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 September 30, 1997
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
(State or other jurisdiction
of incorporation or organization)
48-1120026
(I.R.S. Employer Identification Number)
800 Poyntz Avenue, Manhattan, Kansas 66502
(Address of principal executive offices) (Zip Code)
(785) 565-2000
(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 November 10, 1997, the Registrant had outstanding
639,110 shares of its common stock, $.01 par value per share.
MNB BANCSHARES, INC.
Form 10-Q Quarterly Report
Table of Contents
PART I
Page Number
Item 1. Financial Statements and Related Notes 1 - 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 6-12
PART II
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of
Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Form 10-Q Signature Page 14
<TABLE>
MNB BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, December 31,
1997 1996
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Cash $ 2,250,079 $2,670,159
Interest-bearing deposits in other
financial institutions 2,600,000 1,900,000
Total cash and cash equivalents 4,850,079 4,570,159
Investment securities:
Held to maturity at amortized cost
(estimated fair value of $6,388,000
and $10,154,000 respectively) 6,359,039 10,113,010
Available-for-sale at estimated
fair value 25,371,811 23,125,844
Loans, net 64,077,298 62,549,048
Premises and equipment, net 1,459,929 1,325,798
Other assets 1,746,481 1,736,565
Total assets $ 103,864,637 $ 103,420,424
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 88,100,400 $ 86,709,950
Other borrowings 2,809,895 3,615,020
Accrued expenses, taxes and
other liabilities 981,599 1,761,289
Total liabilities 91,891,894 92,086,259
Stockholders' equity:
Common stock, $.01 par, 1,500,000
shares authorized, 639,110 and
605,215 shares issued and outstanding
at 1997 and 1996, respectively 6,391 6,052
Additional paid in capital 7,103,581 6,321,016
Retained earnings 5,126,921 5,340,873
Unrealized gain (loss) on investment
securities available-for-sale,
net of tax 45,745 (18,756)
Unearned employee benefits (309,895) (315,020)
Total stockholders' equity 11,972,743 11,334,165
Total liabilities and stockholders'
equity $103,864,637 $103,420,424
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
MNB BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS
OF EARNINGS (Unaudited)
<CAPTION>
For the nine months ended
September 30,
1997 1996
<S> <C> <C>
Interest income:
Loans $4,398,957 $4,292,649
Investment securities 1,412,354 1,334,096
Other 124,278 126,214
Total interest income 5,935,589 5,752,959
Interest expense:
Deposits 2,901,372 2,889,377
Borrowed funds 144,328 155,399
Total interest expense 3,045,700 3,044,776
Net interest income 2,889,889 2,708,183
Provision for loan losses 45,000 -
Net interest income after
provision for loan losses 2,844,889 2,708,183
Noninterest income:
Fees and service charges 379,057 395,062
Gains on sale of loans 64,395 53,039
Loss on sale of investments (21,309) (15,213)
Other 86,102 27,262
Total noninterest income 508,245 460,150
Noninterest expense:
Compensation and benefits 1,039,456 919,651
Occupancy and equipment 322,504 281,777
Federal deposit insurance premiums 35,536 121,633
FDIC special assessment - 449,000
Data processing 76,964 90,619
Amortization 80,636 84,597
Advertising 59,391 48,167
Professional fees 112,133 102,311
Stationery, printing and office supplies 55,312 73,836
Other 449,259 415,318
Total noninterest expense 2,231,191 2,586,909
Earnings before income taxes 1,121,943 581,424
Income tax expense 344,320 192,659
Net earnings $777,623 $388,765
Net earnings per share $1.17 $0.59
Dividends per share $0.375 $0.1937
Average common and common
equivalent shares outstanding 666,332 662,957
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
MNB BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<CAPTION>
For the three months ended
September 30,
1997 1996
<C> <C>
Interest income:
Loans $1,509,183 $1,440,229
Investment securities 480,409 446,980
Other 54,570 38,581
Total interest income 2,044,162 1,925,790
Interest expense:Deposits 990,464 972,082
Borrowed funds 40,800 45,893
Total interest expense 1,031,264 1,017,975
Net interest income 1,012,898 907,815
Provision for loan losses 15,000 -
Net interest income after
provision for loan losses 997,898 907,815
Noninterest income:
Fees and service charges 124,762 135,106
Gains on sale of loans 42,561 25,787
Loss on sale of investments (14,425) (1,273)
Other 19,618 20,701
Total noninterest income 172,516 180,321
Noninterest expense:
Compensation and benefits 368,178 309,865
Occupancy and equipment 120,028 98,682
Federal deposit insurance
premiums 11,633 43,069
FDIC special assessment - 449,000
Data processing 25,102 25,390
Amortization 26,180 27,500
Advertising 17,394 12,259
Professional fees 33,677 20,345
Stationery, printing and
office supplies 15,493 11,908
Other 149,144 126,690
Total noninterest expense 766,829 1,124,708
Earnings before income taxes 403,585 (36,752)
Income tax expense 119,125 (16,467)
Net earnings $284,460 ($20,105)
Net earnings per share $0.43 ($0.03)
Dividends per share $0.125 $0.0656
Average common and common
equivalent shares outstanding 666,252 662,174
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
MNB BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the nine months ended
September 30,
1997 1996
<C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $253,924 $1,240,602
INVESTING ACTIVITIES
Net increase in loans (1,712,470) (1,787,268)
Maturities and prepayments of
investments held to maturity 3,758,946 5,826,991
Purchase of investment held to maturity - (342,906)
Maturities and prepayments of investments
available for sale
3,462,291 3,472,785
Purchase of investments available for sale (8,178,591) (11,049,923)
Proceeds from sale of investment securities
available for sale 2,582,280 3,511,808
Proceeds from sales of other real estate 53,300 5,279
Net cash used to purchase insurance agency (30,000) -
Purchases of equipment and building
improvements (291,539) (83,063)
Net cash used in investing activities (355,783) (446,297)
FINANCING ACTIVITIES
FHLB advances (net) (800,000) (1,225,000)
Net increase (decrease) in deposits 1,390,450 (630,867)
Net increase in securities sold
under agreement to repurchase - 200,000
Issuance of common stock under
stock option plan 31,306 -
Cash dividends paid on common stock (239,977) (116,138)
Net cash provided by (used in) financing
activities 381,779 (1,772,005)
Net increase (decrease) in cash and
cash equivalents 279,920 (977,700)
Cash and cash equivalents at beginning
of period 4,570,159 2,924,017
Cash and cash equivalents at end of period $ 4,850,079 $1,946,317
Supplemental disclosure of cash flow
information
Cash paid during period for interest $3,112,000 $3,195,000
Cash paid during period for taxes $ 347,000 $ 384,000
Supplemental disclosure of noncash
investing and financing activities:
Conversion of loans to real estate owned $- $ 26,600
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
MNB BANCSHARES, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
1. Interim Financial Statements. The condensed consolidated financial
statements of MNB Bancshares, Inc. 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 Annual Report on Form 10-K for the year ended
December 31, 1996, such information and footnotes have not been
duplicated herein. In the opinion of magement, all adjustments,
consisting of normal recurring accruals, considered necessary for a fair
presentation of financial statements have been reflected herein.
The December 31, 1996 condensed consolidated balance sheet has
been derived from the audited balance sheet as of that date. The results
of the interim periods ended September 30, 1997 are not necessarily
indicative of the results expected for the year ended December 31, 1997.
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 period. All periods presented herein reflect
retroactive adjustment of the 5% stock dividends declared by the
Company on May 15, 1997 and August 12, 1996.
3. Recent Accounting Developments. The Company will adopt Statement
of Financial Accounting Standards (SFAS) Nos. 125 and 127 relating to
transfers and servicing of financial assets and extinguishments of
liabilities during 1997 and 1998, according to the required implementation
dates. SFAS No. 125, adopted January 1, 1997, did not have a material
effect on the financial statements. The adoption of SFAS No. 127 on
January 1, 1997 is not expected to have a material effect on financial
statements.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share" which revised the calculation and presentation
provisions of Accounting Principles Board Opinion 15 and related
interpretations. SFAS No. 128 is effective for the Company's fiscal year
ending December 31, 1997. Retroactive application will be required. The
Company believes the adoption of SFAS No. 128 will not have a significant
effect on its reported earnings per share.
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 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 gains 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, data processing, and the provision for loan
losses.
On September 16, 1997, the company announced it had signed a definitive
agreement for the acquisition of Freedom Bancshares, Inc. ("Freedom"), Osage
City, Kansas, the holding company for Citizens State Bank of Osage City, with
a branch in Beloit, Kansas. The proposed acquisition of Freedom, which has
$43 million in assets, is anticipated to close during the first quarter of
1998, subject to regulatory and Freedom shareholder approval.
Net earnings for the first nine months of 1997 increased to $777,623
compared to $388,765 for the first nine months of 1996. This substantial
increase was the
result of an expense accrual of $449,000 which was made in 1996 for the
amount of the Company's one-time assessment to fund the Federal Deposit
Insurance Corporation's (the "FDIC") recapitalization of the Savings
Association Insurance Fund (the "SAIF") as mandated by the Omnibus
Appropriations bill signed into law on September 30, 1996. Absent that
expense, earnings, net of tax, would have been $667,345, at September 30,
1996. Net interest income after provision for loan losses increased
$136,706, or 5.1%, to $2,844,889. Gains on sale of loans increased 21.4%,
or $11,356, to $64,395; and non-interest expense decreased
$355,718, or 13.8%, to $2,231,191. The decrease in non-interest expense was
due to the FDIC special assessment.
Net earnings for the third quarter of 1997 increased to $284,460 compared to a
loss of $20,105 in the same period in 1996. This was due to the expense for
the FDIC special assessment of $449,000 in 1996. Absent this expense,
earnings, net of tax in 1996, would have been $258,475, compared to
$284,460, or an increase of 10.1%. Net interest income, after provision
for loan losses, showed an increase from $907,815 to $997,898, or 9.9%,
during this period. Total noninterest income decreased $7,805, or 4.3%.
Increased gains on sale of loans of $16,774 was not enough to offset
increased losses on sale of investment securities available for
sale and decreased fees and service charges. Losses on sale of
investment securities increased from $1,273 in the third quarter of 1996
to $14,425 in the third quarter of 1997. Noninterest income from fees
and service charges also decreased 7.7% to $124,762 compared to $135,106
in the third quarter of 1996.
Interest Income. Interest income increased by $182,630, or 3.2%, to $5.9
million during the first nine months of 1997. This increase was the result of
an increase in interest on loans of 2.5%, or $106,308, and interest on
investment securities of $78,258, or 5.9%. Interest earned on securities
increased as securities matured and were reinvested in securities yielding
higher interest rates. The slight decrease in other income of $1,936, or
1.5%, was the result of decreased average funds available for investment in
short-term, overnight interest-bearing accounts for the nine month period
ending September 30, 1997.
Interest income for the third quarter of 1997 increased by $118,372, or 6.1%,
compared to the same period of 1996. Interest on loans and investment
securities increased as the loan outstandings increased $2.5 million, or
3.9%, over the same quarter last year. Additionally, proceeds from maturing
securities have been reinvested in securities with higher rates. Interest
income on loans increased $68,954, to $1.5 million from $1.4 million, or
4.8% and interest income from investment securities increased $33,429, or
7.5%, to $480,409. Other interest income increased $15,989, or 41.4%,
because of increased average funds available for investment in short-term
overnight interest-bearing deposits in the third quarter of 1997.
Interest Expense. Interest expense remained steady at $3.0 million during the
first nine months of 1997. Deposit interest expense increased $11,995, or
0.4%, while interest expense on borrowings, consisting of advances from the
Federal Home Loan Bank of Topeka (the "FHLB"), declined $11,071, or 7.1%
during this time period, as these liabilities have been liquidated as they
matured.
Interest expense for the third quarter of 1997 increased slightly from
$1,017,975 to $1,031,264 for the third quarter of 1996. Deposit interest
expense increased $18,382, or 1.8%, to $990,464. This was partially offset
by a decrease of $5,093 on interest expense on borrowings to $40,800.
This decrease was the result of liquidation of borrowings as they matured.
Provision for Loan Losses. A provision for loan losses of $45,000 for the
first nine months of 1997 was made, compared to none in 1996. After
management's quarterly review of the loan portfolio and an economic analysis
performed at the end of the third quarter in 1996, a provision of $5,000 per
month was initiated and continued during the first nine months of 1997.
This was due to management's efforts relating to the expansion of the
Company's commercial lending activities. At the same time, expanded
internal guidelines for credit risk evaluation and documentation were
created and implemented. These factors will continue to be assessed and
further changes will be made if circumstances warrant such changes. At
September 30, 1997, the allowance for loan losses was $869,104, or 1.3% of
gross loans outstanding, compared to $811,653 at September 30, 1996. The
allowance for loan losses was $819,660 at December 31, 1996, or 1.3% of
gross loans outstanding.
Noninterest Income. Noninterest income increased $48,095, or 10.5%, for the
first nine months of 1997. A decrease of $16,005, or 4.2%, in fees and service
charges from $395,062 to $379,057 was partially offset by a change in the
gains on sale of loans of $11,356 from $53,039 to $64,395, for a 21.4%
increase. A loss on sale of investment securities available for sale of
$21,309 was incurred as the Company sought to reposition its portfolio and
lengthen its maturities. Some lower-yield, short-term securities were sold
and the proceeds reinvested in intermediate securities. The analysis done on
these transactions indicated that the losses incurred will be recovered by
the second quarter of 1998. The increase in other noninterest income of
$58,840, or 215.8%, to $86,102 included a gain on the sale of real estate
owned of $30,016, along with $13,258 in income for technical services
provided by a Company employee to a community service provider in
Manhattan, and $15,686 in commission income from the insurance agency, a
wholly-owned subsidiary of the Bank.
Noninterest income for the third quarter of 1997 compared to 1996 decreased
$7,805, or by 4.3%. Fees and service charges decreased $10,344, or 7.7%, to
$124,762. This decrease was offset by increased gains on sale of loans of 65.0%
from $25,787 to $42,561. This increase in gains on sale of loans was a
result of an increased profit margin of loans sold to the secondary market.
However, losses on sale of investment securities of $14,425 were incurred
during this quarter as part of the repositioning of the securities portfolio
mentioned above. Other income decreased slightly from $20,701 to $19,618,
or 5.2%.
Noninterest Expense. Noninterest expense decreased $355,718, or 13.8%
to $2.2 million for the first nine months of 1997. Of this decrease, $449,000
was attributable to the accrual of the FDIC one-time special assessment in
1996 and a decrease of $86,097, or 70.2%, in regular FDIC premiums.
Stationery, printing and office supplies decreased $18,524, or 25.1%,
along with a decrease of $13,655, or 15.1%, in data processing expenses
to $76,964 from $90,619. These decreases were offset by increases in
occupancy and equipment expense of $40,727, or 14.5%, and compensation
of 13.0% from $919,651 to $1,039,456. The reduction in stationery, printing
and office supplies was the result of the costs incurred in connection with the
change of name and consolidation of the bank subsidiaries in December, 1995.
The decrease in data processing was also the result of the consolidation of
subsidiaries. The increase in compensation and occupancy and equipment
was due in large part to the new Topeka branch facility opened in May of
this year. Other operating expense increased $33,941, or 8.2%, from
$415,318 to $449,259.
Total noninterest expense decreased 31.8% to $766,829 for the third quarter
of 1997. This was due to the estimated accrual of the FDIC special assessment
of $449,000 in 1996, along with a decrease of $31,436 in the regular FDIC
premiums from $43,069 to $11,633. These decreases were offset by increases
in compensation of $58,313, or 18.8%, and occupancy and equipment of 21.6%
from $98,682 to $120,028, due in large part to the new branch facility in
Topeka. Other operating expenses increased $22,454, or 17.7%.
Asset Quality and Distribution. The Company's total assets increased slightly
to $103.9 million at September 30, 1997 compared $103.4 million at December
31, 1996. The Company's primary ongoing sources of funds are deposits,
proceeds from principal and interest payments on loans and investment
securities and proceeds from the sale of mortgage loans and investment
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 loans
and the purchase of investment securities. During the first nine months of
1997, the Company originated mortgage loans in the amount of $19.1 million
compared to $23.6 million during the first nine months of 1996. Generally,
the Company originates fixed rate residential mortgage loans for immediate
sale and does not warehouse loans to speculate on interest rates. During
the first nine months of 1997, the Company originated consumer and commercial
non-mortgage loans of $16.8 million compared to $8.7 million during the same
time period for 1996.
Management believes the quality of the loan portfolio continues to be strong.
As of September 30, 1997, ten real estate loans were more than 30 days past
due, with a total balance of $1.1 million, which was 1.7% of total loans
outstanding. Additionally, four residential mortgage loans totaling
$101,719 were on non-accrual status as of September 30, 1997. Excluding
guaranteed student loans, there were seven consumer loans in the amount of
$35,570, or 0.1% of the portfolio over 30 days past due and two on non-
accrual with a balance of $607. Additionally, three commercial loans
totaling $122,459, or 0.2% of the total loan portfolio, were past due over
30 days. Three commercial loans with a balance of $28,199 were on
non-accrual. At September 30, 1997, the Company had outstanding loan
commitments of $8.2 million. Management of the Company believes sufficient
funds will be available to meet existing loan commitments.
During the nine months ended September 30, 1997, the Company purchased
securities to be held to maturity and available for sale in the amount of $8.2
million. These purchases were funded primarily by deposits, proceeds from
the sale of fixed rate mortgage loans totaling $9.9 million, and maturing
securities.
Liability Distribution. At September 30, 1997, total deposits had a net
increase of $1.4 million from December 31, 1996 while borrowings decreased
$.8 million as FHLB advances were paid in full as they matured.
Checking and NOW accounts at the end of the first nine months of 1997 totaled
$22.0 million, or 24.9% of deposits, compared to $20.4 million, or 23.5% of
deposits at December 31, 1996. Money market deposit accounts were 16.2% of
the portfolio and totaled $14.3 million, compared to $13.8 million at
December 31, 1996 and savings accounts totaled $4.8 million compared to $5.2
million at December 31, 1996. Certificates of deposit were $47.0 million,
or 53.4% of the portfolio compared to $47.4 million, or 54.6% at
December 31, 1996.
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 September 30, 1997, and December 31,
1996, these liquid assets totaled $30.2 million and $27.7 million
respectively. 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's
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 available through the use of FHLB advances,
a line of credit with the FHLB or through sales of securities. At September
30, 1997, the Company had outstanding FHLB advances of $2.5 million and no
borrowings were outstanding on its $15 million line of credit with the FHLB.
Additionally, the Company has guaranteed a loan made to the Company's Employee
Stock Ownership Plan (the "ESOP"), with an outstanding balance of $309,895 at
September 30, 1997 to fund the ESOP's purchase of shares in the Company's
1993 common stock offering. The total of these borrowings by the Company
was approximately $2.8 million at September 30, 1997.
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 basis (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 $12.0 million
is, however, well in excess of the Federal Reserve Board's consolidated
capital requirements.
At September 30, 1997, the Bank continued to maintain a sound Tier 1 capital
ratio of 9.01% and a risk based capital ratio of 16.58%. As shown by the
following table, the Company's capital exceeded the minimum capital
equirements (dollars in thousands):
<TABLE>
<CAPTION>
September 30, 1997
Amount Percent Required
<S> <C> <C> <C>
Tier 1 Capital $9,339 9.01% 3.0%
Risk Based Capital 10,043 16.58% 8.0%
</TABLE>
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 Act of 1991 established a bank rating system based on capital
levels of banks. The Bank is rated "well capitalized", which is the highest
rating available under this capital-based rating system.
Year 2000 Compliance. The Company utilizes and is dependent upon
data processing systems and software to conduct its business. The
data processing systems and software include those developed and
maintained by the Company's data processor and purchased software
which is run on in-house computer networks. In 1997, the Company
initiated a review and assessment of all hardware and software to confirm
that it will function properly in the year 2000. The Company's data processor
and those vendors which have been contacted have indicated that their hardware
and/or software will be Year 2000 compliant by the end of 1998. This will
allow time for the testing for compliance. While there may be some expenses
incurred during the next two years, it is not expected to have a material
effect on the Company's consolidated financial statements.
Safe Harbor Statement Under the Private Securities Litigation Reform Act
of 1995. This quarterly report contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended
and Section 21E of the Securities Exchange Act of 1934, as amended. The
Company intends such forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements contained in the Private
Securities Report Act of 1995, and is including this statement for purposes
of these safe harbor provisions. Forward-looking statements, which are
based on certain assumptions and describe future plans, strategies and
expectations of the Company, are generally identifiable by use of the words
"believe," "expect," "intend," "anticipate," "estimate," "project," or similar
expressions. The Company's ability to predict results or the actual effect
of future plans or strategies is inherently uncertain. Factors which could
have a material adverse effect on operations and future prospects of the
Company and the subsidiary include, but are not limited to, changes in:
interest rates, general economic conditions, legislative/regulatory changes,
monetary and fiscal policies of the U.S. Government, including policies of the
U.S. Treasury and the Federal Reserve Board, the quality or composition of
the loan or investment portfolios, demand for loan products, deposit flows,
competition, demand for financial services in the Company's market area
and accounting principles, policies and guidelines. These risks and
uncertainties should be considered in evaluating forward-looking statements
and undue reliance should not be placed on such statements. Further
information concerning the company and its business, including additional
factors that could materially affect the Company's financial results, is
included in the Company's filings with the Securities and Exchange Commission.
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 are 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 A VOTE OF
SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
Exhibit 4. Form of Common Stock Certificate
Exhibit 27. Financial Data Schedule
B. Reports on Forms 8-K filed September 16,
1997 reporting under Item 5 the Agreement
and Plan of Merger between the Company
and Freedom Bancshares, Inc. and on
October 22, 1997 disclosing additional terms
of the Agreement and Plan of Merger
between the Company and Freedom
Bancshares, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
MNB BANCSHARES, INC.
Date: November 13, 1997
/s/ Patrick L. Alexander
President and Chief Executive Officer
Date: November 13, 1997
/s/ Susan E. Roepke
Vice President, Secretary,
Treasurer and Chief Financial Officer
EXHIBIT 4. FORM OF COMMON STOCK CERTIFICATE
Common Stock Common Stock
(Number) (Shares)
MNB BANCSHARES, INC.
A Delaware Corporation
See Reverse For Certain Definitions
CUSIP 553103 10 2
THIS CERTIFIES THAT (NAME) IS THE OWNER OF
(NUMBER)
fully paid and nonassessable shares of common stock, par value
$0.01 per share, of MNB Bancshares, Inc. (the "Corporation"), a Delaware
corporation. The shares represented by this certificate are transferable only
on the stock transfer books of the Corporation by the holder of record hereof,
or by his duly authorized attorney or legal representative, upon surrender of
this certificate properly endorsed. This certificate is not valid until
countersigned and registered by the Corporation's transfer agent and
registrar.
IN WITNESS WHEREOF, the Corporation has caused this certificate to
be executed by the facsimile signatures of its duly authorized officers
and has caused a facsimile of its corporate seal to be hereunto affixed.
Dated: (date)
/s/ Susan E. Roepke
Secretary
(Corporate Seal)
/s/ Patrick L. Alexander
President
MNB BANCSHARES, INC.
The shares represented by this certificate are issued subject to
all of the provisions of the certificate of incorporation and bylaws of
MNB Bancshares, Inc. (the "Corporation"), as from time to time
amended (copies of which are on file at the principal executive
offices of the Corporation).
The Corporation's certificate of incorporation provides that no
"person" (as defined in the certificate of incorporation) who "beneficially
owns" (as defined in the certificate of incorporation) in excess of 10% of
the outstanding shares of the Corporation shall be entitled to vote any shares
held in excess of such limit. This provision of the certificate of
incorporation shall not apply to an acquisition of securities of the
Corporation by an employee stock purchase plan or other employee benefit
plan of the Corporation or any of its subsidiaries.
The Corporation's certificate of incorporation also includes a provision the
general effect of which is to require the affirmative vote o the holders of
two-thirds of the outstanding voting shares of the Corporation to approve
certain business combinations (as defined in the certificate of
incorporation). However, only the affirmative vote of a majority of the
outstanding shares or such vote as is otherwise required by law (rather than
the two-thirds voting requirement) is applicable to a particular transaction
if it is approved by a majority of the "disinterested directors" (as defined
in the certificate of incorporation) or in the case of business combinations
with an interested shareholder (as defined in the certificate of
incorporation) the transaction satisfied certain minimum price and
procedural requirements.
The Corporation will furnish to any stockholder upon request and without
charge a full statement of the powers, designations, preferences and
relative, participating, optional or other special rights of each authorized
class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights, to the extent that the same
have been fixed, and of the authority of the board of directors to designate
the same with respect to other series. Such request may be made to the
Corporation or to its transfer agent and registrar.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common.
Additional abbreviations may also be used though not in the above list.
For value received (name) hereby sell, assign and transfer unto
(Social Security or other identifying number of assignee)
(name, address, zip code of assignee)
(number of shares) shares of the Common Stock represented by the
within certificate, and do hereby and irrevocable constitute and appoint
(name) Attorney to transfer the said shares on the books of the within
named Corporation with full power of substitution in the premises.
Dated (date)
x (signature block)
Notice: The signature(s) to this assignment must correspond with the
name(s) as written upon the face of the certificate in every particular,
without alteration or enlargement or any change whatever.
ITEM 6. REPORTS ON FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: September 16, 1997
(Date of earliest event reported)
MNB BANCSHARES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-20878 48-1120026
(Commission File Number) (IRS Employer
Identification Number)
800 Poyntz Avenue, Manhattan, Kansas 66502
(Address of principal executive offices) (Zip Code)
(785) 565-2000
(Registrant's telephone number, including area code)
Item 5. Other Events
On September 16, 1997, MNB Bancshares, Inc., (the "Registrant") entered
into an Agreement and Plan of Merger (the "Agreement") with Freedom
Bancshares, Inc. ("Freedom"), a Kansas corporation. Pursuant to the terms
of the Agreement, upon consummation of the transaction, the Registrant will
acquire Freedom for cash.
Attached hereto as Exhibit 99.1 is a copy of a press release, dated
September 16, 1997, announcing the signing of the Agreement.
Item 7. Financial Statements, Pro Forma Financial Information, and Exhibits
(a) Financial Statements of Business Acquired
None.
(b) Pro Forma Financial Information
None.
(c) Exhibits
99.1 Press Release dated September 16, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MNB BANCSHARES, INC.
Dated: September 18, 1997
By:
Susan E. Roepke
Vice President
ITEM 6. REPORTS ON FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: October 20, 1997
(Date of earliest event reported)
MNB BANCSHARES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-20878 48-1120026
(Commission File Number) (IRS Employer
Identification Number)
800 Poyntz Avenue, Manhattan, Kansas 66502
(Address of principal executive offices) (Zip Code)
(785) 565-2000
(Registrant's telephone number, including area code)
Item 5. Other Events
As previously reported on a Form 8-K, on September 16, 1997, MNB
Bancshares, Inc., (the "Registrant") entered into an Agreement and Plan of
Merger (the "Agreement") with Freedom Bancshares, Inc. ("Freedom"), a
Kansas corporation. On October 20, 1997, a press release was made disclosing
the terms of the Agreement and stating the final purchase price would be
approximately $3.2 million.
Further details of the transaction are contained in the press release
attached hereto as Exhibit 99.1
Item 7. Financial Statements, Pro Forma Financial Information, and Exhibits
(a) Financial Statements of Business Acquired
None.
(b) Pro Forma Financial Information
None.
(c) Exhibits
99.1 Press Release dated October 20, 1997
Exhibit 99.1
PRESS RELEASE
CONTACT:
Patrick L. Alexander
President and Chief Executive Officer
MNB Bancshares, Inc.
785/565-2000
CONTACT:
William J. Schlobohm
President
Freedom Bancshares, Inc.
913/528-3112
FOR IMMEDIATE RELEASE
TERMS OF FREEDOM BANCSHARES TRANSACTION ANNOUNCED
Manhattan, Kansas October 20, 1997
Patrick L. Alexander, President and Chief Executive Officer of
MNB Bancshares, Inc. (Nasdaq Small Cap MNBB), Manhattan, and
William J. Schlobohm, President of Freedom Bancshares, Inc. (Freedom),
Osage City, Kansas, disclosed today the terms for the purchase of Freedom by
MNB Bancshares. Freedom is a bank holding company for Citizens State
Bank, Osage City.
"Under the terms of the September 16 agreement," Alexander said,
"MNB Bancshares will acquire the issued and outstanding shares of
Freedom Bancshares for $165 per share in cash, subject to regulatory
and shareholder approval."
Additionally, MNB will redeem Freedom's preferred stock and will
assume the holding company's debt. The final purchase price of
approximately $3.2 million is projected to be approximately 290% of
Freedom's tangible book value.
"Our due diligence review is now complete and all the appropriate regulatory
filings are being made." Alexander said.
Schlobohm commented on the acquisition, saying, "We are very excited
about joining with MNB and contributing to its community banking philosophy.
By teaming with MNB, we are able to achieve our dual goals of getting an
excellent price for our shareholders and combining with an organization that
strongly believes in the importance of the bank remaining a leader in the
communities it serves. We feel this combination is good for our shareholders,
our employees, and the community."
"We intend to continue and to strengthen Citizens State Bank's tradition
of being the leading provider of financial products and services in the
community," Alexander said. "Community banks such as ours are
competing today with formidable financial giants for the same pool of
customers. We think that by combining our resources with the employees
and the character of banks like Citizens, and maintaining the relationships
which have been developed over the years, we can compete effectively in
this environment. This will provide enhanced community banking to
Citizens' customers."
"Consumers today can get their financial products and services from any
number of places," Alexander continued, "but banking is fundamentally a
'people' business. We believe our people should be involved in the community.
We feel that decisions should be made locally by bankers who are familiar
with their customers and knowledgeable about their needs. Our idea is
simple, but effective: If we pool our resources and capitalize on our
strengths, we can deliver quality products and exceptional service in a
community banking environment. That is our goal."
MNB Bancshares, Inc., with total assets of $102 million is a bank holding
company for Security National Bank, which is headquartered in Manhattan,
Kansas. Earlier this year, Security National Bank opened a branch at 21st and
Wanamaker in Topeka. In 1995, MNB acquired Security State Bank of Auburn,
Kansas, which is now a branch of Security National Bank. The proposed
combination will bring total assets to approximately $145 million.
###
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MNB BANCSHARES, INC.
Dated: October 23, 1997
By: Susan E. Roepke
Vice President
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