SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1997 Commission file number 0-18925
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.)
120 West Charles Street, Muncie, Indiana 47305
----------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (765) 747-7575
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No-Par Value
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
Indicate by check mark whether the registrant (1) has filed all reports
required be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant (for purposes of such calculation, includes persons who are not
directors, executive officers or holders of more than 10% of the registrant's
common stock) based upon the average of the bid and asked prices as of March
11, 1998 was approximately $125,492,000.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock as of March 11, 1998:
Common Stock, No-Par Value - 4,549,874 shares
Documents incorporated by reference:
Portions of the Annual Report to Shareholders of ANB Corporation for the year
ended December 31, 1997 are incorporated by reference into Part II.
Portions of the definitive proxy statement dated March 19, 1998 relating to
the annual meeting of shareholders of ANB Corporation to be held on April 21,
1998 are incorporated by reference into Part III.
Exhibit index - page 22
<PAGE>
FORM 10-K TABLE OF CONTENTS
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Page
Part I
Item 1 - Business................................................... 3
Item 2 - Properties................................................. 15
Item 3 - Legal Proceedings.......................................... 15
Item 4 - Submission of Matters to a Vote of Security Holders........ 15
Part II
Item 5 - Market For the Registrant's Common Equity and
Related Stockholder Matters.............................. 15
Item 6 - Selected Financial Data.................................... 15
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 15
Item 7A - Quantitative and Qualitative Disclosures
About Market Risk........................................ 15
Item 8 - Financial Statements and Supplementary Data................ 15
Item 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure...................... 16
Part III
Item 10 - Directors and Executive Officers of the Registrant......... 16
Item 11 - Executive Compensation..................................... 16
Item 12 - Security Ownership of Certain Beneficial
Owners and Management.................................... 16
Item 13 - Certain Relationships and Related Transactions............. 16
Part IV
Item 14 - Exhibits, Financial Statement Schedules, and
Reports on Form 8-K...................................... 17
Signatures ......................................................... 20
2
<PAGE>
PART I
ITEM 1. BUSINESS
- ------------------------------------------------------------------------------
GENERAL
ANB Corporation (the "Registrant") is a multibank holding company located in
Muncie, Indiana, engaged in the business of commercial banking, and trust and
asset management. The business of the Registrant is conducted through its
financial institution and trust subsidiaries, American National Bank and Trust
Company of Muncie ("American National"), American National Trust and
Investment Management Company ("ANTIM") and Peoples Loan & Trust Bank
("Peoples"), which provide a broad range of financial services.
American National is a national banking association with its principal offices
in Muncie, Delaware County, Indiana. American National was originally
incorporated under the laws of the State of Indiana in 1918. In 1960,
American National received its charter as a national banking association.
Muncie Federal Savings Bank ("Muncie Federal"), a federally chartered mutual
savings and loan association, was acquired by the Registrant in 1991 and
converted to a savings bank. Muncie Federal and American National merged in
1993. The acquisition of Muncie Federal benefited the Registrant through an
increase in market share and an expansion of its operations. The additional
Muncie Federal offices allowed American National to increase the number of
full service banking locations within Delaware County and to expand into Jay
County, Indiana, northeast of the Registrant's home county. At December 31,
1997, American National had assets of $358.3 million, deposits of $280.8
million and stockholder's equity of $30.6 million.
The Registrant acquired Winchester Bancorporation ("Winchester") in
Winchester, Indiana and its subsidiary bank, Peoples in early 1994. The
Registrant acquired 100% of the outstanding common stock of Winchester for
approximately $11.0 million. Peoples' customers are located primarily in
Randolph, Wayne and surrounding counties. In December, 1995, The Saratoga
State Bank ("Saratoga"), previously a subsidiary of the Registrant, was merged
into Peoples. Saratoga was located in Saratoga, Randolph County, Indiana,
immediately east of the Registrant's home county. In 1997, Peoples acquired a
branch in Parker City, Indiana with deposits approximately $9 million. At
December 31, 1997, Peoples had assets of $158.3 million, deposits of $131.1
million and stockholder's equity of $16.6 million.
ANTIM, previously the trust department of American National, traces its
history to 1900 and is the successor of The Muncie Trust Company. To
capitalize on its profitable $1.5 billion trust operation, American National
formed its previously wholly owned subsidiary, ANTIM, which has succeeded to
American National's trust business. Ownership of ANTIM was transferred from
American National to the Registrant in December, 1996. ANTIM provides trust
and asset management services with offices in Indianapolis, Anderson, Fort
Wayne, Winchester and Muncie. In September 1997, ANTIM acquired a 15%
interest in Indiana Trust & Investment Management Company in Mishawaka,
Indiana, and under a Stock Acquisition Agreement, is obligated to acquire the
remaining 85% by the year 2002, subject to various terms and conditions. Trust
operations provide a significant source of fee income to the Registrant and in
1997 constituted 10.8% of the Registrant's total operating income.
ANB Financial Planning Services ("ANBFPS") is a wholly owned subsidiary of
American National. ANBFPS offers a full range of financial planning services.
The Registrant provides its commercial banking, trust and asset management
products and services through its 26 affiliated offices in eight Indiana
counties, and this expanded financial base has enabled it to compete with
larger bank holding companies in east central Indiana.
3
<PAGE>
BUSINESS ACTIVITIES
American National and Peoples offer a wide range of depository, lending,
fiduciary and related financial services to individual and business customers.
The financial institutions offer checking and savings plans; investment
accounts consisting of certificates of deposit, money market deposit accounts,
IRA accounts and interest paying deposit accounts; provide lending services
consisting of simple interest consumer loans, car and home improvement loans,
student loans, commercial loans and mortgage loans; and offer credit cards
(Master Card and Visa), safety deposit services, travelers checks, U. S.
Savings Bonds, night depositories, bank by mail and automatic transfer
services. Automated teller machines provide 24-hour service in Muncie,
Winchester, Richmond, Parker City, Portland, Farmland and Yorktown. Trust
services are provided to both individual and corporate customers, including
personal trust and agency accounts, employee benefit plans and corporate bond
trustee accounts.
The lending philosophy of the Registrant is to develop sound loans with the
resources of its subsidiary financial institutions. The subsidiaries
emphasize loans to existing customers, potential customers in proximity to the
branch offices and potential customers within their respective market areas.
The Registrant lends almost exclusively within its market area and does not
make loans to foreign countries.
The Registrant is dedicated to minimizing risk in the loan portfolio through
careful pre-loan investigation, through clearly understood loan terms, through
acquisition of adequate collateral and through close monitoring of loan and
financial information on customer accounts. Efforts are made to avoid
industry concentrations by type of business through diversification of
borrowers.
EMPLOYEES
As of December 31, 1997, the Registrant and its subsidiaries had approximately
275 full-time equivalent employees to whom it provides a variety of benefits
and with whom it enjoys excellent relations.
STATISTICAL INFORMATION
The following tables present statistical information with respect to the
Registrant, which is not included in Registrant's 1997 Annual Report to
Shareholders.
4
<PAGE>
LOAN PORTFOLIO
Types of Loans
- --------------
The loan portfolio at the dates indicated is presented below:
<TABLE>
<CAPTION>
December 31 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Commercial $ 99,378 $ 81,142 $ 75,083 $ 68,361 $ 48,293
Term federal funds sold 1,500 5,500 8,784 9,969 6,260
Real estate mortgage 262,711 243,115 226,069 211,442 159,068
Individuals' loans for
household expenditures 39,654 42,507 35,736 35,495 23,790
Tax-exempt and other loans 5,528 3,817 3,241 3,536 1,938
------------------------------------------------------------
Total loans $408,771 $376,081 $348,913 $328,803 $239,349
============================================================
</TABLE>
Maturities and Sensitivities of Loans to Changes in Interest Rates
- ------------------------------------------------------------------
Presented in the table below are the maturities of the commercial loan
portfolio and the sensitivity of the portfolio at December 31, 1997 as to
predetermined or adjustable interest rates.
<TABLE>
<CAPTION>
Within 1-5 Over
1 Year Years 5 Years Total
- ---------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Fixed rate loans $14,964 $16,049 $ 2,156 $33,169
Variable rate loans 46,200 15,242 4,767 66,209
--------------------------------------------
Totals $61,164 $31,291 $ 6,923 $99,378
============================================
Per cent 61.5% 31.5% 7.0% 100.0%
</TABLE>
Principal balances of term loans included in the 1-5 Years and Over 5 Years
categories are shown based on maturity date.
Risk Elements
- -------------
Nonaccrual, past due and restructured loans
<TABLE>
<CAPTION>
December 31 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Nonaccruing loans* $ 538 $1,326 $1,184 $2,472 $ 822
Accruing loans contractually
past due 90 days or more
as to interest or principal
payments 300 472 241 390 516
Restructured loans* 590 63 880 156 629
</TABLE>
*Impaired loans for 1997 included in nonaccruing loans totaled $190; impaired
loans for 1996 included in nonaccruing and restructured loans totaled $657 and
$63, respectively.
5
<PAGE>
Nonaccruing loans are loans which are reclassified to a nonaccruing status
when in management's judgment the collateral value and financial condition of
the borrower do not justify accruing interest. Interest previously recorded
but not deemed collectible is reversed and charged against current income.
Interest income on these loans is then recognized when collected.
Restructured loans are loans for which the contractual interest rate has been
reduced or other concessions are granted to the borrower because of a
deterioration in the financial condition of the borrower resulting in the
inability of the borrower to meet the original contractual terms of the loans.
Interest income of $59,000 for the year ended December 31, 1997 was recognized
on the nonaccruing and restructured loans listed in the table above, whereas
interest income of $83,000 would have been recognized under their original
loan terms.
Potential problem loans:
Management has identified additional impaired loans of $518,000 as of
December 31, 1997, not included in the risk element table, about which there
are doubts as to the borrowers' ability to comply with present repayment
terms. Loans are considered to be impaired when it becomes probable that the
bank subsidiaries will be unable to collect all amounts due according to the
contractual terms of the loan agreement.
Risk elements are considered by management in determining the appropriate
level of the allowance for loan losses.
Allocation of the Allowance for Loan Losses at December 31
- ----------------------------------------------------------
Presented below is an analysis of the composition of the allowance for loan
losses (in thousands) and per cent of loans in each category to total loans:
<TABLE>
<CAPTION>
1997 1996 1995
- -----------------------------------------------------------------------------------------------
Amount Per Cent Amount Per Cent Amount Per Cent
- -----------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31:
Commercial $1,505 24.3% $1,337 21.6% $ 827 21.5%
Term federal funds sold .4 1.5 2.5
Real estate mortgage 838 64.2 889 64.6 878 64.8
Loans to individuals 730 9.7 581 11.3 554 10.3
Tax exempt and other 25 1.4 23 1.0 12 .9
Unallocated 399 570 626
-------------------------------------------------------------
Totals $3,497 100.0% $3,400 100.0% $2,897 100.0%
=============================================================
</TABLE>
<TABLE>
<CAPTION>
1994 1993
- -----------------------------------------------------------------------------------------------
Amount Per Cent Amount Per Cent
- -----------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Balance at December 31:
Commercial $ 867 20.8% $ 664 20.2%
Term federal funds sold 3.0 2.6
Real estate mortgage 1,172 64.3 343 66.5
Loans to individuals 481 10.8 353 9.9
Tax exempt and other 20 1.1 .8
Unallocated 158 81
---------------------------------------
Totals $2,698 100.0% $1,441 100.0%
=======================================
</TABLE>
6
<PAGE>
Loan Loss Charge-off Procedures
- -------------------------------
The subsidiary financial institutions have weekly loan committee meetings at
which loans in excess of certain amounts are approved or disapproved and loan
delinquencies, maturities and problems are reviewed.
The boards of directors of the subsidiaries receive and review reports on
loans monthly, including information on new and renewed, delinquent and
problem loans.
All chargeoffs are reported to and approved by the subsidiaries' boards
monthly. Loans are charged off when a determination is made that all or a
portion of a loan is uncollectible or as a result of examinations by
regulators and the independent auditors.
Provision for Loan Losses
- -------------------------
In banking, loan losses are one of the costs of doing business. Although the
financial institutions' management emphasize the early detection and chargeoff
of loan losses, it is inevitable that at any time certain losses exist in the
portfolio which have not been specifically identified. Accordingly, the
provision for loan losses is charged to earnings on an anticipatory basis, and
recognized loan losses are deducted from the allowance so established. Over
time, all net loan losses must be charged to earnings. During the year, an
estimate of the loss experience for the year serves as a starting point in
determining the appropriate level for the provision. However, the amount
actually provided in any period may be greater or less than net loan losses,
based on management's judgment as to the appropriate level of the allowance
for loan losses. The determination of the provision in any period is based on
management's continuing review and evaluation of the loan portfolio, and its
judgment as to the impact of current economic conditions on the portfolio. The
evaluation by management includes consideration of past loan loss experience,
changes in the composition of the loan portfolio, the current condition and
amount of loans outstanding, and the probability of collecting all amounts
due.
SECURITIES PORTFOLIO
The carrying values of the components of the securities portfolio at the dates
indicated were:
<TABLE>
<CAPTION>
December 31 1997 1996 1995
- ---------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Available for sale(1)
U. S. Treasury $ 14,880 $ 17,838 $ 18,173
Federal agencies 8,248 7,972 4,153
State and municipal 45,031 44,166 43,105
Corporate obligations 100 200 447
Mortgage-backed 3,078 3,695
Other securities 813 690 941
----------------------------------
Total available for sale $ 69,072 $ 73,944 $ 70,514
==================================
</TABLE>
(1) Available for sale securities are carried at market value.
7
<PAGE>
The maturity distribution and average yields for the securities portfolio at
December 31, 1997 were:
<TABLE>
<CAPTION>
Within 1 Year 1-5 Years 5-10 Years Over 10 Years
- ----------------------------------------------------------------------------------------------------------
Amount Yield* Amount Yield* Amount Yield* Amount Yield*
- ----------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Available for sale(2)
U. S. Treasury $ 5,536 6.5% $ 9,275 6.0%
Federal agencies 7,904 6.1 $ 349 6.5%
State and municipal 370 8.5 6,556 10.2 16,824 9.2 $19,043 9.3%
Corporate obligations 100 5.5
Other securities 813 7.0
----------------------------------------------------------------------------
Totals $ 6,719 6.9% $23,835 7.2% $17,173 9.2% $19,043 9.3%
======= ======= ======= =======
</TABLE>
(2) Available for sale amounts shown in the maturity distribution table are
at amortized cost for computation of yields.
* Interest yields on state and municipal securities are presented on a
fully taxable equivalent basis using a 34% rate after adjustment for
effect of non-deductible interest expense attributed to such investments.
DEPOSITS
The following table shows the average amount of deposits and the average rate
of interest paid thereon for the years indicated.
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------------------------------------------
Amount Rate Amount Rate Amount Rate
- ------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing demand $ 48,556 $ 42,816 $ 39,780
NOW accounts 74,511 2.5% 71,954 2.5% 67,742 2.4%
Money market investment accounts 40,304 3.2 40,383 3.1 44,235 3.0
Savings 26,592 2.5 28,174 2.5 29,277 2.6
Certificates of deposit 219,853 5.3 217,350 5.4 207,075 5.5
-------- -------- --------
Totals $409,816 $400,677 $388,109
======== ======== ========
</TABLE>
As of December 31, 1997, certificates of deposit and other time deposits of
$100,000 or more mature as follows:
<TABLE>
<CAPTION>
3-6 6-12 Over
3 Months Months Months 12 Months Total
- --------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Certificates of deposit $33,022 $13,675 $ 6,252 $ 6,717 $59,666
Per cent 55.3% 22.9% 10.5% 11.3% 100.0%
</TABLE>
8
<PAGE>
SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
December 31 1997 1996 1995
- ----------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Short-term borrowings
Federal funds purchased $ 6,375 $ 6,600
Securities sold under repurchase agreements 3,980 7,203 $ 4,594
U. S. Treasury demand notes 2,980 3,873 3,155
-------------------------------
Totals $13,335 $17,676 $ 7,749
===============================
</TABLE>
Securities sold under repurchase agreements are borrowings maturing within one
year and are secured by U. S. Treasury and Federal agencies securities.
Pertinent information with respect to short-term borrowings is summarized
below:
<TABLE>
<CAPTION>
December 31 1997 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average interest rate on outstanding balance
Securities sold under repurchase agreements 5.1% 5.1% 5.3%
Total short-term borrowings 5.9 5.9 5.2
Weighted average interest rate paid on short-term
borrowings during the year 5.5 5.2 5.6
Highest amount outstanding at any month end
during the year (in thousands)
Securities sold under repurchase agreements $ 6,932 $ 7,203 $ 8,502
Total short-term borrowings 19,523 17,676 12,933
Average short-term borrowings outstanding
during the year (in thousands) 11,277 9,267 8,516
</TABLE>
REGULATION AND SUPERVISION OF THE REGISTRANT
The Registrant is a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended ("BHCA"), and is registered as such
with the Board of Governors of the Federal Reserve System ("Federal Reserve").
The Registrant is examined, regulated and supervised by the Federal Reserve
and is required to file annual reports and other information regarding its
business and operations and the business and operations of its subsidiaries
with the Federal Reserve. The Federal Reserve has the authority to issue
cease-and-desist orders against a bank holding company and nonbank
subsidiaries if it determines that activities of such entities represent an
unsafe and unsound practice or a violation of law.
Under the BHCA, a bank holding company is, with limited exceptions, prohibited
from acquiring direct or indirect ownership or control of voting stock of any
company which is not a bank and from engaging in any activity other than
managing or controlling banks. A bank holding company may, however, own
shares of a company engaged in activities which the Federal Reserve has
determined to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto.
9
<PAGE>
Acquisitions by the Registrant of banks and savings associations are subject
to federal and state regulation. Any acquisition by the Registrant of more
than five percent of the voting stock of any bank requires prior approval of
the Federal Reserve. Acquisition of savings associations is also subject to
the approval of the Office of Thrift Supervision ("OTS").
Federal law imposes, with certain limited exceptions, a "cross-guarantee" on
the part of commonly controlled depository institutions. Under this
provision, if one depository institution subsidiary of a multi-unit holding
company, such as the Registrant, fails or requires Federal Deposit Insurance
Corporation ("FDIC") assistance, the FDIC may assess a commonly controlled
depository institution for the loss or estimated loss suffered by the FDIC.
While the FDIC's claim is junior to the claims of nonaffiliated depositors,
holders of secured liabilities, general creditors, and subordinated creditors,
it is superior to the claims of stockholders and any affiliate of the
depository institution. In addition, under Federal Reserve policy the
Registrant is expected to act as a source of financial strength to, and commit
resources to support, each of its affiliate banks. As a result, the
Registrant may be required to commit resources to its affiliate banks in
circumstances where it might not otherwise do so.
REGULATION AND SUPERVISION OF THE SUBSIDIARY BANKS
American National and ANTIM are supervised, regulated and examined by the
Comptroller of the Currency. Peoples is supervised, regulated and examined by
the Indiana Department of Financial Institutions and, as state non-member
bank, by the FDIC. A cease and desist order may be issued by the Comptroller
of the Currency against American National and by the Indiana Department of
Financial Institutions and FDIC against Peoples, if the respective agency
finds that the activities of such institution represents an unsafe and unsound
banking practice or violation of law. In addition, under certain
circumstances, the FDIC may also issue a cease-and-desist order against any
subsidiary financial institution of the Registrant.
With certain exceptions, a bank, a savings and loan association, and a
subsidiary or affiliate thereof, may not extend credit, lease or sell property
or furnish any services or fix or vary the consideration for the foregoing on
the condition that (i) the customer must obtain or provide some additional
credit, property or services from, or to, any of them, or (ii) the customer
may not obtain some other credit, property or service from a competitor,
except to the extent reasonable conditions are imposed to assure the soundness
of credit extended.
The deposits of American National and Peoples are insured by the Bank
Insurance Fund ("BIF") of the FDIC. The deposits of Muncie Federal, previously
a separate entity (merged into American National in 1993), continue to be
insured by the Savings Association Insurance Fund ("SAIF") of the FDIC. The
insurance rates paid by banks range from 0 to 27 basis points. Insurance
premiums paid by banks to SAIF are also at a range from 0 to 27 basis points.
The FDIC is authorized to make limited adjustments to the BIF rate schedule
without notice or rulemaking as deemed necessary by the FDIC to maintain the
BIF designated reserve ratio. Increases in the rate schedule could adversely
impact, and decreases would positively impact, the Registrant and its
subsidiary banks.
Branching by banks in Indiana is subject to the jurisdiction, and requires the
prior approval, of the bank's primary federal regulatory authority and, if the
branching bank is a state bank, of the Indiana Department of Financial
Institutions. Under Indiana law, American National and Peoples may branch
anywhere in the state.
The Registrant is a legal entity separate and distinct from its subsidiary
banks. There are various legal limitations on the extent to which the
subsidiary banks can supply funds to the Registrant. The principal source of
the Registrant's funds consists of dividends from its subsidiaries. State and
Federal laws restrict the amount of dividends which may be paid by banks and
savings associations. In addition, the subsidiary banks are subject to
certain restrictions on extensions of credit to the Registrant or any of its
subsidiaries, on investments in the stock or other securities of the
Registrant or in any of its subsidiaries and in taking such stock or
securities as collateral for loans.
10
<PAGE>
FDICIA
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
directs that each federal banking agency prescribe standards for depository
institutions relating to internal controls, information systems, internal
audit systems, loan documentation, credit underwriting, interest rate
exposure, asset growth and quality, management compensation, minimum earnings
sufficient to absorb losses, and such other standards as the agency deems
appropriate. The federal banking agencies have issued guidelines establishing
standards for safety and soundness for operational and managerial standards
and compensation standards, and has proposed guidelines for asset quality and
earnings. If an institution fails to comply with any of the standards set
forth in the guidelines, the institution's primary federal regulator may
require the institution to submit a plan for achieving and maintaining
compliance. Failure to submit an acceptable compliance plan, or failure to
adhere to a compliance plan that has been accepted by the appropriate
regulator, would constitute grounds for further enforcement action.
Under FDICIA, as implemented by final regulations adopted by the FDIC,
FDIC-insured state banks are prohibited, subject to certain exceptions, from
directly or indirectly acquiring or retaining any equity investments of a
type, or in an amount, that are not permissible for a national bank. FDICIA,
as implemented by FDIC regulations, also prohibits FDIC-insured state banks
and their subsidiaries, subject to certain exceptions, from engaging as
principal in any activity that is not permitted for a national bank or its
subsidiary, respectively, unless the bank meets, and continues to meet, its
minimum regulatory capital requirements and the FDIC determines the activity
would not pose a significant risk to the deposit insurance fund of which the
bank is a member. Impermissible investments and activities must be divested
or discontinued within certain time frames set by the FDIC in accordance with
FDICIA. These restrictions are not currently expected to have a material
impact on the operations of Peoples.
The federal banking regulators have adopted regulations to implement the
prompt corrective action provisions of FDICIA, effective as of December 19,
1992. Among other things, the regulations define the relevant capital
measures for the five capital categories. An institution is deemed to be
"well capitalized" if it has a total risk-based capital ratio of 10% or
greater, a Tier 1 risk-based capital ratio of 8% or greater, and a leverage
ratio of 5% or greater, and is not subject to a regulatory order, agreement or
directive to meet and maintain a specific capital level for any capital
measure. An institution is deemed to be "adequately capitalized" if it has a
total risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital
ratio of 4% or greater, and generally a leverage ratio of 4% or greater. An
institution is deemed to be "undercapitalized" if it has a total risk-based
capital ratio of less than 8%, a Tier 1 risk-based capital ratio of less than
4%, or generally a leverage ratio of less than 4%, and "significantly
undercapitalized" if it has a total risk-based capital ratio of less than 6%,
a Tier 1 risk-based capital ratio of less than 3%, or a leverage ratio of less
than 3%. An institution is deemed to be "critically undercapitalized" if it
has a ratio of tangible equity (as defined in the regulations) to total assets
that is equal to or less than 2%.
"Undercapitalized" banks are subject to growth limitations and are required to
submit a capital restoration plan. A bank's compliance with such plan is
required to be guaranteed by any company that controls the undercapitalized
institution as described above. If an "undercapitalized" bank fails to submit
an acceptable plan, it is treated as if it is significantly undercapitalized.
"Significantly undercapitalized" banks are subject to one or more of a number
of requirements and restrictions, including an order by the appropriate
federal banking regulator to sell sufficient voting stock to become adequately
capitalized, requirements to reduce total assets and cease receipt of deposits
from correspondent banks, and restrictions on compensation of executive
officers. "Critically undercapitalized" institutions may not, beginning 60
days after becoming "critically undercapitalized", make any payment of
principal or interest on certain subordinated debt or extend credit for a
highly leveraged transaction or enter into any transaction outside the
ordinary course of business. In addition, "critically undercapitalized"
institutions are subject to appointment of a receiver or conservator.
11
<PAGE>
Additionally, under FDICIA, a bank holding company is required to guarantee
the compliance of any insured depository institution subsidiary that may
become "undercapitalized" (as defined in the statute) with the terms of any
capital restoration plan filed by such subsidiary with its appropriate federal
banking agency up to the lesser of (i) an amount equal to 5% of the
institution's total assets at the time the institution became
undercapitalized, or (ii) the amount that is necessary (or would have been
necessary) to bring the institution into compliance with all applicable
capital standards as of the time the institution fails to comply with such
capital restoration plan.
CAPITAL REQUIREMENTS
The Registrant and its subsidiary banks must meet certain minimum capital
requirements mandated by the Federal Reserve, the Comptroller of the Currency,
the FDIC and state banking regulators in Indiana. These regulatory agencies
require bank holding companies and banks to maintain certain minimum ratios of
primary capital to total assets and total capital to total assets. As of
January 1, 1991, the Federal Reserve required bank holding companies to
maintain a minimum Tier 1 leverage ratio of 3 percent capital to total assets;
however, for all but the most highly rated institutions which do not
anticipate significant growth, the minimum Tier 1 leverage ratio is 3 percent
plus an additional cushion of 100 to 200 basis points. As of December 31,
1997, the Registrant's leverage ratio of capital to total assets was 9.8
percent.
The Federal Reserve, the Comptroller of the Currency and the FDIC each have
approved the imposition of "risk-adjusted" capital ratios on bank holding
companies and financial institutions. At least half of the total required
capital, or 4%, must be "Tier 1 capital," consisting principally of common
shareholders' equity, noncumulative perpetual preferred stock, a limited
amount of cumulative perpetual preferred stock and minority interest in the
equity accounts of consolidated subsidiaries, less certain goodwill items. The
remainder ("Tier 2 capital") may consist of a limited amount of subordinated
debt and intermediate-term preferred stock, certain hybrid capital instruments
and other debt securities, cumulative perpetual preferred stock, and a limited
amount of the general loan loss allowance.
The Registrant and each of its subsidiaries had capital to assets ratios and
risk-adjusted capital ratios at December 31, 1997 in excess of the applicable
regulatory minimum requirements. The following table summarizes the
Registrant's risk-adjusted capital ratios under Federal Reserve guidelines at
December 31, 1997:
<TABLE>
<CAPTION>
Registrant Regulatory
Consolidated Minimum
Ratio Requirement
----- -----------
<S> <C> <C>
Tier 1 Capital to Risk-Weighted Assets Ratio 13.3% 4%
Total Capital to Risk-Weighted Assets Ratio 14.3% 8%
</TABLE>
12
<PAGE>
The Comptroller of the Currency and the FDIC include, in evaluations of a
bank's capital adequacy, an assessment of the bank's exposure to declines in
the economic value of the bank's capital due to changes in interest rates. In
1996, the FDIC, along with the Comptroller of the Currency and the Federal
Reserve, issued a joint policy statement to provide guidance on sound
practices for managing interest rate risk. The statement sets forth the
factors the federal regulatory examiners will use to determine the adequacy of
a bank's capital for interest rate risk. These qualitative factors include
the adequacy and effectiveness of the bank's internal interest rate risk
management process and the level of interest rate exposure. Other qualitative
factors that will be considered include the size of the bank, the nature and
complexity of its activities, the adequacy of its capital and earnings in
relation to the bank's overall risk profile, and its earning exposure to
interest rate movements. The interagency supervisory policy statement
describes the responsibilities of a bank's board of directors in implementing
a risk management process and the requirements of the bank's senior management
in ensuring the effective management of interest rate risk. Further, the
statement specifies the elements that a risk management process must contain.
The Federal Reserve, the Comptroller of the Currency, and the FDIC have issued
final regulations further revising their risk-based capital standards to
include a supervisory framework for measuring market risk. The effect of
these regulations is that any bank holding company or bank which has
significant exposure to market risk must measure such risk using its own
internal model, subject to the requirements contained in the regulations, and
must maintain adequate capital to support that exposure. These regulations
apply to any bank holding company or bank whose trading activity equals 10% or
more of its total assets, or whose trading activity equals $1 billion or more.
Examiners may require a bank holding company or bank that does not meet the
applicability criteria to comply with the capital requirements if necessary
for safety and soundness purposes. These regulations contain supplemental
rules to determine qualifying and excess capital, calculate risk-weighted
assets, calculate market risk equivalent assets and calculate risk-based
capital ratios adjusted for market risk.
INTERSTATE BANKING
The Riegle Community Development and Regulatory Improvement Act of 1994
allows bank holding companies to acquire banks anywhere in the United States
subject to certain state restrictions and permits an insured bank to merge
with an insured bank in another state without regard to whether such merger is
prohibited by state law. Additionally, an out-of-state bank may acquire the
branches of an insured bank in another state without acquiring the entire
bank; provided, however, that the law of the state where the branch is located
permits such an acquisition. Indiana permits interstate branching (both
denovo and by acquisition), subject to certain conditions, as contemplated by
the Act. Bank holding companies may merge existing bank subsidiaries located
in different states into one bank.
An insured bank subsidiary may act as an agent for an affiliated bank or
thrift in offering limited banking services (receive deposits, renew time
deposits, close loans, service loans and receive payments on loans
obligations) both within the same state and across state lines.
13
<PAGE>
ADDITIONAL MATTERS
In addition to the matters discussed above, the Registrant's affiliate banks
are subject to additional regulation of their activities, including a variety
of consumer protection regulations affecting their lending, deposit and
collection activities and regulations affecting secondary mortgage market
activities. Both federal and state law extensively regulate various aspects of
the banking business such as reserve requirements, truth-in-lending and
truth-in-savings disclosure, equal credit opportunity, fair credit reporting,
community reinvestment activities, trading in securities and other aspects of
banking operations. Current federal law also requires banks, among other
things, to make deposited funds available within specified time periods. The
extensive regulation, supervision and examination of financial institutions by
the bank regulatory agencies is intended primarily for the protection of the
insurance fund and depositors. Moreover, such regulation imposes substantial
restrictions on the operations and activities of such institutions, and grants
to regulators broad discretion in connection with their supervisory and
enforcement activities and examination policies, including policies with
respect to classification of assets and establishment of adequate loan loss
reserves. Any changes in such regulations, whether by legislation or
regulatory action, could have a material impact on the subsidiary banks and
their operations. The Registrant cannot predict what, if any, future actions
may be taken by legislative or regulatory authorities or what impact any such
actions may have on the operations of the subsidiary banks.
The earnings of financial institutions are also affected by general economic
conditions and prevailing interest rates, both domestic and foreign, and by
the monetary and fiscal policies of the United States Government and its
various agencies, particularly the Federal Reserve.
Additional legislation and administrative actions affecting the banking
industry are being considered and in the future may be considered by the
United States Congress, state legislatures and various regulatory agencies,
including those referred to above. It cannot be predicted with certainty
whether such legislation of administrative action will be enacted or the
extent to which the banking industry in general or the Registrant and its
affiliate banks in particular would be affected thereby.
YEAR 2000 SAFETY AND SOUNDNESS
Safety and soundness guidance on the risks posed to financial institutions by
the Year 2000 problem has been issued by the Federal Institutions Examination
Council. The guidance underscores that Year 2000 preparation is not only an
information systems issue, but also an enterprise-wide challenge that must be
addressed at the highest level of a financial institution. The guidance sets
out the responsibilities of senior management and boards of directors in
managing their Year 2000 projects. Among the responsibilities of institution
managers and directors is that of managing the internal and external risks
presented by providers of data-processing products and services, business
partners, counterparties and major loan customers. Under the guidance, senior
management must provide the board of directors with status reports, at least
quarterly, on efforts to reach Year 2000 goals both internally and by the
institution's major vendors. Senior managers and directors must allocate
sufficient resources to ensure that high priority is given to seeing that
remediation plans are fulfilled, and that the project receives the quality
personnel and timely support it requires. The guidance does not require
financial institutions to obtain Year 2000 certification from their vendors.
Rather, an institution must implement its own internal testing or verification
processes for vendor products and services to ensure that its different
computer systems function properly together.
14
<PAGE>
ITEM 2. PROPERTIES
- ------------------------------------------------------------------------------
As of December 31, 1997, the Registrant operated through twenty-six affiliated
offices. American National operates eleven branch offices, nine of which are
in Muncie and one in Yorktown and in Portland. Peoples operates nine
full-service offices, including branches in Winchester, Saratoga, Richmond,
Farmland, Parker City and Lynn. Other offices are operated by ANTIM and
ANBFPS. All such offices are owned by the subsidiaries with the exception of
two branches of American National and three facilities of ANTIM which are
leased.
ITEM 3. LEGAL PROCEEDINGS
- ------------------------------------------------------------------------------
As a part of the ordinary course of business, the Registrant's subsidiaries
are parties to lawsuits involving claims to the ownership of funds and
involving the collection of delinquent accounts. All such litigation is
incidental to the business of the financial institutions. Management believes
that no litigation is threatened or pending in which the Registrant or its
subsidiaries face potential loss or exposure which will materially affect the
Registrant's stockholders' equity or financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------------------------
None
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
- ------------------------------------------------------------------------------
Market for the Registrant's common equity and related stockholder matters
included in the 1997 Annual Report to Shareholders of the Registrant on page 5
is incorporated herein by reference.
As of March 13, 1998, the Registrant had approximately 654 stockholders of
record.
ITEM 6. SELECTED FINANCIAL DATA
- ------------------------------------------------------------------------------
Selected financial data under the heading "Financial Highlights" included in
the 1997 Annual Report to Shareholders of the Registrant on page 6 is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operation included in the 1997 Annual Report to Shareholders of the Registrant
on pages 36 through 55 is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ------------------------------------------------------------------------------
Quantitative and qualitative disclosures about market risk included in the 1997
Annual Report to Shareholders of the Registrant on pages 50-52 is incorporated
herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------------------------------------------------------------------------------
Consolidated financial statements as of and for the three-year period ended
December 31, 1997 and the independent auditor's report included in the 1997
Annual Report to Shareholders of the Registrant on pages 11 through 35 are
incorporated herein by reference.
15
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- ------------------------------------------------------------------------------
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------------------------
The information to be provided under this item is incorporated by reference
herein from pages 2 and 3 of the Registrant's definitive proxy statement dated
March 19, 1998 as filed with the Commission pursuant to Regulation 14A.
ITEM 11. EXECUTIVE COMPENSATION
- ------------------------------------------------------------------------------
The information to be provided under this item is incorporated by reference
herein from pages 6 through 12 of the Registrant's definitive proxy statement
dated March 19, 1998 as filed with the Commission pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------------
The information to be provided under this item is incorporated by reference
herein from pages 2, 4,and 5 of the Registrant's definitive proxy statement
dated March 19, 1998 as filed with the Commission pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------------------------------------------------------------------------------
The information to be provided under this item is incorporated by reference
herein from page 5 of the Registrant's definitive proxy statement dated March
19, 1998 as filed with the Commission pursuant to Regulation 14A.
16
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- ------------------------------------------------------------------------------
(a)(1) The following consolidated financial statements of the Registrant and
subsidiaries are incorporated by reference in Item 8:
Annual
Report
Page
Number
------
Independent Auditor's Report 11
Consolidated Balance Sheet as of December 31, 1997 and 1996 12
Consolidated Statement of Income for the years ended
December 31, 1997, 1996 and 1995 13
Consolidated Statement of Changes in Stockholders' Equity
for the years ended December 31, 1997, 1996 and 1995 14
Consolidated Statement of Cash Flows for the years ended
December 31, 1997, 1996 and 1995 15
Notes to Consolidated Financial Statements 16 -- 35
(2) All financial statement schedules have been omitted because they are
not applicable or the required information is shown in the
consolidated financial statements or notes thereto.
(3) Listing of Exhibits:
Exhibit Number Description
-------------- -----------
2.01 Restated and Amended Plan and Agreement of
Reorganization (Incorporated herein by reference to
Exhibit 2.01 of Form S-1 Registration Statement,
Commission File No. 33-36958).
2.02 Restated and Amended Plan of Merger-Conversion
(Incorporated herein by reference to Exhibit 2.02
of Form S-1 Registration Statement, Commission File
No. 33-36958).
17
<PAGE>
(3) Listing of Exhibits:
Exhibit Number Description
-------------- -----------
2.03 Agreement of Merger and Reorganization, as amended
by Amendment and Waiver (Incorporated herein by
reference to Exhibit 2.03 of the Registrant's Form
8-K filed on February 4, 1994).
3.01 Articles of Incorporation of the Registrant, as
amended (Incorporated herein by reference to
Exhibit 3.01 of the Registrant's 1995 Form 10-K
Annual Report).
3.02 Bylaws of the Registrant, as amended (Incorporated
herein by reference to Exhibit 3.02 of the
Registrant's 1996 Form 10-K Annual Report).
10.01 ANB Corporation Stock Option Plan (Incorporated
herein by reference to Exhibit 4.3 of Form S-8
Registration Statement, Commission File No. 33-
95868 filed on August 18, 1995).
10.02 Nonqualified Stock Option Plan of ANB Corporation
for Former Directors of Muncie Federal Savings and
Loan Association (Incorporated herein by reference
to Exhibit 28 of the Registrant's Form 10-Q as of
March 31, 1991).
10.03 Agreement to Merge by and between American National
Bank and Trust Company and Muncie Federal Savings
Bank dated June 16, 1992 (Incorporated herein by
reference to Exhibit 10.12 of the Registrant's 1992
Form 10-K Annual Report).
10.04 1993 Amended and Restated Employment Agreement
dated September 7, 1993 by and among James R.
Schrecongost, ANB Corporation and a subsidiary of
ANB Corporation (Incorporated herein by reference
to Exhibit 10.13 of the Registrant's 1993 Form 10-K
Annual Report).
10.05 1993 Amended and Restated Employment Agreement
dated September 7, 1993 by and among Lloyd M.
Townsend, ANB Corporation and a subsidiary of ANB
Corporation (Incorporated herein by reference to
Exhibit 10.14 of the Registrant's 1993 Form 10-K
Annual Report).
10.06 1993 Amended and Restated Employment Agreement
dated September 7, 1993 by and among Larry E.
Thomas, ANB Corporation and a subsidiary of ANB
Corporation (Incorporated herein by reference to
Exhibit 10.15 of the Registrant's 1993 Form 10-K
Annual Report).
10.07 1993 Amended and Restated Employment Agreement
dated September 7, 1993 by and among David W.
Spade, ANB Corporation and a subsidiary of ANB
Corporation (Incorporated herein by reference to
Exhibit 10.16 of the Registrant's 1993 Form 10-K
Annual Report).
18
<PAGE>
(3) Listing of Exhibits:
Exhibit Number Description
-------------- -----------
10.08 1993 Amended and Restated Employment Agreement
dated September 8, 1993 by and among Paul L.
Sehnert, Jr., ANB Corporation and a subsidiary of
ANB Corporation (Incorporated herein by reference
to Exhibit 10.17 of the Registrant's 1993 Form 10-K
Annual Report).
10.09 1994 Amended and Restated Employment Agreement
dated November 30, 1994 by and among Chris L.
Talley, ANB Corporation and a subsidiary of ANB
Corporation (Incorporated herein by reference to
Exhibit 10.19 of the Registrant's 1994 Form 10-K
Annual Report).
10.10 1994 Amended and Restated Employment Agreement
dated November 30, 1994 by and among Philip R.
Hirschfeld, ANB Corporation and a subsidiary of ANB
Corporation (Incorporated herein by reference to
Exhibit 10.20 of the Registrant's 1994 Form 10-K
Annual Report).
10.11 ANB Corporation 1995 Stock Option Plan
(Incorporated herein by reference to Exhibit 4.3 of
Form S-8 Registration Statement, Commission File
No. 33- 95866 filed on August 18, 1995).
10.12 ANB Corporation 1996 Directors' Stock Option Plan
(Incorporated herein by reference to Exhibit 10.13
of the Registrant's 1996 Form 10-K Annual Report).
10.13 Employment Agreement dated December 1, 1997 by and
among Jerome J. Gassen, ANB Corporation and a
subsidiary of ANB Corporation.
10.14 Employment and Noncompetition Agreement dated
September 16, 1997 by and among R. Michael Miner,
ANB Corporation and a subsidiary of ANB
Corporation.
10.15 Employment and Noncompetition Agreement dated
October 17, 1997 by and among Mark W. Cremonie, ANB
Corporation and a subsidiary of ANB Corporation
13 1997 Annual Report to Shareholders of ANB
Corporation (Incorporated in part into this Form
10-K by reference).
21 Subsidiaries of the Registrant.
23 Consent of Geo. S. Olive & Co. LLC.
27 Financial Data Schedule (Included in electronic
version only).
99 Annual financial statements and independent
auditor's report for Stock Investment Plan of ANB
Corporation for the year ended December 31, 1997.
(b) During the fourth quarter of 1997, the Registrant did not file any
reports on Form 8-K.
(c) See the listing of exhibits in Item 14(a)(3).
(d) No financial statement schedules are required to be submitted.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, as of the 23rd day of
March, 1998.
ANB CORPORATION
(Registrant)
By: /s/ James R. Schrecongost
-----------------------------------------
James R. Schrecongost, Vice
Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated below as of the 23rd day of March,
1998.
Name Title
- ------------------------------------------------------------------------------
/s/ Kelly N. Stanley Chairman of the Board of Directors
- ---------------------------------
Kelly N. Stanley
/s/ James R. Schrecongost Vice Chairman, President and
- --------------------------------- Chief Executive Officer
James R. Schrecongost
/s/ Larry E. Thomas Treasurer (Chief Financial Officer
- --------------------------------- and Principal Accounting Officer)
Larry E. Thomas
/s/ Ben E. Delk Director
- ---------------------------------
Ben E. Delk
/s/ Madelyn K. Ferris Director
- ---------------------------------
Madelyn K. Ferris
/s/ R. David Hoover Director
- ---------------------------------
R. David Hoover
20
<PAGE>
Director
- ---------------------------------
William L. Peterson
/s/ Donald A. Ross Director
- ---------------------------------
Donald A. Ross
/s/ Chris L. Talley Director
- ---------------------------------
Chris L. Talley
/s/ Leon V. Towne Director
- ---------------------------------
Leon V. Towne
21
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
2.01 Restated and Amended Plan and Agreement of Reorganization
(Incorporated herein by reference to Exhibit 2.01 of Form S-1
Registration Statement, Commission File No. 33-36958).
2.02 Restated and Amended Plan of Merger-Conversion (Incorporated
herein by reference to Exhibit 2.02 of Form S-1 Registration
Statement, Commission File No. 33-36958).
2.03 Agreement of Merger and Reorganization, as amended by
Amendment and Waiver (Incorporated herein by reference to
Exhibit 2.03 of the Registrant's Form 8-K filed on February 4,
1994).
3.01 Articles of Incorporation of the Registrant, as amended
(Incorporated herein by reference to Exhibit 3.01 of the
Registrant's 1995 Form 10-K Annual Report).
3.02 Bylaws of the Registrant, as amended (Incorporated herein by
reference to Exhibit 3.02 of the Registrant's 1996 Form 10-K
Annual Report).
10.01 ANB Corporation Stock Option Plan (Incorporated herein by
reference to Exhibit 4.3 of Form S-8 Registration Statement,
Commission File No. 33- 95868 filed on August 18, 1995).
10.02 Nonqualified Stock Option Plan of ANB Corporation for Former
Directors of Muncie Federal Savings and Loan Association
(Incorporated herein by reference to Exhibit 28 of the
Registrant's Form 10-Q as of March 31, 1991).
10.03 Agreement to Merge by and between American National Bank and
Trust Company and Muncie Federal Savings Bank dated June 16,
1992 (Incorporated herein by reference to Exhibit 10.12 of the
Registrant's 1992 Form 10-K Annual Report).
10.04 1993 Amended and Restated Employment Agreement dated September
7, 1993 by and among James R. Schrecongost, ANB Corporation
and a subsidiary of ANB Corporation (Incorporated herein by
reference to Exhibit 10.13 of the Registrant's 1993 Form 10-K
Annual Report).
10.05 1993 Amended and Restated Employment Agreement dated September
7, 1993 by and among Lloyd M. Townsend, ANB Corporation and a
subsidiary of ANB Corporation (Incorporated herein by
reference to Exhibit 10.14 of the Registrant's 1993 Form 10-K
Annual Report).
10.06 1993 Amended and Restated Employment Agreement dated September
7, 1993 by and among Larry E. Thomas, ANB Corporation and a
subsidiary of ANB Corporation (Incorporated herein by
reference to Exhibit 10.15 of the Registrant's 1993 Form 10-K
Annual Report).
10.07 1993 Amended and Restated Employment Agreement dated September
7, 1993 by and among David W. Spade, ANB Corporation and a
subsidiary of ANB Corporation (Incorporated herein by
reference to Exhibit 10.16 of the Registrant's 1993 Form 10-K
Annual Report).
22
<PAGE>
Exhibit Number Description
- -------------- -----------
10.08 1993 Amended and Restated Employment Agreement dated September
8, 1993 by and among Paul L. Sehnert, Jr., ANB Corporation and
a subsidiary of ANB Corporation (Incorporated herein by
reference to Exhibit 10.17 of the Registrant's 1993 Form 10-K
Annual Report).
10.09 1994 Amended and Restated Employment Agreement dated November
30, 1994 by and among Chris L. Talley, ANB Corporation and a
subsidiary of ANB Corporation (Incorporated herein by
reference to Exhibit 10.19 of the Registrant's 1994 Form 10-K
Annual Report).
10.10 1994 Amended and Restated Employment Agreement dated November
30, 1994 by and among Philip R. Hirschfeld, ANB Corporation
and a subsidiary of ANB Corporation (Incorporated herein by
reference to Exhibit 10.20 of the Registrant's 1994 Form 10-K
Annual Report).
10.11 ANB Corporation 1995 Stock Option Plan (Incorporated herein by
reference to Exhibit 4.3 of Form S-8 Registration Statement,
Commission File No. 33- 95866 filed on August 18, 1995).
10.12 ANB Corporation 1996 Directors' Stock Option Plan
(Incorporated herein by reference to Exhibit 10.13 of the
Registrant's 1996 Form 10-K Annual Report).
10.13 Employment Agreement dated December 1, 1997 by and among
Jerome J. Gassen, ANB Corporation and a subsidiary of ANB
Corporation.
10.14 Employment and Noncompetition Agreement dated September 16,
1997 by and among R. Michael Miner, ANB Corporation and a
subsidiary of ANB Corporation.
10.15 Employment and Noncompetition Agreement dated October 17, 1997
by and among Mark W. Cremonie, ANB Corporation and a
subsidiary of ANB Corporation
13 1997 Annual Report to Shareholders of ANB Corporation
(Incorporated in part into this Form 10-K by reference).
21 Subsidiaries of the Registrant.
23 Consent of Geo. S. Olive & Co. LLC.
27 Financial Data Schedule (Included in electronic version only).
99 Annual financial statements and independent auditor's report
for Stock Investment Plan of ANB Corporation for the year
ended December 31, 1997.
23
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
This Agreement is made and entered into this 1st day of December,
1997, by and between American National Bank and Trust Company of Muncie,
Indiana, located at 110 E. Main Street, Muncie, Indiana 47305 (hereinafter
referred to as Bank), and ANB Corporation, an Indiana corporation which owns
Bank (hereinafter referred to as Corporation), with its principal office
located at 120 W. Charles Street, Muncie, Indiana 47305 and Jerome J. Gassen,
Bank's President (hereinafter referred to as Executive) of 600 S. Turnberry
Lane, Yorktown, Indiana 47396.
WITNESSETH THAT:
WHEREAS, Executive is employed as an officer of the Bank and has
devoted his ability, time, effort and energies to the affairs of the Bank; and
WHEREAS, the Bank considers the continuance of proficient and
experienced management to be essential to protecting and enhancing the best
interest of the Bank, Corporation and its shareholders; and
WHEREAS, the Bank and Corporation desire to assure themselves of
retaining the services of the Executive (including his services without
distraction by uncertainty and risk of unemployment) in the event of a
proposed Change of Control (as hereinafter defined) of the Bank and/or the
Corporation; and
WHEREAS, the Bank and Corporation desire to compensate the Executive
should his employment terminate under certain hereinafter enumerated
circumstances after a Change of Control, and to clarify that no such
compensation is payable in the event Executive is terminated for Cause, as
defined in this Agreement.
NOW THEREFORE, IN CONSIDERATION of the foregoing recitals, the mutual
promises contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree that the above recitals are included as a part of this agreement.
ARTICLE I
DEFINITIONS
-----------
For purposes of this Agreement, the terms in this Article shall have
the following meaning throughout this Agreement:
(A) Cause: "Cause" to terminate Executive's employment
exists when the Executive:
(1) willfully and continually fails to substantially
perform his duties with the Bank and/or Corporation;
or
(2) substantially fails to meet the performance goals, or
reasonable policies and regulations established by the
Bank and/or Corporation; or
(3) is adjudged guilty of any crime involving a breach of
fiduciary duties to the Bank and/or Corporation; or
(4) willfully violates the Bank's or the Corporation's
Code of Conduct or any rules and regulations relating
to any existing banking law; or
<PAGE>
(5) acts in a manner which is detrimental to the Bank's or
Corporation's best interests, its reputation in the
community, or its standing in the banking industry.
(B) Change of Control: A "Change of Control" occurs if:
(1) any person, partnership, corporation, trust or similar
group, other than the Corporation or Bank as the case may be,
acquires more than twenty-five percent (25%) of the voting
securities of the Corporation or the Bank in a
transaction or series of transactions; or
(2) at any time a majority of the Board of Directors of
the Corporation or the Bank are not Continuing Directors as
defined under the Articles of Incorporation of the Corporation
or the Bank.
(C) Date of Termination: "Date of Termination" shall mean the
date stated in the Notice of Termination or thirty (30) days from the date of
delivery of such notice, whichever comes first.
(D) Disability: "Disability" shall mean the definition of such
term as used in the disability policy then in effect for the Bank and a
determination of full disability by the parties; provided that in the event
there is no disability insurance then in force, "disability" shall mean
incapacity due to physical or mental illness, which will have caused Executive
to have been unable to perform his duties with the Bank and/or Corporation on
a full time basis for 180 consecutive calendar days.
(E) Notice of Termination: "Notice of Termination" shall mean a
written notice, communicated to the other parties hereto, which shall indicate
the specific termination provisions of this Agreement relied upon and set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executive's employment under the provisions so
indicated.
(F) Retirement: "Retirement" shall mean termination of
employment by the Bank and/or Corporation or by the Executive in accordance
with Bank's or Corporation's normal retirement policy generally applicable to
its salaried employees in effect at the time of Change of Control.
(G) Unreasonable Changes: An "Unreasonable Change" occurs if
any of the following events occur:
(1) without Executive's express written consent and after
a Change of Control, the assignment to him of any
duties materially inconsistent with his position,
duties, and responsibility with the Bank and/or
Corporation immediately prior to a Change of Control;
(2) without Executive's express written consent and after
a Change of Control, a reduction by the Bank and/or
Corporation in the Executive' annual salary;
(3) without Executive's express written consent and after
a Change of Control, the Bank and/or Corporation
requires Executive to be relocated anywhere other than
the offices in Muncie, Indiana, and Bank and/or
Corporation fail to pay all reasonable moving expenses
incurred by him relating to a change of his principal
residence in connection with such relocation including
an obligation by the Bank and/or Corporation to
provide a customary home guarantee purchase of the
Executive's residence, the value of the home to be
determined by at least one real estate appraiser
designated by him and satisfactory to the Bank and/or
Corporation;
<PAGE>
(4) without Executive's express written consent and after
a Change of Control (1) the failure by the Bank and/or
Corporation to continue in effect (or to substitute
plans providing him with no less than substantially
similar benefits) any compensation plan or benefit
plans including, but not limited to, any retirement or
pension plan, savings plan, life insurance plan,
health and accident or disability plan in which
Executive is participating at the time of a Change of
Control; or (2) in the event the Bank and/or
Corporation institutes new or revised compensation or
benefit plans which provide more favorable benefits
than the plans in which Executive is participating at
the time of a Change of Control, the failure of the
Bank and/or Corporation to entitle Executive to
participate in and receive benefits under any such new
or revised plans providing more favorable benefits; or
(3) the taking of any action by the Bank that would
adversely affect Executive's participation in or
materially reduce his benefits under any of such plans
described in either (1) or (2) of this paragraph;
(5) without Executive's express written consent and after
a Change of Control, the taking of any action by the
Bank and/or Corporation to deprive Executive of any
material fringe benefit enjoyed by him at the time of
the Change of Control, or the failure by the Bank
and/or Corporation to provide him with the number of
paid vacation days to which he is entitled on the
basis of years of service with the Bank and/or
Corporation and in accordance with the Bank's and/or
Corporation's normal vacation policy in effect at the
time of Change of Control; or
(6) the failure of the Bank and/or Corporation to obtain
the assumption of this Agreement by any successor as
contemplated in this Agreement.
ARTICLE II
EMPLOYMENT AND TERM
-------------------
Bank hereby employs Executive as its President. The term of this
Agreement shall commence on the date hereof and this Agreement shall remain in
continuous effect until a Notice of Termination is given to the contrary by
either party to the other, subject to the provisions of Article III hereof;
provided, however, if a Change of Control shall occur on or before the date on
which Notice of Termination is received, the term of this Agreement shall
extend and be binding upon all parties hereto and their successors and assigns
for a period of two (2) years from the date on which such Change of Control
occurs.
ARTICLE III
TERMINATION
-----------
(A) In the absence of a Change of Control or threat of Change of
Control:
(1) the Bank and/or Corporation may terminate the
Executive without regard to the provisions of this
Agreement and this Agreement shall have no relevance
to the issues surrounding said termination; and
(2) Executive may terminate his employment with the Bank
and/or Corporation without regard to the provisions of
this Agreement, and this Agreement shall have no
relevance to the issues surrounding said termination.
(B) In the event any person, persons or entity commences a tender
or exchange offer, or circulates a proxy to the Corporation's shareholders
designed to effect a Change of Control, Executive
<PAGE>
agrees that he will not voluntarily leave his employment with the Bank and/or
Corporation and will continue to perform his regular duties, until such
person, persons or entity has abandoned or terminated its efforts to effect a
Change of Control. In the event any person, persons or entity successfully
concludes a tender or exchange offer, or has successfully circulated a proxy
to the Corporation's shareholders effecting a Change of Control, Executive
agrees that he will not voluntarily leave his employment with the Bank and/or
Corporation and will continue to perform his regular duties, subject to the
provisions of Articles III and IV of this Agreement.
(C) If, following a Change of Control, the Executive's employment
shall be terminated for Cause, the Bank and Corporation shall pay him his full
salary through the Date of Termination at the rate in effect on the date of
the Notice of Termination, and the Bank and Corporation shall have no further
obligations under this Agreement. If, following a Change of Control, the
Executive's employment shall be terminated as a result of death, disability,
or Retirement, compensation to the Executive shall be made pursuant to the
Bank's and Corporation's then existing policies on death, disability or
retirement, and the Bank and the Corporation shall have no further obligations
under this Agreement.
(D) If a Change of Control occurs and within a twenty-four (24)
month period thereafter an Unreasonable Change occurs to Executive's
employment relationship, the Executive shall be entitled to resign with
justification, and shall be entitled to the benefits provided in sub-paragraph
(E) of this Article. If the Executive invokes the rights pertaining to
resignation with justification, the Executive's notice of resignation shall
state that the Executive's resignation is in the best interests of the Bank
and/or Corporation considering the circumstances of the Change of Control and
Unreasonable Change, and that it is not his intent to resign for the sole
purpose of collecting compensation without working for it.
(E) If, within twenty-four (24) months of a Change of Control, the
Bank and/or Corporation shall terminate Executive's employment other than for
death, disability, Retirement or Cause, or if Executive shall resign in
accordance with sub-paragraph (D) of this Article, the Bank and/or Corporation
shall:
(1) pay Executive his salary after the Change of Control
through the Date of Termination plus the aggregate
amount of any bonus accrued but unpaid as of such Date
of Termination; and,
(2) pay Executive an amount in cash which, when added to
the present value of all other compensation, benefits
and payments required to be included in the
calculation under Section 280G of the Internal Revenue
Code and regulations thereunder, shall equal 299% of
the `base amount' as defined under Section 280G of the
Internal Revenue Code in effect on December 31, 1992.
Such amounts shall be payable in equal installments
over thirty-six (36) months from the Date of
Termination at the same frequencies as salaries paid
to other salaried employees of the Bank and/or
Corporation; provided, however, if Executive obtains
employment, the Bank's and/or Corporation's obligation
to pay such amount above thirty-six (36) months shall
continue but shall be reduced to that amount necessary
which, when added to Executive's salary for his new
employment, will maintain the Executive at the equal
monthly installment amount payable by the Bank and
Corporation described above; and,
(3) continue the Executive's participation in the life,
accident, disability and health insurance plans of the
Bank and/or Corporation, or shall provide equivalent
benefits, at no cost to the Executive until the third
anniversary of the Date of Termination, or if earlier,
at the Executive's commencement of full-time
employment with a new employer; provided, however,
that in the event Executive shall die before the
expiration of the
<PAGE>
period during which the Bank and/or Corporation would
be required to continue Executive's participation in
such insurance plans, the participation of the
Executive's surviving spouse and family in the Bank's
and/or Corporation's insurance plans shall continue in
accordance with the Bank's and/or Corporation's
standard policy for a spouse and family of a surviving
employee in effect at the time of the Change of
Control; and,
(F) Notwithstanding anything contained herein to the contrary, in
no event shall any payment or part thereof be made to the Executive which
would be considered an "excess parachute payment" within the meaning of
section Section 280G(b)(1) of the Internal Revenue Code of 1986, as amended.
The provisions of this sub-paragraph of Article III shall survive
termination of this Agreement and termination of the Executive's employment
under this Agreement.
ARTICLE IV
SOURCE OF PAYMENTS
------------------
All payments provided in this Agreement shall be paid in cash from the
general funds of the Bank and/or the Corporation and no special or separate
fund shall be established and no other segregation of assets shall be made to
assure payment. The Executive shall have no right, title, or interest
whatsoever in or to any investments which the Bank and/or Corporation may make
to aid the Bank and/or Corporation in meeting its obligations hereunder.
Nothing contained in this Agreement, and no action taken to fund its
provisions, shall create or be construed to create a trust of any kind, or a
fiduciary relationship, between the Bank and/or Corporation and Executive or
any other person. To the extent that any person acquires a right to receive
payments from the Bank and/or Corporation hereunder, such right shall be no
greater than the right of an unsecured creditor of the Bank and/or the
Corporation.
ARTICLE V
INDEMNIFICATION AND INSURANCE
-----------------------------
In the event Executive is or was a party or is threatened to be made a
party, to any threatened, pending or completed legal action, suit or
proceeding by reason of the fact that he is or was an officer, director, agent
or employee of the Bank or Corporation or is or was serving at the request of
the Bank or Corporation as an officer, director, agent, or employee of another
corporation or other entity, he shall be fully indemnified by the Bank or
Corporation to the maximum extent permitted by the Articles of Association of
Bank or Corporation. The Executive's costs of defense shall be borne by the
Bank or Corporation to the maximum extent permitted by the Articles of
Association of Bank or Corporation. The right of indemnification herein
provided shall not be deemed exclusive of any other rights to which Executive
may be entitled as a matter of law and any rights of indemnity under any
policy of insurance carried by the Bank or Corporation. Following a Change of
Control, the Bank or Corporation shall not terminate, or cause or allow to be
terminated, any policy of insurance carried by the Bank or Corporation
providing rights of indemnity to Executive in connection with his service as
an officer, director, agent or employee of the Bank or Corporation, or in
connection with such service rendered at the request of the Bank or
Corporation, prior to the expiration date provided under the terms of such
policy, unless the Bank or Corporation is carrying at such time a substitute
policy providing substantially similar rights of indemnity to Executive. The
Bank or Corporation shall provide, or shall cause any policy of insurance
carried by the Bank or Corporation to provide, rights of indemnity to
Executive which are at least equivalent to the most favorable rights provided
to an officer, director, agent or employee of the Bank or Corporation or the
acquiring entity in connection with service rendered to the Bank or
Corporation or the acquiring entity.
<PAGE>
ARTICLE VI
SUCCESSORS
----------
In recognition of the value of continued employment of Executive
following a Change of Control, and in recognition of the need for a smooth
transition of management of the Bank and/or Corporation following a Change of
Control, and in recognition of the need for certainty in the employment status
of Executive at the time of a Change of Control, the parties expressly agree
as follows:
The Bank and the Corporation will use their best efforts, collectively
and individually, to avoid assisting, permitting or soliciting a Change of
Control, unless the person, persons or entity successfully concluding a tender
or exchange offer, or successfully circulating a proxy to the Corporation's
shareholders effecting a Change of Control shall first have assumed all
obligations and liabilities under this Agreement, and have expressly agreed to
be obligated to perform all of the terms and conditions stated in this
Agreement following the completion of the Change of Control.
ARTICLE VII
GUARANTEE BY CORPORATION AND BANK
---------------------------------
In consideration of the value of the continued employment of Executive
by the Bank and the Corporation, and the benefits derived by the Bank and the
Corporation from Executive's employment by the Bank and the Corporation, the
Corporation and the Bank hereby unconditionally and fully guarantee and
endorse the obligations of the other hereunder, and agree to be fully bound by
the terms of this Agreement in the event that the other fails to perform,
honor or otherwise complete fully its obligations hereunder.
ARTICLE VIII
MISCELLANEOUS
-------------
The following terms shall govern this Agreement:
(A) This Agreement may not be changed orally, but only by
agreement in writing signed by the parties; the waiver by any party of
compliance with provisions of this Agreement by any other party shall not
operate or be construed as a waiver of any subsequent breach by such party.
(B) The article captions are inserted merely for the purpose of
identification and shall be given no significance in determining the meaning
of any article.
(C) This Agreement shall be interpreted and governed by the laws
of the State of Indiana.
(D) This Agreement shall be binding and inure to the benefit of
the parties hereto, and any successors and assigns of the Bank and the
Corporation, and to any successors, assigns, heirs and the personal
representatives of the Executive.
(E) The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect. It
is the intent of the parties that this Agreement be construed and interpreted
toward its validity and that this Agreement shall be deemed modified only to
the minimum extent necessary to sustain any questioned provision.
<PAGE>
IN WITNESS WHEREOF, the Bank and the Corporation have caused this
Employment Agreement to be executed by duly authorized officers of the
respective entities and the seals of the Bank and the Corporation to be
affixed hereto, and the Executive has hereunto subscribed his name, the 1st
day of December, 1997.
"CORPORATION" "BANK"
ANB CORPORATION AMERICAN NATIONAL BANK &
TRUST COMPANY OF MUNCIE,
INDIANA
BY: /s/ Kelly N. Stanley BY: /s/ Donald A. Ross
---------------------------- --------------------------
Printed: Kelly N. Stanley Printed: Donald A. Ross
Its: Chairman of the Board Its: Chairman of the Board
"EXECUTIVE"
/s/ Jerome J. Gassen
- -------------------------------
Printed: Jerome J. Gassen
EXHIBIT 10.14
EMPLOYMENT AND NONCOMPETITION AGREEMENT
---------------------------------------
This Agreement is made and entered into this 16th day of September,
1997, by and between American National Trust and Investment Management
Company, a trust company organized under the laws of the United States
("ANTIM"), located at 320 South High Street, Muncie, Indiana 47305-2325, ANB
Corporation ("ANBC"), an Indiana corporation organized as a bank holding
company under the laws of the United States, located at 110 East Main Street,
Muncie, Indiana 47308-0751 and R. Michael Miner, ("Executive"), residing at
4847 Silver Hill Drive, Greenwood, Indiana 46142.
WHEREAS, ANTIM is a nationally-chartered trust company providing trust
and fiduciary services to its clients and is a wholly-owned subsidiary of ANB
Corporation ("ANBC");
WHEREAS, Executive has many years of experience in the trust and
fiduciary services business and has in-depth knowledge and experience in said
business;
WHEREAS, ANTIM is establishing a location in downtown Indianapolis
which is anticipated to have a unique identity, certain autonomy, and possibly
a name separate and distinct from ANTIM (the "Indianapolis Company");
WHEREAS, ANTIM desires to employ Executive to assist in the
establishment and development of business for the Indianapolis Company; and
WHEREAS, Executive desires to be employed by ANTIM on the terms and
conditions herein provided.
NOW, THEREFORE, for good and valuable consideration, the sufficiency
and receipt of which is hereby acknowledged, ANTIM and Executive agree as
follows:
1. Employment. Upon the terms and subject to the conditions of
this Agreement, ANTIM hereby employs Executive and Executive hereby accepts
employment by ANTIM on the terms set forth in this Agreement.
2. Term. The "Employment Term" shall commence as of September
15, 1997 ("Effective Date"), and shall continue for a period of one year
through September 15, 1998, and shall include any renewal periods, unless
Executive's employment is terminated prior to the expiration of the full
Employment Term, as provided in this Agreement (such shorter period is
referred to herein as the "Employment Term"). This Agreement shall
automatically renew upon terms and conditions no less favorable than those in
existence at the time of the renewal for successive additional one (1) year
periods unless Executive or ANTIM gives written notice to the other party of
the election not to renew this Agreement at least ninety (90) days prior to
the end of the initial Employment Term or any renewal terms.
3. Executive's Position, Duties and Authority.
3.1 Position. ANTIM shall employ Executive, and Executive shall
serve, as Senior Vice President and Senior Trust Officer for the Indianapolis
Company.
3.2 Description. Executive shall be responsible to work with
other executive management of the Indianapolis Company in the overall
management and strategic direction of the Indianapolis Company, as well as the
identification and development of new opportunities in the trust and fiduciary
and other related businesses and the administration of trust and other
fiduciary relationships.
4. Full-Time Services. Executive shall devote substantially all
of his business, time, labor, skill and energy to conducting the business and
affairs of the Indianapolis Company and ANTIM and to satisfying
<PAGE>
the duties and responsibilities referred to in Section 3.2 of this Agreement.
Notwithstanding the foregoing, Executive shall have the right, subject to
Section 10, to devote a portion of his business time to personal investments
and commitments not related to the business of the Indianapolis Company or
ANTIM; provided, that the time devoted thereto shall not interfere in any
material respect with the performance of Executive's services hereunder.
5. Compensation and Other Benefits. ANTIM shall pay and provide
the following compensation and other benefits to Executive as compensation for
services rendered under this Agreement:
(a) Base Salary. During the Employment Term, ANTIM shall
pay to Executive, in equal installments on ANTIM's regular payroll
dates and no less frequently than once per month, an initial base
salary of One Hundred Thirty Thousand Dollars ($130,000) ("Base
Salary"). The Base Salary shall be reviewed by ANTIM in the fall of
1998 and periodically thereafter in accordance with ANTIM's policies
relating to salary review.
(b) Bonus Plan. Executive shall be eligible to
participate in ANTIM's bonus plan, which participation shall accrue at
a target rate of eleven percent (11%) of the Base Salary beginning as
of the Effective Date.
(c) Stock Options. Executive shall be eligible for stock
option awards of ANBC stock and will receive a recommendation of two
thousand (2,000) shares for 1997.
(d) Sales Commission Plan. Executive shall be eligible to
participate in ANTIM's sales commission plan beginning as of the
Effective Date.
(e) Defined Benefit Plan. Executive shall be eligible to
participate in the defined benefit plan available to ANTIM employees,
which participation will vest in five (5) years.
(f) 401k Plan. Executive shall be eligible to participate
in ANTIM's 401k Plan beginning as of January 1, 1999.
(g) Employee Stock Purchase Plan. Executive shall be
eligible to participate in the employee stock purchase plan available
to ANTIM employees beginning as of September 1, 1998.
(h) Vacation. Executive shall be eligible for one (1)
week paid vacation in 1997 and four (4) weeks paid vacation annually
thereafter.
(i) Insurance. Executive shall be eligible to participate
in major medical insurance, group life insurance, dental and eye
insurance programs available to ANTIM employees.
(j) Club Membership. Executive shall be provided with a
paid membership in the Columbia Club.
(k) Future Benefit Plans. Executive shall be entitled to
participate in benefit plans which may be established in the future
for the Indianapolis Company, which plans may be in lieu of certain of
the plans enumerated above by the mutual agreement of ANTIM and
Executive.
6. Source of Payments. All payments provided in this Agreement
shall be paid in cash from the general funds of ANTIM and no special or
separate fund shall be established and no other segregation of assets shall be
made to assure payment. Executive shall have no right, title, or interest
whatsoever in or to any investment which ANTIM may make to aid ANTIM in
meeting its obligations hereunder. Nothing contained in this Agreement, and
no action taken to fund its provisions, shall create or be construed to create
a trust of any kind, or a fiduciary relationship, between ANTIM and Executive
or any other person. To the
<PAGE>
extent that any person acquires a right to receive payments from ANTIM
hereunder, such right shall be no greater than the right of an unsecured
creditor of ANTIM.
7. Indemnification and Insurance. In the event Executive is or
was a party or is threatened to be made a party, to any threatened, pending or
completed legal action, suit or proceeding by reason of the fact that he is or
was an officer, director, agent or employee of ANTIM or is or was serving at
the request of ANTIM or ANBC as an officer, director, agent, or employee of
another corporation or other entity, he shall be fully indemnified by ANTIM
and ANBC to the maximum extent permitted by law and ANTIM's articles of
association and bylaws and ANBC's articles of incorporation and bylaws.
Executive's costs of defense shall be borne by ANTIM and ANBC to the maximum
extent permitted law and ANTIM's articles of association and bylaws and ANBC's
articles of incorporation and bylaws. The right of indemnification herein
provided shall not be deemed exclusive of any other rights to which Executive
may be entitled as a matter of law, under ANTIM's articles of association and
bylaws and ANBC articles of incorporation and bylaws and any rights of
indemnity under any policy of insurance carried by ANTIM and ANBC.
8. Business Information. All records, papers, programs and other
documents of ANTIM and those kept or made by Executive relating to the
business or affairs of ANTIM and/or its clients or customers shall be and
remain the property of ANTIM, and to the extent available and under the
control of Executive, shall be delivered by Executive to ANTIM upon the
expiration or earlier termination of Executive's employment by ANTIM.
9. Termination.
9.1 Definitions. For purposes of this Agreement, the terms in
this Section 9.1 shall have the following meaning throughout this Agreement:
(a) "Cause" to terminate Executive's employment exists
when Executive:
(1) willfully and continually fails to
substantially perform his duties with ANTIM;
or
(2) substantially fails to meet reasonable and
defined performance goals, or reasonable policies and
regulations established by ANTIM; or
(3) is adjudged guilty of any crime involving a
breach of fiduciary duties to ANTIM; or
(4) willfully violates ANTIM's Code of Conduct,
the National Bank Act or any rules and regulations promulgated
thereunder; or
(5) acts in a manner which is detrimental to
ANTIM's best interests, its reputation in the community, or
its standing in the banking industry.
(b) A "Change of Control" occurs if:
(1) any person, partnership, corporation, trust or
similar group, other than ANBC, acquires more than twenty-five
percent (25%) of the voting securities of ANBC or ANTIM in a
transaction or series of transactions; or
(2) at any time a majority of the Board of
Directors of ANBC or ANTIM are not Continuing Directors as
defined under the articles of incorporation or association of
ANBC or ANTIM.
<PAGE>
(c) "Date of Termination" shall mean the date stated in
the Notice of Termination or thirty (30) days from the date of delivery of
such notice, whichever comes first.
(d) "Disability" shall mean the definition of such term as
used in the disability policy then in effect for ANTIM and a determination of
full disability by ANTIM; provided that in the event there is no disability
insurance then in force, "disability" shall mean incapacity due to physical or
mental illness, which will have caused Executive to have been unable to
perform his duties with ANTIM on a full time basis for one hundred eighty
(180) consecutive calendar days.
(e) "Notice of Termination" shall mean a written notice,
communicated to the other parties hereto, which shall indicate the specific
termination provisions of this Agreement relied upon and set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provisions so indicated.
(f) Retirement" shall mean termination of employment by
ANTIM or Executive in accordance with ANTIM's normal retirement policy
generally applicable to its salaried employees in effect at the time of Change
of Control.
(g) An "Unreasonable Change" occurs if any of the
following event occur:
(1) without Executive's express written consent
and after a Change of Control, the assignment to him of any
duties materially inconsistent with his positions, duties and
responsibilities with ANTIM immediately prior to a Change of
Control;
(2) without Executive's express written consent
and after a Change of Control, a reduction by ANTIM in
Executive's annual salary;
(3) without Executive's express written consent
and after a Change of Control, ANTIM requires Executive to be
relocated anywhere other than ANTIM's offices in downtown
Indianapolis, Indiana, or, if Executive provides his consent,
ANTIM fails to pay all reasonable moving expenses in
connection with such relocation including an obligation by
ANTIM to provide a customary home guarantee purchase of
Executive's residence, the value of the home to be determined
by at least one real estate appraiser designated by him and
satisfactory to ANTIM;
(4) without Executive's express written consent
and after a Change of Control (1) the failure by the Trust
Company to continue in effect (or to substitute plans
providing him with no less than substantially similar
benefits) any compensation plan or benefit plans including,
but not limited to, any retirement or pension plan, savings
plan, life insurance plan, health and accident or disability
plan in which Executive is participating at the time of a
Change of Control; or (2) in the event the Trust Company
institutes new or revised compensation or benefit plans which
provide more favorable benefits than the plans in which
Executive is participating at the time of a Change of Control,
the failure of the Trust Company to entitle Executive to
participate in and receive benefits under any such new or
revised plans providing more favorable benefits; or (3) the
taking of any action by the Trust Company that would adversely
affect Executive's participation in or materially reduce his
benefits under any of such plans described in either (1) or
(2) of this paragraph;
(5) without Executive's express written consent
and after a Change of Control, the taking of any action by the
Trust Company to deprive Executive of any material fringe
benefit enjoyed by him at the time of the Change of Control,
or the failure by the Trust Company to provide him with the
number of paid vacation days to which he is entitled under
this Agreement or on the basis of years of service with the
Trust Company and in
<PAGE>
accordance with the Trust Company's normal vacation policy in
effect at the time of Change of Control (if greater); or
(6) the failure of the Trust Company or
Corporation to obtain the assumption of this Agreement by any successor as
contemplated in this Agreement.
9.2 Termination by ANTIM.
(a) This Agreement may be terminated prior to the
expiration of the Employment Term by ANTIM upon delivery of a Notice
of Termination to Executive (or his personal representative), upon the
happening of any of the following events:
(1) Upon the death of Executive;
(2) Upon the Disability of Executive;
(3) Retirement; or
(4) For Cause.
(b) If Executive's employment shall be terminated for
Cause (regardless of whether or not a Change of Control has occurred),
ANTIM shall pay to Executive his full Base Salary through the date of
termination, and ANTIM shall have no further obligations under this
Agreement.
(c) If Executive's employment shall be terminated as a
result of death, Disability or Retirement (regardless of whether or
not a Change of Control has occurred), compensation to Executive, his
estate, legal representatives or designee shall be made pursuant to
ANTIM's then existing policies on death, Disability or Retirement, and
ANTIM shall have no further obligations under this Agreement.
9.3 Termination by Executive.
(a) This Agreement may be terminated prior to the
expiration of the Employment Term by Executive upon delivery of a
Notice of Termination to ANTIM, upon the happening of any of the
following events:
(1) without Executive's express written consent,
the assignment to him of any duties materially inconsistent
with his positions, duties and responsibilities with ANTIM;
(2) without Executive's express written consent, a
reduction by ANTIM in Executive's annual salary or a reduction
or elimination of compensation and benefits as enumerated in
Section 5(a) through (k);
(3) without Executive's express written consent,
ANTIM requires Executive to be relocated anywhere other than
ANTIM's offices in downtown Indianapolis, Indiana.
(b) If Executive shall resign in accordance with Section
9.3(a), ANTIM shall pay Executive his Base Salary through the Date of
Termination plus the aggregate amount of any bonus accrued but unpaid
as of such Date of Termination.
9.4 Change of Control. In the event any person, persons or entity
commences a tender or exchange offer, or circulates a proxy to the
shareholders of ANBC designed to effect a Change of Control (as hereinafter
defined), Executive agrees that he will not voluntarily leave his employment
with ANTIM and will
<PAGE>
continue to perform his regular duties, until such person, persons or entity
has abandoned or terminated its efforts to effect a Change of Control. In the
event any person, persons or entity successfully concludes a tender or
exchange offer, or has successfully circulated a proxy to the shareholders of
ANBC effecting a Change of Control, Executive agrees that he will not
voluntarily leave his employment with ANTIM and will continue to perform his
regular duties, subject to the provisions of this Section 9.4.
(a) If a Change of Control occurs and within a twenty-four
(24) month period thereafter an Unreasonable Change occurs to
Executive's employment relationship, Executive shall be entitled to
resign with justification, and shall be entitled to the benefits
provided in Section 9.4(b). If Executive invokes the rights
pertaining to resignation with justification, Executive's notice of
resignation shall state that Executive's resignation is in the best
interests of ANTIM considering the circumstances of the Change of
Control and Unreasonable Change, and that it is not his intent to
resign for the sole purpose of collecting compensation without working
for it.
(b) If, within twenty-four (24) months of a Change of
Control, ANTIM shall terminate Executive's employment other than for
death, Disability, Retirement or Cause, or if Executive shall resign
in accordance with Section 9.4(a), ANTIM shall:
(1) pay Executive his Base Salary after the Change
of Control through the Date of Termination plus the aggregate
amount of any bonus accrued but unpaid as of such Date of
Termination; and,
(2) pay Executive an amount in cash which, when
added to the present value of all other compensation, benefits
and payments required to be included in the calculation under
Section 280G of the Internal Revenue Code of 1986, as amended,
(the "Code") and regulations thereunder, shall equal 299% of
the "base amount" as defined under Section 280G of the Code.
"Base amount" shall, however, include only Executive's Base
Salary and shall exclude any incentive compensation. Such
amount shall be payable in equal installments over thirty-six
(36) months from the Date of Termination at the same
frequencies as salaries paid to other salaried employees of
ANTIM; provided, however, if Executive obtains employment,
ANTIM's obligation to pay such amount over thirty-six (36)
months shall continue but shall be reduced to that amount
necessary which, when added to Executive's salary from his new
employment, will maintain Executive at the equal monthly
installment amount payable by ANTIM described above; and,
(3) continue Executive's participation in the
life, accident, disability and health insurance plans of
ANTIM, or provide equivalent benefits, at no cost to
Executive, until the third anniversary of the date of
termination, or if earlier, at Executive's commencement of
full-time employment with a new employer; provided, however,
that in the event Executive dies before the expiration of the
period during which ANTIM would be required to continue
Executive's participation in such insurance plans, the
participation of Executive's surviving spouse and family in
ANTIM's insurance plans shall continue in accordance with
ANTIM's standard policy for a spouse and family of a deceased
employee in effect at the time of the Change of Control; and
(4) pay those expenses incurred by Executive which
are not reimbursed by the new employer in connection with his
obtaining full-time employment with a new employer, including
the cost associated with employment search firms, travel in
obtaining full-time employment, temporary housing and related
relocation expenses, provided, however, that such expenses to
be paid by ANTIM shall not exceed 50% of Executive's Base
Salary and bonus determined as of the date of termination. In
addition, ANTIM shall provide a customary home guarantee
purchase of Executive's residence, the value of the home to be
<PAGE>
determined by at least one real estate appraiser designated by
him and satisfactory to ANTIM.
(5) The provisions of this Section 9.4 shall
survive termination of this Agreement, termination of
Executive's employment under this Agreement and the election
by either party not to renew this Agreement as provided in
Section 2.
10. Noncompetition.
(a) Executive agrees that during his employment by ANTIM
and for a period of one (1) year following termination of Executive's
employment for any reason other than those specified in Sections 9.2,
9.3 or 9.4, Executive will not for any person or entity engaged in
providing trust and fiduciary services or any other business in which
ANTIM is engaged, directly or indirectly, solicit or perform such
services or business or assist others in any way to solicit or perform
such services or business in Marion County, Indiana; provided,
however, the prohibitions described in this sentence shall not apply
to the private practice of law in Marion County, Indiana, so long as
any law firm or other organization with which Executive engages in
such law practice does not operate a trust or fiduciary services
department. The parties acknowledge and agree that such services
which are incidental to the practice of law, such as serving as the
executor of a will, do not, in and of themselves, constitute the
operation of a trust or fiduciary services department.
(b) The covenants set forth in this Section 10 shall apply
to Executive as an individual for his own account, as a partner, as an
employee, as an officer, director, or owner of an entity (other than
as a shareholder of a corporation whose shares are registered with the
Securities and Exchange Commission and traded on a public market), or
otherwise, and shall specifically prohibit the solicitation,
suggestion, advice, counselling or otherwise encouraging other
employees or agents of ANTIM or ANBC (or any other entity affiliated
with ANTIM or ANBC) to seek or accept employment with any competitor
or client which is also a competitor of ANTIM for the above specified
period in Marion County.
(c) Executive recognizes that this Section 10 is designed
and intended to protect valuable proprietary information owned by
ANTIM and the substantial investment ANTIM is making in Executive.
Executive further acknowledges that the restrictions contained in this
Agreement are reasonable as to geographic area, duration and scope of
employment activities. In order to protect ANTIM's proprietary
information and ANTIM's investment, and in recognition of the
difficulty in measuring damages resulting from any breach of this
Section 10, and the fact that money damages may well be inadequate,
Executive specifically agrees that ANTIM or ANBC may obtain
injunctions (temporary, preliminary and permanent) or other
appropriate orders to restrain any breach without showing any actual
damages, and to recover all costs and expenses, including attorneys'
fees, incurred in enforcing this Section 10. The parties agree that
ANBC is a third party beneficiary of the provisions of this Section 10
and as such may enforce said provisions.
11. Notice. Any notice required or permitted to be given
hereunder shall be given in writing and may be given by telex, telegram,
facsimile transmission or similar method if confirmed by mail as herein
provided; by mail if sent postage prepaid by registered mail, return receipt
requested; or by hand delivery to any party at the address of the party set
forth below. If notice is given by telex, telegram or facsimile transmission
or similar method or by hand delivery, it shall be deemed to have been given
or made on the date on which it was given, and if mailed, shall be deemed to
have been given or made on the fifth business day following the day after
which it was mailed. Any party may, from time to time, by like notice give
notice of any change of address and in such event, the address of such party
shall be deemed to be changed accordingly.
(a) In the case of ANTIM, to:
<PAGE>
American National Trust and Investment Management Company
320 South High Street
Muncie, Indiana 47305-2325
Attention: Paul L. Sehnert, Jr.
President and Chief Executive Officer
With a copy to:
Constance J. Gustafson
Lowe Gray Steele & Darko
Bank One Tower
111 Monument Circle, Suite 4600
Indianapolis, Indiana 46204
(a) In the case of ANBC, to:
ANB Corporation
110 East Main Street
Muncie, Indiana 47308-0751
Attention: James R. Schrecongost
President and Chief Executive Officer
With a copy to:
Constance J. Gustafson
Lowe Gray Steele & Darko
Bank One Tower
111 Monument Circle, Suite 4600
Indianapolis, Indiana 46204
(c) In the case of Executive, to:
R. Michael Miner
4847 Silver Hill Drive
Greenwood, Indiana 46142
12. General. The following terms shall govern this Agreement:
12.1 Amendments; Waivers. This Agreement may not be changed
orally, but only in agreement in writing signed by the parties; the waiver by
any party of compliance with provisions of this Agreement by any other party
shall not operate or be construed as a waiver of any subsequent breach by such
party.
12.2 Captions. The section captions are inserted merely for the
purpose of identification and shall be given no significance in determining
the meaning of any section.
12.3 Governing Law. This Agreement shall be interpreted and
governed by the laws of the State of Indiana, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws.
12.4 Successors and Assigns. This Agreement shall be binding and
inure to the benefit of the parties hereto, and any successors and assigns of
ANTIM and ANBC, and to any successors, assigns, heirs and the personal
representatives of Executive.
<PAGE>
12.5 Severability. If any provision hereon is or becomes illegal,
invalid or unenforceable under the laws of a particular jurisdiction, then:
(a) such provision shall be fully severable from this Agreement with respect
to such laws; (b) with resect to such laws, such provision shall be deemed
modified to impose the maximum duty permitted by such laws and such provision
be legal, valid and enforceable in such modified form as if separately stated
in and made part of this Agreement; (c) the remaining provision of this
Agreement shall remain in full force and effect in such jurisdiction and shall
not be affected by such provision or by its severance from this Agreement; and
(d) all of the provisions of this Agreement shall remain in full force and
effect in all other jurisdictions and shall not be affected by the severance
and replacement of such provision under the laws of such jurisdiction.
12.6 Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter
hereof, and supersedes all prior agreements, arrangements and understandings,
written or oral, between or among the parties with respect to the subject
matter hereof, except as specifically provided herein. There are no oral
promises, conditions, representations, understandings, interpretations or
terms of any kind of conditions or inducements to Executive hereof or in
effect among the parties. No custom or trade usage, nor course of conduct
among the parties, shall be relief upon to vary the terms hereof.
12.7 Survival of Certain Provisions. The provisions of Sections 7,
8, 9, 10, 11 and 12 shall, to the extent applicable, continue in full force
and effect notwithstanding the expiration or earlier termination of this
Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
"ANTIM":
AMERICAN NATIONAL TRUST AND
INVESTMENT MANAGEMENT COMPANY
By: /s/ Paul L. Sehnert, Jr
------------------------------------
Paul L. Sehnert, Jr., President and
Chief Executive Officer
"ANBC":
ANB CORPORATION
By: /s/ James R. Schrecongost
------------------------------------
James R. Schrecongost, President and
Chief Executive Officer
"EXECUTIVE":
/s/ R. Michael Miner
------------------------------------
R. Michael Miner
EXHIBIT 10.15
EMPLOYMENT AND NONCOMPETITION AGREEMENT
---------------------------------------
This Agreement is made and entered into this 17th day of October,
1997, by and between American National Trust and Investment Management
Company, a trust company organized under the laws of the United States
("ANTIM"), located at 320 South High Street, Muncie, Indiana 47305-2325, ANB
Corporation ("ANBC"), an Indiana corporation organized as a bank holding
company under the laws of the United States, located at 110 East Main Street,
Muncie, Indiana 47308-0751 and Mark W. Cremonie, ("Executive"), residing at
4265 E. 169th Street, Noblesville, Indiana 46060.
WHEREAS, ANTIM is a nationally-chartered trust company providing trust
and fiduciary services to its clients and is a wholly-owned subsidiary of ANB
Corporation ("ANBC");
WHEREAS, Executive has many years of experience in the trust and
fiduciary services business and has in-depth knowledge and experience in said
business;
WHEREAS, ANTIM is establishing a location in downtown Indianapolis
which is anticipated to have a unique identity, certain autonomy, and will do
business under the name "Indiana Capital Management" ("ICM");
WHEREAS, ANTIM desires to employ Executive to assist in the
establishment and development of business for ICM; and
WHEREAS, Executive desires to be employed by ANTIM on the terms and
conditions herein provided.
NOW, THEREFORE, for good and valuable consideration, the sufficiency
and receipt of which is hereby acknowledged, ANTIM and Executive agree as
follows:
1. Employment. Upon the terms and subject to the conditions of
this Agreement, ANTIM hereby employs Executive and Executive hereby accepts
employment by ANTIM on the terms set forth in this Agreement.
2. Term. The "Employment Term" shall commence as of October 6,
1997, 1997 ("Effective Date"), and shall continue for a period of one year
through October 6, 1998, and shall include any renewal periods, unless
Executive's employment is terminated prior to the expiration of the full
Employment Term, as provided in this Agreement (such shorter period is
referred to herein as the "Employment Term"). This Agreement shall
automatically renew upon terms and conditions no less favorable than those in
existence at the time of the renewal for successive additional one (1) year
periods unless Executive or ANTIM gives written notice to the other party of
the election not to renew this Agreement at least ninety (90) days prior to
the end of the initial Employment Term or any renewal terms.
<PAGE>
3. Executive's Position, Duties and Authority.
3.1 Position. ANTIM shall employ Executive, and Executive shall
serve, as Vice President and Investment Officer for ANTIM and Executive Vice
President for ICM.
3.2 Description. Executive shall be responsible to work with
other executive management of ICM in the overall management and strategic
direction of ICM, as well as the identification and development of new
opportunities in the trust and fiduciary and other related businesses and the
administration of trust and other fiduciary relationships.
4. Full-Time Services. Executive shall devote substantially all
of his business, time, labor, skill and energy to conducting the business and
affairs of ICM and ANTIM and to satisfying the duties and responsibilities
referred to in Section 3.2 of this Agreement. Notwithstanding the foregoing,
Executive shall have the right, subject to Section 10, to devote a portion of
his business time to personal investments and commitments not related to the
business of ICM or ANTIM; provided, that the time devoted thereto shall not
interfere in any material respect with the performance of Executive's services
hereunder.
5. Compensation and Other Benefits. ANTIM shall pay and provide
the following compensation and other benefits to Executive as compensation for
services rendered under this Agreement:
(a) Base Salary. During the Employment Term, ANTIM shall
pay to Executive, in equal installments on ANTIM's regular payroll
dates and no less frequently than once per month, an initial base
salary of One Hundred Five Thousand Dollars ($105,000) ("Base
Salary"). The Base Salary shall be reviewed by ANTIM in the fall of
1998 and periodically thereafter in accordance with ANTIM's policies
relating to salary review.
(b) Bonus Plan. Executive shall be eligible to
participate in ANTIM's bonus plan, which participation shall accrue at
a target rate of eleven percent (11%) of the Base Salary beginning as
of the Effective Date.
(c) Stock Options. Executive shall be eligible for stock
option awards of ANBC stock.
(d) Sales Commission Plan. Executive shall be eligible to
participate in ANTIM's sales commission plan beginning as of the
Effective Date.
(e) Defined Benefit Plan. Executive shall be eligible to
participate in the defined benefit plan available to ANTIM employees,
which participation will vest in five (5) years.
(f) 401k Plan. Executive shall be eligible to participate
in ANTIM's 401k Plan beginning as of January 1, 1999.
(g) Employee Stock Purchase Plan. Executive shall be
eligible to participate in the employee stock purchase plan available
to ANTIM employees beginning as of September 1, 1998.
(h) Vacation. Executive shall be eligible for one (1)
week paid vacation in 1997 and four (4) weeks paid vacation annually
thereafter.
(i) Insurance. Executive shall be eligible to participate
in major medical insurance, group life insurance, dental and eye
insurance programs available to ANTIM employees.
(j) Club Membership. Executive shall be provided with a
paid membership in the Columbia Club.
<PAGE>
(k) Future Benefit Plans. Executive shall be entitled to
participate in benefit plans which may be established in the future
for ICM, which plans may be in lieu of certain of the plans enumerated
above by the mutual agreement of ANTIM and Executive.
6. Source of Payments. All payments provided in this Agreement
shall be paid in cash from the general funds of ANTIM and no special or
separate fund shall be established and no other segregation of assets shall be
made to assure payment. Executive shall have no right, title, or interest
whatsoever in or to any investment which ANTIM may make to aid ANTIM in
meeting its obligations hereunder. Nothing contained in this Agreement, and
no action taken to fund its provisions, shall create or be construed to create
a trust of any kind, or a fiduciary relationship, between ANTIM and Executive
or any other person. To the extent that any person acquires a right to
receive payments from ANTIM hereunder, such right shall be no greater than the
right of an unsecured creditor of ANTIM.
7. Indemnification and Insurance. In the event Executive is or
was a party or is threatened to be made a party, to any threatened, pending or
completed legal action, suit or proceeding by reason of the fact that he is or
was an officer, director, agent or employee of ANTIM or is or was serving at
the request of ANTIM or ANBC as an officer, director, agent, or employee of
another corporation or other entity, he shall be fully indemnified by ANTIM
and ANBC to the maximum extent permitted by law and ANTIM's articles of
association and bylaws and ANBC's articles of incorporation and bylaws.
Executive's costs of defense shall be borne by ANTIM and ANBC to the maximum
extent permitted law and ANTIM's articles of association and bylaws and ANBC's
articles of incorporation and bylaws. The right of indemnification herein
provided shall not be deemed exclusive of any other rights to which Executive
may be entitled as a matter of law, under ANTIM's articles of association and
bylaws and ANBC articles of incorporation and bylaws and any rights of
indemnity under any policy of insurance carried by ANTIM and ANBC.
8. Business Information. All records, papers, programs and other
documents of ANTIM and those kept or made by Executive relating to the
business or affairs of ANTIM and/or its clients or customers shall be and
remain the property of ANTIM, and to the extent available and under the
control of Executive, shall be delivered by Executive to ANTIM upon the
expiration or earlier termination of Executive's employment by ANTIM.
9. Termination.
9.1 Definitions. For purposes of this Agreement, the terms in
this Section 9.1 shall have the following meaning throughout this Agreement:
(a) "Cause" to terminate Executive's employment exists
when Executive:
(1) willfully and continually fails to
substantially perform his duties with ANTIM;
or
(2) substantially fails to meet reasonable and
defined performance goals, or reasonable policies and
regulations established by ANTIM; or
(3) is adjudged guilty of any crime involving a
breach of fiduciary duties to ANTIM; or
(4) willfully violates ANTIM's Code of Conduct,
the National Bank Act or any rules and regulations promulgated
thereunder; or
(5) acts in a manner which is detrimental to
ANTIM's best interests, its reputation in the community, or
its standing in the banking industry.
<PAGE>
(b) A "Change of Control" occurs if:
(1) any person, partnership, corporation, trust or
similar group, other than ANBC, acquires more than twenty-five
percent (25%) of the voting securities of ANBC or ANTIM in a
transaction or series of transactions; or
(2) at any time a majority of the Board of
Directors of ANBC or ANTIM are not Continuing Directors as
defined under the articles of incorporation or association of
ANBC or ANTIM.
(c) "Date of Termination" shall mean the date stated in
the Notice of Termination or thirty (30) days from the date of
delivery of such notice, whichever comes first.
(d) "Disability" shall mean the definition of such term as
used in the disability policy then in effect for ANTIM and a
determination of full disability by ANTIM; provided that in the event
there is no disability insurance then in force, "disability" shall
mean incapacity due to physical or mental illness, which will have
caused Executive to have been unable to perform his duties with ANTIM
on a full time basis for one hundred eighty (180) consecutive calendar
days.
(e) "Notice of Termination" shall mean a written notice,
communicated to the other parties hereto, which shall indicate the
specific termination provisions of this Agreement relied upon and set
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the
provisions so indicated.
(f) Retirement" shall mean termination of employment by
ANTIM or Executive in accordance with ANTIM's normal retirement policy
generally applicable to its salaried employees in effect at the time
of Change of Control.
(g) An "Unreasonable Change" occurs if any of the
following event occur:
(1) without Executive's express written consent
and after a Change of Control, the assignment to him of any
duties materially inconsistent with his positions, duties and
responsibilities with ANTIM immediately prior to a Change of
Control;
(2) without Executive's express written consent
and after a Change of Control, a reduction by ANTIM in
Executive's annual salary;
(3) without Executive's express written consent
and after a Change of Control, ANTIM requires Executive to be
relocated anywhere other than ANTIM's offices in downtown
Indianapolis, Indiana, or, if Executive provides his consent,
ANTIM fails to pay all reasonable moving expenses in
connection with such relocation including an obligation by
ANTIM to provide a customary home guarantee purchase of
Executive's residence, the value of the home to be determined
by at least one real estate appraiser designated by him and
satisfactory to ANTIM;
(4) without Executive's express written consent
and after a Change of Control (1) the failure by the Trust
Company to continue in effect (or to substitute plans
providing him with no less than substantially similar
benefits) any compensation plan or benefit plans including,
but not limited to, any retirement or pension plan, savings
plan, life insurance plan, health and accident or disability
plan in which Executive is participating at the time of a
Change of Control; or (2) in the event the Trust Company
institutes new or revised
<PAGE>
compensation or benefit plans which provide more favorable
benefits than the plans in which Executive is participating at
the time of a Change of Control, the failure of the Trust
Company to entitle Executive to participate in and receive
benefits under any such new or revised plans providing more
favorable benefits; or (3) the taking of any action by the
Trust Company that would adversely affect Executive's
participation in or materially reduce his benefits under any
of such plans described in either (1) or (2) of this
paragraph;
(5) without Executive's express written consent
and after a Change of Control, the taking of any action by the
Trust Company to deprive Executive of any material fringe
benefit enjoyed by him at the time of the Change of Control,
or the failure by the Trust Company to provide him with the
number of paid vacation days to which he is entitled under
this Agreement or on the basis of years of service with the
Trust Company and in accordance with the Trust Company's
normal vacation policy in effect at the time of Change of
Control (if greater); or
(6) the failure of the Trust Company or
Corporation to obtain the assumption of this Agreement by any
successor as contemplated in this Agreement.
9.2 Termination by ANTIM.
(a) This Agreement may be terminated prior to the
expiration of the Employment Term by ANTIM upon delivery of a Notice
of Termination to Executive (or his personal representative), upon the
happening of any of the following events:
(1) Upon the death of Executive;
(2) Upon the Disability of Executive;
(3) Retirement; or
(4) For Cause.
(b) If Executive's employment shall be terminated for
Cause (regardless of whether or not a Change of Control has occurred),
ANTIM shall pay to Executive his full Base Salary through the date of
termination, and ANTIM shall have no further obligations under this
Agreement.
(c) If Executive's employment shall be terminated as a
result of death, Disability or Retirement (regardless of whether or
not a Change of Control has occurred), compensation to Executive, his
estate, legal representatives or designee shall be made pursuant to
ANTIM's then existing policies on death, Disability or Retirement, and
ANTIM shall have no further obligations under this Agreement.
9.3 Termination by Executive.
(a) This Agreement may be terminated prior to the
expiration of the Employment Term by Executive upon delivery of a
Notice of Termination to ANTIM, upon the happening of any of the
following events:
(1) without Executive's express written consent,
the assignment to him of any duties materially inconsistent
with his positions, duties and responsibilities with ANTIM; or
<PAGE>
(2) without Executive's express written consent, a
reduction by ANTIM in Executive's annual salary or a reduction
or elimination of compensation and benefits as enumerated in
Section 5(a) through (k).
(b) If Executive shall resign in accordance with Section
9.3(a), ANTIM shall pay Executive his Base Salary through the Date of
Termination plus the aggregate amount of any bonus accrued but unpaid
as of such Date of Termination.
9.4 Change of Control. In the event any person, persons or entity
commences a tender or exchange offer, or circulates a proxy to the
shareholders of ANBC designed to effect a Change of Control (as hereinafter
defined), Executive agrees that he will not voluntarily leave his employment
with ANTIM and will continue to perform his regular duties, until such person,
persons or entity has abandoned or terminated its efforts to effect a Change
of Control. In the event any person, persons or entity successfully concludes
a tender or exchange offer, or has successfully circulated a proxy to the
shareholders of ANBC effecting a Change of Control, Executive agrees that he
will not voluntarily leave his employment with ANTIM and will continue to
perform his regular duties, subject to the provisions of this Section 9.4.
(a) If a Change of Control occurs and within a twenty-four
(24) month period thereafter an Unreasonable Change occurs to
Executive's employment relationship, Executive shall be entitled to
resign with justification, and shall be entitled to the benefits
provided in Section 9.4(b). If Executive invokes the rights
pertaining to resignation with justification, Executive's notice of
resignation shall state that Executive's resignation is in the best
interests of ANTIM considering the circumstances of the Change of
Control and Unreasonable Change, and that it is not his intent to
resign for the sole purpose of collecting compensation without working
for it.
(b) If, within twenty-four (24) months of a Change of
Control, ANTIM shall terminate Executive's employment other than for
death, Disability, Retirement or Cause, or if Executive shall resign
in accordance with Section 9.4(a), ANTIM shall:
(1) pay Executive his Base Salary after the Change
of Control through the Date of Termination plus the aggregate
amount of any bonus accrued but unpaid as of such Date of
Termination; and,
(2) pay Executive an amount in cash which, when
added to the present value of all other compensation, benefits
and payments required to be included in the calculation under
Section 280G of the Internal Revenue Code of 1986, as amended,
(the "Code") and regulations thereunder, shall equal 299% of
the "base amount" as defined under Section 280G of the Code.
"Base amount" shall, however, include only Executive's Base
Salary and shall exclude any incentive compensation. Such
amount shall be payable in equal installments over thirty-six
(36) months from the Date of Termination at the same
frequencies as salaries paid to other salaried employees of
ANTIM; provided, however, if Executive obtains employment,
ANTIM's obligation to pay such amount over thirty-six (36)
months shall continue but shall be reduced to that amount
necessary which, when added to Executive's salary from his new
employment, will maintain Executive at the equal monthly
installment amount payable by ANTIM described above; and,
(3) continue Executive's participation in the
life, accident, disability and health insurance plans of
ANTIM, or provide equivalent benefits, at no cost to
Executive, until the third anniversary of the date of
termination, or if earlier, at Executive's commencement of
full-time employment with a new employer; provided, however,
that in the event Executive dies before the expiration of the
period during which ANTIM would be required to continue
Executive's participation in such insurance plans, the
participation of Executive's surviving
<PAGE>
spouse and family in ANTIM's insurance plans shall continue in
accordance with ANTIM's standard policy for a spouse and
family of a deceased employee in effect at the time of the
Change of Control; and
(4) pay those expenses incurred by Executive which
are not reimbursed by the new employer in connection with his
obtaining full-time employment with a new employer, including
the cost associated with employment search firms, travel in
obtaining full-time employment, temporary housing and related
relocation expenses, provided, however, that such expenses to
be paid by ANTIM shall not exceed 50% of Executive's Base
Salary and bonus determined as of the date of termination. In
addition, ANTIM shall provide a customary home guarantee
purchase of Executive's residence, the value of the home to be
determined by at least one real estate appraiser designated by
him and satisfactory to ANTIM.
(5) The provisions of this Section 9.4 shall
survive termination of this Agreement, termination of
Executive's employment under this Agreement and the election
by either party not to renew this Agreement as provided in
Section 2.
10. Noncompetition.
(a) Executive agrees that during his employment by ANTIM
and for a period of one (1) year following termination of Executive's
employment for any reason other than those specified in Sections 9.2,
9.3 or 9.4, Executive will not for any person or entity engaged in
providing trust and fiduciary services, investment management services
or any other business in which ANTIM is engaged, directly or
indirectly, solicit or perform such services or business or assist
others in any way to solicit or perform such services or business in
Marion County, Indiana.
(b) The covenants set forth in this Section 10 shall apply
to Executive as an individual for his own account, as a partner, as an
employee, as an officer, director, or owner of an entity (other than
as a shareholder of a corporation whose shares are registered with the
Securities and Exchange Commission and traded on a public market), or
otherwise, and shall specifically prohibit the solicitation,
suggestion, advice, counselling or otherwise encouraging other
employees or agents of ANTIM or ANBC (or any other entity affiliated
with ANTIM or ANBC) to seek or accept employment with any competitor
or client which is also a competitor of ANTIM for the above specified
period in Marion County.
(c) Executive recognizes that this Section 10 is designed
and intended to protect valuable proprietary information owned by
ANTIM and the substantial investment ANTIM is making in Executive.
Executive further acknowledges that the restrictions contained in this
Agreement are reasonable as to geographic area, duration and scope of
employment activities. In order to protect ANTIM's proprietary
information and ANTIM's investment, and in recognition of the
difficulty in measuring damages resulting from any breach of this
Section 10, and the fact that money damages may well be inadequate,
Executive specifically agrees that ANTIM or ANBC may obtain
injunctions (temporary, preliminary and permanent) or other
appropriate orders to restrain any breach without showing any actual
damages, and to recover all costs and expenses, including attorneys'
fees, incurred in enforcing this Section 10. The parties agree that
ANBC is a third party beneficiary of the provisions of this Section 10
and as such may enforce said provisions.
11. Notice. Any notice required or permitted to be given
hereunder shall be given in writing and may be given by telex, telegram,
facsimile transmission or similar method if confirmed by mail as herein
provided; by mail if sent postage prepaid by registered mail, return receipt
requested; or by hand delivery to any party at the address of the party set
forth below. If notice is given by telex, telegram or facsimile
<PAGE>
transmission or similar method or by hand delivery, it shall be deemed to have
been given or made on the date on which it was given, and if mailed, shall be
deemed to have been given or made on the fifth business day following the day
after which it was mailed. Any party may, from time to time, by like notice
give notice of any change of address and in such event, the address of such
party shall be deemed to be changed accordingly.
(a) In the case of ANTIM, to:
American National Trust and Investment Management Company
320 South High Street
Muncie, Indiana 47305-2325
Attention: Paul L. Sehnert, Jr.
President and Chief Executive Officer
With a copy to:
Constance J. Gustafson
Lowe Gray Steele & Darko
Bank One Tower
111 Monument Circle, Suite 4600
Indianapolis, Indiana 46204
(a) In the case of ANBC, to:
ANB Corporation
110 East Main Street
Muncie, Indiana 47308-0751
Attention: James R. Schrecongost
President and Chief Executive Officer
<PAGE>
With a copy to:
Constance J. Gustafson
Lowe Gray Steele & Darko
Bank One Tower
111 Monument Circle, Suite 4600
Indianapolis, Indiana 46204
(c) In the case of Executive, to:
Mark W. Cremonie
4265 E. 169th Street
Noblesville, Indiana 46060
12. General. The following terms shall govern this Agreement:
12.1 Amendments; Waivers. This Agreement may not be changed
orally, but only in agreement in writing signed by the parties; the waiver by
any party of compliance with provisions of this Agreement by any other party
shall not operate or be construed as a waiver of any subsequent breach by such
party.
12.2 Captions. The section captions are inserted merely for the
purpose of identification and shall be given no significance in determining
the meaning of any section.
12.3 Governing Law. This Agreement shall be interpreted and
governed by the laws of the State of Indiana, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws.
12.4 Successors and Assigns. This Agreement shall be binding and
inure to the benefit of the parties hereto, and any successors and assigns of
ANTIM and ANBC, and to any successors, assigns, heirs and the personal
representatives of Executive.
<PAGE>
12.5 Severability. If any provision hereon is or becomes illegal,
invalid or unenforceable under the laws of a particular jurisdiction, then:
(a) such provision shall be fully severable from this Agreement with respect
to such laws; (b) with resect to such laws, such provision shall be deemed
modified to impose the maximum duty permitted by such laws and such provision
be legal, valid and enforceable in such modified form as if separately stated
in and made part of this Agreement; (c) the remaining provision of this
Agreement shall remain in full force and effect in such jurisdiction and shall
not be affected by such provision or by its severance from this Agreement; and
(d) all of the provisions of this Agreement shall remain in full force and
effect in all other jurisdictions and shall not be affected by the severance
and replacement of such provision under the laws of such jurisdiction.
12.6 Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter
hereof, and supersedes all prior agreements, arrangements and understandings,
written or oral, between or among the parties with respect to the subject
matter hereof, except as specifically provided herein. There are no oral
promises, conditions, representations, understandings, interpretations or
terms of any kind of conditions or inducements to Executive hereof or in
effect among the parties. No custom or trade usage, nor course of conduct
among the parties, shall be relief upon to vary the terms hereof.
12.7 Survival of Certain Provisions. The provisions of Sections 7,
8, 9, 10, 11 and 12 shall, to the extent applicable, continue in full force
and effect notwithstanding the expiration or earlier termination of this
Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
"ANTIM":
AMERICAN NATIONAL TRUST AND
INVESTMENT MANAGEMENT COMPANY
By: /s/ Paul L. Sehnert, Jr.
--------------------------------------
Paul L. Sehnert, Jr., President and
Chief Executive Officer
"ANBC":
ANB CORPORATION
By: /s/ James R. Schrecongost
--------------------------------------
James R. Schrecongost, President and
Chief Executive Officer
"EXECUTIVE":
/s/ Mark W. Cremonie
--------------------------------------
Mark W. Cremonie
[MISSION STATEMENT APPEARS HERE]
<PAGE>
[EIGHT DECADES OF FINANCIAL SERVICE APPEARS HERE]
two
<PAGE>
[EIGHT DECADES OF FINANCIAL SERVICE APPEARS HERE]
three
<PAGE>
SHAREHOLDER INFORMATION
ANB Corporation is a multi-bank holding company engaged in the business of
commercial banking, trust and asset management. Headquartered in Muncie,
Indiana, the business of the company is conducted primarily through three
affiliate companies: American National Bank & Trust Company of Muncie;
American National Trust & Investment Management Company and Peoples Loan
& Trust Bank.
American National Bank is a national banking association with its principal
office in Muncie, Delaware County, Indiana. It has one wholly owned
subsidiary, ANB Financial Planning Services. American National Trust is a
nationally chartered trust bank headquartered in Muncie, with regional offices
in several other Indiana communities. Indiana Capital Management and
Indiana Trust Co. are affiliated with American National Trust. Peoples
Loan & Trust is a state banking association with its home office in
Winchester, Randolph County, Indiana.
ALLEN COUNTY
American National Trust
DELAWARE COUNTY [MAP INDICATING THE CITY & COUNTY
American National Bank OF BANK & AFFILIATE LOCATIONS
(10 offices) APPEARS HERE]
American National Trust
ANB Financial Planning
Services (2 offices)
JAY COUNTY
American National Bank
MADISON COUNTY
American National Trust
MARION COUNTY
Indiana Capital Management
RANDOLPH COUNTY
American National Trust
Peoples Loan & Trust Bank
(5 offices)
ST. JOSEPH COUNTY
Indiana Trust Co. (minority
interest owned by American
National Trust)
WAYNE COUNTY
Peoples Loan & Trust Bank
(2 offices)
four
<PAGE>
ANNUAL MEETING MARKET MAKERS
Tuesday, April 21, 1998 NatCity Investments Inc.
Horizon Convention Center McDonald & Company Sec., Inc.
401 South High Street Howe Barnes Investments, Inc.
Muncie, Indiana 47305 Robert W. Baird & Co., Inc.
ABN AMRO Chicago Corporation
CORPORATE ADDRESS Stifel, Nicolaus & Co., Inc.
ANB Corporation
120 West Charles Street STOCK TRANSFER AGENT
Muncie, Indiana 47305 American National Trust & Investment
Management Company
320 South High Street
Muncie, Indiana 47305
ANNUAL REPORT (FORM 10-K)
Upon written request, the Company will provide without charge to each
shareholder, a copy of the annual report on Form 10-K as filed with the
Securities and Exchange Commission for the year ended December 31, 1997.
Address all requests to: L.E. Thomas, Chief Financial Officer and Treasurer,
at the corporate office address.
COMPANY STOCK PRICES AND DIVIDENDS
The Company's common stock trades on The NASDAQ Stock Market under the symbol
ANBC. At December 31, 1997, the Company had 4,530,974 shares of its common
stock outstanding, and there were 651 shareholders of record.
The following table sets forth the high and low prices of the Company's
common stock as reported by NatCity Investments in 1997 and 1996. The
prices do not include retail mark-ups, mark-downs or commissions and
may not represent actual transactions. The prices have been adjusted for
stock splits. The table also sets forth the cash dividends declared on
Company common stock since January 1, 1996. All dividends have been adjusted
to give effect to stock splits.
STOCK PRICE DIVIDENDS
HIGH LOW PER SHARE
-------------------------------------------------
1997 1996 1997 1996 1997 1996
-------------------------------------------------
First Quarter $ 19.75 $ 16.50 $ 18.50 $15.50 $0.15 $0.125
Second Quarter 19.50 17.50 18.00 16.50 0.15 0.125
Third Quarter 21.88 18.00 19.50 17.50 0.17 0.15
Fourth Quarter 26.25 21.00 21.50 18.00 0.17 0.15
The primary source of funds for the payment of cash dividends by the Company
is dividends received from its subsidiaries. The subsidiaries have certain
dividend restrictions, which are common to the banking industry, that limit
the payment of dividends. The Company has no reason to believe these
restrictions will, in any way, impair the payment of future cash dividends.
The Company currently anticipates that it will continue to pay quarterly cash
dividends on its common stock. The payment of dividends in the future is at
the discretion of the Company's Board of Directors and will depend on the
Company's operating results and financial condition, the availability of
funds, regulatory limitations, tax considerations and other factors.
five
<PAGE>
FINANCIAL HIGHLIGHTS
ANB CORPORATION SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
(Dollars in Thousands Except for Per Share Amounts)
<S> <C> <C> <C> <C> <C>
FOR THE YEAR:
Net interest income $ 22,504 $ 21,028 $ 19,824 $ 17,411 $ 14,424
Provision for loan losses 955 1,089 1,084 277 519
Net interest income
after provision for loan losses 21,549 19,939 18,740 17,134 13,905
Income before cumulative
effect of change in accounting
method 7,007 6,006 5,285 4,770 4,987
Net income 7,007 6,006 5,285 4,770 5,185
Dividends 2,887 2,472 2,090 1,866 1,676
Average shares outstanding:
Basic 4,508,408 4,501,155 4,551,822 4,549,010 4,529,060
Diluted 4,606,268 4,595,300 4,638,155 4,633,144 4,617,471
PER SHARE:*
Basic income $ 1.55 $ 1.33 $ 1.16 $ 1.05 $ 1.14
Diluted income 1.52 1.31 1.14 1.03 1.12
Dividends 0.64 0.55 0.46 0.41 0.37
Stockholders' equity 12.41 11.43 10.92 9.85 9.17
Market stock price at year end 26.13 20.00 15.75 12.00 13.25
AT YEAR END:
Total assets $ 525,490 $ 493,847 $ 483,236 $ 441,586 $ 346,335
Loans, net 405,274 372,681 346,016 326,105 237,908
Deposits 411,262 405,845 415,351 380,132 289,492
Stockholders' equity 56,233 51,341 49,471 44,910 41,703
</TABLE>
* Per share amounts have been restated to give retroactive effect to the 1995
stock split.
s i x
<PAGE>
[REPORT FROM MANAGEMENT APPEARS HERE]
s e v e n
<PAGE>
[REPORT FROM MANAGEMENT APPEARS HERE]
e i g h t
<PAGE>
[REPORT FROM MANAGEMENT APPEARS HERE]
n i n e
<PAGE>
[REPORT FROM MANAGEMENT APPEARS HERE]
t e n
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and
Board of Directors
ANB Corporation
Muncie, Indiana
We have audited the consolidated balance sheet of ANB Corporation and
subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of income, changes in stockholder's equity and cash flows for each
of the three years in the period ended December 31, 1997. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, in a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principals used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion the consolidated financial statements described above present
fairly, in all material respects, the consolidated financial position of ANB
Corporation and subsidiaries as of December 31, 1997 and 1996, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted
accounting principals.
Geo. S. Olive & Co. LLC
Indianapolis, Indiana
January 30, 1998
e l e v e n
<PAGE>
CONS0LIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31 1997 1996
(Dollars in Thousands)
<S> <C> <C>
ASSETS
Cash and due from banks $ 22,262 $ 21,835
Federal funds sold 2,475
Interest-bearing deposit accounts 391 74
------------ ------------
Cash and cash equivalents 22,653 24,384
Investment securities available for sale 69,072 73,944
Mortgage loans held for sale 76 204
Loans 408,771 376,081
Allowance for loan losses (3,497) (3,400)
------------ ------------
Net loans 405,274 372,681
Premises and equipment 11,664 9,345
Federal Reserve and Federal Home Loan Bank stock 4,699 2,713
Foreclosed real estate 518 516
Interest receivable 4,532 4,159
Core deposit intangibles and goodwill 5,050 4,306
Other assets 1,952 1,595
------------ ------------
Total assets $ 525,490 $ 493,847
============ ============
LIABILITIES
Deposits
Noninterest bearing $ 54,640 $ 50,256
Interest bearing 356,622 355,589
------------ ------------
Total deposits 411,262 405,845
Short-term borrowings 13,335 17,676
Federal Home Loan Bank advances 39,615 14,000
Interest payable 1,334 1,391
Other liabilities 3,711 3,594
------------ ------------
Total liabilities 469,257 442,506
------------ ------------
Commitments and Contingent Liabilities
STOCKHOLDERS' EQUITY
Preferred stock, without par value
Authorized and unissued-250,000 shares
Common stock, $1 stated value
Authorized-20,000,000 shares
Issued and outstanding-4,530,974 and 4,490,556 shares 4,531 4,491
Paid-in capital 7,691 6,930
Paid-in capital-stock options 335 397
Retained earnings 42,286 38,325
Net unrealized gain on securities available for sale 1,390 1,198
------------ ------------
Total stockholders' equity 56,233 51,341
------------ ------------
Total liabilities and stockholders' equity $ 525,490 $ 493,847
============ ============
</TABLE>
See notes to consolidated financial statements.
t w e l v e
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1997 1996 1995
- ------------------------------------------------------------------------------------------------
(Dollars in Thousands Except for Per Share Amounts)
<S> <C> <C> <C>
INTEREST INCOME
Loans receivable
Taxable $ 34,987 $ 32,310 $ 30,342
Tax exempt 124 107 80
Investment securities
Taxable 1,648 1,837 1,674
Tax exempt 2,616 2,679 2,573
Federal funds sold 87 271 591
Other interest and dividend income 257 220 211
----------- ----------- -----------
Total interest income 39,719 37,424 35,471
----------- ----------- -----------
INTEREST EXPENSE
Deposits 15,480 15,484 15,051
Short-term borrowings 625 481 479
Federal Home Loan Bank advances 1,110 431 117
----------- ----------- -----------
Total interest expense 17,215 16,396 15,647
----------- ----------- -----------
NET INTEREST INCOME 22,504 21,028 19,824
Provision for loan losses 955 1,089 1,084
----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 21,549 19,939 18,740
----------- ----------- -----------
OTHER INCOME
Fiduciary activities 5,114 4,452 4,132
Service charges on deposit accounts 1,431 1,359 1,349
Other customer fees 407 463 338
Investment securities losses, net (13)
Net loans sold gains 105 159 97
Other income 551 567 625
----------- ----------- -----------
Total other income 7,595 7,000 6,541
----------- ----------- -----------
OTHER EXPENSES
Salaries and employee benefits 10,453 10,017 9,827
Premises and equipment expenses 3,095 2,672 2,645
Advertising 524 472 496
Professional fees 386 268 336
Deposit insurance expense 26 867 558
Printing and office supplies 609 561 569
Amortization of goodwill
and core deposit intangibles 459 375 360
Other expenses 3,037 2,907 2,683
----------- ----------- -----------
Total other expenses 18,589 18,139 17,474
----------- ----------- -----------
INCOME BEFORE INCOME TAX 10,555 8,800 7,807
Income tax expense 3,548 2,794 2,522
----------- ----------- -----------
NET INCOME $ 7,007 $ 6,006 $ 5,285
=========== =========== ===========
BASIC EARNINGS PER SHARE $ 1.55 $ 1.33 $ 1.16
=========== =========== ===========
DILUTED EARNINGS PER SHARE $ 1.52 $ 1.31 $ 1.14
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
t h i r t e e n
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK COMPENSATORY STOCK NET
OPTIONS UNREALIZED
------------ ------------------ GAIN ON
PREPAID SECURITIES
SHARES PAID-IN PAID-IN COMPENSATION RETAINED AVAILABLE FOR
OUTSTANDING AMOUNT CAPITAL CAPITAL EXPENSE EARNINGS SALE TOTAL
---------------------------------------------------------------------------------------------
(Dollars in Thousands Except for Per Share Amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES, JANUARY 1, 1995 2,280,265 $ 2,280 $ 8,141 $ 512 $ (152) $ 34,108 $ 21 $ 44,910
Net income for 1995 5,285 5,285
Cash dividends
($.46 per share) (2,090) (2,090)
Net change in unrealized
gain on securities available
for sale 1,890 1,890
Two-for-one stock split 2,261,963 2,262 (2,262)
Exercise of stock options 17,913 18 172 (46) 144
Stock tendered in exercise
of stock options (6,195) (6) (14) (89) (109)
Compensation expense
for 1995 related
to options granted 84 84
Tax benefit on stock
options exercised 66 66
Stock repurchases (34,651) (35) (126) (856) (1,017)
Stock issued under dividend
reinvestment and stock
purchase plan 11,040 11 297 308
--------- ------- -------- ------- -------- -------- --------- --------
BALANCES, DECEMBER 31, 1995 4,530,335 4,530 6,274 466 (68) 36,358 1,911 49,471
Net income for 1996 6,006 6,006
(Cash dividends
($.55 per share) (2,472) (2,472)
Net change in unrealized
gain on securities available
for sale (713) (713)
Exercise of stock options 39,950 40 287 (57) 270
Stock tendered in exercise
of stock options (10,488) (10) (13) (157) (180)
Compensation expense
for 1996 related
to options granted 56 56
Compensatory stock
options cancelled (12) 12
Tax benefit on stock
options exercised 109 109
Stock repurchases (93,000) (93) (128) (1,410) (1,631)
Stock issued under dividend
reinvestment and stock
purchase plan 23,759 24 401 425
--------- ------- ------- ------- -------- -------- --------- --------
BALANCES, DECEMBER 31, 1996 4,490,556 4,491 6,930 397 - 38,325 1,198 51,341
Net income for 1997 7,007 7,007
Cash dividends
($.64 per share) (2,887) (2,887)
Net change in unrealized
gain on securities available
for sale 192 192
Exercise of stock options 29,200 29 233 (62) 200
Stock tendered in exercise
of stock options (9,132) (9) (14) (159) (182)
Tax benefit on stock
options exercised 136 136
Stock issued under dividend
reinvestment and stock
purchase plan 20,350 20 406 426
--------- ------- ------- ------- -------- -------- --------- --------
BALANCES, DECEMBER 31, 1997 4,530,974 $ 4,531 $ 7,691 $ 335 $ - $ 42,286 $ 1,390 $ 56,233
========= ======= ======= ======= ======== ======== ========= ========
</TABLE>
See notes to consolidated financial statements.
f o u r t e e n
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1997 1996 1995
------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 7,007 $ 6,006 $ 5,285
Adjustments to reconcile net income
to net cash provided by operating activities
Provision for loan losses 955 1,089 1,084
Depreciation and amortization 1,293 1,109 1,172
Amortization of goodwill and core intangibles 459 375 360
Deferred income tax (355) (381) (274)
Investment securities amortization (accretion), net (37) (63) (132)
Investment securities losses 13
Net loans sold gains (105) (159) (97)
Mortgage loans originated for sale (10,588) (10,924) (9,187)
Proceeds from sale of mortgage loans 10,821 11,008 9,319
Net change in
Accounts receivable for loans sold 163 (163)
Interest receivable (373) (78) (566)
Interest payable (57) (235) 376
Other adjustments 295 184 1,478
------------- ------------- -------------
Net cash provided by operating activities 9,328 8,094 8,655
------------- ------------- -------------
INVESTING ACTIVITIES
Net change in marketable equity securities
available for sale (123) 251 (274)
Purchases of securities available for sale (9,533) (I8,455) (17,758)
Proceeds from maturities of securities held to maturity 6,342
Proceeds from maturities of securities available for sale 7,724 11,408 15,025
Proceeds from sales of securities available for sale 7,146 250
Purchases of securities held to maturity (3,493)
Net change in loans (33,751) (28,203) (21,094)
Purchases of premises and equipment (3,512) (878) (572)
Proceeds from sale of foreclosed real estate 299 253 20
Purchase of Federal Home Loan Bank stock (1,986) (52) (13)
Acquisitions, net of cash acquired 7,342 (399)
Other investing activities 21 24 42
------------- ------------- -------------
Net cash used by investing activities (26,373) (35,801) (21,775)
------------- ------------- -------------
FINANCING ACTIVITIES
Net change in
Noninterest-bearing, interest-bearing demand
and savings deposits 2,260 (5,737) 903
Certificates of deposit (5,913) (3,760) 34,409
Short-term borrowings (4,341) 9,926 (4,908)
Proceeds from Federal Home Loan Bank advances 46,495 15,000 4,850
Repayment of Federal Home Loan Bank advances (20,880) (3,395) (2,850)
Cash dividends (2,887) (2,472) (2,090)
Stock repurchases (1,631) (1,017)
Exercise of stock options 154 199 101
Dividend reinvestment and stock purchase plan 426 425 308
------------- ------------- -------------
Net cash provided by financing activities 15,314 8,555 29,706
------------- ------------- -------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (1,731) (19,152) 16,586
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 24,384 43,536 26,950
------------- ------------- -------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 22,653 $ 24,384 $ 43,536
============= ============= =============
ADDITIONAL CASH FLOWS INFORMATION
Interest paid $ 17,272 $ 16,631 $ 15,271
Income tax paid 3,725 3,095 2,530
</TABLE>
See notes to consolidated financial statements.
f i f t e e n
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Table Dollar Amounts In Thousands
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The
accounting and reporting policies of ANB Corporation ("Company") and its
wholly owned subsidiaries, American National Bank and Trust Company of Muncie
("American National"), Peoples Loan & Trust Bank ("Peoples"), and American
National Trust and Investment Management Company ("ANTIM"), and ANB Financial
Planning Services ("ANBFPS"), a subsidiary of American National, conform to
generally accepted accounting principles and general practices followed by the
banking industry. The more significant of the policies are described below.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
The Company is a bank holding company whose principal activity is the
ownership and management of the banks and other subsidiaries. The bank and
trust company subsidiaries operate under national and state bank charters and
provide full banking services. Accordingly, these subsidiaries are subject to
regulation by the Office of the Comptroller of the Currency, Department of
Financial Institutions, State of Indiana, and the Federal Deposit Insurance
Corporation.
The banking subsidiaries generate commercial, mortgage and consumer loans and
receive deposits from customers located primarily in Delaware, Jay, Randolph
and Wayne Counties, Indiana and surrounding counties. The loans are generally
secured by specific items of collateral including real property, consumer
assets and business assets. American National also engages in loan servicing
for investors. ANTIM provides trust and asset management services, and ANBFPS
is engaged in the selling of financial services.
CONSOLIDATION - The consolidated financial statements include the accounts of
the Company and subsidiaries after elimination of all material intercompany
transactions.
INVESTMENT SECURITIES - Debt securities are classified as held to maturity
when the Company has the positive intent and ability to hold the securities to
maturity. Securities held to maturity are carried at amortized cost. Debt
securities not classified as held to maturity are classified as available for
sale. Securities available for sale are carried at fair value with unrealized
gains and losses reported separately in stockholders' equity, net of tax.
Amortization of premiums and accretion of discounts are recorded as interest
income from securities. Realized gains and losses are recorded as net security
gains (losses). Gains and losses on sales of securities are determined on the
specific-identification method.
MORTGAGE LOANS HELD FOR SALE are carried at the lower of aggregate cost or
market. Net unrealized losses are recognized through a valuation allowance by
charges to income.
s i x t e e n
<PAGE>
LOANS are carried at the principal amount outstanding. Interest income is
accrued on the principal balances of loans. A loan is impaired when, based on
current information or events, it is probable that the Company will be unable
to collect all amounts due (principal and interest) according to the
contractual terms of the loan agreement. Loan payments with insignificant
delays not exceeding 90 days outstanding are not considered impaired. Certain
nonaccrual and substantially delinquent loans may be considered to be
impaired. The Company considers its investment in one-to-four family
residential loans and installment loans to be homogeneous and therefore
excluded from separate identification of evaluation of impairment. The accrual
of interest on impaired and nonaccrual loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as they
become due. When interest accrual is discontinued, all unpaid accrued interest
is reversed when considered uncollectible. Interest income is subsequently
recognized only to the extent cash payments are received. Certain loan fees
and direct costs are being deferred and amortized as an adjustment of yield on
the loans.
ALLOWANCE FOR LOAN LOSSES is maintained to absorb loan losses based on
management's continuing review and evaluation of the loan portfolio and its
judgment as to the impact of economic conditions on the portfolio. The
evaluation by management includes consideration of past loss experience,
changes in the composition of the portfolio, the current condition and amount
of loans outstanding, and the probability of collecting all amounts due.
Impaired loans are measured by the present value of expected future cash
flows, or the fair value of the collateral of the loan, if collateral
dependent.
The determination of the adequacy of the allowance for loan losses is based on
estimates that are particularly susceptible to significant changes in the
economic environment and market conditions. Management believes that as of
December 31, 1997, the allowance for loan losses is adequate based on
information currently available. A worsening or protracted economic decline in
the areas within which the banking subsidiaries operate would increase the
likelihood of additional losses due to credit and market risks and could
create the need for additional loss reserves.
PREMISES AND EQUIPMENT are carried at cost net of accumulated depreciation.
Depreciation is computed using the straight-line and the declining balance
methods based principally on the estimated useful lives of the assets.
Maintenance and repairs are expensed as incurred while major additions and
improvements are capitalized. Gains and losses on dispositions are included in
current operations.
FEDERAL RESERVE AND FEDERAL HOME LOAN BANK STOCK are required investments for
institutions that are members of the Federal Reserve ("FRB") and Federal Home
Loan Bank ("FHLB") systems. The required investment in the common stock is
based on a predetermined formula.
FORECLOSED REAL ESTATE is carried at the lower of cost or fair value less
estimated selling costs.
s e v e n t e e n
<PAGE>
When foreclosed real estate is acquired, any required adjustment is charged to
the allowance for loan losses. All subsequent activity is included in current
operations.
CORE DEPOSIT INTANGIBLES AND GOODWILL are being amortized on straight-line or
accelerated methods over periods not exceeding 15 years. Such assets are
periodically evaluated as to the recoverability of their carrying value.
STOCK OPTIONS subsequent to 1993 are granted for a fixed number of shares with
an exercise price equal to the fair value of the shares at the date of grant.
The Company accounts for and will continue to account for stock option grants
in accordance with Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees, and, accordingly, recognizes no
compensation expense for the stock option grants.
INCOME TAX in the consolidated statement of income includes deferred income
tax provisions or benefits for all significant temporary differences in
recognizing income and expenses for financial reporting and income tax
purposes. The Company files consolidated income tax returns with its
subsidiaries.
EARNINGS PER SHARE have been computed based upon the weighted average common
and potential common shares outstanding during each year after retroactive
adjustment for the 1995 stock split.
RESTRICTION ON CASH AND DUE FROM BANKS The banking subsidiaries are required
to maintain reserve funds in cash and/or on deposit with the FRB. The reserve
required at December 31, 1997, was $5,869,000.
INVESTMENT SECURITIES
<TABLE>
<CAPTION>
1997
----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31 COST GAINS LOSSES VALUE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale
U.S. Treasury $ 14,811 $ 76 $ 7 $ 14,880
Federal agencies 8,253 11 16 8,248
State and municipal 42,793 2,241 3 45,031
Marketable equity securities 813 813
Corporate obligations 100 100
--------- ---------- ---------- -----------
Total investment securities $ 66,770 $ 2,328 $ 26 $ 69,072
========= ========== ========== ===========
</TABLE>
e i g h t e e n
<PAGE>
<TABLE>
<CAPTION>
1996
-----------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31 COST GAINS LOSSES VALUE
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
======= ======= ======= =======
</TABLE>
Marketable equity securities consist of shares in a mutual fund which invests
in money market instruments including federal funds and repurchase agreements.
The amortized cost and fair value of securities available for sale at December
31, 1997, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because issuers may have the right to call
or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
- ---------------------------------------------------------------
<S> <C> <C>
Within one year $ 5,906 $ 5,923
One to five years 23,835 24,143
Five to ten years 17,173 17,965
After ten years 19,043 20,228
--------- ---------
65,957 68,259
Marketable equity securities 813 813
--------- ---------
Totals $ 66,770 $ 69,072
========= =========
</TABLE>
Securities with a total carrying value of $35,241,000 and $41,063,000 were
pledged at December 31, 1997 and 1996 to secure certain deposits and for other
purposes as permitted or required by law.
Proceeds from sales of securities available for sale during 1997 and 1996 were
$7,146,000 and $250,000. Gross gains of $31,000 and gross losses of $44,000
were realized on the 1997 sales. No gains or losses were realized on the 1996
sales.
The tax benefit for securities losses was $5,100 for 1997.
n i n e t e e n
<PAGE>
LOANS AND ALLOWANCE
<TABLE>
<CAPTION>
DECEMBER 31 1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial and industrial loans $ 99,378 $ 81,142
Term federal funds sold 1,500 5,500
Real estate loans
One-to-four family properties 157,570 144,749
Other 105,141 98,366
Individuals' loans for household and other personal expenditures 39,654 42,507
Tax-exempt loans 2,994 2,432
Other loans 2,534 1,385
-------- --------
Total loans $408,771 $376,081
======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 1997 1996 1995
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Allowance for loan losses
Balances, January 1 $ 3,400 $ 2,897 $ 2,698
Provision for losses 955 1,089 1,084
Recoveries on loans 192 66 187
Loans charged off (1,050) (652) (1,072)
-------- -------- --------
Balances December 31 $ 3,497 $ 3,400 $ 2,897
======== ======== ========
</TABLE>
Information on impaired loans is summarized below.
<TABLE>
<CAPTION>
DECEMBER 31 1997 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Impaired loans with an allowance $ 518 $ 1,047
Impaired loans for which the discounted cash flows
or collateral value exceeds the carrying value of the loan 190 190
-------- --------
Total impaired loans $ 708 $ 1,237
======== ========
Allowance for impaired loans
(included in the Company's allowance for loan losses) $ 236 $ 459
======== ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1997 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Average balance of impaired loans $ 839 $ 1,152 $ 1,370
Interest income recognized on impaired loans 46 56 16
Cash-basis interest included above 46 56 16
</TABLE>
t w e n t y
<PAGE>
The Company's banking subsidiaries have entered into transactions with certain
directors, executive officers, significant stockholders and their affiliates
or associates (related parties). Such transactions were made in the ordinary
course of business on substantially the same terms and conditions, including
interest rates and collateral, as those prevailing at the same time for
comparable transactions with other customers, and did not, in the opinion of
management, involve more than normal credit risk or present other unfavorable
features.
The aggregate amount of loans, as defined, to such related parties were as
follows:
<TABLE>
<CAPTION>
<S> <C>
Balance, December 31, 1996 $ 14,686
Changes in composition of related parties 153
New loans, including renewals 10,978
Payments, etc., including renewals (8,267)
--------
Balance, December 31, 1997 $ 17,550
========
</TABLE>
PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31 1997 1996
- -----------------------------------------------------------------------
<S> <C> <C>
Land $ 2,361 $ 2,342
Buildings 8,049 7,516
Leasehold improvements 563 246
Equipment 10,211 8,897
-------- --------
Total cost 21,184 19,001
Accumulated depreciation (9,520) (9,656)
-------- --------
Net $ 11,664 $ 9,345
======== ========
</TABLE>
DEPOSITS
<TABLE>
<CAPTION>
DECEMBER 31 1997 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Demand deposits $170,985 $163,181
Savings deposits 25,797 26,727
Certificates and other time deposits of $100,000 or more 59,666 57,674
Other certificates and time deposits 154,814 158,263
-------- --------
Total deposits $411,262 $405,845
======== ========
</TABLE>
t w e n t y o n e
<PAGE>
Certificates and other time deposits maturing in years ending after December
31, 1997:
<TABLE>
<CAPTION>
<S> <C>
1998 $168,339
1999 30,056
2000 13,533
2001 1,499
2002 1,053
--------
$214,480
========
</TABLE>
In 1997, the Company acquired deposits totaling $9,070,000 for a premium of
$890,000 allocated to core deposit intangibles and goodwill.
SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
DECEMBER 31 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
Federal funds purchased $ 6,375 $ 6,600
Securities sold under repurchase agreements 3,980 7,203
U.S. Treasury demand notes 2,980 3,873
-------- --------
Total short-term borrowings $ 13,335 $ 17,676
======== ========
</TABLE>
Securities sold under agreements to repurchase consist of obligations of the
Company to other parties. The obligations are secured by U.S. Treasury
securities, and such collateral is held in safekeeping by financial
institutions. The maximum amount of outstanding agreements at any month-end
during 1997 and 1996 totaled $6,932,000 and $7,203,000 and the monthly average
of such agreements totaled $5,488,000 and $4,761,000. The agreements at
December 31, 1997 mature within six months.
FEDERAL HOME LOAN BANK ADVANCES
FHLB advances were $39,615,000 and $14,000,000 at December 31, 1997 and 1996.
Maturities by year for advances at December 31, 1997 are $26,500,000 in 1998;
$9,115,000 in 1999; and $4,000,000 in 2000. The weighted average interest
rate at December 31, 1997 and 1996 was 5.93% and 5.61%.
These advances are secured by first mortgage loans and investment securities
totaling $156,217,000 and $146,175,000 at December 31, 1997 and 1996. Advances
are subject to restrictions or penalties in the event of prepayment.
t w e n t y t w o
<PAGE>
LOAN SERVICING
Mortgage loans serviced for others are not included in the accompanying
consolidated balance sheet. The unpaid principal balances of mortgage loans
serviced for others totaled $58,265,000 and $56,350,000 at December 31, 1997
and 1996. Retained mortgage servicing rights on originated or purchased loans
capitalized by the Company are not material.
INCOME TAX
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1997 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax expense
Currently payable
Federal $ 2,971 $ 2,361 $ 2,071
State 932 814 725
Deferred
Federal (331) (317) (259)
State (24) (64) (15)
-------- -------- --------
Total income tax expense $ 3,548 $ 2,794 $ 2,522
======== ======== ========
Reconciliation of federal statutory to actual tax expense
Federal statutory income tax at 34% $ 3,589 $ 2,992 $ 2,654
Tax exempt interest (816) (834) (797)
Effect of state income taxes 599 495 468
Nondeductible goodwill amortization 122 121 122
Other 54 20 75
-------- -------- --------
Actual tax expense $ 3,548 $ 2,794 $ 2,522
======== ======== ========
</TABLE>
t w e n t y t h r e e
<PAGE>
A cumulative net deferred tax asset (liability) is included in other assets
(liabilities). The components of the asset (liability) are as follows:
<TABLE>
<CAPTION>
DECEMBER 31 1997 1996
- --------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Allowance for loan losses $ 733 $ 449
Pensions and employee benefits 565 491
Directors' fees 209 218
Stock option compensation 142 168
Other 71 14
-------- --------
Total assets 1,720 1,340
-------- --------
LIABILITIES
Depreciation (559) (543)
State income tax (123) (114)
FHLB dividends (110) (110)
Securities available for sale (912) (785)
-------- --------
Total liabilities (1,704) (1,552)
-------- --------
$ 16 $ (212)
======== ========
</TABLE>
No valuation allowance was necessary at any time during 1997, 1996 or 1995.
COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business there are outstanding commitments and
contingent liabilities, such as commitments to extend credit and standby
letters of credit, which are not included in the accompanying financial
statements. The banking subsidiaries' exposure to credit loss in the event of
nonperformance by the other party to the financial instruments for commitments
to extend credit and standby letters of credit is represented by the
contractual or notional amount of those instruments. The banking subsidiaries
use the same credit policies in making such commitments as they do for
instruments that are included in the consolidated balance sheet.
Financial instruments whose contract amount represents credit risk as of
December 31 were as follows:
<TABLE>
<CAPTION>
1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
Commitments to extend credit $ 72,436 $ 57,944
Standby letters of credit 1,114 1,032
</TABLE>
t w e n t y f o u r
<PAGE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The banking subsidiaries
evaluate each customer's credit worthiness on a case-by-case basis. The amount
of collateral obtained, if deemed necessary by the banking subsidiaries upon
extension of credit, is based on management's credit evaluation. Collateral
held varies but may include accounts receivable, inventory, property and
equipment, and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the banking
subsidiaries to guarantee the performance of a customer to a third party.
The Company has entered into agreements with 10 officers which provide for
salary continuation for a three-year period under certain circumstances
following a change of control of the Company, as defined. Under the terms of
the agreements, these payments could occur if, during a two year period
following a change of control, such officers are terminated other than for
cause or unreasonable changes are made in their employment relationships.
In September 1997, ANTIM acquired a 15% interest in the outstanding shares of
common stock of Indiana Trust & Investment Management Company ("Indiana
Trust"), a trust company located in Mishawaka, Indiana, for a purchase price
of approximately $510,000, including goodwill of $313,000. The investment is
being recorded using the equity method of accounting. ANTIM is obligated to
acquire the remaining outstanding shares of common stock of Indiana Trust for
cash or Company stock in 2002 or earlier, subject to various terms and
conditions set forth in the Stock Acquisition Agreement. The agreement
contains terms and conditions related to the determination of the purchase
price of the stock, a change in control of the Company or ANTIM, Indiana Trust
shareholder changes, its termination and other matters.
The Company and its subsidiaries are also subject to claims and lawsuits which
arise primarily in the ordinary course of business. It is the opinion of
management that the disposition or ultimate resolution of such claims and
lawsuits will not have a material adverse effect on the consolidated financial
position of the Company.
DIVIDENDS AND CAPITAL RESTRICTIONS
Without prior approval of the Comptroller of the Currency, American National
is restricted by national banking laws as to the maximum amount of dividends
it can pay in any calendar year to its retained net profits (as defined) for
that year plus the two preceding years. In addition, American National assumed
the Muncie Federal Savings Bank (merged into American National in 1993)
liquidation account for the benefit of eligible account holders established in
connection with its merger-conversion, which was $6,277,000 at October 1,
1990. As a result of these restrictions, net assets of American National not
available for payment of dividends to the Company were approximately
$26,103,000 as of
t w e n t y f i v e
<PAGE>
December 31, 1997. Total net assets of American National at such date were
$30,624,000.
Without prior approval, current regulations allow Peoples to pay dividends to
the Company not exceeding net profits (as defined) for the current year plus
those for the previous two years. As a result of this restriction, net assets
of Peoples not available for payment of dividends to the Company were
approximately $15,219,000 as of December 31, 1997. Total net assets of Peoples
at such date were $16,620,000.
As a practical matter, banking subsidiary dividends are restricted to a lesser
amount because of the need to maintain adequate capital structures.
STOCK TRANSACTIONS
In April, 1995, the stockholders approved an increase in the number of
authorized shares of common stock from 5,000,000 to 20,000,000 shares.
In April, 1995, the Company adopted a resolution to repurchase up to 200,000
shares of Company common stock. During 1996 and 1995, shares totaling 93,000
and 69,302 were repurchased under this program, which was terminated effective
in November, 1996.
In November, 1995, the Company declared a two-for-one common stock split,
distributed 2,261,963 shares ($1 stated value) to stockholders on December 29,
1995, and transferred $2,261,963 from paid-in-capital to common stock.
Accordingly, all references to stock option plans, dividend reinvestment plan,
and stock repurchase program data in the notes to consolidated financial
statements, weighted average shares outstanding and per share amounts have
been restated to give retroactive effect to the two-for-one split.
Pursuant to the stock option plans, the Company redeemed 9,132, 10,488 and
7,397 shares of its common stock and issued 29,200, 39,950 and 24,426 shares
of common stock in 1997, 1996 and 1995, respectively. Tax benefits of
$135,900, $109,500 and $66,100 related to the exercise of stock options were
credited to paid-in capital in 1997, 1996 and 1995.
The Company approved a Dividend Reinvestment and Stock Purchase Plan in 1994
enabling stockholders to elect to have their cash dividends on all shares held
automatically reinvested in additional shares of the Company's common stock.
In addition, stockholders may elect to make optional cash payments up to an
aggregate of $5,000 per quarter for the purchase of additional shares of
common stock. The stock is credited to participant accounts at fair market
value. Dividends are reinvested on a quarterly basis on the applicable
dividend payment date that began with the October, 1994 dividend payment. The
plan made 200,000 shares available for purchase. At December 31, 1997, 123,637
shares of common stock remained available for purchase under the plan.
REGULATORY CAPITAL
The Company and banking subsidiaries are subject to various regulatory capital
requirements administered by the federal banking agencies and are assigned to
a capital category. The assigned capital category is largely
t w e n t y s i x
<PAGE>
determined by three ratios that are calculated according to the regulations.
The ratios are intended to measure capital relative to assets and credit risk
associated with those assets and off-balance sheet exposures of the entity.
The capital category assigned to an entity can also be affected by qualitative
judgments made by regulatory agencies about the risk inherent in the entity's
activities that are not part of the calculated ratios.
There are five capital categories defined in the regulations, ranging from
well capitalized to critically undercapitalized. Classification of a bank in
any of the undercapitalized categories can result in actions by regulators
that could have a material effect on a bank's operations. At December 31, 1997
and 1996, the Company and its banking subsidiaries are categorized as well
capitalized and met all subject capital adequacy requirements. There are no
conditions or events since December 31, 1997 that management believes have
changed the Company's or bank subsidiaries' classification.
The Company's and subsidiary banks' actual and required capital amounts and
ratios are as follows:
<TABLE>
<CAPTION>
Required for Adequate To Be Well
Actual Capital (1) Capitalized (1)
----------------------------------------------------------------
December 31 Amount Ratio Amount Ratio Amount Ratio
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1997
Total capital (1) (to risk-weighted assets)
Consolidated $53,280 14.3% $29,807 8.0% N/A
American National 31,663 12.3 20,551 8.0 $25,689 10.0%
Peoples 13,467 11.8 9,094 8.0 11,367 10.0
Tier I capital (1) (to risk-weighted assets)
Consolidated 49,783 13.3 14,972 4.0 N/A
American National 29,380 11.4 10,276 4.0 15,414 6.0
Peoples 12,254 10.8 4,547 4.0 6,820 6.0
Tier I capital (1) (to average assets)
Consolidated 49,783 9.8 20,320 4.0 N/A
American National 29,380 8.3 14,082 4.0 17,602 5.0
Peoples 12,254 8.1 6,060 4.0 7,575 5.0
AS OF DECEMBER 31, 1996
Total capital (1) (to risk-weighted assets)
Consolidated $49,237 14.4% $27,418 8.0% N/A
American National 28,926 12.5 18,544 8.0 $23,180 10.0%
Peoples 13,275 12.4 8,598 8.0 10,748 10.0
Tier I capital (1) (to risk-weighted assets)
Consolidated 45,837 13.4 13,709 4.0 N/A
American National 26,742 11.5 9,272 4.0 13,908 6.0
Peoples 12,059 11.2 4,299 4.0 6,449 6.0
Tier I capital (1) (to average assets)
Consolidated 45,837 9.5 19,245 4.0 N/A
American National 26,742 8.1 13,233 4.0 16,541 5.0
Peoples 12,059 8.4 5,726 4.0 7,158 5.0
</TABLE>
(1) As defined by regulatory agencies
t w e n t y s e v e n
<PAGE>
EMPLOYEE BENEFIT PLANS
The Company's defined-benefit pension plan covers substantially all of its
employees. The benefits are based primarily on years of service and employees'
pay near retirement. 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. Pension expense was $163,000 for 1997, $231,000 for
1996 and $161,000 for 1995.
The following table sets forth the plan's funded status and amounts recognized
in the consolidated balance sheet:
<TABLE>
<CAPTION>
DECEMBER 31 1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of
Accumulated benefit obligation including vested benefits
of $6,219 and $5,715 $ 6,532 $ 6,012
======== ========
Projected benefit obligation for service rendered to date $ (8,055) $ (7,296)
Plan assets at fair value, primarily fixed income obligations,
equity Securities, and collective investment and mutual funds 9,024 8,056
-------- --------
Plan assets in excess of projected benefit obligation 969 760
Unrecognized net (gain) loss from experience different
than that assumed (258) 186
Unrecognized prior service cost being recognized over 16 years (407) (441)
Unrecognized net asset at January 1, 1987 being recognized
over 17 years (434) (499)
-------- --------
Prepaid (accrued) pension cost included in other assets (liabilities) $ (130) $ 6
======== ========
Plan assets at fair value related to the Company
Company common stock $ 879 $ 760
Collective investment funds managed by ANTIM 893 1,033
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 1997 1996 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pension expense includes the following components
Service cost-benefits earned during the year $ 443 $ 454 $ 346
Interest cost on projected benefit obligation 535 496 517
Actual return on plan assets (1,538) (976) (833)
Net amortization and deferral 723 257 131
-------- -------- --------
$ 163 $ 231 $ 161
======== ======== ========
Assumptions used in the accounting as of December 31 were
Discount rate 7.25% 7.50% 7.00%
Rate of increase in compensation 4.50% 4.50% 4.50%
Expected long-term rate of return on assets 9.00% 9.00% 9.00%
</TABLE>
t w e n t y e i g h t
<PAGE>
The Company has a retirement savings 401(k) plan in which substantially all
employees may participate. The Company matches employees' contributions at the
rate of 50 percent for the first 4 percent of base salary contributed by
participants. The Company also has a stock investment plan under which
employees may, at their option, purchase stock of the Company. The Company
contributes 20 percent of employees' contributions. The expense for these
plans was $164,000 for 1997, $157,600 for 1996 and $140,600 for 1995.
STOCK OPTION PLANS
Under terms of the ANB Corporation Stock Option Plan ("1990 Plan") for key
employees, 300,000 shares of Company common stock shall be available for
grant, and the option price upon exercise shall not be less than 75% of fair
market value of such stock at date of grant. Options granted shall be
exercisable in four annual installments, on a cumulative basis, beginning one
year after date of grant, or upon a change in control of the Company as
defined in the 1990 Plan, a purchase of Company stock pursuant to a tender
offer or exchange offer, or a merger or sale of assets in which the Company
does not survive as an independent entity. The period for exercising options
shall not exceed ten years, and no options may be granted after December,
1999. The excess of fair market value over the option price at date of grant
for grants prior to 1994 was recorded as prepaid compensation expense and
allocated to paid-in capital. The Company recorded amortization of prepaid
compensation expense of $56,000 for 1996 and $84,000 for 1995 as a charge to
income. There were 8,300 shares available for grant under the 1990 Plan as of
December 31, 1997.
The Nonqualified Stock Option Plan of ANB Corporation for former Directors of
Muncie Federal Savings and Loan Association ("1991 Plan") made 28,000 shares
of Company common stock available for grant at an option price upon exercise
of $7.25 per share. Options granted were exercisable within five years from
date of grant, and all were exercised.
Under terms of the ANB Corporation 1995 Stock Option Plan ("1995 Plan") for
key employees, 300,000 shares of Company common stock shall be available for
granting both incentive ("ISO's") and non-qualified stock options. The option
price to be paid upon exercise shall be not less than fair market value at
date of grant. For an individual who receives a grant and is also the owner of
more than 10% of the total of the Company's common stock (stockholder-
employee), the option price shall be not less than 110% of such value. The
period for exercising options shall not exceed ten years from the date of
grant. The option period for any ISO granted to a stockholder-employee may not
exceed five years. No option may be granted after December 31, 2004. The
options shall be exercisable in four annual installments, on a cumulative
basis, beginning one year after date of grant, after reaching age 65, upon
circumstances or earlier times determined by the Compensation Committee or
upon a change in control as defined in the 1995 plan. The 1995 Plan may be
amended or terminated with no options granted thereafter pursuant to its
terms. There were 165,000 shares available for grant under the 1995 Plan as of
December 31, 1997.
t w e n t y n i n e
<PAGE>
Under terms of the ANB Corporation 1996 Directors' Stock Option Plan
("Directors' Plan"), 96,000 shares of Company stock shall be available for
granting non-qualified stock options. The option price to be paid upon
exercise shall be not less than fair market value at date of grant. The period
for exercising options shall not exceed ten years from the date of grant.
Options granted shall be exercisable in four annual installments, on a
cumulative basis, beginning one year after date of grant. Exercise rights
terminate thirty days after status as a director terminates other than for
retirement after age 70, death or disability. The Directors' Plan may be
amended or terminated with no options granted thereafter pursuant to terms set
forth in the Directors' Plan. There were 44,000 options available for grant
under the Directors' Plan as of December 31, 1997.
The following is a summary of the status of the Company's stock option plans
and changes in those plans as of and for the years ended December 31, 1997,
1996, and 1995.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS SHARES PRICE SHARES PRICE SHARES PRICE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 329,450 $ 11.37 305,150 $ 8.97 289,876 $ 7.78
Granted 76,000 23.29 70,000 19.14 42,000 15.44
Exercised (29,200) 6.86 (39,950) 6.75 (24,426) 5.91
Cancelled (1,250) 18.78 (5,750) 10.52 (2,300) 10.07
-------- -------- --------
Outstanding at end of year 375,000 14.11 329,450 11.37 305,150 8.97
======== ======== ========
Options exercisable at year end 214,625 189,700 178,675
Weighted-average fair value of options
granted during the year $ 3.96 $ 3.38 $ 1.89
</TABLE>
As of December 31, 1997, other information in exercise price ranges for
options outstanding and exercisable is as follows:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
---------------------------------------------------------------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
NUMBER REMAINING EXERCISE NUMBER EXERCISE
EXERCISE PRICE RANGES OF SHARES CONTRACTUAL LIFE PRICE OF SHARES PRICE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 5.44 - 6.56 94,000 3.3 years $ 6.05 94,000 $ 6.05
8.80 - 12.38 94,000 5.9 10.50 82,375 10.23
15.44 - 20.38 142,000 8.7 17.92 38,250 17.10
26.50 45,000 9.9
------- -------
Total 375,000 6.8 14.11 214,625 9.62
======= =======
</TABLE>
t h i r t y
<PAGE>
Although the Company has elected to follow APB Opinion No. 25, Statement of
Financial Accounting Standards ("SFAS") No. 123 requires pro forma disclosures
of net income and earnings per share as if the Company had accounted for its
employee stock options under that Statement. The fair value of each option
grant was estimated on the grant date using an option-pricing model with the
following assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Risk-free interest rates 5.8 and 6.6% 6.2 and 6.5% 5.4%
Dividend yields 2.9% 3.0% 3.3%
Expected volatility factors of market price
of common stock 11.0% 11.0% 8.0%
Weighted-average expected life of the options 6 years 6 years 6 years
</TABLE>
Under SFAS No. 123, compensation cost is recognized in the amount of the
estimated fair value of the options and amortized to expense over the options'
vesting period. The pro forma effect on net income and earnings per share of
this Statement are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income As reported $7,007 $6,006 $5,285
Pro forma 6,940 5,983 5,284
Basic earnings per share As reported 1.55 1.33 1.16
Pro forma 1.54 1.33 1.16
Diluted earnings per share As reported 1.52 1.31 1.14
Pro forma 1.51 1.30 1.14
</TABLE>
During the initial phase-in period of SFAS No. 123, the effects of applying
this Statement are not likely to be representative of the effects on reported
net income for future years because options vest over several years and
additional awards generally are made each year.
t h i r t y o n e
<PAGE>
EARNINGS PER SHARE
Earnings per share ("EPS") were computed as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------ ------------------------------ -------------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE PER SHARE AVERAGE PER SHARE AVERAGE PER SHARE
YEAR ENDED DECEMBER 31 INCOME SHARES AMOUNT INCOME SHARES AMOUNT INCOME SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE
Income available to
common stockholders $7,007 4,508,408 $ 1.55 $6,006 4,501,155 $ 1.33 $ 5,285 4,551,822 $ 1.16
====== ====== ======
EFFECT OF DILUTIVE
STOCK OPTIONS - 97,860 - 94,145 - 86,333
------ --------- ------ --------- ------- ---------
DILUTED EARNINGS PER SHARE
Income available to
common stockholders
and assumed
conversions $7,007 4,606,268 $ 1.52 $6,006 4,595,300 $ 1.31 $ 5,285 4,638,155 $ 1.14
====== ========= ====== ====== ========= ====== ======= ========= ======
</TABLE>
Options to purchase 45,000 and 46,000 shares of common stock at $26.50 and
$20.38 per share were outstanding at December 31, 1997 and 1996, respectively,
but were not included in the computation of diluted EPS because the options'
exercise price was greater than the average market price of the common shares.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument:
CASH AND CASH EQUIVALENTS - The fair value of cash and cash equivalents
approximates carrying value.
INVESTMENT SECURITIES - Fair values are based on quoted market prices.
LOANS - For both short-term loans and variable-rate loans that reprice
frequently and with no significant change in credit risk, fair values are
based on carrying values. The fair value for other loans are estimated using
discounted cash flow analyses and using interest rates currently being offered
for loans with similar terms to borrowers of similar credit quality.
FRB AND FHLB STOCK - Fair value of FRB and FHLB stock is based on the price at
which it may be resold to the FRB and FHLB.
INTEREST RECEIVABLE/PAYABLE - The fair values of accrued interest
receivable/payable approximate carrying values.
DEPOSITS - The fair values of noninterest-bearing, interest-bearing demand and
savings accounts are equal to the amount payable on demand at the balance
sheet date. The carrying amounts for variable rate, fixed-term certificates of
deposit approximate their fair values at the balance sheet date. Fair values
for fixed-rate certificates of deposit are estimated using a discounted cash
flow calculation that applies interest rates currently being offered on
certificates to a schedule of aggregated expected monthly maturities on such
time deposits.
t h i r t y t w o
<PAGE>
SHORT-TERM BORROWINGS - The interest rates on short-term borrowings
approximate market rates, and thus the fair values approximate carrying
values.
FHLB Advances - The fair value of these borrowings are estimated using a
discounted cash flow calculation, based on current FHLB advance rates for
periods comparable to the remaining terms to maturity of these advances.
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
1997 1996
----------------------- -------------------------
CARRYING FAIR CARRYING FAIR
DECEMBER 31 AMOUNT VALUE AMOUNT VALUE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 22,653 $ 22,653 $ 24,384 $ 24,384
Investment securities available
for sale 69,072 69,072 73,944 73,944
Loans including loans held
for sale, net 405,350 406,760 372,885 374,766
Stock in FRB and FHLB 4,699 4,699 2,713 2,713
Interest receivable 4,532 4,532 4,159 4,159
LIABILITIES
Deposits 411,262 411,770 405,845 406,815
Short-term borrowings 13,335 13,335 17,676 17,676
FHLB advances 39,615 39,629 14,000 14,006
Interest payable 1,334 1,334 1,391 1,391
</TABLE>
CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)
Presented below is condensed financial information as to financial position,
results of operations and cash flows of the Company:
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEET
DECEMBER 31 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash on deposits $ 630 $ 663
Investment securities available for sale 15 14
Investment in subsidiaries 54,137 50,323
Core deposit intangibles and goodwill 75 107
Premises and equipment 1,653 18
Other assets 361 380
-------- --------
Total assets $ 56,871 $ 51,505
======== ========
LIABILITIES $ 638 $ 164
STOCKHOLDERS' EQUITY 56,233 51,341
-------- --------
Total liabilities and stockholders' equity $ 56,871 $ 51,505
======== ========
</TABLE>
t h i r t y t h r e e
<PAGE>
<TABLE>
<CAPTION>
CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31 1997 1996 1995
- -------------------------------------------------------------------------------------------
<S>
INCOME <C> <C> <C>
Dividends from subsidiaries $ 4,159 $ 10,261 $ 3,697
Other income 234 120 107
------- -------- -------
Total income 4,393 10,381 3,804
------- -------- -------
EXPENSES
Amortization of core deposit intangibles,
goodwill and fair value adjustments 38 43 48
Salaries and employee benefits 915 626 693
Compensation expense for stock options 56 84
Premises and equipment 161 8 4
Professional fees 85 62 115
Other expenses 296 202 177
------- -------- -------
Total expenses 1,495 997 1,121
------- -------- -------
Income before income tax and equity
in undistributed income of subsidiaries 2,898 9,384 2,683
Income tax benefit 487 292 378
------- -------- -------
Income before equity in undistributed
income of subsidiaries 3,385 9,676 3,061
Equity in undistributed
(distribution in excess of) income of subsidiaries 3,622 (3,670) 2,224
------- -------- -------
NET INCOME $ 7,007 $ 6,006 $ 5,285
======= ======== =======
</TABLE>
t h i r t y f o u r
<PAGE>
<TABLE>
<CAPTION>
CONDENSED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31 1997 1996 1995
- ---------------------------------------------------------------------------------------------
<S>
OPERATING ACTIVITIES <C> <C> <C>
Net income $ 7,007 $ 6,006 $ 5,285
Adjustments to reconcile net income
to net cash provided by operating activities
Equity in undistributed income of subsidiaries. (3,622) 3,670 (2,224)
Noncash dividend (6,426)
Depreciation 92 8 4
Other adjustments 525 (63) 227
-------- -------- --------
Net cash provided by operating activities 4,002 3,195 3,292
-------- -------- --------
INVESTING ACTIVITIES
Net change in marketable equity securities
available for sale (1) (14)
Purchases of premises and equipment (1,727) (13) (9)
-------- -------- --------
Net cash used by investing activities (1,728) (27) (9)
-------- -------- --------
FINANCING ACTIVITIES
Cash dividends (2,887) (2,472) (2,090)
Stock repurchases (1,631) (1,017)
Exercise of stock options 154 199 101
Dividend reinvestment and stock purchase plan 426 425 308
-------- -------- --------
Net cash used by financing activities (2,307) (3,479) (2,698)
-------- -------- --------
NET CHANGE IN CASH ON DEPOSIT (33) (311) 585
CASH ON DEPOSIT AT BEGINNING OF YEAR 663 974 389
-------- -------- --------
CASH ON DEPOSIT AT END OF YEAR $ 630 $ 663 $ 974
======== ======== ========
</TABLE>
t h i r t y f i v e
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF THE COMPANY
The following discussion and analysis is intended to cover the significant
factors affecting the Company's consolidated financial statements from January
1, 1995, to December 31, 1997. It 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.
ANALYSIS OF RESULTS OF OPERATIONS
NET INCOME. 1997 was the most profitable year in the history of the Company.
Net income for 1997 climbed to $7.007 million, an increase of $1.001 million
or 16.7% over the previous high of $6.006 million which was reported in
1996. Net income results for 1996 were higher by 13.6% or $721 thousand when
compared to the $5.285 million net income recorded in 1995.
Basic net income per common share for 1997, 1996 and 1995 was $1.55, $1.33 and
$1.16 respectively. Basic net income per common share increased 16.5% for 1997
over 1996, following an increase of 14.7% in 1996 when compared to 1995.
Diluted net income per common share for 1997, 1996 and 1995 was $1.52, $1.31
and $1.14 respectively. Diluted net income per common share increased 16.0%
for 1997 over 1996, following an increase of 14.9% in 1996 when compared to
1995.
A significant contributor in 1997 to the Company's strong earnings trend was
the continued quality growth in the loan portfolio, and the resulting increase
in both net interest margin and net interest income, For the third year in a
row the Company achieved a net interest margin of over 5.00%, on a fully
taxable equivalent basis.
Also having a positive impact on 1997 results were a 14.9% increase in income
generated by the Company's fiduciary activities, and the continued improvement
in the operating efficiency ratio of the Company.
The following table presents certain key performance ratios for the last three
years:
1997 1996 1995
- ------------------------------------------------------------------
Return on average assets 1.41% 1.27% 1.17%
Return on average equity 13.34 12.29 11.37
Efficiency ratio* 57.98 58.96 62.16
Average earning assets to average
assets 93.09 93.26 93.08
Net interest spread 4.46 4.41 4.39
Net interest margin (fully taxable
equivalent) 5.14 5.07 5.02
* Excludes one-time special SAIF assessment of $589 thousand in 1996.
t h i r t y s i x
<PAGE>
Other factors impacting the net income of the Company are discussed below.
NET INTEREST INCOME. The economic climate of 1997 generally served the banking
industry quite well, and provided opportunities for the Company to pursue a
number of challenging loan portfolio growth objectives.
Short term interest rates changed very little during 1997, while concerns over
the Asian crisis and other economic factors impacted long term rates, but not
until near year end, when the yield on the bellwether 30 year U.S. Treasury
bond quickly fell to a 20 year low. This flattening of the yield curve makes
it increasingly difficult for most banks to maintain the interest rate spreads
needed to meet profitability goals. In anticipation of changing economic
conditions, the Company is continuously developing alternative strategies to
deal with the expected effect on the volume and nature of loan demand, as well
as deposit activity.
The Company strives to remain prepared to react to even minor changes in its
economic environment, and attempts to fine tune strategies in tandem with
changes in its market. This proactive approach, designed to support a macro
strategy of focusing on loan portfolio growth as the primary driver of
earnings, resulted in net interest income again being raised substantially
over the record level of the prior year, 1996.
An increase or decrease in net interest income, the Company's primary source
of revenue, is the combined result of volume and rate changes for both earning
assets and interest-bearing liabilities. Loan volume continued to be the
principal factor in another record level of net interest income, and was
funded through multiple strategies involving deposits and borrowings, in
addition to the capital provided by earnings. In 1997, the Company frequently
relied on borrowings from the Federal Home Loan Bank ("FHLB") to fund the
substantial growth of the loan portfolio, and this source often proved to be
an attractive alternative from a marginal cost perspective, as well as serving
as an immediate long term funding source when the yield curve quickly
flattened at year end. This allowed the Company to modify its liability
maturity posture to mitigate the interest rate risk associated with long term
fixed-rate loans previously added to the portfolio.
In 1997, the Company continued an impressive trend of surpassing prior year
results, once again using moderate growth in net average earning assets
(average earning assets net of average interest-bearing liabilities) and
moderate growth in net interest spread (average yield on earning assets net of
average cost of interest-bearing liabilities) to create a combined effect that
produced a significant improvement in net interest income.
Net interest income on a tax-equivalent basis for 1997 of $23.798 million
exceeded the 1996 total of $22.347 million by $1.451 million), or 6.5%. The
1996 total represented a $1.278 million, or 6.1%, increase over 1995 net
interest income on a tax-equivalent basis of $21.069 million. The similar
growth rates for 1997 and 1996 were both primarily a function of significant
growth in net average earning assets coupled with an improvement in the net
interest spread.
t h i r t y s e v e n
<PAGE>
Total interest income on a tax-equivalent basis of $41.013 million for 1997
was $2.270 million, or 5.9%, higher than the $38.743 million earned in 1996.
The increase was due primarily to a $22.389 million, or 5.1%, growth in
average earning assets from $440.741 million to $463.130 million. The 1997
yield on average earning assets of 8.86% was seven basis points higher than
the prior year. In 1996, total interest income on a tax-equivalent basis rose
5.5% to $38.743 million from the $36.716 million recorded in 1995. The 1996
increase was accomplished through a $20.828 million, or 5.0%, growth in
average earning assets combined with a four basis points improvement in yield
to 8.79%. Similar yields on earning assets for the most recent three years,
again, were to a degree a function of the generally low interest rate
volatility environment.
The Company achieved only a modest gain in total interest-bearing deposits for
1997, and the average interest-bearing deposits total for the year of $361.260
million represented a $3.399 million, or 0.9%, increase over the $357.861
million total for 1996. The continued greater reliance on borrowings to fund
loans resulted in the total of average borrowed money for 1997 increasing by
$13.587 million, or 82.3%, to $30.097 million for 1997, compared to $16.510
million for 1996. As in the prior year, the increase in total interest expense
was due primarily to these volume increases, with the total net increase to a
significant degree mitigated by rate reductions achieved in the certificates
of deposit category. Total interest expense for 1997 of $17.215 million was
$819 thousand, or 5.00%, above the 1996 total of $16.396 million. Funding
strategies and market conditions resulted in a 4.40% cost of funds, a slight
increase of two basis points over the 4.38% cost for 1996, which also
represented a two basis points increase over the prior year.
In 1996, the Company grew $9.532 million, or 2.7%, in average interest-bearing
deposits, and $6.339 million, or 62.3%, in average borrowed money. 1996 was
the first year that the Company used Federal Home Loan Bank borrowings as a
major funding source and interest rate risk management tool. Total average
interest-bearing liabilities of $374.371 for 1996 represented a $15.871
million, or 4.4%, increase over 1995. The incremental cost of the volume
increase was mitigated with lower certificates of deposit average costs, and
total interest in 1996 rose $749 thousand, or 4.8%, above the 1995 total of
$15.647 million.
Net average earning assets were increased to $71.774 million in 1997, from
$66.370 million in 1996 and $61.413 million in 1995, or annual increases of
8.1% for both 1997 and 1996. This substantial growth rate in net average
earning assets was accomplished primarily through the utilization of funds
available from undistributed earnings and from an increase in average total
balances in non-interest bearing demand deposits during each of the two years.
The Company improved its net interest spread rate to 4.46% for 1997, a five
basis point increase over 4.41% for 1996, which represented a two basis point
gain over the 4.39% achieved in 1995.
t h i r t y e i g h t
<PAGE>
The following table presents net interest income components on a
tax-equivalent basis and reflects changes between periods attributable to
movement in either the average balance or average interest rate for both
earning assets and interest-bearing liabilities. The volume differences were
computed as the difference in volume between the current and prior year
multiplied times the prior year's interest rate, while the interest rate
changes were computed as the difference in rate between the current and prior
year multiplied times the volume of the prior year. Volume/rate variances have
been allocated on the basis of the absolute relationship between volume
variances and rate variances.
ANALYSIS OF CHANGES IN NET INTEREST INCOME
<TABLE>
<CAPTION
1997 OVER 1996 1996 OVER 1995
---------------------------- ----------------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL
---------------------------- ----------------------------
(In Thousands on Fully Taxable Equivalent Basis)
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Federal funds sold $ (191) $ 7 $ (184) $ (279) $ (41) $ (320)
Interest-bearing deposits 4 (2) 2 (7) (2) (9)
Investment securities (262) 14 (248) 335 12 347
Loans 2,612 88 2,700 1,969 40 2,009
------- ------- ------- ------- ------- ------
Totals $ 2,163 $ 107 $ 2,270 $ 2,018 9 $ 2,027
======= ======= ======= ======= ======= ======
Interest expense:
NOW accounts $ 64 $ (19) $ 45 $ 105 $ 42 $ 147
Money market investment
accounts (2) 27 25 (119) 30 (89)
Savings deposits (40) 2 (38) (28) (16) (44)
Certificates of deposit 134 (169) (35) 556 (137) 419
Short-term borrowings 110 34 144 41 (39) 2
Federal Home Loan Bank
advances 682 (4) 678 335 (21) 314
------- ------- ------- ------- ------- ------
Totals $ 948 $ (129) $ 819 $ 890 $ (141) $ 749
======= ======= ======= ======= ======= ======
Change in net interest income
(fully taxable equivalent
basis) $ 1,215 $ 236 1,451 $ 1,128 $ 150 $ 1,278
======= ======= ======= =======
Tax equivalent adjustment 25 (74)
------- ------
Change in net interest income $ 1,476 $ 1,204
======= ======
</TABLE>
t h i r t y n i n e
<PAGE>
PROVISION FOR LOAN LOSSES, During 1997, 1996, and 1995, the Company provided
$955 thousand, $1.089 million and $1.084 million, respectively, to replenish
the allowance for loan losses for charge-offs recorded, and to maintain an
adequate balance for potential losses that may exist in the portfolio, but are
not specifically known.
The allowance for loan losses at year end 1997, 1996, and 1995 was $3.497
million, $3.400 million, and $2.897 million, respectively. Total loan balances
at the end of these periods were $408.771 million, $376.081 million, and
$348.913 million, respectively and the ratio of the allowance for loan losses
to total loan balances was 0.86%, 0.90% and 0.83%, respectively.
The allowance for loan losses included $236 thousand at December 31, 1997, and
$459 thousand at December 31, 1996, for loans considered by the Company to be
impaired. Impaired loans totaled $708 thousand and $1.237 million at December
31, 1997 and 1996, respectively.
The Company's dollar amount of outstanding loans made to individuals to
purchase owner occupied residential property represented 36.1% of the total
loan portfolio at December 31, 1997. Historically, net charge-offs in this
category of the mortgage loan portfolio have been minimal.
Net charge-offs in 1997 were $858 thousand, compared to $586 thousand in 1996,
and $885 thousand in 1995. The ratio of net charge-offs to average outstanding
loans for 1997, 1996, and 1995 was 0.22%, 0.16%, and 0.26%, respectively,
which compares favorably to the Company's peer group.
Based on management's analysis of the composition of the loan portfolio and
current economic conditions, management considers the current allowance for
loan losses to be adequate.
f o r t y
<PAGE>
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes the loan loss experience for the years
indicated.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------
(In Thousands, Except for Ratios)
<S> <C> <C> <C> <C> <C>
Allowance for loan losses:
Balance at January 1 $ 3,400 $ 2,897 $ 2,698 $ 1,441 $ 2,136
------- ------- ------- ------- -------
Additions resulting
from acquisitions 1,105
-------
Charge-offs:
Commercial 702 284 544 254 1,067
Real estate mortgage 89 177 261 69 140
Loans to individuals 259 191 267 104 87
------- ------- ------- ------- -------
Total charge-offs 1,050 652 1,072 427 1,294
------- ------- ------- ------- -------
Recoveries:
Commercial 79 14 32 31 4
Real estate mortgage 53 20 64 214 21
Loans to individuals 60 32 91 57 55
------- ------- ------- ------- -------
Total recoveries 192 66 187 302 80
------- ------- ------- ------- -------
Net charge-offs 858 586 885 125 1,214
------- ------- ------- ------- -------
Provision for loan losses 955 1,089 1,084 277 519
------- ------- ------- ------- -------
Balance at December 31 $ 3,497 $ 3,400 $ 2,897 $ 2,698 $ 1,441
======= ======= ======= ======= =======
Ratio of net charge-offs during the
period to average loans
outstanding during the period 0.22% 0.16% 0.26% 0.04% 0.48%
</TABLE>
f o r t y o n e
<PAGE>
OTHER INCOME. The following table shows the
components of other income for 1997, 1996,
and 1995.
1997 1996 1995
- ---------------------------------------------------------------------
(In Thousands)
Fiduciary activities $ 5,114 $ 4,452 $ 4,132
Service charges on deposit accounts 1,431 1,359 1,349
Other customer fees 407 463 338
Other income 551 567 625
------- ------- -------
Subtotal 7,503 6,841 6,444
Investment securities losses (13)
Net loans sold gains 105 159 97
------- ------- -------
Total other income $ 7,595 $ 7,000 $ 6,541
======= ======= =======
Other income is comprised of income items not directly related to the
Company's interest-earning assets. Other income, excluding net securities
losses and net gains from loan sales, increased $662 thousand from 1996 to
1997, or 9.7%. From 1995 to 1996, other income, excluding net securities
losses and net gains from loan sales, increased $397 thousand, or 6.2%. The
1997 increase in other income, excluding net securities losses and net gains
from loan sales, was primarily a result of increased fees from fiduciary
activities and increased service charges on deposit accounts. Due to net
growth in accounts and appreciation of assets under management, fiduciary fees
increased $662 thousand from 1996 to 1997, or 14.9%. Service charges on
deposit accounts increased 5.3%, or $72 thousand, from 1996 to 1997.
Other customer fees decreased $56 thousand, or 12.1% from 1996 to 1997
following a 1995 to 1996 increase of $125 thousand, or 37.0%.
In 1997, the Company recorded net gains from loan sales of $105 thousand. This
represented a decrease of 34.0%, or $54 thousand, from the amount recorded in
1996. In 1997, market opportunities allowed management to implement strategies
whereby a smaller amount of real estate loan production was sold in the
secondary market. Effective January 1, 1996, SEAS No. 122, Accounting for
Mortgage Servicing Rights, was adopted by the Company The impact of SFAS
No. 122 requiring the capitalization of retained mortgage servicing rights on
originated or purchased loan was not material.
f o r t y t w o
<PAGE>
OTHER EXPENSES. The following table shows the
components of other expenses for 1997, 1996,
and 1995.
1997 1996 1995
- ---------------------------------------------------------------------
(In Thousands)
Salaries and employee benefits $ 10,453 $ 10,017 $ 9,827
Premises and equipment expenses 3,095 2,672 2,645
Advertising 524 472 496
Professional fees 386 268 336
Deposit insurance expense 26 867 558
Printing and office supplies 609 561 569
Amortization of goodwill and core
deposit intangibles 459 375 360
Other operating expenses 3,037 2,907 2,683
-------- -------- --------
Total other expenses $ 18,589 $ 18,139 $ 17,474
======== ======== ========
Other expenses are noninterest operating expenses of the Company. Total
other expenses increased $450 thousand, or 2.5%, from 1996 to 1997, and $665
thousand, or 3.8%, from 1995 to 1996.
Salaries and employee benefits, the largest component of other expenses,
increased 4.4%, or $436 thousand, from 1996 to 1997, and 1.9%, or $190
thousand, from 1995 to 1996. The 1997 increase was primarily due to general
and merit pay increases and incentive bonus plan payments as well as the
addition of staff due to the acquisition of a branch in Parker, Indiana by
Peoples in April, 1997 and expansion into the Indianapolis market by ANTIM.
After a modest increase of 1.0% from 1995 to 1996, premises and equipment
expenses increased $423 thousand, or 15.8%, from 1996 to 1997. The 1997
increase reflects the Company's continuing commitment to technology with the
purchase and installation of a corporate in-house core data processing system.
Advertising costs increased $52 thousand, or 11.0%, from 1996 to 1997 due to
the Company's continuing emphasis on marketing programs.
Professional fees increased $118 thousand, or 44.0%, from 1996 to 1997
following a 1995 to 1996 decrease of $68 thousand. The 1997 increase was
primarily related to costs associated with the acquisition of the Parker
branch by Peoples and a minority interest in Indiana Trust by ANTIM.
Deposit insurance premiums declined sharply in 1997. Premiums decreased $841
thousand, or 97.0%, due to a lower assessment rate on deposits by the Federal
Deposit Insurance Corporation. In 1995 and 1996, the Federal Deposit Insurance
Corporation lowered the rate assessed on deposits insured by the Bank
Insurance Fund resulting in a reduction in
f o r t y t h r e e
<PAGE>
federal deposit insurance expense. From 1995 to 1996, deposit insurance
premiums increased $309 thousand, or 55.4%, due to a special deposit insurance
assessment on Savings Insurance Fund ("SAIF") deposits levied by the Federal
Deposit Insurance Corporation. SAIF insured deposits acquired in the 1991
acquisition of Muncie Federal Savings Bank, a savings and loan association,
were subject to the special assessment. The special assessment resulted in a
before tax charge of $589 thousand to deposit insurance expense.
Amortization of goodwill and core deposit intangibles increased $84 thousand,
or 22.4%, due to the acquisition of the Parker branch and the minority
interest in Indiana Trust.
INCOME TAXES. Income tax expense for 1997, 1996 and 1995 was $3.548 million,
$2.794 million and $2.522 million, respectively. The Company invests in
tax-exempt municipal securities as its principal strategy to reduce federal
income taxes. The Company also receives a state tax credit for a portion of
interest earned on qualified loans made to urban enterprise zone businesses
and residents. The tax credit earned is then reinvested in the urban
enterprise zone which produced the credit.
The effective tax rates for 1997,1996 and 1995 were 33.6%, 31.7% and 32.3%,
respectively. The increase in income tax expense is generally due to increases
in income upon which applicable federal and state income taxes are calculated.
BALANCE SHEET ANALYSIS
AVERAGE BALANCES AND INTEREST. Average total assets for 1997 of $497.498
million represented a $24.909 million, or 5.3%, gain over the total of
$472.589 million for 1996. 1996, by comparison, was $21.437 million, or 4.8%,
above the average total assets of $451.152 million for 1995.
Consistent with strategic objectives, balance sheet growth in recent years has
been concentrated in the loan portfolio. Average total loans of $390.178
million for 1997 were $28.979 million, or 8.0% greater than the prior year.
The 1997 growth rate surpassed 1996 results, when average total loans of
$361.199 million exceeded the 1995 total by $21.902 million, for an increase
of 6.5%.
The average size of the Company's portfolio of investment securities and
overnight investments has been reduced somewhat in recent years, as more
profitable growth opportunities generally have existed in the lending area.
The total portfolio average balance for 1997 of $72.952 million was a $6.590
million, or 8.2% reduction from the 1996 total, which represented a less
significant $1.074 million, or 1.3%, decline from 1995. This multipurpose
portfolio serves as a ready source of liquidity, can be restructured to
mitigate interest rate risk in other areas of the balance sheet, and provides
further diversification of the Company's total portfolio of earning assets.
Average earning assets for 1997 were $463.130 million, or 93.1% of average
total assets, and representative of the Company's continuing success in
maintaining a high level for this key ratio. Average earning assets were
$440.741 million and $419.913 million, and 93.3% and 93.1% of total average
assets for 1996 and 1995, respectively.
f o r t y f o u r
<PAGE>
Total deposits changed direction and grew slightly from year end 1996 to year
end 1997, and average total deposits for 1997 of $409.816 million were up
$9.139 million, or 2.3%, from the prior year The 1996 situation was unique in
that total deposits declined slightly, but average total deposits of $400.677
million for the year exceeded the 1995 average by $12.568 million, or 3.2%.
Funding strategies employed in 1997 were similar to 1996, and the Company
again frequently tapped the resources of the FHLB, utilizing a variety of
their credit products to maintain a two-fold objective of further meeting the
home financing needs of the communities served, while expanding its
residential mortgage loan portfolio. FHLB borrowings averaged $18.820 million
for 1997, which was $11.577 million greater than 1996. Average FHLB borrowings
of $7.243 million in 1996 represented a $5.588 million increase over 1995.
Average short term borrowings climbed less dramatically during the most recent
two years, moving to $11.277 million for 1997 from $9.267 million and $8.516
million for 1996 and 1995, respectively.
Management's efforts, coupled with primarily favorable economic conditions in
recent years, have resulted in a pattern of sustained quality growth of the
Company's business, as evidenced by increasing net earning assets combined
with a widening interest rate spread. The Company's success in pursuing its
strategic objectives is manifested in the consistent significant growth rates
of net interest income. In 1997, net interest income on a tax equivalent basis
rose to $23.798 million, compared to $22.347 million for 1996 and $21.069
million for 1995. The results for the most recent two years reflect increases
of $1.451 million, or 6.5%, and $1.278 million, or 6.1%, for 1997 and 1996,
respectively.
A summary of average earning assets and interest-bearing liabilities is set
forth below, together with the interest earned (on a tax-equivalent basis) and
paid on each major type of earning asset and interest-bearing liability
account. The average yield of the earning assets and the average rate paid on
the interest-bearing liabilities is also summarized.
f o r t y f i v e
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------- ----------------------------- -----------------------------
INTEREST INTEREST INTEREST
AVERAGE INCOME/ AVERAGE AVERAGE INCOME/ AVERAGE AVERAGE INCOME/ AVERAGE
BALANCE EXPENSE RATE (%) BALANCE EXPENSE RATE (%) BALANCE EXPENSE RATE (%)
---------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Federal funds sold $ 1,559 $ 87 5.58% $ 4,992 $ 271 5.43% $ 10,084 $ 591 5.86%
Interest-bearing deposits 255 10 3.92 163 8 4.91 303 17 5.61
Investment securities:
Taxable 29,788 1,896 6.36 32,606 2,048 6.28 31,030 1,868 6.02
Tax-exempt 41,350 3,851 9.31 41,781 3,947 9.45 39,199 3,780 9.64
--------- --------- --------- --------- --------- ---------
Total investment
securities 71,138 5,747 8.08 74,387 5,995 8.06 70,229 5,648 8.04
Loans:*
Commercial 89,681 8,879 9.90 86,217 8,429 9.78 78,916 8,061 10.21
Term federal funds 3,475 191 5.50 5,528 295 5.34 7,142 424 5.94
Real estate mortgage 253,954 22,011 8.67 228,381 19,843 8.69 215,442 18,472 8.57
Loans to individuals 41,027 3,905 9.52 39,123 3,743 9.57 36,355 3,385 9.31
Tax-exempt 2,041 183 8.97 1,950 159 8.15 1,442 118 8.18
--------- --------- --------- --------- --------- ---------
Total loans 390,178 35,169 9.01 361,199 32,469 8.99 339,297 30,460 8.98
--------- --------- --------- --------- --------- ---------
Total earning assets* 463,130 41,013 8.86 440,741 38,743 8.79 419,913 36,716 8.75
--------- --------- ---------
Allowance for loan losses (3,295) (2,882) (2,548)
Cash and due from banks 16,250 14,900 13,667
Premises and equipment 10,543 9,475 9,934
Other assets 10,870 10,355 10,186
--------- --------- ---------
Total assets 497,498 41,013 $ 472,589 38,743 $ 451,152 36,716
========= --------- ========= --------- ========= ---------
LIABILITIES:
Interest-bearing deposits:
NOW accounts 74,511 1,847 2.48 $ 71,954 1,802 2.50 $ 67,742 1,655 2.44
Money market investment
accounts 40,304 1,278 3.17 40,383 1,253 3.10 44,235 1,342 3.03
Savings deposits 26,592 667 2.51 28,174 705 2.50 29,277 749 2.56
Certificates of deposit 219,853 11,689 5.32 217,350 11,724 5.39 207,075 11,305 5.46
--------- --------- --------- --------- --------- ---------
Total interest-bearing
deposits 361,260 15,481 4.29 357,861 15,484 4.33 348,329 15,051 4.32
Short-term borrowings 11,277 625 5.54 9,267 481 5.19 8,516 479 5.62
FHLB advances 18,820 1,109 5.89 7,243 431 5.95 1,655 117 7.07
--------- --------- --------- --------- --------- ---------
Total interest-bearing
liabilities 391,357 17,215 4.40 374,371 16,396 4.38 358,500 15,647 4.36
Non-interest bearing
demand deposits 48,556 42,816 39,780
Other liabilities 5,050 6,535 6,400
--------- --------- ---------
Total liabilities 444,963 423,722 404,680
STOCKHOLDERS'EQUITY 52,535 48,867 46,472
--------- --------- --------- --------- --------- ---------
Total liabilities and
stockholders' equity $ 497,498 17,215 3.72** $ 472,589 16,396 3.72** $ 451,152 15,647 3.73**
========= --------- ========= --------- ========= ---------
Net interest income $ 23,798 5.14 $ 22,347 5.07 $ 21,069 5.02
========= ========= =========
Adjustments to convert
tax-exempt investment
securities and loans to
fully taxable equivalent
basis, using marginal rate
of 34% after adjustment
for effect of non-deductible
interest expense attributed
to such assets $ 1,294 $ 1,319 $ 1,245
========= ========= =========
</TABLE>
* Securities held for sale are included with investment securities and loans
held for sale are included with loans. Nonaccruing loans have been included
in the average balances.
** Total interest expense divided by total earning assets.
f o r t y s i x
<PAGE>
ASSETS. In 1997, total assets rose to another record level, finishing the year
at $525.490 million. The December 31, 1997, total represented a $31.643
million, or 6.4%, gain for the year. The 1996 growth rate was substantially
lower, with total assets at year end of $493.847 million, which was an
increase of $10.611 million, or 2.2%, over the December 31,1995, total.
The decrease in the investment securities portfolio for 1997 was primarily the
result of loan funding opportunities, and strategies designed to enhance the
return on the Company's earning assets. The investment securities portfolio
totaled $69.072 million, or 14.3% of earning assets at December 31, 1997,
down from $73.944 million, or 16.2% of earning assets at the prior year end.
Total investment securities at December 31, 1995, were $70.514 million, or
15.9% of earning assets. The investment mix of the portfolio, which consists
of relatively conservative financial instruments, did not change materially
over the most recent two year period.
Investment securities classified as available-for-sale are reported at fair
value, with unrealized gains and losses excluded from earnings, but reported
as a separate component of stockholders' equity. As a result of a prior
management decision to maintain greater liquidity and flexibility within the
portfolio, all investment securities held at year end 1997, 1996, and 1995 had
been classified as available for sale.
The investment portfolio totals include unrealized gains net of unrealized
losses totaling $2.302 million, $1.983 million, and $3.163 million for
December 31, 1997, 1996 and 1995, respectively
Securities with a carrying value of $6.719 million, or 9.7% of the total
investment portfolio at December 31, 1997, were scheduled to mature within one
year. The following table shows the mix of the investment securities portfolio
for each of the last three years at December 31, and the maturity distribution
at year end 1997.
f o r t y s e v e n
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
------------------- ------------------- -------------------
Amount Percent Amount Percent Amount Percent
------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury $ 14,880 21.6% $ 17,838 24.1% $ 18,173 25.8%
Federal agencies 8,248 11.9 7,972 10.8 4,153 5.9
State and municipal 45,031 65.2 44,166 59.7 43,105 61.2
Mortgage-backed 3,078 4.2 3,695 5.2
Corporates 100 0.1 200 0.3 447 0.6
Other 813 1.2 690 0.9 941 1.3
-------- ----- -------- ----- -------- -----
$ 69,072 100.0% $ 73,944 100.0% $ 70,514 100.0%
======== ===== ======== ===== ======== =====
</TABLE>
<TABLE>
<CAPTION>
Within Over
1 Year 1-5 Years 5-10 Years 10 Years Total
-------- --------- ---------- -------- -----
<S> <C> <C> <C> <C> <C>
U.S. Treasury $ 5,549 $ 9,331 $ 14,880
Federal Agencies 7,901 $ 347 8,248
State and Municipal 374 6,811 17,618 $ 20,228 45,031
Corporates 100 100
Other 813 813
-------- ------- -------- -------- --------
$ 6,736 $24,143 $ 17,965 $ 20,228 $ 69,072
======== ======= ======== ======== ========
Distribution
Percent 9.7% 35.0% 26.0% 29.3% 100.0%
</TABLE>
LOANS. The Company surpassed its aggressive loan portfolio growth objectives
for 1997 with the use of effective marketing strategies, while benefiting from
a favorable economic environment that created a positive impact on loan
demand.
The total loan portfolio at December 31, 1997, of $408.771 million,
represented significant quality growth for the year of $32.690 million, or an
increase of 8.7% over the 1996 year end portfolio of $376.081 million. The
comparable gain achieved during 1996 was $27.168 million, or 7.8%, from the
1995 year end total of $348.913.
Commercial loan production was particularly vibrant in 1997, and indicative of
strong business expansion opportunities in the East Central communities served
by the Company. Total commercial and industrial loans rose to $99.378 million
at December 31, 1997, a substantial $18.236 million, or 22.5%, net addition
for the year. Less robust, but significant commercial loan activity in 1996
resulted in $6.059 million, or 8.1% portfolio growth for that year.
Mortgage lending volume remained relatively stable through most of 1997, but
ended with a flourish as a quick drop in long term rates late in the year
spawned a wave of refinancing with fixed-rate product. The Company reacted by
modifying interest rate risk management strategies, and sold in the secondary
market a greater share of the production of one-to-four family mortgage loans
with lower interest rates. Commercial and investment property mortgage
f o r t y e i g h t
<PAGE>
lending demand remained relatively strong throughout the year. Real estate
loans on one-to-four family properties increased $12.821 million, or 8.9%,
while mortgage loans on other properties grew $6.775 million, or 6.9%. The
1997 growth rates were comparable to the 1996 portfolio increases of 7.6% and
7.4% for real estate loans on one-to-four family properties, and other real
estate properties, respectively.
OTHER ASSETS. Major technology investments during 1997 in a new core data
processing system, ancillary computer systems, including new alternative
delivery systems for bank products and services, and in computer networks
linking all offices, were primarily responsible for the significant $2.319
million increase in the net book value of premises and equipment to $11.664
million. In 1996, normal depreciation exceeded the acquisition cost of new
additions, causing the carrying value of premises and equipment to decrease
$232 thousand.
The $1.986 million increase in 1997 for total Federal Reserve and FHLB stock
was due to additional investments required to support a higher credit line at
the FHLB.
DEPOSITS. The Company realized significant demand deposit growth in 1997 of
$7.804 million, or 4.8%, to $170.985 million. The 1997 experience was a
reversal of 1996 when the total at year end of $163.181 million represented a
3.5% decline for the year. It should be noted that the change in total demand
deposit balances between any two dates is not necessarily indicative of a
trend. Due to the nature of transaction accounts, balance totals sometimes
change quickly and significantly for various reasons during the course of a
year, which is unlike balance totals for savings and certificate accounts that
typically demonstrate much lower volatility.
Savings accounts remained on a downward trend, but at a slower pace than the
prior year, finishing 1997 at $25.797 million, a $930 thousand, or 3.5%, drop
for the year. In 1996 by comparison, the year end total was down $1.900
million, or 6.6%, for the period.
Attractive returns on a variety of products that are readily available in the
financial markets continued during 1997, and presented enticing investment
alternatives to traditional bank products, which created difficulty for most
financial institutions in their efforts to retain retail certificate of
deposit balances. Total balances of certificates of deposit of less than
$100,000 dropped in each of the last two years, but similar to the savings
account experience, at a slowing pace. Total balances of $154.814 million at
December 31, 1997, were $3.449 million, or 2.2%, less than the prior year end.
The decrease in 1996 was higher at $6.250 million, or 3.8% of total balances
at the end of 1995.
Growth in certificates of deposit with balances of $100,000 or more was
primarily a function of greater use of public funds deposits as a short-term
funding source. These deposits offered a lower marginal cost solution than
other immediate loan funding alternatives available to the Company. Total
certificates of deposits of $100,000 or more were $59.666 million at December
31, 1997, a $1.992 million, or 3.5%, increase for the year. By comparison,
these non-core deposit balances were increased $2.481 million, or 4.5%, in
1996.
f o r t y n i n e
<PAGE>
The Company's total deposits at December 31, 1997, of $411.262 million
represented a slight gain for the year of $5.417 million, or 1.3%. In 1996,
the Company experienced a modest loss of $9.506 million, or a 2.3% decline
from year end 1995.
BORROWED FUNDS. In recent years the Company has relied more heavily on FHLB
borrowings to fund its significant loan portfolio production. Interest rate
spreads are maximized by controlling the marginal cost of new funds, and in
1997 wholesale funding often proved to be an attractive alternative from that
perspective. Longer term FHLB borrowing rates became particularly attractive
when market rates dropped appreciably near the end of the year. Additionally,
with the variety of credit products currently offered by the FHLB, this source
of funds can provide significant flexibility when designing strategies that
also incorporate the use of borrowings as a tool for moderating interest rate
risk in the Company's balance sheet. The company had a total of $39.615
million in FHLB borrowings at December 31, 1997, including both fixed-rate and
adjustable-rate notes, with maturities staggered through the following three
years. The year end 1997 total represented an increase of $25.615 million over
the $14.000 million total for the prior year end. FHLB advances totaled only
$2.395 million at year end 1995. Federal funds, repurchase agreements, and
U.S. Treasury tax notes are all borrowing instruments used to meet the
short-term cash needs of the Company. These short-term borrowings totaled
$13.335 million at December 31, 1997, down $4.341 million, or 24.6%, from a
year earlier.
Total borrowed funds have risen quickly to $52.950 million at December 31,
1997, from $31.676 million and $10.144 million on December 31, 1996, and 1995,
respectively.
LIQUIDITY, INTEREST RATE SENSITIVITY, AND MARKET RISK. The principal objective
of liquidity management is to insure the availability of sufficient funds to
meet borrowers' credit requirements and depositor withdrawal needs on a
continual basis, while maintaining a responsive program of investing excess
funds until the need arises for their use. Funds management committees are
responsible for monitoring the liquidity position on a monthly basis at each
affiliate. outside sources for temporary primary liquidity, which include the
federal funds market and the Federal Reserve discount window, are available
should such a situation develop.
During 1997 and 1996, funds provided principally through net income, advances
from the FHLB, and a reduction in the Company's average daily federal funds
sold position were used by the Company to take advantage of strong loan
demand.
Interest rate sensitive assets and liabilities are monitored monthly by the
Asset/Liability Management committees. A rate sensitive asset is any asset
that can be repriced upward or downward within a specific time frame, and
likewise, a rate sensitive liability is any liability that can be repriced
upward or downward within the identical time frame. Measuring interest rate
sensitivity is an important fundamental to develop so that proper management
of interest margins can be achieved, thereby avoiding wide variances in
net
f i f t y
<PAGE>
interest income and net income. A positive or negative gap results from the
measurement of rate sensitivity, and this gap can be expressed as a percentage
of total assets. The lower the negative or positive gap, the less likely a
severe earnings swing will occur during periods of rapidly changing interest
rates.
On December 31, 1997, the Company had $236.616 million in rate-sensitive
assets and $271.695 million in rate-sensitive liabilities which matured or
could be repriced within one year For this one year time frame, the Company
had a negative rate sensitivity gap. A negative rate sensitivity gap is
beneficial to the Company's net interest income during a time when interest
rates are falling, and could adversely impact the Company's net interest
income during a period in which interest rates are rising. The Company's
current negative gap for the one year time frame expressed as a percentage of
total assets is 6.7%.
The following table shows the gap position of the Company at December 31,
1997.
<TABLE>
<CAPTION>
0-3 3-6 Total 6-12 Total 12 Over 12 Current
Months Months 6 Months Months Months Months Balance
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earning assets
Interest-bearing deposits
in banks $ 391 $ 391 $ 391 $ 391
Securities available for sale
Taxable 7,624 $ 1,348 8,972 $ 1,703 10,675 $ 18,065 28,740
Tax-exempt 40 40 334 374 44,657 45,031
Loans 117,050 39,265 156,315 68,785 225,100 183,671 408,771
Loans held for sale 76 76 76 76
-------- -------- -------- -------- -------- -------- --------
Totals 125,181 40,613 165,794 70,822 236,616 246,393 483,009
-------- -------- -------- -------- -------- -------- --------
Interest-hearing liabilities
Deposits:
NOW accounts 8,036 7,160 15,196 12,058 27,254 46,404 73,658
Money market accounts 13,792 9,336 23,128 10,595 33,723 8,964 42,687
Regular savings 1,174 1,120 2,294 2,092 4,386 21,411 25,797
Certificates of deposit 104,143 29,040 133,183 36,314 169,497 44,983 214,480
Short-term borrowings 12,615 720 13,335 13,335 13,335
Federal Home Loan Bank
advances 18,500 1,000 19,500 4,000 23,500 16,115 39,615
-------- -------- -------- -------- -------- -------- --------
Totals 158,260 48,376 206,636 65,059 271,695 137,877 409,572
-------- -------- -------- -------- -------- -------- --------
Rate sensitivity gap positive
(negative) $(33,079) $ (7,763) $(40,842) $ 5,763 $(35,079)
======== ======== ======== ======== ========
Rate sensitivity gap as a
percent of total assets (6.3%) ( 1.5%) (7.8%) 1.1% (6.7%)
Percent of earning assets to
interest-bearing liabilities 79.1% 80.2% 87.1%
</TABLE>
f i f t y o n e
<PAGE>
Market risk is the risk of loss in financial instruments arising from adverse
changes in market rates and prices. Interest rate risk is the primary source
of market risk for the Company. Interest rate risk is always present in the
Company's balance sheet, impacting the Company's performance and value. The
Company's Asset/Liability Management committees monitor and manage interest
rate risk on an ongoing basis.
Interest rate risk represents the sensitivity of earnings to changes in market
interest rates. When interest rates change, the interest income and expense
streams associated with the Company's financial instruments change, thereby
impacting net interest income. The Company uses a rate sensitivity gap and
rate shock analysis model for estimating the impact on net interest income in
the event of market interest rate changes. The timing mismatch between the
repricing of assets and liabilities is at the core of interest rate risk. If
repricing opportunities of assets and liabilities were identical, there would
be no risk and the spread between the two would remain constant if assets and
liabilities were priced from the same index or yield curve. However, in
reality the mismatch exists, and it is the Company's challenge to quantify and
manage the timing difference of the interest spread.
Based on the Company's model utilized, if market interest rates were to
immediately increase 100 basis points, the Company would experience a slight
decline in earnings, due to a decrease in net interest income of approximately
$454 thousand over a one year time period. This hypothetical estimate is based
on numerous assumptions including yield curve shape and loan amortization. In
addition, maturing balances are replaced with new balances at the new rate
level and repricing balances are adjusted to the new rate shock level. The
analysis assesses the behavior of earning assets and interest-bearing
liabilities and assumes that account rate behavior correlates to economic
behavior. The Company cannot make any assurances as to the predictive nature of
these assumptions, nor can it assess the impact of such variables as
prepayment and refinancing levels, depositor withdrawals, customer product
preference changes, and competitive factors, as well as other internal and
external variables. In addition, this analysis cannot reflect actions taken by
the Company's Asset/Liability Management committees; therefore, this analysis
should not be relied upon as indicative of expected operating results.
CAPITAL. The Company's strong capital position and earnings performance has
afforded it the flexibility for future growth within current affiliate
markets. The strong capital base also provides the foundation for future
growth and expansion through acquisitions.
For the three years ended December 31, 1997, the Company has recorded net
income totaling $ 18.298 million. Total stockholders' equity has grown from
$44.910 million on January 1, 1995, to $56.233 million at year end 1997, an
increase of $ 11.323 million or 25.2% for the three year period. Shareholders
have received a total of $7.449 million in cash dividends, which represents an
average payout ratio or 41.8% for the three year period. In August of 1997,
the Company's Board of Directors approved increasing the quarterly dividend
from $0.15 to $0.17 a share effective with the third quarter of 1997. This
13.3% increase in the quarterly
f i f t y t w o
<PAGE>
dividend rate marked the eighteenth consecutive year dividends have been
increased. In each of the last fourteen years total annual dividends paid per
share have grown at a rate of 10.8% or more. The average increase in total
dividends paid per share during the last fourteen years has been 16.2%.
The $4.892 million increase in stockholders' equity in 1997 was the result of
net income of $7.007 million, an increase of $192 thousand related to market
value accounting for investment securities classified as available for sale, a
net addition of $580 thousand from activity related to stock options and the
Company's dividend reinvestment and stock purchase plan, and a reduction of
$2.887 million for cash dividends.
At December 31, 1997 the Company's leverage capital ratio was 9.8%, which was
5.8% greater than the requirement for adequately capitalized institutions. The
Federal Reserve Board has adopted "risk adjusted" capital ratios for bank
holding companies. The "risk based" guidelines require the assignment of risk
weightings to all assets and certain off-balance sheet items. Bank holding
companies are required to have a total risk-based capital ratio of 8% or
greater to be considered adequately capitalized. The Company's total
risk-based capital ratio at December 31, 1997 was 14.3%, which is 6.3% above
the level considered "adequately capitalized" under the current regulatory
guidelines.
The following table shows various capital and performance ratios for the last
three years:
1997 1996 1995
- --------------------------------------------------------------------------
Average stockholders' equity to:
Average assets 10.56% 10.34% 10.30%
Average deposits 12.82 12.20 11.97
Dividend payout ratio 42.11 41.98 40.35
Increases in annual dividends paid 16.36 19.57 12.20
Total return to investors (*) 34.62 30.91 35.66
Market value as a percent of book value 210.56 174.98 144.23
(*) Market value may change with dividends reinvested.
INFLATION. Changing prices of goods, services and capital affect the financial
position of every business enterprise. The level of market interest rates and
the price of funds loaned or borrowed fluctuate due to changes in the rate of
inflation and various other factors, including government monetary policy.
Fluctuating interest rates affect the affiliated banks' net interest income
and loan volume. The Company and affiliated banks' other expenses, such as
employee salaries and benefits, reflect the effects of escalating prices as
well as increased levels of operation and other factors. As the inflation rate
increases, the purchasing power of the dollar decreases. Those holding
fixed-rate monetary assets incur a loss, while those holding fixed-rate
monetary liabilities enjoy a gain. The nature of a bank holding company's
operations is such that there will be an excess of monetary assets over
monetary liabilities and thus, a bank holding company will tend to suffer from
an increase in the rate of inflation and benefit from a decrease.
f i f t y t h r e e
<PAGE>
YEAR 2000 COMPLIANCE
A significant issue has emerged in the banking industry and for the economy
overall regarding how existing application software program and operating
systems can accommodate the date value for the year 2000. The year 2000 Issue
is the result of computer programs being written using two digits rather than
four to define the applicable year. The Company has formed a year 2000 review
committee to focus on potential operational problems associated with this
issue. The financial impact to the Company to ensure year 2000 compliance is
not anticipated by management to be material to the financial position,
results of operations or cash flow of the Company,
IMPACT OF NEW ACCOUNTING STANDARDS
EARNINGS PER SHARE. In 1997, the Financial Accounting Standards Board ("FASB")
issued Statement No. 128, Earnings per share, and specified the computation,
presentation, and disclosure requirements for earnings per share (EPS) for
entities with publicly held common stock or potential common stock. Statement
128 was issued to simplify the computation of EPS and replaces Primary EPS and
Fully Diluted EPS with Basic EPS and Diluted EPS on the face of the income
statement for all entities with complex capital structures, such as the
Company, and requires a reconciliation of the numerator and denominator of the
Basic EPS computation to the numerator and denominator or the Diluted EPS
compiltation.
Statement 128 is effective for financial statement periods (both interim and
annual) ending after December 15, 1997. Earlier application is not permitted
(although pro forma EPS disclosure in the footnotes for periods prior to
required adoption is permitted). After adoption, all prior period EPS data
presented shall be restated (including interim financial statements, summaries
of earnings and selected financial data) to conform with Statement 128.
Accordingly, the Company adopted Statement 128 during the fiscal quarter ended
December 31, 1997.
REPORTING COMPREHENSIVE INCOME. During 1997 the FASB issued Statement No.130,
Reporting Comprehensive Income, establishing standards for the reporting of
comprehensive income and its components in financial statements. Enterprises
that have no items of other comprehensive income in any period presented are
excluded from the scope of this Statement.
Statement 1330 is effective for interim and annual periods beginning after
December 15, 1997. Earlier application is permitted. The Company will adopt
Statement 130 for 1998.
f i f t y f o u r
<PAGE>
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE. Also in 1997, the FASB issued
Statement No. 131, Disclosures About Segments of an Enterprise and Related
Information, which supersedes SFAS 14, "Financial Reporting for Segments of a
Business Enterprise", and establishes standards for the way that public
enterprises report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS 131 defines operating segments as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
This standard is effective for financial statement periods beginning after
December 15, 1997 and requires comparative information for earlier years to be
restated. Due to recent issuance of this standard, management has been unable
to frilly evaluate the impact, if any, it may have on the Company's future
financial statement disclosures.
f i f t y f i v e
<PAGE>
ANB CORPORATION
DIRECTORS AND OFFICERS
DIRECTORS
BEN E. DELK, President, Standt's Fine jewelry
MADELYN K. FERRIS, Senior Vice President, Paws Incorporated
R. DAVID HOOVER, Vice Chairman and Chief Financial Officer, Ball Corporation
WILLIAM L. PETERSON, Chairman of the Board, Alltrista Corporation
DONALD A. ROSS, President, A.L. Ross & Sons, Inc.
JAMES R. SCHRECONGOST, Vice Chairman, President and Chief Executive Officer
KELLY N. STANLEY, Chairman; President and Chief Executive Officer, Ontario
Corporation
CHRIS L. TALLEY, President and Chief Executive Officer, Peoples Bank & Trust
Bank
LEON V. TOWNE, Management Advisor and Consultant
HONORARY DIRECTOR
EDMUND F. BALL
OFFICERS
KELLY N. STANLEY, Chairman
JAMES R. SCHRECONGOST, Vice Chairman, President & Chief Executive Officer
LARRY E. THOMAS, Treasurer and Chief Financial Officer
JAMES W. CONVY, Vice President, Human Resources and Corporate Secretary
JOSEPH M. DAVIS, Vice President, Data Processing Manager
GARY D. DEMAREE, Vice President, Corporate Director of Marketing
ROGER S. MILLER, Vice President, Corporate Operations & Technology
DOUGLAS J. SCHUBA, CBA, Senior Auditor
JASON A. CONLEY, Assistant Vice President, Technology Officer
DAVID M. IVEY, Assistant Vice President, Assistant Data Processing Manager
JILL A. JORDAN, Assistant Vice President, Operations Manager
CYNTHIA L. SOLLARS, CPA, Assistant Treasurer
DAVID W. SPADE, Assistant Secretary
BETTIE J. HENSLEY, Personnel Officer
THOMAS L. KOVACH, Corporate Marketing Manager
DEBRA A. CLAYBORN, Assistant Auditor
PATRICIA A. SHOEMAKER, Assistant Cashier, Data Processing Supervisor
f i f t y s i x
<PAGE>
AMERICAN NATIONAL TRUST & INVESTMENT MANAGEMENT COMPANY
DIRECTORS AND OFFICERS
DIRECTORS
William A. Barnes, Chairman of the Board
Frank E. Ball, President, Minnetrista Corporation
John W. Fisher, Retired Chairman, Ball Corporation
Robert E. Kersey, President, American Lawn Mower Company
James R. Schrecongost, Vice Chairman, President and Chief Executive
Officer, ANB Corporation
Paul L. Sehnert, Jr., President and Chief Executive Officer, American
National Trust
William L. Skinner, Senior Vice President, Alltrista Corporation
HONORARY DIRECTOR
Edmund F. Ball
OFFICERS
William A. Barnes, Chairman
Paul L. Sehnert, Jr., President and Chief Executive Officer
David S. Gooden, Senior Vice President and Senior Investment Officer
Theodore H. Jarvis, Senior Vice President and Senior PortfoIio Manager
Terri E. Matchett, Vice President and Senior Trust Officer
Archie B. Spangler, Vice President and Senior Trust Officer; Corporate
Cashier/Secretary
Edward V. Huffman, Vice President and Trust Officer
Tracy O. Osborne, Vice President and Trust Officer
Nancy L. Reed, Vice President and Trust Officer
John C. Silletto, Vice President and Investment Officer
William A. Tucker, Jr., Vice President and Trust Officer
Carolyn S. Bowers, Assistant Vice President and Trust Officer
Judith A. Polson, Assistant Vice President and Trust Officer
Shirley J. Ertel, Trust Officer
James L. Griest, Business Development Officer
J. Thomas Hurley, Trust Officer
Melissa V. Jones, Trust Officer
Brenda K. Reveal, Tax Officer
OFFICERS, Indiana Capital Management
Mark W. Cremonie, Executive Vice President
R. Michael Miner, Executive Vice President
f i f t y s e v e n
<PAGE>
ANB FINANCIAL PLANNING SERVICES
DIRECTORS AND OFFICERS
DIRECTORS & OFFICERS
Jerome J. Gassen, Chairman of the Board
Michael T. Downham, Executive Vice President
John J. Letter, CPA, Secretary and Treasurer
AMERICAN NATIONAL BANK & TRUST COMPANY
DIRECTORS AND OFFICERS
DIRECTORS
Ben E. Delk, President, Standt's Fine Jewelry
W H Fike, Managing Partner, Atlas Collections, Inc.
Charles N. Hetrick, President and Chief Operating Officer, Maxon Corporation
Robert L. Hoogenboom, Retired, American National Bank & Trust Company
Donald A. Ross, Chairman; President, A.L. Ross & Sons, Inc.
Charles E. Sanders, M.D., Medical Consultants, P.C.
James R. Schrecongost, Vice Chairman and Chief Executive Officer; Vice
Chairman, President and Chief Exectitive Officer, ANB Corporation
W.Alan Simmons, Partner, Simmons, Carroll, Summers, Estep & Whisler, CPA
Norman L. Tirey, Retired Vice Chairman, ANB Corporation
HONORARY DIRECTORS
Edmund F. Ball
Wendell E. Covalt, M.D.
John L. Cullison, M.D.
J. Roberts Dailey
Margaret J. Edwards
John W. Fisher
John P. Isenbarger
William E Radcliff
Charles W. Rothhaar
Martin D. Schwartz
Edgar H. Seward
James O. Timbrook
f i f t y e i g h t
<PAGE>
AMERICAN NATIONAL BANK & TRUST COMPANY
DIRECTORS AND OFFICERS (CONT'D)
OFFICERS
Donald A. Ross, Chairman of the Board
James R. Schrecongost, Vice Chairman and Chief Executive Officer
Jerome J. Gassen, President and Chief Operating Officer
David W. Spade, Senior Vice President, Lending
James W. Convy, Vice President Human Resources and Branch Administrator
Patricia A. Davis, Vice President and Senior Mortgage Loan Officer
Richard A. Hancock, Vice President, Operations
John J. Letter, CPA, Vice President and Controller
Thomas R. Miller, Vice President, Commercial Lending
Wade R. Phelps, Vice President, Commercial Lending
Terri E. Rickel, Vice President, Loan Administration
Serona S. Bartlett, Assistant Vice President, Mortgage Loan Officer
David George II, Assistant Vice President, Consumer Lending
Brian T. Jackson, Assistant Vice President, Mortgage Loan Officer
Betty M. Brown, Assistant Cashier
Sherry J. Hildreth, Manager of Customer Service & Proof
Deborah C. Robinson, Marketing Manager
Judy A. Schuck, Mortgage Loan Operations Officer
Merry Schwindt, Mortgage Loan Closing Officer
Denise L. Williams, Consumer Loan Officer
Mary J. Wingate, Assistant Cashier, Money Desk Manager
BANKING CENTER MANAGERS
Tamra L. Brown, Manager, Hoyt Avenue, Muncie
Carol S. Dobbs, Manager, Westminster Village, Muncie
Shelley K. Evans, Manager, McGalliard Road, Muncie
Donald C. Gillespie, Assistant Vice President and Manager, Portland
Jennifer S. Haisley, Manager, Morrison Road, Muncie
Rebecca L. Harmon, Assistant Vice President and Manager, Jackson Street,
Muncie
Lillie M. King, Assistant Vice President and Manager, Main Street, Muncie
Connie J. Lamb, Manager, Country Village, Muncie
Yvonne Edwards-Gregory, Manager, East Memorial, Muncie
Barbara I. Metcalf-Bell, Assistant Vice President and Manager, Broadway
Avenue, Muncie
Stanton L. Schad, Assistant Vice President and Manager, Yorktown
f i f t y n i n e
<PAGE>
PEOPLES LOAN & TRUST BANK
DIRECTORS AND OFFICERS
DIRECTORS
Richard G. Applegate, President, R.G. Applegate Steel Company, Inc.
Lowell W. Fields, Retired Manager, Campbell Soup Company
Richard L. Golliher, Retired, The Saratoga State Bank
John B. Goodrich, President, J&P Plating, Inc.
Grace E. Losh, Retired
James R. Schrecongost, Vice Chairman, President and Chief Executive
Officer, ANB Corporation
Gerald Stephen, Chairman
Chris L. Talley, President and Chief Executive Officer, Peoples Loan &
Trust Bank
Carl A. Thompson, Retired Farmer
HONORARY DIRECTOR
John W. Thompson
OFFICERS
Gerald Stephen, Chairman of the Board
Chris L. Talley, President and Chief Executive Officer
Dean E. Edwards, Executive Vice President, Loan Administration
Kent L. Heckley, Executive Vice President, Randolph County Mortgage & Consumer
Lending
Philip R. Hirschfeld, Executive Vice President, Wayne County Commercial
Lending
Janice A. Powers, Vice President/Cashier
E. Daniel Cox, Vice President, Wayne County Commercial and Agriculture Lending
Marc C. Edwards, Vice President and Branch Manager, Saratoga
Ernest R. Heighway, Vice President, Wayne County, Mortgage Lending
Mary Jane Miller, Vice President, Wayne County Commercial Lending
Thomas L. Powers, Vice President and Branch Manager, Farmland/Parker
Stephen K. Welch, Vice President and Branch Manager, Lynn
David E. Bertram, Assistant Vice President and Branch Manager, Wayne County
Kathy E. Beumer, Assistant Vice President and Director of Marketing
Debra K. Butcher, Secretary to the Board of Directors
Jan Brehm, Mortgage Loan Officer
Linda E. Pugh, Controller
s i x t y
EXHIBIT 21-SUBSIDIARIES OF THE REGISTRANT
- ------------------------------------------------------------------------------
Incorporation
-------------
American National Bank and Trust Company of Muncie United States
Peoples Loan & Trust Bank State of Indiana
American National Trust and Investment Management
Company United States
ANB Financial Planning Services (indirect subsidiary) State of Indiana
EXHIBIT 23-CONSENT OF GEO. S. OLIVE & CO. LLC
- ------------------------------------------------------------------------------
We consent to the incorporation by reference in the Registration Statements on
Form S-8's, File No's. 33-41105, 33-95866 and 33-95868, and on Form S-3, File
No. 33-83838, of our report dated January 30, 1998 contained in the 1997
Annual Report to Shareholders of ANB Corporation, which is incorporated by
reference in this Form 10-K.
GEO. S. OLIVE & CO. LLC
Indianapolis, Indiana
March 24, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 22,262
<INT-BEARING-DEPOSITS> 391
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 69,072
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 408,847
<ALLOWANCE> 3,497
<TOTAL-ASSETS> 525,490
<DEPOSITS> 411,262
<SHORT-TERM> 13,335
<LIABILITIES-OTHER> 26,500
<LONG-TERM> 13,115
0
0
<COMMON> 4,531
<OTHER-SE> 51,702
<TOTAL-LIABILITIES-AND-EQUITY> 525,490
<INTEREST-LOAN> 35,111
<INTEREST-INVEST> 4,264
<INTEREST-OTHER> 344
<INTEREST-TOTAL> 39,719
<INTEREST-DEPOSIT> 15,480
<INTEREST-EXPENSE> 17,215
<INTEREST-INCOME-NET> 22,504
<LOAN-LOSSES> 955
<SECURITIES-GAINS> (13)
<EXPENSE-OTHER> 18,589
<INCOME-PRETAX> 10,555
<INCOME-PRE-EXTRAORDINARY> 7,007
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,007
<EPS-PRIMARY> 1.55
<EPS-DILUTED> 1.52
<YIELD-ACTUAL> 5.14
<LOANS-NON> 538
<LOANS-PAST> 300
<LOANS-TROUBLED> 590
<LOANS-PROBLEM> 190
<ALLOWANCE-OPEN> 3,400
<CHARGE-OFFS> 1,050
<RECOVERIES> 192
<ALLOWANCE-CLOSE> 3,497
<ALLOWANCE-DOMESTIC> 3,497
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 399
</TABLE>
EXHIBIT 99-ANNUAL FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S REPORT FOR
STOCK INVESTMENT PLAN OF ANB CORPORATION FOR THE YEAR ENDED DECEMBER 31, 1997
- ------------------------------------------------------------------------------
Exhibit to be filed by amendment - will include information required by Form
11-K.
