738 663,699 708,042
Amortization of premiums and
accretion of discounts on securities 115,412 (256,843) 197,111
Provision for loan losses 375,000 570,000 20,000
(Gain) loss on sale of securities (307,258) 19,922 246,245
(Increase) decrease in other assets 122,184 (374,185) (34,040)
Increase (decrease) in other liabilities (362,926) 832,435 (127,644)
---------------------------------------------------
Net cash provided by operating
activities $ 5,570,528 $ 5,562,119 $ 4,323,995
---------------------------------------------------
Supplemental Schedule of Non-Cash Investing
and Financing Activities:
Stock dividends $ 7,766,772 $ -- $ 3,824,977
Held-to-maturity securities transferred to
available-for-sale $ -- $ 25,344,511 $ --
Net change in unrealized gain (loss) on
available-for-sale securities $ (268,000) $ 2,271,500 $ (2,361,500)
Four-for-three stock split $ -- $ 39,596 $ --
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
AMERICAN BANCORP OF NEVADA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Business And Significant accounting Policies
Nature of business
American Bancorp of Nevada (the "Company") is a bank holding company providing a
full range of banking services to commercial and consumer customers through five
branches of its subsidiary, American Bank of Commerce (the "Bank"), located in
Southern Nevada.
The primary services provided by the Bank include commercial, construction and
real estate financing, and business loans to customers who are predominantly
small and middle-market businesses. The Bank also grants consumer loans to
individuals, offers a full array of depository accounts and provides trust and
estate administration services.
The Company's business is concentrated in Southern Nevada and is subject to the
general economic conditions of this area.
Use of estimates in the preparation of financial statements
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 and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Principles of consolidation
The consolidated financial statements include the accounts of American Bancorp
of Nevada and its wholly-owned subsidiaries, American Bank of Commerce, AmBank
Mortgage Company and AmBank Financial, Inc. All significant intercompany
accounts and transactions have been eliminated in consolidation. AmBank Mortgage
Company's and AmBank Financial Inc.'s operations have been substantially
curtailed since 1986.
Cash and cash equivalents
For purposes of reporting cash flows, cash and cash equivalents includes cash on
hand, other interest bearing accounts, amounts due from banks (including cash
items in process of clearing) and federal funds sold. Cash flows from loans
originated by the Bank and deposits are reported net.
The Bank maintains amounts due from banks which, at times, may exceed federally
insured limits. The Bank has not experienced any losses in such accounts.
Available-for-sale securities
Securities classified as available-for-sale include all equity securities and
those debt securities that the Company intends to hold for an indefinite period
of time but not necessarily to maturity. Any decision to sell a security
classified as available-for-sale would be based on various factors, including
significant movements in interest rates, changes in the maturity mix of the
Company's assets and liabilities, liquidity needs, regulatory capital
considerations and other similar factors. Securities available-for-sale are
carried at fair value. Unrealized gains or losses are reported as increases or
decreases in stockholders' equity, net of the related deferred tax effect.
Realized gains or losses, determined on the basis of the cost of specific
securities sold, are included in earnings.
Loans receivable
Loans receivable are stated at the amount of unpaid principal, reduced by
unearned fees and allowance for loan losses.
<PAGE>
The allowance for loan losses is established through a provision for loan losses
charged to expense. Loans are charged against the allowance for loan losses when
management believes that collectibility of the principal is unlikely. The
allowance is an amount that management believes will be adequate to absorb
estimated losses on existing loans that may become uncollectible, based on
evaluation of the collectibility of loans and prior credit loss experience. This
evaluation also takes into consideration such factors as changes in the nature
and volume of the loan portfolio, overall portfolio quality, review of specific
problem credits and current economic conditions that may affect the borrower's
ability to pay. While management uses the best information available to make its
evaluation, future adjustments to the allowance may be necessary if there are
significant changes in economic or other conditions. In addition, the Federal
Deposit Insurance Corporation (FDIC), as an integral part of their examination
process, periodically reviews the Bank's allowance for loan losses, and may
require the Bank to make additions to the allowance based on their judgment
about information available to them at the time of their examinations.
Impaired loans are measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate or, as a practical
expedient, at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. A loan is impaired when it is
probable the Company will be unable to collect all contractual principal and
interest payments due in accordance with the terms of the loan agreement.
Interest and fees on loans
Interest on loans is recognized over the terms of the loans and is calculated
under the effective interest method. The accrual of interest on impaired loans
is discontinued when, in management's opinion, the borrower may be unable to
meet payments as they become due. When interest accrual is discontinued, all
unpaid accrued interest is reversed. Interest income is subsequently recognized
only to the extent cash payments are received.
Loan origination and commitment fees and certain direct loan origination costs
are deferred and the net amount amortized as an adjustment of the related loan's
yield. The Company is generally amortizing these amounts over the contractual
life. Commitment fees based upon a percentage of a customer unused line of
credit and fees related to standby letters of credit are recognized over the
commitment period.
Bank premises and equipment
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is computed principally by the straight-line method
over the following estimated useful lives:
Years
-----
Buildings 30
Equipment and furnishings 3 - 7
Improvements to leased property are amortized over the lesser of the term of the
lease or life of the improvements.
Earnings per common and common equivalent share
Earnings per common and common equivalent share are determined on the basis of
the weighted-average number of common shares and common equivalent shares
outstanding. The weighted average number of common and common equivalent shares
outstanding and earnings per share have been adjusted for all periods presented
to reflect the stock dividends and stock split discussed in Note 11. Common
stock equivalents represent the dilutive effect of outstanding stock options.
Income taxes
Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and deferred tax liabilities
are recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely thannot that some portion or all of the
deferred tax assets will not be realized. Deferred tax assets and liabilities
are adjusted for the effect of changes in tax laws and rates on the date of
enactment.
The Company and its subsidiaries file a consolidated income tax return. The
provision for taxes on income is based upon earnings reported in the
consolidated financial statements.
<PAGE>
Reclassification of other interest bearing accounts
During the year ended December 31, 1996, management began classifying other
interest bearing accounts as cash and cash equivalents compared to their
previous classification as securities available-for-sale. The December 31, 1995
balance sheet and the December 31, 1995 and 1994 statements of cash flows were
reclassified to be consistent with the classifications adopted during the year
ended December 31, 1996.
Fair value of financial instruments
Financial Accounting Standards Board (FASB) Statement No. 107, Disclosures About
Fair Value of Financial Instruments, requires disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate that value.
Management uses its best judgment in estimating the fair value of the Company's
financial instruments; however, there are inherent weaknesses in any estimation
technique. Therefore, for substantially all financial instruments, the fair
value estimates presented herein are not necessarily indicative of the amounts
the Company could have realized in a sales transaction at either December 31,
1996 or 1995. The estimated fair value amounts for 1996 and 1995 were measured
as of their respective year ends, and were not reevaluated or updated for
purposes of these consolidated financial statements subsequent to those
respective dates. As such, the estimated fair values of these financial
instruments subsequent to the respective reporting dates may be different than
the amounts reported at each year end.
The information in Note 16 should not be interpreted as an estimate of the fair
value of the entire Company since a fair value calculation is only required for
a limited portion of the Company's assets.
Due to the wide range of valuation techniques and the degree of subjectivity
used in making the estimate, comparisons between the Company's disclosures and
those of other companies or banks may not be meaningful.
The following methods and assumptions were used by the Company in estimating the
fair value of its financial instruments:
Cash and cash equivalents
The carrying amounts reported in the consolidated balance sheets for cash
and cash equivalents approximate their fair values.
Available-for-sale securities
Fair values for securities are based on quoted market prices, dealer
quotes, or valuations obtained from securities pricing services offered by
various brokers. Fair values of securities with prepayment risk such as
collateral mortgage obligations (CMO's) and securities with little or no
active trading market such as certain structured notes and municipal
securities do not necessarily represent the actual trade price which could
be obtained on any given day for any particular security.
Loans receivable
For variable rate loans that reprice frequently and experience no
significant change in credit risk, fair values are based on carrying
values. At December 31, 1996 and 1995, variable rate loans comprised
approximately 95% and 94% of the loan portfolio, respectively. The fair
value for all other loans are estimated using discounted cash flow analyses
and interest rates currently being offered for loans with similar terms to
borrowers with similar credit quality.
Accrued interest receivable
The carrying amounts reported in the consolidated balance sheets for
accrued interest receivable approximate their fair values.
Deposit liabilities
Fair values disclosed for demand deposits equal their carrying amounts,
which represent the amounts payable on demand. The carrying amounts for
variable-rate, deposit accounts approximate their fair values. Fair values
for fixed-rate certificates of deposit are estimated using a discounted
cash flow calculation that applies interest rates currently being offered
on certificates to a schedule of aggregated expected monthly maturities on
these deposits. Early withdrawals of fixed-rate certificate of deposits are
not expected to be significant.
Securities sold under agreements to repurchase
The fair value of securities sold under agreements to repurchase, all of
which mature within one day, is the amount payable on demand at the
reporting date.
<PAGE>
Off-balance-sheet instruments
Fair values for the Company's off-balance-sheet instruments (lending
commitments and standby letters of credit) are based on quoted fees
currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the counterparties' credit standing.
Current accounting development
Effective January 1, 1996, the Company adopted FASB Statement No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of. Statement No. 121 establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held and used for long-lived assets and certain
identifiable intangibles to be disposed of. There was no material effect on the
consolidated financial statements relating to this adoption.
Effective January 1, 1996, the Company adopted FASB Statement No. 123,
Accounting for Stock-Based Compensation. Statement No. 123 establishes financial
accounting and reporting standards for stock-based employee compensation plans,
such as stock options and stock purchase plans. The Statement generally suggests
but does not require stock-based compensation transactions for employees to be
accounted for based on the fair value of the consideration received or the fair
value of the equity instruments issued, whichever is more reliably measurable.
Transactions occurring after December 15, 1995 with non-employees shall be
accounted for based on the fair value of the consideration received or the fair
value of the equity instruments issued, whichever is more reliably measurable.
Companies that do not elect to change their accounting for stock-based
compensation are required to disclose the effect on net income and earnings per
share as if the accounting provision of Statement No. 123 were applied. The
Company has decided not to adopt the accounting provision of this Statement.
The FASB has issued Statement No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities (as amended by FASB No. 127
which defers implementation of certain provisions of FASB No. 125 to January 1,
1998), which becomes effective for transactions occurring after December 31,
1996. The Statement does not permit earlier or retroactive application. The
Statement distinguishes transfers of financial assets that are sales from
transfers that are secured borrowings. A transfer of financial assets in which
the transferor surrenders control over those assets is accounted for as a sale
to the extent that consideration other than beneficial interests in the
transferred assets is received in exchange. The Statement also establishes
standards on the initial recognition and measurement of servicing assets and
other retained interests and servicing liabilities, and their subsequent
measurement.
The Statement requires that debtors reclassify financial assets pledged as
collateral and that secured parties recognize those assets and their obligation
to return them in certain circumstances in which the secured party has taken
control of those assets. In addition, the Statement requires that a liability be
derecognized only if the debtor is relieved of its obligation through payment to
the creditor or by being legally released from being the primary obligor under
the liability either judicially or by the creditor.
Management does not believe the application of the Statement to transactions of
the Company that have been typical in the past will materially affect the
Company's financial position or results of operations.
Emerging Issues Task Force (EITF) Issue No. 96-12 Recognition of Interest Income
and Balance Sheet Classification of Structured Notes, requires the use of the
retrospective interest method of recognizing income on certain structured note
securities. The application of this consensus applies prospectively to new
securities acquired after November 14, 1996. Management does not believe the
application of this consensus will materially affect the Company's financial
position or results of operations.
<PAGE>
Note 2. Restrictions on Cash and Due From Banks
The Company is required to maintain reserve balances in cash or on deposit with
the Federal Reserve Bank. The total of those reserve balances was approximately
$5,960,000 at December 31, 1996.
Note 3. Securities
Carrying amounts and fair values of available-for-sale securities as of December
31, 1996 and 1995 are summarized as follows:
<TABLE>
1996
---------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
---------------------------------------------------------
<S> <C> <C> <C> <C>
Equity securities ......................... $ 3,000,000 $ -- $ -- $ 3,000,000
Structured notes .......................... 8,475,199 2,217 (197,467) 8,279,949
Obligations of U.S. Treasury
and U.S. government agencies ............ 59,343,008 261,627 (102,415) 59,502,220
Obligations of states and
political subdivisions .................. 22,340,071 207,403 (41,404) 22,506,070
Collateralized mortgage obligations ....... 28,192,417 40,459 (146,820) 28,086,056
Other securities .......................... 500,000 1,400 -- 501,400
-----------------------------------------------------------
$121,850,695 $ 513,106 $(488,106) $121,875,695
===========================================================
1995
-----------------------------------------------------------
Equity securities ......................... $ 5,479,711 $ -- $ -- $ 5,479,711
Structured notes .......................... 14,939,417 4,673 (305,190) 14,638,900
Obligations of U. S. Treasury
and U.S. government agencies ............ 54,458,579 570,312 (80,389) 54,948,502
Obligations of states and
political subdivisions .................. 25,789,251 177,369 (57,362) 25,909,258
Collateralized mortgage obligations ....... 18,762,190 142,060 (22,467) 18,881,783
Other securities .......................... 728,923 1,994 -- 730,917
-----------------------------------------------------------
$120,158,071 $ 896,408 $(465,408) $120,589,071
===========================================================
</TABLE>
The amortized cost and fair value of securities as of December 31, 1996, by
contractual maturities, are shown below. Maturities may differ from contractual
maturities in CMO's because the mortgages underlying the securities may be
called or repaid without any penalties. Therefore, these securities, and equity
securities, which have no maturity, are listed separately in the maturity
summary. In addition, securities with amortized cost of $23,073,242 and fair
value of $23,018,606 at December 31, 1996 contain certain call provisions. Given
certain interest rate environments some or all of these securities may be called
by their issuers prior to the scheduled maturities.
Amortized Fair
Cost Value
---------------------------
Due in one year or less ............... $ 41,685,347 $ 41,461,510
Due after one year through 5 years .... 46,189,787 46,436,271
Due after 5 years through 10 years .... 2,783,144 2,891,858
Collateralized mortgage obligations ... 28,192,417 28,086,056
Equity securities ..................... 3,000,000 3,000,000
----------------------------
$121,850,695 $121,875,695
============================
Proceeds from sales of available-for-sale securities and the gross gains and
losses realized on those sales during the years ended December 31, 1996, 1995
and 1994 are as follows:
1996 1995 1994
----------------------------------------
Proceeds from sales ........ $19,747,907 $16,767,148 $37,167,658
========================================
Gross realized gains ....... $ 335,700 $ 47,561 $ 215,120
Gross realized losses ...... (28,442) (67,483) (461,365)
----------------------------------------
$ 307,258 $ (19,922) $ (246,245)
========================================
<PAGE>
Securities with amortized cost of $75,210,764 and $63,396,639 at December 31,
1996 and 1995, respectively, were pledged to secure public deposits, securities
sold under agreements to repurchase and for other purposes required or permitted
by law.
On November 27, 1995, the Company reassessed the appropriateness of the
classification of all securities in accordance with the issuance of the
Financial Accounting Standards Board's Guide to Implementation of Statement 115
on Accounting for Certain Investments in Debt and Equity Securities. As a
result, the Company transferred $25,344,511 of securities previously classified
as held-to-maturity into available-for-sale securities. The Company did not
recognize an unrealized holding gain or loss as a result of the transfer.
Note 4. Loans Receivable
The composition of the Company's loan portfolio at December 31 is as follows:
1996 1995
---------------------------
Real estate loans:
Construction .......................... $ 24,105,582 $15,113,573
Residential ........................... 11,594,713 10,643,190
Commercial ............................ 48,274,044 34,627,184
---------------------------
83,974,339 60,383,947
Commercial, financial and industrial loans 35,428,680 24,875,838
Commercial receivables financing ......... 3,329,322 2,396,952
Loans to individuals ..................... 4,977,794 7,340,220
---------------------------
127,710,135 94,996,957
Less unearned net loan fees .............. (972,058) (510,170)
---------------------------
$126,738,077 $94,486,787
===========================
The loans are expected to be repaid from cash flows or proceeds from the sale of
selected assets of the borrowers. The Company's policy for requiring collateral
is to obtain collateral whenever it is available or desirable, depending upon
the degree of risk the Company is willing to take.
The Company's real estate loans are secured by office buildings, land for
development, multifamily residential real estate, single family homes and other
property, substantially all of which is in Southern Nevada. Substantially all of
these loans are secured by first liens with an initial loan to value ratio of
generally not more than 70%.
The Company has two impaired loans with a combined recorded investment of
$700,171 as of December 31, 1996, which have been recognized in conformity with
FASB Statement No. 114, as amended by FASB Statement No. 118. The allowance for
loan losses related to these loans was $350,086 at December 31, 1996. Interest
income recognized on the impaired loans is not considered material.
Excluding the loans referred to in the previous paragraph, the Company has no
other material loans at December 31, 1996 and 1995 which should be classified as
impaired loans in accordance with FASB Statement No. 114 as amended by FASB
Statement No. 118.
Note 5. Allowance for Loan Losses
Changes in the allowance for loan losses are as follows:
Years Ended December 31,
-----------------------------------
1996 1995 1994
-----------------------------------
Balance, beginning ...................... $1,242,620 $ 726,899 $ 649,252
Provision charged to operating expense 375,000 570,000 20,000
Recoveries of amounts charged off .... 9,705 32,130 72,331
Less amounts charged off ............. (315,889) (86,409) (14,684)
-----------------------------------
Balance, ending ......................... $1,311,436 $1,242,620 $ 726,899
===================================
<PAGE>
Note 6. Bank Premises and Equipment
The major classes of bank premises and equipment and the total accumulated
depreciation and amortization at December 31 are as follows:
December 31,
-------------------------
1996 1995
-------------------------
Land ............................................... $ 3,614,072 $ 2,902,594
Building and improvements .......................... 9,908,920 8,214,022
Equipment and furniture ............................ 3,326,583 2,848,658
------------------------
16,849,575 13,965,274
Less accumulated depreciation and amortization ..... (4,003,834) (3,455,483)
------------------------
$12,845,741 $10,509,791
========================
Note 7. Time Deposits
At December 31, 1996, the scheduled maturities of time deposits are as follows:
1997 $ 12,353,509
1998 383,265
1999 30,000
----------------
$ 12,766,774
================
Note 8. Securities Sold Under Agreements to Repurchase
Securities sold under agreements to repurchase remain under the Company's
control and generally mature within one day of the transaction date. Information
concerning securities sold under agreements to repurchase is summarized as
follows:
1996 1995
---------------------------
Average balance during the year ................ $37,626,801 $24,217,033
Average interest rate during the year .......... 3.76% 4.20%
Maximum month-end balance during the year ...... $45,488,185 $36,748,550
Securities underlying the agreements at year
end are as follows:
Carrying value .............................. $66,481,741 $53,817,697
Estimated fair value ........................ 66,406,117 53,916,277
Note 9. Income Tax Matters
The provision for federal income taxes is comprised of the following for the
years ended December 31, 1996, 1995 and 1994:
1996 1995 1994
------------------------------------
Current expense ........................ $1,858,000 $1,593,600 $ 964,000
Deferred taxes ......................... (20,000) (222,600) 66,000
------------------------------------
$1,838,000 $1,371,000 $1,030,000
====================================
<PAGE>
The provision for income taxes differs from the amounts computed by applying the
U. S. federal income tax rate to pretax income for the years ended December 31,
1996, 1995 and 1994 as follows:
1996 1995 1994
------------------------------------
Expected provision for income taxes .... $2,350,300 $1,917,300 $1,520,000
Tax exempt interest .................... (413,000) (476,800) (527,000)
Disallowed interest expense ............ 34,800 47,300 34,000
Dividends received deduction ........... (28,500) (51,000) (39,000)
Benefit of income taxed at lower rates . (67,000) (41,500) (28,600)
Other .................................. (38,600) (24,300) 70,600
------------------------------------
$1,838,000 $1,371,000 $1,030,000
====================================
The temporary differences which created deferred tax assets and liabilities at
December 31, 1996 and 1995 are as follows:
1996 1995
-----------------------
Deferred tax assets:
Allowance for loan losses ...................... $362,000 $ 333,100
Bank premises and equipment .................... 91,000 76,100
Accrued expenses ............................... 13,000 86,300
Other .......................................... 42,499 20,200
-----------------------
Total deferred tax assets ......................... $508,499 $ 515,700
-----------------------
Deferred tax liabilities:
Unrealized gain on available-for-sale securities $ (9,000) $(147,000)
Deferred loan fees and expenses ................ (34,000) (61,200)
-----------------------
Total deferred tax liabilities .................... (43,000) (208,200)
-----------------------
Net deferred tax assets ........................... $465,499 $307,500
=======================
Note 10. Commitments and Contingencies
Contingencies
In the normal course of business, the Company is involved in various legal
proceedings. In the opinion of management, any liability resulting from such
proceedings would not have a material adverse effect on the consolidated
financial statements.
Financial instruments with off-balance-sheet risk
The Company is party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit and standby letters
of credit. They involve, to varying degrees, elements of credit risk in excess
of amounts recognized on the consolidated balance sheets.
The Company's exposure to credit loss in the event of nonperformance by the
other parties to the financial instrument for these commitments is represented
by the contractual amounts of those instruments. The Company uses the same
credit policies in making commitments and conditional obligations as it does for
on-balance-sheet instruments.
A summary of the contract amount of the Company's exposure to off-balance-sheet
risk as of December 31, 1996 and 1995 is as follows:
1996 1995
------------------------
Commitments to extend credit ....................... $75,893,769 $44,851,447
Standby letters of credit .......................... 1,993,436 3,391,044
------------------------
$77,887,205 $48,242,491
========================
<PAGE>
Commitments to extend credit 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 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 party. Collateral held varies, but may
include accounts receivable, inventory, property and equipment, residential real
estate and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. Collateral held varies
as specified above and is required as the Company deems necessary.
Lease Commitments
The Company leases certain premises under noncancelable operating leases
expiring in various years through 2006. The following is a schedule of future
minimum rental payments under these leases:
1997 $ 209,463
1998 209,463
1999 209,463
2000 209,463
2001 179,131
Thereafter 582,460
----------
Total $1,599,443
==========
Total rental expense under these leases and month-to-month leases for the years
ended December 31, 1996, 1995 and 1994 was $206,456, $197,894 and $253,880,
respectively.
Note 11. Common Stock
On March 18, 1996, the Board of Directors of the Company declared a 15% stock
dividend on the outstanding shares of common stock of the Company, effective on
April 9, 1996 to stockholders of record on April 2, 1996. On March 20, 1995 the
Board of Directors of the Company declared a four-for-three stock split on the
outstanding shares of common stock of the Company, effective on April 11, 1995
to stockholders of record on April 4, 1995. On March 21, 1994 the Board of
Directors of the Company declared a 15% stock dividend on the outstanding shares
of common stock of the company effective on April 12, 1994 to stockholders of
record on April 5, 1994.
<PAGE>
Note 12. Regulatory Capital
The Bank is subject to various regulatory capital requirements administered by
federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory - and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the
Company's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve qualitative measures of the Bank's assets,
liabilities and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1996, that the Bank
meets all capital adequacy requirements to which it is subject.
As of December 31, 1996, the most recent notification from the Federal Deposit
Insurance Corporation (FDIC) categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized the Bank must maintain minimum total risk-based, Tier I risk-based
and Tier I leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the Bank's
category.
The Bank's actual capital amounts and ratios are presented in the following
table:
<TABLE>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
-------------------- ------------------ -------------------
Amount Ratio Amount Ratio Amount Ratio
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996:
Total Capital (to Risk-Weighted Assets) ....... $ 31,327,000 16.4% $ 15,328,000 8 $19,160,000 10%
Tier I Capital (to Risk-Weighted Assets) ...... $ 30,026,000 15.7 7,664,000 4 $11,496,000 6%
Tier I Capital (to Average Assets) ............ $ 30,026,000 10.3 11,715,000 4 $14,643,000 5%
As of December 31, 1995:
Total Capital (to Risk-Weighted Assets) ....... $ 26,253,000 17.6% $ 11,950,000 8 $14,937,000 10%
Tier I Capital (to Risk-Weighted Assets) ...... $ 25,021,000 16.8% $ 5,975,000 4 $ 8,962,000 6%
Tier I Capital (to Average Assets) ............ $ 25,021,000 9.8% 10,207,000 4 $12,759,000 5%
</TABLE>
The Company's capital amounts and ratios are substantially the same as the
amounts presented above.
Additionally, State of Nevada banking regulations restrict distribution of the
net assets of the Bank because such regulations require the sum of the Bank's
stockholders' equity and allowance for loan losses to be at least 6% of the
average of the Bank's total daily deposit liabilities for the preceding 60 days.
As a result of these regulations, approximately $14,175,000 and $12,367,500 of
the Bank's stockholders' equity was restricted at December 31, 1996 and 1995,
respectively.
<PAGE>
Note 13. Stock Options and Stock Appreciation Rights
The Company has employee stock-based compensation plans, which are described
below, in effect at December 31, 1996. The Company applies APB Opinion 25 and
related interpretations in accounting for its plans. Accordingly, no
compensation cost has been recognized for its stock option plans. Had
compensation cost for the Company's stock-based compensation plans been recorded
based on the fair value at the grant dates for awards under those plans
consistent with the method of FASB Statement 123, the Company's net income and
earnings per share would have been reduced to the pro forma amounts indicated
below:
1996 1995
--------------------------
Net income As reported $4,877,378 $4,107,091
Pro forma 4,603,119 3,966,078
Earnings per share As reported 1.28 1.10
Pro forma 1.21 1.06
Stock Options
The Company has granted certain directors, officers and key employees options to
purchase shares of the Company's common stock at prices equal to or greater than
the fair market value at the date of grant. On April 17, 1995, the Company's
shareholders approved the 1995 Stock Option Plan ("1995 Plan"). The 1995 Plan
authorized 350,000 (which increased to 402,500 shares as a result of the 15%
stock dividend declared during 1996) shares of common stock to be provided by
shares authorized but unissued. Options under the 1995 plan become exercisable
in annual installments of 25% of the amount granted per optionee, one year
following the date of grant and expire five years after the date of grant. The
fair value of each option grant for pro forma disclosure purposes discussed
above is estimated on the date of grant using the Black-Scholes option pricing
model with the following assumptions:
Risk free interest rate 6.48% to 6.55%
Dividend yield 0%
Expected lives 4 to 5 years
Volatility 32% to 33%
Additional information concerning this stock option plan follows:
1996 1995
-------------------
Options outstanding, beginning of year ............... 123,250 --
Granted .............................................. 16,750 123,750
Adjustment due to stock dividends .................... 18,194 --
Forfeited ............................................ (13,130) (500)
Exercised ............................................ (1,520) --
-------------------
Options outstanding, end of year ..................... 143,544 123,250
===================
Options exercisable, end of year ........................ $ 31,699 $ --
Available to grant, end of year ......................... $257,436 $226,750
Weighted-average exercise price under option, end of year $ 12.13 $ 13.37
Weighted-average exercise price of options, granted at
fair value, during the year .......................... $ 15.95 $ 13.38
Weighted-average fair value of options granted during
the year ............................................. $ 6.25 $ 5.30
Weighted-average price of options exercised ............. $ 11.52 $ --
Weighted-average price of options forfeited ............. $ 11.64 $ 13.25
The range of exercise prices at December 31, 1996 is $11.52 to $17 and the
weighted-average remaining contractual life of the options outstanding as of
December 31, 1996 is 3.8 years.
<PAGE>
Options granted prior to 1995 become exercisable, in annual installments of 20%
of the amount granted per optionee, upon the date of grant. Information
concerning these stock options follows:
1996 1995 1994
-------------------------------
Options outstanding, beginning of year 100,332 123,900 239,050
Adjustment due to stock split ........ 36,950
Forfeited ............................ (2,751) (4,467) (2,200)
Exercised ............................ (14,880) (56,051) (112,950)
-------------------------------
Options outstanding, end of year ..... 82,701 100,332 123,900
===============================
Options exercisable, end of year ..... 78,733 75,780 86,850
Available to grant, end of year ...... 10,418 7,667 1,750
Average exercise price under option,
end of year ....................... $ 5.14 $ 5.80 $ 5.19
Stock Appreciation Rights
On January 23, 1995, the Company's Board of Directors approved the 1995 Stock
Appreciation Rights Plan ("SAR Plan"). The SAR Plan authorized 350,000 rights to
be granted to certain directors, officers and key employees at the discretion of
the Board of Directors. Each right gives the grantee the right to receive cash
payment from the Company equal to the excess of (a) the fair market value of a
share of the Company's common stock at a date, as determined by the SAR Plan,
approximating the date such right is exercised over (b) the fair market value of
a share of the Company's common stock on the date of grant. Grantees may
exercise their rights at any time between the time a right vests and five years
following the date of grant. Rights granted under the SAR Plan vest in annual
installments of 25% beginning one year following the date of grant. Changes in
the market price of the Company's common stock are reflected as a charge to
earnings for each period in which the rights are outstanding.
Information concerning stock appreciation rights is as follows:
1996 1995
------------------
Rights outstanding, beginning of year .................... 129,329 --
Granted .................................................. 8,000 111,000
Adjustment due to stock split ............................ -- 18,329
Adjustment due to stock dividend ......................... 19,250 --
Forfeited ................................................ (1,000) --
Exercised ................................................ (13,416) --
-----------------
Rights outstanding, end of year .......................... 142,163 129,329
-----------------
Rights exercisable, end of year .......................... 31,529 --
Available to grant, end of year .......................... 194,421 220,671
Weighted-average exercise price of rights, end of year ... $ 10.36 $ 11.48
Weighted-average exercise price of rights, granted at fair
value, during the year ................................ $ 16.44 $ 13.38
Weighted-average price of rights exercised ............... $ 9.70 $ --
Weighted-average price of rights forfeited ............... $ 11.74 $ --
<PAGE>
The price range for rights at December 31, 1996 is $8.64 to $17 and the
weighted-average remaining contractual life of the rights outstanding as of
December 31, 1996 is 2.3 years.
Note 14. Trust Department
Assets with a recorded value of $96,541,105 and $65,557,444 were held in trust
for others at December 31, 1996 and 1995, respectively. These assets and the
offsetting liability amounts are not recorded on the consolidated financial
statements since they are not assets of the Company.
Note 15. Employee Benefit Plan
The Company has a qualified 401(k) employee benefit plan for all eligible
employees. Each participant is able to defer a maximum of 15% of their annual
compensation subject to Internal Revenue Code maximums. The Company contributes
an amount equal to 100% of each employee's contribution up to the first 3%, and
50% for contributions over 3% but no more than 6% of the employee's annual
compensation. Additionally, the Company may elect to contribute a discretionary
amount each year, but no election was made during 1996, 1995 or 1994. The
Company's total contribution for 1996, 1995 and 1994 was $122,799, $93,496 and
$110,279, respectively.
Note 16. Fair Value of Financial Instruments
The carrying amounts and fair values of the Company's financial instruments at
December 31 are as follows:
<TABLE>
1996 1995
--------------------------- -----------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents ............. $ 54,425,240 $ 54,425,240 $ 49,572,498 $ 49,572,498
Available-for-sale securities ......... 121,875,695 121,875,695 120,589,071 120,589,071
Loans, net ............................ 125,426,641 125,240,496 93,244,167 93,244,167
Accrued interest receivable ........... 2,008,949 2,008,949 2,051,124 2,051,124
Financial liabilities:
Deposits .............................. $(248,595,953) $(248,614,390) $(211,523,839) $(211,523,839)
Securities sold under
agreements to repurchase ........... (36,440,370) (36,440,370) (36,748,550) (36,748,550)
Unrecognized financial
instruments:
Commitments to extend credit .......... $ -- $ 555,513 $ -- $ 370,046
Standby letters of credit ............. -- 20,802 -- 34,486
</TABLE>
The Company assumes interest rate risk (the risk that general interest rate
levels will change) as a result of its normal operations. As a result, the fair
values of the Company's financial instruments will change when interest rate
levels change and that change may be either favorable or unfavorable to the
Company. Management attempts to match maturities of assets and liabilities to
the extent believed necessary to minimize interest rate risk. However, borrowers
with fixed rate obligations are less likely to prepay in a rising rate
environment and more likely to prepay in a falling rate environment. Also,
depositors who are receiving fixed rates are more likely to withdraw funds
before maturity in a rising rate environment and less likely to do so in a
falling rate environment. Management monitors rates and maturities of assets and
liabilities and attempts to minimize interest rate risk by adjusting terms of
new loans and deposits and by investing in securities with terms that mitigate
the Company's overall interest rate risk.
<PAGE>
Note 17. Condensed Financial Information
Condensed financial information of the Company (parent only) is provided below:
American Bancorp of Nevada (parent only)
Condensed Statements of Financial Condition
December 31, 1996 and 1995
Assets 1996 1995
- ------ --------------------------
Cash .............................................. $ 713,906 $ 889,160
Due from American Bank of Commerce ................ 494,917 394,917
Investment in American Bank of Commerce ........... 30,042,107 25,305,331
Investment in other subsidiaries .................. 597,754 586,107
Deferred taxes .................................... 126,002 126,002
-------------------------
Total assets ........................ $31,974,686 $ 27,301,517
=========================
Liabilities and Stockholders' Equity
Liabilities - Accrued and other liabilities ....... $ 323,276 $ 412,594
-------------------------
Stockholders' Equity
Common stock ................................... 186,453 161,494
Surplus ........................................ 28,293,760 20,420,262
Retained earnings .............................. 3,264,478 6,156,314
Unrealized gain on available-for-sale
securities, net of income taxes .............. 16,000 284,000
-------------------------
31,760,691 27,022,070
Less treasury stock, at cost ...................... (109,281) (133,147)
-------------------------
Total stockholders' equity ........................ 31,651,410 26,888,923
-------------------------
Total liabilities and stockholders'
equity ........................ $31,974,686 $27,301,517
=========================
American Bancorp of Nevada (parent only)
Condensed Income Statements
Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
--------------------------------------
Expenses ............................. $ 211,044 $ 573,935 $ 160,497
--------------------------------------
Loss before equity in undistributed
earnings of subsidiaries .......... (211,044) (573,935) (160,497)
Equity in undistributed earnings of
subsidiaries .................... 5,016,422 4,486,026 3,474,778
--------------------------------------
Income before taxes .................. 4,805,378 3,912,091 3,314,281
Income tax benefit ................... 72,000 195,000 --
--------------------------------------
Net income ........................... $4,877,378 $4,107,091 $3,314,281
======================================
<PAGE>
American Bancorp of Nevada (parent only)
Statements of Cash Flows
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
1996 1995 1994
---------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Reconciliation of Net Income to Net Cash
Used In Operating Activities:
Net income ..................................... $ 4,877,378 $ 4,107,091 $ 3,314,281
Earnings from subsidiaries ..................... (5,016,422) (4,486,026) (3,474,778)
(Increase) decrease in assets .................. (72,000) (195,000) (15,540)
Increase (decrease) in other liabilities ....... (89,319) 394,042 4,682
---------------------------------------
Net cash used in operating activities (300,363) (179,893) (171,355)
---------------------------------------
Cash Flows From Financing Activities
Proceeds from sales of treasury stock .......... 42,676 2,275 2,231
Proceeds from issuance of common stock ......... 84,875 240,189 702,294
Fractional shares issued in cash ............... (2,442) (1,257) (1,473)
---------------------------------------
Net cash provided by
financing activities ............ 125,109 241,207 703,052
---------------------------------------
Net increase (decrease) in cash ..... (175,254) 61,314 531,697
Cash, Beginning of Year ........................... 889,160 827,846 296,149
---------------------------------------
Cash, End of Year ................................. $ 713,906 $ 889,160 $ 827,846
---------------------------------------
Supplemental Schedule of Non-Cash Investing
and Financing Activities:
Stock dividends issued ......................... $ 7,766,772 $ -- $ 3,824,977
=======================================
</TABLE>
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Inapplicable
PART III
ITEM 10-13
The information called for by Items 10 through 13 of Part III is incorporated by
reference herein from the Bancorp's Proxy Statement for Annual Meeting of
Shareholders.
<PAGE>
PART IV
ITEM 14- EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
A. 1. Financial Statements
See Part II, Item 8 for the index to Consolidated Financial Statements.
2. Financial Statement Schedules
All schedules are omitted for the reason that they are not applicable, or
the required information is shown in the financial statements or notes
thereto.
3. Exhibits
(3) Articles of Incorporation are incorporated by reference to Exhibit 5 of
the Registrant's Registration Statement on Form S-14 (File No.
2-76974). Registrant's Bylaws are incorporated by reference to Exhibit
6 of Registrant's Registration Statement on Form S-14 (File No.
2-76974).
(4) Instruments defining the rights of security holders.
Inapplicable.
(9) Voting Trust Agreement.
Inapplicable.
(10) Material Contracts.
The American Bancop of Nevada 1995 stock option plan is incorporated by
reference to the Registrant's Registration Statement on Form S-8 (File
No. 33-66217).
The American Bancorp of Nevada 1989 stock option plan is incorporated
by reference to the Registrant's Registration Statement on Form S-8
(File No. 33-29914 )
Exhibit 10-1 the American Bancorp of Nevada 1995 Stock Appreciation
Rights Plan is filed herein.
Exhibit 10-2 the management contract with Bruce E. Hendricks, President
and Chief Operating Officer is filed herein.
(12) Statement re-computation of ratios.
Inapplicable.
(18) Letter re-change in accounting principles.
Inapplicable.
(21) Subsidiaries of the Registrant.
The subsidiaries of Bancorp are as follows:
a. American Bank of Commerce, a Nevada Corporation
b. AmBank Financial, Inc., a Nevada Corporation
c. AmBank Mortgage Company, a Nevada Corporation
(22) Published report regarding matters submitted to vote of security
holders.
Inapplicable.
(23) Independent Auditors' Consent.
23 - 1 Consent of McGladrey & Pullen, LLP
(27) Financial Data Schedule
B. Reports on Form 8-K
During the last quarter of Fiscal Year 1996, the following reports on Form
8-K were filed:
None.
C. Exhibits
See Item A.3 above.
<PAGE>
POWER OF ATTORNEY
American Bancorp of Nevada, and each of the undersigned, do hereby constitute
and appoint Bruce E. Hendricks, Robert E. Olson, and Patricia L. Kirkwood, and
each of them individually, as attorney-in-fact, to act as its or their true and
lawful attorneys to execute on behalf of American Bancorp of Nevada and the
undersigned any and all amendments to this Annual Report on Form 10-K and to
file the same with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this form to be signed on its behalf
by the undersigned, thereunto duly authorized.
Dated March 11, 1997 AMERICAN BANCORP OF NEVADA (Registrant)
By:/S/ Bruce E. Hendricks
--------------------------------------------
Bruce E. Hendricks
President and Chief Operating Officer
By:/S/ Robert E. Olson
--------------------------------------------
Robert E. Olson
Executive Vice President and
Chief Financial Officer
By:/S/ Patricia L. Kirkwood
--------------------------------------------
Patricia L. Kirkwood
Executive Vice President and Cashier
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons and in the capacities and on the
dates indicated:
Signature and Title Date
- ------------------------------- --------------
/S/ Claudine Williams March 11, 1997
- ------------------------------- --------------
Claudine Williams
Director, Chairman of the Board
/S/ James V. Bradham March 11, 1997
- -------------------------------- --------------
James V. Bradham
Director, Vice Chairman & CEO
/S/ Bruce E. Hendricks March 11, 1997
- -------------------------------- --------------
Bruce E. Hendricks
Director, and President & COO
/S/ Edward D. Smith March 11, 1997
- -------------------------------- --------------
Edward D. Smith
Director, Corporate Secretary
/S/ Vern J. Christensen March 11, 1997
- -------------------------------- --------------
Vern J. Christensen
Director
/S/ Elias F. Ghanem, M.D. March 11, 1997
- -------------------------------- --------------
Elias F. Ghanem, M.D.
Director
/S/ Nasser F. Ghanem March 11, 1997
- -------------------------------- --------------
Nasser F. Ghanem
Director
<PAGE>
/S/ Joel A. Laub March 11, 1997
- -------------------------------- --------------
Joel A. Laub
Director
/S/ Betty Lou Lehman March 11, 1997
- -------------------------------- --------------
Betty Lou Lehman
Director
/S/ Darrell A. Luery March 11, 1997
- -------------------------------- --------------
Darrell A. Luery
Director
AMERICAN BANCORP OF NEVADA
1995 STOCK APPRECIATION RIGHTS PLAN
1. Purpose of Plan
The purpose of the 1995 Stock Appreciation Rights Plan (the "Plan") is
to provide key employees and directors with long-term compensation
based on the long-term growth and profitability of American Bancorp of
Nevada (the "Company"). Specific objectives of the Plan include:
o Motivating participants to maximize shareholder value
o Providing a long-term orientation in the participant's
decision-making
o Retaining participants over a long period
o Rewarding the participants for the Company's outstanding performance
2. Administration
The Board of Directors (the "Board") will administer the Plan. The
Board has the authority to interpret the Plan and all provisions
relating to the Plan as deemed necessary.
3. Eligibility
Key employees of the Company or any of its subsidiaries, and members of
the Board are eligible to participate in the Plan. The Board will
determine who will participate in the Plan.
4. Rights Set Aside
The Plan will allocate a maximum of 350,000 Stock Appreciation Rights
("Rights"). In the event that a Right previously granted shall for any
reason lapse or be canceled without being exercised, the referenced
Right shall be restored to the total number of Rights to be granted
under the Plan.
5. Grants
The Board shall have the exclusive power to determine the number of
Rights to be granted to the participants and when Rights will be
granted. Rights shall be subject to such terms and conditions as set
forth in the Plan.
6. Exercise Price
The exercise price of each Right granted shall be the fair market value
of a share of common stock of the Company at the date of grant.
<PAGE>
7. Rights Account
Rights granted to the participants shall be credited to a Rights
Account (the "Account") established and maintained for each of the
participants. The Account of a participant shall record the value of
the Rights granted to a participant under the Plan, is solely for
accounting purposes, and shall not require a segregation of any of the
Company's assets. Each Right shall be valued in the manner provided in
Section 10.
8. Performance Period
The performance period of the Rights shall be for a period of up to
five years from the date of the grant of the Right (the "Performance
Period"). The Performance Period shall extend from the date the Rights
are granted until the earliest of the following events:
o Death, disability or retirement
o Termination, liquidation or dissolution of the Company
o Sale of substantially all of the assets and/or common stock of the
Company
o The Company merges or consolidates with any other corporation and
the Company is not the surviving corporation
o A participant is voluntarily or involuntarily terminated from the
Company with respect to Rights granted to such participant in the
capacity as an employee
o A participant ceases his or her directorship with the Company with
respect to Rights granted to such participant in the capacity as a
director
o The participant exercises the Right
o Five years from the date of grant has elapsed
5. Vesting of Rights
Rights granted to the participants shall vest in accordance with the
following schedule of years of employment or directorship that the
participant has had with the Company since the date of the grant of
such Rights.
Percentage Years Following
of Rights Date of Grant
---------- ---------------
25% 1 year
50% 2 years
75% 3 years
100% 4 years
Notwithstanding the above provision, all Rights granted to the
participants shall become fully vested upon (I) death, disability or
retirement; (ii) termination, liquidation or dissolution of the
Company; (iii) sale of substantially all of the assets and/or common
stock of the Company; or (iv) the merger or consolidation of the
Company with any other corporation wherein the Company is not the
surviving corporation.
For the purposes of the Plan: (I) a participant will be considered
disabled if, in the sole determination of the Board, the participant is
subject to a physical or mental condition which is expected to render
the participant unable to perform the participant's usual duties or any
comparable duties on behalf of the Company or a subsidiary of the
Company for a period in excess of one year; and (ii) the participant
will be considered retired if the participant's employment with the
Company or a subsidiary of the Company terminates at or after the date
the participant attains the age of 65.
<PAGE>
If a participant voluntarily or involuntarily terminates employment
with, or directorship of the Company, all unvested Rights will be
canceled, and such Rights shall be restored to the total number of
Rights to be granted under the Plan.
10. Valuation of Rights
The value of each Right shall be equal to the excess of (I) the average
of the daily average of the closing bid and asked prices of the
Company's common stock for the five consecutive business days beginning
with the third business day after the date of filing of the Company's
10-Q or 10-K, as applicable, that is filed prior to the nearest in time
to the end of the Performance Period, over (ii) the fair market value
of an outstanding share of common stock of the Company at the date the
Right was granted.
11. Exercise of Rights
Participants can exercise any vested Rights at any time during the
Performance Period. Participants shall exercise rights by delivering a
written notice, in a form and in a manner substantially as shown in
Exhibit A hereto, and specifying the number of Rights to be exercised.
Upon receipt of the notice of exercise, the Company shall have thirty
days to pay the participant. For purposes of the valuation in Section
10 above, the Rights which are exercised pursuant to this Section 11
shall be deemed to be exercised as of the date provided in the notice
of exercise or the date such notice is received by the Company,
whichever is earlier.
12. Payment of Rights
Upon the end of the Performance Period of granted Rights, the
participant shall be entitled to receive from the Company an amount,
with respect to each vested Right in each participant's Account, equal
to the value of each Right as determined pursuant to Section 10 above.
13. Changes in Capital and Corporate Structure
In the event of any change in the outstanding shares of common stock of
the Company by reason of an issuance of additional shares,
recapitalization, reclassification, reorganization, redemption, stock
split, reverse stock split, combination of shares, stock dividend or
similar transaction, the Board shall proportionately adjust, in an
equitable manner, the number of Rights held by the participants under
the Plan and the fair market value of an outstanding share of common
stock of the Company at the date the Right was granted.
14. Forfeiture of Rights
If the employment of a participant is terminated for any reason other
than death, disability or retirement, the participant's interest in
Rights which have not vested on or prior to the date of the termination
of employment shall be forfeited or canceled, and neither the
participant nor the participant's heirs, personal representatives, or
successors shall have any future rights with respect to any such
Rights.
Notwithstanding any other provision of the Plan, all rights to any
future payments to be made hereunder to a participant will be forfeited
and canceled, and the Company will have no further obligation hereunder
to such participant, if the participant is discharged from employment
with the Company "for cause". However, the Board in its sole
discretion, may reinstate the Rights of the participant as of the date
of the termination of employment, provided that the Board takes such
action within thirty days of the date of termination of employment of
such participant.
<PAGE>
The participant shall be deemed to have been terminated "for cause" if
the participant's employment is involuntarily terminated because of
either the participant's willful malfeasance or the participant's gross
negligence in a matter of material importance to the Company, or if the
participant's employment is terminated, whether voluntarily or
involuntarily, because of his commission of a felonious act against the
Company. The Board's determination of a participant's termination "for
cause" for purposes of this Plan shall be final, conclusive and binding
on all persons including the participant.
15. Termination of Plan
In the event that (I) the owners of a majority of the shares of the
common stock of the Company terminate the business of, or liquidate or
dissolve, the Company, (ii) the Company merges or consolidates with
another corporation and the Company is not the surviving corporation of
such merger or consolidation, (iii) substantially all the assets of the
Company are sold, (iv) the Company sells shares of common stock of the
Company in an amount that is equal to more than 51% of the Company's
outstanding shares of common stock or (v) more than 51% of the
Company's outstanding shares of common stock or voting rights thereto
are purchased or acquired by any person, entity or group of persons
and/or entities acting in concert, then this Plan shall terminate, all
Rights that have been granted under the Plan shall become vested, and
the Company shall make payment for the Rights as provided in Section
12.
16. Nontransferability
Rights granted under the Plan, and any rights and privileges pertaining
thereto, may not be transferred, assigned, pledged or hypothecated in
any manner, by operation of law or otherwise, other than by will or by
the laws of descent and distribution, and shall not be subject to
execution, attachment or similar process. In the event of a
participant's death, payment of any amount due under the Plan shall be
made to the duly appointed and qualified executor or other personal
representative of the participant to be distributed in accordance with
the participant's will or applicable law of descent and distribution.
17. Withholding
The Company shall have the right to deduct from all amounts paid
pursuant to the Plan any taxes required by law to be withheld with
respect to such amounts.
18. Voting and Dividend Rights
The participants shall not be entitled to any voting rights or to
receive any dividends with respect to the Company's common stock in
connection with the Rights granted under the Plan.
19. Miscellaneous Provisions
a. No employee or other person shall have any claim or right to be made
a participant under the Plan. Neither the Plan nor any action taken
hereunder shall be construed as giving any employee or person any
right to be retained in the employ of the Company.
b. ThePlan shall at all times be entirely unfunded, and no provision
shall at any time be made with respect to segregating assets of the
Company for payment of any benefits hereunder. The participants
shall not have any interest in any particular asset or assets of the
Company by reason of the right to receive a benefit under the Plan,
and the participants shall have only the rights of general unsecured
creditors of the Company with respect to any Rights under the Plan.
<PAGE>
c. Except when otherwise required by the context, any masculine
terminology in this document shall include the feminine, and any
singular terminology shall include the plural.
d. The Plan shall be governed and construed in accordance with the laws
of the State of Nevada.
e. Nothing contained herein shall be deemed to exclude the participants
from any supplemental compensation, bonus, profit sharing,
insurance, severance pay, or other benefit which a participant
otherwise might be or might become entitled to as an employee or
director of the Company.
20. Effectiveness and Terms of Plan
The effective date of the Plan shall be January 1, 1995. The Board may
terminate the Plan at any time, and unless terminated sooner by the
Board, the Plan shall terminate on December 31, 1999. No Rights shall
be granted pursuant to the Plan after the date of termination of the
Plan, although after such date, payments shall be made with respect to
Rights granted prior to the date of termination.
<PAGE>
EXHIBIT A
NOTICE OF STOCK APPRECIATION REIGHT EXERCISE
Mr. James V. Bradham
American Bancorp of Nevada
President/Chief Executive Officer
4425 Spring Mountain Road
Las Vegas, Nevada 89102
Dear Mr. Bradham:
Pursuant to the my Stock Appreciation Rights Agreement dated ("Agreement"), I am
exercising (#) Rights. I understand that payment pursuant to the terms and
conditions of the Agreement shall be made to me within thirty days of the
receipt of this notice by American Bancorp of Nevada.
I further acknowledge that American Bancorp of Nevada makes no representations
as to federal or state tax matters, and that I am to consult my own tax attorney
or tax accountant for advice with respect to the exercise of my stock
appreciation rights.
Sincerely,
Name of Grantee
<PAGE>
AMERICAN BANCORP OF NEVADA
STOCK APPRECIATION RIGHTS AGREEMENT
This Stock Appreciation Rights Agreement (the "Agreement") is made and
entered into as of the _____ day of _____________, 19___, by and between
American Bancorp of Nevada, a Nevada corporation (the "Bancorp"), and
____________________________, ("Grantee");
WHEREAS, pursuant to the American Bancorp of Nevada 1995 Stock
Appreciation Rights Plan (the "Plan"), a copy of which is attached hereto and
incorporated by reference, the Board of Directors of the Bancorp has authorized
granting to Grantee ________ stock appreciation rights ("Rights"), such grant
shall be for the term and upon the terms and conditions hereinafter stated;
NOW, THEREFORE, it is hereby agreed: 1. Grant of Rights. Pursuant to
said action of the Board of Directors, the Bancorp hereby grants to Grantee
________ Rights, whereby each Right, subject to the terms and conditions herein
and in the Plan, entitles the Grantee to receive in cash the difference between
(I) the average of the daily average of the closing bid and asked prices of the
Company's common stock for the five consecutive business days beginning with the
third business day after the date of filing of the Company's 10-Q or 10-K, as
applicable, which is filed prior to and nearest in time to the end of the
Performance Period as defined in the Plan for such Right and (ii) $__________
(the fair market value of an outstanding share of common stock of Bancorp at the
date the Rights were granted). 10-1(8)
2. Exercisability. The Rights shall be exercisable as to twenty-five
percent (25%) of the total number of Rights granted hereby on the first
anniversary date of the date of the grant of the Rights, an additional
twenty-five percent (25%) of the total number of Rights on the second
anniversary date of the date of the grant of the Rights, an additional
twenty-five percent (25%) of the total number of Rights on the third anniversary
date of the date of the grant of the Rights, and the remaining twenty-five
percent (25%) of the total number of Rights on the fourth anniversary date of
the date of the grant of the Rights.
Unless the Rights have expired or terminated earlier in accordance with
the provisions hereof or in the Plan, the Rights which have vested shall remain
exercisable until ___________, ______ ("Expiration Date") which date shall not
be later than five years from the date the Rights were granted.
3. Exercise of Rights. Rights which have vested may be exercised by
written notice (substantially in the form as that which is attached as Exhibit
A) delivered to the Bancorp stating the number of Rights which are being
exercised. Upon exercise, Grantee shall make appropriate arrangements and shall
be responsible for the withholding of any federal and state taxes then due.
4. Cessation of Directorship or Employment. Except as provided in
Paragraphs 2 and 5 hereof, if Grantee shall cease to be a director or employee
of the Bancorp or a subsidiary corporation for any reason including Grantee's
death or disability, the Performance Period of the Rights shall expire at the
time of such cessation of employment or directorship.
5. Termination of Employment for Cause. If Grantee's employment with
the Bancorp or a subsidiary corporation is terminated for cause as defined in
the Plan, the Rights accrued by Grantee as of such termination date shall
terminate and shall no longer be exercisable. However, the Board of Directors of
Bancorp within thirty days from the date of such termination, in its sole
discretion, may reinstate the Rights of Grantee that were vested as of the date
of such termination.
<PAGE>
6. Nontransferability. The Rights shall not be transferable except by
will or by the laws of descent and distribution and shall be exercisable during
Grantee's lifetime only by Grantee.
7. Employment. This Agreement shall not obligate the Bancorp or a
subsidiary corporation to employ Grantee for any period, nor shall it interfere
in any way with the right of the Bancorp or a subsidiary corporation to reduce
Grantee's compensation.
8. Representations of Grantee. Grantee represents that the Bancorp. its
directors, officers, employees and agents have not and will not provide tax
advice with respect to the Rights, and Grantee agrees to consult with his or her
own tax advisor as to the specific tax consequences of the Rights, including the
application and effect of federal, state, local and other tax laws.
9. Notices. Any notice to the Bancorp provided for in this Agreement
shall be addressed to it in care of its President or Chief Financial Officer at
its main office and any notice to Grantee shall be addressed to Grantee's
address on file with the Bancorp or a subsidiary corporation, or to such other
address as either may designate to the other in writing. Any notice shall be
deemed to be duly given if and when enclosed in a properly sealed envelope and
addressed as stated above and deposited, postage prepaid, with the United States
Postal Service. In lieu of giving notice by mail as aforesaid, any written
notice under this Agreement may be given to Grantee in person, and to the
Bancorp by personal delivery to its President or Chief Financial Officer.
10. Participant as an Unsecured Creditor. The Grantee acknowledges and
agrees that he or she shall have no interest in any particular asset or assets
of the Company by reason of the Rights, and furthermore the Grantee acknowledges
and agrees that he or she shall have only the rights of a general unsecured
creditor of the Bancorp with Respect to the Rights.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
GRANTEE AMERICAN BANCORP OF NEVADA
By By
--------------------------------- ---------------------------------
By
---------------------------------
May 3, 1996
James V. Bradham
President & CEO
American Bank of Commerce
4425 Spring Mountain Road
Las Vegas, Nevada 89102
Dear Jim:
Thank you for taking time yesterday to come to Sheridan. Both Judi and I enjoyed
seeing you. I'm pleased to accept employment with American Bank of Commerce
under the following terms:
1. Title: Senior Executive Vice President
and C.O.O. with a position on
the Board of Directors
2. Salary: Annual Base Salary - $125,000
3. Signing Bonus: To include relocation expenses - $25,000
4. Stock Options: 5,000 shares with strike price to be
determined by 7/01/96
5. SARs: 5,000 SARs
6. Employment Contract: In the event of change in control within two
years of employment date, 1 year annual
base pay or the equivalent of a 10 year
Senior Management payment benefit which
ever may be greater. Actual contract to be
completed by Gary Findley and signed by
employment date.
7. Participation in Executive Bonus Program
1996: Bonus Compensation to be the same
as the highest of any Executive Vice President.
8. Vacation: Benefit to be the same as a 10 year
member of senior management.
9. Other: Bank will provide an automobile, Country Club
membership, and group family medical plan
coverage as soon as eligible.
Jim, I hope this meets with your approval. If you wish to make any changes or
discuss, please call.
Signed: Accepted:
/s/Bruce E. Hendricks /s/James V. Bradham
- ----------------------------- ---------------------------
Bruce E. Hendricks James V. Bradham
Date: May 3, 1996 Date: May 3, 1996
<PAGE>
MEMORANDUM OF UNDERSTANDING
June 20, 1996
In the event that change of control of the company (as defined in the Option
Plan) occurs before June 18, 1998, and Bruce Hendricks does not accept
employment with the acquiring firm, he is entitled to one year base pay, or
severance benefits equal to a member of senior management with ten (10) years
seniority, whichever is greater.
/s/Bruce E. Hendricks /s/James V. Bradham
- ----------------------------- ---------------------------
Bruce E. Hendricks James V. Bradham
Senior Executive Vice President & President
Chief Operating Officer
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation of our report, dated January 17, 1997,
included in this Form 10-K in the previously filed Registration Statements of
American Bancorp of Nevada on Form S-8 No. 33-66217 and 33-29914.
/s/ McGLADREY & PULLEN, LLP
McGLADREY & PULLEN, LLP
Las Vegas, Nevada
March 11, 1997
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1996 FORM 10-K FOR AMERICAN BANCORP OF NEVADA AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 36,454
<INT-BEARING-DEPOSITS> 9,571
<FED-FUNDS-SOLD> 8,400
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 121,876
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 126,738
<ALLOWANCE> 1,311
<TOTAL-ASSETS> 317,854
<DEPOSITS> 248,596
<SHORT-TERM> 36,440
<LIABILITIES-OTHER> 1,166
<LONG-TERM> 0
0
0
<COMMON> 186
<OTHER-SE> 31,465
<TOTAL-LIABILITIES-AND-EQUITY> 317,854
<INTEREST-LOAN> 12,592
<INTEREST-INVEST> 7,293
<INTEREST-OTHER> 388
<INTEREST-TOTAL> 20,273
<INTEREST-DEPOSIT> 4,376
<INTEREST-EXPENSE> 5,792
<INTEREST-INCOME-NET> 14,480
<LOAN-LOSSES> 375
<SECURITIES-GAINS> 307
<EXPENSE-OTHER> 9,130
<INCOME-PRETAX> 6,715
<INCOME-PRE-EXTRAORDINARY> 4,877
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,877
<EPS-PRIMARY> 1.28
<EPS-DILUTED> 1.28
<YIELD-ACTUAL> 6.05
<LOANS-NON> 700
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,243
<CHARGE-OFFS> 316
<RECOVERIES> 10
<ALLOWANCE-CLOSE> 1,311
<ALLOWANCE-DOMESTIC> 1,311
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
