AMB Financial : 2021 Annual Report

AMB

2021 AFINANCIALnnualCORP. Report

President's Message

To Our Stockholders:

On behalf of AMB Financial Corp. (the Company), and its wholly owned subsidiary, American Community Bank of Indiana (the Bank or American Community Bank), I am pleased to present our 2021 annual financial report.

Financial highlights:

• Net income available to common shareholders totaled a record $3,781,000 for 2021 as compared to $2,792,000 for 2020, representing an increase of $989,000, or 35.4%.
• Diluted earnings per share available to common shareholders totaled $3.97 per share for the year ended December 31, 2021 compared to $2.88 per share for 2020.
• Total assets of the Company were $288.0 million at December 31, 2021, an increase of $25.7 million from $262.3 million at December 31, 2020.
• Net loans receivable increased $24.6 million to $212.5 million at December 31, 2021, from $187.9 million at December 31, 2020.
• In response to the Covid-19 pandemic, we originated Paycheck Protection Program loans totaling $16.7 million which helped retain jobs for small businesses during 2021.
• Deposits increased $28.0 million to $251.5 million at December 31, 2021, from $223.5 million at December 31, 2020.
• Non-accrualloans decreased $537,000 to $442,000 at December 31, 2021, from $979,000 at December 31, 2020.
• Classified substandard assets decreased $1.8 million to $460,000 at December 31, 2021, from $2.3 million at December 31, 2020, due to a reduction in other real estate owned and non-accrual loans.
• The book value per common share outstanding at December 31, 2021 was $27.54.
• The Bank's Tier 1 leverage capital ratio, risked-based common equity Tier 1 capital ratio, Tier 1 capital ratio and risk-based total capital ratios of 9.19%, 12.42%, 12.42% and 13.62%, respectively, at December 31, 2021 exceeded all regulatory requirements and categorize the Bank as well capitalized under applicable regulations.

Our financial performance and stock performance are available on our website at https://www.acbanker.com. I urge you to visit our site to view this information and utilize its other services.

The entire staff of the Bank and the Company appreciates your commitment and support.

Sincerely,

Michael Mellon

President / CEO

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

General. AMB Financial Corp. (the "Company") is the bank holding company for American Community Bank of Indiana, (the "Bank") a State of Indiana chartered commercial bank. Collectively, the Company and the Bank are referred to herein as the "Company."

The Company's primary market area consists of the northwest portion of Lake County, Indiana. Business is conducted from our main office at 7880 Wicker Avenue, St. John, Indiana, as well as our four full-service banking offices located in Munster, Dyer, Hammond, and Crown Point, Indiana. The Bank is a community-oriented institution whose business consists primarily of accepting deposits from customers within its market area and investing those funds in mortgage loans secured by residential and non-residential real estate as well as non-real estate commercial and consumer loans. The Company also invests in mortgage-backed and other investment securities.

The Company's results of operations are primarily dependent on net interest income, which is the difference between the interest income on its interest-earning assets, such as loans and securities, and the interest expense on its interest- bearing liabilities, such as deposits and borrowings and to a lesser degree, non-interest income and non-interest expense. Net interest income depends upon the volume of interest-earning assets and interest-bearing liabilities and the interest rate earned or paid on them, respectively. When the Company's non-performing assets increase, our volume of interest-earning assets declines, adversely impacting net interest income. Non-interest income primarily consists of fees on deposits and loan products, increase in cash surrender value of life insurance, rental income, income or losses from other real estate owned operations and gains on the sale of loans. The Company's non-interest expenses primarily consist of employee compensation and benefits, professional and legal fees, occupancy and equipment expenses, data processing service fees, federal deposit insurance premiums, and other operating expenses.

The Company's results of operations are also affected by general economic conditions, the monetary and fiscal policies of Federal agencies and the policies of agencies that regulate financial institutions. Future changes in applicable laws, regulations, or government policies, which are likely, may have a material impact on the Company. Lending activities are influenced by the demand for real estate loans and other types of loans, competition among lenders, the general level of real estate values, the level of interest rates and the availability of funds. Deposit flows and costs of funds are influenced by prevailing market interest rates, account maturities, and the levels of personal income and savings in the Company's market area.

Status as Non-ReportingCompany. 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 year ended December 31, 2021 and should not be read to cover any other periods.

Forward-LookingStatements. 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 Annual 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 that 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 forward-looking 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, when due;
• the impact of new laws and regulations on financial institutions, the lending market, and our regulatory agencies;
• the impact of new regulations imposed by the Federal Reserve System, the Federal Deposit Insurance Corporation ("FDIC") and the State of Indiana Department of Financial Institutions;
• future deposit premium levels;

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• 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 future financial strength, dividend level and activities of the FHLB of Indianapolis in which we own stock and from which we borrow money;
• 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 interest rate environment;
• our success in gaining regulatory approval of our products and services, when required;
• 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 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 COVID-19 pandemic has caused substantial disruption to the global, national, and local economies which may have an adverse effect on the Company's business and results of operations. The future impacts of the COVID-19 pandemic on the global economy and the Company's business, results of operations and financial condition remains uncertain.

In March 2020, the World Health Organization declared novel coronavirus disease 2019 (COVID-19) as a global pandemic. The pandemic has resulted in governmental authorities implementing numerous measures attempting to contain the spread and impact of COVID-19 such as travel bans and restrictions, quarantines, shelter in place orders, and limitations on business activities, including in markets in which the Company and its clients are located or do business. The COVID-19 pandemic, and governmental responses to the pandemic, have negatively impacted the economy, creating significant volatility and disruption in financial markets, and increased unemployment levels.

Should current economic impacts persist or continue to deteriorate, this economic environment could have an adverse effect on our business and operations, including, but not limited to, decreased demand for the Company's products and services, protracted periods of lower interest rates, loss of income resulting from deferrals and fee waivers provided by the Company to its consumer and commercial borrowers, increased credit losses due to deterioration in the financial condition of our consumer and commercial borrowers, including declining asset and collateral values, which may result in increases in provision for credit losses and net charge-offs. The business operations of the Company may also be disrupted if significant portions of its workforce or those of vendors or third-party service providers are unable to work effectively, including because of illness, quarantines, government actions, restrictions in connection with the pandemic, and technology limitations and/or disruptions. The Company also faces an increased risk of litigation and governmental and regulatory scrutiny because of the effects of the pandemic on market and economic conditions and actions taken by governmental authorities in response to those conditions.

The extent to which the COVID-19 pandemic impacts the Company's business, results of operations, and financial condition, as well as its regulatory capital ratios, will depend on future developments, which are highly uncertain, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic. Moreover, the effects of the COVID-19 pandemic may heighten many of the other risks described in the section entitled "Forward Looking Statements" in our most recent Annual Report or any subsequent Quarterly Report including, but not limited to, financial market conditions, economic conditions, credit risk, interest rate risk and risk of security breaches.

The Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), the Consumer Financial Protection Bureau (CFPB), and the State Banking Regulators (hereafter, the agencies) provided guidance to financial institutions to work with borrowers affected by the COVID-19. The Company established a loan deferral program to provide temporary relief for borrowers who are experiencing short-term financial or operational problems

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