SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_______________________
FORM 10-QSB
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
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 0-25484
AMTRUST CAPITAL CORP.
______________________________________________________________
(Exact name of registrant as specified in its charter)
DELAWARE 35-1940250
___________________________ ______________________________
(State or other jurisdiction of (I.R.S. Employer Identification number)
incorporation or organization)
20 W. Fifth Street, Peru, Indiana 46970
_______________________________________________________
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (317) 472-1991
Check here 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 reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ x ] No [ ]
As of December 31, 1996, there were 494,355 shares of the Registrant's
common stock outstanding.
Transitional Small Disclosure (check one): Yes [ ] No [ x ]
<PAGE>
AMTRUST CAPITAL CORP. AND SUBSIDIARY
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated condensed balance sheet at
December 31, 1996 and June 30, 1996
(Unaudited) ..............................................3
Consolidated condensed statement of income for
the three and six months ended December 31, 1996
and 1995 (Unaudited) ....................................4
Consolidated condensed statement of changes in
stockholders' equity for the six months ended
December 31, 1996 and 1995 (Unaudited) ...................5
Consolidated condensed statement of cash flows for
the six months ended December 31, 1996 and 1995
(Unaudited) ..............................................6
Notes to unaudited consolidated condensed financial
statements ...............................................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ..........................................14
Item 2. Changes in Securities ......................................14
Item 3. Defaults Upon Senior Securities ............................14
Item 4. Submission of Matters to a Vote of Security Holders ........14
Item 5. Other Information ..........................................14
Item 6. Exhibits and Reports on Form 8-K ...........................14
Signatures .............................................15
<PAGE>
AMTRUST CAPITAL CORP. AND SUBSIDIARY
AMERICANTRUST FEDERAL SAVINGS BANK
CONSOLIDATED CONDENSED BALANCE SHEET
December 31, June 30,
1996 1996
----------------------------
(UNAUDITED)
ASSETS
CASH AND DUE FROM BANKS $ 1,618,806 $ 1,128,289
INTEREST-BEARING DEPOSITS 943,310 617,842
INVESTMENT SECURITIES
HELD TO MATURITY 2,291,443 2,612,885
AVAILABLE FOR SALE 12,139,629 11,919,170
----------------------------
TOTAL INVESTMENT SECURITIES 14,431,072 14,532,055
MORTGAGE LOANS HELD FOR SALE 629,635 1,508,611
LOANS 50,639,587 50,294,720
ALLOWANCE FOR LOAN LOSSES (475,757) (494,375)
----------------------------
NET LOANS 50,163,830 49,800,345
PREMISES AND EQUIPMENT 1,302,998 1,124,519
FEDERAL HOME LOAN BANK OF
INDIANAPOLIS STOCK 1,050,000 1,050,000
CASH SURRENDER VALUE-LIFE
INSURANCE POLICIES 1,118,697 1,100,203
INTEREST RECEIVABLE 353,012 378,648
DEFERRED INCOME TAX BENEFITS 196,765 326,650
CURRENT INCOME TAX REFUNDABLE 124,196 22,105
OTHER ASSETS 286,496 302,400
---------------------------
TOTAL ASSETS $ 72,218,817 $ 71,891,667
===========================
LIABILITIES
DEPOSITS $ 47,777,783 $ 44,561,525
ADVANCES FROM FHLB OF INDIANAPOLIS 14,663,466 19,500,036
INTEREST PAYABLE 100,536 83,030
OTHER LIABILITIES 300,708 535,787
---------------------------
TOTAL LIABILITIES 64,842,493 64,680,378
---------------------------
STOCKHOLDERS' EQUITY
PREFERRED STOCK ($.01 PAR VALUE)
AUTHORIZED AND UNISSUED--350,000 SHARES
COMMON STOCK ($.01 PAR VALUE)
AUTHORIZED--1,750,000 SHARES
ISSUED--580,064 SHARES 5,801 5,801
PAID IN CAPITAL 4,182,406 4,178,218
RETAINED EARNINGS-SUBSTANTIALLY
RESTRICTED 4,139,429 4,167,860
UNEARNED ESOP SHARES --
37,124 SHARES (296,992 (315,554)
TREASURY STOCK AT COST --
48,585 SHARES (496,836) (535,299)
NET UNREALIZED LOSS ON SECURITIES
AVAILABLE, NET OF TAX (157,484) (289,737)
---------------------------
TOTAL STOCKHOLDERS' EQUITY 7,376,324 7,211,289
---------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 72,218,817 $ 71,891,667
===========================
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
<PAGE>
AMTRUST CAPITAL CORP AND SUBSIDIARY
AMERICANTRUST FEDERAL SAVINGS BANK
CONSOLIDATED CONDENSED STATEMENT OF INCOME
THREE MONTHS ENDED
DECEMBER 31,
1996 1995
___________________________
(UNAUDITED)
INTEREST INCOME
LOANS RECEIVABLE $ 998,571 $ 1,019,978
SECURITIES, INCLUDING DIVIDENDS 268,342 136,399
INTEREST BEARING DEPOSITS 8,798 20,138
---------------------------
1,275,711 1,176,515
---------------------------
INTEREST EXPENSE
DEPOSITS 558,088 594,644
ADVANCES FROM FEDERAL HOME LOAN BANK 247,704 133,551
---------------------------
805,792 728,195
---------------------------
NET INTEREST INCOME 469,919 448,320
PROVISION (ADJUSTMENT) FOR LOSSES ON LOANS (17,348) (19,317)
---------------------------
NET INTEREST INCOME AFTER PROVISION
(ADJUSTMENT) FOR LOSSES ON LOANS 487,267 467,637
---------------------------
OTHER INCOME
SERVICE CHARGES ON DEPOSIT ACCOUNTS 18,854 29,644
GAINS ON SALE OF:
LOANS HELD FOR SALE 34,136 63,101
LOAN FEES AND SERVICE CHARGES 21,435 23,390
ANNUITY COMMISSIONS AND OTHER FEES 30,079 5,150
OTHER INCOME 22,947 17,456
---------------------------
127,451 138,741
---------------------------
OTHER EXPENSES
SALARIES AND EMPLOYEE BENEFITS 235,998 230,587
NET OCCUPANCY EXPENSES 27,414 34,926
EQUIPMENT EXPENSES 26,015 23,741
DATA PROCESSING FEES 25,320 28,554
DEPOSIT INSURANCE EXPENSE 19,908 55,126
LEGAL FEES 21,115 24,509
CUSTOMER DEPOSIT ACCOUNT EXPENSES 15,979 9,853
ADVERTISING AND PROMOTION 10,528 9,018
PRINTING AND OFFICE SUPPLIES 10,997 13,821
OTHER EXPENSES 122,934 120,481
-------------------------
516,208 550,616
-------------------------
INCOME BEFORE INCOME TAX EXPENSE 98,510 55,762
INCOME TAX EXPENSE 38,162 33,641
-------------------------
NET INCOME $ 60,348 $ 22,121
=========================
NET INCOME PER SHARE 0.12 0.04
WEIGHTED AVERAGE SHARES OUTSTANDING 493,489 579,303
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
<PAGE>
AMTRUST CAPITAL CORP AND SUBSIDIARY
AMERICANTRUST FEDERAL SAVINGS BANK
CONSOLIDATED CONDENSED STATEMENT OF INCOME
SIX MONTHS ENDED
DECEMBER 31,
1996 1995
_________________________
(UNAUDITED)
INTEREST INCOME
LOANS RECEIVABLE $ 2,016,924 $ 1,987,101
SECURITIES, INCLUDING DIVIDENDS 540,088 298,961
INTEREST BEARING DEPOSITS 19,334 55,386
-------------------------
2,576,346 2,341,448
-------------------------
INTEREST EXPENSE
DEPOSITS 1,088,750 1,185,336
ADVANCES FROM FEDERAL HOME LOAN BANK 519,096 276,588
-------------------------
1,607,846 1,461,924
-------------------------
NET INTEREST INCOME 968,500 879,524
PROVISION (ADJUSTMENT) FOR LOSSES ON LOANS (17,348) (19,317)
-------------------------
NET INTEREST INCOME AFTER PROVISION
(ADJUSTMENT) FOR LOSSES ON LOANS 985,848 898,841
-------------------------
OTHER INCOME
SERVICE CHARGES ON DEPOSIT ACCOUNTS 37,811 56,309
GAINS ON SALE OF:
INVESTMENT SECURITIES 14,063
LOANS HELD FOR SALE 78,327 118,029
LOAN FEES AND SERVICE CHARGES 35,815 45,712
ANNUITY COMMISSIONS AND OTHER FEES 79,339 7,035
OTHER INCOME 46,474 30,720
-------------------------
277,766 271,868
-------------------------
OTHER EXPENSES
SALARIES AND EMPLOYEE BENEFITS 488,312 460,119
NET OCCUPANCY EXPENSES 59,890 68,719
EQUIPMENT EXPENSES 51,706 48,398
DATA PROCESSING FEES 50,880 56,810
DEPOSIT INSURANCE EXPENSE 344,841 62,434
LEGAL FEES 36,883 41,228
CUSTOMER DEPOSIT ACCOUNT EXPENSES 32,770 22,832
ADVERTISING AND PROMOTION 14,439 18,620
PRINTING AND OFFICE SUPPLIES 22,190 28,627
OTHER EXPENSES 222,937 200,593
------------------------
1,324,838 1,008,380
------------------------
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT) (61,224) 162,329
INCOME TAX EXPENSE (BENEFIT) (32,793) 79,614
------------------------
NET INCOME (LOSS) $ (28,431) $ 82,715
========================
NET INCOME (LOSS) PER SHARE (0.06) 0.14
WEIGHTED AVERAGE SHARES OUTSTANDING 490,952 579,684
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
<PAGE>
AMTRUST CAPITAL CORP. AND SUBSIDIARY
AMERICANTRUST FEDERAL SAVINGS BANK
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED
DECEMBER 31,
1996 1995
____________________________
BEGINNING BALANCE $ 7,211,289 $ 7,637,135
STOCK PURCHASE (53,125)
ESOP SHARES EARNED 18,562 18,562
ADDITIONAL PAID IN CAPITAL 4,641 5,221
STOCK ISSUED UNDER RECOGNITION
AND RETENTION PLAN 38,010
CHANGE IN NET UNREALIZED
GAINS (LOSSES) ON SECURITIES 132,253 975
NET INCOME (28,431) 82,715
----------------------------
ENDING BALANCE $ 7,376,324 $ 7,691,483
============================
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
<PAGE>
AMTRUST CAPITAL CORP. AND SUBSIDIARY
AMERICANTRUST FEDERAL SAVINGS BANK
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED
DECEMBER 31,
1996 1995
__________________________
(UNAUDITED)
NET INCOME (LOSS) $ (28,431) $ 82,715
ADJUSTMENTS TO RECONCILE NET
INCOME (LOSS) TO NET CASH
PROVIDED (USED) BY OPERATING
ACTIVITIES:
PROVISION (ADJUSTMENT) FOR LOAN LOSSES (17,348) (19,317)
PREMIUM AND DISCOUNT AMORTIZATION, NET (522) 14,349
DEPRECIATION AND AMORTIZATION 49,169 46,504
GAINS ON SALES OF INVESTMENT
SECURITIES AVAILABLE FOR SALE (14,063)
DEFERRED INCOME TAX BENEFIT 43,140 (5,151)
CURRENT INCOME TAX REFUNDABLE (102,091) 113,728
LOANS ORIGINATED FOR SALE (1,648,190) (6,457,876)
PROCEEDS FROM SALES AND PAYDOWNS
ON LOANS HELD FOR SALE 2,605,493 6,470,532
GAINS ON SALES OF LOANS HELD FOR SALE (78,327) (118,029)
ESOP SHARES EARNED 22,750 23,783
RECOGNITION AND RETENTION PLAN
COMPENSATION PLAN 38,463
CHANGE IN:
INTEREST RECEIVABLE AND OTHER ASSETS 41,540 (1,179,565)
CASH SURRENDER VALUE OF LIFE INSURANCE
POLICIES (18,494) (22,564)
INTEREST PAYABLE AND OTHER LIABILITIES (217,573) 181,021
--------------------------
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES 689,579 (883,933)
--------------------------
INVESTING ACTIVITIES:
NET CHANGE IN INTEREST-BEARING DEPOSITS (325,468) (1,390,841)
PURCHASES OF SECURITIES AVAILABLE FOR SALE (22,259) (8,986,900)
PAYMENTS ON SECURITIES AVAILABLE FOR SALE 1,554,338
PROCEEDS FROM SALES OF SECURITIES
AVAILABLE FOR SALE 3,014,063
PURCHASES OF SECURITIES HELD TO MATURITY (250,000)
PAYMENTS ON SECURITIES HELD TO MATURITY 342,762 991,623
NET CHANGE IN LOANS (346,137) 151,290
PURCHASE OF PREMISES AND EQUIPMENT (227,648) (37,735)
---------------------------
NET CASH USED BY INVESTING ACTIVITIES (578,750) (4,954,162)
---------------------------
FINANCING ACTIVITIES:
NET CHANGE IN NOW, SAVINGS
AND CERTIFICATES OF DEPOSIT 5,216,258 496,462
PROCEEDS FROM FHLB ADVANCES 10,566,570 8,750,000
REPAYMENT OF FHLB ADVANCES (15,403,140) (3,850,000)
PURCHASE OF AMTRUST STOCK (53,125)
---------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 379,688 5,343,337
---------------------------
NET CHANGE IN CASH 490,517 (494,758)
CASH, BEGINNING OF YEAR 1,128,289 1,129,259
---------------------------
CASH, END OF YEAR $ 1,618,806 $ 634,501
===========================
ADDITIONAL CASH FLOW AND SUPPLEMENTARY INFORMATION
INTEREST PAID $ 1,590,340 $ 1,438,212
INCOME TAX PAID 168,350 (38,750)
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
<PAGE>
AMTRUST CAPITAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS
Note 1 - Basis of Presentation
The unaudited interim consolidated condensed financial statements include the
accounts of AmTrust Capital Corp. (the "Company") and its subsidiary,
AmericanTrust Federal Savings Bank ("AmericanTrust" or the "Bank") and
should be read in conjunction with the Company's most recent annual report.
The significant accounting policies followed by the Company and Bank for
interim financial reporting are consistent with the accounting policies followed
for annual financial reporting except for the change in method of accounting
discussed more fully in Note 2.
The unaudited interim consolidated condensed financial statements have been
prepared in accordance with the instructions to Form 10-QSB and, therefore,
do not include all information and disclosures required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, the financial statements reflect all adjustments necessary to
present fairly the Company's financial position as of December 31, 1996 and
results of operations for the three- and six-month periods ending December
31, 1996 and 1995. The results of operations for the three- and six-month
periods ended December 31, 1996 are not necessarily indicative of the results
of operations which may be expected for the fiscal year ended June 30, 1997.
Note 2 - Change in Accounting Method
The Company adopted Statement of Accounting Standards ("SFAS") No.
122, Accounting for Mortgage Servicing Rights, on July 1, 1996. Mortgage
servicing rights on originated loans are capitalized by allocating the total
cost of the mortgage loans between the mortgage servicing rights and the loans
based on their relative fair values. Capitalized servicing rights are amortized
in proportion to and over the period of estimated servicing revenues. The
amount of mortgage servicing rights capitalized during the three and six
months ended December 31, 1996 were $12,000 and $24,000, respectively.
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company was incorporated under the laws of the State of Delaware for
the purpose of becoming the savings and loan holding company of
AmericanTrust in connection with the Bank's conversion from a federally
chartered mutual savings bank to a federally chartered stock savings bank,
pursuant to its Plan of Conversion. Additionally, at December 31, 1996, the
Company had no significant assets except its equity investment in the Bank's
stock, cash and a loan to its Employee Stock Ownership Plan, no material
liabilities and the Company had not conducted any material operations. As a
result, the consolidated condensed financial statements appearing herein and
the following discussion of results of operations relate primarily to the Bank.
AmericanTrust has been, and continues to be, a community-oriented financial
institution offering selected financial services to meet the needs of the
communities it services. The Bank attracts deposits from the general public
and historically has used such deposits, together with other funds, primarily to
originate one- to four-family residential mortgage loans. The Bank also
originates consumer loans, and to a lesser extent, construction loans.
Through its main office, branch office, and limited service office,
AmericanTrust serves communities in Howard and Miami Counties in
Indiana.
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.
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. Net interest income depends upon the volume of interest-earning
assets and interest bearing liabilities and the interest rates earned or paid on
them, respectively.
FINANCIAL CONDITION
Total assets increased by $327,000 in the six months ended December 31,
1996 from $71.9 million at June 30, 1996 to $72.2 million at December 31,
1996. Cash and interest-bearing deposits increased $816,000 due to an
increase in deposits. Investment and mortgage-backed securities decreased by
$101,000 during the six months ended December 31, 1996 due to principal
reductions. Total loans decreased by $515,000 due to a decrease in loans
originated for sale.
Deposits increased to $47.8 million at December 31, 1996 from $44.6 million
at June 30, 1996. The increase of $3.2 million was primarily due to increased
use of public funds. FHLB advances decreased to $14.7 million at December
31, 1996 from $19.5 million at June 30, 1996 due to repayment of advances
from increased deposits.
Stockholders' equity decreased $165,000 between June 30, 1996 and
December 31, 1996 as a result of a net loss for the quarter of $28,000, due to
the one-time special assessment to recapitalize the Savings Association
Insurance Fund ("SAIF"), an increase of $23,000 as ESOP shares were
earned at current stock prices, an increase of $38,000 due to stock issued
under the Recognition and Retention Plan and a reduction of net unrealized
losses on securities available for sale, net of tax, of $132,000.
COMPARISON OF OPERATING RESULTS FOR THE THREE- AND
SIX-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1995
General. The Company had net income of $60,000 for the three-month
period ended December 31, 1996 and a net loss of $28,000 for the six month
period ended December 31, 1996 as compared to net income of $22,000 and
$83,000 for the three- and six-month periods ended December 31, 1995. The
decrease of $111,000 for the six-month period is primarily as result of the
one-time FDIC special assessment to recapitalize the SAIF of $170,000, net
of tax. Absent the one-time special assessment, the net income for the six
months ended December 31, 1996 would have been $142,000.
Net Interest Income. Net interest income was $470,000 and $969,000 for the
three- and six-month periods ended December 1996 as compared to $448,000
and $880,000 for the three- and six-month periods ended December 31, 1995.
The increases of $22,000 and $89,000 for the three- and six-month periods
ended December 31, 1996 are due to an increase in the interest spread. The
Company's average spread increased to 2.50% for the six-month period
ended December 31, 1996 from 2.39% the six-month period ended December
31, 1995. The ratio of the Company's average interest earning assets to
average interest-bearing liabilities decreased to 104.73% for the six-month
period ended December 31, 1996 from 108.20% for the six-month period
ended December 31, 1995.
Interest Income. Total interest income increased by $99,000 and $235,000
for the three- and six-month periods ended December 31, 1996 as compared
to the three- and six-month periods ended December 31, 1995 due to an
increase in interest earning assets to $67.8 million and $67.9 million from
$64.8 million and $63.4 million for the three- and six-month periods ended
December 31, 1995. Average yields on interest-earning assets increased to
7.46% and 7.51% for the three- and six-month periods ended December 31,
1996 as compared to 7.27% and 7.39% for the three- and six-month periods
ended December 31, 1995. Income from investment securities increased by
$132,000 and $241,000 for the three- and six-month periods ended December
31, 1996 from the three- and six-month periods ended December 31, 1995
due to the purchase of $8.0 million in securities in the latter part of December
1995.
Interest Expense. Interest expense increased $78,000 and $146,000 for the
three and six months ended December 31, 1996 as compared to the three and
six months ended December 31, 1995 due to an increase in the average rate
paid on interest-bearing liabilities. Average interest-bearing liabilities
increased by $3.2 million to $65.1 million for the three month period ended
December 31, 1996 as compared to $61.9 for the three month period ended
December 31, 1995. The average rate paid on interest-bearing liabilities
increased to 4.99% and 5.00% for the three- and six-month periods ended
December 31, 1996 from 4.85% and 4.99% for the three- and six-month
periods ended December 31, 1995. The increase is due to an increase in the
higher cost public funds.
Provision for Losses on Loans. Management's quarterly assessment of
classified assets, provision for loan losses and the portfolio as a whole
indicated that no additional provision for losses on loans for the six month
period. The adjustment of $17,000 resulted from a recovery on a loan. The
allowance for losses on loans to total loans decreased to .94% at December
31, 1996 from .98% at June 30, 1996.
Bennett Funding Group. The Company has a business relationship with
Bennett Funding Group, Inc. ("BFGI") which filed for Chapter 11 bankruptcy
protection on March 29, 1996. From 1992 to 1995, the Company purchased
commercial lease contracts covering business equipment from BFGI, for
which BFGI acts as servicer. At December 31, 1996, the book value of the
Company's lease contracts totaled $817,000. In addition, the Company had
$674,000 in Short Term Dealer Contracts with Bennett Leasing Corporation
("BLC") which was later included in the bankruptcy proceedings. Newspaper
reports have indicated that BFGI may have utilized fictitious leases in some of
its business activities. The Securities and Exchange Commission has filed a
criminal and civil suit against an officer of BFGI which alleges various
fraudulent actions including the sale of the same leases to two or more buyers.
An allowance for loan losses of $179,000 has been allocated for potential
losses on leases. The leases are currently on non-accrual status. BFGI
continues to service the lease contracts under the leadership of the
court-appointed Trustee. The Company is continuing to evaluate the allegations
against BFGI and BLC and the effect that the bankruptcy filing will have on
its leases and its security. Until the evaluation is complete, management is
unable to predict with any certainty the effects of the bankruptcy on the
Company.
Other Income. Other income decreased $11,000 and increased $6,000 for the
three and six months ended December 31, 1996 as compared to the three and
six months ended December 31, 1995. The changes were due to increases of
$25,000 and $72,000 in commissions for the three and six months ended
December 31, 1996 as compared to the three and six months ended December
31, 1995 due to the purchase of U.S. Title in December of 1995. These
increases were offset by decreases in gains on loans sold of $29,000 and
$40,000 due to fewer loans originated for sale during the three and six month
periods ended December 31, 1996 and 1995. Other decreases included
$11,000 and 18,000 in service charges on deposit accounts as a result of the
Company's April, 1996 sale of $5.2 million in deposits, and a $14,000
decrease in gains on the sale of investment securities for the six months ended
December 31, 1996 as compared to the six months ended December 31,
1995.
Other Expenses. Other expenses decreased $35,000 and increased $317,000
for the three and six months ended December 31, 1996 as compared to the
three and six months ended December 31, 1995. The decrease of $35,000 in
the three months ended December 31, 1996 was a result of a decrease in
deposit insurance expense due to a reduction of the FDIC premium. The
increase in the six months ended December 31, 1996 was primarily a result of
the one-time FDIC special assessment on to recapitalize SAIF. FDIC deposit
insurance increased $283,000 for the six months ended December 31, 1996 as
compared to the six months ended December 31, 1995. In addition,
compensation expense increased $28,000 for the six month period ended
December 31, 1996 due to the addition in staff related to the purchase of U.S.
Title in December, 1995.
Income Tax Expense. Income tax expense increased $4,000 for the three
months ended December 31, 1996 as compared to the three months ended
December 31, 1995 as a result of an increase in pre-tax income. Income tax
expense decreased from an expense of $80,000 for the six months ended
December 31, 1995 to a tax benefit of $33,000 due primarily to the pre-tax
loss resulting from the FDIC special assessment.
LIQUIDITY AND CAPITAL RESOURCES
The Bank's most liquid assets are cash and interest-bearing deposits. The
levels of these assets are dependent on the Bank's operating, financing and
investing activities. At December 31, 1996 and June 30, 1996, cash and
interest-bearing deposits totaled $2.6 million and $1.7 million, respectively.
The Bank's primary sources of funds include principal and interest payments
on loans (both scheduled and prepayments), maturities of investment
securities and principal payments from mortgage-backed securities.
While scheduled loan repayments and proceeds from maturing investment
securities and principal payments on mortgage-backed securities are relatively
predictable, deposit flows and early repayments are more influenced by
interest rates, general economic conditions, and competition. The Bank
attempts to price its deposits to meet asset-liability objectives and local
market conditions.
Liquidity management is both a short- and a long-term responsibility of
management. The Bank adjusts its investments in liquid assets based upon
management's assessment of (I) expected loan demand, (ii) projected
purchases of investment and mortgage-backed securities, (iii) expected
deposit flows, (iv) yields available on interest-bearing deposits, and (v)
liquidity of its asset/liability management program. Excess liquidity is
generally invested in interest-earning overnight deposits and other short-term
U.S. agency obligations. If the Bank requires funds beyond its ability to
generate them internally, it has the ability to borrow funds from the Federal
Home Loan Bank of Indianapolis ("FHLB"). Federal law limits an
institutions's borrowings from the FHLB to 20 times the amount paid for
capital stock in the FHLB, subject to regulatory capital requirements. As a
policy matter, however, the FHLB of Indianapolis typically limits the amount
of borrowings from the FHLB to 50% of adjusted assets (total assets less
borrowings). At December 31, 1996, the Bank had approximately $14.1
million of unused credit available to it under the above-mentioned borrowing
arrangement. At December 31, 1996, the Bank had borrowings of $14.7
million from the FHLB of Indianapolis.
The Bank is required to maintain minimum levels of liquid assets as defined by
OTS regulations. This requirement, which may be varied at the direction of
the OTS depending upon economic conditions, is based upon a percentage of
deposits and short-term borrowings. The required ratio is currently 5.0%.
The Bank's liquidity ratios have consistently been maintained at levels in
excess of regulatory requirements and at December 31, 1996 and June 30,
1996 were 11.55% and 9.29%, respectively.
At December 31, 1996 and June 30, 1996, the Bank had outstanding
commitments to originate loans of $444,000 and $1.7 million, respectively.
The Bank anticipated that it will have sufficient funds available to meet its
current commitments principally through the use of current liquid assets and
through its borrowing capacity discussed above.
The OTS's minimum capital standards generally require the maintenance of
regulatory capital sufficient to meet each of three tests, hereinafter described
as the tangible capital requirement, the core capital requirement and the
risk-based capital requirement. The tangible capital requirement provides for
minimum tangible capital (defined as retained earnings less all intangible
assets) equal to 1.5% of adjusted total assets. The core capital requirement
provides for minimum core capital (tangible capital plus certain forms of
supervisory goodwill and other qualifying intangible assets) equal to 3% of
adjusted total assets. The OTS has proposed to increase the core capital
requirement to 4-5%. Management cannot predict what core capital
requirement will be applicable to the Bank under the proposed new rule. The
risk-based capital requirements provide for the maintenance of core capital
plus a portion of unallocated loss allowances equal to 8% of risk-weighted
assets. In computing risk-weighted assets the Bank multiplies the value of
each asset on its balance sheet by a defined risk-weighting factor (e.g. one- to
four-family residential loans carry a risk-weighted factor of 50%).
At December 31, 1996, the Bank's tangible and core capital both totaled $7.0
million or 9.69% of adjusted total assets, which exceeded the minimum
tangible requirement by $5.9 million and the minimum core requirement by
$4.8 million. The Bank's risk-based capital at December 31, 1996 totaled
$7.3 million, which is $3.9 million above the 8% requirement.
EFFECT OF INFLATION AND CHANGING PRICES
The consolidated condensed financial statements and related financial data
presented herein have been prepared in accordance with GAAP which require
the measurement of financial position and operating results in terms of
historical dollars, without considering the change in the relative purchasing
power of money over time due to inflation. The impact of inflation is
reflected in the increased cost of the Company's operations. Unlike most
industrial companies, virtually all the assets and liabilities of a financial
institution are monetary in nature. As a result, interest rates generally have
a more significant impact on a financial institution's performance than do
general levels of inflation. Interest rates do not necessarily move in the same
direction or to the same extent as the prices of goods and services.
RECENT DEVELOPMENTS
On September 30, 1996, federal legislation was enacted that requires the
SAIF to be recapitalized with a one-time assessment on virtually all
SAIF-insured institutions, such as the Bank, equal to 65.7 basis points on
SAIF-insured deposits maintained by those institutions as of March 31, 1995.
This SAIF assessment, which was paid to the FDIC on November 27, 1996, was
$295,000.
As a result of the SAIF recapitalization, the FDIC has amended its regulation
concerning the insurance premiums payable by SAIF-insured institutions.
Effective January 1, 1997 the FDIC reduced the SAIF insurance premium to a
range of 0 to 27 basis points per $100 of domestic deposits. Additionally, the
FDIC imposed a Financing Corporation ("FICO") assessment rate for the first
semi-annual payment of 1997 equal to 6.48 basis points annually for
SAIF-assessed deposits.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceeding. None.
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. None.
Item 6. Exhibits and Reports on Form 8-K.
(A) Exhibits
27. Financial Data Schedules
(B) A current report on Form 8-K was filed on October 15, 1996 to report
the issuance of a press release announcing the Company's request for
approval to repurchase shares of its outstanding common stock on the
open market over a twelve-month period.
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMTRUST CAPITAL CORP.
Registrant
Date: January 21, 1997 /s/ Bruce M. Borst
________________________________
Bruce M. Borst, President, Chief
Executive Officer and Director
(Duly Authorized Officer)
Date: January 21, 1997 /s/ Jami L. Cornish
______________________________
Jami L. Cornish, Treasurer and
Chief Financial Officer
(Principal Financial Officer)
<TABLE> <S> <C>
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<LEGEND>
AMTRUST CAPITAL CORP. AND SUBSIDIARY
All numbers in thousands except per share data.
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