<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
September 30, 1997 0-18925
--------------------- ----------------------
For the quarter ended Commission file number
ANB CORPORATION
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
INDIANA 35-1612066
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 East Main Street, Muncie, Indiana 47305
----------------------------------------------
Address of principal executive offices
317-747-7575
-----------------------------------------
Registrant's telephone number & area code
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
As of November 6, 1997 there were outstanding 4,522,247 Common Shares,
$1 stated value, of the Registrant.
Page 1 of 15 Pages
<PAGE>
ANB CORPORATION
FORM 10-Q
September 30, 1997
-----------------
TABLE OF CONTENTS
Part I - Financial Information:
Item 1 - Financial Statements PAGE
----
Consolidated Condensed Balance Sheet........... 3
Consolidated Condensed Statement of Income..... 4 - 5
Consolidated Condensed Statement of Changes in
Stockholders' Equity........................... 6
Consolidated Condensed Statement of Cash Flows. 7
Notes to Consolidated Condensed Financial
Statements..................................... 8 - 9
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations.. 10 - 13
Part II - Other Information:
Item 6 - Exhibits and Reports on Form 8-K............... 14
Signatures.............................................. 15
Page 2 of 15 Pages
<PAGE>
ANB CORPORATION
FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED CONDENSED BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
SEPTEMBER 30, DECEMBER 31,
1997 1996
---- ----
ASSETS:
Cash and due from banks ...................... $ 19,798 $ 21,835
Federal funds sold............................ 2,475
Interest-bearing deposit accounts............. 451 74
-------- --------
Cash and cash equivalents.................. 20,249 24,384
Securities available for sale:
Taxable.................................... 25,211 29,778
Tax exempt................................. 43,679 44,166
-------- --------
Total securities available for sale..... 68,890 73,944
Loans:
Loans...................................... 401,631 376,081
Allowance for loan losses.................. (3,361) (3,400)
-------- --------
Net loans............................... 398,270 372,681
Loans held for sale .......................... 105 204
Premises and equipment........................ 11,272 9,345
Federal Reserve & Federal Home Loan Bank Stock 3,293 2,713
Other real estate............................. 489 516
Interest receivable........................... 4,073 4,159
Goodwill and core deposit intangibles ........ 4,890 4,306
Other assets.................................. 2,447 1,595
-------- --------
Total assets............................ $513,978 $493,847
======== ========
LIABILITIES
Deposits
Noninterest bearing........................ $ 54,769 $ 50,256
Interest bearing........................... 368,308 355,589
-------- --------
Total deposits 423,077 405,845
Short-term borrowings......................... 11,414 17,676
Federal Home Loan Bank advances............... 18,780 14,000
Interest payable.............................. 1,747 1,391
Other liabilities............................. 3,877 3,594
-------- --------
Total liabilities....................... 458,895 442,506
-------- --------
Commitments and contingent liabilities
STOCKHOLDERS' EQUITY
Preferred stock, without par value:
Authorized-250,000 shares, none issued
Common stock, $1 stated value:
Authorized-20,000,000 shares
Issued and outstanding-4,518,797 and
4,490,556 shares.......................... 4,519 4,491
Capital surplus.............................. 7,287 6,930
Capital surplus-stock options................ 396 397
Retained earnings............................ 41,556 38,325
Net unrealized gains on securities
available for sale........................ 1,325 1,198
-------- --------
Total stockholders' equity............. 55,083 51,341
-------- --------
Total liabilities and stockholders' equity $513,978 $493,847
======== ========
Page 3 of 15 Pages
<PAGE>
ANB CORPORATION
FORM 10-Q
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
Interest Income ---- ---- ---- ----
Loans, including fees:
Taxable............... $8,957 $8,208 $25,870 $24,024
Tax exempt............ 32 24 87 82
Securities available for sale:
Taxable............... 408 478 1,253 1,361
Tax exempt............ 656 683 1,952 1,997
Federal funds sold....... 1 23 78 265
Other interest
income................ 69 53 185 167
Total interest ------ ------ ------ ------
income.......... 10,123 9,469 29,425 27,896
------ ------ ------ ------
Interest Expense
Deposits................. 3,860 3,903 11,406 11,657
Short-term
borrowings............ 214 131 491 320
FHLB advances............ 299 128 804 243
Total interest ------ ------ ------ ------
expense......... 4,373 4,162 12,701 12,220
------ ------ ------ ------
NET INTEREST INCOME........ 5,750 5,307 16,724 15,676
Provision for loan
losses................ 173 236 683 368
------ ------ ------ ------
NET INTEREST INCOME
AFTER PROVISION FOR
LOAN LOSSES........... 5,577 5,071 16,041 15,308
Page 4 of 15 Pages
<PAGE>
(continued) ANB CORPORATION
FORM 10-Q
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
Other Income:
Fiduciary activities..... 1,302 1,079 3,731 3,225
Service charges on
deposit accounts......... 381 347 1,077 1,008
Other customer fees...... 61 119 295 360
Securities available
for sale gains,
(losses) net......... (13) (8) 12
Gains (losses) on
loans held for sale:
Realized........... 31 41 76 140
Unrealized......... 13 (52)
Other operating
income................ 137 124 409 426
Total other ------ ------ ------ ------
income.......... 1,899 1,723 5,580 5,119
------ ------ ------ ------
Other Expenses:
Salaries and
employee benefits..... 2,669 2,449 7,695 7,365
Premises and
equipment expense..... 737 652 2,105 2,043
Advertising.............. 151 95 407 355
Printing, supplies
and stationery........ 157 125 443 420
Professional fees........ 48 68 281 208
Deposit insurance
premiums.............. 6 328 20 798
Goodwill and core
deposit intangibles
amortization.......... 109 94 307 281
Other operating
expenses.............. 805 707 2,295 2,129
Total other ------ ------ ------ ------
expenses........... 4,682 4,518 13,553 13,599
------ ------ ------ ------
INCOME BEFORE INCOME
TAX EXPENSE.............. 2,794 2,276 8,068 6,828
Income tax expense....... 950 714 2,715 2,194
------ ------ ------ ------
NET INCOME................. $1,844 $1,562 $5,353 $4,634
====== ====== ====== ======
Per Share
Net income............... $ 0.41 $ 0.35 $ 1.19 $ 1.03
Cash dividends........... 0.17 0.15 $ 0.47 $ 0.40
AVERAGE SHARES
OUTSTANDING.............. 4,511,986 4,487,365 4,502,739 4,507,736
Page 5 of 15 Pages
<PAGE>
ANB CORPORATION
FORM 10-Q
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in Thousands)
(Unaudited)
1997 1996
---- ----
Balance, January 1 ............................. $51,341 $49,471
Net income...................................... 5,353 4,634
Cash dividends ($.47 and $.40 per share)........ (2,117) (1,803)
Net change in unrealized gains on securities
available for sale ........................... 127 (928)
Exercise of stock options ...................... 132 225
Stock tendered in exercise of stock options..... (167) (173)
Capital surplus allocation for compensatory
stock options.............................. 44
Tax benefit on stock options exercised.......... 87 83
Stock repurchases .............................. (1,633)
Stock issued under dividend reinvestment
and stock purchase plan.................... 327 317
------- -------
Balance, September 30 ............. $55,083 $50,237
======= =======
Page 6 of 15 Pages
<PAGE>
ANB CORPORATION
FORM 10-Q
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Nine Months Ended
September 30,
1997 1996
OPERATING ACTIVITIES: ---- ----
Net income.................................... $5,353 $4,634
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses............... 683 368
Depreciation............................ 939 810
Securities amortization................. 31 44
Amortization of goodwill, other intangibles
and fair value adjustments............ 307 281
Net change in:
Loans held for sale.................. 99 (1,484)
Interest receivable.................. 86 146
Interest payable..................... 356 74
Other adjustments....................... (895) (209)
------ -----
Net cash provided by operating activities.. 6,959 4,664
------ -----
INVESTING ACTIVITIES:
Purchases of available for sale securities.... (4,877) (18,011)
Proceeds from available for sale securities
maturities and sales........................ 10,058 10,181
Net increase in loans......................... (26,205) (20,710)
Purchases of premises and equipment........... (2,863) (665)
Cash received in branch acquisition........... 7,852
------ ------
Net cash used by investing activities...... (16,035) (29,205)
------ ------
FINANCING ACTIVITIES:
Net change in noninterest-bearing,
NOW, money market and savings deposits...... (3,363) (11,988)
Net change in certificates of
deposits and other time deposits............ 11,524 (946)
Net change in short-term borrowings........... (6,262) 5,353
Proceeds from Federal Home Loan Bank advances. 10,780 8,605
Repayment of Federal Home Loan Bank advances.. (6,000)
Cash dividends................................ (2,117) (1,803)
Stock sold:
Exercise of stock options.................. 52 135
Dividend reinvestment and stock purchase plan 327 317
Stock repurchases............................. (1,633)
Net cash (provided) used ------ ------
by financing activities.............. 4,941 (1,960)
------ ------
NET CHANGE IN CASH AND CASH EQUIVALENTS......... (4,135) (26,501)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.. 24,384 43,536
------ ------
CASH AND CASH EQUIVALENTS, END OF PERIOD........ $20,249 $17,035
====== ======
Additional Cash Flows Information:
Interest paid................................. $12,346 $12,146
Income tax paid............................... 3,005 2,370
Page 7 of 15 Pages
<PAGE>
ANB CORPORATION
FORM 10-Q
September 30, 1997
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands)
NOTE 1--GENERAL:
The significant accounting policies followed by ANB Corporation
(Company) and its subsidiaries, American National Bank and Trust Company of
Muncie, American National Trust and Investment Management Company and Peoples
Loan & Trust Bank, Winchester, for interim financial reporting, are
consistent with the accounting policies followed for annual financial
reporting. The accompanying financial statements are unaudited, however, all
adjustments, consisting only of normal recurring adjustments, which are, in
the opinion of management necessary for a fair presentation of the results
for the periods reported, have been included in the accompanying consolidated
condensed financial statements. The results of operations for the nine
months and three months ended September 30, 1997 are not necessarily
indicative of those expected for the remainder of the year.
NOTE 2--INVESTMENT SECURITIES:
1997
------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
September 30 Cost Gains Losses Value
- -----------------------------------------------------------------------------
Available for sale:
U.S. Treasury........ $16,201 $ 87 $14 $16,274
Federal agencies..... 6,747 8 26 6,729
State and municipal.. 41,523 2,172 16 43,679
Mortgage-backed
securities...... 1,389 17 1,372
Marketable equity
securities...... 736 736
Corporate obligations 100 100
----------------------------------------
Total investment
securities..... $66,696 $2,267 $73 $68,890
========================================
1996
------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
December 31 Cost Gains Losses Value
- -----------------------------------------------------------------------------
Available for sale:
U.S. Treasury........ $17,763 $ 106 $ 31 $17,838
Federal agencies..... 8,047 3 78 7,972
State and municipal.. 42,138 2,178 150 44,166
Mortgage-backed
securities...... 3,123 45 3,078
Marketable equity
securities...... 690 690
Corporate obligations 200 200
----------------------------------------
Total investment
securities..... $71,961 $2,287 $ 304 $73,944
========================================
Page 8 of 15 Pages
<PAGE>
ANB CORPORATION
FORM 10-Q
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 3--LOANS AND ALLOWANCE:
SEPTEMBER 30, DECEMBER 31,
1997 1996
Loans ---- ----
Commercial and industrial loans............... $ 91,801 $ 81,142
Term federal funds sold....................... 5,500 5,500
Real estate loans:
One-to-four family properties.............. 155,124 144,749
Other...................................... 104,807 98,366
Individuals' loans for household and other
personal expenditures...................... 39,749 42,507
Tax exempt loans.............................. 2,729 2,432
Other loans................................... 1,921 1,385
-------- --------
Total loans.......................... $401,631 $376,081
======== ========
Nonperforming loans
Nonaccruing loans............................. $ 931 $ 1,326
Accruing loans contractually past due
90 days or more other than nonaccruing..... 403 472
Restructured loans............................ 554 63
-------- --------
Total nonperforming loans............ $ 1,888 $ 1,861
======== ========
NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
Allowance for loan losses ---- ----
Balances, beginning of period................. $ 3,400 $ 2,897
Provision for losses.......................... 683 368
Recoveries on loans........................... 182 56
Loans charged off............................. (904) (446)
-------- --------
Balances, end of period....................... $ 3,361 $ 2,875
======== ========
NOTE 4--DEPOSITS:
SEPTEMBER 30, DECEMBER 31,
1997 1996
Deposits ---- ----
Noninterest bearing.......................... $ 54,769 $ 50,256
NOW accounts................................. 68,664 75,174
Money market deposit accounts................ 41,355 37,751
Savings deposits............................. 26,371 26,727
Certificates and other time deposits
of $100,000 or more....................... 73,849 57,674
Other certificates and time deposits......... 158,069 158,263
-------- --------
Total deposits......................... $423,077 $405,845
======== ========
Page 9 of 15 Pages
<PAGE>
ANB CORPORATION
FORM 10-Q
September 30, 1997
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
General =====================
- -------
The following discussion and analysis is designed to provide a more
comprehensive review of the operating results and financial position than
could be obtained from an analysis of the financial statements alone. It
should, however, be read in conjunction with the financial statements and
notes included elsewhere herein.
Net Income
- ----------
Net income for the first nine months of 1997 was $5.353 million compared
to $4.634 million for the first nine months of 1996, an increase of $719
thousand or 15.5%. Net income per share for the first nine months of 1997
was $1.19, an increase of $0.16 or 15.5% from the $1.03 which was reported
for the first nine months of 1996.
Third quarter 1997 net income improved $282 thousand from the $1.562
million reported for third quarter 1996. Net income per share for third
quarter 1997 was higher by $.06 per share or 17.1% when compared to third
quarter of 1996.
The Company's return on average assets for the first nine months of 1997
was 1.45%, an increase of 13 basis points over the first nine months of 1996
and a 18 basis point improvement over the 1996 year ended return on average
assets of 1.27%.
Return on average equity for the first nine months of 1997 was 13.78%
compared to 12.74% for the same period in 1996.
The company's cash or tangible earnings per share (net income per share
plus the amortization per share of goodwill and core deposit intangibles) for
the first nine months of 1997 was $1.25 compared to $1.09 per share for the
comparable period in 1996. Cash or tangible earnings per share for the third
quarter of 1997 was $0.43 compared to $0.37 for the same period in 1996.
Statement of Financial Accounting Standards No. 128, Earnings Per Share,
is effective for the Company's 1997 annual financial statements. This
statement simplifies the calculations for earnings per share. The Company
does not expect that the new disclosure for basic earnings per share will be
substantially different from the primary earnings per share as currently
calculated and disclosed. Additional disclosures include diluted earnings
per share, which will reflect the potential dilution that could occur from
unexercised stock options under the Company's stock option plans.
Net Interest Income
- -------------------
Net interest income is the difference between interest and fees earned
on earning assets and interest paid on interest bearing liabililties. It is
the largest and most critical component of the Company's earnings and is
impacted by both rates and volume of earning assets and interest-bearing
liabilities. The Company's net interest income, reported on a full tax
equivalent basis (FTE), increased $959 thousand or 5.8% for the nine months
ended September 30, 1997 when compared to the same nine month period last
year. Total interest income, expressed on a FTE basis increased $1.440
million for the nine month period, while total interest expense was higher in
the amount of $481 thousand. Net interest margin (FTE), expressed as a
percent of earning assets, was 5.16% for the first nine months of 1997, an
increase of 8 basis points when compared to the 5.08% net interest margin
reported for the nine months ended September 30, 1996. The Company's net
interest margin (FTE) for the year ended December 31, 1996 was 5.07%.
For the third quarter of 1997, net interest income (FTE) increased $415
thousand or 7.4% when compared to the quarter ended September 30,1996. Net
interest margin (FTE) for third quarter 1997 was 5.20%.
Higher net interest income and improving net interest margins (FTE) in
excess of the 5.00% level can in part be attributable to the continuing
increased level of lending activity and the higher volume of interest income
received related to the strong loan demands which have been experienced.
Attractive opportunities to make quality loans continue to exist.
Page 10 of 15 Pages
<PAGE>
ANB CORPORATION
FORM 10-Q
September 30, 1997
Provision for Loan Losses
- -------------------------
The Company's provision for loan losses increased $315 thousand for the
nine months ended September 30, 1997 when compared to the same period in
1996. For the third quarter of 1997 the provision expense was $173 thousand
compared to $236 thousand for the third quarter of 1996.
Increases in the Company's provision for loan losses were required to
partially replenish the allowance for loan losses for charge-offs recorded
during the first nine months of 1997.
Net charge-offs during the first nine months of 1997 were $722 thousand
compared to net charge-offs of $390 thousand for the comparable period in
1996. During the first quarter of 1997, a large commercial loan of
approximately $725 thousand was written down by $379 thousand and the balance
was transferred to nonaccruing loans. Net charged-off loans as a percentage
of average loans was .19% at September 30, 1997 compared to .11% for the same
nine month period in 1996.
Other Income and Expense
- ------------------------
Other income represents income received which is not directly related to
the Company's interest-earning assets, except for gains and losses on
securities and loans held for sale. Total other income increased $461
thousand or 9% during the first nine months of 1997 compared to the same
period one year ago. Fees generated from fiduciary activities increased
$506 thousand, or 15.7%, while service charges combined with other customer
fees rose $4 thousand for the nine month period. "Other operating income"
declined by $17 thousand for the nine months ended September 30, 1997 when
compared to 1996. For 1996 "other operating income" included a recovery of a
prior period loss amounting to approximately $38 thousand.
For the third quarter of 1997 other income increased $176 thousand, with
most of the higher results due to greater fees earned related to fiduciary
activities.
Total other expenses declined $46 thousand in the first nine months of
1997 compared to the same period in 1996. Salaries and employee benefits
increased $330 thousand or 4.5%. Full time equivalent employees were 271 at
September 30, 1997, 13 greater than reported a year ago. The Company's
purchase of two branch bank locations and the planned expansion of trust
affiliate activities account for most of the increase in full time equivalent
employees.
Professional fees for the first nine months of 1997 were higher by $73
thousand when compared to the first nine months of 1996. During 1997,
additional professional fees were recorded relating to the Company's purchase
of two branches, including deposits and real estate. Also, during 1997 fees
relating to merger/acquisition activities increased this category.
Deposit insurance expense declined from $798 thousand for the first nine
months of 1996 to only $20 thousand for first nine months of 1997, a
reduction of $778 thousand. For the nine months ended September 30, 1996 the
Company expensed $589 thousand relating to a special Federal Deposit
Insurance Corporation (FDIC) assessment on Savings Association Insurance Fund
("SAIF") deposits which it acquired in 1991. For the third quarter of 1996
the Company expensed $259 thousand, as $330 thousand had previously been
expensed during the first six months of the year. In addition, for 1997, the
FDIC lowered the rate assessed on deposits insured by the Bank Insurance
Fund.
Income Taxes
- ------------
Income tax expense, including both federal income tax and the Indiana
franchise tax increased by $521 thousand for the first nine months of 1997
over 1996. Income before income tax increased $1.240 million or 18.2% for
the first nine months of 1997 over 1996. The effective tax rate for the
period ending September 30, 1997 was 33.7% compared to 32.1% for the first
nine months of 1996.
Page 11 of 15 Pages
<PAGE>
ANB CORPORATION
FORM 10-Q
September 30, 1997
Balance Sheet
- -------------
The Company's total assets increased $20.131 million from the level
reported at year end 1996. When compared to September 30, 1996 total assets
have increased $31.556 million or 6.5%. For the third quarter in 1997
average assets were $498.790 million compared to $477.050 million for the
third quarter of 1996.
Cash and cash equivalents decreased $4.135 million at September 30, 1997
from the level reported at December 31, 1996. Federal funds sold decreased
by $2.475 million from December 31, 1996 while cash and due from banks,
including interest bearing deposit accounts, decreased $1.660 million from
the levels reported at year end.
Loans and Deposits
- ------------------
Loans, excluding loans held for sale and term federal funds, were
$396.131 million at September 30, 1997, an increase of $25.550 million over
the year end level of $370.581 million. At September 30, 1996, loans,
excluding loans held for sale and term federal funds, were $365.594 million.
Growth in the Company's loan portfolio from September 30, 1996 to September
30, 1997 has been $30.537 million or 8.4%. This loan growth has occured in
most major categories of the portfolio, with $18.079 million, or 59% of the
total growth experienced during the past twelve months, having occurred in
the mortgage loan component of the loan portfolio.
Real estate loans continue to be the largest asset category of the
Company. At September 30, 1997 loans made to individuals on owner occupied
property represented 30.2% of total assets and 59.7% of the Company's
mortgage loan portfolio. At September 30, 1996 loans made to individuals on
owner occupied property represented 29.5% of total assets and 58.9% of the
Company's mortgage loan portfolio. Loans made on owner occupied property
have increased $10.375 million from year end 1996 and $12.625 million from
September 30, 1996 while commercial mortgage loans have increased $5.454
million for the period beginning September 30, 1996 and ending September 30,
1997.
Loan growth has been achieved under the Company's strategic plan and has
been accomplished in accordance with credit policies designed to ensure
continued strong asset quality.
Total deposits of the Company at September 30, 1997 increased $17.232
million from levels reported at year end 1996. Noninterest-bearing deposits
increased by $4.513 million at September 30, 1997 as measured against year
end, while total interest bearing deposits increased $12.719 million.
During the second quarter of 1997, the Company purchased two branches,
including deposits of approximately $9,071, from another financial
institution. The purchase price included goodwill/core deposit intangibles
to be amortized of $890 thousand.
Allowance for Loan Losses and Nonperforming Loans
- -------------------------------------------------
The Company's nonperforming loans, which include nonaccrual, past due 90
days, and restructured loans, increased $27 thousand from year end 1996. At
September 30, 1997 total nonperforming loans amounted to $1.888 million or
.37% of total assets, compared to .38% at year end 1996. Total nonperforming
loans represented .47% of total loans at September 30, 1997 compared to .78%
and .49% at September 30, 1996 and December 31, 1996 respectively.
The allowance for loan losses at September 30, 1997 decreased $39
thousand from year end 1996. Loans charged off for the period ending
September 30, 1997 increased by $458 thousand when compared to the same
period in 1996. A large commercial loan was written down by $379 thousand and
the balance transferred to nonaccruing during the first quarter of 1997. The
allowance for loan losses equaled 178% of nonperforming loans at September
30, 1997 compared to 183% and 136% for December 31, 1996 and September 30,
1996.
Based on the components of the loan portfolio, an analysis of historical
net charge-offs, and other economic considerations, management considers the
allowance for loan losses to be adequate.
Page 12 of 15 Pages
<PAGE>
ANB CORPORATION
FORM 10-Q
September 30, 1997
Liquidity and Rate Sensitivity
- ------------------------------
The Company manages liquidity by closely monitoring the funds available
to meet the financial needs and credit demands of its customer base. The
Company expects to have adequate funds available to satisfy loan demand as
provided through both deposit growth and net income. Additionally the Company
has established federal funds lines with correspondent banks and may borrow
from the Federal Reserve Bank or the Federal Home Loan Bank.
The Company's loan to deposit ratio, excluding loans which are held for
sale was 95% on September 30, 1997 compared to 92% at September 30, 1996.
The Company's interest rate sensitivity position is influenced by the
various maturities of its interest earning assets and interest bearing
liabilities. The Company monitors its maturity distribution of assets and
liabilities to ensure an adequate balance is maintained. Company policy
requires management to keep rate sensitivity positions within pre-established
guidelines, so as to control the interest rate risk exposure.
The Company is liability sensitive at the one-year time frame,
indicating that net interest income could be adversely impacted during
periods of increasing interest rates, since rate sensitive liabilities would
be repricing at a more rapid rate than interest sensitive assets. The
Company measures the impact of changes in interest rates on a regular basis.
During recent years the Company has steadily increased its net interest
income and resulting fully taxable equivalent net interest margin.
Capital Resources
- -----------------
Stockholders' equity, including net unrealized gains on securities
available for sale, increased from $51.341 million at December 31, 1996 to
$55.083 million on September 30, 1997. Book value per share was $12.19 at
September 30, 1997 compared to $11.43 at year end 1996. Excluding net
unrealized gains on securities available for sale, per share book value
increased $0.74 a share to $11.90 at September 30, 1997 from year end 1996.
Tangible book value per share on September 30, 1997 was $10.92 compared to
$10.24 for the year end 1996 and $10.05 on September 30, 1996. (Tangible
book value per share is defined as total stockholders' equity less net
unrealized gains on securities available for sale and goodwill/core deposit
intangibles; divided by total outstanding shares.)
For the nine months ended September 30, 1997 a total of 16,576 shares
have been issued through the Company's Dividend Reinvestment and Stock
Purchase Plan. A total of 313 shareholders or 48% of the Company's
shareholders of record participate in the Plan.
At September 30, 1997 the Company's Tier 1 risk based capital ratio was
13.52% and its leverage capital ratio was 9.89%. The Company and each of
its affiliate banks currently exceed all capital requirements mandated by
regulatory authorities.
Other
- -----
The Securities and Exchange Commission maintains a web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission, including
the Company. The web site address is (http://www.sec.gov).
Page 13 of 15 Pages
<PAGE>
ANB CORPORATION
FORM 10-Q
September 30, 1997
PART II. OTHER INFORMATION
--------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27, Financial Data Schedule
(b) No reports on Form 8-K were filed with respect to events
occurring during the three months ended September 30, 1997.
Page 14 of 15 Pages
<PAGE>
ANB CORPORATION
FORM 10-Q
September 30, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ANB CORPORATION
Date: November 6, 1997 BY: /s/ James R. Schrecongost
-----------------------------------
James R. Schrecongost
Vice Chairman, President
and Chief Executive Officer
Date: November 6, 1997 BY: /s/ Larry E. Thomas
-----------------------------------
Larry E. Thomas
Chief Financial Officer and
Principal Accounting Officer
Page 15 of 15 Pages
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