AMB Financial Corp.
8230 Hohman Avenue
Munster, Indiana 46321
(219) 836-5870
Financial Report
For The Three Months Ended
March 31, 2014
Note: This report is intended to be read in conjunction with our Annual Report to Stockholders for the
year ended December 31, 2013, copies of which are included on this website. This report is dated March
31, 2014 and should not be read to cover any subsequent periods. We specifically disclaim any obligation
to update this report even if the contents thereof should become misleading.
This report has not been prepared in accordance with Securities and Exchange Commission rules
applicable to public companies and is not intended to comply with such rules.
AMB FINANCIAL CORP.
TABLE OF CONTENTS
Page
Consolidated Statements of Financial Condition at
March 31, 2014 (unaudited) and December 31, 2013
2
Consolidated Statements of Income for the three
months ended March 31, 2014 and 2013 (unaudited)
3
Consolidated Statements of Comprehensive Income for the three
months ended March 31, 2014 and 2013 (unaudited)
4
Consolidated Statements of Changes in Stockholders’
Equity for the three months ended March 31, 2014 and 2013 (unaudited)
5
Consolidated Statements of Cash Flows for the three months
ended March 31, 2014 and 2013 (unaudited)
6
Earnings Per Share Analysis
7
Notes to Unaudited Consolidated Financial Statements
8
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
1
9 - 26
AMB Financial Corp. and Subsidiaries
Consolidated Statem ents of Financial Condition
March 31,
2014
unaudited
Assets
Cash and amounts due from depository institutions
Interest-earning deposits
Total cash and cash equivalents
Mortgage backed securities, available for sale, at fair value
Loans receivable (net of allow ance for loan losses:
$1,710,869 at March 31, 2014 and
$1,658,875 at December 31, 2013)
Other real estate ow ned and repossessed assets
Investment in limited partnership
Stock in Federal Home Loan Bank of Indianapolis
Accrued interest receivable
Office properties and equipment- net
Bank ow ned life insurance
Prepaid expenses and other assets
$
2,088,464
11,277,620
13,366,084
8,886,441
December 31,
2013
$
135,764,633
699,270
468,570
1,628,300
492,158
9,054,778
4,496,061
2,216,259
Total assets
2,255,411
11,129,880
13,385,291
9,341,486
132,419,702
847,701
477,870
1,628,300
499,251
9,127,459
4,470,981
2,311,425
$
177,072,554
$
174,509,466
$
149,883,263
3,426,605
$
148,532,852
3,450,346
Liabilities and Stockholders' Equity
Liabilities
Deposits
Borrow ed money
Guaranteed preferred beneficial interest in the
Company's subordinated debentures
Advance payments by borrow ers for taxes and insurance
Other liabilities
Total liabilities
$
3,000,000
897,291
3,210,163
160,417,322
$
3,000,000
684,111
2,408,070
158,075,379
$
3,858,000
$
16,837
11,533,912
8,813,983
(27,802)
(7,760,843)
16,434,087
Stockholders' Equity
Preferred stock, $.01 par value, $1,000 liquidation value; authorized 100,000 shares;
3,858 shares issued and outstanding at March 31, 2014
and December 31, 2013
Common Stock, $.01 par value; authorized 1,900,000 shares;
1,683,641 shares issued and 981,638 shares outstanding at
March 31, 2014 and December 31, 2013
Additional paid- in capital
Retained earnings
Accumulated other comprehensive loss, net of tax
Treasury stock, at cost (702,003 shares at March 31, 2014 and December 31, 2013)
Total stockholders' equity
$
3,858,000
$
16,837
11,533,912
9,022,756
(15,430)
(7,760,843)
16,655,232
Total liabilities and stockholders' equity
$
See accompanying notes to unaudited consolidated financial statements.
2
177,072,554
$
174,509,466
AMB Financial Corp. and Subsidiaries
Consolidated Statem ents of Incom e
(Unaudited)
Interest income
Loans
Mortgage-backed securities
Interest-bearing deposits
Dividends on FHLB stock
Total interest income
Interest expense
Deposits
Borrow ings
Total interest expense
Net interest income
Provision for loan losses
Net interest income after
provision for loan losses
Non-interest income:
Loan fees and service charges
Deposit related fees
Other fee income
Rental Income
Loss from investment in limited partnership
Net gain (loss) on sale of other real estate ow ned
and repossessed assets
Gain on sale of loans
Increase in cash surrender value of life insurance
Other income
Total non-interest income
Non-interest expense:
Staffing costs
Advertising
Occupancy and equipment expense
Data processing
Professional fees
Federal deposit insurance premiums
Insurance expense
Other operating expenses
Total non-interest expense
Income before income taxes
Income tax expense
Net income
Three Months
Ended
March 31,
2014
Three Months
Ended
March 31,
2013
$ 1,627,624
45,292
4,850
22,283
$ 1,700,049
$ 1,575,692
42,101
16,088
14,072
$ 1,647,953
$
$
$
186,269
62,345
248,614
$
265,732
80,675
346,407
$ 1,451,435
60,000
$ 1,301,546
136,156
$ 1,391,435
$ 1,165,390
$
$
$
60,769
95,004
14,075
84,994
(9,300)
71,569
28,660
25,080
4,710
375,561
$
$
69,568
82,476
19,701
91,035
(9,300)
(5,319)
225,926
26,207
5,408
505,702
727,821
35,025
195,952
169,076
71,340
40,872
23,782
159,638
$ 1,423,506
743,561
37,295
170,633
168,701
79,553
39,131
25,651
144,378
$ 1,408,903
$
$
Preferred stock dividends
343,490
125,072
218,418
$
9,645
262,189
32,317
229,872
48,225
Net income available to common shareholders
$
208,773
$
181,647
Earnings per common share:
Basic
Net income
Preferred stock dividends
Net income available to common shareholders
$
$
$
0.22
0.01
0.21
$
$
$
0.24
0.05
0.19
Diluted
Net income
Preferred stock dividends
Net income available to common shareholders
$
$
$
0.22
0.01
0.21
$
$
$
0.24
0.05
0.19
See accompanying notes to unaudited consolidated financial statements.
3
AMB Financial Corp. and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)
Three Months Ended March 31,
2014
Net income
$
2013
218,418
$
229,872
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on securities
available for sale-Unrealized holding gain (loss) arising during the period
12,372
(1,661)
-
-
12,372
(1,661)
Less: reclassification adjustment for (gain) loss
included in net income
Other comprehensive income (loss), net of tax
Total comprehensive income
$
See accompanying notes to unaudited consolidated financial statements
4
230,790
$
228,211
AMB Financial Corp. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
For the Three Months Ended March 31, 2014 and 2013
Accumulated
Additional
Balance at December 31, 2013
$
Other
Preferred
Common
Paid-in
Retained
Comprehensive
Treasury
Stock
Stock
Capital
Earnings
Loss
Stock
3,858,000 $
16,837
$ 11,533,912
Net income
$ 8,813,983 $
218,418
Other comprehensive income, net of tax
Balance at March 31, 2014
(27,802) $(7,760,843) $ 16,434,087
218,418
12,372
Cash dividends paid on preferred stock
12,372
(9,645)
$
3,858,000 $
16,837
$ 11,533,912
Total
(9,645)
$ 9,022,756 $
(15,430) $(7,760,843) $ 16,655,232
Accumulated
Additional
Balance at December 31, 2012
$
Other
Preferred
Common
Paid-in
Retained
Comprehensive
Treasury
Stock
Stock
Capital
Earnings
Income
Stock
3,858,000 $
16,837
$ 11,533,912
Net income
$ 8,264,462 $
229,872
Other comprehensive loss, net of tax
(48,225)
$
3,858,000 $
16,837
$ 11,533,912
5
$ 8,446,109 $
$(7,760,843) $ 15,998,444
229,872
(1,661)
Cash dividends paid on preferred stock
Balance at March 31, 2013
86,076
Total
(1,661)
(48,225)
84,415
$(7,760,843) $ 16,178,430
AMB Financial Corp. and Subsidiaries
Consolidated Statements of Cash Flows
Three Months Ended March 31,
2014
2013
(unaudited)
Cash flows from operating activities:
Net income
$
218,418
$
229,872
Adjustments to reconcile net income to net cash from operating activities:
Depreciation
87,257
89,924
Amortization of premiums and accretion of discounts
27,042
(33,231)
Proceeds from sale of loans originated for sale
1,230,600
8,833,279
(1,201,940)
(8,607,353)
Gain on sale of loans
(28,660)
(225,926)
(Gain) loss on sale of other real estate owned
(71,569)
Loans originated for sale
Provision for loan losses
5,319
60,000
Loss from limited partnership
Increase in cash surrender value of life insurance
Increase in deferred income on loans
Decrease in prepaid and deferred income taxes
Decrease in accrued interest receivable
136,156
9,300
9,300
(25,080)
(26,207)
15,132
22,908
(185,207)
(105,981)
7,093
18,656
(Decrease) increase in accrued interest payable
(604)
820
(Decrease) increase in deferred compensation
(927)
1,577
Other, net
Net cash provided by operating activities
1,075,749
278,394
1,216,604
627,507
Cash flows from investing activities:
Purchase of mortgage-backed securities
-
Proceeds from repayments of mortgage-backed securities
(1,351,163)
448,623
Purchase of loan participations
752,206
-
(1,000,000)
Loans receivable originated for investment
(18,154,832)
(3,694,474)
Principal repayments on loans receivable
12,597,318
7,573,727
Loan participations sold
1,995,131
Proceeds from sale of other real estate owned
362,320
Property and equipment expenditures, net
(14,576)
Net cash provided (for) by investing activities
(2,766,016)
246,021
(435,312)
2,091,005
Cash flows from financing activities:
Net increase in deposits
1,350,411
Repayment of borrowed money
82,343
(23,741)
-
Increase in advance payments by borrowers
for taxes and insurance
213,180
Dividends paid on preferred stock
Net cash provided by financing activities
(48,225)
1,530,205
Net change in cash and cash equivalents
373,913
(19,207)
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
339,795
(9,645)
3,092,425
13,385,291
27,668,915
$
13,366,084
$
30,761,340
$
249,219
$
345,588
Supplemental disclosure of cash flow information:
Interest paid
Income taxes paid
-
Transfer of loans to other real estate owned
142,370
See accompanying notes to unaudited consolidated financial statements.
6
-
AMB Financial Corp. and Subsidiaries
Earnings Per Share
(Unaudited)
Net Income
Three Months
Three Months
Ended
Ended
March 31, 2014
March 31, 2013
$
218,418
$
208,773
Less: Preferred stock dividends
$
229,872
$
181,647
9,645
Net income available to common shareholders
48,225
Total weighted average common shares
outstanding for basic computation
981,638
Basic income per common share
$
0.21
981,638
$
0.19
Total weighted average common shares
outstanding for basic computation
981,638
981,638
Common stock equivalents due to
dilutive effect of stock options
-
-
Total weighted average common shares and
equivalents outstanding for diluted
computation
981,638
Diluted income per common share
$
7
0.21
981,638
$
0.19
AMB Financial Corp.
And Subsidiaries
Status as Non-Reporting Company. We are not subject to the reporting requirements of Section 13 of
the Securities Exchange Act of 1934 and accordingly this report has not been prepared in accordance
with applicable Securities Exchange Commission rules. This report is intended to cover the three month
period ended March 31, 2014 and should not be read to cover any other periods.
Notes to Consolidated Financial Statements. The accompanying unaudited consolidated financial
statements have been prepared on the basis of accounting principles generally accepted in the United
States of America and in the opinion of management contain all adjustments (all of which are normal
and recurring in nature) necessary for a fair presentation. The results of operations for the three months
ended March 31, 2014 are not necessarily indicative of the results expected for the year ending
December 31, 2014. The March 31, 2014 consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes for the year ended December 31, 2013
included in the Company’s Annual Report. The Company’s consolidated statement of condition as of
December 31, 2013 has been derived from the Company’s audited consolidated statement of condition
as of that date.
The preparation of the consolidated financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and assumptions that could have a
material effect on the carrying value of certain assets and liabilities. These estimates and assumptions
affect the amounts reported in the consolidated financial statements and the disclosures provided. The
determination of the allowance for loan losses, valuations and impairments of investment securities, and
the accounting for income tax expense are highly dependent on management’s estimates and
assumptions where changes in any of these could have a significant impact on the financial statements.
The consolidated financial statements include the accounts of AMB Financial Corp. (the “Company”),
its wholly-owned subsidiary, American Savings, FSB (the “Bank”), and its wholly-owned dormant
subsidiary NIFCO, Inc., and the wholly-owned dormant subsidiary of NIFCO, Inc., Ridge Management,
Inc.
Earnings Per Share. Earnings per share for the three month periods ended March 31, 2014 and 2013
were determined by dividing net income available to common shareholders for the periods by the
weighted average number of both basic and diluted shares of common stock, as well as common stock
equivalents outstanding. Stock options are regarded as common stock equivalents and are considered in
diluted earnings per share calculations. Common stock equivalents are computed using the treasury
stock method. For such periods, there was no dilutive effect of common stock equivalents.
Reclassifications. Certain 2013 items or amounts have been reclassified or restated in order to conform
to the 2014 presentation.
8
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements. The Company and the Bank may from time to time make written or
oral “forward-looking statements.” These forward-looking statements may be included in this Financial
Report, which are made in good faith by us. These forward-looking statements include statements about
our beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, which are
subject to significant risks and uncertainties, and are subject to change based on various factors, some of
which are beyond our control. The words “may,” “could,” “should,” “would,” “believe,” “anticipate,”
“estimate,” “expect,” “intend,” “plan” and similar expressions are intended to identify forward-looking
statements. The following factors, among others, could cause our financial performance to differ
materially from the plans, objectives, expectations, estimates and intentions expressed in the forwardlooking statements:



















the current condition of the United States economy in general and in our local economy
(including unemployment) in which we conduct operations;
the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate
policies of the Federal Reserve Board and the United States Treasury (“UST”);
our ability to manage and reduce our non-performing assets;
our ability to repay our holding company debt, including our $3 million of trust preferred stock
and $2 million of holding company notes, when due;
the impact of new laws and regulations resulting from the recent economic crisis on financial
institutions, the lending market and our regulatory agencies;
the impact of current and future restrictions and requirements on institutions like us which have
accepted funds from the UST under its Small Business Lending Fund Program (“SBLF”);
the impact of new regulations imposed by the Federal Reserve System and the Office of the
Comptroller of the Currency;
future deposit premium levels which may continue to rise;
the impact of the possible receivership or nationalization of other banking institutions;
future loan underwriting and consumer protection requirements including those issued by the
Consumer Financial Protection Bureau;
inflation, interest rate, market and monetary fluctuations and its impact on our interest rate
sensitive balance sheet;
the decline in loan demand and real estate values within our local market;
our ability to redeem our $3.9 million of preferred stock issued to the UST under its SBLF
program before the dividend on the preferred stock increases to 9% on March 31, 2016;
the future financial strength, dividend level and activities of the FHLB of Indianapolis in which
we own stock and from which we borrow money;
the impact of any new government foreclosure relief and loan modification programs;
the timely development of and acceptance of our new products and services and the perceived
overall value of these products and services by users, including the features, pricing and quality
thereof compared to competitors’ products and services;
the willingness of users to substitute our products and services for products and services of our
competitors;
our ability to reinvest our cash flows in today’s very low interest rate environment;
our success in gaining regulatory approval of our products and services, when required;
9








the impact of changes in financial services’ laws and regulations (including laws concerning
taxes, banking, securities and insurance);
the impact of technological changes;
competition from other financial service providers in the Company’s market area;
the success of our new executives in managing our business operations;
the success of our loan restructuring and work out arrangements;
our ability to accurately estimate the value of our assets and the appropriate level of our
allowance for loan losses;
our ability to lease space in our branch facilities when vacancies occur; and
future changes in consumer spending and saving habits.
The list of important factors stated above is not exclusive. We do not undertake to update any forwardlooking statement, whether written or oral, that may be made from time to time by or on behalf of the
Company or the Bank.
Issuance of Preferred Stock Under Small Business Lending Fund. On September 22, 2011, AMB
Financial Corp. entered into a Securities Purchase Agreement with the Secretary of the UST, pursuant to
which the Company issued 3,858 shares of the Company’s Senior Non-Cumulative Perpetual Preferred
Stock, Series C (“Series C Preferred Stock”), having a liquidation value of $1,000 per share, for a total
purchase price of $3,858,000. The Series C Preferred Stock was issued pursuant to the Small Business
Lending Fund (“SBLF”) program, a $30 billion fund established under the Small Business Jobs Act of
2010 that was created to encourage lending to small businesses by providing capital to qualified
community banks.
Financial Condition. Total assets of the Company were $177.1 million at March 31, 2014, an increase
of $2.6 million, or 1.5%, from $174.5 million at December 31, 2013. The increase in assets was
primarily the result of an increase in loans receivable.
Cash and cash equivalents, consisting primarily of interest-earning deposits, remained relatively
unchanged totaling $13.4 million at March 31, 2014 and December 31, 2013. Cash and cash equivalents
can fluctuate significantly on a day-to-day basis due to cash demands, customer deposit levels, loan
activity and future expected cash flows.
Mortgage-backed securities, available for sale, decreased $455,000 to $8.9 million at March 31, 2014,
from $9.3 million at December 31, 2013. The decrease was the result of repayments as there was no
purchase activity during the three month period ended March 31, 2014. The Company recorded an
unrealized loss on available for sale mortgage-backed securities of $26,000 at March 31, 2014 compared
to a $46,000 unrealized loss at December 31, 2013.
Net loans receivable increased $3.4 million, or 2.5%, to $135.8 million at March 31, 2014, from $132.4
million at December 31, 2013. Loans receivable originated and purchased for investment in the portfolio
totaled $18.2 million during the three month period ended March 31, 2014, as compared to $4.7 million
during the prior year period. The change in originations from the prior year is primarily due to increased
commercial real estate originations and, to a lesser extent, commercial non real estate originations. The
Company also originated $1.2 million of loans for sale which were subsequently sold during the three
month period ended March 31, 2014, as compared to $8.6 million during the prior year period. Loans
originated for sale are generally fixed-rate, single-family mortgage loans, which are sold in an effort to
10
manage interest rate risk and generate fee income. Loan sale activities have declined significantly during
the first three months of 2014 as compared to the prior year period due to an increase in interest rates,
which has caused a decrease in loan refinance activity. Offsetting the total originations and purchases
were amortization, prepayments, and sales of loans totaling $15.8 million and $16.4 million for the three
month periods ended March 31, 2014 and 2013, respectively.
The determination of the allowance for loan losses involves material estimates that are susceptible to
significant change in the near term. The allowance for loan losses is maintained at a level appropriate to
absorb management’s estimate of probable incurred losses inherent in the loan portfolio. The provision
for loan losses is based upon management’s quarterly review of the loan portfolio. The purpose of the
review is to assess loan quality, identify impaired loans, analyze delinquencies, ascertain loan growth,
evaluate potential charge-offs and recoveries, and assess general economic conditions in the markets that
the Company serves. To determine the appropriate level for the allowance for loan losses, management
applies historical loss percentages to performing residential real estate, nonresidential real estate,
consumer, and commercial business loan balances. In addition, nonperforming loans are evaluated for
current collateral deficiencies. When such loans are found to have collateral deficiencies, the deficiency
is charged-off to the allowance for loan losses. By applying the historical and subjective loss factors to
the current loan balances and identifying the required collateral deficiency reserves for the period,
management records loan loss provisions, which establishes the appropriate level for the allowance for
loan losses.
The allowance for loan losses increased by $52,000 during the quarter ended March 31, 2014 and totaled
approximately $1.7 million at March 31, 2014 as compared to December 31, 2013. The Bank’s
allowance for loan losses to net loans receivable remained unchanged at 1.24% at March 31, 2014 and
December 31, 2013, respectively. Management believes that the allowance for loan losses is adequate to
meet probable incurred loan losses at March 31, 2014. While management uses available information to
recognize losses on loans, future additions to the allowance may be necessary based on changes in
information and economic conditions. In addition, the Office of the Comptroller of the Currency (the
“OCC”), as an integral part of its examination process, periodically reviews the Bank's allowance for
loan losses and may require the Bank to recognize additions to the loan loss allowance based upon their
judgments about information available to them at the time of their examination.
11
The following table sets forth the activity in the allowance for loan losses for the three ended March 31,
2014 and 2013.
Balance at beginning of period: ............................................
Charge-offs:
One- to four family .............................................................
Multi-family ........................................................................
Non-residential....................................................................
Land ....................................................................................
Consumer ............................................................................
Commercial business ..........................................................
Total charge-offs ..............................................................
Recoveries:
One- to four family .............................................................
Multi-family ........................................................................
Non-residential....................................................................
Consumer ............................................................................
Commercial business ..........................................................
Total recoveries................................................................
Net charge-offs .....................................................................
Provisions for loan losses......................................................
Balance at end of period .......................................................
Three Months
Ended
March 31,
2014
Three Months
Ended
March 31,
2013
$1,658,875
$2,049,976
(77,187)
(331)
(4,357)
(81,875)
(59,648)
(1,981)
(4,230)
(65,859)
66,343
6,704
114
708
73,869
11,227
5,950
17,177
(8,006)
60,000
$1,710,869
(48,682)
136,156
$2,137,450
Ratio of net charge-offs during the period to average gross loans
outstanding during the period ...............................................
0.01%
0.04%
Ratio of net charge-offs during the period to average non-performing
loans during the period..........................................................
0.28%
1.25%
12
Loans receivable are summarized as follows at the dates indicated:
March 31,
2014
Mortgage loans:
One-to-four family
Multi-family
Nonresidential
Construction
Land
$
December 31,
2013
74,719,728
6,013,455
31,580,152
6,830,286
2,481,967
$
73,940,528
5,894,568
30,462,030
6,671,880
2,586,063
Total mortgage loans
121,625,588
119,555,069
Other loans:
Equity lines of credit
Other consumer
5,317,347
1,621,208
5,622,242
1,584,275
Total other loans
6,938,555
7,206,517
10,786,597
10,109,313
139,350,740
136,870,899
1,750,037
125,201
1,710,869
2,682,252
110,070
1,658,875
135,764,633
$ 132,419,702
Commercial business loans
Total loans receivable
Less:
Loans in process
Net deferred yield adjustments
Allowance for loan losses
Loans receivable, net
$
13
Criticized and Classified Assets. The following table sets forth the amounts and categories of nonperforming assets and other criticized and classified assets, on the dates indicated.
March 31,
2014
Substandard non-accruing loans:
One- to four-family
Multi-family
Non-residential
Construction
Land
Equity lines of credit
Other consumer
Commercial business
Total substandard non-accruing loans
Total loans receivable
Total non-accrual / loans receivable
Substandard – accruing loans
One- to four-family
Non-residential
Land
Other consumer
Commercial business
Total substandard – accruing loans
Total loans receivable
Total substandard accruing / loans receivable
Total classified loans
Total loans receivable
Total classified loans / loans receivable
Substandard foreclosed assets:
One- to four-family
Multi-family
Land
Total substandard foreclosed assets
Total classified assets
Total assets
Total classified assets / total assets
Other criticized assets
Special mention – accruing loans
One- to four-family
Non-residential
Other consumer
Commercial business
Total special mention – accruing loans
Total loans receivable
Total special mention accruing / loans
receivable
$
$
$
$
$
$
December 31,
2013
2,509,963
297,420
61,610
19,930
15,332
11,092
2,915,347
139,350,740
2.09%
1,033,881
392,211
192,118
6,322
20,383
1,644,915
139,350,740
1.18%
$
$
$
$
$
$
2,472,830
291,661
62,675
19,816
15,828
12,713
6,238
2,881,761
136,870,899
2.11%
1,044,378
395,536
195,990
9,729
26,547
1,672,180
136,870,899
1.22%
$
$
4,560,262
139,350,740
3.27%
$
$
4,553,941
136,870,899
3.33%
$
291,537
407,733
699,270
$
152,539
287,429
407,733
847,701
$
$
$
$
5,259,532
177,072,554
2.97%
$
$
5,401,642
174,509,466
3.10%
$
281,313
281,313
139,350,740
$
283,284
283,284
136,870,899
$
$
0.20%
14
$
$
0.21%
Non-Performing Assets, Impaired Loans and Allowance for Loan Losses.
The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio
segment and based on impairment method for the dates indicated:
Allowance for Loan Losses
At March 31, 2014
One-to-four family
Multi-family
Nonresidential
Construction
Land
Equity lines of credit
Other consumer
Commercial business loans
Total
Individually
Evaluated
for
Impairment
Collectively
Evaluated
for
Impairment
$
$
64,496
-
$
At December 31, 2013
Total
958,500
159,227
348,317
34,387
19,746
35,893
15,216
75,087
64,496 $
$
1,646,373 $
1,022,996
159,227
348,317
34,387
19,746
35,893
15,216
75,087
1,710,869
Individually
Evaluated
for
Impairment
Collectively
Evaluated
for
Impairment
$
$
$
59,937
4,218
7,059
71,214 $
966,600
159,846
329,244
26,800
20,541
37,741
16,862
30,027
Total
$
1,587,661 $
1,026,537
159,846
329,244
26,800
20,541
37,741
21,080
37,086
1,658,875
Loan Balances
Individually
Evaluated
for
Impairment
One-to-four family
Multi-family
Nonresidential
Construction
Land
Equity lines of credit
Other consumer
Commercial business loans
Total
At March 31, 2014
Collectively
Evaluated
for
Impairment
$ 2,888,320
297,420
61,610
19,930
15,332
11,092
19,718
$
3,313,422 $
$
Individually
Evaluated
for
Impairment
Total
71,831,408
5,716,035
31,518,542
6,830,286
2,462,037
5,302,015
1,610,116
10,766,879
$
136,037,318 $
74,719,728
6,013,455
31,580,152
6,830,286
2,481,967
5,317,347
1,621,208
10,786,597
139,350,740
At December 31, 2013
Collectively
Evaluated
for
Impairment
$ 2,853,675
291,661
62,675
19,816
15,828
12,713
29,782
$
3,286,150 $
$
71,086,853
5,602,907
30,399,355
6,671,880
2,566,247
5,606,414
1,571,562
10,079,531
133,584,749 $
Total
$
73,940,528
5,894,568
30,462,030
6,671,880
2,586,063
5,622,242
1,584,275
10,109,313
136,870,899
Impaired loans, which consist of the Company's non-accrual loans and troubled debt restructured loans, were as follows:
Period end loans with allocated allowance for loan losses
Period end loans with no allocated allowance for loan losses
Total
March 31,
December 31,
2013
2014
$
378,357 $
582,981
2,935,065
2,703,169
$
3,313,422 $
3,286,150
Valuation reserve relating to impaired loans
$
15
64,496 $
71,214
The following table presents loans individually evaluated for impairment by class of loans as of the dates indicated:
At March 31, 2014
Unpaid
Principal
Balance
With an allowance recorded:
One-to-four family
Multi-family
Nonresidential
Construction
Land
Equity lines of credit
Other consumer
Commercial business loans
$
With no related allowance recorded:
One-to-four family
Multi-family
Nonresidential
Construction
Land
Equity lines of credit
Other consumer
Commercial business loans
Total
$
At December 31, 2013
Allowance for
Loan Losses
Allocated
378,357
-
$
2,509,963
297,420
61,610
19,930
15,332
11,092
19,718
3,313,422 $
Unpaid
Principal
Balance
64,496
-
$
-
64,496
$
540,486
12,713
29,782
2,313,189
291,661
62,675
19,816
15,828
3,286,150 $
Nonaccrual loans are summarized as follows:
One-to-four family
Multi-family
Nonresidential
Construction
Land
Equity lines of credit
Other consumer
Commercial business loans
$
Total
$
16
March 31,
2014
2,509,963
297,420
61,610
19,930
15,332
11,092
2,915,347
December 31,
2013
$
2,472,830
291,661
62,675
19,816
15,828
12,713
6,238
$
Allowance for
Loan Losses
Allocated
2,881,761
$
59,937
4,218
7,059
71,214
The following tables presents the aging of the recorded investment in past due loans.
March 31, 2014
One-to-four family
Multi-family
Nonresidential
Construction
Land
Equity lines of credit
Other consumer
Commercial business loans
Total
30 - 89
Days
Past Due
$
967,748
330,318
50,000
11,718
19,155
$ 1,378,939
90 Days
or Greater
Past Due
$ 2,193,501
297,420
61,610
19,930
15,332
11,092
$ 2,598,885
Total
Past Due
$ 3,161,249
297,420
391,928
19,930
65,332
22,810
19,155
$ 3,977,824
$
$
Loans
Not
Past Due
71,558,479
5,716,035
31,188,224
6,830,286
2,462,037
5,252,015
1,598,398
10,767,442
135,372,916
$
$
Total
74,719,728
6,013,455
31,580,152
6,830,286
2,481,967
5,317,347
1,621,208
10,786,597
139,350,740
December 31, 2013
One-to-four family
Multi-family
Nonresidential
Construction
Land
Equity lines of credit
Other consumer
Commercial business loans
Total
30 - 89
Days
Past Due
$ 1,955,289
75,234
19,105
25,965
$ 2,075,593
90 Days
or Greater
Past Due
$ 1,945,010
291,661
62,675
19,816
15,828
12,713
6,238
$ 2,353,941
Total
Past Due
$ 3,900,299
291,661
137,909
19,816
15,828
31,818
32,203
$ 4,429,534
$
$
Loans
Not
Past Due
70,040,229
5,602,907
30,324,121
6,671,880
2,566,247
5,606,414
1,552,457
10,077,110
132,441,365
$
$
Total
73,940,528
5,894,568
30,462,030
6,671,880
2,586,063
5,622,242
1,584,275
10,109,313
136,870,899
The Company has allocated $64,496 and $39,656 of loan loss reserves to customers whose loan terms have been modified in
troubled debt restructurings as of March 31, 2014 and December 31, 2013, respectively.
The following table presents loans by class classified as troubled debt restructurings.
One-to-four family
Commercial business loans
Trouble debt restructured loans accrual loans
One-to-four family
Multi-family loans
Trouble debt restructured loans nonaccrual loans
Trouble debt restructured loans
March 31,
2014
$
378,357
19,718
December 31,
2013
$
380,845
23,544
$
398,075
$
404,389
$
97,950
227,670
$
108,910
223,145
$
$
325,620
723,695
$
$
332,055
736,444
17
Risk Classification of Loans. The Company’s policies, consistent with regulatory guidelines, provide
for the classification of loans and other assets that are considered to be of lesser quality as substandard,
doubtful, or criticized assets designated as special mention.
A substandard asset is inadequately protected by the current sound worth and paying capacity of the
obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness, or
weaknesses, that jeopardize the liquidation of the debt. They are characterized by the distinct possibility
that the Bank will sustain some loss if the deficiencies are not corrected. The risk rating guidance
published by the OCC clarifies that a loan with a well-defined weakness does not have to present a
probability of default for the loan to be rated substandard, and that an individual loan’s loss potential
does not have to be distinct for the loan to be rated substandard. An asset classified doubtful has all the
weaknesses inherent in one classified substandard with the added characteristic that the weaknesses
make collection or liquidation in full, on the basis of currently existing facts, conditions, and values,
highly questionable and improbable. If an asset is considered uncollectible and of such little value that
their continuance as assets is not warranted, they are promptly charged-off as required by applicable
federal regulations. A special mention asset has potential weaknesses that deserve management’s close
attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment
prospects for the asset or in the institution’s credit position at some future date. Special mention assets
are not adversely classified and do not expose an institution to sufficient risk to warrant adverse
classification.
Based on a review of the Company’s classified assets at March 31, 2014, loans classified substandard as
well as other real estate owned totaled $5.3 million. On that same date, the Company had $281,000 of
criticized loans designated as special mention assets.
Non-Performing Loans
Non-performing loans, which consist of those nonaccrual loans which are past due ninety days or more
as well as loans less than ninety days past due which in management’s judgment, the collateral value and
financial condition of the borrower do not justify accruing interest, totaled $2.9 million, or 2.09% of
total loans receivable at March 31, 2014, compared to $2.9 million, or 2.11% of total loans receivable at
December 31, 2013. Non-performing loans as of March 31, 2014 consist of the following:






41 single-family mortgage loans totaling $2.5 million, of which three loans totaling $163,000 are
purchased loans located outside of the Bank’s general lending area;
two loans secured by multi-family dwelling units totaling $297,000;
two non-residential loans totaling $62,000;
one loan secured by vacant land totaling $20,000;
two consumer home equity lines of credit totaling $15,000; and
one secured consumer loan totaling $11,000.
Included in the above non-performing loan totals are troubled debt restructured loans, which totaled
$326,000 consisting of one single-family loan totaling $98,000 and one multi-family loan totaling
$228,000.
Potential Problem Loans
The Company defines potential problem loans as performing loans rated substandard or special mention,
which do not meet the definition of a non-performing loan. The Company does not necessarily expect to
18
realize losses on potential problem loans, but does recognize that potential problem loans carry a higher
probability of default and require additional attention by management. As part of its loan review
process, the Company evaluates a borrower’s financial condition as well as the underlying collateral’s
cash flows in order to determine the appropriate loan grade/classification. The Company reviews
nonresidential real estate loans, commercial non real estate loans and multiple non-owner occupied
single-family loans made to the same borrower to determine if these loans should be classified. As a
result of these reviews, $1.6 million of loans were classified as substandard at March 31, 2014 as
compared to $1.7 million at December 31, 2013. Of the aforementioned classified loans at March 31,
2014, nine loans totaling $1.6 million were current and three loans totaling $22,000 were delinquent less
than 30 days.
Potential problem loans categorized as special mention totaled $281,000 at March 31, 2014 as compared
to $283,000 at December 31, 2013. None of the loans included in this special mention category were
delinquent at March 31, 2014.
The ratio of allowance for loan losses to classified and criticized loans was 35.34% at March 31, 2014,
compared to 34.29% at December 31, 2013.
Other Real Estate Owned
Other real estate owned, which is classified substandard, totaled $699,000 at March 31, 2014 as
compared to $848,000 at December 31, 2013 and includes the following:


ten one-to-four family vacant land parcels totaling $408,000; and
three single-family dwelling units totaling $291,000.
Included in the above is one single-family dwelling unit totaling $48,000 which is located out of the
Bank’s general lending area. Other real estate owned properties are initially recorded at fair value less
estimated cost to sell at acquisition, establishing a new cost basis. If fair value declines subsequent to
foreclosure, a valuation allowance is recorded through expense. During the three month period ended
March 31, 2014, the Company recorded net sales of other real estate owned properties totaling
$362,000, resulting in a net gain of $72,000. The Company routinely obtains current appraisals for other
real estate owned to determine value as management continues to aggressively market these real estate
assets.
There can be no assurance that we will not experience increases in our non-performing assets or that the
value of our current non-performing assets will not further decline. It is not clear how serious an effect
the economy will have on the Company’s loan volume, credit quality and deposit flows. However,
management believes that the Company’s non-owner occupied loans, purchased loans, and consumer
loans, as well as the other real estate it owns, may be particularly sensitive to adverse economic
conditions.
The Company’s investment in a limited partnership decreased $9,000 to $469,000 at March 31, 2014,
from $478,000 at December 31, 2013. The decline represents the Company’s share of the operating
losses generated by the partnership, which manages an investment in an affordable housing apartment
development.
19
The Bank is a member of the Federal Home Loan Bank of Indianapolis (FHLBI) and holds a $1.6
million investment in stock of the FHLBI at March 31, 2014. Members are required to own a certain
amount of stock based on the level of borrowings and other factors, and may invest in additional
amounts. The investment is carried at par value, as there is not an active market for FHLBI stock.
Office properties and equipment decreased $73,000 to $9.1 million at March 31, 2014. The decrease
represents current period additions, which totaled $14,000, offset by normal depreciation of $87,000.
Bank owned life insurance increased $25,000 to $4.5 million at March 31, 2014. The change represents
an increase in the cash surrender value of the life insurance policies purchased in connection with
deferred compensation plans utilized by directors and officers of the Company.
Prepaid expenses and other assets decreased $95,000 to $2.2 million at March 31, 2014. Included in
prepaid expenses and other assets is a $1.2 million deferred income tax asset.
Total deposits increased $1.4 million to $149.9 million at March 31, 2014, from $148.5 million at
December 31, 2013. The increase in deposits during the period was due to a $2.5 million increase in
demand deposits and NOW accounts (checking) and a $973,000 increase in passbook accounts offset in
part by a $1.9 million decrease in certificates of deposit and a $162,000 decrease in money market
accounts. At March 31, 2014, the Bank’s non-certificate accounts (passbook, checking and money
market accounts) comprised $80.7 million, or 53.8% of deposits, compared to $77.4 million, or 52.1%
of deposits, at December 31, 2013. The majority of the Bank’s deposits are derived from core client
sources, relating to long-term relationships with local individuals, businesses and to a lesser extent,
public clients. The Company does not utilize brokered deposits.
Borrowed money, which consisted of FHLBI advances and other borrowings, totaled $3.4 million at
March 31, 2014. Borrowings from the FHLBI at March 31, 2014, totaled $1.5 million with a weighted
average rate of 6.44% and a weighted term to maturity of 4.8 years. Other borrowed money totaled $1.9
million and carries a 5.00% rate of interest with a maturity date of March 31, 2018. This borrowing
requires principal and interest payments amortized over a fifteen year period. Principal payments have
reduced the balance by $24,000 over the most recent three month period.
The Company’s trust preferred subordinated debentures remained unchanged totaling $3.0 million at
March 31, 2014. The interest rate payable on the debentures adjusts quarterly to the three month LIBOR
plus 1.65% and was 1.88% at March 31, 2014. These debentures have a contractual maturity date of
June 15, 2037 and the Company has the right to redeem the debentures, in whole or in part, on any
interest payment date.
Advance payments by borrowers for taxes and insurance increased $213,000 totaling $897,000 at March
31, 2014. Other liabilities increased $802,000 totaling $3.2 million at March 31, 2014. The increase was
primarily due to increases in accrued taxes, clearing accounts and miscellaneous accounts payable items.
Total stockholders’ equity increased $221,000 to $16.7 million, or 9.41% of total assets, at March 31,
2014, compared to $16.4 million, or 9.42% of total assets, at December 31, 2013. The increase in
stockholders’ equity was attributable to the net income from operations for the three month period ended
March 31, 2014, totaling $218,000 as well as a decline in the unrealized loss on available for sale
securities during the period, net of tax, in the amount of $12,000 offset by preferred stock cash dividends
20
paid to the United States Treasury under the SBLF program totaling $9,000. The number of common
shares outstanding at March 31, 2014 was 981,638 and the book value per common share (excluding
book value relating to preferred stock) outstanding was $13.04. The Bank’s Tier 1 (core) capital, Tier 1
risk-based and total risk-based capital percentages of 10.39%, 14.34% and 15.59%, respectively, at
March 31, 2014 exceeded all regulatory requirements and categorize the Bank as well capitalized under
applicable regulations.
Comparison of the Results of Operations for the Quarter Ended March 31, 2014 and March 31,
2013
General. Net income available to common shareholders for the quarter ended March 31, 2014 was
$209,000, or $.21 per diluted share, an increase of $27,000 compared to $182,000 or $.19 per diluted
share for the same period in 2013. The increase in the current period net income compared to the prior
year’s period was the result of a $150,000 increase in net interest income, a $76,000 decrease in the
provision for loan losses and a $39,000 decrease in preferred stock dividends, offset by a $130,000
decrease in non-interest income, a $92,000 increase in income tax expense a $15,000 increase in other
non-interest expense.
Interest Income. Total interest income increased $52,000, or 3.2%, to $1.7 million for the quarter
ended March 31, 2014, from $1.6 million for the prior year period. The weighted average yield on
interest-earning assets increased 32 basis points to 4.37% for the quarter ended March 31, 2014 from
4.05% for prior year period while the average balance of interest-earning assets decreased $7.1 million
to $155.9 million for the 2014 quarter from $163.0 million for the 2013 quarter.
Interest income on loans receivable increased $52,000, to $1.6 million for the quarter ended March 31,
2014, as compared to the 2013 quarter. The increase in interest income on loans was the result of an
$11.5 million increase in the average balance of loans outstanding to $135.8 million for the quarter
ended March 31, 2014, as compared to $124.3 million for the quarter ended March 31, 2013 offset by a
decline of 28 basis points in the average yield to 4.80% for the quarter ended March 31, 2014 as
compared to 5.08% for the 2013 quarter. The increase in the average balance was due in part to an
increased emphasis on new originations, primarily in non-residential and small business commercial
lending, which far outpaced loan payoffs and repayments. The decline in the average yield earned
reflects the impact of market interest rates on new originations retained in the portfolio.
Interest income on mortgage-backed securities increased $3,000 to $45,000 for the quarter ended March
31, 2014 as compared to $42,000 for the prior year’s quarter. The increase in interest income was the
result of a 25 basis point increase in the average yield to 1.98% for the quarter ended March 31, 2014,
from 1.73% for the prior year’s quarter offset in part by a $541,000 decrease in the average outstanding
balance of mortgage-backed securities to $9.2 million for the quarter ended March 31, 2014 from $9.7
million for the quarter ended March 31, 2013. Interest income on interest-earning deposits decreased
$11,000 to $5,000 for the quarter ended March 31, 2014 compared to $16,000 for the quarter ended
March 31, 2013. The decrease in interest income was primarily due to an $18.0 million decrease in the
average outstanding balance of interest-earning deposits to $9.4 million for the quarter ended March 31,
2014 from $27.4 million for the quarter ended March 31, 2013 which was used in part to fund the
increase in loans receivable. Dividend income on FHLBI stock increased $8,000 to $22,000 for the
quarter ended March 31, 2014, as compared to $14,000 for the 2013 quarter. The most recent quarterly
dividend paid by the FHLBI included a special supplemental dividend of $8,000, which accounts for the
21
increase.
Interest Expense. Total interest expense decreased $97,000, or 28.2%, to $249,000 for the quarter
ended March 31, 2014, as compared to $346,000 for the 2013 quarter. The average cost of interestbearing liabilities decreased 22 basis points to 0.65% for the quarter ended March 31, 2014, as compared
to 0.87% for the quarter ended March 31, 2013, while the average balance of interest-bearing liabilities
outstanding decreased $7.0 million to $154.0 million for the quarter ended March 31, 2014 from $161.0
million for the 2013 quarter. The average balance of deposits outstanding decreased by $6.8 million and
the average balance of borrowings outstanding decreased by $206,000 between the periods.
Interest expense on deposits decreased $79,000, or 29.9%, to $186,000 for the quarter ended March 31,
2014, from $265,000 for the 2013 quarter. The decrease in interest expense on deposits was due to the
aforementioned $6.8 million decrease in the average balance of deposits outstanding, as well as a 19
basis point decrease in the average cost of deposits to 0.51% for the quarter ended March 31, 2014 from
0.70% for the prior year’s quarter. The decrease in the average cost of deposits was primarily driven by
a 30 basis point decrease on certificates of deposit to an average rate of 0.89% for the quarter ended
March 31, 2014, as compared to an average rate of 1.19% for the 2013 quarter. The decrease in the
average balance of deposits outstanding was primarily driven by a $10.5 million decrease in certificates
of deposits offset in part by a $2.9 million increase in demand accounts and a $758,000 increase in
savings deposits.
Interest expense on borrowings decreased $18,000, or 22.7%, to $63,000 for the quarter ended March
31, 2014, from $81,000 for the 2013 quarter. This decrease was the result of a 100 basis point decrease
in the average cost of borrowed funds to 3.91% for the quarter ended March 31, 2014 compared to
4.91% for the quarter ended March 31, 2013 as well as the aforementioned $206,000 decrease in the
average balance of borrowings to $6.4 million for the quarter ended March 31, 2014, from $6.6 million
for the prior year’s quarter. Interest expense on FHLBI advances decreased to $24,000 for the quarter
ended March 31, 2014, as compared to $26,000 for the prior year’s quarter as a result of a $129,000
decrease in the average balance outstanding to $1.5 million for the quarter ended March 31, 2014, from
$1.6 million for the prior year’s quarter. Interest expense on other borrowings, having an outstanding
average balance of $1.9 million, declined $15,000 to $24,000 for the quarter ended March 31, 2014,
from $39,000 for the prior year’s quarter. The decline was the result of a 300 basis point decrease in the
average cost to 5.00% for the quarter ended March 31, 2014 compared to 8.00% for the quarter ended
March 31, 2013. The interest expense on junior subordinated debentures, having an outstanding average
balance of $3.0 million, decreased $1,000 to $14,000 for the quarter ended March 31, 2014, from
$15,000 for the prior year’s quarter. This decrease was the result of a 6 basis point decline in the average
cost of the variable rate of interest to 1.89% for the quarter ended March 31, 2014 compared to the same
period one year ago.
Net Interest Income. As a result of the above changes in interest income and interest expense, net
interest income totaled $1.4 million for the quarter ended March 31, 2014, compared to $1.3 million for
the prior year’s quarter. The increase reflects the aforementioned $52,000 increase in interest income
and the $98,000 decrease in interest expense. The net interest rate spread increased by 54 basis points to
3.72% for the quarter ended March 31, 2014 from 3.18% for prior year’s quarter, while the net interest
margin, expressed as a percentage of average earning assets, increased by 53 basis points to 3.72% for
the quarter ended March 31, 2014 from 3.19% for prior year’s quarter. The increase in the net interest
rate spread and net interest margin resulted primarily from a larger average loan portfolio balance which
22
generated higher yields than lower yielding interest-bearing deposits as well as the decline in cost of
funds due in part to the continued low interest rate environment and also to the reduction in interest paid
on the $1.9 million other borrowing discussed above.
Provision for Loan Losses. The Company recorded a provision for loan losses of $60,000 during the
quarter ended March 31, 2014, as compared to $136,000 during the prior year’s quarter. The provision
for loan losses is a function of the allowance for loan loss methodology used to determine the
appropriate level of the allowance for inherent loan losses after net charge-offs have been deducted. Net
charge-offs were $8,000 for the three months ended March 31, 2014, compared to $49,000 for the same
period in 2013. Current period provisions were impacted by growth in the loan portfolio while the prior
year’s provision was impacted by new additions to nonperforming loans as well as charge-off activity.
Non-Interest Income. Non-interest income decreased $130,000 to $376,000 for the quarter ended
March 31, 2014, as compared to $506,000 for the prior year’s quarter. The decrease was primarily
attributed to a $197,000 reduction in gains on the sale of loans to the FHLBI, as refinance activity on
one-to-four family residential lending has slowed dramatically, a $9,000 decrease in loan fee income,
and $6,000 declines in both rental income and other fee income offset in part by a $77,000 increase in
gains on the sale of other real estate owned and a $13,000 increase in deposit fee income due primarily
to overdraft fees and other deposit related fees.
Non-Interest Expense. Non-interest expense increased $15,000 to $1.4 million for the quarter ended
March 31, 2014 as compared to the prior year’s quarter. The increase was primarily due to a $25,000
increase in occupancy expenses primarily due to increased snow removal costs and a $15,000 increase in
other operating primarily due to OREO and nonperforming loan expenses offset in part by a $16,000
reduction in staffing expenses primarily due to reductions in health insurance and pension costs as well
as an $8,000 decrease in professional fees.
Income Taxes. The Company recognized income tax expense of $125,000 for the quarter ended March
31, 2014, for an effective tax rate of 36.41%, compared to income tax expense of $32,000, for an
effective income tax rate of 12.33%, for the prior year’s quarter. The prior year’s quarter was positively
impacted by previously reserved low-income housing tax credits totaling $61,000 that the Company
determined could be utilized on a going forward basis.
23
Analysis of Net Interest Income. Net interest income represents the difference between interest earned
on interest-earning assets and interest paid on interest-bearing liabilities. Net interest income is affected
by the relative amounts of interest-earning assets and interest-bearing liabilities, and the interest rates
earned or paid on them.
The following table presents, for the periods indicated, the total dollar amounts of interest income from
average interest-earning assets and the resultant yields, as well as the interest expense on average
interest-bearing liabilities, expressed both in dollars and rates. All average balances were calculated
using average daily balances and include non-accruing loans.
Yield Analysis
(Dollars in thousands)
Three Months Ended
March 31, 2014
Average
Balance
Assets:
Interest-Earning Assets:
Loans receivable
Mortgage-backed securities
Interest-bearing deposits
FHLBI stock
Total interest-earning assets
Non interest-earning assets
Total assets
$135,761 $1,628
9,172
45
9,356
5
1,628
22
155,917 1,700
18,528
174,445
Liabilities and Stockholders’ Equity:
Interest-Bearing Liabilities:
Passbook accounts
25,188
Demand accounts
52,309
Certificate accounts
70,093
Total deposits
147,590
6,442
Borrowings
Total interest-bearing liabilities
154,032
3,858
Non-interest-bearing liabilities
Total liabilities
157,890
Stockholders’ equity
16,555
Total liabilities and stockholders’ equity $174,445
Net interest income / interest rate spread
Average
Yield/
Interest Cost
Three Months Ended
March 31, 2013
Average
Balance
Average
Yield/
Interest Cost
4.80%
1.98
0.21
5.55
4.37
$124,258 $1,576
9,713
42
27,394
16
1,628
14
162,993 1,648
17,862
180,855
5.08%
1.73
0.24
3.50
4.05
4
27
155
186
63
249
0.07%
0.21
0.89
0.51
3.91
0.65
24,430
49,364
80,583
154,377
6,648
161,025
3,737
164,762
16,093
$180,855
4
24
237
265
81
346
0.07%
0.20
1.19
0.70
4.91
0.87
$1,451
3.72%
$1,302
3.18%
Net interest margin
3.72%
24
3.19%
Capital Standards. As a federally chartered savings bank, the Bank’s deposits are insured up to the
applicable limits by the Federal Deposit Insurance Corporation (“FDIC”). The Bank is a member of the
Federal Home Loan Bank (“FHLB”) of Indianapolis, which is one of the twelve regional banks
comprising the FHLB system. Effective July 21, 2011, pursuant to the Dodd-Frank Act, the Bank
became regulated by the Office of the Comptroller of the Currency (“OCC”), the primary federal
regulator of national banks. The Bank is further regulated by the Board of Governors of the Federal
Reserve System (“FRB”) as to reserves required to be maintained against deposits and certain other
matters. Pursuant to the Dodd-Frank Act, the Company is now regulated by the FRB. Such regulation
and supervision establishes a comprehensive framework of activities in which an institution can engage
and is intended primarily for the protection of the insurance fund and depositors. The regulatory
structure also gives the regulatory authorities extensive discretion in connection with their supervisory
and enforcement activities. Any change in such regulation, whether by the OCC, the FRB or Congress
could have a material impact on the Company and its operations.
Savings associations must meet three capital requirements: Tier 1 capital to average assets, Tier 1 capital
to risk-weighted assets and total capital to risk-weighted assets.
Tier 1 Capital Requirement. The Tier 1 capital requirement currently requires a savings institution to
maintain a core capital of not less than 4.0% of adjusted total assets and 5.0% to be considered “well
capitalized.” For the Bank, core capital generally includes common stockholders’ equity (including
retained earnings), and minority interests in the equity accounts of fully consolidated subsidiaries, less
disallowed portions of mortgage servicing rights and deferred tax assets. Investments in and advances to
subsidiaries engaged in activities not permissible for national banks are also required to be deducted in
computing core total capital.
Tier 1 Risk-Based Capital Requirement. Under current regulations, savings institutions are required to
meet a Tier 1 risk-based capital requirement of not less than 4.0% of total risk-weighted assets and 6.0%
to be considered “well capitalized.” Risk-based capital consists of tangible capital defined above, plus
supplementary capital, primarily general loan loss reserves (limited to a maximum of 1.25% of total
risk-weighted assets.).
Risk-Based Capital Requirement. The risk-based capital requirement provides that savings institutions
maintain total capital equal to not less than 8% of total risk-weighted assets and 10.0% to be considered
“well capitalized.”
In July 2013, the OCC and the other federal bank regulatory agencies issued a final rule that will revise
their leverage and risk-based capital requirements and the method for calculating risk-weighted assets to
make them consistent with agreements that were reached by the Basel Committee on Banking
Supervision and certain provisions of the Dodd-Frank Act. Among other things, the rule establishes a
new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), increases the
minimum Tier 1 capital to risk-based assets requirement (from 4% to 6% of risk-weighted assets) and
assigns a higher risk weight (150%) to exposures that are more than 90 days past due or are on
nonaccrual status and to certain commercial real estate facilities that finance the acquisition,
development or construction of real property. The final rule also requires unrealized gains and losses on
certain “available-for-sale” securities holdings to be included for purposes of calculating regulatory
capital requirements unless a one-time opt-in or opt-out is exercised. The rule limits a banking
organization’s capital distributions and certain discretionary bonus payments if the banking organization
25
does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to riskweighted assets in addition to the amount necessary to meet its minimum risk-based capital
requirements.
The final rule becomes effective for the Bank on January 1, 2015. The capital conservation buffer
requirement will be phased in beginning January 1, 2016 and ending January 1, 2019, when the full
capital conservation buffer requirement will be effective. The final rule also implements consolidated
capital requirements for savings and loan holding companies, such as the Company, effective January 1,
2015.
American Savings, FSB
At March 31, 2014, the Bank was in compliance with all of its capital requirements as follows:
March 31, 2014
Stockholders' equity of the Bank
$
Core capital
Core capital requirement - "Well Capitalized"
Excess
$
Tier 1 Risk-Based Capital / Risk Weighted Assets:
Core capital requirement - "Well Capitalized"
Excess
$
$
$
Amount
18,332,984
Percent of
Assets
10.39 %
18,322,824
8,821,021
9,501,803
10.39 %
5.00
5.39 %
$
18,322,824
7,666,080
10,656,744
14.34 %
6.00
8.34 %
$
15.59 %
10.00
5.59 %
$
$
December 31, 2013
Percent of
Amount
Assets
18,055,713
10.37 %
18,057,261
8,702,337
9,354,924
10.37 %
5.00
5.37 %
18,057,261
7,583,520
10,473,741
14.29 %
6.00
8.29 %
$
19,638,136
12,639,200
6,998,936
15.54 %
10.00
5.54 %
$
$
Total Risk-Based Capital
Risk-based capital requirement - "Well Capitalized"
Excess
$
$
19,921,324
12,776,800
7,144,524
Total Bank Assets - Regulatory Financial Report
Adjusted Total Assets-Regulatory Financial Report
For Regulatory Capital Calculation
Total Risk-Weighted Assets-Thrift Financial Report
$
176,445,923
$
174,073,311
$
$
176,420,410
127,768,000
$
$
174,046,746
126,392,000
A reconciliation of stockholders' equity of the Bank for financial reporting purposes to capital
available to the Bank to meet regulatory capital requirements is as follows:
March 31, 2014
Stockholders' equity of the Bank
Regulatory capital adjustment
For mortgage servicing rights
For deferred tax assets
For available for sale securities
Core capital
$
$
(25,590)
15,430
$
Allowable general loan loss reserves
Total Risk- Based Capital
18,332,984
December 31, 2013
18,322,824
(26,254)
27,802
$
1,598,500
$
19,921,324
18,055,713
18,057,261
1,580,875
$
19,638,136
Legal Proceedings. At March 31, 2014, we were not involved in any legal proceedings or lawsuits that
are not routine and incidental to our business.
26