UNITED STATES
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 September 30, 1996.
OR
[ ] 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 0-18127
AMERICAN BANCORP OF NEVADA
(Exact name of registrant as specified in its charter)
Nevada 94-2792608
- ------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4425 Spring Mountain Road, Las Vegas, Nevada 89102
- -------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(702) 362-7222
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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 issuer's classes of
common stock, as of September 30, 1996:
Common stock, $.05 par value 3,702,674
- -----------------------------------------------------------------------------
Class Number of Shares
INDEX
PART I - FINANCIAL INFORMATION PAGE NO.
- ------------------------------ --------
Condensed Consolidated Statements of Income
Nine Months and Quarters ended September 30, 1996 and 1995
Condensed Consolidated Statements of Condition
September 30, 1996 and December 31, 1995
Condensed Consolidated Statements of Cash Flows
Nine Months ended September 30, 1996 and 1995
Notes to Condensed Consolidated Financial Statements
Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II - OTHER INFORMATION
Signatures
PART I - FINANCIAL INFORMATION
AMERICAN BANCORP OF NEVADA AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS AND QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995
(Dollars in thousands except for earnings per share)
(Unaudited)
For the Nine For the
Months Ended Quarter Ended
September 30, September 30,
-------------------- --------------------
1996 1995 1996 1995
-------- -------- -------- --------
INTEREST INCOME
Interest and Fees on Loans ...... $ 8,954 $ 8,601 $ 3,261 $ 3,042
Interest on Securities .......... 5,490 5,535 1,798 1,981
Interest on Federal Funds Sold .. 285 315 88 95
-------- -------- -------- --------
Total Interest Income ........... $ 14,729 $ 14,451 $ 5,147 $ 5,118
-------- -------- -------- --------
INTEREST EXPENSE
Interest on Deposits ............ 3,249 3,798 1,092 1,352
Interest on Securities Sold Under
Agreements to Repurchase ...... 993 712 332 306
-------- -------- -------- --------
Total Interest Expense .......... 4,242 4,510 1,424 1,658
-------- -------- -------- --------
NET INTEREST INCOME .................. 10,487 9,941 3,723 3,460
Provision for Loan Losses ....... (275) (420) (125) (150)
-------- -------- -------- --------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSS ................... 10,212 9,521 3,598 3,310
TOTAL NON-INTEREST INCOME: ........... 1,371 1,055 374 305
TOTAL NON-INTEREST EXPENSE: .......... 6,691 6,426 2,274 2,147
-------- -------- -------- --------
INCOME BEFORE TAXES .................. 4,892 4,150 1,698 1,468
PROVISION FOR INCOME TAXES ........... (1,397) (1,071) (445) (340)
-------- -------- -------- --------
NET INCOME ........................... $ 3,495 $ 3,079 $ 1,253 $ 1,128
======== ======== ======== ========
NET INCOME PER SHARE ................. $ .92 $ .82 $ .33 $ .30
======== ======== ======== ========
The accompanying notes are an integral part of these statements.
AMERICAN BANCORP OF NEVADA AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(Dollars in Thousands)
September 30, December 31,
1996 1995
- --------------------------------------------------------------------------------
(Unaudited)
ASSETS
Cash and Due From Banks ............................... $ 26,759 $ 36,376
Federal Funds Sold .................................... 0 9,500
Money Market Accounts ................................. 863 3,697
--------- ---------
Total Cash and Cash Equivalents .................. 27,622 49,573
Available-for-sale Securities ......................... 119,840 120,589
Net Loans ............................................. 118,034 93,244
Premises and Fixed Assets, Net ........................ 12,053 10,510
Other Assets .......................................... 4,218 2,775
- ------------------------------------------------------- --------- ---------
TOTAL ASSETS .......................................... $ 281,767 $ 276,691
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits .............................................. $ 210,870 $ 211,524
Securities Sold Under Agreements to Repurchase ........ 36,093 36,749
Federal Funds Purchased ............................... 4,000 0
Other Liabilities ..................................... 1,085 1,529
--------- ---------
Total Liabilities ..................................... 252,048 249,802
--------- ---------
STOCKHOLDERS' EQUITY
Common Stock .......................................... 186 162
Surplus ............................................... 28,200 20,420
Retained Earnings ..................................... 1,882 6,156
Unrealized Gain (Loss) on Available-for-sale Securities (438) 284
--------- ---------
29,830 27,022
Less Treasury Stock, at Cost .......................... (111) (133)
--------- ---------
Total Stockholders' Equity ............................ 29,719 26,889
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY ............................... $ 281,767 $ 276,691
========= =========
The accompanying notes are an integral part of these statements.
AMERICAN BANCORP OF NEVADA AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Dollars in Thousands)
(Unaudited)
Nine Months Ended
September 30,
----------------------
1996 1995
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received .................................... $ 15,184 $ 13,778
Other income ......................................... 1,035 1,007
Interest paid ........................................ (4,265) (4,482)
Cash paid to suppliers and employees ................. (6,446) (5,619)
Income taxes paid .................................... (1,717) (928)
-------- --------
Net cash provided by operating activities ............ 3,791 3,756
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of securities ..... 64,381 51,867
Purchase of securities ............................... (64,524) (57,019)
Net increase in loans made to customers .............. (26,268) (20,169)
Capital expenditures ................................. (2,079) (1,210)
-------- --------
Net cash used in investing activities ................ (28,490) (26,531)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits .................. (654) 13,546
Net increase (decrease) in securities sold under
agreements to repurchase ........................ (655) 19,840
Net increase in federal funds purchased .............. 4,000 0
Other ................................................ 57 65
-------- --------
Net cash provided by financing activities ............ 2,748 33,451
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH ............. (21,951) 10,676
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT JANUARY 1 ............... 49,573 22,216
-------- --------
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30 ............ $ 27,622 $ 32,892
======== ========
(Continued)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Nine Months Ended
September 30,
-----------------
1996 1995
- --------------------------------------------------------------------------------
RECONCILIATION OF NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Net income ................................................. $ 3,495 $ 3,079
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization of property and equipment 536 495
Amortization of security premiums and accretion
of discounts ...................................... 127 (153)
Provision for loan losses ............................. 275 420
Change in deferred loan fees .......................... 364 (22)
Loss (Gain) on sale of securities ..................... (330) 20
Increase in other assets .............................. (232) (596)
Increase (decrease) in other liabilities .............. (444) 513
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES .................. $ 3,791 $ 3,756
======= =======
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock dividend .......................... $ 24 $ 0
======= =======
Conversion of loans to other real estate owned ............. $ 839 $ 0
======= =======
Issuance of common stock split ............................. $ 0 $ 0
======= =======
The accompanying notes are an integral part of these statements.
AMERICAN BANCORP OF NEVADA AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Unaudited)
NOTE A - PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the parent holding
company, American Bancorp of Nevada, ("Company"), and its wholly owned
subsidiaries, American Bank of Commerce ("Bank"), AmBank Mortgage Company and
AmBank Financial Company.
Material intercompany balances and transactions have been eliminated.
NOTE B - BASIS OF PRESENTATION
In the opinion of management, all adjustments (consisting only of normal
recurring accruals) considered necessary for a fair presentation have been
reflected in the financial statements. The results of operations for the three
and nine months ended September 30, 1996, are not necessarily indicative of the
results to be expected for the full year.
NOTE C - INCOME PER SHARE
Net Income per common share is based upon the weighted average number of common
and common equivalent shares outstanding, 3,805,842 and 3,748,458 for September
30, 1996 and 1995 respectively.
The weighted average number of common shares, common shares outstanding and
earnings per share are adjusted to reflect a 15% stock dividend declared on
March 18, 1996, to stockholders of record as of April 2, 1996.
NOTE D - ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1996, the Company adopted FASB Statement No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of. Statement No. 121 establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held used and for long-lived assets and certain
identifiable intangibles to be disposed of. There was no material effect on the
consolidated financial statements relating to this adoption.
Effective January 1, 1996, the Company adopted FASB Statement No. 123,
Accounting for Stock-Based Compensation. Statement No. 123 establishes financial
accounting and reporting standards for stock-based employee compensation plans,
such as stock options and stock purchase plans. The statement generally suggests
but does not require stock-based compensation transactions to be accounted for
based on the fair value of the consideration received or the fair value of the
equity instruments issued, whichever is more reliably measurable. Companies that
do not elect to change their accounting for stock-based compensation are
required to disclose the effect on net income and earnings per share as if the
accounting provisions of Statement No. 123 were applied. The Company has decided
not to adopt the accounting provisions of this statement.
ITEM II
AMERICAN BANCORP OF NEVADA AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which affected the Company's financial position and operating results
during the period in the accompanying condensed consolidated financial
statements.
Nine Months ended September 30, 1996
Asset Growth
Total assets increased $5,076,000 or 1.83% during the first nine months of 1996.
The primary element of this growth was a $24,790,000 or 26.59% increase in net
loans. Premises and fixed assets increased $1,543,000 or 14.68% during the first
six months due to branch and office development activities. Additionally, other
assets increased $1,443,000 or 52.0% when compared to December 31, 1995,
primarily due to the reclassification of certain loans to other real estate
owned. These increases were offset by a decrease in available-for-sale
securities of approximately $749,000 or .62% due primarily to market value
adjustments. Cash and cash equivalents decreased approximately $21,951,000 or
44.28%. Asset growth was driven primarily by earnings for the nine month period
as well as an increase in federal funds purchased. Net loans of the Company
continue to grow as a result of the Bank's business development efforts,
successful operation, increased recognition throughout the business community
and the overall strength of the Las Vegas economy.
Interest Income
Total interest income increased $278,000 or 1.92% during the first nine months
of 1996 when compared to the same period of 1995, and increased $29,000 or .57%
for the quarter ended September 30, 1996. It is anticipated that interest income
will continue to grow through the remainder of the year based upon the overall
growth of the Company's loan portfolio. Total interest income is composed of the
following categories:
Interest and Fees on Loans: Interest and fee income increased $353,000 or 4.10%
during the first nine months of 1996 as compared to the same period of 1995 and
increased $219,000 or 7.20% for the quarter ended September 30, 1996. The
increase in year-to-date earnings is attributable to a $402,000 increase in
interest income offset by a $49,000 decrease in fee income. The increase in
interest income is due primarily to an increase in average loan volume of
approximately $12,306,000 to $100,695,000. The yield on the loan portfolio
decreased .82% to 10.29%. The interest differential resulting from the
fluctuations in volume and yield is approximately $1,026,000 and ($624,000),
respectively. The quarter-to-date increase is composed of a $202,000 increase in
interest income and a $17,000 increase in fee income. The increase in interest
income is due primarily to an increase in the average loan volume of
approximately $16,066,000 to $110,572,000. The quarterly yield on the loan
portfolio decreased .88% to 10.17%. The interest differential resulting from the
fluctuations in volume and yield is approximately $444,000 and ($242,000),
respectively.
Interest on Securities: The Bank continues to invest its excess funds in
interest bearing securities. Interest on securities decreased $45,000 during the
nine months ended September 30, 1996 compared with the same period of the prior
year. This decrease was a result of a decrease in the yield from 5.89% to 5.79%,
offset by an increase of approximately $965,000 in the average volume of
investments to $126,341,000. The tax equivalent yield decreased from 6.31% to
6.14%. Comparing the quarter ended September 30, 1996 with September 30, 1995,
interest income decreased $183,000 or 9.24%. This decrease is the result of a
decrease in the average volume of approximately $8,206,000 to $124,480,000
coupled with a decrease in the yield from 5.97% to 5.78%. The Bank's current
investment strategy is to maintain an investment portfolio with rather short
maturities. At this time, the relative flatness of the yield curve does not
warrant increased risk or extending the overall maturity of the portfolio.
Management continually monitors these factors when evaluating investment
strategies and asset liability management.
Interest on Federal Funds Sold: Interest earned on federal funds sold decreased
$30,000 or 9.52% during the first nine months of 1996 compared to the same
period of the prior year. This decrease was due primarily to a decrease of
approximately $14,000 in the average volume to $7,274,000 coupled with a decline
in the average yield from 5.76% in 1995 to 5.22% in 1996. Comparing the quarters
ended September 30, interest decreased $7,000 or 7.37%. This decrease is
attributable to a decrease in the yield of .43% to 5.26%, offset by an increase
of approximately $14,000 in average volume to $6,688,000.
Interest Expense
Total interest expense decreased $268,000 or 5.94% during the first nine months
of 1996 as compared to the first nine months of 1995. Interest on deposits
decreased $549,000 or 14.45% due to a decrease in the average balances of
interest bearing accounts by $11,841,000 to $117,019,000. The average rate paid
on interest bearing deposits decreased from 3.93% in 1995 to 3.70% in 1996.
Comparing the quarter ended September 30, 1996 with the same period of the prior
year, interest on deposits decreased $260,000 or 19.23%. This decrease is the
result of a decrease in the average volume of approximately $13,943,000 to
$118,185,000. Additionally, the average rate paid on deposits decreased from a
4.09% in 1995 to 3.70% in 1996.
Interest on securities sold under agreements to repurchase increased $281,000 or
39.47% for the nine month period ended September 30, 1996 as the average volume
increased approximately $13,865,000 to $36,199,000. This increase in volume was
offset by a decrease in the average rate from 4.25% during 1995 to 3.66% during
1996. Comparing the quarter ended September 30, 1996 with the same period of the
prior year, interest paid on securities sold under agreements to repurchase
increased $26,000 or 8.50%. This increase is the result of an increase in the
average volume of approximately $8,556,000 to $37,067,000. The average rate for
the quarter ended September 30, decreased from 4.29% in 1995 to 3.58% in 1996.
Interest Rate Risk
Management attempts to protect earnings from wide shifts in interest rates by
employing the following strategies:
Loans: Approximately 92% of the Bank's loan portfolio is written on an
adjustable basis that floats with the Bank's base rate. Thus, approximately
$109,854,000 reprices immediately upon a change in the base rate.
Investments: The majority of the investment portfolio of the Bank is of a fixed
rate nature. This enables Management to provide an underlying level of income
irrespective of changes in rates. Additionally, the average life of the
portfolio is approximately 2 years. This strategy of maintaining short
maturities provides maximum flexibility in dealing with fluctuating interest
rates.
Deposits: Management discourages use of long term Certificates of Deposit by
consistently paying at or below market rates and not offering greater than one
year maturities. However, an attempt is currently underway to recapture some of
the jumbo short-term Certificates of Deposit market. Offering rates for
Certificates of Deposit over $100,000 and less than one year maturity are
reviewed weekly for adjustments. At September 30, 1996, approximately 38% of
time deposits had a maturity of three months or less.
The above factors, taken into consideration together with the fact that the
Bank's non-interest bearing customer deposits are approximately 46.27% of total
deposits, provides management the opportunity to maintain favorable net interest
margins under most normal interest rate scenarios.
Loans
The composition of the Company's loan portfolio is as follows:
September 30 December
1996 1995
--------- ----------
Real Estate Loans:
Construction ................................ $ 20,450 $ 15,114
Residential ................................. 12,121 10,643
Commercial .................................. 45,946 34,627
--------- ---------
Total Real Estate Loans .......................... 78,517 60,384
Commercial, financial and industrial loans ....... 31,555 24,876
Commercial receivables financing ................. 3,448 2,397
Loans to individuals ............................. 6,761 7,340
Less unearned net loan fees ...................... (874) (510)
--------- ---------
Total Loans ...................................... $ 119,407 $ 94,487
========= =========
Maturities and Sensitivity of Loans to Changes in Interest Rates
The following table shows the balances of commercial, financial and industrial
loans and real estate-construction loans outstanding as of September 30, 1996 by
maturities, based on remaining scheduled repayments of principal. Also shown are
the balance of loans due after one year, classified according to sensitivity to
changes in interest rates.
MATURITY
One
One Year Through After
or Less Five Years Five Years Total
------- ---------- ---------- -------
Commercial, Financial
and Industrial ............ $21,421 $ 9,415 $ 719 $31,555
Real estate-Construction ....... 20,157 293 0 20,450
------- ------- ------- -------
Total .......................... $41,578 $ 9,708 $ 719 $52,005
======= ======= ======= =======
The maturity of certain loans may vary due to the Bank's rollover policy. The
Bank will consider extending the maturity of a loan upon receipt of current
financial information and evaluation of the loan performance, the financial
performance of the business, and overall economic conditions. Loans with
maturities so affected have been revised as appropriate in the above table.
INTEREST SENSITIVITY
The following table represents the total amount of commercial, financial and
industrial loans and real estate-construction loans due after one year which (a)
have predetermined interest rates and (b) have floating or adjustable interest
rates.
Loans Due After One Year
Fixed or Predetermined Rate ................................ $ 850
Floating or Adjustable Rate ................................ 9,577
-------
Total ...................................................... $10,427
=======
Provision for Loan Loss
The provision for loan losses during the nine months ended September 30, 1996
was $275,000 as compared to $420,000 for the same period of the prior year. The
allowance for loan losses stands at 1.15% of total loans at September 30, 1996
compared to 1.16% at September 30, 1995. Management believes the current
allowance is adequate to satisfy any unanticipated loan losses based upon the
historical performance of the loan portfolio.
Net charged off loans and leases were approximately $145,000 and $31,000 for the
nine months ended September 30, 1996 and 1995 respectively.
At September 30, 1996, two loans totaling approximately $900,000 were accounted
for on a non-accrual basis. Approximately $18,000 of interest income would have
been recorded during the three months ended September 30, 1996 had the loans
been current in accordance with the original terms. Additionally, one loan
totaling approximately $27,000 was contractually past due 90 days or more as to
principal or interest. No loans were accounted for as "troubled debt
restructurings" as defined in SFAS No. 15. Loans are placed on non-accrual
status when they go over 90 days delinquent, or when circumstances indicate that
timely collection of interest is doubtful. Loans over 90 days delinquent may be
left on accrual status if a repayment plan has been negotiated and it appears
likely that all interest will be paid. In addition, all significant impaired
loans have been evaluated in accordance with FASB Statement No. 114 as amended
by FASB Statement No. 118.
The Company had approximately $839,000 in other real estate owned ("REO") and
related development costs at September 30, 1996. This property consists of four
single family residences and was acquired through foreclosure. The units were
approximately 90-95% complete at the time of foreclosure. At September 30, 1996
the residences are complete and listed for sale on the retail market. Appraisal
values are approximately $260,000 per unit, representing a book-to-market ratio
of approximately 81%. Subsequent to September 30, 1996, one home was sold on the
open market for approximately $220,000. Due to the favorable location of the
units, and the current strong market for homes in this price range, the Company
fully expects to recover the remaining principal balance.
As of September 30, 1996, there are no other loans outstanding, which causes
management to have serious doubts as to the ability of the borrower to comply
with the loan repayment terms.
Management reviews portfolio concentration levels on a regular basis and
appraisal reviews are performed to support the values at which loans are carried
in the portfolio. Construction lending is generally focused on entry level and
first move-up homes. Lending for larger, speculative homes is tightly limited to
financially sound borrowers. Commercial real estate lending is generally limited
to owner-occupied properties.
Management reviews the loan loss analysis on a quarterly basis. A percentage of
the allowance is allocated to pass credits, substandard, doubtful, loss and
accounts receivable factoring. Management believes the current allowance of
$1,373,000 is adequate and there is sufficient unallocated allowance to handle
any unexpected problems within the portfolio.
The table below details changes in allowance for loan losses:
Nine Months Ended
September 30,
----------------------------
1996 1995
- --------------------------------------------------------------------------------
Balance, beginning ............................. $ 1,243,000 $ 727,000
Provision charged to operating expense .... 275,000 420,000
Recoveries of amounts charged off ......... 5,000 30,000
Less amounts charged off .................. (150,000) (61,000)
----------- -----------
Balance, ending ................................ $ 1,373,000 $ 1,116,000
=========== ===========
The schedule below shows the major categories of loan charge-offs and recoveries
for the nine months ended September 30, 1996 and 1995:
NET CHARGE-OFFS 1996 1995
- --------------------------------------------------------------------------------
Charge-Offs:
Real estate loans
Construction .............................. $ 0 $ 0
Residential ............................... 0 0
Commercial ................................ 0 0
Commercial, financial and industrial .......... 150,000 60,000
Commercial receivables financing .............. 0 0
Loans to individuals .......................... 0 1,000
-------- --------
Total ......................................... 150,000 61,000
-------- --------
Less Recoveries:
Real estate loans
Construction .............................. $ 0 $ 0
Residential ............................... 0 0
Commercial ................................ 0 0
Commercial, financial and industrial .......... 4,000 21,000
Commercial receivables financing .............. 0 0
Loans to individuals .......................... 1,000 9,000
-------- --------
Total ......................................... 5,000 30,000
-------- --------
Net Charge-Offs .................................... $145,000 $ 31,000
======== ========
The table below details the allocation by loan type of the allowance for loan
losses at September 30, 1996:
Amount Percentage
---------- ----------
Real estate loans
Construction ............................... $ 40,000 2.92%
Residential ................................ 10,000 .73%
Commercial ................................. 96,000 6.99%
Commercial, financial and industrial ............ 975,000 71.01%
Commercial receivables financing ................ 152,000 11.07%
Loans to individuals ............................ 100,000 7.28%
---------- -------
Total ........................................... $1,373,000 100.00%
========== =======
Non-Interest Income
Total non-interest income for the first nine months of 1996 increased $316,000,
or 29.95%, over the same period of 1995. The increase was primarily due to
recorded gains on sales of securities.
Non-Interest Expense
Total non-interest expense increased by $265,000, or 4.12%, during the first
nine months of 1996 as compared to the first nine months of 1995. This increase
is due primarily to increased salary and employee benefit expenses due to normal
salary increases and staff additions.
Liquidity
Management of the Company strives to obtain the highest possible earnings while
maintaining a sound liquidity position. The Company's primary sources of
liquidity are its investment portfolio and federal funds sold. The Company's
investment portfolio had an average balance of approximately $126,341,000 during
the nine months ended September 30, 1996 and an average life of approximately 2
years. Federal funds sold maintained an average balance of approximately
$7,274,000 during the nine months ended September 30, 1996. The Company's
liquidity position is further enhanced by its core deposits which represent
approximately 85% of total deposits at September 30, 1996. The Bank avoids the
use of highly sensitive short-term funds such as brokered deposits and believes
its deposits represent funding sources with safety in respect to both liquidity
and earnings. The Company continues to meet the cash flow requirements of
customers who are depositors desiring to withdraw funds and of borrowers
requiring assurance that sufficient funds will be available to meet their credit
needs. The measures of solid liquidity practices such as Total Deposits to Total
Assets and Loans to Deposits are monitored constantly for any adverse trends.
Historically, the Bank's loan to deposit ratio has been low when compared to
industry norms and conversely, its liquidity ratio has been high. At September
30, 1996, the net loan to deposit ratio was approximately 55.97%. The liquidity
ratio, which is comprised of cash, federal funds sold and unpledged securities
as a percent of total demand deposits stood at approximately 40.66% at September
30, 1996. Management continuously monitors outstanding loan commitments and
letters of credit for funding needs. At September 30, 1996, outstanding loan
commitments and letters of credit were approximately $54,838,000 and $2,350,000
respectively.
Net cash flow provided by operating activities remains positive for the nine
months ended September 30, 1996 primarily due to favorable interest rate yields
and continued growth in the loan portfolio. Management expects this trend to
continue. Cash flows from investing activities was negative for the nine months
ended September 30, 1996, primarily due to the funding of loans and capital
expenditures. Cash flows from financing activities was positive for the nine
months ended September 30, 1996, primarily due to an increase in federal funds
purchased, which was partially offset by a decrease in demand deposits and
securities sold under agreements to repurchase.
Capital Resources
On March 18, 1996, the Board of Directors declared a 15% stock dividend to be
issued on April 19, 1996 to shareholders of record on April 2, 1996. Stock
dividends have no effect on total capital. Stockholders' equity (exclusive of
the net unrealized gain/loss of securities available for sale) as a percentage
of total assets was approximately 10.70% at September 30, 1996 as compared to
9.62% at December 31, 1995.
As of September 30, 1996, the Company has completed construction on a two-story
17,000 square foot office complex located adjacent to its corporate headquarters
site at Spring Mountain Road and Arville. The building offers approximately
13,000 square feet of class "A" office space. As of September 30, 1996, the
Company has finalized lease agreements with tenants for approximately 5,200
square feet and negotiations to rent the remainder are ongoing. Management
anticipates having the building fully occupied by the end of the current year.
Construction of this facility was funded by cash flow from operations and had no
significant impact on capital.
The Bank's newest branch located in the industrial area of North Las Vegas was
officially open as of August 7, 1996 and is now serving customers located within
that area. The Bank now has a total of five branches throughout the Las Vegas
area. Construction of the branch was funded by cash flow from operations and had
no significant impact on capital.
At September 30, 1996, the Bank's Tier 1 Core Capital to risk weighted assets
was 17.07%, Total Capital to risk weighted assets was 17.89% and the leverage
ratio was 10.18%, all above the current minimum guidelines of 4.0%, 8.0% and
4.0%, respectively, as established and defined by regulatory authorities. The
Company's capital ratios are parallel to the Bank's.
In addition, the Federal Deposit Insurance Corporation Improvement Act of 1991
(FDICIA) defined five levels of capital for financial institutions:
Well-capitalized, Adequately capitalized, Undercapitalized, Significantly
undercapitalized and Critically undercapitalized. A bank falls into one of these
levels based on its risk-based ratio and leverage ratio. At September 30, 1996,
the Bank falls in the Well-capitalized category.
PART II - OTHER INFORMATION
SIGNATURES
Pursuant to the requirement of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN BANCORP OF NEVADA
DATED: November 7, 1996 /S/ James V. Bradham
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James V. Bradham
President and Chief Executive Officer
DATED: November 7, 1996 /S/ Patricia L. Kirkwood
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Patricia L. Kirkwood
Executive Vice President/Cashier