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 March 31, 1998
--------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 For the transition period from to .
----------- -----------
Commission File Number: 0-27036
-------
Ambanc Holding Co., Inc.
-----------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 14-1783770
- ------------------------------------- --------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
11 Division Street, Amsterdam, New York 12010-4303
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (518)842-7200
-----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date.
Class Outstanding at May 13, 1998
- ----------------------------- -----------------------------------
Common Stock, $.01 Par Value 4,258,418
<PAGE>
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
FORM 10-Q
March 31, 1998
Table of Contents
Part I. FINANCIAL INFORMATION
Item 1. Consolidated Interim Financial Statements (unaudited):
Consolidated Interim Statements of Income for the three months
ended March 31, 1998 and 1997.................................. 3
Consolidated Interim Statements of Financial Condition at
March 31, 1998 and December 31, 1997........................... 4
Consolidated Interim Statements of Cash Flows for the three
months ended March 31, 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......................................10
Item 3. Quantitative and Qualitative Disclosures About Market Risk.....17
Part II. OTHER INFORMATION..................................................17
Item 6. Exhibits and Reports on Form 8-K...................................17
SIGNATURES....................................................................18
EXHIBITS INDEX................................................................19
<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)
The Three Months
Ended March 31,
1998 1997
------- -------
Interest and dividend income:
Loans .................................................. $ 5,506 $ 4,891
Securities available for sale .......................... 3,405 3,659
Federal Funds Sold ..................................... 35 88
Federal Home Loan Bank stock ........................... 63 37
------- -------
Total interest income ................................ 9,009 8,675
------- -------
Interest Expense:
Deposits ............................................... 3,466 3,103
Borrowings ............................................. 1,681 1,552
------- -------
Total interest expense ............................... 5,147 4,655
------- -------
Net interest income .................................. 3,862 4,020
Provision for loan losses ................................. 225 363
------- -------
Net interest income after provision
for loan losses .................................... 3,637 3,657
------- -------
Non-interest income:
Service charges on deposit accounts .................... 212 181
Net gains (losses) on securities transactions .......... 7 (1)
Other .................................................. 106 54
------- -------
Total non-interest income ............................ 325 234
------- -------
Non-interest expense:
Salaries, wages and benefits ........................... 1,585 1,346
Occupancy and equipment ................................ 413 334
Data processing ........................................ 251 232
Federal deposit insurance premium ...................... 10 9
Correspondent bank processing fees ..................... 30 34
Real estate owned and repossessed assets expenses, net . 8 110
Professional fees ...................................... 138 109
Other .................................................. 719 641
------- -------
Total non-interest expenses .......................... 3,154 2,815
------- -------
Income before taxes ...................................... 808 1,076
Income tax expense ........................................ 362 424
------- -------
Net income ........................................... $ 446 $ 652
======= =======
Net income per common share - basic ....................... $0.12 $0.16
Net income per common share - diluted ..................... $0.11 $0.16
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) March 31 Dec. 31,
1998 1997
--------- ---------
Assets
Cash and due from banks ............................... $ 6,831 $ 10,225
Federal funds sold .................................... 9,000 --
--------- ---------
Cash and cash equivalents ........................ 15,831 10,225
Securities available for sale, at fair value .......... 204,640 205,842
Loans receivable, net of unamortized fees ............. 287,668 284,930
Allowance for loan losses ........................ (3,952) (3,807)
--------- ---------
Loans receivable, net ............................ 283,716 281,123
Accrued interest receivable ........................... 3,015 3,734
Premises and equipment, net ........................... 3,021 3,121
Federal Home Loan Bank of New York stock, at cost ..... 3,498 3,291
Real estate owned and repossessed assets .............. 140 143
Other assets .......................................... 2,968 2,965
Due from brokers ...................................... 3,002 --
--------- ---------
Total assets ..................................... $ 519,831 $ 510,444
========= =========
Liabilities and Shareholders' Equity
Liabilities:
Deposits ........................................... $ 324,448 $ 333,265
Advances from borrowers for taxes and insurance .... 1,319 1,902
Advances from FHLB ................................. 0 12,300
Other borrowed funds ............................... 116,650 99,250
Accrued interest payable ........................... 907 819
Accrued expenses and other liabilities ............. 1,722 1,706
Due to brokers ..................................... 14,031 --
--------- ---------
Total liabilities ................................ 459,077 449,242
Shareholders' equity:
Preferred stock $.01 par value. Authorized 5,000,000
shares; none outstanding at March 31, 1998 and
December 31, 1997 ................................. -- --
Common stock $.01 par value. Authorized 15,000,000
shares; 5,422,250 shares issued at March 31,
1998 and December 31, 1997 ........................ 54 54
Additional paid in capital ......................... 52,482 52,385
Retained earnings, substantially restricted ......... 26,648 26,458
Treasury Stock, at cost (1,163,832 shares at March
31, 1998 and 1,115,832 at December 31, 1997) .... (13,461) (12,585)
Common stock acquired by ESOP ...................... (3,180) (3,303)
Unearned RRP shares issued ......................... (1,420) (1,533)
Accumulated other comprehensive income ............. (369) (274)
--------- ---------
Total shareholders' equity ....................... 60,754 61,202
Total liabilities and shareholders' equity ....... $ 519,831 $ 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 Three months
ended March 31
1998 1997
-------- --------
Increase (decrease) in cash and cash equivalents:
Cash flows provided by operating activities:
Net income ....................................... $ 446 $ 652
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and Amortization ................... 177 129
Provision for loan losses ....................... 225 363
Provision for losses and writedowns on
real estate owned and repossessed assets ....... 3 58
ESOP compensation expense ....................... 219 170
RRP Expense ..................................... 113 --
Net gains (losses) on securities transactions ... (7) 1
Net loss on sale of other real estate
owned and other repossessed assets ............. -- 7
Net amortization on securities ................. 242 86
Increase) decrease in accrued interest
receivable and other assets .................... 771 180
Increase (decrease) in accrued expenses
and other liabilities .......................... 104 68
Increase (decrease) in advances from
borrowers for taxes and insurance .............. (583) (592)
-------- --------
Net cash provided by
operating activities ........................ 1,710 1,122
Cash flows from investing activities:
Proceeds from sales and redemptions of
securities available for sale ................... 41,041 2,467
Purchases of securities available for sale ....... (41,749) (12,529)
Proceeds from principal paydowns and
maturities of securities available for sale ..... 12,546 5,232
Purchase of FHLB stock ........................... (207) (1,262)
Net (increase) decrease in loans made to customers (2,895) (424)
Capital Expenditures ............................. (68) (166)
Proceeds from Sale of other real estate owned and
other repossessed assets ....................... 77 62
-------- ---------
Net cash used by investing activities 8,745 (6,620)
(Continued)
5
<PAGE>
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Interim Statements of Cash Flows, Continued (unaudited)
(dollars in thousands)
For the Three months
ended March 31
1998 1997
-------- --------
Cash flows from financing activities:
Purchase of Treasury Stock ..................... (876) --
Dividends paid ................................. (256) --
Net increase (decrease) in deposits ............ (8,817) 13,389
Advances from (repayments on)
FHLB borrowings, net .......................... (12,300) (6,000)
Increase (decrease) in other borrowed funds .... 17,400 (470)
-------- --------
Net cash provided (used) by financing
activities .................................... (4,849) 6,919
Net increase in cash and cash equivalents ........... 5,606 1,421
Cash and cash equivalents at beginning of year ..... 10,225 10,887
-------- --------
Cash and cash equivalents at end of period ......... $ 15,831 $ 12,308
======== ========
Supplemental disclosures of cash flow information-
cash paid during the year for:
Interest ................................ $ 5,061 $ 4,698
======== ========
Income Taxes ............................ $ 267 $ 270
======== ========
Noncash investing activity:
Net reduction in loans receivable
resulting from the transfer to real
estate owned and other repossessed assets ............ $ 77 $ 75
======== ========
Due from/(to) Brokers, Net............................ $(11,029) ---
======== ========
Net decrease in unrealized loss on securities
available for sale, net of deferred tax effect ....... ($ 95) ($ 1,521)
======== ========
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
three month periods ended March 31, 1998 and March 31, 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 presentations.
(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:
For the quarter ended March 31, 1998
- ------------------------------------
Basic EPS
- ---------
Income available to common shareholder $446 3,828,636 $0.12
Effect of Dilutive Securities
- ----------------------------
Stock Options 62,499
RRP shares 36,769
---------
Diluted EPS
- -----------
Income available to common shareholders
plus assumed conversions $446 3,927,904 $0.11
==== ========= =====
7
<PAGE>
For the quarter ended March 31, 1997
- ------------------------------------
Basic EPS
- ---------
Income available to common shareholders $652 4,011,349 $0.16
Effect of Dilutive Securities
- -----------------------------
Stock Options ---
RRP ---
---------
Diluted EPS
- -----------
Income available to common shareholders
plus assumed conversions $652 4,011,349 $0.16
==== ========= =====
(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 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.
Comprehensive income (loss) for the three-month periods ended March 31,
1998 and 1997 was $351,000 and ($869,000), respectively. The following
summarizes the components of other comprehensive income:
Unrealized Gains (Losses) on Securities:
(Dollars in thousands)
Unrealized holding gains (losses) arising during three
months ended March 31, 1997, net of tax
(pre-tax amount of ($2,536,000) ($1,522)
Reclassification adjustment for losses realized
in net income during the three months ended
March 31, 1997, net of tax (pre-tax amount of $1,000) 1
-------
Other comprehensive income (loss)- three months ended March 31, 1997 ($1,521)
=======
Unrealized holding gains (losses) arising during three months
ended March 31, 1998, net of tax
(pre-tax amount of ($152,000) ($ 91)
Reclassification adjustment for gains realized in net
income during the three months ended March 31, 1998,
net of tax (pre-tax amount of $7,000) ( 4)
-------
Other comprehensive income (loss)- three months ended March 31, 1998 ($ 95)
=======
8
<PAGE>
(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
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) 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.
9
<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.
Year 2000
The Company has established a committee (the "Y2K Committee") to conduct a
comprehensive review of its computer systems to identify the systems that could
be affected by the "Year 2000" problem. Since December 31, 1997, the Y2K
Committee has not reported any significant non-compliance issues pertaining to
the Company, its vendors or its customers.
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
10
<PAGE>
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.
Ambanc recorded net income of $446,000, or $0.12 per basic common share,
for the quarter ended March 31, 1998. These results compare to net income of
$652,000, or $0.16 per basic common share, for the comparable period in 1997.
Diluted earnings per share for the quarter ended March 31, 1998 were $0.11 as
compared to $0.16 for the corresponding period in 1997.
Non-performing assets improved to $3.2 million at March 31, 1998, from $3.4
million at December 31, 1997. At March 31, 1998, non-performing assets were
0.62% of total assets as compared to 0.67% at December 31, 1997. The Company's
allowance for loan losses to non-performing loans and to total loans at March
31, 1998, were 127.81% and 1.37%, respectively, as compared to 117.07% and
1.34%, respectively, at December 31, 1997. See "Asset Quality" herein.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income before provision for loan losses for the three months
ended March 31, 1998 was $3.9 million, a decline of $158,000, or 3.93%, when
compared to the comparable period in 1997. Total interest and dividend income
increased by $334,000 while total interest expense increased by $492,000.
The increase in total interest and dividend income was due primarily to
growth of $34.5 million, or 13.75%, in the average volume of loans for the three
months ended March 31, 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 9 basis points to 7.82% in the average rate earned on loans
resulting in a net increase in interest income from loans of $615,000. The
increase in loan interest was partially offset by a decrease of $254,000 in
interest income earned on securities available for sale ("securities") mainly
due to a decline of 47 basis points in the average rate earned to 6.79%, the
result of the general decline in market interest rates from March 31, 1997 to
March 31, 1998. The lower rate environment produced an acceleration in mortgage
prepayments on mortgage backed securities (which represent approximately 71% of
the total securities portfolio) and call redemptions on other securities. The
reinvestments of the cash flows generated from securities were made at the lower
interest rates that were in effect at the date of reinvestment.
The increase in total interest expense was due mainly to an increase in the
interest paid on certificates of deposits of $380,000, the result of a $22.3
million increase in the average volume of certificates of deposit accompanied by
an increase in the average rate paid to 5.77%, an increase of 16 basis points
over the rate paid in the quarter ended March 31, 1997. Additionally, the cost
of borrowed funds increased by $129,000, primarily the result of an increase in
the average volume of $8.5 million.
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
11
<PAGE>
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 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.
Between March 31, 1997 and 1998, the number of transaction accounts
(comprised of commercial and retail checking accounts, NOW accounts and money
market fund accounts) grew by 5.81% to approximately 24,000 accounts with retail
checking accounts increasing by 6.29% and commercial checking account increasing
by 11.05%. The Company's growing customer base provides Ambanc with the
potential for future, profitable customer relationships, which should increase
shareholder value.
Provision for loan losses
Provision for loan losses declined by $138,000, or 38.02%, to $225,000 for
the three months ended March 31, 1998, from $363,000 in 1997. The reduction in
the provision expense was primarily attributable to the continued improvement in
the quality of the loan portfolio as evidenced by the reduction in
non-performing loans.
Non-interest income
Total non-interest income increased by $91,000, or 38.89%, to $325,000 from
$234,000. Service charges on deposit accounts increased by $31,000 due mainly to
an increase in certain service charges.
Other non-interest income increased by $52,000, or 96.3%, to $106,000 from
$54,000. Included in the increase is $41,000 of residual rental income related
to an other real estate owned property that was previously sold.
Non-interest expense
Total non-interest expense for the three months ended March 31, 1998
increased to $3.1 million compared to $2.8 million for the same period in 1997,
an increase of $339,000 or 12.0%. This increase resulted primarily from an
increase in salaries, wages and benefits of $239,000, or 17.76%, to $1.6
million.
Salaries and wages increased by $183,000 to $1.0 million and the related
payroll taxes increased by $8,000. Salaries and wages related to the three
branch offices opened in May 1997 accounted for approximately $50,000 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 $45,000, or 11.01%, to
$454,000 for the three months ended March 31, 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.
12
<PAGE>
FINANCIAL CONDITION
The Company's total assets at March 31, 1998, were $519.8 million, an
increase of $9.4 million, or 1.8%, 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 federal funds sold, which increased by $2.7 million and
$9.0 million, respectively.
Total deposits at March 31, 1998, were $324.4 million, a decrease of $8.8
million, or 2.65%, from $333.3 million at December 31, 1997. The decrease in
total deposits was attributable primarily to a $9.3 million, or 5.1%, decrease
in certificates of deposit.
Total shareholders' equity decreased $448,000 to $60.8 million, primarily
due to the repurchase of common stock shares totaling $876,000 and the payment
of a cash dividend of $256,000, partially offset by net income from operations
of $446,000 for the three months ended March 31, 1998. Including unreleased ESOP
and restricted RRP shares as outstanding, the book value per share was $14.27 at
March 31, 1998 compared to $14.21 at December 31, 1997. Excluding the
tax-effected unrealized losses on securities available for sale, the book value
per share at March 31, 1998, was $14.35 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 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 quarter ended March 31, 1998,
the Bank's loan originations totaled $13.0 million. The Company purchased
securities available for sale during the same quarter of $55.8 million.
The primary financing activity of the Bank is the attraction of deposits.
However, during the quarter ended March 31, 1998, the Bank's deposits decreased
by $8.8 million from December 31, 1997, primarily certificates of deposit, which
decreased $9.3 million. Management believes that the decrease in CDs during the
three months ended March 31, 1998, resulted primarily from the holders of
maturing certificates of deposit pursuing alternative investments to obtain
better returns.
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 March
1998 was 20.4%.
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
13
<PAGE>
period. At March 31, 1998, cash and cash equivalents totaled $15.8 million,
compared to $10.2 million at December 31, 1997. The increase resulted from an
increase of $9.0 million in federal funds sold, partially offset by a decline in
cash and bank deposits.
The Bank anticipates that it will have sufficient funds available to meet
its current commitments. At March 31, 1998, the Bank had commitments to
originate loans of $5.6 million as well as undrawn commitments of $6.5 million
on home equity and other lines of credit. Certificates of deposit that are
scheduled to mature in one year or less at March 31, 1998, totaled $115.7
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 stockholders. 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 March 31, 1998, the Bank had $45.4 million of tangible and core capital,
respectively, or 8.8% of adjusted total assets, which was approximately $37.7
million and $30.0 million above the minimum requirements of 1.5% and 3.0%,
respectively, of the adjusted total assets in effect on that date. On March 31,
1998, the Bank had risk-based capital of $48.1 million (including $45.4 million
in core capital and $2.7 million in qualifying supplementary capital) or 22.1%
of risk-weighted assets of $218.4 million. The Bank's risk-weighted capital was
$30.6 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.
14
<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 from the date of such
notification. Foreclosed assets include assets acquired in settlement of loans.
March 31 Dec.31
1998 1997
------ ------
(In thousands)
Non-accruing loans:
One-to four-family ...................... $ 809 $ 843
Multi-family ............................ 28 28
Commercial real estate .................. 232 265
Consumer ................................ 223 293
Commercial Business ..................... 193 447
------ ------
Total ................................. 1,485 1,876
------ ------
Accruing loans delinquent more than 90 days:
One-to four-family ...................... 366 280
Multi-family ............................ -- --
Commercial real estate .................. 20 13
Consumer ................................ 0 2
Commercial Business ..................... 34 156
------ ------
Total ................................. 420 451
------ ------
Troubled debt restructured loans:
One-to four-family ...................... 86 86
Multi-family ............................ -- 34
Commercial real estate .................. 757 761
Consumer ................................ -- --
Commercial Business ..................... 344 50
------ ------
Total ................................. 1,187 931
------ ------
Total non-performing loans ................. 3,092 3,258
------ ------
Foreclosed assets:
One-to four-family ...................... 69 69
Multi-family ............................ -- --
Commercial real estate .................. -- --
Consumer ................................ 71 74
Commercial Business ..................... -- --
------ ------
Total ................................. 140 143
------ ------
Total non-performing assets ................ $3,232 $3,401
====== ======
Total as a percentage of total assets ...... 0.62% 0.67%
There were no material changes in non-performing assets since December 31,
1997.
15
<PAGE>
Allowance for Loan Losses
The allowance for loan losses is established through a provision for loan
losses based on management's evaluation of the 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. The following table sets forth an analysis of the Company's allowance
for loan losses.
For the Three months
ended March 31,
1998 1997
------ ------
(In thousands)
Balance at beginning of period ..................... $ 3,807 $ 3,438
Charge-offs:
One- to four-family ........................... (6) --
Multi Family .................................. -- --
Commercial Real Estate ........................ -- --
Consumer ...................................... (92) (108)
Commercial Business ........................... -- --
------- -------
Total Charge offs .......................... (98) (108)
Recoveries:
One- to four-family ........................... 1 --
Multi Family .................................. -- --
Commercial Real Estate ........................ -- 4
Consumer ...................................... 13 9
Commercial Business ........................... 4 6
------- -------
Total Recoveries ........................... 18 19
Net Charge-offs .................................... (80) (89)
Provisions charged to operations.................... 225 363
------- -------
Balance at end of period ........................... 3,952 3,712
======= =======
Ratio of net charge-offs during
the period to average loans
outstanding during period ......................... 0.03% 0.04%
Ratio of net charge-offs during
the period to average
non-performing assets ............................. 1.12% 1.68%
16
<PAGE>
Item 3.
Quantitative And Qualitative Disclosures About Market Risk
There have been no material changes in the Company's interest rate risk
position since December 31, 1997. 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. 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 February 19, 1998, March 2,
1998 and April 23, 1998.
(i) February 19, 1998 press release regarding Ambanc Holding Co., Inc.
Stock Repurchase Program.
(ii) March 2, 1998 press release regarding Ambanc Holding Co., Inc.,
Quarterly Cash Dividend.
(iii) April 23, 1998 press release regarding Ambanc Holding Co., Inc.
Merger Announcement
17
<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.
Robert J. Brittain
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 13, 1998
Harold A. Baylor, Jr.
Vice President, CFO and Treasurer
(Principal Financial and Accounting Officer)
Date: May 13, 1998
18
<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 MARCH 31, 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> 3-mos
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 5039
<INT-BEARING-DEPOSITS> 1792
<FED-FUNDS-SOLD> 9000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4640
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 287668
<ALLOWANCE> 3952
<TOTAL-ASSETS> 519831
<DEPOSITS> 324448
<SHORT-TERM> 53650
<LIABILITIES-OTHER> 17979
<LONG-TERM> 63000
0
0
<COMMON> 54
<OTHER-SE> 60700
<TOTAL-LIABILITIES-AND-EQUITY> 519831
<INTEREST-LOAN> 5506
<INTEREST-INVEST> 3405
<INTEREST-OTHER> 98
<INTEREST-TOTAL> 9009
<INTEREST-DEPOSIT> 3466
<INTEREST-EXPENSE> 5147
<INTEREST-INCOME-NET> 3862
<LOAN-LOSSES> 225
<SECURITIES-GAINS> 7
<EXPENSE-OTHER> 3154
<INCOME-PRETAX> 808
<INCOME-PRE-EXTRAORDINARY> 808
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 446
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.11
<YIELD-ACTUAL> 3.18
<LOANS-NON> 1485
<LOANS-PAST> 420
<LOANS-TROUBLED> 1187
<LOANS-PROBLEM> 5667
<ALLOWANCE-OPEN> 3807
<CHARGE-OFFS> 98
<RECOVERIES> 18
<ALLOWANCE-CLOSE> 3952
<ALLOWANCE-DOMESTIC> 3952
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
