ITEM 1. BUSINESS - ------------------------------------------------------------------------------
GENERAL
ANB Corporation (the "Registrant") is a multibank holding company located in Muncie, Indiana, engaged in the business of commercial banking, and trust and asset management. The business of the Registrant is conducted through its financial institution and trust subsidiaries, American National Bank and Trust Company of Muncie ("American National"), American National Trust and Investment Management Company ("ANTIM") and Peoples Loan & Trust Bank ("Peoples"), which provide a broad range of financial services.
American National is a national banking association with its principal offices in Muncie, Delaware County, Indiana. American National was originally incorporated under the laws of the State of Indiana in 1918. In 1960, American National received its charter as a national banking association. Muncie Federal Savings Bank ("Muncie Federal"), a federally chartered mutual savings and loan association, was acquired by the Registrant in 1991 and converted to a savings bank. Muncie Federal and American National merged in 1993. The acquisition of Muncie Federal benefited the Registrant through an increase in market share and an expansion of its operations. The additional Muncie Federal offices allowed American National to increase the number of full service banking locations within Delaware County and to expand into Jay County, Indiana, northeast of the Registrant's home county. At December 31, 1997, American National had assets of $358.3 million, deposits of $280.8 million and stockholder's equity of $30.6 million.
The Registrant acquired Winchester Bancorporation ("Winchester") in Winchester, Indiana and its subsidiary bank, Peoples in early 1994. The Registrant acquired 100% of the outstanding common stock of Winchester for approximately $11.0 million. Peoples' customers are located primarily in Randolph, Wayne and surrounding counties. In December, 1995, The Saratoga State Bank ("Saratoga"), previously a subsidiary of the Registrant, was merged into Peoples. Saratoga was located in Saratoga, Randolph County, Indiana, immediately east of the Registrant's home county. In 1997, Peoples acquired a branch in Parker City, Indiana with deposits approximately $9 million. At December 31, 1997, Peoples had assets of $158.3 million, deposits of $131.1 million and stockholder's equity of $16.6 million.
ANTIM, previously the trust department of American National, traces its history to 1900 and is the successor of The Muncie Trust Company. To capitalize on its profitable $1.5 billion trust operation, American National formed its previously wholly owned subsidiary, ANTIM, which has succeeded to American National's trust business. Ownership of ANTIM was transferred from American National to the Registrant in December, 1996. ANTIM provides trust and asset management services with offices in Indianapolis, Anderson, Fort Wayne, Winchester and Muncie. In September 1997, ANTIM acquired a 15% interest in Indiana Trust & Investment Management Company in Mishawaka, Indiana, and under a Stock Acquisition Agreement, is obligated to acquire the remaining 85% by the year 2002, subject to various terms and conditions. Trust operations provide a significant source of fee income to the Registrant and in 1997 constituted 10.8% of the Registrant's total operating income.
ANB Financial Planning Services ("ANBFPS") is a wholly owned subsidiary of American National. ANBFPS offers a full range of financial planning services.
The Registrant provides its commercial banking, trust and asset management products and services through its 26 affiliated offices in eight Indiana counties, and this expanded financial base has enabled it to compete with larger bank holding companies in east central Indiana.
BUSINESS ACTIVITIES
American National and Peoples offer a wide range of depository, lending, fiduciary and related financial services to individual and business customers. The financial institutions offer checking and savings plans; investment accounts consisting of certificates of deposit, money market deposit accounts, IRA accounts and interest paying deposit accounts; provide lending services consisting of simple interest consumer loans, car and home improvement loans, student loans, commercial loans and mortgage loans; and offer credit cards (Master Card and Visa), safety deposit services, travelers checks, U. S. Savings Bonds, night depositories, bank by mail and automatic transfer services. Automated teller machines provide 24-hour service in Muncie, Winchester, Richmond, Parker City, Portland, Farmland and Yorktown. Trust services are provided to both individual and corporate customers, including personal trust and agency accounts, employee benefit plans and corporate bond trustee accounts.
The lending philosophy of the Registrant is to develop sound loans with the resources of its subsidiary financial institutions. The subsidiaries emphasize loans to existing customers, potential customers in proximity to the branch offices and potential customers within their respective market areas. The Registrant lends almost exclusively within its market area and does not make loans to foreign countries.
The Registrant is dedicated to minimizing risk in the loan portfolio through careful pre-loan investigation, through clearly understood loan terms, through acquisition of adequate collateral and through close monitoring of loan and financial information on customer accounts. Efforts are made to avoid industry concentrations by type of business through diversification of borrowers.
EMPLOYEES
As of December 31, 1997, the Registrant and its subsidiaries had approximately 275 full-time equivalent employees to whom it provides a variety of benefits and with whom it enjoys excellent relations.
STATISTICAL INFORMATION
The following tables present statistical information with respect to the Registrant, which is not included in Registrant's 1997 Annual Report to Shareholders.
LOAN PORTFOLIO
Types of Loans - --------------
The loan portfolio at the dates indicated is presented below:
Maturities and Sensitivities of Loans to Changes in Interest Rates - ------------------------------------------------------------------
Presented in the table below are the maturities of the commercial loan portfolio and the sensitivity of the portfolio at December 31, 1997 as to predetermined or adjustable interest rates.
Principal balances of term loans included in the 1-5 Years and Over 5 Years categories are shown based on maturity date.
Risk Elements - -------------
Nonaccrual, past due and restructured loans
*Impaired loans for 1997 included in nonaccruing loans totaled $190; impaired loans for 1996 included in nonaccruing and restructured loans totaled $657 and $63, respectively.
Nonaccruing loans are loans which are reclassified to a nonaccruing status when in management's judgment the collateral value and financial condition of the borrower do not justify accruing interest. Interest previously recorded but not deemed collectible is reversed and charged against current income. Interest income on these loans is then recognized when collected.
Restructured loans are loans for which the contractual interest rate has been reduced or other concessions are granted to the borrower because of a deterioration in the financial condition of the borrower resulting in the inability of the borrower to meet the original contractual terms of the loans.
Interest income of $59,000 for the year ended December 31, 1997 was recognized on the nonaccruing and restructured loans listed in the table above, whereas interest income of $83,000 would have been recognized under their original loan terms.
Potential problem loans:
Management has identified additional impaired loans of $518,000 as of December 31, 1997, not included in the risk element table, about which there are doubts as to the borrowers' ability to comply with present repayment terms. Loans are considered to be impaired when it becomes probable that the bank subsidiaries will be unable to collect all amounts due according to the contractual terms of the loan agreement.
Risk elements are considered by management in determining the appropriate level of the allowance for loan losses.
Allocation of the Allowance for Loan Losses at December 31 - ----------------------------------------------------------
Presented below is an analysis of the composition of the allowance for loan losses (in thousands) and per cent of loans in each category to total loans:
Loan Loss Charge-off Procedures - -------------------------------
The subsidiary financial institutions have weekly loan committee meetings at which loans in excess of certain amounts are approved or disapproved and loan delinquencies, maturities and problems are reviewed.
The boards of directors of the subsidiaries receive and review reports on loans monthly, including information on new and renewed, delinquent and problem loans.
All chargeoffs are reported to and approved by the subsidiaries' boards monthly. Loans are charged off when a determination is made that all or a portion of a loan is uncollectible or as a result of examinations by regulators and the independent auditors.
Provision for Loan Losses - -------------------------
In banking, loan losses are one of the costs of doing business. Although the financial institutions' management emphasize the early detection and chargeoff of loan losses, it is inevitable that at any time certain losses exist in the portfolio which have not been specifically identified. Accordingly, the provision for loan losses is charged to earnings on an anticipatory basis, and recognized loan losses are deducted from the allowance so established. Over time, all net loan losses must be charged to earnings. During the year, an estimate of the loss experience for the year serves as a starting point in determining the appropriate level for the provision. However, the amount actually provided in any period may be greater or less than net loan losses, based on management's judgment as to the appropriate level of the allowance for loan losses. The determination of the provision in any period is based on management's continuing review and evaluation of the loan portfolio, and its judgment as to the impact of current economic conditions on the portfolio. The evaluation by management includes consideration of past loan loss experience, changes in the composition of the loan portfolio, the current condition and amount of loans outstanding, and the probability of collecting all amounts due.
SECURITIES PORTFOLIO
The carrying values of the components of the securities portfolio at the dates indicated were:
(1) Available for sale securities are carried at market value.
The maturity distribution and average yields for the securities portfolio at December 31, 1997 were:
(2) Available for sale amounts shown in the maturity distribution table are at amortized cost for computation of yields.
* Interest yields on state and municipal securities are presented on a fully taxable equivalent basis using a 34% rate after adjustment for effect of non-deductible interest expense attributed to such investments.
DEPOSITS
The following table shows the average amount of deposits and the average rate of interest paid thereon for the years indicated.
As of December 31, 1997, certificates of deposit and other time deposits of $100,000 or more mature as follows:
SHORT-TERM BORROWINGS
Securities sold under repurchase agreements are borrowings maturing within one year and are secured by U. S. Treasury and Federal agencies securities.
Pertinent information with respect to short-term borrowings is summarized below:
REGULATION AND SUPERVISION OF THE REGISTRANT
The Registrant is a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended ("BHCA"), and is registered as such with the Board of Governors of the Federal Reserve System ("Federal Reserve"). The Registrant is examined, regulated and supervised by the Federal Reserve and is required to file annual reports and other information regarding its business and operations and the business and operations of its subsidiaries with the Federal Reserve. The Federal Reserve has the authority to issue cease-and-desist orders against a bank holding company and nonbank subsidiaries if it determines that activities of such entities represent an unsafe and unsound practice or a violation of law.
Under the BHCA, a bank holding company is, with limited exceptions, prohibited from acquiring direct or indirect ownership or control of voting stock of any company which is not a bank and from engaging in any activity other than managing or controlling banks. A bank holding company may, however, own shares of a company engaged in activities which the Federal Reserve has determined to be so closely related to banking or managing or controlling banks as to be a proper incident thereto.
Acquisitions by the Registrant of banks and savings associations are subject to federal and state regulation. Any acquisition by the Registrant of more than five percent of the voting stock of any bank requires prior approval of the Federal Reserve. Acquisition of savings associations is also subject to the approval of the Office of Thrift Supervision ("OTS").
Federal law imposes, with certain limited exceptions, a "cross-guarantee" on the part of commonly controlled depository institutions. Under this provision, if one depository institution subsidiary of a multi-unit holding company, such as the Registrant, fails or requires Federal Deposit Insurance Corporation ("FDIC") assistance, the FDIC may assess a commonly controlled depository institution for the loss or estimated loss suffered by the FDIC. While the FDIC's claim is junior to the claims of nonaffiliated depositors, holders of secured liabilities, general creditors, and subordinated creditors, it is superior to the claims of stockholders and any affiliate of the depository institution. In addition, under Federal Reserve policy the Registrant is expected to act as a source of financial strength to, and commit resources to support, each of its affiliate banks. As a result, the Registrant may be required to commit resources to its affiliate banks in circumstances where it might not otherwise do so.
REGULATION AND SUPERVISION OF THE SUBSIDIARY BANKS
American National and ANTIM are supervised, regulated and examined by the Comptroller of the Currency. Peoples is supervised, regulated and examined by the Indiana Department of Financial Institutions and, as state non-member bank, by the FDIC. A cease and desist order may be issued by the Comptroller of the Currency against American National and by the Indiana Department of Financial Institutions and FDIC against Peoples, if the respective agency finds that the activities of such institution represents an unsafe and unsound banking practice or violation of law. In addition, under certain circumstances, the FDIC may also issue a cease-and-desist order against any subsidiary financial institution of the Registrant.
With certain exceptions, a bank, a savings and loan association, and a subsidiary or affiliate thereof, may not extend credit, lease or sell property or furnish any services or fix or vary the consideration for the foregoing on the condition that (i) the customer must obtain or provide some additional credit, property or services from, or to, any of them, or (ii) the customer may not obtain some other credit, property or service from a competitor, except to the extent reasonable conditions are imposed to assure the soundness of credit extended.
The deposits of American National and Peoples are insured by the Bank Insurance Fund ("BIF") of the FDIC. The deposits of Muncie Federal, previously a separate entity (merged into American National in 1993), continue to be insured by the Savings Association Insurance Fund ("SAIF") of the FDIC. The insurance rates paid by banks range from 0 to 27 basis points. Insurance premiums paid by banks to SAIF are also at a range from 0 to 27 basis points. The FDIC is authorized to make limited adjustments to the BIF rate schedule without notice or rulemaking as deemed necessary by the FDIC to maintain the BIF designated reserve ratio. Increases in the rate schedule could adversely impact, and decreases would positively impact, the Registrant and its subsidiary banks.
Branching by banks in Indiana is subject to the jurisdiction, and requires the prior approval, of the bank's primary federal regulatory authority and, if the branching bank is a state bank, of the Indiana Department of Financial Institutions. Under Indiana law, American National and Peoples may branch anywhere in the state.
The Registrant is a legal entity separate and distinct from its subsidiary banks. There are various legal limitations on the extent to which the subsidiary banks can supply funds to the Registrant. The principal source of the Registrant's funds consists of dividends from its subsidiaries. State and Federal laws restrict the amount of dividends which may be paid by banks and savings associations. In addition, the subsidiary banks are subject to certain restrictions on extensions of credit to the Registrant or any of its subsidiaries, on investments in the stock or other securities of the Registrant or in any of its subsidiaries and in taking such stock or securities as collateral for loans.
FDICIA
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") directs that each federal banking agency prescribe standards for depository institutions relating to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth and quality, management compensation, minimum earnings sufficient to absorb losses, and such other standards as the agency deems appropriate. The federal banking agencies have issued guidelines establishing standards for safety and soundness for operational and managerial standards and compensation standards, and has proposed guidelines for asset quality and earnings. If an institution fails to comply with any of the standards set forth in the guidelines, the institution's primary federal regulator may require the institution to submit a plan for achieving and maintaining compliance. Failure to submit an acceptable compliance plan, or failure to adhere to a compliance plan that has been accepted by the appropriate regulator, would constitute grounds for further enforcement action.
Under FDICIA, as implemented by final regulations adopted by the FDIC, FDIC-insured state banks are prohibited, subject to certain exceptions, from directly or indirectly acquiring or retaining any equity investments of a type, or in an amount, that are not permissible for a national bank. FDICIA, as implemented by FDIC regulations, also prohibits FDIC-insured state banks and their subsidiaries, subject to certain exceptions, from engaging as principal in any activity that is not permitted for a national bank or its subsidiary, respectively, unless the bank meets, and continues to meet, its minimum regulatory capital requirements and the FDIC determines the activity would not pose a significant risk to the deposit insurance fund of which the bank is a member. Impermissible investments and activities must be divested or discontinued within certain time frames set by the FDIC in accordance with FDICIA. These restrictions are not currently expected to have a material impact on the operations of Peoples.
The federal banking regulators have adopted regulations to implement the prompt corrective action provisions of FDICIA, effective as of December 19, 1992. Among other things, the regulations define the relevant capital measures for the five capital categories. An institution is deemed to be "well capitalized" if it has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 8% or greater, and a leverage ratio of 5% or greater, and is not subject to a regulatory order, agreement or directive to meet and maintain a specific capital level for any capital measure. An institution is deemed to be "adequately capitalized" if it has a total risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital ratio of 4% or greater, and generally a leverage ratio of 4% or greater. An institution is deemed to be "undercapitalized" if it has a total risk-based capital ratio of less than 8%, a Tier 1 risk-based capital ratio of less than 4%, or generally a leverage ratio of less than 4%, and "significantly undercapitalized" if it has a total risk-based capital ratio of less than 6%, a Tier 1 risk-based capital ratio of less than 3%, or a leverage ratio of less than 3%. An institution is deemed to be "critically undercapitalized" if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2%.
"Undercapitalized" banks are subject to growth limitations and are required to submit a capital restoration plan. A bank's compliance with such plan is required to be guaranteed by any company that controls the undercapitalized institution as described above. If an "undercapitalized" bank fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized. "Significantly undercapitalized" banks are subject to one or more of a number of requirements and restrictions, including an order by the appropriate federal banking regulator to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets and cease receipt of deposits from correspondent banks, and restrictions on compensation of executive officers. "Critically undercapitalized" institutions may not, beginning 60 days after becoming "critically undercapitalized", make any payment of principal or interest on certain subordinated debt or extend credit for a highly leveraged transaction or enter into any transaction outside the ordinary course of business. In addition, "critically undercapitalized" institutions are subject to appointment of a receiver or conservator.
Additionally, under FDICIA, a bank holding company is required to guarantee the compliance of any insured depository institution subsidiary that may become "undercapitalized" (as defined in the statute) with the terms of any capital restoration plan filed by such subsidiary with its appropriate federal banking agency up to the lesser of (i) an amount equal to 5% of the institution's total assets at the time the institution became undercapitalized, or (ii) the amount that is necessary (or would have been necessary) to bring the institution into compliance with all applicable capital standards as of the time the institution fails to comply with such capital restoration plan.
CAPITAL REQUIREMENTS
The Registrant and its subsidiary banks must meet certain minimum capital requirements mandated by the Federal Reserve, the Comptroller of the Currency, the FDIC and state banking regulators in Indiana. These regulatory agencies require bank holding companies and banks to maintain certain minimum ratios of primary capital to total assets and total capital to total assets. As of January 1, 1991, the Federal Reserve required bank holding companies to maintain a minimum Tier 1 leverage ratio of 3 percent capital to total assets; however, for all but the most highly rated institutions which do not anticipate significant growth, the minimum Tier 1 leverage ratio is 3 percent plus an additional cushion of 100 to 200 basis points. As of December 31, 1997, the Registrant's leverage ratio of capital to total assets was 9.8 percent.
The Federal Reserve, the Comptroller of the Currency and the FDIC each have approved the imposition of "risk-adjusted" capital ratios on bank holding companies and financial institutions. At least half of the total required capital, or 4%, must be "Tier 1 capital," consisting principally of common shareholders' equity, noncumulative perpetual preferred stock, a limited amount of cumulative perpetual preferred stock and minority interest in the equity accounts of consolidated subsidiaries, less certain goodwill items. The remainder ("Tier 2 capital") may consist of a limited amount of subordinated debt and intermediate-term preferred stock, certain hybrid capital instruments and other debt securities, cumulative perpetual preferred stock, and a limited amount of the general loan loss allowance.
The Registrant and each of its subsidiaries had capital to assets ratios and risk-adjusted capital ratios at December 31, 1997 in excess of the applicable regulatory minimum requirements. The following table summarizes the Registrant's risk-adjusted capital ratios under Federal Reserve guidelines at December 31, 1997:
The Comptroller of the Currency and the FDIC include, in evaluations of a bank's capital adequacy, an assessment of the bank's exposure to declines in the economic value of the bank's capital due to changes in interest rates. In 1996, the FDIC, along with the Comptroller of the Currency and the Federal Reserve, issued a joint policy statement to provide guidance on sound practices for managing interest rate risk. The statement sets forth the factors the federal regulatory examiners will use to determine the adequacy of a bank's capital for interest rate risk. These qualitative factors include the adequacy and effectiveness of the bank's internal interest rate risk management process and the level of interest rate exposure. Other qualitative factors that will be considered include the size of the bank, the nature and complexity of its activities, the adequacy of its capital and earnings in relation to the bank's overall risk profile, and its earning exposure to interest rate movements. The interagency supervisory policy statement describes the responsibilities of a bank's board of directors in implementing a risk management process and the requirements of the bank's senior management in ensuring the effective management of interest rate risk. Further, the statement specifies the elements that a risk management process must contain.
The Federal Reserve, the Comptroller of the Currency, and the FDIC have issued final regulations further revising their risk-based capital standards to include a supervisory framework for measuring market risk. The effect of these regulations is that any bank holding company or bank which has significant exposure to market risk must measure such risk using its own internal model, subject to the requirements contained in the regulations, and must maintain adequate capital to support that exposure. These regulations apply to any bank holding company or bank whose trading activity equals 10% or more of its total assets, or whose trading activity equals $1 billion or more. Examiners may require a bank holding company or bank that does not meet the applicability criteria to comply with the capital requirements if necessary for safety and soundness purposes. These regulations contain supplemental rules to determine qualifying and excess capital, calculate risk-weighted assets, calculate market risk equivalent assets and calculate risk-based capital ratios adjusted for market risk.
INTERSTATE BANKING
The Riegle Community Development and Regulatory Improvement Act of 1994 allows bank holding companies to acquire banks anywhere in the United States subject to certain state restrictions and permits an insured bank to merge with an insured bank in another state without regard to whether such merger is prohibited by state law. Additionally, an out-of-state bank may acquire the branches of an insured bank in another state without acquiring the entire bank; provided, however, that the law of the state where the branch is located permits such an acquisition. Indiana permits interstate branching (both denovo and by acquisition), subject to certain conditions, as contemplated by the Act. Bank holding companies may merge existing bank subsidiaries located in different states into one bank.
An insured bank subsidiary may act as an agent for an affiliated bank or thrift in offering limited banking services (receive deposits, renew time deposits, close loans, service loans and receive payments on loans obligations) both within the same state and across state lines.
ADDITIONAL MATTERS
In addition to the matters discussed above, the Registrant's affiliate banks are subject to additional regulation of their activities, including a variety of consumer protection regulations affecting their lending, deposit and collection activities and regulations affecting secondary mortgage market activities. Both federal and state law extensively regulate various aspects of the banking business such as reserve requirements, truth-in-lending and truth-in-savings disclosure, equal credit opportunity, fair credit reporting, community reinvestment activities, trading in securities and other aspects of banking operations. Current federal law also requires banks, among other things, to make deposited funds available within specified time periods. The extensive regulation, supervision and examination of financial institutions by the bank regulatory agencies is intended primarily for the protection of the insurance fund and depositors. Moreover, such regulation imposes substantial restrictions on the operations and activities of such institutions, and grants to regulators broad discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to classification of assets and establishment of adequate loan loss reserves. Any changes in such regulations, whether by legislation or regulatory action, could have a material impact on the subsidiary banks and their operations. The Registrant cannot predict what, if any, future actions may be taken by legislative or regulatory authorities or what impact any such actions may have on the operations of the subsidiary banks.
The earnings of financial institutions are also affected by general economic conditions and prevailing interest rates, both domestic and foreign, and by the monetary and fiscal policies of the United States Government and its various agencies, particularly the Federal Reserve.
Additional legislation and administrative actions affecting the banking industry are being considered and in the future may be considered by the United States Congress, state legislatures and various regulatory agencies, including those referred to above. It cannot be predicted with certainty whether such legislation of administrative action will be enacted or the extent to which the banking industry in general or the Registrant and its affiliate banks in particular would be affected thereby.
YEAR 2000 SAFETY AND SOUNDNESS
Safety and soundness guidance on the risks posed to financial institutions by the Year 2000 problem has been issued by the Federal Institutions Examination Council. The guidance underscores that Year 2000 preparation is not only an information systems issue, but also an enterprise-wide challenge that must be addressed at the highest level of a financial institution. The guidance sets out the responsibilities of senior management and boards of directors in managing their Year 2000 projects. Among the responsibilities of institution managers and directors is that of managing the internal and external risks presented by providers of data-processing products and services, business partners, counterparties and major loan customers. Under the guidance, senior management must provide the board of directors with status reports, at least quarterly, on efforts to reach Year 2000 goals both internally and by the institution's major vendors. Senior managers and directors must allocate sufficient resources to ensure that high priority is given to seeing that remediation plans are fulfilled, and that the project receives the quality personnel and timely support it requires. The guidance does not require financial institutions to obtain Year 2000 certification from their vendors. Rather, an institution must implement its own internal testing or verification processes for vendor products and services to ensure that its different computer systems function properly together.
ITEM 2.
ITEM 2. PROPERTIES - ------------------------------------------------------------------------------
As of December 31, 1997, the Registrant operated through twenty-six affiliated offices. American National operates eleven branch offices, nine of which are in Muncie and one in Yorktown and in Portland. Peoples operates nine full-service offices, including branches in Winchester, Saratoga, Richmond, Farmland, Parker City and Lynn. Other offices are operated by ANTIM and ANBFPS. All such offices are owned by the subsidiaries with the exception of two branches of American National and three facilities of ANTIM which are leased.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS - ------------------------------------------------------------------------------
As a part of the ordinary course of business, the Registrant's subsidiaries are parties to lawsuits involving claims to the ownership of funds and involving the collection of delinquent accounts. All such litigation is incidental to the business of the financial institutions. Management believes that no litigation is threatened or pending in which the Registrant or its subsidiaries face potential loss or exposure which will materially affect the Registrant's stockholders' equity or financial position.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------------------------
None
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - ------------------------------------------------------------------------------
Market for the Registrant's common equity and related stockholder matters included in the 1997 Annual Report to Shareholders of the Registrant on page 5 is incorporated herein by reference.
As of March 13, 1998, the Registrant had approximately 654 stockholders of record.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA - ------------------------------------------------------------------------------
Selected financial data under the heading "Financial Highlights" included in the 1997 Annual Report to Shareholders of the Registrant on page 6 is incorporated herein by reference.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of Operation included in the 1997 Annual Report to Shareholders of the Registrant on pages 36 through 55 is incorporated herein by reference.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - ------------------------------------------------------------------------------
Quantitative and qualitative disclosures about market risk included in the 1997 Annual Report to Shareholders of the Registrant on pages 50-52 is incorporated herein by reference.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ------------------------------------------------------------------------------
Consolidated financial statements as of and for the three-year period ended December 31, 1997 and the independent auditor's report included in the 1997 Annual Report to Shareholders of the Registrant on pages 11 through 35 are incorporated herein by reference.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE - ------------------------------------------------------------------------------
None
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - ------------------------------------------------------------------------------
The information to be provided under this item is incorporated by reference herein from pages 2 and 3 of the Registrant's definitive proxy statement dated March 19, 1998 as filed with the Commission pursuant to Regulation 14A.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION - ------------------------------------------------------------------------------
The information to be provided under this item is incorporated by reference herein from pages 6 through 12 of the Registrant's definitive proxy statement dated March 19, 1998 as filed with the Commission pursuant to Regulation 14A.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - ------------------------------------------------------------------------------
The information to be provided under this item is incorporated by reference herein from pages 2, 4,and 5 of the Registrant's definitive proxy statement dated March 19, 1998 as filed with the Commission pursuant to Regulation 14A.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - ------------------------------------------------------------------------------
The information to be provided under this item is incorporated by reference herein from page 5 of the Registrant's definitive proxy statement dated March 19, 1998 as filed with the Commission pursuant to Regulation 14A.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K - ------------------------------------------------------------------------------
(a)(1) The following consolidated financial statements of the Registrant and subsidiaries are incorporated by reference in Item 8:
Annual Report Page Number ------
Independent Auditor's Report 11
Consolidated Balance Sheet as of December 31, 1997 and 1996 12
Consolidated Statement of Income for the years ended December 31, 1997, 1996 and 1995 13
Consolidated Statement of Changes in Stockholders' Equity for the years ended December 31, 1997, 1996 and 1995 14
Consolidated Statement of Cash Flows for the years ended December 31, 1997, 1996 and 1995 15
Notes to Consolidated Financial Statements 16 -- 35
(2) All financial statement schedules have been omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.
(3) Listing of Exhibits:
Exhibit Number Description -------------- -----------
2.01 Restated and Amended Plan and Agreement of Reorganization (Incorporated herein by reference to Exhibit 2.01 of Form S-1 Registration Statement, Commission File No. 33-36958).
2.02 Restated and Amended Plan of Merger-Conversion (Incorporated herein by reference to Exhibit 2.02 of Form S-1 Registration Statement, Commission File No. 33-36958).
(3) Listing of Exhibits:
Exhibit Number Description -------------- -----------
2.03 Agreement of Merger and Reorganization, as amended by Amendment and Waiver (Incorporated herein by reference to Exhibit 2.03 of the Registrant's Form 8-K filed on February 4, 1994).
3.01 Articles of Incorporation of the Registrant, as amended (Incorporated herein by reference to Exhibit 3.01 of the Registrant's 1995 Form 10-K Annual Report).
3.02 Bylaws of the Registrant, as amended (Incorporated herein by reference to Exhibit 3.02 of the Registrant's 1996 Form 10-K Annual Report).
10.01 ANB Corporation Stock Option Plan (Incorporated herein by reference to Exhibit 4.3 of Form S-8 Registration Statement, Commission File No. 33- 95868 filed on August 18, 1995).
10.02 Nonqualified Stock Option Plan of ANB Corporation for Former Directors of Muncie Federal Savings and Loan Association (Incorporated herein by reference to Exhibit 28 of the Registrant's Form 10-Q as of March 31, 1991).
10.03 Agreement to Merge by and between American National Bank and Trust Company and Muncie Federal Savings Bank dated June 16, 1992 (Incorporated herein by reference to Exhibit 10.12 of the Registrant's 1992 Form 10-K Annual Report).
10.04 1993 Amended and Restated Employment Agreement dated September 7, 1993 by and among James R. Schrecongost, ANB Corporation and a subsidiary of ANB Corporation (Incorporated herein by reference to Exhibit 10.13 of the Registrant's 1993 Form 10-K Annual Report).
10.05 1993 Amended and Restated Employment Agreement dated September 7, 1993 by and among Lloyd M. Townsend, ANB Corporation and a subsidiary of ANB Corporation (Incorporated herein by reference to Exhibit 10.14 of the Registrant's 1993 Form 10-K Annual Report).
10.06 1993 Amended and Restated Employment Agreement dated September 7, 1993 by and among Larry E. Thomas, ANB Corporation and a subsidiary of ANB Corporation (Incorporated herein by reference to Exhibit 10.15 of the Registrant's 1993 Form 10-K Annual Report).
10.07 1993 Amended and Restated Employment Agreement dated September 7, 1993 by and among David W. Spade, ANB Corporation and a subsidiary of ANB Corporation (Incorporated herein by reference to Exhibit 10.16 of the Registrant's 1993 Form 10-K Annual Report).
(3) Listing of Exhibits:
Exhibit Number Description -------------- -----------
10.08 1993 Amended and Restated Employment Agreement dated September 8, 1993 by and among Paul L. Sehnert, Jr., ANB Corporation and a subsidiary of ANB Corporation (Incorporated herein by reference to Exhibit 10.17 of the Registrant's 1993 Form 10-K Annual Report).
10.09 1994 Amended and Restated Employment Agreement dated November 30, 1994 by and among Chris L. Talley, ANB Corporation and a subsidiary of ANB Corporation (Incorporated herein by reference to Exhibit 10.19 of the Registrant's 1994 Form 10-K Annual Report).
10.10 1994 Amended and Restated Employment Agreement dated November 30, 1994 by and among Philip R. Hirschfeld, ANB Corporation and a subsidiary of ANB Corporation (Incorporated herein by reference to Exhibit 10.20 of the Registrant's 1994 Form 10-K Annual Report).
10.11 ANB Corporation 1995 Stock Option Plan (Incorporated herein by reference to Exhibit 4.3 of Form S-8 Registration Statement, Commission File No. 33- 95866 filed on August 18, 1995).
10.12 ANB Corporation 1996 Directors' Stock Option Plan (Incorporated herein by reference to Exhibit 10.13 of the Registrant's 1996 Form 10-K Annual Report).
10.13 Employment Agreement dated December 1, 1997 by and among Jerome J. Gassen, ANB Corporation and a subsidiary of ANB Corporation.
10.14 Employment and Noncompetition Agreement dated September 16, 1997 by and among R. Michael Miner, ANB Corporation and a subsidiary of ANB Corporation.
10.15 Employment and Noncompetition Agreement dated October 17, 1997 by and among Mark W. Cremonie, ANB Corporation and a subsidiary of ANB Corporation
13 1997 Annual Report to Shareholders of ANB Corporation (Incorporated in part into this Form 10-K by reference).
21 Subsidiaries of the Registrant.
23 Consent of Geo. S. Olive & Co. LLC.
27 Financial Data Schedule (Included in electronic version only).
99 Annual financial statements and independent auditor's report for Stock Investment Plan of ANB Corporation for the year ended December 31, 1997.
(b) During the fourth quarter of 1997, the Registrant did not file any reports on Form 8-K.
(c) See the listing of exhibits in Item 14(a)(3).
(d) No financial statement schedules are required to be submitted.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, as of the 23rd day of March, 1998.
ANB CORPORATION (Registrant)
By: /s/ James R. Schrecongost ----------------------------------------- James R. Schrecongost, Vice Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities indicated below as of the 23rd day of March, 1998.
Name Title - ------------------------------------------------------------------------------
/s/ Kelly N. Stanley Chairman of the Board of Directors - --------------------------------- Kelly N. Stanley
/s/ James R. Schrecongost Vice Chairman, President and - --------------------------------- Chief Executive Officer James R. Schrecongost
/s/ Larry E. Thomas Treasurer (Chief Financial Officer - --------------------------------- and Principal Accounting Officer) Larry E. Thomas
/s/ Ben E. Delk Director - --------------------------------- Ben E. Delk
/s/ Madelyn K. Ferris Director - --------------------------------- Madelyn K. Ferris
/s/ R. David Hoover Director - --------------------------------- R. David Hoover
Director - --------------------------------- William L. Peterson
/s/ Donald A. Ross Director - --------------------------------- Donald A. Ross
/s/ Chris L. Talley Director - --------------------------------- Chris L. Talley
/s/ Leon V. Towne Director - --------------------------------- Leon V. Towne
EXHIBIT INDEX
Exhibit Number Description - -------------- -----------
2.01 Restated and Amended Plan and Agreement of Reorganization (Incorporated herein by reference to Exhibit 2.01 of Form S-1 Registration Statement, Commission File No. 33-36958).
2.02 Restated and Amended Plan of Merger-Conversion (Incorporated herein by reference to Exhibit 2.02 of Form S-1 Registration Statement, Commission File No. 33-36958).
2.03 Agreement of Merger and Reorganization, as amended by Amendment and Waiver (Incorporated herein by reference to Exhibit 2.03 of the Registrant's Form 8-K filed on February 4, 1994).
3.01 Articles of Incorporation of the Registrant, as amended (Incorporated herein by reference to Exhibit 3.01 of the Registrant's 1995 Form 10-K Annual Report).
3.02 Bylaws of the Registrant, as amended (Incorporated herein by reference to Exhibit 3.02 of the Registrant's 1996 Form 10-K Annual Report).
10.01 ANB Corporation Stock Option Plan (Incorporated herein by reference to Exhibit 4.3 of Form S-8 Registration Statement, Commission File No. 33- 95868 filed on August 18, 1995).
10.02 Nonqualified Stock Option Plan of ANB Corporation for Former Directors of Muncie Federal Savings and Loan Association (Incorporated herein by reference to Exhibit 28 of the Registrant's Form 10-Q as of March 31, 1991).
10.03 Agreement to Merge by and between American National Bank and Trust Company and Muncie Federal Savings Bank dated June 16, 1992 (Incorporated herein by reference to Exhibit 10.12 of the Registrant's 1992 Form 10-K Annual Report).
10.04 1993 Amended and Restated Employment Agreement dated September 7, 1993 by and among James R. Schrecongost, ANB Corporation and a subsidiary of ANB Corporation (Incorporated herein by reference to Exhibit 10.13 of the Registrant's 1993 Form 10-K Annual Report).
10.05 1993 Amended and Restated Employment Agreement dated September 7, 1993 by and among Lloyd M. Townsend, ANB Corporation and a subsidiary of ANB Corporation (Incorporated herein by reference to Exhibit 10.14 of the Registrant's 1993 Form 10-K Annual Report).
10.06 1993 Amended and Restated Employment Agreement dated September 7, 1993 by and among Larry E. Thomas, ANB Corporation and a subsidiary of ANB Corporation (Incorporated herein by reference to Exhibit 10.15 of the Registrant's 1993 Form 10-K Annual Report).
10.07 1993 Amended and Restated Employment Agreement dated September 7, 1993 by and among David W. Spade, ANB Corporation and a subsidiary of ANB Corporation (Incorporated herein by reference to Exhibit 10.16 of the Registrant's 1993 Form 10-K Annual Report).
Exhibit Number Description - -------------- -----------
10.08 1993 Amended and Restated Employment Agreement dated September 8, 1993 by and among Paul L. Sehnert, Jr., ANB Corporation and a subsidiary of ANB Corporation (Incorporated herein by reference to Exhibit 10.17 of the Registrant's 1993 Form 10-K Annual Report).
10.09 1994 Amended and Restated Employment Agreement dated November 30, 1994 by and among Chris L. Talley, ANB Corporation and a subsidiary of ANB Corporation (Incorporated herein by reference to Exhibit 10.19 of the Registrant's 1994 Form 10-K Annual Report).
10.10 1994 Amended and Restated Employment Agreement dated November 30, 1994 by and among Philip R. Hirschfeld, ANB Corporation and a subsidiary of ANB Corporation (Incorporated herein by reference to Exhibit 10.20 of the Registrant's 1994 Form 10-K Annual Report).
10.11 ANB Corporation 1995 Stock Option Plan (Incorporated herein by reference to Exhibit 4.3 of Form S-8 Registration Statement, Commission File No. 33- 95866 filed on August 18, 1995).
10.12 ANB Corporation 1996 Directors' Stock Option Plan (Incorporated herein by reference to Exhibit 10.13 of the Registrant's 1996 Form 10-K Annual Report).
10.13 Employment Agreement dated December 1, 1997 by and among Jerome J. Gassen, ANB Corporation and a subsidiary of ANB Corporation.
10.14 Employment and Noncompetition Agreement dated September 16, 1997 by and among R. Michael Miner, ANB Corporation and a subsidiary of ANB Corporation.
10.15 Employment and Noncompetition Agreement dated October 17, 1997 by and among Mark W. Cremonie, ANB Corporation and a subsidiary of ANB Corporation
13 1997 Annual Report to Shareholders of ANB Corporation (Incorporated in part into this Form 10-K by reference).
21 Subsidiaries of the Registrant.
23 Consent of Geo. S. Olive & Co. LLC.
27 Financial Data Schedule (Included in electronic version only).
99 Annual financial statements and independent auditor's report for Stock Investment Plan of ANB Corporation for the year ended December 31, 1997.