SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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)
(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 August 9,
2000, the Registrant had outstanding 1,516,115 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 2 - 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 12
Item 3. Quantitative and Qualitative Disclosures about 13
Market Risk
PART II
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of
Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 16
Form 10-Q Signature Page 17
<TABLE>
MNB BANCSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
<S> <C> <C>
June 30, December 31,
2000 1999
ASSETS
(Unaudited)
Cash and cash equivalents $3,053,715 $4,315,013
Investment securities:
Held-to-maturity at amortized cost 1,220,241 1,603,268
(estimated fair value of $1,224,000
and $1,602,000 respectively)
Available-for-sale at estimated fair value 45,010,823 43,402,200
Loans, net 93,378,636 87,720,201
Premises and equipment, net 2,281,754 2,288,028
Other assets 4,074,375 3,933,590
Total assets $149,019,544 $143,262,300
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $114,350,364 $112,336,329
Other borrowings 19,402,951 16,698,857
Accrued expenses, taxes and other liabilities 1,736,897 936,730
___________ ___________
Total liabilities 135,490,212 129,971,916
___________ ___________
Stockholders' equity:
Common stock, $.01 par, 3,000,000 shares
authorized, 1,449,702 and 1,449,303 shares issued
and outstanding at 2000 and 1999, respectively 14,497 14,493
Additional paid in capital 9,015,037 9,011,899
Treasury stock, at cost, 5,681 and 0 shares
at 2000 and 1999, respectively (45,448) -
Retained earnings 5,100,080 4,821,937
Accumulated other comprehensive income (388,323) (384,098)
Unearned employee benefits (166,511) (173,847)
__________ __________
Total stockholders' equity 13,529,332 13,290,384
___________ ___________
Total liabilities and stockholders' equity $149,019,544 $143,262,300
<FN>
</FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
MNB BANCSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<S> <C> <C>
For the Six Months
Ended June 30,
2000 1999
Interest income:
Loans $ 3,893,213 $ 3,255,134
Investment securities 1,287,981 1,362,236
Other 15,279 11,151
_________ _________
Total interest income 5,196,473 4,628,521
Interest expense:
Deposits 2,326,385 2,168,836
Borrowed funds 510,490 255,234
_________ _________
Total interest expense 2,836,875 2,424,070
Net interest income 2,359,598 2,204,451
Provision for loan losses 35,000 -
_________ _________
Net interest income after
provision for loan losses 2,324,598 2,204,451
Noninterest income:
Fees and service charges 492,145 392,265
Gains on sale of loans 39,790 89,191
Gains (losses) on sale of investments (30,368) 7,147
Other 28,881 28,337
_______ _______
Total noninterest income 530,448 516,940
Noninterest expense:
Compensation and benefits 1,100,902 1,042,243
Occupancy and equipment 328,785 294,077
Amortization 109,080 114,937
Data processing 69,357 67,225
Other 574,603 575,004
_________ _________
Total noninterest expense 2,182,727 2,093,486
Earnings before income taxes 672,319 627,905
Income tax expense 213,343 213,942
_________ ___________
Net earnings $ 458,976 $ 413,963
Earnings per share:
Basic $ 0.32 $ 0.29
Diluted $ 0.31 $ 0.28
Dividends per share $ 0.125 $ 0.125
<FN>
</FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
MNB BANCSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<S> <C> <C>
For the Three Months
Ended June 30,
2000 1999
Interest income:
Loans $1,987,388 $1,657,140
Investment securities 656,407 665,374
Other 6,164 2,754
_________ _________
Total interest income 2,649,959 2,325,268
Interest expense:
Deposits 1,178,349 1,063,645
Borrowed funds 286,928 135,593
_________ _________
Total interest expense 1,465,277 1,199,238
Net interest income 1,184,682 1,126,030
Provision for loan losses
20,000 -
_________ _________
Net interest income after
provision for loan losses 1,164,682 1,126,030
Noninterest income:
Fees and service charges 278,339 209,937
Gains on sale of loans 25,472 36,388
Gains (losses) on sale of investments (30,368) 5,500
Other 11,863 10,728
_______ _______
Total noninterest income 285,306 262,553
Noninterest expense:
Compensation and benefits 545,004 527,724
Occupancy and equipment 167,066 146,714
Amortization 53,492 55,588
Data processing 34,296 33,429
Other 302,786 290,185
_________ _________
Total noninterest expense 1,102,644 1,053,640
Earnings before income taxes 347,344 334,943
Income tax expense
109,079 115,440
Net earnings $238,265 $219,503
Earnings per share:
Basic $ 0.17 $ 0.15
Diluted $ 0.16 $ 0.15
Dividends per share $ 0.0625 $ 0.0625
<FN>
</FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
MNB BANCSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<S> <C> <C>
For the Six Months
Ended June 30,
2000 1999
Net cash provided by operating activities $ 1,919,875 $ 1,222,675
INVESTING ACTIVITIES
Net increase in loans (6,252,114) (5,030,905)
Maturities and prepayments of
investments held to maturity 387,416 134,654
Maturities and prepayments of
investments available for sale 7,498,412 8,782,480
Proceeds from sale of investments
available for sale 2,280,547 5,049,734
Proceeds from sale of investments held
to maturity - 102,317
Purchase of investments available for sale (11,468,211) (11,747,633)
Proceeds from sale of foreclosed assets 27,190 50,000
Improvements of real estate owned (8,659) -
Purchases of premises and equipment, net (148,080) (100,529)
__________ ____________
Net cash used in investing activities (7,683,499) (2,759,882)
FINANCING ACTIVITIES
Net increase (decrease) in deposits 2,014,035 (6,961,971)
Federal Home Loan Bank borrowings
(repayment), net 2,606,430 8,491,430
Purchase of treasury stock (45,448) -
Issuance of common stock under stock option
plan 3,142 62,882
Payment of dividends (180,833) (171,164)
Proceeds (repayments) on note payable 105,000 (650,000)
_________ _________
Net cash used in financing activities 4,502,326 771,177
_________ _________
Net decrease in cash (1,261,298) (766,030)
Cash and cash equivalents at beginning
of period 4,315,013 3,875,529
_________ _________
Cash and cash equivalents at end of period $ 3,053,715 $ 3,109,499
Supplemental disclosure of cash flow
information:
Cash paid during period for interest $ 2,733,000 $ 2,427,000
Cash paid during period for taxes $ 167,000 $ 42,000
Supplemental schedule of noncash investing
activities:
Transfer of loans to real estate owned $ 199,000 $ 50,000
============ =============
<FN>
</FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
MNB BANCSHARES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
1. Interim Financial Statements
The condensed consolidated financial statements of MNB Bancshares, Inc.
(the "Company") and subsidiaries 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, 1999, 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, 1999
condensed consolidated balance sheet has been derived from the audited
balance sheet as of that date. The results of the interim periods ended June
30, 2000 are not necessarily indicative of the results expected for the year
ending December 31, 2000.
2. Earnings Per Share
Basic earnings per share have been computed based upon the weighted
average number of common shares outstanding during each year. Diluted
earnings per share include the effect of all potential common shares
outstanding during each year. Earnings per share for all periods presented
have been adjusted to give effect to the 5% stock dividends paid by the
Company annually since 1994.
The shares used in the calculation of basic and diluted income per
share, which have been restated for the annual 5% stock dividends are shown
below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the three months For the six months
ended June 30, ended June 30,
2000 1999 2000 1999
---- ---- ---- ----
Weighted average common
shares outstanding 1,444,021 1,442,035 1,446,383 1,440,195
Stock options 32,151 42,996 32,422 44,921
_________ _________ _________ _________
Total 1,476,172 1,485,031 1,478,805 1,485,116
</TABLE>
3. Comprehensive Income
The Company's only component of other comprehensive income is the
unrealized holding gains and losses on available for sale securities.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the three months For the six months
ended June 30, ended June 30,
2000 1999 2000 1999
____ ____ ____ ____
Net earnings $ 238,265 219,503 458,976 413,963
Unrealized holding losses 109,856 (406,692) (37,182) (592,217)
Less - reclassification
adjustment for gain (loss)
included in net earnings (30,368) 5,500 (30,368) 7,147
_______ _______ ______ _______
Net unrealized losses on
securities 140,224 (412,192) (6,814) (599,362)
Income tax expense (benefit) 41,745 (156,633) (2,589) (227,758)
_________ _______ _______ _______
Total comprehensive income $ 336,744 36,056 454,751 42,357
</TABLE>
MNB BANCSHARES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General. MNB Bancshares, Inc. 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
home office for the Bank is Manhattan, Kansas, with branches operating in
Auburn, Manhattan, Osage City, and Topeka, Kansas. On January 6, 2000, we
opened an in-store supermarket branch in Manhattan, Kansas. We also
completed the purchase of the Wamego and Osage City, Kansas branches of
Commercial Federal Bank on July 21, 2000, comprised of total deposits of $14
million and total loans of $1 million. Our 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. Our 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. Our 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.
Net earnings for the first six months of 2000 increased $45,000, or 11%,
to $459,000 as compared to the first six months of 1999. Net interest income
increased $155,000, or 7%, from $2.2 million, to $2.4 million. This
improvement in net earnings and net interest income was generally
attributable to growth in the commercial, commercial real estate and retail
loan portfolios resulting in an increase of approximately $13 million in net
loans outstanding from June 30, 1999. Noninterest income increased $13,000,
or 3%, from $517,000 to $530,000, as new fee and service charge initiatives
overcame a $49,000 decrease in gains on sale of loans and a $30,000 loss on
sale of investments. Noninterest expense increased $89,000 or 4%, relating
primarily to the opening during January 2000 of our first supermarket branch
in west Manhattan.
Net earnings for the second quarter of 2000 increased 9% to $238,000 in
comparison to the same period in 1999. Net interest income increased from
$1.1 million to $1.2 million, or 5%, during this period. Noninterest income
increased 9% to $285,000 compared to $263,000 as a result of increased fees
and service charges which were partially offset by gains on sale of loans
declining and a loss on sale of investments. Noninterest expense increased
$49,000, or 5%.
Interest Income. Interest income increased $568,000, or 12%, to $5.2
million from $4.6 million in the first six months of 2000. This increase was
primarily related to the strong growth in the loan portfolio, along with
increased yields on our investment portfolio. Average loans for the first
six months of 2000 were $89.4 million, compared to average loans of $76.2
million for the first six months of 1999.
Interest income for the second quarter of 2000 increased by $325,000, or
14% compared to the same period of 1999. Average loans for the second
quarter of 2000 were $90.2 million, compared to average loans of $78.0
million for the second quarter of 1999.
Interest Expense. As compared to the same period a year earlier,
interest expense during the first six months of 2000 increased by $413,000,
or 17.0%. Interest expense on deposits increased $158,000, or 7% while
interest expense on borrowings, consisting of advances from the Federal Home
Loan Bank of Topeka and funds borrowed for acquisitions, increased $255,000,
or 100% during this time period. Interest expense increased as a result of
an increase in interest rates and additional borrowings from the Federal Home
Loan Bank, offset partially by principal repayments on our note payable.
Interest expense for the second quarter of 2000 increased 22% to $1.5
million from $1.2 million in 1999. Deposit interest expense increased
$115,000, or 11%, to $1.2 million. These increases were the result of the
increase in interest rates and additional Federal Home Loan Bank borrowings,
offset partially by principal repayments on our note payable.
Provision for Loan Losses. The provision for loan losses for the first
six months of 2000 was $35,000, compared to no provision during the first six
months of 1999. While the loan portfolio quality remains strong,
management's review of the portfolio coupled with the increase in loans
experienced during 1999 and 2000 prompted an increased provision. At June
30, 2000, the allowance for loan losses was $1.3 million, or 1.4% of gross
loans outstanding, compared to $1.3 million, or 1.6% of gross loans
outstanding, at June 30, 1999. The allowance for loan losses was $1.2
million at December 31, 1999, or 1.4% of gross loans outstanding.
Noninterest Income. Noninterest income increased $13,000, or 3%, for
the first six months of 2000 to $530,000 compared to the same period in
1999. Fees and service charges increased from $392,000 to $492,000, of which
approximately $83,000 was attributable to an increase in overdraft fee
income. Partially offsetting this increase was a decline of 55% in gains on
sale of loans from $89,000 to $40,000 resulting from the increase in home
mortgage rates and a $30,000 loss on sale of investments as we restructured
our investment portfolio to obtain higher yielding investments with a
projected break even point within fiscal 2000.
Noninterest income for the second quarter of 2000 increased 9% to
$285,000, compared to $263,000 for the second quarter of 1999. Contributing
to this increase was an increase in fee and service charge income of $68,000,
offset by a decline in gains on sale of loans of $11,000, and the $30,000
loss of sale of investments.
Noninterest Expense. Noninterest expense increased $89,000, or 4%, to
$2.2 million for the first six months of 2000 over the same period in 1999,
resulting from increased expenses for compensation and benefits, advertising,
and occupancy and equipment. These increased expense categories, related
primarily to opening and operating expenses of the new Dillons supermarket
branch which opened in January 2000, were partially offset by reductions in
professional fees and federal deposit insurance premiums. Noninterest
expense for the second quarter of 2000 increased $49,000, or 5% as compared
to the same period in 1999, with the results generally mirroring those of the
six month periods.
Asset Quality and Distribution. Total assets increased to $149 million
at June 30, 2000 compared to $143 million at December 31, 1999. The 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 are the origination of mortgage,
consumer, and commercial loans and the purchase of investment and mortgage
backed securities. Generally, long term fixed rate residential mortgage
loans are originated for immediate sale and we do not warehouse loans to
speculate on interest rates.
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 one
month or more. As of June 30, 2000, twenty-four real estate loans were more
than one month past due with a total balance of $2.3 million, which was 2.5%
of total loans outstanding. Three of these loans, totaling $262,000, were on
non-accrual status as of June 30, 2000. With the exception of guaranteed
student loans, fifteen consumer loans totaling $105,000, or 0.1%, were over
one month past due as of June 30, 2000 and three of these loans with a
combined balance of $26,000 were on non-accrual. Additionally, eleven
commercial loans totaling $300,000, or 0.3%, were past due. One of these
commercial loans totaling $51,000 was on non-accrual status.
During the six months ended June 30, 2000, investment securities
available for sale were purchased in the amount of $11.5 million. These
activities were funded primarily by maturities of investment securities of
$7.9 million, along with deposit growth and proceeds from the sale of
investments available for sale of $2.3 million.
Liability Distribution. At June 30, 2000, total deposits had a net
increase of $2.0 million from December 31, 1999, while borrowings increased
$2.6 million. The change in the liability mix was primarily related to daily
fluctuations experienced on the deposit balances maintained by our public
funds providers.
Noninterest bearing demand accounts at the end of the second quarter of
2000 totaled $9.9 million, or 9% of deposits, compared to approximately 9%,
or $10.1 million at December 31, 1999. Certificates of deposit increased to
$56.2 million at June 30, 2000 from $55.1 million, or 2%. Money market and
NOW accounts increased 2% from December 31, 1999 to $37.8 million from $37.1
million, and were 33% of total deposits, while savings accounts increased
from $10.0 million to $10.5 million. The increase in money market and NOW
accounts primarily resulted from the fluctuating balances of the public funds
providers accounts.
Liquidity. Our most liquid assets are cash and cash equivalents and
investment securities available for sale. The level of these assets are
dependent on the operating, financing, lending and investing activities
during any given period. At June 30, 2000, and December 31, 1999
respectively, these liquid assets totaled $48.1 million and $47.7 million.
During periods in which we are not able to originate a sufficient amount of
loans and/or periods of high principal prepayments, we increase our liquid
assets by investing in short-term U. S. Government and agency securities.
Liquidity management is both a daily and long-term function of the
management strategy. Excess funds are generally invested in short-term
investments. In the event funds are required beyond the ability to generate
them internally, additional funds are generally available through the use of
Federal Home Loan Bank advances, a line of credit with the Federal Home Loan
Bank or through sales of securities. At June 30, 2000, we had outstanding
Federal Home Loan Bank advances of $17.2 million and had $1.0 million
outstanding on our $17.5 million line of credit. Additionally, we have
guaranteed a loan made to our Employee Stock Ownership Plan with an
outstanding balance of $166,511 at June 30, 2000, to fund the plan's purchase
of shares in our common stock offering in 1993. Total borrowings were $19.4
million at June 30, 2000, compared to $16.7 million at December 31, 1999.
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
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, which includes our organization. It is anticipated that we will have
in excess of $150 million of total assets at the end of the third quarter of
2000. Our total capital of $13.5 million is well in excess of the Federal
Reserve Board's consolidated minimum capital requirements.
At June 30, 2000, Security National Bank continued to maintain a sound
Tier 1 capital ratio of 8.57% and a risk based capital ratio of 14.78%. As
shown by the following table, Security National Bank's capital exceeded the
minimum capital requirements (dollars in thousands):
<TABLE>
<CAPTION>
June 30, 2000
Amount Percent Required
<S> <C> <C> <C>
Tier 1 Capital $12,769 8.57% 4.00%
Risk Based Capital 13,950 14.78% 8.00%
</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
Improvement Act of 1991 establishes a bank rating system based on the capital
levels of banks. Security National Bank is rated "well capitalized", which
is the highest rating available under this capital-based rating system.
Recent Accounting Developments. The Financial Accounting Standards Board
("FASB") issued Statements of Financial Accounting Standards ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging Activities," in June
1998. SFAS No. 133 establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. This
statement, as amended by SFAS No. 137, is effective for all fiscal quarters
beginning after June 15, 2000. We believe adoption of SFAS Nos. 133 and 137
will not have a material effect on our financial position or results of
operations, nor will adoption require additional capital resources.
Recent Regulatory Developments. The Gramm-Leach-Bliley Act, which was
enacted in November 1999, allows eligible bank holding companies to engage in
a wider range of nonbanking activities, including greater authority to engage
in securities and insurance activities. Under the act, an eligible bank
holding company that elects to become a financial holding company may engage
in any activity that the Board of Governors of the Federal Reserve System, in
consultation with the Secretary of the Treasury, determines by regulation or
order is financial in nature, incidental to any financial activity, or
complementary to any financial activity and does not pose a substantial risk
to the safety or soundness of depository institutions or the financial system
generally. National banks are also authorized by the act to engage, through
"financial subsidiaries," in certain activity that is permissible for
financial holding companies (as described above) and certain activity that
the Secretary of the Treasury, in consultation with the Federal Reserve,
determines is financial in nature or incidental to any financial activity.
Various bank regulatory agencies have begun issuing regulations as
mandated by the act. During June 2000, all of the federal bank regulatory
agencies jointly issued regulations implementing the privacy provisions of
the act. In addition, the Federal Reserve issued interim regulations
establishing procedures for bank holding companies to elect to become
financial holding companies and listing the financial activities permissible
for financial holding companies, as well as describing the extent to which
financial holding companies may engage in securities and merchant banking
activities. The Office of the Comptroller of the Currency issued a
regulation regarding the parameters under which national banks may establish
and maintain financial subsidiaries. At this time, it is not possible to
predict the impact the Act and its implementing regulations may have on us.
As of the date of this filing, we have not applied for or received approval
to operate as a financial holding company. In addition, Security National
Bank has not applied for or received approval to establish any financial
subsidiaries.
Year 2000 Compliance. The Year 2000 posed a unique set of challenges to
companies reliant on information technology. We utilize and are dependent
upon data processing systems and software to conduct our business. In 1997,
we established a Year 2000 committee and initiated a review and assessment of
all hardware and software issues related to the Year 2000 and the potential
for those issues to adversely affect our operations.
As a result of our efforts, we have not experienced any business
interruptions or encountered any credit or deposit customers who have
experienced adverse consequences resulting from the Year 2000. Among the
benefits derived from the time, effort and costs related to Year 2000 was a
complete review and update of our disaster recovery and contingency plans.
As a result, we are now better prepared to deal with technical or natural
disasters which could threaten our operations. We will continue to remain
aware of dates during 2000 which are considered critical, such as 10/10/2000,
and will address issues in connection with the contingency plan should the
need arise.
MNB BANCSHARES, INC. AND SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our assets and liabilities are principally financial in nature and the
resulting net interest income thereon is subject to changes in market
interest rates and the mix of various assets and liabilities. Interest rates
in the financial markets affect our decision on pricing its assets and
liabilities which impacts net interest income, a significant cash flow source
for us. As a result, a substantial portion of our risk management activities
relates to managing interest rate risk.
Our Asset/Liability Management Committee monitors the interest rate
sensitivity of our balance sheet using earnings simulation models and
interest sensitivity GAP analysis. We have set policy limits of interest
rate risk to be assumed in the normal course of business and monitors such
limits through its simulation process.
We have been successful in meeting the interest rate sensitivity
objectives set forth in its policy. Simulation models are prepared to
determine the impact on net interest income for the coming twelve months,
including one using rates at June 30, 2000 and forecasting volumes for the
twelve-month projection. This position is then subjected to a shift in
interest rates of 200 basis points rising and 200 basis points falling with
an impact to our net interest income on a one year horizon as follows:
<TABLE>
<CAPTION>
Scenario $ change in net % of net int. income
interest income
<S> <C> <C>
200 basis point rising ($424,000) (8.21%)
200 basis point falling 510,000 9.88%
</TABLE>
We believe that no significant changes in our interest rate sensitivity
position have occurred since June 30, 2000 with the exception of our July 21,
2000 acquisition of the Commercial Federal Bank branches in Wamego and Osage
City, Kansas, comprising total deposits of $14 million and total loans of $1
million. We anticipate our interest rate sensitivity will be reduced as a
result of paying off $13 million in variable rate borrowings from the Federal
Home Loan Bank. We also believes we are appropriately positioned for future
interest rate movements, although we may experience some fluctuations in net
interest income due to short term timing differences between the repricing of
assets and liabilities.
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. We
intend such forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in the Private Securities
Reform 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
are generally identifiable by use of the words "believe," "expect," "intend,"
"anticipate, "estimate," "project" or similar expressions. Our ability to
predict results or the actual effect of future plans or strategies is
inherently uncertain. Factors which could have a material adverse affect on
the 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 our market area, our implementation of new
technologies, our ability to develop and maintain secure and reliable
electronic systems 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 us and our business, including additional
factors that could materially affect our financial results, is included in
our filings with the Securities and Exchange Commission.
MNB BANCSHARES, INC. AND SUBSIDIARIES
PART II
ITEM 1. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which MNB
Bancshares, Inc. or its subsidiaries 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.
On May 17, 2000, the annual meeting of MNB Bancshares, Inc.
stockholders was held. At the meeting, Susan E. Roepke and Donald
J. Wissman were elected to serve as Class II directors with terms
expiring in 2001. Continuing as Class I directors (term expires in
2002) are Patrick L. Alexander, Joseph L. Downey and Jerry R.
Pettle and continuing as Class III directors (term expires in 2001)
are Brent A. Bowman, Charles D. Green and Vernon C. Larson. The
stockholders also ratified the appointment of KPMG LLP as MNB
Bancshares, Inc.'s independent public accountants for the year
ending December 31, 2000.
There were 1,444,021 issued and outstanding shares of Common Stock
at the time of the annual meeting. The voting on each item at the
annual meeting was as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Withheld/ Broker
For Against Abstain Non-Votes
-------------------------------------------------------
Susan E. Roepke 1,020,616 150,983 - -
Donald J. Wissman 1,022,009 149,590 - -
KPMG LLP 1,055,125 97,756 18,718 -
</TABLE>
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
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: August 9, 2000 __________________________________
/s/Patrick L. Alexander
President and Chief Executive Officer
Date: August 9, 2000 __________________________________
/s/Mark A. Herpich
Vice President, Secretary, Treasurer
and Chief Financial Officer
