UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT 1934. For the quarterly period ended June 30, 1996
---------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 For the transition period from to .
---------- ----------
Commission File Number: 0-27306
-------
Ambanc Holding Co., Inc.
-----------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 14-1783770
- - ------------------------------------- --------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
11 Division Street, Amsterdam, New York 12010-4303
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (518)842-7200
-----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's class
of common stock, as of the latest practicable date.
Class Outstanding at August 13, 1996
- - ----------------------------- -----------------------------------
Common Stock, $.01 Par Value 4,880,025
<PAGE>
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
FORM 10-Q
June 30, 1996
Table of Contents
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited):
Consolidated Statements of Income for the three months and
six months ended June 30, 1996 and 1995........................ 3
Consolidated Statements of Financial Condition at June 30, 1996
and December 31, 1995.......................................... 4
Consolidated Statements of Cash Flows for the six
months ended June 30, 1996 and 1995............................ 5
Summarized Notes to Consolidated Financial Statements.......... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 7
Part II. OTHER INFORMATION..................................................15
SIGNATURES....................................................................16
EXHIBITS INDEX................................................................17
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Statements of Income (unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income:
Loans ....................................... $ 10,046 $ 10,883 $ 4,963 $ 5,504
Mortgage-backed securities .................. 2,778 921 1,867 456
Investment securities ....................... 999 681 659 318
Federal funds sold and other ................ 715 213 101 148
-------- -------- -------- --------
Total interest income ..................... 14,538 12,698 7,590 6,426
-------- -------- -------- --------
Interest Expense:
Deposits .................................... 6,320 5,704 3,058 3,102
Borrowings .................................. 623 298 623 46
-------- -------- -------- --------
Total interest expense .................... 6,943 6,002 3,681 3,148
-------- -------- -------- --------
Net interest income ....................... 7,595 6,696 3,909 3,278
Provision for loan losses ...................... 2,061 1,284 433 1,116
-------- -------- -------- --------
Net interest income after provision
for loan losses ......................... 5,534 5,412 3,476 2,162
-------- -------- -------- --------
Non-interest income:
Service charges on deposit accounts ......... 330 313 169 166
Net gains (losses) on securities transactions (98) 1 -- 1
Other ....................................... 154 226 83 89
-------- -------- -------- --------
Total other income ........................ 386 540 252 256
-------- -------- -------- --------
Non-interest expense:
Salaries, wages and benefits ................ 2,461 2,213 1,207 1,191
Occupancy and equipment ..................... 570 489 271 242
Data processing ............................. 423 299 203 158
Federal deposit insurance premium ........... 1 353 0 177
Correspondent bank processing fees .......... 57 168 29 86
Provision for losses on investments ......... -- 105 0 89
Losses & write-downs on real estate owned ... 219 997 120 800
Repairs and maintenance ..................... 103 119 61 78
Legal expenses .............................. 171 71 111 30
Other ....................................... 1,514 1,313 853 838
-------- -------- -------- --------
Total other expenses ...................... 5,519 6,127 2,855 3,689
-------- -------- -------- --------
Income (loss) before taxes ..................... 401 (175) 873 (1,271)
Income tax expenses (benefit) .................. 205 (3) 363 (451)
-------- -------- -------- --------
Net income (loss) ......................... $ 196 ($ 172) $ 510 ($ 820)
======== ======== ======== ========
Net income (loss) per common share*
(5,422,250 weighted average number of
shares issued and outstanding) $0.04 N/A $0.09 N/A
</TABLE>
*Primary and fully diluted
See accompanying notes to consolidated interim financial statements.
3
<PAGE>
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition (unaudited)
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------- ---------
Assets
<S> <C> <C>
Cash and due from banks .................................... $ 7,484 $ 7,513
Federal funds sold ......................................... -- 77,100
--------- ---------
Cash and cash equivalents ............................. 7,484 84,613
Investment securities available for sale, at fair value .... 43,862 21,389
Mortgage-backed securities available for sale, at fair value 132,685 53,033
Loans receivable, net of unamortized fees .................. 263,149 252,638
Allowance for loan losses ............................. (4,348) (2,647)
--------- ---------
Loans receivable, net ................................. 258,801 249,991
Accrued interest receivable ................................ 3,135 1,827
Premises and equipment ..................................... 2,967 3,071
Investments requred by law, principally stock in the
Federal Home Loan Bank .................................. 2,029 1,892
Real estate owned, net ..................................... 3,247 2,888
Other assets ............................................... 4,778 2,533
Due from brokers ........................................... -- 18,128
--------- ---------
Total assets .......................................... $ 458,988 $ 439,365
========= =========
Liabilities and Shareholders' Equity
Liabilities:
Deposits ................................................ $ 305,355 $ 311,239
Advances from borrowers for taxes and insurance ......... 1,841 1,693
Advances from FHLB ...................................... 9,800 --
Other borrowed funds .................................... 64,570 --
Accrued expenses and other liabilities .................. 2,600 3,538
Due to brokers .......................................... -- 46,880
--------- ---------
Total liabilities ..................................... 384,166 363,350
Shareholders' equity:
Preferred stock $.01 par value. Authorized 5,000,000
shares; none outstanding at June 30, 1996 and
December 31, 1995 ...................................... -- --
Common stock $.01 par value. Authorized 15,000,000
shares; 5,422,250 shares issued and outstanding at
June 30, 1996 and December 31, 1995 .................... 54 54
Retained earnings,substantially restricted .............. 28,468 28,272
Additional paid in capital .............................. 52,127 52,127
Common stock acquired by ESOP ........................... (4,121) (4,338)
Net unrealized loss on securities available for sale .... (1,706) (100)
--------- ---------
Total shareholders' equity ............................ 74,822 76,015
Total liabilities and shareholders' equity ............ $ 458,988 $ 439,365
========= =========
</TABLE>
See accompanying notes to consolidated interim financial statements.
4
<PAGE>
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands) For the six months
ended June 30,
1996 1995
--------- ---------
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Net income (loss) ................................ $ 196 ($ 172)
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization ................. 284 233
Provision for loan losses ..................... 2,061 1,284
Provision for losses and writedowns on real
estate owned and other assets .............. 29 802
Writedown of Nationar investments ............. -- 105
Loss on early disposal of fixed assets ........ 23 --
Gains on sale and redemptions of investment
and mortgage-backed securities-AFS ......... 98 --
Net loss on sale of other real estate owned ... 50 67
Net amortization on investment securities and
mortgage-backed securities-AFS ............. 296 10
Deferred tax expense (benefit) ................ 389 (544)
Decrease in other assets ...................... 15,196 736
Decrease in accrued expenses
and other liabilities ...................... (47,818) (393)
Increase in advances from borrowers
for taxes and insurance .................... 148 181
--------- ---------
Net cash (used) provided by operating activities . (29,048) 2,309
Cash flows from investing activities:
Purchases of mortgage-backed securities-AFS ...... (94,670) (103)
Proceeds from principal paydowns of
mortgage-backed securities-AFS ................ 12,741 1,050
Proceeds from maturity of investment securites-AFS 6,100 3,116
Proceeds from sales of investment securities-AFS . 15,299 --
Purchase of investment securities-AFS ............ (44,430) --
Purchase of FHLB stock ........................... (137) (237)
Net (increase) decrease in loans made to customers (11,980) (656)
Capital Expenditures ............................. (172) (365)
Proceeds from ORE sales .......................... 465 1,105
--------- ---------
Net cash (used) provided by investing activities . (116,784) 3,910
Cash flows from financing activities:
Principal repayment on ESOP Loan ................. 217 --
Net increase (decrease) in demand deposits,
NOW and savings ............................... 4,452 (21,617)
Net increase (decrease) in certificates of deposit (10,336) 41,976
(Repayments) advances from FHLB ................. 9,800 (15,000)
Advances from other borrowings ................... 66,140 --
(Repayments) from other borrowings .............. (1,570) (4,000)
--------- ---------
Net cash provided by financing activities ........ 68,703 1,359
Net increase (decrease) in cash and cash equivalents (77,129) 7,578
Cash and cash equivalents at beginning of year ...... 84,613 16,287
--------- ---------
Cash and cash equivalents at end of period .......... $ 7,484 $ 23,865
========= =========
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest ............................... $ 6,522 $ 6,200
========= =========
Income Taxes ........................... $ 736 $ 870
========= =========
Noncash investing activity:
Net reduction in loans receivable resulting
from the transfer to real estate owned
and other repossessed assets ................. $ 1,362 $ 353
========= =========
See accompanying notes to consolidated interim financial statements.
5
<PAGE>
SUMMARIZED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) In Management's opinion, the financial information, which is unaudited,
reflects all adjustments (consisting solely of normal recurring adjustments)
necessary for a fair presentation of the financial information as of and for the
three and six month periods ended June 30, 1996 and June 30, 1995, in conformity
with generally accepted accounting principles. These financial statements should
be read in conjunction with Ambanc Holding Co., Inc.'s ("the Company" herein)
1995 Annual Report on Form 10-K.
(2) In May 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 (SFAS No. 121), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
Various assets are excluded from the scope of SFAS No. 121, including financial
instruments which constitute the majority of the Company's assets. For
long-lived assets included in the scope of SFAS No. 121, such as premises and
equipment, an impairment loss must be recognized when the estimate of total
undiscounted future cash flows attributable to the asset is less than the
asset's carrying amount of the asset to its fair value. Long-lived assets to be
disposed of such as real estate or premises to be sold, are reported at the
lower of carrying amount or fair value less cost to sell. The Company adopted
SFAS No. 121 in the first quarter of 1996. The adoption of SFAS No. 121 will not
have a material effect on the Company's consolidated financial statements or
results of operations.
(3) Commitments and Contingent Liabilities: Legal Proceedings
---------------------------------------------------------
Current Owners of F.H. Doherty Associates, Inc. vs. Amsterdam Savings Bank, FSB
- - -------------------------------------------------------------------------------
As an update to the disclosure in Note (15) to the Company's consolidated
financial statements for the year ended December 31, 1995, the case has been
assigned to a newly appointed District Court Judge in Albany, New York, for
trial. A settlement offer of $175,000, the full amount of the Bank's reserve,
was made to the plantiffs and was rejected. Therefore, the trial is expected to
occur before the end of 1996. The ultimate outcome of the litigation cannot be
adequately determined.
(4) Loss Contingency
----------------
As an update to the disclosure in Note (17) to the Company's consolidated
financial statements for the year ended December 31, 1995, in regard to the
seizure of Nationar by the Superintendent of Banks of the State of New York, the
Bank has received the full amount of its demand deposit account claim of
$221,000, less $1,000 for interest assessed by the Superintendent, which was
charged against the reserve previously established.
In addition, effective June 10, 1996, the Bank agreed to the issuance of a
new letter of credit as proposed by the attorneys representing the
Superintendent of Banks. The new letter of credit is for $150,000. With the
issuance of this new letter of credit, the Bank has effectively recovered
$837,500 of the estimated fair value of the security. Concurrent with the
issuance of the $150,000 letter of credit, the Bank was required to pay to the
Banking Department interest of $58,000 under the terms of the original letter of
credit agreement. This amount was charged against the reserve account that the
Bank had previously established. Management believes that the remaining reserve
balance of approximately $41,000 should be adequate to cover any losses related
to the $150,000 letter of credit. As a result of the foregoing events,
management does not expect that there will be any material effect on the Bank's
financial position.
6
<PAGE>
Item 2
- - ------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the consolidated financial statements and related notes and with the statistical
information and financial data appearing in this report as well as the Company's
1995 Annual Report on Form 10-K.
When used in this quarterly Report on Form 10-Q, the words or phrases "will
likely result", "are expected to", "will continue", "is anticipated",
"estimate", "project" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are subject to certain risks and
uncertainties - including, changes in economic conditions in the company's
market area, changes in policies by regulatory agencies, fluctuations in
interest rates, demand for loans in the Company's market area and competition,
that could cause actual results to differ materially from historical earnings
and those presently anticipated or projected. The Company wishes to caution
readers not to place undue reliance on any such forward-looking statements,
which speak only as of the date made. The Company wishes to advise readers that
the factors listed above could affect the Company's financial performance and
could cause the Company's actual results for future periods to differ materially
from any opinions or statements expressed with respect to future periods in any
current statements.
The Company does not undertake - and specifically disclaims any obligation
- - - to publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurance of anticipated or unanticipated
events.
General
- - -------
Prior to the consummation of the conversion on December 26, 1995, the
Company had no significant assets, liabilities or operations. Accordingly, the
consolidated data for the quarter and the six-months ended June 30, 1995,
represents the data of the Bank and its subsidiaries.
The Company's results of operations are dependent primarily on net interest
income, which is the difference between the income earned on its loan and
investment portfolios and its cost of funds, consisting of the interest paid on
deposits and borrowings. Results of operations are also affected by the
Company's provision for loan losses, net expenses on real estate owned and by
general economic and competitive conditions, particularly changes in interest
rates, government policies and actions of regulatory authorities. Future changes
in applicable law, regulations or government policies may materially impact the
financial condition and results of operations of the Company and the Bank.
The Company recorded net income of $510,000 for the quarter ended June 30,
1996, or $0.09 per share, and earnings for the six months ended June 30, 1996,
of $196,000, or $0.04 per share, compared to losses of $820,000 and $172,000 in
the corresponding periods in 1995, respectively. Shares issued and outstanding
on June 30, 1996, were 5,422,250.
The 1996 second quarter earnings improvement was due , in part, to an
increase in net interest income before provision for loan losses of $631,000.
Also contributing to the improved earnings were decreases in the provision for
loan losses and non-interest expenses of $683,000 and $834,000, respectively, in
comparison to the 1995 period. The Company's efficiency ratio decreased to 65.7%
for the three months ended June 30,1996, from 81.8% in the comparable 1995
period.
The improvement in net income of $368,000 for the six months ended June 30,
1996, to $196,000 was the result, in part, of an increase in net interest income
before provision for loan losses of $899,000. Also contributing to the improved
earnings was a decrease in non-interest expenses of $608,000. These positive
factors were partially offset by an increase in the provision for loan losses of
$777,000. The Company's efficiency ratio was reduced to 65.6% for the six months
ended June 30, 1996, from 70.0% in the same period a year ago.
7
<PAGE>
Non-performing assets increased to $16.8 million at June 30,1996, from
$12.0 million at December 31, 1995. At June 30, 1996, non-performing assets were
3.65% of total assets compared to 2.72% at December 31, 1995. The Company's
allowance for loan losses to non-performing loans and to total loans at June 30,
1996, was 32.88% and 1.65%, respectively, compared to 30.10% and 1.05%,
respectively, at December 31, 1995. See "Asset Quality" herein.
RESULTS OF OPERATIONS
Comparison of Operating Results for the Quarter Ended June 30, 1996 and 1995
- - ----------------------------------------------------------------------------
Net interest income
- - -------------------
Net interest income before provision for loan losses for the quarter ended June
30, 1996, was $3.9 million, an increase of $631,000, or 19.2%, compared to the
same period in 1995. The improvement in net interest income resulted from an
increase in average net interest-earning assets of $43.2 million (net of
securities purchased pending settlement and net unrealized losses on available
for sale securities) funded primarily by the proceeds received in the conversion
and an increase in borrowed funds. The growth in average net interest-earning
assets was primarily attributable to increases in average mortgage-backed
securities of $82.6 million and average investment securities of $13.6 million,
both of which are presented net of securities purchased pending settlement and
net unrealized losses on available for sale securities. These increases were
partially offset by declines in average loans receivable and average other
interest-earning assets of $13.4 million and $3.1 million, respectively, and an
increase in average interest bearing liabilities of $36.5 million. The increase
in average interest-bearing liabilities was mainly due to the addition of $40.8
million to the mix of interest-bearing liabilities in average securities sold
under agreements to repurchase. The positive effect from the growth in average
net interest-earning assets was partially offset by a narrowing of 14 basis
points in the Company's average net interest margin to 3.87% from 4.01% in
1995's second quarter.
The narrowing in the average net interest margin resulted primarily from a
decrease by 40 basis points in the average yield on loans receivable
attributable mainly to the general decline in the level of market interest rates
since June 30, 1995, partially offset by a decline of 22 basis points in the
overall cost of the funds used to support average interest-earning assets.
Provision for loan losses
- - -------------------------
The provision for loan losses declined by $683,000 to $433,000 for the
quarter ended June 30, 1996, compared to the same quarter in 1995. In the 1995
period, the Company decided that it was prudent to significantly increase its
allowance based on management's analysis of the Company's asset quality and the
level of its allowance for loan losses. See "Asset Quality" herein.
Non-interest income
- - -------------------
Non-interest income declined modestly, down $4,000, to $252,000 from the
second quarter 1995 level. Service charges on deposit accounts increased by
$3,000 but were offset by declines of $1,000 and $6,000 in net gains on
securities transactions and other non-interest income, respectively.
Non-interest expense
- - --------------------
The decrease in non-interest expenses of $834,000 was primarily
attributable to a decline in losses and write-downs on real estate owned of
$680,000. In the second quarter of 1995, the Company significantly increased its
losses and write-down expense based on actual expenses incurred and management's
estimations of lower fair values, less disposal costs. Management's estimations
of the fair value of the Company's repossessed assets were based on various
factors, which included appraisals, actual sales, and offers to purchase such
properties or properties similar in nature to the repossessed properties held by
the Company. A similar analysis in the 1996 period did not indicate that
additional write-downs were required as was the case in 1995. Also contributing
to the decrease in non-interest expenses was a decline in the FDIC/BIF deposit
insurance expense of $177,000 due to the minimum annual premium assessment of
$2,000 currently applied to well-capitalized institutions, such as the Bank.
8
<PAGE>
Income taxes
- - ------------
Income tax expense increased by $814,000 to $363,000 due to the loss before
income taxes of $1.3 million incurred in the three months ended June 30,1995,
compared to income before taxes of $873,000 for the 1996 period.
Comparison of Operating Results for the Six Months Ended June 30, 1996 and 1995
- - -------------------------------------------------------------------------------
Net interest income
- - -------------------
Net interest income before provision for loan losses increased $899,000, or
13.4%, to $7.6 million for the six months ended June 30,1996,compared to the
same period in 1995. The improvement in net interest income was attributable to
an increase in average net interest-earning assets of $46.6 million (net of
securities purchased pending settlement and net unrealized losses on available
for sale securities) funded primarily by the proceeds from the conversion and an
increase in borrowed funds. The growth in average net interest-earning assets
was primarily attributable to increases in average mortgage-backed securities of
$55.7 million (net of securities purchased pending settlement and net unrealized
losses on available for sale securities) and in average other interest-earning
assets of $19.0 million, mainly federal funds sold, even though the Company 's
federal funds sold had declined to zero as of June 30, 1996. Average investment
securities available for sale also increased by $4.2 million (net of securities
purchased pending settlement and net unrealized losses on available for sale
securities). These increases were partially offset by declines in average loans
receivable of $13.8 million and an increase in average interest-bearing
liabilities of $18.9 million. The increase in average interest-bearing
liabilities was mainly due to an increase in average certificates of deposit of
$15.1 million to $152.1 million and an increase in borrowed funds of $11.3
million resulting from the addition to the liability mix of $20.4 million in
average securities sold under agreements to repurchase, partially offset by
declines in average savings accounts and other interest-bearing deposits of
$7.5 million. The positive effect derived by the growth in average net
interest-earning assets was partially offset by a decrease in the average net
interest margin to 3.89% for the six months ended June 30, 1996, from 4.13% in
the same period of 1995.
The narrowing in the average net interest margin was attributable primarily
to an increase of 41 basis points in the average cost of certificates of deposit
and a heavier concentration of these deposits in the deposit mix, which resulted
from special promotions of these deposits at rates above those offered by the
Company's local competitors. Two of these promotions were related to the opening
of supermarket branch offices. The net interest margin was also impacted by
declines in the average rates earned on mortgage-backed securities, federal
funds sold and loans receivable by 25 basis points, 41 basis points and 24 basis
points, respectively, due primarily to the general decline in the level of
market interest rates since June 30, 1995.
Provision for loan lossses
- - --------------------------
The increase was due entirely to a $1.5 million charge taken on March 31,
1996, pertaining to the Bank's aggregate lending relationship of $3.6 million
with the Bennett Funding Group, a company that filed for Chapter 11 bankruptcy
protection on March 29, 1996. See "Asset Quality" herein.
Non-interest income
- - -------------------
Non-interest income decreased by $154,000 to $386,000, primarily due to net
losses on securities sold of $98,000 compared with a net gain of $1,000 in the
1995 period. The Bank's securities portfolio was yielding below market rates in
late 1995. As a result, the Bank decided in early January 1996 to sell most of
its holdings and reinvest the proceeds in then current higher yielding
securities, based on a projection that the losses on the sales would be
recovered in approximately six-months. Also contributing to the decrease in
non-interest income was a decline of $21,000 in commission income from the sales
of annuities and mutual funds by the Bank's insurance agency subsidiary and a
decrease in insurance dividends received of $32,000, which resulted from the
recognition of non-recurring dividends received in the three-months ended June
30, 1995.
9
<PAGE>
Non-interest expense
- - --------------------
Earnings for the six months ended June 30,1996, were also positively
affected by a decline in non-interest expenses of $608,000, or 9.9%, to $5.5
million. The primary reason for the decrease was a decline in losses and
write-downs on real estate owned of $778,000 for the same reasons as stated
above for the three months ended June 30, 1996. Also contributing to the
decrease in non-interest expenses was a decline in the FDIC/BIF deposit
insurance premium of $352,000, which reflects the lower assessment rate applied
to the Bank.
Income taxes
- - ------------
The Company recorded an expense of $205,000 on pre-tax income of $401,000
for the six months ended June 30, 1996, compared to a pre-tax loss of $175,000
and the recording of a slight tax benefit for the same period in 1995.
FINANCIAL CONDITION
The Company's total assets at June 30, 1996, were $459.0 million, an
increase of $19.6 million, or 4.5%, compared to total assets of $439.4 million
at December 31, 1995. The growth in assets was primarily attributable to a $79.7
million increase in mortgage-backed securities and an increase of $22.5 million
in investment securities. Loans receivable, net of unamortized fees, also grew
slightly to $263.1 million, an increase of 4.2%, which is more indicative of the
Company's loan origination trend than the declines in average loans receivable
for the three and six month periods ended June 30, 1996, compared to the
corresponding periods in 1995. Partially offsetting these increases were a
decline in federal funds sold of $77.1 million and an $18.1 million decrease in
the amount due from brokers. The total asset growth of $19.6 million was
primarily funded with federal funds sold and new borrowings of $64.6 million in
securities sold under agreements to repurchase and $9.8 million in advances from
the Federal Home Loan Bank of New York, partially offset by declines in deposits
of $5.9 million and due to brokers of $46.9 million. .
Total deposits were $305.4 million, a decline of 1.9% from December 31,
1995.
Total shareholders' equity decreased $1.2 million from December 31,1995, to
$74.8 million at June 30,1996, due primarily to an increase of $1.6 million in
net tax-effected unrealized losses on securities available for sale. The primary
factor responsible for the increase in unrealized losses was the general
increase in market interest rates that occurred during the six months ended June
30, 1996. If market interest rates continue to increase, the Company will
evaluate whether it is more advantageous to sell the below market securities at
a loss and reinvest the proceeds in higher yielding securities and/or loans
based on management's determination of the time period during which such losses
could be recovered. However, a sale at a loss could adversely impact the
Company's net earnings in the year of the sale. Net interest income also could
be adversely impacted if the Company decided not to sell the below market
securities and, as rates continue to increase, the cost of carrying these below
market assets would increase, thus narrowing the Company's net interest margin.
At June 30, 1996, the book value per share on 5,422,250 outstanding was
$13.80 compared to $14.02 at December 31, 1995, on the same number of shares
outstanding.
On July 22, 1996, the Company announced that it intended to repurchase up
to 10% of its outstanding shares, or 542,225 shares, during the period July 23,
1996 to December 31, 1996. As of August 6, 1996, the Company successfully
completed the buy-back of the 542,225 shares at an average repurchase price of
$10.10 per share.
10
<PAGE>
Liquidity and Funding
- - ---------------------
The Company's primary sources of funds for operations are deposits from its
market area, principal and interest payments on loans, mortgage-backed and
investment securities, proceeds from the sale and maturity of securities,
advances from the FHLB of New York and other borrowed funds, primarily
securities sold under agreements to repurchase. While maturities and scheduled
amortization of loans and securities are predictable sources of funds, deposit
flows and mortgage prepayments are greatly influenced by general interest rates,
economic conditions, and competition.
The primary investing activities of the Company are the origination of
loans and the purchase of securities. During the six months ended June 30, 1996,
the Company's loan originations totaled $40.8 million. The Company purchased
investment securities available for sale and mortgage-backed securities
available for sale, during the six months, of $44.4 million and $94.7 million,
respectively.
The primary financing activity of the Company is the attraction of
deposits. However, during the six months ended June 30, 1996, the Bank
experienced a net decrease in deposits of $5.9 million from December 31, 1995.
Management believes that the decrease in deposits, primarily certificates of
deposit, occurred because some of the Company's customers were unwilling to
accept the lower interest rates offered by the Company and others that resulted
from a general decline in local market CD rates and, therefore, these more rate
sensitve depositors pursued alternative investments.
The Bank is required to maintain minimum levels of liquid assets as defined
by OTS regulations. This requirement, which may be varied by the OTS depending
upon economic conditions and deposit flows, is based upon a percentage of
deposits and short-term borrowings. The required minimum liquidity ratio is
currently 5% and the short-term liquidity ratio is 1%. The Bank's average daily
liquidity ratio for the month of June 1996 was 6.9%, and its short-term
liquidity ratio for the same month was 1.2%.
The Company's most liquid assets are cash and cash equivalents, which
consist of federal funds sold and bank deposits. The level of these assets is
dependent on the Bank's operation, financing, and investing activities during
any given period. At June 30, 1996, cash and cash equivalents totaled $7.5
million, compared to $84.6 million at December 31, 1995. As previously
mentioned, the decline in cash equivalents, mainly federal funds sold, was
primarily used to fund the purchase of mortgage-backed and investment
securities.
The Bank anticipates that it will have sufficient funds available to meet
its current commitments. At June 30, 1996, the Bank had commitments to originate
loans of $14.5 million as well as undrawn commitments of $6.3 million on home
equity and other lines of credit. Certificates of deposit which are scheduled to
mature in one year or less at June 30, 1996, totaled $98.4 million. Management
believes that a significant portion of such deposits will remain with the Bank.
However, if the Bank is not able to maintain its historical retention rate on
maturing certificates of deposit, it may consider employing the following
strategies: increase its borrowed funds position to compensate for the deposit
outflows; and/or, increase the rates it offers on these deposits in order to
increase the retention rate on maturing CDs and to attract new deposits.
Depending on the level of market interest rates at the CD renewal dates, these
strategies could result in higher or lower levels of net interest income and net
earnings.
The Company also has a need for, and sources of, liquidity. Liquidity is
required to fund its operating expenses, as well as for the payment of any
dividends to stockholders. The primary source of liquidity on an ongoing basis
is dividends from the Bank. To date, no dividends have been paid from the Bank
to the Company.
Management does not believe that the consolidated financial condition and
results of operations of the Company and its subsidiaries will be affected
materially by the outcome of the legal proceeding in which the Bank is the
defendant or by the settlement of its claims in the Nationar bankruptcy workout.
See Summarized Notes (3) and (4) to the interim consolidated financial
statements (unaudited) herein.
11
<PAGE>
Capital
- - -------
Federally insured savings institutions are required to maintain a minimum
level of regulatory capital. The OTS has established capital standards,
including a tangible capital requirement, a leverage ratio (or core capital)
requirement and a risk-based capital requirement applicable to such savings
associations. These capital requirements must be generally as stringent as the
comparable capital requirements for national banks. The OTS is also authorized
to impose capital requirements in excess of these standards on individual
associations on a case-by-case basis.
At June 30, 1996, the Bank had $50.2 million of tangible and core capital,
respectively, or 11.3% of adjusted total assets, which was approximately $43.6
million and $36.9 million above the minimum requirements of 1.5% and 3.0%,
respectively, of the adjusted total assets in effect on that date. On June 30,
1996, the Bank had risk-based capital of $51.8 million (including $50.2 million
in core capital and $2.8 million in qualifying supplementary capital, less $1.3
million in loan balances with loan-to-value ratios in excess of 80% which were
required to be deducted) or 23.1% of risk-weighted assets of $223.8 million. The
Bank's risk-weighted capital was $33.8 million above the 8.0% requirement in
effect on that date.
12
<PAGE>
ASSET QUALITY
Non-performing assets
- - ---------------------
The table below sets forth the amounts and categories of non-performing
assets in the Company's loan portfolio at the dates indicated. A loan is placed
on non-accrual status when the loan is more than 90 days delinquent (except for
FHA insured and VA guaranteed loans) or when the collection of principal and/or
interest in full becomes doubtful. When loans are designated as non-accrual, all
accrued but unpaid interest is reversed against current period income and, as
long as the loan remains on non-accrual status, interest is recognized only when
received. Foreclosed assets includes assets acquired in settlement of loans.
June 30 Dec. 31
1996 1995
-------- -------
(In thousands)
Non-accruing loans:
One-to four-family ............................ $ 616 $ 1,525
Multi-family .................................. 1,379 77
Commercial real estate ........................ 1,825 1,549
Consumer ...................................... 1,262 605
Commercial Business ........................... 4,306 743
------- -------
Total ....................................... 9,388 4,499
------- -------
Accruing loans delinquent more
than 90 days:
One-to four-family ............................ 128 261
Multi-family .................................. 0 0
Commercial real estate ........................ 0 0
Consumer ...................................... 0 0
Commercial Business ........................... 0 0
------- -------
Total ....................................... 128 261
------- -------
Troubled debt restructured loans:
One-to four-family ............................ 88 89
Multi-family .................................. 1,616 1,626
Commercial real estate ........................ 1,933 2,185
Consumer ...................................... 2 84
Commercial Business ........................... 68 51
------- -------
Total ....................................... 3,707 4,035
------- -------
Foreclosed assets:
One-to four-family ............................ 1,005 459
Multi-family .................................. 789 926
Commercial real estate ........................ 1,453 1,503
Consumer ...................................... 295 281
Commercial Business ........................... 0 0
------- -------
Total ....................................... 3,542 3,169
------- -------
Total non-performing assets ...................... $16,765 $11,964
======= =======
Total as a percentage of total assets ............ 3.65% 2.72%
13
<PAGE>
For the six months ended June 30, 1996, gross interest income which would
have been recorded had the non-accruing loans been current in accordance with
their original terms amounted to $522,000. The amount that was included in
interest income on such loans was $138,000, which represents actual receipts.
Similarly, for the six months ended June 30, 1996, gross interest income
which would have been recorded had the restructured loans paid in accordance
with their original terms amounted to $200,000. The amount that was included in
interest income on such loans was $137,000.
Material changes in non-performing assets since December 31, 1995, resulted
primarily from the addition of three loans to the non-accruing category during
the quarter ended March 31, 1996, and these loans continued to be non-accruing
as of June 30, 1996. There were no material additions made to non-performing
assets during the quarter ended June 30,1996.
As previously mentioned, the Company has a lending relationship with the
Bennett Funding Group, Inc. comprised of nine commercial business loans,
aggregating $3.6 million, secured by a total of 684 lease agreements. The
Company designated all of the Bennett loans as non-accruing due to the Bennett
bankruptcy filing and the subsequent freeze placed on their accounts. Counsel
for the bankruptcy trustee and counsel for the Bank have been engaged in
discussions which might lead to an agreed upon recognition of a percentage of
the Bank's perfected security interest in the cash collateral held by the
trustee. The discussions are quite preliminary, and it is not known if a
settlement is likely or what percentage of the security, if any, will actually
be paid. It has been suggested that installment payments may be resumed as early
as September, but this is also subject to further negotiation. Based on these
negotiations, the $1.5 million reserve appears to be appropriate.
The next largest loan placed on non-accrual status during the six months
ended June 30,1996, was a commercial real estate loan in the amount of $702,000.
This loan is secured by an 8 story, 33-unit mixed purpose income property
located in Albany, New York, consisting of 30 residential apartments and 3
commercial suites. At June 30, 1996, the loan was still greater than 90 days
delinquent and the Bank is continuing its previously initiated foreclosure
action but has entered into negotiations with the borrower to restructure the
terms of the loan.
The only other material addition to non-accrual loans at June 30, 1996,
compared to December 31, 1995, was a multi-family real estate loan in the amount
of $600,000. This loan is secured by a three building, 27- unit garden apartment
complex located in Monroe County, New York. At June 30, 1996, the property was
93% occupied; however, payments became delinquent due to personal financial
problems of the borrower. The Bank has initiated foreclosure proceedings and a
receiver has been appointed to collect rental payments. The borrower requested
and has been provided with a workout agreement. Under the terms of the workout
agreement, the borrower will be required to agree to the appointment of a real
estate management firm to oversee the property and to a stipulation that the
loan be brought current. During the negotiation of the workout terms, an
environmental concern was detected and reported to the N.Y.S. Department of
Environmental Conservation ("DEC"). An environmental inspection has been ordered
and upon receipt of the report, further stipulations may have to be added to the
workout agreement. Once the borrower has agreed to the workout terms, the
receivership will be terminated and the foreclosure proceeding will be
discontinued.
Additionally, the Bank is closely monitoring a $1.4 million commercial real
estate loan that was delinquent less than 90 days as of June 30, 1996, and,
therefore, not classified as non-performing. This loan is secured by property
located in Colonie, New York and is currently being used for the operation of a
restaurant. The borrower is experiencing financial problems and is currently
attempting to refinance all of his outstanding debt with another financial
institution(s) and, in order to facilitate this consolidation, the borrower's
accountant requested that the Bank accept a discounted amount as payment in full
for this loan. The Bank rejected this request and is waiting for a more
reasonable proposal from the borrower or payment in full if the consolidation
loan is consummated. The borrower was recently notified that interest only
payments must be made on the loan while the negotiations continue. If the
interest only terms are not complied with, the Bank has informed the borrower
that a foreclosure action will be initiated.
14
<PAGE>
Allowance for Loan Losses
- - -------------------------
The allowance for loan losses is established through a provision for loan
losses based on management's evaluation of the risk inherent in its loan
portfolio and changes in the nature and volume of its loan activity, including
those loans which are being specifically monitored by management. Such
evaluation, which includes a review of loans for which full collectibility may
not be reasonably assured, considers among other matters, the estimated fair
value of the underlying collateral, economic conditions, historical loan loss
experience, and other factors that warrant recognition in providing for an
adequate loan loss allowance.
The following table sets forth an analysis of the Company's allowance for
loan losses.
For the six months
ended June 30,
1996 1995
--------- --------
(In thousands)
Balance at beginning of period ......................... $ 2,647 $ 2,235
Charge-offs:
One- to four-family .................................. (118) (25)
Multi Family ......................................... 0 0
Commercial Real Estate ............................... (28) (192)
Consumer ............................................. (250) (117)
Commercial Business .................................. 0 0
-------- --------
Total Charge-offs ................................. (396) (334)
Recoveries:
One- to four-family .................................. 9 0
Multi Family ......................................... 0 64
Commercial Real Estate ............................... 0 0
Consumer ............................................. 27 35
Commercial Business .................................. 0 0
Total Recoveries .................................. 36 99
-------- --------
Net Charge-offs ....................................... (360) (235)
Provisions charged to operations ....................... 2,061 1,284
-------- --------
Balance at end of period ............................... $ 4,348 $ 3,284
======== ========
Ratio of net charge-offs during
the period to average loans
outstanding during period .............................. 0.29% 0.18%
Ratio of net charge-offs during
the period to average
non-performing assets .................................. 4.73% 3.58%
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits as required by Item 601 of Regulation S-K.
(27) Financial Data Schedule
(b) Reports on Form 8-K
Current reports on Form 8-K were filed on July 26, 1996 for:
(i) July 19, 1996 press release regarding Ambanc Holding Co.,
Inc. earnings for the three and six months ended June 30,
1996.
(ii) July 22, 1996 press release regarding Ambanc stock buy-back
program.
15
<PAGE>
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.
AMBANC HOLDING CO., INC.
/s/ Robert J. Brittain
Robert J. Brittain
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 14, 1996
/s/ Harold A. Baylor, Jr.
Harold A. Baylor, Jr.
Vice President and Treasurer
(Principal Financial and Accounting Officer)
Date: August 14, 1996
16
<PAGE>
EXHIBITS INDEX
Exhibit Number Description
- - -------------- -----------
27 Financial Data Schedule
17
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF CONDITION AND STATEMENTS OF INCOME FOR THE SIX MONTHS
ENDED JUNE 30, 1996 OF AMBANC HOLDING CO., INC. AND ITS SUBSIDIARIES AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 4834
<INT-BEARING-DEPOSITS> 2650
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 176547
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 263149
<ALLOWANCE> 4348
<TOTAL-ASSETS> 458988
<DEPOSITS> 305355
<SHORT-TERM> 54770
<LIABILITIES-OTHER> 4441
<LONG-TERM> 19600
0
0
<COMMON> 54
<OTHER-SE> 74768
<TOTAL-LIABILITIES-AND-EQUITY> 458988
<INTEREST-LOAN> 10046
<INTEREST-INVEST> 3777
<INTEREST-OTHER> 715
<INTEREST-TOTAL> 14538
<INTEREST-DEPOSIT> 6320
<INTEREST-EXPENSE> 6943
<INTEREST-INCOME-NET> 7595
<LOAN-LOSSES> 2061
<SECURITIES-GAINS> (98)
<EXPENSE-OTHER> 5519
<INCOME-PRETAX> 401
<INCOME-PRE-EXTRAORDINARY> 401
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 196
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
<YIELD-ACTUAL> 3.89
<LOANS-NON> 9388
<LOANS-PAST> 128
<LOANS-TROUBLED> 3707
<LOANS-PROBLEM> 6395
<ALLOWANCE-OPEN> 2647
<CHARGE-OFFS> 396
<RECOVERIES> 36
<ALLOWANCE-CLOSE> 4348
<ALLOWANCE-DOMESTIC> 4348
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 537
</TABLE>
