SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number 0-23182
AMB FINANCIAL CORP.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 35-1905382
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(State or other jurisdiction I.R.S. Employer
of incorporation or Identification
organization) Number
8230 Hohman Avenue, Munster, Indiana 46321-1578
- --------------------------------------------------------------------------------
(Address of Principal executive offices) (Zip Code)
Registrant telephone number, including area code: (219) 836-5870
Check whether the issuer (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. Yes [ X ] No [ ]
As of October 29, 1997 there were 1,124,125 shares of the Registrant's
common stock issued and 963,798 shares outstanding.
Transitional Small Business Disclosure Format(check one): Yes [ ] No [ X ]
<PAGE>
AMB FINANCIAL CORP.
FORM 10-Q
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition at
September 30, 1997 (Unaudited) and December 31, 1996
Consolidated Statements of Earnings for the three
and nine months ended September 30, 1997 and 1996
(unaudited)
Consolidated Statements of Cash Flows for the
nine months ended September 30, 1997 and 1996
(unaudited)
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. OTHER INFORMATION
Signatures
Index to Exhibits
Earnings Per Share Analysis(Exhibit 11)
Financial Data Schedule (Exhibit 27)
<PAGE>
<TABLE>
<CAPTION>
AMB FINANCIAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Financial Condition
September 30, December 31,
1997 1996
------------ ------------
unaudited
<S> <C> <C>
Assets
Cash and amounts due from depository
institutions .............................................................. 2,691,839 1,473,962
Interest-bearing deposits ...................................................... 8,541,368 1,093,405
------------ ------------
Total cash and cash equivalents ........................................... 11,233,207 2,567,367
Investment securities, available for sale, at fair value ....................... 8,193,345 8,938,937
Investment securities held for trade ........................................... 2,017,005 539,500
Mortgage backed securities, available for sale, at fair value .................. 3,650,941 4,018,835
Loans receivable (net of allowance for loan losses:
$387,994 at September 30, 1997 and
$354,631 at December 31, 1996) ............................................ 75,149,616 67,365,632
Real Estate Owned .............................................................. 126,429 --
Stock in Federal Home Loan Bank of Indianapolis ................................ 725,400 545,600
Accrued interest receivable .................................................... 554,800 452,955
Office properties and equipment- net ........................................... 502,698 510,603
Prepaid expenses and other assets .............................................. 1,234,387 1,162,631
------------ ------------
Total assets .............................................................. 103,387,828 86,102,060
============ ============
Liabilities and Stockholders' Equity
Liabilities
Deposits ....................................................................... 73,744,886 60,410,997
Borrowed money ................................................................. 13,500,000 9,500,000
Advance payments by borrowers for taxes
and insurance ............................................................. 670,664 312,213
Other liabilities .............................................................. 1,061,765 708,993
------------ ------------
Total liabilities ......................................................... 88,977,315 70,932,203
------------ ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMB FINANCIAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(continued)
September 30, December 31,
1997 1996
------------ ------------
unaudited
<S> <C> <C>
Stockholders' Equity
Preferred stock, $.01 par value; authorized
100,000 shares; none outstanding .......................................... -- --
Common Stock, $.01 par value; authorized 1,900,000 shares;
1,124,125 shares issued and 963,798 shares outstanding
at September 30, 1997 and 1,067,919 shares outstanding at .................. 11,241 11,241
December 31, 1996
Additional paid- in capital .................................................... 10,683,246 10,657,746
Retained earnings, substantially restricted .................................... 7,166,264 6,564,203
Unrealized gain on securities available for sale,
net of income taxes ....................................................... 54,975 30,386
Treasury stock, at cost (160,327 and 56,206 shares at .......................... (2,223,051) (724,717)
September 30, 1997 and December 31, 1996)
Common stock acquired by Employee Stock Ownership
Plan ...................................................................... (809,370) (809,370)
Common stock awarded by Recognition and Retention Plan ......................... (472,792) (559,632)
------------ ------------
Total stockholders' equity ................................................ 14,410,513 15,169,857
------------ ------------
Total liabilities and stockholders' equity ..................................... 103,387,828 86,102,060
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
AMB FINANCIAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Earnings
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
Sept 30, Sept 30, Sept 30, Sept 30,
---------- ---------- ---------- ----------
1997 1996 1997 1996
---------- ---------- ---------- ----------
unaudited unaudited unaudited unaudited
<S> <C> <C> <C> <C>
Interest income
Loans ........................................ 1,545,014 1,258,701 4,437,100 3,603,109
Mortgage-backed securities ................... 63,728 71,694 198,029 161,097
Investment securities ........................ 148,836 135,711 479,416 385,082
Interest-bearing deposits .................... 76,146 61,087 144,115 184,837
Dividends on FHLB stock ...................... 15,080 10,766 38,072 31,928
---------- ---------- ---------- ----------
Total interest income ................... 1,848,804 1,537,959 5,296,732 4,366,053
---------- ---------- ---------- ----------
Interest expense
Deposits ..................................... 810,537 705,857 2,250,660 2,059,413
Borrowings ................................... 199,274 26,090 512,008 114,712
---------- ---------- ---------- ----------
Total interest expense .................. 1,009,811 731,947 2,762,668 2,174,125
---------- ---------- ---------- ----------
Net interest income before
provision for loan losses ............. 838,993 806,012 2,534,064 2,191,928
Provision for loan losses ......................... 15,000 -- 46,425 --
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses ............. 823,993 806,012 2,487,639 2,191,928
---------- ---------- ---------- ----------
Non-interest income:
Loan fees and service charges ................ 28,759 18,871 74,033 68,330
Commission income ............................ 29,389 10,078 71,674 51,275
Deposit related fees ......................... 70,822 40,995 174,763 121,362
Gain on sale of investment securities
available for sale .......................... 4,740 51,376 22,264 52,617
Gain on sale of investment
securities held for trade ................... 22,029 -- 35,519 --
Unrealized gain on investment
securities held for trade ................... 171,841 19,531 337,655 19,531
Other income ................................. 18,910 17,104 62,853 57,940
---------- ---------- ---------- ----------
Total non-interest income ............... 346,490 157,955 778,761 371,055
---------- ---------- ---------- ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMB FINANCIAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Earnings
(continued)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
Sept 30, Sept 30, Sept 30, Sept 30,
---------- ---------- ---------- ----------
1997 1996 1997 1996
---------- ---------- ---------- ----------
unaudited unaudited unaudited unaudited
<S> <C> <C> <C> <C>
Non-interest expense:
Staffing costs ............................... 330,278 271,327 947,682 792,848
Advertising .................................. 43,386 11,822 95,445 56,294
Occupancy and equipment expense .............. 82,908 83,024 260,962 252,395
Data processing .............................. 81,179 78,106 253,541 218,767
Federal deposit insurance premiums ........... 10,780 423,894 31,064 491,812
Other operating expenses ..................... 146,647 142,805 422,080 362,033
---------- ---------- ---------- ----------
Total non-interest expense .............. 695,178 1,010,978 2,010,774 2,174,149
---------- ---------- ---------- ----------
Net income before income taxes .................... 475,305 (47,011) 1,255,626 388,834
Provision for federal and state
income taxes .................................... 184,820 (35,116) 485,360 120,085
---------- ---------- ---------- ----------
Net income .............................. 290,485 (11,895) 770,266 268,749
========== ========== ========== ==========
Earnings per share- primary ....................... $ 0.32 ($ 0.01) $ 0.82 $ 0.26
Earnings per share- fully diluted ................. $ 0.32 ($ 0.01) $ 0.82 $ 0.26
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
AMB FINANCIAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Nine Months Ending Nine Months Ending
September 30, September 30,
1997 1996
------------- -------------
unaudited unaudited
<S> <C> <C>
Cash flows from operating activities:
Net income .................................................... $ 770,266 268,749
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation ............................................... 115,044 105,458
Amortization of premiums and discounts on
investment and mortgage-backed securities - net ......... 687 1,371
Amortization of cost of stock benefit plans ................ 86,840 --
Increase in deferred compensation .......................... 61,172 52,130
Provision for loan losses .................................. 46,425 --
Gain on sale of investment securities ...................... (22,264) (52,617)
Gain on sale of trading account securities ................. (35,519) --
Unrealized gain on trading account securities ............. (337,655) (19,531)
Purchase of trading account securities ..................... (1,335,227) (297,244)
Proceeds from sales of trading account securities .......... 230,896 --
Increase in deferred income on loans ....................... 11,356 15,064
Increase in current and deferred federal
income tax ............................................... 203,113 146,429
Increase in accrued interest receivable .................... (101,845) (60,108)
Increase in accrued interest payable ...................... 9,888 49,566
Change in prepaid and accrued items, net ................... 3,022 342,867
------------- -------------
Net cash provided by (for) operating activities ................. (293,801) 552,134
------------- -------------
Cash flows from investing activities:
Proceeds from maturities of investment securities .......... 750,000 1,000,000
Proceeds from sale of investment securities ................ 4,014,689 132,617
Purchase of investment securities .......................... (3,994,341) (3,038,857)
Proceeds from repayments of mortgage-backed
securities ............................................... 405,693 340,837
Purchase of mortgage-backed securities ..................... -- (3,034,419)
Purchase of Federal Home Loan Bank stock ................... (179,800) --
Purchase of loans .......................................... (5,222,283) (1,000,000)
Disbursements for loans .................................... (16,045,440) (17,918,539)
Loan repayments ............................................ 13,312,462 10,996,952
Property and equipment expenditures ........................ (107,139) (34,344)
------------- -------------
Net cash provided by (for) investing activities ................. (7,066,159) (12,555,753)
------------- -------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMB FINANCIAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(continued)
Nine Months Ending Nine Months Ending
September 30, September 30,
1997 1996
------------- -------------
unaudited unaudited
<S> <C> <C>
Cash flows from financing activities:
Net proceeds from sale of common stock ..................... -- 9,758,807
Deposit account receipts ................................... 111,025,932 91,339,367
Deposit account withdrawals ................................ (99,360,675) (88,163,226)
Interest credited to deposit accounts ...................... 1,668,632 1,669,251
Proceeds from borrowed money ............................... 7,000,000 --
Repayment of borrowed money ................................ (3,000,000) (2,000,000)
Increase in advance payments by borrowers
for taxes and insurance ................................... 358,451 224,341
Payment of dividends ....................................... (168,206) (67,447)
Purchase of treasury stock ................................. (1,498,334) --
------------- -------------
Net cash provided by financing activities ....................... 16,025,800 12,761,093
------------- -------------
Net change in cash and cash equivalents ......................... 8,665,840 757,474
Cash and cash equivalents at beginning of period ................ 2,567,367 4,036,817
------------- -------------
Cash and cash equivalents at end of period ...................... $ 11,233,207 4,794,291
============= =============
Cash paid during the period for:
Interest ................................................... $ 2,752,780 2,124,559
Income taxes ............................................... 245,509 255,709
Non-cash investing activities:
Transfer of loans to real estate owned ........................ 113,496 --
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
AMB Financial Corp.
and Subsidiaries
Notes to Consolidated Financial Statements
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of only normal recurring accruals) necessary for a fair presentation have been
included.
The results of operations for the three and nine months ended September
30, 1997 are not necessarily indicative of results that may be expected for the
entire fiscal year ended December 31, 1997.
The consolidated financial statements include the accounts of AMB
Financial Corp. (the "Company") and its wholly-owned subsidiary, American
Savings FSB (the "Bank"), the Bank's wholly owned subsidiary, NIFCO, Inc. and
the wholly-owned subsidiary of NIFCO, Inc., Ridge Management, Inc., as of and
for the three and nine month periods ended September 30, 1997 and 1996 and as of
December 31, 1996. All material intercompany balances and transactions have been
eliminated in consolidation.
2. Mutual to Stock Conversion
In December 1995, the Bank's Board of Directors approved a Plan of
Conversion (the "Conversion"), providing for the Bank's conversion from a
federally chartered mutual savings bank to a federally chartered stock savings
bank with the concurrent formation of a holding company. The Holding Company
issued 1,124,125 shares of $.01 par value common stock at $10.00 per share, for
an aggregate purchase price of $11,241,250. The Conversion and sale of 1,124,125
shares of common stock of the Holding Company was completed on March 29, 1996.
Net proceeds to the Company, after conversion expenses, totaled approximately
$10,658,000.
3. Earnings Per Share
Earnings per share for the three and nine month periods ended September
30, 1997 were determined by dividing net income for the periods by the weighted
average number of both primary and fully diluted shares of common stock and
common stock equivalents outstanding (see Exhibit 11 attached). Stock options
are regarded as common stock equivalents and are therefore considered in both
primary and fully diluted earnings per share calculations. Common stock
equivalents are computed using the treasury stock method. ESOP shares not
committed to be released to participants are not considered outstanding for
purposes of computing earnings per share amounts.
<PAGE>
4. Impact of New Accounting Standards
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities. In June 1996, the FASB issued SFAS No. 125
("SFAS 125"), "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." This statement, among other things, applies a
"financial-components approach" that focuses on control, whereby an entity
recognizes the financial and servicing assets it controls and the liabilities it
has incurred, derecognizes assets when control has been surrendered, and
derecognizes liabilities when extinguished. SFAS 125 provides consistent
standards for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. SFAS 125 is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring after
December 31, 1996. The Company has adopted SFAS 125 effective January 1, 1997,
resulting in no material impact on its consolidated financial condition or
results of operations.
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities. In December 1996, the FASB issued Statement of
Financial Accounting Standards No. 127 ("SFAS 127"), "Deferral of the Effective
Date of Certain Provisions of FASB Statement No. 125". The statement delays for
one year the implementation of SFAS 125, as it relates to (1) secured borrowings
and collateral, and (2) for the transfers of financial assets that are part of
repurchase agreements, dollar-rolls, securities lending and similar
transactions. The Company has adopted portions of SFAS 125 (those not deferred
by SFAS 127) effective January 1, 1997. Adoption of these portions did not have
a significant effect on the Company's financial condition or results of
operations. Based on its review of SFAS 125, management does not believe that
adoption of the portions of SFAS 125 which have been deferred by SFAS 127 will
have a material effect on the Company.
Accounting for Earnings Per Share. In February 1997, the FASB issued
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per
Share". This statement establishes standards for computing and presenting
earnings per share (EPS) and applies to entities with publicly held common
stock. This statement simplifies the standards for computing earnings per share
previously found in Accounting Principles Board Opinion No. 15, "Earnings Per
Share" and makes them comparable to international EPS standards. It replaces the
presentation of primary EPS with a presentation of basic EPS and fully diluted
EPS with diluted EPS. It also requires duel presentation of basic EPS and
diluted EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation.
Basic EPS, unlike primary EPS, excludes dilution and is computed by
dividing income available to common stockholders by the weighted-average number
of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity. Diluted EPS is
computed similarly to fully diluted EPS under APB 15.
SFAS 128 is effective for financial statements for both interim and
annual periods ending after December 15, 1997. The following presentation
illustrates pro forma basic and diluted per share based on the provisions of
SFAS 128:
<PAGE>
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
------------- ------------- ------------- -------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Weighted average number of common shares
outstanding used in basic earnings
per share calculation ............... 887,357 1,037,192 925,186 1,037,192
Add common stock equivalents for shares
issuable under Stock Option Plan .... 14,286 - - - 9,911 - - -
---------- ---------- ---------- ----------
Weighted average number of shares
outstanding adjusted for common stock
equivalent ........................... 901,643 1,037,192 935,097 1,037,192
========== ========== ========== ==========
Net Income ............................. $ 290,485 (11,895) 770,266 268,749
Basic earnings per share ............... $ 0.33 (0.01) 0.83 0.26
Diluted earnings per share ............. $ 0.32 (0.01) 0.82 0.26
</TABLE>
Disclosure of Information about Capital Structure. In February 1997,
the FASB issued Statement of Financial Accounting Standards No. 129, "Disclosure
of Information about Capital Structure" ("SFAS No. 129"). This statement
establishes standards for disclosing information about an entity's capital
structure. It supersedes specific disclosure requirements of APB Opinions No.
10, "Omnibus Opinion- 1966," and No. 15, "Earnings Per Share," and SFAS No. 47,
"Disclosure of Long-Term Obligations," and consolidates them in this statement
for ease of retrieval and for greater visibility to nonpublic entities. This
statement is effective for financial statements for periods ending after
December 15, 1997. It contains no changes in disclosure requirements for
entities that were previously subject to the requirements of Opinions No. 10 and
No. 15 and SFAS No. 47, and, therefore, is not expected to have a significant
impact on the consolidated financial condition or results of operations of the
Company.
Reporting Comprehensive Income. In June 1997, the FASB issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 130"). This statement establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains, losses) in a
full set of general-purpose financial statements. SFAS 130 is effective for
fiscal years beginning after December 15, 1997. The Company has not yet
determined the impact of adopting this statement.
Disclosures About Segments of an Enterprise and Related Information. In
June 1997, the FASB issued Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131") which becomes effective for fiscal years beginning after December 15,
1997. SFAS 131 establishes standards for the way that public business
enterprises report information about operating segments and requires enterprises
to report selected information about operating segments in interim financial
reports. The Company has not yet determined the impact of adopting this
statement.
<PAGE>
The foregoing does not constitute a comprehensive summary of all
material changes or developments affecting the manner in which the Company keeps
its books and records and performs its financial accounting responsibilities. It
is intended only as a summary of some of the recent pronouncements made by the
FASB which are of particular interest to financial institutions.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
FINANCIAL CONDITION
September 30, 1997 compared to December 31, 1996.
Total assets of the Company increased $17.3 million, or 20.1% to $103.4 million
at September 30, 1997 compared to $86.1 million at December 31, 1996. This
increase was primarily due to increases in cash and cash equivalents and growth
in loans receivable, which were funded by an increase in deposits and borrowed
funds.
At September 30, 1997, cash and cash equivalents increased by $8.7 million as
excess funds received from the deposit growth were retained in anticipation of
the repayment of $1.5 million of FHLB of Indianapolis advances in October, 1997,
the funding of approximately $2.0 million of loans commitments in early October
1997 and for general liquidity purposes.
Investment securities available for sale decreased $750,000 to $8.2 million at
September 30, 1997 as a result of investment sales of $4.0 million and $750,000
in proceeds from maturing securities offset by $4.0 million in new purchases.
These sales were from a medium term U.S. Government mutual fund while the new
purchases were primarily in the same fund and to a lesser extent, in medium term
U.S. Treasury notes.
Loans receivable increased to $75.1 million at September 30, 1997, a $7.8
million or 11.5% increase, as new loan originations of $16.0 million and loan
purchases of $5.2 million exceeded loan repayments of $13.3 million. Loan
purchases in the third quarter include $2.0 million in single family first
mortgage loans located in southern Indiana and a $1.8 million equipment lease
financing loan.
Total deposits at September 30, 1997 increased by $13.3 million or 22.10%, as
deposit receipts of $111.0 million and interest credited of $1.7 million
exceeded withdrawal activity of $99.3 million. This deposit gain was primarily
attributable to a special rate 11 month, 17 month and 21 month certificate of
deposit program.
Borrowed funds, which consist of FHLB of Indianapolis advances, increased $4.0
million to $13.5 million at September 30, 1997. The increase in borrowed funds
was utilized to fund loan production during the period. The Company anticipated
repaying $1.5 million of advances in October, 1997.
Stockholders' equity decreased $759,000 to $14.4 million at September 30, 1997
from $15.2 million at December 31, 1996. This decrease was primarily due to
stock repurchase of $1.5 million and the declaration of dividends on common
stock of $167,000, which was offset by net income of $770,000, an increase of
$25,000 in the unrealized gain on securities available for sale and normal
amortization of RRP and ESOP benefits of $112,000.
<PAGE>
Results of Operations
The Company's results of operations depend primarily upon the level of net
interest income, which is the difference between the interest income earned on
its interest-earning assets such as loans and investments, and the costs of the
Company's interest-bearing liabilities, primarily deposits and borrowings. Net
interest income depends upon the volume of interest-earning assets and
interest-bearing liabilities and the interest rate earned or paid on them,
respectively. Results of operations are also dependent upon the level of the
Company's non-interest income, including fee income and service charges, and
affected by the level of its non-interest expenses, including its general and
administrative expenses.
Comparison of Operating Results for the Quarters
Ended September 30, 1997 and 1996.
Net Income. The Company's net income for the three months ended September 30,
1997 increased $302,000 to $290,000 as compared to $12,000 loss for the same
period in 1996. This increase was due primarily to an increase in net interest
income of $33,000, and an increase in non-interest income of $188,000 a decrease
in the non-interest expense of $316,000, offset by an increase in loan loss
provision of $15,000, and an increase in income taxes of $220,000.
Interest Income. Total interest income increased $311,000 or 20.2%, for the
three months ended September 30, 1997 compared to the prior year's quarter. This
increase is chiefly due to the higher volume of interest-earning assets of $13.2
million. This higher volume is due mostly to a higher volume of loans receivable
which reflects the Company's aggressive lending efforts. During the quarter
ended September 30, 1997, the average yield on interest-earning assets increased
to 8.03% from 7.81% during the prior year's quarter. The increase in yield on
average interest-earning assets was due primarily to a combination of a greater
proportion of higher yielding assets and current market interest rates.
Interest Expense. Total interest expense increased $278,000 or 38% for the three
months ended September 30, 1997 compared to the prior year's quarter. The
increase was due primarily to a higher volume of both deposits and borrowings
and a .37% increase in the average rate paid on deposits and borrowings.
Provision for Loan Losses. The determination of the allowance for loan losses
involves material estimates that are susceptible to significant change in the
near term. The allowance for loan losses is maintained at a level deemed
adequate to provide for losses through charges to operating expense. The
allowance is based upon past loss experience and other factors which, in
management's judgment, deserve current recognition in estimating losses. Such
other factors considered by management include growth and composition of the
loan portfolio, the relationship of the allowance for losses to outstanding
loans, and economic conditions.
A provision for loan losses of $15,000 was recorded during the three months
ended September 30, 1997 while no provision was recorded in the comparable 1996
period. The increase in the provision for losses on loans was due to the
continuing growth in loans receivables. The Bank will continue to review its
allowance for loan losses and make future provisions as economic and regulatory
conditions dictate. Although the Bank maintains its allowance for loan losses at
a level that it considers to be adequate to provide for losses, there can be no
assurance that future losses will not exceed estimated amounts or that
additional provisions for loan losses will not be required in future periods.
<PAGE>
Non-Interest Income. The Company's non-interest income increased $188,000 to
$346,000 for the quarter ended September 30, 1997 compared to $158,000 for the
same quarter a year ago. The increase was due primarily from gains on the sale
of investment securities held for trade of $22,000, an increase in unrealized
gain on the Company's trading portfolio of $152,000, an increase of $19,000 in
commission income from the sale of various financial products by the Bank's
wholly owned subsidiary, NIFCO, Inc. and a $30,000 increase in deposit related
fees due in part to an increase in ATM usage fees, offset by a $47,000 decrease
from gain on sale of investment securities available for sale.
Non-Interest Expense. The Company's non-interest expense decreased $316,000 to
$695,000 for the quarter ended September 30, 1997 compared to $1.0 million for
the same quarter a year ago. The decrease was primarily the result of a $390,000
charge, reflected in the 1996 period, for the special insurance assessment
imposed by the FDIC to recapitalize the Savings Association Insurance Fund. As a
result of the recapitalization of the SAIF, quarterly insurance premiums
decreased by $71,000 as compared to the prior year period. This decrease in cost
was partially offset by an increase in staffing costs of $59,000 due to normal
salary and benefit increases and the expense recognition of the ESOP and RRP,
and $32,000 in advertising costs associated with the marketing of the special
certificate of deposit program and loan solicitations.
Provision for Income Taxes. The provision for income taxes increased $220,000 to
$185,000 for the three months ended September 30, 1997 as compared to a tax
benefit of $35,000 in the prior year quarter. This increase was attributable to
pre-tax income in the 1997 quarter as compared to a pre-tax loss in the 1996
quarter.
Comparison of Operating Results for the Nine Months
Ended September 30, 1997 and 1996
Net Income. The Company's net income for the nine months ended September 30,
1997 was $770,000 as compared to $269,000 for the same period in 1996 or an
increase of $502,000. This increase was due primarily to an increase in net
interest income of $342,000, an increase in non-interest income of $408,000 and
a decrease in non-interest expense of $163,000, offset by an increase in the
loan loss provision of $46,000 and an increase in income taxes of $365,000.
Interest Income. Total interest income for the nine month period ended September
30, 1997 increased $931,000, or 21.3%, as compared to the prior year period. The
increase in interest income was primarily due to growth in interest- earning
assets, mainly loans receivable, since the third quarter of 1996. Due to a high
volume of loan originations during the last twelve months, the average balance
of loans receivable was $12.8 million higher during the first nine months of
1997 as compared to the prior period in 1996. This increase in the balance of
loans receivable caused interest income to increase by $834,000. Overall,
average interest-earning assets in the first nine months of 1997 were $15.2
million higher than the first nine months of 1996. Increases in the remaining
components of interest-earning assets helped fuel the increased interest income,
but to a much lesser extent. The increase in the average balance of
mortgage-backed securities and investment securities was $696,000 and $2.4
million respectively while the decrease in the average balance of
interest-bearing deposits was $ 767,000 between the two periods. The primary
funding for the growth in interest-earning assets came from increases in the
interest-bearing liabilities. The volume changes in interest-earning assets
resulted in substantially all of the increase in total interest income. During
the nine months ended September 30, 1997, the average yield on interest-earning
assets increased to 7.93% from 7.88% during the nine months ended September 30,
1996.
<PAGE>
Interest Expense. Total interest expense for the nine month period ended
September 30, 1997 increased $589,000, or 27.1%, as compared to the prior year
period. The average balance of interest-bearing liabilities, primarily borrowed
funds used to fund the Bank's loan originations, was $14.0 million higher during
the first nine months of 1997, to $78.4 million, as compared to the prior year
period. In addition, the average balance of deposit accounts increased by $4.9
million during the two periods as several new certificate promotions accounted
for the increase. The volume changes in interest-bearing liabilities resulted in
substantially all of the increase in total interest expense. The average cost of
interest-bearing liabilities increased by 19 basis points to 4.70% for the first
nine months of 1997 as compared to 4.51% for the 1996 period. The increase in
the average cost of funds was due primarily to a higher proportion of borrowed
funds to total interest-bearing liabilities and its effect on total interest
expense was minimal.
Provision for Loan Losses. A provision for loan losses of $46,000 was recorded
during the nine months ended September 30, 1997 while no provision was recorded
in the comparable 1996 period. Management believes that the allowance for loan
losses of $388,000 is adequate given the local economic conditions and the
Bank's loan portfolio. The Bank will continue to review its allowance for loan
losses and make future provisions as economic and regulatory conditions dictate.
Although the Bank maintains its allowance for loan losses at a level that it
considers to be adequate to provide for losses, there can be no assurance that
future losses will not exceed estimated amounts or that additional provisions
for loan losses will not be required in future periods.
Non-Interest Income. The Company's non-interest income was $779,000 for the nine
months ended September 30, 1997 compared to $371,000 for the same period a year
ago. The increase was due primarily from gains on the sale of investment
securities held for trade of $36,000, an increase in unrealized gain on the
Company's trading portfolio of $318,000, and a $53,000 increase in deposit
related fees due to general increase in many service fee categories, offset by a
$30,000 decrease from gain on sale of investment securities available for sale.
Non-Interest Expense. The Company's non-interest expense decreased $163,000 to
$2.0 million for the nine months ended September 30, 1997 compared to $2.2
million for the same period a year ago. The decrease was primarily the result of
a $390,000 charge, reflected in the 1996 period, for the special insurance
assessment imposed by the FDIC to recapitalize the Savings Association Insurance
Fund. As a result of the recapitalization of the SAIF, quarterly insurance
premiums decreased by $71,000 as compared to the prior year. The decrease in
costs was partially offset by increased staffing costs of $155,000 due to normal
salary and benefit increases and the expense recognition of the ESOP and RRP,
$50,000 of expenses relating to operations as a public company which did not
occur in the prior year's period, $39,000 in advertising to market special
certificate and loan products, and $35,000 of additional data processing costs
associated with the servicing and maintenance of the new ATM machines and
increased debit card activity.
Provision for Income Taxes. Tax expense for the nine months ended September 30,
1997 increased $365,000 to $485,000 compared to $120,000 for the comparable
period in 1996. Income taxes increased primarily as a result of increased income
before income taxes.
<PAGE>
Liquidity and Capital Resources
The Company's principal sources of funds are deposits, proceeds from principal
and interest payments on loans (including mortgage-backed securities), sales or
maturities of investment securities and income from operations. While scheduled
loan repayments and maturing investments are relatively predictable, deposit
flows and early loan repayments are more influenced by interest rates, floors
and caps on loan rates, general economic conditions and competition. The primary
business activity of the Company, that of making conventional mortgage loans on
residential housing, is likewise affected by economic conditions.
Federal regulations require the Bank to maintain minimum levels of liquid
assets. The required percentage has varied from time to time based upon economic
conditions and savings flows and is currently 5% of net withdrawable savings
deposits and borrowings payable on demand or in one year or less during the
preceding calendar month. Liquid assets for purposes of this ratio include cash,
certain time deposits, U.S. Government, government agency and corporate
securities and other obligations generally having remaining maturities of less
than five years. The Bank has historically maintained its liquidity ratio for
regulatory purposes at levels in excess of those required. At September 30,
1997, the Bank's liquidity ratio for regulatory purposes was 21.13%.
The Company's most liquid assets are cash and cash equivalents, which consist of
interest-bearing deposits and short-term highly liquid investments with original
maturities of less than three months that are readily convertible to known
amounts of cash. The level of these assets is dependent on the Company's
operating, financing and investing activities during any given period. At
September 30, 1997 and December 31, 1996 cash and cash equivalents totaled $11.2
million and $2.6 million respectively.
Liquidity management for the Company is both a daily and long-term function of
the Company's management strategy. Excess funds are generally invested in
short-term investments, such as overnight deposits. If the Company requires
funds beyond its ability to generate them internally, additional funds are
available through FHLB advances.
The Company anticipates that it will have sufficient funds available to meet
current commitments. At September 30, 1997 the Company has outstanding loan
commitments totaling $40,000 and unused lines of credit granted totaling $4.3
million.
Federally insured savings associations, such as the Bank, 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 September 30, 1997, the Bank had core capital equal to $9.2 million, or 9.15%
of adjusted total assets which was $6.2 million above the minimum leverage ratio
requirement of 3% in effect on that date. The Bank had total capital of $9.6
million (including $9.2 million in core capital and $400,000 in qualifying
supplementary capital) and risk-weighted assets of $52.9 million; or total
risk-based capital of 18.1% of risk-weighted assets at September 30, 1997. This
amount was $5.4 million above the 8% requirement in effect on that date.
<PAGE>
Non-Performing Assets
The following table sets forth the amounts and categories of
non-performing assets in the Company's portfolio. Loans are reviewed monthly and
any loan whose collectibility is doubtful is placed on non-accrual status. Loans
are placed on non-accrual status when principal and interest is 90 days or more
past due, unless, in the judgement of management, the loan is well
collateralized and in the process of collection. Interest accrued and unpaid at
the time a loan is placed on non-accrual status is charged against interest
income. Subsequent payments are either applied to the outstanding principal
balance or recorded as interest income, depending on the assessment of the
ultimate collectibility of the loan. Restructured loans include troubled debt
restructuring (which involved forgiving a portion of interest or principal on
any loans or making loans at a rate materially less than the market rate). At
September 30, 1997, the Company had no restructured loans.
<TABLE>
<CAPTION>
September 30 December 31,
1997 1996
---- ----
<S> <C> <C>
Non- accruing loans:
One to four family ............. 194 302
Multi- family .................. -- --
Non- residential ............... -- --
Construction ................... -- --
Consumer ....................... 8 3
---- ----
Total ............................... 202 305
---- ----
Foreclosed assets:
One to four family ............. 126 --
Multi-family ................... -- --
Non-residential ................ -- --
Construction ................... -- --
Consumer ....................... -- --
---- ----
Total ............................... 126 --
---- ----
Total non- performing assets ........ 328 305
==== ====
Total as a percentage of total assets 0.32% 0.35%
==== ====
</TABLE>
For the nine months period ended September 30, 1997, gross interest income which
would have been recorded had the non-accruing loans been current in accordance
with their original terms amounted to $5,000.
In addition to the non-performing assets set forth in the table above, as of
September 30, 1997, there were no loans with respect to which known information
about the possible credit problems of the borrowers or the cash flows of the
security properties have caused management to have concerns as to the ability of
the borrowers to comply with present loan repayment terms and which may result
in the future inclusion of such items in the non- performing asset categories.
<PAGE>
Management has considered the Company's non-performing and "of concern" assets
in establishing its allowance for loan losses.
Recent Developments
The Company declared a cash dividend of $.07 per share, payable on November 28,
1997 to shareholders of record on November 14, 1997.
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
From time to time, the Bank is a party to legal proceedings in
the ordinary course of business, wherein it enforces its security interest. The
Company and the Bank are not engaged in any legal proceedings of a material
nature at the present time.
Item 2. CHANGES IN SECURITIES
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Computation of earnings per share (Exhibit 11 filed
herewith)
(b) Financial Data Schedule (Exhibit 27 filed herewith)
(c) No reports on Form 8-K were filed this quarter
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
AMB FINANCIAL CORP.
Registrant
DATE: October 29, 1997
BY: /s/Clement B. Knapp, Jr.
------------------------
Clement B. Knapp, Jr.
President and Chief Executive Officer
(Duly Authorized Representative)
BY: /s/Daniel T. Poludniak
-----------------------
Daniel T. Poludniak
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer
<PAGE>
INDEX TO EXHIBITS
Exhibit No.
11 Statement re: Computation of Earnings Per Share
27 Financial Data Schedule
<TABLE>
<CAPTION>
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
Three Months Nine Months
Ended Ended
September 30, September 30,
1997 1997
----------- -----------
<S> <C> <C>
Net Income .................................... $ 290,485 $ 770,266
=========== ===========
Weighted average shares outstanding ........... 963,798 1,006,123
Reduction for common shares not yet
released by Employees Stock Ownership Plan (76,441) (80,937)
Common stock equivalents due to dilutive
effect of stock options .................. 14,286 9,911
----------- -----------
Total weighted average common shares and
equivalents outstanding .................. 901,643 935,097
=========== ===========
Primary earning per share ..................... $ 0.32 $ 0.82
=========== ===========
Total weighted average common ................. 901,643 935,097
shares and equivalents outstanding
for primary computation
Additional dilutive shares using the end
of period market value versus the
average market value when applying the
treasury stock method .................... 4,122* 8,497
----------- -----------
Total weighted average common shares and
equivalents outstanding for fully diluted
computation .............................. 905,765 943,594
=========== ===========
Fully diluted earnings per share ............. $ 0.32 $ 0.82
=========== ===========
</TABLE>
* Note: If the average share price is greater than the ending price, use average
price for both primary and fully diluted calculation.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This legend contains summary information extracted from the Form 10-Q and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,691,839
<INT-BEARING-DEPOSITS> 8,541,368
<FED-FUNDS-SOLD> 1,650,000
<TRADING-ASSETS> 2,017,005
<INVESTMENTS-HELD-FOR-SALE> 11,844,286
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 75,537,610
<ALLOWANCE> 387,994
<TOTAL-ASSETS> 103,387,828
<DEPOSITS> 73,744,886
<SHORT-TERM> 13,500,000
<LIABILITIES-OTHER> 1,732,429
<LONG-TERM> 0
0
0
<COMMON> 11,241
<OTHER-SE> 14,399,272
<TOTAL-LIABILITIES-AND-EQUITY> 103,387,828
<INTEREST-LOAN> 4,437,100
<INTEREST-INVEST> 859,632
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 5,296,732
<INTEREST-DEPOSIT> 2,250,660
<INTEREST-EXPENSE> 2,762,668
<INTEREST-INCOME-NET> 2,534,064
<LOAN-LOSSES> 46,425
<SECURITIES-GAINS> 395,438
<EXPENSE-OTHER> 2,010,774
<INCOME-PRETAX> 1,255,626
<INCOME-PRE-EXTRAORDINARY> 1,255,626
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 770,266
<EPS-PRIMARY> 0.82
<EPS-DILUTED> 0.82
<YIELD-ACTUAL> 3.80
<LOANS-NON> 202,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 354,631
<CHARGE-OFFS> 28,551
<RECOVERIES> 15,489
<ALLOWANCE-CLOSE> 387,994
<ALLOWANCE-DOMESTIC> 387,994
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
