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, 1998
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
- --------------------------------------------------------------------------------
(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 July 30, 1998 there were 1,124,125 shares of the Registrant's common
stock issued and 915,609 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, 1998 (Unaudited) and December 31, 1997
Consolidated Statements of Earnings for the three
and six months ended June 30, 1998 and 1997
(unaudited)
Consolidated Statements of Changes in
Stockholders Equity, six months ended
June 30, 1998 (unaudited)
Consolidated Statements of Cash Flow for the
six months ended June 30, 1998 and 1997
(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 of 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
June 30, December 31,
1998 1997
----------- ----------
unaudited
<S> <C> <C>
Assets
Cash and amounts due from depository institutions ........... 3,102,630 2,510,527
Interest-bearing deposits ................................... 2,082,302 3,176,428
----------- ----------
Total cash and cash equivalents ........................ 5,184,932 5,686,955
Investment securities, available for sale, at fair value .... 6,451,090 8,213,614
Trading securities .......................................... 2,920,151 2,412,967
Mortgage backed securities, available for sale, at fair value 3,026,445 3,494,035
Loans receivable (net of allowance for loan losses:
$457,342 at June 30, 1998 and
$410,383 at December 31, 1997) ......................... 87,349,476 77,093,229
Investment in LTD Partnership ............................... 1,391,454 --
Real Estate Owned ........................................... -- 27,481
Stock in Federal Home Loan Bank of Indianapolis ............. 1,034,500 725,400
Accrued interest receivable ................................. 578,201 533,509
Office properties and equipment- net ........................ 459,345 471,730
Prepaid expenses and other assets ........................... 2,942,891 1,136,860
----------- ----------
Total assets ........................................... 111,338,485 99,795,780
=========== ==========
Liabilities and Stockholders' Equity
Liabilities
Deposits .................................................... 75,699,542 71,700,126
Borrowed money .............................................. 18,683,000 12,000,000
Notes Payable ............................................... 1,391,454 --
Advance payments by borrowers for taxes and insurance ....... 496,958 383,237
Other liabilities ........................................... 949,800 942,134
----------- ----------
Total liabilities ...................................... 97,220,754 85,025,497
----------- ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMB FINANCIAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(continued)
June 30, December 31,
1998 1997
----------- ----------
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 915,609 shares outstanding
at June 30, 1998 and 963,798 shares outstanding at ...... 11,241 11,241
December 31, 1997
Additional paid- in capital ................................. 10,751,368 10,717,068
Retained earnings, substantially restricted ................. 7,554,979 7,357,250
Accumulated other comprehensive income ...................... 74,296 71,061
Treasury stock, at cost (208,516 and 160,327 shares at
June 30, 1998 and December 31, 1997) ................... (3,168,760) (2,223,051)
Common stock acquired by Employee Stock Ownership Plan ...... (719,440) (719,440)
Common stock awarded by Recognition and Retention Plan ...... (385,953) (443,846)
----------- ----------
Total stockholders' equity ............................. 14,117,731 14,770,283
----------- ----------
Total liabilities and stockholders' equity .................. 111,338,485 99,795,780
=========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMB FINANCIAL CORP.
AND SUBIDIARIES
Consolidated Statements of Earnings
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
--------- ------- --------- ---------
unaudited unaudited unaudited unaudited
<S> <C> <C> <C> <C>
Interest income
Loans .................................. 1,708,971 1,469,695 3,359,690 2,892,086
Mortgage-backed securities ............. 51,679 66,315 109,246 134,301
Investment securities .................. 104,783 171,063 230,220 330,580
Interest-bearing deposits .............. 57,109 36,791 119,248 67,969
Dividends on FHLB stock ................ 17,425 12,431 32,836 22,992
--------- ------- --------- ---------
Total interest income ............. 1,939,967 1,756,295 3,851,240 3,447,928
--------- ------- --------- ---------
Interest expense
Deposits ............................... 861,508 739,591 1,699,326 1,440,123
Borrowings ............................. 244,543 176,368 447,119 312,734
--------- ------- --------- ---------
Total interest expense ............ 1,106,051 915,959 2,146,445 1,752,857
--------- ------- --------- ---------
Net interest income before
provision for loan losses........ 833,916 840,336 1,704,795 1,695,071
Provision for loan losses ................... 29,923 26,270 52,855 31,425
--------- ------- --------- ---------
Net interest income after
provision for loan losses........ 803,993 814,066 1,651,940 1,663,646
--------- ------- --------- ---------
Non-interest income:
Loan fees and service charges .......... 37,864 23,386 74,656 45,274
Commission income ...................... 13,225 32,399 18,105 42,285
Deposit related fees ................... 81,047 64,622 154,556 103,941
Gain on sale of investment
securities available for sale ......... 11,338 17,524 11,338 17,524
Gain on sale of trading securities ..... -- -- 24,086 13,490
Unrealized gain on trading
securities ............................ (71,435) 117,811 57,443 165,814
Gain (loss) on sale
of real estate owned .................. (1,697) -- (1,697) 1,828
Other income ........................... 29,490 17,968 49,458 42,115
--------- ------- --------- ---------
Total non-interest income ......... 99,832 273,710 387,945 432,271
--------- ------- --------- ---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMB FINANCIAL CORP.
AND SUBIDIARIES
Consolidated Statements of Earnings
(continued)
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
--------- ------- --------- ---------
unaudited unaudited unaudited unaudited
<S> <C> <C> <C> <C>
Non-interest expense:
Staffing costs ......................... 348,613 318,213 729,021 617,404
Advertising ............................ 19,576 27,502 42,906 52,059
Occupancy and equipment expense ........ 84,048 90,258 171,371 178,054
Data processing ........................ 90,427 90,672 180,991 172,362
Federal deposit insurance premiums ..... 11,123 9,861 22,712 20,284
Other operating expenses ............... 174,578 149,303 355,144 275,433
--------- ------- --------- ---------
Total non-interest expense ........ 728,365 685,809 1,502,145 1,315,596
--------- ------- --------- ---------
Net income before income taxes .............. 175,460 401,967 537,740 780,321
Provision for federal and state
income taxes .............................. 80,884 156,733 218,525 300,540
--------- ------- --------- ---------
Net income ........................ 94,576 245,234 319,215 479,781
========== ========== ========== ==========
Earnings per share- basic ................... $ 0.11 $ 0.27 $ 0.36 $ 0.50
Earnings per share- diluted ................. $ 0.11 $ 0.27 $ 0.35 $ 0.50
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
AMB FINANCIAL CORP.
AND SUBIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Accumulated Common Common
Additional Other Stock Stock
Common Paid-in Retained Comprehensive Treasury Acquired Awarded
Stock Capital Earnings Income Stock by ESOP by RRP Total
----- ------- -------- ------ ----- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 11,241 10,717,068 7,357,250 71,061 (2,223,051) (719,440) (443,846) 14,770,283
Comprehensive income:
Net income 319,215 319,215
Adjustment of securities
available for sale to fair
value, net of tax effect 3,235 3,235
------ ---------- --------- ------ ---------- -------- -------- ----------
Comprehensive income 0 0 319,215 3,235 0 0 0 322,450
Amortization of award of
RRP stock 57,893 57,893
ESOP compensation adjustment 34,300 34,300
Purchase of treasury stock (945,709) (945,709)
Dividends declared on
common stock (121,486) (121,486)
------ ---------- --------- ------ ---------- -------- -------- ----------
Balance at June 30, 1998 11,241 10,751,368 7,554,979 74,296 (3,168,760) (719,440) (385,953) 14,117,731
====== ========== ========= ====== ========== ======== ======== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMB FINANCIAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six Months Ended June 30,
------------------------------
1998 1997
------------ ---------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................... $ 319,215 479,781
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation ........................................... 75,585 76,466
Amortization of premiums and discounts on
investment and mortgage-backed securities - net...... 3,910 493
Amortization of cost of stock benefit plans ............ 57,893 57,893
Increase in deferred compensation ..................... 26,998 39,936
ESOP compensation ..................................... 34,300 17,010
Provision for loan losses ............................. 52,855 31,425
Gain on sale of investment securities ................. (11,338) (17,524)
Gain on sale of trading account securities ............ (24,086) (13,490)
Unrealized gain on trading account securities.......... (57,443) (165,814)
Purchase of trading account securites ................. (550,054) (703,649)
Proceeds from sales of trading account securities ..... 124,399 112,000
Increase (decrease) in deferred income on loans ....... (51,109) 2,765
Increase (decrease) in current and deferred
income taxes......................................... (160,996) 96,223
Increase in accrued interest receivable ............... (44,692) (8,868)
Increase in accrued interest payable .................. 38,317 24,221
Other, net ............................................ (162,359) (231,830)
------------ ---------
Net cash provided for operating activities ................. (328,605) (202,962)
------------ ---------
Cash flows from investing activities:
Proceeds from maturities of investment
securities .......................................... 2,375,000 750,000
Proceeds from sale of investment securities ........... 11,338 3,514,689
Purchase of investment securities ..................... (617,299) (3,990,899)
Proceeds from repayments of mortgage-backed
securities .......................................... 473,894 200,455
Purchase of Federal Home Loan Bank stock .............. (309,100) (179,400)
Purchase of life insurance policies ................... (1,515,000) --
Purchase of loans ..................................... (8,969,935) (1,446,535)
Loan disbursements .................................... (12,908,140) (10,974,740)
Loan repayments ....................................... 11,620,082 8,777,489
Property and equipment expenditures ................... (63,200) (85,096)
------------ ---------
Net cash provided for investing activities ................. (9,902,360) (3,434,037)
------------ ---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMB FINANCIAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(continued)
Six Months Ended June 30,
------------------------------
1998 1997
------------ ---------
(unaudited)
<S> <C> <C>
Cash flows from financing activities:
Deposit account receipts .............................. 71,133,861 70,787,479
Deposit account withdrawals ........................... (68,506,231) (66,927,323)
Interest credited to deposit accounts ................. 1,371,786 1,211,853
Proceeds from borrowed money .......................... 6,683,000 5,000,000
Repayment of borrowed money ........................... - (1,000,000)
Increase in advance payments by borrowers
for taxes and insurance .............................. 113,721 47,907
Payment of dividends .................................. (121,486) (115,234)
Purchase of treasury stock ............................ (945,709) (1,498,334)
------------ ---------
Net cash provided by financing activities .................. 9,728,942 7,506,348
------------ ---------
Net change in cash and cash equivalents .................... (502,023) 3,869,349
Cash and cash equivalents at beginning of period............ 5,686,955 2,567,367
------------ ---------
Cash and cash equivalents at end of period ................. $ 5,184,932 6,436,716
============ =========
Cash paid during the period for:
Interest .............................................. $ 2,108,128 1,728,636
Income taxes .......................................... 379,521 180,409
Non-cash investing activities:
Transfer of loans to real estate owned ................... - 92,519
</TABLE>
See notes to consolidated financial statements.
<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, 1998, the results of
operations for the three and six months ended June 30, 1998 and 1997 and
cash flows for the six months ended June 30, 1998 and 1997. These results
have been determined on the basis of generally accepted accounting
principles. The preparation of financial statements in conformity with
generally accepted 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 reported period. Actual results could differ from those
estimates. The attached consolidated statements are those of AMB Financial
Corp. (the "Holding Company") and its consolidated subsidiaries American
Savings, FSB (the "Bank"), the Bank's wholly owned subsidiary NIFCO, Inc.,
and the wholly owned subsidiary of NIFCO, Inc., Ridge Management, Inc. The
results of operations for the three and six month periods ended June 30,
1998 is not necessarily indicative of the results to be expected for the
full year.
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 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 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, 1998 and 1997 were determined by dividing net income for the periods by
the weighted average number of both basic and diluted shares of common
stock and common stock equivalents outstanding (see Exhibit 11 attached).
Stock options are regarded as common stock equivalents and are considered
in 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. Earnings per share data for the three
and six month period ended June 30, 1997 have been restated for comparative
purposes to reflect the implementation of Statement of Financial Accounting
Standards No. 128.
<PAGE>
4. Impact of New Accounting Standards
Employers' Disclosure about Pension and Other Employee Benefits.
In February 1998, the FASB issued Statement of Financial Accounting
Standards No. 132, "Employer's Disclosures about Pension and Other
Postretirement Benefits" ("SFAS No. 132"). SFAS No. 132 alters current
disclosure requirements regarding pensions and other postretirement
benefits in the financial statements of employers who sponsor such benefit
plans. The revised disclosure requirements are designed to provide
additional information to assist readers in evaluating future costs related
to such plans. Additionally, the revised disclosures are designed to
provide changes in the components of pension and benefits costs in addition
to the year end components of those factors in the resulting asset or
liability related to such plans. The statement is effective for fiscal year
beginning after December 15, 1997 with earlier application available. The
Company has not yet determined the impact of adopting this statement.
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, 1998 compared to December 31, 1997
Total assets of the Company increased $11.5 million, or 11.57% to
$111.3 million at June 30, 1998 compared to $99.8 million at December 31,
1997. This increase was primarily attributable to the Company's loan growth
which was funded by an increase in both deposits and borrowed funds.
Cash and cash equivalents totaled a combined $5.2 million at June
30, 1998, a decrease of $502,000 from the combined balance of $5.7 million
at December 31, 1997.
Investment securities available for sale decreased $1.8 million to
$6.5 million at June 30, 1998 as a result of proceeds from maturing U.S.
Treasury securities being utilized for lending purpose.
Loans receivable increased to $87.3 million at June 30, 1998, a
$10.3 million or 13.3% increase, as new loan originations of $12.9 million
and loan purchases of $9.0 million exceeded loan repayments of $11.6
million. Loan purchases during the first six months of 1998 were primarily
in one to four family residential first mortgage loans.
Total deposits at June 30, 1998 increased by $4.0 million or 5.58
%, as deposit receipts of $71.1 million and interest credited of $1.4
million exceeded withdrawal activity of $68.5 million. This deposit gain
was primarily attributable to a special rate 13 and 14 month certificate of
deposit program.
<PAGE>
Borrowed funds, which consist of FHLB of Indianapolis advances,
increased $6.7 million to $18.7 million at June 30, 1998. The increase in
borrowed funds was utilized to fund loan production during the period.
Stockholders' equity decreased $653,000 to $14.1 million at June
30, 1998 from $14.8 million at December 31, 1997. This decrease was
attributable to the purchase of treasury stock of $946,000, and the payment
of dividends on common stock of $121,000, which was offset by net income of
$319,000, an increase in net unrealized gain on securities available for
sale of $3,000, and normal amortization of RRP and ESOP benefits of
$92,000.
Results of Operations
The Company's results of operations depend primarily upon the level of net
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, 1998 and 1997
Net Income. The Company's net income for the three months ended June 30,
1998 decreased $150,000 to $95,000 as compared to $245,000 in the prior
year's quarter. This decrease was due to a decrease in non-interest income
of $174,000, a decrease in net interest income of $6,000, an increase in
non-interest expense of $42,000, and an increase in loan loss provision of
$4,000, offset by a decrease in income taxes of $76,000.
Interest Income. Total interest income increased $184,000 or 10.46%, for
the three months ended June 30, 1998 compared to the prior year's quarter.
This increase is chiefly due to the higher volume of interest-earning
assets of $12.8 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, 1998, the average yield on
interest-earning assets decreased to 7.71% from 7.94% during the prior
year's quarter. The decrease in yield on average interest-earning assets
was due primarily to reduced market interest rates.
Interest Expense. Total interest expense increased $190,000 or 20.75%, for
the three months ended June 30, 1998 compared to the prior year's quarter.
The increase was due primarily to an increase of $13.0 million in the
average deposits and borrowed money outstanding and, to a lesser extent, by
an increase of 16 basis points in the average cost of funds.
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
<PAGE>
expense. The allowance is based upon past loss experience and other factors
which, in management's judgement, 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 $30,000 was recorded during the three months
ended June 30, 1998 compared to $26,000 for the same quarter a year ago.
The increase in the provision for losses on loans was due to the continuing
growth in loans receivable. Non-performing loans at June 30, 1998 continue
to remain stable, as compared to December 31, 1997, and amounted to
$213,000 or .19% of net loans receivable. The allowance for loan losses at
June 30, 1998 of $457,000 represents 215% of non-performing loans.
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 adequate to provide for losses, there can be no assurance that
future losses will not exceed estimated amounts of that additional
provisions for loan losses will not be required in future periods.
Non-Interest Income. The Company's non-interest income decreased $174,000
to $100,000 for the quarter ended June 30, 1998 compared to $274,000 for
the same quarter a year ago. The decrease was due primarily as a result of
decreases in unrealized gains on the Company's trading portfolio of
$189,000 reflecting a general market downturn in banking and thrift equity
security prices which comprise the Company's trading portfolio, a decease
of $19,000 in commissions from the sale of various financial products by
the Bank's wholly owned subsidiary Nifco, and a $6,000 decrease in gains on
sale of securities available for sale, offset by an increase of $15,000 in
loan fees and service charges, a $16,000 increase in deposit related fees
due to increases in ATM usage fees, and $11, 000 increase in other income.
Non-Interest Expense. The Company's non-interest expense increased $42,000
to $728,000 for the quarter ended June 30, 1998 compared to $686,000 for
the same quarter a year ago. The increase was primarily the result of
increased staffing costs of $30,000 due to normal salary and benefit
increases, and other operating expenses of $25,000 due to expanded product
offerings and the overall growth of the Company's operations offset by a
decrease in advertising costs of $8,000 and a decrease in occupancy and
equipment expense of $6,000.
Provision for Income Taxes. The provision for income taxes decreased
$76,000 to $81,000 for the three months ended June 30, 1998 as compared to
the prior year quarter due to a decrease in pre-tax income.
Comparison of Operating Results for the Six Months
Ended June 30, 1998 and 1997
Net Income. The Company's net income for the six months ended June 30, 1998
decreased $161,000 to $319,000 as compared to $480,000 in the prior period.
This decrease was due to an increase in non-interest expense of $186,000, a
decrease in non-interest income of $45,000, and an increase in loan loss
provision of $22,000, offset by an increase in net interest income of
$10,000 and a decrease in income taxes of $82,000.
<PAGE>
Interest Income. Total interest income increased $403,000 or 11.70%, for
the six months ended June 30, 1998 compared to the prior year. This
increase is chiefly due to the higher volume of interest-earning assets of
$12.5 million. This higher volume is due mostly to a higher volume of loans
receivable which reflects the Company's aggressive lending efforts. During
the six months ended June 30, 1998, the average yield on interest-earning
assets decreased to 7.75% from 7.93% during the prior year's period. The
decrease in yield on average interest-earning assets was due primarily to
current market interest rates.
Interest Expense. Total interest expense increased $393,000 or 22.45% for
the six months ended June 30, 1998 compared to the prior year's period. The
increase was due primarily to an increase of $13.5 million in the average
deposits and borrowed money outstanding and, to a lesser extent, by an
increase of 18 basis points in the average cost of funds.
Provision of 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 judgement, 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 $53,000 was recorded during the six months
ended June 30, 1998 compared to $31,000 for the same period a year ago. The
increase in the provision for losses was due to the continuing growth in
loans receivables. The Bank will continue to review its allowance for loan
losses and make future 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 the future periods.
Non-Interest Income. The Company's non-interest income decreased $45,000 to
$388,000 for the six months ended June 30, 1998 compared to $433,000 for
the same period a year ago. The decrease was primarily due to a decrease of
$108,000 in unrealized gains on the Company's trading portfolio and a
decrease of $24,000 in commissions from the sale of various financial
products by the Bank's wholly owned subsidiary, NIFCO offset in part by an
increase in loan fees and service charges of $29,000, and an increase of
$51,000 in deposit related fees due in part to increases in ATM usage fees.
Non-Interest Expense. The Company's non-interest expense increased $186,000
to $1.5 million for the six months ended June 30, 1998 compared to $1.3
million for the same period a year ago. The increase was primarily the
result of increased staffing costs of $112,000 due to bonuses of $44,000,
normal salary and benefit increases of $49,000, and the expense recognition
of benefit plans of $19,000, and an increase in other operating expenses of
$80,000 due to the continuing growth of the Company's operations.
Provision for Income Taxes. The provision for income taxes decreased
$82,000 to $219,000 for the six months ended June 30, 1998 as compared to
the prior year period due to a decrease in pre-tax income.
<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, advances from
the FHLB of Indianapolis 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.
Current Office of Thrift Supervision regulations require the Bank to
maintain cash and eligible investments in an amount equal to at least 4% of
short term customer accounts and borrowings to assure its ability to meet
demands for withdrawals and repayment of short term borrowings. 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, 1998, the
Bank's liquidity ratio for regulatory purposes was 13.22%.
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 is
dependent on the Company's operating, financing and investing activities
during any given period. At June 30, 1998 and December 31, 1997 cash and
cash equivalents totaled $5.2 million and $5.7 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, 1998 the Company has outstanding loan
commitments totaling $329,000 and unused lines of credit granted totaling
$5.2 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 leverage ratio (or core capital) requirement
and a risk-based capital requirement applicable to such savings
associations. These capital requirements must be generally as stringent as
the comparable capital requirements for national banks. The OTS is also
authorized to impose capital requirements in excess of these standards on
individual associations on a case-by-case basis.
At June 30, 1998, the Bank had core capital equal to $9.9 million, or 9.21%
of adjusted total assets which was $5.6 million above the minimum leverage
ratio requirement of 4% in effect on that date. The Bank had total capital
of $10.3 million (including $9.9 million in core capital and $400,000 in
qualifying supplementary capital) and risk-weighted assets of $62.0 million
at June 30, 1998; or total risk-based capital of 16.29% of risk-weighted
assets at June 30, 1998. This amount was $5.3 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 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 principal on any loans or making loans at a rate
materially less than the market
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---- ----
(Dollars in thousands)
<S> <C> <C>
Non- accruing loans:
One to four family ............................ 212 282
Multi- family ................................. -- 21
Non- residential .............................. -- --
Construction .................................. -- --
Consumer ...................................... 1 5
--- ---
Total .............................................. 213 308
--- ---
Foreclosed assets:
One to four family ............................ -- 27
Multi-family .................................. -- --
Non-residential ............................... -- --
Construction .................................. -- --
Consumer ...................................... -- --
--- ---
Total .............................................. 0 27
--- ---
Total non- performing assets ....................... 213 335
=== ===
Total as a percentage of total assets .............. 0.19% 0.34%
=== ===
</TABLE>
For the six months period ended June 30, 1998, gross interest which would
have been recorded had the non-accruing loans been current in accordance
with their original terms amounted to $1,000.
<PAGE>
In addition to the non-performing assets set forth in the table above, as
of June 30, 1998, 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.
Management has considered the Company's non-performing and "of concern"
assets in establishing its allowance for loan losses.
Year 2000 Compliance. The Company utilizes and is dependent upon data
processing systems and software to conduct its business. The data
processing systems and software include those developed and maintained by
the Company's third-party data processing vendor and purchased software
which is run on in-house computer networks. During the previous fiscal
year, the Company initiated a review and assessment of all hardware and
software to confirm that it will function properly in the year 2000. To
date, those vendors which have been contacted have indicated that their
hardware or software is or will be Year 2000 compliant in time frames that
meet regulatory requirements. The costs associated with the compliance
efforts are not expected to have a significant impact on the Company's
ongoing results of operations.
Recent Developments
The Company declared a cash dividend of $.07 per share, payable on August
21, 1998 to shareholders of record on August 7, 1998.
<PAGE>
PART 11 - 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 and 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 30, 1998
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 EXHIBIT
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 Six Months
Ended Ended
June 30, 1998 June 30, 1998
------------- -------------
<S> <C> <C>
Net Income ................................ $ 94,576 319,215
======== ========
Weighted average shares outstanding
for basic EPS computation ............... 931,495 947,558
Reduction for common shares not yet
released by Employee Stock Ownership Plan (69,696) (71,944)
-------- --------
Total weighted average common shares
outstanding for basic computation ...... 861,799 875,614
======== ========
Basic earnings per share .................. $ 0.11 $ 0.36
======== ========
Total weighted average common shares
outstanding for basic computation ....... 861,799 875,614
Common stock equivalents due to
dilutive effect of stock options ........ 29,896 27,700
-------- --------
Total weighted average common shares and
equivalents outstanding for diluted
computation ............................. 891,695 903,314
======== ========
Diluted earnings per share ................ $ 0.11 $ 0.35
======== ========
</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-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,102,630
<INT-BEARING-DEPOSITS> 2,082,302
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 2,920,151
<INVESTMENTS-HELD-FOR-SALE> 9,477,535
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 87,349,476
<ALLOWANCE> 457,342
<TOTAL-ASSETS> 111,338,485
<DEPOSITS> 75,699,542
<SHORT-TERM> 6,000,000
<LIABILITIES-OTHER> 1,446,758
<LONG-TERM> 14,074,454
0
0
<COMMON> 11,241
<OTHER-SE> 14,106,490
<TOTAL-LIABILITIES-AND-EQUITY> 111,338,485
<INTEREST-LOAN> 3,359,690
<INTEREST-INVEST> 491,550
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 3,851,240
<INTEREST-DEPOSIT> 1,699,326
<INTEREST-EXPENSE> 2,146,445
<INTEREST-INCOME-NET> 1,704,795
<LOAN-LOSSES> 52,885
<SECURITIES-GAINS> 81,529
<EXPENSE-OTHER> 1,502,145
<INCOME-PRETAX> 537,740
<INCOME-PRE-EXTRAORDINARY> 537,740
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 319,215
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.35
<YIELD-ACTUAL> 3.41
<LOANS-NON> 213,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 410,383
<CHARGE-OFFS> 5,896
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 457,342
<ALLOWANCE-DOMESTIC> 457,342
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
