UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2003
Commission file number 000-33405
AJS BANCORP, INC.
(Exact name of registrants specified in its charter)
Federal 36-4485429
(State of incorporation) (IRS Employer Identification No.)
14757 S. Cicero Avenue, Midlothian, Illinois 60445
(Address of Principal Executive Offices)
(708) 687-7400
(Issuer's telephone number, including area code)
Check whether the issuer: (1) filed all reports required to be filed by Section
12, 13 or 15(d) of the Exchange Act during the past 12 months (or such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by checkmark whether the registrant is an accelerated filer (as defined
in Rule 12b-2 of the Exchange Act) Yes [ ] No [X]
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date.
As of April 30, 2003 the Registrant had outstanding 2,385,550 shares of common
stock.
AJS BANCORP, INC.
Form 10-Q Quarterly Report
Index
Page
PART I - Financial Information ----
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 6
Item 3. Quantitative and Qualitative Disclosures About Market Risk 9
Item 4. Controls and Procedures 10
PART II - Other Information
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Securities Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
ITEM 1. FINANCIAL STATEMENTS
AJS Bancorp, Inc.
Consolidated Statements of Financial Condition
(in thousands of dollars, except share data)
(unaudited)
March 31, December 31,
2003 2002
---- ----
ASSETS
Cash and cash equivalents
Cash and due from banks (interest-bearing: 2003 -
$9,454; 2002 - $9,955) $ 10,968 $ 16,896
Federal funds sold 19,000 6,000
------------ ------------
Total cash and cash equivalents 29,968 22,896
Securities available-for-sale 53,807 51,903
Securities held-to-maturity (fair value: 2003 -
$350; 2002 - $307) 342 360
Loans, net 141,435 136,134
Federal Home Loan Bank stock, at cost 7,101 4,477
Premises and equipment 4,875 4,595
Accrued interest receivable and other assets 1,786 2,205
------------ ------------
Total assets $ 239,314 $ 222,570
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits $ 182,870 $ 169,008
Federal Home Loan Bank advances 19,000 16,000
Advance payments by borrowers for taxes and insurance 1,148 1,459
Accrued interest payable and other liabilities 2,440 2,457
------------ ------------
Total liabilities 205,458 188,924
Stockholders' equity
Preferred stock, $.01 par value, 20,000,000 shares authorized - -
Common stock, $.01 par value, 50,000,000 authorized;
2,406,950 shares issued 24 24
Treasury Stock (2003 - 8,400 shares) (150) -
Additional paid in capital 11,346 11,308
Unearned ESOP shares (519) (566)
Retained earnings 22,334 21,864
Accumulated other comprehensive income 821 1,016
------------ ------------
Total stockholders' equity 33,856 33,646
------------ ------------
Total liabilities and stockholders' equity $ 239,314 $ 222,570
============ ============
See notes to consolidated financial statements
1
AJS Bancorp, Inc.
Consolidated Statements of Income
(in thousands of dollars, except share data)
(unaudited)
Three Months
Ended March 31,
---------------
2003 2002
---- ----
Interest and dividend income
Loans $ 2,354 $ 2,485
Securities 680 750
Interest-bearing deposits and other 83 78
Federal funds sold 36 25
---------- ----------
Total interest income 3,153 3,338
Interest expense
Deposits 1,079 1,216
Federal Home Loan Bank
Advances and other 209 189
---------- ----------
Total interest expense 1,288 1,405
---------- ----------
Net interest income 1,865 1,933
Provision for loan losses - 20
---------- ----------
Net interest income after provision for loan losses 1,865 1,913
Noninterest income
Service fees 123 131
Insurance commissions 89 107
Other 74 154
---------- ----------
Total noninterest income 286 392
Noninterest expense
Compensation and employee benefits 781 789
Occupancy expense 224 217
Data processing expense 80 110
Advertising and promotion 67 57
Other 264 252
---------- ----------
Total noninterest expense 1,416 1,425
---------- ----------
Income before income taxes 735 880
Income taxes 265 309
---------- ----------
Net income $ 470 $ 571
========== ==========
Earnings per share
Basic and diluted $ .20 $ .25
Weighted average shares 2,350,597 2,333,827
------------ ----------
Comprehensive income $ 275 $ 237
============ ==========
AJS Bancorp, Inc.
Consolidated Statements of Cash Flows
(in thousands of dollars)
(unaudited)
Three Months Ended
March 31,
---------
2003 2002
---- ----
Cash flows from operating activities
Net income $ 470 $ 571
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 75 112
Provision for loan losses - 20
Premium amortization, net - (19)
ESOP compensation expense 85 65
Loss on disposal of equipment - 1
Federal Home Loan Bank stock dividends (124) (19)
Gain on Sale of loans held for sale (23) -
Gain on sale of other real estate (3) (1)
Changes in
Loans held for sale (275) -
Accrued interest receivable and other assets 530 47
Accrued interest payable and other liabilities (16) 228
------------ -----------
Net cash from operating activities 719 1,005
Cash flows from investing activities
Securities available-for-sale
Purchases (7,184) -
Maturities and principal payments 4,961 4,559
Securities held-to-maturity
Maturities and principal payments 18 379
Maturities of certificates of deposit - 1,000
Loan originations, net (4,991) (1,409)
Proceeds from sale of other real estate 3 104
Purchase of equipment (355) (805)
Purchase of Federal Home Loan Bank stock (2,500) (2,000)
----------- ------------
Net cash from investing activities (10,048) 1,828
Cash from financing activities
Net change in deposits 13,862 (11,586)
Net change in Federal Home Loan Bank advances 3,000 (1,000)
Purchase of Treasury stock (150) -
Net change in advance payments by borrowers for taxes and insurance (311) (311)
----------- -----------
Net cash from financing activities 16,401 (12,897)
----------- -----------
Net change in cash and cash equivalents 7,072 (10,064)
Cash and cash equivalents at beginning of period 22,896 29,009
----------- -----------
Cash and cash equivalents at end of period $ 29,968 $ 18,945
=========== ===========
See notes to consolidated financial statements.
2
AJS Bancorp, Inc.
Consolidated Statements of Stockholders' Equity
Three months ended March 31, 2003
(in thousands of dollars)
(unaudited)
Additional Unearned
Common Treasury Paid-in ESOP
Stock Stock Capital Shares
----- ------- ------ --------
Balance at December 31, 2001 $ 24 $ - $ 11,220 $ (755)
ESOP shares earned - - 18 47
Comprehensive income
Net income - - - -
Change in unrealized gain on securities -
available-for-sale, net of taxes - - - -
Total comprehensive income ________ - -
---------- ----------- -----------
Balance at March 31, 2002 $ 24 $ - $ 11,238 $ (708)
=========== ========== =========== ===========
Accumulated
Other Total
Compre- Stock-
Retained hensive holders'
Earnings Income (Loss) Equity
-------- ------------- ------
Balance at December 31, 2001 $ 19,749 $ 1,010 $ 31,248
ESOP shares earned - - 65
Comprehensive income
Net income 571 - 571
Change in unrealized gain on securities
available-for-sale, net of taxes - (334) (334)
-----------
Total comprehensive income - - 237
----------- --------- ------------
Balance at March 31, 2002 $ 20,320 $ 676 $ 31,550
=========== ========= ===========
Additional Unearned
Common Treasury Paid-in ESOP
Stock Stock Capital Shares
----- ----- ------- ------
Balance at December 31, 2002 $ 24 $ 0 $ 11,308 $ (566)
Treasury stock (8,400 shares) (150)
ESOP shares earned - - 38 47
Comprehensive income -
Net income - - - -
Change in unrealized gain on securities -
available-for-sale, net of taxes - - - -
Total comprehensive income - - -
---------- ----------- -----------
Balance at March 31, 2003 $ 24 $ (150) $ 11,346 $ (519)
=========== ========== =========== ===========
Compre- Stock-
Retained hensive holders'
Earnings Income (Loss) Equity
-------- ------------- ------
Balance at December 31, 2002 $ 21,864 $ 1,016 $ 33,646
Treasury stock (8,400 shares) (150)
ESOP shares earned - - 85
Comprehensive income
Net income 470 - 470
Change in unrealized gain on securities
available-for-sale, net of taxes - (195) (195)
-----------
Total comprehensive income - - 275
----------- --------- -----------
Balance at March 31, 2003 $ 22,334 $ 821 $ 33,856
=========== ========== ===========
See notes to consolidated financial statements
4
AJS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
Note 1 - Basis of Presentation
Principles of Consolidation: The accompanying consolidated interim financial
- ----------------------------
statements include the accounts of AJS Bancorp, Inc. ("the Company") and its
wholly owned subsidiaries, A. J. Smith Federal Savings Bank ("the Bank") and
A.J.S. Insurance, LLC, which provides insurance and investment services to the
public. All significant intercompany balances and transactions have been
eliminated.
The accompanying interim consolidated financial statements have been prepared
pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly,
certain disclosures required by accounting principles generally accepted in the
United States of America are not included herein. These interim statements
should be read in conjunction with the Company's Annual Report on Form 10-K. The
December 31, 2002 balance sheet presented herein has been derived from the
audited financial statements included in the Company's Annual Report on Form
10-K, but does not include all of the disclosures required by accounting
principles generally accepted in the United States of America.
Interim statements are subject to possible adjustment in connection with the
annual audit of the Company for the year ending December 31, 2003. In the
opinion of management of the Company, the accompanying unaudited interim
consolidated financial statements reflect all of the adjustments (consisting of
normal recurring adjustments) necessary for a fair presentation of the
consolidated financial position and consolidated results of operations for the
periods presented. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year.
Note 2 - Employee Stock Ownership Plan
As part of the reorganization to a mutual holding company, the Bank established
an employee stock ownership plan (ESOP) for the benefit of substantially all
employees. The ESOP borrowed $944,000 from the Company and used those funds to
acquire 94,352 shares of the Company's stock at $10 per share.
Shares issued to the ESOP are allocated to ESOP participants based on principal
and interest repayments made by the ESOP on the loan from the Company. The loan
is secured by shares purchased with the loan proceeds and will be repaid by the
ESOP with funds from the Company's discretionary contributions to the ESOP and
earnings on the ESOP's assets. Principal payments are scheduled to occur over a
ten-year period. However, in the event the Company's contributions exceed the
minimum debt service requirements, additional principal payments will be made.
Note 3 - Earnings Per Share
Amounts reported as earnings per share of common stock reflect earnings
available to stockholders for the period divided by the weighted average number
of common shares outstanding during the period. Basic and diluted earnings were
$0.20 per share and $0.25 per share for the quarters ended March 31, 2003 and
2002, respectively.
5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Reform Act of
1995 as amended and is including this statement for purposes of these safe
harbor provisions. Forward-looking statements, which are based on certain
assumptions and describe future plans, strategies, and expectations of the
Company, are generally identifiable by use of the words "believe," "expect,"
"intend," "anticipate," "estimate," "project," or similar expressions. The
Company's ability to predict results or the actual effect of future plans or
strategies is inherently uncertain. Factors that could have a material adverse
affect on the operations and future prospects of the Company and its
wholly-owned subsidiaries include, but are not limited to, changes in: interest
rates; general economic conditions; legislative/regulatory provisions; monetary
and fiscal policies of the U.S. Government, including policies of the U.S.
Treasury and the Federal Reserve Board; the quality or composition of the loan
or investment portfolios; demand for loan products; deposit flows; competition;
demand for financial services in the Company's market area; and accounting
principles, policies, and guidelines. These risks and uncertainties should be
considered in evaluating forward-looking statements, and undue reliance should
not be placed on such statements. Further information concerning the Company and
its business, including additional factors that could materially affect the
Company's financial results, is included in the Company's filings with the
Securities and Exchange Commission.
The following discussion compares the financial condition of AJS Bancorp, Inc.
("the Company") at March 31, 2003 to its financial condition at December 31,
2002 and the results of operations for the three-month periods ended March 31,
2003 to the same period in 2002. This discussion should be read in conjunction
with the interim financial statements and footnotes included herein.
FINANCIAL CONDITION
Total assets at March 31, 2003 were $239.3 million compared to $222.6 million at
December 31, 2002, an increase of $16.7 million, or 7.5%. The increase in total
assets primarily reflects increases in cash and cash equivalents, securities
available-for-sale, and loans. Cash and cash equivalents increased 30.9% to
$30.0 million at March 31, 2003 due to the increase in federal funds sold of
$13.0 million to $19.0 million at March 31, 2003, while cash and due from banks
decreased $5.9 million to $11.0 million at March 31, 2003 from $16.9 million at
December 31, 2002. The increase in federal funds sold and corresponding decrease
in cash and due from banks was partially due to the Bank investing the cash into
a slightly higher yielding investment. Securities increased by $1.9 million, or
3.6%, to $54.1 million at March 31, 2003 from $52.2 million at December 31,
2002. The increase in securities occurred due to an arrangement whereby the Bank
purchased $5.0 million in mortgage-backed securities partially funded by Federal
Home Loan Bank advances. The mortgage-backed securities purchase represents the
Bank's attempt to lock in a spread between the interest earned on the asset and
the lower interest paid on the advances. Loans receivable increased $5.3 million
or 4.0% to $141.4 million at March 31, 2003 from $136.1 million at December 31,
2002. Loan volume increased due to higher demand caused mostly by customers
refinancing their mortgage in the historically low interest rate environment.
The allowance for loan losses was $2.0 million at March 31, 2003 and $2.1
million at December 31, 2002. This represents a ratio of allowance for loan
losses to gross loans receivable of 1.43% at March 31, 2003 compared to 1.51% at
December 31, 2002. The Company had non-performing assets of $1.1 million as of
March 31, 2003 and December 31, 2002.
7
Total liabilities at March 31, 2003 were $205.5 million compared to $188.9
million at December 31, 2002, an increase of $16.5 million, primarily due to an
increase in deposits and Federal Home Loan Bank advances. Total deposits
increased $13.9 million or 8.2% to $182.9 million at March 31, 2003 from $169.0
million at December 31, 2002. This increase was largely due to the marketing
efforts associated with the opening of our new branch facility in Orland Park,
Illinois. This full service facility opened in December 2002. Federal Home Loan
Bank advances increased to $19.0 million at March 31, 2003 from $16.0 million at
December 31, 2002. These fixed rate borrowings were used to fund the purchase of
mortgage-backed securities.
Total stockholders' equity increased to $33.9 million at March 31, 2003 from
$33.6 million at December 31, 2002. The increase in stockholders' equity was
primarily due to net income of $470,000 partially offset by a decrease in the
fair value of securities available-for-sale, net of tax, of $195,000 and the
purchase of $150,000 in treasury stock.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND MARCH 31,
2002
Net income decreased $101,000 to $470,000 for the quarter ended March 31, 2003
compared to the same period in 2002. The return on average assets decreased to
..79% from 1.10% in the prior period. The decrease in net income resulted from
decreases in net interest income and non-interest income during the comparative
periods.
Total interest income decreased by $185,000 or 5.5% to $3.2 million for the
quarter ended March 31, 2003 from $3.3 million for the same quarter in 2002. The
decline in interest income was primarily a result of lower interest rates earned
on interest earning assets due to the continued general decline in market
interest rates. Average interest earning assets totaled $224.4 million and
$196.6 million during the comparative quarters ended March 31, 2003 and 2002
while the average yield decrease significantly to 5.62% and 6.79%, respectively.
Total interest expense decreased $117,000 or 8.3% to $1.3 million for the
quarter ended March 31, 2003 from $1.4 million for the same quarter in 2002.
This was due to the decrease in interest expense on deposits of $137,000 or
11.3% to $1.1 million for the quarter ended March 31, 2003 from $1.2 million for
the same quarter in 2002. The decrease in the cost of our deposits was primarily
due to the general decline in market interest rates and certificates of deposit
maturing and renewing at lower rates. The average cost of deposits at March 31,
2003 was 2.39% as compared to 2.98% at March 31, 2002. Interest expense on
borrowings increased marginally to $209,000 for the quarter ended March 31, 2003
from $189,000 for the same period during 2002. This was largely due to an
increase in the average balance of Federal Home Loan Bank (FHLB) borrowings
offset in part by a decrease in the cost of the advances. The average rate on
FHLB borrowings was 4.40% for the three months ended March 31, 2003 compared to
6.10% for the quarter ended March 31, 2002.
Net interest income decreased by $68,000 or 3.5% to $1.9 million for the quarter
ended March 31, 2003. Our net interest rate spread decreased 55 basis points to
3.04% for the quarter ended March 31, 2003 from 3.59% for the same quarter in
2002, while our net interest margin decreased 61 basis points to 3.32% from
3.93%, as our assets repriced more rapidly than our liabilities. This was
mitigated to some degree by an improvement in the ratio of average
interest-earning assets to average interest-bearing liabilities to 112.41% for
the three months ended March 31, 2003 from 112.01% for the same period in 2002.
Due to the overall improvements in the quality of our loan portfolio there was
no provision for loan losses for the quarter ended March 31, 2003, compared to a
provision of $20,000 for the same period in 2002. The loan provision made for
the three months ended March 31, 2002 was based on concerns regarding losses
inherent in our subprime loan portfolio. The subprime loan portfolio has
decreased $2.6 million to $28.7 million at March 31, 2003 from $31.2 million at
December 31, 2002. Non-performing assets as a percentage of total assets was
0.46% at March 31, 2003 and 0.68% at March 31, 2002. The allowance to
non-performing loans was 183.75% and 175.03% at March 31, 2003 and 2002,
respectively.
7
Management assesses the allowance for loan losses on a quarterly basis and makes
provisions for loan losses as necessary in order to maintain the allowance.
While management uses available information to recognize losses on loans, future
loan loss provisions 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 allowance for loan losses and may
require us to recognize additional provisions based on their judgment of
information available to them at the time of their examination. The allowance
for loan losses as of March 31, 2003 is maintained at a level that represents
management's best estimate of inherent losses in the loan portfolio, and such
losses were both probable and reasonably estimable.
Noninterest income decreased $106,000 to $286,000 for the quarter ended March
31, 2003 from $392,000 for the comparable quarter in 2002. The decrease in
noninterest income was the result of an $18,000 decrease in insurance
commissions to $89,000 and an $80,000 decrease in other noninterest income for
the quarter ended March 31, 2003. Other non-interest income decreased primarily
due to a decrease of $79,000 in correspondent fees and a decrease in rental
income of $25,000, partially offset by an increase in the gain on the sale of
mortgage loans of $23,000 for the quarter ended March 31, 2003. The decrease in
correspondent fee income was the result of the Bank's decision to cut back the
staffing in the correspondent department, which resulted in a decrease in loan
volume and related income. The gain on the sale of loans designated for sale was
a result of our entry into the secondary mortgage loan market as we sought to
insulate ourselves from interest rate risk by selling designated longer term
fixed rate mortgage loans. This type of activity may continue in the future, but
it is not an integral part of our business at this time.
Noninterest expense remained stable at $1.4 million for the quarters ended March
31, 2003 and 2002. Although the overall noninterest expense remained stable,
compensation and employee benefit expense decreased $8,000 and data processing
costs decreased $30,000. These decreases were partially offset by an increase in
occupancy costs of $7,000, an increase in advertising and promotion costs of
$10,000 and an increase in other non-interest expense of $12,000. Data
processing expense decreased during the first quarter of 2003 due to the
renegotiation of our contract with our service provider. The increase in
advertising and promotion costs occurred due to the extra costs associated with
the promotion of the opening of our new branch facility in Orland Park,
Illinois. This full service branch opened in December of 2002.
Our federal and state taxes decreased $44,000 to $265,000 for the quarter ended
March 31, 2003 from $309,000 in the same period of 2002. This is primarily the
result of lower pre-tax income for the quarter ended 2003.
LIQUIDITY
The Bank must maintain an adequate level of liquidity to ensure the availability
of sufficient funds to fund loan originations and deposit withdrawals, to
satisfy other financial commitments, and to take advantage of investment
opportunities. The Bank invests excess funds in overnight deposits and other
short-term interest-bearing assets to provide liquidity to meet these needs. At
March 31, 2003, cash and cash equivalents totaled $30.0 million. At March 31,
2003, the Bank had commitments to fund loans of $17.0 million. At March 31,
2003, certificates of deposit represented 58.0% of total deposits. The Bank
expects to retain these deposit accounts. In addition, the Bank could borrow up
to $45.1 million from the Federal Home Loan Bank without providing additional
collateral. The Bank considers its liquidity and capital resources sufficient to
meet its outstanding short-term and long-term needs.
CAPITAL RESOURCES
The Bank is subject to capital-to-asset requirements in accordance with bank
regulations. The following table summarizes the Bank's regulatory capital
requirements versus actual capital as of March 31, 2003:
ACTUAL REQUIRED EXCESS
------ -------- ------
(Dollars in thousands) AMOUNT % AMOUNT % AMOUNT %
------ - ------ - ------ -
Core capital
(to adjusted total assets) $27,600 11.6% $ 9,500 4.0% $ 18,100 7.6%
Risk-based capital
to (risk-weighted assets) 29,100 23.7 9,800 8.0 19,300 15.7
8
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
QUALITATIVE ASPECTS OF MARKET RISK
The majority of our assets and liabilities are monetary in nature. Consequently,
our most significant form of market risk is interest rate risk. Our assets,
consisting primarily of mortgage loans, have longer maturities than our
liabilities, consisting primarily of deposits. As a result, a principal part of
our business strategy is to manage interest rate risk and reduce the exposure of
our net interest income to changes in market interest rates. Accordingly, our
Board of Directors has established an Asset/Liability Management Committee which
is responsible for evaluating the interest rate risk inherent in our assets and
liabilities, for determining the level of risk that is appropriate given our
business strategy, operating environment, capital, liquidity and performance
objectives, and for managing this risk consistent with the guidelines approved
by the Board of Directors. Senior management monitors the level of interest rate
risk on a regular basis and the Asset/Liability Management Committee, which
consists of senior management operating under a policy adopted by the Board of
Directors, meets as needed to review our asset/liability policies and interest
rate risk position.
We have sought to manage our interest rate risk by more closely matching the
maturities of our interest rate sensitive assets and liabilities. In particular,
we offer one, three and five year adjustable rate mortgage loans, and three and
five year balloon loans. Furthermore, our experience with subprime loans has
been that these loans remain a part of our portfolio for a significantly shorter
period of time than other one- to four-family loans. In a low interest rate
environment, borrowers typically prefer fixed-rate loans to adjustable-rate
mortgages. We intend to sell into the secondary market our originations of
longer-term fixed-rate loans. We do not solicit high-rate jumbo certificates of
deposit or brokered funds.
In past years, many savings associations have measured interest rate sensitivity
by computing the "gap" between the assets and liabilities which are expected to
mature or reprice within certain time periods based on assumptions regarding
loan prepayment and deposit decay rates formerly provided by the Office of
Thrift Supervision. However, the Office of Thrift Supervision now requires the
computation of amounts by which the net present value of an institution's cash
flow from assets, liabilities and off-balance-sheet items (the institution's net
portfolio value or "NPV") would change in the event of a range of assumed
changes in market interest rates. The Office of Thrift Supervision provides all
institutions that file a Consolidated Maturity/Rate Schedule as a part of their
quarterly Thrift Financial Report with an interest rate sensitivity report of
net portfolio value. The Office of Thrift Supervision simulation model uses a
discounted cash flow analysis and an option-based pricing approach to measuring
the interest rate sensitivity of net portfolio value. The Office of Thrift
Supervision model estimates the economic value of each type of asset, liability
and off-balance-sheet contract under the assumption that the United States
Treasury yield curve increases or decreases instantaneously by 100 to 300 basis
points in 100 basis point increments. A basis point equals one-hundredth of one
percent, and 100 basis points equals one percent. An increase in interest rates
from 7% to 8% would mean, for example, a 100 basis point increase in the "Change
in Interest Rates" column below. The Office of Thrift Supervision provides us
the results of the interest rate sensitivity model, which is based on
information we provide to the Office of Thrift Supervision to estimate the
sensitivity of our net portfolio value.
The table below sets forth, as of December 31, 2002 (the latest date for which
information is available), the estimated changes in our net portfolio value that
would result from the designated instantaneous changes in the United States
Treasury yield curve. The company expects the March 31, 2003 Net Portfolio Value
to be similar to the December 31, 2002 table shown below:
Change in NPV as % of
Interest Rates Portfolio Value of Assets
-------------------------
in Basis Points Net Portfolio Value NPV Basis Point
-------------------
(Rate Shock) Amount $ Change % Change Ratio Change
- -------------- ------ -------- -------- ----- ------
(Dollars in thousands)
300 $ 30,321 -4,610 -13% 13.50% -140bp
200 32,446 -2,485 -7 14.20 -70bp
100 34,070 -861 -2 14.70 -20bp
Static 34,931 14.90 bp
-100 34,129 -802 -2 14.49 -42bp
-200 N/A N/A N/A N/A N/A
-300 N/A N/A N/A N/A N/A
9
The table above indicates that at December 31, 2002, in the event of a 200 basis
point increase in interest rates, we would experience a 7% decrease in net
portfolio value. All model outputs associated with the -300 and -200 bp
scenarios are not applicable because of the abnormally low prevailing interest
rate environment.
Certain shortcomings are inherent in the methodology used in the above interest
rate risk measurement. Modeling changes in net portfolio value require making
certain assumptions that may or may not reflect the manner in which actual
yields and costs respond to changes in market interest rates. In this regard,
the net portfolio value table presented assumes that the composition of our
interest-sensitive assets and liabilities existing at the beginning of a period
remains constant over the period being measured and assumes that a particular
change in interest rates is reflected uniformly across the yield curve
regardless of the duration or repricing of specific assets and liabilities.
Accordingly, although the net portfolio value table provides an indication of
our interest rate risk exposure at a particular point in time, such measurements
are not intended to and do not provide a precise forecast of the effect of
changes in market interest rates on its net interest income, and will differ
from actual results.
ITEM 4. CONTORLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
Under the supervision and with the participation of our management,
including our Chief Executive Officer, President and Chief Financial
Officer, we evaluated the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Rule 13a-14(c) under the
Exchange Act) as of May 1, 2003 (the "Evaluation Date") within 90 days
prior to the filing date of this report. Based upon that evaluation, the
Chief Executive Officer, President and Chief Financial Officer concluded
that, as of the Evaluation Date, our disclosure controls and procedures
were effective in timely alerting them to the material information relating
to us (or our consolidated subsidiaries) required to be included in our
periodic SEC filings.
(b) Changes in internal controls. There were no significant changes made in
our internal control during the period covered by this report or, to our
knowledge, in other factors that could significantly affect these controls
subsequent to the date of their evaluation.
10
PART II - - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Periodically, there have been various claims and lawsuits
involving the Company, such as claims to enforce liens,
condemnation proceedings on properties in which the Company holds
security interest, claims involving the making and servicing of
real property loans, and other issues incident to the Company's
business. In the opinion of management, after consultation with
the Company's legal counsel, no significant loss is expected from
any such pending claims or lawsuits. The Company is not a party
to any material pending legal proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
None.
(b) Reports on Form 8-K.
The Company announced its March 31, 2003 financial
results by release. The press release was included as an
exhibit and filed on Form 8-K.
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AJS BANCORP, INC.
Date: 5/10/03 /s/ Thomas R. Butkus
-------------------------------------------------
Thomas R. Butkus
Chief Executive Officer and Chairman of the Board
Date: 5/10/03 /s/ Lyn G. Rupich
-------------------------------------------------
Lyn G. Rupich
President
12
Certification of Chief Executive Officer
I, Thomas R. Butkus, Chief Executive Officer and Chairman of the Board, certify
that:
1. I have reviewed this quarterly report on Form 10-Q of AJS Bancorp,
Inc;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have: a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this quarterly
report is being prepared; b) evaluated the effectiveness of the
registrant's disclosure controls and procedures as of a date within 90
days prior to the filing date of this quarterly report (the
"Evaluation Date"); and c) presented in this quarterly report our
conclusions about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of
13
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: 5/14/03 /s/ Thomas R. Butkus
-----------------------
Chief Executive Officer
14
Certification of President
I, Lyn G. Rupich, President and Chief Operating Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of AJS Bancorp;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have: a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this quarterly
report is being prepared; b) evaluated the effectiveness of the
registrant's disclosure controls and procedures as of a date within 90
days prior to the filing date of this quarterly report (the
"Evaluation Date"); and c) presented in this quarterly report our
conclusions about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date; 5. The
registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing
the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
15
Date: 5/14/03 /s/ Lyn G. Rupich
-------------------------------------
President and Chief Operating Officer
16
Certification of Chief Financial Officer
I, Pamela N. Favero, Chief Financial Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of AJS Bancorp,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: 5/14/03 /s/ Pamela N. Favero
-----------------------
Chief Financial Officer
17