SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 1O-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-25484
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: (765) 472-1991
Check here whether the issuer (1) has filed all reports required to be Sled 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 September 30, 1998, there were 466,662 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
September 30, 1998 and June 30, 1998 (Unaudited) ............ 3
Consolidated condensed statement of income fur
the three months ended September 30, 1998 and
1997 (Unaudited) ............................................. 4
Consolidated condensed statement of changes in
stockholders' equity for the three months ended
September 30, 1998 and 1997 (Unaudited) ...................... 5
Consolidated condensed statement of cash flows
for the three months ended September 30, 1998
and 1997 (Unaudited) ......................................... 6
Notes to unaudited consolidated condensed financial
statements ................................................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .......................... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ............................................. 15
Item 2. Changes in Securities ......................................... 15
Item 3. Defaults Upon Senior Securities ............................... 15
Item 4. Submission of Matters to a Vote of Security Holders ........... 15
Item 5. Other Information ............................................. 15
Item 6. Exhibits and Reports on Form 8-K .............................. 15
Signatures .................................................... 16
2
<PAGE>
AMTRUST CAPITAL CORP. AND SUBSIDIARY
AMERICANTRUST FEDERAL SAVINGS BANK
CONSOLIDATED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CASH AND DUE FROM BANKS $ 2,309,158 $ 1,776,692
INTEREST-BEARING DEPOSITS 3,162,615 1,099,107
INVESTMENT SECURITIES
HELD TO MATURITY 1,031,656 1,139,995
AVAILABLE FOR SALE 8,790,237 4,349,636
------------ ------------
TOTAL INVESTMENT SECURITIES 9,821,893 5,489,631
MORTGAGE LOANS HELD FOR SALE 1,850,603 1,944,088
LOANS 41,430,929 43,091,521
ALLOWANCE FOR LOAN LOSSES (495,414) (517,653)
------------ ------------
NET LOANS 40,935,515 42,573,868
PREMISES AND EQUIPMENT 1,825,437 1,794,803
FEDERAL HOME LOAN BANK OF INDIANAPOLIS STOCK 1,050,000 1,050,000
CASH SURRENDER VALUE-LIFE INSURANCE POLICIES 1,309,848 1,296,746
INTEREST RECEIVABLE 247,311 257,754
DEFERRED INCOME TAX BENEFITS 66,576 66,575
CURRENT INCOME TAX REFUNDABLE 0 123,735
OTHER ASSETS 1,848,975 595,610
------------ ------------
TOTAL ASSETS $ 64,427,931 $ 58,068,609
============ ============
LIABILITIES
DEPOSITS $ 54,036,668 $ 46,881,488
ADVANCES FROM FHLB OF INDIANAPOLIS 2,370,405 3,070,405
INTEREST PAYABLE 216,225 101,259
CURRENT TAX PAYABLE 10,173 0
OTHER LIABILITIES 577,316 584,079
------------ ------------
TOTAL LIABILITIES 57,210,787 50,637,231
------------ ------------
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, OUTSTANDING--466,662 SHARES 5,801 5,801
PAID IN CAPITAL 4,236,559 4,236,559
RETAINED EARNINGS-SUBSTANTIALLY RESTRICTED 4,248,817 4,284,019
UNEARNED ESOP SHARES -- 25,792 AND 27,954 SHARES (211,471) (220,752)
TREASURY STOCK AT COST -- 87,610 AND 76,610 SHARES (1,071,708) (915,583)
ACCUMULATED COMPREHENSIVE INCOME 9,146 41,334
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 7,217,144 7,431,378
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 64,427,931 $ 58,068,609
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
3
<PAGE>
AMTRUST CAPITAL CORP AND SIBSIDIARY
AMERICANTRUST FEDERAL SAVINGS BANK
CONSOLIDATED CONDENSED STATEMENT OF INCOME
THREE MONTHS ENDED
SEPTEMBER 30,
1998 1997
----------- -----------
(UNAUDITED)
INTEREST INCOME
LOANS RECEIVABLE $ 854,515 $ 945,096
SECURITIES, INCLUDING DIVIDENDS 95,355 266,173
INTEREST BEARING DEPOSITS 112,406 15,730
----------- -----------
1,062,276 1,226,999
----------- -----------
INTEREST EXPENSE
DEPOSITS 553,961 596,907
ADVANCES FROM FEDERAL HOME LOAN BANK 66,993 164,573
----------- -----------
620,954 761,480
----------- -----------
NET INTEREST INCOME 441,322 465,519
PROVISION FOR LOSSES ON LOANS 0 8,965
----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR LOSSES ON LOANS 441,322 456,554
----------- -----------
OTHER INCOME
SERVICE CHARGES ON DEPOSIT ACCOUNTS 27,520 27,546
GAINS (LOSSES) ON SALE OF
LOANS HELD FOR SALE 55,819 50,485
LOAN FEES AND SERVICE CHARGES 31,837 16,386
ANNUITY COMMISSIONS AND OTHER FEES 7,707 42,311
OTHER INCOME 17,130 17,806
----------- -----------
140,013 154,534
----------- -----------
OTHER EXPENSES
SALARIES AND EMPLOYEE BENEFITS 237,837 236,200
NET OCCUPANCY EXPENSE 41,135 34,052
EQUIPMENT EXPENSES 35,912 27,514
DATA PROCESSING FEES 40,068 28,794
DEPOSIT INSURANCE EXPENSE 7,988 8,053
LEGAL FEES 77,628 4,958
CUSTOMER DEPOSIT ACCOUNT EXPENSE 15,912 5,471
ADVERTISING AND PROMOTION 10,458 9,576
PRINTING AND OFFICE SUPPLIES 17,019 9,827
OTHER EXPENSES 126,588 140,659
----------- -----------
610,545 505,104
----------- -----------
INCOME BEFORE INCOME TAX EXPENSE (BENEFIT) (29,210) 105,984
INCOME TAX EXPENSE (BENEFIT) (19,180) 44,905
----------- -----------
NET INCOME (LOSS) $ (10,030) $ 61,079
=========== ===========
NET INCOME (LOSS) PER SHARE:
BASIC $ (0.02) $ 0.12
DILUTED (0.02) 0.12
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
4
<PAGE>
AMTRUST CAPITAL CORP. AND SUBSIDIARY
AMERICANTRUST FEDERAL SAVINGS BANK
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED
SEPTEMBER 30,
1998 1997
----------- -----------
(UNAUDITED)
BEGINNING BALANCE $ 7,431,378 $ 7,463,513
COMPREHENSIVE INCOME:
NET INCOME (LOSS) (10,030) 61,079
OTHER COMPREHENSIVE INCOME, NET OF TAX:
UNREALIZED GAINS (LOSSES) ON SECURITIES
AVAILABLE FOR SALE (32,188) 96,671
----------- -----------
COMPREHENSIVE INCOME (LOSS) (42,218) 157,750
----------- -----------
DIVIDENDS (25,172) (26,324)
PRUCHASE OF COMMON STOCK (156,125) 0
ESOP SHARES EARNED 9,281 9,281
ADDITIONAL PAID IN CAPITAL 0 10,586
----------- -----------
ENDING BALANCE $ 7,217,144 $ 7,614,806
=========== ===========
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
5
<PAGE>
AMTRUST CAPITAL CORP. AND SUBSIDIARY
AMERICANTRUST FEDERAL SAVINGS BANK
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1998 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES:
NET INCOME (LOSS) $ (10,030) $ 61,079
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
PROVISION FOR LOAN LOSSES 0 8,965
PREMIUM AND DISCOUNT AMORTIZATION, NET 482 (561)
DEPRECIATION AND AMORTIZATION 29,265 29,306
DEFERRED INCOME TAX BENEFIT 0 10,260
CURRENT INCOME TAX REFUNDABLE 0 52,923
LOANS ORIGINATED FOR SALE (2,819,072) (2,077,519)
PROCEEDS FROM SALES AND PAYDOWNS ON LOANS HELD FOR SALE 2,954,317 1,947,680
(GAINS) LOSSES ON SALES OF LOANS HELD FOR SALE (55,819) (50,485)
ESOP SHARES EARNED 9,281 19,868
CHANGE IN:
INTEREST RECEIVABLE AND OTHER ASSETS (411,044) (180,699)
CASH SURRENDER VALUE OF LIFE INSURANCE POLICIES (13,102) (8,169)
INTEREST PAYABLE AND OTHER LIABILITIES 132,525 219,526
------------ ------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (183,197) 32,174
------------ ------------
INVESTING ACTIVITIES:
NET CHANGE IN INTEREST-BEARING DEPOSITS (2,063,508) 926,473
PURCHASES OF SECURITIES AVAILABLE FOR SALE (5,000,000) (14,764)
PAYMENTS ON SECURITIES AVAILABLE FOR SALE 513,146 0
PAYMENTS ON SECURITIES HELD TO MATURITY 107,773 167,445
NET CHANGE IN LOANS 1,638,353 1,569,790
CASH ACQUIRED IN BRANCH ACQUISITION 10,913,403 0
PURCHASE OF PREMISES AND EQUIPMENT (59,899) (11,883)
------------ ------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 6,049,268 2,637,061
------------ ------------
FINANCING ACTIVITIES:
NET CHANGE IN NOW, SAVINGS AND CERTIFICATES OF DEPOSIT (4,452,308) (5,115,901)
PROCEEDS FROM FHLB ADVANCES 5,000,000 9,500,000
REPAYMENT OF FHLB ADVANCES (5,700,000) (7,315,000)
PURCHASE OF AMTRUST STOCK (156,125) 0
PAYMENT OF DIVIDENDS (25,172) (26,324)
------------ ------------
NET CASH USED BY FINANCING ACTIVITIES (5,333,605) (2,957,225)
------------ ------------
NET CHANGE IN CASH 532,466 (287,990)
CASH, BEGINNING OF YEAR 1,776,692 1,514,563
------------ ------------
CASH, END OF PERIOD $ 2,309,158 $ 1,226,573
============ ============
ADDITIONAL CASH FLOW AND SUPPLEMENTARY INFORMATION
INTEREST PAID $ 505,988 $ 690,584
INCOME TAX PAID 58,750 13,750
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6
<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 (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.
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 September 30, 1998 and
results of operations for the three-month periods ending September 30, 1992 and
1997. The results of operations for the three months ended September 30, 1998
are not necessarily indicative of the results of operations which maybe expected
for the fiscal year ended June 30, 1999.
The Company adopted Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income. Comprehensive income includes unrealized gains
on securities available for sale, net of tax. Accumulated other comprehensive
income and income tax On such income reported are as follows:
Three Months Ended
September 30
-------------------------
1998 1997
--------- ---------
Accumulated comprehensive income (loss)
Balance, July 1 ........................... $ 41,334 $(153,165)
Net unrealized gains (losses) ............. (32,188) 96,671
--------- ---------
Balance, September 30 ..................... $ 9,146 $ (56,494)
========= =========
Income tax expense (benefit):
Unrealized holding gains (losses) ......... $ (21,304) $ 63,407
SEAS No. 131. Disclosures about Segments of an Enterprise and Related
Information, changes the way public business enterprises report information
about operating segments in annual financial statements and requires those
enterprises to report selected information about reportable segments in interim
financial reports to shareholders. It also establishes standards for related
7
<PAGE>
disclosures about products and services, geographic areas and major customers.
SPAS No. 131 becomes effective for the Company in 1998.
Note 2 - Earnings Per Share
<TABLE>
<CAPTION>
For the Three Months Ended September 30, 1998 1997
Weighted Per Weighted Per
Average Share Average Share
Income Shares Amount Income Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Basic Net Income Per Share:
Net Income (Loss) Available to Common Stockholders $(10,030) 473,380 $ (0.02) $ 61,079 493,477 $ 0.12
========= =========
Effect of Dilutive Stock Options and Grants 0 0 0 7,438
-------- ------- -------- -------
Diluted Net Income Per Share:
Net Income (Loss) Available to Common Stockholders $(10,030) 473,380 $ (0.02) $ 61,079 500,915 $ 0.12
======== ======= ========= ======== ======= =========
</TABLE>
8
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL COMMON AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
When used in this filing and in future filings by the Company with the
Securities and Exchange Commission, the the Company's press releases or other
public or shareholder communications, or in oral statements made with the
approval of an authorized executive officer, the words or phrases "would be,"
"will allow," "intends to," "will likely result," "are expected to," "will
continue" "is anticipated," "estimate," "project," or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
risks and uncertainties, including but not limited to changes in economic
conditions in the Company's market area, changes in policies by regulatory
agencies, fluctuations in interest rates, demand for loans in the Company's
market area and competition, all or some of which could cause actual results to
differ materially from historical earnings and those presently anticipated or
projected.
The Company wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made, and advises
readers that various factors, including regional and national economic
conditions, substantial changes in levels of market interest rates, credit and
other risks of lending and investment activities and competitive and regulatory
factors, could affect the Company's financial performance and could cause the
Company's actual results for future periods to differ materially from those
anticipated or projected.
The Company does not undertake, and specifically disclaims any obligation, to
update any forward-looking statements to reflect occurrences or unanticipated
events or circumstances after the date of such statements.
GENERAL
AmTrust Capital Corp. was incorporated under the laws of the State of Delaware
for the purpose of becoming the savings and loan holding company of
AmericanTrust Federal Savings Bank 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 September 30, 1998,
the Company had no significant assets except the equity investment in the Bank's
stock, cash and 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.
9
<PAGE>
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 and three branch offices, AmericanTrust serves communities in
Howard and Miami Counties, 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 $6.3 million in the three months ended September 30,
1998 from $58.1 million at June 30, 1998 to $64.4 million at September 30, 1998.
Cash and interest-bearing deposits increased $2.6 million, and investment
securities increased $4.3 million due to the use of cash received in the Bunker
Hill branch acquisition. Total loans decreased by $1.6 million due to principal
reductions.
Deposits increased to $54.0 million at September 30, 1998 from $46.9 million at
June 30, 1998. The net increase of $7.1 million was due to the Bunker Hill
acquisition, offset by a decrease in the use of public funds. FHLB advances
decreased to $2.4 million at September 30, 1998 from $3.1 million at June 30,
1998 as a result of principal payments.
Stockholders' equity decreased $214,000 between June 30, 1998 and September 30,
1998 as a result of a net loss for the quarter of $10,000, a reduction of net
unrealized gains on securities available for sale, net of tax, of $32,000, a
payment of dividends to shareholders of $25,000, and a $156,000 purchase of
treasury stock. This decrease was partially offset by earned ESOP shares of
$9,000.
COMPARISON OF OPERATING RESULTS FOR THE THREE-MONTH PERIOD
ENDED SEPTEMBER 30, 1998 AND 1997
General. The Company had a net loss of $10,000 for the three months ended
September 30, 1998 as compared to net income of $61,000 for the three months
ended September 30, 1997. The decrease of $71,000 is primarily as result of
increased legal expenses in connection with Bennett Funding Group, Inc. and
increased occupancy and data processing expenses due to the addition of Bunker
Hill and Kokomo branches which were not in operation during the three months
ended September 30, 1997.
10
<PAGE>
Net Interest Income. Net interest income decreased $24,000 to $441,000 for the
three-month period ended September 30, 1998 from $465,000 for the three-month
period ended September 30, 1997. The Company's avenge spread increased from
2.51% for the three-month period ended September 30, 1997 to 2.88% for the
three-month period ended September 30, 1998. The ratio of the Company's average
interest-earning assets to average interest-bearing liabilities decreased from
105.57% during the three-month period ended September 30, 1997 to 101.07% for
the three-month period ended September 30, 1998.
Interest/Income. Total interest income decreased by $100,000 to $1.1 million for
the three-month period ended September 30, 1998 from $1.2 million for the
three-month period ended September 30, 1997 due primarily to a decrease in the
average balance of interest-earning assets to $59.5 million for the three months
ended September 30, 1998 from $66.0 million for the three months ended September
30, 1997. Average yields on interest-earning assets decreased to 7.13% for the
three-month period ended September 30, 1998 from 7.42% for the three-month
period ended September 30, 1997.
Interest Expense. Interest expense decreased $140,000 to $621,000 for the three
months ended September 30, 1998 from $761,000 for the three months ended
September 30, 1997 primarily due to a decrease in the average interest-bearing
liabilities to $58.8 million for the three months ended September 30, 1998
compared to the $62.5 million for the three months ended September 30, 1997.
Average yields on interest-bearing liabilities also decreased to 4.26% for the
three-month period ended September 30, 1998 from 4.91% for the three-month
period ended September 30, 1997.
Provision for Losses on Loans. The provision for losses on loans decreased
$9,000 for the three months ended September 30, 1998 as compared to the three
months ended September 30, 1997 as a result of management's quarterly assessment
of classified assets, provision for loan losses and the portfolio as a whole. At
September 30, 1998 and at June 30, 1998, the allowance for losses on loans was
1.14% and 1.15% of total loans, respectively.
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 September 30, 1998, the book value of the Company's lease contracts
totaled $305,000. 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. Reserves of $216,000 have been recorded for
probable losses. The leases are currently on non-accrual status. BFGI continues
to service the lease contracts and has remitted $153,000 during the quarter
ending September 30, 1998, under the leadership of the court-appointed Trustee.
The Company is continuing to
11
<PAGE>
evaluate the allegations against BFGI and BLC and the effect that the bankruptcy
filing will have on 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 $14,000 for the three months ended
September 30, 1998 as compared to the three months ended September 30, 1997.
Increases in services charges on deposit accounts were offset by decreases in
commissions and other income.
Other Expense. Other expenses increased $106,000 to $611,000 for the three
months ended September 30, 1998 from $505,000 for the three months ended
September 30, 1997. The increase in the three-month period was primarily a
result of increased legal expenses in connection with Bennett Funding Group,
Inc. and increased occupancy and data processing expenses due to the addition of
Bunker Hill and Kokomo branches which were not in operation during the three
months ended September 30, 1997.
Income Tax Expense. Income tax expense decreased from a tax expense of $45,000
for the three months ended September 30, 1997 to a tax benefit of $19,000 for
the three months ended September 30, 1998 as a result of the decrease in pre-tax
income.
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 September 30, 1998 and June 30, 1998, cash and interest-bearing
deposits totaled $5.5 million and $2.9 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 institution's borrowings from
the FHLB to 20 times the amount paid for capital stock in the FHLB, subject to
regulatory capital
12
<PAGE>
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 September 30, 1998, the Bank had approximately $28.6
million of unused credit available to it under the above-mentioned borrowing
arrangement. At September 30, 1998, the Bank had borrowings of $2.4 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 September 30, 1998 and June 30, 1998 were 18.9%
and 8.8%, respectively.
At September 30, 1998 and June 30, 1998, the Bank had outstanding commitments to
originate loans of $461,000 and $250,000, 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 4% of
adjusted total assets. 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 September 30, 1998, the Bank's tangible and core capital both totaled $7.0
million, 10.8% of adjusted total assets, which exceeded the minimum tangible
requirement by $6.0 million and the minimum core requirement by $4.1 million.
The Bank's risk-based capital at September 30, 1998 totaled $5.6 million, or
14.1% of risk-weighted assets, which is $2.4 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
13
<PAGE>
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.
IMPACT OF THE YEAR 2000
The Company has conducted a comprehensive review of its computer systems to
identify applications that could be affected by the "Year 2000" issue, and has
developed an implementation plan to address the issue. The Company's data
processing is performed primarily in-house; however software and hardware
utilized is under maintenance agreements with third party vendors, consequently
the Company is very dependent on those vendors to conduct its business. The
Company has already contacted each vendor to request time tables for year 2000
compliance and expected costs, if any, to be passed along to the Company. To
date, the Company has been informed that its primary service providers
anticipate that all reprogramming efforts will be completed by December 31,
1999, allowing the Company adequate time for testing. Certain other vendors have
not yet responded, however, the Company will pursue other options if it appears
that these vendors will be unable to comply. Management does not expect these
costs to have a significant impact on its financial position or results of
operations however, there can be no assurance that the vendors' systems will be
2000 compliant, consequently the Company could incur incremental costs to
convert to another vendor. The Company has identified certain of its hardware
and software equipment that will not be Year 2000 compliant and intends to
purchase new equipment and software prior to March 31, 1999. These capital
expenditures are expected to total approximately $250,000.
14
<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. None.
(A) Exhibits
27. Financial Data Schedules
(B) A current report on Form 8-K was filed on August 13, 1998 to
report an amendment to the bylaws of the Company to require that
any proposals submitted by shareholders for inclusion in any of
the Company's proxy materials must be received at the Company's
main office no later than sixty (60) days after the end of the
Company's fiscal year.
15
<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: November 10, 1998 \s\ Bruce M. Borst
------------------------------------------
Bruce M. Borst, President, Chief
Executive Officer and Director
(Duly Authorized Officer)
Date: November 10, 1998 \s\ Deborah M. Huff
------------------------------------------
Deborah M. Huff, Treasurer and
Chief Financial Officer
(Principal Financial Officer)
16
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,309
<INT-BEARING-DEPOSITS> 3,163
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 8,790
<INVESTMENTS-CARRYING> 1,032
<INVESTMENTS-MARKET> 1,041
<LOANS> 41,431
<ALLOWANCE> 495
<TOTAL-ASSETS> 64,428
<DEPOSITS> 54,037
<SHORT-TERM> 690
<LIABILITIES-OTHER> 804
<LONG-TERM> 1,680
0
0
<COMMON> 6
<OTHER-SE> 7,211
<TOTAL-LIABILITIES-AND-EQUITY> 64,428
<INTEREST-LOAN> 855
<INTEREST-INVEST> 95
<INTEREST-OTHER> 112
<INTEREST-TOTAL> 1,062
<INTEREST-DEPOSIT> 554
<INTEREST-EXPENSE> 621
<INTEREST-INCOME-NET> 441
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 611
<INCOME-PRETAX> (29)
<INCOME-PRE-EXTRAORDINARY> (29)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
<YIELD-ACTUAL> 7.13
<LOANS-NON> 428
<LOANS-PAST> 0
<LOANS-TROUBLED> 616
<LOANS-PROBLEM> 2,750
<ALLOWANCE-OPEN> 518
<CHARGE-OFFS> 23
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 495
<ALLOWANCE-DOMESTIC> 495
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
