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 June 30, 1998
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) 885-6580
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:
6,999,425 common shares of stock were outstanding as of
August 13, 1998.
PAGE
AMBANC CORP.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at
June 30, 1998 (unaudited) and
December 31, 1997
Consolidated Statements of Income for
Six and three months ended June 30, 1998
and 1997(unaudited)
Consolidated Statements of Cash
Flows for six months ended
June 30, 1998 and 1997 (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 1. Legal Proceedings
Item 6. Exhibits and Reports of Form 8-K
Signatures
Exhibit Index
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AMBANC CORP.
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except share data)
June 30, December 31,
1998 1997
ASSETS
Cash and due from banks $ 25,120 $ 37,313
Federal funds sold -- 7,440
Total cash and cash equivalents 25,120 44,753
Interest-bearing deposits in other banks 199 298
Securities available for sale at market 123,874 150,219
Loans held for sale 4,197 2,443
Loans, net of unearned income 561,656 540,433
Allowance for loan losses (5,883) (5,428)
Loans, net 555,773 535,005
Premises, furniture and equipment, net 13,009 12,934
Accrued interest receivable and other assets 13,319 13,743
TOTAL ASSETS $ 735,491 $ 759,395
LIABILITIES
Noninterest-bearing deposits $ 62,914 $ 63,641
Interest-bearing deposits 542,553 602,044
Total deposits 605,467 665,685
Short-term borrowings 18,333 3,511
Federal funds purchased and repurchase agreements 17,308 3,236
Long-term debt 6,743 2,031
Accrued interest payable and other liabilities 6,669 6,577
TOTAL LIABILITIES 654,520 681,040
SHAREHOLDERS' EQUITY
Preferred stock, $10 par value, 200,000 shares
authorized, no shares issued or outstanding -- --
Common stock, $10 par value, 10,000,000
shares authorized, 6,999,425 and 6,985,712
shares issued at June 30, 1998,
and December 31, 1997 69,994 69,857
Treasury stock (144 and 34 shares at cost) (4) (1)
Retained earnings 9,989 7,422
Accumulated other comprehensive income, net
of taxes 992 1,077
TOTAL SHAREHOLDERS' EQUITY 80,971 78,355
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 735,491 $ 759,395
PAGE
AMBANC CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Dollar amounts in thousands, except share data)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
INTEREST INCOME
Interest and fees on loans $ 12,257 $ 11,343 $ 24,204 $ 22,337
Interest and fees on loans
held for sale 90 23 142 70
Interest on securities
Taxable 1,137 1,695 2,540 3,441
Tax exempt 675 725 1,354 1,458
Other interest income 15 149 107 233
TOTAL INTEREST INCOME 14,174 13,935 28,347 27,539
INTEREST EXPENSE
Interest on deposits 6,385 6,987 13,309 13,747
Interest on short-term borrowings 178 66 269 162
Interest on long-term debt 107 31 139 66
TOTAL INTEREST EXPENSE 6,670 7,084 13,717 13,975
NET INTEREST INCOME 7,504 6,851 14,630 13,564
Provision for loan losses 390 315 580 630
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 7,114 6,536 14,050 12,934
NONINTEREST INCOME
Income from fiduciary activities 225 177 403 371
Service charges on
deposit accounts 504 417 969 820
Gain/(loss) on securities -- 19 9 74
Other operating income 608 490 1,052 909
TOTAL NONINTEREST INCOME 1,337 1,103 2,433 2,174
NONINTEREST EXPENSE
Salaries and employees benefits 2,675 2,721 5,478 5,221
Occupancy expenses, net 377 351 751 692
Equipment expenses 452 343 849 659
Data processing expenses 78 113 173 236
FDIC expense 21 26 52 33
Other operating expenses 1,434 1,169 2,829 2,341
TOTAL NONINTEREST EXPENSE 5,037 4,723 10,132 9,182
INCOME BEFORE INCOME TAXES 3,414 2,916 6,351 5,926
Income taxes 1,089 904 1,969 1,799
NET INCOME $ 2,325 $ 2,012 $ 4,382 $ 4,127
EARNINGS PER SHARE
Earnings per common share $ .33 $ .29 $ .63 $ .59
Earnings per common share
assuming dilution .33 .29 .63 .59
Weighted average outstanding shares 6,999,245 6,963,723 6,992,983 6,963,612
PAGE
AMBANC CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands, except share data)
Six Months Ended
June 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,382 $ 4,127
Adjustments to reconcile net income to
net cash from operating activities:
Net premium amortization and discount
accretion on securities 122 169
Depreciation 691 595
Provision for loan losses 580 630
(Gain)/loss on securities (9) (74)
(Gain)/loss on sales of assets 14 (4)
(Gain)/loss on sales of loans (221) (277)
Proceeds from sales of loans held for sale 35,284 8,840
Loans held for sale made to customers,
net of payments collected (36,817) (8,218)
Accrued interest receivable
and other assets 449 264
Accrued interest payable
and other liabilities 92 (866)
Deferred loan fees net of costs (32) (78)
NET CASH FROM OPERATING ACTIVITIES 4,535 5,108
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities available
for sale 0 6,405
Proceeds from maturities and calls of securities
available for sale 29,533 10,192
Purchases of securities available for sale (3,411) (7,758)
Net change in interest bearing deposits
in other banks 99 193
Loans made to customers, net of
payments collected (25,316) (16,387)
Loans purchased 4,000 --
Proceeds from sales of loans -- --
Property and equipment expenditures (780) (2,327)
NET CASH FROM INVESTING ACTIVITIES 4,125 (9,682)
PAGE
AMBANC CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(Dollar amounts in thousands, except share data)
Six Months Ended
June 30,
1998 1997
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits (60,218) (4,679)
Net change in short-term borrowings 28,894 771
Payments on long-term debt (343) (400)
Proceeds on long-term debt 5,055 59
Net change in treasury stock (3) --
Dividends paid (1,678) (1,426)
NET CASH FROM FINANCING ACTIVITIES (28,293) (5,675)
NET CHANGE IN CASH AND CASH EQUIVALENTS (19,633) (10,249)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 44,753 32,284
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 25,120 $ 22,035
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period:
Interest $ 13,834 $ 14,121
Income taxes 1,440 2,198
PAGE
AMBANC CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the six months ended June 30, 1998
(Dollar amounts in thousands, except share data)
The Consolidated balance sheet as of June 30, 1998,
consolidated statements of income for the six month and three
month periods ended June 30, 1998 and 1997, and the consolidated
statements of cash flows for the six month periods ended June 30,
1998 and 1997, 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 June 30, 1998, 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 consolidated financial statements and notes thereto
included in the Corporation's December 31, 1997, annual report to
shareholders. The results of operations for the period
ended June 30, 1998, are not necessarily indicative
of the operating results for the full year.
PROPOSED ACQUISITION OF AMBANC CORP.
On April 1, 1998, the Corporation entered into a definitive
agreement to be acquired by Union Planters Corporation (UPC) in
Memphis, Tennessee. Pursuant to the proposed acquisition, the
Corporation has been offered .4841 shares of UPC common stock for
each outstanding share of the corporation. The transaction will
be accounted for under the pooling of interests method.
Consummation of the transaction is subject to regulatory and
shareholders' approval.
PAGE
AMBANC CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the six months ended June 30, 1998
(Dollar amounts in thousands, except share data)
NEW ACCOUNTING PRONOUNCEMENTS
The Corporation adopted Statement of Financial Accounting
Standards (FAS) 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," effective
January 1, 1998. The adoption of FAS 125 had no effect on the
Corporation's financial statements due to no covered transactions
existing.
The Corporation adopted FAS 130, "Comprehensive Income",
effective January 1, 1998. It requires that changes in the
amounts of certain items, including foreign currency translation
adjustments and gains and losses on certain securities be shown
in the financial statements. FAS 130 does not require a specific
format for the financial statement in which comprehensive income
is reported, but does require that an amount representing total
comprehensive income be reported in that statement. All prior
year financial statements have been reclassified for comparative
purposes.
The following is a summary of the Corporation's total
comprehensive income for the interim six month periods ended June
30, 1998 and 1997 under FAS 130:
Six Months Ended
June 30,
1998 1997
Net income $ 4,382 $ 4,127
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities
arising during period (93) (107)
Reclassification adjustment for (gains)
losses included in net income 8 (94)
Other comprehensive income (85) (201)
COMPREHENSIVE INCOME $ 4,297 $ 3,926
FAS 131, "Disclosures about Segments of an Enterprise and Related
Information", was issued in June 1997. This statement is
effective for fiscal years beginning after December 15, 1997, and
will change the way corporations report information about
products, services and segments of their business in their annual
financial statements and requires them to report selected segment
information in their quarterly reports issued to shareholders.
Management has not yet determined the effect, if any, of FAS 131
on the consolidated financial statements.
PAGE
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
As of and for the six months ended June 30, 1998
(Dollar amounts in thousands, except share data)
FINANCIAL STATEMENT RECLASSIFICATIONS
Certain other items in the prior years financial statements have
been reclassified to correspond with the current presentations.
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%.
Six Months Ended
June 30, Increase
1998 1997 (Decrease)
Interest income $ 28,347 $ 27,539 2.93 %
Adjusted for tax-
exempt income 831 830 0.12
Tax-equivalent
interest income 29,178 28,369 2.85
Interest expense 13,717 13,975 (1.85)
Net interest income $ 15,461 $ 14,394 7.41 %
PAGE
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
As of and for the six months ended June 30, 1998
(Dollar amounts in thousands, except share data)
Net interest income increased $1,066 or 7.86% for the six
months ended June 30, 1998, compared to the six months
ended June 30, 1997. This $1,066 increase was a combination of a
$808 increase in interest income and a $(258) decrease in
interest expense. The $808 increase in interest income was
composed of an increase of $467 due to increased volume of
average interest-earning assets and an increase of $341 due to
increased rates received on these interest-earning assets. The
$(258) decrease in interest expense was a combination of an
increase of $113 due to increased volume of average interest-
bearing liabilities and an decrease of $(371) due to rate
decreases on these interest-bearing liabilities. The favorable
changes in both interest income and expense reflect management's
increased emphasis on net interest margin.
The Corporation's average assets for the first six months of 1998
increased $15,605 or 2.17% to $734,424 from $718,819. The
percent of average earning assets to total average assets has
decreased to 93.96% or $690,041 for the first six months of 1998.
This decreasing trend is due primarily to a continuing investment
in our branch network, primarily since the beginning of 1997.
Net interest margin increased .26% to 4.52% for the first six
months of 1998 from 4.26% for the first six months of 1997. This
increase is due to the cost of average interest-bearing
liabilities decreasing (.13)% from 4.82% for the first six months
of 1997 to 4.69% for the first six months of 1998 while the yield
on average earning assets increased .10% from 8.41% for the first
six months of 1997 to 8.51% for the first six months of 1998.
Although the Corporation has seen a substantial improvement in
its net interest margin, it has proven increasingly difficult to
achieve better results in this area with increased rate pressure
from the competition.
PAGE
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
As of and for the six months ended June 30, 1998
(Dollar amounts in thousands, except share data)
The provision for loan losses decreased $(50) or (7.94)% to $580
during the first six months of 1998 compared to $630 during the
first six months of 1997. Stable loan quality and a substantial
recovery enabled the company to maintain a reasonable provision
without adversely impacting the allowance for loan losses.
The allowance for loan losses at June 30, 1998, was $5,883 or
1.05% of total loans less unearned income as compared to $5,428
or 1.00% of total loans less unearned income at December 31,
1997. During the first six months of 1998, loans charged off
were $418 and recoveries from previously written off loans were
$293, thus net charge offs for the first six months of 1998 were
$125. 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 June 30, 1998, is adequate to
cover potential losses on identified loans with credit problems
and historical losses on the remaining loan portfolio. The
following are the various classifications of problem loans with
their outstanding balances and percent of total loans less
unearned income at June 30, 1998, and December 31, 1997:
June 30, 1998 December 31, 1997
Nonaccrual loans $1,714 .31% $ 649 .12%
Loans past due 90 days 530 .10 1,976 .37
Performing restructured loans 2,313 .42 2,421 .45
OREO 859 .15 729 .13
PAGE
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
As of and for the six months ended June 30, 1998
(Dollar amounts in thousands, except share data)
A summary of the activity in the allowance for loan losses
account for the first six months ending June 30, 1998 and
1997 was:
1998 1997
Balance, January 1 $5,428 $5,630
Provision for loan losses 580 630
Loans charged off (418) (949)
Recoveries of loans previously
charged off 293 164
Balance, June 30, $5,883 $5,475
Noninterest income for the six months ended June 30, 1998,
increased 11.91% or $259 to $2,433 from $2,174 in 1997. Income
from fiduciary services increased $32 or 8.63% to $403 from $371
in 1997. This increase is due to improved business volume in
1998 compared to 1997. The commissions for selling securities
through an affiliation with PrimeVest are included in fiduciary
activities income. This service was provided to customers at
both bank subsidiaries for the first time in 1997. Service
charges on deposit accounts increased $149 or 18.17% to $969 in
1998 compared to $820 in 1997 and is mainly due to increased
charges on non-sufficient funds checks. Security gains were down
$(65) for the first six months of 1998 compared to the first six
months of 1997. During 1997, the Corporation instituted a plan
of selling small investment pieces to reduce carrying expenses
and to extending maturities on securities that would mature
within the next year. Other operating income increased 15.73% or
$143 to $1,052 for the six months ended June 30, 1998, from $909
for the same six months in 1997. This increase is due primarily
to positive variations in the mortgage servicing rights
portfolio.
PAGE
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
As of and for the six months ended June 30, 1998
(Dollar amounts in thousands, except share data)
Noninterest expense for the six months ended June 30, 1998, was
$10,132 as compared to $9,182 for the six months ended June 30,
1997, for an increase of $950 or 10.35%. Salaries and employee
benefits are the largest portion of noninterest expense and
increased $257 or 4.92% in the first six months of 1998 compared
to the same period in 1997. This increase is due in part to
normal increases and the Corporation adding a new branch in
April, 1998. The major increases in employee benefits were in
medical insurance and expenses related to SARs outstanding.
Occupancy expenses were up $59 or 8.53% and equipment expenses
were up $190 or 28.83% in the first six months of 1998 compared
to 1997. The additions to the branch structure added
significantly to these expenses. The branches added in 1997 will
have more depreciation in 1998, due to the half-year convention
used in the first year of service for many fixed assets. In
addition, the new Terre Haute facility will add expenses that
have not impacted prior years financial statements.
The 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 for the FDIC deposit insurance
premium. Currently no payments are required by the FDIC. The
Financing Corporation (FICO) rates for the Bank Insurance Fund
(BIF) and the Savings Association Insurance Fund (SAIF) are
determined quarterly. These rates are not tied to the FDIC risk
classification and are .0122% for BIF and .0610% for SAIF as of
June 30, 1998.
PAGE
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
As of and for the six months ended June 30, 1998
(Dollar amounts in thousands, except share data)
Other operating expenses increased $488 or 20.85% to $2,829 for
the first six months of 1998 from $2,341 for the same period in
1997. This increase represents $294 of merger related expenses
and the shifting of a considerable amount of overhead to the
holding company where it is charged back to the subsidiaries and
reclassified as other operating expenses. Had this shift not
occurred, increases in salaries and benefits, occupancy,
equipment and data processing expenses would have been greater,
reflective of the increased investment in both branch structure
and new technologies.
Income before income taxes was up $425 or 7.17% to $6,351 for the
first six months of 1998 from $5,926 for the first six months of
1997. The net income for the first six months ended June 30,
1998, was up $255 or 6.18% to $4,382 as compared to $4,127 for
the six months ended June 30, 1997. Earnings per share were $.33
and $.29 for the quarters ending June 30, 1998 and 1997 and were
$.63 and $.59 for the first 6 months of 1998 and 1997. Based
upon annualized net income the return on average assets for the
first six months of 1998 was up slightly at 1.20% compared to
1.16% in 1997.
PAGE
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
As of and for the six months ended June 30, 1998
(Dollar amounts in thousands, except share data)
The following schedule shows selected financial amounts and ratios for the
three months and six months ended June 30, 1998 and 1997.
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
AVERAGE BALANCE SHEET DATA
Total assets $ 727,913 $ 723,083 $ 734,424 $ 718,819
Earning assets 685,586 684,266 690,041 681,052
Securities 127,485 162,825 135,310 165,856
Loans 554,148 508,117 549,151 504,165
Allowance for loan losses 5,621 5,346 5,511 5,400
Goodwill 1,534 1,696 1,552 1,717
Deposits 623,374 636,344 635,156 632,098
Shareholders' equity 78,086 72,739 78,476 72,625
END OF PERIOD BALANCE SHEET DATA
Total assets $ 735,491 $ 717,009
Securities 123,874 161,471
Loans 561,656 510,147
Allowance for loan losses 5,883 5,475
Goodwill 1,523 1,681
Deposits 605,467 628,876
Shareholders' equity 80,971 74,683
INCOME DATA
Net interest income(t.e. basis) $ 7,921 $ 7,264 $ 15,461 $ 14,394
Provision for loan losses 390 315 580 630
Noninterest income 1,337 1,103 2,433 2,174
Noninterest expense 5,037 4,723 10,132 9,182
Net income 2,325 2,012 4,382 4,127
PAGE
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
As of and for the six months ended June 30, 1998
(Dollar amounts in thousands, except share data)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
PER SHARE DATA
Earnings per common share $ .33 $ .29 $ .63 $ .59
Earnings per common share
assuming dilution .33 .29 .63 .59
Cash dividends .12 .10 .24 .20
Book value at end of period 11.57 10.72
Tangible book value at end
of period 11.35 10.43
Stock price at end of period 27.13 17.67
Weighted average
common shares 6,999,425 6,964,161 6,993,137 6,964,161
Weighted average
treasury shares 180 438 154 549
SELECTED RATIOS
Return on average assets 1.28% 1.12% 1.20% 1.16%
Return on average equity 11.94 11.09 11.26 11.46
Net interest margin(t.e.basis) 4.63 4.26 4.52 4.26
Efficiency ratio 56.97 59.52 59.41 58.62
Net charge-offs to average loans .04 .05 .02 .16
Allowance for loan losses
to loans 1.05 1.07
Nonaccrual loans to loans .31 .24
Loans past due 90 days or
more to loans .10 .19
Performing restructured loans
to loans .42 .76
OREO to loans .15 .19
Tier 1 leverage capital 10.71 10.14
Tier 1 capital 13.53 13.66
Total capital 14.55 14.68
PAGE
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
As of and for the six months ended June 30, 1998
(Dollar amounts in thousands, except share data)
FINANCIAL CONDITION
Total assets have decreased $(23,904) or (3.25)% to $735,491 at
June 30, 1998, from $759,395 at December 31, 1997. Total
noninterest-bearing deposits have decreased $(727) or (1.14)% and
interest-bearing deposits have decreased $(59,491) or (9.88)% at
June 30, 1998, from December 31, 1997 for a total decrease in
deposits of $60,218 or 9.05%. The reduction in deposit totals
are reflective of both strong competition and tighter pricing
controls. While the level of deposits has decreased, price
controls and an increasing percentage of loans in proportion to
total earning assets had a positive impact on the net interest
margin. Securities available for sale before the mark-to-market
have decreased $(26,235) or (17.66)% to $122,300 at June 30,
1998, from $148,535 at December 31, 1997. Securities available
for sale at market indicates a decrease of $(26,345) or (17.54)%
at June 30, 1998, from December 31, 1997. This change is due
primarily to the run off of the securities portfolio. This
change is also a result of normal repricing of investment
securities in different rate environments and accounted for $109
of the reduction in the valuation of securities available for
sale on the balance sheet.
PAGE
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
As of and for the six months ended June 30, 1998
(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
six months ended June 30, 1998. In general, current rate
volatility on these loans is making it necessary to sell them as
soon as they are booked. The following is the detail of activity
in the loans held for sale between year end and June 30, 1998:
Balance December 31, 1997 $ 2,443
New loans booked (net of payments) 37,038
Loans sold (35,284)
Total at June 30, 1998 $ 4,197
The sale of loans to the secondary market has provided $221 of
net gains on sales during the first six months of 1998 and the
Corporation is servicing $126,180 of real estate loans sold to
the secondary market as of June 30, 1998.
Loans have increased $21,223 or 3.93% at June 30, 1998, from
December 31, 1997. The following shows the balance and percent
of total by loan classification as of the end of the periods:
6-30-98 12-31-97
% of % of
Balance Total Balance Total
Commercial $249,034 44.34% $224,468 41.53%
Agricultural 68,909 12.27 55,267 10.23
Real estate 127,832 22.76 147,016 27.20
Installment 112,803 20.08 110,252 20.40
Credit cards 3,077 .55 3,430 .63
Total $561,655 $540,433
The types of loans outstanding as a percentage of total loans has
remained fairly stable between year end 1997 and June 30, 1998.
The demand for new commercial loans has been the strongest,
reflecting the current level of economic development in this
region. The increase in agricultural loans coupled with the
decrease in real estate loans is primarily due to a change made
to more accurately classify some of the company's agricultural
real estate loans during the first quarter of 1998. The
additional drop in real estate loans came as a result of a shift
from adjustable to fixed rate loans, which are generally sold
after they are booked.
PAGE
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
As of and for the six months ended June 30, 1998
(Dollar amounts in thousands, except share data)
Total shareholders' equity, including the unrealized gain on
securities available for sale, increased $2,616 or 3.34% to
$80,971 at June 30, 1998, from $78,355 at December 31, 1997. The
change in the adjustment for securities available for sale caused
total equity to decrease $(85) or (.11)% at June 30, 1998, from
December 31, 1997. This decrease is the after-tax effect of the
mark-to-market adjustment on securities available for sale which
was a positive $992 at June 30, 1998, and was a positive $1,077
at December 31, 1997. 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 $77,179 at December 31,
1997, and increased $2,697 or 3.49% to $79,875 at June 30, 1998.
This increase was due to net income of $4,382 less dividends paid
of $(1,678), $(4) related to a decrease in the mark-to-market on
mutual funds and $(3) related to treasury stock.
Capital adequacy in the banking industry is evaluated primarily
by the use of three required capital ratios based on three
separate calculations: Tier 1 Leverage Capital, Tier 1 Capital
and Total Capital. The Corporation's capital ratios at June 30,
1998, and December 31, 1997, were:
June 30, 1998 December 31, 1997
Tier 1 Leverage Capital 10.71% 10.40%
Tier 1 Capital 13.56% 13.37%
Total Capital 14.58% 14.33%
PAGE
AMBANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
As of and for the six months ended June 30, 1998
(Dollar amounts in thousands, except share data)
YEAR 2000
As with other companies, many of the Corporation's computer
programs were originally designed to recognize calendar years by
their last two digits. Calculations performed using these
truncated fields will not work properly with dates from the year
2000 and beyond. The Corporation has formed a project committee
that is reviewing the status of the conversion. A comprehensive
review to identify the systems affected by this issue has been
undertaken and an implementation plan was compiled and is
currently being executed. The Corporation expects to either
modify or upgrade existing systems or to replace some systems
altogether, depending upon results of testing. Considerable
progress has been made by AMBANC personnel and it is anticipated
that this project will be largely completed by internal staff.
Most of the Corporation's systems are vendor-supplied, and the
Corporation is working with these vendors to attain year 2000
compliance. The Corporation presently believes that, with
modifications to existing systems, conversion to new systems, and
vendor delivery of millennium-compliant systems, the year 2000
compliance issues will be resolved on a timely basis. Whether or
not costs associated with year 2000 compliance will be
significant is unknown at this time. However, any related costs
should not have a material impact on the operations, cash flows,
or financial condition of future periods. The statements in this
paragraph regarding the resolution of the year 2000 problems
contain forward-looking statements that may or may not be
accurate due to the impossibility or predicting future events.
The project committee could uncover additional problems, and
other factors might occur, that could cause related costs to
increase.
PAGE
AMBANC CORP.
As of and for the six months ended June 30, 1998
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
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.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule for June 30, 1998.
(b) No Form 8-K was filed with the SEC during the quarter
ended June 30, 1998.
PAGE
AMBANC CORP.
As of and for the six months ended June 30, 1998
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: August 13, 1998 BY: R. Watson
Robert G. Watson, Chairman of
the Board, President and
Chief Executive Officer
DATE: August 13, 1998 BY: Troy D. Stoll
Troy D. Stoll, CPA
Secretary, Treasury and C.F.O.
PAGE
AMBANC CORP.
As of and for the six months ended June 30, 1998
EXHIBIT INDEX
EXHIBITS PAGE
27 Financial Data Schedule for June
30, 1998.