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 June 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.
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(Exact name of registrant as specified in its charter)
Delaware 35-1903582
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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
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(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 July 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
June 30, 1997 (Unaudited) and December 31, 1996
Consolidated Statements of Earnings for the three
and six months ended June 30, 1997 and 1996
(unaudited)
Consolidated Statements of Cash Flows for the
six months ended June 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>
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
AMB FINANCIAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Financial Condition
June 30, December 31,
1997 1996
----------- -----------
unaudited
<S> <C> <C>
Assets
Cash and amounts due from depository institutions ........... 2,181,063 1,473,962
Interest-bearing deposits ................................... 4,255,653 1,093,405
----------- -----------
Total cash and cash equivalents ........................ 6,436,716 2,567,367
Investment securities, available for sale, at fair value .... 8,637,062 8,938,937
Investment securities held for trade ........................ 1,310,453 539,500
Mortgage backed securities, available for sale, at fair value 3,826,685 4,018,835
Loans receivable (net of allowance for loan losses:
$379,235 at June 30, 1997 and
$354,631 at December 31, 1996) ......................... 70,889,530 67,365,632
Real Estate Owned ........................................... 98,948 --
Stock in Federal Home Loan Bank of Indianapolis ............. 725,000 545,600
Accrued interest receivable ................................. 461,823 452,955
Office properties and equipment- net ........................ 519,233 510,603
Prepaid expenses and other assets ........................... 1,273,446 1,162,631
----------- -----------
Total assets ........................................... 94,178,896 86,102,060
=========== ===========
Liabilities and Stockholders' Equity
Liabilities
Deposits .................................................... 65,483,006 60,410,997
Borrowed money .............................................. 13,500,000 9,500,000
Advance payments by borrowers for taxes
and insurance .......................................... 360,120 312,213
Other liabilities ........................................... 748,593 708,993
----------- -----------
Total liabilities ...................................... 80,091,719 70,932,203
----------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMB FINANCIAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Financial Condition (continued)
June 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 June 30, 1997 and 1,067,919 shares outstanding at
December 31, 1996....................................... 11,241 11,241
Additional paid- in capital ................................. 10,673,046 10,657,746
Retained earnings, substantially restricted ................. 6,928,750 6,564,203
Unrealized gain on securities available for sale,
net of income taxes .................................... 8,300 30,386
Treasury stock at cost (160,327 and 56,206 shares at
June 30, 1997 and December 31, 1996..................... (2,223,051) (724,717)
Common stock acquired by Employee Stock Ownership Plan .... (809,370) (809,370)
Common stock awarded by Recognition and Retention Plan ...... (501,739) (559,632)
----------- -----------
Total stockholders' equity ............................. 14,087,177 15,169,857
----------- -----------
Total liabilities and stockholders' equity .................. 94,178,896 86,102,060
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMB FINANCIAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Earnings
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
--------- --------- --------- ---------
1997 1996 1997 1996
---- ---- ---- ----
unaudited unaudited unaudited unaudited
<S> <C> <C> <C> <C>
Interest income
Loans ............................... 1,469,695 1,198,798 2,892,086 2,344,408
Mortgage-backed securities .......... 66,315 63,395 134,301 89,403
Investment securities ............... 171,063 138,641 330,580 249,371
Interest-bearing deposits ........... 36,791 83,974 67,969 123,750
Dividends on FHLB stock ............. 12,431 10,310 22,992 21,162
--------- --------- --------- ---------
Total interest income .......... 1,756,295 1,495,118 3,447,928 2,828,094
--------- --------- --------- ---------
Interest expense
Deposits ............................ 739,591 657,419 1,440,123 1,353,556
Borrowings .......................... 176,368 42,498 312,734 88,622
--------- --------- --------- ---------
Total interest expense ......... 915,959 699,917 1,752,857 1,442,178
--------- --------- --------- ---------
Net interest income before
provision for loan losses .... 840,336 795,201 1,695,071 1,385,916
Provision for loan losses ................ 26,270 -- 31,425 --
--------- --------- --------- ---------
Net interest income after
provision for loan losses .... 814,066 795,201 1,663,646 1,385,916
--------- --------- --------- ---------
Non-interest income:
Loan fees and service charges ....... 23,386 29,797 45,274 49,459
Commission income ................... 32,399 15,339 42,285 41,197
Deposit related fees ................ 64,622 39,029 103,941 80,367
Gain on sale of investment securities
available for sale .................. 17,524 -- 17,524 --
Gain on sale of investment
secutities held for trade .......... -- -- 13,490 --
Unrealized gain on investment
securites held for trade ........... 117,811 -- 165,814 --
Other income ........................ 17,968 16,897 43,943 42,077
--------- --------- --------- ---------
Total non-interest income ...... 273,710 101,062 432,271 213,100
--------- --------- --------- ---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMB FINANCIAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Earnings
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
--------- --------- --------- ---------
1997 1996 1997 1996
---- ---- ---- ----
unaudited unaudited unaudited unaudited
<S> <C> <C> <C> <C>
Non-interest expense:
Staffing costs ...................... 318,213 264,278 617,404 521,521
Advertising ......................... 27,502 23,939 52,059 44,472
Occupancy and equipment expense ..... 90,258 85,792 178,054 169,371
Data processing ..................... 90,672 72,681 172,362 140,661
Federal deposit insurance premiums .. 9,861 34,155 20,284 67,918
Other operating expenses ............ 149,303 109,216 275,433 219,228
--------- --------- --------- ---------
Total non-interest expense ..... 685,809 590,061 1,315,596 1,163,171
--------- --------- --------- ---------
Net income before income taxes ........... 401,967 306,202 780,321 435,845
Provision for federal and state
income taxes ........................... 156,733 111,381 300,540 155,201
--------- --------- --------- ---------
Net income ..................... 245,234 194,821 479,781 280,644
========= ========= ========= =========
Earnings per share- primary .............. $ 0.27 $ 0.19 $ 0.50 $ 0.27
Earnings per share- fully diluted ........ $ 0.27 $ 0.19 $ 0.50 $ 0.27
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMB FINANCIAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six Months Ending Six Months Ending
June 30, June 30,
1997 1996
------------ ------------
unaudited unaudited
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................... $ 479,781 280,644
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation .......................................... 76,466 70,585
Amortization of premiums and discounts on
investment and mortgage-backed securities - net .... 493 1,478
Amortization of cost of stock benefit plans ............ 57,893 --
Increase in deferred compensation ..................... 39,936 34,650
Provision for loan losses ............................. 31,425 --
Gain on sale of investment securties available for sale (17,524) --
Gain on sale of trading account securities ............ (13,490) --
Unrealized gain on sale of trading account securties .. (165,814) --
Purchase of trading account securites ................. (703,649) --
Proceeds from sales of trading account securities ..... 112,000 --
Increase in deferred income on loans ................... 2,765 4,248
Increase in current and deferred federal
income tax .......................................... 96,223 2,962
Increase in accrued interest receivable ............... (8,868) (89,309)
Increase (decrease) in accrued interest payable ....... 24,221 (1,924)
Change in prepaid and accrued items, net .............. (214,820) (158,864)
------------ ------------
Net cash provided by (for) operating activities ............ (202,962) 144,470
------------ ------------
Cash flows from investing activities:
Proceeds from maturities of investment securities ..... 750,000 1,000,000
Proceeds from sale of investment securities ........... 3,514,689 --
Purchase of investment securities ..................... (3,990,899) (3,030,232)
Proceeds from repayments of mortgage-backed
securities .......................................... 200,455 182,715
Purchase of mortgage-backed securities ................ -- (3,034,419)
Purchase of Federal Home Loan Bank stock .............. (179,400) --
Purchase of loans ..................................... (1,446,535) --
Disbursements for loans ............................... (10,974,740) (11,395,000)
Loan repayments ....................................... 8,777,489 6,858,498
Property and equipment expenditures ................... (85,096) (33,376)
------------ ------------
Net cash provided by (for) investing activities ............ (3,434,037) (9,451,814)
------------ ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMB FINANCIAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(continued)
Six Months Ending Six Months Ending
June 30, June 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 .............................. 70,787,479 58,685,770
Deposit account withdrawals ........................... (66,927,323) (59,421,458)
Interest credited to deposit accounts ................. 1,211,853 1,136,417
Proceeds from borrowed money .......................... 5,000,000 --
Repayment of borrowed money ........................... (1,000,000) (1,000,000)
Increase in advance payments by borrowers
for taxes and insurance ............................... 47,907 409,666
Payment of dividends ................................... (115,234) --
Purchase of treasury stock ............................. (1,498,334) --
------------ ------------
Net cash provided by financing activities .................. 7,506,348 9,569,202
------------ ------------
Net change in cash and cash equivalents .................... 3,869,349 261,858
Cash and cash equivalents at beginning of period ........... 2,567,367 4,036,817
------------ ------------
Cash and cash equivalents at end of period ................. $ 6,436,716 4,298,675
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest .............................................. $ 1,728,636 1,444,102
Income taxes .......................................... 180,409 170,559
Non-cash investing activities:
Transfer of loans to real estate owned ................... 92,519 --
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
AMB Financial Corp.
and Subsidiaries
Notes to Consolidated Financial Statements
1. Statement of Information Furnished
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Form 10-Q instructions and Article 10 of Regulation
S-X, and in the opinion of management contains all adjustments (all of which are
normal and recurring in nature) necessary to present fairly the financial
position as of June 30, 1997, the results of operations for the three and six
months ended June 30, 1997 and 1996 and cash flows for the six months ended June
30, 1997 and 1996. These results have been determined on the basis of generally
accepted accounting principles. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The attached consolidated statements are those of AMB Financial Corp. (the
"Company") and its consolidated subsidiaries American Savings, FSB (the "Bank");
its wholly owned subsidiary NIFCO, Inc.; and its wholly owned subsidiary Ridge
Management, Inc. The results of operations for the three and six month periods
ended June 30, 1997 are not necessarily indicative of the results to be expected
for the full year.
2. Mutual to Stock Conversion
In December 1995, the Banks Board of Directors approved a Plan of
Conversion (the "Conversion"), providing for the Banks 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 six month periods ended June 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 operation.
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 agreement, dollar-roll, 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
SFAS No. 128 ("SFAS 128"), "Earnings Per Share". This statement is intended to
simplify the computation of earnings per share ("EPS") by replacing the
presentation of primary EPS with a presentation of basic EPS. Basic EPS does not
include potential dilution and is computed by dividing income available to
common stockholders by an average number of common shares outstanding.
Diluted EPS reflects the potential dilution of securities that could
share in the earnings of a company, similar to the fully diluted EPS currently
used. The statement requires dual presentation of basic and diluted EPS by
companies with complex capital structures. SFAS 128 is effective for financial
statements issued for periods ending after December 15, 1997. The Company does
not anticipate that this statement will have an impact on its consolidated
financial condition or results of operations.
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
<PAGE>
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.
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
June 30, 1997 compared to December 31, 1996.
Total assets of the Company increased $8.1 million or 9.4% to $94.2 million at
June 30, 1997 from $86.1 million at December 31, 1996. This increase primarily
resulted from increases in cash and equivalents of $3.9 million, and loans
receivable of $3.5 million, which were funded by an increase in deposits of $5.1
million and borrowed funds of $4.0 million.
At June 30, 1997, cash and cash equivalents increased by $3.9 million as excess
funds received from deposit growth and borrowings during the second quarter were
retained in anticipation of the funding of commitments on loans including the
purchase of $1.9 million in single family first mortgages from a Midwest
financial institution.
Loans receivable increased to $70.9 million at June 30, 1997, a $3.5 million or
5.2% increase, as new loan originations of $11.0 million and loan purchases of
$1.4 million exceeded loan repayments of $8.8 million. Loan purchases in the
second quarter include a $500,000 loan participation on a nursing home located
in Muncie, Indiana and a $203,000 equipment lease financing loan.
Total deposits at June 30, 1997 increased by $5.1 million to $65.5 million, or
8.4% as deposit receipts of $70.8 million and interest credited of $1.2 million
exceeded withdrawal activity of $66.9 million. This deposit gain is attributable
to a special rate 17 month and 21 month certificate of deposit program. FHLB
advances increased by $4.0 million to fund loan originations and upcoming loan
commitments.
Stockholders' equity decreased $1.1 million to $14.1 million at June 30, 1997
from $15.2 million at December 31, 1996. This decrease was primarily due to
stock repurchase of $1.5 million, payment of dividends on common stock of
$115,000 and a decrease in net unrealized gain on securities available for sale
of $22,000 which was offset by net income of $480,000 and normal amortization of
RRP and ESOP benefits of $73,000.
<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 June 30, 1997 and 1996.
Net Income. The Company's net income for the three months ended June 30, 1997
increased $50,000 to $245,000 as compared to $195,000 for the same period in
1996. This increase was due primarily to an increase in net interest income of
$45,000, and an increase in non-interest income of $173,000 offset by an
increase in the loan loss provision of $26,000, an increase in non-interest
expense of $96,000, and an increase in income taxes of $46,000.
Interest Income. Total interest income increased $261,000 or 17.5%, for the
three months ended June 30, 1997 compared to the prior year's quarter. This
increase is chiefly due to the higher volume of interest-earning assets of $15.0
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 June 30, 1997, the average yield on interest-earning assets increased to
8.00% from 7.89% 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 $216,000 or 31% for the three
months ended June 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 .23%
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 $26,000 was recorded during the three months
ended June 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 $173,000 to
$274,000 for the quarter ended June 30, 1997 compared to $101,000 for the same
quarter a year ago. The increase was due primarily from gains on the sale of
investment securities available for sale of $17,000 and an unrealized gain on
the Company's trading portfolio of $118,000, both of which did not occur in the
prior year's quarter, an increase of $17,000 in commission income from the sale
of various financial products by the Bank's wholly owned subsidiary, NIFCO, Inc.
and a $26,000 increase in deposit related fees due to general increases in many
service fee categories.
Non-Interest Expense. The Company's non-interest expense increased $96,000 to
$686,000 for the quarter ended June 30, 1997 compared to $590,000 for the same
quarter a year ago. The increase resulted primarily from increased staffing
costs of $54,000 due to normal salary and benefit increases and the expense
recognition of the ESOP and RRP, $26,000 of expenses relating to operations as a
public company which did not occur in the prior year's quarter, $18,000 of
additional data processing costs associated with the servicing and maintenance
of the new ATM machines and increased debit card activity and $14,000 in other
operating expenses resulting from increased usage of outside services and
growth. These increased costs were partially offset by a decrease of $24,000 in
federal deposit insurance premiums which was the result of legislation enacted
in September 1996 to recapitalize the Savings Association Insurance Fund. As a
result of this legislation, highly rated institutions, such as the Bank, have
begun paying substantially reduced deposit insurance premiums beginning January
1, 1997.
Provision for Income Taxes. Tax expense for the quarter ended June 30, 1997
increased $46,000 to $157,000 compared to $111,000 for the comparable quarter in
1996. Income taxes increased primarily as a result of increased income before
income taxes.
Comparison of Operating Results for the Six Months
Ended June 30, 1997 and 1996
Net Income. The Company's net income for the six months ended June 30, 1997 was
$480,000 as compared to $281,000 for the same period in 1996 or an increase of
$199,000. This increase was due primarily to an increase in net interest income
of $309,000, and an increase in non-interest income of $219,000 offset by an
increase in the loan loss provision of $31,000, an increase in non-interest
expense of $153,000, and an increase in income taxes of $145,000.
Interest Income. Total interest income for the six month period ended June 30,
1997 increased $620,000, or 22%, 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 second quarter of 1996. Due to high
volumes of loan originations in the second quarter of 1996 and the first half of
1997, the average balance of loans receivable was $12.6 million higher during
the first six months of 1997 as compared to the comparable period in 1996. This
increase in the balance of loans receivable caused interest income to increase
by $548,000. Overall, average interest-earning assets in the first half of 1997
were $14.7 million higher than the first half 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 $1.3 million
and $2.8 million respectively while the decrease in the average balance of
interest-bearing deposits was $2.1 million between the two periods. The primary
funding for the growth in interest-earning assets came from increases in the
<PAGE>
interest-bearing liabilities. The volume changes in interest-earning assets
resulted in a $605,000 increase in total interest income. During the six months
ended June 30, 1997, the average yield on interest-earning assets increased to
7.98% from 7.89% during the six months ended June 30, 1996. The increase in
yield on average interest-earning assets was due primarily to a higher
proportion of higher yielding investments and accounted for a $15,000 increase
in total interest income.
Interest Expense. Total interest expense for the six month period ended June 30,
1997 increased $311,000, or 22%, 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 $12.0 million higher during the first
six months of 1997, to $75.9 million, as compared to the prior year period. In
addition, the average balance of deposit accounts increased by $4.1 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 10 basis points to 4.62% for the first
half of 1997 as compared to 4.52% 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 $31,000 was recorded
during the six months ended June 30, 1997 while no provision was recorded in the
comparable 1996 period. Management believes that the allowance for loan losses
of $379,000 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 $432,000 for the six
months ended June 30, 1997 compared to $213,000 for the same period a year ago.
The increase was due primarily from gains on the sale of investment securities
available for sale and trading account securities of $17,000 and $13,000
respectively and an unrealized gain on the Company's trading portfolio of
$166,000, all of which did not occur in the prior year's quarter, and a $24,000
increase in deposit related fees due to general increase in many service fee
categories.
Non-Interest Expense. The Company's non-interest expense increased $152,000 to
$1.3 million for the six months ended June 30, 1997 compared to $1.2 million for
the same period a year ago. The increase resulted primarily from increased
staffing costs of $96,000 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,
and $32,000 of additional data processing costs associated with the servicing
and maintenance of the new ATM machines and increased debit card activity. These
increased costs were partially offset by a decrease of $48,000 in federal
deposit insurance premiums.
Provision for Income Taxes. Tax expense for the six months ended June 30, 1997
increased $145,000 to $300,000 compared to $155,000 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 June 30, 1997, the
Bank's liquidity ratio for regulatory purposes was 18.40%.
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 June
30, 1997 and December 31, 1996 cash and cash equivalents totaled $6.4 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 June 30, 1997 the Company has outstanding loan
commitments totaling $3.0 million 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 June 30, 1997, the Bank had core capital equal to $11.5 million, or 12.5% of
adjusted total assets which was $8.8 million above the minimum leverage ratio
requirement of 3% in effect on that date. The Bank had total capital of $11.9
million (including $11.5 million in core capital and $400,000 in qualifying
supplementary capital) and risk-weighted assets of $49.0 million; or total
risk-based capital of 24.4% of risk-weighted assets at June 30, 1997. This
amount was $8.0 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
June 30, 1997, the Company had no restructured loans.
<TABLE>
<CAPTION>
June 30, December 3,
1997 1996
---- ----
<S> <C> <C>
Non-accruing loans:
One to four family ........................ 659 302
Multi-family .............................. -- --
Non-residential ........................... -- --
Construction .............................. -- --
Consumer .................................. 9 3
---- ----
Total ......................................... 668 305
---- ----
Foreclosed assets:
One to four family.........................
Multi-family .............................. 99 --
Non-residential ........................... -- --
Construction .............................. -- --
Consumer .................................. -- --
---- ----
Total ......................................... 99 --
Total non-performing assets ................... 767 305
==== ====
Total as a percentage of total assets ......... 0.81% 0.35%
</TABLE>
For the six months period ended June 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 $14,000.
In addition to the non-performing assets set forth in the table above, as of
June 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 $.06 per share, payable on August 20,
1997 to shareholders of record on August 7, 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: July 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.
No.
11 Statement re: Computation of Earnings Per Share
27 Financial Data Schedule
EXHIBIT 11
<TABLE>
<CAPTION>
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
Three Months Six Months
Ended Ended
June 30, June 30,
1997 1997
----------- -----------
<S> <C> <C>
Net Income ...................................... $ 245,234 $ 479,781
=========== ===========
Weighted average shares outstanding ............. 987,797 1,027,637
Reduction for common shares not yet
released by Employees Stock Ownership Plan . (78,689) (80,937)
Common stock equivalents due to dilutive
effect of stock options .................... 9,949 7,518
----------- -----------
Total weighted average common shares and
equivelents outstanding .................... 919,057 954,218
=========== ===========
Pro- forma primary earning per share ............ $ 0.27 $ 0.50
=========== ===========
Total weighted average common ................... 919,057 954,218
shares and equivelents 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 ............................... -- * 1,414*
----------- -----------
Total weighted average common shares and
equivalents outstanding for fully diluted
computation ................................ 919,057 955,632
=========== ===========
Pro-forma fully diluted earnings per share ...... $ 0.27 $ 0.50
=========== ===========
* Note: If the average share price is greater than the ending price, use average
price for both primary and fully diluted calculation.
</TABLE>
<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,181,063
<INT-BEARING-DEPOSITS> 4,255,653
<FED-FUNDS-SOLD> 1,500,000
<TRADING-ASSETS> 1,310,453
<INVESTMENTS-HELD-FOR-SALE> 12,463,747
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 71,268,765
<ALLOWANCE> 379,235
<TOTAL-ASSETS> 94,178,896
<DEPOSITS> 65,483,006
<SHORT-TERM> 13,500,000
<LIABILITIES-OTHER> 1,108,713
<LONG-TERM> 0
11,241
0
<COMMON> 0
<OTHER-SE> 14,075,936
<TOTAL-LIABILITIES-AND-EQUITY> 94,178,896
<INTEREST-LOAN> 2,892,086
<INTEREST-INVEST> 555,842
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 3,447,928
<INTEREST-DEPOSIT> 1,440,123
<INTEREST-EXPENSE> 1,752,857
<INTEREST-INCOME-NET> 1,695,071
<LOAN-LOSSES> 31,425
<SECURITIES-GAINS> 196,828
<EXPENSE-OTHER> 1,315,596
<INCOME-PRETAX> 780,321
<INCOME-PRE-EXTRAORDINARY> 780,321
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 479,781
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.50
<YIELD-ACTUAL> 3.92
<LOANS-NON> 668,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 354,631
<CHARGE-OFFS> 16,821
<RECOVERIES> 10,000
<ALLOWANCE-CLOSE> 379,235
<ALLOWANCE-DOMESTIC> 379,235
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
