SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------
Form 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
COMMISSION FILE NUMBER 0-26870
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AMERICAN NATIONAL BANCORP, INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-1943817
- ----------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
211 North Liberty Street, Baltimore, Maryland 21201-3978
- ------------------------------------------------------------------------------
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (410)-752-0400
--------------------------
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
------ ------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
--------- ---------
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date: Common Stock, $0.01 par value--3,603,646 shares as of
February 28, 1997.
<PAGE>
AMERICAN NATIONAL BANCORP, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition 1
at January 31, 1997 (unaudited) and July 31, 1996
Consolidated Statements of Operations (unaudited) 2
for the Three Months ended January 31, 1997 and 1996
and for the Six months ended January 31, 1997 and 1996
Consolidated Statements of Cash Flows (unaudited) 3
for the Six Months ended January 31, 1997 and 1996
Notes to Unaudited Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis 7
of Financial Condition and Results
of Operations
PART II. OTHER INFORMATION 12
<PAGE>
<TABLE>
AMERICAN NATIONAL BANCORP, INC. and SUBSIDIARY
Consolidated Statements of Financial Condition (Unaudited)
<CAPTION>
Assets January 31, 1997 July 31, 1996
- ------------------------------------- ---------------- -------------
(In thousands)
<S> <C> <C>
Cash:
On hand and due from banks $ 3,514 $ 2,671
Interest-bearing deposits 909 1,837
Federal funds sold 91 394
Securities available for sale 36,788 40,266
Investment securities 27,146 24,109
Mortgage-backed securities 102,628 100,195
Loans receivable, net 307,151 278,042
Federal Home Loan Bank stock, at cost 4,431 3,141
Investments in real estate, net 5,346 5,670
Investments in and advances to real
estate joint ventures 988 1,270
Property and equipment, net 1,338 1,198
Prepaid expenses and other assets 436 612
Deferred income taxes 1,740 1,866
-------------- --------------
$ 492,506 $ 461,271
============== ==============
Liabilities and Stockholders' Equity
- --------------------------------------
Liabilities:
Deposits $ 321,725 $ 313,083
Borrowed funds 33,294 34,445
Advances from the Federal Home Loan
Bank of Atlanta 86,327 62,824
Drafts payable 1,629 859
Advance payments by borrowers for taxes
and insurance 4,014 1,760
Accrued expenses and other liabilities 1,161 1,030
-------------- --------------
Total Liabilities 448,150 414,001
Stockholders' Equity:
Serial preferred stock 1,000,000 shares
authorized, none issued - -
Common stock, $.01 par value, 8,000,000
shares authorized, 3,980,500 shares
issued and 3,603,646 shares outstanding
at January 31, 1997 40 40
Additional paid-in capital 30,667 30,705
Unearned common stock acquired by
management recognition and retention
plans (996) (77)
Unearned employee stock ownership plan
(ESOP) shares (1,537) (1,629)
Treasury stock at cost, 376,854 shares
and 199,025 shares at January 31, 1997
and July 31, 1996 respectively (4,240) (2,040)
Retained income - substantially restricted 21,733 21,970
Net unrealized holding loss on securities,
net of income taxes (1,311) (1,699)
------------- -------------
Total Stockholders' Equity 44,356 47,270
------------- -------------
$ 492,506 $ 461,271
============= =============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-1-
<PAGE>
<TABLE>
AMERICAN NATIONAL BANCORP, INC. and SUBSIDIARY
Consolidated Statements of Operations (Unaudited)
<CAPTION>
Six months ended January 31,
1997 1996
----------- ----------
(In thousands, except per share data)
<S> <C> <C>
Interest income:
Loans receivable $ 12,562 $ 10,454
Mortgage-backed securities 4,193 5,041
Investment securities 1,212 551
Other 374 377
--------- ---------
Total interest income 18,341 16,423
Interest expense:
Deposits 7,695 8,089
Borrowed funds 3,266 2,419
--------- ---------
Total interest expense 10,961 10,508
--------- ---------
Net interest income 7,380 5,915
Provision for loan losses 420 500
--------- ---------
Net interest income after
provision for loan losses 6,960 5,415
Noninterest income:
Fees and service charges 389 292
Gain (loss) on sales of:
Loans receivable, net 22 14
Mortgage-backed securities, net (64) 17
Investment securities, net - 4
Other 87 78
--------- ---------
Total noninterest income 434 405
Noninterest expenses:
Salaries and employee benefits 2,327 2,151
Net occupancy 646 674
Professional services 207 183
Advertising 414 351
Federal deposit insurance premiums 2,381 404
Furniture, fixtures and equipment 226 147
Loss on investment in real estate 86 112
Equity in net loss of real estate
joint ventures 137 112
Other 841 805
---------- ---------
Total noninterest expenses 7,265 4,939
---------- ---------
Income before income taxes 129 881
Income tax provision 44 267
---------- ----------
Net income $ 85 $ 614
========== ==========
Earnings per common share: $ 0.02 N/A
========== ==========
Proforma earnings per common share N/A $ 0.22
========== ==========
<CAPTION>
Three months ended January 31,
1997 1996
----------- ----------
(In thousands, except per share data)
<S> <C> <C>
Interest income:
Loans receivable $ 6,524 $ 5,344
Mortgage-backed securities 2,083 2,451
Investment securities 627 276
Other 197 181
--------- ---------
Total interest income 9,431 8,252
Interest expense:
Deposits 3,867 3,972
Borrowed funds 1,700 1,141
--------- ---------
Total interest expense 5,567 5,113
--------- ---------
Net interest income 3,864 3,139
Provision for loan losses 210 210
--------- ---------
Net interest income after
provision for loan losses 3,654 2,929
Noninterest income:
Fees and service charges 197 142
Gain (loss) on sales of:
Loans receivable, net 22 11
Mortgage-backed securities, net - 15
Investment securities, net - 4
Other 42 40
--------- ---------
Total noninterest income 261 212
Noninterest expenses:
Salaries and employee benefits 1,193 1,093
Net occupancy 332 325
Professional services 135 94
Advertising 203 184
Federal deposit insurance premiums 129 199
Furniture, fixtures and equipment 117 75
Loss on investment in real estate 52 59
Equity in net loss of real estate
joint ventures 137 82
Other 445 434
---------- ---------
Total noninterest expenses 2,743 2,545
---------- ---------
Income before income taxes 1,172 596
Income tax provision 399 165
---------- ----------
Net income $ 773 $ 431
========== ==========
Earnings per common share: $ 0.22 $ 0.11
========== ==========
Proforma earnings per common share N/A N/A
========== ==========
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
-2-
<PAGE>
<TABLE>
AMERICAN NATIONAL BANCORP, INC. and SUBSIDIARY
Consolidated Statements of Cash Flows (Unaudited)
<CAPTION>
Six months ended January 31,
1997 1996
------------- -----------
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 85 $ 614
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 266 253
Noncash compensation under stock-
based benefit plans 111 87
Amortization of loan fees (211) (180)
Amortization of premiums and
discounts, net 123 (146)
Provision for losses on loans
and investments in real estate 420 510
Loss (gain) on sales of assets, net 42 (35)
Loans originated for sale (3,553) (4,420)
Sales of loans originated for sale 3,163 1,546
Deferred income taxes (115) 264
Decrease (increase) in prepaid
expenses and other assets 176 (111)
Increase (decrease) in accrued expenses
and other liabilities 131 (84)
Increase in income taxes receivable - (64)
Other, net (284) (94)
---------- ----------
Net cash provided by (used in) operating
activities 354 (1,860)
---------- ----------
Cash flows from investing activities:
Repayments of mortgage-backed securities
available for sale 1,678 676
Sales of mortgage-backed securities
available for sale 4,254 14,292
Purchases of mortgage-backed securities
available for sale (2,033) (10,988)
Maturities of investment securities 3,000 11,000
Purchases of investment securities (6,000) (10,265)
Repayments of mortgage-backed securities 2,508 5,464
Purchases of mortgage-backed securities (4,984) (3,477)
Loan principal repayments 25,304 22,265
Loan originations (40,563) (35,836)
Loan purchases (14,129) (6,493)
Increase in deferred loan fees, net 335 258
Decrease in investments in real estate 717 947
Decrease in investments in and advances
to real estate joint ventures 419 548
Purchases of property and equipment (406) (239)
Federal Home Loan Bank stock purchases, net (1,290) -
----------- -----------
Net cash used in investing activities (31,190) (11,848)
----------- -----------
(continued)
-3-
<PAGE>
AMERICAN NATIONAL BANCORP, INC. and SUBSIDIARY
Consolidated Statements of Cash Flows (Unaudited)
<CAPTION>
Six months ended January 31,
1997 1996
----------- -----------
(In thousands)
<S> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in deposits 8,642 (3,838)
Net decrease in borrowed funds (1,151) (5,465)
Proceeds from Federal Home Loan Bank
advances 60,496 110,338
Repayment of Federal Home Loan Bank
advances (36,993) (109,808)
Increase (decrease) in drafts payable 770 (735)
Increase in advance payments by borrowers
for taxes and insurance 2,254 2,293
Proceeds from issuance of common stock,
net of expenses - 21,040
Proceeds from exercised options 58 -
Common stock acquired by ESOP - (1,746)
Cash dividends paid (216) (92)
Purchase of treasury stock (2,316) -
Purchase of stock to fund 1996 Recognition
and Retention Plan (1,096) -
----------- -----------
Net cash provided by financing activities 30,448 11,987
Net decrease in cash and cash equivalents (388) (1,721)
Cash and cash equivalents at beginning of
period 4,902 5,360
----------- -----------
Cash and cash equivalents at end of period $ 4,514 $ 3,639
=========== ===========
Supplemental information:
Interest paid on deposits and borrowed
funds $ 10,963 $ 10,503
Income taxes paid, net 100 (1)
========== ============
Noncash activities: Loans transferred to
real estate acquired through foreclosure $ 393 $ 2,126
========== ===========
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
-4-
<PAGE>
AMERICAN NATIONAL BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (Unaudited)
January 31, 1997
(1) Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements include all
adjustments, consisting of normal recurring adjustments, which are necessary,
in the opinion of management, to fairly reflect the Company's financial
position, results of operations and cash flows for the periods presented. The
statements have been prepared using the accounting policies described in the
July 31, 1996 Annual Financial Statements. The results of operations for the
three and six months ended January 31, 1997 are not necessarily indicative of
the results which may be expected for the entire year.
(2) Principles of Consolidation
----------------------------
The consolidated financial statements include the accounts of American
National Bancorp, Inc., (the "Company"), and its wholly owned subsidiary,
American National Savings Bank, F.S.B. (the "Bank") and its subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation.
(3) Reclassification of Prior Year's Statements
-------------------------------------------
Certain amounts in the 1996 financial statements have been reclassified
to conform with the 1997 presentation.
(4) Securities Available For Sale
-----------------------------
On August 8, 1994, the Bank transferred approximately $36.3 million of
its collateralized mortgage obligations (CMO), net of unrealized loss of
approximately $1.8 million, from the available for sale portfolio to held to
maturity. On that date, certain accounting issues were resolved permitting
the
Bank to transfer substantially all of these securities from the available for
sale portfolio to the held to maturity portfolio as originally intended. The
unrealized loss at the time of the transfer is being amortized over the
remaining lives of the securities as an adjustment of yield. The unrealized
loss, net of taxes, was $1.1 million and as a component of stockholders'
equity is being reduced through the amortization.
(5) Earnings Per Common Share
-------------------------
Earnings per share were computed by dividing net income for the three and
six months ended January 31, 1997 by the weighted average number of shares of
common stock and common stock equivalents outstanding for the three months
ended (3,533,035 shares) and for the six months ended (3,575,582 shares),
respectively. ESOP shares that have not been committed to be released are not
considered outstanding for the computation of earnings per share in accordance
with Statement of Position 93-6, "Employers' Accounting for Employee Stock
Ownership Plans" ("SOP 93-6"). Shares granted but not yet issued under the
Company's stock option plans are considered common stock equivalents for
earnings per share calculations.
Without the one-time FDIC special assessment, earnings per share for the
six months ended January 31, 1997 would have been income of $.40 per share.
See Management's Discussion and Analysis - Noninterest Expense.
Earnings per share information for the three months ended January 31,
1996 was computed by dividing the net income for the three months ended
January 31, 1996 by the weighted average number of shares of common stock
outstanding during the period of 3,806,900 shares.
-5-
<PAGE>
The pro forma net income per share for the six months ended January 31,
1996 has been calculated as if the 2,182,125 shares issued had been sold on
August 1, 1995. The net proceeds of the offering are assumed to have been
invested at a net effective yield of 7.86%, (the approximate weighted average
yield on all interest earning assets during the period from August 1, 1995 to
October 31, 1995) for the period from August 1, 1995 to October 31, 1995, and
income so calculated, reduced for income taxes at an assumed effective tax
rate of 38.6%, was added to reported net income for the period to obtain the
pro forma net income used in the calculation.
(6) Dividends on Common Stock
-------------------------
On January 16, 1997, the Company declared a quarterly cash dividend of
$0.03 per share payable on February 18, 1997 to stockholders of record as of
January 31, 1997.
(7) Employee Stock Benefit Plans
----------------------------
At its Annual Meeting on November 21, 1996, stockholders approved the
Company's 1996 Recognition and Retention Plan (RRP) and the 1996 Stock Option
Plan (the Stock Plan).
The RRP authorizes the grant of stock to directors and officers of the
Company for 87,285 shares. Shares will vest at the rate of 20% of the
initially awarded amount per year with the first installment being earned on
the first trading day of 1998 and succeeding installments being earned on the
first trading day of the following year.
The Stock Plan authorized the grant of stock to directors and officers
for the aggregate of 218,213 of authorized, but unissued shares. Options are
exercisable at the market price at the time of grant on a cumulative basis at
a rate of 20 percent per year commencing one year from the date of grant and
expire 10 years from the date of grant.
(8) Impact of New Accounting Standards
----------------------------------
In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities (Statement
125). Statement 125 is effective for transfers and servicing of financial
assets and extinguishments of liabilities occurring after December 31, 1996
and is to be applied prospectively. This Statement will require, among other
things, that the Company record at fair value, assets and liabilities
resulting from a transfer of financial assets. In December 1996, Statement
127 was issued which deferred the effective date of certain provisions of
Statement 125 until January 1, 1998 related to repurchase agreements,
securities, lending and similar transactions. The Company adopted the
provisions of Statement 125 as of January 1, 1997.
-6-
<PAGE>
AMERICAN NATIONAL BANCORP, INC.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis covers material changes in the
financial condition since July 31, 1996 and material changes in the results of
operations for the three and six months ended January 31, 1997 as compared to
the same period in 1996. This discussion should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in the 1996 Annual Report to Stockholders.
Financial Condition
- -------------------
Total assets increased by $31.2 million, or 6.8%, to $492.5 million at
January 31, 1997 from $461.3 million at July 31, 1996. Assets increased
primarily due to an increase in mortgage loans originated and purchased.
Loans receivable increased by $29.2 million, or 10.5% to $307.2 million from
$278.0 million at July 31, 1996. Mortgage-backed securities increased by $2.4
million, or 2.4%, to $102.6 million at January 31, 1997, from $100.2 million
at July 31, 1996. Investment securities increased by $3.0 million, or 12.6%,
to $27.1 million, at January 31, 1997, from $24.1 million at July 31, 1996,
primarily due to the purchase of $3.0 million in FHLB nine-month callable
notes. Securities available for sale decreased $3.5 million, or 8.6%, to
$36.8 million at January 31, 1997 from $40.3 million at July 31, 1996 due to
the sale of securities.
Deposits increased by $8.6 million, or 2.8%. Advances from the Federal
Home Loan Bank of Atlanta increased $23.5 million, or 37.4%. Borrowed funds
decreased by $1.2 million, or 3.3%. The net increase is due to the funding of
loan originations and loan and security purchases.
Total stockholders' equity decreased by $2.9 million to $44.4 million at
January 31, 1997 compared to $47.3 million at July 31, 1996. This decrease
was the result of the Company repurchasing 189,074 shares of common stock for
$2.3 million or $12.25 per share, the purchase of 87,285 shares of common
stock in the second quarter to fund the 1996 Recognition and Retention Plan
which was approved by the stockholders at the November 21, 1996 annual
meeting, and quarterly dividends of approximately $216,000 for the six months
ended January 31, 1997, partially offset by a decrease in the net unrealized
holding loss on securities of $388,000 and net income for the six months of
$85,000.
Results of Operations
- ---------------------
The consolidated earnings of the Company depend primarily on the
difference between the interest earned on its loan, mortgage-backed securities
and investment portfolios and the interest paid on deposits and borrowings.
This difference is known as "net interest income". The Company's net income
also is affected by its provision for losses on loans and investments in real
estate, as well as the amount of non-interest income, including loan fees and
service charges, and non-interest expense, such as salaries and employee
benefits, deposit insurance premiums, occupancy and equipment costs and income
taxes. Earnings of the Company also are affected significantly by general
economic and competitive conditions, particularly changes in market interest
rates, government policies and actions of regulatory authorities.
-7-
<PAGE>
Interest Income. Interest income totalled $9.4 million and $18.3 million
for the three and six months ended January 31, 1997, compared to $8.3 million
and $16.4 million for the three and six months ended January 31, 1996,
respectively. The $1.1 million increase for the three months ended January
31, 1997 compared to the three months ended January 31, 1996 resulted from a
$50.0 million, or 11.6%, increase in average interest earning assets to $481.3
million for the three months ended January 31, 1997 and an increase in the
yield on average interest earning assets to 7.8% for the three months ended
January 31, 1997, from 7.7% for the three months ended January 31, 1996. The
increase in average interest earning assets resulted from a $55.4 million, or
22.5%, increase in average loans to $301.8 million from $246.4 million; and a
$16.7 million, or 92.8% increase in average investment securities to $34.7
million from $18.0 million, offset by a $23.7 million, or 15.1%, decrease in
mortgage-backed securities. The increase in the yield on interest-earning
assets was due to increases in the weighted average yield on consumer loans
and investment securities offset by decreases in the weighted average yield on
mortgage loans and other interest-earning assets.
The $1.9 million increase for the six months ended January 31, 1997 was
due to a $46.5 million, or 10.9%, increase in average interest earning assets
to $473.5 for the six months ended January 31, 1997. Average loans increased
$54.8 million and average investment securities increased $16.6 million.
These increases were offset by a decrease in average mortgage-backed
securities of $25.4 million.
Interest Expense. Interest expense totalled $5.6 million and $11.0
million for the three and six months ended January 31, 1997, compared to $5.1
million and $10.5 million for the three and six months ended January 31, 1996.
The $454,000 increase for the three months ended January 31, 1997 was due to a
$54.9 million increase in average interest-bearing liabilities offset by a
decrease of 25 basis points in the average cost of funds. The $453,000
increase for the six months ended January 31, 1997 compared to the six months
ended January 31, 1996 was due to a $38.7 million increase in average
interest-bearing liabilities, offset by a decrease of 27 basis points in the
average cost of funds. The Company utilized deposits, FHLB advances and other
borrowings to fund loan originations and purchases of loans and securities.
Net Interest Income. Net interest income totalled $3.9 million and $7.4
million for the three and six months ended January 31, 1997 compared to $3.1
million and $5.9 million for the three and six months ended January 31, 1996.
The increase in net interest income for the three and six months was primarily
due to the results of operations discussed above, which resulted in an
increase in the Company's interest rate spread to 2.77% from 2.33% for the
three months and 2.66% from 2.33% for the six months.
Provision for Loan Losses. The Company maintains an allowance for loan
losses based upon management's periodic evaluation of known and inherent risks
in the loan portfolio, the Company's past loan loss experience, adverse
situations that may affect borrowers' ability to repay loans, estimated value
of underlying loan collateral, and current and expected future economic
conditions. The allowance for loan losses was $4.3 million, or 1.4%, of net
loans receivable, at January 31, 1997, compared to $4.4 million, or 1.6% of
net loans receivable at July 31, 1996. Nonperforming assets decreased from
$4.7 million, or 1.0%, of total assets at July 31, 1996, to $3.4 million, or
.7% of total assets at January 31, 1997. The provision for loan losses
decreased by $80,000 to $420,000 for the six months ended January 31, 1997
from $500,000 for the six months ended January 31, 1996. This decrease
reflects management's assessment of loans and its current view of the risk in
the Company's loan portfolio based on an evaluation of specific loans in its
portfolio, estimated collateral values, historical loss experience, current
economic trends, and the existing level of the Company's allowance for loan
losses.
-8-
<PAGE>
The following table sets forth information regarding nonperforming loans,
real estate owned and restructured loans within the meaning of Statement 15,
at the dates indicated.
<TABLE>
<CAPTION>
At At
January 31, 1997 July 31, 1996
---------------- -------------
(Dollars in Thousands)
<S> <C> <C>
Nonperforming loans:
One to four-family residential
real estate $ 942 $ 690
Multifamily residential real
estate 1,566 1,580
Commercial real estate 118 1,374
Construction 80 -
Consumer 234 265
-------- --------
Total nonperforming loans 2,940 3,909
Total real estate owned <F1> 450 766
-------- --------
Total nonperforming assets 3,390 4,675
Restructured loans <F2> 988 1,636
-------- --------
Total nonperforming assets and
restructured loans $ 4,378 $ 6,311
======== =======
Impaired loan balance with a
valuation allowance of $778,000
and $1.4 million at January 31, 1997
and July 31, 1996, respectively $ 1,780 $ 2,953
======== =======
Total nonperforming loans to total loans
receivable .90% 1.31%
Total nonperforming loans to total assets .60% .85%
Total nonperforming loans and real estate
owned to total assets .69% 1.01%
<FN>
<F1> Represents property acquired by the Company through foreclosure or deed
in lieu of foreclosure.
<F2> All restructured loans are performing in accordance with their
restructured payment terms.
</FN>
</TABLE>
Noninterest Income. Noninterest income, consisting primarily of deposit
fees, loan servicing fees, and gains and losses on sales of loans, mortgage-
backed securities and investments, totalled $261,000 and $434,000 for the
three and six months ended January 31, 1997, compared to $212,000 and $405,000
for the three and six months ended January 31, 1996. The $49,000 and $29,000
increase for the three and six months ended January 31, 1997 is due to
increases in deposit fees collected offset by a loss on the sale of mortgage-
backed securities for the six months ended January 31, 1997 and no sales of
mortgage-backed securities for the three months ended January 31, 1997.
Noninterest Expense. Noninterest expense, consisting primarily of
salaries and employee benefits, occupancy and equipment, federal deposit
insurance premiums and provision for losses on investments in real estate
("REO"), totalled $2.7 million and $7.3 million for the three and six months
ended January 31, 1997, compared to $2.5 million and $4.9 million for the
three and six months ended January 31, 1996. The $198,000 increase in non-
interest expense for the three months ended January 31, 1997 was the result of
amortization of the 1996 Recognition and Retention Plan, an increase in
professional services and additional loss recognized on the investment in a
real estate joint venture. These increases were offset by a $70,000 decrease
in the Federal deposit insurance premium for the three months ended January
31, 1997.
-9-
<PAGE>
The $2.3 million increase for the six months ended January 31, 1997 was
due to the results of changes noted above as well as the Federal Deposit
Insurance Corporation ("FDIC") one-time special assessment to recapitalize the
Savings Association Insurance Fund. On September 30, 1996, legislation was
enacted and signed into law which provides a resolution to the disparity in
the Bank Insurance Fund/Savings Association Insurance Fund ("SAIF") premiums.
In particular, SAIF-insured institutions paid a one-time assessment of 65.7
cents on every $100 of deposits held at March 31, 1995. As a result of the
new law, the Company paid approximately $2.1 million. The special assessment
is tax deductible, therefore, the cost, net of income tax benefits, is
approximately $1.4 million. The Company has made a one-time charge to
earnings of this amount for the fiscal quarter ended October 31, 1996. Also,
beginning January 1, 1997, the previous annual minimum premium of 23 basis
points was reduced to 6.5 basis points.
Net Income. Net income was $773,000 or $.22 per share for the three
months ended January 31, 1997, compared to $431,000 of $.11 per share for the
three months ended January 31, 1996. The $342,000 increase in net income was
primarily due to an increase in net interest income of $725,000, an increase
of noninterest income of $49,000, offset by increases in noninterest expense
of $198,000 and income tax expense of $234,000. Net income was $85,000 for
the six months ended January 31, 1997 compared to $614,000 for the six months
ended January 31, 1996. The $529,000 decrease in net income was primarily due
to an increase in noninterest expense of $2.3 million from the FDIC special
assessment, partially offset by an increase in net interest income of $1.5
million, a decrease in the provision for loan loss of $80,000, and a decrease
in the income tax provision of $223,000. Without the one-time FDIC special
assessment, net income for the six months ended January 31, 1997 would have
been $1.4 million, or $.40 per share.
Liquidity and Capital Resources
- -------------------------------
The Bank is required to maintain minimum levels of liquid assets as
defined by Office of Thrift Supervision (OTS) regulations. This requirement,
which varies from time to time depending upon economic conditions and deposit
flows, is based upon a percentage of deposits and short-term borrowings. The
required ratio currently is 5%. The Bank's liquidity ratio averaged 6.57%
during the month of January 1997. In addition, the Bank is required to
maintain short term liquid assets of at least 1% of the Bank's average daily
balance of net withdrawable deposit accounts and current borrowings. The Bank
adjusts liquidity as appropriate to meet its asset and liability management
objectives. At January 31, 1997, the Bank was in compliance with such
liquidity requirements.
The Bank's primary sources of funds are deposits, amortization and
prepayment of loans and mortgage-backed securities, maturities of investment
securities and other short-term investments, FHLB advances and earnings and
funds provided from operations. While scheduled principal repayments on loans
and
mortgage-backed securities are a relatively predictable source of funds,
deposit flows and loan prepayments are greatly influenced by general interest
rates, economic conditions, and competition. The Bank manages the pricing of
its deposits to maintain a desired deposit balance. In addition, the Bank
invests excess funds in federal funds, and other short-term interest-earning
and other assets, which provide liquidity to meet lending requirements.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") requires thrift institutions to maintain certain minimum levels of
regulatory capital. The regulatory capital regulations require minimum levels
of tangible and core capital of 1.5% and 3%, respectively, of adjusted total
assets and risk-based capital of 8% of risk-weighted assets. The Bank was in
compliance with the regulatory capital requirements with tangible, core and
risk-based capital ratios of approximately 8.19%, 8.19%, and 17.27%,
respectively, at January 31, 1997.
-10-
<PAGE>
The OTS has proposed an increase in the core capital requirement for
savings institutions of at least 100 to 200 basis points higher than the
current 3.0% requirement for all but the highest rated savings institutions.
The OTS has not taken final action on the proposal; however, it has reserved
the right to apply this higher standard to any insured financial institution
when considering an institution's capital adequacy.
The Federal Deposit Insurance Corporation Improvement Act (FDICIA) of
1991 included prompt corrective action provisions for which implementing
regulations became effective on December 19, 1992. FDICIA also includes
significant changes to the legal and regulatory environment for insured
depository institutions, including reduction in insurance coverage for certain
kinds of deposits, increased supervision by the federal regulatory agencies,
increased reporting requirements for insured institutions, and new regulations
concerning internal controls, accounting, and operations.
The prompt corrective action regulations define specific capital
categories based on an institution's capital ratios. The capital categories,
in declining order, are "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and "critically
undercapitalized." Institutions categorized as "undercapitalized" or worse
are subject to certain defined restrictions, including the requirement to file
a capital plan with its primary federal regulator, prohibitions on the payment
of dividends and
management fees, restrictions on executive compensation, and increased
supervisory monitoring, among other things. To be considered "well
capitalized," an institution must generally have a leverage ratio of at least
5%, a tier one risk-based capital ratio of at least 6% and a total risk-based
capital ratio of at least 10%. The Bank is in the "well capitalized" category
at January 31, 1997.
-11-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
There are various claims and lawsuits in which the Company is
periodically involved incidental to the Company's business. In the opinion of
management, no material loss is expected from any of such pending claims or
lawsuits.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
No Form 8-K reports were filed during the period ended January 31, 1997.
-12-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned
thereunto duly authorized.
AMERICAN NATIONAL BANCORP, INC.
Date: March 14, 1997 By: /s/ A. Bruce Tucker
-------------- ------------------------------------
A. Bruce Tucker
PRESIDENT and
CHIEF EXECUTIVE OFFICER
Date: March 14, 1997 By: /s/ James M. Uveges
-------------- -----------------------------------
James M. Uveges
SENIOR VICE PRESIDENT and
CHIEF FINANCIAL OFFICER
-13-
<PAGE>
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