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, 1997
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 For the transition period from to .
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Commission File Number: 0-27036
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Ambanc Holding Co., Inc.
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(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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (518)842-7200
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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 14, 1997
- ----------------------------- -----------------------------------
Common Stock, $.01 Par Value 4,175,133
<PAGE>
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
FORM 10-Q
June 30, 1997
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Table of Contents
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Part I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements (unaudited):
Consolidated Interim Statements of Income for the three months
and six months ended June 30, 1997 and 1996..................... 3
Consolidated Interim Statements of Financial Condition at June
30, 1997 and December 31, 1996.................................. 4
Consolidated Interim Statements of Cash Flows for the six months
ended June 30, 1997 and 1996.................................... 5
Summarized Notes to Consolidated Interim Financial Statements... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................... 9
Part II. OTHER INFORMATION
-----------------
Item 4. Submissions of Matters to a Vote of Security Holders............ 19
Item 6. Exhibits and Reports on Form 8-K................................ 19
SIGNATURES.................................................................. 20
EXHIBITS INDEX.............................................................. 21
<PAGE>
Part I. Financial Information
---------------------
Item 1.
- -------
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Interim Statements of Income (unaudited)
(dollars in thousands, except per share amounts)
- -----------------------------------------------------
<TABLE>
<CAPTION>
The Six Months Three Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest and dividend income:
Loans ................................................ $ 9,944 $ 9,985 $ 5,053 $ 4,936
Securities available for sale ........................ 7,157 3,714 3,498 2,494
Federal Funds Sold ................................... 258 715 170 101
Federal Home Loan Bank stock ......................... 89 63 52 31
----------- ----------- ----------- -----------
Total interest and dividend income ................. 17,448 14,477 8,773 7,562
----------- ----------- ----------- -----------
Interest Expense:
Deposits ............................................. 6,451 6,320 3,348 3,058
Borrowings ........................................... 2,969 623 1,417 623
----------- ----------- ----------- -----------
Total interest expense .............................. 9,420 6,943 4,765 3,681
----------- ----------- ----------- -----------
Net interest income ................................. 8,028 7,534 4,008 3,881
Provision for loan losses ............................... 638 2,061 275 433
----------- ----------- ----------- -----------
Net interest income after provision
for loan losses ..................................... 7,390 5,473 3,733 3,448
----------- ----------- ----------- -----------
Non-interest income:
Service charges on deposit accounts .................. 376 349 195 173
Net gains (losses) on securities transactions ........ 177 (98) 178 0
Other ................................................ 150 113 96 59
----------- ----------- ----------- -----------
Total non-interest income .......................... 703 364 469 232
----------- ----------- ----------- -----------
Non-interest expense:
Salaries, wages and benefits ......................... 2,891 2,461 1,545 1,207
Occupancy and equipment .............................. 711 673 377 332
Data processing ...................................... 457 426 225 205
Federal deposit insurance premium .................... 19 1 10 0
Correspondent bank processing fees ................... 64 57 30 29
Real estate owned and repossessed assets expenses, net 243 283 133 156
Professional fees .................................... 155 220 46 80
Other ................................................ 1,588 1,449 947 869
----------- ----------- ----------- -----------
Total non-interest expenses ....................... 6,128 5,570 3,313 2,878
----------- ----------- ----------- -----------
Income before taxes .................................... 1,965 267 889 802
Income tax expense ...................................... 741 71 317 292
----------- ----------- ----------- -----------
Net income ........................................ $ 1,224 $ 196 $ 572 $ 510
=========== =========== =========== ===========
Net income per common share ............................. $ 0.30 $ 0.04 $ 0.14 $ 0.10
=========== =========== =========== ===========
Weighted average common shares outstanding .............. 4,017,979 4,995,722 4,024,536 5,002,525
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated interim financial statements
3
<PAGE>
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Interim Statements of Financial Condition
(unaudited)-(dollars in thousands)
- ------------------------------------------------------
June 30 Dec.31,
1997 1996
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Assets
------
Cash and due from banks ................................ $ 5,872 $ 6,387
Federal funds sold ..................................... 14,300 4,500
--------- ---------
Cash and cash equivalents ......................... 20,172 10,887
Securities available for sale, at fair value ........... 184,020 200,539
Loans receivable, net of unamortized fees .............. 271,547 251,532
Allowance for loan losses ......................... (3,798) (3,438)
--------- ---------
Loans receivable, net ............................. 267,749 248,094
Accrued interest receivable ............................ 3,169 3,201
Premises and equipment, net ............................ 3,200 2,784
Federal Home Loan Bank of New York stock, at cost ...... 3,291 2,029
Real estate owned and repossessed assets ............... 290 715
Other assets ........................................... 3,088 4,172
--------- ---------
Total assets ...................................... $ 484,979 $ 472,421
========= =========
Liabilities and Shareholders' Equity
------------------------------------
Liabilities:
Deposits ............................................ $ 326,139 $ 298,082
Advances from borrowers for taxes and insurance ..... 2,090 1,703
Advances from FHLB .................................. --- 6,000
Other borrowed funds ................................ 87,830 102,780
Accrued interest payable ............................ 1,055 1,077
Accrued expenses and other liabilities .............. 5,111 1,261
--------- ---------
Total liabilities ................................. 422,225 410,903
Shareholders' equity:
Preferred stock $.01 par value. Authorized 5,000,000
shares; none outstanding at June 30, 1997 and
December 31, 1996 ................................ --- ---
Common stock $.01 par value. Authorized 15,000,000
shares; 5,422,250 shares issued
at June 30, 1997 and December 31, 1996 ............ 54 54
Additional paid in capital .......................... 52,221 52,128
Retained earnings,substantially restricted .......... 25,660 24,436
Treasury Stock, at cost(1,030,227 shares at June 30,
1997 and December (11,208) (11,208)
Common stock acquired by ESOP ....................... (3,554) (3,812)
Net unrealized loss on securities available for sale (419) (80)
--------- ---------
Total shareholders' equity ........................ 62,754 61,518
Total liabilities and shareholders' equity ........ $ 484,979 $ 472,421
========= =========
See accompanying notes to consolidated interim financial statements
4
<PAGE>
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Interim Statements of Cash Flows
(unaudited)-(dollars in thousands)
- ---------------------------------------------
For the six months
Ended June 30,
------------------
1997 1996
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Increase (decrease) in cash and cash equivalents:
Cash flows provided (used) by operating activities:
Net income ........................................$ 1,224 $ 196
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation ................................... 266 252
Amortization of computer software costs ........ 22 32
Provision for loan losses ...................... 638 2,061
ESOP Compensation Expense ...................... 352 217
Loss on disposal of fixed assets ............... -- 23
Net loss (gains) on sale and redemptions of
securities available for sale .............. (178) 98
Net loss on sale and writedowns of other real
estate owned and other repossessed assets . 157 79
Net amortization on securities ................ 15 296
Decrease in accrued interest receivable
and other assets .......................... 1,364 15,585
Increase (Decrease) in accrued expenses and
other liabilities .......................... 3,828 (47,818)
Increase in advances from borrower
for taxes and insurance .................... 387 148
Net cash provided (used) by
operating activities ............ 8,218 (28,831)
Cash flows from investing activities:
Proceeds from sales and redemptions of
securities available for sale ................. 48,468 21,399
Purchases of securities available for sale ....... (44,979) (139,100)
Proceeds from principal paydowns and
maturities of securities available for sale .. 12,461 12,741
Purchase of FHLB stock ........................... (1,262) (137)
Net increase in loans made to customers .......... (20,423) (11,980)
Capital Expenditures ............................. (682) (165)
Expenditures Computer Software ................... (22) (7)
Proceeds from Sale of other real estate owned and
otherhrepossessedsassetset .................... 399 465
------- -------
Net cash used by investing
activities ................ (6,040) (116,784)
(Continued)
5
<PAGE>
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Interim Statements of Cash Flows,
Continued (unaudited)-(dollars in thousands)
- ---------------------------------------------
Cash flows from financing activities:
Net increase (decrease) in deposits .............. 28,057 (5,884)
Advances (repayments) on FHLB borrowings, net .... (6,000) 9,800
Increase (decrease) in other borrowed funds ...... (14,950) 64,570
--------- ---------
Net cash provided by financing activities ........ 7,107 68,486
--------- ---------
Net increase (decrease) in cash and cash equivalents . 9,285 (77,129)
Cash and cash equivalents at beginning of year ....... 10,887 84,613
-------- ---------
Cash and cash equivalents at end of period ........... $ 20,172 $ 7,484
========= =========
Supplemental disclosures of cash flow information-
cash paid during the year for:
Interest ..................................... $ 9,480 $ 6,522
========= =========
Income Taxes ................................. $ 880 $ 736
========= =========
Noncash investing activity:
Net reduction in loans receivable resulting
from the transfer to real estate owned and
other repossessed
assets ............................................ $ 131 $ 1,362
========= =========
Net change in unrealized loss on available for
sale securities, net of deferred tax effect ....... ($ 339) ($ 1,607)
========= =========
See accompanying notes to consolidated interim financial statements
6
<PAGE>
SUMMARIZED NOTES TO CONSOLIDATED INTERIM 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, 1997 and June 30, 1996, in conformity
with generally accepted accounting principles. These consolidated interim
financial statements should be read in conjunction with Ambanc Holding Co.,
Inc.'s ("the Company" herein) 1996 Annual Report on Form 10-K.
(2) Amounts in the prior periods' consolidated interim financial statements
are reclassified whenever necessary to conform to current period presentations.
(3) Earnings or loss per share are computed based on the weighted average
number of shares outstanding, less unreleased employee stock ownership plan
shares, during the period. The weighted average number of shares outstanding
were 4,024,536 and 5,002,525 for the three months ended June 30, 1997 and 1996,
respectively. For the six months ended June 30, 1997 and 1996, the weighted
average number of shares outstanding were 4,017,979 and 4,995,722, respectively.
The effect of the Recognition and Retention Plan ("RRP") and the 1997 Stock
Option Incentive Plan ("SOP") are not material to the calculation of net income
per share.
The RRP and SOP were ratified for adoption by the Company's shareholders
at the annual meeting of shareholders held May 23, 1997 (the grant date).
The Board of Directors believes that it is appropriate for the Company to
have a flexible and comprehensive SOP which permits the granting of a variety of
long-term incentive awards as a means of enhancing and encouraging the
recruitment and retention of those individuals on whom the continued success of
the Company most depends. As a result of the adoption of the SOP, options to
purchase an aggregate of 373,974 shares of common stock were granted to
directors and officers at an exercise price of $13.75 per share, representing
the fair market value of the stock on the grant date, which leaves available
168,251 shares for future grants. The options vest over a four year period at a
rate of 25% annually, commencing on the one year anniversary of the grant date.
The RRP is designed to provide directors, officers and employees with a
proprietary interest in the Company in a manner designed to encorage such
individuals to remain with the Company and the Bank. Pursuant to the
ratification of the RRP by shareholders, 216,890 shares of common stock were
made available for awards. Concurrent with the approval of the RRP, 131,285
shares were awarded and vest over a four period at a rate of 25% annually, com-
mencing on the one year anniversary of the grant date. An aggregate of 85,605
shares are available for future awards. For the six months ended June 30, 1997,
the Company recognized compensation expense related to the RRP of approximately
$124,200.
7
<PAGE>
(4) In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
(Statement 128), which establishes standards for computing and presenting
earnings per share (EPS). This Statement simplifies the standards for computing
EPS making them comparable to international EPS standards and supersedes
Accounting Principals Board Opinion No. 15, "Earnings Per Share" and related
interpretations. Statement 128 replaces the presentation of primary EPS with the
presentation of basic EPS. It also requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the diluted EPS calculation.
Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock, or resulted in the issuance of common
stock that then shared in the earnings of the entity. This Statement is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods. Earlier application is not permitted. This
statement requires restatement of all prior-period EPS data presented.
The Company will present its EPS data in accordance with Statement 128
as of December 31, 1997. Management anticipates that the effect of the adoption
of this Statement will not have a material effect on the Company's consolidated
financial statements.
(5) Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" (Statement 130), which establishes standards for reporting and display
of comprehensive income and its components in financial statements. Statement
130 states that comprehensive income includes reported net income of a company,
adjusted for items that are currently accounted for as direct entries to equity,
such as the net unrealized gain or loss on securities available for sale,
foreign currency items, and minimum pension liability adjustments. This
statement is effective for both interim and annual periods beginning after
December 15, 1997. As required, the Company will adopt Statement 130 in the
first quarter in 1998 and will report and display comprehensive income in
accordance with the new statement.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (Statement 131), which establishes standards for reporting by
public companies about operating segments of their business. Statement 131 also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. This statement is effective for periods
beginning after December 15, 1997. Management does not anticipate that the
adoption of this statement will have a material effect on the Company's
consolidated financial statements.
8
<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 unaudited consolidated interim financial statements and related notes
and with the statistical information and financial data appearing in this report
as well as the Company's 1996 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 occurrence of anticipated or
unanticipated events.
General
- -------
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 other
repossessed assets 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 $572,000 for the quarter ended June
30, 1997, or $0.14 per share, and earnings for the six months ended June 30,
1997, of $1.2 million, or $0.30 per share, compared to earnings of $510,000, or
$0.10 per share, and $196,000, or $0.04 per share, in the corresponding periods
in 1996, respectively.
9
<PAGE>
The improvement in second quarter 1997 earnings compared to 1996 was due,
in part, to an increase in net interest income before provision for loan losses
of $127,000, or 3.3%, to $4.0 million from $3.9 million in the second quarter of
1996. Also contributing to the improved earnings was a decrease in the provision
for loan losses by $158,000, or 36.5%, and an increase by $178,000 in net gains
on sales of securities available for sale (securities AFS).
The improvement in net income by $1.0 million to $1.2 million for the
six months ended June 30, 1997, compared to the corresponding 1996 period, was
primarily the result of a decrease by $1.4 million in the provision for loan
losses. In the first six months of 1996, the Company incurred a charge to
provision for loan losses of $1.5 million related to a lending relationship with
a lease finance company that filed for Chapter 11 bankruptcy protection on March
29, 1996 (see "Asset Quality," herein). Also contributing to the improvement in
earnings were increases in net interest income before the provision for loan
losses and noninterest income. These positive factors were partially offset
by increases in noninterest expenses and income tax expense.
The level of non-performing assets improved to $3.1 million at June
30,1997, from $5.6 million at December 31, 1996. At June 30, 1997,
non-performing assets were 0.63% of total assets compared to 1.18% at December
31, 1996. The Company's allowance for loan losses to non-performing loans and to
total loans at June 30, 1997, was 137.0% and 1.40%, respectively, compared to
70.5% and 1.37%, respectively, at December 31, 1996.
See "Asset Quality" herein.
10
<PAGE>
RESULTS OF OPERATIONS
---------------------
Comparison of Operating Results for the Quarters Ended June 30, 1997 and 1996.
Net Interest Income
- -------------------
Net interest income before provision for loan losses for the quarter ended
June 30, 1997 was $4.0 million, an increase of $127,000, or 3.3%, compared to
the same period in 1996. The improvement in net interest income resulted from an
increase in total average interest-earning assets by $60.6 million, or 14.8% to
$468.6 million, funded primarily by increases in average certificates of deposit
and borrowed funds of $21.7 million, or 14.7%, and $50.5 million, or 118.9%,
respectively. All of the categories that comprise total average interest-earning
assets increased, or 14.7% for the quarter ended June 30, 1997, as compared to
the comparable 1996 period; and the total average yield associated with these
assets increased by 6 basis to 7.51% from 7.45% in the second quarter of 1996.
The growth in average interest-earning assets was primarily attributable to an
increase in average securities available for sale by $46.5 million, or 31.7% to
$193.2 million. The average yield on these securities increased by 44 basis
points to 7.24% from 6.80% in the quarter ended June 30, 1996. These positive
factors more than offset the increased funding costs related to the higher
average volumes and average rates for certificates of deposit and borrowed
funds. The average rate on certificates of deposit increased by 9 basis points
to 5.7%, and the average rate on borrowed funds increased 21 basis points to
6.11% compared to the second quarter of 1996.
Provision for loan losses
- -------------------------
The provision for loan losses declined by $158,000 to $275,000 for the
quarter ended June 30, 1997, compared to the same quarter in 1996. The lower
expense was attributable to the improvement in the quality of the Company's loan
portfolio and the level of the allowance for loan losses at June 30, 1997, in
relation to total loans and to non-performing loans.
Noninterest income
- ------------------
Total noninterest income increased by $237,000, or 102.2%, to $469,000 from
the second quarter 1996 level. The improvement in total noninterest income was
primarily the result of an increase in gains on the sales of securities
available for sale in the second quarter of 1997, an increase of $178,000
compared to 1996. Other noninterest income increased by $37,000 to $96,000
mainly attributable to a partial recovery of $25,000 against a previous
charge-off of a capital debenture issued by Nationar, an institution that was
seized by the Superintendent of Banks of N.Y.S. Also contributing to the
improvement in other noninterest income were increases in commissions on the
sales of annuities and mutual funds and item processing charges for third party
imaging of $5,500 and $4,000, respectively.
11
<PAGE>
Noninterest expense
- -------------------
Total noninterest expense for the three months ended June 30, 1997,
increased $435,000 to $3.3 million compared to 1996. The increase was due
primarily to an increase in salaries, wages and benefits by $338,000 with
$178,000 of the total increase attributable to increased accruals for the
Company's ESOP and other stock based compensation during the quarter ended June
30, 1997. Also contributing to the total increase in salaries, wages and
benefits were additions to staff, mainly to support the opening of three new
branch offices in the second quarter of 1997.
Income taxes
- ------------
Income tax expense increased by $25,000 to $317,000 primarily due to the
improvement in the Company's income before taxes to $889,000 from $802,000 in
the second quarter of 1996.
Comparison of Operating Results for the Six Months Ended June 30, 1997 and 1996.
Net interest income
- -------------------
Net interest income before provision for loan losses increased by $494,000,
or 6.6%, to $8.0 million for the six months ended June 30,1997, compared to the
corresponding period in 1996. The improvement in net interest income was
attributable to an increase in total average interest-earning assets by $73.9
million, or 18.9%, to $465.4 million, primarily funded by increases in the
average volumes of certificates of deposit and borrowed funds of $11.2 million,
or 7.4% and $77.6 million, respectively. The growth in total average
interest-earning assets was attributable primarily to an increase in average
securities AFS by $86.0 million,or 77.3%, to $197.3 million, partially offset by
a decline by $16.8 million, or 61.9% in the average volume of federal funds sold
to $10.3 million. The total average yield on interest-earning assets increased
by 12 basis points to 7.56% for the six months ended June 30, 1997 from 7.44% in
the 1996 period. These positive effects were partially offset by the increased
funding costs related to the increases in the average volumes of certificates of
deposit and borrowed funds coupled with an increase in the average rate paid on
borrowed funds to 6.06%, an increase of 16 basis points, compared to the six
months ended June 30, 1996.
Provision for loan losses
- --------------------------
The decrease of $1.4 million to $638,000 for the six-months ended June 30,
1997, compared to 1996, was due entirely to a $1.5 million provision recorded in
the first quarter of 1996 pertaining to the Bank's aggregate lending
relationship with the Bennett Funding Group, a company that filed for Chapter 11
bankruptcy protection on March 29, 1996. See "Asset Quality" herein.
12
<PAGE>
Noninterest income
- ------------------
Total noninterest income increased by $339,000 to $703,000 for the
six-months ended June 30, 1997, compared to the like 1996 period, primarily due
to an increase in net gains of sales of securities AFS by $275,000 to $177,000
compared to a net loss of $98,000 in the 1996 period. Also contributing to the
improvement in total noninterest income were increases in service charges on
deposit accounts, mainly NSF fees, and other noninterest income by $27,000 and
$37,000, respectively. The increase in other noninterest income was attributable
primarily to the aforementioned partial recovery on Nationar and to an increase
by $13,000 in commissions on sales of annuities and mutual funds through the
Company's subsidiary, ASB Insurance Agency, Inc.
Noninterest expense
- -------------------
Total noninterest expense increased by $558,000 to $6.1 million for the
six-months ended June 30, 1997 compared to the similar period of 1996. The
increase resulted primarily from an increase in salaries, wages and benefits by
$430,000, or 17.5%, $260,000 of which resulted from increased accruals for the
Company's ESOP and other stock based compensation. Also contributing to the
total increase in salaries, wages and benefits were additions to staff, mainly
to support the opening of three new branch offices in the second quarter of
1997, and normal cost-of-living and merit increases.
Income taxes
- ------------
The Company recorded a tax expense of $741,000 on pretax income of $2.0
million for the six months ended June 30, 1997, compared to a tax expense of
$71,000.00 on pretax income of $267,000 in the 1996 period.
FINANCIAL CONDITION
-------------------
The Company's total assets at June 30, 1997, were $485.0 million, an
increase of $12.6 million, or 2.7%, compared to total assets of $472.4 million
at December 31, 1996. The growth in total assets was primarily attributable to
an increase in loans receivable, net of unamortized fees, of $20.0 million, or
8.0%, and to an increase in federal funds sold of $9.8 million,or 217.8%
partially offset by a decline in securities available for sale by $16.5 million,
or 8.2%. The growth in total assets was primarily funded by an increase in total
deposits of $28.1 million, or 9.4%, to $326.1 million, partially offset by a
decrease in advances from FHLB and other borrowed funds of $21.0 million, or
19.3%.
Total shareholders' equity increased by $1.2 million from December 31,1996,
to $62.8 million at June 30,1997, due primarily to a $1.2 million increase in
retained earnings.
13
<PAGE>
At June 30, 1997, the book value per share on 4,392,023 common shares
outstanding was $14.29 compared to $14.01 at December 31, 1996, on the same
number of shares outstanding. Excluding the tax-effected unrealized losses on
securities AFS, the book value per share at June 30, 1997 was $14.38 compared to
$14.02 at December 31, 1996.
Liquidity and Funding
- ---------------------
The Company's primary sources of funds for operations are deposits from its
market area, principal and interest payments on loans, 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, 1997,
the Company's loan originations totaled $50.8 million. The Company purchased
securities AFS during the same period of $45.0 million.
The primary financing activity of the Company is the attraction of
deposits. During the six months ended June 30, 1997, total deposits increased by
$28.1 million. Management believes that the increase in deposits, primarily
certificates of deposit, occurred because more of the Company's customers were
willing to lock-in the interest rates offered by the Company due to the general
uncertainty pertaining to the direction of market interest rates during the
six-months ended June 30, 1997; i.e., if market interest rates declined, the
depositor was assured of a higher return and, if market rates increased in the
short-term, the depositor could request an early withdrawal, pay the penalty and
reinvest the proceeds at a higher rate.
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 1997 was 10.8%, and its short-term
liquidity ratio for the same month was 4.8%.
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, 1997, cash and cash equivalents totaled $20.2
million, compared to $10.9 million at December 31, 1996. The increase in cash
and cash equivalents was attributable to an increase in federal funds sold of
$9.8 million, which resulted mainly from the increase in total deposits.
14
<PAGE>
The Bank anticipates that it will have sufficient funds available to meet
its current commitments. At June 30, 1997, the Bank had commitments to originate
loans of $12.1 million as well as undrawn commitments of $6.1 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, 1997, totaled $118.4 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 would consider employing one or more of the
following strategies: increase its borrowed funds position to compensate for the
deposit outflows; increase the rates it offers on these deposits in order to
increase the retention rate on maturing CDs and/or to attract new deposits; or,
attempt to increase certificates of deposit through the use of deposit brokers.
Depending on the level of market interest rates at the CD renewal dates, the
implementation of one or more of 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 declared or paid
from the Bank to the Company.
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, 1997, the Bank had $47.7 million of tangible and core
capital, respectively, or 10.0% of adjusted total assets, which was
approximately $40.5 million and $33.4 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, 1997, the Bank had risk-based capital of $50.4 million
(including $47.7 million in core capital and $2.7 million in qualifying
supplementary capital) or 23.9% of risk-weighted assets of $211.1 million. The
Bank's risk-weighted capital was $33.5 million above the 8.0% requirement in
effect on that date.
15
<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.
AMSTERDAM SAVINGS BANK, FSB
NON-PERFORMING ASSETS
FOR THE YEAR 1997
- ---------------------------
June 30 Dec.31
1997 1996
------ ------
(In thousands)
Non-accruing loans:
One-to four-family .................................... $ 345 $ 259
Multi-family .......................................... 0 0
Commercial real estate ................................ 229 339
Consumer .............................................. 197 256
Commercial Business ................................... 729 2,269
------ ------
Total ............................................... 1,500 3,123
------ ------
Accruing loans delinquent more than 90 days:
One-to four-family .................................... 111 151
Multi-family .......................................... 0 0
Commercial real estate ................................ 18 568
Consumer .............................................. 5 6
Commercial Business ................................... 126 0
------ ------
Total ............................................... 260 725
------ ------
Troubled debt restructured loans:
One-to four-family .................................... 86 88
Multi-family .......................................... 36 38
Commercial real estate ................................ 775 781
Consumer .............................................. 53 56
Commercial Business ................................... 62 68
------ ------
Total ............................................... 1,012 1,031
------ ------
------ ------
Total non-performing loans ............................... 2,772 4,879
------ ------
Foreclosed assets:
One-to four-family .................................... -- 194
Multi-family .......................................... 207 282
Commercial real estate ................................ -- --
Consumer .............................................. 83 239
Commercial Business ................................... 0 0
------ ------
Total ............................................... 290 715
------ ------
Total non-performing assets .............................. $3,062 $5,594
====== ======
Total as a percentage of total assets .................... 0.63% 1.18%
16
<PAGE>
Non performing loans decreased from $4.9 million at December 31, 1996 to $
2.8 million at June 30, 1997 primarily due to the Bennett Funding Group Inc.
lending relationship, which represented $1.9 million of the non performing loans
at Decmeber 31, 1996 and $455,000 at June 30, 1997. The reduction was due to the
receipt of $1.4 million in the second quarter of 1997 under the terms of a
settlement agreement with the bankruptcy trustee. On the basis of the terms
specified in the settlement agreement, management believes that no additional
provisions or charge-offs on this relationship will be necessary.
In addition, as of June 30, 1997, the Company had foreclosed multi-family
assets of $207,000 consisting of one property: a three-story, 54-unit, student
housing project located in Morrisville, New York. A purchase proposal on this
property has been accepted contingent upon a closing within 60 days. On the
basis of the offer received, the asset was written-down by $75,000 to reflect
the sale price. The property encroachment dispute discussed in the March 31,
1997 Form 10-Q has been resolved and the resolution agreement is to signed by
the parties involved.
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 for collateral dependent loans, the net
present value of estimated future cash flows if the loan is not collateral
dependent, economic conditions, historical loan loss experience, and other
factors that warrant recognition in providing for an adequate loan loss
allowance.
17
<PAGE>
The following table sets forth an analysis of the Company's allowance for loan
losses.
AMSTERDAM SAVINGS BANK, FSB
ALLOWANCE FOR LOAN LOSSES ACTIVITY
- ----------------------------------
For the six months
ended June 30,
1997 1996
------- -------
(In thousands)
Balance at beginning of period .......................... $ 3,438 $ 2,647
Charge-offs:
One- to four-family ................................ (5) (118)
Multi Family ....................................... (12) 0
Commercial Real Estate ............................. (50) (28)
Consumer ........................................... (193) (250)
Commercial Business ................................ (66) 0
------- -------
Total Charge offs ............................... (326) (396)
Recoveries:
One- to four-family ................................ 0 9
Multi Family ....................................... 0 0
Commercial Real Estate ............................. 4 0
Consumer ........................................... 31 27
Commercial Business ................................ 13 0
------- -------
Total Recoveries ................................ 48 36
Net Charge-offs ......................................... (278) (360)
Provisions charged to operations ........................ 638 2,061
------- -------
Balance at end of period ................................ 3,798 4,348
======= =======
Ratio of net charge-offs during
the period to average loans
outstanding during period ............................... 0.11% 0.29%
Ratio of net charge-offs during
the period to average
non-performing assets ................................... 6.12% 4.73%
18
<PAGE>
Part II. - Other Information
- ----------------------------
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Ambanc Holding Co., Inc.'s Annual Meeting of Shareholders was held on May 23,
1997.
Proxies for the meeting were solicited pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended. There was no solicitation in
opposition to management's nominees as listed in the proxy statement, and all
such nominees were elected.
With respect to management's nominees, voting was as follows: John Daly, For -
3,881,917, Withheld - 112,406; Lionel H. Fallows, For - 3,909,553, Withheld -
84,770; Marvin R. LeRoy, Jr., For - 3,911,447, Withheld - 82,876; and William A.
Wilde, Jr., For - 3,910,713, Withheld - 83,610.
Proxies were also solicited at the annual meeting for ratification of the 1997
Stock Option and Incentive Plan. The proposal was adopted, with 2,537,347 shares
voting For, 387,765 shares voting Against, and 36,861 shares Abstaining.
Proxies were also solicited at the annual meeting for ratification of the
Recognition and Retention Plan. The proposal was adopted, with 2,561,646 shares
voting For, 412,345 shares voting Against, and 53,333 shares Abstaining.
Proxies were also solicited at the annual meeting for the ratification of the
appointment of KPMG Peat Marwick LLP as independent auditors of the Company. The
proposal was adopted, with 3,945,966 shares voting For, 39,500 shares voting
Against, and 10,147 shares Abstaining.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits as required by Item 601 of Regulation S-K.
Exhibit number 27, Financial Data Schedule
(b) Reports on Form 8-K
Current reports on form 8-K were filed on July 7 and July 28, 1997
for:
(i) June 23, 1997 Press release regarding Ambanc stock buy-back program.
(ii) July 22, 1997 Press release regarding Ambanc Holding Co., Inc.
earnings for the three and six months ended June 30, 1997.
(iii) July 25, 1997 Press release regarding the Company's initial regular
cash dividend.
19
<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, 1997
/s/ Harold A. Baylor, Jr.
- -------------------------
Harold A. Baylor, Jr.
Vice President, Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
Date: August 14, 1997
20
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT DESCRIPTION
- ------- -----------
EX 27. Financial Data Schedule
21
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997 OF
AMBANC HOLDING CO., INC. AND ITS SUBSIDIARIES AND IS
QUALIFIED IN ITS ENTIRETY BY REFRENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Jun-30-1997
<CASH> 3742
<INT-BEARING-DEPOSITS> 2130
<FED-FUNDS-SOLD> 14300
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 184020
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 271547
<ALLOWANCE> 3798
<TOTAL-ASSETS> 484979
<DEPOSITS> 326139
<SHORT-TERM> 67330
<LIABILITIES-OTHER> 8256
<LONG-TERM> 20500
0
0
<COMMON> 54
<OTHER-SE> 62700
<TOTAL-LIABILITIES-AND-EQUITY> 484979
<INTEREST-LOAN> 9944
<INTEREST-INVEST> 7157
<INTEREST-OTHER> 347
<INTEREST-TOTAL> 17448
<INTEREST-DEPOSIT> 6451
<INTEREST-EXPENSE> 9420
<INTEREST-INCOME-NET> 8028
<LOAN-LOSSES> 638
<SECURITIES-GAINS> 177
<EXPENSE-OTHER> 6128
<INCOME-PRETAX> 1965
<INCOME-PRE-EXTRAORDINARY> 1965
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1224
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
<YIELD-ACTUAL> 3.43
<LOANS-NON> 1500
<LOANS-PAST> 260
<LOANS-TROUBLED> 1012
<LOANS-PROBLEM> 6732
<ALLOWANCE-OPEN> 3438
<CHARGE-OFFS> 326
<RECOVERIES> 48
<ALLOWANCE-CLOSE> 3798
<ALLOWANCE-DOMESTIC> 3798
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
