FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to
______________
Commission File No. 0-10710
AMBANC CORP.
(Exact name of Registrant as specified in its charter)
INDIANA 35-1525227
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
302 Main Street, Vincennes, Indiana 47591
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number,
including area code: (812) 885-6418
Securities registered pursuant to
Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
None None
Securities registered pursuant to
Section 12(g) of the Act:
Common Shares, $10.00 par value
(Title of Class)
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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 (Section
229.405 of this chapter) 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]
The aggregate market value of the voting shares held by
non-affiliates of the Registrant is $86,060,599.
Solely for purposes of this computation, it has been
assumed that officers and directors are "affiliates"
and the price of $30.50 as reported on NASDAQ as the
last trade on March 22, 1996, was the fair market value
of the shares.
Number of Common Shares outstanding at March 22, 1996:
3,158,961
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF PARTS II AND IV ARE INCORPORATED BY
REFERENCE FROM THE REGISTRANT'S 1995 ANNUAL REPORT TO
SHAREHOLDERS; AND A PORTION OF PART III IS INCORPORATED
BY REFERENCE FROM THE REGISTRANT'S PROXY STATEMENT
PURSUANT TO REGULATION 14A DATED MARCH 25, 1996, FOR
THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 19,
1996. EXCEPT FOR THOSE PORTIONS OF THE 1995 ANNUAL
REPORT INCORPORATED BY REFERENCE, THE ANNUAL REPORT IS
NOT DEEMED FILED AS PART OF THIS REPORT.
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AMBANC CORP.
VINCENNES, INDIANA
ANNUAL REPORT TO SECURITIES
AND EXCHANGE COMMISSION
DECEMBER 31, 1995
PART I
ITEM 1. BUSINESS
GENERAL
AMBANC Corp. (the "Corporation") is a registered
bank holding company whose principal subsidiaries are
The American National Bank of Vincennes, Indiana
("ANB"), Citizens' National Bank of Linton, Indiana
("CNB"), Bank of Casey, Illinois ("BOC"), and The First
National Bank in Robinson, Illinois ("FNB")
(collectively ANB, CNB, BOC and FNB are referred to
herein as the "Banks"). The Corporation was organized
as an Indiana corporation on January 7, 1982. Since
October 1, 1982, the Corporation's principal business
has been the ownership of the stock of its banking
subsidiaries, ANB (since October 1, 1982), CNB (since
August 1, 1990), BOC (since June 1, 1994), and FNB
(since November 1, 1995). The Corporation's Common
Stock is listed on the NASDAQ Small Cap Market and is
traded under the symbol "AMBK."
Effective November 1, 1995, the Corporation
acquired First Robinson Bancorp ("Robinson"), the
holding company for FNB, by merging a wholly owned
subsidiary of the Corporation (which had been formed
solely for the purposes of facilitating the
acquisition) into Robinson, with the subsidiary
surviving the merger. Immediately subsequent to the
first merger, the subsidiary was merged into the
Corporation, with the Corporation surviving the second
merger. Also, as part of the acquisition, Farmers'
State Bank of Palestine, Illinois ("FSB"), a wholly
owned subsidiary of the Corporation, was merged into
FNB with FNB surviving the merger. As a consequence of
the mergers, FNB became a direct subsidiary of the
Corporation and the former main office of FSB became a
branch office of FNB. The Corporation issued 636,504
shares of its Common Stock in exchange for all of the
issued and outstanding shares of Robinson (this number
has not been adjusted to reflect the November 30, 1995,
five percent stock dividend because the shares were
issued before the declaration and payment of the
dividend).
As a bank holding company, the Corporation engages
in commercial banking through its banking subsidiaries
and can engage in certain non-banking businesses
closely related to banking and own certain other
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<PAGE>4
business corporations that are not banks, subject to
applicable laws and regulations. In addition to the
Banks, the Corporation has as a subsidiary American
National Realty Corp., which owns various real estate,
which is leased to ANB for normal banking activities,
and Lincolnland Insurance Agency & Investments, Inc.,
which is a non-operating shell corporation that was
acquired in connection with the BOC acquisition.
ANB was chartered as a national bank under the
name "German-National Bank" in 1888. CNB was chartered
as a national bank in 1934. BOC was chartered as an
Illinois banking association in 1963. FNB was
chartered as a national bank in 1932.
The Corporation, ANB and CNB have entered into an
agreement, dated February 27, 1996, which provides for
the merger of CNB into ANB, with ANB surviving the
merger. Currently it is anticipated that the merger
will become effective on or about July 1, 1996.
The Corporation's principal executive offices are
located at 302 Main Street, Vincennes, Indiana 47591,
and its telephone number is (812) 885-6418.
OPERATIONS
The Banks engage in a wide range of commercial and
personal banking activities, including accepting demand
deposits; accepting savings and time deposits and money
market accounts; making secured and unsecured loans to
corporations, individuals and others; issuing letters
of credit; offering safekeeping services; and providing
financial counseling for institutions and individuals.
The Banks' lending services include commercial, real
estate, installment loans and credit cards. Revenues
from the Banks' lending activities comprise the largest
component of the Banks' operating revenues.
ANB provides a wide range of personal and
corporate trust and trust-related services, including
serving as executor of estates, as trustee under
testamentary and inter vivos trusts and various pension
and other employee benefit plans, as guardian of the
estates of minors and incompetents, as escrow agent
under various agreements, and as financial advisor to
and custodian for individuals, corporations and others.
BOC and FNB also provide certain trust and trust-
related services.
EMPLOYEES
At December 31, 1995, the Corporation and the
Banks had 309 full-time equivalent employees. Neither
the Corporation nor the Banks are a party to any
collective bargaining agreement, and employee relations
are considered to be good.
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REGULATION AND SUPERVISION
The Corporation is subject to the Bank Holding
Company Act of 1956, as amended (the "BHC Act"), and is
required to file with the Board of Governors of the
Federal Reserve System ("FRB") annual reports and such
additional information as the FRB may require. The FRB
also may make examinations or inspections of the
Corporation.
The BHC Act prohibits a bank holding company from
engaging in, or acquiring direct or indirect control of
more than 5 percent of the voting shares of any company
engaged in, non-banking activities. One of the
principal exceptions to this prohibition is for
activities deemed by the FRB to be "closely related to
banking." Under current regulations, bank holding
companies and their subsidiaries are permitted to
engage in such banking-related business ventures as
sales and consumer finance, equipment leasing, computer
service bureau and software operations, and mortgage
banking.
The BHC Act and Indiana law govern banking
expansion by banks and bank holding companies. Under
current Indiana law, banks may establish an unlimited
number of branches anywhere within the State of
Indiana. A holding company may establish non-banking
offices without geographical limitation.
Under the BHC Act, the Corporation must receive
the prior written approval of the FRB or its delegate
before it may acquire ownership or control of more than
five percent of the voting shares of another bank, and
under Indiana law it may not acquire 25 percent or more
of the voting shares of another bank without the prior
approval of the Indiana Department of Financial
Institutions. Furthermore, the Corporation's
acquisition of a bank located outside the State of
Indiana is not permitted unless the acquisition is
specifically authorized by the laws of the state in
which such bank is located. Illinois law expressly
authorizes the acquisition of an Illinois bank by bank
holding companies in other states, such as Indiana, the
laws of which expressly authorize Illinois bank holding
companies to acquire banks in such other states. Since
July 1, 1992, bank holding companies outside of Indiana
have been permitted under Indiana law to acquire
Indiana banks and bank holding companies, subject to
certain restrictions such as the existence of
reciprocal legislation in the state of the acquiring
bank holding company.
The Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 provides for nationwide
interstate banking and branching. Since September 30,
1995, well-capitalized bank holding companies have been
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authorized, pursuant to the legislation, to acquire
banks and bank holding companies in any state. The
legislation also permits banks to merge across state
lines, thereby creating a main bank in one state with
branches in other states. Interstate branching by
merger provisions will become effective on June 1,
1997, unless a state takes legislative action prior to
that date. States may pass laws to either "opt in"
before June 1, 1997 or to "opt-out" by expressly
prohibiting merger transactions involving out-of-state
banks, providing the legislative action is taken before
June 1, 1997. Indiana has not yet taken any
legislative action with respect to such interstate
mergers. Illinois has adopted legislation that will
permit interstate branching by acquisition effective
June 1, 1997.
As national banks, ANB, CNB and FNB are under the
supervision of and subject to examination by the
Comptroller of the Currency. BOC is an Illinois state-
chartered bank subject to regulation by the Illinois
Commissioner of Banks and Trust Companies. Regulation
and examination by banking regulatory agencies are
primarily for the benefit of depositors rather than
shareholders.
The Corporation is a legal entity separate and
distinct from the Banks. Substantially all of the
Corporation's cash income, including funds for the
satisfaction of the Corporation's debt service
requirements, for the payment of its operating
expenses, and for the payment of Corporation dividends,
is derived from dividends paid by the Banks. There are
statutory and regulatory limitations on the amount of
dividends that may be paid to the Corporation by the
Banks. The prior approval of appropriate regulatory
authorities is required if the total of all dividends
declared by ANB, CNB or FNB in any calendar year would
exceed net income for the preceding two calendar years.
The payment of dividends and other distribution by BOC
is subject to restrictions imposed by Illinois state
banking laws which prohibit the payment of dividends in
an amount greater than BOC's net profits less losses
and bad debts. At December 31, 1995, approximately
$8,814,000 was available for distribution from the
Banks to the Corporation. For discussion of the Banks'
ability to pay dividends to the Corporation, see Note
16 of the Notes to the Consolidated Financial
Statements.
The Banks also are subject to certain restrictions
imposed by federal law on extensions of credit to the
Corporation and other "affiliates" (as the term is
defined by such laws) and on investments in or
purchases of the securities of the Corporation and
other affiliates. Such restrictions prevent the
Corporation and other affiliates from borrowing from
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the Banks unless the loans are secured by certain types
and amounts of collateral. Further, all secured loans
to, or investments by any of the Banks in, the
Corporation or any affiliate are limited in amount to
10 percent of such Bank's capital and surplus, and all
secured loans and investments with respect to all
affiliates as a group are limited, in the aggregate, to
20 percent of such Bank's capital and surplus. These
laws also limit the Banks with respect to taking
securities of the Corporation as collateral for loans.
EFFECTS OF GOVERNMENT MONETARY POLICIES
The earnings of commercial banks are affected not
only by general economic conditions but also by the
policies of various governmental regulatory
authorities. In particular, the FRB regulates money
and credit conditions and interest rates in order to
influence general economic conditions, primarily
through open-market operations in U.S. Government
securities, varying the discount rate on bank
borrowings, and setting reserve requirements against
bank deposits. These policies have a significant
influence on overall growth and distribution of bank
loans, investments and deposits, and affect interest
rates charged on loans and earned on investments or
paid for deposits. FRB monetary policies have had a
significant effect on the operating results of
commercial banks in the past and such policies are
expected to continue to have a significant effect in
the future. The general effect, if any, of such
policies upon the future business and earnings of the
Corporation and the Banks cannot accurately be
predicted.
COMPETITION
The banking business is highly competitive. The
Banks' market area consists principally of Knox,
Greene, Gibson and Eastern Sullivan Counties in
Indiana, and Crawford, Clark, Lawrence and Wabash
Counties in Illinois, although the Banks also compete
with other financial institutions in those counties and
in surrounding counties in Indiana and Illinois in
obtaining deposits and providing many types of
financial services. The Banks compete with larger
banks in other areas for the business of local and
regional offices of companies located in the Banks'
market area and are aggressively seeking and have
acquired commercial loan customers from the
Indianapolis, Indiana and Evansville, Indiana areas.
Recent changes in federal and state law have
resulted in and are expected to continue to result in
increased competition. Banks other than ANB, CNB, BOC
and FNB located in the Banks' market area have been
acquired by larger bank holding companies from other
parts of Indiana and Illinois. As a consequence of the
Riegle-Neal legislation, substantially all state legal
barriers to the acquisition of banks by out-of-state<PAGE>
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bank holding companies were eliminated beginning
September 30, 1995. The Corporation anticipates that
the Riegle-Neal legislation will have the effect of
further increasing the competition in the markets in
which the Banks operate, although it is not possible to
predict the extent or timing of such increased
competition.
The Banks also compete with savings and loan
associations, credit unions, production credit
associations and federal land banks and with finance
companies, personal loan companies, money market funds
and other non-depository financial intermediaries.
Many of these financial institutions have resources
many times greater than those of the Banks. In
addition, new financial intermediaries such as
money-market mutual funds and large retailers are not
subject to the same regulations and laws that govern
the operation of traditional depository institutions.
RECENT AND PROPOSED LEGISLATION
The Federal Reserve Board, the Office of the
Comptroller of the Currency and the Federal Deposit
Insurance Corporation, each has issued similar
risk-based capital guidelines for all U.S. banks and
bank holding companies. The guidelines include a
definition of capital and provide a framework for
calculating weighted risk assets by assigning assets
and off-balance sheet items to broad risk categories.
The guidelines also provide a schedule for achieving a
minimum supervisory standard for the ratio of
qualifying capital to weighted risk assets. All banks
must have a minimum ratio of total capital to risk-
weighted assets of 8.0 percent. As of December 31,
1995, the Corporation was in compliance with the
risk-based capital guidelines. The Federal Deposit
Insurance Corporation Improvement Act of 1991
("FDICIA"), which was enacted into law on December 19,
1991, among other changes, requires the federal banking
agencies periodically to review and revise capital
standards.
Pursuant to FDICIA, the Federal Reserve Board
issued new regulations in 1992 that define five
categories of financial institutions for purposes of
implementing prompt corrective action and supervisory
enforcement requirements. The category to which the
most highly capitalized institutions are assigned is
termed "Well Capitalized." Institutions falling into
this category must have a total risk-based capital
ratio (the ratio of total capital to risk-weighted
assets) of at least 10 percent, a Tier 1 risk-based
capital ratio (the ratio of Tier 1, or "core," capital
to risk-weighted assets) of at least 6 percent, a
leverage ratio (the ratio of Tier 1 capital to total
assets) of at least 5 percent, and must not be subject
to any written agreement, order or directive from its
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regulator relative to meeting and maintaining a
specific capital level. As of December 31, 1995, each
of the Banks was considered by federal regulatory
authorities to be "well capitalized."
On August 8, 1995, the Board of Directors of the
FDIC approved a reduction in the deposit insurance
premiums paid by banks. Under the new premium
schedule, institutions insured through the Bank
Insurance Fund ("BIF") pay insurance premiums ranging
from 4 to 31 cents per $100 of domestic deposits.
Before the change, the lowest premium rate was 23 cents
per $100 of domestic deposits. Institutions that are
insured through the Savings Association Insurance Fund
("SAIF") would continue to pay premiums ranging from 23
to 31 cents per $100 of deposits. All of the
Corporation's banking subsidiaries are BIF-insured
institutions (the deposits ANB acquired from the
Princeton branch of First Indiana Bank on March 17,
1995, however, remain insured through SAIF).
Under the risk-based insurance assessment system
that became effective January 1, 1994, the FDIC places
each bank into one of nine risk categories based on the
bank's capital ratios and other risk measures. The
insurance premium paid by a bank depends upon the
category in which the bank is placed, with the
healthiest banks paying a deposit insurance premium of
4 cents per $100 of insured deposits and the most
troubled banks paying 31 cents per $100 of insured
deposits. Under this system, all the Banks fall into
the lowest risk category and, therefore, are required
to pay a premium of 4 cents on all deposits (except for
the SAIF-insured deposits held by ANB).
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ITEM 2. PROPERTIES
The Banks conduct their operations from 24 banking
offices located in Vincennes, Bicknell, Sandborn,
Monroe City, Linton, Patoka and Princeton in Indiana,
and Robinson, Palestine, Casey, Mt. Carmel, Flat Rock,
Martinsville, Westfield and West Union in Illinois. In
addition, the Banks have a total of 23 automated teller
machines.
ANB's main banking office is located at 302 Main
Street, Vincennes. The main office building contains
approximately 80,000 square feet and the Corporation
occupies approximately 80 percent of the space. The
remaining space is leased to third parties. All of the
parcels of real estate and buildings utilized as
banking offices of ANB are owned by either ANB or
American National Realty Corp. The ANB branches in
Patoka and Princeton were acquired on January 1, 1992,
when PNB was merged into ANB.
The Corporation also owns the main offices and
branch locations of CNB, BOC and FNB, except that the
CNB branch office is leased from a Director of CNB
and the FNB Westgate Branch facility is leased from the
grocery store in which it is located.<PAGE>
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ITEM 3. LEGAL PROCEEDINGS
Other than ordinary routine litigation incidental
to the business, there are no material pending legal
proceedings to which the Corporation or its
subsidiaries are a party or of which any of their
property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
Not Applicable.
SPECIAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information
relating to the executive officers of the Corporation
as of March 1, 1996.
<TABLE>
<CAPTION>
NAME AGE OFFICES HELD
<S> <C> <C>
Robert G. Watson 60 Chairman of the Board,
President and Chief
Executive Officer of the
Corporation and ANB
Richard E. Welling 50 Secretary, Treasurer, and
Chief Financial Officer
of the Corporation
Judith K. Adams 53 Senior Vice President,
Trust Officer and
Director of FNB
Richard A. Fox 53 Director of Human
Resources of the
Corporation
Chris D. Melton 46 Senior Vice President of
ANB
David K. Milligan 40 Senior Vice President and
Cashier of ANB
Raymond E. Mott 56 Senior Vice President of
ANB
William F. Perry 47 Senior Vice President of
ANB and a Director of BOC
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Dan J. Robinson 48 Executive Vice President
of ANB and a Director of
CNB
Mark J. Robinson 39 Chairman, President and
C.E.O. of CNB
Troy D. Stoll 30 Senior Auditor of the
Corporation
Officers are elected annually by the Board of
Directors and serve for a one-year period and until
their successors are elected. No officers have
employment contracts except Robert G. Watson, whose
employment contract is incorporated by reference as
Exhibit 10-A to this Report. There are no family
relationships between or among the persons named.
Except as indicated below, each of the officers has
held the same or similar position with the Corporation
or the Banks for the past five years.
Mr. Welling was appointed Secretary and Chief
Financial Officer of the Corporation in 1991.
Ms. Adams served as President of Farmers' State
Bank of Palestine ("Farmers'") from January 1, 1995,
until Farmers' merger into FNB effective November 1,
1995. Prior to 1995, she had served as Executive Vice
President of Farmers'.
Mr. Milligan, who had been employed by ANB since
1986, was named a Senior Vice President and Cashier of
ANB in April 1991.
Mr. Fox has been employed as the Corporation's
Director of Human Resources since 1993. Prior to that
date he had served as General Manager and Corporate
Secretary of Green Construction of Indiana, Inc.
Mr. Melton has been employed by ANB since October
1994. From September 1978 to August 1994, he was
employed by The National City Bank of Evansville,
Evansville, Indiana.
Mr. Mott has been employed by ANB since 1987 and
has served as Senior Vice President since 1993. He
served as a Director of the Corporation from 1989
through 1990 and as a Director of ANB from 1989 through
1993.
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Mr. Perry has been employed by ANB since September
1986, serving as Senior Loan Officer. He was elected
Senior Vice President of ANB in April 1987. He was
elected a Director of BOC in 1994.
Mr. Dan Robinson was in charge of the
Administrative Division of ANB until 1993 when he was
elected Executive Vice President. He was elected a
Director of CNB in 1991.
Mr. Mark Robinson had served as Vice President of
CNB prior to being named President in April 1995.
Mr. Stoll has been employed as Senior Auditor of
the Corporation since December 1993. He served as
Senior Auditor of ANB from October 1991 until December
1993, Staff Accountant in the ANB Accounting Department
from May 1990 until August 1991.
For information concerning the Directors of the
Corporation, see the Corporation's Proxy Statement.
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PART II
Information for Items 5 through 8 of this Report
appears in the 1995 Annual Report to Shareholders as
indicated in the following tables and is incorporated
herein by reference from the Annual Report to
Shareholders:
ITEM 5. MARKET FOR THE CORPORATION'S COMMON SHARES
AND RELATED SECURITY HOLDER MATTERS
Annual Report to
Shareholders
Page
(a) Market 46
(b) Holders 46
(c) Dividends 46
ITEM 6. SELECTED FINANCIAL DATA
Annual Report to
Shareholders
Page
Selected Financial Data 48
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Annual Report to
Shareholders
Page
Management's Discussion and
Analysis 29-46 and 48
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Annual Report to
Shareholders
Page
Financial Statements and
Supplementary Data 8-27
ITEM 9. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
The information required in response to this item
has been previously reported on a Current Report on
Form 8-K.
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PART III
Except as set forth below in "Directors and
Executive Officers of the Corporation," the information
for Items 10 through 13 of this Report is incorporated
herein by reference from the Corporation's definitive
Proxy Statement for its Annual Meeting of Shareholders
to be held April 19, 1996, which was filed with the
Commission pursuant to Regulation 14A on March 25,
1996.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
CORPORATION
The information required by this item relating to
Executive Officers is found under the heading "Special
Item. Executive Officers of the Registrant" in Part I
of this Report and the information required by this
item relating to Directors is included under the
caption "Election of Directors" in the Corporation's
definitive Proxy Statement for its Annual Meeting of
Shareholders to be held April 19, 1996, which has been
filed with the Commission and is incorporated herein by
reference in this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is included
under the caption "Executive Compensation" in the
Corporation's definitive Proxy Statement for its Annual
Meeting of Shareholders to be held April 19, 1996,
which has been filed with the Commission and is
incorporated by reference in this Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The information required by this item is included
under the caption "Election of Directors" in the
Corporation's definitive Proxy Statement for its Annual
Meeting of Shareholders to be held April 19, 1996,
which has been filed with the Commission and is
incorporated by reference in this Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
The information required by this item is included
under the caption "Certain Transactions" in the
Corporation's definitive Proxy Statement for its Annual
Meeting of Shareholders to be held April 19, 1996,
which has been filed with the Commission and is
incorporated by reference in this Form 10-K.
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<PAGE>16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
The documents listed below are either filed as a
part of this Report or incorporated by reference from
the Annual Report to Shareholders or the Corporation's
Registration Statement as indicated.
(a)1. Financial Statements
Annual Report to
Shareholders
Page
Independent Auditors' Report 6
Consolidated Balance Sheets as of
December 31, 1995 and 1994 8
Consolidated Statements of Income for
the years ended December 31, 1995,
1994 and 1993 9
Consolidated Statements of Changes
in Shareholders' Equity for the
years ended December 31, 1995,
1994 and 1993 10
Consolidated Statements of Cash Flows
for the years ended December 31,
1995 and 1994 and 1993 11
Notes to Consolidated Financial
Statements 12-27
All other schedules have been omitted because the
required information is either inapplicable or has been
included in the Corporation's consolidated financial
statement or notes thereto.
(a)2. Exhibits. The following exhibits are filed
as part of this Report:
3-A Restated Articles of Incorporation of the
Corporation. The copy of this Exhibit filed
as Exhibit 3.1 to the Registration Statement
Under the Securities Act of 1933 on Form S-4
filed by the Corporation on January 22, 1993
(File No. 33-57296), is incorporated herein
by reference.
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3-B Bylaws of the Corporation, as amended to
date. The copy of this Exhibit filed as
Exhibit 3-B to the Corporation's Annual
Report on Form 10-K for the year ended
December 31, 1993, is incorporated herein by
reference.
10-A Employment Agreement executed January 15,
1985, and re-executed December 21, 1988,
between the Corporation and Robert G. Watson.
The copy of this Exhibit filed as Exhibit
10.1 to the Corporation's Registration
Statement on Form S-4 (File No. 33-61065)
filed July 17, 1995, is incorporated herein
by reference.
10-B 1988 AMBANC Corp. Nonqualified Stock Option
Plan, as amended. The copy of this Exhibit
filed as Exhibit 10.2 to the Corporation's
Registration Statement on Form S-4 (File No.
33-61065) filed July 17, 1995, is
incorporated herein by reference.
10-C Letter from AMBANC to Robert G. Watson, dated
November 8, 1988, granting a stock option.
The copy of this Exhibit filed as Exhibit
10.3 to the Corporation's Registration
Statement on Form S-4 (File No. 33-61065)
filed July 17, 1995, is incorporated herein
by reference.
10-D Letter from AMBANC to Robert G. Watson, dated
May 16, 1989, granting stock appreciation
rights. The copy of this Exhibit filed as
Exhibit 10.4 to the Corporation's
Registration Statement on Form S-4 (File No.
33-61065) filed July 17, 1995, is
incorporated herein by reference.
10-E Letter from AMBANC to Raymond E. Mott, dated
November 8, 1988, granting a stock option.
The copy of this Exhibit filed as Exhibit
10.5 to the Corporation's Registration
Statement on Form S-4 (File No. 33-61065)
filed July 17, 1995, is incorporated herein
by reference.
10-F Letter from AMBANC to Raymond E. Mott, dated
May 16, 1989, granting stock appreciation
rights. The copy of this Exhibit filed as
Exhibit 10.6 to the Corporation's
Registration Statement on Form S-4 (File No.
33-61065) filed July 17, 1995, is
incorporated herein by reference.
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<PAGE>18
10-G Amended and Restated Supplemental Retirement
Benefits Agreement between the Corporation
and Robert G. Watson dated March 16, 1995.
10-H List of Executive Compensation Plans and
Arrangements.
11 Statement of Computation of per share
earnings.
13 Copy of the portions of the Corporation's
Annual Report to Shareholders for the year
ended December 31, 1995 that are incorporated
by reference herein. This exhibit, except
for portions thereof that have expressly been
incorporated by reference into this Report,
is furnished for the information of the
Commission and shall not be deemed "filed" as
part hereof.
22 List of Subsidiaries.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Kemper CPA Group L.L.C.
23.3 Consent of McGladrey & Pullen, LLP.
27 Financial Data Schedule.
99.1 Report of Crowe, Chizek & Company.
99.2 Reports of Kemper CPA Group L.L.C.
99.3 Report of McGladrey & Pullen, LLP
(b) Reports on Form 8-K.
A Current Report on Form 8-K was filed on
November 13, 1995, to report the
effectiveness as of November 1, 1995 of the
Corporation's acquisition of First Robinson
Bancorp, and the merger of Farmers' State
Bank of Palestine into The First National
Bank in Robinson.
<PAGE>
<PAGE>19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Corporation has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AMBANC CORP.
Date: March 28, 1996 By /s/ Robert G. Watson
Robert G. Watson, Chairman
of the Board, President &
Chief Executive Officer,
and Director
Date: March 28, 1996 /s/ Richard E. Welling
Richard E. Welling,
Secretary, Treasurer and
Chief Financial Officer
Date: March __, 1996
Glen G. Apple, Director
Date: March 28, 1996 /s/ Paul E. Brocksmith
Paul E. Brocksmith,
Director
Date: March 28, 1996 /s/ Christina M. Ernst
Christina M. Ernst,
Director
Date: March __, 1996
Robert D. Green, Director
Date: March 28, 1996 /s/ Rolland L. Helmling
Rolland L. Helmling,
Director
Date: March 28, 1996 /s/ Gerry M. Hippensteel
Gerry M. Hippensteel,
Director
Date: March __, 1996
Rebecca A. Kaley, Director
<PAGE>
<PAGE>20
Date: March __, 1996
Owen M. Landrith, Director
Date: March 28, 1996 /s/ Bernard G. Niehaus
Bernard G. Niehaus,
Director
Date: March 28, 1996 /s/ Richard H. Schaffer
Richard H. Schaffer,
Director
Date: March 28, 1996 /s/ Robert E. Seed
Robert E. Seed, Director
Date: March __, 1996
John A. Stachura, Jr.
Director
Date: March 28, 1996 /s/ Phillip M. Summers
Phillip M. Summers,
Director
Date: March __, 1996
Frank J. Weber, Director
Date: March 28, 1996 /s/ Howard R. Wright
Howard R. Wright, Director
<PAGE>
<PAGE>21
</TABLE>
<TABLE>
EXHIBIT INDEX
<CAPTION>
EXHIBITS
<S> <C>
3-A Restated Articles of Incorporation of the Corporation. The copy
of this Exhibit filed as Exhibit 3.1 to the Registration
Statement Under the Securities Act of 1933 on Form S-4 filed by
the Corporation on January 22, 1993 (File No. 33-57296), is
incorporated herein by reference.
3-B Bylaws of the Corporation, as amended to date. The copy of this
Exhibit filed as Exhibit 3-B to the Corporation's Annual Report
on Form 10-K for the year ended December 31, 1993, is
incorporated herein by reference.
10-A Employment Agreement executed January 15, 1985, and re-executed
December 21, 1988, between the Corporation and Robert G. Watson.
The copy of this Exhibit filed as Exhibit 10.1 to the
Corporation's Registration Statement on Form S-4 (File No.
33-61065) filed July 17, 1995, is incorporated herein by
reference.
10-B 1988 AMBANC Corp. Nonqualified Stock Option Plan, as amended.
The copy of this Exhibit filed as Exhibit 10.2 to the
Corporation's Registration Statement on Form S-4 (File No.
33-61065) filed July 17, 1995, is incorporated herein by
reference.
10-C Letter from AMBANC to Robert G. Watson, dated November 8, 1988,
granting a stock option. The copy of this Exhibit filed as
Exhibit 10.3 to the Corporation's Registration Statement on Form
S-4 (File No. 33-61065) filed July 17, 1995, is incorporated
herein by reference.
10-D Letter from AMBANC to Robert G. Watson, dated May 16, 1989,
granting stock appreciation rights. The copy of this Exhibit
filed as Exhibit 10.4 to the Corporation's Registration Statement
on Form S-4 (File No. 33-61065) filed July 17, 1995, is
incorporated herein by reference.
10-E Letter from AMBANC to Raymond E. Mott, dated November 8, 1988,
granting a stock option. The copy of this Exhibit filed as
Exhibit 10.5 to the Corporation's Registration Statement on Form
S-4 (File No. 33-61065) filed July 17, 1995, is incorporated
herein by reference.
10-F Letter from AMBANC to Raymond E. Mott, dated May 16, 1989,
granting stock appreciation rights. The copy of this Exhibit
filed as Exhibit 10.6 to the Corporation's Registration Statement
on Form S-4 (File No. 33-61065) filed July 17, 1995, is
incorporated herein by reference.
<PAGE>
<PAGE>22
10-G Amended and Restated Supplemental Retirement Benefits Agreement
between the Corporation and Robert G. Watson dated March 16,
1995.
10-H List of Executive Compensation Plans and Arrangements.
11 Statement of Computation of per share earnings.
13 Copy of the portions of the Corporation's Annual Report to
Shareholders for the year ended December 31, 1995 that are
incorporated by reference herein. This exhibit, except for
portions thereof that have expressly been incorporated by
reference into this Report, is furnished for the information of
the Commission and shall not be deemed "filed" as part hereof.
22 List of Subsidiaries.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Kemper CPA Group L.L.C.
23.3 Consent of McGladrey & Pullen, LLP.
27 Financial Data Schedule.
99.1 Report of Crowe, Chizek & Company.
99.2 Reports of Kemper CPA Group L.L.C.
99.3 Report of McGladrey & Pullen, LLP
</TABLE>
EXHIBIT 10-G
AMENDED AND RESTATED
SUPPLEMENTAL RETIREMENT BENEFITS AGREEMENT
This Agreement is made and entered into as of the
16th day of March, 1995, by and among Robert G. Watson,
Jr. (the "Employee"), The American National Bank of
Vincennes, a national banking association with its
principal office in Vincennes, Indiana (the "Bank"),
and AMBANC Corp. (the "Company"), an Indiana
corporation that owns all of the outstanding capital
stock of the Bank. (The Company and the Bank are
collectively referred to herein as the "Employer").
WHEREAS, the Employer, in recognition of the
invaluable contribution of the Employee's services to
its success, and in recognition of the Employee's
considerable and unique knowledge and experience
relating to its business, affairs and operations,
desires and believes it to be in its best interest and
the best interest of its shareholders to secure the
continuation of the Employee's services as an employee
of the Employer; and
WHEREAS, to induce the Employee to continue to
serve as an employee of the Employer, the Employer
desires to provide the Employee additional compensation
in the event of the termination of his employment with
both the Company and the Bank.
NOW, THEREFORE, in consideration of the foregoing,
and for other good and valuable consideration, the
Employee and the Employer hereby enter into this
Agreement and agree to be bound by its terms and
conditions.
ARTICLE I
Definitions
Section 1.01. Account Balance. "Account Balance"
means the Employee's account balance under the AMBANC
Corp. Retirement and Savings Plan as amended (the
"401(k) Plan") that is derived from Employer
contributions including matching contributions and
including any adjustments the 401(k) Plan administrator
deems necessary to account for any early withdrawals by
the Employee from such Employer contributions.
Section 1.02. Beneficiary. "Beneficiary" means the
person(s) designated in writing by the Employee to the
Employer to receive any Supplemental Retirement
Benefits that may be payable hereunder after the
Employee's death.
<PAGE>
<PAGE>2
Section 1.03. Commencement Date. "Commencement
Date" means the date on which the payment of
Supplemental Retirement Benefits to the Employee begins
and shall be the first day of the month following the
Termination Date.
Section 1.04. Termination. "Termination" means
termination of the Employee's employment for any reason
(including discharge, resignation, retirement,
disability or death) with both the Company and the Bank
(or termination of employment with the last of the two
if termination of the Employee's employment with the
Company and the Bank does not occur simultaneously).
Section 1.05. Termination Date. "Termination Date"
means the date and time at which the Employee's
employment with both the Company and the Bank
terminates (or the date and time at which the
Employee's employment with the last of the two
terminates if termination of the Employee's employment
with both the Company and the Bank does not occur
simultaneously) by reason of a Termination.
ARTICLE II
Supplemental Retirement Benefits
Section 2.01. Fifteen Year Certain Annuity. Upon a
Termination the Employee shall be entitled to receive
from the Employer a monthly annuity payment (the
"Annuity Payment") in an amount determined in
accordance with Sections 2.02 and 2.03 hereof payable
to the Employee during his lifetime, but in any event
payable for a period of not less than one hundred
eighty (180) months (the "Fifteen Year Certain
Annuity"). Payment of such monthly Annuity Payments to
the Employee shall begin on the Commencement Date and
shall be payable on the first day of each month
thereafter during the Employee's lifetime and, if the
Employee dies prior to receiving one hundred eighty
(180) Annuity Payments, shall continue to be paid after
the Employee's death as provided in Section 2.04 below
until an aggregate total of one hundred eighty (180)
such monthly Annuity Payments have been paid to the
Employee and the Beneficiary (or other successor to
whom such Annuity Payments are made after the
Employee's death).
Section 2.02. Amount of Annuity Payments. Subject
to adjustment pursuant to Section 2.03 (if applicable),
the amount of each Annuity Payment payable to the
Employee pursuant to Section 2.01 hereof shall be
determined as follows:
<PAGE>
<PAGE>3
(a) If the Termination Date occurs after March
31, 2000, the amount of each Annuity Payment
shall be Seven Thousand Two Hundred Dollars
($7,200).
(b) If the Termination Date occurs prior to
April 1, 2000, the amount of each Annuity
Payment shall be (i) One Thousand Nine
Hundred Forty-eight Dollars and Eighty Cents
($1,948.80), plus (ii) the product obtained
by multiplying Eighty-seven Dollars and
Fifty-two Cents ($87.52) times the number of
full calendar months from March 31, 1995 to
the Termination Date (excluding the month in
which the Termination Date occurs, and not
exceeding 60 months in any event).
Section 2.03. Adjustment Based on Retirement and
Savings Plan. The Employee is a participant in the
401(k) Plan. Dependent upon the balance of the
Employer's contributions to the Account Balance under
the 401(k) Plan as of the Termination Date, an
adjustment shall be made to the amount of each Annuity
Payment as follows:
(a) If the Termination Date occurs after June
30, 1999 and the Account Balance as of
December 31, 1999 is less than $235,000, the
Annuity Payment will be increased by $10 for
each $1,000 that $235,000 exceeds the
Account Balance. If the Account Balance
exceeds $235,000, the Annuity Payment will
be decreased by $10 for each $1,000 that the
Account Balance exceeds $235,000.
(b) If the Termination Date occurs after June
30, 1998 and before July 1, 1999 and the
Account Balance as of December 31, 1998 is
less than $205,000, the Annuity Payment will
be increased by $9.10 for each $1,000 that
$205,000 exceeds the Account Balance. If
the Account Balance exceeds $205,000, the
Annuity Payment will be decreased by $9.10
for each $1,000 that the Account Balance
exceeds $205,000.
(c) If the Termination Date occurs after June
30, 1997 and before July 1, 1998 and the
Account Balance as of December 31, 1997 is
less than $177,000, the Annuity Payment will
be increased by $8.40 for each $1,000 that
$177,000 exceeds the Account Balance. If
<PAGE>
<PAGE>4
the Account Balance exceeds $177,000, the
Annuity Payment will be decreased by $8.40
for each $1,000 that the Account Balance
exceeds $177,000.
(d) If the Termination Date occurs after June
30, 1996 and before July 1, 1997 and the
Account Balance as of December 31, 1996 is
less than $151,000, the Annuity Payment will
be increased by $7.80 for each $1,000 that
$151,000 exceeds the Account Balance. If
the Account Balance exceeds $151,000, the
Annuity Payment will be decreased by $7.80
for each $1,000 that the Account Balance
exceeds $151,000.
(e) If the Termination Date occurs after June
30, 1995 and before July 1, 1996 and the
Account Balance as of December 31, 1995 is
less than $127,000, the Annuity Payment will
be increased by $7.10 for each $1,000 that
$127,000 exceeds the Account Balance. If
the Account Balance exceeds $127,000, the
Annuity Payment will be decreased by $7.10
for each $1,000 that the Account Balance
exceeds $127,000.
Section 2.04. Payments After Employee's Death. If
the Employee dies at any time after the effective date
of this Agreement, the Employer shall make any and all
payments to which the Employee would have been entitled
if not for the Employee's death to the Employee's
Beneficiary. Absent a valid beneficiary designation,
the Employer shall pay such sums to the Employee's
surviving spouse or, in the absence of a surviving
spouse, to the Employee's estate.
ARTICLE III
Miscellaneous
Section 3.01. Succession. This Agreement shall
inure to the benefit of and be binding upon and may be
enforced by the Employer, its legal representatives,
successors and assigns, including without limitation,
any corporation which may acquire all or substantially
all of the Employer's assets and business or into which
the Employer may be consolidated or merged, and shall
be binding on the Employee and inure to the benefit of
and may be enforced by the Employee, his legal
representatives, heirs, executors, and administrators.
<PAGE>
<PAGE>5
Section 3.02. Legal Expenses. In the event that
the Employee or his successors institute any legal
action to enforce their rights under, or to recover
damages for breach of, this Agreement, the Employee or
his successors, if the prevailing party, shall be
entitled to recover from the Employer actual expenses
(including attorneys' fees) incurred in connection with
such legal action.
Section 3.03. Titles. The titles of sections
hereof are intended solely for convenience, and no
provision hereof is to be construed by reference to any
such title.
Section 3.04. Amendment or Modification. No
provision hereof may be amended, modified or waived
unless such amendment, modification or waiver is agreed
to in writing and signed by the Employee and the
Employer.
Section 3.05. Severability. In the event that any
provision or portion hereof is determined to be invalid
or unenforceable for any reason, the remaining
provisions and portions hereof shall be unaffected
thereby and shall remain in full force and effect to
the fullest extent permitted by law; provided, however,
that if the remaining provisions and portions hereof
are so essentially and inseparably connected, and so
depended upon, the provision or portion declared
invalid that they are incomplete and incapable of being
given effect without such provision or portion, then
this entire Agreement shall be deemed to be invalid and
unenforceable.
Section 3.06. No Employee Interest or Trust.
Neither anything contained herein nor any action taken
pursuant to the provisions hereof shall create or be
construed to create an interest of the Employee in any
insurance or annuity policy purchased and owned by the
Employer for the purposes of paying the retirement
benefits payable hereunder, and neither anything
contained herein nor any such action shall create or be
construed to create a trust of any kind or a fiduciary
relationship between the Employer and the Employee, his
beneficiary or any other person. Any funds that may be
set aside or invested by the Employer for the purpose
of paying the Supplemental Retirement Benefits payable
hereunder shall continue for all purposes to be a part
of the general funds of the Employer, and no person
other than the Employer shall, by virtue of the
provisions hereof, have any interest in such funds. To
the extent that any person acquires a right to receive
payments from the Employer hereunder, such right shall
<PAGE>
<PAGE>6
be no greater than the right of any unsecured general
creditor of the Employer.
Section 3.07. Other Benefits. Nothing contained
herein shall be deemed to exclude the Employee from any
supplemental compensation, bonus, pension, insurance,
severance pay or other benefit to which he might
otherwise be or become entitled as an employee of the
Employer.
Section 3.08. Governing Law. This Agreement
contains the entire understanding between the parties
with respect to the subject matter hereof, and shall be
governed by the laws of the State of Indiana.
ARTICLE V
Effective Date
This Agreement is effective as of March 16, 1995.
This Agreement amends and completely restates the
Supplemental Retirement Benefits Agreement, which
became effective on June 20, 1989.
IN WITNESS WHEREOF, the Company, the Bank and the
Employee have executed this Agreement as of the date
and year first above written.
COMPANY:
AMBANC CORP.
By: /s/ Howard R. Wright
BANK:
THE AMERICAN NATIONAL BANK
OF VINCENNES
By: /s/ Howard R. Wright
EMPLOYEE:
/s/ Robert G. Watson, Jr.
Robert G. Watson, Jr.
EXHIBIT 10-H
LIST OF EXECUTIVE COMPENSATION
PLANS AND ARRANGEMENTS
The Corporation's Chief Executive Officer, Robert G. Watson,
who is the only named executive officer, participates in the
following compensatory plans and arrangements:
EMPLOYMENT AGREEMENT.
Employment Agreement executed January 15, 1985, and re-executed
December 21, 1988, between the Corporation and Robert G. Watson.
This document was filed as Exhibit 10.1 to the Corporation's
Registration Statement on Form S-4 (File No. 33-61065) filed
July 17, 1995.
STOCK OPTION PLAN AND OPTION/SAR GRANTS.
1988 AMBANC Corp. Nonqualified Stock Option Plan, as amended. This
document was filed as Exhibit 10.2 to the Corporation's
Registration Statement on Form S-4 (File No. 33-61065) filed
July 17, 1995.
Letter from AMBANC to Robert G. Watson, dated November 8, 1988,
granting a stock option. This document was filed as Exhibit 10.3
to the Corporation's Registration Statement on Form S-4 (File No.
33-61065) filed July 17, 1995.
Letter from AMBANC to Robert G. Watson, dated May 16, 1989,
granting stock appreciation rights. This document was filed as
Exhibit 10.4 to the Corporation's Registration Statement on Form
S-4 (File No. 33-61065) filed July 17, 1995.
AMENDED AND RESTATED SUPPLEMENTAL RETIREMENT BENEFITS AGREEMENT.
Amended and Restated Supplemental Retirement Benefits Agreement
among the Corporation, The American National Bank of Vincennes, and
Robert G. Watson dated March 16, 1995.
<TABLE>
EXHIBIT 11
AMBANC Corp.
Computation of Per Share Earnings
with Common Stock Options Outstanding
(Treasury Stock Method)
<CAPTION>
1995(a) 1994(a) 1993(a)
Fully Fully Fully
Primary Diluted Primary Diluted Primary Diluted
<S> <C> <C> <C> <C> <C> <C>
Average shares
Outstanding Common
Stock 3,158,958 3,158,961 3,156,410 3,158,578 3,156,190 3,156,190
Common Stock
Equivalents:
Stock Options 25,200 25,200 25,200 25,200 25,200 25,200
Assumed Repurchase of
Treasury Shares (15,569) (15,569)(b) (15,449) (15,449)(b) (14,715) (13,714)
Average Common and
Common Equivalent
Shares Outstanding 3,168,589 3,168,592 3,166,161 3,168,329 3,166,675 3,167,676
Net Income in $1,000 7,045 7,045 6,502 6,502 6,162 6,162
Earnings Per Common and
Common Equivalent Share $ 2.22 $ 2.22 $ 2.05 $ 2.05 $ 1.95 $ 1.95
</TABLE>
(a) -- The above schedule has been restated to
reflect AMBANC Corp. shares issue in merger
transactions of 414,845 on June 1, 1993,
569,454 on June 1 1994, and 668,235 on
November 1, 1995, and the effect on net
income of these merger transactions booked
under the pooling of interests method of
accounting, and a 5% stock dividend issued to
shareholders on November 30, 1995.
(b) -- Because it was higher, average price not
ending price was used for repurchase
assumption.
EXHIBIT 13
AMBANC Corp.
1995 Annual Report to Shareholders
Pages 6, 8 through 27 and 29 through 46 and 48 are
incorporated by reference
<PAGE>
<PAGE> 1
BOARD OF DIRECTORS AND SHAREHOLDERS OF
AMBANC CORP.
VINCENNES, INDIANA
We have audited the consoldiated balance sheet of
AMBANC Corp. as of December 31, 1995, and the related
consolidated statements of income, changes in
shareholders' equity, and cash flows for the year ended
December 31, 1995. These financial statements are the
responsibility of the Corporation's management. Our
responsibility is to express an opinion on the
financial statements based on our audit.
We conducted our audit 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 audit
provides 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 AMBANC Corp. as of
December 31, 1995, and the results of their operations
and their cash flows for the year ended, in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements give
retroactive effect to the merger of AMBANC Corp. and
First Robinson Bancorp (FRB), which has been accounted
for as a pooling of interests as described in Note 2 to
the consolidated financial statements.
Other auditors previously audited and reported on the
consolidated balance sheet of AMBANC Corp. as of
December 31, 1994, and the related consolidated
statements of income, changes in shareholders' equity
and cash flows for the years ended December 31, 1994
and 1993, prior to their restatement for the 1995
pooling of interests, and their report dated January
27, 1995, expressed an unqualified opinion on those
statements and included an explanatory paragraph
concerning a change in method of accounting for income
taxes, postretirement benefits and certain securities
<PAGE>
<PAGE> 2
and an explanatory paragraph that described the
restatement of the 1994 and 1993 financial statements
to reflect the 1994 pooling of interests described in
Note 2 to the consolidated financial statements. The
financial statements of FRB for the years ended
December 31, 1994 and 1993, were audited by other
auditors, whose report dated January 20, 1995,
expressed an unqualified opinion. We audited the
combination of the accompanying consolidated balance
sheet as of December 31, 1994, and the related
consoldiated statements of income, changes in
shareholders' equity and cash flows for the years ended
December 31, 1994 and 1993, after restatement for the
1995 pooling of interests; in our opinion, such
consolidated statements have been properly combined on
the basis described in Note 2 to the consolidated
financial statements.
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
January 18, 1996
<PAGE>
<PAGE> 3
AMBANC CORP.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE
AND PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
ASSETS
Cash and due from banks.............................. $ 20,520 $ 22,531
Federal funds sold................................... 22,653 7,000
Total cash and cash equivalents.................... 43,173 29,531
Interest bearing deposits in other banks............. 692 1,193
Securities available for sale-at market
(amortized cost 1995-$171,744 and 1994-$152,177)... 173,469 146,680
Securities held to maturity
(market value of $39,177 in 1994).................. - 40,195
Loans held for sale.................................. 6,727 2,664
Loans, net of unearned income........................ 442,657 388,657
Allowance for loan losses............................ (5,022) (4,531)
Loans, net......................................... 437,635 384,126
Premises, furniture and equipment, net............... 9,398 8,888
Accrued interest receivable and other assets......... 11,253 11,963
Total assets................................... $ 682,347 $ 625,240
LIABILITIES
Noninterest bearing deposits......................... $ 63,116 $ 62,269
Interest bearing deposits............................ 536,953 488,118
Total deposits..................................... 600,069 550,387
Short-term borrowings................................ 6,788 9,294
Long-term debt....................................... 2,677 3,189
Accrued interest payable and
other liabilities.................................. 5,101 4,160
Total liabilities.............................. 614,635 567,030
SHAREHOLDERS' EQUITY
Preferred stock, $10 par value, 200,000 shares
authorized, no shares issued or outstanding........ - -
Common stock, $10 par value, 5,000,000
shares authorized, 3,158,961 and 3,008,587 shares
issued and outstanding at December 31, 1995 and
1994............................................... 31,590 30,086
Retained earnings.................................... 35,009 31,612
Unrealized gain/(loss) on securities available for
sale, net of deferred tax of $612 and ($2,009)..... 1,113 (3,488)
Total shareholders' equity..................... 67,712 58,210
Total liabilities and shareholders' equity..... $ 682,347 $ 625,240
</TABLE>
See accompanying notes to consolidated financial
statements.<PAGE>
<PAGE> 4
<TABLE>
AMBANC CORP.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans........................... $ 37,959 $ 30,676 $ 27,237
Interest and fees on loans held for sale............. 326 536 1,280
Interest on securities
Taxable............................................ 7,680 8,629 9,789
Tax exempt......................................... 2,759 2,842 2,952
Other interest....................................... 739 370 500
Total interest income.............................. 49,463 43,053 41,758
INTEREST EXPENSE
Interest on deposits................................. 23,593 18,568 18,712
Interest on short-term borrowings.................... 437 409 263
Interest on long-term debt........................... 161 177 32
Total interest expense............................. 24,191 19,154 19,007
Net interest income.............................. 25,272 23,899 22,751
Provision for loan losses.............................. 1,182 338 1,492
Net interest income after
provision for loan losses...................... 24,090 23,561 21,259
NONINTEREST INCOME
Income from fiduciary activities..................... 602 546 561
Service charges on deposit accounts.................. 1,454 1,274 1,325
Net realized gain on securities...................... 41 29 93
Other operating income............................... 1,016 1,035 1,120
Total noninterest income........................... 3,113 2,884 3,099
NONINTEREST EXPENSE
Salaries and employee benefits....................... 9,450 8,777 8,413
Occupancy expenses, net.............................. 1,051 1,107 1,014
Equipment expenses................................... 1,096 1,038 1,043
Data processing expenses............................. 430 442 583
FDIC insurance....................................... 690 1,225 1,191
Other operating expenses............................. 4,816 4,730 4,130
Total noninterest expense.......................... 17,533 17,319 16,374
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE......... 9,670 9,126 7,984
Income taxes........................................... 2,625 2,624 2,074
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE.............................. 7,045 6,502 5,910
Cumulative effect of change in accounting for
deferred income taxes................................ - - 252
NET INCOME....................................... $ 7,045 $ 6,502 $ 6,162
<PAGE>
<PAGE> 5
EARNINGS PER SHARE
Income per share before cumulative
effect of accounting change........................ $ 2.23 $ 2.06 $ 1.87
Cumulative effect of accounting change............... - - .08
Net income per share............................. $ 2.23 $ 2.06 $ 1.95
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<PAGE> 6
<TABLE>
AMBANC CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
UNREALIZED
GAIN/(LOSS) TOTAL
COMMON RETAINED TREASURY ON SHAREHOLDERS'
STOCK EARNINGS STOCK SECURITIES EQUITY
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993 AS
PREVIOUSLY REPORTED............ $ 23,698 $ 20,663 $ - $ (28) $ 44,333
Adjusted for pooling of
interests with FRB............. 6,364 1,926 (15) (56) 8,219
BALANCE, JANUARY 1, 1993 AS
RESTATED....................... 30,062 22,589 (15) (84) 52,552
Net income for 1993.............. 6,162 6,162
Cash dividends ($.54 per common
share)......................... (1,701) (1,701)
Net change in unrealized gain on
securities available for sale.. 733 733
Purchased treasury stock......... (22) (22)
Fractional shares paid for
acquisition.................... (2) (2)
BALANCE, DECEMBER 31, 1993....... 30,062 27,048 (37) 649 57,722
Net income for 1994.............. 6,502 6,502
Cash dividends ($.62 per common
share)......................... (1,947) (1,947)
Net change in unrealized loss on
securities available
for sale....................... (4,137) (4,137)
Issuance of stock for dividend
reinvestment and stock
purchase plan.................. 24 50 74
Fractional shares paid for
acquisition.................... (4) (4)
BALANCE, DECEMBER 31, 1994....... 30,086 31,649 (37) (3,488) 58,210
Net income for 1995.............. 7,045 7,045
Cash dividends ($.68 per common
share)......................... (2,144) (2,144)
Net change in unrealized gain
on securities available
for sale....................... 4,601 4,601
Issuance of stock for dividend
reinvestment and stock
purchase plan.................. 4 8 12
Fractional shares paid for
acquisition and stock dividend. (12) (12)
Retired treasury stock........... (37) 37 -
5% stock dividend................ 1,500 (1,500) -
BALANCE, DECEMBER 31, 1995....... $ 31,590 $ 35,009 $ - $ 1,113 $ 67,712
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<PAGE> 7
<TABLE>
AMBANC CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLAR AMOUNTS IN THOUSANDS)
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income......................................... $ 7,045 $ 6,502 $ 6,162
Adjustments to reconcile net income to net
cash from operating activities:
Net premium amortization and discount
accretion on securities...................... 374 443 496
Depreciation................................... 987 1,072 1,163
Provision for loan losses...................... 1,182 338 1,492
Deferred income tax provision.................. (621) 365 (365)
Gain on securities............................. (41) (29) (93)
Proceeds from sales of loans held for sale..... 16,231 35,676 39,591
Loans held for sale made to customers,
net of payments collected.................... (20,294) (21,421) (44,957)
Accrued interest receivable
and other assets............................. (1,290) (4,047) 149
Accrued interest payable
and other liabilities........................ 941 2,436 (399)
Deferred loan fees, net of costs............... (81) (33) (119)
Net cash from operating activities........... 4,433 21,302 3,120
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities
available for sale............................... 4,559 14,999 -
Proceeds from sales of securities held to maturity. - - 7,420
Proceeds from maturities and calls of securities
available for sale............................... 31,453 40,783 -
Proceeds from maturities and calls of securities
held to maturity................................. 4,037 3,232 69,549
Purchases of securities available for sale......... (15,816) (38,136)
Purchases of securities held to maturity........... (3,938) (4,020) (75,552)
Net change in interest bearing deposits
in other banks................................... 501 (303) (8)
Loans made to customers, net of payments collected. (54,028) (51,206) (37,640)
Loans purchased.................................... (7,386) (1,187) (1,150)
Proceeds from sales of loans....................... 6,804 6,845 5,633
Property and equipment expenditures................ (1,497) (1,295) (1,028)
Net cash from investing activities........... (35,311) (30,288) (32,776)
/TABLE
<PAGE>
<PAGE> 8
<TABLE>
AMBANC CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLAR AMOUNTS IN THOUSANDS)
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits............................. 49,682 494 5,583
Net change in short-term borrowings................ (2,506) (527) 490
Payments on long-term debt......................... (597) (338) (200)
Proceeds from long-term debt....................... 85 2,527 1,000
Purchase of treasury stock......................... - - (23)
Payment for fractional shares and
dissenter's shares............................... (12) (4) (2)
Issuance of stock for dividend reinvestment
and stock purchase plan.......................... 12 74
Dividends paid..................................... (2,144) (1,947) (1,701)
Net cash from financing activities....... 44,520 279 5,147
NET CHANGE IN CASH AND CASH EQUIVALENTS.............. 13,642 (8,707) (24,509)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR....... 29,531 38,238 62,747
CASH AND CASH EQUIVALENTS AT END OF YEAR............. $ 43,173 $ 29,531 $ 38,238
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest......................................... $ 22,371 $ 18,976 $ 19,396
Income taxes..................................... 2,981 2,722 2,186
</TABLE>
Noncash activities occurred consisting of the
reclassification of $40,080 from the held to maturity
securities portfolio to the available for sale
securities portfolio in 1995.
See accompanying notes to consolidated financial
statements.
<PAGE>
<PAGE> 9
AMBANC CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE
AND PER SHARE DATA)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF REPORTING
The consolidated financial statements include the
accounts of AMBANC Corp. (Corporation), and its wholly
owned subsidiaries, The American National Bank of
Vincennes (ANB), Citizens' National Bank of Linton
(CNB), Bank of Casey (BOC), The First National Bank in
Robinson (FNB), American National Realty Corp. (ANR)
and Lincolnland Insurance Agency & Investments, Inc.
(LIA). Upon consolidation, all significant
intercompany accounts and transactions have been
eliminated. As discussed in Note 2, AMBANC Corp.
acquired BOC on June 1, 1994, and FNB on November 1,
1995, both under the pooling of interests method of
accounting. These consolidated financial statements
have been restated to reflect the accounts of BOC and
FNB for all periods presented.
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that
affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ
from those estimates.
DESCRIPTION OF BUSINESS
ANB, CNB, BOC and FNB operate primarily in the banking
industry, which accounts for more than 90 percent of
the Corporation's revenues, operating income and
assets. ANB, CNB, BOC and FNB generate commercial,
real estate mortgage and installment loans and receive
deposits from customers located in Greene, Knox,
Gibson, Vigo and surrounding counties in Indiana and
Crawford, Clark, Wabash and surrounding counties in
Illinois. Although the overall loan portfolio is
diversified, the economy of these counties is heavily
dependent upon the agricultural industry. The majority
of the loans are secured by specific items of
collateral including business assets, real property and
consumer assets.
ANR owns various real estate, which is leased to ANB
for normal banking activities, such as parking,
drive-in banking and branch banking facilities.
<PAGE>
<PAGE> 10
SECURITIES
Statement of Financial Accounting Standards (FAS) 115,
"Accounting for Certain Investments in Debt and Equity
Securities", requires securities to be classified as
held to maturity, available for sale or trading. Only
those securities classified as held to maturity, which
management has the intent and ability to hold to
maturity, are reported at amortized cost. Available
for sale securities are reported at fair value with
unrealized after tax gains and losses included in
shareholders' equity. The Corporation does not
maintain any securities classified as trading.
Realized securities gains or losses are reported in the
Consolidated Statements of Income. The cost of
securities sold is based on the specific identification
method.
In November 1995 the Financial Accounting Standards
Board allowed a one time reclassification of all
securities. In December 1995 the Corporation
reclassified all held to maturity securities to
available for sale securities.
LOANS HELD FOR SALE
Loans held for sale consist of fixed rate mortgage
loans conforming to established guidelines and held for
sale to the secondary mortgage market. Mortgage loans
held for sale are carried at the lower of cost or
market value determined on an aggregate basis. Gains
and losses on the sale of these mortgage loans are
included in other noninterest income.
LOANS
Interest on real estate, commercial and installment
loans is accrued over the term of the loans on a level
yield basis. The recognition of interest income is
discontinued when, in management's judgment, the
interest will not be collectible in the normal course
of business.
The Corporation adopted FAS 114 and 118, "Accounting by
Creditors for Impairment of a Loan and Income
Recognition and Disclosures", as amended, effective
January 1, 1995. These statements require that
impaired loans be measured based on the present value
of expected future cash flows discounted at the loan's
effective interest rate or the fair value of the
underlying collateral, and specifies alternative
methods for recognizing interest income on loans that
are impaired or for which there are credit concerns.
For purposes of applying this standard, impaired loans
<PAGE>
<PAGE> 11
have been defined as all nonaccrual loans. The
Corporation's policy for income recognition was not
affected by adoption of the standard. The adoption of
FAS 114 and 118 did not have any effect on the total
reserve for credit losses or related provision.
LOAN FEES AND COSTS
The Corporation defers loan fees, net of certain direct
loan origination costs. The net amount deferred is
reported on the balance sheets as part of loans and is
recognized into interest income over the term of the
loan on a level yield basis.
ALLOWANCE FOR LOAN LOSSES
The balance in the allowance and the amount of the
annual provision charged to expense are judgmentally
determined based upon a number of factors. The
allowance is maintained by management at a level
considered adequate to cover possible losses that are
currently anticipated based on past loss experience,
general economic conditions, information about specific
borrower situations, including their financial position
and collateral values, and other factors that are
particularly susceptible to changes that could result
in a material adjustment in the near term. While
management endeavors to use the best information
available in making its evaluations, future allowance
adjustments may be necessary if economic conditions
change substantially from the assumptions used in
making the evaluations. While management may
periodically allocate portions of the allowance for
specific problem loan situations, the entire allowance
is available for any loan charge-offs which occur.
Increases to the allowance are recorded by a provision
for possible loan losses charged to expense. A loan is
charged off by management as a loss when deemed
uncollectible, although collection efforts continue and
future recoveries may occur.
PREMISES, FURNITURE AND EQUIPMENT
Premises, furniture and equipment are stated at cost
less accumulated depreciation. Premises, furniture and
equipment are depreciated over the estimated useful
lives of the assets ranging from 3 to 40 years,
principally on the straight-line method. Maintenance
and repairs are expensed, and major improvements are
capitalized.
<PAGE>
<PAGE> 12
INTANGIBLE ASSETS
Goodwill and other intangible assets are amortized on a
straight-line basis generally over a period of 15
years. Management reviews intangible assets for
possible impairment if there is a significant event
that detrimentally affects operations. Impairment is
measured using estimates of the future earnings
potential of the entity or assets acquired.
OTHER REAL ESTATE
Real estate acquired through foreclosure or acceptance
of a deed in lieu of foreclosure is recorded at the
lower of cost (fair value at date of foreclosure) or
fair value less estimated selling costs. The costs of
holding the real estate are charged to operations while
major improvements are capitalized.
INCOME TAXES
Effective January 1, 1993, the Corporation adopted FAS
109, "Accounting for Income Taxes", which requires an
asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax
assets and liabilities are computed annually for
differences between the financial statement and tax
basis of assets and liabilities that will result in
taxable or deductible amounts in the future based on
enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable
income. Income tax expense is the tax payable or
refundable for the period plus or minus the change
during the period in deferred tax assets and
liabilities. The cumulative effect of the accounting
change on years prior to January 1, 1993, of $252 is
shown on the 1993 income statement.
The Corporation and its subsidiaries file consolidated
tax returns. Each entity is charged or credited for
taxes as if separate returns were filed.
FIDUCIARY ACTIVITIES
Trust Department income is recognized on the cash basis
method, which in this circumstance does not materially
differ from the accrual method.
STATEMENTS OF CASH FLOWS
Cash and cash equivalents is defined to include cash on
hand, noninterest bearing amounts due from other banks
and federal funds sold. Generally, federal funds are
sold for one-day periods. The Corporation reports net
<PAGE>
<PAGE> 13
cash flows for loans held for sale, customer loan
transactions, deposit transactions and deposits made
with other financial institutions.
NEW ACCOUNTING PRONOUNCEMENTS
FAS 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of", is
effective for fiscal years beginning after December 15,
1995. This statement establishes accounting standards
for the impairment of long-lived assets, certain
liabilities, certain intangibles and goodwill. The
effects of FAS 121 on the future financial position and
results of operations of the Corporation cannot be
readily determined.
FAS 122, "Accounting for Mortgage Servicing Rights - an
Amendment of FASB Statement No. 65", is effective for
fiscal years beginning after December 15, 1995. This
Statement specifies conditions under which mortgage
servicing rights should be accounted for separately
from the underlying mortgage loans. The effects of FAS
122 on the future financial position and results of
operations of the Corporation cannot be readily
determined.
FAS 123, "Accounting for Stock-Based Compensation", was
issued in October 1995 and defines a new method of
accounting for stock options. Companies can either
elect the new method of accounting or disclose in a
note to the financial statements the pro forma effect
of adopting the standard. This will not have an impact
on results of operations of the Corporation since no
current plan exists for issuing stock options.
FINANCIAL STATEMENT PRESENTATION
Certain items in the 1994 and 1993 financial statements
have been reclassified to correspond with the 1995
presentation.
<PAGE>
<PAGE> 14
NOTE 2 - BUSINESS COMBINATIONS
<TABLE>
<CAPTION>
COMMON
SHARES METHOD OF
DATE COMPLETED ISSUED ACCOUNTING
<S> <C> <C> <C>
First Robinson Bancorp (FRB) November 1, 1995 668,235 Pooling
Lincolnland Bancshares, Inc. (LBI) June 1, 1994 569,454 Pooling
</TABLE>
The Consolidated Financial Statements have been
restated to include the accounts and operations of FRB,
parent holding company of FNB, and LBI, parent holding
company of BOC and LIA for all periods presented. FRB
and LBI were merged into the Corporation and ceased to
exist at the conclusion of these mergers. The
contributions of FRB and LBI to consolidated interest
income, net interest income and net income for the
periods prior to the merger were as follows.
<TABLE>
<CAPTION>
TEN
MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
<S> <C> <C> <C>
Interest income
Previously reported... $ 33,967 $ 35,023 $ 27,701
LBI................... N/A N/A 6,336
FRB................... 6,826 8,030 7,721
Total............... $ 40,793 $ 43,053 $ 41,758
Net interest income
Previously reported... $ 17,362 $ 19,423 $ 15,002
LBI................... N/A N/A 3,315
FRB................... 3,624 4,476 4,434
Total............... $ 20,986 $ 23,899 $ 22,751
Net income
Previously reported... $ 5,042 $ 5,443 $ 4,557
LBI................... N/A N/A 862
FRB................... 678 1,059 743
Total............... $ 5,720 $ 6,502 $ 6,162
</TABLE>
<PAGE>
<PAGE> 15
NOTE 3 - SECURITIES
The amortized cost and estimated market value of
securities are as follows.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
U.S. Government and its agencies..... $ 101,483 $ 891 $ (664) $ 101,710
States and political subdivisions.... 50,216 1,705 (84) 51,837
Corporate obligations................ 3,550 43 (3) 3,590
Collateralized mortgage obligations.. 15,544 45 (73) 15,516
Mutual funds......................... 951 - (135) 816
Total.............................. $ 171,744 $ 2,684 $ (959) $ 173,469
</TABLE>
The one-time reclassification under FAS 115 occurred in
December 1995 and reclassified securities with
amortized cost of $40,080 from held to maturity to
available for sale. The unrealized gain at the time of
the transfer was $1,628.
<TABLE>
<CAPTION>
DECEMBER 31, 1994
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
U.S. Government and
its agencies.................. $ 116,633 $ 114 $ (4,740) $ 112,007
States and political
subdivisions.................. 11,175 179 (88) 11,266
Corporate obligations........... 4,985 24 (44) 4,965
Collateralized mortgage
obligations................... 17,995 7 (712) 17,290
Mutual funds.................... 1,389 - (237) 1,152
Total......................... $ 152,177 $ 324 $ (5,821) $ 146,680
SECURITIES HELD TO MATURITY
U.S. Government and
its agencies.................. $ 500 $ - $ (30) $ 470
Nontaxable states and
political subdivisions........ 39,695 433 (1,421) 38,707
Total......................... $ 40,195 $ 433 $ (1,451) $ 39,177
</TABLE>
<PAGE>
<PAGE>16
Investments in states and political subdivisions
and corporate obligations are made within policy
standards, which call for these securities to be
investment grade or better as established by national
rating organizations. These securities are actively
traded and have a readily available market valuation.
Ratings and market values of these securities are
reviewed monthly with market values being obtained from
an independent rating service or broker.
The amortized cost and estimated market value of
securities at December 31, 1995, by contractual
maturity are shown in the following schedule. Expected
maturities will differ from contractual maturities
because borrowers may have the right to call or prepay
obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
AVAILABLE FOR SALE
ESTIMATED
AMORTIZED MARKET
COST VALUE
<S> <C> <C>
Due in 1 year or less.................... $ 29,068 $ 29,145
Due after 1 year through 5 years......... 59,286 59,507
Due after 5 years through 10 years....... 32,044 33,096
Due after 10 years....................... 7,252 7,397
Subtotal............................... 127,650 129,145
Collateralized mortgage obligations...... 15,544 15,516
U.S. agency mortgage-backed
securities............................. 27,599 27,992
Mutual funds............................. 951 816
Total.................................. $ 171,744 $ 173,469
</TABLE>
Proceeds from sales of securities available for sale were
$4,559 in 1995, $14,999 in 1994 and $0 in 1993. Proceeds from
sales of securities held to maturity were $0 in 1995 and 1994 and
$7,420 in 1993. Sales and calls of securities available for sale
resulted in gross gains of $21 and gross losses of $3 in 1995 and
gross gains of $78 and gross losses of $49 in 1994. Sales and
calls of securities held to maturity resulted in gross gains and
gross losses of $24 and $1 in 1995, $0 and $0 in 1994, and $147
and $54 in 1993, respectively.
Securities with a carrying value of $47,631 and $45,694 at
December 31, 1995 and 1994, were pledged to secure public deposits
and for other purposes required or permitted by law.
<PAGE>
<PAGE>17
NOTE 4 - LOANS
Loans as presented on the balance sheets are comprised of
the following.
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Commercial and agricultural.... $ 213,077 $ 180,403
Real estate.................... 132,067 116,611
Installment.................... 98,506 93,651
Total loans.................. 443,650 390,665
Unearned income................ (993) (2,008)
Total loans, net............. $ 442,657 $ 388,657
</TABLE>
At December 31, 1995, 1994 and 1993, non-accrual
loans totaled $983, $650 and $1,078. Income recorded
on these loans during 1995, 1994 and 1993 totaled $18,
$17 and $17. Income which would have been recorded on
these loans during 1995, 1994 and 1993, had they been
accruing all year, was $41, $55 and $105.
Certain loans have been restructured in a manner
that grants a concession to the borrower because of the
borrower's financial difficulties. At December 31,
1995, 1994 and 1993, these loans totaled $45, $490 and
$565. Interest income recorded on these loans was $3,
$39 and $40 during 1995, 1994 and 1993. Interest
income which would have been recorded under the
original terms of the loans was $4, $44 and $48 during
1995, 1994 and 1993.
Directors and executive officers of the
Corporation and its wholly owned subsidiaries were
customers of, and had other transactions with, the
banking subsidiaries in the ordinary course of
business. A schedule of the aggregate activity
involving loans to related parties follows.
Balance, January 1, 1995.................... $ 11,307
New loans................................... 15,076
Loan reductions............................. (7,074)
Balance, December 31, 1995.................. $ 19,309
<PAGE>
<PAGE>18
NOTE 5 - ALLOWANCE FOR LOAN LOSSES
The activity in the allowance for loan losses is
as follows.
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Balance, January 1.............. $ 4,531 $ 4,238 $ 4,168
Provision charged to operations. 1,182 338 1,492
Loans charged off............... (1,019) (808) (1,754)
Recoveries...................... 328 763 332
Balance, December 31............ $ 5,022 $ 4,531 $ 4,238
</TABLE>
The recorded investment in loans considered
impaired at December 31, 1995, under FAS 114 and 118,
was $983 of which $160 related to loans with a specific
valuation reserve of $50 and $823 related to loans with
no valuation reserve. For the year ended December 31,
1995, the average recorded investment in impaired loans
was approximately $1,146.
NOTE 6 - PREMISES, FURNITURE AND EQUIPMENT
Premises, furniture and equipment as presented on
the balance sheets are comprised of the following.
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Land and improvements....................... $ 1,346 $ 1,346
Buildings and improvements.................. 10,751 9,997
Furniture and equipment..................... 8,973 8,570
Total cost.............................. 21,070 19,913
Accumulated depreciation.................... (11,672) (11,025)
Total, net.............................. $ 9,398 $ 8,888
</TABLE>
Depreciation expense for the years ended
December 31, 1995, 1994 and 1993, totaled $987, $1,072
and $1,163.
NOTE 7 - INTEREST BEARING DEPOSITS
Interest bearing deposits issued in denominations
of $100 or greater totaled $66,647 and $57,149 at
December 31, 1995 and 1994.
<PAGE>
<PAGE>19
NOTE 8 - SHORT-TERM BORROWINGS
Short-term borrowings included:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Federal funds purchased
and repurchase agreements................. $ 5,385 $ 7,207
Demand notes issued to the U.S. Treasury.... 1,403 2,087
Total..................................... $ 6,788 $ 9,294
</TABLE>
Federal funds purchased generally mature daily.
Borrowings under the Federal Reserve Bank note option
plan are collateralized by certain securities and are
reduced at the discretion of the U.S. Treasury.
NOTE 9 - LONG-TERM DEBT
Long-term debt is comprised of a deferred
compensation plan of $102 and $27 in 1995 and 1994 as
discussed in Note 10 and two Federal Home Loan Bank
Mortgage Advances (Advances) totaling $2,575 and $3,162
in 1995 and 1994. The Advances have an average rate of
5.68%, interest payable monthly and principal payable
in annual installments with the final payment due March
15, 2004, and are secured by various securities. The
principal maturities of these Advances in each of the
five years after December 31, 1995, will be $484, $400,
$332, $211 and $188.
NOTE 10 - EMPLOYEE BENEFITS
The Corporation maintains retirement savings plans
(Plans) covering substantially all employees. To be
eligible to participate, the Plans require employees to
complete one year of service and be 21 years of age.
The first of these Plans covers all employees except
FNB employees and allows for the matching of 50% of the
first 4% of employee salary contributions and an annual
discretionary contribution. The FNB Plan allowed for
the matching of 50% of the first 6% of employee salary
contributions and an annual discretionary contribution
of which there has been none during the last three
years. FNB employees were eligible to participate in a
defined contribution money purchase pension plan that
provided for a contribution of 5% of eligible
compensation. The Corporation's contributions to all
Plans are vested by employees at 20% per year starting
with the second year of service and become 100% vested
after six years. The Corporation's total contributions
to the Plans were $473, $435 and $368 for 1995, 1994
and 1993.
<PAGE>
<PAGE>20
Prior to December 31, 1994, BOC sponsored a
defined benefit pension plan covering substantially all
employees. Benefits were based primarily on years of
service and on the employees' average compensation
during their period of employment. BOC's funding
policy was to contribute the minimum amount required by
applicable regulations. Plan assets consist primarily
of investments in interest bearing balances with
financial institutions, U.S. government bonds and
marketable equity mutual funds. In 1994 a curtailment
occurred which was accounted for in accordance with FAS
88, "Employers' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for
Termination Benefits". The effect of curtailing the
Plan was to recognize a decrease in the 1994 projected
benefit obligation of $215, to recognize the transition
obligation of $472 in 1994 and to recognize an
additional gain of $208 at December 31, 1994. The net
$49 curtailment loss is included with pension costs in
the 1994 consolidated statement of income.
<PAGE>
<PAGE>21
Summary of the Plan's funded status at
December 31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Actuarial present value of accumulated
benefit obligations
Vested.................................... $ (928) $ (1,090)
Nonvested................................. - (13)
Projected benefit obligation for
services rendered to date............. (928) (1,103)
Plan assets at fair value................... 958 925
Plan assets over/(under) projected
benefit obligation.................... 30 (178)
Items not yet recognized in income
Unrecognized loss......................... 72 81
Prepaid/(accrued) pension cost.......... $ 102 $ (97)
</TABLE>
Net pension expense for the years ended
December 31:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Service cost-benefits earned................ $ - $ 93 $ 76
Interest cost on projected
benefit obligation........................ 50 84 79
Actual return on plan assets................ (69) (35) (43)
Net amortization and deferral............... 8 6 (4)
Effect of curtailment loss.................. - 49 -
Net pension (benefit)/expense............. $ (11) $ 197 $ 108
</TABLE>
The weighted-average discount rate used in
determining the actuarial present value of projected
benefit obligations was 5% in 1995 and 1994 and 8% in
1993. Additionally, the rate of increase in future
compensation assumed was 0% for 1995 and 4% for 1994
and 1993. The expected long-term rate of return on
plan assets was 6% in 1995 and 8% in 1994 and 1993.
The Corporation has a deferred compensation plan
for the benefit of certain executive officers. In
return for the officers' relinquishing the right to a
portion of their current compensation, the Corporation
agrees to pay the participants at retirement or
termination, in the form of 120 monthly payments or one
lump-sum payment, the amount deferred plus any interest
earned during the deferral period. Interest is paid
annually at prime rate and the liability of $102 and
$27 is included with long-term debt on the December 31,
1995 and 1994, balance sheets. During 1995 and 1994
the Corporation accrued approximately $6 and $1 of
interest expense towards its obligation under the plan.
<PAGE>
<PAGE>22
NOTE 11 - POSTRETIREMENT BENEFITS
The Corporation sponsors an unfunded
postretirement benefit plan which provides defined
medical and death benefits to certain eligible
employees. Retirees as of December 31, 1992, receive
postretirement medical benefits and death benefits for
themselves and medical benefits for their spouses.
These medical expenses were fixed in 1992 and all
future increases are passed onto the retirees.
Employees hired before April 1990 who retire after
January 1, 1993, are eligible to receive a
postretirement medical benefit for themselves, if they
have completed 20 years of service and attained age 62.
This benefit is sixty dollars per month to pay up to
fifty percent of the retirees medical benefits provided
under the Corporation's group major medical insurance
plan until age 65 and then under a medicare supplement
plan.
Accumulated postretirement benefit obligations at
December 31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Retirees................................. $ (350) $ (318)
Fully eligible active participants....... (28) (7)
Other active plan participants........... (261) (131)
Accumulated postretirement benefit
obligation......................... (639) (456)
Unrecognized prior service cost.......... 74 -
Unrecognized loss........................ (20) -
Unrecognized transition obligation....... 494 398
Accrued postretirement
benefit liability.................. $ (91) $ (58)
</TABLE>
Net periodic postretirement benefit cost for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Service cost-benefits attributed to
service during the period.............. $ 13 $ 11 $ 10
Interest cost on accumulated
postretirement benefit obligation...... 39 40 41
Amortization of transition
obligation over 20 years............... 29 29 29
Postretirement benefit cost.......... $ 81 $ 80 $ 80
</TABLE>
Benefit payments of $48, $45 and $57 were made for
postretirement medical benefits in 1995, 1994 and 1993.
<PAGE>
<PAGE>23
For measurement purposes, the annual rate of
increase in the per capita cost of covered health care
benefits was assumed to be 9.5% for 1995 and 16% for
1994 and 1993 with the rate gradually decreasing to 6%
after 15 years. The health care cost trend assumption
has a significant effect on the amounts reported. An
increase in the assumed health care cost trend rates by
1% in each year would increase the accumulated
postretirement benefit obligation as of December 31,
1995, 1994 and 1993, by approximately $14 and would
have virtually no effect on the aggregate of the
service and interest cost components of net periodic
postretirement benefit cost for 1995, 1994 and 1993.
The weighted-average discount rate used in
determining the accumulated postretirement benefit
obligation was 7%, 6% and 7% at December 31, 1995, 1994
and 1993.
NOTE 12 - STOCK OPTION PLAN
The Corporation had a Nonqualified Stock Option
Plan which expired in April 1993. Under the terms of
the plan, options were granted at amounts not less than
the fair market value of the shares at the date of the
grant and any options granted must be exercised within
ten years of the grant. As of December 31, 1995, 1994
and 1993, fully vested options for 25,200 shares at an
option price of $19.05 per share were outstanding.
Additionally, under provisions of the Nonqualified
Stock Option Plan, stock appreciation rights have been
granted coinciding with the number of stock options
ranted. The value of each stock appreciation right at
any time is equal to 50% of the excess of the fair
market value of one share of common stock of the
orporation over the exercise price of the option to
which it relates. Employee benefits charged/(credited)
to operations in 1995, 1994 and 1993 includes $12,
$69) and $60 related to stock appreciation rights.
NOTE 13 - INCOME TAXES
Income taxes consist of the following.
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Income taxes
Current payable........................... $ 3,246 $ 2,259 $ 2,439
Deferred income taxes/(benefits).......... (409) 365 (365)
Change in valuation allowance............. (212) - -
Income taxes............................ $ 2,625 $ 2,624 $ 2,074
</TABLE>
Income taxes applicable to security transactions
were $14, $17 and $36 in 1995, 1994 and 1993.
<PAGE>
<PAGE>24
The following is a reconciliation of income tax
expense and the amount computed by applying the
statutory federal income tax rate of 34% to income
before income taxes.
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Statutory rate applied to income............ $ 3,288 $ 3,103 $ 2,715
Adjustments
Tax exempt interest income................ (1,048) (1,086) (1,146)
Non-deductible interest................... 144 156 153
Merger expenses........................... 111 66 48
State income taxes........................ 374 333 306
Alternative minimum tax................... - (27) 97
Surtax exemption and other................ (32) 79 (99)
Change in valuation allowance............. (212) - -
Total income taxes...................... $ 2,625 $ 2,624 $ 2,074
</TABLE>
The Corporation's deferred income tax assets and
liabilities consist of the following.
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred tax assets
Allowance for loan losses................. $ 563 $ 231
Accrued employee benefits................. 392 284
Unrealized loss on securities
available for sale...................... - 2,009
Alternative minimum tax carryforward...... 258 253
Other..................................... 5 43
Valuation allowance....................... - (212)
1,218 2,608
Deferred tax liabilities
Depreciation.............................. 605 552
Unrealized gain on securities
available for sale...................... 612 -
Market to market adjustment on
loans held for sale..................... 1 92
Accretion of securites discount........... 112 76
1,330 720
Net deferred tax asset/(liability)...... $ (112) $ 1,888
</TABLE>
NOTE 14 - COMMITMENTS AND CONTINGENT LIABILITIES
The Corporation leases various facilities and
equipment. These leases expire at various times during
the years 1996 through 2008 with renewal options
through the year 2038. Certain of these leases are
with companies controlled by directors of the
Corporation and its subsidiaries and had total lease
payments of $42, $41 and $22 in 1995, 1994 and 1993.
Total rental expense for all leases for the years
<PAGE>
<PAGE>25
1995, 1994 and 1993, was $166, $94 and $71. The
following is a schedule of future minimum lease
payments.
1996............ $ 270
1997............ 270
1998............ 191
1999............ 91
2000............ 94
Thereafter...... 1,002
Total......... $ 1,918
In the ordinary course of business, the
Corporation's banking subsidiaries have loans,
commitments and contingent liabilities, such as
guarantees and commitments to extend credit, which are
not reflected in the consolidated balance sheets. The
Corporation's exposure to credit loss in the event of
nonperformance by the other party to the financial
instrument for commitments to make loans and standby
letters of credit is represented by the contractual
amount of those instruments. The Corporation uses the
same credit policy to make such commitments as is used
for on-balance sheet items. Outstanding loan
commitments and customers' unused lines of credit
amounted to $74,779 and $69,791 at December 31, 1995
and 1994. Outstanding standby letters of credit were
$6,058 and $6,417 at December 31, 1995 and 1994. Since
many commitments to make loans expire without being
used, the outstanding amount of commitments does not
necessarily represent future cash commitments.
Collateral obtained upon exercise of the commitment is
determined using management's credit evaluation of the
borrower and may include accounts receivable,
inventory, property, land and other items.
The Corporation was required to have $7,018 and
$6,988 at December 31, 1995 and 1994, on deposit with
the Federal Reserve or as cash on hand or on deposit
with other banks. These reserves do not earn interest.
NOTE 15 - SHAREHOLDERS' EQUITY
All share and per share amounts have been
retroactively adjusted to reflect the effect of the
shares issued in the business combinations discussed in
Note 2 as though these shares had been outstanding for
all periods presented. A 5% stock dividend was paid on
November 30, 1995, and all average share and per share
amounts have been retroactively adjusted to reflect
this stock dividend. Earnings per share amounts are
based on average outstanding shares of 3,158,958 for
1995, 3,156,410 for 1994 and 3,156,190 for 1993.
<PAGE>
<PAGE>26
In 1993 the directors of the Corporation approved
the establishment of a Dividend Reinvestment and Stock
Purchase Plan (Plan) to provide shareholders a method
of purchasing additional shares of the Corporation's
common stock by reinvesting their cash dividends or
making optional cash payments into the Plan. Shares
are credited to the participant's account at the market
value of the Corporation's stock at the date of the
monthly purchase by the Plan. The directors of the
Corporation reserved 50,000 shares for the Plan and
issued 383 shares in 1995 and 2,388 shares in 1994 to
the Plan. The Plan was changed to a market only plan
during the second quarter of 1995 and no more shares of
common stock are reserved or will be issued by the
Corporation through this Plan.
The Corporation 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
Corporation's financial statements. Under capital
adequacy guidelines and the regulatory framework for
prompt corrective action, the Corporation must meet
specific capital guidelines that involve quantitative
measures of the Corporation's assets, liabilities, and
certain off-balance sheet items as calculated under
regulatory accounting practices. The Corporation's
capital amounts and classification are also subject to
qualitative judgments by the regulators about
omponents, risk weightings and other factors.
Quantitative measures established by regulation to
ensure capital adequacy require the Corporation to
maintain minimum amounts and ratios (set forth in the
table to follow) of Total and Tier 1 capital (as
defined in the regulations) to risk-weighted assets (as
defined), and of Leverage capital (as defined) to
average assets (as defined). Management believes, as
of December 31, 1995 and 1994, that the Corporation
meets all capital adequacy requirements to which it is
subject. The most recent notification from federal
banking agencies categorized the Corporation as well
capitalized under the regulatory framework for prompt
corrective action. To be categorized as adequately
capitalized the Corporation must maintain minimum
Leverage capital, Tier 1 risk-based capital and Total
risk-based capital ratios as set forth in the table.
Since that notification there have been no conditions
or events that management believes have changed the
Corporation's category.
<PAGE>
<PAGE>27
<TABLE>
<CAPTION>
To be Well
Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1995
Leverage capital............. $ 64,572 10.01% $ 25,805 4.00% $ 32,256 5.00%
Tier 1 risk-based capital.... 64,577 13.61 18,981 4.00 28,471 6.00
Total risk-based capital..... 64,577 14.67 37,961 8.00 47,452 10.00
As of December 31, 1994
Leverage capital............. $ 61,263 9.87% $ 24,826 4.00% $ 31,032 5.00%
Tier 1 risk-based capital.... 61,272 14.25 17,201 4.00 25,802 6.00
Total risk-based capital..... 65,803 15.30 34,402 8.00 43,003 10.00
</TABLE>
NOTE 16 - DIVIDEND RESTRICTIONS
The Corporation and its wholly owned subsidiary
banks are subject to regulations which require the
maintenance of certain capital levels and, as a result,
limit the amount of dividends which may be paid by the
banks. ANB, CNB and FNB are regulated by the
Comptroller of the Currency, BOC is regulated by the
Commissioner of Banks and Trust Companies in Illinois,
while the Corporation is regulated by the Federal
eserve Board. The most restrictive of the regulations
generally requires the banks to maintain a minimum
leverage capital to total asset ratio. As a result of
this limitation, approximately $32,310 of the $66,901
equity of the banks was restricted and unavailable for
the payment of dividends to the Corporation at December
31, 1995.
Additionally, the amount of dividends the banks
may pay to the Corporation in a single year without
approval from regulators is limited by regulation.
Under the most restrictive regulations, approximately
$8,814 of undistributed earnings of the banks was
available for distribution to the Corporation at
December 31, 1995. As a practical matter dividends are
ordinarily restricted to a lesser amount because of
he need to maintain an adequate capital structure.
NOTE 17 - FAIR VALUES OF FINANCIAL INSTRUMENTS
The following table shows the carrying amount and
estimated fair value of financial instruments held by
the Corporation at December 31, 1995 and 1994.
<PAGE>
<PAGE>28
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
<S> <C> <C> <C> <C>
Cash and cash equivalents..... $ 43,173 $ 43,173 $ 29,531 $ 29,531
Interest bearing deposits
in other banks.............. 692 692 1,193 1,193
Securities available for sale. 173,469 173,469 146,680 146,680
Securities held to maturity... - - 40,195 39,177
Loans held for sale........... 6,727 6,727 2,664 2,664
Loans, less allowance for
loan losses................. 437,635 429,848 384,126 383,597
Demand and savings deposits... 275,087 275,087 281,165 281,165
Time deposits................. 324,982 320,921 269,222 271,016
Short-term borrowings......... 6,788 6,788 9,294 9,294
Long-term debt................ 2,677 2,677 3,189 2,997
</TABLE>
For purposes of the above disclosures of estimated
fair value, the following assumptions were used as of
December 31, 1995 and 1994. The estimated fair value
for cash and cash equivalents is considered to
approximate cost. The estimated fair value for
securities is based on quoted market values for the
individual securities or for equivalent securities.
The estimated fair value for commercial loans is based
on estimates of the difference in interest rates the
bank would charge the borrowers for similar loans with
similar maturities applied for an estimated time period
until the loan is assumed to reprice or be paid. The
estimated fair value for other loans is based on
estimates of the rates the bank would charge for
similar such loans applied for the time period until
estimated repayment. The estimated fair value for
demand and savings deposits is based on their carrying
value. The estimated fair value for time deposits is
based on estimates of the rates the bank would pay on
such deposits applied for the time period until
maturity. The estimated fair value for short-term
borrowings is considered to approximate cost. Rates
currently available to the Corporation for debt with
similar terms and remaining maturities are used to
estimate the fair value of existing long-term debt.
The estimated fair value for other financial
instruments and off-balance sheet loan commitments
approximate cost and are not considered significant to
this presentation because the majority of these items
are primarily at variable rates and are not made for
long term periods.
While these estimates of fair value are based on
management's judgment of the most appropriate factors,
there is no assurance that were the Corporation to have
disposed of such items at December 31, 1995 and 1994,
the estimated fair values would necessarily have been
achieved at that date, since market values may differ
depending on various circumstances. The estimated fair
<PAGE>
<PAGE>29
values at December 31, 1995 and 1994, should not
necessarily be considered to apply at subsequent dates.
In addition, other assets and liabilities of the
Corporation that are not defined as financial
instruments are not included in the above disclosures,
such as property and equipment. Also, non-financial
instruments typically not recognized in financial
tatements nevertheless may have value but are not
included in the above disclosures. These include,
among other items, the estimated earnings power of core
deposit accounts, the earnings potential of loan
servicing rights, the earnings potential of trust
departments, a trained work force, customer goodwill
and similar items.
NOTE 18 - PARENT COMPANY STATEMENTS
Presented below are condensed balance sheets,
statements of income and cash flows for the parent
company.
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
1995 1994
<S> <C> <C>
ASSETS
Cash on deposit with subsidiaries................... $ 673 $ 645
Investment in bank subsidiaries..................... 66,648 56,999
Investment in non-bank subsidiaries................. 454 197
Premises, furniture and equipment, net.............. 158 30
Other assets........................................ 529 542
Total assets...................................... $ 68,462 $ 58,413
LIABILITIES
Other liabilities................................... $ 750 $ 203
SHAREHOLDERS' EQUITY
Common stock........................................ 31,590 30,086
Retained earnings................................... 35,009 31,612
Unrealized gain/(loss) on securities
available for sale, net of deferred tax........... 1,113 (3,488)
Total shareholders' equity........................ 67,712 58,210
Total liabilities and shareholders' equity........ $ 68,462 $ 58,413
</TABLE>
<PAGE>
<PAGE>30
<TABLE>
<CAPTION>
Condensed Statements Of Income
For the years ended December 31, 1995, 1994 and 1993
1995 1994 1993
<S> <C> <C> <C>
OPERATING INCOME
Dividends received from bank subsidiaries.... $ 2,678 $ 3,526 $ 2,396
Rental income................................ - 240 240
Other income................................. 35 32 27
Total operating income..................... 2,713 3,798 2,663
OPERATING EXPENSE
Other expenses............................... 2,315 1,003 723
INCOME BEFORE INCOME TAXES AND EQUITY IN
UNDISTRIBUTED EARNINGS OF SUBSIDIARIES... 398 2,795 1,940
Income tax credit.............................. (351) (181) (119)
INCOME BEFORE EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARIES................. 749 2,976 2,059
Equity in undistributed earnings
of subsidiaries.............................. 6,296 3,526 4,103
NET INCOME................................. $ 7,045 $ 6,502 $ 6,162
</TABLE>
<TABLE>
<CAPTION>
Condensed Statements Of Cash Flows
For the years ended December 31, 1995, 1994 and 1993
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income..................................... $ 7,045 $ 6,502 $ 6,162
Adjustments to reconcile net income to
net cash from operating activities
Depreciation............................... 19 100 198
Equity in undistributed income of
subsidiaries............................. (2,678) (3,526) (4,103)
Other liabilities.......................... 547 (11) 282
Other assets............................... 13 78 (249)
Net cash from operating activities....... 4,946 3,143 2,290
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in subsidiaries..................... (2,664) (893) -
Purchase of furniture and equipment............ (147) (33) -
Net cash from investing activities........ (2,811) (926) -
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt..................... - - (392)
Dividends paid................................. (2,144) (1,947) (1,701)
Fractional shares paid for acquisitions and
stock dividend............................... (12) (4) (2)
Treasury stock................................. 37 - (23)
Issuance of stock for dividend reinvestment
and stock purchase plan...................... 12 74 -
Net cash from financing activities....... (2,107) (1,877) (2,118)
NET CHANGE IN CASH AND CASH EQUIVALENTS.......... 28 340 172
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR... 645 305 133
CASH AND CASH EQUIVALENTS AT END OF YEAR......... $ 673 $ 645 $ 305
/TABLE
<PAGE>
PAGE>31
The management of AMBANC Corp. is responsible for the
integrity of all information contained in the
accompanying financial statements and other sections of
this annual report. The statements have been prepared
in conformity with generally accepted accounting
principles and include amounts that are based on
management's best estimates and judgment.
In meeting its responsibility, management relies on the
systems of internal control which are designed to
provide reasonable assurance that assets are
safeguarded and that transactions are properly executed
and recorded. The development and dissemination of
written policies and procedures, appropriate
segregation of duties and responsibilities and the
conducting of a continuing comprehensive program of
internal audits provide further enhancements to the
systems of internal control.
The Audit Committee of the Board of Directors,
consisting solely of outside Directors, meets
periodically with management, the internal auditors and
the independent auditors to review audits, financial
reporting and other related matters. The internal
auditors and the independent auditors have full and
free access to the Audit Committee to further assure
their independence.
The financial statements have been audited by
Deloitte & Touche LLP, independent auditors for the
year ended December 31, 1995. They were engaged to
audit the financial statements and to express an
opinion thereon. Their audit was conducted in
accordance with generally accepted auditing standards.
Robert G. Watson Richard E. Welling, CPA
Chairman of the Board, Secretary, Treasurer and
President and C.E.O. C.F.O.
<PAGE>
<PAGE> 32
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This section presents an analysis of the consolidated
financial condition of AMBANC Corp. (Corporation) and
its wholly-owned subsidiaries, The American National
Bank of Vincennes (ANB), Citizens' National Bank of
Linton (CNB), Bank of Casey (BOC), The First National
Bank in Robinson (FNB), (collectively, the Banks),
American National Realty Corp. and Lincolnland
Insurance Agency & Investments, Inc. (LIA) at December
31, 1995 and 1994, and the consolidated results of
operations for the years ended December 31, 1995, 1994
and 1993. This review should be read in conjunction
with the consolidated financial statements, notes to
consolidated financial statements and other financial
data presented elsewhere in this Annual Report.
On November 1, 1995, the Corporation issued 668,235
shares of its common stock in exchange for all of the
outstanding common stock of First Robinson Bancorp
(FRB), the parent holding company of FNB. FRB was then
merged into the Corporation. On June 1, 1994, the
Corporation issued 569,454 shares of its common stock
in exchange for all of the outstanding common stock of
Lincolnland Bancshares, Inc. (LBI), the parent holding
company of BOC and LIA. LBI was then merged into the
Corporation. These acquisitions were accounted for
under the pooling of interests method. Accordingly,
the Corporation's financial statements and financial
data have been retroactively restated to include the
accounts and operations of LBI and FRB for all periods
presented. Certain reclassifications have been made to
LBI's and FRB's historical financial statements to
conform to the Corporation's presentation. A 5% stock
dividend was paid on November 30, 1995. All share and
per share amounts have been retroactively restated to
reflect the 5% stock dividend and the shares issued for
FRB and LBI. Earnings per share amounts are based on
average outstanding shares of 3,158,958 for 1995,
3,156,410 for 1994 and 3,156,190 for 1993.
RESULTS OF OPERATIONS
(Dollar amounts in thousands, except share
and per share data)
Net income for 1995 was $7,045 or $2.23 per share
compared to $6,502 or $2.06 per share in 1994 and
$6,162 or $1.95 per share in 1993. Included in net
income for 1993 was an adjustment of $252, resulting
<PAGE>
<PAGE> 33
from the adoption of Financial Accounting Standard
(FAS) 109, "Accounting for Income Taxes". This
adjustment is shown on the income statement as the
cumulative effect on prior years of changing to a
different method of accounting for income taxes.
Earnings per share for 1993 before this accounting
change was $1.87. Earnings expressed as a percent of
average assets and average equity were:
<TABLE>
<CAPTION>
TABLE I
PERCENT OF PERCENT OF
AVERAGE ASSETS AVERAGE EQUITY
1995 1994 1993 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Income before cumulative
effect of accounting change. 1.09 % 1.05 % .98 % 11.30 % 11.19 % 10.75 %
Cumulative effect of
accounting change........... - - .04 - - .46
Net income.................. 1.09 % 1.05 % 1.02 % 11.30 % 11.19 % 11.21 %
</TABLE>
RESULTS OF OPERATIONS - Continued
(Dollar amounts in thousands, except share
and per share data)
The following is an analysis of the critical components
of net income for the years 1995, 1994 and 1993 with
discussion and analysis of the contrasts between these
periods and the effect of previous trends on
anticipated future earnings performance.
NET INTEREST INCOME
Net interest income is the principal source of the
Corporation's earnings and represents the difference
between interest income on interest earning assets and
the interest cost of interest bearing liabilities.
Income on certain interest earning assets is exempt
from federal income tax and, as is customary in the
banking industry, changes in net interest income are
analyzed on a fully tax equivalent basis. Under this
method, and throughout this discussion, nontaxable
income on loans and securities is adjusted to an amount
which represents the equivalent earnings if such
earnings were subject to federal tax. The marginal tax
<PAGE>
<PAGE> 34
rate used to restate nontaxable income was 34% for
1995, 1994 and 1993.
The yield on average interest earning assets and the
rate paid on average interest bearing liabilities is
based upon three major factors: the yield/rate
received or paid, the mix of the individual components
and the volume of interest earning assets and interest
bearing liabilities. While the national prime rate is
not the only indicator for yields received on assets or
the rates paid on liabilities by the Corporation, it
does indicate a general trend of current rates being
received on assets and paid on liabilities. The
national prime rate averaged 6.00% all during 1993,
increased to an average of 7.14% during 1994 and
increased to an average of 8.83% during 1995. Yields
received and rates paid by the Corporation are a blend
of current and past year's interest rates due to the
lag effect of the repricing of both long-term assets
and long-term liabilities.
Tables II, III and IV illustrate the components of net
interest income for the last three years. Table II
shows the average balances, interest income or expense
and average yields and rates on interest earning assets
and interest bearing liabilities by type. It also
shows the calculation of net interest margin for 1995,
1994 and 1993. Table III shows the change from year to
year for average interest earning assets and average
interest bearing liabilities and the resulting net
interest earning assets. Table IV shows the change in
net interest income from year to year and the
allocation of that yearly change between volume and
rate by type of interest earning asset and interest
bearing liability.
<PAGE>
<PAGE> 35
RESULTS OF OPERATIONS - CONTINUED
Table II
Consolidated Average Balance Sheets and Interest Rates
Years ended December 31, 1995, 1994 and 1993
(Dollar amounts in thousands, except share
and per share data)
<TABLE>
<CAPTION>
1995
Interest
Average Income/
Balance Expense Average
(Note A) (Note B) Rate
<S> <C> <C> <C>
ASSETS
Interest earning
assets
Securities
U.S. Government $107,553 $ 6,166 5.73%
State and municipal
obligations 50,112 4,298 8.58
Other 22,113 1,396 6.31
Total securities 179,778 11,860 6.60
Interest bearing
deposits n other banks 914 54 5.91
Loans held for sale 4,307 326 7.57
Total loans, less
unearned
(Notes A and C) 416,489 38,144 9.16
Federal funds sold 11,842 685 5.78
Total interest
earning assets and
interest income 613,330 $ 51,069 8.33%
Noninterest earning
assets
Cash and due from banks 18,372
Premises and
equipment, net 8,877
Other assets 10,906
Allowance for
loan losses (4,636)
Unrealized loss on
securities available
for sale (2,393)
Total assets $644,456
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest bearing
liabilities
Savings and demand
deposits $212,092 $ 6,662 3.14%
Time deposits 299,794 16,931 5.65
Total savings and
time deposits 511,886 23,593 4.61
Short-term
borrowings 8,129 437 5.38
Long-term debt 2,804 161 5.74
Total interest
bearing
liabilities
and interest
expense 522,819 $ 24,191 4.63%
Noninterest
bearing
liabilities
Demand deposits 55,527
Other 3,766
Shareholders'
equity 62,344
Total liabilities
and shareholders'
equity $644,456
Interest margin recap
Interest income/
interest
earning assets $ 51,069 8.33%
Interest expense/
interest
earning assets 24,191 3.95
Net interest
income/
interest
earning
assets $ 26,878 4.38%
</TABLE>
<PAGE>
[following is the middle section of the table above]
<TABLE>
<CAPTION>
1994
Interest
Average Income/
Balance Expense Average
(Note A) (Note B) Rate
<S> <C> <C> <C>
ASSETS
Interest earning
assets
Securities
U.S. Government $125,846 $ 6,864 5.45%
State and
municipal
obligations 51,211 4,474 8.74
Other 29,126 1,597 5.48
Total
securities 206,183 12,935 6.27
Interest bearing
deposits
in other banks 1,548 75 4.85
Loans held for
sale 6,849 536 7.83
Total loans, less
unearned
(Notes A and C) 368,198 30,882 8.39
Federal funds
sold 7,424 2953.97
Total interest
earning
assets and
interest
income 590,202 $ 44,723 7.58%
Noninterest
earning assets
Cash and due
from banks 17,326
Premises and
equipment, net 9,044
Other assets 8,864
Allowance for
loan losses (4,377)
Unrealized loss
on securities
available
for sale (1,519)
Total assets $619,540
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Interest bearing
liabilities
Savings and
demand
deposits $225,280 $ 6,485 2.88%
Time deposits 266,698 12,083 4.53
Total savings
and time
deposits 491,978 18,568 3.77
Short-term
borrowings 9,649 409 4.24
Long-term debt 2,924 177 6.05
Total interest
bearing
liabilities
and interest
expense 504,551 $ 19,154 3.80%
Noninterest
bearing
liabilities
Demand deposits 53,415
Other 3,461
Shareholders'
equity 58,113
Total
liabilities
and
shareholders'
equity $619,540
Interest margin
recap
Interest income/
interest
earning assets $ 44,723 7.58%
Interest expense/
interest
earning assets 19,154 3.25
Net interest
income/
interest
earning
assets $ 25,569 4.33%
</TABLE>
<PAGE>
[following is the right-hand side of the table above]
<TABLE>
<CAPTION>
1994
Interest
Average Income/
Balance Expense Average
(Note A) (Note B) Rate
<S> <C> <C> <C>
ASSETS
Interest earning
assets
Securities
U.S. Government $125,578 $ 7,517 5.99%
State and
municipal
obligations 49,352 4,636 9.39
Other 39,395 2,103 5.34
Total
securities 214,325 14,256 6.65
Interest bearing
deposits
in other banks 838 58 6.92
Loans held for
sale 15,133 1,280 8.46
Total loans, less
unearned
(Notes A and C) 325,544 27,460 8.44
Federal funds
sold 14,734 442 3.00
Total interest
earning
assets and
interest
income 570,574 $ 43,496 7.62%
Noninterest
earning assets
Cash and due
from banks 17,528
Premises and
equipment, net 8,960
Other assets 8,322
Allowance for
loan losses (4,152)
Unrealized loss
on securities
available
for sale -
Total assets $601,232
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Interest bearing
liabilities
Savings and
demand
deposits $219,975 $ 6,572 2.99%
Time deposits 264,276 12,148 4.60
Total savings
and time
deposits 484,251 18,720 3.87
Short-term
borrowings 7,139 255 3.57
Long-term debt 674 32 4.75
Total interest
bearing
liabilities
and interest
expense 492,064 $ 19,007 3.86%
Noninterest
bearing
liabilities
Demand deposits 50,197
Other 4,004
Shareholders'
equity 54,967
Total
liabilities
and
shareholders'
equity $601,232
Interest margin
recap
Interest income/
interest
earning assets $ 43,496 7.62%
Interest expense/
interest
earning assets 19,007 3.33
Net interest
income/
interest
earning
assets $ 24,489 4.29%
</TABLE>
<PAGE>
<PAGE> 41
Note A - Included in total loans are nonaccrual loans.
Note B - Interest income includes the effects of tax
equivalent adjustments using a marginal federal tax
rate of 34% for 1995, 1994 and 1993. The total
adjustment to convert tax exempt loans and securities
to a fully tax equivalent basis was $1,606, $1,670 and
$1,738 for 1995, 1994 and 1993.
Note C - Net loan fees and costs included in interest
income on loans amounted to $937, $769 and $482, for
the years 1995, 1994 and 1993.
<TABLE>
RESULTS OF OPERATIONS - Continued
(Dollar amounts in thousands, except share
and per share data)
Table III
Changes in Net Interest Earning Assets
<CAPTION>
1995 change 1994 change
from 1994 from 1993
1995 Dollar Percent 1994 Dollar Percent 1993
<S> <C> <C> <C> <C> <C> <C> <C>
Average interest
earning assets............. $613,330 $23,128 3.92% $590,202 $19,628 3.44% $570,574
Average interest bearing
liabilities................ 522,819 18,268 3.62 504,551 12,487 2.54 492,064
Net interest
earning assets...... $ 90,511 $ 4,860 5.67% $ 85,651 $ 7,141 9.10% $ 78,510
</TABLE>
<PAGE>
<PAGE> 42
<TABLE>
Table IV
Changes in Net Interest Income
<CAPTION>
1995 compared to 1994 1994 compared to 1993
increase/(decrease) increase/(decrease)
due to change in due to change in
Volume Rate Total Volume Rate Total
<S> <C> <C> <C> <C> <C> <C>
Interest income
Loans....................... $4,423 $ 2,839 $ 7,262 $3,577 $ (155) $ 3,422
Loans held for sale......... (192) (18) (210) (648) (96) (744)
Interest bearing deposits
with other banks.......... (37) 16 (21) 34 (17) 17
Securities
U.S. Government........... (1,049) 351 (698) 15 (668) (653)
State and municipal
obligations............. (94) (82) (176) 162 (324) (162)
Other..................... (443) 242 (201) (563) 57 (506)
Total securities........ (1,586) 511 (1,075) (386) (935) (1,321)
Federal funds sold.......... 256 134 390 (290) 143 (147)
Total interest income... 2,864 3,482 6,346 2,287 (1,060) 1,227
Interest expense
Savings and demand deposits. (414) 591 177 153 (240) (87)
Time deposits............... 1,869 2,979 4,848 110 (175) (65)
Short-term borrowings....... (82) 110 28 106 48 154
Long-term debt.............. (7) (9) (16) 136 9 145
Total interest expense.. 1,366 3,671 5,037 505 (358) 147
Net interest income... $1,498 $ (189) $ 1,309 $1,782 $ (702)$ 1,080
</TABLE>
RESULTS OF OPERATIONS - Continued
(Dollar amounts in thousands, except share
and per share data)
Net interest income in 1995 increased $1,309 or 5.12%
from 1994, and the percent of net interest margin, or
net interest income to average interest earning assets,
increased to 4.38% in 1995 from 4.33% in 1994. This
increase in net interest income was due to an increase
of $4,860 or 5.67% in net interest earning assets
during 1995 from 1994 and the increase in rates for
both interest earning assets and interest bearing
liabilities. The allocation of the yearly difference
shows that $1,498 of the 1995 increase was due to
<PAGE>
<PAGE> 43
volume changes while rate changes reduced the net
interest income by $189. Rates on both interest
earning assets and interest bearing liabilities
increased in 1995, but the rate allocation shows the
increase in the rates on interest bearing liabilities
exceeded the increase in rates on interest earning
assets.
Net interest income in 1994 increased $1,080 or 4.41%
from 1993, and the percent of net interest margin
increased to 4.33% in 1994 from 4.29% in 1993. This
increase in net interest income was due to an increase
of $7,141 or 9.10% in net interest earning assets
during 1994 from 1993 and the decrease in rates for
both average interest earning assets and average
interest bearing liabilities. The allocation of the
yearly difference shows that $1,782 of the 1994
increase was due to volume changes while rate changes
reduced the net interest income by $702. Rates on both
interest earning assets and interest bearing
liabilities decreased in 1994, but the decrease in
rates on interest earning assets was greater than the
decrease in rates on interest bearing liabilities.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses expense on the income
statement provides a reserve called the allowance for
loan losses (a contra asset on the balance sheet) to
which loan losses are charged as those losses become
evident. Management of each bank determines the
appropriate level of the allowance for loan losses on a
quarterly basis utilizing a report containing loans
with a more than normal degree of risk. This report is
the by-product of an ongoing loan review process, the
purpose of which is to determine the level of credit
risk within the portfolio and to ensure proper
adherence to underwriting and documentation standards.
Utilizing this report, a specific portion of the
reserve is allocated to those loans which are
considered to represent significant exposure to risk.
In addition, estimates are made for potential losses on
consumer loans, residential mortgage loans and
commercial loans not specifically reviewed based on
historical loan loss experience and other factors and
trends. Table V shows the provision and allowance for
loan losses for the last five years. Table VI includes
the specific allocation for loan losses at year end for
the last five years.
<PAGE>
<PAGE> 44
<TABLE>
RESULTS OF OPERATIONS - Continued
(Dollar amounts in thousands, except share
and per share data)
Table V
Analysis of Allowance for Loan Losses
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning
of year................. $ 4,531 $ 4,238 $ 4,168 $ 3,957 $ 4,227
Loans charged off
Commercial and
agricultural......... 349 352 1,327 777 1,351
Real estate............ 11 32 112 315 245
Installment............ 537 365 266 460 525
Other.................. 122 59 49 50 59
Total charge-offs.. 1,019 808 1,754 1,602 2,180
Charge-offs recovered
Commercial and
agricultural......... 193 548 177 152 198
Real estate............ 6 71 43 45 41
Installment............ 117 136 105 115 172
Other.................. 12 8 7 6 2
Total recoveries... 328 763 332 318 413
Net loans
charged off...... 691 45 1,422 1,284 1,767
Current year provision... 1,182 338 1,492 1,495 1,497
Balance at
end of year...... $ 5,022 $ 4,531 $ 4,238 $ 4,168 $ 3,957
Loans at year end........ $442,657 $388,657 $342,950 $311,097 $305,130
Ratio of allowance
to loans at year end... 1.13 % 1.17 % 1.24 % 1.34 % 1.30 %
Average loans............ $416,489 $368,198 $325,544 $311,523 $309,935
Ratio of net loans
charged off to
average loans.......... .17 % .01 % .44 % .41 % .57 %
</TABLE>
<PAGE>
<PAGE> 45
<TABLE>
Table VI
Allocation of Allowance for Loan Losses
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Commercial and
agricultural............. $ 1,639 $ 1,118 $ 1,245 $ 1,354 $ 1,681
Real estate............... 228 235 261 133 382
Installment............... 469 699 474 426 662
Unallocated............... 2,686 2,479 2,258 2,255 1,232
Total.................. $ 5,022 $ 4,531 $ 4,238 $ 4,168 $ 3,957
</TABLE>
RESULTS OF OPERATIONS - Continued
(Dollar amounts in thousands, except share
and per share data)
NONPERFORMING ASSETS
Nonperforming assets are defined as nonaccrual loans
for which the ultimate collectibility of interest is
uncertain, but for which the principal is considered
collectible; restructured loans which have had an
alteration to the original interest rate, repayment
terms or principal balance because of a deterioration
in the financial condition of the borrower; and loans
past due over 90 days but still accruing interest
because the interest is ultimately considered
collectible. Impaired loans covered in FAS 114 and 118
are defined by the Corporation to be nonaccrual loans.
Nonperforming assets also include other real estate
owned which has been acquired through foreclosure or
acceptance of a deed in lieu of foreclosure. Other
real estate owned is carried at the lower of cost or
fair value less estimated selling costs, and is
actively being marketed for sale. Table VII sets forth
the components of nonperforming assets and their
percentage to loans and the allowance for loan losses
as a percent of nonperforming assets at December 31,
for the past five years.
<PAGE>
<PAGE> 46
<TABLE>
Table VII
Nonperforming Assets at December 31,
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Nonaccrual loans........ $ 983 $ 650 $ 1,078 $ 1,612 $ 2,655
Restructured............ 45 490 565 265 447
90 days or more past
due.................... 1,272 1,325 837 1,179 1,542
Total nonperforming
loans.............. $ 2,300 $ 2,465 $ 2,480 $ 3,056 $ 4,644
Percent of loans........ .52 % .63 % .72 % .98 % 1.52 %
Percent of allowance
for loan losses 218 % 184 % 171 % 136 % 85 %
Other real estate owned. $ 280 $ 72 $ 145 $ 215 $ 212
Percent of loans........ .06 % .02 % .04 % .07 % .07 %
</TABLE>
Assets considered to be nonperforming are reviewed more
frequently by management for repayment probability and
residual collateral values. All restructured loans
shown above have been performing within the terms of
their restructured agreements. In addition to the
nonperforming loans, there are other loans in the
portfolio that have been identified by management or
through an ongoing loan review process as having more
than a normal degree of risk. These loans are reviewed
quarterly by management and totaled $9,106 or 2.06% of
total loans at December 31, 1995.
The provision for loan losses for 1995, 1994 and 1993
was $1,182, $338 and $1,492 while net charge-offs were
$691, $45 and $1,422. The increase in the provision in
1995 was due to the increase of loans outstanding
rather than anticipated credit problems in the loan
portfolio. Loans at December 31, 1995, were up $54,000
or 13.89% to $442,657 while nonperforming loans showed
a decrease in both amount and percent of ending loans.
Nonperforming loans at December 31, 1995, were down
$165 or 6.69% to $2,300 from $2,465 at December 31,
1994. Nonperforming loans were also down to .52% of
loans at December 31, 1995, from .63% at December 31,
1994. This improvement in nonperforming loans at
December 31, 1995, was also helped by an increase of
loans charged off in 1995 over 1994. Net loan charge-
offs increased $646 to $691 in 1995 from an unusual low
<PAGE>
<PAGE> 47
of $45 in 1994. With a steady to improving economy in
the market areas served by the Corporation, the percent
of nonperforming loans to loans has shown a steady
improvement during each of the last five years. The
percent of allowance for loan losses to nonperforming
loans has also shown a steady improvement over the last
five years.
Based upon the Corporation's review, considering
remaining collateral and/or financial condition of
identified loans with a more than normal degree of
risk, including nonperforming loans, historical loan
loss percentages and economic conditions, it is
management's belief that the $1,182 of provision for
loan losses during 1995 and the $5,022 of allowance for
loan losses at December 31, 1995, is adequate to cover
future possible losses.
RESULTS OF OPERATIONS - Continued
(Dollar amounts in thousands, except share
and per share data)
NONINTEREST INCOME
<TABLE>
Table VIII
Changes in Noninterest Income
1995 change 1994 change
from 1994 from 1993
1995 Dollar Percent 1994 Dollar Percent 1993
<S> <C> <C> <C> <C> <C> <C> <C>
Fiduciary income............ $ 602 $ 56 10.26 % $ 546 $ (15) (2.67)% $ 561
Deposit service charges..... 1,454 180 14.13 1,274 (51) (3.85) 1,325
Other operating income...... 1,016 (19) (1.84) 1,035 (85) (7.59) 1,120
Security gains/(losses)..... 41 12 41.38 29 (64) (68.82) 93
Total noninterest income.. $3,113 $ 229 7.94 % $2,884 $ (215) (6.94)% $3,099
</TABLE>
A bank typically generates noninterest income through
fees and service charges. As shown in Table VIII
noninterest income in 1995 was up in all areas except
other operating income. Fiduciary income was up due to
the increase in the market value of the investments
managed. This same explanation in reverse was the
reason for the decrease in trust fees in 1994 from
1993. Deposit service charges increased the largest
<PAGE>
<PAGE> 48
dollar amount in 1995 and was due to large increases in
fees from nonsufficient and returned check charges.
Other operating income was down in 1995 and was due to
the reduction of gains on sales of loans held for sale.
Loans held for sale (see loan discussion) realized net
gains of $191, $229 and $265 in the years 1995, 1994
and 1993. Other operating income also included
nonrecurring gains from sales of excess land in 1993
that were not in 1994 or 1995.
RESULTS OF OPERATIONS - Continued
(Dollar amounts in thousands, except share
and per share data)
NONINTEREST EXPENSE
<TABLE>
Table IX
Changes in Noninterest Expense
<CAPTION>
1995 change 1994 change
from 1994 from 1993
1995 Dollar Percent 1994 Dollar Percent 1993
<S> <C> <C> <C> <C> <C> <C> <C>
Salaries and
employee benefits......... $ 9,450 $ 673 7.67 % $ 8,777 $ 364 4.33 % $ 8,413
Occupancy expenses.......... 1,051 (56) (5.06) 1,107 93 9.17 1,014
Equipment expenses.......... 1,096 58 5.59 1,038 (5) (.48) 1,043
Data processing expenses.... 430 (12) (2.71) 442 (141) (24.19) 583
FDIC insurance.............. 690 (535) (43.67) 1,225 34 2.85 1,191
Other operating expenses.... 4,816 86 1.82 4,730 600 14.53 4,130
Total noninterest expense. $17,533 $ 214 1.24 % $17,319 $ 945 5.77 % $16,374
</TABLE>
The largest component of noninterest expense is
salaries and employee benefits which increased $466 in
1995 due to salary increases and $207 due to increases
in fringe benefits with the major increases being in
payroll taxes, medical insurance and pension expense.
Occupancy expense is down in 1995 after increasing in
1994. The Corporation opened a new branch and made
major repairs to several other branches in 1994.
During the later part of 1995 the Corporation opened
two new branches and the expense of their operations
will be more evident with a whole year of operation
starting in 1996. The Corporation anticipates opening
<PAGE>
<PAGE> 49
two more new branches in 1996 which should also
increase occupancy expense in future years. Two of
these new branches, one in 1995 and one in 1996, are
instore retail operations in Wal-Mart stores.
Equipment expense increased in 1995 and is due in part
to the new branches and to expenses related to the
continued increase in the use of technology. The
Corporation will install a marketing customer
information file system in early 1996 which will add
additional equipment expenses in 1996. The
centralization of the data processing by the
Corporation has caused a decrease in data processing
expenses in 1995 and 1994. Due to increased demands, a
new computer system was installed in 1995, and although
data processing expenses are expected to increase in
the next year, the Corporation will see long term data
processing costs decrease due to the complete
centralization of all bank subsidiaries in the near
future. FNB was converted to the Corporation's data
processing system in February of 1996.
The FDIC deposit insurance premium rate paid by the
Corporation to provide insurance on customers deposits
was .23% through May 31, 1995, and for 1994 and 1993.
The FDIC deposit insurance rate was lowered to .04%
effective June 1, 1995, and will go to a rate of 0%
with a minimum annual payment of $2 per subsidiary bank
starting in 1996. The Banks have all been assigned the
classification of least risk by the FDIC and as such
are subject to the lowest deposit insurance rates
available from the Bank Insurance Fund (BIF). This 0%
rate for FDIC insurance will exist as long as BIF
remains at or above the 1.25% of total insured deposits
as set by law. The Corporation does have $36,122 of
deposits as of December 31, 1995, purchased from
savings and loans by two of its subsidiary banks.
These deposits (adjusted to a consistent percent of
current deposits) remain insured by the Savings
Association Insurance Fund (SAIF) rather than BIF. The
cost of SAIF to the Corporation for these savings and
loan deposits will remain at .23% for the foreseeable
future. However Congress is currently considering a
special one-time assessment on SAIF insured deposits.
If enacted, this assessment could result in a one-time,
pre-tax charge of up to $309, which could be offset by
lower ongoing insurance costs in the future.
Other operating expenses increased both in 1995 and
1994 with the largest increases in both years being due
to audit, legal and other professional expenses related
to acquisition activities. The acquisitions of FRB and
<PAGE>
<PAGE> 50
LBI during 1995 and 1994 were more expensive than
acquisitions occurring in previous years. The 1995
increase also includes significant increases in
advertising related to the use of a consistent
Corporate logo and the opening of new branches and new
amortization of goodwill related to deposits purchased
in 1995.
RESULTS OF OPERATIONS - Continued
(Dollar amounts in thousands, except share
and per share data)
INCOME TAX
Effective January 1, 1993, the Corporation adopted FAS
109, "Accounting for Income Taxes". FAS 109 is an
asset and liability approach that requires the
recognition of deferred tax assets and liabilities for
the expected future tax consequences of temporary
differences between the carrying amounts and the tax
basis of assets and liabilities. In estimating future
tax consequences, FAS 109 generally considers all
expected future events other than enactments of changes
in the tax law or rates. The effect of adopting FAS
109 in 1993 was to increase net income by $252 which is
shown as the cumulative effect on prior years of
changing to a different method of accounting for income
taxes on the 1993 income statement.
The Corporation's effective tax rate was 27.15%, 28.75%
and 25.98% in 1995, 1994 and 1993. The 1995 effective
tax rate was lower due to the reversal of an allowance
relating to the realization of alternative minimum tax
credits of $212. Management has determined that such
credits will be realized, accordingly, the allowance
was reversed. The major differences between the
effective tax rate on the financial statements and the
federal statutory rate of 34% is interest income on tax
exempt securities and loans offset by nondeductible
interest, nondeductible merger expenses and state
taxes. The Corporation had tax exempt income of
$3,118, $3,218 and $3,395 for 1995, 1994 and 1993.
Note 13 to the consolidated financial statements
contains additional details of the differences between
the statutory taxes and taxes shown on the consolidated
financial statements.
<PAGE>
<PAGE> 51
FINANCIAL CONDITION
(Dollar amounts in thousands, except share
and per share data)
INVESTMENTS
The Corporation's holdings of short-term investments
and securities serve as a source of liquidity to meet
depositor and borrower funding requirements, in
addition to being a significant element of total
interest income. Short-term investments, defined as
federal funds sold and interest bearing deposits in
other banks, had combined average outstanding balances
of $12,756, $8,972 and $15,572 for the years 1995, 1994
and 1993. The year end outstanding balances of
short-term investments were $23,345, $8,193 and $19,936
for 1995, 1994 and 1993. The significant changes in
the amounts in short-term investments from year to year
is due to large fluctuations in deposits from public
and governmental institutions which are invested in
federal funds sold at year end. These deposits were
being kept liquid to fund commercial loan commitments
at year end 1995 and for possible liquidity needs of
institutional deposits.
Effective December 31, 1993, the Corporation adopted
FAS 115, "Accounting for Certain Investments in Debt
and Equity Securities". With the adoption of FAS 115,
all securities were classified by management into one
of two categories, available for sale or held to
maturity. The Corporation does not maintain any
securities that are held for trading. Securities
classified as available for sale are securities that
the Corporation intends to hold for an indefinite
period of time, but not necessarily until maturity.
Securities available for sale are carried at market
value with market adjustments, net of related deferred
taxes, being recorded in shareholders' equity as
unrealized gain or loss on securities. Securities
classified as held to maturity are carried at amortized
cost, calculated by using the level yield method. In
November 1995, the Financial Accounting Standards Board
allowed a one time reclassification of all securities
without calling into question the intent of an
enterprise to hold other securities to maturity in the
future. The Corporation reclassified all held to
maturity securities to available for sale securities in
December 1995. This reclassification was made to allow
for all securities to be sold in response to changes in
interest rates, changes in prepayment risk or other
requirements of liquidity. Since the original adoption
of FAS 115, and starting in December 1994, the equity
<PAGE>
<PAGE> 52
adjustment for mark to market of available for sale
securities has been deleted from inclusion in the
regulatory capital ratio calculations. The mark to
market for available for sale securities at December
31, 1995, included market gains of $2,684 and market
losses of $959 for a net increase due to the mark to
market of $1,725 on securities with an amortized cost
of $171,744. The after tax effect of these available
for sale securities accounted for $1,113 of the total
equity at December 31, 1995. The mark to market for
available for sale securities at December 31, 1994,
included market gains of $324 and market losses of
$5,821 for a net decrease due to the mark to market of
$5,497 on securities with an amortized cost of $152,177
at December 31, 1994. The after tax effect on these
available for sale securities accounted for a negative
$3,488 of the total equity at December 31, 1994. The
effect on the total change in equity of the Corporation
at December 31, 1995, from December 31, 1994, was a
total increase of $4,601 due to this mark to market of
available for sale securities. The drastic difference
between the mark to market adjustment at December 31,
1995 and 1994, is due to the difference in the market
yields at these two year ends when compared to the
yields on the investments of the Corporation classified
as available for sale. The decline in market rates at
December 31, 1995, resulted in rates on the
Corporation's available for sale securities being
mostly better than market rates. This was in contrast
to the higher market rates at December 31, 1994,
causing a negative mark to market adjustment for the
Corporation's available for sale securities. Sales of
available for sale securities in 1995 were $4,559 and
resulted in net gains of $18 while sales of $14,999
resulted in net gains of $29 in 1994. Calls and
maturities of held to maturity securities accounted for
net gains of $23 in 1995 and had no gain or loss in
1994. Other than U.S. Government securities, there are
no concentrations of securities over 10% of
shareholders' equity to any single issuer.
<PAGE>
<PAGE> 53
FINANCIAL CONDITION - Continued
(Dollar amounts in thousands, except share
and per share data)
<TABLE>
Table X
Securities at December 31,
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Securities available for sale
U.S. Government and its agencies................ $101,710 $112,007 $101,649
States and political subdivisions............... 51,837 11,266 2,471
Corporate obligations........................... 3,590 4,965 7,620
Collateralized mortgage obligations............. 15,516 17,290 25,341
Mutual funds.................................... 816 1,152 359
Total securities available for sale.......... 173,469 146,680 137,440
Securities held to maturity
U.S. Government and its agencies................ - 500 22,730
States and political subdivisions............... - 39,695 48,036
Corporate obligations........................... - - 1,388
Collateralized mortgage obligations............. - - 243
Mutual funds.................................... - - 937
Total securities held to maturity............ - 40,195 73,334
Total securities............................. $173,469 $186,875 $210,774
</TABLE>
The market value of securities held to maturity was $0,
$39,177 and $76,601 for 1995, 1994 and 1993.
LOANS
The loan portfolio constitutes the major earning asset
of most bank holding companies and typically offers the
best alternative for obtaining the maximum interest
spread above the cost of funds. The overall economic
strength of any bank holding company generally
parallels the quality and yield of its loan portfolio.
The Corporation's total average loans were $416,489 in
1995, an increase of $48,291 or 13.12% from 1994. The
Corporation had total average loans of $368,198 in
1994, an increase of $42,654 or 13.10% from the 1993
total average loans of $325,544. Table XI presents
loans outstanding at year end for the preceding five
years.
<PAGE>
<PAGE> 54
<TABLE>
Table XI
Loans at December 31,
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Commercial and agricultural....... $213,077 $180,403 $165,331 $149,443 $151,614
Real estate....................... 132,067 116,611 95,921 94,859 90,701
Installment....................... 98,506 93,651 83,948 68,536 64,003
Total loans..................... 443,650 390,665 345,200 312,838 306,318
Unearned income................... (993) (2,008) (2,250) (1,741) (1,188)
Total loans, net................ $442,657 $388,657 $342,950 $311,097 $305,130
Loans held for sale $ 6,727 $ 2,664 $ 16,919 $ 11,553 $ 12,198
Composition of loan portfolio at December 31,
Commercial and agricultural....... 48.14 % 46.42 % 48.21 % 48.04 % 49.69 %
Real estate....................... 29.83 30.00 27.97 30.49 29.72
Installment....................... 22.03 23.58 23.82 21.47 20.59
</TABLE>
FINANCIAL CONDITION - Continued
(Dollar amounts in thousands, except share
and per share data)
The economy rebounded in late 1992 and has continued
steady to strong through 1995. The Corporation has
placed added efforts to take advantage of the increased
demand in commercial and agricultural loans. Commercial
and agricultural loans increased $32,674 or 18.11% in
1995 from 1994, increased $15,072 or 9.12% in 1994 from
1993 and increased $15,888 or 10.63% in 1993 from 1992.
Real estate loans shown in Table XI are variable rate
loans. These loans have increased $15,456 or 13.25% in
1995 from 1994 and $20,690 or 21.57% in 1994 from 1993.
During these years the Corporation has placed added
emphasis on serving the real estate mortgage needs of
our customers. The balance of real estate loans is
directly effected by the current rates on variable and
fixed rate mortgages. As rates increase customers tend
to prefer variable rate mortgages and as rates
decreased customers tend to prefer fixed rate loans.
The Corporation also makes conforming fixed rate
mortgage loans that can be sold into the secondary
market with the Corporation retaining more than 95% of
the servicing rights. These fixed rate mortgage loans
are shown separately in Table XI and on the balance
sheet as loans held for sale. The Corporation's
strategy has been to hold fixed rate loans during
periods of decreasing rates and sell them during
<PAGE>
<PAGE> 55
periods of increasing rates to realize a gain. The
balance of loans held for sale at year end fluctuates a
great deal depending upon the variations of rates
during the year and the amount of these loans that are
sold into the secondary market. Sales of loans held
for sale have been $16,231, $35,676 and $39,591 for
1995, 1994 and 1993 with corresponding net gains of
$191, $229 and $265. At December 31, 1995, the
Corporation services $79,990 of loans sold into the
secondary market.
Installment loans increased $4,855 or 5.18% in 1995
over 1994, $9,703 or 11.56% in 1994 over 1993 and
$15,412 or 22.49% in 1993 over 1992. Consumer lending
normally relates directly to consumer confidence in the
economy, but the Corporation has seen increased charge-
offs of installment loans in 1995 and 1994 over 1993.
A lag effect does exist in charge-offs and the
Corporation has increased its lending criteria for
consumer loans during 1995. The makeup of installment
loans at December 31, 1995, is $88,310 of vehicle and
other secured loans, $4,934 of money lines tied to
second mortgages on real estate, $3,722 of credit card
loans and $1,540 of unsecured loans.
The loan portfolio contains no loans to foreign
governments, foreign enterprises or foreign operations
of domestic corporations. Other than loans for real
estate, equipment and operating lines to farmers
engaged in the agricultural industry, the Corporation
has no concentrations of loans in the same or similar
industries that exceed 10% of total loans.
DEPOSITS
The deposit base provides the major funding source for
earning assets of most bank holding companies.
Generally, demand, savings and time certificates less
than $100 are recognized as the core base of deposits
while certificates in excess of $100 and public funds
are more subject to interest variations and, thus, are
not included in the core deposit base. Because of
these factors, management views the growth of demand,
savings and time certificates less than $100 as more
stable growth. The Corporation's total average core
deposits were $519,453 in 1995, $500,103 in 1994 and
$484,976 in 1993. Total average deposits were
$567,413, $545,393 and $534,448 during 1995, 1994 and
1993. Table XII indicates the mix and levels of
deposits at year end for the preceding five years.
<PAGE>
<PAGE> 56
<TABLE>
Table XII
Deposits at December 31,
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Noninterest bearing............... $ 63,116 $ 62,269 $ 62,145 $ 58,484 $ 48,528
Interest bearing demand
and savings..................... 211,971 218,896 226,030 217,633 177,118
Time, less than $100.............. 258,335 212,073 208,716 217,801 228,235
Time, $100 or more................ 66,647 57,149 53,459 50,180 56,622
Total deposits................. $600,069 $550,387 $550,350 $544,098 $510,503
</TABLE>
FINANCIAL CONDITION - Continued
(Dollar amounts in thousands, except share
and per share data)
The Corporation purchased $25,462 of deposits from a
savings and loan association in March 1995. These
purchased deposits plus lower interest rates and the
general trend of consumers returning deposits to banks
from nonbanking institutions saw total deposits
increase $49,682 or 9.03% in 1995 from 1994 after
remaining almost flat in 1994 from 1993. The largest
growth in 1995 from 1994 was in time deposits both
under and over $100 and accounted for $39,337 of the
increase. Time deposits had also increased $7,047 in
1994 from 1993. Interest bearing demand and savings
deposits actually decreased $6,925 in 1995 and have
shown a decrease in both 1995 and 1994 after peaking in
1993. Noninterest bearing deposits remained almost
constant in 1995, 1994 and 1993.
LIQUIDITY AND CAPITAL RESOURCES
(Dollar amounts in thousands, except share
and per share data)
LIQUIDITY AND RATE SENSITIVITY
Cash flows for the Corporation occur within the
operating, investing and financing categories as
follows: Cash flows from operating activities emanate
primarily from interest income and fees reduced by
interest expense and overhead expense. Investing
activities generate or use cash flows through the
origination, purchase and principal collection of
loans; the purchase, maturity and sale of investments;
and the acquisition of property and equipment for the
Corporation. Cash flows from financing activities
occur from deposits and withdrawals of deposit
accounts, increases or decreases in short-term
<PAGE>
<PAGE> 57
borrowings and long-term debt, and dividends paid by
the Corporation.
The Corporation's use and source of funds can be
determined by the changes in average balances of assets
and liabilities. Table XIII summarizes funding uses
and sources for 1995 and 1994, showing average
balances, amount of dollar change from prior year and
the percent change from the prior year.
<TABLE>
Table XIII
<CAPTION>
1995
Average Increase/(decrease)
Balance Dollar Percent
<S> <C> <C> <C>
Funding uses
Loans
held for
sale $ 4,307 $ (2,542) (37.12)%
Taxable loans,
net of
unearned income 410,846 49,053 13.56
Tax exempt loans 5,643 (762) (11.90)
Taxable
securities 128,846 (17,882) (12.19)
Tax exempt
securities 48,539 (9,397) (16.22)
Interest bearing
deposits in
other banks 914 (634) (40.96)
Federal funds
sold 11,842 4,418 59.51
Total uses. $ 610,937 $ 22,254 3.78 %
Funding sources
Noninterest
bearing deposits $ 55,527 $ 2,112 3.95 %
Interest bearing
demand and
savings deposits 212,092 (13,188) (5.85)
Time deposits 299,794 33,096 12.41
Short-term
borrowings 8,129 (1,520) (15.75)
Long-term debt 2,804 (120) (4.10)
Other 32,591 1,874 6.10
Total sources $ 610,937 $ 22,254 3.78 %
/TABLE
<PAGE>
[the following is the right-hand side of the table above]
<TABLE>
<CAPTION>
1994
Average Increase/(decrease)
Balance Dollar Percent
<S> <C> <C> <C>
Funding uses
Loans
held for
sale $ 6,849 $ (8,284) (54.74)%
Taxable loans,
net of unearned
income 361,793 43,900 13.81
Tax exempt loans 6,405 (1,246) (16.29)
Taxable securities 146,728 (20,193) (12.10)
Tax exempt
securities 57,936 10,532 22.22
Interest bearing
deposits in other
banks 1,548 710 84.73
Federal funds sold 7,424 (7,310) (49.61)
Total uses $ 588,683 $ 18,109 3.17 %
Funding sources
Noninterest
bearing deposits $ 53,415 $ 3,218 6.41 %
Interest bearing
demand and
savings deposits 225,280 5,305 2.41
Time deposits. 266,698 2,422 .92
Short-term
borrowings 9,649 2,510 35.16
Long-term debt 2,924 2,250 333.83
Other 30,717 2,404 8.49
Total sources $ 588,683 $ 18,109 3.17 %
</TABLE>
Total average loans increased $48,291 or 13.12% to
$416,489 in 1995 from $368,198 in 1994. Commercial
loans averaged $198,599, real estate loans averaged
$95,448 and installment loans averaged $122,442 in
1995. The average increase in loans during 1995 was
funded mainly by reductions in average securities of
$27,279 and increases of $22,020 in average deposits.
The 1995 reduction in average securities was achieved
mainly by normal maturities of securities. Average
deposits in 1995 increased partially through the
purchase of deposits and partially because of deposit
growth due to the offering by the Corporation of more
<PAGE> 59
competitive rates. With more competitive rates,
deposits were returned to the Banks that had previously
been taken to nonbanking institutions. The opening of
the new branch in the Wal-Mart during late 1995 has
also proven that a pure retail branch location can be
successful to bring in new deposits.
LIQUIDITY AND CAPITAL RESOURCES - Continued
(Dollar amounts in thousands, except share
and per share data)
The Corporation anticipates a gradual increase in loan
demand for 1996 but expects to be able to meet this
demand with the increase in deposits as discussed.
Other than this, the Corporation does not foresee any
unusual demands on funds for capital outlays or
liquidity needs in the foreseeable future.
Outstanding loan commitments and customers' unused
lines of credit totaled $74,779 at December 31, 1995,
which was a decrease of $1,142 or 1.50% from $75,921 at
December 31, 1994. Standby letters of credit
outstanding at December 31, 1995, decreased $359 or
5.59% to $6,058 from $6,417 at December 31, 1994.
Letters of credit typically are not funded. To the
extent, however, that letters of credit, loan
commitments and customers' unused lines of credit
require funding, these obligations will be met by the
normal conversion of short-term investments, which
totaled $23,345 at December 31, 1995, and one year or
less maturities of investments which totaled $29,644 at
December 31, 1995, the sale of loans held for sale plus
the increase in deposits discussed. Further liquidity,
if required, would be provided by conversion of
securities available for sale or other assets into cash
or accessing sources of incremental funding such as
repurchase agreements or federal funds purchased.
Interest rate sensitivity occurs when assets or
liabilities are subject to rate and yield changes
within a designated time period. The rate sensitivity
position, or gap, is determined by the difference in
the amount of rate sensitive assets and rate sensitive
liabilities at various maturity intervals. The
management of this gap position is required to protect
the net interest rates and to assure a greater degree
of earnings stability. Provided in Tables XIV through
XVI are various repricing information relative to
securities, loans and deposits at December 31, 1995.
<PAGE>
<PAGE> 60
<TABLE>
Table XIV
Maturities and Average Yields at December 31, 1995
<CAPTION>
1 Year and Less 1 - 5 Years 5 - 10 Years
Dollar Yield Dollar Yield Dollar Yield
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury............. $ 11,149 5.57 % $ 10,315 5.73 % $ - - %
Federal agencies.......... 13,751 5.50 36,585 4.80 9,568 7.62
State and municipal....... 3,012 8.59 16,336 8.71 26,376 8.10
Corporate obligations..... 1,700 6.83 634 7.03 - -
Collateralized
mortgage obligations.... 32 6.93 6,048 6.21 2,371 5.58
Mutual funds.............. - - - - - -
Total.................. $ 29,644 5.91 % $ 69,918 5.96 % $ 38,315 7.82%
</TABLE>
[following is the right-hand side of the table above]
<TABLE>
<CAPTION>
Over 10 Years Total
Dollar Yield Dollar Yield
<S> <C> <C> <C> <C>
U.S. Treasury............. $ - - % $ 21,464 5.65 %
Federal agencies.......... 20,342 6.07 80,246 5.57
State and municipal....... 6,113 7.78 51,837 8.28
Corporate obligations..... 1,256 7.46 3,590 7.09
Collateralized
mortgage obligations.... 7,065 6.26 15,516 6.13
Mutual funds.............. 816 6.46 816 6.45
Total.................. $35,592 6.46 % $173,469 6.46 %
</TABLE>
<TABLE>
Table XV
Maturity Ranges of Time Deposits
with Balances of $100 or More at December 31,
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Three months or less.................... $ 29,372 $ 24,437 $ 20,603
Over three through six months........... 11,460 12,558 8,428
Over six through twelve months.......... 9,315 8,333 9,115
Over twelve months...................... 16,500 11,821 15,313
Total................................ $ 66,647 $ 57,149 $ 53,459
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES - Continued
(Dollar amounts in thousands, except share
and per share data)
<TABLE>
Table XVI
Loan Maturities at December 31, 1995
<CAPTION>
1 Year 1 - 5 Over 5
and Less Years Years Total
<S> <C> <C> <C> <C>
Commercial and agricultural...... $158,089 $ 49,148 $ 5,840 $213,077
</TABLE>
There were no material real estate construction loans
outstanding at December 31, 1995.
<PAGE>
<PAGE> 62
Interest Rate Sensitivity of Above Loans Maturing After
One Year
Fixed rate.......................... $ 25,057
Variable rate....................... 29,931
Total selected loans................ $ 54,988
<TABLE>
Table XVII
Liquidity and Interest Rate Sensitivity at
December 31, 1995
<CAPTION>
0 - 90 91 - 365 1 - 5
Days Days Years
<S> <C> <C> <C>
Interest earning assets
Loans...................................... $ 121,257 $ 122,549 $ 178,149
Securities................................. 43,025 29,813 43,404
Other...................................... 23,903 101 591
Total................................... $ 188,185 $ 152,463 $ 222,144
Interest bearing liabilities
Savings and demand deposits................ $ 211,971 $ - $ -
Time, less than $100....................... 80,645 76,953 99,311
Time, $100 or more......................... 27,925 22,180 15,974
Other...................................... 7,083 184 1,131
Total................................... $ 327,624 $ 99,317 $ 116,416
Rate sensitive gap............................ $(139,439) $ 53,146 $ 105,728
Rate sensitive cumulative gap................. (139,439) (86,293) 19,435
Percent to total assets....................... (20.44)% (12.65)% 2.85 %
</TABLE>
Rate sensitive gap as shown in Table XVII is defined as
the difference between the repricing of interest
earning assets and the repricing of interest bearing
liabilities within certain defined time frames. Rate
sensitive gap is also expressed as a percentage of
total assets based upon the accumulation of the defined
time frame gap calculation. Rate sensitive gaps
constantly change as funds are acquired and invested
and the Corporation's analysis as of December 31, 1995,
is shown above. As of December 31, 1995, the
Corporation had a negative gap of $86,293 and 12.65%
during the next one year period with a negative gap of
$139,439 and 20.44% relating to the first quarter of
1996. The effect of these negative gaps may result in
a negative impact on earnings in 1996 if interest rates
<PAGE>
<PAGE> 63
increase, but could result in a positive impact on
earnings if interest rates decline in 1996. The above
rate sensitivity analysis is significantly impacted by
the inclusion of savings and demand deposits in the
first quarter of the gap analysis. These deposits have
historically not exhibited the same degree of
sensitivity to rate changes as other liabilities
because deposit rates are set by the Corporation. If
the above analysis were changed to reflect the
Corporation's actual historical results, the savings
and demand deposits would be moved to the one to five
year time frame. With this change the Corporation
would have a positive gap of $125,678 or 18.42% during
the next one year period and a positive gap of $72,532
or 10.63% relating to the first quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES - Continued
(Dollar amounts in thousands, except share
and per share data)
SHAREHOLDERS' EQUITY
Total shareholders' equity at December 31, 1995,
increased $9,502 or 16.32% to $67,712 from $58,210 at
December 31, 1994. As noted previously the Corporation
included more investments as available for sale at
December 31, 1995, than at December 31, 1994. This
reclassification together with the favorable movement
in the market rates provided an unrealized gain on
securities available for sale of $1,113 at December 31,
1995, compared to an unrealized loss on securities
available for sale of $3,488 at December 31, 1994.
Thus, securities available for sale provided $4,601 of
the increase in total shareholders' equity in 1995.
The Corporation's regulators have issued guidelines
stating that this unrealized gain or loss on
securities, other than those related to mutual funds,
should not be included in shareholders' equity for
capital ratio calculations. See Note 15 to the
financial statements for further explanation of capital
adequacy. By all measurements the Corporation is
considered well capitalized at December 31, 1995, and
has a Leverage capital ratio of 10.01%, a Tier 1 risk-
based capital ratio of 13.61% and a Total risk-based
capital ratio of 14.67%.
<PAGE>
<PAGE> 64
INTERIM FINANCIAL DATA
Table XVIII sets forth the quarterly results of
operations and per share information for the years
ended December 31, 1995 and 1994.
<TABLE>
Table XVIII
<CAPTION>
Quarter Ended
December September June March
31 30 30 31
<S> <C> <C> <C> <C>
1995
Interest income....................... $ 13,020 $ 12,676 $ 12,217 $ 11,550
Interest expense...................... 6,609 6,329 5,960 5,293
Net interest income................. 6,411 6,347 6,257 6,257
Provision for loan losses............. 535 361 140 146
Noninterest income.................... 792 855 678 788
Noninterest expense................... 4,423 4,090 4,454 4,566
Income before income taxes.......... 2,245 2,751 2,341 2,333
Income taxes.......................... 397 868 667 693
Net income.......................... $ 1,848 $ 1,883 $ 1,674 $ 1,640
Per share
Net income.......................... $ .58 $ .60 $ .53 $ .52
Stock price (Note A)................ 30.50 30.48 31.25 29.52
Weighted average shares............... 3,158,961 3,158,961 3,158,961 3,158,948
1994
Interest Income....................... $ 11,308 $ 10,939 $ 10,559 $ 10,247
Interest expense...................... 5,048 4,910 4,693 4,503
Net interest income................. 6,260 6,029 5,866 5,744
Provision for loan losses............. 102 96 42 98
Noninterest income.................... 586 732 735 831
Noninterest expense................... 4,356 4,262 4,347 4,354
Income before income taxes.......... 2,388 2,403 2,212 2,123
Income taxes.......................... 693 715 544 672
Net income.......................... $ 1,695 $ 1,688 $ 1,668 $ 1,451
Per share
Net income.......................... $ .54 $ .53 $ .53 $ .46
Stock price (Note A)................ 29.52 30.00 30.71 30.71
Weighted average shares............... 3,156,756 3,156,491 3,156,190 3,156,190
</TABLE>
<PAGE>
<PAGE> 65
Note A - The stock price above represents the sales
price of the last actual trade in each
respective quarter as reported in the Wall
Street Journal restated for the 5% stock
dividend paid on November 30, 1995.
(Dollar amounts in thousands, except share
and per share data)
INFLATION
For a financial institution, effects of price changes
and inflation vary considerably from an industrial
organization. Changes in the prices of goods and
services are the primary determinant of an industrial
company's profit, whereas changes in interest rates
have a major impact on a financial institution's
profitability. Inflation affects the growth of total
assets, but it is difficult to assess its impact
because neither the timing nor the magnitude of the
changes in the consumer price index directly coincide
with changes in interest rates.
During periods of high inflation there are normally
corresponding increases in the money supply. During
such times financial institutions often experience
above average growth in loans and deposits. Also,
general increases in the price of goods and services
will result in increased operation expenses. Over the
past few years the rate of inflation has been
relatively low, and its impact on the growth in the
balance sheets and increased levels of income and
expense has been nominal.
MARKET PRICE OF AMBANC CORP. COMMON STOCK AND
RELATED SHAREHOLDER MATTERS
The Corporation's common stock is traded on The Nasdaq
Small-Cap Market (NASDAQ) under the symbol AMBK. The
quarterly range of the low and high bid prices per
share of the Corporation's common stock, as reported by
NASDAQ, is shown in Table XIX. This information
represents prices between dealers and does not include
adjustments for mark-ups, mark-downs or commissions and
does not necessarily represent actual prices on
transactions.
<PAGE>
<PAGE> 66
<TABLE>
Table XIX
<CAPTION>
1995 1994
Stock Range Stock Range
<S> <C> <C>
1st Quarter............. $ 28.81 - 31.43 $ 31.19 - 35.24
2nd Quarter............. 29.52 - 31.43 28.81 - 31.43
3rd Quarter............. 29.05 - 32.38 28.81 - 31.43
4th Quarter............. 30.00 - 32.25 28.81 - 30.95
</TABLE>
As of December 31, 1995, there were approximately 1,419
shareholders of record. The Corporation pays cash
dividends on a quarterly basis. Cash dividends paid by
the Corporation were $.80 per share in 1995 and 1994
and $.76 per share in 1993. Cash dividends, as
restated to reflect the acquisitions of LBI and FRB
under the pooling of interests method of accounting,
were $.68, $.62 and $.54 for the years 1995, 1994 and
1993. Refer to Note 16 to the consolidated financial
statements for information concerning restrictions on
dividends.
<PAGE>
<PAGE> 67
<TABLE>
FIVE YEAR SUMMARY
(Dollar amounts in thousands, except per share data)
<CAPTION>
1995(a) 1994(a) 1993(a) 1992 1991
<S> <C> <C> <C> <C> <C>
AT PERIOD END
Actual balances
Assets..................... $ 682,347 $ 625,240 $ 622,568 $ 610,407 $ 573,892
Securities................. 173,469 186,875 210,774 211,196 201,515
Loans...................... 442,657 388,657 342,950 311,097 305,130
Allowance for loan losses.. 5,022 4,531 4,238 4,168 3,957
Deposits................... 600,069 550,387 550,350 544,098 510,503
Shareholders' equity....... 67,712 58,210 57,722 52,552 48,203
Daily averages
Assets..................... $ 644,456 $ 619,540 $ 601,232 $ 582,603 $ 563,213
Securities................. 177,385 204,664 214,325 210,847 197,385
Loans...................... 416,489 368,198 325,544 311,523 309,935
Allowance for loan losses.. 4,636 4,377 4,152 3,966 4,003
Deposits................... 567,413 545,393 534,448 520,034 501,878
Shareholders' equity....... 62,344 58,113 54,967 50,615 45,982
OPERATING RESULTS
Interest income.............. $ 49,463 $ 43,053 $ 41,758 $ 44,722 $ 50,211
Net interest income.......... 25,272 23,899 22,751 22,335 20,936
Provision for loan losses.... 1,182 338 1,492 1,495 1,497
Income before cumulative
effect of accounting change 7,045 6,502 5,910 5,818 5,409
Net income................... 7,045 6,502 6,162 5,818 5,409
Dividends paid on
common stock............... 2,144 1,947 1,701 1,581 1,498
PER SHARE DATA
Income before cumulative
effect of accounting change $ 2.23 $ 2.06 $ 1.87 $ 1.84 $ 1.71
Cumulative effect of
accounting change.......... - - .08 - -
Net income................... 2.23 2.06 1.95 1.84 1.71
Cash dividends before
pooling of interests....... .80 .80 .76 .76 .76
Cash dividends restated for
pooling of interests....... .68 .62 .54 .50 .47
Book value at end of period.. 21.43 18.43 18.29 16.65 15.27
Book value at end of period
before FAS 115............. 21.08 19.53 18.05 16.65 15.27
Tangible book value at
end of period.............. 20.82 18.34 18.24 16.59 15.25
Tangible book value at end
of period before FAS 115... 20.47 19.45 18.00 16.59 15.25
Weighted average
shares outstanding......... 3,158,958 3,156,410 3,156,190 3,156,190 3,156,190
<PAGE>
<PAGE> 68
RATIOS
Return on average assets..... 1.09 % 1.05 % 1.02 % 1.00 % .96 %
Return on average equity..... 11.30 11.19 11.21 11.50 11.76
Dividends paid as a
percent of net income...... 30.43 29.95 27.61 27.17 27.70
Leverage capital (Tier 1
equity/average
tangible assets)............ 10.01 9.87 9.45 8.99 8.55
Efficiency ratio............. 61.77 64.66 67.56 64.38 62.51
(a) - reflects FAS 115 adjustments.
</TABLE>
EXHIBIT 22
AMBANC CORP. LIST OF SUBSIDIARIES
1. The American National Bank of Vincennes, Indiana is a wholly-
owned subsidiary of AMBANC Corp. and is a national banking
association.
2. Citizens' National Bank of Linton, Indiana is a wholly-owned
subsidiary of AMBANC Corp. and is a national banking
association.
3. Bank of Casey, Illinois, is a wholly-owned subsidiary of
AMBANC Corp. and is an Illinois state-chartered banking
association.
4. The First National Bank in Robinson is a wholly-owned
subsidiary of AMBANC Corp. and is a national banking
association.
5. American National Realty Corp. is a wholly-owned subsidiary of
AMBANC Corp. and is incorporated under the laws of the State
of Indiana.
6. Lincolnland Insurance Agency & Investments, Inc., is a wholly-
owned, non-operating subsidiary of AMBANC Corp., which was
acquired in connection with the Bank of Casey acquisition.
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement No. 33-42949 of AMBANC Corp. on Form S-8 of our report
dated January 18, 1996, appearing in this Annual Report on Form
10-K of AMBANC Corp. for the year ended December 31, 1995.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
March 29, 1996
Exhibit 23.2
March 18, 1996
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus constituting
part of the Registration Statement on Form S-8 of AMBANC Corp. of our
report dated January 20, 1995 and 1994, 1993 and 1992 consolidated financial
statements of First Robinson Bancorp which report is incorporated by
reference in this Form 10-K. We also consent to the reference to us under the
heading "Experts" in the Prospectus.
KEMPER CPA GROUP, L.L.C.
Certified Public Accountants
Robinson, Illinois 62454
Exhibit 23.3
[Logo]
McGladrey & Pullen, LLP
Certified Public Accountants and Consultants
INDEPENDENT AUDITOR'S CONSENT
We consent to our report dated January 7, 1994 on
the consolidated statement of income, stockholders'
equity and cash flows for the year ended December 31,
1993 of Lincolnland Bancshares, Inc. appearing in the
annual report on Form 10-K of AMBANC Corp. for the year
ended December 31, 1995.
/s/ McGladrey & Pullen, LLP
McGLADREY & PULLEN, LLP
Champaign, Illinois
March 27, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000702904
<NAME> AMBANC CORP.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 20,520
<INT-BEARING-DEPOSITS> 692
<FED-FUNDS-SOLD> 22,653
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 173,469
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 442,657
<ALLOWANCE> 5,022
<TOTAL-ASSETS> 682,347
<DEPOSITS> 600,069
<SHORT-TERM> 6,788
<LIABILITIES-OTHER> 5,101
<LONG-TERM> 2,677
0
0
<COMMON> 31,590
<OTHER-SE> 36,122
<TOTAL-LIABILITIES-AND-EQUITY> 682,347
<INTEREST-LOAN> 37,959
<INTEREST-INVEST> 10,439
<INTEREST-OTHER> 739
<INTEREST-TOTAL> 49,463
<INTEREST-DEPOSIT> 23,593
<INTEREST-EXPENSE> 24,191
<INTEREST-INCOME-NET> 25,272
<LOAN-LOSSES> 1,182
<SECURITIES-GAINS> 41
<EXPENSE-OTHER> 17,533
<INCOME-PRETAX> 9,670
<INCOME-PRE-EXTRAORDINARY> 9,670
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,045
<EPS-PRIMARY> 2.22
<EPS-DILUTED> 2.22
<YIELD-ACTUAL> 4.12
<LOANS-NON> 983
<LOANS-PAST> 1,272
<LOANS-TROUBLED> 45
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,531
<CHARGE-OFFS> 1,019
<RECOVERIES> 328
<ALLOWANCE-CLOSE> 5,022
<ALLOWANCE-DOMESTIC> 2,336
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,686
</TABLE>
Exhibit 99.1
[Logo]
Crowe Chizek
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
AMBANC Corp.
Vincennes, Indiana
We have audited the consolidated balance sheet of AMBANC
Corp. as of December 31, 1994, and the related
consolidated statements of income, changes in
shareholders' equity and cash flows for the years ended
December 31, 1994 and 1993, prior to the subsequent
restatement for the 1995 pooling of interests. These
financial statements are the responsibility of the
Corporation's management. Our responsibility is to
express an opinion on these financial statements based on
our audits.
The consolidated statements of income, changes in
shareholders' equity, and cash flows for the year ended
December 31, 1993 have been restated to reflect the
pooling of interests in 1994. Separate financial
statements for the other companies included in the 1993
restated financial statements were audited and reported
on by other auditors, which statements reflect net income
of $862 for the year ended December 31, 1993.
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, based on our audits and the reports of
other auditors, the consolidated financial statements
referred to above present fairly, in all material
respects, the financial position of AMBANC Corp. as of
December 31, 1994, and the results of its operations and
its cash flows for the years ended December 31, 1994 and
1993, prior to the subsequent restatement for the 1995
pooling of interests, in conformity with generally
accepted accounting principles.
<PAGE>2
As disclosed in the Notes to the consolidated financial
statements, in 1993 the Corporation changed its method of
accounting for income taxes, postretirement benefits and
certain securities.
/s/ Crowe, Chizek and
Company LLP
Crowe, Chizek and Company
LLP
Indianapolis, Indiana
January 27, 1995
EXHIBIT 99.2
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
of First Robinson Bancorp
Robinson, Illinois
We have audited the accompanying consolidated statements of
condition of First Robinson Bancorp (an Illinois corporation)
and Subsidiary as of December 31, 1993 and 1992, and the
related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the years then
ended. These financial statements are the responsibility of the
Bank'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
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
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 financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of First Robinson Bancorp and Subsidiary at December 31, 1993
and 1992, and the consolidated results of their operations and
their cash flows for each of
the years then ended, in conformity with generally accepted
accounting principles.
KEMPER CPA GROUP
Certified Public Accountants
January 20, 1994
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
of First Robinson Bancorp
Robinson, Illinois
We have audited the accompanying consolidated statements of
financial condition of First Robinson Bancorp (The Bank) and
Subsidiary as of December 31, 1994 and 1993, and the related
consolidated statements of income, changes in shareholders'
equity, and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the
Bank's management. Our responsibility is to express an opinion
on these consolidated financial statements based
on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes
assessing the accounting principals used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
responsible basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of First Robinson Bancorp and Subsidiary as of
December 31, 1994 and 1993, and the results of their operations
and cash flows for the years then ended in conformity with
generally accepted accounting principles.
KEMPER CPA GROUP L.L.C.
Certified Public Accountants
January 20, 1995
Exhibit 99.3
[Logo]
McGladrey & Pullen, LLP
Certified Public Accountants and Consultants
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
LINCOLNLAND BANCSHARES, INC.
Casey, Illinois
We have audited the related consolidated statements of
income, stockholders' equity, and cash flows of
LINCOLNLAND BANCSHARES, INC. and subsidiaries for the
year ended December 31, 1993. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material
respects, the results of operations and cash flows for
LINCOLNLAND BANCSHARES, INC. and subsidiaries for the
year ended December 31, 1993, in conformity with
generally accepted accounting principles.
As described in Note 4 to the financial statements, the
Company changed its method of accounting for investment
securities in 1993.
/s/ McGladrey & Pullen LLP
Champaign, Illinois
January 7, 1994
