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, 2000
--------------
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 12, 2000
- ----------------------------- -----------------------------------
Common Stock, $.01 Par Value 4,893,648
<PAGE>
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
FORM 10-Q
March 31, 1999
Table of Contents
Part I. FINANCIAL INFORMATION
Item 1. Consolidated Interim Financial Statements (unaudited):
Consolidated Interim Statements of Financial Condition at
March 31, 2000 and December 31, 1999........................... 3
Consolidated Interim Statements of Income for the three months
ended March 31, 2000 and 1999.................................. 4
Consolidated Interim Statements of Cash Flows for the three
months ended March 31, 2000 and 1999........................... 5
Notes to Unaudited Interim Consolidated Financial Statements... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................8
Item 3. Quantitative and Qualitative Disclosures About Market Risk.....20
Part II. OTHER INFORMATION..................................................20
Item 6. Exhibits and Reports on Form 8-K...................................20
SIGNATURES....................................................................21
3
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition (unaudited)
(dollars in thousands, except per share amounts) March 31, December 31,
2000 1999
Assets ---------- ----------
Cash and due from banks ............................... $ 11,488 $ 26,380
Interest-bearing deposits ............................. 1,572 3,231
---------- ----------
Cash and cash equivalents ........................ 13,060 29,611
Securities available for sale, at fair value .......... 208,221 212,145
Federal Home Loan Bank of New York stock, at cost ..... 8,748 8,748
Loans receivable ...................................... 472,775 470,986
Allowance for loan losses ........................ (5,506) (5,509)
---------- ----------
Loans receivable, net ............................ 467,269 465,477
Accrued interest receivable ........................... 4,491 4,411
Premises and equipment, net ........................... 5,602 5,593
Real estate owned and repossessed assets .............. 353 322
Goodwill .............................................. 7,257 7,390
Other assets .......................................... 6,289 6,975
---------- ----------
Total assets ..................................... $ 721,290 $ 740,672
========== ==========
Liabilities and Shareholders' Equity
Liabilities:
Deposits ........................................... $ 464,297 $ 450,134
Federal Home Loan Bank short-term borrowings ....... 51,300 71,200
Federal Home Loan Bank long-term advances .......... 35,686 20,965
Securities sold under agreements to repurchase ..... 87,740 112,740
Advances from borrowers for taxes and insurance .... 2,728 3,641
Accrued interest payable ........................... 1,221 1,508
Accrued expenses and other liabilities ............. 2,873 4,891
---------- ----------
Total liabilities ................................ 645,845 665,079
---------- ----------
Shareholders' equity:
Preferred stock $.01 par value. Authorized 5,000,000
shares; none issued at March 31, 2000 and
December 31, 1999 ................................. -- --
Common stock $.01 par value. Authorized 15,000,000
shares; 5,432,245 issued at March 31, 2000
and December 31, 1999 ............................. 54 54
Additional paid-in capital ......................... 63,355 63,314
Retained earnings,substantially restricted ......... 29,317 28,879
Treasury stock, at cost (522,773 shares at March 31,
2000 and 465,155 shares at December 31, 1999) ... (8,237) (7,486)
Unallocated common stock held by ESOP .............. (2,240) (2,353)
Unearned RRP shares ................................ (489) (443)
Accumulated other comprehensive loss ............... (6,315) (6,372)
---------- ----------
Total shareholders' equity ....................... 75,445 75,593
---------- ----------
Total liabilities and shareholders' equity ....... $ 721,290 $ 740,672
========== ==========
See accompanying notes to unaudited interim consolidated financial statements.
3
<PAGE>
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Interim Statements of Income (unaudited)
(dollars in thousands, except per share amounts)
Three Months
Ended March 31,
2000 1999
Interest and dividend income: ------- -------
Loans receivable ..................................... $ 8,697 $ 7,781
Securities available for sale ........................ 3,667 3,792
Federal funds sold and interest-bearing deposits ..... 33 272
Federal Home Loan Bank stock ......................... 147 119
------- -------
Total interest and dividend income ................. 12,544 11,964
------- -------
Interest expense:
Deposits ............................................. 4,364 4,212
Borrowings ........................................... 2,664 2,359
------- -------
Total interest expense ............................. 7,028 6,571
------- -------
Net interest income ................................ 5,516 5,393
Provision for loan losses ............................... 120 255
------- -------
Net interest income after provision for loan losses 5,396 5,138
------- -------
Non-interest income:
Service charges on deposit accounts .................. 335 333
Other ................................................ 154 91
------- -------
Total non-interest income .......................... 489 424
------- -------
Non-interest expenses:
Salaries, wages and benefits ......................... 2,102 1,838
Occupancy and equipment .............................. 598 629
Data processing ...................................... 387 235
Real estate owned and repossessed assets expenses, net 3 26
Professional fees .................................... 90 88
Amortization of goodwill ............................. 133 133
Other ................................................ 865 797
------- -------
Total non-interest expenses ........................ 4,178 3,746
------- -------
Income before taxes .................................... 1,707 1,816
Income tax expense ...................................... 723 781
------- -------
Net income ......................................... $ 984 $ 1,035
======= =======
Basic earnings per share $ 0.21 $ 0.21
======= =======
Diluted earnings per share $ 0.21 $ 0.20
======= =======
See accompanying notes to unaudited interim consolidated financial statements.
4
<PAGE>
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Interim Statements of Cash Flows (unaudited)
(dollars in thousands) Three months
ended March 31,
2000 1999
-------- -------
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Net income ........................................ $ 984 $ 1,035
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of premises
and equipment .............................. 223 238
Amortization of goodwill ........................ 133 133
Net amortization of premium on securities ....... 73 301
Provision for loan losses ....................... 120 255
Provision for losses and writedowns on real
estate owned and repossessed assets ........ 3 1
Net (gains) losses on sales of real estate owned
and repossessed assets ..................... (12) 1
ESOP compensation expense ....................... 154 188
RRP expense ..................................... 121 79
Decrease (increase) in accrued interest
receivable and other assets ................ 569 (98)
(Decrease) increase in accrued interest
payable, accrued expenses and
and other liabilities ...................... (2,305) 2,334
-------- -------
Net cash provided by
operating activities ........... 63 4,467
Cash flows from investing activities:
Proceeds from sales and redemptions of
securities available for sale .............. -- 7,000
Purchases of securities available for sale ...... (77) (43,140)
Proceeds from principal paydowns and
maturities of securities available for sale 4,022 24,751
Net (increase) decrease in loans made
to customers .............................. (2,017) 673
Purchases of premises and equipment ............. (232) (281)
Proceeds from sales of real estate owned and
repossessed assets ......................... 83 125
-------- -------
Net cash provided by (used in)
investing activities ........... 1,779 (10,872)
(continued)
5
<PAGE>
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Interim Statements of Cash Flows (unaudited) (continued)
(dollars in thousands) Three months
ended March 31,
2000 1999
-------- -------
Cash flows from financing activities:
Net increase (decrease) in deposits .............. $ 14,163 $ (2,785)
Net decrease in FHLB short-term borrowings ....... (19,900) --
Proceeds from FHLB long-term advances ............ 15,000 --
Repayments of FHLB long-term advances ............ (279) (111)
Repayments of repurchase agreements .............. (25,000) --
Decrease in advances from borrowers
for taxes and insurance .................... (913) (504)
Purchase of treasury stock ....................... (922) (1,557)
Excercises of stock options ...................... -- 34
Dividends paid ................................... (542) (374)
-------- -------
Net cash used in financing activities ...... (18,393) (5,297)
Net decrease in cash and cash equivalents ............ (16,551) (11,702)
Cash and cash equivalents at beginning of period ..... 29,611 42,815
-------- -------
Cash and cash equivalents at end of period ........... $ 13,060 $ 31,113
======== =======
Supplemental disclosures of cash flow information -
cash paid during the period for:
Interest ............................................. $ 7,315 $ 6,621
======== =======
Income taxes ......................................... -- --
======== =======
Noncash investing and financing activities:
Net transfer of loans to real estate owned
and repossessed assets .......................... $ 105 $ 50
======== =======
See accompanying notes to unaudited interim consolidated financial statements.
6
<PAGE>
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(1) In management's opinion, the financial information included herein, 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, 2000 and 1999, 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) 1999 Annual Report on Form 10-K. The results of operations for
the 2000 interim period are not necessarily indicative of the results of
operations to be expected for the full fiscal year ended December 31, 2000.
(2) Amounts in the prior periods' unaudited interim consolidated financial
statements are reclassified whenever necessary to conform to current periods'
presentation.
(3) Earnings per Share
Basic earnings per share (EPS) excludes dilution and is calculated by dividing
net income available to common shareholders by the weighted average number of
shares outstanding during the period. Unallocated ESOP shares are not considered
outstanding for purposes of computing EPS. Shares of restricted stock (RRP
shares) are considered outstanding common shares and included in the computation
of basic EPS when they become fully vested. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
(such as the Company's stock options and unvested RRP shares) were exercised
into common stock or resulted in the issuance or vesting of common stock.
The calculation of basic EPS and diluted EPS is as follows:
Net Weighted
Income Average Per Share
(in thousands) Shares Amount
For the quarter ended March 31, 2000 ------------ ---------- ---------
Basic EPS
Net income available to common shareholders $ 984 4,669,625 $0.21
====== =====
Effect of dilutive securities:
Stock options 5,651
Unvested RRP shares 16,700
---------
Diluted EPS
Net income available to common shareholders
plus assumed conversions $ 984 4,691,976 $0.21
====== ========= =====
For the quarter ended March 31, 1999
Basic EPS
Net income available to common shareholders $1,035 5,009,031 $0.21
====== =====
Effect of dilutive securities:
Stock options 31,603
Unvested RRP shares 20,201
---------
Diluted EPS
Net income available to common shareholders
plus assumed conversions $1,035 5,060,835 $0.20
====== ========= =====
7
<PAGE>
(4) Comprehensive Income
Comprehensive income represents the sum of net income and items of other
comprehensive income or loss, which are reported directly in shareholders'
equity, net of tax, such as the change in the net unrealized gain or loss on
securities available for sale. Accumulated other comprehensive income or loss,
which is included in shareholders' equity, net of tax, represents the net
unrealized gain or loss on securities available for sale.
Comprehensive income for the three-month periods ended March 31, 2000 and
1999 was $1.0 million and $514,000, respectively.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Ambanc Holding Co., Inc. ("Ambanc" or the "Company") is a unitary savings and
loan holding company. Ambanc was formed as a Delaware Corporation to act as the
holding company for the former Amsterdam Savings Bank, FSB (now known as Mohawk
Community Bank) upon the completion of Amsterdam Savings Bank's conversion from
the mutual to stock form on December 26, 1995 (the "Conversion").
Mohawk Community Bank's (the "Bank"'s) results of operations are primarily
dependent on its net interest income, which is the difference between the
interest and dividend income earned on its assets, primarily loans and
securities, and the interest expense on its liabilities, primarily deposits and
borrowings. Net interest income may be affected significantly by general
economic and competitive conditions and policies of regulatory agencies,
particularly those with respect to market interest rates. The results of
operations are also significantly influenced by the level of non-interest
expenses, such as employee salaries and benefits, non-interest income, such as
fees on deposit-related services, the provision for loan losses, and income
taxes.
8
<PAGE>
The Bank has been, and intends to continue to be, a community-oriented financial
institution offering a variety of financial services. Management's strategy has
been to try to achieve a high loan to asset ratio with emphasis on originating
traditional one- to four-family residential mortgage and home equity loans in
its primary market area. At March 31, 2000, the Bank's loans receivable, net, to
assets ratio was 64.8%, up from 62.8% at December 31, 1999. The Bank's portfolio
of one- to four-family residential mortgage and home equity loans was 85.2% of
total loans at March 31, 2000.
Forward-Looking Statements
When used in this Form 10-Q, in future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases or other
public or shareholder communications, and in oral statements made with the
approval of an authorized executive officer, 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 that
could cause actual results to differ materially from historical results and
those presently anticipated or projected, including, but not limited to, 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. 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.
Financial Condition
Comparison of Financial Condition at March 31, 2000 and December 31, 1999. Total
assets decreased by $19.4 million, or 2.6%, to $721.3 million at March 31, 2000
from $740.7 million at December 31, 1999, primarily due to decreases in cash and
cash equivalents and securities available for sale of $16.6 million and $3.9
million, respectively, partially offset by an increase in loans receivable, net
of $1.8 million.
Cash and cash equivalents decreased by $16.6 million, or 55.9%, to $13.1 million
at March 31, 2000 from $29.6 million at December 31, 1999. This decrease was
primarily due to a decrease in cash and due from banks of $14.9 million, or
56.5%, from $26.4 million at December 31, 1999 to $11.5 million at March 31,
2000, in addition to a decrease in interest-bearing deposits from $3.2 million
at December 31, 1999 to $1.6 million at March 31, 2000. The decrease in cash and
due from banks is the result of the Company's decision to temporarily increase
vault cash in preparation for potential year 2000 liquidity needs of depositors
at year end. However, early in the first quarter of 2000, vault cash returned to
9
<PAGE>
more normal levels. Securities available for sale decreased $3.9 million, or
1.8%, to $208.2 million at March 31, 2000 from $212.1 million at December 31,
1999 resulting primarily from the maturities and calls of securities and the
reinvestment of the proceeds in the loan portfolio. Loans receivable, net
increased $1.8 million from $465.5 million at December 31, 1999, to $467.3
million at March 31, 2000 due to increased loan activity primarily in
residential mortgage and commercial loans.
Deposits increased by $14.2 million, or 3.1%, to $464.3 million at March 31,
2000 from $450.1 million at December 31, 1999 primarily due to various marketing
promotions offered during the quarter. Securities repurchase agreements
decreased $25.0 million, or 22.2%, to $87.7 million at March 31, 2000 from
$112.7 million at December 31, 1999, due primarily to the maturity of repurchase
agreements. Short-term borrowings from the FHLB decreased by $19.9 million, or
27.9%, to $51.3 million at March 31, 2000. These funding reductions were
replaced in part with a combination of long-term advances from the FHLB and
increased deposits. Long-term advances from the FHLB increased $14.7 million, or
70.2%, to $35.7 million at March 31, 2000 from $21.0 million at December 31,
1999. Accrued expenses and other liabilities decreased $2.0 million, or 41.3%,
to $2.9 million at March 31, 2000, primarily due to a change in processing of
teller drafts and money orders.
Shareholders' equity decreased $148 thousand, or 0.2%, from $75.6 million at
December 31, 1999 to $75.4 million at March 31, 2000, due primarily to the
repurchases of treasury stock and the payment of cash dividends of $922 thousand
and $542 thousand, respectively, partially offset by net income of $984 thousand
for the quarter. Other items impacting shareholders' equity during the first
quarter of 2000 were the release of ESOP shares, the grant of RRP shares in lieu
of Directors' Board fees, the amortization of unearned RRP shares, and the
after-tax impact of the change in the net unrealized losses on securities
available for sale.
Consolidated Average Balances, Interest Rates & Yields
The following table presents for the periods indicated the total dollar
amount of interest and dividend income earned on average earning assets and the
resultant yields, as well as the total dollar amount of interest expense
incurred on average interest-bearing liabilities and the resultant rates. No tax
equivalent adjustments were made. All average balances are daily average
balances. Non-accruing loans have been included in the table as loans with
interest earned on a cash basis only. Securities available for sale are included
at amortized cost.
10
<PAGE>
<TABLE>
<CAPTION>
Three months ended March 31,
2000 1999
------------------------------------ -------------------------------------
Average Interest Yield/ Average Interest Yield/
Balance Inc./Exp. Rate Balance Inc./Exp. Rate
<S> <C> <C> <C> <C> <C> <C>
Earning assets (Dollars in thousands)
Loans receivable $471,035 $8,697 7.43% $425,163 $7,781 7.42%
Securities available for sale (AFS) 220,860 3,667 6.68% 244,726 3,792 6.28%
Federal Home Loan Bank stock 8,748 147 6.76% 7,215 119 6.69%
Federal funds sold &
interest-bearing deposits 2,566 33 5.17% 23,983 272 4.60%
-------------- --------- -------- ------------ --------- --------
Total earning assets 703,209 12,544 7.17% 701,087 11,964 6.92%
-------------- --------- -------- ------------ --------- --------
Allowance for loan losses (5,530) (4,983)
Unrealized gain/(loss) on AFS securities (10,537) 355
Other assets 36,129 30,538
--------------- ------------
Total assets $723,271 $726,997
=============== ============
Interest-bearing liabilities
Savings deposits 128,524 878 2.75% 138,831 992 2.90%
NOW deposits 35,962 110 1.12% 33,010 144 1.77%
Certificates of deposit 231,923 3,103 5.38% 227,743 2,861 5.09%
Money market accounts 28,617 273 3.84% 22,402 215 3.89%
Borrowed funds 181,999 2,664 5.89% 173,746 2,359 5.51%
-------------- --------- -------- ------------ --------- --------
Total interest-bearing liabilities 607,025 7,028 4.66% 595,732 6,571 4.47%
-------------- --------- -------- ------------ --------- --------
Demand deposits 35,358 36,903
Other liabilities 5,221 8,775
--------------- ------------
Total liabilities 647,604 641,410
--------------- ------------
Stockholders' equity 75,667 85,587
--------------- ------------
Total liabilities & equity $723,271 $726,997
=============== ============
Net interest income $5,516 $5,393
Interest rate spread 2.51% 2.45%
Net earning assets $ 96,184 $105,355
Net interest margin 3.15% 3.12%
Average earning assets/Average
interest-bearing liabilities 115.85% 117.68%
</TABLE>
11
<PAGE>
Consolidated Rate/Volume Analysis of Net Interest Income
The following table presents the dollar amount of changes in interest and
dividend income and interest expense for major components of earning assets and
interest-bearing liabilities. It distinguishes between the changes related to
outstanding balances and the changes due to changes in interest rates. For each
category of earning assets and interest-bearing liabilities, information is
provided on changes attributable to (i) changes in volume (i.e. changes in
volume multiplied by old rate) and (ii) changes in rate (i.e. changes in rate
multiplied by old volume). For purposes of this table, changes attributable to
both rate and volume, which cannot be segregated, have been allocated
proportionately to the change due to volume and the change due to rate.
Three months ended March 31,
2000 vs. 1999
-------------------------------
Increase
(Decrease)
Due to Total
--------------------- Increase
Volume Rate (Decrease)
--------- -------- --------
Earning assets (Dollars in thousands)
Loans receivable .......................... $ 912 $ 4 $ 916
Securities available for sale ............. (350) 225 (125)
Federal Home Loan Bank stock .............. 27 1 28
Federal funds sold and interest-bearing
deposits ............................... (277) 38 (239)
--------- -------- --------
Total earning assets .................. 312 268 580
--------- -------- --------
Interest-bearing liabilities
Savings deposits .......................... (67) (47) (114)
NOW deposits ............................. 14 (48) (34)
Certificates of deposit ................... 60 182 242
Money market accounts ..................... 61 (3) 58
Borrowed funds ............................ 124 181 305
--------- -------- --------
Total interest-bearing liabilities .... 192 265 457
--------- -------- --------
Net interest income ..................... $ 120 $ 3 $ 123
========= ======== ========
12
<PAGE>
Comparison of Operating Results for the Three Months Ended March 31, 2000 and
1999.
Net Income. Net income decreased by $51 thousand, or 4.9%, for the three months
ended March 31, 2000 to $984 thousand from $1.0 million for the three months
ended March 31, 1999. Net income for the three months ended March 31, 2000 was
reduced primarily as a result of increased non-interest expenses, offset in part
by a decrease in the provision for loan losses and increases in net interest
income and non-interest income. These and other changes are discussed in more
detail below.
Net Interest Income. Net interest income increased $123 thousand, or 2.3%, to
$5.5 million for the three months ended March 31, 2000 from $5.4 million for the
three months ended March 31, 1999. The increase in net interest income was
primarily due to an increase of $2.1 million in the average balance of earning
assets, in addition to an increase in the interest rate spread from 2.45% for
the three months ended March 31, 1999 to 2.51% for the three months ended March
31, 2000. This was partially offset by an increase in the average balance of
interest-bearing liabilities of $11.3 million, or 1.9%.
Earning assets consist of loans receivable, securities available for sale,
federal funds sold, interest-bearing deposits, and FHLB of New York stock.
Interest-bearing liabilities consist of interest-bearing deposits, FHLB advances
and securities repurchase agreements.
The interest rate spread, which is the difference between the yield on average
earning assets and the cost of average interest-bearing liabilities, increased
to 2.51% for the three months ended March 31, 2000, from 2.45% for the three
months ended March 31, 1999. The increase in the interest rate spread was due
primarily to the Company redeploying assets from lower-yielding federal funds
sold and securities available for sale to the higher-yielding loan portfolio.
Primarily due to this shift in asset mix, the average yield on earning assets
increased from 6.92% for the three months ended March 31, 1999 to 7.17% for the
three months ended March 31, 2000. The impact of this increase was partially
offset by increases in the average balance of the higher costing certificates of
deposit and borrowed funds of $4.2 million and $8.3 million, respectively.
Likewise, for the three months ended March 31, 2000 the average rate paid on
certificates of deposit and borrowed funds increased 29 basis points, to 5.38%,
and 38 basis points, to 5.89%, respectively. Many of the Company's securities
repurchase agreements contain call features. If these repurchase agreements are
called (which is likely if interest rates continue to increase) and the Company
cannot replace the funding at a similar or lower interest rate, the interest
rate spread is likely to decrease.
The Company operates in an environment of intense competition for deposits and
loans. The competition in today's environment is not limited to other local
banks and thrifts, but also includes a myriad of financial services providers
that are located both within and outside the Company's local market area. 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, the interest rate spread and
the net interest margin. This is especially true during periods when the growth
in earning assets lags behind the growth in interest-bearing liabilities.
13
<PAGE>
However, management does not want to discourage, by offering noncompetitive
interest rates, the creation of new customer relationships or jeopardize
existing relationships thereby curtailing the Company's customer base and loan
growth and the attendant benefits to be derived from them. Management believes
that the longer-term benefits to be derived from this position will outweigh the
shorter-term costs associated with attracting, cross-selling and retaining an
expanding customer base. The growing customer base provides the Company with the
potential for future, profitable customer relationships, which should in turn
increase the value of the franchise.
Interest and Dividend Income. Interest and dividend income increased by $580
thousand, or 4.8%, to $12.5 million for the three months ended March 31, 2000
from $12.0 million for the three months March 31, 1999. The increase was largely
the result of the increase and shift in the average balance of earning assets
from federal fund sold and securities available for sale to loans receivable
(and, to a much lesser extent, FHLB stock.) This shift consisted primarily of
increases in the average balance of loans receivable of $45.9 million, or 10.8%,
and FHLB stock of $1.5 million, or 21.2 %, substantially offset by decreases in
securities available for sale of $23.9 million, or 9.8%, and federal funds sold
and interest-bearing deposits of $21.4 million, or 89.3%. In addition to the
increase in the average balance of earning assets was a 25 basis point increase
in the average yield on total earning assets. The yield on the average balance
of earning assets was 7.17% and 6.92% for the three months ended March 31, 2000
and 1999, respectively.
Interest and fees on loans increased $916 thousand, or 11.8%, to $8.7 million
for the three months ended March 31, 2000. This increase was primarily the
result of an increase in the average balance of net loans receivable of $45.9
million, or 10.8%, to $471.0 million for the three months ended March 31, 2000
from $425.2 million for the three months ended March 31, 1999.
Interest income on securities available for sale decreased $125 thousand, or
3.3%, to $3.7 million for the three months ended March 31, 2000 from $3.8
million for the previous period. This decrease is primarily the result of a
decrease in the average balance of securities available for sale of $23.9
million offset in part by a 40 basis point increase in the average yield on
these securities.
Interest income of federal funds sold and interest-bearing deposits decreased
$239 thousand, or 87.9%, to $33 thousand for the three months ended March 31,
2000 from $272 thousand for the same quarter of the previous year primarily due
to a decrease in the average balance of federal funds sold and interest-bearing
deposits of $21.4 million, or 89.3%, resulting from the shift in assets from
lower yielding federal funds sold and interest-bearing deposits to higher
yielding loans receivable.
Interest Expense. Total interest expense increased by $457 thousand, or 7.0%, to
$7.0 million for the three months ended March 31, 2000 from $6.6 million for the
three months ended March 31, 1999. Total average interest-bearing liabilities
increased by $11.3 million, or 1.9%, to $607.0 million for the first quarter of
2000 compared to $595.7 million for the same period of the previous year
primarily due to the funding of loan activity during 1999. Also, a portion of
this increase was due to higher vault cash balances maintained during January
2000 as a result of potential year 2000 liquidity needs of depositors at year
14
<PAGE>
end. During the same periods, the average rate paid on interest-bearing
liabilities increased by 19 basis points to 4.66% from 4.47%.
Total interest expense for the three months ended March 31, 2000 increased
primarily due to an increase of 38 basis points, to 5.89%, in the average rate
paid on total borrowed funds during the period, consistent with the general
increase in market interest rates. In addition, the average balance on these
funds increased to $182.0 million for the three months ended March 31, 2000,
from $173.7 million for the previous period. Likewise, interest expense relative
to certificates of deposit and money market accounts increased as a result of
increases in the average balances on these deposit accounts. Moreover, the
increase in interest on certificates of deposit was primarily due to increases
in the average cost of these deposit accounts from 5.09% for the three months
ended March 31, 1999 to 5.38% for the three months ended March 31, 2000.
Provision for Loan Losses. The Company's provision for loan losses is based upon
management's analysis of the adequacy of the allowance for loan losses. The
allowance is increased by a charge to the provision for loan losses, the amount
of which depends upon an analysis of the changing risks inherent in the loan
portfolio. Management determines the adequacy of the allowance for loan losses
based upon its analysis of risk factors in the loan portfolio. This analysis
includes evaluation of credit risk, historical loss experience, current economic
conditions, estimated fair value of underlying collateral, delinquencies, and
other factors. The provision for loan losses for the three months ended March
31, 2000 decreased $135 thousand to $120 thousand from $255 thousand for the
three months ended March 31, 1999. The Bank's ratio of non-performing loans to
total loans was 0.68% and 0.89% at March 31, 2000 and December 31, 1999,
respectively.
Non-Interest Income. Total non-interest income increased by $65 thousand, or
15.3%, to $489 thousand for the three months ended March 31, 2000 from $424
thousand for the three months ended March 31, 1999. This increase was primarily
due to the increase in fees charged for cashing non-customer tax refund checks,
in addition to fees associated with the purchase of bank checks and money
orders. Moreover, the Bank now charges an ATM fee for non-customer transactions
made at the Bank's ATM machines. Also included in other non-interest income
during the first quarter 2000 was the recognition of income for an experience
refund from an insurance carrier on consumer loans in the amount of $11
thousand.
Non-Interest Expenses. Non-interest expenses increased $432 thousand, or 11.5%,
to $4.2 million for the three months ended March 31, 2000 from $3.7 million for
the three months ended March 31, 1999 primarily due to increased costs
associated with salaries, wages and benefits and data processing. Also impacting
non-interest expenses during the first quarter of 1999 were the acceleration of
depreciation and amortization of equipment and leasehold improvements due to the
closing of a branch. These and other changes are discussed in more detail below.
15
<PAGE>
Salaries, wages and benefits expense increased by $264 thousand, or 14.4%, for
the first quarter of 2000 primarily due to an increase in salaries and wages
associated with the increase in staff in the commercial loan department as a
result of the Company's decision to increase emphasis in growing the commercial
loan portfolio, coupled with the establishment of the Senior Management Salary
Incentive Plan during the second quarter of 1999. Also contributing to this
increase was the general cost of living and merit raises given to employees at
the beginning of 2000. In addition, during the first quarter of 1999, salaries,
wages and benefits expense was reduced due to the reversal of an accrual
associated with severance offered to an employee terminated at the time of the
merger which was not accepted. Management believes that salaries, wages and
benefits expenses may fluctuate in future periods as costs related to the
Company's ESOP are dependent on the Company's average stock price. The expense
related to the ESOP for the first quarter of 2000 was $34 thousand lower than
the comparable quarter in 1999 due to the lower stock price in 2000 relative to
1999.
Occupancy and equipment decreased $31 thousand, or 4.9%, to $598 thousand for
the three months ended March 31, 2000, from $629 thousand in 1999 primarily due
to the acceleration of depreciation and amortization of equipment and leasehold
improvements, during the first quarter of 1999, on a branch being closed as a
result of the acquisition of AFSALA Bancorp, Inc. Offsetting these decreases was
an increase in depreciation of furniture, fixtures and equipment primarily
resulting from computer hardware and software upgrades related to year 2000
compliance subsequent to the first quarter of 1999.
Data processing increased $152 thousand, or 64.7%, from $235 thousand in 1999 to
$387 thousand for the three months ended March 31, 2000. During the first
quarter of 1999, at the time of the initial conversion of the core application
data system, the Bank received credits from the new data center totaling
approximately $92 thousand to be applied against data processing fees in the
first quarter of 1999. No such credits were received in the 2000 period.
Other non-interest expense increased $68 thousand, or 8.5%, to $865 thousand for
the three months ended March 31, 2000 when compared to the previous period. This
increase was primarily due to expenses associated with the promotion and
advertising of time deposit products offered during the quarter ended March 31,
2000.
Income Tax Expense. Income tax expense decreased by $58 thousand, or 7.4%, to
$723 thousand for the three months ended March 31, 2000 from $781 thousand for
the three months ended March 31, 1999. The decrease was primarily the result of
the decrease in income before taxes.
16
<PAGE>
ASSET QUALITY
Non-Performing Assets
The table below sets forth the amounts and categories of non-performing
assets at the dates indicated.
March 31, December 31,
2000 1999
------ ------
(Dollars in thousands)
Non-accruing loans:
One-to four-family (1) ........... $1,424 $1,570
Commercial real estate ........... 85 274
Consumer ......................... 292 434
Commercial business .............. 287 298
------ ------
Total .......................... 2,088 2,576
------ ------
Accruing loans delinquent
more than 90 days:
One-to four-family (1) ........... 383 372
Commercial real estate ........... 131 685
Consumer ......................... 51 11
------ ------
Total .......................... 565 1,068
------ ------
Troubled debt restructured loans:
One-to four-family (1) ........... 84 84
Commercial real estate ........... 470 475
Commercial business .............. 5 7
------ ------
Total .......................... 559 566
------ ------
Total non-performing loans ..... 3,212 4,210
------ ------
Foreclosed assets:
One-to four-family (1) ........... 154 126
Commercial real estate ........... 142 142
Consumer ......................... 57 54
------ ------
Total .......................... 353 322
------ ------
Total non-performing assets ......... $3,565 $4,532
====== ======
Non-performing loans as a percentage
of total loans 0.68% 0.89%
Non-performing assets as a percentage
of total assets ...................... 0.49% 0.61%
(1) Includes home equity loans.
17
<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 the Bank's 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,
2000 1999
------- -------
(Dollars in thousands)
Balance at beginning of period ........ $ 5,509 $ 4,891
Charge-offs:
One- to four-family (1) .......... (1) (10)
Consumer ......................... (132) (34)
------- -------
Total charge-offs ............. (133) (44)
------- -------
Recoveries:
Commercial real estate ........... -- 25
Consumer ......................... 6 11
Commercial business .............. 4 12
------- -------
Total recoveries .............. 10 48
------- -------
Net (charge-offs) recoveries .......... (123) 4
Provisions charged to operations ...... 120 255
------- -------
Balance at end of period .............. $5,506 $5,150
======= =======
Ratio of allowance for loan
losses to total loans (period end) .... 1.16% 1.21%
Ratio of allowance for loan losses
to non-performing loans (at period end) 171.42% 170.53%
Ratio of net charge-offs (recoveries)
during the period to average loans
outstanding during period (annualized) 0.11% (0.00%)
(1) Includes home equity loans.
18
<PAGE>
Liquidity and Capital Resources
The Bank is required by OTS regulations to maintain, for each calendar month, a
daily average balance of cash and eligible liquid investments of not less than
4% of the average daily balance of its net withdrawable savings and borrowings
(due in one year or less) during the preceding calendar month. This liquidity
requirement may be changed from time to time by the OTS to any amount within the
range of 4% to 10%. The Bank's average liquidity ratio was 26.92% and 28.36% at
March 31, 2000 and December 31, 1999, respectively.
The Company's sources of liquidity include cash flows from operations, principal
and interest payments on loans, mortgage-backed securities and collateralized
mortgage obligations, maturities of securities, deposit inflows, borrowings from
the FHLB of New York and proceeds from the sale of securities sold under
agreements to repurchase.
While maturities and scheduled amortization of loans and securities are, in
general, a predictable source of funds, deposit flows and prepayments on loans
and securities are greatly influenced by general interest rates, economic
conditions and competition. In addition, the Bank invests excess funds in
overnight deposits which provide liquidity to meet lending requirements.
In addition to deposit growth, the Company borrows funds from the FHLB of New
York or may utilize other types of borrowed funds to supplement its cash flows.
At March 31, 2000 and December 31, 1999, the Company had $87.0 million and $92.2
million, respectively, in outstanding borrowings from the FHLB and $87.7 million
and $112.7 million, respectively, in securities repurchase agreements, the vast
majority of which are also with the FHLB.
As of March 31, 2000 and December 31, 1999, the Company had $208.2 million and
$212.1 million, respectively, of securities classified as available for sale.
The liquidity of the securities available for sale portfolio provides the
Company with additional potential cash flows to meet loan growth and deposit
flows.
Liquidity may be adversely affected by unexpected deposit outflows, excessive
interest rates paid by competitors, adverse publicity relating to the savings
and loan industry, and similar matters. Management monitors projected liquidity
needs and determines the level desirable, based in part on the Company's
commitment to make loans and management's assessment of the Company's ability to
generate funds.
The Bank is subject to federal regulations that impose certain minimum capital
requirements. At March 31, 2000, the Bank's capital exceeded each of the
regulatory capital requirements of the OTS. The Bank is "well capitalized" at
March 31, 2000 according to regulatory definition. At March 31, 2000, the Bank's
tangible and core capital levels were both $67.1 million (9.44% of total
adjusted assets) and its total risk-based capital level was $71.4 million
(20.48% of total risk-weighted assets). The minimum regulatory capital ratio
requirements of the Bank are 1.5% for tangible capital, 4.0% for core capital,
and 8.0% for total risk-based capital.
19
<PAGE>
During the first three months of 2000, the Company repurchased 68,400 shares of
its common stock in open-market transactions at a total cost of $922 thousand.
Effect of Inflation and Changing Prices
The Company's consolidated financial statements and related data presented
herein have been prepared in accordance with generally accepted accounting
principles, which require the measurement of financial position and operating
results in terms of historical dollars, without considering changes in the
relative purchasing power of money over time due to inflation. Unlike industrial
companies, virtually all of the assets and liabilities of a financial
institution are monetary in nature. As a result, interest rates have a more
significant impact on a financial institution's performance than the effects of
general levels of inflation. Interest rates do not necessarily move in the same
direction or with the same magnitude as the prices of goods and services.
Recent Accounting Pronouncement
In June 1998, the FASB issued Statement 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. As amended, this
Statement is effective for all fiscal quarters of fiscal years beginning after
June 15, 2000. Management is currently evaluating what impact, if any, this
Statement will have on the Company's consolidated financial statements.
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, 1999. 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
During the quarter under report, a Form 8-K (item 5 and 7) was
filed on February 8, 2000.
20
<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.
John M. Lisicki
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 15, 2000
James J. Alescio
Senior Vice President, CFO and Treasurer
(Principal Financial and Accounting Officer)
Date: May 15, 2000
21
<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, 2000 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-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 11488
<INT-BEARING-DEPOSITS> 1572
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 208221
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 472775
<ALLOWANCE> 5506
<TOTAL-ASSETS> 721290
<DEPOSITS> 464297
<SHORT-TERM> 51300
<LIABILITIES-OTHER> 6822
<LONG-TERM> 123426
0
0
<COMMON> 54
<OTHER-SE> 75391
<TOTAL-LIABILITIES-AND-EQUITY> 721290
<INTEREST-LOAN> 8697
<INTEREST-INVEST> 3667
<INTEREST-OTHER> 180
<INTEREST-TOTAL> 12544
<INTEREST-DEPOSIT> 4364
<INTEREST-EXPENSE> 7028
<INTEREST-INCOME-NET> 5516
<LOAN-LOSSES> 120
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4178
<INCOME-PRETAX> 1707
<INCOME-PRE-EXTRAORDINARY> 1707
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 984
<EPS-BASIC> 0.21
<EPS-DILUTED> 0.21
<YIELD-ACTUAL> 3.15
<LOANS-NON> 2088
<LOANS-PAST> 565
<LOANS-TROUBLED> 559
<LOANS-PROBLEM> 2041
<ALLOWANCE-OPEN> 5509
<CHARGE-OFFS> 133
<RECOVERIES> 10
<ALLOWANCE-CLOSE> 5506
<ALLOWANCE-DOMESTIC> 5506
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
