[Picture of Flag]
the ambanc corp.
ANNUAL
REPORT
1994
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TABLE OF CONTENTS
1 Financial Highlights
2-3 Letter to the Shareholders
4 AMBANC Directors
5 The AMBANC Mission
6 Report of Independent Auditors
7 Consolidated Balance Sheets
8 Consolidated Statements of
Income
9 Consolidated Statements of
Changes in Shareholders'
Equity
10 Consolidated Statements of
Cash flows
11-26 Notes
27 Management's Report
28-47 Management's Discussion and
Analysis
48 AMBANC Service Area
49 Five-Year Summary
50 Financial Trends
51-52 Corporate Organization and
Banking Throughout 1994
Locations
53 Investor Information
ON THE COVER
AMBANC continued to
remain a solid, growing,
bank holding company
dedicated to its
stockholders, customers
and community.
Our philosophy of business
and community involvement
is synonymous with all
for which the American
flag represents.
3
FINANCIAL HIGHLIGHTS
1994 1993
(Dollar amounts in thousands, except per share data)
INCOME STATEMENT DATA
Total interest income $35,023 $34,037
Total interest expense 15,600 15,720
Net interest income after
provision for loan losses 19,323 17,847
Total noninterest income 2,391 2,587
Total noninterest expense 14,018 13,326
Net income after income taxes and
cumulative effective of an accounting
change 5,443 5,419
BALANCE SHEET DATA 1994 1993
Total assets $516,096 $512,692
Total liabilities 467,059 463,732
Total shareholders' equity 49,037 48,960
Total liabilities and shareholders'
equity 516,096 512,692
EARNINGS PER SHARE 1994 1993 [picture of flag]
Income per share before cumulative ANNUAL MEETING
effect of an accounting change $2.30 $2.18 Friday
April 21, 1995
Cumulative effect of accounting change --- .11 10:30 a.m.
Isaac K. Beckes
Net income per share 2.30 2.29 Student Union
Vincennes University
Vincennes, Indiana
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LETTER TO THE
SHAREHOLDERS
To our shareholders:
1994 saw AMBANC Corp. continue on the path of excellence. We
remained focused on profitability and controlled growth, as
evidenced by our annual financial statements. Earnings from
operations were $5,443,000, or $2.30 per share for the year ended
December 31, 1994, compared to $5,167,000, or $2.18 per share for
the same period in 1993. The first quarter of 1993 did include
the cumulative effect of an accounting change and net income for
1993 was $5,419,000, or $2.29 per share, compared to $5,443,000,
or $2.30 per share in 1994.
Total assets at December 31, 1994, were $516,096,000 and total
shareholders' equity was $49,037,000 with FAX 115. Shareholders'
equity without FAX 115 increased $3,735,000, or 7.75% to
$51,952,000 at December 31, 1994, from $48,217,000 at December 31,
1993.
We are strong believers in our growth strategy of merging with
other community banks that fit the AMBANC mold. Not every bank is
an ideal fit, so we are careful to ensure each is best for all
parties and, most importantly, for you, the shareholders. We use
the term "merger" rather than "acquisition" because we realize the
importance of our subsidiary banks. We provide an environment in
which our subsidiary banks can remain autonomous but still give us
their insight and input. 1994 was no exception to this
philosophy. We were pleased to announce the pending purchase and
transfer of deposits from Mid-West Federal in Princeton, Indiana
to American National Bank. The acquisition of deposits will
enable us to increase our presence in the Gibson County market.
An additional highlight to the year was the announcement of the
pending merger of First National Bank in Robinson, IL, a
subsidiary of First Robinson Bancorp., into the AMBANC Corp. David
Musgrave, president of the bank, and his staff will be an ideal
match with the AMBANC tradition of bringing our customers the
finest in community banking products and services.
On the operational side, we have taken strides this past year to
take advantage of some economies of scale that have come to us as
a result of our merger activity. One such stride was to
centralize our marketing efforts to ensure uniformity, continuity
and, most of all, efficiency. Other such measures include the
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consolidation of statement processing, human resource and audit
functions within AMBANC Corp. These measures will enable us to
streamline our operations, ensuring higher efficiency and
profitability.
While we hold strongly to the principles of a traditional bank, we
realize the importance of monitoring the banking environment and
keeping an eye on the future. To that end, we feel it is
important to establish a modern look to our company as we approach
the 21st century. A prime example of this effort can be seen in
our 1994 annual report. We have incorporated a fresher look to
the report along with our new corporate logo, which was developed
to enhance recognition of the AMBANC Corp. name. As we continue
to grow, it is crucial that our subsidiaries, while maintaining
their respective banking names and strong presence in their
individual communities, also are recognized as members of AMBANC
Corp.
We have taken steps this year to revise our Dividend Reinvestment
Program to make it more attractive to all shareholders of the
company. Participants in the plan will be able to reinvest their
dividends quarterly on the open market at the current price, thus
simplifying the process and increasing liquidity in the stock. We
are extremely pleased with the revised plan and hope it generates
more participation. If you have any questions or would like more
information on the plan, please contact our shareholder relations
department at AMBANC.
Our task at AMBANC is to run the company to the best of our
ability in order to give you, the shareholders, the greatest
possible return on your investment. While we have made tremendous
strides over the past year, we will continually strive to ready
the company to meet new challenges in the upcoming year and even
into the next century. We know with your continued loyalty and
support, we will be able to meet those challenges and continue to
position ourselves as a leader in the banking industry, providing
the finest in community banking products and services.
Sincerely,
/s/ Robert G. Watson
Robert G. Watson /
Chairman of the Board,
President and Chief Executive Officer
[picture
of flag]
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AMBANC DIRECTORS
[Picture of Directors]
DIRECTORS
Standing (left to right):
Owen M. Landrith Chairman of the Board,
Farmers'
State Bank
Sherman L. Anderson Chairman of the Board,
President and C.E.O.,
Citizens' National Bank
Rolland L. Helmling President, Harold's
Supermarkets, Inc.
Glen G. Apple Farmer
John A. Stachura, Jr. Superintendent, Solar Sources
Underground
Robert G. Watson Chairman of the Board,
President and C.E.O., AMBANC
Corp. and American National
Bank
Richard H. Schaffer Retired
Paul E. Brocksmith, D.V.M. Retired
Seated (left to right):
[picture of Phillip M. Summers, Ph.D. President, Vincennes
University
Robert E. Seed] Howard R. Wright Retired
Gerry M. Hippensteel, M.D. Physician
Robert D. Green President, R D Services, Inc.
Bernard G. Niehaus President, Niehaus Lumber Co.,
Inc.
ROBERT E. SEED
Chairman of the Board,
President and C.E.O.,
Bank of Casey
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THE AMBANC MISSION
Our business purpose is to optimize
the long-range return on shareholders' equity
by enhancing our stock price.
To accomplish this, it is necessary
to acquire and maintain strong,
profitable banking institutions that
focus upon and serve the financial needs
of our customers as well as provide
socially responsive community leadership
in our market areas.
Whenever possible, our affiliate banks
will operate as autonomous units
within their respective market areas.
[Picture of Flag]
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[CROWE CHIZEK LOGO]
Board of Directors and
Shareholders
AMBANC Corp.
Vincennes, Indiana
REPORT OF INDEPENDENT AUDITORS (in thousands)
We have audited the accompanying consolidated balance sheets of
AMBANC Corp. as of December 31, 1994 and 1993, and the related
consolidated statements of income, changes in shareholders'
equity, and cash flows for the years ended December 31, 1994,
1993 and 1992. These financial statements are the responsibility
of the Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our
audits.
The consolidated balance sheet as of December 31, 1993, and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for the years ended December 31, 1993 and 1992 have been restated to
reflect the pooling of interests in 1994 and 1993, as described in Notes 1 and
2. Separate financial statements for the other companies included in the 1993
and 1992 restated financial statements were audited and reported on by other
auditors, which statements reflect total assets of $93,092 and total
liabilities of $84,302 at December 31, 1993, and net income of $862 and $1,491
for the years ended December 31, 1993 and 1992, respectively.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of AMBANC Corp. as of December 31,
1994 and 1993, and the results of its operations and its cash flows for the
years ended December 31, 1994, 1993 and 1992, in conformity with generally
accepted accounting principles.
As disclosed in Notes 1 and 11 to the consolidated financial statements, in
1993 the Corporation changed its method of accounting for income taxes,
postretirement benefits and certain securities.
/s/ CROWE, CHIZEK AND COMPANY
Crowe, Chizek and Company
Indianapolis, Indiana
January 27, 1995
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[Picture of Flag]
1994
AMBANC CORP.
FINANCIALS
10
AMBANC CORP.
Consolidated Balance Sheets
December 31, 1994 and 1993
(Dollar amounts in thousands, except share and per share data)
1994 1993
ASSETS
Cash and due from banks (Note 14).................... $ 19,595 $ 17,164
Federal funds sold................................... 7,000 15,346
Total cash and cash equivalents (Note 1)........... 26,595 32,510
Interest bearing deposits in other banks............. 1,193 890
Securities available for sale at market (Note 3)..... 112,214 137,440
Securities held to maturity (Note 3)
(market values of $38,707 and $40,734
in 1994 and 1993).................................. 39,695 38,857
Loans held for sale.................................. 2,664 16,919
Loans, net of unearned income (Note 4)............... 321,096 277,088
Allowance for loan losses (Note 5)................... (3,911) (3,685)
Loans, net......................................... 317,185 273,403
Premises, furniture and equipment, net (Note 6)...... 6,487 6,204
Accrued interest receivable and other assets......... 10,063 6,469
Total assets................................... $ 516,096 $ 512,692
LIABILITIES
Noninterest bearing deposits......................... $ 51,838 $ 50,455
Interest bearing deposits (Note 7)................... 403,396 402,167
Total deposits..................................... 455,234 452,622
Short-term borrowings (Note 8)....................... 5,690 6,979
Long-term debt (Notes 9 and 10)...................... 3,189 1,000
Accrued interest payable and
other liabilities (Note 11)........................ 2,946 3,131
Total liabilities.............................. 467,059 463,732
Commitments and contingent liabilities(Note 14)
SHAREHOLDERS' EQUITY
Preferred stock, $10 par value, 200,000 shares
authorized, no shares issued or outstanding........ -- --
Common stock, $10 par value, 5,000,000
shares authorized, 2,372,172 and 2,369,784 shares
issued and outstanding at December 31, 1994 and
1993 (Note 15)..................................... 23,722 23,698
Retained earnings (Note 16).......................... 28,277 24,550
Unrealized gain/(loss) on securities available for
sale, net of tax of ($1,784) and $420.............. (2,962) 712
Total shareholders' equity..................... 49,037 48,960
Total liabilities and shareholders' equity..... $ 516,096 $ 512,692
See accompanying notes to consolidated financial statements.
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AMBANC CORP.
Consolidated Statements of Income
For the years ended December 31, 1994, 1993 and 1992
(Dollar amounts in thousands, except per share data)
1994 1993 1992
INTEREST INCOME
Interest and fees on loans...................$ 24,881 $ 22,248 $ 24,181
Interest and fees on loans held for sale..... 536 1,280 1,017
Interest on securities
Taxable.................................... 7,030 7,685 9,225
Tax exempt................................. 2,279 2,369 2,038
Other interest............................... 297 455 684
Total interest income...................... 35,023 34,037 37,145
INTEREST EXPENSE
Interest on deposits......................... 15,140 15,513 18,218
Interest on short-term borrowings............ 283 175 245
Interest on long-term debt................... 177 32 3
Total interest expense..................... 15,600 15,720 18,466
Net interest income...................... 19,423 18,317 18,679
Provision for loan losses (Note 5)........... 100 470 1,375
Net interest income after
provision for loan losses.............. 19,323 17,847 17,304
NONINTEREST INCOME
Income from fiduciary activities.............. 387 419 383
Service charges on deposit accounts........... 1,116 1,174 1,149
Net realized gain/(loss) on securities........ (6) 13 72
Other operating income........................ 894 981 548
Total noninterest income.................... 2,391 2,587 2,152
NONINTEREST EXPENSE
Salaries and employee benefits
(Notes 10, 11 and 12). 7,168 6,920 6,536
Occupancy expenses, net....................... 854 779 757
Equipment expenses............................ 847 853 767
Data processing expenses...................... 442 583 682
FDIC insurance................................ 1,008 987 961
Other operating expenses...................... 3,699 3,204 2,908
Total noninterest expense................... 14,018 13,326 12,611
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE.. 7,696 7,108 6,845
Income taxes (Note 13)........................ 2,253 1,941 1,909
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE..................... 5,443 5,167 4,936
Cumulative effect on prior years of changing to a
different method of accounting for
income taxes (Note 1)....................... -- 252 --
NET INCOME.......................... . $ 5,443 $ 5,419 $ 4,936
EARNINGS PER SHARE (Note 15)
Income per share before cumulative
effect of accounting change................. $ 2.30 $ 2.18 $ 2.08
Cumulative effect of accounting change...... -- .11 --
Net income per share........................ $ 2.30 $ 2.29 $ 2.08
See accompanying notes to consolidated financial statements.
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AMBANC CORP.
Consolidated Statements of Changes in Shareholders' Equity
For the years ended December 31, 1994, 1993 and 1992
(Dollar amounts in thousands, except per share data)
Unrealized
Gain/(Loss)
Common Retained on Total
Stock Earnings Securities Equity
BALANCE, JANUARY 1, 1992 as
previously reported............. $ 9,137 $ 24,575 $ 33,712
Adjusted for pooling of
interest (Note 2)............... 2,712 4,425 $ (17) 7,120
BALANCE, JANUARY 1, 1992 as
restated........................ 11,849 29,000 (17) 40,832
Net Income for 1992............... 4,936 4,936
Cash dividends ($.60 per common
share) (Note 15)................ (1,424) (1,424)
Stock split....................... 11,849 (11,849) --
Net change in unrealized loss on
marketable liquidity mutual
funds........................... (11) (11)
BALANCE, DECEMBER 31, 1992........ 23,698 20,663 (28) 44,333
Net income for 1993............... 5,419 5,419
Cash dividends ($.65 per common
share) (Note 15)................ (1,532) (1,532)
Net change in unrealized gain on
securities available
for sale........................ 740 740
BALANCE, DECEMBER 31, 1993........ 23,698 24,550 712 48,960
Net income for 1994............... 5,443 5,443
Cash dividends ($.75 per common
share) (Note 15)................ (1,766) (1,766)
Net change in unrealized loss
on securities available
for sale........................ (3,674) (3,674)
Issuance of stock for dividend
reinvestment and stock
purchase plan (Note 15)......... 24 50 74
BALANCE, DECEMBER 31, 1994........ $ 23,722 $ 28,277 $ (2,962) $ 49,037
See accompanying notes to consolidated financial statements.
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AMBANC CORP.
Consolidated Statements of Cash Flows
For the years ended December 31, 1994, 1993 and 1992
(Dollar amounts in thousands)
1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES
Net income......................................... $ 5,443 $ 5,419 $ 4,936
Adjustments to reconcile net income to net
cash from operating activities:
Net premium amortization and discount
accretion on securities...................... 371 352 510
Depreciation................................... 927 1,021 923
Provision for loan losses...................... 100 470 1,375
(Gain)/Loss on securities...................... 6 (13) (72)
Net change in loans held for sale.............. 14,255 (5,366) 645
Accrued interest receivable
and other assets............................. (3,594) (71) 1,338
Accrued interest payable
and other liabilities........................ 2,019 (538) (758)
Deferred loan fees net of costs................ (33) (119) (43)
Net cash from operating activities........... 19,494 1,155 8,854
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities
available for sale............................... 9,451 -- --
Proceeds from sales of securities held to maturity. -- -- 3,128
Proceeds from maturities and calls of securities
available for sale............................... 37,328 -- --
Proceeds from maturities and calls of securities
held to maturity................................. 3,232 60,760 67,025
Purchases of securities available for sale......... (27,858) -- --
Purchases of securities held to maturity........... (4,020) (71,247) (75,756)
Net change in interest bearing deposits
in other banks................................... (303) (8) 1,408
Loans made to customers, net of payments collected. (49,507) (18,452) 1,131
Loans purchased.................................... (1,187) (1,150) (1,856)
Proceeds from sales of loans....................... 6,845 5,633 2,100
Property and equipment expenditures................ (1,210) (810) (1,038)
Net cash from investing activities........... (27,229) (25,274) (3,858)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in demand deposit
and savings accounts............................. (3,693) 10,212 38,516
Net change in certificates of deposit.............. 6,305 (9,730) (18,982)
Net change in short-term borrowings................ (1,289) 372 587
Payments on long-term debt......................... (338) (200) (573)
Proceeds from long-term debt....................... 2,527 1,000 --
Issuance of stock for dividend reinvestment
and stock purchase plan.......................... 74 -- --
Dividends paid..................................... (1,766) (1,532) (1,424)
Net cash from financing activities........... 1,820 122 18,124
NET CHANGE IN CASH AND CASH EQUIVALENTS.............. (5,915) (23,997) 23,120
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR....... 32,510 56,507 33,387
CASH AND CASH EQUIVALENTS AT END OF YEAR............. $ 26,595 $ 32,510 $ 56,507
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest......................................... $ 15,475 $ 16,092 $ 19,058
Income taxes..................................... 2,422 1,846 2,137
See accompanying notes to consolidated financial statements.
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AMBANC CORP.
Notes To Consolidated Financial Statements
December 31, 1994, 1993 and 1992
(Dollar amounts in thousands, except share and per share data)
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Reporting
The consolidated financial statements include the accounts
of AMBANC Corp. (Corporation), and its wholly owned
subsidiaries, The American National Bank of Vincennes
(ANB), Citizens' National Bank of Linton (CNB), Farmers'
State Bank of Palestine (FSB), Bank of Casey (BOC),
American National Realty Corp and Lincolnland Insurance
Agency & Investments, Inc. (LIA). Upon consolidation, all
significant intercompany accounts and transactions have
been eliminated. As discussed in Note 2, AMBANC Corp.
acquired FSB on June 1, 1993, and BOC on June 1, 1994, both
under the pooling of interests method of accounting. These
consolidated financial statements have been restated to
reflect the accounts of FSB and BOC for all periods
presented.
Description of Business
ANB, CNB, FSB and BOC operate primarily in the banking
industry, which accounts for more than 90 percent of the
Corporation's revenues, operating income and assets. ANB,
CNB, FSB and BOC generate commercial, real estate mortgage
and installment loans and receive deposits from customers
located in Greene, Knox, Gibson and surrounding counties in
Indiana and Crawford, Clark and surrounding counties in
Illinois. Although the overall loan portfolio is
diversified, the economy of these counties is heavily
dependent upon the agricultural industry. The majority of
the loans are secured by specific items of collateral
including business assets, real property and consumer
assets.
American National Realty Corp. owns various real estate,
most of which is leased to ANB for normal banking
activities, such as parking, drive-in banking and branch
banking facilities.
Securities
On December 31, 1993, the Corporation adopted Financial
Accounting Standard No. 115 (FAS 115), "Accounting for
Certain Investments in Debt and Equity Securities." Prior
to adoption of FAS 115, all debt securities were carried at
amortized cost (cost adjusted for amortization of premiums
or accretion of discounts), because management had the
intent and ability to hold them for the foreseeable future.
All marketable liquidity mutual funds were carried at the
lower of cost or market value with any unrealized loss due
to temporary market fluctuations recorded as a separate
component of equity. Upon the adoption of FAS 115, all
securities were classified by management as available for
sale or held to maturity. The adoption of FAS 115 in 1993
had no effect on net income, earnings per share or retained
earnings. The unrealized gain/(loss) on securities
available for sale is reflected as a separate component of
equity, net of tax on the balance sheet.
Securities classified as available for sale are marketable
liquidity mutual funds and debt securities that the
Corporation intends to hold for an indefinite period of
time, but not necessarily until maturity. Securities
available for sale include securities that management might
use as part of its asset-liability strategy, or that may be
sold in response to changes in interest rates, changes in
15
prepayment risk or other similar factors, and which are
carried at market value. Securities classified as held to
maturity are securities that the Corporation has both the
ability and positive intent to hold to maturity and are
carried at cost adjusted for amortization of premium or
accretion of discount using the level yield basis.
Realized gains and losses on securities are computed on a
specific identification basis. Interest and dividend
income, adjusted by amortization of purchase premium or
discount, is included in earnings.
Loans Held for Sale
Loans held for sale consist of fixed rate mortgage loans
conforming to established guidelines and held for sale to
the secondary mortgage market. Mortgage loans held for
sale are carried at the lower of cost or market value
determined on an aggregate basis. Gains and losses on the
sale of these mortgage loans are included in other
noninterest income.
Interest Income on Loans
Interest on real estate, commercial and installment loans
is accrued over the term of the loans on a level yield
basis. The recognition of interest income is discontinued
when, in management's judgment, the interest will not be
collectible in the normal course of business.
Loan Fees and Costs
The Corporation defers loan fees, net of certain direct
loan origination costs. The net amount deferred is
reported on the balance sheets as part of loans and is
recognized into interest income over the term of the loan
on a level yield basis.
Allowance for Loan Losses
The balance in the allowance and the amount of the annual
provision charged to expense are judgmentally determined
based upon a number of factors. Estimating the risk of
loss and the amount of loss on any loan is necessarily
subjective. Accordingly, the allowance is maintained by
management at a level considered adequate to cover possible
losses that are currently anticipated based on past loss
experience, general economic conditions, information about
specific borrower situations, including their financial
position and collateral values, and other factors and
estimates which are subject to change over time. While
management may periodically allocate portions of the
allowance for specific problem loan situations, the whole
allowance is available for any loan charge-offs which
occur. Increases to the allowance are recorded by a
provision for possible loan losses charged to expense. A
loan is charged off by management as a loss when deemed
uncollectible, although collection efforts continue and
future recoveries may occur.
Premises, Furniture and Equipment
Premises, furniture and equipment are stated at cost less
accumulated depreciation. Premises, furniture and
equipment are depreciated over the estimated useful lives
of the assets, principally on the straight-line method.
Maintenance and repairs are expensed, and major
improvements are capitalized.
Other Real Estate
Real estate acquired through foreclosure or acceptance of a
deed in lieu of foreclosure is recorded at the lower of
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cost (fair value at date of foreclosure) or fair value
less estimated selling costs. The costs of holding the
real estate are charged to operations while major
improvements are capitalized.
Income Taxes
Effective January 1, 1993, the Corporation adopted
Financial Accounting Standard No. 109 (FAS 109),
"Accounting for Income Taxes", which requires an asset and
liability approach to financial accounting and reporting
for income taxes. Deferred income tax assets and
liabilities are computed annually for differences between
the financial statement and tax basis of assets and
liabilities that will result in taxable or deductible
amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are
expected to affect taxable income. Income tax expense is
the tax payable or refundable for the period plus or minus
the change during the period in deferred tax assets and
liabilities. In years prior, the Corporation recorded tax
expense based on the effect of timing differences on
taxable income during the year the timing differences arose
or reversed.
The cumulative effect of the accounting change on years
prior to January 1, 1993, of $252 is shown on the 1993
income statement.
The Corporation and its subsidiaries file consolidated tax
returns. Each entity is charged or credited for taxes as
if separate returns were filed.
Fiduciary Activities
Trust Department income is recognized on the cash basis
method, which in this circumstance does not materially
differ from the accrual method.
Statements of Cash Flows
Cash and cash equivalents is defined to include cash on
hand, noninterest bearing amounts due from other banks and
federal funds sold. Generally, federal funds are sold for
one-day periods. The Corporation reports net cash flows
for loans held for sale, customer loan transactions,
deposit transactions and deposits made with other financial
institutions.
Financial Statement Presentation
Certain items in the 1993 and 1992 financial statements
have been reclassified to correspond with the 1994
presentation.
Note 2 - BUSINESS COMBINATIONS
On June 1, 1993, the Corporation issued 395,090 shares of
its common stock in exchange for all of the outstanding
common stock of Farmers' State Bank of Palestine (FSB). On
June 1, 1994, the Corporation issued 542,338 shares of its
common stock in exchange for all of the outstanding common
stock of Lincolnland Bancshares, Inc. (LBI), the parent
holding company of BOC and LIA. LBI was then merged into
the Corporation. These acquisitions were accounted for
under the pooling of interests method. Accordingly, the
Corporation's financial statements and financial data have
been retroactively restated to include the accounts and
operations of FSB and LBI for all periods presented.
Certain reclassifications have been made to FSB's and LBI's
historical financial statements to conform to the
Corporation's presentation.
17
Interest income and net income of the Corporation, FSB and
LBI for the periods prior to the acquisition were as
follows.
Five
Months Ended Year Ended Year Ended
May 31, December 31, December 31,
1994 1993 1992
Interest income
Previously reported... $ 11,347 $ 27,701 $ 25,785
FSB................... N/A N/A 4,436
LBI................... 2,598 6,336 6,924
Total............... $ 13,945 $ 34,037 $ 37,145
Net interest income
Previously reported... $ 6,352 $ 15,002 $ 13,397
FSB................... N/A N/A 1,986
LBI................... 1,385 3,315 3,296
Total............... $ 7,737 $ 18,317 $ 18,679
Net income
Previously reported... $ 1,777 $ 4,557 $ 3,445
FSB................... N/A N/A 617
LBI................... 282 862 874
Total............... $ 2,059 $ 5,419 $ 4,936
Note 3 - SECURITIES
The amortized cost and estimated market value of securities
are as follows.
December 31, 1994
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
Securities available for sale
U.S. Government and its agencies..... $ 93,273 $ 66 $ (3,968) $ 89,371
Taxable states and
political subdivisions............. 1,863 9 (38) 1,834
Corporate obligations................ 3,592 -- (39) 3,553
Collateralized mortgage obligations.. 17,843 7 (712) 17,138
Mutual funds......................... 389 -- (71) 318
Total.............................. $ 116,960 $ 82 $ (4,828) $ 112,214
December 31, 1994
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
Securities held to maturity
Nontaxable states and
political subdivisions....... $ 39,695 $ 433 $ (1,421) $ 38,707
/TABLE
18
December 31, 1993
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
Securities available for sale
U.S. Government and
its agencies.................. $ 100,650 $ 1,294 $ (295) $ 101,649
Taxable states and
political subdivisions........ 2,397 74 -- 2,471
Corporate obligations........... 7,533 93 (6) 7,620
Collateralized mortgage
obligations................... 25,338 103 (100) 25,341
Mutual funds.................... 390 -- (31) 359
Total......................... $ 136,308 $ 1,564 $ (432) $ 137,440
December 31, 1993
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
Securities held to maturity
Nontaxable states and
political subdivisions........ $ 38,857 $ 1,937 $ (60) $ 40,734
Investments in states and political subdivisions and corporate
obligations are made within policy standards, which call for these
securities to be investment grade or better as established by
national rating organizations. These securities are actively
traded and have a readily available market valuation. Ratings and
market values of these securities are reviewed monthly with market
values being obtained from an independent rating service or
broker.
The amortized cost and estimated market value of securities at
December 31, 1994, by contractual maturity are shown below.
Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
Available for Sale Held to Maturity
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
Due in 1 year or less............... $ 14,588$ 14,459$ 2,562$ 2,601
Due after 1 year through 5 years.... 45,323 43,278 12,712 12,908
Due after 5 years through 10 years.. 9,957 9,228 20,795 19,916
Due after 10 years.................. 1,452 1,438 3,626 3,282
Subtotal.......................... 71,320 68,403 39,695 38,707
Collateralized mortgage obligations. 17,843 17,138 -- --
U.S. agency mortgage-backed
securities........................ 27,408 26,355 -- --
Mutual funds........................ 389 318 -- --
Total............................. $ 116,960$ 112,214$ 39,695$ 38,707
/TABLE
19
Proceeds from sales of securities available for
sale were $9,451 in 1994 and $0 in 1993 and 1992.
Proceeds from sales of securities held to
maturity were $0 in 1994 and 1993 and $3,128 in
1992. Sales and calls of securities available
for sale during 1994 resulted in gross gains of
$43 and gross losses of $49. Sales and calls of
securities held to maturity resulted in gross
gains and gross losses of $62 and $49 in 1993 and
$100 and $28 in 1992, respectively.
Securities with a carrying value of $28,024 and
$27,912 at December 31, 1994 and 1993, were
pledged to secure public deposits and for other
purposes required or permitted by law.
Note 4 - LOANS
Loans as presented on the balance sheets are
comprised of the following.
1994 1993
Commercial loans........... $ 159,914 $ 144,047
Real estate loans.......... 79,464 61,364
Installment loans.......... 82,606 72,606
Total loans.............. 321,984 278,017
Unearned income............ (888)
(929)
Total loans, net......... $ 321,096 $ 277,088
At December 31, 1994, 1993 and 1992, non-accrual loans
totalled $571, $891 and $1,355. Income recorded on
these loans during 1994, 1993 and 1992 totalled $17,
$17 and $25. Income which would have been recorded on
these loans during 1994, 1993 and 1992, had they been
accruing all year, was $51, $94 and $150.
Certain loans have been restructured in a manner that
grants a concession to the borrower because of the
borrower's financial difficulties. At December 31,
1994, 1993 and 1992, these loans totalled $490, $565
and $265. Interest income recorded on these loans was
$39, $40 and $15 during 1994, 1993 and 1992. Interest
income which would have been recorded under the
original terms of the loans was $44, $48 and $24 during
1994, 1993 and 1992.
Directors and executive officers of the Corporation and
its wholly owned subsidiaries were customers of, and
had other transactions with, the banking subsidiaries
in the ordinary course of business. A schedule of the
aggregate activity involving loans to related parties
follows.
20
Balance, January 1, 1994............. $ 11,171
New loans............................. 6,097
Loan reductions....................... (7,593)
Balance, December 31, 1994............$ 9,675
Note 5 - ALLOWANCE FOR LOAN LOSSES
The activity in the allowance for loan losses is as
follows.
1994 1993 1992
Balance, January 1....... $3,685 $3,510 $3,369
Provision charged
to operations.......... 100 470 1,375
Loans charged off........ (538) (561) (1,479)
Recoveries............... 664 266 245
Balance, December 31..... $3,911 $3,685 $3,510
Note 6 - PREMISES, FURNITURE AND EQUIPMENT
Premises, furniture and equipment as presented on the
balance sheets are comprised of the following.
1994 1993
Land and improvements...........$ 891 $ 918
Buildings and improvements........7,729 7,171
Furniture and equipment...........6,947 6,386
Total cost...................15,567 14,475
Accumulated depreciation.........(9,080) (8,271)
Total, net.................$ 6,487 $ 6,204
Depreciation expense for the years ended December 31,
1994, 1993 and 1992, totalled $927, $1,021 and $923.
Note 7 - INTEREST BEARING DEPOSITS
Interest bearing deposits issued in denominations of
$100 or greater totalled $46,086 and $42,889 at
December 31, 1994 and 1993.
Note 8 - SHORT-TERM BORROWINGS
Short-term borrowings included:
1994 1993
Federal funds purchased
and repurchase agreements.......$ 4,060 $ 2,377
Demand notes issued to the
U.S. Treasury..................... 1,630 4,602
Total...........................$ 5,690 $ 6,979
21
Federal funds purchased generally mature daily. Borrowings under
the Federal Reserve Bank note option plan are collateralized by
certain securities and are reduced at the discretion of the U.S.
Treasury.
Note 9 - LONG-TERM DEBT
Long-term debt is comprised of a deferred compensation plan of $27
as discussed in Note 10 and two Federal Home Loan Bank Mortgage
Advances totalling $3,162. These dvances have an average rate of
5.65%, interest payable monthly and principal payable in annual
installments with the final payment due March 15, 2004. These
loan advances are secured by various securities. The principal
maturities of debt in each of the five years after December 31,
1994, will be $587, $484, $400, $332 and $211.
Note 10 - EMPLOYEE BENEFITS
ANB, CNB and FSB maintain a retirement savings plan (Plan)
covering substantially all employees. The Plan requires employees
to complete one year of service and be 21 years of age before
entering the Plan. Employee contributions are limited to a
maximum of 12% of their salary. The Plan allows for a matching of
the first 4% of employee salary contributions and an annual
discretionary contribution. The Corporation's contributions to
the Plan are vested by employees at 20% per year starting with the
second year of service and become 100% vested after six years of
service. The Corporation's total 401(k) contributions were $350,
$312 and $305 for 1994, 1993 and 1992.
Prior to December 31, 1994, BOC sponsored a defined benefit
pension plan covering substantially all employees. Benefits were
based primarily on years of service and on the employees' average
compensation during their period of employment. BOC's funding
policy was to contribute the minimum amount required by applicable
regulations. Plan assets consist primarily of investments in
interest bearing balances with financial institutions, U.S.
government bonds and marketable equity mutual funds.
BOC elected to eliminate the accrual of benefits for services
under the plan effective December 31, 1994, and intends to
terminate the plan on April 30, 1995. The effect of eliminating
the accrual of benefits is accounted for as a plan curtailment in
accordance with FAS No. 88, "Employers' Accounting for Settlements
and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits."
On December 31, 1994, the projected benefit obligation was $1,318
and accumulated plan benefits totalled $895, of which $871 was
vested. The fair value of plan assets available for benefits was
$925. The effect of curtailing the Plan was to recognize a
decrease in the projected benefit obligation of $215, to currently
recognize the transition obligation of $472, and to recognize a
gain of $208 at December 31, 1994. This net $49 curtailment loss
is included with pension costs in the consolidated statement of
income.
The following sets forth the Plan's funded status and amount
recognized in the financial statements at December 31 (amounts
computed as of December 31, 1994, and November 30, 1993).
22
1994 1993
Actuarial present value of accumulated
benefit obligations
Vested.................................... $ (1,090) $ (774)
Nonvested................................. (13) (30)
Total................................... (1,103) (804)
Additional benefits based on future
compensation levels....................... -- (341)
Projected benefit obligation for services
rendered to date.......................... (1,103) (1,145)
Plan assets at fair value................... 925 802
Plan assets in excess of projected
benefit obligation........................ (178) (343)
Items not yet recognized in income
Unrecognized gain......................... (81) (271)
Unrecognized transition obligation........ -- 502
Accrued pension liability................... $ (97) $ (112)
Net pension expense included the following.
1994 1993 1992
Service cost-benefits earned................ $ 93 $ 76 $ 58
Interest cost on projected
benefit obligation........................ 84 79 67
Actual return on plan assets................ (35) (43) (39)
Net amortization and deferral............... 6 (4) (2)
Effect of curtailment loss.................. 49 -- --
Net pension expense....................... $ 197 $ 108 $ 84
The weighted-average discount rate used in determining the
actuarial present value of projected benefit obligations was 5% in
1994 and 8% in 1993 and 1992. dditionally, the rate of increase
in future compensation assumed was 4% for 1994, 1993 and 1992.
The expected long-term rate of return on plan assets was 8% in
1994, 1993 and 1992.
During 1994 the Corporation implemented a deferred compensation
plan for the benefit of certain executive officers. In return for
relinquishing the right to a portion of their current
compensation, the Corporation agrees to pay the participants at
retirement or termination, in the form of 120 monthly payments or
one lump-sum payment, the amount deferred plus any interest earned
during the deferral period. Interest is paid annually at prime
rate and the liability of $27 is included with long-term debt on
the December 31, 1994, balance sheet. During 1994 the Corporation
accrued approximately $1 of interest expense towards its bligation
under the plan.
Note 11 - POSTRETIREMENT BENEFITS
As of January 1, 1993, the Corporation adopted the Financial
Accounting Standard No. 106 (FAS 106), "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The Corporation
sponsors a postretirement benefit plan which provides defined
medical and death benefits. Employees hired before April 1990 who
retire after January 1, 1993, are eligible to receive
postretirement medical benefits for themselves, if they have
completed 20 years of service and attained age 62. Existing
retirees as of December 31, 1992, will receive postretirement
medical benefits for themselves and their spouses and death
benefits. Prior to the attainment of age 65 medical coverage is
provided under the Corporation's group major medical insurance
plan. At age 65 coverage is provided under a medicare supplement
plan.
23
The plan is contributory. Participants who were retired as of
December 31, 1992, are required to contribute an amount equal to
the amount they paid as of December 31, 1992, plus any future
increase in the applicable premium to provide the coverage.
Participants who retired on or after January 1, 1993, are required
to contribute an amount equal to the entire applicable premium to
provide the coverage, less sixty dollars or fifty percent,
whichever is lower, paid monthly by the Corporation.
The following sets forth the plans' funded status and amounts
recognized in the financial statements at December 31, 1994 and
1993.
Accumulated postretirement benefit obligations:
1994 1993
Retirees..........................$ (318) $ (377)
Fully eligible active
participants...................... (7) (16)
Other active plan participants.... (131) (182)
Accumulated postretirement benefit
obligation in excess of plan
assets.......................... (456) (575)
Unrecognized transition
obligation........................ 398 552
Accrued postretirement
benefit liability...........$ (58) $ (23)
Net periodic postretirement benefit cost for the years
ended December 31, 1994 and 1993, included the
following components:
Service cost-benefits
attributed to service
during the period............... $ 11 $ 10
Interest cost on
accumulated post-
retirement benefit
obligation...................... 40 41
Amortization of transition
obligation over 20 years........ 29 29
Post-retirement benefit
cost...................... $ 80 $ 80
Benefit payments of $45 and $57 were made for postretirement
medical benefits in 1994 and 1993.
For measurement purposes, a 16% annual rate of increase in the per
capital cost of covered health care benefits was assumed for 1994
and 1993 with the rate gradually decreasing to 6% after 25 years.
The health care cost trend assumption has a significant effect on
the amounts reported. An increase in the assumed health care cost
trend rates by 1% in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1994 and
1993, by approximately $14 and would have virtually no effect on
the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for 1994 and 1993.
The weighted-average discount rate used in determining the
accumulated postretirement benefit obligation was 6% and 7% at
December 31, 1994 and 1993.
24
Note 12 - STOCK OPTION PLAN
The Corporation had a Nonqualified Stock Option Plan which expired
in April 1993. Under the terms of the plan, optionswere granted
at amounts not less than the fair market value of the shares at
the date of the grant and any options granted must be exercised
within ten years of the grant. As of December 31, 1994, 1993 and
1992, fully vested options for 24,000 shares at an option price of
$20 per share were outstanding.
Additionally, under provisions of the Nonqualified Stock Option
Plan, stock appreciation rights have been granted coinciding with
the number of stock options granted. The value of each stock
appreciation right at any time is equal to 50% of the excess of
the fair market value of one share of common stock of the
Corporation over the exercise price of the option to which it
relates. Employee benefits charged/(credited) to operations in
1994 and 1993 includes $(69) and $60 related to stock appreciation
rights.
Note 13 - INCOME TAXES
Income taxes consist of the following.
1994 1993 1992
Income taxes
Current payable........................... $ 1,973 $ 2,314 $ 2,027
Deferred income taxes (benefits).......... 280 (373) (118)
Income taxes.............................. $ 2,253 $ 1,941 $ 1,909
Income taxes applicable to securities transactions were
$3, $4 and $24 in 1994, 1993 and 1992.
The following is a reconciliation of income tax expense
and the amount computed by applying the statutory
federal income tax rate of 34% to income before income
taxes.
1994 1993 1992
Statutory rate applied to income............ $ 2,617 $ 2,417 $ 2,327
Adjustments
Tax exempt interest income................ (868) (918) (835)
Non-deductible interest................... 108 107 140
Merger expenses........................... 66 48 1
State income taxes........................ 333 306 289
Surtax exemption and other................ (3) (19) (13)
Total income taxes...................... $ 2,253 $ 1,941 $ 1,909
The source and related tax effect of significant timing
differences are as follows.
1992
Provision for loan losses............... $ (65)
Accretion of securities discount........ 9
Employee benefits....................... (33)
Other................................... (29)
Total................................ $ (118)
The net deferred tax asset in the accompanying balance sheet
includes the following amounts of deferred tax assets and
liabilities at December 31.
25
1994 1993
Deferred tax asset................. $ 2,336 $ 706
Deferred tax (liability)........... (364) (658)
Valuation allowance................ -- --
Net deferred tax asset........... $ 1,972 $ 48
The effects of principal temporary differences are shown in the
following table.
1994 1993
Allowance for loan loss............ $ 227 $ 219
Mark to market adjustment on loans
held for sale.................... (92) 165
Accrued employee benefits.......... 171 143
Unrealized loss/(gain) on
securities available for sale.... 1,784 (420)
Accretion of securities discount... (36) (61)
Depreciation....................... (125) (107)
Other.............................. 43 109
Total............................ $ 1,972 $ 48
Note 14 - COMMITMENTS AND CONTINGENT LIABILITIES
The Corporation leases various facilities and equipment. These
leases expire at various times during the years 1995 through 2008
with renewal options through the year 2038. Certain of these
leases are with companies controlled by directors of the
Corporation and its subsidiaries and had total lease payments of
$41, $22 and $9 in 1994, 1993 and 1992. Total rental expense for
all leases for the years 1994, 1993 and 1992, was $87, $64 and
$29. The following is a schedule of future minimum lease
payments.
1995............ $ 81
1996............ 76
1997............ 69
1998............ 51
1999............ 30
Thereafter...... 328
Total......... $ 635
In the ordinary course of business, the Corporation's banking
subsidiaries have loans, commitments and contingent liabilities,
such as guarantees and commitments to extend credit, which are not
reflected in the consolidated balance sheets. The Corporation's
exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to make
loans and standby letters of credit is represented by the
contractual amount of those instruments. The Corporation uses the
same credit policy to make such commitments as is used for
on-balance sheet items. Outstanding loan commitments and
customers' unused lines of credit amounted to $62,056 and $51,890
at December 31, 1994 and 1993. Outstanding standby letters of
credit were $6,408 and $5,674 at December 31, 1994 and 1993.
Since many commitments to make loans expire without being used,
the outstanding amount of commitments does not necessarily
represent future cash commitments. Collateral obtained upon
exercise of the commitment is determined using management's credit
evaluation of the borrower and may include accounts receivable,
inventory, property, land and other items.
26
The Corporation was required to have $6,295 and $6,720 at December
31, 1994 and 1993, on deposit with the Federal Reserve or as cash
on hand or on deposit with other banks. These reserves do not
earn interest.
Note 15 - SHAREHOLDERS' EQUITY
All share and per share amounts have been retroactively adjusted
to reflect the effect of the shares issued in the business
combinations discussed in Note 2, as though these shares had been
outstanding for all periods presented. Earnings per share amounts
are based on average outstanding shares of 2,370,004 for 1994 and
2,369,784 for 1993 and 1992.
In 1993 the directors of the Corporation approved the
establishment of a Dividend Reinvestment and Stock Purchase Plan
(Plan) to provide shareholders a method of purchasing additional
shares of the Corporation's common stock by reinvesting their cash
dividends or making optional cash payments into the Plan. Shares
will be credited to the participant's account at the market value
of the Corporation's stock at the date of the monthly purchase by
the Plan. The directors of the Corporation reserved 50,000 shares
for the Plan and issued 2,388 shares to the Plan in 1994.
Note 16 - DIVIDEND RESTRICTIONS
The Corporation and its wholly owned subsidiary banks are subject
to regulations which require the maintenance of certain capital
levels and, as a result, limit the amount of dividends which may
be paid by the banks. ANB and CNB are regulated by the
Comptroller of the Currency, FSB and BOC are regulated by the
Commissioner of Banks and Trust Companies in Illinois, while the
Corporation is regulated by the Federal Reserve Board. The most
restrictive of the regulations generally requires the banks to
maintain a minimum leverage capital to total asset ratio. As a
result of this limitation, approximately $25,220 of the $48,006
equity of the banks was restricted and unavailable for the payment
of dividends to the Corporation at December 31, 1994.
Additionally, the amount of dividends the banks may pay to the
Corporation in a single year without approval from regulators is
limited by regulation. Under the most restrictive regulations,
approximately $6,087 of undistributed earnings of the banks was
available for distribution to the Corporation at December 31,
1994. As a practical matter dividends are ordinarily restricted
to a lesser amount because of the need to maintain an adequate
capital structure.
Note 17 - FAIR VALUES OF FINANCIAL INSTRUMENTS
The following table shows the carrying amount and estimated fair
value of financial instruments held by the Corporation at December
31, 1994 and 1993.
27
December 31, 1994 December 31, 1993
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
Cash and cash equivalents..... $ 26,595 $ 26,595 $ 32,510 $ 32,510
Interest bearing deposits
in other banks.............. 1,193 1,196 890 915
Securities available for sale. 112,214 112,214 137,440 137,440
Securities held to maturity.... 39,695 38,707 38,857 40,734
Loans held for sale............ 2,664 2,675 16,919 17,709
Loans, less allowance for
loan losses................. 317,185 316,748 273,403 275,764
Demand and savings deposits... (236,808) (236,808) (240,499) (240,499)
Time deposits................. (218,426) (219,882) (212,123) (215,070)
Short-term borrowings......... (5,690) (5,690) (6,979) (6,979)
Long-term debt................. (3,189) (2,997) (1,000) (976)
For purposes of the above disclosures of estimated fair value, the
following assumptions were used as of December 31, 1994 and 1993.
The estimated fair value for cash and cash equivalents is
considered to approximate cost. The estimated fair value for
securities is based on quoted market values for the individual
securities or for equivalent securities. The estimated fair value
for commercial loans is based on estimates of the difference in
interest rate the bank would charge the borrowers for similar
loans with similar maturities applied for an estimated time period
until the loan is assumed to reprice or be paid. The estimated
fair value for other loans is based on estimates of the rate the
bank would charge for similar such loans applied for the time
period until estimated repayment. The estimated fair value for
demand and savings deposits is based on their carrying value. The
estimated fair value for time deposits is based on estimates of
the rate the bank would pay on such deposits applied for the time
period until maturity. The estimated fair value for short-term
borrowings is considered to approximate cost. Rates currently
available to the Corporation for debt with similar terms and
remaining maturities are used to estimate fair value of existing
long-term debt. The estimated fair value for other financial
nstruments and off-balance sheet loan commitments approximate cost
and are not considered significant to this presentation because
the majority of these items are primarily at variable rates and
are not made for long term periods.
While these estimates of fair value are based on management's
judgment of the most appropriate factors, there is no assurance
that were the Corporation to have disposed of such items at
December 31, 1994 and 1993, the estimated fair values would
necessarily have been achieved at that date, since market values
may differ depending on various circumstances. The estimated fair
values at December 31, 1994 and 1993, should not necessarily be
considered to apply at subsequent dates.
In addition, other assets and liabilities of the Corporation that
are not defined as financial instruments are not included in the
above disclosures, such as property and equipment. Also, non-
financial instruments typically not recognized in financial
statements nevertheless may have value but are not included in the
above disclosures. These include, among other items, the
estimated earnings power of core deposit accounts, the earnings
potential of loan servicing rights, the earnings potential of the
bank's trust department, the trained work force, customer goodwill
and similar items.
28
Note 18 - PARENT COMPANY STATEMENTS
Presented below are condensed balance sheets, statements of income
and cash flows for the parent company.
Condensed Balance Sheets
December 31, 1994 and 1993
1994 1993
ASSETS
Cash on deposit with subsidiaries............. $ 570 $ 163
Investment in bank subsidiaries................ 48,006 48,143
Investment in non-bank subsidiaries............ 197 183
Premises, furniture and equipment, net......... 30 97
Other assets................................ 403 391
Total assets................................. $ 49,206 $ 48,977
LIABILITIES
Other liabilities...............................$ 169 $ 17
SHAREHOLDERS' EQUITY
Common stock.................................... 23,722 23,698
Retained earnings............................... 28,277 24,550
Unrealized gain/(loss) on securities
available for sale, net of tax............. (2,962) 712
Total shareholders' equity.................... 49,037 48,960
Total liabilities and shareholders' equity....$ 49,206 $ 48,977
29
Condensed Statements Of Income
For the years ended December 31, 1994, 1993 and 1992
1994 1993 1992
OPERATING INCOME
Dividends received from bank subsidiaries....... $ 3,364 $ 2,093 $ 1,722
Rental income................................... 240 240 240
Other income.................................... 28 23 24
Total operating income............... 3,632 2,356 1,986
OPERATING EXPENSE
Other expenses.................................. 967 700 589
INCOME BEFORE INCOME TAXES AND EQUITY IN
UNDISTRIBUTED EARNINGS OF SUBSIDIARIES.......... 2,665 1,656 1,397
Income tax credit................................. (174) (116) (110)
INCOME BEFORE EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARIES........................ 2,839 1,772 1,507
Equity in undistributed earnings
of subsidiaries................................. 2,604 3,647 3,429
NET INCOME........................................ $ 5,443 $ 5,419 $ 4,936
Condensed Statements Of Cash Flows
For the years ended December 31, 1994, 1993 and 1992
1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES
Net income..................................... $ 5,443 $ 5,419 $ 4,936
Adjustments to reconcile net income to
net cash from operating activities
Depreciation........................... 100 198 207
Equity in undistributed income of
subsidiaries...................... (2,604) (3,647) (3,429)
Other liabilities....................... 152 120 (119)
Other assets............................ (12) (82) 40
Net cash from operating activities.... 3,079 2,008 1,635
Condensed Statements of Cash Flows - Continued
For the years ended December 31, 1994, 1993 and 1992
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in subsidiary.......................$ (947) $ -- $ --
Purchase of furniture and equipment............ (33) -- --
Net cash from investing activities... (980) -- --
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt..................... -- (392) (284)
Dividends paid................................. (1,766) (1,532) (1,424)
Issuance of stock for dividend reinvestment
and stock purchase plan...................... 74 -- --
Net cash from financing activities........... (1,692) (1,924) (1,708)
NET CHANGE IN CASH AND CASH EQUIVALENTS.......... 407 84 (73)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR... 163 79 152
CASH AND CASH EQUIVALENTS AT END OF YEAR......... $ 570 $ 163 $ 79
30
Note 19 - PENDING CHANGES IN ACCOUNTING PRINCIPLE
The Financial Accounting Standards Board had issued Financial
Accounting Standard No. 114, "Accounting by Creditors for
Impairment of a Loan." Under this pronouncement, companies are
required to adopt the new method of accounting for impaired loans
in 1995. The Corporation has determined that the implementation
of this standard will be immaterial to the financial statements.
Note 20 - PROPOSED ACQUISITION
On October 12, 1994, the Corporation entered into a definitive
agreement to acquire First Robinson Bancorp (FRB), the parent
holding company for The First National Bank in Robinson, Illinois.
Pursuant to the proposed acquisition, the Corporation has offered
between 555,075 and 666,090 shares of its common stock for the
outstanding shares of FRB. The actual number of shares of the
Corporation to be issued for FRB will be based upon the actual
market value of the Corporation's stock immediately prior to the
consummation of the transaction. The transaction will be
accounted for under the pooling of interests method. Consummation
of the transaction is subject to regulatory and FRB shareholders'
approval. FRB had total assets of $109,144 and total liabilities
of $99,971 at December 31, 1994, and net income of $1,059 for the
twelve months ended December 31, 1994.
On September 26, 1994, ANB entered into a definitive purchase and
assumption agreement with First Indiana Bank, a Federal Savings
Bank, to purchase the building and the outstanding deposits at the
date of closing, of their Princeton, Indiana branch. The
transaction will be accounted for as a purchase and consummation
of the transaction is subject to regulatory approval. Total
deposits of the First Indiana Bank branch to be acquired were
$26,021 as of December 31, 1994.
31
MANAGEMENT'S REPORT
The management of AMBANC Corp. is responsible for the integrity of
all information contained in the accompanying financial statements
and other sections of this annual report. The statements have
been prepared in conformity with generally accepted accounting
principles and include amounts that are based on management's best
estimates and judgment.
In meeting its responsibility, management relies on the systems of
internal control which are designed to provide reasonable
assurance that assets are safeguarded and that transactions are
properly executed and recorded. The development and dissemination
of written policies and procedures, appropriate segregation of
duties and responsibilities and the conducting of a continuing
comprehensive program of internal audits provide further
enhancements to the systems of internal control.
The Audit Committee of the Board of Directors, consisting solely
of outside Directors, meets periodically with management, the
internal auditors and the independent auditors to review audits,
financial reporting and other related matters. The internal
auditors and the independent auditors have full and free access to
the Audit Committee to further assure their independence.
The financial statements have been audited by Crowe, Chizek and
Company, independent auditors. They were engaged to audit the
financial statements and to express an opinion thereon. Their
audit was conducted in accordance with generally accepted auditing
standards.
/s/ Robert G. Watson /s/ Richard E. Welling
Robert G. Watson Richard E. Welling, CPA
Chairman of the Board, Secretary, Treasurer and
C.F.O.
President and C.E.O.
32
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This section presents an analysis of the consolidated financial condition of
AMBANC Corp. (Corporation) and its wholly-owned subsidiaries, The American
National Bank of Vincennes (ANB), Citizens' National Bank of Linton (CNB),
Farmers' State Bank of Palestine (FSB), Bank of Casey (BOC) (Collectively, the
"Banks") and American National Realty Corp. and Lincolnland Insurance Agency &
Investments, Inc. (LIA) at December 31, 1994 and 1993, and the consolidated
results of operations for the years ended December 31, 1994, 1993 and 1992.
This review should be read in conjunction with the consolidated financial
statements, notes to consolidated financial statements and other financial
data presented elsewhere in this Annual Report.
On June 1, 1993, the Corporation issued 395,090 shares of its common stock in
exchange for all of the outstanding common stock of FSB. On June 1, 1994, the
Corporation issued 542,338 shares of its common stock in exchange for all of
the outstanding common stock of Lincolnland Bancshares, Inc. (LBI), the parent
holding company of BOC and LIA. LBI was then merged into the Corporation.
These acquisitions were accounted for under the pooling of interests method.
Accordingly, the Corporation's financial statements and financial data have
been retroactively restated to include the accounts and operations of FSB and
LBI for all periods presented. Certain reclassifications have been made to
FSB's and LBI's historical financial statements to conform to the
Corporation's presentation.
RESULTS OF OPERATIONS
(Dollar amounts in thousands, except share and per share data)
Net income for 1994 was $5,443 or $2.30 per share compared to $5,419 or $2.29
per share in 1993 and $4,936 or $2.08 per share in 1992. Included in net
income for 1993 was an adjustment of $252, resulting from the adoption of
Financial Accounting Standard No. 109, "Accounting for Income Taxes." This
adjustment is shown on the income statement as the cumulative effect on prior
years of changing to a different method of accounting for income taxes.
Earnings per share for 1993 before this accounting change was $2.18. Earnings
expressed as a percent of average assets and average equity were:
Percent of Percent of
Average Assets Average Equity
1994 1993 1992 1994 1993 1992
Income before cumulative
effect of accounting change. 1.07 % 1.04 % 1.02 % 11.16 % 11.19 % 11.51 %
Cumulative effect of
accounting change........... -- .05 -- -- .55 --
Net income.................. 1.07 % 1.09 % 1.02 % 11.16 % 11.74 % 11.51 %
The following is an analysis of the critical components of net income for the
years 1994, 1993 and 1992 with discussion and analysis of the contrasts
between these periods and the effect of previous trends on anticipated future
earnings performance.
Net Interest Income
Net interest income is the principal source of the Corporation's earnings and
represents the difference between interest income on interest earning assets
and the interest cost of interest bearing liabilities. Income on certain
interest earning assets is exempt from federal income tax and, as is customary
in the banking industry, changes in net interest income are analyzed on a
fully tax equivalent basis. Under this method, and throughout this
discussion, nontaxable income on loans and securities is adjusted to an amount
which represents the equivalent earnings if such earnings were subject to
federal tax. The marginal tax rate used to restate nontaxable income was 34%
for 1994, 1993 and 1992.
33
The yield on average interest earning assets and the rate paid on average
interest bearing liabilities is based upon three major factors: the
yield/rate received or paid, the mix of the individual components and the
volume of interest earning assets and interest bearing liabilities. While the
national prime rate is not the only indicator for yields received on assets or
the rates paid on liabilities by the Corporation, it does indicate a general
trend of current rates being received on assets and paid on liabilities. The
national prime rate averaged 6.26% in 1992, decreased to 6.00% all during 1993
and increased to an average of 7.14% during 1994. Yields received and rates
paid by the Corporation are a blend of current and past year's interest rates
due to the lag effect of the repricing of both long-term assets and long-term
liabilities. The following table shows the average balances, interest income
or expense and average yields and rates on interest earning assets and
interest bearing liabilities by type. It also shows the calculation of net
interest margin for 1994, 1993 and 1992.
34
Consolidated Average Balance Sheets and Interest Rates
Years ended December 31, 1994, 1993 and 1992
(Dollar amounts in thousands, except share and per share data)
1 9 9 4
Interest
Average Income/ Average
Balance Expense Average Balance
(Note A) (Note B) Rate (Note A)
ASSETS
Interest earning assets
Securities
U.S. Government................... $103,316 $ 5,449 5.27% $ 97,366
State and municipal
obligations..................... 42,027 3,621 8.62 39,809
Other............................. 26,464 1,413 5.34 36,194
Total securities................. 171,807 10,483 6.10 173,369
Interest bearing deposits
in other banks.................... 1,548 75 4.85 838
Loans held for sale................ 6,849 536 7.83 15,133
Total loans, less unearned
(Notes A and C).................. 299,919 25,034 8.35 268,954
Federal funds sold................. 5,551 222 4.00 13,266
Total interest earning assets and
interest income................. 485,674 $ 36,350 7.48% 471,560
Noninterest earning assets
Cash and due from banks............ 15,185 15,359
Premises and equipment, net........ 6,613 6,553
Other assets....................... 7,149 6,681
Allowance for loan losses.......... (3,799) (3,567)
Unrealized loss on securities
available for sale............... (1,748) --
Total assets..................... $509,074 $496,586
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities
Savings and demand deposits........ $186,631 $ 5,336 2.86% $181,563
Time deposits...................... 215,645 9,804 4.55 216,739
Total savings and
time deposits.................. 402,276 15,140 3.76 398,302
Short-term borrowings.............. 6,769 283 4.18 4,943
Long-term debt..................... 2,924 177 6.05 674
Total interest bearing
liabilities and
interest expense.............. 411,969 $ 15,600 3.79% 403,919
Noninterest bearing liabilities
Demand deposits.................... 46,048 43,370
Other.............................. 2,273 3,140
Shareholders' equity................ 48,784 46,157
Total liabilities and
shareholders' equity............ $509,074 $496,586
Interest margin recap
Interest income/interest
earning assets................... $ 36,350 7.48%
Interest expense/interest
earning assets................... 15,600 3.21
Net interest income/interest
earning assets................. $ 20,750 4.27%
/TABLE
35
1 9 9 3 1 9 9 2
Interest Interest
Income/ Average Income/
Expense Average Balance Expense Average
(Note B) Rate (Note A) (Note B) Rate
ASSETS
Interest earning assets
Securities
U.S. Government.............. $ 5,659 5.81% $ 93,033 $ 6,551 7.04%
State and municipal
obligations................ 3,753 9.43 30,998 3,239 10.45
Other........................ 1,862 5.14 38,094 2,513 6.60
Total securities............ 11,274 6.50 162,125 12,303 7.59
Interest bearing deposits
in other banks.............. 58 6.92 1,878 129 6.87
Loans held for sale........... 1,280 8.46 10,511 1,017 9.68
Total loans, less unearned
(Notes A and C)............. 22,430 8.34 269,843 24,390 9.04
Federal funds sold............. 397 2.99 16,797 564 3.36
Total interest earning
assets and interest income..$ 35,439 7.52% 461,154 $ 38,403 8.33%
Noninterest earning assets
Cash and due from banks........ 13,578
Premises and equipment, net.... 6,499
Other assets................... 6,679
Allowance for loan losses...... (3,340)
Unrealized loss on securities
available for sale........... --
Total assets................. $484,570
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest bearing liabilities
Savings and demand deposits...$ 5,420 2.99% $159,999 $ 5,628 3.52%
Time deposits.................. 10,101 4.66 232,603 12,599 5.42
Total savings and
time deposits............. 15,521 3.90 392,602 18,227 4.64
Short-term borrowings......... 167 3.38 5,598 236 4.22
Long-term debt................ 32 4.75 41 3 7.32
Total interest bearing
liabilities and
interest expense......... $ 15,720 3.89% 398,241 $ 18,466 4.64%
Noninterest bearing liabilities
Demand deposits............... 39,680
Other......................... 3,757
Shareholders' equity........... 42,892
Total liabilities and
shareholders' equity....... $484,570
Interest margin recap
Interest income/interest
earning assets.............. $ 35,439 7.52% $ 38,403 8.33%
Interest expense/interest
earning assets.............. 15,720 3.33 18,466 4.01
Net interest income/interest
earning assets............ $ 19,719 4.19% $ 19,937 4.32%
Note A - Included in total loans are non-accrual loans.
Note B - Interest income includes the effects of taxable
equivalent adjustments using a marginal federal tax rate
of 34% for 1994, 1993 and 1992. The total adjustment to
convert tax exempt loans and securities to a fully tax
equivalent basis was $1,327, $1,402 and $1,258 for 1994,
1993 and 1992.
Note C - Net loan fees and costs included in interest income
on loans amounted to $706, $428 and $355, for the years 1994,
1993 and 1992.
36
Net interest income in 1994 increased $1,031 or 5.23% from 1993,
and the percent of net interest margin, or net interest income to
average interest earning assets, increased to 4.27% in 1994 from
4.18% in 1993. This increase in net interest income was due to
favorable rate and volume changes during 1994 when compared to
1993. During 1994 yields on average interest earning assets
decreased more slowly than rates on average interest bearing
liabilities. Yields on interest earning assets decreased .04% to
7.48% from 7.52% in 1993 while rates on interest bearing
liabilities decreased .10% to 3.79% in 1994 from 3.89% in 1993.
As illustrated below, total average interest earning assets also
increased $12,366 or 2.62% in 1994 from 1993 while average
interest bearing liabilities increased $8,050 or 1.99% in 1994
from 1993.
Net interest income in 1993 decreased $218 or 1.09% from 1992,
and the percent of net interest margin, or net interest income to
average interest earning assets, decreased to 4.19% in 1993 from
4.32% in 1992. This decrease in net interest income was due to
unfavorable rate changes offset by favorable volume changes
during 1993 when compared to 1992. During 1993 yields on average
interest earning assets decreased faster than rates on average
interest bearing liabilities. Rates on interest earning assets
decreased .81% to 7.52% in 1993 from 8.33% in 1992 while rates on
interest bearing liabilities decreased .75% to 3.89% in 1993 from
4.64% in 1992. The total average interest earning assets did
increase $10,406 or 2.26% in 1993 from 1992 while average
interest bearing liabilities increased $5,678 or 1.43% in 1993
from 1992.
The following table illustrates the total average interest
earning assets and average interest bearing liabilities and net
interest earning assets for 1994, 1993 and 1992.
37
1994 1993 1992
Average interest earning assets....... $483,926 $471,560
$461,154
Average interest bearing liabilities.. 411,969 403,919
398,241
Net interest earning assets........ $ 71,957 $ 67,641 $
62,913
Net interest income is also affected by volume and rate of
average interest earning assets and average interest bearing
liabilities. The following table depicts the dollar effect of
volume and rate changes from year to year for the different types
of interest earning assets and interest bearing liabilities and
the resultant change in interest income and interest expense from
volume and rate changes from year to year. Variances which were
not specifically attributable to volume or rate were allocated
proportionately between each based on the overall effect of each
to the total. Non-performing loans are included with loans in
the table.
Changes in Net Interest Income
1994 compared to 1993 1993 compared to 1992
Increase/(decrease) Increase/(decrease)
due to change in due to change in
Volume Rate Total Volume Rate Total
Interest income
Loans................... $2,585 $ 19 $ 2,604 $ (74)$(1,886) $(1,960)
Loans held for sale...... (648) (96) (744) 391 (128) 263
Interest bearing deposits
with other banks........ 34 (17) 17 (72) 1 (71)
Securities
U.S. Govt. & its
agencies................ 314 (524) (210) 252 (1,144) (892)
State and
municipalities.......... 191 (323) (132) 831 (317) 514
Other................... (520) 71 (449) (98) (553) (651)
Total securities........ (15) (776) (791) 985 (2,014) (1,029)
Federal funds sold......... (308) 133 (175) (106) (61) (167)
Total interest income....1,648 (737) 911 1,124 (4,088) (2,964)
38
1994 compared to 1993 1993 compared to 1992
Increase/(decrease) Increase/(decrease)
due to change in due to change in
Volume Rate Total Volume Rate Total
Interest expense
Deposits
Interest bearing demand
and savings............. $ 145 $ (229) $ (84) $ 644 $ (852) $ (208)
Time...................... (50) (247) (297) (739) (1,759) (2,498)
Short-term borrowings....... 76 40 116 (22) (47) (69)
Long-term debt.............. 137 8 145 30 (1) 29
Total interest expense.. 308 (428) (120) (87) (2,659) (2,746)
Net interest income... $1,340 $ (309) $ 1,031 $ 1,211 $(1,429)$ (218)
As stated previously, general interest rates increased in 1994
from 1993 and the Corporation's average interest earning assets
and interest bearing liabilities both increased. The volume
increase added $1,648 interest income on average interest bearing
assets and increased interest cost on average interest bearing
liabilities by only $308 for a total net interest income increase
of $1,340 due to volume changes. The rate increases in 1994 were
offset by the lag effect of lower rates on long-term assets and
liabilities and left the Corporation's interest income being
reduced $737 on average interest bearing assets and reduced
interest cost by $428 on average interest bearing liabilities for
a total decrease of $309 in net interest income due to rate
changes. The volume increase and rate decrease combined to
provide the $1,031 increase in net interest income for 1994 when
compared to 1993.
Rates actually reduced slightly in 1993 from 1992 while the
Corporation's volume of interest earning assets and interest
bearing liabilities increased. The volume increase added $1,124
to interest income on average interest earning assets and reduced
the interest expense on average interest bearing liabilities by
$87 for a total increase of $1,211 to net interest income due to
volume. The interest expense reduction from volume is
contradictory to an overall increase in average interest bearing
liabilities but is explained by the large decrease in average
time deposits during 1993. Time deposits historically have been
at higher rates than other types of deposits and their volume
reduction more than offset any expense increase due to volume
increases on the other deposit products of the Corporation during
1993. The slight rate decrease in 1993 from 1992 plus the lag
effect of older higher rates on assets and liabilities running
off caused a $4,088 reduction in interest income from average
interest earning assets and a reduction of $2,659 from interest
expense on average interest bearing liabilities for a total
decrease of $1,429 in net interest income during 1993. The
volume increase offset by a higher rate reductions combined to
provide the $218 decrease in net interest income for 1993 when
compared to 1992.
Provision for Loan Losses
The provision for loan losses provides a reserve (the allowance
for loan losses) to which loan losses are charged as those losses
become evident. Management of each bank determines the
appropriate level of the allowance for loan losses on a quarterly
basis utilizing a report containing loans with a more than normal
39
degree of risk. This report is the by-product of an ongoing loan
review process, the purpose of which is to determine the level of
credit risk within the portfolio and to ensure proper adherence
to underwriting and documentation standards. Utilizing this
report, a specific portion of the reserve is allocated to those
loans which are considered to represent significant exposure to
risk. In addition, estimates are made for potential losses on
consumer loans, residential mortgage loans and commercial loans
not specifically reviewed based on historical loan loss
experience and other factors and trends.
The provision for loan losses for 1994 was only $100 compared to
$470 in 1993 and $1,375 in 1992. The reduced provision during
1994 was the result of a continued overall improvement in the
credit quality of the loan portfolio and additional recoveries of
loans previously charged off. Total loan charge-offs for 1994
decreased $23 to $538 from $561 in 1993 and nonperforming loans
decreased $293 to $1,703 in 1994 from $1,996 in 1993 and were
only .53% of total loans at year end 1994. The 1993 provision
was also lower than 1992 due to overall improvements in the loan
portfolio and the fact that net loan charge-offs in 1993 were
only $295 compared to $1,234 in 1992. Total nonperforming loans
at year end 1993 were also reduced to .72% of total loans from
.85% of total loans at year end 1992. The ending allowance for
loan losses as a percent of loans decreased to 1.22% at 1994 from
1.33% at 1993 and 1992. The ratio of net loans charged off as a
percent of total average loans has remained well below 1% and was
(.04)% in 1994, .11% in 1993 and .46% in 1992.
40
An analysis of the allowance for loan losses for the past five
years follows.
1994 1993 1992 1991 1990
Balance at beginning
of year................. $ 3,685 $ 3,510 $ 3,369 $ 3,746 $ 3,839
Loans charged off
Commercial and
agricultural......... 256 212 749 1,319 861
Real estate............ 31 105 270 194 370
Installment............ 192 195 410 511 504
Other.................. 59 49 50 59 93
Total charge-offs.. 538 561 1,479 2,083 1,828
Charge-offs recovered
Commercial and
agricultural......... 500 157 127 191 182
Real estate............ 54 18 26 38 122
Installment............ 102 84 86 158 125
Other.................. 8 7 6 2 4
Total recoveries... 664 266 245 389 433
Net loans charged off.... (126) 295 1,234 1,694 1,395
Current year provision... 100 470 1,375 1,317 1,302
Balance at end of year... $ 3,911 $ 3,685 $ 3,510 $ 3,369 $ 3,746
Loans at year end........ $321,096 $277,088 $263,296 $265,861 $275,575
Ratio of allowance
to loans at year end... 1.22 % 1.33 % 1.33 % 1.27 % 1.36 %
Average loans............ $299,919 $268,954 $269,843 $268,780 $265,828
Ratio of net loans
charged off to
average loans.......... (.04)% .11 % .46 % .63 % .52 %
As noted above, total charge-offs decreased to $538 in 1994 from
$561 in 1993 and $1,479 in 1992. The improved economy plus
excellent farm crops during the past three years lead to the
reduction of loan charge-offs.
Nonperforming assets are defined as nonaccrual loans for which
the ultimate collectibility of interest is uncertain, but for
which the principal is considered collectible; restructured loans
which have had an alteration to the original interest rate,
repayment terms or principal balance because of a deterioration
in the financial condition of the borrower; and loans past due
over 90 days but still accruing interest because the interest is
ultimately considered collectible. Nonperforming assets also
include other real estate owned which has been acquired through
foreclosure or acceptance of a deed in lieu of foreclosure.
Other real estate owned is carried at the lower of cost or fair
value less estimated selling costs, and is actively being
marketed for sale. The following table sets forth the components
of nonperforming assets and their percentage to loans at the year
end for the past five years.
41
Nonperforming Assets at December 31,
1994 1993 1992 1991 1990
Nonaccrual loans........ $ 571 $ 891 $ 1,355 $ 2,222 $ 3,534
Restructured............ 490 565 265 447 1,010
90 days or more past
due.................... 642 540 626 1,165 586
Total nonperforming
loans.............. $ 1,703 $ 1,996 $ 2,246 $ 3,834 $ 5,130
Percent of loans........ .53 % .72 % .85 % 1.44 % 1.86 %
Other real estate owned. $ 439 $ 367 $ 728 $ 720 $ 555
Percent of loans........ .14 % .13 % .28 % .27 % .20 %
The following table compares the allowance for loan losses and
the total nonperforming loans at year end for the past three
years.
December 31,
1994 1993 1992
Allowance for loan losses..................... $ 3,911 $ 3,685 $ 3,510
Nonperforming loans........................... 1,703 1,996 2,246
Allowance as a percent of nonperforming
loans........................................ 230 % 185 % 156 %
Assets considered to be nonperforming are reviewed more
frequently by management for repayment probability and residual
collateral values. All restructured loans shown above for 1994,
1993, 1992 and 1991 have been performing within the terms of
their restructured agreements. The level of nonperforming loans
decreased $1,588 or 41.42% between 1991 and 1992. The decrease
was primarily attributable to two commercial loan customers
totaling $974 that were on nonaccrual at the end of 1991 but
which had payoffs or were liquidated by the end of 1992. The
decrease between 1990 and 1991 is due to nonperforming loans
being charged off.
In addition to the nonperforming loans, there are other loans in
the portfolio that have been identified by management or through
an ongoing loan review process as having more than a normal
degree of risk. These loans are reviewed quarterly by management
and totalled $5,924 or 1.84% of total loans at December 31, 1994.
Based upon the Corporation's review, considering remaining
collateral and/or financial condition of identified loans with a
more than normal degree of risk, including nonperforming loans,
historical loan loss percentages and economic conditions, it is
management's belief that the $100 of provision for loan losses
during 1994 and the $3,911 of allowance for loan losses at
December 31, 1994, is adequate to cover future possible losses.
42
Allocation of allowance for loan losses at December 31,
1994 1993 1992 1991 1990
Commercial and
agricultural............. $ 965 $ 1,083 $ 1,140 $ 1,431 $ 1,741
Real estate............... 203 227 112 325 507
Installment............... 603 412 359 564 479
Unallocated............... 2,140 1,963 1,899 1,049 1,019
Total.................. $ 3,911 $ 3,685 $ 3,510 $ 3,369 $ 3,746
Composition of loan portfolio by type at December 31,
1994 1993 1992 1991 1990
Commercial and
agricultural......... 49.80 % 51.98 % 50.52 % 52.17 % 49.38 %
Real estate............. 24.75 22.15 26.36 25.43 27.31
Installment............. 25.45 25.87 23.12 22.40 23.31
Total................100.00 % 100.00 % 100.00 % 100.00 % 100.00 %
The allowance for loan loss allocation is based upon the
management's assessment of specific allocation to loan types and
to historical loan loss percentages by loan type. The above
shows a large portion of the allowance for loan loss at year end
1994, 1993 and 1992 that is unallocated and available to cover
unidentified risks in the portfolio due to possible economic
problems and continued loan growth.
The Corporation's loan growth of 15.88% during 1994, including an
11.02% increase in commercial loans, has not added any unusual
risk to the loan portfolio. The market areas served, customers
and types of loans included in the 1994 loan growth were
consistent with those serviced by the Corporation in prior years.
Noninterest Income
A bank typically generates noninterest income through fees and
service charges. The following table outlines the components of
noninterest income for the years 1994, 1993 and 1992.
% Change From
Noninterest Income Analysis Prior Year
1994 1993 1992 1994 1993
Fiduciary income.............. $ 387 $ 419 $ 383 (7.64)% 9.40 %
Deposit service charges....... 1,116 1,174 1,149 (4.94) 2.18
Other operating income........ 894 981 548 (8.87) 79.01
Subtotal.................... 2,397 2,574 2,080 (6.88)% 23.75 %
Security gains/(losses)....... (6) 13 72
Total noninterest income.... $ 2,391 $ 2,587 $ 2,152
Noninterest income in 1994, excluding security gains and losses,
decreased $177 or 6.88% from 1993. Fiduciary income decreased
$32 or 7.64% due to decreases in trust business and lower profits
due to the general increase in the investment market rates. A
portion of the trust business derives profits based on a
42
percentage of profits of individual trust accounts invested in
different market instruments which were valued lower due to the
general rate increase of the market. Deposit service charges
were down $58 or 4.94% due to an overall reduction of fees during
1994 when compared to 1993. Other operating income decreased $87
or 8.87% in 1994 from 1993 due to land sales in 1993 and not in
1994, reduced gains in 1994 on sales of loans held for sale when
compared to 1993 offset by increases in other service charges and
insurance commission income. Noninterest income in 1993,
excluding security gains and losses, increased $494 or 23.75%
from 1992. Fiduciary income increased $36 or 9.40% due to growth
in the trust business during 1993 and generally lower rates in
the investment markets. Deposit service charges stayed almost
the same with only a $25 or 2.18% increase. Other operating
income increased $433 or 79.01% in 1993 from 1992. This growth
is mainly due to increases in customer service charges, insurance
commission income, gain on sale of excess land, gain on sale of
loans held for sale and earnings on cash surrender value of life
insurance.
Noninterest Expense
% Change From
Noninterest Expense Analysis Prior Year
1994 1993 1992 1994 1993
Salaries and employee benefits.. $ 7,168 $ 6,920 $ 6,536 3.58 % 5.88 %
Occupancy expenses.............. 854 779 757 9.63 2.91
Equipment expenses.............. 847 853 767 (.70) 11.21
Data processing expenses........ 442 583 682 (24.19) (14.52)
FDIC insurance.................. 1,008 987 961 2.13 2.71
Other operating expenses........ 3,699 3,204 2,908 15.45 10.18
Total noninterest expense.... $ 14,018 $ 13,326 $ 12,611 5.19 % 5.67 %
Noninterest expense increased $692 or 5.19% in 1994 from 1993 and
increased $715 or 5.67% in 1993 from 1992. Salaries and benefits
increased $248 or 3.58% in 1994 from 1993 with increases in
salaries and related taxes offset by reductions in medical
insurance, life insurance and expenses related to stock
appreciation rights granted to certain key employees. The
decrease in the market value of the Corporation's stock during
1994 decreased the expense related to the stock appreciation
rights by $69 in 1994. Salary and benefits increased $384 or
5.88% in 1993 from 1992 with increases in salaries and related
taxes, medical insurance, pension expense, education expense and
expense related to the stock appreciation rights which was $60
for 1993.
The increases in occupancy expense of $75 or 9.63% in 1994 from
1993 were related to the Corporation opening a new branch,
acquiring another branch and making needed repairs to several
branches during 1994. The change in occupancy expense in 1993
from 1992 was slight with an increase of only $22 or 2.91%.
Equipment expense decreased only $6 in 1994 from 1993 which had
increased $86 or 11.21% from 1992. The equipment expense
increases in 1993 are due mainly to additional depreciation and
contract expense related to continued increases in the use of
technology by the Corporation.
44
Data processing expenses decreased $141 or 24.19% in 1994 from
1993 and decreased $99 or 14.52% in 1993 from 1992. The
Corporation has continued to seek efficiencies by combining the
data processing operations of its affiliate banks. FSB was
converted to ANB's in-house data processing system in 1993 and
CNB and another bank now operated by ANB were converted in 1992.
With the elimination of the outside service bureaus and the
conversion expenses, data processing expenses continue to
decrease.
The FDIC deposit insurance premium rate paid by the Corporation
to provide insurance on customers' deposits was .23% in 1994,
1993 and 1992. The increases in FDIC insurance for 1994, 1993
and 1992 are due entirely to increased insured deposit balances.
The Banks have all been assigned the classification of least risk
by the FDIC and as such will be subject to the lowest possible
FDIC, deposit insurance rates in 1995. With the FDIC fund
approaching its required 1.25% of insured deposits, it is
anticipated that the Corporation's cost for FDIC insurance will
be reduced to .04% sometime during 1995.
Other operating expenses increased $495 or 15.45% in 1994 from
1993. Major increases were professional and legal fees related
to acquisition activities, supplies, telephone, bank processing
fees as the Corporation paid hard dollar charges verses soft
dollar charges, advertising, director fees, other real estate
owned expenses and officer travel expenses offset by reductions
in charitable contributions and loan collection and repossession
expenses. Other operating expenses increased $296 or 10.18% in
1993 from 1992. Major increases were professional and legal fees
related to acquisition activities, supplies, telephone, bank
processing fees, advertising, director fees, publications and
subscriptions, other real estate owned expense offset by
reductions in charitable contributions and loan collection and
repossession expenses.
Income Tax
Effective January 1, 1993, the Corporation adopted Financial
Accounting Standard No. 109 (FAS 109), "Accounting for Income
Taxes." FAS 109 is an asset and liability approach that requires
the recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between
the carrying amounts and the tax basis of assets and liabilities.
In estimating future tax consequences, FAS 109 generally
considers all expected future events other than enactments of
changes in the tax law or rates. The effect of adopting FAS 109
in 1993 was to increase net income by $252 which is shown as the
cumulative effect on prior years of changing to a different
method of accounting for income taxes on the 1993 income
statement.
The Corporation's effective tax rate was 29.27%, 27.31% and
27.89% in 1994, 1993 and 1992. The major differences between the
effective tax rate on the financial statements and the federal
statutory rate of 34% is interest income on tax exempt securities
and loans offset by nondeductible interest, nondeductible merger
expenses and state taxes. The Corporation had tax exempt income
of $2,576, $2,722 and $2,443 for 1994, 1993 and 1992. Note 13 to
the consolidated financial statements contains additional details
45
of the differences between the statutory taxes and taxes shown on
the consolidated financial statements.
Investments
The Corporation's holdings of short-term investments and
securities serve as a source of liquidity to meet depositor and
borrower funding requirements, in addition to being a significant
element of total interest income. Short-term investments,
defined as federal funds sold and interest bearing deposits in
other banks, had combined average outstanding balances of $7,099,
$14,104 and $18,675 for the years 1994, 1993 and 1992. The year
end outstanding balances of short-term investments were $8,193,
$16,236 and $39,892 for 1994, 1993 and 1992. The decreases in
short-term investments is due to large fluctuations in deposits
from public and governmental institutions which are invested in
federal funds sold at year end.
Effective December 31, 1993, the Corporation adopted Financial
Accounting Standard No. 115 (FAS 115), "Accounting for Certain
Investments in Debt and Equity Securities." With the adoption of
FAS 115, all securities were classified by management into one of
two categories either available for sale or held to maturity.
The Corporation does not maintain any securities that are held
for trading. Securities classified as available for sale are
securities that the Corporation intends to hold for an indefinite
period of time, but not necessarily until maturity. These
securities might be used by the Corporation as part of its asset-
liability strategy, or may be sold in response to changes in
interest rates, changes in prepayment risk or other similar
factors. Securities available for sale are carried at market
value with market adjustments, net of related deferred taxes,
being recorded in shareholders' equity as unrealized gain or loss
on securities. The decrease in market value of securities
available for sale during 1994 resulted in a decrease of $4,746
to the carrying value of securities and a $2,962 unrealized loss
on securities in shareholders' equity, which is net of the
deferred taxes of $1,783. The increase in market value of
securities available for sale in 1993 increased the carrying
value of securities by $1,132 and caused an unrealized gain on
securities of $712 in shareholders' equity, net of deferred taxes
of $420. The change in carrying value from 1993 to 1994 of
$5,877 for securities available for sale was caused by the market
change in investment products during 1994. Should rates continue
to increase during 1995 the portfolio will be subject to further
market valuation declines. Prior to December 31, 1993, and the
adoption of FAS 115, all securities owned by the Corporation were
classified as held to maturity. The following table shows the
detail of securities held by the Corporation at year end for the
past three years.
46
Securities at December 31,
1994 1993 1992
Securities available for sale
U.S. Government and its agencies................ $ 89,371 $101,649 $ --
States and political subdivisions............... 1,834 2,471 --
Corporate obligations........................... 3,553 7,620 --
Collateralized mortgage obligations............. 17,138 25,341 --
Mutual funds.................................... 318 359 --
Total securities available for sale.......... 112,214 137,440 --
Securities held to maturity
U.S. Government and its agencies................ -- -- 89,522
States and political subdivisions............... 39,695 38,857 37,072
Corporate obligations........................... -- -- 12,441
Collateralized mortgage obligations............. -- -- 25,706
Total securities held to maturity............ 39,695 38,857 164,741
Total securities............................. $151,909 $176,297 $164,741
The market value of securities held to maturity was $38,707,
$40,734 and $168,031 for 1994, 1993 and 1992. The unrecognized
net market appreciation of securities held to maturity at
December 31, 1994, was comprised of securities with a book value
of $24,689 having a market value of $23,268, or a net unrealized
market decline of $1,421, and securities with a book value of
$15,006 having a market value of $15,439, or a net unrealized
market appreciation of $433.
The Corporation sold $9,451 with net losses of $6, had maturities
and calls of $37,328 and purchased $27,858 for a net book value
decrease of $19,348 in securities available for sale during 1994.
Maturities and calls of $3,232 and purchases of $4,020 resulted
in an increase to securities held to maturity of $838 during
1994. Total net proceeds from securities of $18,127 were used to
fund increased loans during 1994. Securities held to maturity
contain no material unrealized losses as of December 31, 1994.
None of the unrealized losses on securities are deemed to be
other than temporary declines in market values. Other than U.S.
Government and its agencies, there are no concentrations of
securities over 10% of shareholders' equity to any single issuer.
Loans
The loan portfolio constitutes the major earning asset of most
bank holding companies and typically offers the best alternative
for obtaining the maximum interest spread above the cost of
funds. The overall economic strength of any bank holding company
generally parallels the quality and yield of its loan portfolio.
The Corporation's total average loans were $299,919 in 1994 an
increase of $30,965 or 11.51% from 1993. The Corporation had
total average loans of $268,954 in 1993 a decrease of $889 or
.33% from the 1992 total average loans of $269,843. The
following table presents loans outstanding at year end for the
preceding five years.
47
Loans Outstanding at December 31,
1994 1993 1992 1991 1990
Commercial and agricultural....... $159,914 $144,047 $133,011 $138,713 $136,073
Real estate....................... 79,464 61,364 69,410 67,607 75,261
Installment....................... 82,606 72,606 61,677 60,243 64,861
Total loans..................... 321,984 278,017 264,098 266,563 276,195
Unearned income................... (888) (929) (802) (702)
(620)
Total loans, net................ $321,096 $277,088 $263,296 $265,861 $275,575
Commercial and agricultural loans increased $15,867 or 11.02% in
1994 from 1993 and increased $11,036 or 8.30% in 1993 from 1992.
The economy began to rebound in late 1992, and the Corporation
experienced a corresponding increase in new commercial and
agricultural loans starting in mid 1993 and continuing through
1994.
During 1991 the Corporation began originating and/or selling real
estate loans to the secondary mortgage market and established a
new asset category on the balance sheet, loans held for sale,
with balances of $2,664, $16,919, $11,553 and $12,198 at year end
1994, 1993, 1992 and 1991. These conforming fixed rate mortgage
loans could be sold to the secondary market with the Corporation
retaining more than 95% of the servicing rights on these loans
sold. This practice of originating and selling to the secondary
mortgage market was begun because of low interest rates on
mortgage loans which increased consumer demand for fixed rate
loans as opposed to adjustable rate mortgages loans. The
Corporation's strategy has been to hold fixed rate loans during
periods of decreasing rates and sell them during periods of
increasing rates to realize a gain. The portfolio of loans held
for sale at the end of 1993 plus new qualifying loans made during
1994 provided for total sales of $35,676 of these loans with a
corresponding net gain of $229. The Corporation also sold
$39,591, $19,873 and $1,027 of these real estate loans held for
sale in 1993, 1992 and 1991 with corresponding net gains of $265,
$109 and $5. With the drastic increase in fixed mortgage rates
consumers started to request variable rate mortgage loans in 1994
and real estate loans increased $18,100 or 29.50% in 1994 from
1993. During 1993 and prior years real estate loans were
reducing because almost all new loans and loans refinanced were
fixed rate loans and were included with loans held for sale.
Installment loans increased $10,000 or 13.77% in 1994 from 1993
and $10,929 or 17.71% in 1993 from 1992. These increases were
largely attributable to an overall increase in volume of consumer
loans during the period. Consumer lending relates directly to
consumer confidence in the economy which increased in the last
quarter of 1992 and continued to improve in 1993 and 1994.
The loan portfolio contains no loans to foreign governments,
foreign enterprises or foreign operations of domestic
corporations. Other than loans for real estate, equipment and
operating lines to farmers engaged in the agricultural industry,
the Corporation has no concentrations of loans in the same or
similar industries that exceed 10% of total loans.
48
Deposits
The deposit base provides the major funding source for earning
assets of most bank holding companies. Generally, demand,
savings and time certificates less than $100 are recognized as
the core base of deposits while certificates in excess of $100
and public funds are more subject to interest variations and,
thus, are not included in the core deposit base. Because of
these factors, management views the growth of demand, savings and
time certificates less than $100 as more stable growth. The
Corporation's total average core deposits were $404,766 in 1994,
$392,200 in 1993 and $383,053 in 1992. Total average deposits
were $448,324, $441,672 and $432,282 during 1994, 1993 and 1992.
The following table indicates the mix and levels of deposits at
year end for the preceding five years.
Deposits at December 31,
1994 1993 1992 1991 1990
Noninterest bearing............... $ 51,838 $ 50,455 $ 48,373 $ 41,054 $ 41,653
Interest bearing demand
and savings..................... 184,970 190,044 182,164 148,044 154,699
Time, less than $100.............. 172,340 169,234 179,020 193,701 194,025
Time, $100 or more................ 46,086 42,889 41,914 48,227 41,504
Total.......................... $455,234 $452,622 $451,471 $431,026 $431,881
Year end total deposits increased only $2,612 or .58% in 1994
from 1993 and only $1,151 or .25% in 1993 from 1992. During the
last quarter of 1994 with rates increasing, the Corporation
experienced deposit customers returning to the Banks from the
nonbanking institutions such as brokerage firms and insurance
companies. Despite the increase in the demand for deposit
dollars from other banks in the area, the Banks are trying to
increase net interest margin by keeping rates as low as possible.
As a result, the December 31, 1994, deposits saw only a $1,383 or
2.74% increase in noninterest bearing deposits, a decrease of
$5,074 or 2.67% in interest bearing demand and savings, a $3,106
or 1.84% increase in time deposits less than $100 and a $3,197 or
7.45% increase in time deposits over $100 when compared to
December 31, 1993. As stated above, average total deposits
increased $6,652 or 1.51% during 1994 when compared to 1993. At
the end of 1993 rates were still low and the Banks were
experiencing continued competition for deposits from nonbanking
institutions. The December 31, 1993, deposits saw an increase of
$2,082 or 4.30% in noninterest bearing deposits, a $7,880 or
4.33% increase in interest bearing demand and savings, a decrease
of $9,786 or 5.47% in time deposits less than $100 and an
increase of $975 or 2.33% in time deposits over $100 when
compared to December 31, 1992. Average deposits for 1993
increased $9,390 or 2.17% when compared to 1992. The year end
balances for 1991 and 1990 remained almost constant but did show
a $20,445 or 4.74% increase at year end 1992 compared to 1991.
As the economy was softening and rates were declining in 1991 and
1992 the Corporation saw customers becoming more rate conscious
and moving deposit balances to interest bearing deposits.
Average deposits increased $7,179 or 1.69% to $432,282 in 1992
compared to 1991 and increased $16,376 or 4.01% to $425,103 in
1991 from 1990. It should also be noted that the Corporation has
historically had a build up of deposits at year end due to an
49
influx of public funds.
As discussed in Note 20 to the consolidated financial statements,
ANB has entered into a definitive agreement to purchase the total
branch deposits of a Federal Savings Bank in Princeton, Indiana.
This purchase is anticipated to be completed during the first
quarter of 1995 and should provide the Corporation with a
substantial increase in market share and liquidity through
deposit growth during 1995. Deposits of the Federal Savings Bank
branch being acquired were $26,021 at December 31, 1994.
LIQUIDITY AND CAPITAL RESOURCES
(Dollar amounts in thousands, except share and per share data)
Liquidity and Rate Sensitivity
Cash flows for the Corporation occur within the operating,
investing and financing categories as follows: Cash flows from
operating activities emanate primarily from interest income and
fees reduced by interest expense and overhead expense. Investing
activities generate or use cash flows through the origination,
purchase and principal collections of loans; the purchase,
maturities and sales of investments; and the acquisition of
property and equipment for the Corporation. Cash flows from
financing activities occur from deposits and withdrawals of
deposit accounts, increases or decreases in short-term borrowings
and long-term debt, and dividends paid by the Corporation.
The Corporation's use and source of funds can be determined by
the changes in average balances of assets and liabilities. The
following table summarizes funding uses and sources for 1994 and
1993, showing average balances, amount of dollar change from
prior year and the percent change from the prior year.
50
1994
Average Increase/(decrease)
Balance Amount Percent
Funding uses
Loans held for sale................... $ 6,849 $ (8,284) (54.74)%
Taxable loans, net of unearned income. 294,741 32,158 12.25
Tax exempt loans...................... 5,178 (1,193) (18.73)
Taxable securities.................... 121,307 (14,201) (10.48)
Tax exempt securities................. 48,752 10,891 28.77
Interest bearing deposits in other
banks............................... 1,548 710 84.73
Federal funds sold.................... 5,551 (7,715) (58.16)
Total uses.......................... $ 483,926 $ 12,366 2.62 %
Funding sources
Noninterest bearing deposits.......... $ 46,048 $ 2,678 6.18 %
Interest bearing demand and
savings deposits.................... 186,631 5,068 2.79
Time deposits......................... 215,645 (1,094) (.50)
Short-term borrowings................. 6,769 1,826 36.94
Long-term debt........................ 2,924 2,250 333.83
Other................................. 25,909 1,638 6.75
Total sources....................... $ 483,926 $ 12,366 2.62 %
1993
Average Increase/(decrease)
Balance Amount Percent
Funding uses
Loans held for sale................... $ 15,133 $ 4,622 43.97 %
Taxable loans, net of unearned income. 262,583 (335) (.13)
Tax exempt loans...................... 6,371 (554) (8.00)
Taxable securities.................... 135,508 2,661 2.00
Tax exempt securities................. 37,861 8,583 29.32
Interest bearing deposits in other
banks............................... 838 (1,040) (55.38)
Federal funds sold.................... 13,266 (3,531) (21.02)
Total uses.......................... $ 471,560 $ 10,406 2.26 %
Funding sources
Noninterest bearing deposits.......... $ 43,370 $ 3,690 9.30 %
Interest bearing demand and
savings deposits.................... 181,563 21,564 13.48
Time deposits......................... 216,739 (15,864) (6.82)
Short-term borrowings................. 4,943 (655) (11.70)
Long-term debt........................ 674 633 1,543.90
Other................................. 24,271 1,038 4.47
Total sources....................... $ 471,560 $ 10,406 2.26 %
51
Because of the fluctuation of interest rates on fixed rate
mortgage loans, carried as loans held for sale, the Corporation
sold $35,676 in 1994 and $39,591 in 1993 to the secondary
mortgage market and retained servicing rights on more the 95% of
the loans. As rates on fixed rate mortgage loans increase the
Corporation sells them to the secondary mortgage market to
eliminate the possibility of holding long-term loans at a below
market rate. Mortgage rates increased during 1994 and the
Corporation saw the volume of financing and refinancing of homes
decrease. With this volume decrease and the increase in rates,
the Corporation had a $6,849 decrease in average loans held for
sale during 1994 after having an increase of $15,133 during 1993
when rates were still increasing or remaining more stable.
Average taxable loans increased substantially during 1994
compared to 1993 after remaining almost constant during 1993
compared to 1992. The economy strengthened during 1993 and
continued into 1994 and consumer and commercial confidence
increased resulting in increases of $18,097 or 13.88% in average
commercial loans, $10,553 or 15.99% in average consumer loans and
$3,508 or 5.31% in average real estate loans during 1994 compared
to 1993. Average tax exempt loans decreased during 1994 and 1993
due to paydowns and payoffs and little demand as rates were
decreasing. Average taxable securities decreased during 1994 due
to maturities and calls and these cash flows being used by the
Corporation to fund loan growth. Average tax exempt securities
increased during both 1994 and 1993 as the Corporation had need
for tax exempt income in its tax planning and the tax equivalent
rates were higher than taxable securities. The Corporation did
have need for funds during parts of 1994 and 1993 and average
federal funds sold decreased in 1994 from 1993 and in 1993 from
1992. Federal funds sold represent overnight investments of
funds from known short-term depositors such as public and
government entities and short-term borrowings which are mainly
treasury tax deposits plus other excess cash waiting to be
invested in loans or securities. The total of all of the above
resulted in average funding uses increasing $12,366 during 1994
compared to 1993 and $10,406 or 2.26% in 1993 compared to 1992.
Average noninterest bearing deposits and average interest bearing
demand and savings deposits both increased in 1994 and 1993 as
the Corporation saw customers holding more cash in these accounts
due to the economic rebound and more activity. As rates began to
rebound in 1994 customers were hesitant to make deposits to time
deposits hoping that rates would continue to climb and average
time deposits decreased slightly in 1994 from 1993. While rates
remained low during 1993 and the Banks had great competition from
nonbank financial institutions, average time deposits decreased
compared to 1992. Short-term borrowings are a minor source of
funds and consist of customers' treasury tax deposits with the
government controlling when these funds are drawn down. During
1993 ANB became a member of the Federal Home Loan Bank of
Indianapolis (FHLB) and long-term debt is almost entirely from
the FHLB. These borrowings are at a fixed rate and are used for
specific fixed rate lending programs. Long-term debt also
includes deferred compensation as discussed in Note 10. Average
long-term debt increased in both 1994 and 1993 due to borrowings
from the FHLB and deferred compensation during 1994.
52
The Corporation does anticipate a continued loan demand for 1995
but expects to be able to meet this demand with the increase in
deposits as discussed. Other than this, the Corporation does not
foresee any unusual demands on funds for capital outlays or
liquidity needs in the foreseeable future.
Outstanding loan commitments and customers' unused lines of
credit were $62,056 at December 31, 1994, which was an increase
of $10,166 or 19.59% from $51,890 at year end 1993. Standby
letters of credit outstanding at December 31, 1994, increased
$734 or 12.94% to $6,408 from $5,674 at year end 1993. Letters
of credit typically are not funded. To the extent, however, that
letters of credit, loan commitments and customers' unused lines
of credit require funding, these obligations will be met by the
normal conversion of short-term investments, which totalled
$8,193 at year end 1994, and the sale of loans held for sale plus
the increase in deposits discussed. Further liquidity, if
required, would be provided by conversion of securities available
for sale or other assets into cash or accessing sources of
incremental funding such as repurchase agreements or federal
funds purchased.
Two basic aspects of asset-liability management strategy are the
maintenance of adequate liquidity and the monitoring of the
interest sensitivity position.
Liquidity management is the process by which the Corporation
provides the continuing flow of funds necessary to meet all of
its financial commitments on a timely basis. These commitments
include meeting depositor withdrawals, funding credit commitments
to borrowers, repaying debt when due and paying operating
expenses and dividends. Liquidity can be provided, in part, in
the normal course of business from cash flows generated from
interest and fee income, maturing assets and new deposits.
The table below illustrates certain relationships used to measure
the liquidity position of a financial institution and relates
these indices to the Corporation for 1994 and 1993.
December 31,
1994 1993
Short-term investments as a % of total assets......... 13.78 % 17.47 %
Volatile liability dependence - %..................... (6.10) (12.29)
Short-term investments consist of federal funds sold, interest
bearing deposits in other banks and securities that will mature
or reprice within one year. The ratio of short-term investments
to total assets measures the liquidity of the Corporation over a
one year time interval. The 1994 decrease in the short-term
investments ratio was due to a combination of a decrease of
$8,346 or 54.39% in federal funds sold, a decrease of $9,943 or
13.54% in securities and a decrease of $195 or 24.68% in interest
bearing deposits in other banks for a total decrease of $18,484
or 20.63% at December 31, 1994 from 1993 compared to a $3,404 or
.66% increase in total assets at year end 1994 from 1993. The
volatile liability dependence ratio is defined as certificates of
deposit in denominations of $100 or more less short-term
investments divided by total loans plus long-term investments.
53
The Corporation has a negative volatile liability dependence
ratio, which indicates the existence of excess liquidity. In
contrast, a positive ratio would indicate a possible need for
liquidity. The 1994 increase in the volatile liability
dependence ratio from 1993 was due to an increase of $3,197 or
7.45% in certificates of deposits with balances of $100 or more
and a decrease of $18,484 or 20.63% in short-term investments as
described above while loans increased $44,008 or 15.88% and long-
term investments decreased $13,947 or 13.55% at December 31, 1994
from 1993.
Interest rate sensitivity occurs when assets or liabilities are
subject to rate and yield changes within a designated time
period. The rate sensitivity position, or gap, is determined by
the difference in the amount of rate sensitive assets and rate
sensitive liabilities at various maturity intervals. The
management of this gap position is required to protect the net
interest rates and to assure a greater degree of earnings
stability. Provided below is various repricing information
relative to securities, loans and deposits at December 31, 1994.
54
Maturities and Average Yields at December 31, 1994
1 Year and Less 1 - 5 Years 5 - 10 Years
Amount Yield Amount Yield Amount Yield
U.S. Treasury............. $ 8,113 4.62 % $ 11,389 5.18 % $ -- -- %
Federal agencies.......... 17,235 5.70 41,021 5.43 8,340 5.96
State and municipal....... 4,729 10.42 13,311 8.71 22,183 7.45
Corporate obligations..... 1,454 5.22 927 5.32 -- --
Collateralized
mortgage obligations.... 3,429 5.87 9,497 6.06 -- --
Mutual funds.............. -- -- -- -- -- --
Total.................. $ 34,960 6.07 % $ 76,145 6.02 % $ 30,523 7.02 %
Over 10 Years Total
Amount Yield Amount Yield
U.S. Treasury............. $ -- -- % $ 19,502 4.95 %
Federal agencies.......... 3,273 5.47 69,869 5.56
State and municipal....... 1,306 7.39 41,529 8.19
Corporate obligations..... 1,172 6.76 3,553 5.75
Collateralized
mortgage obligations.... 4,212 6.75 17,138 6.19
Mutual funds.............. 318 6.60 318 6.60
Total.................. $ 10,281 6.42 % $151,909 6.26 %
55
Maturity Ranges of Time Deposits
with Balances of $100 or More at December 31,
1994 1993 1992
Three months or less.................... $ 21,630 $ 16,529 $ 18,475
Three through six months................ 9,542 6,762 8,703
Six through twelve months............... 6,901 7,313 7,719
Over twelve months...................... 8,013 12,285 7,017
Total................................ $ 46,086 $ 42,889 $ 41,914
Loan Maturities at December 31, 1994
1 Year 1 - 5 Over 5
and less Years Years Total
Commercial and agricultural...... $107,962 $ 40,030 $ 10,995
$158,987
Economic development bonds....... 505 305 117
927
Total selected loans.......... $108,467 $ 40,335 $ 11,112
$159,914
There were no material real estate construction loans outstanding
at December 31, 1994.
Interest rate sensitivity of above loans maturing after one year
follows.
Fixed rate.......................... $ 21,808
Variable rate....................... 29,639
Total selected loans............. $ 51,447
Liquidity and Interest Rate
Sensitivity at December 31, 1994
0 - 90 91 - 365 1 - 5
Days Days Years
Interest earning assets
Loans...................................... $ 84,972 $ 91,082 $ 126,006
Securities................................. 38,393 25,111 42,872
Other...................................... 7,198 397 497
Total................................... $ 130,563 $ 116,590 $ 169,375
Interest bearing liabilities
Savings and demand deposits................ $ 184,970 $ -- $ --
Time, less than $100....................... 61,583 61,012 46,657
Time, $100 or more......................... 25,552 13,523 6,208
Other...................................... 5,694 587 1,427
Total................................... $ 277,799 $ 75,122 $ 54,292
Rate sensitive gap............................ $(147,236) $ 41,468 $ 115,083
Rate sensitive cumulative gap................. (147,236) (105,768) 9,315
Percent to total assets....................... (28.53)% (20.49)% 1.80 %
Rate sensitive gap is defined as the difference between the
repricing of interest earning assets and the repricing of
interest bearing liabilities within certain defined time frames.
Rate sensitive gap is also expressed as a percentage of total
assets based upon the accumulation of the defined time frame gap
calculation. Rate sensitive gaps constantly change as funds are
56
acquired and invested and the Corporation's analysis as of
December 31, 1994, is shown above. As of year end 1994, the
Corporation had a negative gap of $105,768 and 20.49% during the
next one year period with a negative gap of $147,236 and 28.53%
relating to the first quarter of 1995. The effect of these
negative gaps may result in a negative impact on earnings in 1995
if interest rates increase, but could result in a positive impact
on earnings if interest rates decline in 1995. The above rate
sensitivity analysis is significantly impacted by the inclusion
of savings and demand deposits in the first quarter of the gap
analysis. These deposits have historically not exhibited the
same degree of sensitivity to rate changes as other liabilities
because deposit rates are set by the Corporation. If the above
analysis were changed to reflect the Corporations' actual
historical results, the savings and demand deposits would be
moved to the one to five year time frame. With this change the
Corporation would have a positive gap of $79,202 or 15.35% during
the next one year period and a positive gap of $37,734 or 7.31%
relating to the first quarter of 1995.
Capital
The Corporation's shareholders' equity at December 31, 1994, was
$49,037, an increase of $77 or .16% from the December 31, 1993,
total of $48,960. With the adoption of FAS 115, as disclosed in
Note 1 of the consolidated financial statements, the Corporation
had a mark-to-market adjustment for securities available for sale
of a negative $2,962 at December 31, 1994, and a positive $712 at
December 31, 1993, which are included in shareholders' equity as
unrealized gain or loss on securities available for sale. The
Corporation's regulators have issued guidelines stating that this
unrealized gain or loss on securities, other than those related
to mutual funds (FAS 115 adjustments), should not be included in
shareholders' equity for capital ratio calculations. The
Corporation's shareholders' equity, as defined by its regulators,
increased $3,735 or 7.75% to $51,952 at December 31, 1994, from
$48,217 at December 31, 1993.
Capital adequacy in the banking industry is evaluated primarily
by the use of three required capital ratios based on three
separate calculations; leverage capital, Tier 1 risk-based
capital and total risk-based capital. The leverage capital ratio
is defined as total ending Tier 1 capital divided by total
average assets less intangible assets and FAS 115 adjustments.
Tier 1 risk-based capital is defined as Tier 1 capital divided by
risk-weighted assets. Total risk-based capital is defined as
Tier 1 capital plus Tier 2 capital divided by risk-weighted
assets. Tier 1 capital is the sum of the core capital elements
(common shareholders equity, qualifying perpetual preferred stock
and minority interest in the equity accounts of consolidated
subsidiaries) less intangible assets and the FAS 115 adjustments.
Tier 2 capital consists of the allowance for loan losses (limited
to a maximum of 1.25% of risk-weighted assets), perpetual
preferred stock, and other hybrid capital instruments. Risk-
weighted assets are defined to include the assets on the balance
sheet and off-balance sheet financial instruments in broad risk
categories that are weighted at 20% to 100% depending on the
asset totals within these defined broad categories.
57
A well capitalized institution is defined as an institution with
a leverage capital ratio of 5% or better, and an adequately
capitalized institution is defined as an institution with a
leverage capital ratio of 4%. The Corporation currently meets
the well capitalized classification and intends to maintain
capital to remain in this classification. The minimum Tier 1
capital ratio standard for an institution is defined at 4% and
the minimum total capital ratio is defined to be 8%. As shown
below the Corporation's capital adequacy exceeds the required
capital ratios as defined by its regulators.
Under Guidelines
Effective
1994
Capital components
Tier 1 capital.............................. $ 51,764
Total capital............................... 55,675
Assets
Risk-weighted assets and
off-balance sheet instruments............. $ 361,374
Intangible assets........................... 188
Capital ratios
Leverage.................................... 10.14 %
Tier 1 risk-based capital................... 14.32
Total risk-based capital.................... 15.41
Minimum guidelines (adequately capitalized)
Leverage.................................... 4.00 %
Tier 1 risk-based capital................... 4.00
Total risk-based capital.................... 8.00
Capital ratios in excess of
minimum guidelines
Leverage.................................... 6.14 %
Tier 1 risk-based capital................... 10.32
Total risk-based capital.................... 7.41
INTERIM FINANCIAL DATA
(Dollar amounts in thousands, except share and per share data)
The following table sets forth the quarterly results of
operations and per share information for the years ended December
31, 1994 and 1993.
58
Quarter Ended
December September June March
1994 31 30 30 31
Interest Income....................... $ 9,205 $ 8,959 $ 8,567 $ 8,292
Interest expense...................... 4,118 4,002 3,811 3,669
Net interest income................. 5,087 4,957 4,756 4,623
Provision for loan losses............. -- 50 -- 50
Noninterest income.................... 546 592 543 710
Noninterest expense................... 3,553 3,435 3,506 3,524
Income before income taxes.......... 2,080 2,064 1,793 1,759
Income taxes.......................... 595 614 521 523
Net income.......................... $ 1,485 $ 1,450 $ 1,272 $ 1,236
Per share
Net income.......................... $ .63 $ .61 $ .54 $ .52
Stock price (Note A)................ 31.00 31.50 32.25 32.25
Weighted average shares............... 2,370,350 2,370,085 2,369,784 2,369,784
1993
Interest Income....................... $ 8,369 $ 8,525 $ 8,589 $ 8,554
Interest expense...................... 3,815 3,921 3,938 4,046
Net interest income................. 4,554 4,604 4,651 4,508
Provision for loan losses............. 135 95 115 125
Noninterest income.................... 705 636 605 641
Noninterest expense................... 3,481 3,424 3,186 3,235
Income before income taxes
and cumulative effect of
accounting change................. 1,643 1,721 1,955 1,789
Income taxes.......................... 439 457 552 493
Income before cumulative effect
of accounting change ............. 1,204 1,264 1,403 1,296
Cumulative effect on prior years of
changing to a different method of
accounting for income taxes......... -- -- -- 252
Net income.......................... $ 1,204 $ 1,264 $ 1,403 $ 1,548
Per share
Income before cumulative effect of
accounting change ................ $ .51 $ .53 $ .59 $ .55
Net income.......................... .51 .53 .59 .66
Stock price (Note A)................ 36.75 33.50 33.00 33.00
Weighted average shares............... 2,369,784 2,369,784 2,369,784 2,369,784
Note A - The stock price above represents the sales
price of the last actual trade in each respective
quarter as reported in the Wall Street Journal.
PENDING ACQUISITIONS
(Dollar amounts in thousands, except share and per share data)
As described in Note 20 to the consolidated financial statements,
the Corporation has entered into a definitive agreement to
acquire First Robinson Bancorp (FRB), the parent holding company
for the First National Bank in Robinson, Illinois. Consummation
of the transaction remains subject to the receipt of the
appropriate regulatory approvals, approval by shareholders of FRB
and satisfaction of other conditions. The transaction will be
accounted for under the pooling of interests method, and
accordingly, the future consolidated financial statements of the
Corporation will be retroactively restated to include the assets,
liabilities, equity, income and expenses of FRB for all prior
59
periods. The Corporation has offered between 555,075 and 666,090
shares of its common stock for all of the outstanding shares of
FRB. The actual number of shares of the Corporation's stock to
be issued for FRB will be based upon the actual market value of
the Corporation's stock immediately prior to the consummation of
the transaction.
The following table sets forth net income per share and
shareholders equity per share on a pro forma basis as if the FRB
acquisition had occurred as of January 1, 1994. The pro forma
information is prepared based upon the issuance of 610,582 (the
mean between 555,075 plus 666,090) common shares of the
Corporation in exchange for all common shares of FRB.
AMBANC Corp.
AMBANC Corp. Pro Forma
Net income per share for 1994......... $ 2.30 $ 2.18
Shareholders' equity per share at
December 31, 1994................... 20.67 19.53
The pro forma 1994 data may not be indicative of the results that
actually would have occurred if the FRB acquisition had occurred
at the beginning of 1994, or that may be obtained in the future.
Management anticipates that the FRB acquisition will initially be
dilutive to earnings per share, however, management also believes
that this dilution will be recovered through strategic advantages
to the Corporation in future years.
As described in Note 20 to the consolidated financial statements,
ANB entered into a definitive purchase and assumption agreement
with a Federal Savings Bank to purchase the building and the
outstanding deposits at the date of closing, of their Princeton,
Indiana branch. The transaction is anticipated to be completed
during the first quarter of 1995 and will be accounted for as a
purchase. The transaction will create approximately $1,850 of
goodwill which will be amortized to expense over the next fifteen
years. Total deposits of the Federal Savings Bank branch to be
acquired were $26,021 as of December 31, 1994.
PENDING CHANGES
As described in Note 19 to the consolidated financial statements,
the Corporation will be subject to Financial Accounting Standard
No. 114, "Accounting by Creditors for Impairment of a Loan"
starting in 1995. Under this standard if the measured value of
expected future cash flows of an impaired loan is less than the
loan balance, the loan should be written down. The Corporation
has determined that the impact of this standard will be
immaterial to its financial statements.
INFLATION
For a financial institution, effects of price changes and
inflation vary considerably from an industrial organization.
Changes in the prices of goods and services are the primary
determinant of an industrial company's profit, whereas changes in
interest rates have a major impact on a financial institution's
60
profitability. Inflation affects the growth of total assets, but
it is difficult to assess its impact because neither the timing
nor the magnitude of the changes in the consumer price index
directly coincide with changes in interest rates.
During periods of high inflation there are normally corresponding
increases in the money supply. During such times financial
institutions often experience above average growth in loans and
deposits. Also, general increases in the prices of goods and
services will result in increased operation expenses. Over the
past few years the rate of inflation has been relatively low, and
its impact on the growth in the balance sheets and increased
levels of income and expense has been nominal.
Market Price of AMBANC Corp. Common Stock and
Related Shareholder Matters
(Dollar amounts in thousands, except share and per share data)
The Corporation's common stock is traded on The Nasdaq Small-Cap
Market (NASDAQ) under the symbol AMBK. The quarterly range of
the low and high bid prices per share of the Corporation's common
stock, as reported by NASDAQ, are shown below. This information
represents prices between dealers and does not include
adjustments for mark-ups, mark-downs or commissions and does not
necessarily represent actual prices on transactions.
1994 1993
Stock Range Stock Range
1st Quarter............. $ 32.75 - 37.00 $ 31.25 - 33.50
2nd Quarter............. 30.25 - 33.00 32.50 - 35.50
3rd Quarter............. 30.25 - 33.00 31.50 - 34.25
4th Quarter............. 30.25 - 32.50 32.00 - 35.25
As of December 31, 1994, there were approximately 1,380
shareholders of record. The Corporation pays cash dividends on a
quarterly basis. Cash dividends paid by the Corporation were
$.84 per share in 1994 and $.80 per share in 1993 and 1992. Cash
dividends, as restated to reflect the acquisitions of FSB and BOC
under the pooling of interests method of accounting were $.75,
$.65 and $.60 for the years 1994, 1993 and 1992. Refer to Note
16 to the consolidated financial statements for information
concerning restrictions on dividends.
All share and per share amounts have been retroactively adjusted
to reflect the effect of the shares issued in the business
combinations discussed in Note 2 to the consolidated financial
statements, as though the shares had been outstanding for all
periods presented. Earnings per share amounts are based on
average outstanding shares of 2,370,004 in 1994 and 2,369,784 in
1993 and 1992.
AMBANC SERVICE AREA
[Sections of Illinois/Indiana maps pointing out
Bank of Casey, Farmers' State Bank, Citizens' National Bank of
Linton and American National Bank of Vincennes]
61
AMBANC CORP. AND SUBSIDIARIES
FIVE YEAR SUMMARY
(Dollar amounts in thousands, except per share data)
1994(a) 1993(a) 1992 1991 1990
AT PERIOD END
Actual balances
Assets..................... $ 516,096 $ 512,692 $ 506,643 $ 484,352 $ 482,863
Securities................. 151,909 176,297 164,741 159,577 151,433
Loans...................... 321,096 277,088 263,296 265,861 275,575
Allowance for loan losses.. 3,911 3,685 3,510 3,369 3,746
Deposits................... 455,234 452,622 451,471 431,026 431,881
Shareholders' equity....... 49,037 48,960 44,333 40,832 37,560
Daily averages
Assets..................... $ 509,074 $ 496,586 $ 484,570 $ 475,904 $ 462,967
Securities................. 170,059 173,369 162,125 159,059 151,118
Loans...................... 299,919 268,954 269,843 268,780 265,828
Allowance for loan losses.. 3,799 3,567 3,340 3,431 3,660
Deposits................... 448,324 441,672 432,282 425,103 408,727
Shareholders' equity....... 48,784 46,157 42,892 39,017 36,411
OPERATING RESULTS
Interest income.............. $ 35,023 $ 34,037 $ 37,145 $ 42,419 $ 43,718
Net interest income.......... 19,423 18,317 18,679 17,685 16,550
Provision for loan losses.... 100 470 1,375 1,317 1,302
Income before cumulative
effect of accounting change 5,443 5,167 4,936 4,601 3,931
Net income................... 5,443 5,419 4,936 4,601 3,931
Dividends paid on
common stock............... 1,766 1,532 1,424 1,352 1,231
PER SHARE DATA
Income before cumulative
effect of accounting change $ 2.30 $ 2.18 $ 2.08 $ 1.94 $ 1.66
Cumulative effect of
accounting change.......... -- .11 -- -- --
Net income................... 2.30 2.29 2.08 1.94 1.66
Cash dividends before
pooling of interests....... .84 .80 .80 .80 .80
Cash dividends restated for
pooling of interests....... .75 .65 .60 .57 .52
Book value at end of period.. 20.69 20.66 18.71 17.23 15.85
Book value at end of period
before FAS 115............. 21.92 20.35 18.71 17.23 15.85
Tangible book value at
end of period.............. 20.61 20.64 18.68 17.20 15.82
Tangible book value at end
of period before FAS 115... 21.84 20.33 18.68 17.20 15.82
Weighted average
shares outstanding......... 2,370,004 2,369,784 2,369,784 2,369,784 2,369,784
RATIOS
Return on average assets..... 1.07 % 1.09 % 1.02 % .97 % .85 %
Return on average equity..... 11.16 11.74 11.51 11.79 10.80
Dividends paid as a
percent of net income...... 32.46 28.27 28.85 29.39 31.32
Leverage capital (Tier 1
equity/average
tangible assets)............ 10.14 9.70 9.14 8.57 8.10
Efficiency ratio............. 64.26 63.75 60.54 62.40 63.61
(a) - reflects FAS 115 adjustments.
62
FINANCIAL TRENDS
Graph showing Income per share before accounting change:
1990: $1.66
1991: $1.94
1992: $2.08
1993: $2.18
1994: $2.30
Graph showing Tangible book value per share before FAS 115:
1990: $15.82
1991: $17.20
1992: $18.68
1993: $20.33
1994: $21.84
Graph showing Leverage capital:
1990: 8.10%
1991: 8.57%
1992: 9.14%
1993: 9.70%
1994: 10.14%
[picture
of flag]
"We confide in our
strength, without
boasting of it;
we respect that
of others, without
fearing it"
- Thomas Jefferson
63
CORPORATION ORGANIZATION
AND BANKING LOCATIONS
THE AMERICAN NATIONAL BANK OF VINCENNES
DIRECTORS:
Robert G. Watson Chairman of the Board, President and C.E.O.
Glen G. Apple Farmer
Paul E. Brocksmith, D.V.M. Retired
Christina M. Ernst President, Miller Construction Company
Robert D. green President, R D Services, Inc.
Rolland L. Helmling President, Harold's Supermarkets, Inc.
Gerry M. Hippensteel, M.D. Physician
Ray J. Lankford Co-Owner, WRAY Radio Station
Bernard G. Niehaus President, Niehaus Lumber Co., Inc.
John A. Stachura, Jr. Superintendent, Solar Sources Underground
Phillip M. Summers, Ph.D. President, Vincennes University
Howard R. Wright Retired
BANKING LOCATIONS:
Main Office 302 Main Street, Vincennes, Indiana
Vigo Drive-In 33 South 3rd Street, Vincennes, Indiana
North Branch 2202 North 6th Street, Vincennes, Indiana
Bicknell Branch 201 North Main Street, Bicknell, Indiana
Bicknell Drive-In Highway 67 West and Mason Street, Bicknell,
Indiana
Sandborn Branch Anderson and College Streets, Sandborn,
Indiana
Monroe City Branch 1st and Breckinridge Streets, Monroe City,
Indiana
Princeton Branch 1910 West Broadway, Princeton, Indiana
Patoka Branch 416 West Grave Street, Patoka, Indiana
CITIZENS' NATIONAL BANK OF LINTON
DIRECTORS:
Sherman L. Anderson Chairman of the Board, President and C.E.O.
E. Joe Angell Owner, E & W Foods and Angell Leasing
Glen G. Apple Farmer
Donald R. Gregg Vice President, A.M. Risher Trucking, and
Owner, Park Inn
William R. Powers, M.D. Physician
Dan J. Robinson Executive Vice President, American National
Bank
George Williams Retired
William Witherspoon, D.D.S. Retired
BANKING LOCATIONS:
Main Office 89 West Vincennes Street, Linton, Indiana
Linton Shopping Center 1600 A Street N.E., Linton, Indiana
64
FARMERS' STATE BANK OF PALESTINE
DIRECTORS:
Owen M. Landrith Chairman of the Board
Judith K. Adams President, Trust Officer and C.E.O.
Paul E. Brocksmith, D.V.M. Retired
Wendel Goodwin Retired
James M. Goodwine Owner, Goodwine Funeral Homes
Donald K. Magill Owners, Magill Home Furnishings
G. Kent Philips Retired
Paul W. Postlewaite Farmer
Richard E. Welling Secretary, Treasurer and C.F.O.,
AMBANC Corp.
BANKING LOCATION:
Main Office 101 North Main Street, Palestine,
Illinois
BANK OF CASEY
DIRECTORS:
Robert E. Seed Chairman of the Board, President and C.E.O.
T. W. Ahrens Owners, Casey Foods, Inc.
Bill Crouch Farmer, and Secretary/Treasurer, Casey
Fertilizer, Inc.
Joan Finkbiner Owner, Century 21 Crossroads Realty
Dale Huisinga Farmer, and President, Huisinga Grain, Inc.
Denzel Melton Retired
William F. Perry Senior Vice President, American
National Bank
P. A. Tranbrug Retired
BANKING LOCATIONS:
Main Office 101 W. Alabama Street, Casey, Illinois
Martinsville Branch 55 W. Cumberland Street, Martinsville,
Illinois
West Union Branch Rt. 1 South, West Union, Illinois
Westfield Branch 103 E. State Street, Westfield, Illinois
[picture
of flag]
"Build for your team a feeling of oneness, of dependence on one another and
of strength to be derived by unity.
- Vince Lombardi
65
INVESTOR INFORMATION
EXCHANGE
NASDAQ Small-Cap Market
SYMBOL
AMBK
MARKET MAKERS
J. J. B. Hilliard, W. L. Lyons, Inc.
(812) 886-6310 or (800) 688-6310
Howe Barnes Investments, Inc.
(312) 655-2959 or (800) 800-4693
David A. Noyes & Company
(317) 633-1743 or (800) 285-1700
Raffensperger, Hughes & Co., Inc.
(800) 382-1126 Indianapolis or (800) 321-7442
Evansville
TRANSFER AGENT
Shareholders should direct inquiries concerning their
shareholder records to:
Bank One Indianapolis, N.A.
Bank One Center/Tower
Attn: Harriett M. Neer
Suite 1611
111 Monument Circle
Indianapolis, IN 46277
(317) 321-7627 or (800) 735-7107
Upon written request, the Corporation will provide to
each shareholder, without charge, a copy of the
Corporation's Annual Report on Form 10-K for 1994,
including the financial statements thereto but omitting
exhibits. Requests should be addressed to:
Dennis M. Flack, Investor Relations
AMBANC Corp.
302 Main Street
P. O. Box 556
[picture Vincennes, IN 47591-0556
of flag] (812) 885-6418
66
[picture
of flag]
DESIGN
Advertising Visions, Inc./
CAVUdesign
PRINTING
Ewing Printing, Inc.
67
[back cover]
[picture of flag] AMBANC
CORP.
302 Main Street
Post Office Box 556
Vincennes, Indiana 47591-0556