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, 1998
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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 13, 1998
- ----------------------------- -----------------------------------
Common Stock, $.01 Par Value 4,105,164
<PAGE>
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
FORM 10-Q
June 30, 1998
Table of Contents
Part I. FINANCIAL INFORMATION
Item 1. Consolidated Interim Financial Statements (unaudited):
Consolidated Interim Statements of Income for the three months
and six months ended June 30, 1998 and 1997.................... 3
Consolidated Interim Statements of Financial Condition at
June 30, 1998 and December 31, 1997............................ 4
Consolidated Interim Statements of Cash Flows for the six
months ended June 30, 1998 and 1997............................ 5
Summarized Notes to Consolidated Interim Financial Statements.. 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................11
Item 3. Quantitative and Qualitative Disclosures About Market Risk.....22
Part II. OTHER INFORMATION..................................................22
Item 1. Legal Proceedings..............................................22
Item 4. Submission of Matters to a Vote of Security Holders............22
Item 6. Exhibits and Reports on Form 8-K...............................23
SIGNATURES....................................................................24
EXHIBITS INDEX................................................................25
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Interim Statements of Income (unaudited)
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION> Six Months Three Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
---------------- ----------------
Interest and dividend income:
<S> <C> <C> <C> <C>
Loans ................................................ $11,152 $ 9,944 $ 5,646 $ 5,053
Securities available for sale ........................ 6,733 7,157 3,328 3,498
Federal funds sold ................................... 90 258 55 170
Federal Home Loan Bank stock ......................... 129 89 66 52
------- ------- ------- -------
Total interest and dividend income ................. 18,104 17,448 9,095 8,773
------- ------- ------- -------
Interest Expense:
Deposits ............................................. 6,804 6,451 3,338 3,348
Borrowings ........................................... 3,590 2,969 1,909 1,417
------- ------- ------- -------
Total interest expense ............................. 10,394 9,420 5,247 4,765
------- ------- ------- -------
Net interest income ................................ 7,710 8,028 3,848 4,008
Provision for loan losses ............................... 450 638 225 275
------- ------- ------- -------
Net interest income after provision
for loan losses .................................. 7,260 7,390 3,623 3,733
------- ------- ------- -------
Non-interest income:
Service charges on deposit accounts .................. 464 376 252 195
Net gains (losses) on securities transactions ........ (105) 177 (112) 178
Other ................................................ 177 150 71 96
------- ------- ------- -------
Total non-interest income .......................... 536 703 211 469
------- ------- ------- -------
Non-interest expense:
Salaries, wages and benefits ......................... 3,155 2,891 1,570 1,545
Occupancy and equipment .............................. 811 711 398 377
Data processing ...................................... 489 457 238 225
Federal deposit insurance premium .................... 21 19 11 10
Correspondent bank processing fees ................... 67 64 37 30
Real estate owned and repossessed assets expenses, net 21 243 13 133
Professional fees .................................... 360 256 222 147
Consulting and termination cost of former executive .. 399 0 399 0
Other ................................................ 1,496 1,487 777 846
------- ------- ------- -------
Total non-interest expenses ........................ 6,819 6,128 3,665 3,313
------- ------- ------- -------
Income before taxes .................................... 977 1,965 169 889
Income tax expense ...................................... 434 741 72 317
------- ------- ------- -------
Net income ......................................... $ 543 $ 1,224 $ 97 $ 572
------- ------- ------- -------
Net income per common share - basic ..................... $ 0.14 $ 0.30 $ 0.03 $ 0.14
Net income per common share - diluted ................... $ 0.14 $ 0.30 $ 0.03 $ 0.14
</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, December 31,
1998 1997
--------------------
Assets
Cash and due from banks ............................... $ 6,039 $ 10,225
Federal funds sold .................................... -- --
----- ------
Cash and cash equivalents ........................ 6,039 10,225
Securities available for sale, at fair value .......... 223,456 205,842
Loans receivable, net of unamortized fees ............. 325,283 284,930
Allowance for loan losses ........................ (4,090) (3,807)
------- -------
Loans receivable, net ............................ 321,193 281,123
------- -------
Accrued interest receivable ........................... 3,433 3,734
Premises and equipment, net ........................... 2,879 3,121
Federal Home Loan Bank of New York stock, at cost ..... 4,440 3,291
Real estate owned and repossessed assets .............. 63 143
Other assets .......................................... 3,884 2,965
--------- ---------
Total assets ..................................... $ 565,387 $ 510,444
========= =========
Liabilities and Shareholders' Equity
Liabilities:
Deposits ........................................... $ 321,664 $ 333,265
Advances from borrowers for taxes and insurance .... 2,500 1,902
Advances from FHLB ................................. 38,800 12,300
Other borrowed funds ............................... 140,970 99,250
Accrued interest payable ........................... 782 819
Accrued expenses and other liabilities ............. 2,301 1,706
--------- --------
Total liabilities ................................ 507,017 449,242
--------- --------
Shareholders' equity:
Preferred stock $.01 par value. Authorized 5,000,000
shares; none outstanding at June 30, 1998 and
December 31, 1997.................................. -- --
Common stock $.01 par value. Authorized 15,000,000
shares; 5,422,250 shares issued at June 30,
1998 and December 31, 1997 ........................ 54 54
Additional paid in capital ......................... 52,668 52,385
Retained earnings, substantially restricted ........ 26,499 26,458
Treasury Stock, at cost (1,317,086 shares at June
30, 1998 and 1,115,832 at December 31, 1997) .... (16,510) (12,585)
Common stock acquired by ESOP ...................... (3,058) (3,303)
Unearned RRP shares issued ......................... (1,308) (1,533)
Accumulated other comprehensive income ............. 25 (274)
------ ------
Total shareholders' equity ....................... 58,370 61,202
------ ------
Total liabilities and shareholders' equity ....... $ 565,387 $ 510,444
========= =========
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,
1998 1997
-------------------
Increase (decrease) in cash and cash equivalents:
Cash flows provided by operating activities:
Net income ........................................... $ 543 $ 1,224
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and Amortization ...................... 353 288
Provision for loan losses .......................... 450 638
Provision for losses and writedowns on
real estate owned and repossessed assets .......... 4 147
ESOP compensation expense .......................... 446 352
RRP Expense ........................................ 226 48
Net (gains) losses on securities transactions ...... 105 (177)
Net loss on sale of other real estate owned
and other repossessed assets ...................... 4 10
Net amortization on securities ..................... 568 159
(Increase) decrease in accrued interest
receivable and other assets ....................... (760) 1,364
Increase (decrease) in accrued interest
payable, and other liabilities .................... 558 3,778
Increase (decrease) in advances from
borrowers for taxes and insurance ................. 598 387
--------- ---------
Net cash provided by operating activities ........ 3,095 8,218
--------- ---------
Cash flows from investing activities:
Proceeds from sales and redemptions of
securities available for sale ........................ 94,126 48,468
Purchases of securities available for sale ............ (138,635) (44,979)
Proceeds from principal paydowns and
maturities of securities available for sale .......... 26,721 12,461
Purchase of FHLB stock ................................ (1,149) (1,262)
Net (increase) decrease in loans made to customers .... (8,768) (20,423)
Loans purchased ........................................ (31,888) ---
Capital expenditures .................................. (92) (704)
Proceeds from sale of other real estate owned and
other repossessed assets ............................. 207 399
------- ------
Net cash used by investing
activities ........................................... (59,478) (6,040)
------- ------
(Continued)
5
<PAGE>
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Interim Statements of Cash Flows, Continued (unaudited)
(dollars in thousands) For the six months
ended June 30,
1998 1997
------------------
Cash flows from financing activities:
Exercise of stock options .......................... 56 --
Purchase of Treasury Stock ......................... (3,976) --
Dividends paid ..................................... (502) --
Net increase (decrease) in deposits ................ (11,601) 28,057
Advances from (repayments on) FHLB
borrowings, net ................................... 26,500 (6,000)
Increase (decrease) in other borrowed funds, net ... 41,720 (14,950)
--------- ---------
Net cash provided by financing activities ........... 52,197 7,107
--------- ---------
Net increase (decrease) in cash and cash equivalents (4,186) 9,285
Cash and cash equivalents at beginning of year ...... 10,225 10,887
--------- ---------
Cash and cash equivalents at end of period .......... $ 6,039 $ 20,172
========= =========
Supplemental disclosures of cash flow information-
cash paid during the year for:
Interest ....................................... $ 10,432 $ 9,480
========= =========
Income Taxes ................................... $ 838 $ 880
========= =========
Noncash investing activity:
Reduction in loans receivable resulting from
the transfer to real estate owned and other
repossessed assets ................................ $135 $131
========= =========
Net increase (decrease) in net unrealized
gain (loss) on securities available for
sale, net of deferred tax effect .................. $299 ($339)
========= =========
Noncash operating activity:
Tax benefit from vesting of RRP shares ............. $76 ----
========= =========
See accompanying notes to consolidated interim financial statements.
6
<PAGE>
SUMMARIZED NOTES TO UNAUDITED INTERIM 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
six month periods ended June 30, 1998 and June 30, 1997 in conformity with
generally accepted accounting principles. These consolidated financial
statements should be read in conjunction with Ambanc Holding Co., Inc.'s ("the
Company" herein) 1997 Annual Report on Form 10-K. The results of operations for
the interim periods are not necessarily indicative of the results of operations
to be expected for the full fiscal year ended December 31, 1998.
(2) Amounts in the prior periods' consolidated interim financial statements are
reclassified whenever necessary to conform to current period presentation.
(3) Earnings per share
On December 31, 1997, the Company adopted the provisions of SFAS No. 128,
"Earnings Per Share". The statement supersedes Accounting Principles Board
Opinion No. 15, "Earnings Per Share" and related interpretations. SFAS No. 128
requires dual presentation of Basic EPS and Diluted EPS on the face of the
consolidated income statement for all entities with complex capital structures
and specifies additional disclosure requirements. Basic earnings per share
excludes dilution and is calculated by dividing net income available to common
shareholders by the weighted average number of shares outstanding during the
period. Unvested restricted stock awards are considered outstanding common
shares and included in the computation of basic EPS as of the date that they are
fully vested. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised into common
stock or resulted in the issuance of common stock. All prior period EPS data has
been restated to conform to the provisions of this Statement. The adoption of
this Statement did not have a material effect on the Company's consolidated
financial position or results of operations.
Calculations of basic earnings per share (basic EPS) and diluted earnings
per share (diluted EPS) are as follows:
Weighted
Net Average Per Share
Income (loss) Shares Amount
(Dollars in thousands,
except per share amounts)
For the six months ended June 30, 1998:
Basic EPS
Income available to common shareholders $ 543 3,793,648 $ 0.14
=== ====
Effect of Dilutive Securities
Stock Options 66,709
RRP shares 34,351
------
Diluted EPS
Income available to common shareholders
plus assumed conversions 543 3,894,708 0.14
=== ========= ====
7
<PAGE>
For the six months ended June 30, 1997:
Basic EPS
Income available to common shareholders $ 1,224 4,017,979 $ 0.30
===== ====
Effect of Dilutive Securities
Stock Options 1,617
RRP shares 1,122
-----
Diluted EPS
Income available to common shareholders
plus assumed conversions 1224 4,020,718 0.30
==== ========= ====
For the three months ended June 30, 1998:
Basic EPS
Income available to common shareholders $ 97 3,759,045 $ 0.03
== ====
Effect of Dilutive Securities
Stock Options 70,918
RRP shares 31,933
-----
Diluted EPS
Income available to common shareholders
plus assumed conversions 97 3,861,896 0.03
== ========= ====
For the three months ended June 30, 1997:
Basic EPS
Income available to common shareholders $ 572 4,024,536 $ 0.14
=== ====
Effect of Dilutive Securities
Stock Options 3,233
RRP shares 2,244
-----
Diluted EPS
Income available to common shareholders
plus assumed conversions 572 4,030,013 0.14
=== ========= ====
(4) Comprehensive Income
On January 1, 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This
statement establishes standards for reporting and display of comprehensive
income and its components. Comprehensive income includes the reported net income
of a company adjusted for items that are currently accounted for as direct
entries to equity, such as the mark to market adjustment on securities available
for sale, foreign currency items and minimum pension liability adjustments. At
the Company, comprehensive income represents net income plus other comprehensive
income, which consists of the net change in unrealized gains or losses on
securities available for sale, net of tax, for the period. Accumulated other
comprehensive income represents the net unrealized gains or losses on securities
available for sale as of the balance sheet dates.
8
<PAGE>
Comprehensive income (loss) for the three-month periods ended June 30, 1998
and 1997 was $491,000 and $1.8 million, respectively.
Comprehensive income (loss) for the six-month periods ended June 30, 1998
and 1997 was $842,000 and $885,000, respectively. The following summarizes the
components of other comprehensive income:
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Notes to Financial Statement
Consolidated Interim Statements of Comprehensive Income (unaudited)
The six months ended
June 30,
1998 1997
----------------
(Dollars in thousands)
Unrealized gains (losses) on Securities:
Unrealized net holding gains (losses) arising during
the six months ended June 30, 1998 and 1997,
respectively, net of tax (pre-tax amount of $393
and ($388), respectively) ........................... $ 236 ($ 233)
Reclassification adjustment for net (gains) losses
realized in net income during the six months ended
June 30, 1998 and 1997, net of tax (pre-tax amount
of $105 and ($177), respectively) ................... 63 (106)
------- -------
Other comprehensive income (loss) during the six
months ended June 30, 1998 and 1997, respectively ... $ 299 ($ 339)
======= =======
The three months ended
June 30,
1998 1997
------------------
(Dollars in thousands)
Unrealized gains (losses) on Securities:
Unrealized net holding gains (losses) arising during
the three months ended June 30, 1998 and 1997,
respectively, net of tax (pre-tax amount of $545
and $2,148, respectively) ........................... $ 327 $ 1,289
Reclassification adjustment for net (gains) losses
realized in net income during the three months ended
June 30, 1998 and 1997, net of tax (pre-tax amount
of $112 and ($178), respectively) ................... 67 (107)
------- -------
Other comprehensive income during the three months
ended June 30, 1998 and 1997, respectively .......... $ 394 $ 1,182
======= =======
(5) SFAS 125
Effective January 1, 1998 the Company adopted the remaining provisions of
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," which relate to the accounting for securities
lending, repurchase agreements, and other secured financing activities. These
provisions, which were delayed for implementation by SFAS No. 127, are not
9
<PAGE>
expected to have a material impact on the Company. In addition, the FASB is
considering certain amendments and interpretations of SFAS No. 125 which, if
enacted in the future, could affect the accounting for transactions within their
scope.
(6) SFAS 131
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of
an Enterprise and Related Information". SFAS No. 131 establishes standards for
reporting by public companies of operation segments within the company,
disclosures about products and services, geographic areas and major customers.
This statements is effective for the Company's 1998 annual financial reporting.
Management believes that the adoption of SFAS No. 131 will not have an impact on
the Company's consolidated financial statements.
(7) SFAS 132
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pension and Other Postretirement Benefits," which amends the disclosure
requirements of SFAS No. 87, "Employers' Accounting for Pensions, "SFAS No. 88,
"Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits," and SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." Statement No. 132
standardizes the disclosure requirements of Statements No. 87 and No. 106 to the
extent practicable and recommends a parallel format for presenting information
about pensions and other postretirement benefits. This statement is applicable
to all entities and addresses disclosure only. The Statement does not change any
of the measurement or recognition provisions provided for in Statement No. 87,
No. 88, or No. 106. The Statement is effective for fiscal years beginning after
December 15, 1997. Management anticipates providing the required disclosures in
the December 31, 1998 consolidated financial statements.
(8) SFAS 133
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. This Statement is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
Management is currently evaluating the impact of this Statement on the Company's
consolidated financial statements.
(9) Acquisition
On April 23, 1998, the Company signed an agreement to merge AFSALA Bancorp,
Inc. (AFSALA) with the Company. Under the terms of the agreement, each AFSALA
share will be converted into 1.07 shares of the Company in a tax-free stock for
stock exchange, for a total value of approximately $30 million. The acquisition
is expected to be completed in the fourth quarter of 1998. AFSALA had total
assets of $166 million and deposits of $139 million as of March 31, 1998. The
acquisition will be accounted for under the purchase method of accounting.
Accordingly, the results of operations of AFSALA will be included with the
Company's, beginning with the date of acquisition. Consummation of the merger is
subject to satisfaction of a number of conditions, including, amoung other
things, stockholders' and regulatory approval.
10
<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 consolidated financial data appearing in
this report as well as the Company's 1997 Annual Report on Form 10-K.
Forward Looking Statements
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 or
losses 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.
Acquisition
On April 23, 1998, the Company signed an agreement to merge AFSALA Bancorp,
Inc. (AFSALA) with the Company. Under the terms of the agreement, each AFSALA
share will be converted into 1.07 shares of the Company in a tax-free stock for
stock exchange, for a total value of approximately $30 million. The acquisition
is expected to be completed in the fourth quarter of 1998. AFSALA had total
assets of $166 million and deposits of $139 million as of March 31, 1998. The
acquisition will be accounted for under the purchase method of accounting.
Accordingly, the results of operations of AFSALA will be included with the
Company's, beginning with the date of acquisition. Consummation of the merger is
subject to satisfaction of a number of conditions, including, amoung other
things, stockholders' and regulatory approval. The special meetings of the
shareholders of Ambanc and AFSALA will be held on September 1 and September 3,
respectively. Closing is expected to occur early in the fourth quarter.
A Form S-4 was filed electronically with the SEC on July 23, 1998 and can
be accessed at www.sec.gov, under EDGAR Database. The Form S-4 contains more
detailed information pertaining to the pending merger.
11
<PAGE>
Settlement With Shareholder
On August 11, 1998, the Company and AFSALA announced that they had reached
an agreement with Seymour Holtzman, a stockholder of both companies, regarding
the pending merger of the two companies.
Mr. Holtzman has agreed to drop all litigation against Ambanc, refrain from
any future litigation against both companies until at least January 1, 2000,
fully support and vote for the pending merger of Ambanc and AFSALA and vote for
Ambanc's nominees for director and avoid becoming involved with any other
hostile action at the annual meeting of Ambanc stockholders to be held in 1999.
In return, Ambanc has agreed to retain Sandler O'Neill & Partners, L.P.,
its regular investment banker, to seek ways to maximize shareholder value
following completion of the merger, including the possible merger of the
combined companies with a third party. If Ambanc has not entered into a merger
or acquisition agreement with a third party acquiror on or before April 1, 1999,
or a merger or acquistion is not consummated, Ambanc has agreed to appoint to
the Ambanc board two persons from a list of at least four persons selected by
Mr. Holtzman. Finally, Ambanc and AFSALA have agreed to reimburse Mr. Holtzman
$80,000 for a portion of his expenses incurred in the litigation with Ambanc and
his actions with respect to the merger.
Year 2000 ("Y2K") Issues
Year 2000 issues are the result of computer programs having been written
using two digits rather than four to define the applicable year. Any of the
Company's programs that have time sensitive software may recognize a date using
"00" as the year 1900 rather than year 2000. This could result in a major system
failure or miscalculations. The Company is also aware of these risks to third
parties, including vendors (and to the extent appropriate, depositors and
borrowers), and the potential adverse impact on the Company that could result
from failures by these parties to adequately address the Year 2000 issues.
The Company has established a Y2K Committee to conduct a comprehensive
review of its computer systems to identify the systems that could be affected by
the Y2K problem. The Y2K Committee reports on a monthly basis to the Board of
Directors as to the Company's status in resolving any Year 2000 issues.
To date, the Y2K Committee has received Year 2000 compliance
certifications/progress forms from approximately 70% of the Company's vendors.
Of the responses received, 60% of the vendors have certified that they are Y2K
compliant with the remaining 40% informing the Company of their progress and
anticipated compliance dates; however, no assurance can be given as to the
adequacy of such plans or to the timeliness of their implementation. Responses
have been received from all mission critical vendors and periodic updates will
be requested.
Final versions of the Company's Y2K customer evaluation forms and the
associated risk analysis have been completed. Mission critical borrowers are
being contacted to ensure that they complete the evaluation and risk analysis.
The assessment of the Company's commercial borrowers' Y2K readiness has a
targeted completion date of September 30, 1998.
12
<PAGE>
The Company will be conducting its Y2K test with its primary outside data
processing service bureau in August 1998. However, due to the Company's pending
merger with AFSALA and certain issues pertaining to software and vendors to be
retained post-merger, the Company will complete a limited testing program during
the remainder of 1998 on other software applications.
The Y2K Committee has initiated the development of contingency plans to
address the actions that may be needed to be taken by the Company under various
"what if" scenarios, e.g. "what if" the Company's primary outside data
processing service bureau failed to be Y2K compliant on January 1, 2000. The
target date for completion of the contingency plans is December 31, 1998. In
addition, the Company's contingency plans will be modified as appropriate when
decisions pertaining to the pending merger with AFSALA are finalized.
Based on the Company's current knowledge and investigations, the expense of
the year 2000 problem as well as the related potential effect on the Company's
earnings is not expected to have a material effect on the Company's financial
position or results of operations. Furthermore, the Company expects any
corrective measures required to be prepared for the Year 2000 to be implemented
on a timely basis.
General
The results of operations of the Company's subsidiary Bank are dependent
primarily on net interest income, which is the difference between the income
earned on its loans and securities and its cost of funds, consisting of the
interest paid on deposits and borrowings. Results of operations are also
affected by the Bank's provision for loan losses, net expenses on foreclosed
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 $97,000, or $0.03 per diluted share, for
the quarter ended June 30, 1998 and $543,000, or $0.14 per diluted share, for
the six months ended June 30, 1998. In the corresponding periods in 1997, the
Company had net income of $572,000, or $0.14 per diluted share, and $1.2
million, or $0.30 per diluted share, respectively.
The decline in net income for the three and six months ended June 30, 1998
as compared to the corresponding periods in 1997 was attributable primarily to a
$399,000 charge against operating results related to the termination and
consulting agreements entered into with the former President and CEO and
$159,000 in legal fees incurred by the Company to defend against legal actions
initiated by a shareholder. Also contributing to the decline in earnings were
losses on securities transactions of $112,000 and $105,000 for the quarter and
year-to-date periods, respectively, compared to gains on securities transactions
of $178,000 and $177,000 in the same 1997 periods. Core income before taxes,
which excludes these items, for the three months ended June 30, 1998 was
approximately $839,000 compared to $711,000 in the prior year's quarter and for
the six months ended June 30, 1998, core income before taxes was $1.6 million
compared to $1.8 million in 1997.
13
<PAGE>
RESULTS OF OPERATIONS
Comparison of Operating Results for the Quarters Ended June 30, 1998 and 1997.
Net Interest Income
Net interest income before provision for loan losses for the quarter ended
June 30, 1998 was $3.8 million, a decrease of $160,000 or 4.0%, from $4.0
million in 1997. Total interest and dividend income increased by $322,000 while
total interest expense increased by $482,000.
The increase in total interest and dividend income resulted mainly from
growth by $34.2 million, or 13.2%, in the average volume of loans for the
quarter ended June 30, 1998 as compared to the same quarter in 1997. The
increase in average loan volume is primarily related to the purchase of $31.9 of
residential loans located outside of the Bank's primary market area. See also
"Liquidity and Funding." The positive effect derived from the increase in
average loan volume was slightly offset by a decline of 10 basis points to 7.72%
in the average rate earned on loans resulting in a net increase in interest
income from loans of $593,000, or 11.7%. The decline in the yield on loans is
partially due to the amortization of the premiums paid for the previously noted
purchased loans. The increase in loan interest was partially offset by a
decrease of $171,000 in interest income earned on securities available for sale
("securities") and a net decline of $99,000 from other interest earning assets,
primarily federal funds sold.
The decrease in interest income on securities was mainly due to a 75 basis
points decrease in the average rate earned to 6.49%, the result of the general
decline in market interest rates from June 1997 to June 1998. The lower rate
environment produced an acceleration in mortgage prepayments on mortgage backed
securities (approximately 74% of total securities) and redemptions on callable
securities. The reinvestments of the cash flows generated from securities were
made at the lower prevailing interest rates that were in effect on the date of
the reinvestment.
The increase in total interest expense was due mainly to an increase in the
interest paid on borrowered funds (advances from FHLB and other borrowed funds)
of $491,000. The increase in the interest paid on borrowered funds resulted from
an increase in the average volume of $38.1 million, partially offset by a
decline in the average rate paid to 5.84% for the quarter ended June 30, 1998
from 6.11% in the comparable 1997 quarter. The increase in average borrowed
funds was primarily used to fund the above noted purchased loans. See also
"Liquidity and Funding."
Ambanc Holding Co., Inc. operates in an environment of intense competition
for deposits and loans and due to this heightened level of competition to
attract and retain customers, the Company must continue to offer competitive
interest rates on loans and deposits. As a consequence of these competitive
pressures, from time-to-time, the relative spreads between interest rates earned
and interest rates paid will tighten, exerting downward pressure on net interest
income. However, management does not want to curtail growth in the Company's
customer base for loans and deposits, especially core deposits, and the positive
benefits to be derived from them by offering non-competitive interest rates.
Management believes that the longer-term benefits that should be realized from
this strategy will outweigh the shorter-term costs associated with attracting,
cross-selling and retaining an expanding customer base.
14
<PAGE>
Between June 30, 1997 and 1998, the number of transaction accounts
(comprised of commercial and retail demand deposit accounts, NOW accounts and
money market fund accounts) increased by 1200 accounts, or 5.20%, to 24,283
accounts and the balances in these accounts increased by approximately $6.6
million, or 12.89% to $57.4 million. The number of commercial and retail demand
deposits grew by 999 accounts, or 5.59%, and the related balances increased by
$4.2 million, or 17.98%, to $27.7 million at June 30, 1998 from $23.5 million at
June 30, 1997. The Company's growing core deposit customer base provides Ambanc
with the potential for future, profitable customer relationships, which should
enhance shareholder value.
Provision for loan losses
The provision for loan losses declined by $50,000, or 18.2%, to $225,000
for the three months ended June 30, 1998, from $275,000 in 1997. The reduction
in the provision was primarily attributable to the improved quality of the loan
portfolio, as reflected by a reduction of $102,000 in net loan charge-offs to
$87,000 during the three months ended June 30, 1998, as compared to $189,000 in
the same period in 1997.
Non-interest income
Total non-interest income decreased by $258,000 due to net losses on
securities transactions during the quarter ended June 30, 1998 of $112,000
compared to net gains on securities transaction of $178,000 in the corresponding
quarter of 1997.
Service charges on deposit accounts increased by $57,000 due mainly to
price increases in certain service charges. Partially offsetting the increase in
service charges was a decrease in other non-interest income of $25,000 due
primarily to the receipt in April 1997 of $25,000 from the New York State
Superintendent of Banks in partial payment of a claim against Nationar compared
to the final payment received against the claim of $9,000 in April 1998. Also
contributing to the decrease in other non-interest income was a decline of
$11,000 in commissions received on the sale of mutual funds and annuities by the
Company's subsidiary, ASB Insurance Agency, Inc.
Non-interest expense
Total non-interest expense for the quarter ended June 30, 1998, as compared
to the corresponding quarter in 1997, increased by $352,000 attributable to the
previously mentioned $399,000 incurred in connection with the termination and
consulting agreements entered into with the former President and CEO and the
$159,000 in legal expenses incurred by the Company to defend against litigation
initiated by a shareholder. While it is anticipated that the legal costs
associated with defending against legal action initiated by this shareholder
will continue into the third quarter of 1998, the Company announced a settlement
with this shareholder on August 11, 1998. See also "Settlement with
Shareholder".
Excluding the above mentioned charges, total adjusted non-interest expense
decreased by $205,000, or 6.19%, to $3.1 million for the quarter ended June 30,
1998, from $3.3 million the prior year. The improvement in total adjusted
non-interest expense was attributable primarily to a decrease by $120,000 in
real estate owned and repossessed assets expenses, net.
15
<PAGE>
Income Taxes
Income tax expense decreased by $245,000 to $72,000 primarily due to the
decline in income before taxes to $169,000 from $889,000 in the second quarter
of 1997.
Comparison of Operating Results for the Six Months Ended June 30, 1998 and 1997.
Net Interest Income
Net interest income before provision for loan losses for the six months
ended June 30, 1998 was $7.7 million, a decline of $318,000, or 4.0%, when
compared to the comparable period in 1997. Total interest and dividend income
increased by $656,000 while total interest expense increased by $974,000.
The increase in total interest and dividend income was due primarily to
growth of $34.6 million, or 13.6%, in the average volume of loans for the six
months ended June 30, 1998 as compared to the like 1997 period. The positive
effect derived from the increase in the average loan volume was offset slightly
by a decrease of 10 basis points to 7.77% in the average rate earned on loans
resulting in a net increase in interest income from loans of $1.2 million. As
discussed above, the growth in average loans was primarily related to the
purchase of loans. The increase in loan interest was partially offset by a
decrease of $424,000 in interest income earned on securities available for sale
("securities") mainly due to a decline of 61 basis points in the average rate
earned to 6.64%, the result of the general decline in market interest rates from
June 1997 to 1998. The lower rate environment produced an acceleration in
mortgage prepayments on mortgage backed securities (which represent
approximately 74% of the total securities portfolio) and redemptions on callable
securities. The reinvestments of the cash flows generated from securities were
made at the lower interest rates that were in effect on the date of
reinvestment.
The increase in total interest expense was primarily due to an increase in
the interest paid on borrowed funds by $621,000 to $3.6 million, the result of a
$22.9 million increase in the average volume of borrowed funds (advances from
FHLB and other borrowed funds) partially offset by a decrease of 11 basis points
in the average rate paid to 5.95% from 6.06%. The increase in average borrowed
funds was primarily used to fund the above noted purchased loans. Interest
expense on certificates of deposit increased by $386,000 the result of an $11.1
million increase in the average volume of certificates of deposit accompanied by
an increase in the average rate paid to 5.74%, an increase of 8 basis points
over the average rate paid for the six months ended June 30, 1997.
Provision for loan losses
The provision for loan losses decreased by $188,000 to $450,000 for the six
months ended June 30, 1998, as compared to 1997, the result of the improved
quality of the Company's loan portfolio, as reflected in the reduction in loan
charge-offs during the six months ended June 30, 1998, as compared to the same
period in 1997. See also "Asset Quality."
16
<PAGE>
Non-interest income
Total non-interest income for the six months ended June 30, 1998, compared
to 1997, declined by $167,000 to $536,000. The decrease in total non-interest
income was primarily attributable to net losses on securities transactions of
$105,000 in 1998 compared to net gains in 1997 of $177,000.
Service charges on deposit accounts increased by $88,000, or 23.4%, due
mainly to price increases in certain service charges.
Non-interest expense
Total non-interest expense for the six months ended June 30, 1998 increased
to $6.8 million compared to $6.1 million for the same period in 1997, an
increase of $691,000 or 11.3%. This increase resulted primarily from the
previously mentioned $399,000 cost incurred in connection with the termination
and consulting agreements entered into with the former President and CEO and the
$159,000 in legal expenses incurred by the Company to defend against litigation
initiated by a shareholder.
Salaries, wages and payroll taxes increased by $108,000 to $2.2 million.
Salaries and wages related to the three branch offices opened in May 1997
accounted for approximately $43,000 of the total increase in salaries and wages.
The remainder of the increase was attributable to other additions to staff,
salary increases related to promotions, and normal merit and cost of living
adjustments.
Expenses related to employee benefits increased by $155,000, or 20.0%, to
$927,000 for the six months ended June 30, 1998, when compared to the
corresponding period in 1997. This increase was primarily related to increased
costs associated with stock based compensation plans partially offset by a net
decline in all other employee benefit costs.
Total occupancy and equipment expense increased by $100,000, or 14.1%, to
$811,000 for the six months ended June 30, 1998, when compared to the six months
ended June 30, 1997. The opening of three branch offices during the three months
ended June 30, 1997, was the primary reason for the increase.
Income Taxes
Income tax expense for the six-months ended June 30, 1998, decreased by
$307,000 to $434,000 primarily due to the decline in income before taxes to
$977,000 from $2.0 million in the comparable 1997 period.
FINANCIAL CONDITION
The Company's total assets at June 30, 1998, were $565.4 million, an
increase of $54.9 million, or 10.8%, compared to total assets of $510.4 million
at December 31, 1997. The growth in total assets was primarily attributable to
increases in loans and securities available for sale, which increased by $40.4
million and $17.6 million, respectively. See also "Liquidity and Funding."
Total deposits at June 30, 1998, were $321.7 million, a decrease of $11.6
million, or 3.5%, from $333.3 million at December 31, 1997. The decrease in
total deposits was attributable primarily to a $18.8 million, or 10.2%, decrease
in certificates of deposit.
17
<PAGE>
Total shareholders' equity decreased $2.8 million to $58.4 million,
primarily due to the repurchase of common stock totaling $4.0 million and the
payment of a cash dividends of $502,000 partially offset by net income from
operations of $543,000 for the six months ended June 30, 1998. Including
unallocated ESOP shares and unvested restricted RRP shares as outstanding, the
book value per share was $14.22 at June 30, 1998 compared to $14.21 at December
31, 1997. Additionally, excluding the tax-effected unrealized gains (losses) on
securities available for sale, the book value per share at June 30, 1998 was
$14.21 compared to $14.28 at December 31, 1997.
Liquidity and Funding
The Company's primary sources of funds for operations are deposits from its
market area, principal and interest payments on loans and securities available
for sale, proceeds from the sale and maturity of securities available for sale,
advances from the FHLB of New York, and securities sold under agreements to
repurchase. While maturities and scheduled amortization of loans and securities
are generally 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, and to a lesser extent, the purchase of
loans. During the six months ended June 30, 1998, the Bank's loan originations
totaled $36.0 million. The Company purchased securities available for sale of
$138.6 million and also purchased whole loans of approximately $31.9 million
during the same six month period. The purchased loans consisted of residential
loans generally located outside of the Bank's primary market area.
The primary financing activity of the Bank is the attraction of deposits.
However, during the six months ended June 30, 1998, the Bank's deposits
decreased by $11.6 million from December 31, 1997, primarily certificates of
deposit (CDs), which decreased $18.8 million. Management believes that the
decrease in CDs during the six months ended June 30, 1998 resulted primarily
from the holders of maturing certificates of deposit pursuing alternative
investments to obtain better returns.
In the event the attraction of deposits is not sufficient to fund an
expansion in interest earnings assets or when the level of market interest rates
for CDs is higher than the cost of borrowed funds, the Bank may utilize advances
from the Federal Home Loan Bank ("FHLB") and other types of borrowed funds to
fund interest earning asset growth. During the six months ended June 30, 1998,
the Bank increased its borrowed funds by $68.2 million. Advances from the FHLB
increased by $26.5 million and securities sold under agreements to repurchase
("repos") increased by $41.7 million. The Bank has added $50.0 million in
callable repos with the FHLB to its borrowed funds. The FHLB repos all mature in
10 years with call dates ranging from one year to three years and fixed rates
that range from a low of 5.01% to a high of 5.33%. The FHLB repos were used
primarily to fund the purchase of whole loans.
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 4%. The Bank's average daily liquidity ratio for the month of June
1998 was 16.3%.
18
<PAGE>
The Bank's most liquid assets are cash and cash equivalents, which include
federal funds sold and bank deposits. The level of these assets is dependent on
the Bank's operating, financing, and investing activities during any given
period. At June 30, 1998, cash and cash equivalents totaled $6.0 million,
compared to $10.2 million at December 31, 1997. The decrease resulted from a
decline of $4.2 million in cash and bank deposits.
The Bank anticipates that it will have sufficient funds available to meet
its current commitments. At June 30, 1998, the Bank had commitments to originate
loans of $11.4 million as well as undrawn commitments of $6.3 million on home
equity and other lines of credit. The Bank has no commitments to purchase
additional loans at June 30, 1998. Certificates of deposit that are scheduled to
mature in one year or less at June 30, 1998, totaled $105.6 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 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
maintain or 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 a combination 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 shareholders. The primary source of liquidity on an ongoing basis
is dividends from the Bank. The Bank paid its first cash dividend to the Company
on March 31, 1998, in the amount of $5.0 million.
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, 1998, the Bank had $45.8 million of tangible and core capital,
respectively, or 8.21% of adjusted total assets, which was approximately $37.5
million and $29.1 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,
1998, the Bank had risk-based capital of $48.8 million (including $45.8 million
in core capital and $3.0 million in qualifying supplementary capital) or 20.6%
of risk-weighted assets of $237.6 million. The Bank's risk-weighted capital was
$29.8 million above the 8.0% requirement in effect on that date.
ASSET QUALITY
Non-Performing Assets
The table below sets forth the amounts and categories of non-performing
assets at the dates indicated. Generally, loans are placed on non-accrual status
when the loan is 90 days or more delinquent or when management has determined
that the collection of principal and/or interest in full has become doubtful.
19
<PAGE>
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. Accruing loans
delinquent 90 days or more include FHA insured loans, VA guaranteed loans, and
loans that are in the process of negotiating a restructuring with the Bank,
excluding troubled debt restructurings (TDRs), or where the Bank believes that
the outstanding loan balance plus accrued interest and late fees will be
paid-in-full within a relatively short period of time. Foreclosed assets include
assets acquired in settlement of loans.
June 30, December 31,
1998 1997
-------- --------
(In thousands)
Non-accruing loans:
One-to four-family ...................... $ 899 $ 843
Multi-family ............................ 153 28
Commercial real estate .................. 290 265
Consumer ................................ 146 293
Commercial Business ..................... 201 447
------ ------
Total ................................. 1,689 1,876
------ ------
Accruing loans delinquent more than 90 days:
One-to four-family ...................... 359 280
Multi-family ............................ -- --
Commercial real estate .................. 109 13
Consumer ................................ -- 2
Commercial Business ..................... -- 156
------ ------
Total ................................. 468 451
------ ------
Troubled debt restructured loans:
One-to four-family ...................... 86 86
Multi-family ............................ -- 34
Commercial real estate .................. 752 761
Consumer ................................ -- --
Commercial Business ..................... 339 50
------ ------
Total ................................. 1,177 931
------ ------
Total non-performing loans ................. 3,334 3,258
------ ------
Foreclosed assets:
One-to four-family ...................... 3 69
Multi-family ............................ -- --
Commercial real estate .................. -- --
Consumer ................................ 60 74
Commercial Business ..................... -- --
------ ------
Total ................................. 63 143
------ ------
Total non-performing assets ................ $3,397 $3,401
====== ======
Total as a percentage of total assets ...... 0.60% 0.67%
There were no material changes in non-performing assets since December 31,
1997.
20
<PAGE>
Allowance for Loan Losses
The allowance for loan losses is increased through a provision for loan
losses based on management's evaluation of the risks inherent in its loan
portfolio and changes in the nature and volume of its loan activity, including
those loans that 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. Management believes that the allowance for loan losses is adequate to
absorb losses that are inherent in the loan portfolio at June 30, 1998. The
following table sets forth an analysis of the Company's allowance for loan
losses.
For the six months
ended June 30,
1998 1997
--------- ---------
(In thousands)
Balance at beginning of period ............. $ 3,807 $ 3,438
Charge-offs:
One- to four-family ................... (6) (5)
Multi Family .......................... -- (12)
Commercial Real Estate ................ -- (50)
Consumer .............................. (176) (193)
Commercial Business ................... (25) (66)
------- -------
Total Charge offs .................. (207) (326)
Recoveries:
One- to four-family ................... 1 --
Multi Family .......................... -- --
Commercial Real Estate ................ -- 4
Consumer .............................. 28 31
Commercial Business ................... 11 13
------- -------
Total Recoveries ................... 40 48
Net Charge-offs ............................ (167) (278)
Provisions charged to operations............ 450 638
------- -------
Balance at end of period ................... $ 4,090 $ 3,798
======= =======
Ratio of net charge-offs during
the period to average loans
outstanding during period ................. 0.06% 0.11%
Ratio of allowance for loan losses ("ALL")
to total loans at period end .............. 1.26% 1.40%
Ratio of ALL to non-performing loans
at period end ............................. 122.68% 137.01%
21
<PAGE>
Item 3.
Quantitative And Qualitative Disclosures About Market Risk
The composition of the Bank's balance sheet results in maturity mis-matches
between interest-earning assets and interest-bearing liabilities. The scheduled
maturities of the Bank's fixed rate interest-earning assets are longer than the
scheduled maturities of its fixed rate interest-bearing liabilities. This
mis-match exposes the Bank to interest rate risk. In a rising rate scenario, as
measured by the Office of Thrift Supervision ("OTS") interest rate risk exposure
simulation model, the estimated market or portfolio value ("PV") of the Bank's
assets would decline in value to a greater degree than the change in the PV of
the Bank's liabilities, thereby reducing net portfolio value ("NPV"), the
estimated market value of its shareholders' equity.
As of December 31, 1997, under a rate shock scenario of plus 200 basis
points ("bp"), the Bank's pre-shock NPV ratio (NPV as of % of PV of assets) was
estimated in the OTS model to be 10.89%. The post-shock NPV ratio was estimated
to be 6.78%, a decline of 411 bp. As of March 31, 1998, the most recent report
available, the Bank's sensitivity to interest rate changes increased slightly.
The post-shock ratio for a 200 bp increase in market interest rates as of March
31, 1998 was estimated to be 5.33%, a decrease of 439 bp from the pre-shock NPV
ratio estimate of 9.72%.
In order to lessen its exposure to interest rate risk, the Bank has
initiated a program to lengthen the maturities of its fixed rate
interest-bearing liabilities through the use of callable repos with the FHLB.
See "Liquidity and Funding," herein.
Other types of market risk, such as foreign exchange rate risk and
commodity price risk, do not arise in the normal course of the Company's
business activities.
Part II - Other Information
Item 1. Legal Proceedings
In the ordinary course of business, the Company and the Bank are subject to
legal actions which involve claims for monetary relief. Management, based on
advice of counsel, does not believe that any currently known legal actions,
individually or in the aggregate will have a material effect on its consolidated
financial condition or results of operation.
The Company has incurred significant legal costs in connection with
defending against legal actions initiated by a shareholder, and will incur
additional legal expenses in the third quarter of 1998. See also "Non-interest
expense for the quarters ended June 30, 1998 and 1997." The Company announced a
settlement with the shareholder on August 11, 1998. See also "Settlement with
Shareholder."
22
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
Ambanc Holding Co., Inc.'s Annual Meeting of Shareholders was originally
scheduled for May 22, 1998 but was reconvened on June 12, 1998.
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: Lauren T.
Barnett, For - 2,181,681, Withheld - 582,919; Charles S. Pedersen, For -
2,235,634, Withheld - 528,966; Robert J. Brittain, For - 2,228,837, Withheld -
535,763.
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 2,502,878 shares voting For, 244,687 shares
voting Against, and 16,635 shares Abstaining.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits as required by Item 601 of Regulation S-K.
Financial data schedule, Exhibit #27
(b) Reports on Form 8-K
Current reports on Form 8-K were filed April 29, May 14, June 8,
June 12, and July 1, July 1, July 7, and August 11, 1998.
(i) April 29, 1998, press release regarding Ambanc Holding Co., Inc.
to Merge with AFSALA Bancorp.
(ii) May 14, 1998, press release regarding Ambanc Holding Co., Inc.
First Quarter Earnings.
(iii) June 8, 1998, press release regarding Ambanc Holding Co., Inc.
Quarterly Cash Dividend.
(iv) June 12, 1998, press release regarding Ambanc Holding Co., Inc.
Second Favorable Court Decision.
(v) July 1, 1998, press release regarding Ambanc Holding Co., Inc.
Retirement of President and CEO.
(vi) July 1, 1998, press release regarding Ambanc Holding Co., Inc.
Change in Directors' Compensation.
(vii) July 7, 1998 press release regarding Ambanc Holding Co., Inc.
Freeze on Executive Managers' Compensation.
(viii) August 11, 1998, press release regarding Ambanc Holding Co., Inc.
settlement with Seymour Holtzman.
23
<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/ Lauren T. Barnett
Lauren T. Barnett
President and Chief Executive Officer
(Principal Executive Officer)
Date: , 1998
/s/ Harold A. Baylor, Jr.
Harold A. Baylor, Jr.
Vice President, CFO and Treasurer
(Principal Financial and Accounting Officer)
Date: , 1998
24
<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, 1998 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-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 4425
<INT-BEARING-DEPOSITS> 1614
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 223456
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<INVESTMENTS-MARKET> 0
<LOANS> 325283
<ALLOWANCE> 4090
<TOTAL-ASSETS> 565387
<DEPOSITS> 321664
<SHORT-TERM> 87070
<LIABILITIES-OTHER> 5583
<LONG-TERM> 92700
0
0
<COMMON> 54
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<INTEREST-LOAN> 11152
<INTEREST-INVEST> 6733
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<INTEREST-TOTAL> 18104
<INTEREST-DEPOSIT> 6804
<INTEREST-EXPENSE> 10394
<INTEREST-INCOME-NET> 7710
<LOAN-LOSSES> 450
<SECURITIES-GAINS> (105)
<EXPENSE-OTHER> 6819
<INCOME-PRETAX> 977
<INCOME-PRE-EXTRAORDINARY> 977
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 543
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.14
<YIELD-ACTUAL> 3.11
<LOANS-NON> 1689
<LOANS-PAST> 468
<LOANS-TROUBLED> 1177
<LOANS-PROBLEM> 5146
<ALLOWANCE-OPEN> 3807
<CHARGE-OFFS> 207
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