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 March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-25484
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 March 31, 1997, there were 499,355 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
March 31, 1997 and June 30, 1996
(Unaudited) ..............................................
Consolidated condensed statement of income for
the three and nine months ended March 31, 1997
and 1996 (Unaudited) ....................................
Consolidated condensed statement of changes in
stockholders' equity for the nine months ended
March 31, 1997 and 1996 (Unaudited) ......................
Consolidated condensed statement of cash flows for
the nine months ended March 31, 1997 and 1996
(Unaudited) ..............................................
Notes to unaudited consolidated condensed financial
statements ...............................................
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ...........................................
Item 2. Changes in Securities .......................................
Item 3. Defaults Upon Senior Securities .............................
Item 4. Submission of Matters to a Vote of Security Holders .........
Item 5. Other Information ...........................................
Item 6. Exhibits and Reports on Form 8-K ............................
Signatures ..............................................
<PAGE>
AMTRUST CAPITAL CORP. AND SUBSIDIARY
AMERICANTRUST FEDERAL SAVINGS BANK
CONSOLIDATED CONDENSED BALANCE SHEET
March 31, June 30,
1997 1996
------------ ------------
(UNAUDITED)
ASSETS
CASH AND DUE FROM BANKS $ 1,529,708 $ 1,128,289
INTEREST-BEARING DEPOSIT 268,956 617,842
INVESTMENT SECURITIES
HELD TO MATURITY 2,184,126 2,612,885
AVAILABLE FOR SALE 11,895,342 11,919,170
------------ ------------
TOTAL INVESTMENT SECURITIES 14,079,468 14,532,055
MORTGAGE LOANS HELD FOR SALE 499,941 1,508,611
LOANS 50,389,284 50,294,720
ALLOWANCE FOR LOAN LOSSES (474,055) (494,375)
------------ ------------
NET LOANS 49,915,229 49,800,345
PREMISES AND EQUIPMENT 1,284,518 1,124,519
FEDERAL HOME LOAN BANK OF
INDIANAPOLIS STOCK 1,050,000 1,050,000
CASH SURRENDER VALUE-LIFE
INSURANCE POLICIES 1,126,866 1,100,203
INTEREST RECEIVABLE 487,674 378,648
DEFERRED INCOME TAX BENEFITS 293,419 326,650
CURRENT INCOME TAX REFUNDABLE 137,582 22,105
OTHER ASSETS 357,151 302,400
------------ ------------
TOTAL ASSETS $ 71,030,512 $ 71,891,667
============ ============
LIABILITIES
DEPOSITS $ 51,081,680 $ 44,561,525
ADVANCES FROM FHLB OF INDIANAPOLIS 12,163,466 19,500,036
INTEREST PAYABLE 167,405 83,030
OTHER LIABILITIES 395,952 535,787
------------ ------------
TOTAL LIABILITIES 63,808,503 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 4,188,724 4,167,860
UNEARNED ESOP SHARES --
37,124 AND 39,445 SHARES (296,992) (315,554)
TREASURY STOCK AT COST --
53,585 AND 52,205 SHARES (553,086) (535,299)
NET UNREALIZED LOSS ON SECURITIES
AVAILABLE FOR SALE, NET OF TAX (304,844) (289,737)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 7,222,009 7,211,289
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 71,030,512 $ 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 NINE MONTHS ENDED
MARCH 31, MARCH 31,
1997 1996 1997 1996
_______________________ ________________________
(UNAUDITED) (UNAUDITED)
INTEREST INCOME
LOANS RECEIVABLE $ 968,362 $ 1,012,058 $ 2,985,286 $ 2,999,159
SECURITIES, INCLUDING
DIVIDENDS 267,776 275,847 807,864 574,808
INTEREST BEARING DEPOSITS 22,270 47,909 41,604 103,295
----------- ----------- ----------- -----------
1,258,408 1,335,814 3,834,754 3,677,262
----------- ----------- ----------- -----------
INTEREST EXPENSE
DEPOSITS 582,147 598,373 1,670,897 1,783,709
ADVANCES FROM FEDERAL
HOME LOAN BANK 188,218 210,537 707,314 487,125
----------- ----------- ----------- -----------
770,365 808,910 2,378,211 2,270,834
----------- ----------- ----------- -----------
NET INTEREST INCOME 488,043 526,904 1,456,543 1,406,428
PROVISION FOR LOSSES ON LOANS
15,000 (17,348) (4,317)
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR LOSSES ON LOANS 488,043 511,904 1,473,891 1,410,745
----------- ----------- ----------- -----------
OTHER INCOME
SERVICE CHARGES ON
DEPOSIT ACCOUNTS 17,725 21,731 55,536 78,041
GAINS (LOSSES) ON SALE OF
INVESTMENT SECURITIES 14,063
LOANS HELD FOR SALE 33,119 48,747 111,446 166,776
LOAN FEES AND SERVICE
CHARGES 21,662 21,588 57,477 67,300
ANNUITY COMMISSIONS
AND OTHER FEES 25,886 45,640 105,225 52,677
OTHER INCOME 18,027 42,808 64,501 73,527
----------- ----------- ----------- -----------
116,419 180,514 394,185 452,384
----------- ----------- ----------- -----------
OTHER EXPENSES
SALARIES AND EMPLOYEE
BENEFITS 239,736 261,848 728,048 721,967
NET OCCUPANCY EXPENSES 37,993 44,910 97,884 113,629
EQUIPMENT EXPENSES 28,221 24,046 79,927 72,444
DATA PROCESSING FEES 28,998 32,745 79,878 89,555
DEPOSIT INSURANCE EXPENSE 7,624 27,963 352,465 90,397
LEGAL FEES 7,566 5,927 44,448 47,155
CUSTOMER DEPOSIT ACCOUNT
EXPENSES 15,100 15,203 47,870 38,035
ADVERTISING AND PROMOTION 14,874 16,069 29,304 34,860
PRINTING AND OFFICE
SUPPLIES 16,168 10,639 38,358 39,266
OTHER EXPENSES 93,697 102,212 316,634 302,635
----------- ----------- ----------- -----------
489,977 541,562 1,814,816 1,549,943
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAX
EXPENSE 114,485 150,856 53,260 313,186
INCOME TAX EXPENSE 38,616 65,816 5,823 145,430
----------- ----------- ----------- -----------
NET INCOME $ 75,869 $ 85,040 $ 47,437 $ 167,756
=========== =========== =========== ===========
NET INCOME PER SHARE 0.15 0.15 0.10 0.29
WEIGHTED AVERAGE SHARES OUTSTANDING
491,577 571,629 491,157 577,018
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
NINE MONTHS ENDED
MARCH 31,
1997 1996
___________ ___________
BEGINNING BALANCE $ 7,211,289 $ 7,637,135
STOCK PURCHASE (56,250) (139,713)
ESOP SHARES EARNED 18,562 18,562
ADDITIONAL PAID IN CAPITAL 4,641 5,221
RECOGNITION AND RETENTION SHARES EARNED 38,010
NET UNREALIZED LOSSES ON SECURITIES (15,106) (135,998)
DIVIDENDS ($.05 PER SHARE) (26,574)
NET INCOME 47,437 167,756
------------ -----------
ENDING BALANCE $ 7,222,009 $ 7,552,963
============ ===========
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
<PAGE>
AMTRUST CAPITAL CORP. AND SUBSIDIARY
AMERICANTRUST FEDERAL SAVINGS BANK
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED
MARCH 31,
1997 1996
____________ ___________
OPERATING ACTIVITIES:
(UNAUDITED)
NET INCOME $ 47,437 $ 167,756
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
PROVISION FOR LOAN LOSSES (17,348) (4,317)
PREMIUM AND DISCOUNT AMORTIZATION, NET (392) (8,185)
DEPRECIATION AND AMORTIZATION 78,972 70,051
GAINS ON SALES OF INVESTMENT SECURITIES
AVAILABLE FOR SALE (14,063)
DEFERRED INCOME TAX BENEFIT 43,140 (14,453)
CURRENT INCOME TAX REFUNDABLE (115,476) 118,732
LOANS ORIGINATED FOR SALE (2,776,596) (10,007,747)
PROCEEDS FROM SALES AND PAYDOWNS ON LOANS
HELD FOR SALE 3,896,712 9,496,699
GAINS ON SALES OF LOANS HELD FOR SALE (111,446) (166,776)
ESOP SHARES EARNED 23203 23,783
RECOGNITION AND RETENTIONS PLAN
COMPENSATION EXPENSE 38,010
CHANGE IN:
INTEREST RECEIVABLE AND OTHER ASSETS (163,777) (1,401,901)
CASH SURRENDER VALUE OF LIFE INSURANCE POLICIES (26,663) (34,630)
INTEREST PAYABLE AND OTHER LIABILITIES (55,460) 227,613
------------- ----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 860,316 (1,547,438)
------------- ----------
INVESTING ACTIVITIES:
NET CHANGE IN INTEREST-BEARING DEPOSITS 348,886 (32,133)
PURCHASES OF SECURITIES AVAILABLE FOR SALE (36,498) (9,736,900)
PAYMENTS ON SECURITIES AVAILABLE FOR SALE 1,298,355
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 464,461 1,700,108
NET CHANGE IN LOANS (97,536) 370,325
PURCHASE OF PREMISES AND EQUIPMENT (238,971) (47,030)
------------ ---------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 440,342 (3,683,212)
------------ ----------
FINANCING ACTIVITIES:
NET CHANGE IN NOW, SAVINGS AND CERTIFICATES
OF DEPOSIT 6,520,155 415,704
PROCEEDS FROM FHLB ADVANCES 13,066,570 18,250,000
REPAYMENT OF FHLB ADVANCES (20,403,140) (13,750,000)
PURCHASE OF AMTRUST STOCK (56,250) (139,713)
PAYMENT OF DIVIDENDS (26,574)
------------ -----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (899,239) 4,775,991
------------ -----------
NET CHANGE IN CASH 401,419 (454,659)
CASH, BEGINNING OF YEAR 1,128,289 1,129,259
------------ -----------
CASH, END OF YEAR $ 1,529,708 $ 674,600
============ ===========
ADDITIONAL CASH FLOW AND SUPPLEMENTARY INFORMATION
INTEREST PAID $ 2,312,191 $ 2,198,039
INCOME TAX PAID 227,161 (5,750)
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 March 31, 1997 and
results of operations for the three- and nine-month periods ending March 31,
1997 and 1996. The results of operations for the three- and nine-month
periods ended March 31, 1997 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 nine
months ended March 31, 1997 were $11,000 and $35,000, 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 March 31, 1997, the
Company had no significant assets except its equity investment in the Bank's
stock and cash, 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 decreased by $861,000 during the nine months ended March 31,
1997 from $71.9 million at June 30, 1996 to $71.0 million at March 31, 1997.
Cash and interest-bearing deposits increased $53,000. Investment securities
decreased by $453,000 during the nine months ended March 31, 1997 due to
principal reductions. Total loans decreased by $894,000 due to a decrease in
loans origination.
Deposits increased to $51.1 million at March 31, 1997 from $44.6 million at
June 30, 1996. The increase of $6.5 million was due to an increase in public
funds of $6.0 million and an increase in core deposits of $500,000. FHLB
advances decreased to $12.1 million at March 31, 1997 from $19.5 million at
June 30, 1996 due to repayment of advances from increased deposits.
Stockholders' equity increased $11,000 between June 30, 1996 and March 31,
1997 as a result of net income for the quarter of $47,000, an increase of
$23,000 as ESOP shares were earned at current stock prices, an increase of
$38,000 due to stock earned under the Recognition and Retention Plan, a
decrease of $56,000 due to the repurchase of AmTrust stock, a decrease of
$26,000 in dividends paid, and an increase of net unrealized losses on
securities available for sale, net of tax, of $15,000.
COMPARISON OF OPERATING RESULTS FOR THE THREE- AND
NINE-MONTH PERIODS ENDED MARCH 31, 1997 AND 1996
General. The Company had net income of $76,000 and $47,000 for the three-and
nine-month periods ended March 31, 1997 as compared to net income of
$85,000 and $168,000 for the three- and nine-month periods ended March 31,
1996. The decrease of $121,000 for the nine-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 nine months ended March 31, 1997 would have been $217,000.
Net Interest Income. Net interest income was $488,000 and $1.5 million for
the three- and nine-month periods ended March 31, 1997 as compared to
$527,000 and $1.4 million for the three- and nine-month periods ended March
31, 1996. The Company's average spread increased to 2.57% for the nine-month
period ended March 31, 1997 from 2.52% the nine-month period ended March 31,
1996. The ratio of the Company's average interest earning assets to average
interest-bearing liabilities decreased to 104.59% for the nine-month period
ended March 31, 1997 from 107.40% for the nine-month period ended
March 31, 1996.
Interest Income. Total interest income decreased by $77,000 for the three-month
period ended March 31, 1997 as compared to the three-month period
ended March 31, 1996 due to a decrease in the average yield on interest
earning assets to 7.58% for the three months ended March 31, 1997 as
compared to 7.67% for the three months ended March 31, 1996. Total
interest income increased $157,000 for the nine-month periods ended March
31, 1997 as compared to the nine-month periods ended March 31, 1996 due
to an increase in interest earning assets of $2.8 million to $67.2 million from
$64.8 million for the six months ended March 31, 1997 as compared to March
31, 1996. Average yields on interest-earning assets increased to 7.53% for
the nine months ended March 31, 1997 as compared to 7.49% for the nine
months March 31, 1996. Income from investment securities increased by
$233,000 for the nine-month period ended March 31, 1997 from the nine-month
periods ended March 31, 1996 due to the purchase of $8.0 million in
securities in the latter part of December 1995.
Interest Expense. Interest expense decreased $39,000 for the three months
ended March 31, 1997 as compared to the three months ended March 31,
1996 due to a decrease in the average rate paid on interest-bearing liabilities.
Interest expense increased $107,000 for the nine months ended March 31,
1997 as compared to the nine months ended March 31, 1996 due to an
increase of $3.4 million in average interest-bearing liabilities to $64.3
million for the nine month period ended March 31, 1997 as compared to $60.9 for
the nine month period ended March 31, 1996.
The average rate paid on interest-bearing liabilities decreased to 4.89% for the
three-month period ended March 31, 1997 as compared to 4.93% for the
three-month period ended March 31, 1996. The average rate paid on interest-
bearing liabilities for the nine months ended March 31, 1997 and 1996
remained 4.97%.
Provision for Losses on Loans. Management's quarterly assessment of
classified assets, provision for loan losses and the loan portfolio as a whole
indicated that no additional provision for losses on loans for the three month
period. The adjustment of $17,000 for the nine-month period ended March
31, 1997 resulted from a recovery on a loan. The allowance for losses on
loans to total loans decreased to .94% at March 31, 1997 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 March 31, 1997, 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 $64,000 and $58,000 for the three
and nine months ended March 31, 1997 as compared to the three and nine
months ended March 31, 1996. Decreases included $20,000 in commissions
for the three months ended March 31, 1997 as compared to the three months
ended March 31, 1996 due to decreased title policies issued through Indiana
Financial Services Corp. Other decreases included gains on loans sold of
$16,000 and $55,000 due to fewer loans originated for sale during the three
and nine month periods ended March 31, 1997 and 1996, a decrease of
$4,000 and $23,000 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 nine months
ended March 31, 1997 as compared to the nine months ended March 31,
1996. The decrease in the nine months ended March 31, 1997 was partially
offset by an increase of $53,000 in commissions due to the purchase of U.S.
Title in December of 1995.
Other Expenses. Other expenses decreased $52,000 and increased $265,000
for the three and nine months ended March 31, 1997 as compared to the three
and nine months ended March 31, 1996. The decrease of $52,000 in the three
months ended March 31, 1997 was a result of a decrease in deposit insurance
expense due to a reduction of the FDIC premium of $20,000, a decrease of
$22,000 in salaries and benefits was due to decreased commission paid on
loans originated for sale. The increase in the nine months ended March 31,
1997 was primarily a result of the one-time FDIC special assessment on to
recapitalize SAIF. FDIC deposit insurance increased $262,000 for the nine
months ended March 31, 1997 as compared to the nine months ended March
31, 1997.
Income Tax Expense. Income tax expense decreased $27,000 for the three
months ended March 31, 1997 as compared to the three months ended March
31, 1997 as a result of an decrease in pre-tax income. Income tax expense
decreased $140,000 for the nine months ended March 31, 1997 due primarily
to the decrease in pre-tax income of $260,000 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 March 31, 1997 and June 30, 1996, cash and interest-
bearing deposits totaled $1.8 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 March 31, 1997, the Bank had approximately $17.2 million
of unused credit available to it under the above-mentioned borrowing
arrangement. At March 31, 1997, the Bank had borrowings of $12.1 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 March 31, 1997 and June 30, 1996
were 9.07% and 9.29%, respectively.
At March 31, 1997 and June 30, 1996, the Bank had outstanding
commitments to originate loans of $2.0 million 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 March 31, 1997, the Bank's tangible and core capital both totaled $7.2
million or 10.2% of adjusted total assets, which exceeded the minimum
tangible requirement by $6.1 million and the minimum core requirement by
$5.1 million. The Bank's risk-based capital at March 31, 1997 totaled $7.6
million or 16.58%, which is $4.1 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 required 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.
On April 26, 1996 Safeway Corporation of Indiana filed a complaint
against the Bank seeking a temporary restraining order, preliminary
injunction, permanent injunction and damages relating to a servicing
contract. On March 4, 1997, the complaint was settled with the terms
of a payment to Safeway Corporation of $11,000 and the cancellation
of the servicing contract.
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 January 24, 1997 to
report the issuance of a press release announcing the payment of a
quarterly dividend on February 17, 1997.
<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: April 25, 1997 \s\ Bruce M. Borst
________________________________
Bruce M. Borst, President, Chief
Executive Officer and Director
(Duly Authorized Officer)
Date: April 25, 1997 \s\ Jami L. Cornish
______________________________
Jami L. Cornish, Treasurer and
Chief Financial Officer
(Principal Financial Officer)
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AMTRUST CAPITAL CORP. AND SUBSIDIARY
All numbers in thousands except per share data.
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