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, 1997
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)
[Cover page 1 of 2 pages]
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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. [ ]
The aggregate market value of the voting shares held by non-affiliates of the
Registrant is $157,701,555. Solely for purposes of this computation, it has been
assumed that officers and directors are "affiliates" and the price of $24.75 as
reported on NASDAQ as the last trade on March 18, 1998, was the fair market
value of the shares.
Number of Common Shares outstanding at March 18, 1998: 6,985,674
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF PARTS II AND IV ARE INCORPORATED BY REFERENCE FROM THE REGISTRANT'S
1997 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 27, 1998, FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 24,
1998. EXCEPT FOR THOSE PORTIONS OF THE 1997 ANNUAL REPORT INCORPORATED BY
REFERENCE, THE ANNUAL REPORT IS NOT DEEMED FILED AS PART OF THIS REPORT.
[Cover page 2 of 2 pages]
<PAGE>
AMBANC CORP.
VINCENNES, INDIANA
ANNUAL REPORT TO SECURITIES AND EXCHANGE COMMISSION
December 31, 1997
PART I
ITEM 1. BUSINESS
GENERAL
AMBANC Corp. (the "Corporation") is a registered bank holding company.
The Corporation's banking subsidiaries recently have been combined to form two
principal subsidiaries, AmBank Indiana, N.A. and AmBank Illinois, N.A. Effective
July 1, 1996, Citizens' National Bank of Linton, Indiana, was merged into The
American National Bank of Vincennes, Indiana, and the name of the resulting bank
was changed to AmBank Indiana, N.A. ("AmBank Indiana"). Also during 1996, the
name of Bank of Casey, Illinois, was changed to AmBank Illinois, and the name of
The First National Bank in Robinson, Illinois, was changed to AmBank Illinois,
N.A. Effective March 1, 1997, AmBank Illinois was merged into AmBank Illinois,
N.A. (the bank resulting from the merger is referred to hereinafter as "AmBank
Illinois") (collectively AmBank Indiana and AmBank Illinois 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. The Corporation's Common
Stock is listed on the NASDAQ National Market System and is traded under the
symbol "AMBK."
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 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 AmBank Indiana
for normal banking activities. Lincolnland Insurance Agency & Investments, Inc.,
a non-operating shell corporation that the Corporation acquired in connection
with a 1994 Illinois acquisition, was dissolved in 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, agricultural 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,
agricultural, real estate, installment loans and credit cards. Revenues from the
Banks' lending activities comprise the largest component of the Banks' operating
revenues.
<PAGE>
The Banks 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.
EMPLOYEES
At December 31, 1997, the Corporation and the Banks had 309 employees
on a full-time equivalent basis. Neither the Corporation nor the Banks are a
party to any collective bargaining agreement. Employee relations are considered
to be good.
REGULATION AND SUPERVISION
General
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.
As national banks, AmBank Indiana and AmBank Illinois are under the
supervision of and subject to examination by the Comptroller of the Currency.
Regulation and examination by banking regulatory agencies are primarily for the
benefit of depositors rather than shareholders.
Regulation of Expansion
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.
<PAGE>
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "Interstate Act") provided for nationwide interstate banking and branching.
Since September 30, 1995, well-capitalized bank holding companies have been
authorized, pursuant to the legislation, to acquire banks and bank holding
companies in any state. The Interstate Act 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 became effective on June 1,
1997, unless a state took legislative action prior to that date. States could
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 was taken before June 1, 1997. Effective March 14, 1996,
Indiana "opted in" to the interstate branching provisions of the Interstate Act.
Illinois has adopted legislation that permitted interstate branching by
acquisition effective June 1, 1997.
Regulation of Capital Adequacy
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, 1997, the Corporation
was in compliance with the risk-based capital guidelines. For a detailed
discussion of regulatory capital requirements and the Banks' compliance with
such requirements, see Note 18 of the Notes to Consolidated Financial
Statements.
Deposit Insurance
The Bank's deposits are insured up to a maximum of $100,000 per insured
account by the FDIC through the Bank Insurance Fund ("BIF"). Since BIF reached
its required 1.25 reserve ratio in 1995, the FDIC has reduced deposit insurance
assessment rates to historic low levels. The assessment rates currently in
effect range from zero to $.27 per $100 of insured deposits, with the healthiest
banks, including the Banks, not being required to pay any deposit insurance
premiums for the period. Legislation enacted in September 1996 included
provisions for the recapitalization of the Savings Association Insurance Fund
("SAIF"). As a result of this legislation, rates for financial institutions
insured through SAIF have been brought into parity with BIF rates. All of the
Corporation's banking subsidiaries are BIF-insured institutions (however, the
deposits that AmBank Indiana acquired from the Princeton, Indiana branch of
First Indiana Bank on March 17, 1995, and the deposits that AmBank Illinois
acquired from Olympic Federal Savings in Mt. Carmel, Illinois on March 27, 1992,
remain insured through SAIF). See Note 18 to the Notes to Consolidated Financial
Statements and the discussion of "Noninterest Expense" in the Results of
Operations section of Management's Discussion and Analysis of Financial
Condition and Results of Operations.
<PAGE>
Dividends
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 AmBank Indiana or AmBank Illinois in any calendar year
would exceed net income for the preceding two calendar years. For discussion of
the Banks' ability to pay dividends to the Corporation, see Note 18 of the Notes
to the Consolidated Financial Statements.
COMPETITION
The banking business is highly competitive. The Banks' market area
consists principally of Knox, Greene, Gibson, Vanderburgh, Vigo 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 area.
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 changes in federal and state law have resulted in and are
expected to continue to result in increased competition. The reductions in legal
barriers to the acquisition of banks by out-of-state bank holding companies
resulting from implementation of the Interstate Act and other recent and
proposed changes are expected to continue to further stimulate competition in
the markets in which the Banks operate, although it is not possible to predict
the extent or timing of such increased competition.
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.
<PAGE>
FORWARD-LOOKING STATEMENTS
This Form 10-K and future filings made by the Corporation with the
Securities and Exchange Commission, as well as other filings, reports and press
releases made or issued by the Corporation and the Banks, and oral statements
made by executive officers of the Corporation and Banks, may include
forward-looking statements relating to such matters as (a) assumptions
concerning future economic and business conditions and their effect on the
economy in general and on the markets in which the Banks do business, and (b)
expectations regarding future revenues and earnings for the Corporation and
Banks, acquisitions, deposit and loan volume and possible new products or
services. Such forward-looking statements are based on assumptions rather than
historical or current facts and, therefore, are inherently uncertain and subject
to risk.
To comply with the terms of a "safe harbor" provided by the Private
Securities Litigation Reform Act of 1995 that protects the making of such
forward-looking statements from liability under certain circumstances, the
Corporation notes that a variety of factors could cause the actual results or
experience to differ materially from the anticipated results or other
expectations described or implied by such forward-looking statements. The risks
and uncertainties that may affect the operations, performance, development and
results of the Corporation's and Banks' business include the following: (a) the
risk of adverse changes in business conditions in the banking industry generally
and in the specific markets in which the Banks operate; (b) changes in the
legislative and regulatory environment that negatively impact the Corporation
and Banks through increased operating expenses; (c) increased competition from
other financial and non-financial institutions; (d) the impact of technological
advances; and (e) other risks detailed from time to time in the Corporation's
filings with the Securities and Exchange Commission. The Corporation and Banks
do not undertake any obligation to update or revise any forward-looking
statements subsequent to the date on which they are made.
ITEM 2. PROPERTIES
The Banks conduct their operations from 26 banking offices located in
Vincennes, Bicknell, Evansville, Sandborn, Monroe City, Linton, Patoka,
Princeton and Terre Haute 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 26 automated teller machines.
<PAGE>
AmBank Indiana'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 AmBank Indiana are owned by either
AmBank Indiana or American National Realty Corp., except for six branches that
are leased.
The Corporation also owns the main offices and branch locations of
AmBank Illinois.
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, 1998.
<TABLE>
Name Age Offices Held
---- --- ------------
<S> <C> <C>
Robert G. Watson 62 Chairman of the Board, President and Chief Executive Officer
of the Corporation and AmBank Indiana
Donald J. Demas 57 Assistant Director of Human Resources of the Corporation
David A. Eck 38 Vice President of the Corporation
Richard A. Fox 55 Director of Human Resources of the Corporation
Dan J. Robinson 50 Executive Vice President of AmBank Indiana
Robert E. Seed 63 President, C.E.O. and a Director of AmBank Illinois, N.A.;
Vice President of the Corporation
Troy D. Stoll 32 Chief Financial Officer, Secretary and Treasurer of the
Corporation
</TABLE>
<PAGE>
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.
Prior to his appointment as Vice President of the Corporation in 1997, Mr.
Eck served as Vice President of AmBank Indiana for Branch Administration and
Retail Lending.
Mr. Fox has been employed as the Corporation's Director of Human Resources
since 1993.
Mr. Robinson was in charge of the Administrative Division of AmBank Indiana
until 1993 when he was elected Executive Vice President.
Mr. Seed was Chief Executive Officer and President of Bank of Casey prior
to its name change in 1996 to AmBank Illinois and its merger, effective March 1,
1997, into AmBank Illinois, N.A., at which time he became Vice President and a
Director of the Corporation.
Mr. Stoll was appointed Chief Financial Officer, Secretary and Treasurer of
the Corporation in November 1997. Prior to that date he had served as Senior
Auditor of the Corporation and Trust Officer of AmBank Indiana.
For information concerning the Directors of the Corporation, see the
Corporation's Proxy Statement.
<PAGE>
PART II
Information for Items 5 through 8 of this Report appears in the 1997
Annual Report to Shareholders as indicated in the following tables and is
incorporated herein by reference from the Annual Report to Shareholders (page
references are to printed Annual Report):
ITEM 5. MARKET FOR THE CORPORATION'S COMMON SHARES AND RELATED SECURITY HOLDER
MATTERS
Annual Report to
Shareholders
Page
(a) Market 47
(b) Holders 47
(c) Dividends 47
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 of Financial
Condition and Results of
Operations 29-47
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Annual Report to
Shareholders
Page
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations -- Liquidity and
Rate Sensitivity 42-45
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Annual Report to
Shareholders
Page
Financial Statements and
Supplementary Data 5-8
ITEM 9. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
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 24, 1998,
which was filed with the Commission pursuant to Regulation 14A on or about March
27, 1998.
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 24, 1998, which has been filed with the Commission and is
incorporated herein by reference in this Form 10-K.
<PAGE>
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 24, 1998, 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 24, 1998, 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 24, 1998, which has been filed
with the Commission and is incorporated by reference in this Form 10-K.
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.
<PAGE>
(a)1. Financial Statements.
Annual Report to
Shareholders
Page
Independent Auditors' Report 4
Consolidated Balance Sheets as of
December 31, 1997 and 1996 5
Consolidated Statements of Income for
the years ended December 31, 1997,
1996 and 1995 6
Consolidated Statements of Changes
in Shareholders' Equity for the
years ended December 31, 1997,
1996 and 1995 7
Consolidated Statements of Cash Flows
for the years ended December 31,
1997, 1996 and 1995 8
Notes to Consolidated Financial
Statements 9-27
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. Schedules.
All schedules have been omitted because the required information is
either inapplicable or has been included in the Corporation's consolidated
financial statements or notes thereto.
(a)3. Exhibits.
The exhibits filed as part of this Report on Form 10-K are identified
in the Exhibit Index, which Exhibit Index specifically identifies those exhibits
that describe or evidence all management contracts and compensatory plans or
arrangements required to be filed as exhibits to this Report. Such Exhibit Index
is incorporated herein by reference,
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended December 31,
1997.
<PAGE>
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 23, 1998 By /s/ Robert G. Watson
Robert G. Watson, Chairman of
the Board, President & Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 23, 1998 /s/ Robert G. Watson
Robert G. Watson, President,
Chief Executive Officer, and
Director
Date: March 23, 1998 /s/ Troy D. Stoll
Troy D. Stoll, Chief Financial
Officer (Principal Accounting
Officer and Principal Financial
Officer)
Date: March ___, 1998 __________________________________
Glen G. Apple, Director
Date: March 25, 1998 /s/ Christina M. Ernst
Christina M. Ernst, Director
Date: March 25, 1998 /s/ Robert D. Green
Robert D. Green, Director
Date: March 25, 1998 /s/ Rolland L. Helmling
Rolland L. Helmling,
Director
<PAGE>
Date: March ___, 1998 ___________________________________
Gerry M. Hippensteel, Director
Date: March ___, 1998 ____________________________________
Rebecca A. Kaley, Director
Date: March 25, 1998 /s/ Bernard G. Niehaus
Bernard G. Niehaus, Director
Date: March ___, 1998 ___________________________________
Robert E. Seed, Director
Date: March 25, 1998 /s/ John A. Stachura, Jr.
John A. Stachura, Jr. Director
Date: March ___, 1998 ____________________________________
Phillip M. Summers, Director
Date: March 25, 1998 /s/ Frank J. Weber
Frank J. Weber, Director
<PAGE>
EXHIBIT INDEX
Exhibits
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, and amended effective
December 31, 1997, 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.*
10-G Amended and Restated Supplemental Retirement Benefits
Agreement between the Corporation and Robert G. Watson dated
March 16, 1995. The copy of this Exhibit filed as Exhibit
10-G to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995, is incorporated herein by
reference.*
<PAGE>
10-H AMBANC Corp. Director Stock Grant Plan. The copy of this
Exhibit filed as Exhibit 10-A to the Registrant's Report on
Form 10-Q for the Quarter ended June 30, 1996, is
incorporated herein by reference.*
10-I AMBANC Corp. and Affiliates Director Deferred Compensation
Plan. The copy of this Exhibit filed as Exhibit 10-B to the
Registrant's Report on Form 10-Q for the Quarter ended June
30, 1996, is incorporated herein by reference.*
13 Copy of the portions of the Corporation's Annual Report to
Shareholders for the year ended December 31, 1997, 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.
21 List of Subsidiaries.
23 Consent of Deloitte & Touche LLP.
27 Financial Data Schedule.
*Indicates an exhibit that describes or evidences a management contract or
compensatory plan or arrangement required to be filed as an exhibit.
EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
This section presents an analysis of the consolidated financial condition of
AMBANC Corp. (Corporation) and its wholly-owned subsidiaries, AmBank Indiana,
N.A. (IND), AmBank Illinois, N.A. (ILL) and American National Realty Corp. (ANR)
at December 31, 1997 and 1996, and the consolidated results of operations for
the years ended December 31, 1997, 1996 and 1995. 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 701,647 shares of its common stock
in exchange for all of the outstanding common stock of First Robinson Bancorp
(FRB), the parent holding company of The First National Bank in Robinson. FRB
was then merged into the Corporation. This acquisition was 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 FRB for all periods presented. Certain
reclassifications have been made to FRB's historical financial statements to
conform to the Corporation's presentation. A 2-for-1 stock split was paid on
August 29, 1997. A 5% stock dividend was paid on December 8, 1997, December 2,
1996, and November 30, 1995. All share and per share amounts have been
retroactively restated to reflect the stock split, 5% stock dividends and the
shares issued for FRB.
<PAGE>
RESULTS OF OPERATIONS
(Dollar amounts in thousands, except share and per share data)
Net income for 1997 was $8,286 or $1.19 per share compared to $7,966 or $1.14
per share in 1996 and $7,045 or $1.01 per share in 1995. Earnings expressed as a
percentage of average assets and average equity were:
Table I
Percentage of Percentage of
Average Assets Average Equity
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
Net income 1.14 % 1.13 % 1.09 % 11.14 % 11.58 % 11.30 %
The following is an analysis of the critical components of net income for the
years 1997, 1996 and 1995 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 rate used to restate nontaxable income was 34% for 1997, 1996
and 1995.
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 8.83% during 1995, decreased to an average of 8.27% during
1996 and increased to an average of 8.44% during 1997. 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 1997, 1996 and 1995. 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>
RESULTS OF OPERATIONS - Continued
Table II
Consolidated Average Balance Sheets and Interest Rates
For the Years ended December 31, 1997, 1996 and 1995
(Dollar amounts in thousands, except share and per share data)
<TABLE>
1 9 9 7 1 9 9 6 1 9 9 5
--------- --------- ---------
Interest Interest Interest
Average Income/ Average Income/ Average Income/
Balance Expense Average Balance Expense Average Balance Expense Average
(Note A) (Note B) Rate (Note A) (Note B) Rate (Note A) (Note B) Rate
-------- -------- ---- -------- ------ ----- ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets
Securities
U.S. Government $ 90,359 $ 5,536 6.13% $111,473 $ 6,756 6.06% $107,553 $ 6,166 5.73%
State and municipal
obligations 54,324 4,414 8.13 52,493 4,325 8.24 50,112 4,298 8.58
Other 16,479 1,008 6.12 15,889 979 6.16 22,113 1,396 6.31
Total securities 161,162 10,958 6.80 179,855 12,060 6.71 179,778 11,860 6.60
Interest-bearing deposits
in other banks 413 25 6.05 628 38 6.05 914 54 5.91
Loans held for sale 2,021 163 8.07 5,441 389 7.15 4,307 326 7.57
Total loans, less unearned
(Notes A and C) 516,513 46,342 8.97 467,509 42,421 9.07 416,489 38,073 9.14
Federal funds sold 7,744 427 5.51 13,076 710 5.43 11,842 685 5.78
Total interest-earning assets and
interest income $687,853 $ 57,915 8.42% 666,509 $ 55,618 8.34% 613,330 $ 50,998 8.32%
Noninterest-earning assets
Cash and due from banks 19,967 18,325 18,372
Premises and equipment, net 12,427 10,249 8,877
Other assets 13,345 11,954 10,906
Allowance for loan losses (5,448) (5,237) (4,636)
Unrealized loss on securities
available for sale 137 (214) (2,393)
Total assets $728,281 $701,586 $644,456
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Savings and demand deposits $216,034 $ 6,520 3.02% $218,090 $ 6,709 3.08% $212,092 $ 6,662 3.14%
Time deposits 368,061 21,487 5.84 344,388 20,052 5.82 299,794 16,931 5.65
Total savings and
time deposits 584,095 28,007 4.80 562,478 26,761 4.76 511,886 23,593 4.61
Short-term borrowings 5,433 305 5.61 7,383 385 5.22 8,129 437 5.38
Long-term debt 2,064 129 6.25 2,373 142 5.98 2,804 161 5.74
Total interest-bearing liabilities
and interest expense 591,592 $ 28,441 4.81% 572,234 $ 27,288 4.77% 522,819 $ 24,191 4.63%
Noninterest-bearing liabilities
Demand deposits 56,062 54,730 55,527
Other 6,230 5,850 3,766
Shareholders' equity 74,397 68,772 62,344
Total liabilities and
shareholders' equity $728,281 $701,586 $644,456
Interest margin recap
Interest income/interest-
earning assets $ 57,915 8.42% $ 55,618 8.34% $ 50,998 8.32%
Interest expense/interest-
earning assets 28,441 4.13 27,288 4.09 24,191 3.95
Net interest income/interest-
earning assets $ 29,474 4.29% $ 28,330 4.25% $ 26,807 4.37%
</TABLE>
<PAGE>
Note A - Included in total loans are nonaccrual loans averaging $710, $2,495
and $1,127 for the years 1997, 1996 and 1995.
Note B - Interest income includes the effects of tax-equivalent adjustments
using a marginal federal tax rate of 34% for 1997, 1996 and 1995. The
total adjustment to convert tax-exempt loans and securities to a fully
tax-equivalent basis was $1,661, $1,611 and $1,606 for 1997, 1996 and
1995.
Note C - Net loan fees and costs included in interest income on loans amounted
to $932, $971 and $866, for the years 1997, 1996 and 1995.
<PAGE>
RESULTS OF OPERATIONS - Continued
(Dollar amounts in thousands, except share and per share data)
Table III
Changes in Net Interest-Earning Assets
---------------------------------------
<TABLE>
1997 change 1996 change
from 1996 from 1995
--------- ---------
1997 Dollar Percentage 1996 Dollar Percentage 1995
---- ------ ---------- ---- ------ ---------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Average interest-
earning assets $687,853 $21,344 3.20% $666,509 $53,179 8.67% $613,330
Average interest-bearing
liabilities 591,592 19,358 3.38 572,234 49,415 9.45 522,819
Net interest-
earning assets $ 96,261 $ 1,986 2.11% $ 94,275 $ 3,764 4.16% $ 90,511
</TABLE>
Table IV
Changes in Net Interest Income
<TABLE>
1997 compared to 1996 1996 compared to 1995
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 $4,397 $ (476) $ 3,921 $ 4,629 $ (281) $ 4,348
Loans held for sale (276) 50 (226) 81 (18) 63
Interest-bearing deposits
with other banks (13) 0 (13) (17) 1 (16)
Securities
U.S. Government (1,294) 74 (1,220) 237 353 590
State and municipal
obligations 149 (60) 89 196 (169) 27
Other 36 (7) 29 (383) (34) (417)
Total securities (1,109) 7 (1,102) 50 150 200
Federal funds sold (294) 11 (283) 67 (42) 25
Total interest income 2,705 (408) 2,297 4,810 (190) 4,620
Interest expense
Savings and demand deposits (62) (127) (189) 185 (138) 47
Time deposits 1,382 53 1,435 2,597 524 3,121
Short-term borrowings (110) 30 (80) (39) (13) (52)
Long-term debt (19) 6 (13) (26) 7 (19)
Total interest expense 1,191 (38) 1,153 2,717 380 3,097
Net interest income $1,514 $ (370) $ 1,144 $ 2,093 $ (570) $ 1,523
</TABLE>
<PAGE>
RESULTS OF OPERATIONS - Continued
(Dollar amounts in thousands, except share and per share data)
Net interest income in 1997 increased $1,144 or 4.04% from 1996, and the
percentage of net interest margin, or net interest income to average
interest-earning assets, increased to 4.29% in 1997 from 4.25% in 1996. This
increase in net interest income was due to an increase of $1,986 or 2.11% in net
interest-earning assets during 1997 from 1996 and the increase in rates for both
interest-earning assets and interest-bearing liabilities. The allocation of the
yearly difference shows that $1,514 of the 1997 increase was due to volume
changes while rate changes reduced the net interest income by $370. Rates on
both interest-earning assets and interest-bearing liabilities increased in 1997,
but the rate allocation shows the .08% increase in the rates on interest-bearing
assets exceeded the .04% increase in rates on interest-earning liabilities.
Net interest income in 1996 increased $1,523 or 5.68% from 1995, and the
percentage of net interest margin, or net interest income to average
interest-earning assets, decreased to 4.25% in 1996 from 4.37% in 1995. This
increase in net interest income was due to an increase of $3,764 or 4.16% in net
interest-earning assets during 1996 from 1995 and the increase in rates for both
interest-earning assets and interest-bearing liabilities. The allocation of the
yearly difference shows that $2,093 of the 1996 increase was due to volume
changes while rate changes reduced the net interest income by $570. Rates on
both interest-earning assets and interest-bearing liabilities increased in 1996,
but the rate allocation shows the .14% increase in the rates on interest-bearing
liabilities exceeded the .02% increase in rates on interest-earning assets.
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 commercial,
agricultural, real estate, installment, credit cards and other 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>
RESULTS OF OPERATIONS - Continued
(Dollar amounts in thousands, except share and per share data)
Table V
Analysis of Allowance for Loan Losses
<TABLE>
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Balance at beginning
of year $ 5,630 $ 5,022 $ 4,531 $ 4,238 $ 4,168
Loans charged off
Commercial 1,006 329 349 352 1,327
Agricultur (a) (a)
Real estat 180 106 11 32 112
Installment 436 586 537 365 266
Credit cards 109 219 108 (a) (a)
Other 36 26 14 59 49
----- ----- ----- --- -----
Total charge-offs 1,767 1,266 1,019 808 1,754
----- ----- ----- --- -----
Charge-offs recovered
Commercial 54 196 115 548 177
Agricultural 14 70 78 (a) (a)
Real estate 62 29 6 71 43
Installment 157 195 117 136 105
Credit cards 22 11 7 (a) (a)
Other 11 7 5 8 7
--- --- --- --- ---
Total recoveries 320 508 328 763 332
--- --- --- --- ---
Net loans
charged off 1,447 758 691 45 1,422
Current year provision 1,245 1,366 1,182 338 1,492
----- ----- ----- --- -----
Balance at
end of year $ 5,428 $ 5,630 $ 5,022 $ 4,531 $ 4,238
===== ===== ===== ===== =====
Loans at year end $540,433 $494,467 $442,657 $388,657 $342,950
Ratio of allowance
to loans at year end 1.00 % 1.14 % 1.13 % 1.17 % 1.24 %
Average loans $516,513 $467,509 $416,489 $368,198 $325,544
Ratio of net loans
charged off to
average loans .28 % .16 % .17 % .01 % .44 %
</TABLE>
(a) Unavailable but included in another classification.
<PAGE>
Table VI
Allocation of Allowance for Loan Losses
<TABLE>
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Commercial $ 663 $ 1,305 $ 1,231 $ 936 $ 954
Agricultural 105 94 424 213 329
Real estate 285 223 212 204 223
Installment 488 350 451 674 457
Credit cards 131 109 18 25 17
Unallocated 3,756 3,549 2,686 2,479 2,258
----- ----- ----- ----- ------
Total $ 5,428 $ 5,630 $ 5,022 $ 4,531 $ 4,238
===== ===== ===== ===== =====
</TABLE>
<PAGE>
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 percentage of
nonperforming assets at December 31, for the past five years.
Table VII
Nonperforming Assets at December 31,
<TABLE>
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 649 $ 1,421 $ 983 $ 650 $ 1,078
Restructured 2,421 3,089 45 490 565
90 days or more past due 1,976 1,313 1,272 1,325 837
----- ----- ----- ----- ------
Total nonperforming
loans $ 5,046 $ 5,823 $ 2,300 $ 2,465 $ 2,480
===== ===== ===== ===== =====
Percentage of loans .93 % 1.18 % .52 % .63 % .72 %
=== ==== === === ===
Allowance as a percentage
of nonperforming loans 108 % 97 % 218 % 184 % 171 %
=== == === === ===
Other real estate owned $ 729 $ 324 $ 280 $ 72 $ 145
=== === === == ===
Percentage of loans .13 % .07 % .06 % .02 % .04 %
=== === === === ===
</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 $17,704 or 3.28% of total loans at
December 31, 1997.
<PAGE>
The provision for loan losses for 1997, 1996 and 1995 was $1,245, $1,366 and
$1,182 while net charge-offs were $1,447, $758 and $691. Trends in the loan
portfolio are indicative of a healthy local economy. Loan growth is strong and
asset quality is improved. Loans at December 31, 1997, were up $45,966 or 9.30%
to $540,433 while nonperforming loans showed a decrease in both amount and
percentage of ending loans. Nonperforming loans at December 31, 1997, were down
$777 or 13.34% to $5,046 from $5,823 at December 31, 1996. Nonperforming loans
were also down to .93% of loans at December 31, 1997, from 1.18% at December 31,
1996. 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 $1,245 of provision for
loan losses during 1997 and the $5,428 of allowance for loan losses at December
31, 1997, is adequate to cover future possible losses. The statements in this
paragraph related to the adequacy of the Corporation's provision for loan losses
and allowance for loan losses are forward-looking statements that may or may not
be accurate due to the impossibility of predicting future events. Severe
economic downturns or other factors could cause significant increases in loan
losses that cannot be foreseen by the Corporation, resulting in the allowance
being inadequate to cover future losses.
RESULTS OF OPERATIONS - Continued
(Dollar amounts in thousands, except share and per share data)
Noninterest Income
Table VIII
Changes in Noninterest Income
<TABLE>
1997 change 1996 change
from 1996 from 1995
----------- -----------
1997 Dollar Percentage 1996 Dollar Percentage 1995
---- ------ ---------- ---- ----- ---------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Fiduciary income $ 758 $ 104 15.90 % $ 654 $ 52 8.64 % $ 602
Deposit service charges 1,754 168 10.59 1,586 66 4.34 1,520
Other operating income 1,759 333 23.35 1,426 436 44.04 990
Security gains/(losses) 78 50 178.57 28 (13) (31.71) 41
----- --- ------ ----- ---- ------ -----
Total noninterest income $4,349 $ 655 17.73 % $3,694 $ 541 17.16 % $3,153
===== === ===== ===== ==== ===== ======
</TABLE>
As shown in Table VIII, noninterest income was up in both 1997 and 1996.
Fiduciary income increased both years due to the trust departments' having
additional assets under management and due to the increase in the market
valuation of investments managed. Deposit service charges increased in both 1997
and 1996 and was due mainly to increases in fees from nonsufficient and return
check charges. These fees increased in 1997 as a result of stronger collection
efforts in this area. The major reason for the increase in other operating
income in 1997 was due to increased gains on sales of loans held for sale and
increased insurance commissions. The 1996 increase came primarily as a result of
increases in gains on sales of loans held for sale. Loans held for sale (see
loan discussion) realized net gains of $558, $409 and $191 in the years 1997,
1996 and 1995.
<PAGE>
RESULTS OF OPERATIONS - Continued
(Dollar amounts in thousands, except share and per share data)
Noninterest Expense
Table IX
Changes in Noninterest Expense
<TABLE>
1997 change 1996 change
from 1996 from 1995
--------- ----------
1997 Dollar Percentage 1996 Dollar Percentage 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Salaries and
employee benefits $10,679 $1,046 10.86 % $ 9,633 $ 183 1.94 % $ 9,450
Occupancy expenses 1,473 255 20.94 1,218 167 15.89 1,051
Equipment expenses 1,488 268 21.97 1,220 103 9.22 1,117
Data processing expenses 461 (19) (3.96) 480 92 23.71 388
FDIC insurance 75 (195) (72.22) 270 (420) (60.87) 690
Other operating expenses 4,869 (109) (2.19) 4,978 172 3.58 4,806
----- ----- ------ ----- --- ---- -----
Total noninterest expense $19,045 $1,246 7.00 % $17,799 $ 297 1.70 % $17,502
====== ===== ==== ====== === ==== ======
</TABLE>
The largest component of noninterest expense is salaries and employee benefits
which increased $1,046 in 1997 due to increases in salary, medical and pension
expenses. All three categories were affected by the additional personnel
required to staff the increased branch network and growing asset base. Medical
expenses are subject to large swings in claim activity from year to year. Claim
activity was unexpectedly heavy during 1997, resulting in larger medical
expenses. Occupancy expense increased again in 1997 after a significant increase
during 1996. The Corporation opened two new branches and relocated a third in
1997 and opened two new branches in 1996. Equipment expense increased
significantly in 1997 after a smaller increase in 1996 and was due in part to
new branches and to expenses related to the continued increase in the use of
technology, as well as a consolidation of the operations area completed in the
fourth quarter of 1997. Data processing expenses decreased slightly in 1997
after increasing in 1996. Both subsidiary banks are now using one computer
system which was installed during the latter part of 1995. Having this new data
processing system during all of 1996 caused data processing expenses to increase
that year and level off in 1997.
The FDIC deposit insurance premium paid by the Corporation for the Bank
Insurance Fund (BIF) was at a 0% rate with a minimum annual payment of $2 per
subsidiary bank starting in 1996. Both subsidiary banks have been assigned the
classification of least risk by the FDIC and as such are subject to the lowest
deposit insurance rates available from BIF. The Corporation had $32,374 of
deposits as of December 31, 1997, purchased from savings and loans by its
subsidiary banks. These deposits (adjusted to a consistent percentage 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 was .0644% and .23% for 1997 and 1996, respectively. At September 30,
1996, a special one-time assessment was signed into law and charged on all SAIF
insured deposits. This special assessment amounted to 0.5256% of SAIF deposits
as of March 31, 1995, and totaled $191 in 1996 for the Corporation. This special
assessment was $118 after tax and had the effect of reducing earnings per share
for 1996 by $.04. The cost of BIF and SAIF fees through 1999 are estimated to be
.0129% and .0644%, respectively. Starting in the year 2000, it is anticipated
that the insurance expense on all deposits will be approximately .0243%.
<PAGE>
Other operating expenses decreased slightly in 1997 after increasing in 1996.
Several components of other operating expenses showed improvement in 1997. Key
expense reductions were noted in supplies, professional fees, advertising, ATM
charges and outside labor. Offsetting those reductions were increases in
telephone and collection expenses. Tighter cost controls, consolidation of
functions and the lack of acquisition activity in 1997, for the most part,
accounted for favorable reductions in 1997 expenses. At the same time, additions
to the branch network and increasing consumer delinquency accounted for
increased expenses. The largest increases in 1996 were in telephone, supplies,
advertising, ATM charges, goodwill amortization and outside labor offset by a
decrease in professional fees. Most of these increases can be explained by the
changing of the name of all subsidiary banks to AmBank effective July 1, 1996,
the opening of new branches in 1996 and the fact that the Corporation did not
incur professional fees in 1996 related to an acquisition. The goodwill increase
in 1996 resulted from a full year of goodwill amortization from deposits
purchased in 1995.
<PAGE>
RESULTS OF OPERATIONS - Continued
(Dollar amounts in thousands, except share and per share data)
Income Tax
The Corporation's effective tax rate was 30.21%, 29.18% and 27.15% in 1997, 1996
and 1995. The relatively lower effective rate for 1995 resulted from a reversal
of an allowance relating to the realization of alternative minimum tax credits
of $212. Management determined that these credits would be realized and the
allowance was reversed during 1995. 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 $3,226, $3,128 and $3,118 for 1997, 1996 and 1995. Note 14
to the consolidated financial statements contains additional details of the
differences between the statutory taxes and taxes shown on the consolidated
financial statements.
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 $8,157, $13,704 and
$12,756 for the years 1997, 1996 and 1995. The year-end outstanding balances of
short-term investments were $7,738, $6,465 and $23,346 for 1997, 1996 and 1995.
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
1997 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 required to be classified by management into one of
three categories, "available for sale," "held to maturity," or "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 fair 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. Securities classified as trading are carried at fair market value. The
Corporation does not currently maintain any securities that are classified as
held to maturity or trading. Since the original adoption of FAS 115, and
starting in December 1994, the equity 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, 1997, included market gains of $2,301 and market losses of $617 for
a net increase due to the mark-to-market of $1,684 on securities with an
amortized cost of $148,535. The after-tax effect of these available for sale
securities accounted for $1,077 of the Corporation's total equity at December
31, 1997. The effect on the total change in equity of the Corporation at
December 31, 1997, from December 31, 1996, was an increase of $767 due to this
mark-to-market of available for sale securities. The difference between the
mark-to-market adjustment at December 31, 1997 and 1996, was 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.
Proceeds from sales of available for sale securities in 1997 were $6,405 and
resulted in net gains of $78, while sales of $16,893 resulted in net gains of
$28 in 1996 and sales of $4,559 resulted in net gains of $41 in 1995. Other than
U.S. Government securities, there are no concentrations of securities over 10%
of shareholders equity to any single issuer. Table X presents securities
outstanding at year-end for the preceding three years.
<PAGE>
FINANCIAL CONDITION - Continued
(Dollar amounts in thousands, except share and per share data)
Table X
Securities at December 31,
<TABLE>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Securities available for sale
U.S. Government and its agencies $ 76,583 $101,819 $101,710
States and political subdivisions 54,233 55,776 51,837
Corporate obligations 2,140 1,823 3,590
Collateralized mortgage obligations 10,522 9,166 15,516
Mutual funds 6,741 2,140 816
------- ------- -------
Total securities available for sale $150,219 $170,724 $173,469
======= ======= =======
</TABLE>
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 $516,513 in 1997, an
increase of $49,004 or 10.48% from 1996. The Corporation had total average loans
of $467,509 in 1996, an increase of $51,020 or 12.25% from the 1995 total
average loans of $416,489. Table XI presents loans outstanding at year-end for
the preceding five years.
Table XI
<TABLE>
Loans at December 31,
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Commercial $224,468 $201,092 $172,782 $151,027 $126,738
Agricultural 55,267 55,404 65,239 44,876 52,569
Real estate 147,016 129,116 107,123 101,111 81,945
Installment 110,310 105,464 94,784 90,300 80,909
Credit cards 3,430 3,686 3,722 3,351 3,039
------- ------- ------- ------- -------
Total loans 540,491 494,762 443,650 390,665 345,200
Unearned income (58) (295) (993) (2,008) (2,250)
------- ------- ------- ------- -------
Total loans, net $540,433 $494,467 $442,657 $388,657 $342,950
======= ======= ======= ======= =======
Loans held for sale $ 2,443 $ 2,350 $ 6,727 $ 2,664 $ 16,919
====== ====== ====== ====== ======
Composition of loan portfolio at December 31,
Commercial 41.54 % 40.67 % 39.03 % 38.86 % 36.95 %
Agricultural 10.23 11.20 14.74 11.55 15.33
Real estate 27.20 26.11 24.20 26.01 23.89
Installment 20.40 21.27 21.19 22.72 22.94
Credit cards .63 .75 .84 .86 .89
</TABLE>
<PAGE>
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
1997. The Corporation has increased efforts to take advantage of the healthy
demand in commercial loans resulting from the growing economy. Commercial loans
increased $23,376 or 11.62% in 1997 from 1996 and increased $28,310 or 16.38% in
1996 from 1995. While commercial loans have shown the largest increases over the
last five years, real estate and installment loans have also increased steadily
during that period. As shown in Table XI, the percentage of loans to total loans
for commercial, real estate, installment and credit cards have remained very
similar for 1996 and 1997.
Real estate loans shown in Table XI are predominantly variable-rate loans. These
loans have increased $17,900 or 13.86% in 1997 from 1996 and increased $21,993
or 20.53% in 1996 from 1995. During these years the Corporation has placed added
emphasis on serving the real estate mortgage needs of its customers. The balance
of real estate loans has been directly affected by the current rates on variable
and fixed-rate mortgages. As rates increase, customers tend to prefer
variable-rate mortgages and as rates decrease, customers tend to prefer
fixed-rate mortgages. 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 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 were
$28,298, $30,385 and $16,231 for 1997, 1996 and 1995 with corresponding net
gains of $558, $409 and $191. At December 31, 1997, the Corporation was
servicing $110,484 of loans it had sold into the secondary market. This was a
13.19% increase from $97,606 of sold loans serviced for others as of December
31, 1996. As included in Note 1 and 6 to the consolidated financial statements,
the Corporation adopted FAS 122 as of January 1, 1996. Total mortgage servicing
rights capitalized were $235 and $307 during 1997 and 1996. The Corporation
amortized $25 in 1997 and $16 in 1996 of these mortgage servicing rights for a
net carrying value of $501 at December 31, 1997 and $291 at December 31, 1996.
These loans serviced for others were not included in the financial statements.
Installment loans increased $4,846 or 4.59% in 1997 over 1996 and $10,680 or
11.27% in 1996 over 1995. The level of consumer lending normally relates
directly to consumer confidence in the economy. However, the Corporation has
seen a negative trend in charge-offs of installment loans starting in 1993. A
lag effect exists in charge-offs and the Corporation has strengthened its
lending criteria for consumer loans starting in 1995. The composition of
installment loans at December 31, 1997, was $99,183 of auto and other secured
loans, $6,191 of moneylines tied to second mortgages on real estate and $4,936
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
$549,743 in 1997, $541,832 in 1996 and $519,453 in 1995. Total average deposits
were $640,157, $617,366 and $567,413 during 1997, 1996 and 1995. Table XII
indicates the mix and levels of deposits at year-end for the preceding five
years.
<PAGE>
FINANCIAL CONDITION - Continued
(Dollar amounts in thousands, except share and per share data)
Table XII
Deposits at December 31,
<TABLE>
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Noninterest-bearing $ 63,641 $ 61,616 $ 63,116 $ 62,269 $ 62,145
Interest-bearing demand
and savings 226,517 219,730 211,971 218,896 226,030
Time, less than $100 275,844 275,262 258,335 212,073 208,716
Time, $100 or more 99,683 76,948 66,647 57,149 53,459
------- ------- ------- ------- -------
Total deposits $665,685 $633,556 $600,069 $550,387 $550,350
======= ======= ======= ======= =======
</TABLE>
The Corporation opened new branches in 1997 and 1996, thereby increasing the
size of its branch network and expanding into two larger metropolitan markets.
With the exception of a Wal-Mart facility in Vincennes, Indiana opened in 1996,
these markets are essentially new to AMBANC. New branches coupled with
aggressive targeting of the jumbo CD market saw total deposits increase $32,129
or 5.07% in 1997 from 1996 and $33,487 or 5.58% in 1996 from 1995. The largest
growth in 1997 from 1996 was in time deposits over $100, accounting for $22,735
of the increase, while time deposits over $100 increased $10,301 in 1996 from
1995. Time deposits less than $100 showed a dramatic increase in 1995 because of
aggressive marketing and favorable rates in this area. These accounts showed a
more modest increase in 1996 and leveled off in 1997. Noninterest-bearing and
interest-bearing demand and savings deposits have remained flat due to increased
competition from both bank and nonbank competitors.
Year 2000
As with other companies, many of the Corporation's computer programs were
originally designed to recognize calendar years by their last two digits.
Calculations performed using these truncated fields will not work properly with
dates from the year 2000 and beyond. The Corporation has formed a project
committee that is reviewing the status of the conversion. A comprehensive review
to identify the systems affected by this issue has been undertaken and an
implementation plan was compiled and is currently being executed. The
Corporation expects to either modify or upgrade existing systems or to replace
some systems altogether, depending upon results of testing. Considerable
progress has been made by AMBANC personnel and it is anticipated that this
project will be largely completed by internal staff. Most of the Corporation's
systems are vendor-supplied, and the Corporation is working with these vendors
to attain year 2000 compliance. The Corporation presently believes that, with
modifications to existing systems, conversion to new systems, and vendor
delivery of millennium-compliant systems, the year 2000 compliance issues will
be resolved on a timely basis. Whether or not costs associated with year 2000
compliance will be significant is unknown at this time. However, any related
costs should not have a material impact on the operations, cash flows, or
financial condition of future periods. The statements in this paragraph
regarding the resolution of the year 2000 problems contain forward-looking
statements that may or may not be accurate due to the impossibility of
predicting future events. The project committee could uncover additional
problems, and other factors might occur, that could cause related costs to
increase.
<PAGE>
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 are
derived 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 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 1997 and 1996, showing average balances, amount of dollar change
from prior year and the percentage change from the prior year.
Table XIII
<TABLE>
1997 1996
------ ------
Average Increase/(decrease) Average Increase/(decrease)
Balance Dollar Percentage Balance Dollar Percentage
--------- ------- --------- ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Funding uses
Loans held for sale $ 2,021 $ (3,420) (62.86)% $ 5,441 $ 1,134 26.33 %
Taxable loans, net of unearned income 510,860 48,469 10.48 462,391 51,545 12.55
Tax-exempt loans 5,653 535 10.45 5,118 (525) (9.30)
Taxable securities 106,864 (20,657) (16.20) 127,521 (1,325) (1.03)
Tax-exempt securities 54,435 2,315 4.44 52,120 3,581 7.38
Interest-bearing deposits in other banks 413 (215) (34.24) 628 (286) (31.29)
Federal funds sold 7,744 (5,332) (40.78) 13,076 1,234 10.42
------ ------- ------- ------- ------- ------
Total uses $ 687,990 $ 21,695 3.26 % $ 666,295 $ 55,358 9.06 %
======= ====== ==== ======= ====== =====
Funding sources
Noninterest-bearing deposits $ 56,062 $ 1,332 2.43 % $ 54,730 $ (797) (1.44)%
Interest-bearing demand and
savings deposits 216,034 (2,056) (0.94) 218,090 5,998 2.83
Time deposits 368,061 23,673 6.87 344,388 44,594 14.88
Short-term borrowings 5,433 (1,950) (26.41) 7,383 (746) (9.18)
Long-term debt 2,064 (309) (13.02) 2,373 (431) (15.37)
Other 40,336 1,005 2.56 39,331 6,740 20.68
------- ------ ------ ------- ------ ------
Total sources $ 687,990 $ 21,695 3.26 % $ 666,295 $ 55,358 9.06 %
======= ====== ===== ======= ====== ====
</TABLE>
Total average loans increased $49,004 or 10.48% to $516,513 in 1997 from
$467,509 in 1996. The average increase in loans in 1997 was funded mainly by
$23,673 of increased average time deposits and continued growth of the
Corporation's capital. The increase in the average balances of deposits was due
to opening new branches and offering more competitive rates for deposit
products.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES - Continued
(Dollar amounts in thousands, except share and per share data)
The Corporation anticipates healthy loan demand again in 1998. It is anticipated
that this demand will be funded through deposit growth, particularly in the new
branches opened in 1997 and 1998 or through the conversion of assets as
discussed in the next paragraph. The statements in this paragraph regarding
increased loan demand and deposit growth contain forward-looking statements that
may or may not be accurate due to the impossibility of predicting future events.
Any number of factors, including a downturn in the economy, could cause loan
demand and/or deposit growth to decrease. In the alternative, loan demand and/or
deposit growth could increase. Management believes its projections in planning
for the future are reasonable, but any statements about future occurrences are
inherently uncertain.
Outstanding loan commitments and customers' unused lines of credit totaled
$90,475 at December 31, 1997, which was a decrease of $10,071 or 10.02% from
$100,546 at December 31, 1996. Standby letters of credit outstanding at December
31, 1997, increased $612 or 6.56% to $9,940 from $9,328 at December 31, 1996.
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 $7,738 at December 31, 1997, investments with
maturities of one year or less, which totaled $47,665 at December 31, 1997, the
sale of loans held for sale plus the increase in deposits discussed. IND is a
member of the Federal Home Loan Bank of Indianapolis and through this membership
has the capacity to borrow funds. IND has approved borrowings up to $50,000 as
of February 1997, but had used only a small portion of this available funding as
of December 31, 1997. See Note 10 of the consolidated financial statements for
details. This additional funding from the Federal Home Loan Bank could be
activated easily and might be used in 1998 as a source of funding. Further
liquidity, if required, would be provided by conversion of securities or other
assets into cash or accessing sources of incremental funding, such as repurchase
agreements or federal funds.
Interest rate risk is the potential of economic losses due to future interest
rate changes. These economic losses can be reflected as a loss of future net
interest income and/or a loss of current fair market values. Management realizes
certain risks are inherent and that the goal is to identify and minimize these
risks. The Corporation seeks to control its interest rate risk exposure in a
manner that will allow for adequate levels of earnings and capital over a range
of possible interest rate environments. The table below represents the scheduled
maturity of market risk-sensitive instruments at December 31, 1997, as well as
their fair values. The weighted-average interest rates for the various assets
and liabilities presented are stated as of December 31, 1997.
<PAGE>
Table XIV
Market Risk-Sensitive Instruments
Expected Maturity Date
<TABLE>
Fair
1998 1999 2000 2001 2002 Beyond Total Value
---- ---- ---- ---- ---- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST-SENSITIVE ASSETS:
Interest-bearing deposits in other banks
Fixed-rate $ 99 $ 99 $ 100 $ - $ - $ - $ 298 $ 298
Weighted-average interest rate 6.35% 5.75% 6.00% - - - 6.03%
Securities available for sale
Variable-rate 10,250 332 8,504 - 89 17,325 36,500 36,105
Weighted-average interest rate 4.72% 9.26% 5.01% - 6.76% 6.61% 5.45%
Fixed-rate 12,863 8,687 7,932 8,046 5,362 69,145 112,035 114,114
Weighted-average interest rate 7.35% 6.86% 7.75% 7.93% 8.06% 7.35% 7.28%
Loans held for sale 1,028 22 24 26 21 1,322 2,443 2,474
Weighted-average interest rate 7.61% 7.66% 7.66% 7.66% 7.66% 7.74% 7.68%
Loans, net of unearned income
Variable-rate 147,061 39,142 31,498 17,771 17,971 94,003 347,446 347,739
Weighted-average interest rate 10.07% 11.19% 8.75% 9.66% 10.38% 8.79% 9.73%
Fixed-rate 112,547 32,362 19,729 13,634 4,462 10,253 192,987 193,759
Weighted-average interest rate 9.80% 9.89% 9.01% 9.99% 11.04% 11.27% 9.86%
INTEREST-SENSITIVE LIABILITIES:
Interest-bearing deposits 486,454 93,698 10,663 4,144 4,733 2,352 602,044 602,226
Weighted-average interest rate 4.37% 6.00% 5.97% 6.01% 6.07% 6.01% 5.15%
Short-term borrowings 6,747 - - - - - 6,747 6,747
Weighted-average interest rate 5.61% - - - - - 5.61%
Long-term debt 659 223 188 167 148 646 2,031 2,031
Weighted-average interest rate 7.01% 6.04% 5.91% 5.91% 5.91% 5.91% 6.28%
</TABLE>
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES - Continued
(Dollar amounts in thousands, except share and per share data)
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 XV through XVIII are repricing matrices for securities, loans and
deposits at December 31, 1997.
Table XV
Maturities and Average Yields at December 31, 1997
<TABLE>
1 Year and Less 1 - 5 Years 5 - 10 Years Over 10 Years Total
--------------- ----------- ------------ ------------- -----
Dollar Yield Dollar Yield Dollar Yield Dollar Yield Dollar Yield
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government and its agencies $ 40,530 5.86 % $ 28,194 6.35 % $ 3,697 6.76 % $ 4,038 7.46 % $ 76,459 6.17 %
State and political subdivisions 5,202 9.04 28,815 8.14 17,603 7.74 947 8.17 52,567 8.09
Corporate obligations - - 244 10.83 - - 1,896 7.32 2,140 7.72
Collateralized mortgage obligations 1,933 5.77 4,186 6.59 3,031 6.78 1,326 6.21 10,476 6.44
Mutual funds - - 5,504 4.90 - - 1,389 6.18 6,893 5.15
----- ---- ----- ---- ----- ---- ----- ---- ------ ----
Total $ 47,665 6.20 % $ 66,943 7.03 % $ 24,331 7.47 % $ 9,596 7.15 % $148,535 6.84 %
====== ==== ====== ==== ====== ==== ====== ==== ======= ====
</TABLE>
Table XVI
Maturity Ranges of Time Deposits
with Balances of $100 or More at December 31,
1997 1996 1995
------ ------ ------
Three months or less $ 47,316 $ 33,781 $ 29,372
Over three through six months 15,580 17,572 11,460
Over six through twelve months 24,864 11,991 9,315
Over twelve months 11,923 13,604 16,500
Total $ 99,683 $ 76,948 $ 66,647
Table XVII
Loan Maturities at December 31, 1997
1 Year 1 - 5 Over 5
and Less Years Years Total
-------- ----- ----- -----
Commercial $156,982 $ 57,015 $ 10,471 $224,468
Agricultural 41,301 12,312 1,654 55,267
Interest Rate Sensitivity of Above Loans Maturing After One Year
Commercial Agricultural
--------- ------------
Fixed-rate $ 22,520 $ 4,271
Variable-rate 44,966 9,695
------ -----
Total selected loans $ 67,486 $ 13,966
====== ======
There were no material real estate construction loans outstanding at December
31, 1997.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES - Continued
(Dollar amounts in thousands, except share and per share data)
Table XVIII
Liquidity and Interest Rate Sensitivity at December 31, 1997
<TABLE>
0 - 90 91 - 365 1 - 5
Days Days Years
---- ---- -----
<S> <C> <C> <C>
Interest-earning assets
Loans $ 176,742 $ 153,153 $ 188,973
Securities 24,179 16,158 30,263
Other 14,334 99 199
------- ------- -------
Total $ 215,255 $ 169,410 $ 219,435
======= ======= =======
Interest-bearing liabilities
Savings and demand deposits $ 226,175 $ 341 $ -
Time, less than $100 103,079 107,619 65,954
Time, $100 or more 48,110 40,614 11,096
Other 3,838 331 727
------- ------- ------
Total $ 381,202 $ 148,905 $ 77,777
======= ======= ======
Rate-sensitive gap $(165,947) $ 20,505 $ 141,658
Rate-sensitive cumulative gap (165,947) (145,442) (3,784)
Percent to total assets (21.85)% (19.15)% (0.50)
</TABLE>
Rate-sensitive gap as shown in Table XVIII 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, 1997, is shown above. As of December 31, 1997, the Corporation had a
negative gap of $145,442 and 19.15% during the next one year period with a
negative gap of $165,947 and 21.85% relating to the first quarter of 1998. The
effect of these negative gaps may result in a negative impact on earnings in
1998 if interest rates increase, but could result in a positive impact on
earnings if interest rates decline in 1998. 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.
If the above analysis were changed to reflect the Corporation's actual
historical results, a portion of 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 $23,385 or 3.08% during the next one-year period and a
positive gap of $2,880 or 0.38% relating to the first quarter of 1998.
Shareholders' Equity
Total shareholders' equity at December 31, 1997, increased $6,172 or 8.55% to
$78,355 from $72,183 at December 31, 1996. The change in the mark-to-market on
the unrealized gain on securities available for sale between December 31, 1996
and 1997, resulted in shareholders equity increasing $767. Shareholders' equity
contains a new caption, Treasury stock, at December 31, 1996. These 724 treasury
shares were purchased on the market for future payments of director fees under
the Director Stock Grant Plan as approved by the shareholders in 1996. These
treasury shares are purchased routinely and reissued to the directors each
quarter. See Note 17 to the consolidated financial statements for a description
of the capital requirements for the Corporation and its subsidiary banks. By all
measurements, the Corporation and its subsidiary banks were considered
well-capitalized. At December 31, 1997, the Corporation had a Total Capital
ratio of 14.33%, a Tier 1 Capital ratio of 13.37% and a Tier 1 Leverage Capital
ratio of 10.40%.
<PAGE>
INTERIM FINANCIAL DATA
Table XIX sets forth the condensed quarterly results of operations and per share
information for the years ended December 31, 1997 and 1996.
Table XIX
<TABLE>
Quarter Ended
-------------
December September June March
31 30 30 31
-------- ------- ---- -----
<S> <C> <C> <C> <C>
1997
Interest income $ 14,449 $ 14,266 $ 13,859 $ 13,680
Interest expense 7,251 7,215 7,084 6,891
----- ----- ----- -----
Net interest income 7,198 7,051 6,775 6,789
Provision for loan losses 300 315 315 315
Noninterest income 1,104 1,071 1,179 995
Noninterest expense 4,927 4,936 4,723 4,459
----- ----- ----- -----
Income before income taxes 3,075 2,871 2,916 3,010
Income taxes 923 864 904 895
----- ----- ----- -----
Net income $ 2,152 $ 2,007 $ 2,012 $ 2,115
====== ===== ===== =====
Earnings per average
common share outstanding $ .31 $ .29 $ .29 $ .30
Diluted earnings per average
common share outstanding .31 .29 .29 .30
Stock price (Note A) 25.00 24.53 17.67 17.14
Weighted-average outstanding shares 6,986,084 6,965,328 6,963,723 6,963,499
1996
Interest income $ 14,048 $ 13,488 $ 13,133 $ 13,338
Interest expense 7,034 6,800 6,733 6,721
----- ----- ----- -----
Net interest income 7,014 6,688 6,400 6,617
Provision for loan losses 700 100 299 267
Noninterest income 1,059 736 1,171 728
Noninterest expense 4,411 4,682 4,409 4,297
----- ----- ----- -----
Income before income taxes 2,962 2,642 2,863 2,781
Income taxes 888 770 824 800
----- ----- ------ -----
Net income $ 2,074 $ 1,872 $ 2,039 $ 1,981
===== ===== ===== =====
Earnings per average
common share outstanding $ .30 $ .27 $ .29 $ .28
Diluted earnings per average
common share outstanding .30 .27 .29 .28
Stock price (Note A) 13.58 14.63 13.03 13.83
Weighted-average outstanding shares 6,964,494 6,962,456 6,965,436 6,965,509
</TABLE>
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 a 2-for-1 stock split paid on August 29, 1997, and 5% stock
dividends paid on December 8, 1997 and December 2, 1996.
<PAGE>
INFLATION
(Dollar amounts in thousands, except share and per share data)
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 operating 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.
FORWARD-LOOKING STATEMENTS
This Annual Report and future filings made by the Corporation with the
Securities and Exchange Commission, as well as other filings, reports and press
releases made or issued by the Corporation and its subsidiary banks, and oral
statements made by executive officers of the Corporation and banks may include
forward-looking statements relating to such matters as (a) assumptions
concerning future economic and business conditions and their effect on the
economy in general and on the markets in which the Corporation and the banks do
business, and (b) expectations for increased revenues and earnings for the
Corporation and banks through growth resulting from acquisitions, attraction of
new deposit and loan customers and the introduction to new products and
services. Such forward-looking statements are based on assumptions rather than
historical or current facts and, therefore, are inherently uncertain and subject
to risk.
To comply with the terms of a "safe harbor" provided by the Private Securities
Litigation Reform Act of 1995 that protects the making of such forward-looking
statements from liability under certain circumstances, the Corporation notes
that a variety of factors could cause the actual results or experience to differ
materially from the anticipated results or other expectations described or
implied by such forward-looking statements. The risks and uncertainties that may
affect the operations, performance, development and results of the Corporation's
and banks' business include the following: (a) the risk of adverse changes in
business conditions in the banking industry generally and in the specific
markets in which the banks operate; (b) changes in the legislative and
regulatory environment that negatively impact the Corporation and banks through
increased operating expenses; (c) increased competition from other financial and
non-financial institutions; (d) the impact of technological advances; and (e)
other risks detailed from time to time in the Corporation's filings with the
Securities and Exchange Commission. The Corporation and banks do not undertake
any obligation to update or revise any forward-looking statements subsequent to
the date on which they are made.
MARKET PRICE OF AMBANC CORP. COMMON STOCK AND
RELATED SHAREHOLDER MATTERS
The Corporation's common stock is traded on The Nasdaq National Market (NASDAQ)
under the symbol AMBK. The quarterly range of the low and high trade prices per
share of the Corporation's common stock, as reported by NASDAQ, is shown in
Table XX. 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.
Table XX
1997 1996
Stock Range Stock Range
1st Quarter $ 13.81 - 17.86 $ 13.38 - 14.73
2nd Quarter 16.42 - 18.33 13.03 - 14.28
3rd Quarter 17.73 - 24.88 12.92 - 14.63
4th Quarter 21.67 - 25.50 13.27 - 14.73
<PAGE>
As of December 31, 1997, there were approximately 1,650 shareholders of record.
The Corporation pays cash dividends on a quarterly basis. Cash dividends paid by
the Corporation were $0.41 per share in 1997, $0.38 per share in 1996 and $0.36
per share in 1995. Cash dividends, as restated to reflect the acquisition of FRB
under the pooling of interests method of accounting, was $0.31 for 1995. Refer
to Note 17 of the consolidated financial statements for information concerning
restrictions on dividends.
FIVE YEAR SUMMARY
(Dollar amounts in thousands, except per share data)
<TABLE>
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AT PERIOD END
Actual balances
Assets $ 759,395 $ 719,785 $ 682,347 $ 625,240 $ 622,568
Securities 150,219 170,724 173,469 186,875 210,774
Loans 540,433 494,467 442,657 388,657 342,950
Allowance for loan losses 5,428 5,630 5,022 4,531 4,238
Deposits 665,685 633,556 600,069 550,387 550,350
Shareholders' equity 78,355 72,183 67,712 58,210 57,722
Daily averages
Assets $ 728,281 $ 702,083 $ 644,456 $ 619,540 $ 601,232
Securities 161,299 179,641 177,385 204,664 214,325
Loans 516,513 467,509 416,489 368,198 325,544
Allowance for loan losses 5,448 5,237 4,636 4,377 4,152
Deposits 40,157 617,366 567,413 545,393 534,448
Shareholders' equity 74,397 68,772 62,344 58,113 54,967
OPERATING RESULTS
Interest income $ 56,254 $ 54,007 $ 49,392 $ 43,053 $ 41,758
Net interest income 27,813 26,719 25,201 23,899 22,751
Provision for loan losses 1,245 1,366 1,182 338 1,492
Income before cumulative
effect of accounting change 8,286 7,966 7,045 6,502 5,910
Net income 8,286 7,966 7,045 6,502 6,162
Dividends paid on
common stock 2,887 2,653 2,144 1,947 1,701
PER SHARE DATA
Income before cumulative
effect of accounting change $ 1.19 $ 1.14 $ 1.01 $ .93 $ .85
Cumulative effect of
accounting change - - - - .04
Earnings per average
common share outstanding 1.19 1.14 1.01 .93 .89
Diluted earnings per average
common share outstanding 1.19 1.14 1.01 .93 .88
Cash dividends before
pooling of interests .41 .38 .36 .36 .34
Cash dividends restated for
pooling of interests .41 .38 .31 .28 .24
Book value at end of period 11.22 10.36 9.72 8.36 8.29
Book value at end of period
before FAS 115 11.05 10.31 9.55 8.86 8.19
Tangible book value at
end of period 10.99 10.12 9.44 8.32 8.27
Tangible book value at end
of period before FAS 115 10.82 10.05 9.27 8.82 8.16
Weighted-average
outstanding shares 6,970,072 6,965,433 6,964,593 6,959,497 6,959,057
Weighted-average
treasury shares (387) (966) - - -
<PAGE>
RATIOS
Return on average assets 1.14 % 1.13 % 1.09 % 1.05 % 1.02 %
Return on average equity 11.14 11.58 11.30 11.19 11.21
Dividends paid as a
percentage of net income 34.84 33.30 30.43 29.95 27.61
Tier 1 Leverage Capital 10.40 10.00 10.01 9.87 9.45
Efficiency ratio 59.22 58.52 61.73 64.66 67.56
</TABLE>
Board of Directors and Shareholders of
AMBANC Corp.
Vincennes, Indiana
We have audited the consolidated balance sheets of AMBANC Corp. as of December
31, 1997 and 1996, and the related consolidated statements of income, changes in
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 1997. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of AMBANC Corp. as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997 in conformity
with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the Corporation
adopted the provisions of Statement of Financial Accounting Standards No. 122,
"Accounting for Mortgage Servicing Rights," on January 1, 1996.
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
January 23, 1998
<PAGE>
AMBANC CORP.
Consolidated Balance Sheets
December 31, 1997 and 1996
(Dollar amounts in thousands, except share and per share data)
<TABLE>
1997 1996
------ ------
<S> <C> <C>
ASSETS
Cash and due from banks $ 37,313 $ 26,409
Federal funds sold 7,440 5,875
Total cash and cash equivalents 44,753 32,284
Interest-bearing deposits in other banks 298 590
Securities available for sale-at fair value
(amortized cost 1997-$148,535 and 1996-$170,249) 150,219 170,724
Loans held for sale-at cost
(fair value 1997-$2,474 and 1996-$2,404) 2,443 2,350
Loans, net of unearned income 540,433 494,467
Allowance for loan losses (5,428) (5,630)
-------- -------
Loans, net 535,005 488,837
------- -------
Premises, furniture and equipment, net 12,934 11,184
Accrued interest receivable and other assets 13,743 13,816
------- ------
Total assets $ 759,395 $ 719,785
======= =======
LIABILITIES
Noninterest-bearing deposits $ 63,641 $ 61,616
Interest-bearing deposits 602,044 571,940
------- -------
Total deposits 665,685 633,556
------- -------
Short-term borrowings 6,747 5,285
Long-term debt 2,031 2,309
Accrued interest payable and other liabilities 6,577 6,452
------- ------
Total liabilities 681,040 647,602
------- -------
SHAREHOLDERS' EQUITY
Preferred stock, $10 par value, 200,000 shares
authorized, no shares issued or outstanding
Common stock, $10 par value, 10,000,000 shares
authorized at December 31, 1997 and 1996,
6,985,712 and 3,316,267 shares issued and
outstanding at December 31, 1997 and 1996 69,857 33,163
Treasury stock, 34 and 724 shares at cost at
December 31, 1997 and 1996 (1) (21)
Retained earnings 7,422 38,731
Unrealized gain/(loss) on securities available for
sale, net of deferred taxes of $607 and $165 1,077 310
------ ------
Total shareholders' equity 78,355 72,183
------ ------
Total liabilities and shareholders' equity $ 759,395 $ 719,785
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
AMBANC CORP.
Consolidated Statements of Income
For the years ended December 31, 1997, 1996 and 1995
(Dollar amounts in thousands, except per share data)
<TABLE>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 46,164 $ 42,256 $ 37,888
Interest and fees on loans held for sale 163 389 326
Interest on securities
Taxable 6,593 7,805 7,680
Tax-exempt 2,882 2,809 2,759
Other interest 452 748 739
------ ------ ------
Total interest income 56,254 54,007 49,392
------ ------ ------
INTEREST EXPENSE
Interest on deposits 28,007 26,761 23,593
Interest on short-term borrowings 305 385 437
Interest on long-term debt 129 142 161
------ ------ ------
Total interest expense 28,441 27,288 24,191
------ ------ ------
Net interest income 27,813 26,719 25,201
Provision for loan losses 1,245 1,366 1,182
------ ------ ------
Net interest income after
provision for loan losses 26,568 25,353 24,019
------ ------ ------
NONINTEREST INCOME
Income from fiduciary activities 758 654 602
Service charges on deposit accounts 1,754 1,586 1,520
Net realized gain on securities 78 28 41
Other operating income 1,759 1,426 990
----- ----- -----
Total noninterest income 4,349 3,694 3,153
----- ----- -----
NONINTEREST EXPENSE
Salaries and employee benefits 10,679 9,633 9,450
Occupancy expenses, net 1,473 1,218 1,051
Equipment expenses 1,488 1,220 1,117
Data processing expenses 461 480 388
FDIC insurance 75 270 690
Other operating expenses 4,869 4,978 4,806
------ ------ ------
Total noninterest expense 19,045 17,799 17,502
------ ------ ------
INCOME BEFORE INCOME TAXES 11,872 11,248 9,670
Income taxes 3,586 3,282 2,625
------ ------ -----
NET INCOME $ 8,286 $ 7,966 $ 7,045
====== ====== =====
EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING $ 1.19 $ 1.14 $ 1.01
DILUTED EARNINGS PER AVERAGE COMMON SHARE
OUTSTANDING $ 1.19 $ 1.14 $ 1.01
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
AMBANC CORP.
Consolidated Statements of Changes in Shareholders' Equity
For the years ended December 31, 1997, 1996 and 1995
(Dollar amounts in thousands, except per share data)
<TABLE>
Unrealized
Gain/(Loss) Total
Common Retained Treasury on Shareholders'
Stock Earnings Stock Securities Equity
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995 $ 30,086 $ 31,649 $ (37) $ (3,488) $ 58,210
Net income for 1995 7,045 7,045
Cash dividends ($.31 per common
share) (2,144) (2,144)
Net change in unrealized
gain/(loss) on securities
available for sale 4,601 4,601
Issuance of stock for dividend
reinvestment and stock
purchase plan 4 8 12
Fractional shares paid for
acquisition and stock dividend (12) (12)
Retired treasury stock (37) 37 -
5% stock dividend 1,500 (1,500) -
----- ------ -- ----- ------
BALANCE, DECEMBER 31, 1995 31,590 35,009 - 1,113 67,712
Net income for 1996 7,966 7,966
Cash dividends ($.38 per common
share) (2,653) (2,653)
Net change in unrealized
gain/(loss) on securities
available for sale (803) (803)
Net change in treasury stock (21) (21)
Fractional shares paid for
stock dividend (18) (18)
5% stock dividend 1,573 (1,573) -
------ ------ --- --- ------
BALANCE, DECEMBER 31, 1996 33,163 38,731 (21) 310 72,183
Net income for 1997 8,286 8,286
Cash dividends ($.41 per common
share) (2,887) (2,887)
Net change in unrealized
gain/(loss) on securities
available for sale 767 767
Net change in treasury stock 20 20
Fractional shares paid for
5% stock dividend (14) (14)
5% stock dividend 3,321 (3,321) -
2 for 1 stock split 33,162 (33,162) -
Exercised stock options 211 (211) -
------ ------ --- ---- ------
BALANCE, DECEMBER 31, 1997 $ 69,857 $ 7,422 $ (1) $ 1,077 $ 78,355
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
AMBANC CORP.
Consolidated Statements of Changes in Shareholders'
Equity For the years ended December 31, 1997, 1996 and 1995
(Dollar amounts in thousands)
<TABLE>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 8,286 $ 7,966 $ 7,045
Adjustments to reconcile net income to net
cash from operating activities:
Net premium amortization and discount
accretion on securities 287 319 374
Depreciation 1,266 1,081 987
Provision for loan losses 1,245 1,366 1,182
Deferred income tax provision (407) (337) (621)
Gain on sale of securities (78) (28) (41)
Gain on sale of loans held for sale (558) (409) (191)
Proceeds from sales of loans held for sale 28,298 30,385 16,231
Loans held for sale made to customers,
net of payments collected (27,833) (25,599) (20,103)
Accrued interest receivable
and other assets (123) (748) (1,290)
Accrued interest payable
and other liabilities 286 417 941
Deferred loan fees, net of costs (134) (48) (81)
------- ------- -------
Net cash from operating activities 10,535 14,365 4,433
------ ------ -----
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities
available for sale 6,405 16,893 4,559
Proceeds from maturities and calls of securities
available for sale 23,314 40,395 31,453
Proceeds from maturities and calls of securities
held to maturity 4,037
Purchases of securities available for sale (8,214) (56,084) (15,816)
Purchases of securities held to maturity (3,938)
Net change in interest-bearing deposits
in other banks 292 102 501
Loans made to customers, net of payments collected (48,458) (58,662) (54,028)
Loans purchased (8) (7,386)
Proceeds from sales of loans 1,179 6,150 6,804
Property and equipment expenditures (3,016) (2,867) (1,497)
------- ------- ------
Net cash from investing activities (28,498) (54,081) (35,311)
-------- ------- ------
</TABLE>
<PAGE>
AMBANC CORP.
Consolidated Statements of Changes in Shareholders' Equity
For the years ended December 31, 1997, 1996 and 1995
(Dollar amounts in thousands)
<TABLE>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits 32,129 33,389 49,682
Net change in short-term borrowings 1,462 (1,502) (2,506)
Payments on long-term debt (408) (484) (597)
Proceeds from long-term debt 130 116 85
Sale/(purchase) of treasury stock 20 (21)
Payment for fractional shares (14) (18) (12)
Issuance of stock for dividend reinvestment
and stock purchase plan 12
Dividends paid (2,887) (2,653) (2,144)
------ ------ ------
Net cash from financing activities 30,432 28,827 44,520
------ ------ ------
NET CHANGE IN CASH AND CASH EQUIVALENTS 12,469 (10,889) 13,642
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 32,284 43,173 29,531
------ ------ ------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 44,753 $ 32,284 $ 43,173
====== ====== ======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 35,097 $ 26,343 $ 22,371
Income tax 4,513 3,850 2,981
</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>
AMBANC CORP.
Notes To Consolidated Financial Statements
December 31, 1997, 1996 and 1995
(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, AmBank Indiana, N.A.
(IND), AmBank Illinois, N.A. (ILL), and American National Realty Corp.
(ANR). On June 30, 1996, The American National Bank of Vincennes and
Citizens' National Bank of Linton were merged and renamed AmBank Indiana,
N.A. The First National Bank in Robinson (ROB) and Bank of Casey (CAS) were
also renamed AmBank Illinois, N.A. and AmBank Illinois, respectively, on
June 30, 1996. On March 1, 1997, AmBank Illinois was merged into AmBank
Illinois, N.A. Upon consolidation, all significant intercompany accounts
and transactions have been eliminated. As discussed in Note 2, AMBANC Corp.
acquired First Robinson Bancorp (FRB) on November 1, 1995, under the
pooling of interests method of accounting.
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
IND and ILL operate primarily in the banking industry, which accounts for
more than 90 percent of the Corporation's revenues, operating income and
assets. IND and ILL generate commercial, real estate mortgage and
installment loans and receive deposits from customers located in Greene,
Knox, Gibson, Vanderburgh, 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 IND for normal banking
activities, such as parking, drive-in banking and branch banking
facilities.
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. 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 held to maturity or 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.
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 fair value
determined on an aggregate basis. Gains and losses on the sale of these
mortgage loans are included in other noninterest income.
<PAGE>
AMBANC CORP.
Notes To Consolidated Financial Statements
December 31, 1997, 1996 and 1995
(Dollar amounts in thousands, except share and per share data)
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
The Corporation adopted FAS 122, "Accounting for Mortgage Servicing Rights
(MSRs)," on January 1, 1996. FAS 122 requires that the Corporation
recognize as separate assets, rights to service mortgage loans for others
that have been acquired through either the purchase or origination of a
loan. An entity that sells or securitizes those loans with servicing
rights retained should allocate the total cost of the mortgage loans to
the MSRs and the loans based on their relative fair values. These costs
are initially capitalized and subsequently amortized in proportion to, and
over the period of, estimated net loan servicing income. Additionally, FAS
122 requires that MSRs be reported on the consolidated balance sheet at
the lower of cost or fair value. The Corporation is required to assess its
capitalized MSRs for impairment based upon the fair value of the rights.
MSRs are stratified based upon one or more of the predominant risk
characteristics of the underlying loans. Impairment is recognized through
a valuation allowance for each impaired stratum. The provisions of FAS 122
were applied prospectively beginning in fiscal 1996. The ongoing impact of
FAS 122 is dependent upon, among other things, the volume of loan
originations, the general levels of market interest rates and the rate of
estimated loan prepayments. Accordingly, management is unable to predict
with any reasonable certainty what effect FAS 122 will have on the
Corporation's future results of operations or its financial condition. FAS
122 prohibits restatement of prior years' financial statements. FAS 122
was superseded by FAS 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," effective January 1,
1997. FAS 125 did not have any additional effect on the consolidated
financial statements.
Loans
Loans are stated at the principal amount outstanding adjusted for unearned
discounts, unamortized premiums and net deferred fees. The Corporation
defers loan fees, net of certain direct loan origination costs. The net
amount deferred is reported on the consolidated balance sheets as part of
loans and is recognized into interest income over the term of the loan on
a level yield basis. Any unamortized fees on loans sold are credited to
gain on sale of loans at time of sale. 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.
FAS 114 and 118, "Accounting by Creditors for Impairment of a Loan and
Income Recognition and Disclosures," as amended, requires 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 have been
defined as all nonaccrual loans.
<PAGE>
Allowance for Loan Losses
The balance in the allowance for loan losses 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.
<PAGE>
AMBANC CORP.
Notes To Consolidated Financial Statements
December 31, 1997, 1996 and 1995
(Dollar amounts in thousands, except share and per share data)
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-Continued
Premises, Furniture and Equipment
Premises, furniture and equipment are stated at cost less accumulated
depreciation and 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.
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
The Corporation and its subsidiaries file consolidated tax returns. Each
entity is charged or credited for taxes as if separate returns were filed.
Deferred income tax assets and liabilities reflect the impact of temporary
differences between amounts of assets and liabilities for financial
reporting purposes and basis of such assets and liabilities as measured by
tax laws and regulations.
Statements of Cash Flows
Cash and cash equivalents is defined to include cash on hand,
noninterest-bearing deposits due from other banks and federal funds sold.
Generally, federal funds are sold for one-day periods. The Corporation
reports net cash flows for loans held for sale, customer loan
transactions, deposit transactions and deposits made with other financial
institutions.
Earnings Per Share
Earnings per share is calculated by dividing net income for the period by
the weighted-average number of shares of common stock outstanding during
the period. The assumed exercise of stock options is included in the
calculation of diluted earnings per share.
The Corporation adopted FAS 128, "Earnings Per Share," for 1997 with all
prior-period earnings per share data restated. The statement requires dual
presentation of earnings per share and diluted earnings per share on the
consolidated statements of income and other computational changes. The
adoption of FAS 128 did not have a material effect on previously reported
earnings per share.
New Accounting Pronouncements
FAS 130, "Reporting Comprehensive Income," was issued in June 1997 and is
effective for fiscal years beginning after December 15, 1997. The
statement requires additional reporting of items that affect comprehensive
income but not net income. Examples relevant to the Corporation include
unrealized gains and losses on securities available for sale. This
statement will result in additional financial statement disclosures upon
adoption.
FAS 131, "Disclosures about Segments of an Enterprise and Related
Information," was issued in June 1997 and is effective for fiscal years
beginning after December 15, 1997. The statement requires financial
disclosure and descriptive information about reportable operating
segments. Management has not yet determined the effect, if any, of FAS 131
on the consolidated financial statements.
Financial Statement Presentation
Certain items in the 1996 and 1995 financial statements have been
reclassified to correspond with the 1997 presentation.
<PAGE>
AMBANC CORP.
Notes To Consolidated Financial Statements-Continued
December 31, 1997, 1996 and 1995
(Dollar amounts in thousands, except share and per share data)
Note 2 - BUSINESS COMBINATION
Common
Shares Method of
Date Completed Issued Accounting
-------------- ------ ----------
First Robinson Bancorp (FRB) November 1, 1995 701,647 Pooling
FRB was merged into the Corporation and ceased to exist at the conclusion
of the merger. The contribution of FRB to consolidated interest income,
net interest income and net income for the periods prior to the merger was
as follows:
Ten
Months Ended
October 31,
1995
------------
Interest income
Previously reported $ 33,967
FRB 6,826
------
Total $ 40,793
======
Net interest income
Previously reported $ 17,362
FRB 3,624
------
Total $ 20,986
======
Net income
Previously reported $ 5,042
FRB 678
-----
Total $ 5,720
=====
<PAGE>
Note 3 - SECURITIES
The amortized cost and estimated fair value of securities are as follows:
<TABLE>
December 31, 1997
-----------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Securities available for sale
U.S. Government and its agencies $ 76,459 $ 550 $ (426) $ 76,583
States and political subdivisions 52,567 1,676 (10) 54,233
Corporate obligations 2,140 2,140
Collateralized mortgage obligations 10,476 75 (29) 10,522
Mutual funds 6,893 (152) 6,741
------- ----- ----- -------
Total $ 148,535 $ 2,301 $ (617) $ 150,219
======= ===== ===== =======
</TABLE>
<PAGE>
AMBANC CORP.
Notes To Consolidated Financial Statements-Continued
December 31, 1997, 1996 and 1995
(Dollar amounts in thousands, except share and per share data)
Note 3 - SECURITIES - Continued
<TABLE>
December 31, 1996
------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Securities available for sale
U.S. Government and its agencies $ 102,163 $ 670 $ (1,014) $ 101,819
States and political subdivisions 54,696 1,235 (155) 55,776
Corporate obligations 1,823 1,823
Collateralized mortgage obligations 9,253 2 (89) 9,166
Mutual funds 2,314 (174) 2,140
------- ----- ------ -------
Total $ 170,249 $ 1,907 $ (1,432) $ 170,724
======= ===== ===== =======
</TABLE>
The amortized cost and estimated fair value of securities at December 31,
1997, 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.
Estimated
Amortized Fair
Cost Value
--------- ---------
Due in 1 year or less $ 22,291 $ 22,275
Due after 1 year through 5 years 44,605 45,204
Due after 5 years through 10 years 41,360 42,017
Due after 10 years 10,493 10,842
------ ------
Subtotal 118,749 120,338
Collateralized mortgage obligations 10,476 10,522
U.S. agency mortgage-backed
securities 12,417 12,618
Mutual funds 6,893 6,741
------ ------
Total $ 148,535 $ 150,219
======= =======
Proceeds from sales of securities available for sale were $6,405 in 1997,
$16,893 in 1996 and $4,559 in 1995. Sales and calls of securities
available for sale resulted in gross gains and gross losses of $79 and $1
in 1997, $56 and $28 in 1996 and $21 and $3 in 1995. Sales and calls of
securities held to maturity resulted in gross gains and gross losses of $0
and $0 in 1997 and 1996 and $24 and $1 in 1995.
Securities with a carrying value of $48,246 and $50,609 at December 31,
1997 and 1996, were pledged to secure public deposits and for other
purposes required or permitted by law.
<PAGE>
AMBANC CORP.
Notes To Consolidated Financial Statements-Continued
December 31, 1997, 1996 and 1995
(Dollar amounts in thousands, except share and per share data)
Note 4 - LOANS
Loans at December 31 are comprised of the following:
1997 1996
------ ------
Commercial $ 224,468 $ 201,092
Agricultural 55,267 55,404
Real estate 147,016 129,116
Installment 110,310 105,464
Credit cards 3,430 3,686
------- -------
Total loans 540,491 494,762
Unearned income (58) (295)
------- -------
Total loans, net $ 540,433 $ 494,467
======= =======
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, 1997, 1996 and 1995, these loans totaled $2,422, $3,089 and
$45. Interest income recorded on these loans was $168, $310 and $3 during
1997, 1996 and 1995. Interest income which would have been recorded under
the original terms of the loans was $192, $310 and $4 during 1997, 1996
and 1995.
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 is as follows:
Balance, January 1, 1997 $ 11,529
New loans 4,271
Loan reductions (1,651)
------
Balance, December 31, 1997 $ 14,149
======
<PAGE>
AMBANC CORP.
Notes To Consolidated Financial Statements-Continued
December 31, 1997, 1996 and 1995
(Dollar amounts in thousands, except share and per share data)
Note 5 - ALLOWANCE FOR LOAN LOSSES
The activity in the allowance for loan losses is as follows:
1997 1996 1995
------ ------ ------
Balance, January 1 $ 5,630 $ 5,022 $ 4,531
Provision charged to operations 1,245 1,366 1,182
Loans charged off (1,767) (1,266) (1,019)
Recoveries 320 508 328
----- ----- ------
Balance, December 31 $ 5,428 $ 5,630 $ 5,022
===== ===== =====
Impaired loan information under FAS 114 and 118 is as follows at December 31:
1997 1996
------ ------
Impaired loans with a valuation reserve $ 331 $ 843
Impaired loans with no valuation reserve 318 578
---- -----
Total impaired loans $ 649 $ 1,421
==== =====
Valuation reserve on impaired loans $ 147 $ 469
Average impaired loans 710 2,495
Income recorded on these loans during 1997, 1996 and 1995 totaled $17, $89
and $18. Income which would have been recorded on these loans during 1997,
1996 and 1995, had they been accruing all year, was $75, $149 and $41.
Note 6 - MORTGAGE BANKING ACTIVITIES
Loans serviced for others, amounting to $110,484, $97,606 and $79,990 at
December 31, 1997, 1996 and 1995, are not included in the consolidated
financial statements. Net gain on sales of loans was $558, $409 and $191
for the years ended December 31, 1997, 1996 and 1995. Servicing loans for
others generally consists of collecting mortgage payments, maintaining
escrow accounts, disbursing payments to investors and foreclosure
processing. Loan servicing income includes servicing fees from investors
and certain charges collected from borrowers, such as late payment fees.
MSR activity is as follows:
1997 1996
------ ------
Carrying Value, January 1 $ 291 $ -
Additions 235 307
Amortization (25) (16)
Net change in valuation allowance - -
---- ----
Carrying Value, December 31 $ 501 $ 291
==== ====
The fair value of MSRs was $501 and $291 as of December 31, 1997 and 1996.
Fair value is estimated by discounting the net servicing income to be
received over the estimated servicing term using a current market rate.
The significant risk characteristics of the underlying loans used to
stratify MSRs for impairment measurement were term and rate of note. No
valuation allowance existed for the years ended December 31, 1997 and
1996.
<PAGE>
AMBANC CORP.
Notes To Consolidated Financial Statements-Continued
December 31, 1997, 1996 and 1995
(Dollar amounts in thousands, except share and per share data)
Note 7 - PREMISES, FURNITURE AND EQUIPMENT
Premises, furniture and equipment are comprised of the following:
1997 1996
------ ------
Land and improvements $ 1,879 $ 1,351
Buildings and improvements 13,198 12,133
Furniture and equipment 11,588 10,340
------ ------
Total cost 26,665 23,824
Accumulated depreciation (13,731) (12,640)
------ ------
Total, net $ 12,934 $ 11,184
====== ======
Depreciation expense for the years ended December 31, 1997, 1996 and 1995,
totaled $1,266, $1,081 and $987.
Note 8 - INTEREST-BEARING DEPOSITS
Interest-bearing deposits issued in denominations of $100 or greater
totaled $99,683 and $76,948 at December 31, 1997 and 1996.
Note 9 - SHORT-TERM BORROWINGS
Short-term borrowings are comprised of the following:
1997 1996
------ ------
Repurchase agreements $ 3,236 $ 3,048
Demand notes issued to the U.S. Treasury 3,511 2,237
====== ======
Total $ 6,747 $ 5,285
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.
<PAGE>
AMBANC CORP.
Notes To Consolidated Financial Statements-Continued
December 31, 1997, 1996 and 1995
(Dollar amounts in thousands, except share and per share data)
Note 10 - LONG-TERM DEBT
Long-term debt is comprised of a deferred compensation plan of $340 and
$218 in 1997 and 1996 as discussed in Note 11 and two Federal Home Loan
Bank Mortgage Advances (Advances) totaling $1,691 and $2,091 at December
31, 1997 and 1996. The Advances have an average rate of 5.84% at December
31, 1997 and 1996, 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, 1997, are $332, $211, $188,
$167 and $148.
Note 11 - EMPLOYEE BENEFITS
The Corporation maintains a retirement savings plan covering substantially
all employees. To be eligible to participate, the Plan requires employees
to complete one year of service and be 21 years of age. The Plan covers
all employees and allows for the matching of 50% of the first 4% of
employee salary contributions and an annual discretionary contribution.
The Corporation's contributions to the Plan 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 were $971, $615 and
$473 for 1997, 1996 and 1995.
The Corporation has a deferred compensation plan for the benefit of
certain executive officers and directors. 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 $340 and $218 is included
with long-term debt. During 1997, 1996 and 1995 the Corporation accrued
approximately $23, $13 and $6 of interest expense towards its obligation
under the plan.
<PAGE>
AMBANC CORP.
Notes To Consolidated Financial Statements-Continued
December 31, 1997, 1996 and 1995
(Dollar amounts in thousands, except share and per share data)
Note 12 - 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 on to 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:
1997 1996
------ ------
Retirees $ (323) $ (415)
Fully eligible active participants (73) (30)
Other active plan participants (268) (310)
----- -----
Accumulated postretirement benefit
obligation (664) (755)
Unrecognized prior service cost 130 142
Unrecognized loss (156) (20)
Unrecognized transition obligation 436 465
----- ----
Accrued postretirement
benefit liability $ (254) $ (168)
===== =====
Net periodic postretirement benefit cost for the years ended December 31:
1997 1996 1995
---- ---- ----
Service cost-benefits attributed to
service during the period $ 24 $ 23 $ 13
Interest cost on accumulated
postretirement benefit obligation 52 49 39
Amortization of transition
obligation over 20 years 29 29 29
Amortization of unrecognized
prior service cost 12 12 -
--- --- ---
Postretirement benefit cost $ 117 $ 113 $ 81
=== === ===
Benefit payments of $51, $45 and $48 were made for postretirement medical
benefits in 1997, 1996 and 1995.
<PAGE>
AMBANC CORP.
Notes To Consolidated Financial Statements-Continued
December 31, 1997, 1996 and 1995
(Dollar amounts in thousands, except share and per share data)
Note 12 - POSTRETIREMENT BENEFITS - Continued
For measurement purposes, the annual rate of increase in the per capita
cost of covered health care benefits was assumed to be 9.25% for 1997 and
9.5% for 1996 and 1995 with the rate gradually decreasing to 6% in 2010.
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, 1997, 1996 and 1995, by approximately $96
and would have virtually no effect on the aggregate of the service and
interest cost components of net periodic postretirement benefit cost for
1997, 1996 and 1995.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7% at December 31, 1997, 1996 and
1995.
Note 13 - STOCK OPTION PLAN
The Corporation had a Nonqualified Stock Option Plan, (Option Plan), which
expired in April 1993 and a Reload Option Plan, (Reload Plan), which
expires in July 2002. Under the terms of both plans, options were granted
at amounts not less than the fair value of the shares at the date of the
grant and any options granted must be exercised within ten years of the
grant for the Option Plan and within five years of the grant for the
Reload Plan.
The following is an analysis of the stock option activity for each of the
years in the three year period ended December 31, 1997, and the stock
options outstanding at the end of the respective periods:
<TABLE>
Option Reload
Plan Plan
Shares Price Shares Price
------ ----- ------ -----
<S> <C> <C> <C> <C>
Outstanding January 1, 1995 55,566 $ 8.64 - N/A
Granted - N/A - N/A
Expired - N/A - N/A
Exercised - N/A - N/A
------ ----- ----- ----
Outstanding December 31, 1995 55,566 $ 8.64 - N/A
Granted - N/A - N/A
Expired - N/A - N/A
Exercised - N/A - N/A
------ ----- ----- ----
Outstanding December 31, 1996 55,566 $ 8.64 - N/A
Granted - N/A 12,380 $ 24.11
Expired - N/A - N/A
Exercised 34,548 $ 8.64 - N/A
------ ---- ------ -----
Outstanding December 31, 1997 21,018 $ 8.64 12,380 $ 24.11
====== ===== ====== =====
</TABLE>
As of December 31, 1997, Option Plan outstanding shares had a remaining
contractual life of 1 year and Reload Plan outstanding shares had a
remaining contractual life of 4.5 years.
<PAGE>
AMBANC CORP.
Notes To Consolidated Financial Statements-Continued
December 31, 1997, 1996 and 1995
(Dollar amounts in thousands, except share and per share data)
Note 13 - STOCK OPTION PLAN - Continued
The Corporation applies APB Opinion No. 25, "Accounting for Stock Issued
to Employees," and related interpretations in accounting for the plans. No
compensation cost has been recognized for the plans because the stock
option price is equal to or greater than the fair value at the grant date.
Had compensation cost for the plans been determined based on the fair
value at the grant dates for awards under the plans consistent with the
fair value method of FAS 123, "Accounting for Stock-Based Compensation,"
the Corporation's net income and net income per share would have been
reported as indicated below:
Years Ended December 31,
1997 1996
------ ------
Net income:
As reported $ 8,286 $ 7,966
Pro forma $ 8,250 $ 7,966
Net income per share:
As reported $ 1.19 $ 1.14
Pro forma $ 1.18 $ 1.14
The fair value of options granted was approximately $4.40 per option in
1997. The fair value of the option grants are estimated on the date of the
grant using an option pricing model with the following assumptions:
dividend yield of 1.66%, risk-free interest rate of 5.91%, expected
volatility of 23% and expected life of 2.5 years. The pro forma amounts
are not representative of the effects on reported net income for future
years.
Additionally, under provisions of the Option Plan, stock appreciation
rights have been granted coinciding with the number of stock options
granted. The value of each stock appreciation right at any time is equal
to 50% of the excess of the fair value of one share of common stock of the
Corporation over the exercise price of the option to which it relates.
Employee benefits charged/(credited) to operations in 1997, 1996 and 1995
includes $325, $(1) and $12 related to stock appreciation rights.
<PAGE>
AMBANC CORP.
Notes To Consolidated Financial Statements-Continued
December 31, 1997, 1996 and 1995
(Dollar amounts in thousands, except share and per share data)
Note 14 - INCOME TAXES
Income taxes consist of the following:
<TABLE>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current expense $ 3,993 $ 3,619 $ 3,246
Deferred benefit (407) (337) (409)
Change in valuation allowance (212)
------ ------ ------
Income taxes $ 3,586 $ 3,282 $ 2,625
====== ====== ======
</TABLE>
Income taxes applicable to security transactions were $18, $18 and $14 in
1997, 1996 and 1995.
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>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Statutory rate applied to income $ 4,037 $ 3,824 $ 3,288
Adjustments
Tax-exempt interest income (1,083) (1,053) (1,048)
Non-deductible interest 167 160 144
State income taxes 443 531 374
Merger expenses 111
Other 22 (180) (32)
Change in valuation allowance (212)
----- ----- -----
Total income taxes $ 3,586 $ 3,282 $ 2,625
===== ===== =====
</TABLE>
The Corporation's deferred income tax assets and liabilities consist of the
following:
1997 1996
---- ----
Deferred tax assets
Allowance for loan losses $ 1,608 $ 1,175
Accrued employee benefits 783 519
Alternative minimum tax carryforward - 166
Other - 17
----- -----
2,391 1,877
----- -----
Deferred tax liabilities
Depreciation 738 684
Unrealized gain on securities
available for sale 607 165
Mark-to-market adjustment on
loans held for sale 234 225
Accretion of securities discount 156 131
Other 20 -
----- -----
1,755 1,205
----- -----
Net deferred tax asset $ 636 $ 672
=== ===
<PAGE>
AMBANC CORP.
Notes To Consolidated Financial Statements-Continued
December 31, 1997, 1996 and 1995
(Dollar amounts in thousands, except share and per share data)
Note 15 - COMMITMENTS AND CONTINGENT LIABILITIES
The Corporation leases various facilities and equipment. These leases
expire at various times during the years 1998 through 2008 with renewal
options through the year 2038. Certain leases are with companies
controlled by directors of the Corporation and its subsidiaries which had
total lease payments of $2, $30 and $42 in 1997, 1996 and 1995. Total
rental expense for all leases for the years 1997, 1996 and 1995, was $379,
$308 and $166. The following is a schedule of future minimum lease
payments:
1998 $ 308
1999 201
2000 195
2001 136
2002 113
Thereafter 1,314
-----
Total $ 2,267
=====
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 $90,475 and $100,546 at December 31, 1997 and 1996.
Outstanding standby letters of credit were $9,940 and $9,328 at December
31, 1997 and 1996. 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 $8,261 and $8,137 at December 31,
1997 and 1996, on deposit with the Federal Reserve or as cash on hand or
on deposit with other banks. These reserves do not earn interest.
Note 16 - SHAREHOLDERS' EQUITY
A 2-for-1 stock split effected in the form of a stock dividend was paid on
August 29, 1997. A 5% stock dividend was paid on December 8, 1997,
December 2, 1996, and November 30, 1995, and all average share and per
share amounts have been retroactively adjusted to reflect the stock split
and stock dividends.
The directors of the Corporation are being paid in stock per the Director
Stock Grant Plan approved by the shareholders in 1996. The Corporation's
stock is purchased routinely on the market and held as treasury stock
until it is reissued as payment of director fees each quarter.
<PAGE>
AMBANC CORP.
Notes To Consolidated Financial Statements-Continued
December 31, 1997, 1996 and 1995
(Dollar amounts in thousands, except share and per share data)
Note 17 - EARNINGS PER SHARE (EPS)
The following is a reconciliation of earnings per share to diluted
earnings per share for the years ended December 31:
<TABLE>
1997 1996 1995
---- ---- ----
Per-Share Per-Share Per-Share
Income Shares Amount Income Shares Amount Income Shares Amount
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EPS
Income available to
common stockholders $8,286 6,970,072 $ 1.19 $7,966 6,965,433 $ 1.14 $7,045 6,964,593 $ 1.01
Effect of dilutive
securities-stock options 11,672 20,679 20,985
Diluted EPS
Income available to
common stockholders $8,286 6,981,744 $ 1.19 $7,966 6,986,112 $ 1.14 $7,045 6,985,578 $ 1.01
</TABLE>
Note 18 - REGULATORY MATTERS
The Corporation is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory, and possible
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 amount and
classification is also subject to qualitative judgments by the regulators
about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Corporation to maintain minimum amounts and ratios (set forth
in the table below) of Total and Tier 1 Capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier 1 Leverage
Capital (as defined) to average assets (as defined). As of December 31,
1997, the Corporation met all capital adequacy requirements to which it is
subject.
As of December 31, 1997, the most recent notifications from the Office of
the Comptroller of the Currency categorized the bank subsidiaries as well
capitalized under the regulatory framework for prompt corrective action.
To be categorized as well capitalized, the Corporation must maintain
minimum Total Capital, Tier 1 Capital and Tier 1 Leverage Capital ratios
as set forth in the table. There are no conditions or events since that
notification that management believes have changed the institutions'
categories.
The Corporation's consolidated and individual banking subsidiaries' actual
capital amounts and ratios are also presented in the table.
<PAGE>
AMBANC CORP.
Notes To Consolidated Financial Statements-Continued
December 31, 1997, 1996 and 1995
(Dollar amounts in thousands, except share and per share data)
Note 18 - REGULATORY MATTERS - Continued
<TABLE>
To Be Well
For Capital 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, 1997
Total Capital (to Risk-Weighted Assets)
Consolidated $ 80,959 14.33% $ 45,199 8.00% N/A N/A
AmBank Indiana, N.A. 46,214 12.46 29,673 8.00 $ 37,091 10.00%
AmBank Illinois, N.A. 32,335 16.90 15,309 8.00 19,137 10.00
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated $ 75,531 13.37% $ 22,599 4.00% N/A N/A
AmBank Indiana, N.A. 42,755 11.53 14,836 4.00 $ 22,254 6.00%
AmBank Illinois, N.A. 30,366 15.87 7,655 4.00 11,482 6.00
Tier 1 Leverage Capital (to Average Assets)
Consolidated $ 75,532 10.40% $ 29,054 4.00% N/A N/A
AmBank Indiana, N.A. 42,755 9.50 18,006 4.00 $ 22,508 5.00%
AmBank Illinois, N.A. 30,375 10.90 11,146 4.00 13,933 5.00
</TABLE>
<TABLE>
To Be Well
For Capital 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, 1996
Total Capital (to Risk-Weighted Assets)
Consolidated $ 75,594 14.33% $ 42,195 8.00% N/A N/A
AmBank Indiana, N.A. 43,308 12.82 27,024 8.00 $ 33,780 10.00%
AmBank Illinois, N.A. 31,217 16.49 15,141 8.00 18,926 10.00
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated $ 69,964 13.26% $ 21,098 4.00% N/A N/A
AmBank Indiana, N.A. 39,823 11.79 13,512 4.00 $ 20,268 6.00%
AmBank Illinois, N.A. 29,072 15.36 7,570 4.00 11,356 6.00
Tier 1 Leverage Capital (to Average Assets)
Consolidated $ 69,964 10.00% $ 27,993 4.00% N/A N/A
AmBank Indiana, N.A. 39,823 9.37 16,997 4.00 $ 21,247 5.00%
AmBank Illinois, N.A. 29,072 10.54 11,028 4.00 13,785 5.00
</TABLE>
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.
IND and ILL are regulated by the Comptroller of the Currency, while the
Corporation is regulated by the Federal Reserve 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 $36,538 of the $75,953 equity of the banks was
restricted and unavailable for the payment of dividends to the Corporation
at December 31, 1997.
<PAGE>
AMBANC CORP.
Notes To Consolidated Financial Statements-Continued
December 31, 1997, 1996 and 1995
(Dollar amounts in thousands, except share and per share data)
Note 18 - REGULATORY MATTERS - Continued
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 $9,087
of undistributed earnings of the banks was available for distribution to
the Corporation at December 31, 1997. As a practical matter, dividends are
ordinarily restricted to a lesser amount because of the need to maintain
an adequate capital structure.
On September 30, 1996, the President signed into law an omnibus
appropriations act for fiscal year 1996 that included, among other things,
the recapitalization of the Savings Association Insurance Fund (SAIF) in a
section entitled, "The Deposit Insurance Funds Act of 1996" (the Act). The
Act included a provision where all insured depository institutions would
be charged a one-time special assessment on their SAIF-assessable deposits
as of March 31, 1995. The Corporation recorded a pre-tax charge of $191
during the year ended December 31, 1996, which represented 65.7 basis
points of the March 31, 1995, assessable deposits.
<PAGE>
AMBANC CORP.
Notes To Consolidated Financial Statements-Continued
December 31, 1997, 1996 and 1995
(Dollar amounts in thousands, except share and per share data)
Note 19 - 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, 1997 and
1996:
<TABLE>
December 31, 1997 December 31, 1996
----------------- -----------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
------ ---------- ------ ---------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 44,753 $ 44,753 $ 32,284 $ 32,284
Interest-bearing deposits
in other banks 298 298 590 590
Securities available for sale 150,219 150,219 170,724 170,724
Loans held for sale 2,443 2,474 2,350 2,404
Loans, less allowance for
loan losses 535,005 536,070 488,837 488,033
Demand and savings deposits 290,158 290,158 281,346 281,346
Time deposits 375,527 375,709 352,210 353,556
Short-term borrowings 6,747 6,747 5,285 5,285
Long-term debt 2,031 2,031 2,309 2,309
</TABLE>
For purposes of the above disclosures of estimated fair value, the
following assumptions were used as of December 31, 1997 and 1996. 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, 1997 and 1996,
the estimated fair values would necessarily have been achieved at that
date, since market values may differ depending on various circumstances.
The estimated fair values at December 31, 1997 and 1996, 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 statements 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.
<PAGE>
AMBANC CORP.
Notes To Consolidated Financial Statements-Continued
December 31, 1997, 1996 and 1995
(Dollar amounts in thousands, except share and per share data)
Note 20 - PARENT COMPANY STATEMENTS
Presented below are condensed balance sheets, statements of income and
cash flows for the parent company.
Condensed Balance Sheets
December 31, 1997 and 1996
1997 1996
------ ------
ASSETS
Cash on deposit with subsidiaries $ 648 $ 806
Investment in bank subsidiaries 75,952 71,114
Investment in non-bank subsidiaries 413 494
Premises, furniture and equipment, net 665 178
Other assets 1,797 243
------ ------
Total assets $ 79,475 $ 72,835
====== ======
LIABILITIES
Other liabilities $ 1,121 $ 652
----- ----
SHAREHOLDERS' EQUITY
Common stock 69,857 33,163
Treasury stock (1) (21)
Retained earnings 7,421 38,731
Unrealized gain/(loss) on securities
available for sale, net of deferred tax 1,077 310
----- ----
Total shareholders' equity 78,354 72,183
------ ------
Total liabilities and
shareholders' equity $ 79,475 $ 72,835
====== ======
Condensed Statements Of Income
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
1997 1996 1995
------ ------ -----
<S> <C> <C> <C>
OPERATING INCOME
Dividends received from bank subsidiaries $ 4,960 $ 3,450 $ 2,678
Rental income
Other income - 8 35
----- ----- -----
Total operating income 4,960 3,458 2,713
----- ----- -----
OPERATING EXPENSE
Other expenses 2,992 1,871 2,315
----- ----- -----
INCOME BEFORE INCOME TAXES AND EQUITY IN
UNDISTRIBUTED EARNINGS OF SUBSIDIARIES 1,968 1,587 398
Income tax credit (446) (354) (351)
------ ------ ------
INCOME BEFORE EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARIES 2,414 1,941 749
Equity in undistributed earnings
of subsidiaries 5,872 6,025 6,296
----- ----- -----
NET INCOME $ 8,286 $ 7,966 $ 7,045
===== ===== =====
</TABLE>
<PAGE>
AMBANC CORP.
Notes To Consolidated Financial Statements-Continued
December 31, 1997, 1996 and 1995
(Dollar amounts in thousands, except share and per share data)
Note 20 - PARENT COMPANY STATEMENTS - Continued
Condensed Statements Of Cash Flows
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
1997 1996 1995
------ ----- -----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 8,286 $ 7,966 $ 7,045
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 92 47 19
Equity in undistributed income of
subsidiaries (4,960) (3,450) (2,678)
Other liabilities 469 (98) 547
Other assets (1,554) 33 13
------- ------ -----
Net cash from operating activities 2,333 4,498 4,946
------- ------ -----
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in subsidiaries 969 (1,646) (2,664)
Purchase of furniture and equipment (579) (27) (147)
----- ------- -------
Net cash from investing activities 390 (1,673) (2,811)
---- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (2,887) (2,653) (2,144)
Payment for fractional shares (14) (18) (12)
Treasury stock 20 (21) 37
Issuance of stock for dividend reinvestment
and stock purchase plan - - 12
------- ------ ------
Net cash from financing activities (2,881) (2,692) (2,107)
------- ------ ------
NET CHANGE IN CASH AND CASH EQUIVALENTS (158) 133 20
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 806 673 645
---- --- ---
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 648 $ 806 $ 673
==== ==== ====
</TABLE>
<PAGE>
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 years ended December 31, 1997, 1996 and 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 Troy D. Stoll, CPA
Chairman of the Board, Secretary, Treasurer and C.F.O.
President and C.E.O.
EXHIBIT 21
AMBANC CORP. LIST OF SUBSIDIARIES
1. AmBank Indiana, N.A., Vincennes, Indiana, is a wholly owned subsidiary
of AMBANC Corp. and is a national banking association.
2. AmBank Illinois, N.A., Robinson, Illinois, is a wholly owned
subsidiary of AMBANC Corp. and is a national banking association.
3. American National Realty Corp. is a wholly-owned subsidiary of AMBANC
Corp. and is incorporated under the laws of the State of Indiana.
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-42949 and No. 333-02807 of AMBANC Corp. on Form S-8 of our report dated
January 23, 1998, appearing in this Annual Report on Form 10-K of AMBANC Corp.
for the year ended December 31, 1997.
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
March 26, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FINANCIAL STATEMENTS CONTAINED IN THE FILER'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000702904
<NAME> AMBANC CORP.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 37,313
<INT-BEARING-DEPOSITS> 298
<FED-FUNDS-SOLD> 7,440
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 148,535
<INVESTMENTS-MARKET> 150,219
<LOANS> 540,433
<ALLOWANCE> 5,428
<TOTAL-ASSETS> 759,395
<DEPOSITS> 665,685
<SHORT-TERM> 6,747
<LIABILITIES-OTHER> 6,577
<LONG-TERM> 2,031
0
0
<COMMON> 69,856
<OTHER-SE> 8,499
<TOTAL-LIABILITIES-AND-EQUITY> 759,395
<INTEREST-LOAN> 46,164
<INTEREST-INVEST> 9,475
<INTEREST-OTHER> 452
<INTEREST-TOTAL> 56,254
<INTEREST-DEPOSIT> 28,007
<INTEREST-EXPENSE> 28,441
<INTEREST-INCOME-NET> 27,813
<LOAN-LOSSES> 1,245
<SECURITIES-GAINS> 78
<EXPENSE-OTHER> 19,045
<INCOME-PRETAX> 11,872
<INCOME-PRE-EXTRAORDINARY> 11,872
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,286
<EPS-PRIMARY> 1.19
<EPS-DILUTED> 1.19
<YIELD-ACTUAL> 4.29
<LOANS-NON> 649
<LOANS-PAST> 1,976
<LOANS-TROUBLED> 2,422
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,650
<CHARGE-OFFS> 1,767
<RECOVERIES> 320
<ALLOWANCE-CLOSE> 5,428
<ALLOWANCE-DOMESTIC> 1,672
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,756
</TABLE>
