SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For transition period from ________ to ________
Commission File Number 0-20878
MNB BANCSHARES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 48-1120026
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
800 Poyntz Avenue, Manhattan, Kansas 66502
(Address of principal executive offices) (Zip Code)
(913) 537-2298
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No __
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock as of the latest practicable date: As of May 6,
1996, the Registrant had outstanding 576,514 shares of its common stock,
$.01 par value per share.
<PAGE>
MNB BANCSHARES, INC.
Form 10-Q Quarterly Report
Table of Contents
PART I
Page Number
Item 1. Financial Statements and Related Notes 1 - 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5 - 8
PART II
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of
Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Form 10-Q Signature Page 10
<PAGE>
<TABLE>
MNB BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, December 31,
1996 1995
<S> <C> <C>
ASSETS (Unaudited)
Cash and cash equivalents:
Cash $988,774 $2,136,418
Interest-bearing deposits
in other financial
institutions 790,419 787,599
Total cash and cash
equivalents 1,779,193 2,924,017
Investment securities:
Held-to-maturity at
amortized cost 13,286,710 16,403,035
(estimated fair value
of $13,322,000 and
$16,495,000 respectively)
Available-for-sale at
estimated fair value 18,679,375 15,925,916
Loans, net 64,678,716 62,582,264
Premises and equipment,
net 1,356,502 1,384,052
Other assets 2,025,239 1,965,652
Total assets $101,805,735 $101,184,936
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $85,215,226 $86,399,443
Federal funds purchased 0 325,000
Other borrowings 4,755,914 2,555,915
Accrued expenses, taxes
and other liabilities 963,702 1,094,329
Total liabilities 90,934,842 90,374,687
Stockholders' equity:
Common stock, $.01 par,
600,000 shares authorized,
576,514 shares issued and
outstanding 5,765 5,765
Additional paid in
capital 5,726,704 5,726,704
Retained earnings 5,548,609 5,410,733
Unrealized gain (loss)
on investment securities
available-for-sale,
net of tax (54,270) 22,962
Unearned employee benefits (355,915) (355,915)
Total stockholders'
equity 10,870,893 10,810,249
Total liabilities and
stockholders'
equity $101,805,735 $101,184,936
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
MNB BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<CAPTION>
Pro-Forma
For the Three Months For the Three Months
Ended March 31, Ended March 31,
1995 (Note 3) 1996 1995
<S> <C> <C> <C>
Interest income:
Loans $1,347,470 $1,418,244 $1,090,667
Investment securities 386,416 444,689 303,341
Other 34,238 56,667 7,427
Total interest income 1,768,124 1,919,600 1,401,435
Interest expense:
Deposits 861,288 983,474 685,154
Borrowed funds 66,208 45,046 66,208
Total interest expense 927,496 1,028,520 751,362
Net interest income 840,628 891,080 650,073
Provision for loan losses 3,750 0 15,000
Net interest income after
provision for loan
losses 836,878 891,080 635,073
Noninterest income:
Fees and service
charges 94,046 116,660 67,143
Gains on sale of loans 5,737 18,219 5,737
Other 41,689 3,908 9,716
Total noninterest income 141,472 138,787 82,596
Noninterest expense:
Compensation and
benefits 302,500 301,399 217,535
Occupancy and equipment 83,018 95,925 65,055
Federal deposit insurance
premiums 47,165 39,282 36,702
Data processing 29,453 23,800 23,426
Amortization 26,995 29,597 0
Advertising 22,505 21,453 21,496
Professional Fees 28,092 50,009 24,143
Stationery, printing and
office supplies 18,669 41,349 11,610
Other 140,774 132,997 109,038
Total noninterest
expense 699,171 735,811 509,005
Earnings before income
taxes 279,179 294,056 208,664
Income tax expense 99,681 120,147 72,582
Net earnings $179,498 $173,909 $136,082
Net earnings per share $0.30 $0.29 $0.26
Dividends per share $0.06 $0.06 $0.06
Average common and common
equivalent shares
outstanding 591,191 595,490 527,435
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
MNB BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the Three Months Ended March 31,
1996 1995
<S> <C> <C>
Net cash provided by operating
activities $ 72,148 $370,037
INVESTING ACTIVITIES
Net increase in loans (2,090,734) (162,309)
Maturities and prepayments
of investments held to
maturity 3,108,343 2,369,003
Purchase of investment held
to maturity (242,465) (1,230,098)
Maturities and prepayments of
investments available for
sale 735,266 9,091
Purchase of investments
available for sale (3,860,341) (2,451,485)
Proceeds from sale of
investment securities
available for sale 499,063 0
Purchases of equipment and
building improvements (20,854) (18,208)
Net cash used in investing
activities (1,871,722) (1,484,006)
FINANCING ACTIVITIES
FHLB advances (repayment) and
federal funds purchased
(net) 1,875,000 (3,500,000)
Net increase (decrease)
in deposits (1,184,217) 4,397,319
Cash dividends paid on common
stock (36,033) (30,525)
Net cash provided by
financing activities 654,750 866,794
Net (decrease) in cash and
cash equivalents (1,144,824) (247,175)
Cash and cash equivalents at
beginning of period 2,924,017 1,611,229
Cash and cash equivalents at
end of period $1,779,193 $1,364,054
Supplemental disclosure of cash flow information:
Cash paid during period for
interest $1,213,000 $743,000
Cash paid during period for
taxes $64,213 $5,154
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
MNB BANCSHARES, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
1. Interim Financial Statements
The condensed consolidated financial statements of MNB Bancshares, Inc.
(the "Company") and subsidiary have been prepared in accordance with the
instructions to Form 10-Q. To the extent that information and footnotes
required by generally accepted accounting principles for complete financial
statements are contained in or consistent with the audited financial
statements incorporated by reference in the Company's Form 10-K for the year
ended December 31, 1995, such information and footnotes have not been
duplicated herein. In the opinion of management, all adjustments, consisting
of normal recurring accruals, considered necessary for a fair presentation
of financial statements have been reflected herein. The December 31, 1995
condensed consolidated balance sheet has been derived from the audited
balance sheet as of that date. The results of interim periods ended March
31, 1996 are not necessarily indicative of the results expected for the year
ended December 31, 1996.
2. Earnings Per Share
Net earnings per share have been computed based on the average number of
shares and common equivalent shares outstanding during the year.
All periods presented reflect retroactive adjustment of the 5% stock
dividends declared by the Company on April 17, 1995 and April 18, 1994.
3. Acquisition
On April 1, 1995, the Company acquired Auburn Security Bancshares, Inc.
("Auburn"), and its wholly-owned subsidiary, Security State Bank.
Subsequently, Manhattan National Bank and Security State Bank were merged
and renamed Security National Bank. Auburn had consolidated assets of
approximately $20 million at the acquisition date. The Company acquired
100% of the outstanding common stock of Auburn for approximately $2 million.
The purchase price, including related costs of acquisition, included cash of
approximately $970,000 and 60,270 shares of the Company's common stock. The
acquisition, which was accounted for as a purchase, resulted in a core
deposit intangible asset and goodwill of approximately $461,000 and
$512,000, respectively.
The consolidated operating results of the Company for the three months
ended March 31, 1996 and March 31, 1995, on a proforma basis as though
the acquisition had occurred on January 1, 1995, would be as shown on the
condensed consolidated statements of earnings.
<PAGE>
MNB BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General. MNB Bancshares, Inc. (the "Company") is a one-bank holding company
incorporated under the laws of the State of Delaware and is engaged in the
banking business through its wholly-owned subsidiary, Security National Bank
(the "Bank"). The Company's results of operations depend primarily on net
interest income, which is the difference between interest income from
interest-earning assets and interest expense on interest-bearing liabilities.
The Company's operations are also affected by non-interest income, such as
service charges, loan fees and gain and losses from the sale of newly
originated loans. The Company's principal operating expenses, aside from
interest expense, consist of compensation and employee benefits, occupancy
costs, federal deposit insurance costs, data processing expenses and
provision for loan losses.
On April 1, 1995, the Company acquired all of the issued and outstanding
stock of Auburn Security Bancshares, Inc., a one-bank holding company which
owned 99% of the outstanding stock of Security State Bank. Subsequent to
the acquisition, the Company acquired all of the remaining stock of Security
State Bank. Consolidated assets acquired in this transaction were
approximately $20 million. This acquisition, which was accounted for using
the purchase method of accounting, is reflected in the March 31, 1996
consolidated balance sheet and the consolidated statement of earnings
compared to 1995. On December 31, 1995, the Company merged and consolidated
Manhattan National Bank and Security State Bank, and the resulting
institution was named Security National Bank. The home office for the Bank
is Manhattan, Kansas, with a branch operating in Auburn, Kansas.
Net earnings for the first three months of 1996 increased $37,827, or 27.8%,
to $173,909 as compared to the first three months of 1995. Net interest
income increased $241,007 from $650,073, or 37.1%, to $891,080. Fee and
service charge income increased $49,517, or 73.7%, to $116,660. Non interest
expense increased $226,806 or 44.6% due primarily to the acquisition.
Additionally, one-time expenses due to the subsidiary consolidation and name
change were approximately $50,000. It is anticipated that expenses of
approximately $30,000 will be incurred in the second quarter due to the
consolidation.
Interest Income. Interest income increased by $518,165, or 37.0%, to $1.9
million compared to $1.4 million for the first three months of 1995. This
increase was due to an increase in interest on loans of 30.0%, or $327,577,
and interest on investment securities of $141,348 to $444,689, or 46.6%.
While the acquisition contributed to the interest income increase, interest
on loans was also higher due to loans which repriced at higher rates and
interest earned on securities increased as securities matured and the
proceeds were reinvested in higher-yielding securities. Interest income on
other investments inreased $49,240 to $56,667. This increase was a result of
funds being available for investment in short-term overnight interest bearing
deposits and other short-term investments in 1996.
Interest Expense. As compared to the same period a year earlier, interest
expense during the first three months of 1996 increased by $277,158, or
36.9%, to $1.0 million due primarily to the acquisition. Interest expense
on deposits increased $298,320, or 43.5% due to the acquisition and time
deposits repricing at higher rates. Interest expense on borrowings,
consisting of advances from the Federal Home Loan Bank of Topeka
(the "FHLB"), declined $21,162, or 32.0%, during this time period due to a
lower level of borrowings.
Provision for Loan Losses. No provision for loan losses was made during
the first three months of 1996, as compared to $15,000 for the first three
months of 1995. Management decided that an increased provision was prudent
during 1995 as a result of discussions by the military regarding downsizing
of the armed forces and the potential downsizing or closure of Fort Riley
by the 1996 Base Realignment and Closure Commission. The downsizing which
occurred did not have a materially adverse impact on the Company's portfolio
or collateral values, therefore the provision was reduced during the third
quarter of 1995. Beginning in 1996, it was decided that no provision was
necessary due to the high quality of the portfolio. Management will continue
to assess all of these factors on a quarterly basis and further changes in
the provision will be made if circumstances warrant. The loan loss reserve
at March 31, 1996 was $826,499, representing 1.3% of the gross loans
outstanding and loans held for sale.
<PAGE>
MNB BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION (Continued)
Noninterest Income. Noninterest income increased $56,191, or 68.0%, for the
first three months of 1996 to $138,787 compared to the same period in 1995.
This increase was due to an increase of 73.7% in fees and service charges
from $67,143 to $116,660, of which $25,881 was attributable to the
acquisition. In addition, gains on sale of loans increased $12,482 to
$18,219, or 217.6%, as a result of increased loan originations.
Noninterest Expense. Noninterest expense increased $226,806, or 44.6%, to
$735,811 for the first three months of 1996 over the same period in 1995.
This large increase is due not only to the acquisition, but also to costs
incurred as a result of the change of the name and the consolidation of the
Bank subsidiaries. Stationery, printing, and office supplies increased
$29,739, or 256.1% as a direct result of this change, along with professional
fees which increased 107.1% from $24,143 to $50,009. Occupancy and
equipment expense increased $30,870 or 47.5% and compensation increased
38.6% to $301,399, both primarily as a result of the acquisition.
Amortization of $29,597 for goodwill and core deposit intangibles was a
result of the purchase accounting method utilized in the acquisition. Other
expenses increased from $109,038 to $132,997, or 22.0%, due to a number of
factors, as well as the acquisition.
Asset Quality and Distribution. The Company's total assets increased $.6
million to $101.8 million from December 31, 1995 to March 31, 1996. The
Company's primary ongoing sources of funds are deposits, proceeds from
principal and interest payments on loans and mortgage backed securities and
proceeds from the sale of mortgage loans and mortgage backed securities.
While maturities and scheduled amortization of loans are a predictable source
of funds, deposit flows and mortgage prepayments are greatly influenced by
general interest rates, economic conditions, competition, and the
restructuring of the financial services industry.
The primary investing activities of the Company are the origination of
mortgage, consumer, and commercial loans and the purchase of investment and
mortgage backed securities. During the first three months of 1996, the
Company originated mortgage loans in the amount of $8.4 million compared to
$2.7 million during the first three months of 1995. Generally, the Company
originates long term fixed rate residential mortgage loans for immediate sale
and does not warehouse loans to speculate on interest rates. Efforts of
management to diversify the loan portfolio have resulfted in the Company
having originated consumer and commercial non-mortgage loans of $3.2 million
during the first three months of 1996, compared to $1.5 million in 1995.
Management believes that the quality of the loan portfolio continues to be
strong as evidenced by the small number and amount of loans past due 30 days
or more. As of March 31, 1996, four real estate loans were more than 30 days
past due with a total balance of $159,568, which was 0.49% of total real
estate loans outstanding. Four loans, totaling $79,832, were on non-accrual
status as of March 31, 1996. With the exception of guaranteed student loans,
six consumer loans totaling $41,305 were over 30 days past due as of March
31, 1996 and one loan with a balance of $308 was on non-accrual. No
commercial loans were past due. At March 31, 1996, the Company had
outstanding loan commitments of $7.0 million.
During the three months ended March 31, 1996, the Company purchased
securities to be held to maturity and available for sale in the amount of
$4.1 million. These activities were funded primarily by
<PAGE>
MNB BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
maturing securities of $3.8 million, deposits, and proceeds from the sale
of fixed rate mortgage loans totaling $1.5 million.
Liability Distribution. Interest bearing liabilities at March 31, 1996
increased $.7 million from December 31, 1995 with deposits decreasing
$1.2 million and advances from the FHLB increasing $1.9 million over the same
period.
Checking and NOW accounts at the end of the first quarter of 1996 totaled
$15.4 million, or 18.1% of deposits. Certificates of deposit decreased $2.3
million from $48.7 million at December 31, 1995 to $46.4 million at March 31,
1996. This decrease was the result of a public funds deposit of $2.5
million, which matured in February of 1996 and was not reinvested in the
Bank. Money market funds have increased 27.6% from December 31, 1995 to
$17.8 million from $13.9 million, and are 20.9% of total deposits.
Liquidity. The Company's most liquid assets are cash and cash equivalents
and investment securities available for sale. The level of these assets are
dependent on the Company's operating, financing, lending and investing
activities during any given period. At March 31, 1996, and December 31, 1995
respectively, these liquid assets totaled $20.5 million and $18.8 million.
During periods in which the Company is not able to originate a sufficient
amount of loans and/or periods of high principal prepayments, the Company
increases its liquid assets by investing in short-term U.S. Government and
agency securities.
Liquidity management is both a daily and long-term function of management
strategy. Excess funds are generally invested in short-term investments.
In the event the Company requires funds beyond its ability to generate them
internally, additional funds are generally available through the use of FHLB
advances, a line of credit with the FHLB or through sales of securities. At
March 31, 1996, the Company had outstanding FHLB advances of $2.3 million and
$2.1 million outstanding on its $7.9 million line of credit. Additionally,
the Company has guaranteed a loan made to the Company's Employee Stock
Ownership Plan (the "ESOP") with an outstanding balance of $355,915 to fund
the ESOP's purchase of shares in the Company's common stock offering in 1993.
The total borrowings by the Company were $4.8 million at March 31, 1996,
compared to $2.9 million at December 31, 1995.
Capital. The Federal Reserve Board has established capital requirements
for bank holding companies which generally parallel the capital requirements
for national banks under the Office of the Comptroller of the Currency (the
"OCC") regulations. The regulations provide that such standards will
generally be applied on a bank-only (rather than a consolidated) basis in the
case of a bank holding company with less than $150 million in total
consolidated assets, such as the Company. The Company's total capital of
$10.9 million is, however, well in excess of the Federal Reserve Board's
consolidated minimum capital requirements.
At March 31, 1996, the Bank continued to maintain a sound Tier 1 capital
ratio of 8.60% and a risk based capital ratio of 16.52%. As shown by the
following table, the Bank's capital exceeded the minimum capital requirements
(dollars in thousands):
<TABLE>
<CAPTION>
March 31, 1996
Amount Percent Required
<S> <C> <C> <C>
Tier 1 Capital $8,716 8.60% 3.00%
Risk Based Capital 9,376 16.52% 8.00%
</TABLE>
<PAGE>
MNB BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Banks and bank holding companies are generally expected to operate at or
above the minimum capital requirements. The above ratios are well in excess
of regulatory minimums and should allow the Company to operate without
capital adequacy concerns. The Federal Deposit Insurance Corporation
Improvement Act of 1991 establishes a bank rating system based on the capital
levels of banks. The Bank is rated "well capitalized", which is the highest
rating available under this capital-based rating system.
<PAGE>
MNB BANCSHARES, INC. AND SUBSIDIARY
PART II
ITEM 1. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which the Company or its
subsidiary is a party other than ordinary routine litigation incidental to
their respective businesses.
ITEM 2. CHANGES IN SECURITIES.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. Exhibits
Exhibit 27. Financial Data Schedule
B. Reports on Form 8-K
None.
<PAGE>
SIGNATURES
Pursuant to the requirement 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.
MNB Bancshares, Inc.
Registrant
May 13, 1996 Patrick L. Alexander
Date Patrick L. Alexander
President and Chief Executive Officer
May 13, 1996 Susan E. Roepke
Date Susan E. Roepke
Vice President, Secretary,Treasurer
and Chief Financial Officer
