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 March 31, 2001
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from to .
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Commission File Number: 0-27036
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Ambanc Holding Co., Inc.
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(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
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(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 classes
of common stock, as of the latest practicable date.
Class Outstanding at May 9, 2001
- ----------------------------- -----------------------------------
Common Stock, $.01 Par Value 4,497,468
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
FORM 10-Q
March 31, 2001
Table of Contents
Part I. FINANCIAL INFORMATION
Item 1. Consolidated Interim Financial Statements (unaudited):
Consolidated Statements of Financial Condition at
March 31, 2001 and December 31, 2000........................... 3
Consolidated Statements of Income for the three months
ended March 31, 2001 and 2000.................................. 4
Consolidated Statements of Cash Flows for the three
months ended March 31, 2001 and 2000........................... 5
Notes to Unaudited Interim Consolidated Financial Statements... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................8
Item 3. Quantitative and Qualitative Disclosures About Market Risk.....21
Part II. OTHER INFORMATION..................................................21
Item 6. Exhibits and Reports on Form 8-K...................................21
SIGNATURES....................................................................22
Part I. Financial Information
Item 1. Financial Statements
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition (unaudited)
(dollars in thousands) March 31, December 31,
2001 2000
-------- --------
Assets (unaudited)
Cash and due from banks ................................ $ 14,084 $ 15,306
Federal funds sold ..................................... 56,100 11,600
Interest-bearing deposits .............................. 10,016 51,591
-------- --------
Cash and cash equivalents ......................... 80,200 78,497
-------- --------
Securities available for sale, at fair value ........... 138,335 138,990
Federal Home Loan Bank of New York stock, at cost ...... 8,870 8,870
Loans receivable ....................................... 463,629 465,703
Allowance for loan losses ......................... (5,733) (5,745)
-------- --------
Loans receivable, net ............................. 457,896 459,958
-------- --------
Accrued interest receivable ............................ 3,698 4,103
Premises and equipment, net ............................ 5,248 5,288
Real estate owned and repossessed assets ............... 210 373
Goodwill,net ........................................... 6,725 6,858
Bank-owned life insurance .............................. 10,222 222
Other assets ........................................... 3,050 3,477
-------- --------
Total assets ...................................... $ 714,454 $ 706,636
======== ========
Liabilities and Shareholders' Equity
Liabilities:
Deposits ............................................ $ 485,712 $ 478,592
Federal Home Loan Bank short-term borrowings ........ -- 5,000
Federal Home Loan Bank long-term advances ........... 69,852 66,435
Securities sold under agreements to repurchase ...... 72,500 72,500
Advances from borrowers for taxes and insurance ..... 2,456 3,402
Accrued interest payable ............................ 1,029 1,108
Accrued expenses and other liabilities .............. 4,851 2,477
-------- --------
Total liabilities ................................. 636,400 629,514
-------- --------
Shareholders' equity:
Preferred stock $.01 par value. Authorized 5,000,000
shares; none issued at March 31, 2001 and
December 31, 2000 .................................. -- --
Common stock $.01 par value. Authorized 15,000,000
shares; 5,432,245 shares issued at March 31, 2001
and December 31, 2000 .............................. 54 54
Additional paid-in capital .......................... 63,609 63,529
Retained earnings,substantially restricted .......... 30,711 29,994
Treasury stock, at cost (899,277 shares at March 31,
2001 and 829,279 shares at December 31, 2000) .... (14,262) (13,032)
Unallocated common stock held by ESOP ............... (1,801) (1,909)
Unearned RRP shares ................................. (144) (126)
Accumulated other comprehensive loss ................ (113) (1,388)
-------- --------
Total shareholders' equity ........................ 78,054 77,122
-------- --------
Total liabilities and shareholders' equity ........ $ 714,454 $ 706,636
======== ========
See accompanying notes to unaudited interim consolidated financial statements.
3
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Statements of Income (unaudited)
(dollars in thousands, except per share amounts)
Three months ended
March 31,
2001 2000
------- -------
Interest and dividend income:
Loans receivable ..................................... $ 8,709 $ 8,697
Securities available for sale ........................ 2,374 3,667
Federal funds sold and interest-bearing deposits ..... 900 33
Federal Home Loan Bank stock ......................... 163 147
------- -------
Total interest and dividend income ................. 12,146 12,544
------- -------
Interest expense:
Deposits ............................................. 4,902 4,364
Borrowings ........................................... 2,234 2,664
------- -------
Total interest expense ............................. 7,136 7,028
------- -------
Net interest income ................................ 5,010 5,516
Provision for loan losses ............................... 120 120
------- -------
Net interest income after provision
for loan losses .................................. 4,890 5,396
------- -------
Non-interest income:
Service charges on deposit accounts .................. 319 335
Net gains on securities transactions ................. 25 --
Gain on curtailment of pension plan .................. 1,020 --
Other ................................................ 195 154
------- -------
Total non-interest income .......................... 1,559 489
------- -------
Non-interest expenses:
Salaries, wages and benefits ......................... 1,998 2,102
Occupancy and equipment .............................. 663 611
Data processing ...................................... 410 387
Real estate owned and repossessed assets expenses, net 9 3
Professional fees .................................... 115 90
Amortization of goodwill ............................. 133 133
Other ................................................ 720 852
------- -------
Total non-interest expenses ........................ 4,048 4,178
------- -------
Income before taxes .................................... 2,401 1,707
Income tax expense ...................................... 985 723
------- -------
Net income ......................................... $ 1,416 $ 984
======= =======
Basic earnings per share ................................ $ 0.33 $ 0.21
Diluted earnings per share .............................. $ 0.32 $ 0.21
See accompanying notes to unaudited interim consolidated financial statements.
4
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
(dollars in thousands) Three months
ended March 31,
2001 2000
-------- -------
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Net income ........................................ $ 1,416 $ 984
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of premises
and equipment .............................. 232 223
Amortization of goodwill ........................ 133 133
Net amortization of premiums on securities ...... 50 73
Provision for loan losses ....................... 120 120
Provision for losses and writedowns on real
estate owned and repossessed assets ........ -- 3
Net gains on securities transactions ............ (25) --
Net gains on sales of real estate owned
and repossessed assets ..................... (4) (12)
ESOP compensation expense ....................... 188 154
RRP expense ..................................... 112 121
Gain on curtailment of pension plan ............. 1,020 --
(Increase)decrease in accrued interest receivable
and other assets ........................... (929) 569
Decrease in accrued interest
payable and accrued expenses
and other liabilities ...................... (250) (2,305)
-------- -------
Net cash provided by
operating activities ........... 2,063 63
-------- -------
Cash flows from investing activities:
Proceeds from sales of securities
available for sale ........................ 25,370 --
Purchases of securities available for sale ...... (32,180) (77)
Proceeds from principal paydowns, maturities
and calls of securities available for sale 12,111 4,022
Net loans repaid by(made to) customers .......... 11,750 (2,017)
Purchases of loans .............................. (9,830) --
Purchase of bank-owned life insurance ........... (10,000) --
Purchases of premises and equipment ............. (302) (232)
Proceeds from sales of real estate owned and
repossessed assets ......................... 189 83
-------- -------
Net cash (used in) provided by
investing activities ........... (2,892) 1,779
-------- -------
(continued)
5
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited) (continued)
(dollars in thousands) Three months
ended March 31,
2001 2000
-------- -------
Cash flows from financing activities:
Net increase in deposits ........................ $ 7,120 $ 14,163
Net decrease in FHLB short-term borrowings ....... (5,000) (19,900)
Proceeds from FHLB long-term advances ............ 5,000 15,000
Repayments of FHLB long-term advances ............ (1,583) (279)
Repayments of repurchase agreements .............. -- (25,000)
Decrease in advances from borrowers
for taxes and insurance .................... (946) (913)
Purchases of treasury stock ...................... (1,372) (922)
Dividends paid ................................... (687) (542)
-------- -------
Net cash provided by (used in)
financing activities ..................... 2,532 (18,393)
-------- -------
Net increase(decrease) in cash and
cash equivalents ............................ 1,703 (16,551)
Cash and cash equivalents at beginning of period ..... 78,497 29,611
-------- -------
Cash and cash equivalents at end of period ........... $ 80,200 $ 13,060
======== =======
Supplemental disclosures of cash flow information -
cash paid during the period for:
Interest ............................................. $ 7,215 $ 7,315
======== =======
Income taxes ......................................... $ 115 --
======== =======
Noncash investing and financing activities:
Net transfer of loans to real estate owned
and repossessed assets .......................... $ 22 $ 105
======== =======
Adjustment of securities available for sale to
fair value, net of tax .......................... $ 1,275 $ 57
======== =======
Net book value of premises and equipment transferred
to assets held for sale ......................... $ 113 --
======== =======
Issuance of RRP shares ............................... $ 130 $ 171
======== =======
Purchases of securities available for sale pending
settlement and included in other liabilities .... $ 2,545 $ --
======== =======
See accompanying notes to unaudited interim consolidated financial statements.
6
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(1) In management's opinion, the financial information included herein, 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 month periods ended March 31, 2001 and 2000, in conformity
with generally accepted accounting principles. These consolidated financial
statements should be read in conjunction with Ambanc Holding Co., Inc.'s ("the
Company" herein) 2000 Annual Report on Form 10-K. The results of operations for
the 2001 interim period are not necessarily indicative of the results of
operations to be expected for the full fiscal year ended December 31, 2001.
(2) Amounts in the prior periods' unaudited interim consolidated financial
statements are reclassified whenever necessary to conform to current period's
presentation.
(3) Earnings per Share
Basic earnings per share (EPS) excludes dilution and is calculated by dividing
net income available to common shareholders by the weighted-average number of
shares outstanding during the period. Unallocated ESOP shares are not considered
outstanding for purposes of computing EPS. Shares of restricted stock (RRP
shares) are considered outstanding common shares and included in the computation
of basic EPS when they become fully vested. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
(such as the Company's stock options and unvested RRP shares) were exercised
into common stock or resulted in the issuance or vesting of common stock.
The calculation of basic EPS and diluted EPS is as follows:
Net Weighted-
Income Average Per Share
(in thousands) Shares Amount
For the quarter ended March 31, 2001 ------------ ---------- ---------
Basic EPS
Net income $1,416 4,350,543 $0.33
====== =====
Effect of dilutive securities:
Stock options 85,721
Unvested RRP shares 16,167
---------
Diluted EPS
Net income $1,416 4,452,431 $0.32
====== ========= =====
For the quarter ended March 31, 2000
Basic EPS
Net income $ 984 4,669,625 $0.21
====== =====
Effect of dilutive securities:
Stock options 5,651
Unvested RRP shares 16,700
---------
Diluted EPS
Net income $ 984 4,691,976 $0.21
====== ========= =====
7
(4) Comprehensive Income
Comprehensive income represents the sum of net income and items of other
comprehensive income or loss, which are reported directly in shareholders'
equity, net of tax, such as the change in the net unrealized gain or loss on
securities available for sale. Accumulated other comprehensive income or loss,
which is included in shareholders' equity, net of tax, represents the net
unrealized gain or loss on securities available for sale.
Comprehensive income for the three-month periods ended March 31, 2001 and
2000 was $2.7 million and $1.0 million, respectively.
(5) Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. The Company adopted Statement No. 133, as amended, on
January 1, 2001. As of January 1, 2001, and during the three months ended March
31, 2001, the Company did not have any derivative instruments or derivative
instruments embedded in other contracts. Therefore, the adoption of Statement
No. 133 did not have a material impact on the Company's consolidated financial
statements.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Ambanc Holding Co., Inc. ("Ambanc" or the "Company") is a unitary savings and
loan holding company. Ambanc was formed as a Delaware Corporation to act as the
holding company for the former Amsterdam Savings Bank, FSB (now known as Mohawk
Community Bank) upon the completion of Amsterdam Savings Bank's conversion from
the mutual to stock form on December 26, 1995.
Mohawk Community Bank's (the Bank's) results of operations are primarily
dependent on its net interest income, which is the difference between the
interest and dividend income earned on its assets, primarily loans and
securities, and the interest expense on its liabilities, primarily deposits and
borrowings. Net interest income may be affected significantly by general
economic and competitive conditions and policies of regulatory agencies,
particularly those with respect to market interest rates. The results of
operations are also significantly influenced by the level of non-interest
expenses, such as employee salaries and benefits, non-interest income, such as
fees on deposit-related services, the provision for loan losses, and income
taxes.
8
The Company has been, and intends to continue to be, a community-oriented
financial institution offering a variety of financial services. Management's
strategy has been to try to achieve a high loan to asset ratio with emphasis on
originating traditional one- to four-family residential mortgage and home equity
loans in its primary market area. Recently, the Company has also been focusing
on the origination of commercial-type loans, including entering into
participation agreements with other financial institutions. At March 31, 2001,
the Company's loans receivable, net, to assets ratio was 64.1%, as compared with
65.1% at December 31, 2000. The Company's portfolio of one- to four-family
residential mortgage and home equity loans was 81.1% of total loans at March 31,
2001. Total commercial-type loans were 14.2% of total loans at March 31, 2001,
up from 11.8% at December 31, 2000.
Forward-Looking Statements
When used in this Form 10-Q, in future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases or other
public or shareholder communications, and in oral statements made with the
approval of an authorized executive officer, 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 that
could cause actual results to differ materially from historical results and
those presently anticipated or projected, including, but not limited to, changes
in economic conditions in the Company's market area, changes in policies by
regulatory agencies, fluctuations in interest rates, demand for loans in the
Company's market area and competition. 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.
Financial Condition
Comparison of Financial Condition at March 31, 2001 and December 31, 2000. Total
assets increased by $7.8 million, or 1.1%, to $714.5 million at March 31, 2001
from $706.6 million at December 31, 2000, primarily due to increases in cash and
cash equivalents and bank-owned life insurance of $1.7 million and $10.0
million, respectively, partially offset by decreases in securities available for
sale and loans receivable, net of $655 thousand and $2.1 million, respectively.
9
Cash and cash equivalents increased by $1.7 million, or 2.2%, to $80.2 million
at March 31, 2001 from $78.5 million at December 31, 2000. This increase was
primarily due to an increase in federal funds sold of $44.5 million from $11.6
million at December 31, 2000 to $56.1 million at March 31, 2001. Offsetting this
increase were decreases in interest-bearing deposits and cash and due from banks
from $51.6 million and $15.3 million, respectively, at December 31, 2000, to
$10.0 million and $14.1 million, respectively, at March 31, 2001. The Company
anticipates redeploying the funds invested in federal funds sold and
interest-bearing deposits into the loan portfolio as market conditions permit.
Securities available for sale decreased $655 thousand to $138.3 million at March
31, 2001 from $139.0 million at December 31, 2000. Sales, maturities, paydowns
and calls of securities totaling $37.5 million were almost completely offset by
purchases of $34.7 million. In addition, the net unrealized loss on securities
available for sale decreased $2.1 million due to decreases in market interest
rates during the quarter.
Loans receivable, net decreased $2.1 million from $460.0 million at December 31,
2000, to $457.9 million at March 31, 2001. During the second half of 2000, the
Company entered into commercial real estate and commercial business loan
participations with an unrelated financial institution in its market area. This
strategy is consistent with management's focus on the growth of the commercial
loan portfolio. During the first quarter of 2001, the Company purchased $9.8
million of commercial real estate and commercial business loan participations.
This increase was more than offset by decreases in most other loan categories,
primarily one-to-four family mortgage loans (down $6.5 million), home equity
loans (down $893 thousand), and consumer loans (down $677 thousand).
Bank-owned life insurance increased $10.0 million due to the Company's purchase
of additional bank-owned life insurance during the quarter.
Other assets decreased $427 thousand, or 12.3%, to $3.1 million at March 31,
2001 due primarily to the deferred tax consequences related to the adjustment of
securities available for sale to fair value.
Deposits increased by $7.1 million, or 1.5%, to $485.7 million at March 31, 2001
from $478.6 million at December 31, 2000. The growth for the quarter was
primarily in time deposits, which increased $5.6 million from $248.9 million to
$254.4 million; NOW accounts, which increased $1.2 million from $46.3 million to
$47.5 million; and non-interest-bearing demand deposits, which increased $2.1
million from $38.6 million to $40.7 million. These increases were partially
offset by decreases in savings accounts, which decreased $1.5 million from
$121.4 million to $119.9 million, and money market accounts, which decreased
$271 thousand from $23.4 million to $23.1 million.
Short-term borrowings from the Federal Home Loan Bank ("FHLB") decreased by $5.0
million, to $0 at March 31, 2001. This funding reduction was replaced with a
$5.0 million long-term advance from the FHLB. Long-term advances from the FHLB
increased $3.4 million, or 5.1%, to $69.9 million at March 31, 2001 from $66.4
million at December 31, 2000. The shift to longer-term borrowings is part of the
Company's effort to improve its interest rate risk position by more closely
matching the maturities of its assets and liabilities.
10
Accrued expenses and other liabilities increased $2.4 million, or 95.8%, to $4.9
million at March 31, 2001, due primarily to securities purchased from brokers
pending settlement.
Shareholders' equity increased $932 thousand, or 1.2%, from $77.1 million at
December 31, 2000 to $78.1 million at March 31, 2001, primarily due to net
income of $1.4 million and the decrease in net unrealized losses on securities
available for sale, net of tax, of $1.3 million, partially offset by treasury
stock purchases totaling $1.4 million and the payment of cash dividends of $687
thousand for the quarter. Other items impacting shareholders' equity during the
first quarter of 2001 were the release of ESOP shares, as well as the continued
amortization of unearned RRP shares.
Consolidated Average Balances, Interest Rates & Yields
The following table presents for the periods indicated the total dollar
amount of interest and dividend income earned on average earning assets and the
resultant yields, as well as the total dollar amount of interest expense
incurred on average interest-bearing liabilities and the resultant rates. No tax
equivalent adjustments were made. All average balances are daily average
balances. Non-accruing loans have been included in the table as loans with
interest earned on a cash basis only. Securities available for sale are included
at amortized cost.
11
Three months ended March 31,
2001 2000
------------------------------------ ------------------------------------ -
Average Interest Yield/ Average Interest Yield/
Balance Inc./Exp. Rate Balance Inc./Exp. Rate
Earning assets (Dollars in thousands)
Loans receivable(1) $466,636 $8,709 7.57% $471,035 $8,697 7.43%
Securities available for sale (AFS)(2) 141,544 2,374 6.80% 220,860 3,667 6.68%
Federal Home Loan Bank stock 8,870 163 7.45% 8,748 147 6.76%
Federal funds sold and interest-bearing
deposits 62,423 900 5.85% 2,566 33 5.17%
-------------- --------- -------- -------------- --------- --------
Total earning assets 679,473 12,146 7.25% 703,209 12,544 7.17%
-------------- --------- -------- -------------- --------- --------
Allowance for loan losses (5,777) (5,530)
Unrealized gain(loss) on AFS securities (1,618) (10,537)
Other assets 31,453 36,129
--------------- ---------------
Total average assets $703,531 $723,271
=============== ===============
Interest-bearing liabilities
Savings deposits 122,332 786 2.61% 128,524 878 2.75%
NOW deposits 46,566 222 1.93% 35,962 110 1.23%
Certificates of deposit 249,535 3,670 5.96% 231,923 3,103 5.38%
Money market accounts 22,892 224 3.97% 28,617 273 3.84%
Borrowed funds 144,288 2,234 6.28% 181,999 2,664 5.89%
-------------- --------- -------- -------------- --------- --------
Total interest-bearing liabilities 585,613 7,136 4.94% 607,025 7,028 4.66%
-------------- --------- -------- -------------- --------- --------
Demand deposits 35,906 35,358
Other liabilities 4,957 5,221
--------------- ---------------
Total liabilities 626,476 647,604
--------------- ---------------
Stockholders' equity 77,055 75,667
--------------- ---------------
Total average liabilities & equity $703,531 $723,271
=============== ===============
Net interest income $5,010 $5,516
Interest rate spread 2.31% 2.51%
Net earning assets $ 93,860 $ 96,184
Net interest margin 2.99% 3.15%
Average earning assets/
Average interest-bearing liabilities 116.03% 115.85%
(1) Calculated net of deferred loan fees and costs, loan discounts and loans in process.
(2) Securities available for sale exclude securities pending settlement.
12
Consolidated Rate/Volume Analysis of Net Interest Income
The following table presents the dollar amount of changes in interest and
dividend income and interest expense for major components of earning assets and
interest-bearing liabilities. It distinguishes between the changes related to
outstanding balances and the changes due to changes in interest rates. For each
category of earning assets and interest-bearing liabilities, information is
provided on changes attributable to (i) changes in volume (i.e. changes in
volume multiplied by old rate) and (ii) changes in rate (i.e. changes in rate
multiplied by old volume). For purposes of this table, changes attributable to
both rate and volume, which cannot be segregated, have been allocated
proportionately to the change due to volume and the change due to rate.
Three months ended March 31,
2001 vs. 2000
-------------------------------
Increase
(Decrease)
Due to Total
--------------------- Increase
Volume Rate (Decrease)
--------- -------- --------
Earning assets (Dollars in thousands)
Loans receivable .......................... $ (105) $ 117 $ 12
Securities available for sale ............. (1,360) 67 (1,293)
Federal Home Loan Bank stock .............. 3 13 16
Federal funds sold and interest-bearing
deposits................................. 862 5 867
--------- -------- --------
Total earning assets .................. (600) 202 (398)
--------- -------- --------
Interest-bearing liabilities
Savings deposits .......................... (44) (48) (92)
NOW deposits ............................. 38 74 112
Certificates of deposit ................... 234 333 567
Money market accounts ..................... (58) 9 (49)
Borrowed funds ............................ (592) 162 (430)
--------- -------- --------
Total interest-bearing liabilities .... (422) 530 108
--------- -------- --------
Net interest income ..................... $ (178) $ (328) $ (506)
========= ======== ========
13
Comparison of Operating Results for the Three Months Ended March 31, 2001 and
2000.
Net Income. Net income increased by $432 thousand, or 43.9%, for the three
months ended March 31, 2001 to $1.4 million from $984 thousand for the three
months ended March 31, 2000. Diluted EPS was $0.32 for the three months ended
March 31, 2001, up from $0.21 for the three months ended March 31, 2000. Net
income for the three months ended March 31, 2001 was significantly impacted by a
$1.0 million ($634 thousand after-tax) curtailment gain related to the freezing
of benefit accruals and participation in the Company's defined benefit pension
plan. Excluding this curtailment gain, net income for the three months ended
March 31, 2001 would have been $782 thousand, or diluted EPS of $0.18 per share.
Net Interest Income. Net interest income decreased $506 thousand, or 9.4%, to
$5.0 million for the three months ended March 31, 2001 from $5.5 million for the
three months ended March 31, 2000. The decrease in net interest income was
primarily due to a decrease in the interest rate spread from 2.51% for the three
months ended March 31, 2000 to 2.31% for the three months ended March 31, 2001,
as well as a decrease in the net interest margin from 3.15% to 2.99%.
Earning assets consist of loans receivable, securities available for sale,
federal funds sold and interest-bearing deposits, and FHLB of New York stock.
Interest-bearing liabilities consist of interest-bearing deposits, FHLB advances
and securities repurchase agreements.
The interest rate spread, which is the difference between the yield on average
earning assets and the cost of average interest-bearing liabilities, decreased
to 2.31% for the three months ended March 31, 2001, from 2.51% for the three
months ended March 31, 2000. The decrease in the interest rate spread is due to
the increase in the average cost of interest-bearing liabilities exceeding the
increase in the average yield on earning assets during the period. The average
yield on earning assets increased from 7.17% for the three months ended March
31, 2000 to 7.25% for the three months ended March 31, 2001. This increase was
more than offset by increases in the average rate paid on certificates of
deposit and borrowings of 58 basis points, to 5.96%, and 39 basis points, to
6.28%, respectively. Thus, the average cost of interest-bearing liabilities
increased to 4.94% for the three months ended March 31, 2001 from 4.66% for the
previous period.
The Company operates in an environment of intense competition for deposits and
loans. 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, 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, the interest rate spread and
the net interest margin. This is especially true during periods when the growth
in earning assets lags behind the growth in interest-bearing liabilities.
However, management does not want to discourage, by offering noncompetitive
interest rates, the creation of new customer relationships or jeopardize
existing relationships thereby curtailing the Company's customer base and loan
growth and the attendant benefits to be derived from them. Management believes
that the longer-term 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 growing customer base provides the Company with the
potential for future, profitable customer relationships, which should in turn
increase the value of the franchise.
14
Interest and Dividend Income. Interest and dividend income decreased by $398
thousand, or 3.2%, to $12.1 million for the three months ended March 31, 2001
from $12.5 million for the three months ended March 31, 2000. The decrease was
largely the result of the decrease in the average balance of earning assets from
$703.2 million for the three months ended March 31, 2000 to $679.5 million for
the three months ended March 31, 2001. Offsetting the decrease in the average
balance of earning assets was an 8 basis point increase in the average yield on
total earning assets. The yield on the average balance of earning assets was
7.25% and 7.17% for the three months ended March 31, 2001 and 2000,
respectively.
Interest and fees on loans increased $12 thousand to $8.7 million for the three
months ended March 31, 2001. This increase was primarily the result of an
increase in the average yield on net loans receivable from 7.43% for the three
months ended March 31, 2000 to 7.57% for the three months ended March 31, 2001,
offset almost entirely by a decrease in the average balance of loans receivable
of $4.4 million.
Interest and dividend income on securities available for sale decreased $1.3
million, or 35.3%, to $2.4 million for the three months ended March 31, 2001
from $3.7 million for the previous period. This decrease is primarily the result
of a decrease in the average balance of securities available for sale of $79.3
million, or 35.9%.
Interest income on federal funds sold and interest-bearing deposits increased
$867 thousand to $900 thousand for the three months ended March 31, 2001 from
$33 thousand for the previous quarter primarily due to a increase in the average
balance of federal funds sold and interest-bearing deposits of $59.9 million,
coupled with a 68 basis point increase in the average yield.
Interest Expense. Total interest expense increased by $108 thousand, or 1.5%, to
$7.1 million for the three months ended March 31, 2001 from $7.0 million for the
three months ended March 31, 2000. Total average interest-bearing liabilities
decreased by $21.4 million, or 3.5%, to $585.6 million for the first quarter of
2001 compared to $607.0 million for the same period of the previous year
primarily due to the pay down of borrowed funds, partially offset by an increase
in average interest-bearing deposits. The average balance of borrowed funds
decreased $37.7 million, or 20.7%, from $182.0 million for the three months
ended March 31, 2000 to $144.3 million for the three months ended March 31,
2001. During the same periods, the average rate paid on interest-bearing
liabilities increased by 28 basis points to 4.94% from 4.66%.
Total interest expense for the three months ended March 31, 2001 increased
primarily due to an increase of 58 basis points, to 5.96%, in the average rate
paid on certificates of deposit during the period. In addition, the average
balance on these deposit accounts increased to $249.5 million for the three
months ended March 31, 2001, from $231.9 million for the previous period.
Likewise, interest expense relative to NOW accounts increased as a result of
increases in the average rate paid on NOW accounts coupled with an increase in
the average balance of $10.6 million, or 29.5%. The average rate paid on NOW
accounts increased from 1.23% for the three months ended March 31, 2000 to 1.93%
for the three months ended March 31, 2001.
15
Provision for Loan Losses. The Company's provision for loan losses is based upon
management's analysis of the adequacy of the allowance for loan losses. The
allowance is increased by a charge to the provision for loan losses, the amount
of which depends upon an analysis of the changing risks inherent in the loan
portfolio. Management determines the adequacy of the allowance for loan losses
based upon its analysis of risk factors in the loan portfolio. This analysis
includes evaluation of credit risk, historical loss experience, current economic
conditions, estimated fair value of underlying collateral, delinquencies, and
other factors. The provision for loan losses for the three months ended March
31, 2001 and 2000 was $120 thousand, reflecting the consistency of
non-performing loans and net charge-offs, as well as the increase in the
percentage of commercial-type loans in the portfolio. The Company's ratio of
non-performing loans to total loans was 0.72% and 0.70% at March 31, 2001 and
December 31, 2000, respectively.
Non-Interest Income. Total non-interest income increased by $1.1 million, or
218.8%, to $1.6 million for the three months ended March 31, 2001 from $489
thousand for the three months ended March 31, 2000. Significantly impacting
non-interest income for the quarter ended March 31, 2001 was a $1.0 million
curtailment gain related to the freezing of benefit accruals and participation
in the Company's defined benefit pension plan. Excluding this curtailment gain
and $25 thousand of net gains on securities transactions, total non-interest
income was up slightly from the comparable period of the previous year.
Non-Interest Expenses. Non-interest expenses decreased $130 thousand, or 3.1%,
to $4.0 million for the three months ended March 31, 2001 from $4.2 million for
the three months ended March 31, 2000 primarily due to decreased costs
associated with salaries, wages and benefits and promotion and advertising
expense. Also impacting non-interest expenses during the first quarter of 2001
was the acceleration of lease expense and the amortization of leasehold
improvements due to the announced closing of a branch, which will take place in
June 2001. These and other changes are discussed in more detail below.
Salaries, wages and benefits expense decreased by $104 thousand, or 4.9%, for
the first quarter of 2001 due primarily to the recognition of a net periodic
pension credit of $64 thousand in the first quarter of 2001 compared to a net
periodic pension expense of approximately $34 thousand recognized during the
first quarter of 2000. This reduction is related to the curtailment of the
Company's pension plan noted above, which reduced the service cost component of
net periodic pension cost/credit. However, during the first quarter of 2001 the
Company recognized $37 thousand in expense related to matching contributions
under the Company's 401(k) plan. No matching contributions were made during the
first quarter of 2000. Also contributing to the decrease in salaries, wages and
benefits was the elimination of temporary outside services relative to work
performed during the second half of 1999 and through the first quarter of 2000.
Management believes that salaries, wages and benefits expenses may fluctuate in
future periods as costs related to the Company's ESOP are dependent on the
Company's average stock price. The expense related to the ESOP for the first
quarter of 2001 was $34 thousand higher than the comparable quarter in 2000 due
to the increased stock price in 2001 relative to 2000.
Occupancy and equipment increased $52 thousand, or 8.5%, to $663 thousand for
the three months ended March 31, 2001, from $611 thousand in 2000 primarily due
to the acceleration of lease expense and the amortization of leasehold
improvements during the first quarter of 2001, on a branch office scheduled to
close June 2001.
16
Data processing increased $23 thousand, or 5.9%, from $387 thousand in the 2000
period to $410 thousand for the three months ended March 31, 2001 due primarily
to the increase in volume of deposit and loan accounts serviced by the Company.
Professional fees increased $25 thousand, or 27.8%, to $115 thousand for the
three months ended March 31, 2001, from $90 thousand for the comparable period
of the previous year. The increased professional fees were primarily associated
with certain tax planning strategies being implemented by the Company.
Other non-interest expenses decreased $132 thousand, or 15.5%, to $720 thousand
for the three months ended March 31, 2001 when compared to the previous period.
This decrease was primarily due to expenses associated with the promotion and
advertising of certain time deposit products offered during the quarter ended
March 31, 2000. No such special promotion and advertising was conducted during
the first quarter of 2001.
Income Tax Expense. Income tax expense increased by $262 thousand, or 36.2%, to
$985 thousand for the three months ended March 31, 2001 from $723 thousand for
the three months ended March 31, 2000. The increase was primarily the result of
the increase in income before taxes, partially offset by the impact of certain
tax planning strategies implemented by the Company in the second quarter of
2000.
17
ASSET QUALITY
Non-Performing Assets
The table below sets forth the amounts and categories of non-performing
assets at the dates indicated.
March 31, December 31,
2001 2000
------ ------
(In thousands)
Non-accruing loans:
One-to four-family (1)........ $1,680 $1,471
Commercial real estate ....... -- 44
Consumer ..................... 493 418
Commercial business .......... 439 515
------ ------
Total ...................... 2,612 2,448
------ ------
Accruing loans delinquent
more than 90 days:
One-to four-family (1)........ 167 247
Consumer ..................... 6 10
------ ------
Total ...................... 173 257
------ ------
Troubled debt restructured loans:
One-to four-family (1)........ 82 82
Commercial real estate ....... 453 458
Commercial business .......... -- 1
------ ------
Total ...................... 535 541
------ ------
Total non-performing loans ...... 3,320 3,246
------ ------
Foreclosed and repossessed assets:
One-to four-family (1)........ 176 232
Commercial real estate ....... -- 112
Consumer ..................... 34 29
------ ------
Total ...................... 210 373
------ ------
Total non-performing assets ..... $3,530 $3,619
====== ======
Non-performing loans as a
percentage of total loans ..... 0.72% 0.70%
====== ======
Non-performing assets as a
percentage of total assets .... 0.49% 0.51%
====== ======
(1) Includes home equity loans.
18
Allowance for Loan Losses
The allowance for loan losses is established through a provision for loan
losses based on management's evaluation of the risks inherent in the loan
portfolio and changes in the nature and volume of loan activity, including those
loans that 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. The following
table sets forth an analysis of the Company's allowance for loan losses.
For the three months
ended March 31,
2001 2000
------- -------
(In thousands)
Balance at beginning of period ........ $ 5,745 $ 5,509
Charge-offs:
One- to four-family (1)........... -- (1)
Consumer ......................... (38) (132)
Commercial business .............. (98) --
------- -------
Total charge-offs ............. (136) (133)
------- -------
Recoveries:
One- to four-family (1)........... 1 --
Consumer ......................... 3 6
Commercial business .............. -- 4
------- -------
Total recoveries .............. 4 10
------- -------
Net charge-offs ....................... (132) (123)
Provisions charged to operations ...... 120 120
------- -------
Balance at end of period .............. 5,733 5,506
======= =======
Ratio of allowance for loan
losses to total loans (period end) .... 1.24% 1.16%
Ratio of allowance for loan losses
to non-performing loans (at period end) 172.68% 171.42%
Ratio of net charge-offs during the
period to average loans outstanding
during period (annualized) ............ 0.11% 0.11%
(1) Includes home equity loans.
19
Liquidity and Capital Resources
The Bank is required by OTS regulations to maintain sufficient liquidity to
ensure its safe and sound operation. The Company's sources of liquidity include
cash flows from operations, principal and interest payments on loans,
mortgage-backed securities and collateralized mortgage obligations, maturities
of securities, deposit inflows, borrowings from the FHLB of New York and
proceeds from the sale of securities sold under agreements to repurchase.
While maturities and scheduled amortization of loans and securities are, in
general, a predictable source of funds, deposit flows and prepayments on loans
and securities are greatly influenced by general interest rates, economic
conditions and competition. In addition, the Company invests excess funds in
overnight and short-term deposits which provide liquidity to meet lending
requirements.
In addition to deposit growth, the Company borrows funds from the FHLB of New
York or may utilize other types of borrowed funds to supplement its cash flows.
At March 31, 2001 and December 31, 2000, the Company had $69.9 million and $71.4
million, respectively, in outstanding borrowings from the FHLB and $72.5 million
in securities repurchase agreements (at both dates), the vast majority of which
are also with the FHLB.
As of March 31, 2001 and December 31, 2000, the Company had $138.3 million and
$139.0 million, respectively, of securities classified as available for sale.
The liquidity of the securities available for sale portfolio provides the
Company with additional potential cash flows to meet loan growth and deposit
flows.
Liquidity may be adversely affected by unexpected deposit outflows, excessive
interest rates paid by competitors, adverse publicity relating to the savings
and loan industry, and similar matters. Management monitors projected liquidity
needs and determines the level desirable, based in part on the Company's
commitment to make loans and management's assessment of the Company's ability to
generate funds.
The Bank is subject to federal regulations that impose certain minimum capital
requirements. At March 31, 2001, the Bank's capital exceeded each of the
regulatory capital requirements of the OTS. The Bank was "well capitalized" at
March 31, 2001 according to regulatory definition. At March 31, 2001, the Bank's
tangible and core capital levels were both $63.3 million (9.00% of total
adjusted assets) and its total risk-based capital level was $67.9 million
(18.74% of total risk-weighted assets). The minimum regulatory capital ratio
requirements of the Bank are 1.5% for tangible capital, 4.0% for core capital,
and 8.0% for total risk-based capital.
During the first three months of 2001, the Company repurchased 78,033 shares of
its common stock in open-market transactions at a total cost of $1.4 million.
20
Item 3.
Quantitative And Qualitative Disclosures About Market Risk
There have been no material changes in the Company's interest rate risk
position since December 31, 2000. Other types of market risk, such as foreign
exchange rate risk and commodity price risk, do not arise in the normal course
of the Company's business activities.
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits as required by Item 601 of Regulation S-K.
None.
(b) Reports on Form 8-K
None.
21
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/ John M. Lisicki
John M. Lisicki
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 11, 2001
/S/ James J. Alescio
James J. Alescio
Senior Vice President, CFO and Treasurer
(Principal Financial and Accounting Officer)
Date: May 11, 2001
22