-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VS2nmdHydpDXTw/xAmQ1eGfbwpwvH+PsJFngkxhHY5aXmnc2MKIgbrNSMzpULHun eeiZ711zKLgg38IdmCgGOQ== 0001000301-97-000060.txt : 19971117 0001000301-97-000060.hdr.sgml : 19971117 ACCESSION NUMBER: 0001000301-97-000060 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMBANC HOLDING CO INC CENTRAL INDEX KEY: 0001000301 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 141783770 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-27036 FILM NUMBER: 97718915 BUSINESS ADDRESS: STREET 1: 11 DIVISION ST CITY: AMSTERDAM STATE: NY ZIP: 12010 BUSINESS PHONE: 5188427200 MAIL ADDRESS: STREET 1: PO BOX 669 CITY: AMSTERDAM STATE: NY ZIP: 12010 10-Q 1 FOR THE THREE MONTHS ENDED 9/30/97 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 1934. For the quarterly period ended September 30, 1997 ------------------ or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from to . ---------- ---------- Commission File Number: 0-27036 ------- Ambanc Holding Co., Inc. ----------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 14-1783770 - ------------------------------------- -------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 11 Division Street, Amsterdam, New York 12010-4303 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (518)842-7200 ----------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No Indicate the number of shares outstanding of each of the issuer's class of common stock, as of the latest practicable date. Class Outstanding at November 14, 1997 - ----------------------------- ----------------------------------- Common Stock, $.01 Par Value 4,306,418 AMBANC HOLDING CO., INC. AND SUBSIDIARIES FORM 10-Q September 30, 1997 - ----------------------------------------- Table of Contents ----------------- Part I. FINANCIAL INFORMATION --------------------- Item 1. Financial Statements (unaudited): Consolidated Interim Statements of Income for the three months and nine months ended September 30, 1997 and 1996............... 3 Consolidated Interim Statements of Financial Condition at September 30, 1997 and December 31, 1996........................ 4 Consolidated Interim Statements of Cash Flows for the nine months ended September 30, 1997 and 1996........................ 5 Summarized Notes to Consolidated Interim Financial Statements... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....................................... 9 Part II. OTHER INFORMATION ----------------- Item 6. Exhibits and Reports on Form 8-K................................ 19 SIGNATURES.................................................................. 21 EXHIBITS INDEX.............................................................. 22
Part 1. FINANCIAL INFORMATION --------------------- Item 1. - ------- AMBANC HOLDING CO., INC. AND SUBSIDIARIES Consolidated Interim Statements of Income (unaudited) (dollars in thousands, except per share amounts) - ----------------------------------------------------- The Nine Months Three Months Ended September 30, Ended September 30, 1997 1996 1997 1996 -------- -------- -------- -------- Interest and dividend income: Loans ................................................ $ 15,359 $ 15,263 $ 5,415 $ 5,278 Securities available for sale ........................ 10,394 7,218 3,237 3,504 Federal Funds Sold ................................... 377 725 119 10 Federal Home Loan Bank stock ......................... 145 96 56 33 -------- -------- -------- -------- Total interest income .............................. 26,275 23,302 8,827 8,825 -------- -------- -------- -------- Interest Expense: Deposits ............................................. 10,017 9,372 3,566 3,052 Borrowings ........................................... 4,349 2,165 1,380 1,542 -------- -------- -------- -------- Total interest expense ............................. 14,366 11,537 4,946 4,594 -------- -------- -------- -------- Net interest income ................................ 11,909 11,765 3,881 4,231 Provision for loan losses ............................... 863 2,610 225 549 -------- -------- -------- -------- Net interest income after provision for loan losses .................................. 11,046 9,155 3,656 3,682 -------- -------- -------- -------- Non-interest income: Service charges on deposit accounts .................. 580 549 204 200 Net gains (losses) on securities transactions ........ 505 (89) 328 9 Other ................................................ 196 170 46 57 -------- -------- -------- -------- Total non-interest income .......................... 1,281 630 578 266 -------- -------- -------- -------- Non-interest expense: Salaries, wages and benefits ......................... 4,418 3,624 1,527 1,163 Occupancy and equipment .............................. 1,131 996 420 323 Data processing ...................................... 692 627 235 201 Federal deposit insurance premium .................... 29 2 10 1 Correspondent bank processing fees ................... 95 87 31 30 Real estate owned and repossessed assets expenses, net 291 906 48 623 Professional fees .................................... 365 498 108 107 Other ................................................ 2,153 1,881 667 603 -------- -------- -------- -------- Total non-interest expenses ........................ 9,174 8,621 3,046 3,051 -------- -------- -------- -------- Income before taxes .................................... 3,153 1,164 1,188 897 Income tax expense ...................................... 1,193 396 452 325 -------- -------- -------- -------- Net income ......................................... $ 1,960 $ 768 $ 736 $ 572 ======== ======== ======== ======== Net income per common share $ 0.49 $ 0.16 $ 0.19 $ 0.12 ======== ======== ======== ======== Weighted average shares outstanding 3,977,302 4,883,859 3,897,275 4,662,564 ========= ========= ========= ========= See accompanying notes to consolidated interim financial statements
3 AMBANC HOLDING CO., INC. AND SUBSIDIARIES Consolidated Interim Statements of Financial Condition (unaudited)(dollars in thousands) - ------------------------------------------------------- Sept. 30, Dec. 31, 1997 1996 ---------- --------- Assets ------ Cash and due from banks ............................... $ 10,719 $ 6,387 Federal funds sold .................................... --- 4,500 -------- -------- Cash and cash equivalents ........................ 10,719 10,887 Securities available for sale, at fair value .......... 210,562 200,539 Loans receivable, net of unamortized fees ............. 280,546 251,532 Allowance for loan losses ........................ (4,147) (3,438) -------- -------- Loans receivable, net ............................ 276,399 248,094 Accrued interest receivable ........................... 2,745 3,201 Premises and equipment, net ........................... 3,254 2,784 Federal Home Loan Bank of New York stock, at cost ..... 3,291 2,029 Real estate owned and repossessed assets .............. 228 715 Other assets .......................................... 2,669 4,172 Due from brokers ...................................... 19,442 --- -------- -------- Total assets ..................................... $529,309 $472,421 ======== ======== Liabilities and Shareholders' Equity ------------------------------------ Liabilities: Deposits ........................................... $330,658 $298,082 Advances from borrowers for taxes and insurance .... 663 1,703 Advances from FHLB ................................. 4,000 6,000 Other borrowed funds ............................... 99,950 102,780 Accrued interest payable ........................... 928 1,077 Accrued expenses and other liabilities ............. 1,835 1,261 Due to brokers ..................................... 31,071 --- -------- -------- Total liabilities ................................ 469,105 410,903 Shareholders' equity: Preferred stock $.01 par value. Authorized 5,000,000 shares; none outstanding at September 30, 1997 and December 31, 1996 .................................. -- -- Common stock $.01 par value. Authorized 15,000,000 shares; 5,422,250 shares issued at September 30, 1997 and December 31, 1996 ..... 54 54 Additional paid in capital ......................... 52,294 52,128 Retained earnings,substantially restricted ......... 25,874 24,436 Treasury Stock, at cost (1,115,832 shares at September 30, 1997 and 1,030,227 at December 31, 1996) ............................... (12,585) (11,208) Common stock acquired by ESOP ...................... (3,427) (3,812) Unearned RRP shares issued ......................... (1,805) -- Net unrealized loss on securities available for sale (201) (80) -------- -------- Total shareholders' equity ....................... 60,204 61,518 Total liabilities and shareholders' equity ....... $529,309 $472,421 ======== ======== See accompanying notes to consolidated interim financial statements 4 AMBANC HOLDING CO., INC. AND SUBSIDIARIES Consolidated Interim Statements of Cash Flows (unaudited)-(dollars in thousands) - --------------------------------------------- For the Nine Months Ended September 30, ------------------------- 1997 1996 Increase (decrease) in cash and cash equivalents: ---- ---- Cash flows provided (used) by operating activities: Net income ........................................... $ 1,960 $ 768 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation ....................................... 439 374 Amortization of computer software costs ............ 34 46 Provision for loan losses .......................... 863 2,610 ESOP compensation expense .......................... 551 325 Loss on sale and disposal of fixed assets/software .................................. ---- 64 Net loss (gains) on sale and redemptions of securities available for sale .................... (505) 89 Net loss on sale and writedowns of other real estate owned and other repossessed assets ........ 186 575 Net amortization on securities ..................... 230 400 Decrease (increase)in accrued interest receivable and other assets ...................... 2,041 (2,291) Decrease (increase) in due from broker ............. (19,442) 18,128 Increase (decrease) in accrued expenses and other liabilities ................................ 425 (664) Increase (decrease) in due to broker ............... 31,071 (46,880) Decrease in advances from borrowers for taxes and insurance .......................... (1,040) (805) -------- -------- Net cash provided (used) by operating activities ................... 16,813 (27,261) Cash flows from investing activities: Proceeds from sales and redemptions of securities available for sale .................... 131,895 30,997 Purchases of securities available for sale .........(179,136) (182,369) Proceeds from principal paydowns and maturities of securities available for sale ...... 37,277 18,025 Purchase of FHLB stock ............................. (1,262) (137) Net increase in loans made to customers ............ (29,326) (26,543) Capital Expenditures ............................... (909) (201) Expenditures Computer Software ..................... (22) (9) Proceeds from Fixed Asset Sale ..................... ---- 25 Proceeds from Sale of other real estate owned and other repossessed assets ..................... 459 729 -------- -------- Net cash used by investing activities ............................. (41,024) (159,483) 5 AMBANC HOLDING CO., INC. AND SUBSIDIARIES Consolidated Interim Statements of Cash Flows, Continued (unaudited-(dollars in thousands) - ----------------------------------------------- For the Nine Months Ended September 30, ------------------------- 1997 1996 ---- ---- Cash flows from financing activities: Purchase of Treasury Stock ............................. (1,377) (5,474) Purchase of Recognition & Retention Plan Shares ........ (2,111) ---- Dividend Paid .......................................... (215) ---- Net increase (decrease) in deposits .................... 32,576 (11,248) Advances (repayments) on FHLB borrowings, net .......... (2,000) 22,500 Increase (decrease) in other borrowed funds ............ (2,830) 99,890 -------- -------- Net cash provided by financing activities 24,043 105,668 -------- -------- Net increase (decrease) in cash and cash equivalents ... (168) (81,076) Cash and cash equivalents at beginning of year ......... 10,887 84,613 -------- -------- Cash and cash equivalents at end of period .............$ 10,719 $ 3,537 ======== ======== Supplemental disclosures of cash flow information- cash paid during the year for: Interest ................. $ 14,516 $ 10,675 ======== ======== Income Taxes ............. $ 1,045 $ 736 ======== ======== Noncash investing activity: Net reduction in loans receivable resulting from the transfer to real estate owned and other repossessed assets .................................... $ 157 $ 1,371 ======== ======== Net decrease in unrealized loss on investment securities and mortgage-backed securities, available for sale, net of deferred tax effect ........ ($ (121) $ 1,272 ======== ======== See accompanying notes to consolidated interim financial statements 6 SUMMARIZED NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS ------------------------------------------------------------- (1) In Management's opinion, the interim financial information, which is unaudited, reflects all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the financial information as of and for the three and nine month periods ended September 30, 1997 and September 30, 1996, in conformity with generally accepted accounting principles. These financial statements should be read in conjunction with Ambanc Holding Co., Inc.'s ("the Company" herein) 1996 Annual Report on Form 10-K. (2) Amounts in the prior periods' consolidated interim financial statements are reclassified whenever necessary to conform to current period presentations. (3) Net income per common share for the three months and nine months ended September 30, 1997 and 1996 has been determined by dividing net income by the weighted average number of shares of common stock outstanding for the period. Shares of common stock outstanding are reduced by the company's Employee Stock Ownership Plan (ESOP) shares that have not been committed to be released in accordance with SOP 93-6, "Employers' Accounting for Employee Stock Ownership Plans. The weighted average number of shares of common stock outstanding for the three months and nine months ended September 30, 1997 were 3,897,275 and 3,977,302, respectively. For the corresponding periods in 1996, the weighted average number of shares of common stock outstanding were 4,662,564 and 4,883,859, respectively. The effect of outstanding stock option grants issued under the 1997 Stock Option and Incentive Plan (SOP) and shares awarded under the Recognition and Retention Plan (RRP) are not material to the calculation of net income per share. The RRP and SOP were ratified for adoption by the Company's shareholders at the annual meeting of shareholders held May 23, 1997 (the grant date). The Board of Directors believes that it is appropriate for the Company to have a flexible and comprehensive SOP which permits the granting of a variety of long-term incentive awards as a means of enhancing and encouraging the recruitment and retention of those individuals on whom the continued success of the Company most depend. As a result of the adoption of the SOP, options to purchase an aggregate of 373,974 shares of common stock were granted to directors and officers at an exercise price of $13.75 per share, representing the fair market value of the stock on the grant date, which leaves available 168,251 shares for future grants. The options vest over a four year period at a rate of 25% annually, commencing on the one year anniversary of the grant date. The RRP is designed to provide directors, officers and employees with a proprietary interest in the Company in a manner designed to encourage such individuals to remain with the Company and the Bank. Pursuant to the ratification of the RRP by shareholders, 216,890 shares of common stock were made available for awards. Concurrent with the approval of the RRP, 131,285 shares were awarded and vest over a four year period at a rate of 25% annually, commencing on the one year anniversary of the grant date. An aggregate of 85,605 shares are available for future awards. (4) In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (Statement 128), which establishes standards for computing and presenting earnings per share (EPS). This Statement simplifies the standards for computing EPS making them comparable to international EPS standards and supersedes Accounting Principals Board Opinion No. 15, "Earnings Per Share" and related interpretations. Statement 128 replaces the presentation of primary EPS with the presentation of basic EPS. It also requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the diluted EPS calculation. 7 Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, or resulted in the issuance of common stock that then shared in the earnings of the entity. This Statement is effective for financial statements issued for periods ending after December 15, 1997, including interim periods. Earlier application is not permitted. This statement requires restatement of all prior-period EPS data presented. The Company will present its EPS data in accordance with Statement 128 as of December 31, 1997. Management anticipates that the effect of the adoption of this Statement will not have a material effect on the Company's consolidated financial statements. (5) Recent Accounting Pronouncements In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (Statement 130), which establishes standards for reporting and display of comprehensive income and its components in financial statements. Statement 130 states that comprehensive income includes reported net income of a company, adjusted for items that are currently accounted for as direct entries to equity, such as the net unrealized gain or loss on securities available for sale, foreign currency items, and minimum pension liability adjustments. This statement is effective for both interim and annual periods beginning after December 15, 1997. As required, the Company will adopt Statement 130 in the first quarter in 1998 and will report and display comprehensive income in accordance with the new statement. In June 1997, The FASB issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" (Statement 131), which establishes standards for reporting by public companies about operating segments of their business. Statement 131 also establishes standards for related disclosures about products and services, geographic areas, and major customers. This statement is effective for periods beginning after December 15, 1997. Management does not anticipate that the adoption of this statement will have a material effect on the Company's consolidated financial statements. 8 Item 2. - ------- Management's Discussion and Analysis of Financial Condition and Results of Operations ----------------------------------------------------------- The following discussion and analysis should be read in conjunction with the consolidated interim financial statements and related notes (unaudited) and with the statistical information and financial data appearing in this report as well as the Company's 1996 Annual Report on Form 10-K. When used in this quarterly Report on Form 10-Q, the words or phrases "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 certain risks and uncertainties - including, 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, that 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. The Company wishes to advise readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not undertake - and specifically disclaims any obligation - - to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. The Company has in place a committee that is overseeing the Year 2000 (Y2K) computer program issues. The committee has prepared a specific action plan to ensure that the Company will not face any business interruption. The plan is designed to be comprehensive and yet flexible enough to change as more issues are brought forward. The plan has been presented to the board of directors' Audit Committee and through them to the Company's board of directors. The Audit Committee will receive reports on a quarterly basis apprising them of the Company's progress in resolving the Year 2000 issues and/or problems that the Y2K committee has encountered. The Company is in compliance with the Emerging Issues Task Force's (EITF) pronouncement in July 1996 to charge to expense as incurred the costs associated with Year 2000 projects. For the nine months ended September 30, 1997, Year 2000 expenses were not significant. On the basis of the work that the committee has completed through October 31, 1997, the Company does not anticipate that the Year 2000 issues will result in a material cost to address the issues nor does it anticipate incomplete or untimely resolution of its Year 2000 issues. 9 General - ------- The Company's results of operations are dependent primarily on net interest income, which is the difference between the income earned on its loan and investment portfolios and its cost of funds, consisting of the interest paid on deposits and borrowings. Results of operations are also affected by the Company's provision for loan losses, net expenses on real estate owned and other repossessed assets and by general economic and competitive conditions, particularly changes in interest rates, government policies and actions of regulatory authorities. Future changes in applicable law, regulations or government policies may materially impact the financial condition and results of operations of the Company and the Bank. The Company recorded net income of $736,000 for the quarter ended September 30, 1997, or $0.19 per share, and earnings for the nine months ended September 30, 1997, of $2.0 million, or $0.49 per share, compared to earnings of $572,000, or $0.12 per share, and $768,000, or $0.16 per share, in the corresponding periods in 1996, respectively. The improvement in third quarter 1997 earnings compared to 1996 was due, in part, to an increase by $319,000 in net gains on sales of securities available for sale (securities AFS). Also contributing to the improved earnings was a decrease in the provision for loan losses by $324,000. Partially offsetting these positive changes was a reduction in net interest income by $350,000, or 8.3%, to $3.9 million for the third quarter of 1997 from $4.2 million in the third quarter of 1996. The improvement in net income by $1.2 million to $2.0 million for the nine months ended September 30, 1997, compared to the corresponding 1996 period, was primarily the result of a decrease by $1.7 million in the provision for loan losses. In the first nine months of 1996, the Company incurred a charge to provision for loan losses of $1.5 million related to a lending relationship with the Bennett Funding Group, Inc., a lease finance company that filed for Chapter 11 bankruptcy protection on March 29, 1996 (see "Asset Quality," herein). Also contributing to the improvement in earnings were increases in net gains on sales of securities AFS, net interest income before the provision for loan losses, and noninterest income. These positive factors were partially offset by increases in noninterest expenses and income tax expense. The level of non-performing assets declined from $5.6 million at December 31, 1996, to $3.8 million at September 30,1997. As of September 30, 1997, non-performing assets were 0.73% of total assets compared to 1.18% at December 31, 1996. The Company's ratios for allowance for loan losses to non-performing loans and to total loans at September 30, 1997, were 114.8% and 1.49%, respectively, compared to December 31, 1996, when the ratios were 70.5% and 1.37% , respectively. See "Asset Quality" herein. 10 RESULTS OF OPERATIONS --------------------- Comparison of Operating Results for the Quarters Ended September 30, 1997 and 1996 Net Interest Income - ------------------- Net interest income before provision for loan losses for the quarter ended September 30, 1997, compared to the like period in 1996, declined by $350,000, or 8.3%, to $3.9 million. The decline resulted primarily from an increase in total average interest-bearing liabilities by $13.9 million to $396.9 million, mainly due to an increase in average certificates of deposit, which grew by $31.8 million. The growth in certificates of deposit was accompanied by an increase in the average rate paid on these deposits by 21 basis points to 5.77%, compared to the prior year's third quarter, due mainly to increases in local market rates from 1996 to 1997. Total average interest-earning assets decreased by $1.7 million, or 0.4%, to $469.7 million in the third quarter of 1997, as compared to the like 1996 quarter. A decline of $16.8 million in average securities AFS, due mainly to the reduction in borrowings related to securities sold under agreements to repurchase, more than offset increases by $5.3 million and $10.1 million in average loans and average all other interest-earning assets (primarily federal funds sold ), respectively. The increase in certificates of deposit was partially offset by a decline in total average borrowed funds by $13.3 million to $89.7 million from $102.9 million in 1996. Other average interest-bearing deposits also declined, decreasing by $4.6 million, or 3.5%, in the quarter ended September 30, 1997 as compared to the same period in 1996.. Management believes that the decline in other interest-bearing deposits resulted from depositors shifting funds into higher yielding certificates of deposit from lower yielding savings and money market accounts. The total cost of interest-bearing liabilities increased by 17 basis points to 4.94%, which more than offset a one (1) basis point increase in the average yield on interest-earning assets thereby reducing the Company's net interest rate spread by 16 basis points to 2.51% from 2.67% in the quarter ended September 30, 1996. The Company's net interest margin also narrowed in the three months ended September 30, 1997, compared to the corresponding period in 1996, declining by 29 basis points to 3.28%. The decrease in the net interest margin was attributable to a higher proportion of interest-earning assets being supported by interest-bearing liabilities in 1997 than in 1996, 84.5% compared to 81.2%. Ambanc Holding Co., Inc. operates in an environment of intense competition for the public's investable funds and loan business. The competition in today's environment is not limited to other local banks and thrifts, but also includes a myriad of financial services providers that are located both within and outside the Company's local market area. Due to this heightened level of competition to attract and retain customers, i.e., grow the customer base, the Company must continue to offer competitive interest rates on loans and deposits. As a consequence of these competitive pressures, from time-to-time, the relative spreads between interest rates earned and interest rates paid will tighten , exerting downward pressure on net interest income, net interest rate spread and the net interest margin. This is especially true during periods when the growth in interest-earning assets lags the growth in interest-bearing liabilities, the environment that the Company has experienced in the first nine months of 1997 and that manifested itself in the third quarter's decrease in net interest income as compared to the same period in 1996. However, management does not want to discourage, by offering noncompetitive interest rates, the creation of new 11 customer relationships or jeopardize existing relationships thereby curtailing customer base and loan growth and the attendant benefits to be derived from them. Management believes that the longer range benefits to be derived from this position will outweigh the shorter term costs associated with attracting, cross-selling and retaining an expanding customer base. The Company's growing customer base provides Ambanc with the potential for future, profitable customer relationships, which will, in turn, increase the value of the franchise. Provision for loan losses - ------------------------- The provision for loan losses declined by $324,000 to $225,000 for the quarter ended September 30, 1997, compared to the same quarter in 1996. The lower expense was attributable to the improvement in the quality of the Company's loan portfolio and the level of the allowance for loan losses at September 30, 1997, in relation to total loans and to non-performing loans. Noninterest income - ------------------ Total noninterest income increased by $312,000 to $578,000 from the third quarter 1996 level. The improvement in total noninterest income was primarily the result of an increase in gains on the sales of securities available for sale in the third quarter of 1997, an increase of $319,000 compared to 1996. All other noninterest income decreased by $7,000, primarily due to a decline in the amount of commissions received on the sales of mutual funds and annuity contracts by the Company's wholly owned subsidiary, ASB Insurance Agency, Inc. Noninterest expense - ------------------- Total noninterest expense for the three months ended September 30, 1997, decreased by $5,000, or 0.2%, compared to 1996. The decrease was due primarily to a decline in real estate owned and repossessed asset expenses, net, by $575,000. The reduction in these expenses resulted primarily from the bulk sales of problem loans and other real estate owned in the fourth quarter of 1996. Partially offsetting the decrease in real estate owned and repossessed asset expenses, net, was an increases in salaries, wages and benefits by $364,000 with $148,000 of the total increase attributable to increased accruals for the Company's ESOP and the newly adopted RRP related to employees during the quarter ended September 30, 1997. Also contributing to the total increase in salaries, wages and benefits were additions to staff, mainly to support the opening in the second quarter of 1997 of three new branch offices. Salaries and wages related to the new branches totaled approximately $92,000 during the quarter ended September 30, 1997. Income taxes - ------------ Income tax expense increased by $127,000 to $452,000 due to the improvement in the Company's income before taxes to $1.2 million from $897,000 in the third quarter of 1996. 12 Comparison of Operating Results for the Nine Months Ended September 30, 1997 and 1996 Net interest income - ------------------- Net interest income before provision for loan losses increased by $144,000, or 1.2%, to $11.9 million for the nine months ended September 30,1997, compared to the corresponding period in 1996. The improvement in net interest income was attributable to an increase in total average interest-earning assets by $48.6 million to $466.9 million, primarily funded by increases in the average volumes of certificates of deposit and borrowed funds by $18.2 million and $47.1 million, respectively. The growth in total average interest-earning assets was attributable primarily to an increase in average securities AFS by $51.5 million to $191.3 million and average loan growth of $4.3 million to $282.3 million, partially offset by an $8.2 million decline in the average volume of federal funds sold to $10.2 million. The total average yield on interest-earning assets increased by 8 basis points to 7.52% for the nine months ended September 30, 1997 from 7.44% in the 1996 period. These positive effects were partially offset by higher funding costs attributable primarily to the increases in the average volumes of certificates of deposit and borrowed funds. Provision for loan losses - ------------------------- The decrease by $1.7 million to $863,000 in the provision for loan losses for the nine-months ended September 30, 1997, compared to 1996, was due mainly to a $1.5 million charge taken during the first nine months of 1996 pertaining to the Bank's aggregate lending relationship with the Bennett Funding Group, a lease finance company that filed for Chapter 11 bankruptcy protection on March 29, 1996. See "Asset Quality" herein. Noninterest income - ------------------ Total noninterest income increased by $651,000 to $1.3 million for the nine-months ended September 30, 1997, compared to 1996, primarily due to an increase in net gains on sales of securities AFS by $594,000 to $505,000 compared to a net loss of $89,000 in the 1996 period. Also contributing to the improvement in total noninterest income were increases in service charges on deposit accounts, mainly NSF fees, and other noninterest income by $31,000 and $26,000, respectively. The increase in other noninterest income resulted primarily from the partial recovery of $25,000 against the prior charge-off of a capital debenture issued by Nationar and to an increase by $9,000 in commissions on sales of annuities and mutual funds through the Company's subsidiary, ASB Insurance Agency, Inc. 13 Noninterest expense - ------------------- Total noninterest expense increased by $553,000 to $9.2 million for the nine-months ended September 30, 1997, compared to the similar period in 1996. The increase resulted primarily from an increase in salaries, wages and benefits by $794,000, $332,000 of which resulted from increased accruals for the Company's ESOP and other stock based compensation. Also contributing to the total increase in salaries, wages and benefits were additions to staff, mainly to support the opening of three new branch offices in the second quarter of 1997, an increase in medical insurance premiums by $28,000 and normal cost-of-living and merit increases. The salaries and wages related to the new branches totaled approximately $235,000 for the nine months ended September 30, 1997. Income taxes - ------------ The Company recorded an expense of $1.2 million on pretax income of $3.2 million for the nine months ended September 30, 1997, compared to pretax income of $1.2 million in the 1996 period. 14 FINANCIAL CONDITION ------------------- The Company's total assets at September 30, 1997, were $529.3 million, an increase of $56.9 million, or 12.0%, compared to total assets of $472.4 million at December 31, 1996. The growth in total assets was primarily attributable to an increase in loans receivable, net of unamortized fees, of $29.0 million and to an increase in securities available for sale by $10.0 million, partially offset by a decline of $4.5 million in federal funds sold. The growth in total assets was primarily funded by an increase in total deposits of $32.6 million, or 10.9%, to $330.7 million, partially offset by a decrease in advances from the FHLB and other borrowed funds of $4.8 million. Due from brokers and due to brokers, accounts that recognize securities transactions that have not been settled as of the financial statement date, increased by $19.4 million and $31.1 million, respectively. . Total shareholders' equity decreased by $1.3 million from December 31, 1996, to $60.2 million at September 30,1997, due primarily to repurchases of the Company's common stock shares aggregating $3.5 million, $2.1 million for RRP shares and $1.4 million in treasury shares, which more than offset a $1.7 million increase, net of the Company's first regular cash dividend totaling $216,000 that was paid during the third quarter, in retained earnings. Also contributing to the decline in total equity was an increase by $121,000 in tax-effected unrealized losses on securities available for sale. At September 30, 1997, the book value per share on 4,306,418 common shares outstanding was $13.98 compared to $14.01 at December 31, 1996, on 4,392,023 shares outstanding. Common shares outstanding include unallocated ESOP shares and unearned RRP shares. Excluding the tax-effected unrealized losses on securities AFS, the book value per share at September 30, 1997 was $14.03 compared to $14.02 at December 31, 1996. Liquidity and Funding - --------------------- The Company's primary sources of funds for operations are deposits from its market area, principal and interest payments on loans, mortgage-backed securities and investment securities, proceeds from the sale and maturity of securities, advances from the FHLB of New York and other borrowed funds, primarily securities sold under agreements to repurchase. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments, primarily mortgage prepayments, are greatly influenced by general interest rates, economic conditions, and competition. The primary investing activities of the Company are the origination of loans and the purchase of securities. During the nine months ended September 30, 1997, the Company's loan originations totaled $73.3 million. The Company purchased securities AFS during the same period of $179.1 million. The primary financing activity of the Company is the attraction of deposits. During the nine months ended September 30, 1997, total deposits increased by $32.6 million of which $6.6 million was attributable to the three branch offices opened in May 1997. Management believes that the increase in deposits primarily resulted from the relatively more attractive rates offered on certificates of deposit by the Company in its local market area compared to other interest-earning investment alternatives available to depositors during the nine months ended September 30, 1997. The Bank is required to maintain minimum levels of liquid assets as defined by OTS regulations. This requirement, which may be varied by the OTS depending upon economic conditions and deposit flows, is based upon a percentage of deposits and short-term borrowings. The required minimum liquidity ratio is currently 5% and the short-term liquidity ratio is 1%. The Bank's average daily 15 liquidity ratio for the month of September 1997 was 8.4%, and its short-term liquidity ratio for the same month was 3.4%. The Company's most liquid assets are cash and cash equivalents, which consist of federal funds sold and bank deposits. The level of these assets is dependent on the Bank's operation, financing, and investing activities during any given period. At September 30, 1997, cash and cash equivalents totaled $10.7 million, compared to $10.9 million at December 31, 1996. The Bank anticipates that it will have sufficient funds available to meet its current commitments. At September 30, 1997, the Bank had commitments to originate loans of $5.9 million as well as undrawn commitments of $6.5 million on home equity and other lines of credit. Certificates of deposit which are scheduled to mature in one year or less at September 30, 1997, totaled $126.4 million. Management believes that a significant portion of such deposits will remain with the Bank. However, if the Bank is not able to maintain its historical retention rate on maturing certificates of deposit, it would consider employing one or more of the following options: increase its borrowed funds position to compensate for the deposit outflows; increase the rates it offers on these deposits in order to increase the retention rate on maturing CDs and/or to attract new deposits; or, attempt to increase certificates of deposit through the use of deposit brokers. Depending on the level of market interest rates at the CD renewal dates, the implementation of one or more of these options could result in higher or lower levels of net interest income and net earnings. The Company also has a need for, and sources of, liquidity. Liquidity is required to fund its operating expenses, as well as for the payment of any dividends to stockholders. The primary source of liquidity on an ongoing basis is dividends from the Bank. To date, no dividends have been paid from the Bank to the Company. Capital - ------- Federally insured savings institutions are required to maintain a minimum level of regulatory capital. The OTS has established capital standards, including a tangible capital requirement, a leverage ratio (or core capital) requirement and a risk-based capital requirement applicable to such savings associations. These capital requirements must be generally as stringent as the comparable capital requirements for national banks. The OTS is also authorized to impose capital requirements in excess of these standards on individual associations on a case-by-case basis. At September 30, 1997, the Bank had $48.6 million of tangible and core capital, respectively, or 9.3% of adjusted total assets, which was approximately $40.7 million and $32.9 million above the minimum requirements of 1.5% and 3.0%, respectively, of the adjusted total assets in effect on that date. On September 30, 1997, the Bank had risk-based capital of $51.6 million (including $48.6 million in core capital and $3.0 million in qualifying supplementary capital) or 21.9% of risk-weighted assets of $235.8 million. The Bank's risk-weighted capital was $32.7 million above the 8.0% requirement in effect on that date. ASSET QUALITY ------------- Non-performing assets - --------------------- The table below sets forth the amounts and categories of non-performing assets in the Company's loan portfolio at the dates indicated. A loan is placed on non-accrual status when the loan is more than 90 days delinquent (except for FHA insured and VA guaranteed loans) or when the collection of principal and/or interest in full becomes doubtful. When loans are designated as non-accrual, all 16 accrued but unpaid interest is reversed against current period income and, as long as the loan remains on non-accrual status, interest is recognized only when received. Accruing loans delinquent 90 days or more include FHA insured loans, VA guaranteed loans, and loans that are in the process of negotiating a restructuring with the Bank, excluding troubled debt restructurings (TDRs), or where the Bank has been notified by the borrower that the outstanding loan balance plus accrued interest and late fees will be paid-in-full within a relatively short period of time from the date of such notification. Foreclosed assets includes assets acquired in settlement of loans. September 30 December 31 1997 1996 ------------- ------------ (In thousands) Non-accruing loans: One-to- four-family ................... $1,079 $ 259 Multi-family .......................... --- --- Commercial real estate ................ 191 339 Consumer .............................. 286 256 Commercial Business ................... 564 2,269 ------ ------ Total ............................... 2,120 3,123 ------ ------ Accruing loans delinquent more than 90 days: One-to-four family .................... 339 151 Multi-family .......................... --- --- Commercial real estate ................ 14 568 Consumer .............................. 44 6 Commercial Business ................... 156 - ------ ------ Total ............................... 553 725 ------ ------ Troubled debt restructured loans: One-to four-family .................... 86 88 Multi-family .......................... 35 38 Commercial real estate ................ 763 781 Consumer .............................. - 56 Commercial Business ................... 56 68 ------ ------ Total ............................... 940 1,031 ------ ------ Total non-performing loans ............... 3,613 4,879 ------ ------ Foreclosed assets: One-to four-family .................... --- 194 Multi-family .......................... 188 282 Commercial real estate ................ --- --- Consumer .............................. 39 239 Commercial Business ................... - - ------ ------ Total ............................... 227 715 ------ ------ Total non-performing assets .............. $3,840 $5,594 ====== ====== Total as a percentage of total assets .... 0.73% 1.18% 17 Since December 31, 1996, no material additions were made to non-performing assets and, as detailed in the above table, total non-performing assets have declined. As previously mentioned, the Company has a lending relationship with the Bennett Funding Group, Inc., a lease finance company that filed for Chapter 11 bankruptcy protection. At September 30, 1997, the aggregate balance outstanding on this relationship was approximately $337,000, a $3.3 million reduction from the original balance of $3.6 million as the result of a partial charge-off in the fourth quarter of 1996 of $1.7 million and the receipt of approximately $1.6 million during the nine months ended September 30, 1997 under the terms of a settlement agreement entered into with the bankruptcy trustee. On the basis of the terms specified in the settlement agreement, management believes that no significant additional provisions or charge-offs on this relationship will be necessary in the future. In addition, as of September 30, 1997, the Company had foreclosed multi-family assets of $188,000 consisting of one property: a three-story, 54-unit, student housing project located in Morrisville, New York. A purchase proposal on this property has been accepted contingent upon a closing within 60 days. On the basis of the most recent offer, less estimated selling costs, the asset has been written-down by $94,000 since December 31, 1996. The property encroachment dispute discussed in the March 31, 1997 Form 10-Q has been resolved. Allowance for Loan Losses - ------------------------- The allowance for loan losses is established through a provision for loan losses based on management's evaluation of the risk inherent in its loan portfolio and changes in the nature and volume of its loan activity, including those loans which are being specifically monitored by management. Such evaluation, which includes a review of loans for which full collectibility may not be reasonably assured, considers among other matters, the estimated fair value of the underlying collateral for collateral dependent loans, the net present value of estimated future cash flows if the loan is not collateral dependent, economic conditions, historical loan loss experience, and other factors that warrant recognition in providing for an adequate loan loss allowance. Management believes the allowance for loan losses to be adequate. 18 The following table sets forth an analysis of the Company's allowance for loan losses. For the nine months ended September 30, 1997 1996 -------- -------- (In thousands) Balance at beginning of period .............. $3,438 $2,647 Charge-offs: One- to four-family .................... (11) (120) Multi Family ........................... (12) 0 Commercial Real Estate ................. (50) (28) Consumer ............................... (254) (372) Commercial Business .................... (260) (69) ------ ------ Total Charge offs ................... (587) (589) Recoveries: One- to four-family .................... 1 9 Multi Family ........................... 0 0 Commercial Real Estate ................. 4 0 Consumer ............................... 46 39 Commercial Business .................... 382 0 ------ ------ Total Recoveries .................... 433 48 Net Charge-offs ............................. (154) (541) Provisions charged to operations ............ 863 2,610 ------ ------ Balance at end of period .................... 4,147 4,716 ====== ====== Ratio of net charge-offs during the period to average loans outstanding during period ................... 0.06% 0.20% Ratio of net charge-offs during the period to average non-performing assets ....................... 3.89% 3.34% 19 Part II - Other Information - --------------------------- Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (a) Exhibits as required by Item 601 of Regulation S-K. Exhibit number 27, Financial Data Schedule (b) Reports on Form 8-K Current report on Form 8-K was filed on November 10, 1997 for October 24, 1997 press release regarding Ambanc Holding Co., Inc.'s earnings for the three and nine months ended September 30, 1997. 20 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) 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. AMBANC HOLDING CO., INC. /s/ Robert J. Brittain - ---------------------- Robert J. Brittain President and Chief Executive Officer (Principal Executive Officer) Date: November 14, 1997 /s/ Harold A. Baylor, Jr. - ------------------------- Harold A. Baylor, Jr. Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) Date: November 14, 1997 21 EXHIBIT INDEX Exhibit 27 Financial Data Schedule - ----------------------------------- 22 EX-27 2 FDS -- 09/30/97
9 THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997 OF AMBANC HOLDING CO., INC. AND ITS SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 9-mos DEC-31-1997 SEP-30-1997 9005 1714 0 0 210562 0 0 280546 4147 529309 330658 60950 34497 43000 0 0 54 60150 529309 15359 10394 522 26275 10017 14366 11909 863 505 9174 3153 3153 0 0 1960 0.49 0.49 3.41 2120 553 940 4334 3438 587 433 4147 4147 0 0
-----END PRIVACY-ENHANCED MESSAGE-----