FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1996
Commission File Number: 0-10710
AMBANC CORP.
(exact name of registrant as specified in its charter)
INDIANA 35-1525227
(State or other jurisdiction (I.R.S. Employer ID No.)
of incorporation or
organization)
302 Main Street
P.O. Box 556
Vincennes, Indiana 47591-0556
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number,
including area code (812) 885-6418
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.
Yes: X No:
3,158,747 common shares of stock were outstanding as of
November 13, 1996.
PAGE
AMBANC CORP.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at
September 30, 1996 (unaudited) and
December 31, 1995
Consolidated Statements of Income for
nine months and three months ended
September 30, 1996 and 1995(unaudited)
Consolidated Statements of Cash
Flows for nine months ended
September 30, 1996 and 1995 (unaudited)
Notes to Consolidated Financial
Statements (unaudited)
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial
Condition
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports of Form 8-K
Signatures
Exhibit Index
PAGE
AMBANC CORP.
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except share data)
September 30, December 31,
1996 1995
ASSETS
Cash and due from banks $ 18,631 $ 20,520
Federal funds sold 4,725 22,653
Total cash and cash equivalents 23,356 43,173
Interest bearing deposits in other banks 590 692
Securities available for sale at market 176,953 173,469
Loans held for sale 2,808 6,727
Loans, net of unearned income 481,848 442,657
Allowance for loan losses (5,368) (5,022)
Loans, net 476,480 437,635
Premises, furniture and equipment, net 10,455 9,398
Accrued interest receivable and other assets 14,488 11,253
TOTAL ASSETS $ 705,130 $ 682,347
LIABILITIES
Noninterest bearing deposits $ 50,719 $ 63,116
Interest bearing deposits 568,571 536,953
Total deposits 619,290 600,069
Short-term borrowings 7,780 6,788
Long-term debt 2,266 2,677
Accrued interest payable and other liabilities 5,649 5,101
TOTAL LIABILITIES 634,985 614,635
SHAREHOLDERS' EQUITY
Preferred stock, $10 par value, 200,000 shares
authorized, no shares issued or outstanding -- --
Common stock, $10 par value, 10,000,000 and
5,000,000 shares authorized, 3,158,961 and
3,158,961 shares issued at September 30, 1996,
and December 31, 1995 31,590 31,590
Treasury stock (214 shares at cost) (6) --
Retained earnings 38,912 35,009
Unrealized gain/(loss) on securities
available for sale, net of deferred taxes (351) 1,113
TOTAL SHAREHOLDERS' EQUITY 70,145 67,712
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 705,130 $ 682,347
PAGE
AMBANC CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Dollar amounts in thousands, except share data)
Nine Months Ended Three Months Ended
September 30, September 30,
1996 1995 1996 1995
INTEREST INCOME
Interest and fees on loans $ 31,302 $ 27,798 $ 10,733 $ 9,783
Interest and fees on loans
held for sale 350 221 58 99
Interest on securities
Taxable 5,889 5,856 2,006 1,852
Tax exempt 2,109 2,079 700 691
Other interest 550 443 46 245
TOTAL INTEREST INCOME 40,200 36,397 13,543 12,670
INTEREST EXPENSE
Interest on deposits 19,849 17,118 6,648 6,182
Interest on short-term borrowings 297 342 118 106
Interest on long-term debt 108 122 34 38
TOTAL INTEREST EXPENSE 20,254 17,582 6,800 6,326
NET INTEREST INCOME 19,946 18,815 6,743 6,344
Provision for loan losses 666 647 100 361
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 19,280 18,168 6,643 5,983
NONINTEREST INCOME
Income from fiduciary activities 462 477 125 157
Service charges on
deposit accounts 1,137 1,106 393 378
Gain/(loss) on securities 3 18 10 7
Other operating income 792 750 153 315
TOTAL NONINTEREST INCOME 2,394 2,351 681 857
NONINTEREST EXPENSE
Salaries and employees benefits 7,337 7,117 2,433 2,297
Occupancy expenses, net 908 794 316 268
Equipment expenses 872 797 303 263
Data processing expenses 401 295 147 113
FDIC insurance 256 616 213 (15)
Other operating expenses 3,614 3,475 1,270 1,167
TOTAL NONINTEREST EXPENSE 13,388 13,094 4,682 4,093
INCOME BEFORE INCOME TAXES 8,286 7,425 2,642 2,747
Income taxes 2,394 2,228 770 868
NET INCOME $ 5,892 $ 5,197 $ 1,872 $ 1,879
EARNINGS PER COMMON SHARE
Net income per share $ 1.86 $ 1.64 $ .59 $ .59
Weighted average outstanding shares 3,158,485 3,158,958 3,157,577 3,158,961
PAGE
AMBANC CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands, except share data)
Nine Months Ended
September 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,892 $ 5,197
Adjustments to reconcile net income to
net cash from operating activities:
Net premium amortization and discount
accretion on securities 260 285
Depreciation 784 741
Provision for loan losses 666 647
(Gain)/loss on securities (3) (18)
(Gain) on sales of loans (227) (134)
Proceeds from sales of loans held for sale 24,761 9,766
Loans held for sale made to customers,
net of payments collected (20,615) (12,444)
Accrued interest receivable
and other assets (3,235) (17)
Accrued interest payable
and other liabilities 1,387 (1,578)
Deferred loan fees net of costs (65) (16)
NET CASH FROM OPERATING ACTIVITIES 9,605 2,429
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities available
for sale 11,028 4,340
Proceeds from maturities and calls of securities
available for sale 37,262 3,181
Proceeds from maturities and calls of securities
held to maturity -- 23,590
Purchases of securities available for sale (54,334) (2,783)
Purchases of securities held to maturity -- (9,999)
Net change in interest bearing deposits
in other banks 102 400
Loans made to customers, net of
payments collected (44,342) (45,730)
Loans purchased (8) (5,764)
Proceeds from sales of loans 4,904 4,386
Property and equipment expenditures (1,841) (588)
NET CASH FROM INVESTING ACTIVITIES (47,229) (28,967)
PAGE
AMBANC CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(Dollar amounts in thousands, except share data)
Nine Months Ended
September 30,
1996 1995
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits 19,221 30,857
Net change in short-term borrowings 992 401
Payments on long-term debt (484) (597)
Proceeds on long-term debt 73 71
Issuance of stock for dividend reinvestment -- 12
Purchase of treasury stock (6) --
Dividends paid (1,989) (1,667)
NET CASH FROM FINANCING ACTIVITIES 17,807 29,077
NET CHANGE IN CASH AND CASH EQUIVALENTS (19,817) 2,539
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 43,173 29,531
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 23,356 $ 32,070
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period:
Interest $ 19,639 $ 16,991
Income taxes 2,950 2,294
Noncash activities during the period:
Reclassification of loans held for sale
to real estate loans 940 --
PAGE
AMBANC CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the nine months ended September 30, 1996
(Dollar amounts in thousands, except share data)
ITEM 1.
CONSOLIDATED FINANCIAL STATEMENTS
Effective November 1, 1995, AMBANC Corp. completed the
acquisition of First Robinson Bancorp (FRB) of Robinson, Illinois
in Crawford county. The acquisition, which has been accounted
for as a pooling of interests, involved the issuance of 668,329
shares of AMBANC Corp. common stock in exchange for the 119,200
shares of outstanding common stock of FRB. No fractional shares
were issued and AMBANC Corp. paid $3 for 94 equivalent fractional
shares and issued 668,235 common shares in the FRB acquisition.
At the conclusion of the acquisition, FRB was merged into AMBANC
Corp. and its wholly owned subsidiary, AmBank Illinois, N.A.,
Robinson, Illinois in Crawford county became a direct, wholly
owned subsidiary of AMBANC Corp.
The consolidated balance sheet at December 31, 1995, and the
consolidated statement of income and consolidated statement of
cash flows for nine months ended September 30, 1995, represent
the retroactive restatement, under the pooling of interests
basis, of information for FRB and the previous AMBANC Corp. The
following page presents the consolidated nine months income
statement for the previous AMBANC Corp. and FRB at September 30,
1995.
PAGE
AMBANC CORP.
CONSOLIDATED STATEMENT OF INCOME
(Dollar amounts in thousands, except share data)
Nine Months Ended
September 30, 1995
AMBANC FRB Consolidated
Total interest income $30,231 $ 6,166 $ 36,397
Total interest expense 14,723 2,859 17,582
Net interest income before
provision for loan losses 15,508 3,307 18,815
Provision for loan losses 425 222 647
Net interest income after
provision for loan losses 15,083 3,085 18,168
Total other income 2,002 349 2,351
Total other expense 10,645 2,449 13,094
Income before income taxes 6,440 985 7,425
Income taxes 1,973 255 2,228
Net income $ 4,467 $ 730 $ 5,197
Earnings per common share (based on
3,158,958 average outstanding shares) $ 1.64
PAGE
AMBANC CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the nine months ended September 30, 1996
(Dollar amounts in thousands, except share data)
The Consolidated balance sheet as of September 30, 1996,
consolidated statements of income for the nine months and three
months periods ended September 30, 1996 and 1995, and the
consolidated statements of cash flows for the nine month
periods ended September 30, 1996 and 1995, have been
prepared by the Corporation, without audit. In the
opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly
the financial position, results of operations and changes
in cash flows at September 30, 1996, and all periods
presented, have been made.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance
with generally accepted accounting principles have been
condensed or omitted. It is suggested that these
consolidated financial statements be read in conjunction
with the financial statements and notes thereto included in
the Corporation's December 31, 1995, annual report to
shareholders. The results of operations for the period
ended September 30, 1996, are not necessarily indicative
of the operating results for the full year.
COMMITMENTS AND CONTINGENT LIABILITIES
Other than ordinary routine litigation incidental to the
business, there are no material pending legal proceedings
to which the Corporation or its subsidiaries are a party
or of which any of their property is the subject.
PAGE
AMBANC CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the nine months ended September 30, 1996
(Dollar amounts in thousands, except share data)
NEW ACCOUNTING PRONOUNCEMENTS
The Corporation adopted Statement of Financial Accounting
Standards (FAS) 121, "Accounting for the Impairment of Long-Lived
Assets or for Long-Lived Assets to be Disposed of", effective
January 1, 1996. The adoption of FAS 121 had no effect on the
Corporation because no assets, liabilities or intangibles of the
Corporation were effected by this new FAS.
The Corporation adopted FAS 122, "Accounting for Mortgage
Servicing Rights", effective January 1, 1996, and with it the
gains on sales of mortgages to the secondary mortgage market
increased. The adoption of FAS 122 resulted in the Corporation
recording an asset for servicing rights of $195 on $16,200 of
qualifying fixed rate mortgages sold to the secondary mortgage
market. The Corporation retains servicing rights and this asset
relates only to mortgage loans originated and sold since the
adoption of FAS 122. The book value of the sold real estate
loans is reduced for the amount assigned to these servicing
rights and the gain on the sale of these loans is increased
accordingly. The servicing rights are being amortized against
future service fee income based upon the anticipated life of each
loan.
FAS 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities" was issued in June,
1996 and provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments
of liabilities. FAS 125 applies to transactions occurring after
December 31, 1996. Management has not yet quantified the effect
of this new standard on the consolidated financial statements.
FINANCIAL STATEMENT RECLASSIFICATIONS
Certain items in the prior years financial statements have been
reclassified to correspond with the current presentation.
PAGE
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
As of and for the nine months ended September 30, 1996
(Dollar amounts in thousands, except share data)
ITEM 2.
RESULTS OF OPERATIONS
Net interest income is the principal source of the
Corporation's earnings and represents the difference
between interest income on loans and securities over
interest costs of deposits and borrowed funds. Income
from certain earning assets is exempt from federal income
tax and, as is customary in the banking industry, changes in
net interest income are analyzed on a fully tax equivalent
basis. Under this method, and throughout this discussion,
nontaxable income on loans and investments is adjusted to
an amount which represents the equivalent earnings if such
earnings were subject to federal tax. The marginal tax
rate used to restate nontaxable income was 34%.
Nine Months Ended
September 30, Increase
1996 1995 (Decrease)
Interest income $ 40,200 $ 36,397 10.45 %
Adjusted for tax
exempt income 1,209 1,210 (.08)
Tax equivalent
interest income 41,409 37,607 10.11
Interest expense 20,254 17,582 15.20
Net interest income $ 21,155 $ 20,025 5.64 %
Net interest income increased $1,130 or 5.64% for the nine
months ended September 30, 1996, compared to the nine
months ended September 30, 1995. This $1,130 increase was a
combination of a $3,802 increase in interest income offset by a
$2,672 increase in interest expense. The $3,802 increase in
interest income was composed of an increase of $3,569 due to
increased volume of average interest earning assets and an
increase of $233 due to increased rates received on these
PAGE
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
As of and for the nine months ended September 30, 1996
(Dollar amounts in thousands, except share data)
interest earning assets. The $2,672 increase in interest expense
was a combination of an increase of $1,874 due to increased
volume of average interest bearing liabilities and an increase of
$798 due to rate increases on these interest bearing
liabilities.
The Corporation's average assets for the first nine months of
1996 increased $61,411 or 9.66% to $697,001 from $635,590 for the
first nine months of 1995. The percent of average earning assets
to total average assets has stayed consistent at 95.04% for the
first nine months of 1996 and 95.23% for the first nine months of
1995.
Net interest margin decreased .15% to 4.27% for the first nine
months of 1996 from 4.42% for the first nine months of 1995.
This decrease is due to the fact that costs on average interest
bearing liabilities are increasing faster than rates on average
interest earning assets. The yield on average interest earning
assets increased to 8.35% for the first nine months of 1996 from
8.31% for the first nine months of 1995 for an increase of .04%.
The cost on average interest bearing liabilities increased at a
faster rate and was 4.76% for the first nine months of 1996 and
4.56% for the first nine months of 1995 for an increase of .20%.
The net interest margin started out the first quarter of 1995 at
its best rate and decreased each subsequent quarter ending at
4.38% for all of 1995. The net interest margin for the fourth
quarter of 1995 was 4.24% and thus actually increased .03% during
the first nine months of 1996 compared to the last quarter of
1995. The commercial loan fees received during the first nine
months of 1996 are $220 higher than the first nine months of
1995. If 1996 loan fees were reduced to the same level as in
1995, net interest margin would have been lowered to 4.22% or
.05% less than actual. The interest spread, which is the
mathematical difference between yields on average interest
earning assets and costs on average interest bearing liabilities
was at 3.59% for the first nine months of 1996 compared to 3.75%
for the first nine months of 1995.
PAGE
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
As of and for the nine months ended September 30, 1996
(Dollar amounts in thousands, except share data)
The provision for loan losses was increased during 1996 because
of increased loan volume, as replacement for net loans charged
off and because of an increase in nonaccrual loans. Loans have
increased $39,191 or 8.85% since December 31, 1995 and a portion
of the 1996 provision is attributable to this increase. The
increase in nonaccrual loans is due primarily to commercial loans
to one customer. This customer's real estate secured loans were
placed on nonaccural at the end of the second quarter and all
unpaid accrued interest was written off. These loans are
currently protected by an adequate appraisal and the ultimate
outcome of negotiations can not be determined at this time. The
allowance for loan losses at September 30, 1996, was $5,368 or
1.11% of total loans less unearned income as compared to $5,022
or 1.13% of total loans less unearned income at December 31,
1995. During the first nine months of 1996, loans charged off
were $673 and recoveries from previously written off loans were
$353, thus net charge offs for the first nine months of 1996 were
$320. The adequacy of the allowance for loan losses is analyzed
by management of each subsidiary bank based upon review of
identified loans with more than a normal degree of risk,
historical loan loss percentage by type of loan and present and
forecasted economic conditions. Management's analysis indicates
that the allowance for loan loss at September 30, 1996, is
adequate to cover potential losses on identified loans with
credit problems and historical losses on the remaining loan
portfolio. The following are the different types of problem
loans with their outstanding balances and percent of total loans
less unearned income at September 30, 1996, and December 31,
1995:
September 30, 1996 December 31, 1995
Nonaccrual loans $3,042 .80% $ 983 .32%
Loans past due 90 days 1,662 .34 1,272 .33
Performing restructured loans 79 .02 45 .01
OREO 356 .07 280 .10
PAGE
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
As of and for the nine months ended September 30, 1996
(Dollar amounts in thousands, except share data)
A summary of the activity in the allowance for loan losses
account for the first nine months ending September 30, 1996, and
1995 was:
1996 1995
Balance, January 1 $5,022 $4,531
Provision for loan losses 666 647
Loans charged off (673) (570)
Recoveries of loans previously
charged off 353 244
Balance, September 30, $5,368 $4,852
Noninterest income for the nine months ended September 30, 1996,
was up $43 or 1.83% to $2,394 as compared to $2,351 for the nine
months ended September 30, 1995. Income from fiduciary services
was down by $15 or 3.14% to $462 in 1996 from $477 in 1995.
Service charges on deposit accounts remained consistent with an
increase of $31 or 2.80% in 1996 compared to 1995. Other
operating income increased $42 or 5.60% to $792 for the nine
months ended September 30, 1996, from $750 for the same nine
months in 1995. This increase is due to several factors with the
largest being increased gains on sales of loans held for sale.
The gains on sales of loans held for sale were $195 higher due to
the effect of adopting FAS 122. Such gains were offset by
amortization of the related servicing rights asset totaling $5
for the nine month period ended September 30, 1996.
PAGE
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
As of and for the nine months ended September 30, 1996
(Dollar amounts in thousands, except share data)
Noninterest expense for the nine months ended September 30, 1996,
was $13,388 as compared to $13,094 for the nine months ended
September 30, 1995, for a increase of $294 or 2.25%. Salaries
and employee benefits are the largest portion of noninterest
expense and increased $220 or 3.09% in the first nine months of
1996 compared to the same period in 1995. Individual major
components showed increases in salaries and related taxes, life
insurance and employee relocation expense and decreases in
medical and pension expense. One of the affiliate banks was
funding a defined benefit pension plan in 1995 and not in 1996.
This defined benefit pension plan was curtailed in 1994 and final
funding was completed during 1995. Occupancy expenses were up
$114 or 14.36% and equipment expenses were up $75 or 9.41% in the
first nine months of 1996 compared to 1995. The Corporation has
added four branches since September 30, 1995, and these expenses
have increased accordingly. The Corporation will be entering the
new market area of Evansville, Indiana with the opening of a full
service branch in January 1997. This denovo branch is in
response to the good economic conditions and the success the
Corporation has already had in making commercial loans in
Vanderburgh county. The Corporation is also replacing an
existing drive-in branch which is projected to open in the second
quarter of 1997. Occupancy and equipment expenses can be
expected to increase in the future because of these new branches.
Data processing expenses have increased due to the upgrading of
the computer system. The $106 or 35.93% increase in data
processing expenses during the first nine months of 1996, are the
result of a decision to add short term expenses that will benefit
the Corporation with reduced data processing expenses in the
future. The upgrading of the data processing system in late 1995
and the conversion of all subsidiary banks to this system during
1996 will provide for long term expense reduction. The
conversion of the last subsidiary bank to the in-house data
processing system was completed on October 25, 1996.
All of the Corporation's subsidiary banks have been assigned the
classification of least risk by the FDIC and as such are subject
to the lowest deposit insurance rates available from the Bank
Insurance Fund (BIF). Because of excess funding, the FDIC set
its lowest BIF premium rate at 0% with a minimum of $2 per
subsidiary bank effective January 1, 1996. Two of the subsidiary
banks purchased deposits from savings and loans in the past and
thus must continue to pay the Savings Association Insurance Fund
(SAIF) rather than the BIF rate on these deposits. The SAIF rate
is .23% of insured deposits.
PAGE
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
As of and for the nine months ended September 30, 1996
(Dollar amounts in thousands, except share data)
On September 30, 1996, the Deposit Insurance Fund Act of 1996
(Act) was passed and signed into law. This Act calls for the
recapitalization of the SAIF by imposing a special one time fee
of .657% for all SAIF insured deposits reported as of March 31,
1995. This special fee for the Corporation was reduced by 20% to
.5256% because our SAIF deposits were purchased and the remainder
of each banks deposits are BIF insured. The special fee amounted
to an additional expense of $190 before tax and $118 after tax.
This special assessment was not anticipated to be passed in 1996
and had the effect of reducing 1996 net income per share by $.04
for the third quarter and year to date. This new Act also
changes both the BIF and SAIF rates effective January 1, 1997, to
.0129% and .0644%, respectively. These rates are anticipated to
exist until January 1, 2000, when the BIF and SAIF funds will be
combined under one rate of .0243%. With the reduced rates in
1996 on the BIF insured deposits offset by the special one time
assessment on the SAIF insured deposits the FDIC insurance
expense reduced $360 or 58.44% during the first nine months of
1996 compared to the same period in 1995.
Other operating expenses increased $139 or 4.00% to $3,614 for
the first nine months of 1996 from $3,475 for the same period in
1995. This increase is due to many increases and decreases with
the largest increases being in supplies, telephone and
advertising expenses and the largest decreases being in
professional fees. The Corporation changed the names of all
affiliate banks to AmBank effective July 1, 1996, and this plus
the new branches is the explanation for the increases in supplies
and advertising expenses. The June 30, 1996, financial
statements included an estimate of $100 expense for this name
change, but the actual expenses have significantly exceeded that
original estimate. The Corporation finalized a merger on
November 1, 1995, and professional fees have decreased in 1996
without those related to this merger.
Income before income taxes was up $861 or 11.60% to $8,286 for
the first nine months of 1996 from $7,425 for the first nine
months of 1995. As previously noted, $360 is due to the
reduction in FDIC expense. Even though the FDIC expense has
reduced, the special one time SAIF assessment was not anticipated
and amounted to a reduction of net income for $118 and $.04 per
share for the quarter and year to date. The net income for the
first nine months ended September 30, 1996, was up $695 or 13.37%
to $5,892 as compared to $5,197 for the nine months ended
September 30, 1995. Earnings per share were $1.86 in 1996 and
were $1.64 in 1995. Based upon annualized net income the return
on average assets was 1.13% for the first nine months of 1996
compared to 1.09% for the same period in 1995.
PAGE
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
As of and for the nine months ended September 30, 1996
(Dollar amounts in thousands, except share data)
The following schedule shows selected financial amounts and ratios for the
three months and nine months ended September 30, 1996 and 1995. The
Corporation feels these financial highlights include pertinent information
relevant for its results as a company in the financial institutions
industry.
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
AVERAGE BALANCE SHEET DATA
Total assets $ 700,601 $ 650,302 $ 697,001 $ 635,590
Securities 179,939 173,880 181,522 179,316
Loans 477,496 423,267 461,078 409,070
Allowance for loan losses 5,371 4,653 5,185 4,590
Deposits 614,537 574,566 612,683 559,486
Shareholders' equity 68,655 63,851 68,238 61,305
END OF PERIOD BALANCE SHEET DATA
Total assets $ 705,130 $ 662,880
Securities 176,953 173,223
Loans 481,848 435,455
Allowance for loan losses 5,368 4,852
Deposits 619,290 581,244
Shareholders' equity 70,145 64,925
INCOME DATA
Net interest income(t.e. basis) $ 7,143 $ 6,747 $ 21,155 $ 20,025
Provision for loan losses 100 361 666 647
Noninterest income 681 857 2,394 2,351
Noninterest expense 4,682 4,093 13,388 13,094
Net income 1,872 1,879 5,892 5,197
PAGE
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
As of and for the nine months ended September 30, 1996
(Dollar amounts in thousands, except share data)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
PER SHARE DATA
Net income $ .59 $ .59 $ 1.86 $ 1.64
Cash dividends before pooling
of interests .21 .20 .63 .60
Book value at end of period 22.21 21.58
Book value at end of period
before FAS 115 22.28 21.65
Tangible book value at end
of period 21.63 20.92
Tangible book value at end of
period before FAS 115 21.71 20.99
Stock price at end of period 32.25 30.48
Weighted average
shares 3,158,961 3,158,961 3,158,961 3,158,958
Weighted average
treasury shares 1,384 -- 476 --
SELECTED RATIOS
Return on average assets 1.06% 1.15% 1.13% 1.09%
Return on average equity
before FAS 115 10.76 11.61 11.56 11.04
Net interest margin(t.e.basis) 4.27 4.32 4.27 4.42
Efficiency ratio 63.07 56.84 59.93 61.90
Net charge-offs to average loans .03 .04 .07 .08
Allowance for loan losses
to loans 1.11 1.12
Nonaccrual loans to loans .80 .32
Loans past due 90 days or
more to loans .34 .33
Performing restructured loans
to loans .02 .01
OREO to loans .07 .10
Leverage capital(Tier 1
equity/average assets) 9.86 9.92
Tier 1 risk-based capital 13.31 13.44
Total risk-based capital 14.36 14.47
PAGE
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
As of and for the nine months ended September 30, 1996
(Dollar amounts in thousands, except share data)
FINANCIAL CONDITION
Total assets have increased $22,783 or 3.34% to $705,130 at
September 30, 1996, from $682,347 at December 31, 1995. This
growth is mostly attributable to the opening of two new branch
locations in Wal-Mart Supercenters and the resulting increased
deposits. The rates paid on deposits were set to attract new
customers and business but actually increased deposits more than
was budgeted. This deposit growth is also affected by the fact
that rates paid on bank deposits are coming closer to investment
rates paid by brokerage firms and the Corporation has seen
customers returning deposits to the banks.
Deposits increased $19,221 or 3.20% to $619,290 at September 30,
1996, from $600,069 at December 31, 1995. Noninterest bearing
deposits decreased $12,397 or 19.64% while interest bearing
deposits increased $31,618 or 5.89%. The total cash and cash
equivalents have decreased $19,817 or 45.90% at September 30,
1996, from December 31, 1995, and have provided an additional
source for investing by the Corporation. These increased cash
flows were mostly used to increase investments and loans during
the nine months ended September 30, 1996.
Investments increased $3,484 or 2.01% to $176,953 at September
30, 1996, from $173,469 at December 31, 1995. This is the book
balance of securities available for sale which are presented
after being adjusted to market value. The market value
adjustment for these securities went from a positive $1,725 at
year end 1995 to a negative $578 at the end of September 1996.
This swing is the result of normal repricing of investment
securities in a rising rate environment which occurred during the
first nine months of 1996. Without this mark to market swing of
$2,303, investments would have increased $5,787 or 3.37% between
December 31, 1995, and September 30, 1996.
PAGE
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
As of and for the nine months ended September 30, 1996
(Dollar amounts in thousands, except share data)
Loans held for sale represent qualifying fixed rate mortgage
loans that are available for sale into the secondary market.
Fixed rate real estate mortgage loan rates were low enough that
the Corporation has experienced demand for these loans during the
nine months ended September 30, 1996. The following is the
detail of activity in the loans held for sale between year end
and September 30, 1996:
Balance December 31, 1995 $ 6,727
New loans booked (net of payments) 20,842
Loans sold (24,761)
Total at September 30, 1996 $ 2,808
The sale of loans to the secondary market has provided $227 of
net gains on sales, including $195 due to the adoption of FAS 122
mentioned previously. The Corporation services $95,050 of real
estate loans sold to the secondary market as of September 30,
1996.
Loans have increased $39,191 or 8.85% at September 30, 1996, from
December 31, 1995. The following shows the balance and percent
of total by loan classification as of the end of the periods:
9-30-96 12-31-95
% of % of
Balance Total Balance Total
Commercial $245,325 50.91% $230,077 51.98%
Real estate 129,149 26.80 115,067 25.99
Installment 103,983 21.58 93,791 21.19
Credit cards 3,391 .71 3,722 .84
Total $481,848 $442,657
The Corporation has seen increased demand for commercial loans as
the economy continues its steady to slightly increased movement
and commercial loans have increased $15,248 or 6.63%. Real
PAGE
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
As of and for the nine months ended September 30, 1996
(Dollar amounts in thousands, except share data)
estate loans which are mostly variable rate loans have increased
$14,082 or 12.24%. Installment loans have increased $10,192 or
10.87% due to the steady economy and consistent demand. The
demand for consumer loans seems to have a direct correlation with
the consumer's confidence in the economy.
Total shareholders' equity, including the unrealized loss on
securities available for sale, increased $2,433 or 3.59% to
$70,145 at September 30, 1996, from $67,712 at December 31, 1995.
The change in the adjustment for securities available for sale
caused total equity to decrease $1,464 or 2.16% at September 30,
1996, from December 31, 1995. This decrease is the after tax
effect of the mark-to-market adjustment on securities available
for sale which was a negative $351 at September 30, 1996, and was
a positive $1,113 at December 31, 1995. The Corporation's
regulators have issued guidelines stating that the unrealized
gain or loss on securities available for sale, other than those
related to mutual funds (FAS 115 adjustments), should not be
included in shareholders' equity for capital ratio calculations.
Total shareholders' equity, excluding the FAS 115 adjustments,
was $66,510 at December 31, 1995, and increased $3,802 or 5.72%
to $70,312 at September 30, 1996. This increase was net income
of $5,892 less dividends paid of $1,989 less $95 related to a
decrease in the mark-to-market on mutual funds and $6 related to
treasury stock. The treasury stock was purchased and will be
issued for payment of the Corporation's fees to Directors. The
Director stock grant plan was approved by the shareholders at the
annual meeting in April 1996 and treasury stock thus appears for
the first time on the balance sheet in 1996.
Capital adequacy in the banking industry is evaluated primarily
by the use of three required capital ratios based on three
separate calculations; leverage capital, Tier 1 risk-based
capital and total risk-based capital. The leverage capital ratio
is defined as total ending Tier 1 capital divided by total
average assets less intangible assets and FAS 115 adjustments.
Tier 1 risk-based capital is defined as Tier 1 capital divided by
risk-weighted assets. Total risk-based capital is defined as
Tier 1 capital plus Tier 2 capital divided by risk-weighted
assets. Tier 1 capital is the sum of the core capital elements
PAGE
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
As of and for the nine months ended September 30, 1996
(Dollar amounts in thousands, except share data)
(common shareholders' equity, qualifying perpetual preferred
stock and minority interest in the equity accounts of
consolidated subsidiaries) less intangible assets and the FAS 115
adjustments. Tier 2 capital consists of the allowance for loan
losses (limited to an maximum of 1.25% of risk-weighted assets),
perpetual preferred stock and other hybrid capital instruments.
Risk-weighted assets are defined to include the assets on the
balance sheet and off-balance sheet financial instruments in
broad categories that are weighted at 20% to 100% depending on
the asset totals within these broad categories. The
Corporation's capital ratios at September 30, 1996, and December
31, 1995, were:
September 30, 1996 December 31, 1995
Leverage capital ratio 9.86% 10.01%
Tier 1 risk-based capital 13.31% 13.61%
Total risk-based capital 14.36% 14.67%
PENDING CHANGES
On October 18, 1996, the Board of Directors declared a 5% stock
dividend payable on December 2, 1996, to shareholders of record
on November 20, 1996. This is the second year that a 5% stock
dividend has been declared and paid in the fourth quarter.
PAGE
AMBANC CORP.
As of and for the nine months ended September 30, 1996
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Statement of Computation of per share
earnings. The copy of this exhibit filed as
Exhibit 11 to AMBANC's Annual Report on Form
10-K for the year ended December 31, 1995,
is incorporated herein by reference.
27 Financial Data Schedule for September 30, 1996.
(b) No Form 8-K was filed with the SEC during the quarter
ended September 30, 1996.
PAGE
AMBANC CORP.
As of and for the nine months ended September 30, 1996
SIGNATURES
Pursuant to the requirements 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 CORP.
(Registrant)
DATE: November 13, 1996 BY: R. Watson
Robert G. Watson, Chairman of
the Board, President and
Chief Executive Officer
DATE: November 13, 1996 BY: Richard E. Welling
Richard E. Welling, Secretary,
Treasurer and C.F.O.
PAGE
AMBANC CORP.
As of and for the nine months ended September 30, 1996
EXHIBIT INDEX
EXHIBITS PAGE
11 Statement of Computation of per *
share earnings. The copy of this
exhibit filed as Exhibit 11 to
AMBANC's Annual Report on Form 10-K
for the year ended December 31, 1995,
is incorporated herein by reference.
27 Financial Data Schedule for September
30, 1996.
* Incorporated by reference from previously filed
documents.