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 March 31, 1999
OR
( ) TRANSACTION 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 Principle executive offices) (Zip Code)
Registrant telephone number, include are 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 April 29, 1999 there were 1,124,125 shares of the
Registrant's common stock issued and 826,329 shares outstanding.
Transitional Small Business Disclosure Format (check one) : Yes ____ No_X_
<PAGE>
AMB FINANCIAL CORP.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION Page
<S> <C> <C>
Item 1. Financial Statements
Consolidated Statements of Financial Condition at 3
March 31, 1999 (Unaudited) and December 31, 1998
Consolidated Statements of Earnings for the three
months ended March 31, 1999 and 1998
(unaudited) 4
Consolidated Statements of Changes in 5
Stockholders Equity, three months ended
March 31, 1999 (unaudited)
Consolidated Statements of Cash Flow for the
three months ended March 31, 1999 and 1998
(unaudited) 6
Notes to Unaudited Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-17
Part II. OTHER INFORMATION 18
Signatures 19
Index of Exhibits 20
Earnings Per Share Analysis (Exhibit 11) 21
Financial Data Schedule (Exhibit 27) 22
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMB FINANCIAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Financial Condition
March 31, December 31,
Assets 1999 1998
- ------ ---- ----
unaudited
<S> <C> <C>
Cash and amounts due from depository institutions 2,398,579 3,210,234
Interest-bearing deposits 8,096,216 5,887,182
----------- -----------
Total cash and cash equivalents 10,494,795 9,097,416
Investment securities, available for sale, at fair value 6,035,872 6,137,219
Trading securities 2,389,765 2,394,130
Mortgage backed securities, available for sale, at fair value 2,444,375 2,649,380
Loans receivable (net of allowance for loan losses:
$521,630 at March 31, 1999 and
$506,534 at December 31, 1998) 91,736,746 89,762,417
Investment in LTD Partnership 1,380,030 1,380,925
Real Estate Owned 0 23,369
Stock in Federal Home Loan Bank of Indianapolis 1,334,200 1,334,200
Accrued interest receivable 611,082 594,942
Office properties and equipment- net 419,374 427,823
Prepaid expenses and other assets 3,525,031 3,111,101
----------- -----------
Total assets 120,371,270 116,912,922
=========== ===========
Liabilities and Stockholders' Equity
Liabilities
Deposits 81,931,229 78,997,215
Borrowed money 21,683,000 21,683,000
Notes Payable 1,391,454 1,391,454
Advance payments by borrowers for taxes and insurance 714,766 567,098
Other liabilities 1,174,598 861,325
----------- -----------
Total liabilities 106,895,047 103,500,092
----------- -----------
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 869,829 shares outstanding
at March 31, 1999 and December 31, 1998 11,241 11,241
Additional paid- in capital 10,776,299 10,771,799
Retained earnings, substantially restricted 7,406,201 7,317,519
Accumulated other comprehensive income, net of income taxes 55,121 113,856
Treasury stock, at cost (254,296 shares at March 31, 1999 and December 31, 1998) (3,844,015) (3,844,015)
Common stock acquired by Employee Stock Ownership Plan (629,510) (629,510)
Common stock awarded by Recognition and Retention Plan (299,114) (328,060)
----------- -----------
Total stockholders' equity 13,476,223 13,412,830
----------- -----------
Total liabilities and stockholders' equity 120,371,270 116,912,922
=========== ===========
</TABLE>
3
<PAGE>
AMB FINANCIAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Earnings
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
--------- ---------
1999 1998
---- ----
unaudited unaudited
<S> <C> <C>
Interest income
Loans 1,762,986 1,650,719
Mortgage-backed securities 42,314 57,567
Investment securities 92,240 125,437
Interest-bearing deposits 71,695 62,139
Dividends on FHLB stock 26,318 15,411
--------- ---------
Total interest income 1,995,553 1,911,273
--------- ---------
Interest expense
Deposits 872,777 837,818
Borrowings 304,588 202,576
--------- ---------
Total interest expense 1,177,365 1,040,394
--------- ---------
Net interest income before
provision for loan losses 818,188 870,879
Provision for loan losses 31,903 22,932
--------- ---------
Net interest income after
provision for loan losses 786,285 847,947
--------- ---------
Non-interest income:
Loan fees and service charges 33,031 36,792
Commission income 8,425 4,880
Deposit related fees 71,592 73,509
Gain on sale of trading securities -- 24,086
Unrealized gain (loss) on trading
securities (4,365) 128,878
Gain (loss) on sale
of real estate owned 9,904 --
Loss from investment
in joint venture (3,154) --
Other income 42,643 19,968
--------- ---------
Total non-interest income 158,076 288,113
--------- ---------
(continued)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
--------- ---------
1999 1998
---- ----
unaudited unaudited
<S> <C> <C>
Non-interest expense:
Staffing costs 350,888 390,835
Advertising 17,100 23,330
Occupancy and equipment expense 75,044 87,323
Data processing 101,684 90,564
Federal deposit insurance premiums 11,753 11,589
Other operating expenses 146,731 170,139
--------- ---------
Total non-interest expense 703,200 773,780
--------- ---------
Net income (loss) before income taxes 241,161 362,280
Provision for federal and state income taxes 87,929 137,641
--------- ---------
Net income (loss) 153,232 224,639
========= =========
Earnings per share- basic $ 0.19 $ 0.25
Earnings per share- diluted $ 0.19 $ 0.24
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholder's Equity
(Unaudited)
<TABLE>
<CAPTION>
Accumulated Common
Additional Other 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, 1998 $11,241 10,771,799 7,317,519 113,856 (3,844,015) (629,510) (328,060) 13,412,830
Comprehensive income:
Net income 153,232 153,232
Other comprehensive income,
net of tax:
Unrealized holding gain (loss)
during the period (58,735) (58,735)
--------- ------ ----------
Total comprehensive income 0 0 153,232 (58,735) 0 0 0 94,497
Amortization of award of
RRP stock 28,946 28,946
ESOP compensation adjustment 4,500 4,500
Dividends declared on
common stock ($.08 per share) (64,550) (64,550)
------- ---------- --------- ------ ---------- -------- -------- ----------
Balance at March 31, 1999 $11,241 10,776,299 7,406,201 55,121 (3,844,015) (629,510) (299,114) 13,476,223
======= ========== ========= ====== ========== ======== ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
<TABLE>
<CAPTION>
AMB FINANCIAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three Months Ending March 31,
-----------------------------
1999 1998
----------- -----------
(unaudited)
Cash flows from operating activities:
<S> <C> <C>
Net income $ 153,232 224,639
Items not requiring (providing) cash
Depreciation 32,074 39,120
Amortization of cost of stock benefit plans 28,946 28,947
Amoritization of premiums and accretion of discounts 7,852 881
Provision for loan losses 31,903 22,932
Increase in deferred compensation 19,092 13,336
ESOP compensation 4,500 15,000
Gain on sale of trading securities -- (24,086)
Unrealized (gain) loss on trading account securities 4,365 (128,878)
Purchase of trading account securites -- (298,575)
Proceeds from sales of trading securities -- 124,399
Gain on sale of real estate owned (9,904) --
Decrease in deferred income on loans (7,072) (17,798)
Increase in accrued interest receivable (16,140) (32,601)
Increase in accrued interest payable 27,391 19,653
Change in current and deferred income taxes 80,390 (111,880)
Other, net (187,477) 54,192
----------- -----------
Net cash provided by (for) operating activities 169,152 (70,719)
----------- -----------
Cash flows from investing activities:
Proceeds from maturities of investment securities -- 500,000
Purchase of investment securities (1,478) (1,688)
Proceeds from repayments of mortgage-backed
securities 202,085 223,191
Purchase of Federal Home Loan Bank stock -- (125,000)
Purchase of loans (5,452,397) (6,477,788)
Loan disbursements (5,790,830) (4,892,639)
Loan repayments 9,244,067 5,318,230
Proceeds from sale of real estate owned 33,273 --
Property and equipment expenditures (23,625) (43,159)
----------- -----------
Net cash provided for investing activities (1,788,905) (5,498,853)
----------- -----------
</TABLE>
(continued)
<PAGE>
<TABLE>
<CAPTION>
Three Months Ending March 31,
-----------------------------
1999 1998
----------- -----------
(unaudited)
<S> <C> <C>
Cash flows from financing activities:
Deposit account receipts 36,094,258 33,771,382
Deposit account withdrawals (33,773,183) (31,742,834)
Interest credited to deposit accounts 612,939 662,718
Proceeds from borrowed money -- 3,000,000
Increase in advance payments by borrowers
for taxes and insurance 147,668 327,721
Dividends paid on common stock (64,550) (62,430)
----------- -----------
Net cash provided by financing activities 3,017,132 5,956,557
----------- -----------
Net change in cash and cash equivalents 1,397,379 386,985
Cash and cash equivalents at beginning of period 9,097,416 5,686,955
----------- -----------
Cash and cash equivalents at end of period $ 10,494,795 6,073,940
=========== ===========
Cash paid during the period for:
Interest $ 1,149,974 1,020,741
Income taxes 7,539 249,521
Non-cash investing activities:
Transfer of loans to real estate owned -- --
</TABLE>
See notes to consolidated financial statements.
6
<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 March
31, 1999, the results of operations for the three months ended March 31,
1999 and 1998 and cash flows for the three months ended March 31, 1999
and 1998. 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 reporting 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 month period ended March 31, 1999 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 month periods ended March
31, 1999 and 1998 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.
7
<PAGE>
4. Industry Segments
The Company operates principally in the banking industry through its
subsidiary bank. As such, substantially all of the Company's revenues,
net income, identifiable assets and capital expenditures are related to
banking operations.
5. Impact of New Accounting Standards
Accounting for Derivative Instruments and for Hedging Activities.
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133 ("SFAS No. 133"), entitled "Accounting for Derivative Instruments and for
Hedging Activities." SFAS No. 133 provides a comprehensive and consistent
standard for the recognition and measurement of derivatives and hedging
activities. The statement requires all derivatives to be recorded on the balance
sheet at fair value and establishes special accounting for the following three
different types of hedges: hedges of changes in the fair value of assets,
liabilities or firm commitments (referred to as fair value hedges); hedges of
the variable cash flows of forecasted transactions (cash flow hedges); and
hedges of foreign currency exposures of net investments in foreign operations.
Though the accounting treatment and criteria for each of the three types of
hedges is unique, they all result in recognizing offsetting changes in value or
cash flow of both the hedge and the hedged item in earnings in the same period.
Changes in the fair value of derivatives that do not meet the criteria of one of
these three categories of hedges are included in earnings in the period of the
change. SFAS No. 133 is effective for years beginning after June 15, 1999, but
companies can early adopt as of the beginning of any fiscal quarter that begins
after June 1998. Management does not believe that adoption of SFAS No. 133 will
have a material impact on the Company's consolidated financial condition or
results of operations.
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.
8
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
FINANCIAL CONDITION
March 31, 1999 compared to December 31, 1998
Total assets of the Company increased $3.5 million, or 2.96% to
$120.4 million at March 31, 1999 compared to $116.9 million at December
31, 1998. This increase was primarily attributable to the Company's loan
growth which was funded by an increase in deposits.
Cash and cash equivalents totaled a combined $10.5 million at
March 31, 1999, an increase of $1.4 million from the combined balance of
$9.1 million at December 31, 1998.
Mortgage backed securities available for sale decreased $205,000
to $2.4 million at March 31, 1999 as a result of prepayments.
Loans receivable increased to $91.7 million at March 31, 1999, a
$2.0 million or 2.2% increase, as new loan originations of $5.8 million
and loan purchases of $5.5 million exceeded loan repayments of $9.3
million. Loan purchases during the first three months of 1999 were
primarily in one to four family residential first mortgage loans.
Total deposits at March 31, 1999 increased by $2.9 million or
3.7 %, as deposit receipts of $36.1 million and interest credited of
$613,000 exceeded withdrawal activity of $33.8 million. This deposit
gain was primarily attributable to a special rate 18 month certificate
of deposit program.
Stockholders' equity increased $63,000 to $13.5 million at
March 31, 1999 from $13.4 million at December 31, 1998. This increase
was attributable to net income of $153,000, and normal amortization of
RRP and ESOP benefits of $34,000, which was offset by the payment of
dividends on common stock of $65,000, and a decrease in net unrealized
gain on securities available for sale of $59,000.
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.
9
<PAGE>
Comparison of Operating Results for the Quarters Ended March 31, 1999
and 1998
Net Income. The Company's net income for the three months ended March
31, 1999 decreased $72,000 to $153,000 as compared to $225,000 in the
prior year's quarter. This decrease was due to a decrease in
non-interest income of $130,000, a decrease in net interest income of
$53,000 and an increase in loan loss provision of $9,000, offset by a
decrease in non-interest expense of $71,000 and a decrease in income
taxes of $49,000.
Interest Income. Total interest income increased $84,000 or 4.41%, for
the three months ended March 31, 1999 compared to the prior year's
quarter. This increase is chiefly due to the higher volume of
interest-earning assets of $11.1 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 March 31,
1999, the average yield on interest-earning assets decreased to 7.31%
from 7.79% during the prior year's quarter. The decrease in yield on
average interest-earning assets was due to a 47 basis point reduction in
the yield on average loans which reflects the effects of the lower long
term interest rate environment over the last twelve months.
Interest Expense. Total interest expense increased $137,000 or 13.17%,
for the three months ended March 31, 1999 compared to the prior year's
quarter. The increase was due primarily to an increase of $13.6 million
in the average balance of deposits and borrowed money outstanding,
partially offset by a decrease in the average interest rate to 4.66%
from 4.76%.
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 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 $32,000 was recorded during the three
months ended March 31, 1999 compared to $23,000 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. Net charge-offs during the
current quarter amounted to approximately $17,000 and relate primarily
to credit card receivables. Non-performing loans at March 31, 1999
continue to remain stable, as compared to December 31, 1998, and
amounted to $508,000 or .57% of net loans receivable. The allowance for
loan losses at March 31, 1999 of $522,000 represents 103% of
non-performing loans.
10
<PAGE>
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 or that
additional provisions for loan losses will not be required in future
periods.
Non-Interest Income. The Company's non-interest income decreased
$130,000 to $158,000 for the quarter ended March 31, 1999 compared to
$288,000 for the same quarter a year ago. The decrease was due primarily
to declines in income from unrealized gains and losses on trading
securities resulting from the erosion in value of the Company's holdings
in community bank and thrift stocks. The Company reported an unrealized
loss of $4,000 during the current quarter as compared to a $129,000
unrealized gain recorded in the prior year's quarter. Non-interest
income also declined due to a decease of $24,000 in gains on sale of
trading securities, offset by a $10,000 gain on sale of real estate
owned, in the current period and an increase in cash surrender value
from insurance policies of $19,000.
Non-Interest Expense. The Company's non-interest expense decreased
$71,000 to $703,000 for the quarter ended March 31, 1999 compared to
$774,000 for the same quarter a year ago. The decrease was primarily the
result of decreased staffing costs of $40,000 due primarily to a $44,000
bonus paid and expensed during the first quarter of 1998 that did not
occur during the 1999 period, and decreases in advertising costs of
$6,000, occupancy and equipment expense of $12,000, and other operating
expenses of $23,000 offset by an increase in data processing costs of
$11,000 due to the overall growth of the Company's operation.
Provision for Income Taxes. The provision for income taxes decreased
$49,000 for the three months ended March 31, 1999 as compared to the
prior year quarter due to a decrease in pre-tax income.
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
11
<PAGE>
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 March 31,
1999, the Bank's liquidity ratio for regulatory purposes was 17.09%.
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 March 31, 1999 and December 31, 1998 cash
and cash equivalents totaled $10.5 million and $9.1 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 March 31, 1999 the Company has outstanding
loan commitments totaling $1.5 million and unused lines of credit
granted totaling $4.8 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 March 31, 1999, the Bank had core capital equal to $8.7 million, or
7.47% of adjusted total assets which was $4.0 million above the minimum
leverage ratio requirement of 3% in effect on that date. The Bank had
total capital of $9.2 million (including $8.7 million in core capital
and $500,000 in qualifying supplementary capital) and risk-weighted
assets of $63.8 million at March 31, 1999; or total risk-based capital
of 14.38% of risk-weighted assets at March 31, 1999. This amount was
$3.9 million above the 8% requirement in effect on that date.
12
<PAGE>
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).
13
<PAGE>
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------------- ----------------
(Dollars in thousands)
<S> <C> <C>
Non- accruing loans:
One to four family 373 397
Multi- family --- ---
Non- residential --- ---
Construction --- ---
Consumer 135 86
--------------- ----------------
Total 508 483
--------------- ----------------
Foreclosed assets:
One to four family --- 23
Multi-family --- ---
Non-residential --- ---
Construction --- ---
Consumer --- ---
--------------- ----------------
Total 0 23
--------------- ----------------
Total non- performing assets 508 506
=============== ================
Total as a percentage of total assets 0.42% 0.43%
=============== ================
</TABLE>
<PAGE>
For the three months period ended March 31, 1999, gross interest 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 March 31, 1999, 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.
14
<PAGE>
Year 2000 Readiness Disclosure
General. The year 2000 ("Y2K") issues confronting the Bank and its
suppliers, customers, customers' suppliers and competitors centers on the
inability of computer systems to recognize the year 2000. Many existing computer
programs and systems originally were programmed with six digit dates that
provided only two digits to identify the calendar year 1900 rather than the year
2000.
Financial institution regulators recently have increased their focus
upon Y2K compliance issues and have issued guidance concerning the
responsibilities of senior management and directors. The Federal Financial
Institutions Examination Council ("FFIEC") has issued several interagency
statements on Y2K Project Management Awareness. These statements require
financial institutions to, among other things, examine the Y2K implications of
their reliance on vendors and with respect to data exchange and the potential
impact of the Y2K issue on their customers, suppliers and borrowers. These
statements also require each federally regulated financial institution to survey
its exposure, measure its risk and prepare a plan to address the Y2K issue. In
addition, the federal banking regulators have issued safety and soundness
guidelines to be followed by insured depository institutions, such as the Bank,
to assure resolution of any Y2K problems. The federal banking agencies have
asserted that Y2K testing and certification is a key safety and soundness issue
in conjunction with regulatory exams and, thus, that an institution's failure to
address appropriately the Y2K issue could result in supervisory action,
including the reduction of the institution's supervisory ratings, the denial of
applications for approval of mergers or acquisitions or the imposition of civil
money penalties.
American Savings, FSB understands the importance of the Year 2000 (Y2K)
issue, and the Bank is currently taking steps to insure a smooth transition into
the next millenium. The Senior Management Team of the Bank has decided to follow
the guidelines established by the Federal Financial Institutions Examination
Council (FFIEC) for Y2K preparation. The Bank has intended to meet all deadlines
established by the FFIEC, and to-date the bank has satisfied all requirements.
A Steering Committee comprised of the Bank's department heads was
established in 1998 to oversee and report all the events pertaining to the Y2K
project. These individuals are under the direct supervision of the Bank's CEO
and prepare regular reports to the Board of Directors.
15
<PAGE>
Risks. Like most financial service providers, the Y2K issue due
to its dependence on technology and date-sensitive data may significantly affect
the Company and its operations. Computer software and hardware and other
equipment, both within and outside the Company's direct control, and third
parties with whom the Company electronically or operationally interfaces
(including without limitation its customers and third party vendors) are likely
to be affected. If computer systems are not modified in order to be able to
identify the year 2000, many computer applications could fail or create
erroneous results. As a result, many calculations which rely on date field
information, such as interest, payment or due dates and other operation
functions, could generate results which are significantly misstated, and the
Company could experience an inability to process transactions, prepare
statements or engage in similar normal business activities. Likewise, under
certain circumstances, a failure to adequately address the Y2K issue could
adversely affect the viability of the Company's suppliers and creditors and the
creditworthiness of its borrowers. Thus, if not adequately addressed, the Y2K
issue could result in a significant adverse impact on the Company's operations
and, in turn, its financial condition and results of operations.
The Bank has adopted a five-phase plan to insure Y2K processing
success. Many aspects required for the plan's success have been completed, and
are currently undergoing minor improvement adjustments. The main categories of
the five-phase plan are as follows:
1. Awareness During this phase of the American Savings
Y2K programs the senior management members
attempted to gather information relevant to the
bank's Y2K scenario. Information was gathered from
a variety of sources including seminars, numerous
publications and external consultants.
2. Assessment During the assessment phase of the
Bank's Y2K program each department of the Bank
submitted information on areas that presented a
potential risk to the institution. Members of the
Y2K Steering Committee identified the "date
sensitive" systems and assigned a risk rating to
the individual items. The areas classified as
"mission critical" receive a higher priority rating
from the committee.
3. Renovation Through out the renovation phase of
Bank's Y2K program systems were replaced or
upgraded to insure Y2K compliance. The costs
associated with this phase were not material during
1998 and a substantial change in 1999 is not
expected.
4. Testing American Savings performed internal testing
on all in-house systems and some systems under the
control of service providers. Proxy tests were used
to test the integrity of the banks core application
system. The senior management of the bank is
currently satisfied with the progress of the test
results.
16
<PAGE>
5. Contingency American Savings has begun the process
of contingency planning for all mission critical
systems of the Bank. Members of the Steering
Committee intend to complete the contingency
planning process prior to the FFIEC deadline in
June for all mission critical systems. Including
those systems dependent upon third party vendors or
service providers.
The Company is expensing all cost associated with training and
software as those costs are incurred, and such costs are being funded through
operating cash flows. Hardware cost will be capitalized and expensed under our
fixed asset guidelines. The total cost of the Y2K conversion project for the
Company is estimated to be $65,000. Expenses of approximately $40,000 were
incurred and expensed by the Company through March 31, 1999. The Company does
not expect significant increases in future data processing costs related to Y2K
compliance. While we believe this amount will be sufficient to complete the
requirements of becoming Y2K compliant, it is an estimate. As such we will
review our budget monthly to help ensure that we have allocated sufficient
resources to this project. Any deviations to the preliminary budget will be
reported to the Board of Directors.
Recent Developments
On April 20, 1999 the Company announced its intention to repurchase 43,500
shares of the outstanding shares of common stock, in the open market over a
twelve month period. The shares to be purchased at prevailing market prices form
time to time depending upon market conditions. The repurchased shares will
become treasury stock.
On April 28, 1999 the Company declared a cash dividend of $.08 per share,
payable on May 21, 1999 to shareholders of record on May 7, 1999. The Company
also has completed the repurchase of 43,500 shares of stock pursuant to its
stock repurchase program announced on April 20, 1999. The shares were purchased
at an average price of $14.1875 per share. Additionally, the Company announced
its intent to repurchase 50,000 shares in the open market over a twelve month
period. The shares will be purchased at prevailing market prices form time to
time depending upon market conditions. The repurchased shares will become
treasury stock.
17
<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
18
<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: April 29, 1999
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)
19
<PAGE>
INDEX TO EXHIBIT
----------------
Exhibit No. Page No.
11 Statement re: Computation of Earnings Per Share 21
27 Financial Data Schedule 22
20
<TABLE>
<CAPTION>
Three Months
Ended
March 31, 1999
<S> <C>
Net Income 153,232
===============
Weighted average shares outstanding
for basic EPS computation 869,829
Reduction for common shares not yet
released by Employee Stock Ownership Plan (62,951)
---------------
Total weighted average common shares
outstanding for basic computation 806,878
===============
Basic earnings per share $0.19
===============
Total weighted average common shares
outstanding for basic computation 806,878
Common stock equivalents due to
dilutive effect of stock options 0
---------------
Total weighted average common shares and
equivalents outstanding for diluted
computation 806,878
===============
Diluted earnings per share $0.19
===============
</TABLE>
21
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,398,579
<INT-BEARING-DEPOSITS> 7,296,216
<FED-FUNDS-SOLD> 800,000
<TRADING-ASSETS> 2,389,765
<INVESTMENTS-HELD-FOR-SALE> 8,480,247
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 91,736,746
<ALLOWANCE> 521,630
<TOTAL-ASSETS> 120,371,270
<DEPOSITS> 81,931,229
<SHORT-TERM> 4,000,000
<LIABILITIES-OTHER> 1,889,364
<LONG-TERM> 19,074,454
0
0
<COMMON> 11,241
<OTHER-SE> 13,464,982
<TOTAL-LIABILITIES-AND-EQUITY> 120,371,270
<INTEREST-LOAN> 1,762,986
<INTEREST-INVEST> 232,567
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 1,995,553
<INTEREST-DEPOSIT> 872,777
<INTEREST-EXPENSE> 1,177,365
<INTEREST-INCOME-NET> 818,188
<LOAN-LOSSES> 31,903
<SECURITIES-GAINS> (4,365)
<EXPENSE-OTHER> 703,200
<INCOME-PRETAX> 241,161
<INCOME-PRE-EXTRAORDINARY> 241,161
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 153,232
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.19
<YIELD-ACTUAL> 3.00
<LOANS-NON> 508,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 506,534
<CHARGE-OFFS> 19,305
<RECOVERIES> 2,498
<ALLOWANCE-CLOSE> 521,630
<ALLOWANCE-DOMESTIC> 521,630
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
