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 April 30, 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--3,613,011 shares as of May
31, 1997.
<PAGE>
AMERICAN NATIONAL BANCORP, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition 1
at April 30, 1997 (unaudited) and July 31, 1996
Consolidated Statements of Operations (unaudited) 2
for the Three Months ended April 30, 1997 and 1996
and for the Nine months ended April 30, 1997 and 1996
Consolidated Statements of Cash Flows (unaudited) 3
for the Nine Months ended April 30, 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 April 30, 1997 July 31, 1996
- ------------------------------------- -------------- -------------
(In thousands)
<S> <C> <C>
Cash:
On hand and due from banks $ 3,841 $ 2,671
Interest-bearing deposits 517 1,837
Federal funds sold 903 394
Securities available for sale 30,781 40,266
Investment securities 30,320 24,109
Mortgage-backed securities 102,630 100,195
Loans receivable, net 322,805 278,042
Federal Home Loan Bank stock, at cost 4,370 3,141
Investments in real estate, net 5,035 5,670
Investments in and advances to real
estate joint ventures 397 1,270
Property and equipment, net 1,416 1,198
Prepaid expenses and other assets 511 612
Deferred income taxes 1,792 1,866
-------------- --------------
$ 505,318 $ 461,271
============== ==============
Liabilities and Stockholders' Equity
- --------------------------------------
Liabilities:
Deposits $ 329,516 $ 313,083
Borrowed funds 40,623 34,445
Advances from the Federal Home Loan
Bank of Atlanta 81,323 62,824
Drafts payable 1,424 859
Advance payments by borrowers for taxes
and insurance 5,699 1,760
Income taxes payable 275 -
Accrued expenses and other liabilities 1,143 1,030
-------------- --------------
Total Liabilities 460,003 414,001
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 3,613,011 shares outstanding
at April 30, 1997 40 40
Additional paid-in capital 30,636 30,705
Unearned common stock acquired by
management recognition and retention
plans (896) (77)
Unearned employee stock ownership plan
(ESOP) shares (1,489) (1,629)
Treasury stock at cost, 367,489 shares
and 199,025 shares at April 30, 1997
and July 31, 1996 respectively (4,145) (2,040)
Retained income - substantially restricted 22,587 21,970
Net unrealized holding loss on securities,
net of income taxes (1,418) (1,699)
------------- -------------
Total Stockholders' Equity 45,315 47,270
------------- -------------
$ 505,318 $ 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>
Nine months ended April 30,
1997 1996
----------- ----------
(In thousands, except per share data)
<S> <C> <C>
Interest income:
Loans receivable $ 19,144 $ 15,962
Mortgage-backed securities 6,288 7,436
Investment securities 1,817 764
Other 574 585
--------- ---------
Total interest income 27,823 24,747
Interest expense:
Deposits 11,562 11,930
Borrowed funds 4,926 3,478
--------- ---------
Total interest expense 16,488 15,408
--------- ---------
Net interest income 11,335 9,339
Provision for loan losses 460 562
--------- ---------
Net interest income after
provision for loan losses 10,875 8,777
Noninterest income:
Fees and service charges 566 449
Gain (loss) on sales of:
Loans receivable, net 24 16
Mortgage-backed securities, net (5) 30
Investment securities, net (53) (14)
Other 112 134
--------- ---------
Total noninterest income 644 615
Noninterest expenses:
Salaries and employee benefits 3,503 3,228
Net occupancy 986 1,021
Professional services 326 286
Advertising 610 517
Federal deposit insurance premiums 2,405 586
Furniture, fixtures and equipment 345 226
Loss on investment in real estate 113 300
Equity in net loss of real estate
joint ventures 363 112
Other 1,263 1,215
---------- ---------
Total noninterest expenses 9,914 7,491
---------- ---------
Income before income taxes 1,605 1,901
Income tax provision 539 614
---------- ----------
Net income $ 1,066 $ 1,287
========== ==========
Earnings per common share $ 0.30 N/A
========== ==========
Proforma earnings per common share N/A $ 0.40
========== ==========
<CAPTION>
Three months ended April 30,
1997 1996
----------- ----------
(In thousands, except per share data)
<S> <C> <C>
Interest income:
Loans receivable $ 6,582 $ 5,508
Mortgage-backed securities 2,095 2,395
Investment securities 605 213
Other 200 208
--------- ---------
Total interest income 9,482 8,324
Interest expense:
Deposits 3,867 3,841
Borrowed funds 1,660 1,059
--------- ---------
Total interest expense 5,527 4,900
--------- ---------
Net interest income 3,955 3,424
Provision for loan losses 40 62
--------- ---------
Net interest income after
provision for loan losses 3,915 3,362
Noninterest income:
Fees and service charges 177 157
Gain (loss) on sales of:
Loans receivable, net 2 2
Mortgage-backed securities, net 59 13
Investment securities, net (53) (18)
Other 25 56
--------- ---------
Total noninterest income 210 210
Noninterest expenses:
Salaries and employee benefits 1,176 1,077
Net occupancy 340 347
Professional services 119 103
Advertising 196 166
Federal deposit insurance premiums 24 182
Furniture, fixtures and equipment 119 79
Loss on investment in real estate 27 188
Equity in net loss of real estate
joint ventures 226 -
Other 422 410
---------- ---------
Total noninterest expenses 2,649 2,552
---------- ---------
Income before income taxes 1,476 1,020
Income tax provision 495 347
---------- ----------
Net income $ 981 $ 673
========== ==========
Earnings per common share $ 0.28 $ 0.18
========== ==========
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>
Nine months ended April 30,
1997 1996
------------- -----------
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,066 $ 1,287
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 405 397
Noncash compensation under stock-
based benefit plans 388 114
Amortization of loan fees (315) (303)
Amortization of premiums and
discounts, net 276 (154)
Provision for losses on loans
and investments in real estate 460 720
Loss (gain) on sales of assets, net 34 (32)
Loans originated for sale (4,540) (3,258)
Sales of loans originated for sale 3,163 2,801
Deferred income taxes (111) 506
Decrease (increase) in prepaid
expenses and other assets 101 (23)
Increase (decrease) in accrued expenses
and other liabilities 113 (198)
Decrease (increase) in income taxes
payable 275 (270)
Other, net (661) 48
---------- ----------
Net cash provided by operating activities 654 1,635
---------- ----------
Cash flows from investing activities:
Sales of investment securities
available for sale 2,947 969
Purchases of investment securities
available for sale - (2,000)
Repayments of mortgage-backed securities
available for sale 2,860 2,502
Sales of mortgage-backed securities
available for sale 6,857 41,041
Purchases of mortgage-backed securities
available for sale (3,164) (10,988)
Maturities of investment securities 3,000 11,000
Purchases of investment securities (9,040) (13,265)
Repayments of mortgage-backed securities 3,462 6,750
Purchases of mortgage-backed securities (5,984) (19,198)
Loan principal repayments 34,792 31,824
Loan originations (58,231) (58,849)
Loan purchases (20,751) (11,363)
Increase in deferred loan fees, net 455 442
Decrease in investments in real estate 1,134 2,722
Decrease in investments in and advances
to real estate joint ventures 1,236 865
Purchases of property and equipment (623) (452)
Federal Home Loan Bank stock purchases, net (1,229) -
----------- -----------
Net cash used in investing activities (42,279) (18,000)
----------- -----------
(continued)
-3-
<PAGE>
AMERICAN NATIONAL BANCORP, INC. and SUBSIDIARY
Consolidated Statements of Cash Flows (Unaudited)
<CAPTION>
Nine months ended April 30,
1997 1996
----------- -----------
(In thousands)
<S> <C> <C>
Cash flows from financing activities:
Net increase in deposits $ 16,433 $ 1,889
Net increase (decrease) in borrowed funds 6,178 (1,617)
Proceeds from Federal Home Loan Bank
advances 120,276 171,597
Repayment of Federal Home Loan Bank
advances (101,777) (172,751)
Increase in drafts payable 565 311
Increase in advance payments by borrowers
for taxes and insurance 3,939 3,562
Proceeds from issuance of common stock,
net of expenses - 21,040
Proceeds from exercise of stock options 106 -
Common stock acquired by ESOP - (1,746)
Cash dividends paid (324) (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 41,984 22,193
----------- ----------
Net increase in cash and cash equivalents 359 5,828
Cash and cash equivalents at beginning of
period 4,902 5,360
----------- -----------
Cash and cash equivalents at end of period $ 5,261 $ 11,188
=========== ===========
Supplemental information:
Interest paid on deposits and borrowed
funds $ 16,450 $ 15,151
Income taxes paid, net 346 297
========== ============
Noncash activities: Loans transferred to
real estate acquired through foreclosure $ 499 $ 2,363
========== ===========
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
-4-
<PAGE>
AMERICAN NATIONAL BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (Unaudited)
April 30, 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 nine months ended April 30, 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
nine months ended April 30, 1997 by the weighted average number of shares of
common stock and common stock equivalents outstanding for the three months
ended (3,571,856 shares) and for the nine months ended (3,574,933 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 Federal Deposit Insurance Corporation (FDIC) special
assessment, earnings per share for the nine months ended April 30, 1997 would
have been income of $.68 per share. See Management's Discussion and Analysis
- - Noninterest Expense.
Earnings per share information for the three months ended April 30, 1996
was computed by dividing the net income for the three months ended April 30,
1996 by the weighted average number of shares of common stock outstanding
during the period of 3,810,294 shares.
-5-
<PAGE>
The pro forma net income per share for the nine months ended April 30,
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 April 17, 1997, the Company declared a quarterly cash dividend of
$0.03 per share payable on May 16, 1997 to stockholders of record as of April
30, 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 requires, 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 and there was no significant
impact on operations as a result of the adoption of this Statement.
-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 nine months ended April 30, 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 $44.0 million, or 9.5%, to $505.3 million at
April 30, 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 $44.8 million, or 16.1% to $322.8 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 April 30, 1997, from $100.2 million at
July 31, 1996. Investment securities increased by $6.2 million, or 25.8%, to
$30.3 million, at April 30, 1997, from $24.1 million at July 31, 1996.
Securities available for sale decreased $9.5 million, or 23.6%, to $30.8
million at April 30, 1997 from $40.3 million at July 31, 1996 due to the sale
of securities.
Deposits increased by $16.4 million, or 5.2%. Borrowed funds increased
by $6.2 million, or 17.9%. Advances from the Federal Home Loan Bank of
Atlanta increased $18.5 million, or 29.4%. The increases are due to the
funding of loan originations and loan and security purchases.
Total stockholders' equity decreased by $2.0 million to $45.3 million at
April 30, 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 $324,000 for the nine months ended April
30, 1997, partially offset by a decrease in the net unrealized holding loss on
securities of $281,000 and net income for the nine months of $1.1 million.
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 $9.5 million and $27.8 million
for the three and nine months ended April 30, 1997, compared to $8.3 million
and $24.7 million for the three and nine months ended April 30, 1996,
respectively. The $1.2 million increase for the three months ended April 30,
1997 compared to the three months ended April 30, 1996 primarily resulted from
a $46.6 million, or 10.5%, increase in average interest earning assets to
$489.8 million for the three months ended April 30, 1997 and an increase in
the yield on average interest earning assets to 7.7% for the three months
ended April 30, 1997, from 7.5% for the three months ended April 30, 1996.
The increase in average interest earning assets resulted from a $55.9 million,
or 21.7%, increase in average loans to $314.2 million from $258.3 million; and
a $19.2 million, or 137.1% increase in average investment securities to $33.2
million from $14.0 million, offset by a $28.3 million, or 17.8%, decrease in
average 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 and mortgage-backed securities partially offset by
decreases in the weighted average yield on mortgage loans and other interest-
earning assets.
The $3.1 million increase for the nine months ended April 30, 1997 was
due to a $46.5 million, or 10.7%, increase in average interest earning assets
to $478.8 million for the nine months ended April 30, 1997 and an increase of
eleven (11) basis points in the yield on average interest earning assets to
7.7%. Average loans increased $55.1 million and average investment securities
increased $17.5 million. These increases were offset by a decrease in average
mortgage-backed securities of $26.3 million.
Interest Expense. Interest expense totalled $5.5 million and $16.5
million for the three and nine months ended April 30, 1997, compared to $4.9
million and $15.4 million for the three and nine months ended April 30, 1996.
The $627,000 increase for the three months ended April 30, 1997 was due to a
$43.1 million increase in average interest-bearing liabilities and an increase
of 9 basis points in the average cost of funds. The $1.1 million increase for
the nine months ended April 30, 1997 compared to the nine months ended April
30, 1996 was due to a $42.8 million increase in average interest-bearing
liabilities, offset by a decrease of 18 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 $4.0 million and $11.3
million for the three and nine months ended April 30, 1997 compared to $3.4
million and $9.3 million for the three and nine months ended April 30, 1996.
The increase in net interest income for the three and nine months was
primarily due to the results of operations discussed above, which resulted in
an increase in the Company's interest rate spread to 2.78% from 2.64% for the
three months and 2.70% from 2.40% for the nine 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 $3.8 million, or 1.2%, of net
loans receivable, at April 30, 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 $2.9 million, or .6% of
total assets at April 30, 1997. The provision for loan losses decreased by
$102,000 to $460,000 for the nine months ended April 30, 1997 from $562,000
for the nine months ended April 30, 1996. This decrease reflects the results
of management's evaluations mentioned above.
-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
April 30, 1997 July 31, 1996
-------------- -------------
(Dollars in Thousands)
<S> <C> <C>
Nonperforming loans:
One to four-family residential
real estate $ 806 $ 690
Multifamily residential real
estate 1,487 1,580
Commercial real estate 75 1,374
Construction loans 215 -
Consumer loans 218 265
-------- --------
Total nonperforming loans 2,801 3,909
Total real estate owned <F1> 141 766
-------- --------
Total nonperforming assets 2,942 4,675
Restructured loans <F2> 780 1,636
-------- --------
Total nonperforming assets and
restructured loans $ 3,722 $ 6,311
======== =======
Impaired loan balance with a
valuation allowance of $498,000
and $1.4 million at April 30, 1997
and July 31, 1996, respectively $ 1,500 $ 2,953
======== =======
Total nonperforming loans to total loans
receivable .82% 1.31%
Total nonperforming loans to total assets .55% .85%
Total nonperforming loans and real estate
owned to total assets .58% 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 $210,000 and $644,000 for the
three and nine months ended April 30, 1997, compared to $210,000 and $615,000
for the three and nine months ended April 30, 1996. The $29,000 increase for
nine months ended April 30, 1997 is due to increases in deposit fees collected
partially offset by the loss on the sale of mortgage-backed and investment
securities for the nine months ended April 30, 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 $2.6 million and $9.9 million for the three and nine months
ended April 30, 1997, compared to $2.6 million and $7.5 million for the three
and nine months ended April 30, 1996. The increases in non-interest expense
for the three months ended April 30, 1997 were 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, and were partially offset by a $158,000 decrease in the Federal
deposit insurance premium.
-9-
<PAGE>
The $2.4 million increase for the nine months ended April 30, 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 provided 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 $981,000 or $.28 per share for the three
months ended April 30, 1997, compared to $673,000 or $.18 per share for the
three months ended April 30, 1996. The $308,000 increase in net income was
primarily due to an increase in net interest income of $531,000 and a decrease
in the provision for loan loss of $22,000, partially offset by increases in
noninterest expense of $97,000 and income tax expense of $148,000. Net income
was $1.1 million for the nine months ended April 30, 1997 compared to $1.3
million for the nine months ended April 30, 1996. The $221,000 decrease in
net income was primarily due to an increase in noninterest expense of $2.4
million from the FDIC special assessment, partially offset by an increase in
net interest income of $2.0 million, a decrease in the provision for loan loss
of $102,000, an increase in noninterest income of $29,000, and a decrease in
the income tax provision of $75,000. Without the one-time FDIC special
assessment, net income for the nine months ended April 30, 1997 would have
been $2.4 million, or $.68 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 3.51%
during the month of April 1997 due to securities pledged against short term
borrowings. The securities were released on May 30, 1997 and the Bank is
currently in compliance with the liquidity ratio. 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 April 30, 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.
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 8.26%, 8.26%, and 17.37%, respectively, at April 30,
1997. Also, the Bank is in the "well capitalized" category at April 30, 1997
under the regulatory framework for prompt corrective action.
-10-
<PAGE>
Impact of New Accounting Standards
- ----------------------------------
Stock-Based Compensation. In November 1995, the FASB issued Statement of
Financial Accounting Standards No. 123 Accounting for Awards of Stock-Based
Compensation to Employees (Statement 123). Statement 123 is effective for
years beginning after December 15, 1995. The Statement defines a fair value-
based method of accounting for an employee stock option or similar equity
instrument and encourages all entities to adopt that method of accounting for
an employee stock option or similar equity instrument, and for all of their
employee stock compensation plans. However, it also allows an entity to
continue to measure compensation cost for those plans using the intrinsic
value-based method of accounting prescribed by APB Opinion No. 25, Accounting
for Stock Issued to Employees (Opinion 25). Under the fair value-based
method, compensation cost is measured at the grant date based on the value of
the award and is recognized over the service period, which is usually the
vesting period. Under the intrinsic value-based method, compensation cost is
the excess, if any, of the quoted market price of the stock at the grant date
or other measurement date over the amount an employee must pay to acquire the
stock. Most fixed stock option plans, the most common type of stock
compensation plan, have no intrinsic value at grant date, and under Opinion 25
no compensation cost is recognized for them. Compensation cost is recognized
for other types of stock based compensation plans under Opinion 25, including
plans with variable, usually performance-based features. Statement 123
requires that an employer's financial statements include certain disclosures
about stock-based employee compensation arrangements regardless of the method
used to account for them. Management adopted the provisions of Statement 123
as of August 1, 1996 using the intrinsic value-based method and believes that
the adoption will not have a material impact on the Company's financial
statements. The Company will provide disclosure about its stock based
employee compensation plans in its 1997 financial statements, as required by
Statement 123.
In February 1997, the Financial Accounting Standards Board ("FASB")
issued statement of Financial Accounting Standards 128, Earnings Per Share
(Statement 128). Statement 128 is effective for fiscal years ending after
December 15, 1997. This Statement simplifies the standards for computing
earnings per share previously found in APB Opinion No. 15, Earnings per Share,
and makes them comparable to international EPS standards. It replaces the
presentation of primary EPS with a presentation of basic EPS. It also
requires dual presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS computation
to the numerator and denominator of the diluted EPS computation. Management
has not determined when it will adopt the provision of Statement 128 but
believes that the adoption of Statement 128 will not have a material impact on
the Company's financial statements.
-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 April 30, 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: June 12, 1997 By: /s/ A. Bruce Tucker
-------------- ------------------------------------
A. Bruce Tucker
PRESIDENT and
CHIEF EXECUTIVE OFFICER
Date: June 12, 1997 By: /s/ James M. Uveges
-------------- -----------------------------------
James M. Uveges
SENIOR VICE PRESIDENT and
CHIEF FINANCIAL OFFICER
-13-
<PAGE>
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