<PAGE>
This is a conforming paper copy pursuant to Rule # 901(d) of
Regulation S-T.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 14, 1996
AMERICAN NATIONAL BANKSHARES INC.
(Exact name of registrant as specified in its charter)
Commission file number 0-12820
VIRGINIA 54-1284688
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
628 Main Street
Danville, Virginia 24541
(Address of principal executive offices) (Zip Code)
(804) 792-5111
(Registrant's telephone number, including area code)
<PAGE>
<PAGE>
Item 1. Changes in Control of Registrant
None
Item 2. Acquisition or Disposition of Assets
A Merger of Mutual Savings Bank, F.S.B., Danville, Virginia,
(Mutual) with and into American National Bank and Trust Company,
Danville, Virginia, a wholly owned subsidiary of American
National Bankshares Inc., (ANB) was consummated on March 14,
1996. The proposed merger had been reported and described on
Form 8-K, filed September 27, 1995 and Registration Statement S-
4/A, filed February 2, 1996.
The merger was effected pursuant to the terms of the Agreement
and Plan of Reorganization, dated September 26, 1995, between
Mutual Savings Bank, F.S.B., a federal stock savings bank
organized and existing under the Laws of the United States, with
its principal office located in Danville, Virginia and American
National Bankshares Inc., a corporation organized and existing
under the Laws of the Commonwealth of Virginia, with its
principal office located in Danville, Virginia and the related
Plan of Merger, dated September 26, 1995, between Mutual Savings
Bank, F.S.B. and American National Bank and Trust Company. The
Merger was accounted for as a pooling of interests.
In accordance with the terms of the Agreement, upon consummation
of the Merger, ANB exchanged 879,798 common shares, at an
exchange ratio of .705 of a share of ANB's common stock, for each
of Mutual's 1,248,100 common shares outstanding. Under the terms
of the agreement fractional shares were paid in cash. The
exchange of stock is expected to qualify as a tax-free
transaction for federal income tax purposes.
On March 13, 1996, Mutual held its 1996 Annual Meeting of
Shareholders. At this meeting the Shareholders approved the
Agreement and Plan of Reorganization with American National
Bankshares Inc. and the related Plan of Merger with American
National Bank and Trust Company. On March 13, 1996, American
National Bankshares Inc. held a Special Meeting of Shareholders,
at which time the shareholders approved an Amendment to The
Articles of Incorporation increasing the number of authorized
shares of the $1.00 par value common stock of ANB from 3,000,000
to 10,000,000 in order to effect the Merger.
At the time of the Merger, Mutual's total assets were
approximately $85,000,000. Capital accounts were approximately
$16,000,000. All properties held by Mutual were transferred to
American National Bank and Trust Company and include four branch
offices located at 103 Tower Drive, 600 West Main Street, 539
Arnett Boulevard in Danville and 625 Virginia Avenue,
Collinsville, Virginia. All branch offices, with the exception
of Arnett Boulevard, opened as branch offices of American
National Bank and Trust Company on the morning of March 15, 1996.
Since the Arnett Boulevard office is in close proximity to two
existing branches of American National Bank and Trust Company,
this office will not be opened.
<PAGE>
<PAGE>
Item 3. Bankruptcy or Receivership
Not applicable.
Item 4. Changes in Registrant's Certifying Accountant
Not applicable.
Item 5. Other events
None
Item 6. Resignations of Registrant's Directors
None
Item 7. Financial statements and Exhibits
a. Financial Statements of Mutual Savings Bank, F.S.B.
b. 10Q for Quarter Ending December 31, 1995.
c. Proforma Financial Statements
Item 8. Change in Fiscal year
Not applicable
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
AMERICAN NATIONAL BANKSHARES INC.
(Registrant)
By /s/ Charles H.Majors
Charles H. Majors
President and Chief Executive Officer
Date: March 29, 1996<PAGE>
<PAGE>
MANNING, PERKINSON, FLOYD & COMPANY
A PROFESSIONAL CORPORATION
CERTIFIED PUBLIC ACCOUNTANTS
2012 RIVERSIDE DRIVE
DANVILLE, VIRGINIA 24540
MEMBERS
AMERICAN INSTITUTE OF TELEPHONE: (804) 792-5334
CERTIFIED PUBLIC ACCOUNTANTS FAX - (804) 799-3954
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Mutual Savings Bank, F.S.B.
Danville, Virginia
We have audited the accompanying consolidated statements of financial
condition of Mutual Savings Bank, F.S.B. and subsidiary (the "Savings Bank")
as of September 30, 1995 and 1994, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the years ended
September 30, 1995, 1994 and 1993. These financial statements are the
responsibility of the Savings Bank's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted 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 Mutual
Savings Bank, F.S.B. and subsidiary as of September 30, 1995 and 1994, and
the results of their operations and their cash flows for the years ended
September 30, 1995, 1994, and 1993, in conformity with generally accepted
accounting principles.
Certified Public Accountants
Danville, Virginia
November 8, 1995
<PAGE>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
Mutual Savings Bank, F.S.B.
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Non-interest-bearing deposits.................................................. $ 860,557 $ 853,238
Interest-bearing deposits...................................................... 1,166,729 769,817
Investment securities, net (fair value of $24,010,691 and $24,018,233,
respectively) (Note 2).......................................................... 24,598,018 25,973,821
Mortgage-backed securities (fair value of $14,478,093 and $15,843,922,
respectively) (Note 3).......................................................... 14,337,785 16,333,959
Loans receivable, net (Notes 4, 9 and 15)........................................ 39,869,679 36,908,194
Office properties and equipment, net (Note 5).................................... 1,889,282 1,917,922
Accrued interest receivable (Note 7)............................................. 524,326 562,297
Prepaid and other assets......................................................... 149,608 267,244
-------------- --------------
Total assets............................................................... $ 83,395,984 $ 83,586,492
-------------- --------------
-------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits (Note 8).............................................................. $ 67,512,520 $ 66,930,704
Advances from Federal Home Loan Bank (Note 9).................................. -- 1,500,000
Advance payments and deposits by borrowers..................................... 321,796 223,032
Accounts payable and other accrued liabilities................................. 774,886 673,143
-------------- --------------
Total liabilities.......................................................... 68,609,202 69,326,879
-------------- --------------
Commitments and Contingencies
(Notes 13, 15 and 19)
Stockholders' equity (Notes 10 and 11):
Preferred stock, par value $1.00 per share, authorized 2,500,000 shares;
outstanding, none............................................................. -- --
Common stock, par value $1.00 share, authorized 7,500,000 shares; 1,154,100
shares issued and outstanding................................................. 1,154,100 1,154,100
Additional paid-in capital..................................................... 4,226,252 4,226,252
Retained earnings, substantially restricted.................................... 9,410,509 8,879,261
Net unrealized loss on securities available for sale, net of taxes............. (4,079) --
-------------- --------------
Total stockholders' equity................................................. 14,786,782 14,259,613
-------------- --------------
Total liabilities and stockholders' equity................................. $ 83,395,984 $ 83,586,492
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Mutual Savings Bank, F.S.B.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Interest income:
Loans..................................................................... $3,342,920 $3,062,075 $3,501,880
Mortgage-backed securities................................................ 1,112,311 1,028,424 1,470,679
Investment securities..................................................... 1,542,213 1,534,228 1,077,515
Short-term investments and bank deposits.................................. 43,053 39,135 40,307
---------- ---------- ----------
Total interest income....................................................... 6,040,497 5,663,862 6,090,381
---------- ---------- ----------
Interest expense:
Deposits (Note 8)......................................................... 2,887,887 2,533,926 2,691,268
Federal Home Loan Bank advances........................................... 32,658 10,848 --
Short-term borrowings..................................................... -- 162 7,069
---------- ---------- ----------
Total interest expense...................................................... 2,920,545 2,544,936 2,698,337
---------- ---------- ----------
Net interest income......................................................... 3,119,952 3,118,926 3,392,044
Provision for loan losses (Note 4).......................................... 8,300 -- --
---------- ---------- ----------
Net interest income after provision for loan losses......................... 3,111,652 3,118,926 3,392,044
---------- ---------- ----------
Noninterest income:
Service charges and fees on loans......................................... 40,211 39,208 46,551
Other fees and service charges............................................ 105,296 100,401 84,295
Gain on sale of investments............................................... 45,564 42,673 51,898
Gain on sale of real estate owned......................................... -- 126,029 --
Loss on revaluation of real estate owned.................................. -- -- (6,290)
Other..................................................................... 7,283 17,581 20,832
---------- ---------- ----------
Total noninterest income.................................................... 198,354 325,892 197,286
---------- ---------- ----------
Noninterest expense:
Compensation, payroll taxes, and employee benefits (Note 12).............. 1,098,173 1,039,174 1,106,830
Occupancy and equipment................................................... 160,298 151,988 156,359
Federal deposit insurance premiums........................................ 153,584 152,649 135,446
Other (Note 14)........................................................... 418,056 618,898 379,106
---------- ---------- ----------
Total noninterest expense................................................... 1,830,111 1,962,709 1,777,741
---------- ---------- ----------
Income before income taxes.................................................. 1,479,895 1,482,109 1,811,589
Provision for income taxes (Note 13)........................................ 487,007 506,151 549,812
---------- ---------- ----------
Net income.................................................................. $ 992,888 $ 975,958 $1,261,777
---------- ---------- ----------
---------- ---------- ----------
Earnings per share of common stock (Note 10)................................ $ .82 $ .81 $ 1.06
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Mutual Savings Bank, F.S.B.
<TABLE>
<CAPTION>
NET
UNREALIZED
RETAINED LOSS ON
ADDITIONAL EARNINGS -- SECURITIES STOCK TOTAL
COMMON PAID-IN SUBSTANTIALLY AVAILABLE FOR ACQUIRED STOCKHOLDERS'
STOCK CAPITAL RESTRICTED SALE BY ESOP EQUITY
---------- ---------- ------------ ------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1992....... $1,154,100 $4,226,252 $7,564,806 $ -- $(145,759) $12,799,399
Net income........................ -- -- 1,261,777 -- -- 1,261,777
Cash dividends on common stock.... -- -- (461,640) -- -- (461,640)
ESOP stock purchased.............. -- -- -- -- -- --
ESOP loan payments................ -- -- -- -- 133,369 133,369
---------- ---------- ------------ ------------- --------- ------------
Balance, September 30, 1993....... 1,154,100 4,226,252 8,364,943 -- (12,390) 13,732,905
Net income........................ -- -- 975,958 -- -- 975,958
Cash dividends on common stock.... -- -- (461,640) -- -- (461,640)
ESOP loan payments................ -- -- 12,390 -- -- 12,390
---------- ---------- ------------ ------------- --------- ------------
Balance, September 30, 1994....... 1,154,100 4,226,252 8,879,261 -- -- 14,259,613
Net income........................ -- -- 992,888 -- -- 992,888
Cash dividends on common stock.... -- -- (461,640) -- -- (461,640)
Cumulative effect of change in
accounting for securities
available for sale, net of income
taxes of $2,101.................. -- -- -- (4,079) -- (4,079)
---------- ---------- ------------ ------------- --------- ------------
Balance, September 30, 1995....... $1,154,100 $4,226,252 $9,410,509 $ (4,079) $ -- $14,786,782
---------- ---------- ------------ ------------- --------- ------------
---------- ---------- ------------ ------------- --------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Mutual Savings Bank, F.S.B.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income.............................................................. $ 992,888 $ 975,958 $ 1,261,777
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for depreciation and amortization........................... 63,535 57,843 59,870
Provision for loan losses............................................. 8,300 -- --
Provision for losses -- REO........................................... -- -- 6,290
Increase (decrease) in deferred loan fees............................. (20,149) 10,602 1,378
Gain on sale of real estate owned..................................... -- (126,029) --
Gain on sale of investment securities held to maturity and available
for sale............................................................. (45,564) (42,673) (51,898)
Amortization of premiums and (discounts) on investment securities and
mortgage-backed securities........................................... (2,340) 96,219 (10,236)
Federal Home Loan Bank stock dividends................................ -- (10,300) (44,300)
Loss on sale of property and equipment................................ -- -- 5,493
Deferred income taxes................................................. (29,218) (8,869) (30,010)
(Increase) decrease in interest receivable............................ 37,971 (89,749) (51,009)
(Increase) decrease in prepaid and other assets....................... 127,161 21,213 (188,124)
Increase (decrease) in interest payable............................... 7,119 312 (3,060)
Increase (decrease) in accounts payable and other liabilities......... 220,715 138,025 (89,767)
----------- ----------- -----------
Net cash provided by operating activities............................... 1,360,418 1,022,552 866,404
----------- ----------- -----------
Cash Flows From Investing Activities:
Investment securities held to maturity:
Purchases............................................................. -- (10,003,865) (13,741,250)
Proceeds from sale.................................................... -- 542,673 51,898
Maturities............................................................ 2,116,320 2,666,842 3,904,711
Investment securities available for sale:
Purchases............................................................. (2,733,960) -- --
Proceeds from sale.................................................... 2,041,440 -- --
Purchase of mortgage-backed securities.................................. -- (5,734,989) --
Principal collections on mortgage-backed securities..................... 1,989,901 5,680,930 7,831,757
Net (increase)decrease in loans......................................... (2,949,636) 2,334,557 3,561,268
Purchase of property and equipment...................................... (34,894) (19,518) (585)
Proceeds from sale of real estate owned................................. -- 194,500 --
Proceeds from sale of property and equipment............................ -- 40,000 15,000
----------- ----------- -----------
Net cash provided by (used in) investing activities................... 429,171 (4,298,870) 1,622,799
----------- ----------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
1995 1994 1993
------------- ------------ ------------
<S> <C> <C> <C>
Cash Flows From Financing Activities:
Net increase (decrease) in demand deposits,
NOW accounts and savings accounts................. $(10,015,477) $ 571,243 $ 3,518,876
Net increase (decrease) in certificates of deposit.. 10,597,293 691,954 (5,348,756)
Advances from Federal Home Loan Bank................ 5,900,000 4,250,000 --
Repayment of Federal Home Loan Bank advances........ (7,400,000) (2,750,000) --
Net decrease in advance payments by borrowers
for taxes and insurance........................... (5,534) (23,138) (22,412)
Cash dividends...................................... (461,640) (461,640) (461,640)
------------- ------------ ------------
Net cash provided by (used in) financing
activities........................................ (1,385,358) 2,278,419 (2,313,932)
------------- ------------ ------------
Increase (decrease) in cash and cash equivalents...... 404,231 (997,899) 175,271
Cash and cash equivalents:
Beginning........................................... 1,623,055 2,620,954 2,445,683
------------- ------------ ------------
Ending.............................................. 2,027,286 1,623,055 2,620,954
Supplemental Schedule of Cash and Cash Equivalents:
Non-interest-bearing deposits..................... 860,557 853,238 547,284
Interest-bearing deposits......................... 1,166,729 769,817 2,073,670
------------- ------------ ------------
$ 2,027,286 $ 1,623,055 $ 2,620,954
------------- ------------ ------------
------------- ------------ ------------
Supplemental Disclosures of Cash Flow
Information:
Income taxes paid................................. $ 426,013 $ 576,000 $ 873,569
------------- ------------ ------------
------------- ------------ ------------
Interest paid..................................... $ 2,913,426 $ 2,544,624 $ 2,701,397
------------- ------------ ------------
------------- ------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MUTUAL SAVINGS BANK, F.S.B.
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS:
The Savings Bank is primarily engaged in the business of obtaining
savings deposits and originating single-family residential loans within
its primary lending area, south central Virginia and north central North
Carolina. The Savings Bank's underwriting policies require such loans to
be made at no greater than 80% loan-to-value based upon appraised values
unless private mortgage insurance is obtained. These loans are secured by
the underlying properties.
A description of the significant accounting policies used in the
preparation of the accompanying consolidated financial statements follows:
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of
Mutual Savings Bank, F.S.B. and Mutual Service Corporation, its
wholly-owned subsidiary. All significant intercompany transactions and
balances have been eliminated in the consolidation.
CASH AND CASH EQUIVALENTS:
The Savings Bank considers all cash and amounts due from depository
institutions, and interest-bearing deposits in other banks to be cash
equivalents for purposes of the statements of cash flows.
INVESTMENT SECURITIES:
At October 1, 1994, the Savings Bank adopted the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 115 "Accounting For
Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that debt and equity securities be classified as either held to maturity,
available for sale, or trading.
Investment securities classified as "held to maturity" are stated at
cost, adjusted for amortization of premium and accretion of discount
using a level yield method and are not adjusted to the lower of cost or
market, as the Savings Bank has the intent and ability to hold such
investments to maturity. Gains or losses are recognized by use of the
specific identification method.
Securities classified as "available for sale" are stated at fair value
with unrealized holding gains and losses reported, net of related income
taxes, as a separate component of stockholders' equity until realized.
Adjustment to fair value, below amortized cost, that are other than
temporary are charged to earnings. Realized gains and losses are
recognized by use of the specific identification method.
The Savings Bank has not classified any debt or equity securities as
"trading".
<PAGE>
MORTGAGE-BACKED SECURITIES:
Mortgage-backed securities are stated at cost or unpaid principal
balance, adjusted for amortization of premiums and accretion of discounts
using a level yield method. The Savings Bank has the intent and ability
to hold such assets to maturity. Should any be sold, gains and losses are
recognized by use of the specific identification method.
LOANS RECEIVABLE:
Loans receivable are stated at unpaid principal balances net of
undisbursed loans in process, deferred loan fees, and allowances for loan
losses. Interest is accrued as earned unless the collectibility of the
loan is in doubt, at which time an allowance is provided.
The allowance for loan losses is based upon management's evaluation of
the loans receivable portfolio and is maintained at an amount considered
adequate by management. The evaluation by management considers such
factors as current economic conditions, loan portfolio risks including
the value of underlying collateral, and past loan loss experience. The
allowance is increased by charges to income and decreased by net
charge-offs. While management believes the allowance to be adequate,
there are no assurances that further increases in the allowance will not
be required in the future.
LOAN ORIGINATION FEES AND COSTS:
Loan fees received less direct loan origination costs are deferred and
recognized by the interest method over the life of the related loan as an
adjustment of yield.
OFFICE PROPERTIES AND EQUIPMENT:
Office properties and equipment are stated at cost less accumulated
depreciation. Expenditures for major improvements are capitalized, while
the costs of maintenance and repairs, which do not improve or extend the
life of the existing assets, are expensed as incurred. For financial
reporting, depreciation and amortization are provided on the
straight-line method over the estimated useful lives of the assets,
estimated to be 33 to 50 years for buildings, 5 to 10 years for furniture
and equipment, and 4 years for automobiles.
REAL ESTATE OWNED:
Property acquired by foreclosure or deed in lieu of foreclosure is
recorded at the lower of cost, or fair value less estimated costs to
sell, at date of acquisition. Any improvements to property are
capitalized, while costs of holding property are expensed when incurred.
Specific valuation allowances are recorded through a charge to earnings
if there is further deterioration in fair value.
Real estate held for investment or development and sale is recorded at
the lower of cost or net realizable value. Losses are recognized when
carrying values exceed net realizable value, but gains are only
recognized at the time of sale.
INCOME TAXES:
In 1993, the Savings Bank adopted SFAS No. 109 "Accounting For Income
Taxes". SFAS No. 109 requires a change in the method of accounting and
reporting for deferred income taxes by use of an asset and liability
method of accounting for income taxes. Under the asset
<PAGE>
and liability method, deferred tax assets and liabilities are recognized
for the estimated future tax consequences of temporary differences between
the financial statement carrying amounts and the tax bases of existing
assets and liabilities. The adoption of SFAS No. 109 had no material effect
on the financial statements in 1993.
RECLASSIFICATIONS:
Certain amounts in the 1994 and 1993 financial statements have been
reclassified to conform to the 1995 method of presentation. These
reclassifications had no effect on 1994 and 1993 net income or retained
earnings.
2. INVESTMENT SECURITIES
The amortized cost and fair value of investment securities at September
30 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
-------------------------- --------------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Held to maturity:
U.S. Government and
Agency obligations................... $13,747,583 $13,147,098 $18,735,833 $17,072,253
Corporate securities................. 2,503,555 2,509,216 4,000,763 3,802,182
Obligations of states and political
subdivisions....................... 2,014,328 2,021,825 2,015,524 1,922,097
Other................................ 275,980 275,980 392,301 392,301
----------- ----------- ----------- -----------
18,541,446 17,954,119 25,144,421 23,188,833
----------- ----------- ----------- -----------
Federal Home Loan Bank stock......... 829,400 829,400 829,400 829,400
----------- ----------- ----------- -----------
19,370,846 18,783,519 25,973,821 24,018,233
----------- ----------- ----------- -----------
Available for sale:
U.S. Government and Agency
obligations........................ 2,499,642 2,459,841 -- --
Corporate securities................. 1,753,401 1,783,046 -- --
Obligations of states and
political subdivisions............. 980,309 984,285 -- --
Net unrealized loss.................. (6,180) -- -- --
----------- ----------- ----------- -----------
5,227,172 5,227,172 -- --
----------- ----------- ----------- -----------
$24,598,018 $24,010,691 $25,973,821 $24,018,233
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
<PAGE>
Investment securities had gross unrealized gains and losses at September
30, 1995 and 1994 as follows:
<TABLE>
<CAPTION>
1995 1994
----------------------- -------------------------
GROSS GROSS GROSS GROSS
UNREALIZED UNREALIZED UNREALIZED UNREALIZED
GAINS LOSSES GAINS LOSSES
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Held to Maturity:
U.S. Government and
Agency obligations............... $ 1,521 $(602,006) $ 783 $(1,664,363)
Corporate securities............... 40,357 (34,696) 35,937 (234,518)
Obligations of states
and political subdivisions....... 15,404 (7,906) -- (93,427)
Other.............................. -- -- -- --
---------- ---------- --------- ------------
57,282 (644,608) 36,720 (1,992,308)
---------- ---------- --------- ------------
Available for Sale:
U.S. Government and
Agency obligations............... 2,619 (42,420) -- --
Corporate securities............... 32,911 (3,266) -- --
Obligations of states
and political subdivisions....... 4,645 (669) -- --
---------- ---------- --------- ------------
40,175 (46,355) -- --
---------- ---------- --------- ------------
$ 97,457 $(690,963) $ 36,720 $ (1,992,308)
---------- ---------- --------- ------------
---------- ---------- --------- ------------
</TABLE>
The amortized cost and fair value of debt securities at September 30,
1995, by contractual maturity are shown below:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
----------- -----------
<S> <C> <C>
Held to Maturity:
Due in one year or less................... $ -- $ --
Due after one year through five years..... 8,694,824 8,407,693
Due after five years through ten years.... 9,369,680 9,076,902
Due after ten years....................... 476,942 469,524
----------- -----------
18,541,446 17,954,119
----------- -----------
Available for Sale:
Due in one year or less................... 999,828 991,093
Due after one year through five years..... 2,963,882 2,956,473
Due after five years through ten years.... 1,269,642 1,279,606
Unrealized gain (loss).................... (6,180) --
----------- -----------
5,227,172 5,227,172
----------- -----------
$23,768,618 $23,181,291
----------- -----------
----------- -----------
</TABLE>
<PAGE>
FHLB stock has been excluded from the maturity schedule above because it
does not have a contractual maturity. No ready market exists for this
stock; therefore, for presentation purposes, such stock is assumed to
have a fair value equal to cost.
Proceeds from sales of investments and gross gains and losses realized at
September 30 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------- -------- -------
<S> <C> <C> <C>
Proceeds from sales......... $2,041,440 $542,673 $51,898
---------- -------- -------
---------- -------- -------
Gross gains................. $ 61,337 $ 42,673 $51,898
Gross losses................ 15,773 -- --
---------- -------- -------
Net realized............. $ 45,564 $ 42,673 $51,898
---------- -------- -------
---------- -------- -------
</TABLE>
3. MORTGAGED-BACKED SECURITIES
The amortized cost and fair value of mortgage-backed securities at
September 30 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
-------------------------- --------------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Held to Maturity:
Federal Home Loan
Mortgage Corporation............... $ 5,674,952 $ 5,666,348 $ 6,685,398 $ 6,446,449
Government National
Mortgage Association............... 4,404,176 4,516,456 4,901,517 4,839,315
Federal National Mortgage
Association........................ 2,489,980 2,526,438 2,831,658 2,781,271
Collateralized Mortgage
Obligations........................ 1,768,677 1,768,851 1,915,386 1,776,887
----------- ----------- ----------- -----------
$14,337,785 $14,478,093 $16,333,959 $15,843,922
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The effective yield on collateralized mortgage obligations at September
30, 1995 was 6.07%.
Mortgaged-backed securities had gross unrealized gains and losses at
September 30, 1995 and 1994 as follows:
<TABLE>
<CAPTION>
1995 1994
----------------------- -------------------------
GROSS GROSS GROSS GROSS
UNREALIZED UNREALIZED UNREALIZED UNREALIZED
GAINS LOSSES GAINS LOSSES
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Held to Maturity:
Federal Home Loan Mortgage
Corporation......................... $ 65,921 $ (74,525) $23,376 $(262,325)
Government National Mortgage
Association......................... 135,232 (22,952) 61,860 (124,062)
Federal National Mortgage
Association......................... 49,851 (13,393) 14,617 (65,004)
Collateralized Mortgage Obligations.. 15,886 (15,712) -- (138,499)
---------- ---------- ---------- ------------
$ 266,890 $(126,582) $99,853 $(589,890)
---------- ---------- ---------- ------------
---------- ---------- ---------- ------------
</TABLE>
<PAGE>
The amortized cost and fair value of mortgage-backed securities at
September 30, 1995 by contractual maturity are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or repay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
----------- -----------
<S> <C> <C>
Due in one year or less................. $ 192,928 $ 194,118
Due after one year through five years... 652,644 651,017
Due after five years through ten years.. 2,038,706 2,038,485
Due after ten years..................... 11,453,507 11,594,473
----------- -----------
$14,337,785 $14,478,093
----------- -----------
----------- -----------
</TABLE>
No mortgage-backed securities were sold in years ended September 30,
1995, 1994 or 1993.
4. LOANS RECEIVABLE
Loans receivable at September 30 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Mortgage Loans
1 to 4 family...................... $35,784,427 $32,917,810
Multi-family....................... 621,974 468,288
Non-residential.................... 2,866,754 2,590,792
Land............................... 466,750 445,574
----------- -----------
39,739,905 36,422,464
Commercial........................... 722,241 938,736
Consumer and other................... 1,127,127 515,200
----------- -----------
41,589,273 37,876,400
----------- -----------
Less:
Undisbursed loan funds............. 1,449,201 684,664
Deferred loan fees................. 162,393 182,542
Allowance for loan losses.......... 108,000 101,000
----------- -----------
1,719,594 968,206
----------- -----------
$39,869,679 $36,908,194
----------- -----------
----------- -----------
</TABLE>
The following is an analysis of allowance for loan losses:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Balance beginning.......... $101,000 $101,000 $100,000
Amounts charged off........ (1,300) -- --
Recoveries................. -- -- 1,000
Provision charged.......... 8,300 -- --
-------- -------- --------
Balance ending............. $108,000 $101,000 $101,000
-------- -------- --------
-------- -------- --------
</TABLE>
<PAGE>
The allowance for loan losses consists of the following:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Real estate and commercial loans..... $ 90,000 $ 83,300
Consumer loans....................... 18,000 17,700
-------- --------
$108,000 $101,000
-------- --------
-------- --------
</TABLE>
Nonaccrual loans for which interest has been reduced totaled
approximately $278,453 and $13,600 at September 30, 1995 and 1994,
respectively. Interest income that would have been recorded under the
original terms of such loans and has been foregone amounted to $23,874,
$415 and $8,854 for the years ended September 30, 1995, 1994 and 1993,
respectively. The Savings Bank is not committed to lend additional funds
to customers whose loans are classified as non-performing at September 30,
1995.
In the ordinary course of business, the Savings Bank has made loans to
officers, directors, and related interest aggregating $260,745 and
$276,100 at September 30, 1995 and 1994, respectively.
5. OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment at September 30 are summarized by major
classifications as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Land and improvements................ $ 335,237 $ 335,237
Buildings and building improvements.. 2,137,060 2,137,060
Furniture, fixtures and equipment.... 402,594 391,235
Automobiles.......................... 32,862 9,327
---------- ----------
2,907,753 2,872,859
Less accumulated depreciation and
amortization....................... 1,018,471 954,937
---------- ----------
$1,889,282 $1,917,922
---------- ----------
---------- ----------
</TABLE>
Depreciation expense amounted to $63,535, $57,843, and $59,870, for the
years ended September 30, 1995, 1994 and 1993, respectively.
6. REAL ESTATE OWNED
Real estate acquired in settlement of loans constitutes restructured debt
and produces no interest income for the Savings Bank. Interest foregone
on real estate sold prior to 1995 was estimated to be $-0-, $-0- and $300
for the years ended September 30, 1995, 1994 and 1993, respectively.
<PAGE>
7. ACCRUED INTEREST RECEIVABLE
Accrued interest receivable at September 30 is summarized as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Investment securities.............. $ 368,587 $412,292
Mortgage-backed securities......... 104,011 119,648
Loans receivable................... 51,728 30,357
--------- --------
$ 524,326 $562,297
--------- --------
--------- --------
</TABLE>
8. DEPOSITS
Deposits at September 30 are summarized as follows:
<TABLE>
<CAPTION>
Weighted 1995 1994
Average Rate ---------------------- --------------------
1995 Amount Percent Amount Percent
------------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Outstanding official checks......... $ 242,608 0.36% $ 589,628 0.88%
NOW accounts........................ 2.44% 3,635,441 5.38 3,279,995 4.90
Money market accounts............... 3.45 4,858,450 7.20 5,598,962 8.37
Passbook accounts................... 3.00 15,102,693 22.37 24,386,084 36.43
-------- ----------- ------
23,839,192 35.31 33,854,669 50.58
----------- -------- ----------- ------
Certificates of deposit:
Less than 3%...................... 207,811 0.31 238,920 0.36
3.00% to 3.99%.................... 93,172 0.14 8,987,349 13.43
4.00% to 4.99%.................... 5,822,238 8.62 17,733,369 26.49
5.00% to 5.99%.................... 16,693,182 24.73 3,991,377 5.96
6.00% to 6.99%.................... 17,335,441 25.68 1,242,280 1.86
7.00% to 7.99%.................... 3,304,146 4.89 370,857 0.55
8.00% to 8.99%.................... 210,692 0.31 485,803 0.73
9.00% to 9.99%.................... 6,646 0.01 6,080 0.01
10.00% and over................... -- 0.00 20,000 0.03
----------- -------- ----------- ------
5.78 43,673,328 64.69 33,076,035 49.42
----------- -------- ----------- ------
$67,512,520 100.00% $66,930,704 100.00%
----------- -------- ----------- ------
----------- -------- ----------- ------
Weight average cost of savings
deposits........................... 4.79% 3.84%
</TABLE>
Certificates of deposit with balances of $100,000 or more at September 30,
1995 and 1994 were $5,078,411 and $2,763,500, respectively.
<PAGE>
Scheduled maturities of certificates of deposit at September 30, 1995 are
as follows:
<TABLE>
<CAPTION>
Less Than
One Year 1-2 Years 2-3 Years Over 3 Years Total
---------- --------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Less than 3.00%.................. $ 207,811 $ -- $ -- $ -- $ 207,811
3.00% to 3.99%................... 93,122 50 -- -- 93,172
4.00% to 4.99%................... 5,003,649 818,589 -- -- 5,822,238
5.00% to 5.99%................... 14,016,993 1,096,175 872,456 707,558 16,693,182
6.00% to 6.99%................... 7,804,200 6,901,654 1,423,379 1,206,208 17,335,441
7.00% to 7.99%................... 98,584 -- 1,495,643 1,709,919 3,304,146
8.00% to 8.99%................... 188,977 21,715 -- -- 210,692
9.00% to 9.99%................... 6,646 -- -- -- 6,646
10.00% and over.................. -- -- -- -- --
----------- ---------- --------- ------------ -----------
$27,419,982 $8,838,183 $3,791,478 $ 3,623,685 $43,673,328
----------- ---------- --------- ------------ -----------
----------- ---------- --------- ------------ -----------
</TABLE>
Interest paid on depositor accounts for the years ended September 30
consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
NOW and money market accounts................ $ 243,124 $ 257,180 $ 278,522
Passbook and statement accounts.............. 647,229 867,175 769,761
Certificate accounts......................... 2,009,412 1,413,858 1,651,346
2,899,765 2,538,213 2,699,629
Less penalties for early withdrawal.......... 11,878 4,287 8,361
------------ ----------- -----------
Net interest expense on deposits............. $ 2,887,887 $ 2,533,926 $ 2,691,268
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
9. ADVANCES FROM FEDERAL HOME LOAN BANK
Advances from the Federal Home Loan Bank are summarized below by
maturity date:
<TABLE>
<CAPTION>
1995 1994
--------------------- --------------------
Due in year ending Interest Interest
September 30 Amount Rate Amount Rate
- - ------------------ ------ -------- ------ --------
<S> <C> <C> <C> <C>
1995............................ $ -- -- $1,500,000 5.95%
</TABLE>
At September 30, 1994, under a blanket floating lien with the FHLB, the
Savings Bank had pledged all of its stock in the FHLB and all residential
(1-4 units) first mortgage loans as collateral for advances. These advances
were drawn on a $5,000,000 line of credit that the Savings Bank had established
with FHLB at that time.
The Federal Home Loan Bank has established a credit availability program
and is phasing out the line of credit program. Credit availability allows
members of FHLB to request credit by completing an application. Credit
availability is based on financial and operating conditions and
<PAGE>
is subject to continued creditworthiness, compliance with conditions of the
application, and the pledging of eligible collateral. The credit availability
for the Savings Bank is $12.6 million.
10. STOCKHOLDERS' EQUITY
In 1987, the Board of Directors adopted an incentive stock option plan to
attract and retain management and key employees. The plan provided for
the granting of options to purchase 57,500 shares of common stock at fair
market value on the date of grant and a term of 10 years in which to
exercise the options:
Stock option activity was as follows:
<TABLE>
<CAPTION>
Number Option Price
of Shares Per Share
--------- ------------
<S> <C> <C>
Options outstanding at September 30, 1993 105,500 $5.00
Options surrendered 4,600 --
-------- ------
Options outstanding at September 30, 1994 100,900 5.00
Options surrendered 6,900 --
-------- ------
Options outstanding at September 30, 1995 94,000 $5.00
-------- ------
-------- ------
</TABLE>
All options were eligible to be exercised at September 30, 1995. The
number of shares and the option price per share have been adjusted to
reflect the effect of a 2 for 1 stock split in March 1989.
In lieu of normal redemption of the stock options, under the terms of
the Plan, the optionholders may present their options to the Option
Committee of the Board of Directors and receive, at the discretion
of the Option Committee, either common stock of the Savings Bank or cash
or a combination of cash and stock, an amount equal to the appreciation
of the value of the common stock from the date of grant (i.e., the
difference between the strike price of the option ($5) and the current
market price of the common stock). This settlement of the options is
equivalent to a stock appreciation rights (SAR) feature.
In February 1992, the Option Committee implemented a policy to provide
for the accrual of SAR's on all options then outstanding in anticipation of the
potential future exercise of these options. As of September 30, 1995, the
Option Committee resolved to discontinue accruing for the exercising of SAR's
and to limit any grants of SAR's to a $400,700 cap. Such amount will be
available to grant SAR's requests, if any, during the remaining term of the
plan from the optionees and will be granted on a pro rata basis.
At the time of conversion from mutual to a stock association, a
liquidation account was established in an amount equal to the net worth
as of the latest date of the financial statements contained in the final
prospectus used to sell the stock in the conversion. The liquidation account
will be maintained for the benefit of eligible account holders who continue
to maintain their accounts after conversion. In the event of a complete
liquidation (and only in such an event), each eligible account holder
will be entitled to receive a liquidation distribution from the liquidation
account, in the proportionate amount of the then current adjusted balance for
<PAGE>
accounts then held, before any liquidation distribution may be made with
respect to the stockholders. Except for the repurchase of stock and
payment of dividends by the Savings Bank, the existence of the liquidation
account will not restrict the use or application of such net worth.
The Board of Directors declared cash dividends during fiscal year
1995 totaling $0.40 per share, which amount to $461,640.
Earnings per share for the year ended September 30, 1995, 1994 and
1993 are based on the weighted average number of common and common equivalent
shares outstanding. Stock options are treated as common stock equivalents
using the treasury stock method in each period in which the effect is
dilutive. The weighted average number of common and common equivalent shares
used to compute earnings per share for years ended 1995, 1994, and 1993 were
1,213,732, 1,206,788, and 1,194,299, respectively.
Earnings per share for the years ended 1994 and 1993 have been restated
to provide for inclusion of the common stock equivalents then outstanding.
Retained earnings at September 30, 1995 and 1994, include allocations
of income to bad debt reserves for tax purposes. Earnings appropriated to bad
debt reserves and deducted for federal income tax purposes are not available
for payment of cash dividends or other distributions to stockholders,
including distributions on redemption, dissolutions, or liquidation, without
payment of such taxes on the amount of such earnings removed from the reserves
for such distribution at the then current tax rate. At September 30, 1995,
the Savings Bank had $3,158,439 of such appropriated reserves (see also
Note 13).
11. REGULATORY CAPITAL
Regulations of the Office of Thrift Supervision ("OTS") require
institutions to meet three minimum capital standards: a 1.5% of tangible
capital ratio, a 3% core capital ratio and an 8% risk-based capital ratio.
As of September 30, 1995, the Savings Bank exceeded all three capital
requirements as indicated in the following tabulation:
<TABLE>
<CAPTION>
Actual Required Excess over Actual Required
Capital Capital Required Percent Percent
--------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Tangible capital................ $14,790,861 $1,251,001 $13,539,860 17.73% 1.50%
Core capital.................... 14,790,861 2,502,002 12,288,859 17.73 3.00
Risk-based capital.............. 14,898,861 2,382,243 12,516,618 50.03 8.00
</TABLE>
OTS regulations impose limitations upon all capital distributions such
as dividends, stock repurchases, and cash-out mergers by savings institutions.
The rule establishes three tiers of institutions and the prerequisites as to
how each tier institution can make distributions. As of September 30, 1995,
the Savings Bank qualified as a Tier 1 institution; therefore, capital
distributions can be made, after prior notice but without OTS approval, equal
to the greater of: (1) 100% of net income plus the amount that would reduce
by one-half its "surplus capital ratio" (the excess capital over its fully
phased-in capital requirements) at the beginning of the year; or (2) 75% of
its net income for the previous four quarters. Any additional capital
distributions would require prior regulatory approval.
In addition to the above capital requirements, the Savings Bank is
required to maintain an average daily balance of specified liquid assets equal
to a monthly average of not less than a
<PAGE>
specified percentage of its net withdrawable deposit accounts plus
short-term borrowings. This liquidity requirement is currently 5%. OTS
regulations also require each member institution to maintain an average
daily balance of short-term liquid assets at a specified percentage
(currently 1%) of the total of its net withdrawable deposit accounts and
borrowings payable in one year or less. The Savings Bank's liquidity and
short-term liquidity ratios for September 30, 1995 were 17.22% and 3.42%
respectively.
12. EMPLOYEE BENEFIT PLANS
The Savings Bank has a non-contributory defined benefit pension plan which
covers substantially all employees. The plan uses the final average salary
benefit formula with benefits based on years of accrued service. The
Savings Bank's policy is to contribute annually the amount required by the
plan. Contributions are intended to provide not only for benefits
attributed to service to date, but also for those expected to be earned in
the future.
The following table sets forth the plan's funded status and amounts
recognized in the statements of financial condition at September 30, 1995
and 1994. Certain amounts as shown for 1994 have been restated to provide
new valuation data from the actuary:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits obligation of $1,193,128 and $1,051,322,
respectively. . . . . . . . . . . . . . . . . . . $ 1,251,311 $ 1,108,852
----------- -----------
----------- -----------
Projected benefit obligation for
service rendered to date. . . . . . . . . . . . . $(1,323,744) $(1,207,655)
Plan assets at fair value; Mutual Savings
Bank common stock and short-term investments. . . 1,313,355 1,128,025
----------- -----------
Funded status . . . . . . . . . . . . . . . . . . . (10,389) (79,630)
Unrecognized net obligation being recognized
over 17 years . . . . . . . . . . . . . . . . . . 305,410 335,206
Unrecognized net (gain) or loss . . . . . . . . . . (475,774) (425,323)
----------- -----------
Accrued pension cost. . . . . . . . . . . . . . . . $ (180,753) $ (169,747)
----------- -----------
----------- -----------
</TABLE>
Net periodic pension cost for years ended September 30 included the
following components:
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
Service cost - benefits earned
during the period. . . . . . . . $ 66,518 $ 73,632 $ 64,868
Interest cost on projected
benefit obligation . . . . . . . 82,249 85,883 42,058
Return on plan assets. . . . . . . (138,193) (69,175) (74,623)
Net amortization and deferral. . . 75,432 22,079 15,002
--------- -------- --------
Net periodic pension cost. . . . . $ 86,006 $112,419 $ 47,305
--------- -------- --------
--------- -------- --------
</TABLE>
The discount rate used to determine the actuarial present value of the
projected benefit obligation was 7% for both 1995 and 1994, respectively.
The expected long-term rate of return on plan assets used in determining
net pension expense was 7% for both 1995 and 1994,
<PAGE>
respectively. The assumed rate of increase in future compensation levels
was 4% for both 1995 and 1994, respectively.
As of September 30, 1995, the plan had no additional liability and no
intangible asset.
The Savings Bank also has an Employee Stock Ownership Plan ("ESOP"). The
plan covers substantially all employees. At September 30, 1995, the ESOP
held 118,020 shares of the Savings Bank's common stock all of which had
been allocated to the participants as of that date. As of September 30,
1995, the market value of plan assets was $1,804,497.
Contributions, which include interest, to the ESOP plan for years ended
September 30, 1995, 1994 and 1993 were $57,925, $36,712, and $166,236,
respectively. Contributions are made based upon 10% of annual compensation
plus a discretionary amount as determined by the Board of Directors, not to
exceed 25% of the participants' compensation.
The Savings Bank does not provide any benefits that are subject to the
provisions of SFAS No. 106, "Employers Accounting for Postretirement
Benefits Other Than Pensions" and SFAS No. 112, "Employers Accounting for
Postemployment Benefits".
13. INCOME TAXES
Under the Internal Revenue Code, the Savings Bank is allowed a special bad
debt deduction related to additions to tax bad debt reserves established
for the purposes of absorbing losses. A deduction for bad debts of 8% of
taxable income is allowable. The Savings Bank is also subject to state
income taxes. The state allows a deduction for bad debts of 40% of taxable
income. The Savings Bank did not qualify for the special allowance for bad
debt deduction in 1995 and 1994.
Deferred income taxes have not been provided on bad debt reserves since the
Savings Bank does not intend to use the reserves for purposes other than to
absorb losses.
The Savings Bank estimates that approximately $1,074,000 of income tax
would be payable on the tax bad debt reserves if these amounts are used for
purposes other than bad debt losses.
Provision for income taxes for the years ended September 30 is summarized
as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Current . . . $516,225 $515,020 $579,822
Deferred. . . (29,218) (8,869) (30,010)
-------- -------- --------
$487,007 $506,151 $549,812
-------- -------- --------
-------- -------- --------
</TABLE>
<PAGE>
A reconciliation of the statutory federal income tax rate to the effective
income tax rate follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate . . . . . 34% 34% 34%
Increase (decrease) in taxes
resulting from:. . . . . . . . . . . . . .
Tax bad debt deduction . . . . . . . . . -- -- (3)
Tax exempt interest and dividends. . . . (2) (1) (1)
State income taxes . . . . . . . . . . . 2 2 1
Other, net . . . . . . . . . . . . . . . (1) (1) (1)
---- ---- ----
33% 34% 30%
---- ---- ----
---- ---- ----
</TABLE>
The sources of temporary differences and their deferred tax effect are as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Deferred loan fees . . . . . . $ 6,850 $ (3,605) $ (468)
Depreciation . . . . . . . . . 13,067 9,900 9,531
Pension expense. . . . . . . . (3,742) (102) (16,084)
Federal Home Loan Bank
stock dividends. . . . . . . 479 16,245 12,646
Stock appreciation rights. . . (45,390) (32,028) (35,292)
Other, net . . . . . . . . . . (482) 721 (343)
-------- -------- --------
$(29,218) $ (8,869) $(30,010)
-------- -------- --------
-------- -------- --------
</TABLE>
The tax effect of temporary differences that give rise to deferred tax
assets and deferred tax liabilities at September 30, are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred tax assets:
Deferred loan fees . . . . . . . . . . . . . . . . $ 55,214 $ 62,064
Pension expense. . . . . . . . . . . . . . . . . . 61,456 57,714
Provision for stock appreciation rights. . . . . . 136,238 90,848
Unrealized loss on securities available for sale . 2,101 --
Other. . . . . . . . . . . . . . . . . . . . . . . 623 141
-------- --------
Total gross deferred tax assets. . . . . . . . . 255,632 210,767
-------- --------
Deferred tax liabilities:
Depreciation . . . . . . . . . . . . . . . . . . . 195,572 182,505
Federal Home Loan Bank stock dividends . . . . . . 50,535 50,056
-------- --------
Total gross deferred tax liabilities . . . . . . 246,107 232,561
-------- --------
Net deferred tax assets (liability). . . . . . . $ 9,525 $(21,794)
-------- --------
-------- --------
</TABLE>
With respect to the realization of total gross deferred tax assets, the
Savings Bank believes that a valuation allowance is not necessary.
<PAGE>
14. OTHER NONINTEREST EXPENSE
Other noninterest expense amounts are summarized as follows for the years
ended September 30:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Advertising . . . . . . . . . $ 79,222 $ 49,442 $ 42,081
Data processing . . . . . . . 144,756 137,914 138,963
Merger expenses . . . . . . . 8,278 259,050 --
Other . . . . . . . . . . . . 185,800 172,492 198,062
-------- -------- --------
$418,056 $618,898 $379,106
-------- -------- --------
-------- -------- --------
</TABLE>
Merger expenses as shown for 1995 represent initial consultant expenses
related to the proposed merger with American National Bankshares Inc. (See
also Note 19).
On July 5, 1994, Mutual Savings mutually agreed with FNB Financial Services
Corporation ("FNB") to terminate the plan of combination. The combination
had provided for the Savings Bank to merge with and into a newly chartered
national banking association subsidiary of FNB. Merger expenses as
indicated for 1994 represent a charge to income for expenses incurred as
associated with the merger.
15. COMMITMENTS
The Savings Bank entered into transactions in the normal course of doing
business which represented off-balance-sheet risk as of September 30, 1995
and 1994. A summary of these transactions follow:
<TABLE>
<CAPTION>
1995 1994
---------- --------
<S> <C> <C>
Commitments to finance real estate
acquisitions and construction . . . . . . $1,256,185 $438,500
Commitments to finance commercial loans . . 451,125 367,525
Undisbursed lines of credit . . . . . . . . 33,500 12,500
Standby letters of credit . . . . . . . . . -- 13,500
---------- --------
$1,740,810 $832,025
---------- --------
---------- --------
</TABLE>
The Savings Bank's exposure to credit loss in the event of non-performance
by the other party to the financial instrument for commitments to extend
credit and standby letters of credit is represented by the contractual
notional amount of those instruments. The Savings Bank uses the same credit
policies in making commitments and conditional obligations as it does for
on-balance-sheet instruments.
16. CONCENTRATIONS OF CREDIT RISK
Substantially all of the Savings Bank's loans, commitments and lines of
credit have been granted to customers in the Savings Bank's market area.
Substantially all of the investments are in U.S. Government and Agency
obligations, municipal obligations, and corporate notes of other financial
institutions. Mortgaged-backed securities involve the secondary mortgage
loan
<PAGE>
market through government agencies. The concentrations of credit by loan
are set forth in Note 4. Lines of credit are granted primarily to
commercial borrowers. The Savings Bank does not extend credit to any single
borrower or group in excess of its loans to one borrower limit of
$2.2 million.
17. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly data for years ended September 1995 and 1994 follows:
<TABLE>
<CAPTION>
Year Ended September 30, 1995
-----------------------------
Three Months Ended
--------------------------------------------------
December 31 March 31 June 30 September 30
----------- -------- -------- ------------
<S> <C> <C> <C> <C>
Net interest income . . . . . . . . . $819,230 $786,501 $772,592 $741,629
Provision for loan losses . . . . . . -- -- -- 8,300
Noninterest income. . . . . . . . . . 34,870 87,854 37,763 37,867
Noninterest expense . . . . . . . . . 478,318 463,576 451,182 437,035
-------- -------- -------- --------
Net income before taxes . . . . . . . 375,782 410,779 359,173 334,161
Income taxes. . . . . . . . . . . . . 125,684 146,800 123,000 91,523
-------- -------- -------- --------
Net income. . . . . . . . . . . . . . $250,098 $263,979 $236,173 $242,638
-------- -------- -------- --------
-------- -------- -------- --------
Earnings per share. . . . . . . . . . $ 0.21 $ 0.22 $ 0.19 $ 0.20
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30, 1994
-----------------------------
Three Months Ended
--------------------------------------------------
December 31 March 31 June 30 September 30
----------- -------- -------- ------------
<S> <C> <C> <C> <C>
Net interest income . . . . . . . . . $791,301 $723,933 $797,313 $806,379
Noninterest income. . . . . . . . . . 45,524 81,550 45,578 153,240
Noninterest expense . . . . . . . . . 438,317 416,790 402,517 705,085
-------- -------- -------- --------
Net income before taxes . . . . . . . 398,508 388,693 440,374 254,534
Income taxes. . . . . . . . . . . . . 131,500 128,300 145,300 101,051
-------- -------- -------- --------
Net income. . . . . . . . . . . . . . $267,008 $260,393 $295,074 $153,483
-------- -------- -------- --------
-------- -------- -------- --------
Earnings per share. . . . . . . . . . $ 0.22 $ 0.22 $ 0.24 $ 0.13
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
18. PROPOSED CHANGES IN ACCOUNTING
In December 1991, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments". SFAS
No. 107 requires all entities to disclose the fair value of financial
instruments, for which it is practicable to estimate fair value. SFAS
No. 107 is effective for financial statements issued for fiscal years
ending after December 15, 1992 (1995 for entities with less than
$150 million in total assets in the current statement of financial
position). Presently, this statement will be effective for the Savings
Bank
<PAGE>
in the year ending September 30, 1996. Management believes that the effect
on the consolidated statements would not be significantly adverse.
In May 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for
Impairment of Loans," which is effective for fiscal years beginning after
December 15, 1994. Statement No. 114 requires that specified impaired loans
be measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate. In October, 1994, the
FASB issued SFAS No. 118, "Accounting by Creditors for Impairment of a
Loan - Income Recognition and Disclosures." SFAS No. 118 amends certain
requirements of SFAS No. 114 and is effective concurrently with No. 114.
Statements No. 114 and 118 are not expected to have a material effect on
the Savings Bank.
19. DEFINITIVE MERGER AGREEMENT
On September 26, 1995, Mutual entered into a definitive agreement, whereby
Mutual would be acquired by American National Bankshares Inc. ("American
National") in a stock for stock exchange. The transaction contemplates a
fixed rate of .705 of a share of American National common stock for each
share of Mutual common stock. The merger will be tax free to Mutual's
stockholders and will be accounted for as a pooling of interest. In
connection with the transaction, Mutual has agreed to pay American National
a termination fee of $1,000,000 in the event Mutual, under certain
circumstances as set forth in the agreement, terminates the agreement or
fails to consummate the merger and within 12 months thereafter is acquired
by another party.
<PAGE>
OFFICE OF THRIFT SUPERVISION
WASHINGTON, D.C. 20552
_______________
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
__________________
For Quarter Ended Office of Thrift Supervision
December 31, 1995 Docket Number 4938
MUTUAL SAVINGS BANK, FSB
(Exact name of registrant as specified in its charter)
United States 54-0313280
(State or jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
103 Tower Drive, Danville, Virginia 24540
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (804) 791-0200
Indicate by a 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
As of December 31, 1995, there were issued and outstanding 1,156,100 shares
of the registrant's Common Stock.
Transmittal Small Business Disclosure Format
Yes No X
<PAGE>
MUTUAL SAVINGS BANK, FSB
Consolidated Statements of Financial Condition
______________________________________________________________________________
<TABLE>
<CAPTION>
December September
1995 1995
(Unaudited)
ASSETS
<S> <C> <C>
Cash
Non-interest bearing deposits $ 666,191 860,557
Interest bearing deposits 982,089 1,166,729
Investment securities
Securities available-for-sale 6,286,059 5,227,172
Securities held-to-maturity 19,344,333 19,370,846
Mortgage-backed securities 14,305,522 14,337,785
Loans receivable, net 40,518,370 39,869,679
Office properties and equipment, net 1,883,424 1,889,282
Accrued interest receivable 544,945 524,326
Prepaid and other assets 175,291 149,608
------------ -----------
Total assets $ 84,706,224 83,395,984
============ ===========
LIABILITIES
Deposits $ 68,732,382 67,512,520
Advance payments and deposits by borrowers 212,825 321,796
Accounts payable and other accrued liabilities 805,321 774,886
---------- ----------
Total liabilities 69,750,528 68,609,202
========== ==========
STOCKHOLDERS' EQUITY
Preferred stock - -
Common stock 1,156,100 1,154,100
Additional paid-in capital 4,234,252 4,226,252
Retained earnings 9,530,384 9,410,509
Net unrealized appreciation (depreciation)
on securities available for sale, net of tax 34,960 ( 4,079)
---------- ----------
Total stockholders' equity 14,955,696 14,786,782
Total liabilities & equity $ 84,706,224 83,395,984
============ ===========
</TABLE>
Note:
The consolidated statement of financial condition at September 30, 1995 has
been taken from the audited financial statements at that date.
<PAGE>
MUTUAL SAVINGS BANK, FSB
Consolidated Statements of Income
___________________________________________________________
<TABLE>
<CAPTION>
Three Months Ended
December
1995 1994
(Unaudited)
<S> <C> <C>
Interest income
Loans $ 917,162 781,107
Mortgage-backed securities 261,884 289,742
Investment securities 362,153 403,063
Short-term investments and bank deposits 19,347 8,367
--------- ---------
Total interest income 1,560,546 1,482,279
--------- ---------
Interest expense
Deposits 810,598 648,086
Federal Home Loan Bank advances ( 41) 14,963
--------- --------
Total interest expense 810,557 663,049
--------- --------
Net interest income 749,989 819,230
Provision for loan losses 25,000 -
--------- --------
Net interest income after
provision for loan losses 724,989 819,230
--------- --------
Noninterest income
Service charges and fees on loans 12,078 1,606
Other fees and service charges 29,301 27,427
Gain on sale of investments 898 -
Other 5,405 5,837
--------- --------
Total noninterest income 47,682 34,870
--------- --------
Noninterest expense
Compensation, payroll taxes and
employee benefits 240,131 293,480
Occupancy and equipment 35,126 37,155
Other 139,641 147,683
--------- --------
Total noninterest expense 414,898 478,318
--------- --------
Income before income taxes 357,773 375,782
Provision for income taxes 122,288 125,684
--------- --------
Net income $ 235,485 250,098
=========== ==========
Earnings per share of common and
common stock equivalents $ 0.19 0.21
=========== ==========
Dividends declared per share $ 0.10 0.10
=========== ==========
Weighted average number of common and common
stock equivalent shares outstanding 1,215,650 1,213,881
=========== ==========
</TABLE>
<PAGE>
MUTUAL SAVINGS BANK, FSB
Consolidated Statements of Cash Flows
__________________________________________________________________
<TABLE>
<CAPTION>
Three Months Ended
December
1995 1994
(Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net income $ 235,485 250,098
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation and amortization 16,313 14,951
Provision for loan losses 25,000 -
Increase (decrease) in deferred loan fees ( 13,286) 243
Gain on sale of securities - AFS ( 898) -
Amortization of premiums and (discounts) on
investments and mortgage-backed securities ( 1,635) ( 724)
Deferred income taxes - 73,663
(Increase) decrease in interest receivable ( 20,619) 22,166
Increase in prepaid and other assets ( 27,784) ( 46,691)
Increase (decrease) in interest payable ( 13,417) 1,832
Increase in accounts payable and
other liabilities 38,529 194,412
------------ -----------
Net cash provided by operating
activities 237,688 509,950
------------ -----------
Cash flows from investing activities
Purchase of securities - AFS (1,500,000) -
Proceeds from sales of securities - AFS 500,625 -
Proceeds from maturities of securities - HTM 27,334 528,304
Purchase of mortgage-backed securities ( 518,732) -
Principal collections on mortgage-backed
securities 552,345 459,899
Net increase in loans ( 660,405) ( 236,920)
Purchase of property and equipment ( 10,455) ( 4,367)
------------- ------------
Net cash provided by (used in)
investing activities (1,609,288) 746,916
------------- ------------
Cash flows from financing activities
Net increase (decrease) in demand deposits,
NOW accounts and savings accounts 2,510 (1,989,353)
Net increase in certificates of deposit 1,217,352 705,083
Advances from Federal Home Loan Bank - 1,900,000
Repayment of Federal Home Loan Bank advances - (1,900,000)
Net decrease in advance payments by borrowers
for taxes and insurance ( 121,658) ( 132,681)
Cash dividends ( 115,610) ( 115,410)
Proceeds from exercise of stock options 10,000 -
------------- ------------
Net cash provided by (used in)
financing activities 992,594 (1,532,361)
------------- ------------
(Continued)
</TABLE>
<PAGE>
MUTUAL SAVINGS BANK, FSB
Consolidated Statements of Cash Flows
___________________________________________________________
<TABLE>
<CAPTION>
Three Months Ended
December
1995 1994
(Unaudited)
<S> <C> <C>
Decrease in cash and cash equivalents $( 379,006) ( 275,495)
Cash and cash equivalents
Beginning of period 2,027,286 1,623,055
----------- ---------
End of period $ 1,648,280 1,347,560
=========== =========
Supplemental schedule of cash and
cash equivalents:
Cash
Non-interest bearing deposits $ 666,191 633,787
Interest-bearing deposits 982,089 713,773
----------- ---------
$ 1,648,280 1,347,560
=========== =========
Supplemental disclosures of cash flow
information:
Interest paid $ 823,974 661,218
=========== =========
</TABLE>
<PAGE>
MUTUAL SAVINGS BANK, FSB
Notes to Consolidated Financial Statements
______________________________________________________________________________
1. Presentation of Statements
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (all which were normal recurring
accruals) necessary for a fair presentation. The results of operations for
the interim periods are not necessarily indicative of the results which may
be expected for an entire year.
2. Certain items as shown for prior periods have been reclassified to
conform to the December 31, 1995 form of presentation.
<PAGE>
MUTUAL SAVINGS BANK, FSB
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
_______________________________________________________________________________
Cash and investment securities increased $653,400 for the quarter ended
December 31, 1995 a compared to September 30, 1995. Loans increased $648,700
to $40,518,400 as compared to $39,869,700 as of September 30, 1995.
Deposits increased $1,219,900 for the quarter ended December 31, 1995 to
$68,732,400 as compared to $67,512,500 as of September 30, 1995. Deposits
increases were used to fund investments and loans.
Stockholder's equity totaled $14,955,700 or 17.66% of total assets at
December 31, 1995. Stockholder's equity per share was $12.94 at
December 31, 1995 compared to $12.81 at September 30, 1995. The increase was
due to the crediting of net earnings after dividends and an improvement in
the market value of securities available for sale.
For the three months ended December 31, 1995, Mutual had net income of
$235,500 compared to $250,100 for the same period in 1994. Net interest
income decreased $69,200 for the quarter as compared to the same period last
year. The net interest rate margin decreased 0.08% from 2.77% at
September 30, 1995 to 2.69% at December 31, 1995.
Provision for loan losses increased $25,000 during the quarter so that the
allowance for loan losses would more closely approximate an amount determined
under the methodology used by American National Bank.
Noninterest income increased $12,800 during the current three month period
as compared to the same period last year. This increase was primarily the
result of increased loan fees and prepayment penalties on loans.
Noninterest expense decreased $63,400 during the current three month period as
compared to the same period in 1994. This decrease was primarily the result
of the accrual of $45,500 in stock appreciation rights in 1994 that were not
provided for in 1995. In addition, directors fees were $9,400 higher in 1994.
The following dividends have been declared and paid by the Savings Bank during
the fiscal year:
Date Declared Date Paid Per Share Total
December 19, 1995 January 15, 1996 0.10 115,610
------ ---------
$ 0.10 $ 115,610
Earnings per share on common stock and common stock equivalents were $0.19 for
the quarter as compared to $0.21 for the comparative quarter ended
December 31, 1994.
(Continued)<PAGE>
MUTUAL SAVINGS BANK, FSB
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
______________________________________________________________________________
Under the Financial Institutions Reform, Recovery and Enforcement Act of 1989
(FIRREA), thrifts must meet three capital requirements. As of December 31,
1995, Mutual exceeded all the requirements as indicated by the following table.
Percentages are based on adjusted assets unless otherwise noted.
Total Capital (GAAP) $ 14,955,696
- - Unrealized gain - AFS 52,970
+ Deferred income taxes - AFS 18,010
Regulatory capital 14,920,736
+ General loan loss reserves 133,000
Risk-based capital $ 15,053,736
Total assets $ 84,706,224
- - Unrealized gain - AFS 52,970
Adjusted assets $ 84,653,254
Risk weighted assets $ 30,592,756
Requirement Mutual
Percent Dollar Percent Excess
Tangible capital 1.5% $ 1,269,799 17.63% $ 13,650,937
Core capital 3.0% $ 2,539,598 17.63% $ 12,381,138
Total capital/
risk weighted assets 8.0% $ 2,447,420 49.21% $ 12,606,316
The principal sources of liquidity for the Savings Bank are customer deposits,
principal and interest payments on loans and earnings on investments, with
minimal reliance on FHLB advances and other borrowings. The Savings Bank is
required by current OTS regulations to maintain a minimum liquidity ratio or
5.0%. Mutual's liquidity ratio at December 31, 1995 was 18.75%. Management
believes this liquidity is adequate to meet its requirements.
On July 28, 1995, the FDIC, the Treasury Department, and the OTS released
statements outlining a proposed plan (the "Proposed Plan") to recapitalize
the SAIF certain features of which were subsequently approved by the House of
Representatives and the Senate of the United States in bills that provided for
different resolutions of the BIF-SAIF disparity. In negotiations between
members of the Banking Committee of the House and Senate to reconcile the
differences in the two bills, it agreed on November 7, 1995 that the current
Budget Reconciliation Package will focus on the financial problems of the SAIF.
Under the Committee Agreement, all SAIF-insured institutions would pay a
special assessment to recapitalize the SAIF and the assessment based for the
payments on the FICO bonds would be expanded to include the deposits of both
BIF-and SAIF-insured institutions. The amount of the special assessment
required to recapitalize the SAIF is currently estimated to be approximately
80 basis points, somewhat less than the 85 - 90 basis point assessment that
had been preciously estimated as necessary. The special assessment would be
payable some
(Continued)
<PAGE>
MUTUAL SAVINGS BANK, FSB
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
___________________________________________________________________________
time in 1996 based on the amount of SAIF-insured deposits held on March 31,
1995. The Committee Agreement would also permit BIF-insured institutions
holding deposits subject to SAIF assessments to reduce such SAIF deposits by
20% in computing the institution's special assessment. There is some
questions as to whether either BIF-insured institutions acquiring SAIF-insured
institutions after March 31, 1995 or SAIF-insured institutions that go out of
existence prior to the enactment of the Budget Reconciliation legislation
would be required to pay any special assessment under the current language
of the legislation. If an 80 basis point assessment were assessed against
Mutual's deposits as of March 31, 1995, Mutual would be required to pay a
special assessment on its SAIF-insured deposits of $536,500. In accordance
with generally accepted accounting principles, Mutual had not recorded an
accrual for the special assessment at September 30, 1995. Mutual's assessment
rate for fiscal 1995 was 23 basis points and the premium paid for this period
was $153,585. A significant increase in SAIF insurance premiums or a
significant special assessment to recapitalize the SAIF would likely have an
adverse effect on the operating expenses and results of operations of Mutual.
The merger with American National Bankshares, Inc. is progressing as
anticipated. The Office of Thrift Supervision has been notified and has no
objections, the Controller of the Currency has expressed its approval. Mutual
and American National Bankshares are waiting for the Securities and Exchange
Commission to declare the Form S-4 Registration Statement effective and the OTS
to clear Mutual's proxy statement in order to mail the joint proxy statement
and seek approval of their respective stockholders. If final approval is
timely received, a stockholders meeting to vote on the merger is planned in
March with the merger expected to occur shortly thereafter.
<PAGE>
<PAGE>
MUTUAL SAVINGS BANK, FSB
Other Information
______________________________________________________________________________
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Not applicable.
(b) A Form 8-K was filed December 19, 1995 declaring a cash
dividend of $0.10 per share to stockholders of record as
of January 5, 1996, payable on January 15, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned.
MUTUAL SAVINGS BANK, FSB
(Registrant)
Date _____________________ By _________________________________________
H. Dan Davis, President and Chief
Executive Officer
(Duly Authorized Representative)
Date _____________________ By _____________________________________
James R. Jefferson, Treasurer
(Principal Financial Officer)
<PAGE>
PRO FORMA FINANCIAL INFORMATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1995
(UNAUDITED)
The following unaudited pro forma condensed combined balance sheet is
presented to show the impact on ANB's historical financial position of the
proposed merger with Mutual. The proposed merger is reflected in the pro
forma condensed combined balance sheet under the pooling of interests method
of accounting. For purposes of determining the pro forma effects on the
condensed balance sheets as of September 30, 1995, the pro forma adjustments
and eliminations have been made as if the transaction had occurred on
September 30, 1995. The unaudited pro forma condensed combined balance sheet
should be read in conjunction with the historical consolidated financial
statements of Mutual and ANB, including the respective notes thereto.
The pro forma condensed combined balance sheet is not necessarily indicative
of the results that actually would have occurred had the Merger been
consummated on the date indicated or that may be obtained in the future.
<TABLE>
<CAPTION>
Proforma Condensed Balance Sheets
December 31, 1995
(Unaudited)
(Dollars in thousands) American
National
and Mutual
American Adjustments proforma
National Mutual Debit (Credit) combined
Assets
<S> <C> <C> <C> <C>
Cash and Due from Banks $9,534 $666 $10,200
Federal Funds Sold 1,100 -- 1,100
Interest-Bearing Deposits in Other Banks 128 982 1,110
Investment Securities 109,303 39,108 -500 (e) 147,911
Net Loans 172,815 40,518 213,333
Federal Reserve Stock, Federal Home Loan
Bank Stock and Other, at cost 963 829 1,792
Bank Premises and Equipment,
less accumulated depreciation 3,948 1,883 5,831
Core Deposit Intangibles 2,823 -- 2,823
Accrued Interest Receivable
and Other Assets 4,469 720 5,189
Total Assets $305,083 $84,706 -$500 $389,289
</TABLE>
(a) ANB's plans for certain Mutual securities are demonstrably different from
the plans that have served as the basis for Mutual's intention to hold these
securities to maturity. As such, American National intends to classify
these securities as available for sale. This adjustment is recorded to
present these securities at market value as of September 30, 1995.
<TABLE>
<CAPTION>
Liabilities and Shareholders' Investment
Liabilities:
<S> <C> <C> <C> <C>
Deposits $259,830 $68,732 $328,562
Federal Funds Purchased and
Repurchase agreements 9,572 -- 9,572
Accrued interest payable and
other liabilities 1,556 1,018 1,074 (a)
965 (b) 4,613
Total Liabilities 270,958 69,750 2,039 342,747
Shareholders' Investment:
Common stock, $1 par, 2,400,000
actual shares issued and outstanding,
3,215,000 proforma shares outstanding 2,400 1,156 -1,156 (c)
815 (d) 3,215
Capital in excess of par value 5,400 4,234 -4,234 (c)
4,575 (d) 9,975
Net Unrealized Gain 632 35 667
Retained Earnings 25,693 9,531 -1,074 (a)
-965 (b)
-500 (e) 32,685
Total shareholders' investment 34,125 14,956 -2,539 46,542
Total liabilities and
shareholders' investment $305,083 $84,706 -$500 $389,289
Book value per common share (f) $14.22 $12.94 $14.48
</TABLE>
(a) This adjustment reflects the estimated Federal tax liability associated with
prior untaxed loan loss reserves of Mutual in the amount of $3,158,439
calculated at the marginal tax rate of 34%. The impact of this adjustment
has not been reflected in the Pro Forma Condensed Statements of Income.
(b) This adjustment reflects certain material, nonrecurring expenses expected
to be incurred in connection with the Merger. These charges include such
items as legal, accounting, printing and filing fees. The impact of these
expenses has not been reflected in the Pro Forma Condensed Statements of
Income.
(c) These adjustments eliminate the outstanding shares of Mutual Common Stock
and related capital in excess of par value outstanding prior to the Merger.
(d) Based on the exchange ratio of .705 of a share of ANB Common Stock for each
share of Mutual Common Stock, these adjustments reflect the issuance of
815,051 shares of ANB Common Stock in exchange for the 1,156,100 shares of
Mutual Common Stock outstanding on December 31, 1995.
(e) ANB's plans for certain Mutual securities are demonstrably different from
the plans that have served as the basis for Mutual's intention to hold
these securities to maturity. As such, American National intends to
classify these securities as available for sale. This adjustment is
recorded to present these securities at market value as of December 31,
1995.
(f) Pro forma book value per common share represents pro forma combined total
shareholders' investment divided by 3,215,051 pro forma shares outstanding.
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(UNAUDITED)
The following table sets forth certain unaudited pro forma condensed combined
financial data for ANB giving effect to the Merger accounted for as a pooling
of interests. The following information does not include any pro forma
adjustments relating to expected future reductions in expenses and revenue
enhancements. This information should be read in conjunction with the
historical consolidated financial statements of Mutual and ANB, including
the respective notes thereto. The pro forma financial data are not necessarily
indicative of results that actually would have occurred had the Merger been
consummated on the dates indicated or that may be obtained in the future.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Proforma Condensed Statements of Income
(Unaudited)
(Dollars in thousands except Net Income Per Common Share)
American National and Mutual proforma combined
Fiscal years ended (1)
______________________________________
1995 1994 1993
<S> <C> <C> <C>
Interest Income:
Interest and fees on loans $18,391 $14,860 $14,109
Interest on federal funds sold and other 202 171 322
Interest and dividends on securities
and other investments 7,236 6,690 7,577
---------- ---------- ---------
Total Interest Income 25,829 21,721 22,008
Interest Expense: ---------- ---------- ---------
Interest on deposits 11,144 8,865 9,705
Federal Home Loan bank advances 33 11 --
Short-term borrowings -- 1 7
Interest on federal funds purchased and -- -- --
repurchase agreements 307 42 3
---------- ---------- ---------
Total Interest Expense 11,484 8,919 9,715
---------- ---------- ---------
Net Interest Income 14,345 12,802 12,293
Provision for Loan Losses 484 272 214
Net Interest Income After Provision For ---------- ---------- ---------
Loan Losses 13,861 12,530 12,079
---------- ---------- ---------
Non-interest income 2,084 2,212 2,068
---------- ---------- ---------
Non-interest expense 8,598 8,082 7,549
---------- ---------- ---------
Income Before Income Tax Provision 7,347 6,660 6,598
---------- ---------- ---------
Income Tax Provision 2,331 2,151 2,033
---------- ---------- ---------
Net Income $5,016 $4,509 $4,565
========== ========== =========
PER SHARE DATA
Net Income Per Common Share(2) $1.41 $1.39 $1.41
Dividends per share(3) 0.51 0.56 0.35
</TABLE>
(1) ANB prepares annual financial statements based on a calendar year ending
on December 31, and Mutual prepares annual financial statements based on
a fiscal year ending on September 30. For purposes of annual pro forma
information, the historical data of Mutual at and for the years ended on
September 30 have been combined with the historical data of ANB at and
for the years ended on December 31.
(2) The pro forma combined net income per common share data are based on (i)
combined historical income of Mutual and ANB assuming the Merger is
accounted for as a pooling of interests and (ii) pro
forma combined equivalent common shares of Mutual (as adjusted for the
Exchange Ratio of .705 of a share of ANB Common Stock for each share of
Mutual Common Stock) and ANB.
(3) Represents the historical dividends paid by ANB divided by pro forma
shares outstanding as of the last date of the period which includes
Mutual shares multiplied by the Exchange Ratio of .705.
