EXHIBIT 13
1996 ANNUAL REPORT
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TABLE OF CONTENTS
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PAGE
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President's Message to Stockholders .................................... 1
Selected Consolidated Financial Information ............................ 2
Management's Discussion and Analysis of Financial Condition and
Results of Operations ............................................... 4
Independent Auditors' Report ........................................... 22
Consolidated Statements of Financial Condition ......................... 23
Consolidated Statements of Income ...................................... 24
Consolidated Statements of Changes in Shareholders' Equity ............. 25
Consolidated Statements of Cash Flows .................................. 26
Notes to Consolidated Financial Statements ............................. 28
Corporate and Stockholder Information .................................. 58
Directors and Executive Officers ....................................... 60
A MESSAGE FROM THE PRESIDENT
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To Our Stockholders
I am pleased to present the 2nd Annual Report to Stockholders of Ambanc
Holding Co., Inc., the parent holding company of Amsterdam Savings Bank, FSB.
Last year I told you that we would remain focused on providing a positive return
on your investment. As you review the Annual Report you will see that we have
been faithful to that promise. Two stock repurchases during 1996, totaling
1,030,227 shares, have reduced the company's outstanding shares to 4,392,023.
This has given added value to the investor, and represents a solid investment in
the company's future. The Proxy Statement contains a graph which will illustrate
the increase in market price per share of the company's stock which occurred
during 1996. We believe that this is an indication of the positive results of
our efforts.
I also told you last year that we are committed to a solid and steady
future and that we would use the capital raised in the initial stock offering to
expand customer services and utilize new technological developments. We have
also kept that promise. Three new branch locations were secured in 1996, and all
three will be opening for business in 1997. The new branch office in
Guilderland, New York will be strategically located to serve our Albany and
Schenectady customer base, in a newly constructed building, equipped with
state-of-the-art electronic facilities and customer friendly furnishings.
Construction is expected to be complete by mid-May 1997. The other two new
locations will be in our Saratoga market area and will be super marketbranches.
The opening date for both of these branches is April 14, 1997. We have also
confirmed our commitment to the utilization of new technology by establishing a
home page on the Internet. Our customers are now able to obtain current
information about the bank's products and services "on-line" without leaving the
comfort of their homes.
Our biggest challenge for the future is to successfully compete with larger
institutions for a profitable share of the Capital District market area. We
believe that the key to meeting this challenge is to continue to do what we have
always done the best -- deliver competitively priced products and services to
our customers on a person-to-person basis. In our first full year as a single
bank holding company we have built on the bank's heritage (dating back to 1886)
of strength, stability and personal service. We have stood the test of time and
boldly face the future with pride and confidence that we will meet the challenge
of providing maximum shareholder value, growth, improvement and focus on the
future.
The support of our shareholders (many of whom are also our customers) and
their continuous referrals of friends and neighbors is important to our growth
and profitability. I would like to express my heartfelt gratitude to all of you
and to our employees, officers, directors and customers for your ongoing loyalty
and support.
Very truly yours,
Robert J. Brittain
President and Chief Executive Officer
1
SELECTED CONSOLIDATED FINANCIAL INFORMATION
Set forth below are selected consolidated financial and other data of the
Company. This financial data is derived in part from, and should be read in
conjunction with, the Consolidated Financial Statements and Notes to the
Consolidated Financial Statements of the Company presented elsewhere in this
Annual Report.
December 31,
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1996 1995 1994 1993 1992
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(In thousands)
Selected Consolidated
Financial Condition Data:
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Total assets $472,421 $438,944 $343,334 $332,902 $323,492
Loans receivable, net 248,094 249,991 261,581 220,647 244,437
Securities, available for sale 200,539 74,422 --- --- ---
Securities, held to maturity --- --- 53,390 57,797 36,767
Deposits 298,082 311,239 293,152 294,780 297,849
Total borrowings 108,780 --- 19,000 --- ---
Total equity 61,518 76,015 27,414 25,464 22,783
Years Ended December 31,
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1996 1995 1994 1993 1992
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(In thousands)
Selected Consolidated
Operations Data:
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Total interest income $32,348 $25,582 $23,806 $23,789 $26,661
Total interest expense 16,435 12,746 10,192 10,885 14,332
-------- -------- -------- ------- --------
Net interest income 15,913 12,836 13,614 12,904 12,329
Provision for loan losses 9,450 1,522 1,107 1,689 490
-------- -------- -------- ------- --------
Net interest income after provision
for loan losses 6,463 11,314 12,507 11,215 11,839
Fees and service charges 764 783 642 679 605
Gain (loss) on sales and
redemptions of securities (102) 225 --- --- 5
Other noninterest income 258 504 263 517 451
-------- -------- -------- ------- --------
Total noninterest income 920 1,512 905 1,196 1,061
Total noninterest expense 13,148 11,383 11,340 9,659 8,833
-------- -------- -------- ------- --------
Income (loss) before taxes and
cummulative effect of a change
in accounting principle (5,765) 1,443 2,072 2,752 4,067
Income tax provision (benefit) (1,929) 586 122 671 1,568
Cummulative effect of a change
in accounting principle related to
SFAS No. 109 --- --- --- 600 ---
-------- -------- -------- ------- --------
Net income (loss) ($3,836) $857 $1,950 $2,681 $2,499
======== ======== ======== ======= ========
(Loss) per share (1) ($0.81) N/A N/A N/A N/A
<FN>
(1) Loss per share was calculated net of unearned ESOP shares. Average shares
outstanding for the year 1996 were 4,761,393. Per share earnings were not
calculated for the comparable periods since the Company had no stock outstanding
prior to its initial public offering completed on December 26, 1995.
</FN>
2
Years Ended December 31,
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1996 1995 1994 1993 1992
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Selected Consolidated Financial
Ratios and Other Data:
Performance Ratios:
Return on average assets (0.84%) 0.25% 0.59% 0.83% 0.79%
Return on average equity (1) (5.24) 3.00 7.36 11.00 11.68
Interest rate spread information:
Average during period 2.74 3.36 4.01 3.85 3.66
Net interest margin (2) 3.66 3.87 4.34 4.19 4.08
Efficiency Ratio (3) 62.88 68.18 63.46 61.06 60.88
Ratio of operating expense to average
total assets 2.86 3.37 3.38 2.97 2.74
Ratio of average interest-earning assets
to average interest-bearing liabilities 124.26 113.31 110.24 109.53 108.84
Asset Quality Ratios:
Non-performing assets to total assets
at end of period 1.18 2.72 4.15 5.06 4.76
Non-performing loans to total loans 1.94 3.48 3.97 5.07 4.23
Allowance for loan losses to non-
performing loans 70.47 30.10 21.42 28.59 29.52
Allowance for loan losses to total
loans receivable 1.37 1.05 0.85 1.47 1.27
Capital Ratios:
Equity to total assets at end of period (1) 13.02 17.32 7.98 7.65 7.04
Average equity to average assets (1) 15.95 8.30 7.96 7.52 6.76
Other Data:
Number of full-service offices 9 9 7 6 6
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<FN>
(1) Period end and average asset and equity amounts reflect securities available
for sale at fair value, with net unrealized gains/losses, net of tax, included
as a component of equity.
(2) Net interest income divided by average interest-earning assets
(3) The efficiency ratio represents operating expenses (excluding real estate
owned and repossessed asset expense of $2.6 million, $1.6 million, $2.1 million,
$1.0 million and $534,000 for the fiscal years ended December 31, 1996, 1995,
1994, 1993, and 1992 respectively), divided by the sum of net interest income
and non-interest income.
</FN>
3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
General
The most significant events of the 1996 fiscal year were: (i) the
completion of the Company's two 10% stock repurchase programs, which resulted in
the buy-back of 1,030,227 shares of common stock; (ii) the bulk sales of certain
performing and non-performing loans and foreclosed real estate; and (iii) the
filing for Chapter 11 bankruptcy protection by the Bennett Funding Group, a
lease finance company that had a $3.6 million aggregate lending relationship
with the Company at the time of the bankruptcy filing.
All references to the Company prior to December 26, 1995, the conversion
date, except where otherwise indicated, are to Amsterdam Savings Bank, FSB. (the
"Bank"), the Company's wholly owned bank subsidiary. As of December 31, 1995,
the Company had no material results of operations; accordingly, the following
discussion relates primarily to the Bank's results of operations for periods
prior to fiscal year 1996.
When used in this annual report, the words or phrases "will likely
result", "are expected to", "will continue", "is anticipated", "estimate",
"project" or similar expressions are intended to identify "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such statements are subject to certain risks and uncertainties --
including, changes in economic conditions in the Company's market area, changes
in policies by regulatory agencies, fluctuations in interest rates, demand for
loans in the Company's market area and competition that could cause actual
results to differ materially from historical earnings and those presently
anticipated or projected. The Company wishes to caution readers not to place
undue reliance on any such forward-looking statements, which speak only as of
the date made. The Company wishes to advise readers that the factors listed
above could affect the Company's financial performance and could cause the
Company's actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods in any current
statements.
The Company does not undertake -- and specifically disclaims any
obligation -- to release publicly the result of any revisions that 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.
Management Strategy
Management's primary goal is to improve the Company's profitability while
minimizing its risks. To meet these goals, the Company's strategies focus on:
(i) emphasizing one- to four- family residential mortgage lending, home equity
loans, and consumer loans, especially automobile loans; (ii) asset quality;
(iii) increasing the Company's subsidiary Bank's presence in its market area
primarily through the establishment of low-cost supermarket branches; and (iv)
managing interest rate risk.
4
Emphasizing Lending Secured by One- to Four-Family Residential Mortgages,
Home Equity and Consumer Products
The Company's bank subsidiary has emphasized and plans to continue to
emphasize originating traditional one- to four-family residential mortgage, home
equity and consumer loans in its primary market area.
During 1996, 1995, and 1994, the Bank originated $47.7 million, $8.3
million and $56.0 million, respectively, of loans secured by one-to-four-family
residences, home equity loans of $14.3 million, $7.9 million and $7.9 million,
respectively, and $7.7 million, $18.4 million and $17.2 million, respectively,
of consumer loans. At December 31, 1996, the Bank had $158.2 million of loans
secured by one- to four-family residences, $22.8 million of home equity loans
and $26.0 million of consumer loans representing 63.1%, 9.1% and 10.3%,
respectively, of the Bank's gross loan portfolio.
Asset Quality
The Bank's loan portfolio consists primarily of one- to four-family
residential and home equity loans, which are considered to have less risk than
commercial and multi-family real estate or consumer loans. The Bank has
de-emphasized its commercial and multi-family real estate lending, with the
portfolio shrinking from $50.1 million at December 31, 1995, to $34.7 million at
December 31, 1996. During the same period, the Bank's portfolio of loans secured
by one- to four-family and home equity mortgage loans has grown from $151.0
million to $181.0 million.
The Bank's non-performing assets consist of non-accruing loans, accruing
loans delinquent more than 90 days, troubled debt restructurings and foreclosed
assets. The Bank has established a high priority for its loan collection efforts
and has aggressively marketed real estate owned properties in order to increase
operating earnings.
At the end of the first quarter of 1996, non-performing loans increased due
to the Chapter 11 bankruptcy filing by the Bennett Funding Group, a lease
financing company that had a $3.6 million aggregate lending relationship with
the Company at the time of the filing. During 1996, the Company recorded a
provision for loan losses related to the Bennett relationship of $2.8 million on
a loan relationship exposure of $3.6 million. During December 1996, $1.7 million
of Bennett's total loan balance was charged-off against the allowance for loan
losses previously established through charges to earnings. Negotiations with the
Bennett bankruptcy trustee related to the Bank's total Bennett relationship are
in process, and, based upon discussions to date, the Bank believes that the
remaining $1.1 million loan loss reserve for Bennett is adequate.
5
The Company has been severely handicapped by the level of its
non-performing assets, resulting in significant resources allocated to managing
these assets, as well as reduced earnings. The Company decided to dispose of
certain non-performing assets in a bulk sale versus continuing to resolve the
problems on an asset specific basis in order to accelerate the reduction in loan
portfolio credit risk, reduce the drag on earnings that resulted from these
assets, enhance overall asset quality and better position the Company to achieve
its strategic goals. Accordingly, during the fourth quarter of 1996, the Company
sold certain non-performing commercial type loans totaling $13.8 million and
other performing loans with relatively high credit risk (primarily manufactured
home loans) totaling $10.7 million and other real estate owned totaling $2.5
million. The net sales proceeds totaled $20.4 million, resulting in a loss of
$6.6 million, which was charged against the allowance for loan losses
(approximately $5.6 million) and to other real estate owned expense
(approximately $1.0 million). Primarily as a result of the bulk sale,
non-performing assets as a percentage of total assets improved to 1.18% at
December 31, 1996, from 2.72% at December 31, 1995. In addition, the Bank's
ratios of non-performing loans to total loans and the allowance for loan losses
to non-performing loans also improved. The ratio of non-performing loans to
total loans declined to 1.94% at December 31, 1996 from 3.48% at December 31,
1995. The ratio of the allowance for loan losses to non-performing loans
increased to 70.47% at December 31, 1996 from 30.10% at December 31, 1995. See
"--Selected Consolidated Financial Ratios and Other Data, Asset Quality Ratios,"
herein.
Increasing the Bank's Presence in its Market Area Primarily through the
Establishment of Low-Cost Supermarket Branches
Since November 1994, the Bank has opened three branch offices in
supermarkets, with one located in each of Schenectady, Albany and Montgomery
Counties, New York. The Bank will be opening its fourth and fifth supermarket
branches in April of 1997. These branch offices will both be located in Saratoga
County, New York, one of the fastest growing counties in New York State.
Management believes that these supermarket branch offices are an effective way
to service its customers due to their size, efficiency and convenient, high
traffic locations.
In addition to the two new supermarket branch offices, the Bank will also
open a "traditional" branch office in 1997. This branch office will be located
in the Town of Guilderland, Albany County, New York, in a new shopping center
being constructed at the intersection of N.Y.S. Routes 20 and 155, a high
traffic area.
With the opening of its three new branch offices in 1997, the Bank will be
operating 12 full-service branch locations in its primary market area, all of
which provide customers with 24-hour access to ATMs.
Managing Interest Rate Risk.
The Bank has an asset/liability management committee ("ALCO") that meets
weekly to develop, implement and review policies to manage interest rate risk.
The Bank has endeavored to manage its interest rate risk through the pricing and
diversification of its loans, including the introduction of new, first mortgage
loan products with shorter terms to maturity or with different interest rate
adjustment periods, the origination of consumer loans with shorter average lives
or which reprice at shorter intervals than fixed and adjustable-rate one- to
four-family residential loans and, from time to time, the purchase of short- to
intermediate-term securities available for sale.
6
Financial Condition
Comparison of Financial Condition at December 31, 1996 and December 31,
1995. Total assets at December 31, 1996, were $472.4 million, an increase of
$33.5 million, or 7.6%, compared to total assets of $438.9 million at December
31, 1995. The growth in total assets was primarily attributable to a $126.1
million increase in securities available for sale, mainly mortgage-backed
securities which increased $103.1 million. The growth of $33.5 million in total
asset was funded by an increase in borrowed funds of $108.8 million, primarily
securities sold under agreements to repurchase, which increased to $102.8 at
December 31, 1996, from zero at December 31, 1995. Before committing the Company
to a significant change in the composition of its balance sheet, management
completed an analysis to measure the projected impact on the Company's net
interest income and the net interest margin. On the basis of its analysis,
management determined that the benefit of a projected significant increase in
net interest income, although at a spread lower than the Company's traditional
spread between interest-earning assets and interest-bearing liabilities,
outweighed the negative impact from a projected narrowing in the Company's net
interest margin. See "Net Interest Income" and "Asset/Liability Management"
herein.
Total deposits at December 31, 1996, were $298.1 million, a decrease of
$13.2 million, or 4.2%, compared to $311.2 million the prior year. The decrease
was primarily due to declines in certificates of deposit of $5.4 million,
passbook and statement savings accounts ("savings accounts") of $4.7 million,
and money market accounts of $2.4 million. On the basis of the Bank's
statistical and anecdotal monitoring reports of withdrawals and account
closeouts, management believes that the declines in deposit balances resulted,
in part, from a shift by some of the Bank's depositors of a portion of their
investable funds into alternative investment vehicles, such as stock mutual
funds, during 1996.
Total stockholders' equity decreased $14.5 million to $61.5 million mainly
as the result of the Company's stock buy-backs totaling $11.2 million and the
net loss of $3.8 million recorded for the year ended December 31, 1996,
partially offset by a $527,000 decrease in unearned shares held by the Company's
Employee Stock Ownership Plan ("ESOP").
7
Results of Operations
Comparison of Fiscal Years Ended December 31, 1996 and 1995
General.
For the fiscal year ended December 31, 1996, the Company recorded a net
loss of $3.8 million compared to net income of $857,000 for the prior year. The
net loss for 1996 was attributable primarily to the provision for loan losses of
$9.5 million; which was primarily related to the bulk sale of certain performing
and non-performing loans and the Company's aggregate lending relationship with
the Bennett Funding Group ("Bennett"). See "--Provision for Loan Losses."
Interest Income.
Interest income increased $6.8 million, or 26.4%, to $32.3 million in 1996
from $25.6 million in 1995. The increase in interest income resulted from a
$103.2 million, or 31.2%, increase in the Company's average interest-earning
assets, primarily securities available for sale, which increased $106.5 million,
or 214% in 1996, to $156.1 million at December 31, 1996, compared to $49.6
million of securities held to maturity in 1995. The average yield earned on the
Company's securities increased 89 basis points to 7.00% in 1996 compared to
6.11% in 1995.
However, overall the average yield earned on interest-earning assets
decreased 28 basis points to 7.44% in 1996 from 7.72% in the prior year. The
decrease in the average yield earned was mainly the result of the change in the
mix of average interest-earning assets with lower yielding securities available
for sale increasing as a percent of the total mix, rising to 36.4% during 1996
from 15.5% in 1995, while the percentage of higher yielding loans to total
interest-earning assets declined to 60.3% from 78.9% for the same periods.
Interest Expense.
Interest expense increased by $3.7 million, or 28.9%, to $16.4 million in
1996 compared to $12.7 million in 1995. Average interest-bearing liabilities
increased $57.3 million, or 19.6%, to $349.7 million in 1996 compared to $292.4
million during the prior year. During the same periods, the average rate paid on
interest-bearing liabilities increased by 34 basis points to 4.70% from 4.37%.
The increase in interest expense was due primarily to a $62.7 million increase
in the average outstanding balance of borrowed funds to $67.6 million from $4.9
million in 1995, mainly resulting from an increase in securities sold under
agreements to repurchase, which grew $56.8 million to $57.8 million in 1996 from
$1.0 million in 1995. Average borrowed funds, with an average rate of 5.94%,
increased to 19.3% of total interest-bearing liabilities for 1996 up from 1.7%
in 1995 while average savings accounts, with an average rate of 3.04% in 1996,
declined to 29.5% from 37.2% in 1995 and average certificates of deposit, with
an average rate of 5.65% in 1996, decreased to 43.0% of the funding mix in 1996
from 50.4% the prior year.
8
Net Interest Income.
Net interest income before provision for loan losses increased $3.1
million, or 24.0%, to $15.9 million for the year ended December 31, 1996,
compared to $12.8 million for 1995. As a result of implementing the Company's
strategy to enhance net interest income through the restructuring of its balance
sheet through the use of leveraged reverse repurchase agreements, net interest
income increased approximately $1.4 million. Partially offsetting the increased
net interest income attributable to average net earning asset growth was a
decline in the net yield on average interest-earning assets of 21 basis points
to 3.66% in 1996 from 3.87% in 1995, primarily the result of the changes in the
composition of average interest-earning assets and average interest-bearing
liabilities as discussed above. See "Financial Condition","Interest Income",
"Interest Expense" and "Asset Liability Management" herein.
Provision for Loan Losses.
The provision for loan losses increased $8.0 million to $9.5 million in
1996 from $1.5 million during 1995. The increase resulted primarily from the
Company's bulk sale of certain performing and non-performing loans in the fourth
quarter of 1996, the aggregate lending relationship with the Bennett Funding
Group (see "Asset Quality" herein), a company that filed for Chapter 11
bankruptcy protection on March 29, 1996, as well as the Company's continual
review of its loan portfolio. In order to accelerate its objective of reducing
credit risk in the loan portfolio and better position the Company to achieve its
strategic goals, management considered it to be more prudent to complete the
bulk sale of certain non-performing commercial type loans and manufactured home
loans (which are considered a higher credit risk consumer product), versus
continuing to address these assets on an asset specific basis (see "Asset
Quality" herein).
The Bank records a provision for loan losses based upon its analysis of the
adequacy of the allowance for loan losses. 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 concentrations of credit,
historical loss experience, current economic conditions, estimated fair value of
underlying collateral, delinquencies, and other factors.
While the increase in the 1996 provision for loan losses was primarily due
to the Bennett relationship and the result of the bulk loan sale, it was also
due to weaknesses in the economy in the Bank's primary market area, decreases in
the value of real estate (the primary collateral securing many loans) in the
region, as well as increases in charge-offs, even after excluding the effects of
the bulk loan sales and the Bennett relationship.
9
At December 31, 1996, the Bank's allowance for loan losses totaled $3.4
million, or 1.4% of total loans and 70.5% of non-performing loans, compared to
$2.6 million, or 1.1% of total loans and 30.1% of non-performing loans at
December 31, 1995.
Non-interest Income.
Non-interest income decreased by $592,000 to $920,000 for the year ended
December 31, 1996, from $1.5 million in 1995. The primary reasons for the
decline in non-interest income were the receipt by the Bank of a non-recurring
FDIC deposit insurance premium refund of $189,000 in 1995, net losses on the
sale of securities available for sale of $102,000 in 1996 compared to a net gain
in the prior year of $225,000 and the receipt in 1995 of non-recurring insurance
proceeds related to a fire loss on a real estate owned property in the amount of
$76,000. In late 1995, the Bank's securities portfolio was yielding below market
rates. As a result, the Bank decided in early January 1996 to $34 million of its
holdings and reinvest the proceeds in then current higher yielding securities,
based on a projection that the losses on the sales would be recovered in
approximately six-months.
Non-interest Expense.
Non-interest expense increased $1.8 million to $13.1 million for the year
ended December 31, 1996, an increase of 15.5%, from $11.4 million in 1995. The
primary reasons for the increase were a $962,000 increase in the net costs
associated with the Bank's real estate owned and repossessed assets and an
increase in salaries, wages, and benefits of $694,000, or 15.8% over the prior
year.
The increase in the expenses related to real estate owned and repossessed
assets resulted primarily from the bulk sale of certain foreclosed real estate
properties at an amount below book value, which increased expenses by
approximately $1.0 million. Although these assets had been carried at fair
value, the Bank was willing to accept a price lower than book value as part of
this bulk sale in order to reduce the drag on earnings that resulted from
carrying these non-performing assets. This increase was partially offset by a
decline in other write-downs of real estate owned of $377,000 to $877,000 for
1996 compared to $1.3 million during 1995. Also contributing to the increase was
an increase in expenses related to holding these assets.
10
The increase in salaries, wages, and benefits was primarily attributable to
the Company's Employee Stock Ownership Plan ("ESOP"), that was established at
the time of conversion. The year ended December 31, 1996, was the first year in
which the Company was required to recognize compensation expense related to the
ESOP. The amount of the expense recorded for 1996 was $527,000. Excluding the
ESOP expense, salaries, wages, and benefits increased $167,000, or 3.8%, to $4.6
million from $4.4 million in 1995 due mainly to normal cost of living and merit
increases.
All other non-interest expenses increased by $109,000, or 2.0%, to $5.5
million in 1996 from $5.4 million the prior year. Increases related to occupancy
and equipment, data processing, professional fees, and certain other expense
categories totaling $974,000 were offset almost entirely by decreases of
$865,000 in certain other expense categories, primarily FDIC deposit insurance
premiums, which declined by $531,000 from $533,000 in 1995 to $2,000 in 1996 due
to a decrease in the rates charged to well-capitalized, Bank Insurance Fund
(BIF) member institutions such as the Bank, and the recording of non-recurring
expenses of $205,000 in 1995 pertaining to the seizure and liquidation of
Nationar by the Superintendent of Banks of N.Y.S.
Income Tax Expense.
Due to the pre-tax loss of $5.8 million incurred in 1996 as compared to
pre-tax income of $1.4 million in 1995, the Company recorded a tax benefit of
$1.9 million for 1996 compared to an expense of $586,000 in 1995.
Comparison of Fiscal Years Ended December 31, 1995 and 1994
General.
Net income for the year ended December 31, 1995, decreased $1.1 million, or
56.1%, to $857,000 from $2.0 million for the year ended December 31, 1994. The
decrease in net income resulted primarily from a decline in net interest income
before provision for loan losses of $778,000, or 5.7%, an increase in the
provision for loan losses of $415,000, or 37.5%, and an increase in non-interest
expenses of $43,000, or 0.4%, partially offset by an increase in non-interest
income of $607,000, or 67.1%.
Interest Income.
Interest income increased $1.8 million, or 7.5%, to $25.6 million in 1995
from $23.8 million in 1994. The increase in interest income was the result of a
$17.7 million, or 5.6%, increase in the Bank's average interest-earning assets
(primarily loans receivable) for the year ended December 31, 1995, to $331.3
million, compared to $313.6 million during 1994. The yield earned on the Bank's
interest-earning assets increased 13 basis points to 7.72% in 1995 from 7.59% in
1994. This increase was primarily a result of an increase in rates earned on
federal funds sold by the Bank.
11
Interest Expense.
Interest expense increased by $2.5 million, or 25.1%, to $12.7 million for
the year ended December 31, 1995, from $10.2 million in 1994. Average
interest-bearing liabilities increased $7.9 million, or 2.8%, to $292.4 million
in 1995 from $284.5 million in 1994 and the average rate paid on
interest-bearing liabilities increased by 75 basis points to 4.33% from 3.58%
during the same periods. The increase in interest expense, however, was
primarily the result of a $37.6 million increase in the average outstanding
balance of the Bank's certificate accounts (approximately $14.0 million of which
represented a shift from lower earning savings accounts at the Bank) coupled
with a 118 basis point increase in the rates paid on such accounts. In this
regard, the Bank offered attractive promotional rates on certain certificate
accounts in connection with the supermarket branch openings.
Net Interest Income.
Net interest income before provision for loan losses decreased $778,000, or
5.7%, to $12.8 million for the year ended December 31, 1995, compared to $13.6
million for 1994. The decrease was primarily due to a 65 basis point decline in
the Bank's average net interest rate spread to 3.36% in 1995 from 4.01% in 1994,
partially offset by an increase in average net earning assets of $9.8 million,
or 33.6%, to $38.9 million in 1995 from $29.1 million in 1994. The Bank's
average net yield on interest-earning assets also declined in 1995 to 3.87% from
4.34% in 1994.
Provision for Loan Losses.
The provision for loan losses increased $415,000, or 37.5%, to $1.5 million
for the year ended December 31, 1995, from $1.1 million for the year ended
December 31, 1994. This increase was attributable mainly to increased
non-accruals for consumer loans secured by recreational vehicles and to a lesser
extent manufactured homes. These types of loans typically have a higher risk of
loss associated with them than real estate loans since they are generally
secured by rapidly depreciable assets. Management's decision to increase the
provision for loan losses was impacted primarily by management's analysis of the
Bank's asset quality and the level of its allowance for loan losses. At December
31, 1995, the Bank's allowance for loan losses totaled $2.6 million or 1.1% of
total loans and 30.1% of total non-performing loans.
Non-interest Income.
Total non-interest income increased $607,000, or 67.1%, to $1.5 million for
the year ended December 31, 1995, from $905,000 for the year ended December 31,
1994. The primary reasons for the improvement in non-interest income in 1995
were a non-recurring FDIC deposit insurance premium refund of $189,000 and net
gains on the sale of securities available for sale of $225,000 on the sale of
securities available for sale. Also contributing to the increase in non-interest
income were a $46,000 increase in commissions from annuity and mutual fund sales
by the Bank's insurance agency subsidiary and the receipt of insurance proceeds
related to a fire loss on real estate owned property in the amount of $76,000.
12
Non-interest Expense.
Total non-interest expense increased $43,000, or 0.4%, to $11.4 million for
1995 compared to $11.3 million for 1994. The increase in non-interest expense
was due to a $355,000, or 8.8% increase in salaries, wages, and benefits as a
result of normal cost of living and merit increases and the addition of 13
full-time equivalent employees for the three supermarket branch offices opened
since November of 1994. Also contributing to the increase was an increase of
$232,000 in data processing fees, of which $105,000 was related to the
implementation of check imaging, an increase of $151,000, or 14.1%, in occupancy
and equipment expenses, due mainly to the addition of the three supermarket
branches, partially offset by a decrease in other non-interest expenses of
$695,000. The decrease in other non-interest expenses resulted primarily from a
$451,000 decline in real estate owned and repossessed assets expenses and a
$259,000 reduction in correspondent bank processing fees as a result of the
Bank's decision to no longer outsource certain processes. Also contributing to
the overall decrease in other non-interest expenses was a reduction in the
Bank's FDIC, Bank Insurance Fund (BIF)-member, deposit insurance premiums of
$188,000 due to a downward revision by the FDIC in its premium schedule for
BIF-member institutions in anticipation of the BIF achieving its statutory
reserve ratio. The lower premiums for BIF-member institutions became effective
in the third quarter of 1995. Partially offsetting these decreases were a charge
of $175,000 for legal costs related to a lawsuit in which the Bank was the
defendant and the establishment of loss reserves totaling $205,000 related to
the Bank's relationship with Nationar.
Income Tax Expense.
Income tax expense increased by $464,000 to $586,000 for 1995. The increase
was due to a $641,000 decrease in the deferred tax asset valuation allowance
during 1994, which reduced income tax expenses in 1994, with no such credit in
1995.
13
Average Balances, Interest Rates and Yields
The following table presents for the periods indicated the total dollar
amount of interest income earned on average interest-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.
Years Ended December 31,
---------------------------------------------------------------------------------------
1996 1995 1994
---------------------------- --------------------------- ---------------------------
Average Interest Yield/ Average Interest Yield/ Average Interest Yield/
Balance Inc./Exp. Rate Balance Inc./Exp. Rate Balance Inc./Exp. Rate
-------- --------- ------- ------- --------- ------- ------- --------- ------
(Dollars in Thousands)
Interest-Earning Assets:
Loans receivable (1) $262,193 $20,557 7.84% $261,482 $21,385 8.18% $240,192 $19,718 8.21%
Securities-available for sale (2) 156,093 10,921 7.00 --- --- --- --- --- ---
Securities-held to maturity --- --- --- 49,598 3,028 6.11 55,890 3,360 6.01
Federal Home Loan Bank Stock 2,013 130 6.46 1,867 143 7.66 1,670 127 7.60
Federal funds sold 14,218 740 5.20 18,352 1,026 5.59 15,878 601 3.79
-------- --------- ------- --------- ------- ---------
Total interest-earning assets (1)(2) 434,517 32,348 7.44 331,299 25,582 7.72 313,630 23,806 7.59
-------- --------- ------- --------- ------- ---------
Interest-Bearing Liabilities
Savings deposits 103,931 3,162 3.04 108,747 3,300 3.03 135,747 4,123 3.04
NOW deposits 19,124 527 2.76 18,640 511 2.74 18,583 510 2.74
Certificates of deposit 150,300 8,492 5.65 147,348 8,272 5.61 109,713 4,861 4.43
Money market accounts 8,765 243 2.77 10,362 285 2.75 13,253 364 2.75
Borrowed funds 67,572 4,011 5.94 4,880 299 6.11 5,471 307 5.61
Advances from borrowers for taxes and
insurance, and stock subscription
proceeds --- --- --- 2,402 79 3.28 1,725 27 1.57
-------- --------- ------- --------- ------- ---------
Total interest-bearing liabilities 349,692 16,435 4.70 292,379 12,746 4.36 284,492 10,192 3.58
-------- --------- ------- --------- ------- ---------
Net interest income $15,913 $12,836 $13,614
========= ========= =========
Net interest rate spread (1)(2) 2.74% 3.36% 4.01%
===== ===== =====
Net earning assets (1)(2) $84,825 $38,920 $29,138
======== ======= =======
Net yield on average
interest-earning assets (1)(2) 3.66% 3.87% 4.34%
===== ===== =====
Average interest-earning assets/
average interest-bearing liabilities 124.26% 113.31% 110.24%
======== ======= =======
- ---------------------------------------------
<FN>
(1) Calculated net of deferred loan fees, loan discounts and loans in process.
(2) Net of Securities available for sale pending settlement and net unrealized gains/(losses).
</FN>
14
Rate/Volume Analysis of Net Interest Income
The following table presents the dollar amount of changes in interest
income and interest expense for major components of interest-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 interest-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.
Year Ended December 31,
-----------------------------------------------------------------
1996 vs. 1995 1995 vs. 1994
-----------------------------------------------------------------
Increase Increase
(Decrease) (Decrease)
Due to Total Due to Total
----------------- Increase ------------------ Increase
Volume Rate (Decrease) Volume Rate (Decrease)
-------- ------ --------- -------- ------ ---------
(Dollars in Thousands)
Interest-Earning Assets:
Loans receivable (1) $58 ($886) ($828) $1,739 ($72) $1,667
Securities-available for sale (2) 10,921 -- 10,921 -- -- --
Securities-held to maturity (3,028) -- (3,028) (389) 57 (332)
Federal Home Loan Bank Stock 13 (26) (13) 15 1 16
Federal Funds sold (219) (67) (286) 105 320 425
-------- ------ --------- -------- ------ ---------
Total interest-earning assets 7,745 (979) 6,766 1,470 306 1,776
-------- ------ --------- -------- ------ ---------
Interest-Bearing Liabilities
Savings deposits (145) 7 (138) (809) (14) (823)
NOW deposits 13 3 16 2 (1) 1
Certificates of deposit 167 53 220 1,920 1,491 3,411
Money market accounts (44) 2 (42) (80) 1 (79)
Borrowed funds 3,720 (8) 3,712 (50) 42 (8)
Advances from borrowers for taxes and
insurance, and stock subscription
proceeds (45) (34) (79) 17 35 52
-------- ------ --------- -------- ------ ---------
Total interest-bearing liabilities $3,666 $23 3,689 $1,000 $1,554 2,554
======== ====== --------- ======== ======= ---------
Net interest income $3,077 ($778)
========= ========
- -------------------------------------
<FN>
(1) Calculated net of deferred loan fees, loan discounts and loans in process.
(2) Net of Securities available for sale pending settlement and net unrealized gains/(losses).
</FN>
15
Asset/Liability Management
The Bank, like other financial institutions, is subject to interest rate
risk to the extent that its interest-bearing liabilities reprice on a different
basis or at a different pace from its interest-earning assets. Management of the
Bank believes it is important to manage the relationship between interest rates
and the effect on the Bank's net portfolio value ("NPV"). This approach
calculates the difference between the present value of expected cash flows from
assets and the present value of expected cash flows from liabilities, as well as
cash flows from off-balance sheet contracts.
Thrift institutions with greater than "normal" interest rate exposure must
take a deduction from their total capital available to meet their risk-based
capital requirement. The amount of the deduction is one-half of the difference
between (a) the institution's actual calculated exposure to a 200 basis point
interest rate increase or decrease (whichever results in the greater pro forma
decrease in NPV) and (b) its "normal" level of exposure which is defined as 2%
of the present value of its assets. The regulation, however, will not become
effective until the OTS evaluates the process by which savings associations may
appeal an interest rate risk deduction determination. It is uncertain as to when
this evaluation may be completed. Furthermore, the Bank, due to its asset size
and level of risk-based capital is exempt from this requirement. At December 31,
1996, a change in interest rates of positive 200 basis points would have
resulted in a 4.14% decrease (as a percentage of the net present value of the
Bank's assets) in the Bank's NPV while a change in interest rates of negative
200 basis points would have resulted in a 2.43% increase (as a percentage of the
net present value of the Bank's assets) in the Bank's NPV. Accordingly, the
Bank's interest rate risk was considered normal under OTS regulations and no
additional risk-based capital would have been required at December 31, 1996.
Presented below, as of December 31, 1996, is an analysis of the Bank's
interest rate risk as calculated by the OTS, measured by changes in the Bank's
NPV for instantaneous and sustained parallel shifts in the yield curve, in 100
basis points increments, up and down 400 basis points.
Net Portfolio Value
-------------------
Change in
Interest Rate $ Amount $ Change % Change
------------- -------- -------- --------
(Basis Points) (Dollars in Thousands)
+400 $17,103 $(38,857) (69)%
+300 26,503 (29,459) (53)
+200 36,446 (19,514) (35)
+100 46,552 ( 9,409) (17)
---- 55,961 ---- ----
-100 62,976 7,016 13
-200 67,404 11,444 20
-300 71,920 15,959 29
-400 77,826 21,865 39
16
Certain assumptions utilized by the OTS in assessing the interest rate
risk of thrift institutions were employed in preparing the previous table. These
assumptions related to interest rates, loan prepayment rates, deposit decay
rates and the market values of certain assets under the various interest rate
scenarios. It was also assumed that delinquency rates will not change as a
result of changes in interest rates although there can be no assurance that this
will be the case. Even if interest rates change in the designated amounts, there
can be no assurance that the Bank's assets and liabilities would perform as set
forth above. In addition, a change in Treasury rates in the designated amounts
accompanied by a change in the shape of the Treasury yield curve would cause
significantly different changes to the NPV than indicated above.
The Bank maintains an asset/liability committee ("ALCO") which meets weekly
to review interest rate risk management strategy and to review the Bank's
investment strategy for loans and securities, monitor investment performance and
to take any actions necessary for adjusting future investment direction. In
managing its asset/liability mix, and depending on the relationship between
long- and short-term interest rates, market conditions and consumer preference,
the Bank may place more emphasis on limiting interest rate risk than on
enhancing its net interest income. Management believes that the stability which
can be obtained by limiting interest rate risk can more than offset the benefits
which can be derived from seeking to enhance the net interest margin on a
short-term basis.
In managing its asset/liability mix, the Bank, at times, depending on the
relationship between long- and short-term interest rates, market conditions and
consumer preference, may place greater emphasis on maximizing its net interest
margin than on matching the interest rate sensitivity of its assets and
liabilities, in an effort to improve or maintain its spread. Management believes
that the increased net income resulting from a mismatch in the maturity of its
asset and liability portfolios can, during periods of decline or stable interest
rates, provide high enough returns to justify the increased vulnerability to
sudden and unexpected increases in interest rates which can result from such a
mismatch. As a result, the Bank may at certain times be more vulnerable to rapid
increases in interest rates than some other institutions which concentrate
principally on matching the maturities of their assets and liabilities.
In evaluating the Bank's exposure to interest rate risk, certain
shortcomings inherent in the method of analysis presented in the foregoing table
must be considered. For example, although certain assets and liabilities may
have similar maturities or periods to repricing, they may react in different
degrees to changes in market interest rates. Also, the interest rates on certain
types of assets and liabilities may fluctuate in advance of changes in market
interest rates, while interest rates on other types may lag behind changes in
market rates. Further, in the event of a change in interest rates, prepayments
and early withdrawal levels would likely deviate significantly from those
assumed in calculating the table. Finally, the ability of many borrowers to
service their debt may decrease in the event of an interest rate increase. As a
result, the actual effect of changing interest rates may differ from that
presented in the foregoing table.
17
In addition, as part of its asset/liability management process, the Bank
subscribes as a member of the Federal Home Loan Bank of New York to the Interest
Rate Risk Service provided by the Federal Home Loan Bank of Atlanta (FHLBA). The
Bank directly furnishes the FHLBA with the starting data needed to run the
asset/liability simulation model developed by the FHLBA. The required starting
data consists of the Bank's quarterly OTS call report. The schedules from this
report, provide the FHLBA with asset, liability and capital positions in
addition to maturity, rate and repricing information. The FHLBA's simulation
model identifies the Bank's exposure to interest rate risk by measuring the
estimated interest rate sensitivity of the participating institution's Net
Portfolio Value (NPV), the estimated sensitivity of the institution's net
interest income (NII), and the institution's estimated maturity gap position. In
most cases the FHLBA has followed OTS methodology, however, because of
differences in modeling techniques and assumptions, the FHLBA results may differ
from estimates generated by the OTS.
Management believes that the strategy related to the purchase of securities
with borrowed funds and the simultaneous pledging of those securities as
securities sold under agreements to repurchase does not expose the Company's net
interest income and its net interest margin (NIM) to an unacceptable level of
sensitivity to changes, either up or down, in interest rates. See "Financial
Condition" and "Net Interest Income" herein. Management is aware, however, that
by pursuing the balance sheet strategy it followed, that the Bank's NPV would be
more sensitive to changes in interest rates. Based on the FHLBA's Peer Group
Report for December 31, 1996, if rates increased 200 basis points, the Bank's
NPV would decline 29.6% from its base NPV (compared to the OTS calculated 35% in
the table above) while the median decline for its peers was 22.6%. However, if
interest rates increased 400 basis points, the Bank's NPV would decline by 67.1%
(compared to the OTS calculated 69% in the table above) while the median decline
for its peer group was estimated at 47.2%.
When the Bank is compared to its peers in regard to changes in net interest
income and net interest margin, the Bank becomes less interest rate sensitive
than its peer group. With a 200 basis point increase in interest rates, the
Bank's NII would decline by an estimated 3.9% compared to its peer group's
median decline of 8.5%. If rates increased 400 basis points, the Bank's NII
would decline by 9.2% compared to a median decline of 18.6% for its peer group.
Given a 200 basis increase in interest rates as of December 31, 1996, the
Bank's NIM would decline 13 basis points from its base case rate of 3.14% to
3.01%, compared to a peer group decline to 2.66% from 2.83%, a decline of 17
basis points. If interest rates increased 400 basis points, the Bank's NIM would
decline 29 basis points to 2.85% from the base margin of 3.14% while the peer
group's NIM would decline by 42 basis points to 2.41% from 2.83%.
Liquidity and Capital Resources
The Bank's primary sources of funds for operations are deposits from its
market area, principal and interest payments on loans and securities available
for sale , proceeds from the maturity of securities available for sale, advances
from the FHLB of New York and proceeds from the sale of securities sold under
agreements to repurchase ("reverse repo"). While maturities and scheduled
amortization of loans and securities are predictable sources of funds, deposit
flows and mortgage prepayments are greatly influenced by general interest rates,
economic conditions, and competition.
18
The primary investing activities of the Company are the origination of
loans and purchase of securities. During, 1996, 1995 and 1994 the Bank's loan
originations totaled $81.4 million, $50.2 million and $91.2 million,
respectively. The Bank purchased securities held for investment during the year
ended December 31, 1994 of $12.2 million. During 1995, the Bank purchased $47.0
million of securities and classified such securities, consistent with the
reclassification of all investment and mortgage-backed securities at December
31, 1995, as available for sale. In 1996, the Company purchased $192.6 million
of securities and classified such securities as available for sale.
The primary financing activity of the Bank is the attraction of deposits.
However, during the years ended December 31, 1996 and 1994, the Bank experienced
net decreases in deposits of $13.2 million and $1.6 million, respectively.
During the year ended December 31, 1995, the Bank experienced a net increase in
deposits of $18.1 million. Management believes that the decrease in deposits
during the year ended December 31, 1996, was the result, in part, to some of the
Bank's depositors deciding to pursue alternative investment opportunities, such
as stock mutual funds, with a portion of their investable funds. The net
increase of $18.1 million in 1995 resulted from an increase of $41.2 million in
certificates of deposit, partially offset by declines in savings and transaction
accounts. The increase in certificates of deposit was the result of the Bank's
aggressive 1995 marketing campaigns related, in part, to the three supermarket
branches that the Bank opened since November 1994.
The Bank is required to maintain a minimum levels of liquid assets as
defined by OTS regulations. This requirement, which may be varied by the OTS
depending upon economic conditions and deposit flows, is based upon a percentage
of deposits and short-term borrowings. The required minimum liquidity ratio is
currently 5% and the short-term liquidity ratio is 1%. The Bank's average daily
liquidity ratio for the month of December 1996 was 7.5%, and its short-term
liquidity for the same month was 1.6%.
The Bank's most liquid assets are cash and cash equivalents, which consist
of federal funds sold and bank deposits. The level of these assets is dependent
on the Bank's operation, financing and investing activities during any given
period. At December 31, 1996, 1995 and 1994 cash and cash equivalents totaled
$10.9 million, $84.6 million and $16.3 million, respectively.
The Bank anticipates that it will have sufficient funds available to meet
its current commitments. At December 31, 1996, the Bank had commitments to
originate loans of $1.9 million as well as undrawn commitments of $5.9 million
on home equity and other lines of credit. Certificates of deposit which are
scheduled to mature in one year or less at December 31, 1996, totaled $91.1
million. Management believes that a significant portion of such deposits will
remain with the Bank. However, if the Bank is not able to maintain its
historical retention rate on maturing certificates of deposit, it may consider
employing the following strategies: (i) increase its borrowed funds position to
compensate for the deposit outflows; (ii) increase the rates it offers on these
deposits in order to increase the retention rate on maturing certificates of
deposit and/or to attract new deposits; or (iii) attempt to increase
certificates of deposit through the use of deposit brokers. Depending on the
level of market interest rates on the renewal dates of the certificates of
deposit, the employment of one or a combination of these strategies could result
in higher or lower levels of net interest income and net income.
19
The Bank is also involved as plaintiff or defendant in various legal
actions in the normal course of its business. For additional information
regarding such legal matters see "Business-Legal Proceedings" and Note 13(a) of
the Notes to Consolidated Financial Statements.
The Company also has a need for, and sources of, liquidity. Liquidity is
required to fund its operating expenses, as well as for the payment of any
dividends to stockholders. The Company currently has no significant liquidity
commitments as operating costs are modest and dividends to stockholders are
discretionary and to date no dividends have been declared or paid. At December
31, 1996, the Holding Company had $469,000 in liquid assets on hand, however,
the primary source of liquidity on an ongoing basis is dividends from the Bank.
To date, no dividends have been paid from the Bank to the Company.
Federally insured savings institutions are required to maintain a minimum
level of regulatory capital. The OTS has established standards, including a
tangible capital requirement, a leverage ratio (or core capital) requirement and
a risk-based capital requirement applicable to such savings associations. These
capital requirements must be generally as stringent as the comparable capital
requirements for national banks. The OTS is also authorized to impose capital
requirements in excess of these standards on individual associations on a
case-by-case basis.
At December 31, 1996, the Bank had tangible and core capital of $46.2
million and $46.2 million, respectively, or 10.08% of adjusted total assets,
which was approximately $39.3 million and $32.4 million above the minimum
requirements of 1.5% and 3.0%, respectively, of the adjusted total assets in
effect on that date. On December 31, 1996, the Bank had total risk-based capital
of $48.7 million (including $46.2 million in core capital), or 24.61% of
risk-weighted assets of $198.0 million. This amount was $32.9 million above the
8.0% requirement in effect on that date.
Impact Of Inflation
The Consolidated Financial Statements and Notes thereto presented herein
have been prepared in accordance with generally accepted accounting principles,
which require the measurement of financial position and operating results in
terms of historical dollars without considering the change in the relative
purchasing power of money over time due to inflation. The impact of inflation is
reflected in the increased cost of the Company's operations. Nearly all the
assets sand liabilities of the Company are financial, unlike most industrial
companies. As a result, the Company's performance is directly impacted by
changes in interest rates, which are indirectly influenced by inflationary
expectations. The Company's ability to match the interest sensitivity of its
financial assets to the interest sensitivity of its financial liabilities in its
asset/liability management may tend to minimize the effect of changes in
interest rates on the Company's performance. Changes in interest rates do not
necessarily move to the same extent as do changes in the price of goods and
services.
20
Unaudited Consolidated Interim Financial Information
Following is a summary of unaudited quarterly consolidated financial
information for each quarter of 1996 and 1995.
1996 Quarters Ended 1995 Quarters Ended
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
---- ---- ---- ----- ---- ---- ---- -----
(Dollars in thousands, except per share data)
Interest Income $6,948 $7,590 $8,854 $8,956 $6,272 $6,426 $6,405 $6,479
Net Interest Income 3,686 3,909 4,259 4,059 3,418 3,278 3,064 3,076
Provision for Loan Losses 1,628 433 549 6,840 168 1,116 60 178
Income/(Loss) Before Income Taxes (472) 873 963 (7,129) 1,096 (1,271) 1,031 587
Net Income/(Loss) (314) 510 572 (4,604) 648 (820) 665 364
Per Share: Net Income/(Loss)* (.06) .10 .12 (1.05) N/A N/A N/A N/A
- -----------------------------------------
<FN>
* The summation of the 1996 quarterly earnings per share do not equal the
December 31, 1996 year to date loss per share of ($.81) as a result of the loss
in the fourth quarter being applied to a smaller average shares outstanding
balance for the fourth quarter (due to the two stock buy backs in December 1996)
as compared to the average on a year to date basis.
</FN>
21
Independent Auditors' Report
The Board of Directors
Ambanc Holding Co., Inc.:
We have audited the accompanying consolidated statements of financial condition
of Ambanc Holding Co., Inc. and subsidiaries (the Company) as of December 31,
1996 and 1995, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Ambanc Holding Co.,
Inc. and subsidiaries at December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
As discussed in note 1 to the consolidated financial statements, as of January
1, 1995, the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 114
"Accounting by Creditors For Impairment of a Loan," and Statement of Financial
Accounting Standards No. 118, "Accounting by Creditors For Impairment of a Loan
- - Income Recognition and Disclosures," which prescribe recognition criteria for
loan impairment and measurement methods for certain impaired loans and loans
whose terms are modified in a troubled debt restructuring subsequent to the
adoption of these Statements.
KPMG Peat Marwick LLP
Albany, N.Y.
February 7, 1997
22
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
December 31,
Assets 1996 1995
---- ----
(in thousands)
Cash and due from banks ........................................ $ 6,387 $ 7,513
Federal funds sold ............................................... 4,500 77,100
------- -------
Cash and cash equivalents ................ 10,887 84,613
Securities available for sale,
at fair value (note 4) .......................................... 200,539 74,422
Loans receivable, net (note 5) ................................... 248,094 249,991
Accrued interest receivable (note 6) ............................. 3,201 1,827
Premises and equipment, net (note 7) ............................. 2,784 3,071
Federal Home Loan Bank of New York
stock, at cost .................................................. 2,029 1,892
Real estate owned and repossessed assets ......................... 715 3,169
Other assets ..................................................... 4,172 1,831
Due from broker .................................................. -- 18,128
------- -------
Total assets ............................. $ 472,421 $ 438,944
======= =======
Liabilities and Shareholders' Equity
Liabilities:
Deposits (note 8) ........................................ $ 298,082 $ 311,239
Advances from borrowers for taxes
and insurance .......................................... 1,703 1,692
Borrowed funds (note 9) .................................. 108,780 --
Accrued interest payable ................................. 1,077 2
Accrued expenses and other liabilities ................... 1,261 3,116
Due to broker ............................................ -- 46,880
------- -------
Total liabilities ......................... $ 410,903 $ 362,929
------- -------
Commitments and contingent liabilities (notes 10, 11 and 13)
Shareholders' equity:
Preferred stock $.01 par value, Authorized 5,000,000
shares; none outstanding at December 31, 1996 and 1995 . -- --
Common stock $.01 par value, Authorized 15,000,000 shares;
5,422,250 shares issued and outstanding
at December 31, 1996 and 1995 .......................... 54 54
Additional paid-in capital ............................... 52,128 52,127
Retained earnings, substantially restricted .............. 24,436 28,272
Treasury stock, at cost, (1,030,227 shares
at December 31, 1996 and none at
December 31, 1995) ..................................... (11,208) --
Common stock acquired by ESOP ............................ (3,812) (4,338)
Net unrealized loss on securities
available for sale, net of tax ......................... (80) (100)
------- -------
Total shareholder's equity ................ 61,518 76,015
------- -------
Total liabilities and shareholders' equity. $ 472,421 438,944
======= =======
See accompanying notes to consolidated financial statements.
23
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31,
1996 1995 1994
---- ---- ----
(In thousands, except per share amounts)
Interest and dividend income:
Loans ....................................... $ 20,557 21,385 19,718
Securities available for sale ............... 10,921 -- --
Investment securities ....................... -- 3,028 3,360
Federal funds sold .......................... 740 1,026 601
Federal Home Loan Bank stock ................ 130 143 127
-------- -------- --------
Total interest and dividend income ..... 32,348 25,582 23,806
Interest expense:
Deposits (note 8) ........................... 12,424 12,447 9,885
Borrowings .................................. 4,011 299 307
-------- -------- --------
Total interest expense ................. 16,435 12,746 10,192
-------- -------- --------
Net interest income .................... 15,913 12,836 13,614
Provision for loan losses (note 5) ............... 9,450 1,522 1,107
-------- -------- --------
Net interest income after
provision for loan losses ............ 6,463 11,314 12,507
-------- -------- --------
Other income:
Service charges on deposit accounts ......... 764 783 642
Net gains (losses) on securities transactions (102) 225 --
Other ....................................... 258 504 263
-------- -------- --------
Total other income ..................... 920 1,512 905
-------- -------- --------
Other expenses:
Salaries, wages and benefits ................ 5,097 4,403 4,048
Occupancy and equipment ..................... 1,328 1,219 1,068
Data processing ............................. 843 728 496
Federal deposit insurance premium ........... 2 533 721
Correspondent bank processing fees .......... 116 245 504
Provision for losses on Nationar
related receivable ....................... -- 205 --
Real estate owned and repossessed
assets expenses, net ..................... 2,563 1,601 2,052
Professional fees ........................... 540 358 326
Other ....................................... 2,659 2,091 2,125
-------- -------- --------
Total other expenses ................... 13,148 11,383 11,340
-------- -------- --------
Income (loss) before taxes ....................... (5,765) 1,443 2,072
Income tax expense (benefit) (note 10) ........... (1,929) 586 122
-------- -------- --------
Net income (loss) ...................... $ (3,836) 857 1,950
======== ======== ========
Net loss per share ............................... $ (0.81) N/A N/A
======== ======== ========
See accompanying notes to consolidated financial statements.
24
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders' Equity
Years ended December 31, 1996, 1995 and 1994
(in thousands, except share data)
Net unrealized
gain (loss) on
securities Common
Additional available stock
Common paid-in Treasury Retained for sale, acquired
stock capital stock earnings net of tax by ESOP Total
------- ---------- -------- -------- ------------ -------- -------
Balance at January 1, 1994 ................... $ -- -- -- 25,465 -- -- 25,465
Net income ................................... -- -- -- 1,950 -- -- 1,950
Balance at December 31, 1994 ................. -- -- -- 27,415 -- -- 27,415
Net income ................................... -- -- -- 857 -- -- 857
Common stock issued (5,422,250 shares) ....... 54 52,127 -- -- -- -- 52,181
Purchase of ESOP shares (433,780 shares) ..... -- -- -- -- -- (4,338) (4,338)
Change in net unrealized loss on securities
available for sale, net of tax ............ -- -- -- -- (100) -- (100)
Balance at December 31, 1995 ................. 54 52,127 -- 28,272 (100) (4,338) 76,015
Net loss ..................................... -- -- -- (3,836) -- -- (3,836)
Purchase of treasury shares (1,030,227 shares) -- -- (11,208) -- -- -- (11,208)
Release of ESOP shares (52,964 shares) ....... -- 1 -- -- -- 526 527
Change in net unrealized loss on securities
available for sale, net of tax ............ -- -- -- -- 20 -- 20
Balance at December 31, 1996 ................. $ 54 52,128 (11,208) 24,436 (80) (3,812) 61,518
See accompanying notes to consolidated financial statements.
25
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31,
1996 1995 1994
---- ---- ----
(In thousands)
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Net income (loss) ..................................... $ (3,836) 857 1,950
Adjustments to reconcile
net income (loss) to net cash
provided (used) by operating activities:
Depreciation .................................... 501 438 377
Amortization of computer software costs ......... 57 58 --
Provision for loan losses ....................... 9,450 1,522 1,107
Provision for losses and writedowns on
real estate owned and repossessed assets ............. 877 1,254 1,590
Provisions for losses on Nationar related receivables . -- 205 --
Loss on sale of fixed assets .......................... 64 -- --
ESOP compensation expense ............................. 527 -- --
Net loss (gains) on sale and redemptions of
securities available for sale ........................ 102 (225) --
Net loss on sale of other real estate owned ........... 1,260 74 128
Net amortization on securities ........................ 475 19 39
Deferred tax expense (benefit) ........................ (509) (577) 360
(Increase) decrease in accrued interest
receivable and other assets .......................... (2,807) 17 (1,410)
Decrease (increase) in due from broker ................ 18,128 (18,128) --
Increase (decrease) in accrued expenses and
other liabilities .................................... (1,201) 2,225 (9,144)
Increase (decrease) in due to broker .................. (46,880) 46,880 --
Increase (decrease) in advances from borrowers
for taxes and insurance .............................. 11 (762) 572
------- ------- -------
Net cash provided (used) by operating activities (23,781) 33,857 (4,431)
------- ------- -------
Cash flows from investing activities:
Proceeds from sales and redemptions of
securities available for sale ........................ 34,469 18,372 --
Purchases of securities available for sale ............ (192,647) -- --
Proceeds from principal paydowns and
maturities of securities available for sale .......... 31,508 -- --
Proceeds from principal paydowns and maturities
of investment securities ............................. -- 7,530 16,708
Purchase of investment securities ..................... -- (46,980) (12,195)
Purchase of FHLB stock ................................ (137) (237) --
Proceeds from sale of loans ........................... 18,929 -- --
Net (increase) decrease in loans made to customers .... (28,685) 8,205 (42,714)
Capital expenditures .................................. (341) (692) (544)
Proceeds from sales of other real estate .............. 2,519 1,340 1,378
Proceeds from the sale of fixed assets ................ 25 -- 9
------- ------- -------
Net cash used by investing activities .......... $ (134,360) (12,462) (37,358)
======= ======= =======
(Continued)
26
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
Years ended December 31,
1996 1995 1994
---- ---- ----
Cash flows from financing activities:
Purchase of ESOP shares ............................. $ -- (4,338) --
Net proceeds from common stock issued
in stock conversion .................................. -- 52,181 --
Purchase of treasury stock ............................ (11,208) -- --
Net increase (decrease) in deposits ................... (13,157) 18,087 (1,627)
Advances from (repayments on) FHLB
borrowings, net ...................................... 6,000 (19,000) 19,000
Increase in securities sold under
agreements to repurchase ............................. 102,780 -- --
------- ------- -------
Net cash provided by financing activities ....... 84,415 46,930 17,373
------- ------- -------
Net increase (decrease) in cash and cash equivalents .................. (73,726) 68,325 (24,416)
Cash and cash equivalents at beginning of year ........................ 84,613 16,288 40,704
------- ------- -------
Cash and cash equivalents at end of period ............................ $ 10,887 84,613 16,288
======= ======= =======
Supplemental disclosures of cash flow information -
cash paid during the year for:
Interest .............................................. $ 15,360 12,447 9,950
======= ======= =======
Income taxes .......................................... $ 306 1,000 498
======= ======= =======
Noncash investing activities:
Net reduction in loans receivable resulting
from the transfer to real estate owned ...................... $ 2,203 1,864 1,330
======= ======= =======
Transfer of investment securities to investment
securities available for sale ............................... $ -- 45,736 --
======= ======= =======
Net decrease in unrealized loss on securities
available for sale, net of tax ............................... $ 20 -- --
======= ======= =======
See accompanying notes to consolidated financial statements.
27
AMBANC HOLDING CO., INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996 and 1995
(1) Summary of Significant Accounting Policies
Ambanc Holding Co. Inc. (the Holding Company) was incorporated under Delaware
law in June 1995 as a Holding Company to purchase 100% of the common stock of
Amsterdam Savings Bank, FSB (the Bank). The Bank converted from a mutual form to
a stock institution in December 1995, and the Holding Company completed its
initial public offering on December 26, 1995, at which time the Holding Company
purchased all the outstanding stock of the Bank.
The following is a description of the more significant policies which Ambanc
Holding Co., Inc. follows in preparing and presenting its consolidated financial
statements.
(a) Basis of Presentation
The accompanying consolidated financial statements include the accounts of
Ambanc Holding Co., Inc., and its wholly owned subsidiaries, Amsterdam Savings
Bank FSB and A.S.B. Insurance Agency, Inc., collectively referred to as the
Company. All significant intercompany accounts have been eliminated in
consolidation. The accounting and reporting policies of the Company conform in
all material respects to generally accepted accounting principles and to general
practice within the thrift industry.
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change in
the near-term relate to the determination of the allowance for loan losses and
the valuation of real estate owned and repossessed assets acquired in connection
with foreclosures or in satisfactions of loans. In connection with the
determination of the allowance for loan losses, the valuation of real estate
owned, and estimates of fair value for repossessed assets, management obtained
appraisals for significant assets.
(b) Business
A substantial portion of the Company's assets are loans secured by real estate
in the upstate New York area. In addition, a significant portion of the real
estate owned is located in those same markets. Accordingly, the ultimate
collectibility of a considerable portion of the Company's loan portfolio and the
recovery of a substantial portion of the carrying amount of real estate owned
are dependent upon market conditions in the upstate New York region.
28
(1) Summary of Significant Accounting Policies, Continued
Management believes that the allowance for loan losses is adequate and that
other real estate owned and repossessed assets are properly valued. While
management uses available information to recognize losses on loans and other
real estate owned and repossessed assets, future additions to the allowance or
writedowns of other real estate and repossessed assets may be necessary based on
changes in economic conditions. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the Bank's
allowance for loan losses and valuation of other real estate owned and
repossessed assets. Such agencies may require the Bank to recognize additions to
the allowance or write downs of other real estate and repossessed assets based
on their judgments about information available to them at the time of their
examination which may not be currently available to management.
(c) Securities Available for Sale, Investment Securities and FHLB of New York
Stock
On January 1, 1994 the Bank adopted Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments and Debt and Equity Securities"
(SFAS No. 115). Management determines the appropriate classification of
securities at the time of purchase. If management has the positive intent and
ability to hold debt securities to maturity they are classified as held to
maturity and are stated at amortized cost. All other debt and marketable equity
securities are classified as securities available for sale and are reported at
fair value, with net unrealized gains and losses reported as a separate
component of shareholders' equity, net of estimated income taxes. The Company
does not maintain a trading portfolio, and at December 31, 1996 and 1995 the
Company had no securities classified as investment securities.
Unrealized losses on securities that reflect a decline in value that is other
than temporary are charged to income.
Non- marketable equity securities, such as Federal Home Loan Bank of New York
stock, is stated at cost. The investment in Federal Home Loan Bank of New York
stock is required for membership.
Mortgage backed securities, which are guaranteed by the Government National
Mortgage Association ("GNMA"), the Federal Home Loan Mortgage Corporation
("FHLMC") or the Federal National Mortgage Corporation ("FNMA"), represent
participation interests in direct pass-through pools of long-term first mortgage
loans originated and serviced by the issuers of the securities.
Gains and losses on the sale and redemption of securities available for sale are
based on the amortized cost of the specific security sold. The cost of
securities is adjusted for amortization of premium and accretion of discounts,
which is calculated on an effective interest method.
Purchases and sales are recorded on a trade date basis. Receivables and payables
from unsettled transactions are shown as due from brokers or due to brokers in
the consolidated financial statements.
29
(1) Summary of Significant Accounting Policies, Continued
(d) Reclassification of Investment Securities
In November 1995, the Financial Accounting Standards Board (FASB) released its
Special Report "A Guide to Implementation of Statement 115 on Accounting for
Certain Investments in Debt and Equity Securities." The Special Report
contained, among other things, a unique provision that allowed entities to, as
of one date either concurrent with the initial adoption of the Special Report
(November 15, 1995), but no later than December 31, 1995, reassess the
appropriateness of the classifications of all securities held at that time. In
accordance with the FASB's Special Report, as of December 31, 1995, the Company
reclassified all investment securities held to maturity, with an amortized cost
of $45,735,971, to securities available for sale.
(e) Loans Receivable and Loan Fees
Loans receivable are stated at unpaid principal amount, net of unearned
discount, deferred loan fees, net, and allowance for loan losses. Discounts are
amortized to income over the contractual loan life using the level-yield method.
Loan fees received and the related direct cost of originations have been
deferred and are being recorded as yield adjustments over the life of the
related loans using the interest method of amortization.
Non-performing loans include non-accrual loans, restructured loans and loans
which are 90 days or more past due and still accruing interest. Loans considered
doubtful of collection by management are placed on a nonaccrual status for the
recording of interest. Generally loans past due 90 days or more as to principal
or interest are placed on nonaccrual status except for certain loans which, in
management's judgment, are adequately secured and for which collection is
probable. Previously accrued income that has not been collected is reversed from
current income. Thereafter, the application of payments received (principal or
interest) is dependent on the expectation of ultimate repayment of the loan. If
ultimate repayment of the loan is expected, any payments received are applied in
accordance with contractual terms. If ultimate repayment of principal is not
expected or management judges it to be prudent, any payment received on a
non-accrual loan is applied to principal until ultimate repayment becomes
expected. Loans are removed from non-accrual status when they are estimated to
be fully collectible as to principal and interest. Amortization of related
deferred fees is suspended when a loan is placed on non-accrual status.
The allowance for loan losses is maintained at a level deemed appropriate by
management based on an evaluation of the known and inherent risks in the present
portfolio, the level of non-performing loans, past loan loss experience,
estimated value of underlying collateral, and current and prospective economic
conditions. The allowance is increased by provisions for loan losses charged to
operations.
30
(1) Summary of Significant Accounting Policies, Continued
(f) Loan Impairment
On May 31, 1993, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 114, "Accounting by Creditors for
Impairment of a Loan", (SFAS No. 114). Statement No. 114 was amended by
Statement of Financial Accounting Standards No. 118, "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosures," (SFAS No. 118).
These Statements prescribe recognition criteria for loan impairment, generally
related to commercial type loans and measurement methods for certain impaired
loans and all loans whose terms are modified in troubled debt restructuring
subsequent to the adoption of these Statements. A loan is considered impaired
when it is probable that the borrower will not repay the loan according to the
original contractual terms of the loan agreement. As of January 1, 1995, the
Company adopted the provisions of SFAS No. 114 and SFAS No. 118. The effect of
adoption was not material to the consolidated financial statements.
As a result of the adoption of SFAS No. 114, the allowance for loan losses
related to impaired loans that are identified for evaluation in accordance with
SFAS No. 114 is based on discounted cash flows using the loan's initial
effective rate or the fair value of the collateral for certain loans where
repayment of the loan is expected to be provided solely by the underlying
collateral (collateral dependent loans). The Company's impaired loans are
generally collateral dependent. The Company considers estimated costs to sell,
on a discounted basis, when determining the fair value of collateral in the
measurement of impairment if those costs are expected to reduce the cash flows
available to repay or otherwise satisfy the loans.
Impaired loans are included in non-performing loans, generally as
non-accrual commercial type loans and all loans restructured in a troubled debt
restructuring subsequent to January 1, 1996, and all restructured loans which
are not performing in accordance with their restructured terms.
(g) Real Estate Owned and Repossessed Assets
Real estate owned and repossessed assets include assets received from
foreclosures and in-substance foreclosures. In accordance with SFAS No. 114, a
loan is classified as an insubstance foreclosure when the Company has taken
possession of the collateral regardless of whether formal foreclosure
proceedings have taken place.
Real estate owned and repossessed assets, including in-substance foreclosures,
are recorded on an individual asset basis at net realizable value which is the
lower of fair value minus estimated costs to sell or "cost" (defined as the fair
value at initial foreclosure). When a property is acquired or identified as
in-substance foreclosure, the excess of the loan balance over fair value is
charged to the allowance for loan losses. Subsequent write-downs to carry the
property at fair value less costs to sell are included in noninterest expense.
Costs incurred to develop or improve properties are capitalized, while holding
costs are charged to expense.
31
(1) Summary of Significant Accounting Policies, Continued
At December 31, 1996, real estate owned and repossessed assets consisted
primarily of residential one to four family properties and mobile homes. At
December 31, 1995, real estate owned and repossessed assets consisted primarily
of multi-family and commercial real estate properties. The Company had no
in-substance foreclosures at December 31, 1996 and 1995.
(h) Premises and Equipment, Net
Premises and equipment are carried at cost, less accumulated depreciation
applied on a straight-line basis over the estimated useful lives of the assets.
Leasehold improvements are amortized on a straight-line basis over the
respective original lease terms without regard to lease renewal options.
(i) Income Taxes
Income taxes are recorded on income reported in the consolidated statements of
income regardless of when such taxes are payable. The Company records income
taxes in accordance with Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, (SFAS No. 109) "Accounting for Income
Taxes."
Under the asset and liability method of SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between financial statement carrying amounts of existing assets and
liabilities and their respective tax basis. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the
enactment date. The Company's policy is that deferred tax assets are reduced by
a valuation reserve if, based on the weight of available evidence, it is more
likely than not that some or all of the deferred tax assets will not be
recognized. In considering if it is more likely than not that some or all of the
deferred tax assets will not be realized, the Company considers temporary
taxable differences, historical taxes and estimates of future taxable income.
(j) Pension Plan
The Company has a defined benefit pension plan covering substantially all
employees. The Company's actuarially determined annual contribution to the
pension plan meets or exceeds the minimum funding requirements set forth in the
Employees Retirement Income Security Act of 1974.
(k) Off-Balance Sheet Risk
The Company is a party to certain financial instruments with off-balance sheet
risk such as commitments to extend credit, unused lines of credit and standby
letters of credit. The Company's policy is to record such instruments when
funded.
32
(1) Summary of Significant Accounting Policies, Continued
(l) Cash Equivalents
For purposes of the consolidated statements of cash flows, the Company considers
all highly liquid debt instruments with original maturities of three months or
less to be cash equivalents.
(m) Long Lived Assets
In May 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 (SFAS No. 121), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
Various assets are excluded from the scope of SFAS No. 121, including financial
instruments which constitute the majority of the Company's assets. For
long-lived assets included in the scope of SFAS No. 121, such as premises and
equipment, an impairment loss must be recognized when the estimate of total
undiscounted future cash flows attributable to the asset is less than the
asset's carrying amount. Measurement of impairment loss is determined by
reducing the carrying amount of the asset to its fair value. Long-lived assets
to be disposed of, such as real estate owned and repossessed assets or premises
to be sold, are reported at the lower of carrying amount or fair value less
estimated cost to sell. The Company adopted SFAS No. 121 in 1996. The adoption
of SFAS No. 121 did not have a material impact on the Company's consolidated
financial statements.
(n) Earnings per share
Earnings or loss per share are computed based on the weighted average number of
shares outstanding, less unreleased employee stock ownership plan shares, during
the period. Earnings per share are not presented for periods prior to the
initial stock offering as the Bank was a mutual savings bank at the time and no
stock was outstanding. The weighted average number of shares outstanding was
4,761,393 for the year ended December 31, 1996.
(o) Official Bank Checks
The Company's treasurer checks (including expense checks) are drawn upon the
Bank and are ultimately paid through the Bank's Federal Reserve Bank of New York
correspondent account and are included in accrued expenses and other liabilities
in the consolidated statements of financial condition.
33
(1) Summary of Significant Accounting Policies, Continued
(p) Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities
In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125, "Accounting for Transfer and Servicing
of Financial Assets and Extinguishments of Liabilities" (SFAS No. 125). SFAS No.
125 provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities based on consistent
application of a financial components approach that focuses on control. It
distinguishes transfers of financial assets that are sales from transfers that
are secured borrowings. SFAS No. 125 is effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after December 31,
1996 and will supesede SFAS No. 122, which is discussed above. Certain aspects
of SFAS No. 125 were amended by SFAS No. 127, "Deferral of the Effective Date of
Certain Provision of FAS Statement No. 125." Management believes that adoption
of SFAS No. 125, as amended, will not have a material impact on the Company's
consolidated financial statements.
(q) Reclassifications
Amounts in the prior years' consolidated financial statements are reclassified
whenever necessary to conform to current period presentations.
(2) Conversion to Stock Ownership
On December 26, 1995, the Holding Company sold 5,422,250 shares of common stock
at $10.00 per share to depositors and employees of the Bank. Net proceeds from
the sale of stock of the Holding Company, after deducting conversion expenses of
approximately $2.0 million, were $52.2 million and are reflected as common stock
and additional paid-in capital in the accompanying December 31, 1996 and 1995
consolidated statements of financial condition. The Company utilized $26.0
million of the net proceeds to acquire all of the capital stock of the Bank.
As part of the conversion, the Bank established a liquidation account for the
benefit of eligible depositors who continue to maintain their deposit accounts
in the Bank after conversion. In the unlikely event of a complete liquidation of
the Bank, each eligible depositor will be entitled to receive a liquidation
distribution from the liquidation account, in the proportionate amount of the
then current adjusted balance for deposit accounts held, before distribution may
be made with respect to the Bank's capital stock. The Bank may not declare or
pay a cash dividend to the Holding Company on, or repurchase any of, its capital
stock if the effect thereof would cause the retained earnings of the Bank to be
reduced below the amount required for the liquidation account. Except for such
restrictions, the existence of the liquidation account does not restrict the use
or application of retained earnings.
34
(2) Conversion to Stock Ownership, Continued
The Bank's capital exceeds all of the fully phased-in capital regulatory
requirements. The Office of Thrift Supervision (OTS) regulations provide that an
institution that exceeds all fully phased-in capital requirements before and
after a proposed capital distribution could, after prior notice but without the
approval by the OTS, make capital distributions during the calendar year of up
to 100% of its net income to date during the calendar year plus the amount that
would reduce by one-half its "surplus capital ratio" (the excess capital over
its fully phased-in capital requirements) at the beginning of the calendar year.
Any additional capital distributions would require prior regulatory approval. At
December 31, 1996, the maximum amount that could have been paid by the Bank to
the Holding Company was approximately $17.0 million.
Unlike the Bank, the Holding Company is not subject to these regulatory
restrictions on the payment of dividends to its stockholders.
(3) Reserves and Investments Required by Law
The Company is required to maintain certain reserves of cash and or deposits
with the Federal Reserve Bank. The amount of this reserve requirement, included
in cash and due from banks, was approximately $1,069,000 and $1,005,000 at
December 31, 1996 and 1995, respectively.
The Company is required to maintain certain levels of stock in the Federal Home
Loan Bank. The Company has pledged its investment in this stock, as well as
certain residential real estate loans, to secure its advances from the Federal
Home Loan Bank of New York.
(4) Securities Available for Sale
The amortized cost and estimated fair values of securities available for sale at
December 31, 1996 and 1995 are as follows:
1996
-------------------------------------------------
(in thousands)
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
---- ----- ------ -----
U.S. Government and agency securities $ 43,968 69 (264) 43,773
Mortgage-backed securities .......... 156,191 705 (635) 156,261
State and political subdivisions .... 500 5 -- 505
-------- ----- ------ -------
Total ....................... $ 200,659 779 (899) 200,539
======== ===== ====== =======
35
(4) Securities Available for Sale, Continued
1995
-------------------------------------------------
(in thousands)
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
---- ----- ------ -----
U.S. Government and agency securities $ 10,000 2 (35) 9,967
Mortgage-backed securities .......... 53,070 1 (38) 53,033
Financial notes ..................... 6,998 -- (61) 6,937
Industrial bonds .................... 999 -- (2) 997
Public utility bonds ................ 2,400 -- (10) 2,390
Floating rate notes ................. 1,100 -- (2) 1,098
-------- ----- ------ -------
Total ............... $ 74,567 3 (148) 74,422
======== ===== ====== =======
The amortized cost and estimated fair value of investment securities available
for sale at December 31, 1996, by contractual maturity, are shown below
(mortgage backed securities are included by final contractual maturity).
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.
Amortized Estimated
cost fair value
---- ----------
(In thousands)
Due after one year through five years . $ 29,294 28,964
Due after five years through ten years 19,653 19,534
Due after ten years ................... 151,712 152,041
------- -------
Totals ........................ $ 200,659 200,539
======= =======
Proceeds from sales of securities available for sale in 1996 and 1995 were
$34,469,000 and $18,372,251, respectively. Gross realized gains in 1996 and 1995
were $13,718 and $318,855, respectively, and in 1996 and 1995 there were gross
realized losses of $115,806 and $94,086, respectively.
Securities available for sale carried at $113,828,560 on December 31, 1996 were
pledged to secure repurchase agreements and other purposes.
36
(5) Loans Receivable, Net
Loans receivable consist of the following at December 31, 1996 and 1995:
December 31,
1996 1995
---- ----
(In thousands)
Loans secured by real estate:
1 - 4 Family ..................................... $ 158,182 133,468
Home equity ...................................... 22,817 17,519
Multi family ..................................... 4,724 8,176
Non-residential .................................. 29,947 41,929
Construction ..................................... 2,234 1,073
------- -------
Total loans secured by real estate 217,904 202,165
======= =======
Other Loans:
Consumer loans:
Manufactured homes ....................... 620 13,484
Recreational vehicles .................... 9,416 12,881
Auto loans ............................... 12,417 9,337
Other secured ............................ 1,866 2,020
Unsecured ................................ 1,445 1,299
------- -------
Total consumer loans ............. 25,764 39,021
======= =======
Commercial loans:
Secured .................................. 6,199 9,346
Unsecured ................................ 620 350
------- -------
Total commercial loans ........... 6,819 9,696
------- -------
250,487 250,882
======= =======
Less:
Allowance for loan losses ........................ 3,438 2,647
Unamortized discount and deferred loan fees ...... (1,045) (1,756)
------- -------
2,393 891
------- -------
$ 248,094 249,991
======= =======
A summary of the allowance for loan losses is as follows:
December 31,
1996 1995 1994
---- ---- ----
(In thousands)
Balance at beginning of period $ 2,647 2,235 3,248
Provision charged to operations 9,450 1,522 1,107
Charge-offs ................... (8,718) (1,216) (2,460)
Recoveries .................... 59 106 340
------ ------ ------
Balance at end of period ...... $ 3,438 2,647 2,235
====== ====== ======
37
(5) Loans Receivable, Net, Continued
The following table sets forth the information with regard to non-performing
loans:
December 31,
1996 1995
---- ----
(In thousands)
Loans in a non-accrual status ...... $ 3,123 4,499
Loans contractually past due 90 days
or more and still accruing interest 725 261
Restructured loans ................ 1,031 4,035
----- -----
Total non-performing loans $ 4,879 8,795
===== =====
Accumulated interest on the above non-performing loans of $375,459,
$876,524 and $759,897 was not recognized as income in 1996, 1995 and 1994,
respectively. Approximately $229,000, $482,000 and $356,000 of interest on
restructured and non-accrual loans was collected and recognized as income in
1996, 1995 and 1994, respectively.
At December 31, 1996, the recorded investment in loans that are considered to be
impaired under Statement No. 114 totaled $2,638,780 for which the related
allowance for loan losses is $1,182,838. At December 31, 1995 the recorded
investment in loans that were considered to be impaired was $3,003,497 for which
the related allowance for loan losses was $603,127. As of December 31, 1996 and
1995, there were no impaired loans which did not have an allowance for loan
losses determined in accordance with Statement No. 114. The average recorded
investment in impaired loans during the years ended December 31, 1996 and 1995
was approximately $6,918,000 and $4,106,000, respectively. For the years ended
December 31, 1996 and 1995, the Company recognized interest income on those
impaired loans of $110,470 and $61,278, respectively, which included $13,633 and
$2,787, respectively, of interest income recognized using the cash basis method
of income recognition.
Certain directors and executive officers of the Company were customers of and
had other transactions with the Company in the ordinary course of business.
Loans to these parties were made in the ordinary course of business at the
Company's normal credit terms, including interest rate and collateralization.
The aggregate of such loans totaled approximately $887,696 and $1,154,765 at
December 31, 1996 and 1995, respectively. There were no advances to the
directors and executive officers during the year ended December 31, 1996. Total
payments made on these loans were $267,069.
38
(6) Accrued Interest Receivable
Accrued interest receivable consists of the following:
December 31,
1996 1995
---- ----
(In thousands)
Loans ....................................... $ 1,260 1,374
Securities available for sale ............... 1,941 453
----- -----
$ 3,201 1,827
===== =====
(7) Premises and Equipment
A summary of premises and equipment is as follows:
December 31,
1996 1995
---- ----
(In thousands)
Banking house and land ....................... $ 2,362 2,362
Leasehold improvements ....................... 700 629
Furniture, fixtures and equipment ............ 3,114 3,078
Construction in progress ..................... 80 12
------ ------
6,256 6,081
Less accumulated depreciation and amortization (3,472) (3,010)
------ ------
$ 2,784 3,071
====== ======
Amounts charged to depreciation expense were $500,833, $438,057 and $376,632 for
the years ended December 31, 1996, 1995 and 1994.
(8) Deposits
Deposits are summarized as follows:
December 31,
1996 1995
---- ----
(In thousands)
Passbook accounts (3.00% at December
31, 1996 and 1995) $ 99,569 104,269
------- -------
Certificates of deposit:
3.01 to 4.00% ..................... 994 1,143
4.01 to 5.00% ..................... 42,824 29,464
5.01 to 6.00% ..................... 88,042 70,172
6.01 to 7.00% ..................... 11,330 46,983
7.01 to 8.00% ..................... 8,742 9,593
8.01 to 9.00% ..................... -- 6
------- -------
$ 151,932 157,361
------- -------
Money market accounts(2.86% and 2.75% at
December31, 1996 and 1995, respectively)... 7,433 9,808
NOW accounts (2.75% at December 31 and 1995) 18,875 19,037
Demand accounts ............................ 20,273 20,764
------- -------
Total deposits ..................... $ 298,082 311,239
======= =======
39
(8) Deposits, Continued
The approximate amount of contractual maturities of certificates of deposit for
the years subsequent to December 31, 1996 are as follows:
(In thousands)
Years ended December 31,
1997 $ 91,058
1998 38,397
1999 10,323
2000 10,267
2001 1,887
-------
$ 151,932
=======
The aggregate amount of certificates of deposits with a balance of $100,000 or
more were approximately $11.2 million and $11.1 million at December 31, 1996 and
1995, respectively.
Interest expense on deposits for the years ended December 31, 1996, 1995 and
1994, is summarized as follows:
1996 1995 1994
---- ---- ----
(In thousands)
Passbook accounts ............................. $ 3,162 3,300 4,123
Certificate of deposits ....................... 8,492 8,272 4,860
Now accounts .................................. 527 511 511
Money market accounts ......................... 243 285 364
Advances from borrowers for taxes and insurance -- -- 27
Common stock subscriptions escrow ............. -- 79 --
------ ------ ------
Total interest expense ................ $ 12,424 12,447 9,885
====== ====== ======
(9) Borrowed Funds
On March 29, 1996, the Company entered into a $22.4 million overnight line of
credit and a $22.4 million 30 day line of credit with Federal Home Loan Bank of
New York (FHLB). As of December 31, 1996 the Company had taken $6 million in
advances on these lines of credit. At December 31, 1995, the Company had a $17.4
million line of credit with the FHLB. There were no advances taken on the line
of credit as of December 31, 1995.
The Company enters into sales of securities under repurchase agreements. Such
agreements are treated as financings, and the obligations to repurchase
securities sold are reflected as liabilities on the Company's consolidated
statements of financial condition. During the period of such agreements, the
underlying securities are transferred to a third party custodian's account that
explicitly recognizes the Company's interest in the securities.
40
(9) Borrowed Funds, Continued
The following sets forth certain information related to the Company's
borrowings, consisting of Federal Home Loan Bank (FHLB) advances and securities
sold under agreements to repurchase:
December 31,
1996 1995
(In thousands)
FHLB advances .............................. $ 6,000 --
Securities sold under agreements to repurchase 102,780 --
------- -----
Total borrowings ...................... $ 108,780 --
======= =====
Weighted average interest rate of FHLB advances 5.30% --%
======= =====
Weighted average interest rate of securities
sold under agreements to repurchase .......... 5.96 --%
======= =====
The following table sets forth the maturities of securities sold under
agreements to repurchase, including the weighted average interest rates, and the
fair value of the securities sold under the repurchase agreements as of December
31, 1996:
Weighted Fair Value
Repurchase Average of Securities
Liability Interest Rate Sold
Due within 30 days ............. $ 20,450 5.67% $ 21,318
Due after 30 days up to 90 days 7,700 5.61% 11,372
Due after 91 days up to 365 days 24,130 5.72% 24,847
Due after 365 days ............. 50,500 6.24% 56,292
------- ----- ------
$ 102,780 5.96% $ 113,829
======= ===== =======
The following table sets forth the maximum month-end balances and average
balances of FHLB advances and securities sold under agreements to repurchase for
the periods indicated.
Years Ended December 31,
1996 1995
(In thousands)
Maximum Month-end Balance:
- -------------------------
FHLB advances ................................. $ 28,000 15,000
======= ======
Securities sold under agreements to repurchase 102,780 4,000
======= ======
Average Balance:
- ---------------
FHLB advances ................................. 9,757 3,922
======= ======
Securities sold under agreements to repurchase 57,815 958
======= ======
Weighted average interest rate of FHLB advances 5.35% 6.06%
======= ======
Weighted average interest rate of securities
sold under agreement to repurchase ............ 5.94% 6.30%
======= ======
41
(10) Income Taxes
The components of income tax expense (benefit) are as follows:
December 31,
1996 1995 1994
---- ---- ----
(In thousands)
Current tax (benefit) expense:
Federal ........................ $ (1,421) 955 (98)
State ............................ 1 208 (140)
----- ----- -----
(1,420) 1,163 (238)
Deferred tax (benefit) expense ........... $ (509) (577) 360
----- ----- -----
Total income tax expense (benefit) (1,929) 586 122
===== ===== =====
Actual tax expense (benefit) for the years ended December 31, 1996, 1995 and
1994 differs from expected tax expense (benefit), computed by applying the
Federal corporate tax rate of 34% to income before taxes as follows:
December 31,
1996 1995 1994
---- ---- ----
(In thousands)
Expected tax expense (benefit) ........... $ (1,960) $ 491 $ 704
State taxes, net of Federal
income tax benefit ...................... 1 103 55
Change in valuation allowance for
deferred tax asset....................... -- -- (641)
Other items .............................. 30 (8) 4
----- ----- -----
$ (1,929) $ 586 $ 122
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1996 are
presented below:
Temporary Temporary
Deductions Taxable
Differences Differences
----------- -----------
(In thousands)
Reserves for loan losses ............................ $ 1,358 65
Nonqualified deferred compensation .................. 233 --
Loan accounting differences ......................... 236 --
Property and equipment .............................. -- 113
Prepaid expenses .................................... -- 330
Other items ......................................... 54 --
----- -----
1,881 508
Deferred tax liability .............................. 508
-----
Net deferred tax asset at December 31, 1996 ......... 1,373
Net deferred tax asset at January 1, 1996 ........... 864
-----
Deferred tax benefit for the year ended
December 31, 1996.................................. $ 509
=====
42
(10) Income Taxes, Continued
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1995 are
presented below:
Temporary Temporary
Deductions Taxable
Differences Differences
----------- -----------
(In thousands)
Reserves for loan losses .......................... $ 1,206 120
Nonqualified deferred compensation ................ 417 --
Loan accounting differences ....................... -- 267
Property and equipment ............................ -- 124
Prepaid expenses .................................. -- 361
Other items ....................................... 113 --
----- ----
1,736 872
====
Deferred tax liability ............................ 872
-----
Net deferred tax asset at December 31, 1995 ....... 864
Net deferred tax asset at January 1, 1995 ......... 287
-----
Deferred tax benefit for the year ended
December 31, 1995................................ $ 577
=====
In addition to the deferred tax items described in the preceding table, the
Company also has a deferred tax asset of approximately $40,000 and $46,000 at
December 31, 1996 and 1995, respectively, relating to the unrealized loss on
securities available for sale.
There was no valuation allowance or change in the valuation allowance for
deferred tax assets as of and for the years ended December 31, 1996 and 1995.
Management believes that the realization of the recognized net deferred tax
asset at December 31, 1996 amounting to approximately $1.4 million is more
likely than not, based on available tax planning strategies, and expectations as
to future taxable income. The change in the deferred tax asset valuation reserve
in 1994 was based on the Company's continuing evaluation of the level of such
valuation reserve and the realizability of the temporary differences creating
the deferred tax asset and after considering the estimates of future taxable
income.
As a qualifying thrift institution under IRS guidelines, the Bank has been
eligible to claim special tax deductions substantially in excess of actual loss
experience as a tax bad debt reserve which has not been subject to deferred
taxes through December 31, 1987, in accordance with SFAS No. 109. Accordingly,
no deferred tax liability has been recorded for the tax bad debt reserve at
December 31, 1987. This reserve, which approximated $3,294,000 at December 31,
1987, will not be subject to tax as long as the Bank does not (i) redeem stock
or have excess distributions to shareholders, or (ii) fail to maintain a
specified qualifying assets ratio or meet other definition tests for New York
State purposes.
43
(10) Income Taxes, Continued
As a result of tax legislation passed by Congress in 1996, the Company is no
longer eligible to claim the special deduction for Federal income tax purposes.
The Federal tax bad debt reserve, aggregating approximately $3,456,000 million
at December 31, 1996, exceeds the base year reserve by approximately $162,000
(the "excess reserve"). The excess reserve is to be recaptured as taxable income
over a defined number of years. The Company had previously established a
deferred tax liability for this excess reserve such that there is no impact on
total tax expense (benefit) for the Company in 1996 or any future year.
(11) Employee Benefit Plans
(a) Pension Plan
The Bank maintains a non-contributory pension plan with the RSI Retirement
Trust, covering substantially all employees aged 21 and over with 1 year of
service with the exception of hourly paid employees. Benefits are computed as
two percent of the highest three year average annual earnings multiplied by
credited service up to a maximum of 35 years.
The amounts contributed to the plan are determined annually on the basis of (a)
the maximum amount that can be deducted for Federal income tax purposes or (b)
the amount certified by a consulting actuary as necessary to avoid an
accumulated funding deficiency as defined by the Employee Retirement Income
Security Act of 1974. Contributions are intended to provide not only for
benefits attributed to service to date but also for those expected to be earned
in the future. Assets of the plan are primarily invested in pooled equity funds
and fixed income funds.
The following table sets forth the plan's funded status and amounts recognized
in the Company's consolidated statements of financial condition at December 31,
1996 and 1995:
1996 1995
---- ----
(In thousands)
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $3.1 million in 1996 and $3.0 million in 1995 $ (3,324) (3,171)
===== =====
Projected benefit obligation ............................. (4,060) (3,833)
Plan assets at fair value ................................ 5,093 4,553
----- -----
Projected plan assets in excess of benefit obligation .... 1,033 720
Unrecognized net loss .................................... (301) (28)
Unrecognized prior service cost .......................... 52 61
Unrecognized net asset being recognized over 10.71 years . (132) (178)
----- -----
Prepaid pension cost ..................................... $ 652 575
===== =====
44
(11) Employee Benefit Plans, Continued
Net pension costs recognized in the consolidated statements of income for the
years ended December 31, 1996, 1995 and 1994 are summarized as follows:
1996 1995 1994
---- ---- ----
(In thousands)
Components of net pension cost:
Service cost - benefits earned during the period ...... $ 187 141 169
Interest cost on estimated projected benefit obligation 288 268 251
Actual return on plan assets .......................... (627) (783) 21
Net amortization and deferral ......................... 222 437 (366)
---- ---- ----
Net pension cost ...................................... $ 70 63 75
==== ==== ====
Significant assumptions used in determining the actuarial present value of the
projected benefit obligation are as follows:
1996 1995 1994
---- ---- ----
Weighted average discount rate ........................ 7.50% 7.50% 8.25%
Increase in future compensation ....................... 5.50% 5.50% 6.00%
Expected long term rate of return ..................... 8.00% 8.00% 8.00%
(b) 401(k) Savings Plan
The Bank maintains a defined contribution 401(k) savings plan, covering all full
time employees who have attained age 21 and have completed one year of
employment. The Bank matches 50% of employee contributions that are less than or
equal to 3% of the employee's salary. Total expense recorded during 1996, 1995,
and 1994 was $37,671, $33,181 and $27,514, respectively.
(c) Employee Stock Ownership Plan
As part of the conversion discussed in note 2, an employee stock ownership plan
(ESOP) was established to provide substantially all employees of the Company the
opportunity to become stockholders. The ESOP borrowed $4.3 million from the
Company and used the funds to purchase 433,780 shares of the common stock of the
Company issued in the conversion. The loan will be repaid principally from the
Company's discretionary contributions to the ESOP over a period of ten years. At
December 31, 1996 and 1995, the loan had an outstanding balance of $3.9 million
and $4.3 million, respectively and an interest rate of 6.21%. The loan
obligation is reduced by the amount of loan repayments made by the ESOP. Shares
are released for allocation and unearned compensation is amortized over the loan
repayment period based on the amount of principal and interest paid on the loan
as a percentage of the total principal and interest to be paid on the loan over
its entire term. Shares purchased with the loan proceeds are held in a suspense
account for allocation among participants as the loan is repaid. Contributions
to the ESOP and shares released from the suspense account are allocated among
participants on the basis of compensation in the year of allocation.
45
(11) Employee Benefit Plans, Continued
The Company accounts for the ESOP in accordance with the American Institute of
Certified Public Accountants' Statement of Position No. 93-6 "Employees'
Accounting For Stock Ownership Plans" (SOP 93-6). Accordingly, the shares
pledged as collateral are reported as unallocated ESOP shares in shareholders'
equity. As shares are released from collateral, the Company reports compensation
expense equal to the average market price of the shares (during the applicable
service period), and the shares become outstanding for earnings per share
computations. Unallocated ESOP shares are not included in the earnings per share
computations. The Company recorded approximately $527,000 of compensation
expense under the ESOP during the year ended December 31, 1996.
The ESOP shares as of December 31, 1996 were as follows:
Allocated shares ........................................ --
Shares released for allocation .......................... 52,964
Unallocated shares ...................................... 380,816
---------
433,780
=========
Market value of unallocated shares at December 31, 1996.. $ 4,284,180
=========
(d) Post Retirement Benefits
The Company accounts for postretirement benefits under Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" (SFAS No. 106). Under SFAS No. 106, the cost of
postretirement benefits other than pensions must be recognized on an accrual
basis as employees perform services to earn the benefits. Based on the
transition provisions of SFAS No. 106, the accumulated postretirement benefit
obligation at the date of adoption (the transition obligation) may be recognized
in income as the cumulative effect of an accounting change in the period of
adoption or delayed and amortized as a component of net periodic postretirement
benefit cost. The Company adopted SFAS No. 106 as of January 1, 1995 and opted
to amortize the transition obligation into expense. The adoption of SFAS No. 106
did not have a material effect on the Company's consolidated financial
statements.
Certain postretirement health insurance benefits have been committed to a closed
group of twelve retired employees. The Company has formally adopted measures to
not offer these benefits to any additional employees. The annual health
insurance increase and discount rate used to calculate the transition obligation
were 6% and 8.5%, respectively. There are no plan assets. The estimated
transition obligation at January 1, 1995 was $260,000. The net periodic
postretirement benefit costs in 1996 and 1995 were approximately $26,000.
46
(12) Retained Earnings
As a qualifying thrift institution, the Bank has been eligible to claim special
Federal tax deductions substantially in excess of actual loss experience as a
tax bad debt reserve. Such reserve, aggregating approximately $3,456,000 at
December 31, 1996, is included within equity in the accompanying consolidated
statement of financial condition. Federal tax law restricts the use of such
reserves to charges for bad debts. If this reserve is charged for amounts other
than bad debts, taxable income of an identical amount is created. Since
ineligible charges to the reserve are not anticipated, no provision has been
made for Federal income taxes thereon.
See also note 2.
(13) Commitments and Contingent Liabilities
(a) Legal Proceedings
The Company and its subsidiaries may, from time to time, be defendants in legal
proceedings relating to the conduct of their business. In the best judgments of
management, the consolidated financial position of the Company and its
subsidiaries will not be affected materially by the outcome of any pending legal
proceedings.
The Bank was a defendant in an action by the current owners of F. H.
Doherty Associates, Inc. (the Bank sold F. H. Doherty Associates, Inc. to the
current owners), seeking to rescind the sale of stock, recover any additional
capital contributions made by the plaintiffs, and punitive damages in the amount
of $1,000,000, and indemnification on a potential claim in the amount of $67,500
resulting from a subsequent transfer of a portion of the stock by plaintiffs to
a third party. During 1996, the Bank stipulated to a settlement and agreed to
pay $262,500 to the plaintiffs. The Bank charged $175,000 against the allowance
for probable loss which was established for this matter in 1995. The remaining
$87,500 was charged against current year operations.
(b) Nationar Receivables
On February 6, 1995, the Superintendent of Banks for the State of New York
("Superintendent") seized Nationar, a check-clearing and trust company, freezing
all of Nationar's assets. On that date, the Bank had: a demand account balance
of $233,000, and a Nationar debenture of $100,000 collateralized by a $1,000,000
investment security. On September 26, 1995, the Company entered into a standby
letter of credit with the Superintendent for $1,086,250 which replaced the
$1,000,000 security that was pledged as collateral for the capital debenture
bonds. As of December 31, 1995, the Company charged off the Nationar debenture
of $100,000 and established an additional reserve of $105,000 for potential
losses of the demand account and potential losses related to the stand by letter
of credit.
47
(13) Commitments and Contingent Liabilities, Continued
During 1996 the Company received a cash payment of $233,000 from the
Superintendent relating to its Nationar claim. In addition, on June 10, 1996 the
Company issued a new standby letter of credit for $150,000 to the
Superintendent, and the initial standby letter of credit was cancelled.
Concurrent with the new standby letter of credit, the Company was required to
pay $58,000 under the original standby letter of credit agreement. This amount
was charged against the reserve the Company had previously established.
Subsequently, the Company was informed by the Superintendent's Office that the
$150,000 standby letter of credit was canceled and that the Company will have no
further liability in connection with its agreement with the Superintendent.
(c) Lease Commitments
The Company leases office space and equipment under noncancelable operating
leases. Minimum rental commitments under these leases are as follows:
Years ended December 31,
(In thousands)
1997 $ 289
1998 307
1999 230
2000 202
2001 146
2002 and thereafter 1,994
-----
$ 3,168
=====
Amounts charged to rent expense were approximately $225,000, $203,000 and
$141,000 for the years ended December 31, 1996, 1995 and 1994.
(d) Off-Balance Sheet Financing and Concentrations of Credit
The Company is a party to certain financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit,
unused lines of credit and standby letters of credit. These instruments involve,
to varying degrees, elements of credit risk in excess of the amount recognized
on the consolidated statement of financial condition. The contract amounts of
these instruments reflect the extent of involvement the Company has in
particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the commitments to extend credit, unused lines of credit and
standby letters of credit is represented by the contractual notional amount of
these instruments. The Company uses the same credit policies in making
commitments as it does for on-balance sheet instruments.
Unless otherwise noted, the Company does not require collateral or other
security to support off-balance sheet financial instruments with credit risk.
48
(13) Commitments and Contingent Liabilities, Continued
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being fully drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral, if any,
required by the Company upon the extension of credit is based on management's
credit evaluation of the customer. Mortgage commitments are secured by a first
lien on real estate. Collateral on extensions of credit for commercial loans
varies but may include property, plant and equipment, and income producing
commercial property.
Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support borrowing arrangements. The credit risk involved in
issuing standby letters of credit is essentially the same as that involved in
extending loan facilities to customers.
Contract amounts of financial instruments that represent the future extension of
credit as of December 31, 1996 and 1995 at fixed and variable interest rates are
as follows:
1996
---------------------------
Fixed Variable Total
----- -------- -----
(In thousands)
Financial instruments whose
contract amounts represent
Credit risk:
Commitments to extend credit $ 1,076 826 1,902
Unused lines of credit ..... 914 4,981 5,895
Standby letters of credit .. -- 100 100
----- ----- -----
$ 1,990 5,907 7,897
===== ===== =====
1995
---------------------------
Fixed Variable Total
----- -------- -----
(In thousands)
Financial instruments whose
contract amounts represent
Credit risk:
Commitments to extend credit $ 426 1,528 1,954
Unused lines of credit ..... 864 5,723 6,587
Standby letters of credit .. -- 1,236 1,236
----- ----- -----
$ 1,290 8,487 9,777
===== ===== =====
The range of interest on fixed rate commitments was 7.0% to 8.5% at December 31,
1996, and 7.5% to 8.5% at December 31, 1995.
The range of interest on adjustable rate commitments was 5.5% to 9.75% and 8.50%
to 10.0% at December 31, 1996 and 1995, respectively.
49
(14) Fair Values
The Financial Accounting Standards Board issued SFAS No. 107, "Disclosures about
Fair Value of Financial Instruments" (SFAS No. 107), which requires that the
Company disclose estimated fair values for certain financial instruments. SFAS
No. 107 defines fair value of financial instruments as the amount at which the
instrument could be exchanged in a current transaction between willing parties
other than in a forced or liquidation sale. SFAS No. 107 defines a financial
instrument as cash, evidence of ownership interest in an entity, or a contract
that imposes on one entity a contractual obligation to deliver cash or another
financial instrument to a second entity or to exchange other financial
instruments on potentially unfavorable terms with a second entity and conveys to
that second entity a contractual right to receive cash or another financial
instrument from the first entity or to exchange other financial instruments on
potentially favorable terms with the first entity.
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from offering
for sale at one time the Company's entire holdings of a particular financial
instrument. Because no market exists for a significant portion of the Company's
financial instruments, fair value estimates are based on judgments regarding
future expected net cash flows, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on-and off-balance sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. Significant assets and liabilities that are not
considered financial assets or liabilities include the deferred tax asset and
property, plant, and equipment. In addition, the tax ramifications related to
the realization of the unrealized gains and losses can have a significant effect
on fair value estimates and have not been considered in the estimates of fair
value under SFAS No. 107.
In addition there are significant intangible assets that SFAS No. 107 does not
recognize, such as the value of "core deposits," the Company's branch network
and other items generally referred to as "goodwill."
50
(14) Fair Values, Continued
The specific estimation methods and assumptions used can have a substantial
impact on the resulting fair values ascribed to financial instruments. The
following is a brief summary of the significant methods and assumptions used:
Securities Available for Sale
The carrying amounts for short-term investments approximate fair value because
they mature in 90 days or less and do not present unanticipated credit concerns.
The fair value of longer-term investments and mortgage-backed securities, except
certain state and municipal securities, is estimated based on bid prices
published in financial newspapers or bid quotations received from securities
dealers. The fair value of certain state and municipal securities is not readily
available through market sources other than dealer quotations, so fair value
estimates are based on quoted market prices of similar instruments, adjusted for
differences between the quoted instruments and the instruments being valued. See
note 4 for detail disclosure of securities available for sale.
Loans
Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type such as single family loans,
consumer loans and commercial loans. Each loan category is further segmented
into fixed and adjustable rate interest terms and by performing and
nonperforming categories.
The fair value of performing loans is calculated by discounting scheduled cash
flows through the estimated maturity using estimated market discount rates that
reflect the credit and interest rate risk inherent in the loan. The estimate of
maturity is based on the contractual term of the loans to maturity taking into
consideration certain prepayment assumptions.
Fair value for significant non-performing loans is based on recent external
appraisals and discounting of cash flows. Estimated cash flows are discounted
using a rate commensurate with the risk associated with the estimated cash
flows. Assumptions regarding credit risk, cash flows, and discount rates are
judgmentally determined using available market information and specific borrower
information.
Deposit Liabilities
Under SFAS No. 107, the fair value of deposits with no stated maturity, such as
non-interest bearing demand deposits, passbook accounts, NOW accounts and money
market accounts must be stated at the amount payable on demand. The fair value
of certificates of deposit is based on the discounted value of contractual cash
flows. The discount rate is estimated using the rates currently offered for
deposits of similar remaining maturities.
The fair value estimates above do not include the benefit that results from the
low-cost funding provided by the deposit liabilities compared to the cost of
borrowing funds in the market.
51
(14) Fair Values, Continued
Borrowed Funds
The fair value of borrowed funds due in 90 days or less, or that reprice in 90
days or less is estimated to approximate the carrying amounts. The fair value of
longer term borrowed funds is estimated by discounting scheduled cash flows
based on current rates available to the Company for similar types of borrowing
arrangements.
Other Items
The following items are considered to have a fair value equal to book value due
to the nature of the financial instrument and the period within which it will be
settled or repriced: cash and due from banks, federal funds sold, accrued
interest receivable, due to/from broker, investments required by law, due to
broker, advances from borrowers for taxes and insurance, and accrued interest
payable.
Table of Financial Instruments
The carrying values and estimated fair values of financial instruments as of
December 31, 1996 and 1995 were as follows:
December 31, 1996 December 31, 1995
----------------- -----------------
Estimated Estimated
Carrying Fair Carrying Fair
Value Value Value Value
----- ----- ----- -----
(in thousands)
Financial assets:
Cash and cash equivalents .......... $ 10,887 10,887 84,613 84,613
Securities available for sale ...... 200,539 200,539 74,422 74,422
Federal Home Loan Bank of New York
stock ....................... 2,029 2,029 1,892 1,892
Loans .............................. 251,532 249,665 252,638 248,936
Less: Allowance for loan losses ... (3,438) -- (2,647) --
------- ------- ------- -------
Net loans ................... 248,094 249,665 249,991 248,936
Due from broker .................... -- -- 18,128 18,128
Accrued interest receivable ........ 3,201 3,201 1,827 1,827
Financial liabilities:
Deposits:
Demand, passbook, money
market,and NOW accounts ..... 146,150 146,150 153,878 153,878
Certificates of deposit ..... 151,932 152,797 157,361 159,852
Borrowed funds ..................... 108,780 108,806 -- --
Accrued interest payable ........... 1,077 1,077 2 2
Advances from borrowers for tax
and insurance................ 1,703 1,703 1,692 1,692
Due to broker ...................... -- -- 46,880 46,880
52
(14) Fair Values, Continued
Commitments to Extend Credit, Standby Letters of Credit, and Financial
Guarantees Written
The fair value of commitments to extend credit is estimated using the fees
currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present credit worthiness of the
counterparties. For fixed rate loan commitments, fair value also considers the
difference between current levels of interest rates and the committed rates. The
fair value of financial guarantees written and letters of credit is based on
fees currently charged for similar agreements or on the estimated cost to
terminate them or otherwise settle the obligations with the counterparties.
Fees, such as these are not a major part of the Company's business and in the
Company's business territory are not a "normal business practice." Therefore,
based upon the above facts the Company believes that book value equals fair
value and the amounts are not significant.
(15) Regulatory Capital Requirements
OTS capital regulations require savings institutions to maintain minimum levels
of regulatory capital. Under the regulations in effect at December 31, 1996, the
Bank was required to maintain a minimum ratio of tangible capital to total
tangible assets of 1.5%; a minimum leverage ratio of core (Tier 1) capital to
total adjusted tangible assets of 3.0%; and a minimum ratio of total capital
(core capital and supplementary capital) to risk-weighted assets of 8.0%, of
which 4.0% must be core (Tier 1) capital.
Under the prompt corrective action regulations, the OTS is required to take
certain supervisory actions (and may take additional discretionary actions) with
respect to an undercapitalized institution. Such actions could have a direct
material effect on an institution's financial statements. The regulations
establish a framework for the classification of savings institutions into five
categories: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized. Generally, an
institution is considered well capitalized if it has a core (Tier 1) capital
ratio of at least 5.0% (based on average total assets); a core (Tier 1)
risk-based capital ratio of at least 6.0%; and a total risk-based capital ratio
of at least 10.0%.
The foregoing capital ratios are based in part on specific quantitative measures
of assets, liabilities and certain off-balance sheet items as calculated under
regulatory accounting practices. Capital amounts and classifications are also
subject to qualitative judgments by the OTS about capital components, risk
weightings and other factors.
Management believes that, as a December 31, 1996, the Bank meets all capital
adequacy requirements to which it is subject. Further, the most recent OTS
notification categorized the Bank as a well-capitalized institution under the
prompt corrective action regulations. There have been no conditions or events
since that notification that management believes have changed the Bank's capital
classification.
53
(15) Capital Requirements, Continued
The following is a summary of the Bank's actual capital amounts and ratios as of
December 31, 1996, compared to the OTS minimum capital adequacy requirements and
the OTS requirements for classification as a well-capitalized institution.
Although the OTS capital regulations apply at the Bank level only, the Company's
consolidated capital amounts and ratios are also presented. The OTS does not
have a holding company capital requirement.
Minimum Capital For Classification
Actual Adequacy as Well Capitalized
--------------- --------------- --------------------
Amount Ratio Ratio Ratio
------ ----- ----- -----
Bank
- ----
Tangible capital .... $ 46,225 10.08% 1.50% --
Tier 1 (core) capital 46,225 10.08 3.00 5.00%
Risk-based capital:
Tier 1 ...... 46,225 23.35 -- 6.00
Total ....... 48,712 24.61 8.00 10.00
Actual
---------------
Amount Ratio
------ -----
Consolidated
- ------------
Tangible capital .... $ 61,598 13.04
Tier 1 (core) capital 61,598 13.04
Risk-based capital:
Tier 1 ...... 61,598 30.66
Total ....... 64,098 31.90
54
(16) Holding Company Financial Information
The Holding Company began operations on December 26, 1995 in conjunction with
the Bank's mutual-to-stock conversion and the Company's initial public offering
of its common stock. The Holding Company's statements of financial condition as
of December 31, 1996 and 1995 and related statements of income and cash flows
for the year ended December 31, 1996 and for the period from inception (December
26, 1995) to December 31, 1995 are as follows (the Holding Company did not have
any income or expenses for the period from December 26, 1995 to December 31,
1995):
Statements of Financial Condition
At December 31,
---------------
1996 1995
---- ----
(in thousands)
Assets
Cash and cash equivalents ................................ $ 469 21,752
Securities available for sale* ........................... 13,956 --
Loan receivable from subsidiary .......................... 3,904 4,338
Accrued interest receivable .............................. 163 --
Investment in subsidiary ................................. 46,312 49,925
Other assets ............................................. 85 --
------ ------
Total assets ............................. $ 64,889 76,015
====== ======
Liabilities and Shareholders' Equity
Liabilities:
Security sold under agreement to repurchase** .... $ 3,000 --
Other liabilities ................................ 371 --
------ ------
Shareholders' Equity ..................................... 61,518 76,015
------ ------
Total liabilities and shareholders' equity $ 64,889 76,015
====== ======
* The Holding Company's securities available for sale consist of U.S. Government
Agency and mortgage backed securities with a weighted average maturity of 5.0
years.
** Weighted average rate at December 31, 1996 is 5.60% with a maturity date of
March 26, 1997.
55
(16) Holding Company Financial Information, Continued
Statements of Income
For the Year Ended December 31, 1996, and for the
Period From Inception (December 26, 1995) Through December 31, 1995
1996 1995
---- ----
(in thousands)
Interest income ............................. $ 1,128 --
Interest expense .............................. 2 --
----- -----
Net interest income ................... 1,126 --
Non interest expense .......................... 309 --
----- -----
Income before income taxes and equity
in undistributed earnings (loss) of subsidiary 817 --
----- -----
Income tax expense ............................ 328 --
----- -----
Income before equity in undistributed
earnings (loss) of subsidiary ................ 489 --
Equity in undistributed (loss) earnings
of subsidiary ................................ (4,325) 857
----- -----
Net income (loss) ............................. $ (3,836) 857
===== =====
56
(16) Holding Company Financial Information, Continued
Statements of Cash Flows
For the Year ended December 31, 1996, and for the Period From Inception
(December 26, 1995) Through December 31, 1995
1996 1995
---- ----
(in thousands)
Cash flows from operating activities:
Net income (loss) ................................ $ (3,836) 857
Adjustment to reconcile net
income (loss) to net cash provided
by operating activities:
Equity in undistributed loss
(earnings) of subsidiary ..................... 4,325 (857)
Increase in other liabilities .................. 371 --
Increase in accrued interest receivable ........ (163) --
------- -------
Net cash provided by operating activities 697 --
------- -------
Cash flows from investing activities:
Decrease (increase) in loans receivable
from subsidiary ................................. 434 (4,338)
Investment in common stock of subsidiary .......... -- (26,090)
Purchases of securities available for sale ........ (19,985) --
Proceeds from principal paydowns and
maturities of securities available for sale ..... 3,984 --
Proceeds from sales of available for sale
securities ...................................... 1,795 --
------- -------
Net cash used in investing activities ... (13,772) (30,428)
------- -------
Cash flows from financing activities:
Net increase in borrowed funds .................... 3,000 --
Net proceeds from issuance of common stock ........ -- 52,180
Purchase of treasury stock ........................ (11,208) --
------- -------
Net cash provided by (used in)
financing activities .................. (8,208) 52,180
------- -------
Net increase (decrease) in cash and cash equivalents ...... (21,283) 21,752
Cash and cash equivalents:
Beginning of period ............................... 21,752 --
------- -------
End of period ..................................... $ 469 21,752
======= =======
These financial statements should be read in conjunction with the Company's
consolidated financial statements and notes thereto. 30
57
CORPORATE AND STOCKHOLDER INFORMATION
Company and Bank Address
11 Division Street
Amsterdam, New York 12010-4303
Telephone: (518) 842-7200
Fax: (518) 842-7500
Stock Price Information
The Company's stock is traded on The Nasdaq National Market System under the
symbol "AHCI". The table below shows the range of high and low bid prices since
the Company's common Stock began trading on December 27, 1995. The information
set forth in the table below was provided by The Nasdaq Stock Market. Such
information reflects interdealer prices, without retail mark-up, mark-down or
commission, and may not represent actual transactions.
High Low
1995 Fourth Quarter (1) $10.500 $ 9.500
1996 First Quarter 10.500 9.375
1996 Second Quarter 10.000 9.375
1996 Third Quarter 10.625 9.500
1996 Fourth Quarter 11.750 10.000
(1) Reflects the period from December 27, 1995 through December 31, 1995
- -------------------------------------
No cash dividends have been paid on Ambanc Holding Co., Inc. common stock to
date. For information regarding restriction on dividends, see Note 2 to the
Notes to Consolidated Financial Statements.
As of April 9, 1997, the Company had approximately 1,225 stockholders of record
and 4,392,023 outstanding shares of Common Stock.
Investor Relations
Stockholders, investors and analysts interested in additional information may
contact:
Harold A. Baylor, Jr.
Ambanc Holding Co., Inc.
11 Division Street
Amsterdam, New York 12010-4303
(518) 842-1445
Annual Report on Form 10-K
Copies of Ambanc Holding Co., Inc.'s Annual Report for year ended December 31,
1996 on Form 10-K filed with the Securities and Exchange Commission are
available without charge to stockholders upon written request to:
Investor Relations
Ambanc Holding Co., Inc.
11 Division Street
Amsterdam, New York 12010-4303
58
Annual Meeting
The annual meeting of stockholders will be held at 10:00 a.m., Amsterdam, New
York time, on Friday, May 23, 1997 at the Best Western, formerly the Holiday
Inn, located at 10 Market Street, Amsterdam, New York.
Stock Transfer Agent and Registrar
Ambanc Holding Co., Inc.'s transfer agent, American Stock Transfer & Trust,
maintains all stockholder records and can assist with stock transfer and
registration address changes, changes or corrections in social security or tax
identification numbers and 1099 tax reporting questions. If you have questions,
please contact the stock transfer agent at the address below:
American Stock Transfer & Trust
40 Wall Street, 46th Floor
New York, New York 10005
Telephone: (718) 921-8290
Amsterdam Savings Bank, FSB Offices
Corporate 11 Division Street
Amsterdam, N.Y. 12010
(518) 842-7200
Amsterdam Route 30N
Amsterdam, N.Y. 12010
Price Chopper Supermarket
Sanford Farms Plaza
Amsterdam, N.Y. 12010
Ballston Spa Grand Union Plaza, Rte. 50
Ballston Spa, N.Y. 12020
Clifton Park Village Plaza
Clifton Park, N.Y. 12065
Fort Plain 19 River Street
Fort Plain, N.Y. 13339
Gloversville Arterial at Fifth Avenue
Gloversville, N.Y. 12078
Latham Price Chopper Supermarket
873 New Loudon Road
Latham, N.Y. 12110
Schenectady Price Chopper Supermarket
1640 Eastern Parkway
Schenectady, N.Y. 12309
Operations Center 35 East Main Street
Amsterdam, N.Y. 12010
59
DIRECTORS AND OFFICERS
Board of Directors Year
(Ambanc Holding Co., Inc. and appointed
Amsterdam Savings Bank, FSB) to Bank Board
- ----------------------------------------------------------------- --------------
Paul W. Baker, Chairman of the Board 1963
Robert J. Brittain, President and Chief Executive Officer 1988
Lauren T. Barnett, Barnett Agency, Inc. 1966
John J. Daly, Alpin Haus 1988
Robert J. Dunning D.D.S., Dentist 1972
Lionel H. Fallows, Retired, Lieutenant Colonel 1981
Marvin R. LeRoy, Alzheimers Association, Northeastern NY Chapter 1996
Charles S. Pedersen, Independent Manufacturers' Representative 1977
Carl A. Schmidt, Jr., Sofco, Inc. 1974
William A. Wilde, Jr., Amsterdam Printing and Litho Corp. 1966
Executive Officers of Ambanc Holding Co., Inc.
- ----------------------------------------------
Robert J. Brittain, President/Chief Executive Officer
Harold A. Baylor, Jr., Vice President/Treasurer
Robert Kelly, Vice President/General Counsel/Secretary
Executive Officers of Amsterdam Savings Bank, FSB
- --------------------------------------------------
Robert J. Brittain, President/Chief Executive Officer
Harold A. Baylor, Jr., Vice President/Treasurer
Robert Kelly, Vice President/General Counsel/Secretary
Nancy S. Virkler, Vice President of Operations
Richard C. Edel, Vice President
Cynthia M. Proper, Vice President/Director of Lending
Michelle G. Brown, Vice President/Director of Human Resources
60