<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________to____________
Commission file number 1-14364
Acadiana Bancshares, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
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<S> <C>
Louisiana 72-1317124
- - -------------------------------------------------------------- ----------------
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer
Identification No.)
101 West Vermilion Street
Lafayette, Louisiana 70501
---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
(318)232-4631
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(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
As of September 30, 1999, 1,499,523 shares of the Registrant's
common stock were issued and outstanding. Of that total, 217,541
shares were held by the Registrant's Employee Stock Ownership Plan,
of which 147,351 were not committed to be released.
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ACADIANA BANCSHARES, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
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<S> <C>
Item 1. Financial Statements
Consolidated Statements of Financial Condition
(As of September 30, 1999 and December 31, 1998) 3
Consolidated Statements of Operations (For the three and nine months
ended September 30, 1999 and 1998) 4
Consolidated Statements of Stockholders' Equity (For the nine months
ended September 30, 1999 and 1998) 5
Consolidated Statements of Cash Flows (For the nine months ended
September 30, 1999 and 1998) 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3 Quantitative and Qualitative Disclosures About Market Risk 19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 2. Changes in Securities 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 24
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ACADIANA BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In Thousands, except share data)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
--------- ---------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents:
Cash and Amounts Due from Banks $ 3,541 $ 844
Interest Bearing Deposits 5,903 6,734
--------- ---------
Total 9,444 7,578
Trading Securities 309 575
Securities Available for Sale, at fair value 10,439 14,995
Mortgage-Backed Securities:
Available for Sale, at fair value 16,862 11,409
Held to Maturity (fair value of $12,015 and $12,694, respectively) 11,980 12,360
Loans Receivable, net of Allowance for
Loan Losses of $2,741 and $2,726, respectively 239,206 225,752
Investment in Limited Liability Company 842 966
Federal Home Loan Bank Stock, at Cost 3,039 2,920
Real Estate Owned, Net 163 7
Premises and Equipment, Net 2,603 2,777
Accrued Interest Receivable 1,569 1,367
Other Assets 1,843 1,383
--------- ---------
TOTAL ASSETS $ 298,299 $ 282,089
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits $ 214,289 $ 200,647
Advances from Federal Home Loan Bank 53,850 47,228
Accrued Interest Payable on Deposits 162 124
Advance Payments by Borrowers for Taxes and Insurance 597 394
Accrued and Other Liabilities 1,937 1,522
--------- ---------
TOTAL LIABILITIES 270,835 249,915
--------- ---------
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Preferred Stock of $.01 Par Value; 5,000,000 shares authorized, -0- shares
issued or outstanding
Common Stock of $.01 Par Value; 20,000,000 shares authorized, 27 27
2,731,250 shares issued
Additional Paid-In Capital 32,262 32,192
Retained Earnings (Substantially Restricted) 22,018 20,932
Unearned Common Stock Held by ESOP (1,768) (1,965)
Unearned Common Stock Held by RRP Trust (1,120) (1,335)
Treasury Stock, at Cost; 1,231,727 shares and 910,758 shares, respectively (23,792) (17,935)
Accumulated Other Comprehensive Income (163) 258
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 27,464 32,174
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 298,299 $ 282,089
========= =========
</TABLE>
3
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ACADIANA BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except per share data)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------------- ---------------------------
1999 1998 1999 1998
-------- -------- -------- --------
INTEREST INCOME:
<S> <C> <C> <C> <C>
Loans $ 4,608 $ 4,386 $ 13,393 $ 13,153
Mortgage-Backed Securities 497 460 1,461 1,485
Investment Securities 165 138 498 550
Interest Bearing Deposits 89 441 319 1,017
-------- -------- -------- --------
Total interest income $ 5,359 $ 5,425 $ 15,671 $ 16,205
-------- -------- -------- --------
INTEREST EXPENSE:
Deposits $ 2,468 $ 2,432 $ 7,005 $ 7,047
Advances from Federal Home Loan Bank 631 679 1,878 1,968
-------- -------- -------- --------
Total Interest Expense 3,099 3,111 8,883 9,015
-------- -------- -------- --------
Net Interest Income 2,260 2,314 6,788 7,190
Provision for Loan Losses - - - 90
-------- -------- -------- --------
Net Interest Income After Provision for Loan Losses 2,260 2,314 6,788 7,100
-------- -------- -------- --------
NON-INTEREST INCOME:
Loan Fees and Service Charges $ 32 $ 29 $ 100 $ 98
Servicing Fees on Loans Sold 15 16 43 39
Deposit Fees and Service Charges 233 216 678 591
Trading Account (Losses) Gains , Net (13) (165) (6) (114)
Gain (Loss) on Sale of Loans, Net - 48 89 175
Loss from Investment in Limited Liability Company (36) - (124) -
Other 19 20 70 59
-------- -------- -------- --------
Total Non-Interest Income $ 250 $ 164 $ 850 $ 848
-------- -------- -------- --------
NON-INTEREST EXPENSE:
Salaries and Employee Benefits $ 885 $ 854 $ 2,637 $ 2,549
Occupancy 91 70 241 208
Depreciation 93 107 271 284
Net Costs of Real Estate Owned 10 19 34 (7)
SAIF Deposit Insurance Premium 29 29 89 88
Advertising 50 75 116 243
Bank Shares and Franchise Tax Expense 78 102 268 288
Other 472 392 1,433 1,276
-------- -------- -------- --------
Total Non-Interest Expenses $ 1,708 $ 1,648 $ 5,089 $ 4,929
-------- -------- -------- --------
Income Before Income Taxes $ 802 $ 830 $ 2,549 $ 3,019
Income Tax Expense 277 310 902 1,107
-------- -------- -------- --------
Net Income $ 525 $ 520 $ 1,647 $ 1,912
======== ======== ======== ========
Net Income Per Common Share - basic $ 0.40 $ 0.25 $ 1.17 $ 0.86
Net Income Per Common Share - diluted $ 0.39 $ 0.24 $ 1.13 $ 0.84
</TABLE>
4
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ACADIANA BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
( In Thousands)
<TABLE>
<CAPTION>
Unearned
Retained Unearned Common
Additional Earnings Common Stock
Common Paid In (Substantially Stock Held Held By
Stock Capital Restricted) By ESOP RRP Trust
------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1998 $ 27 $ 32,005 $ 19,355 $ (2,228) $ (1,602)
Comprehensive Income:
Net Income 1,912
Change in Unrealized Gain (Loss)
on Securities Available for Sale,
Net of Deferred Taxes
Total Comprehensive Income
Common Stock Released by ESOP Trust 164 197
Common Stock Earned by Participants of
Recognition and Retention Plan Trust 174
Repurchase of Common Stock
Cash Dividends Declared (749)
------ ---------- ---------- ---------- ----------
BALANCE, SEPTEMBER 30, 1998 $ 27 $ 32,169 $ 20,518 $ (2,031) $ (1,428)
====== ========== ========== ========== ==========
BALANCE, JANUARY 1, 1999 $ 27 $ 32,192 $ 20,932 $ (1,965) (1,335)
Comprehensive Income:
Net Income 1,647
Change in Unrealized Gain (Loss)
on Securities Available for Sale,
Net of Deferred Taxes
Total Comprehensive Income
Common Stock Released by ESOP Trust 102 197
Common Stock Earned by Participants of
Recognition and Retention Plan Trust (8) 215
Common Stock Issued (24)
Repurchase of Common Stock
Cash Dividends Declared (561)
------ ---------- ---------- ---------- ----------
BALANCE, SEPTEMBER 30, 1999 $ 27 $ 32,262 $ 22,018 $ (1,768) $ (1,120)
====== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Other Total
Treasury Comprehensive Stockholders'
Stock Income Equity
---------- ------- ----------
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1998 $ (3,445) $ 450 $ 44,562
Comprehensive Income:
Net Income 1,912
Change in Unrealized Gain (Loss)
on Securities Available for Sale,
Net of Deferred Taxes (56) (56)
----------
Total Comprehensive Income 1,856
Common Stock Released by ESOP Trust 361
Common Stock Earned by Participants of
Recognition and Retention Plan Trust 174
Repurchase of Common Stock (6,730) (6,730)
Cash Dividends Declared (749)
---------- ------- ----------
BALANCE, SEPTEMBER 30, 1998 $ (10,175) $ 394 $ 39,474
========== ======= ==========
BALANCE, JANUARY 1, 1999 $ (17,935) $ 258 $ 32,174
Comprehensive Income:
Net Income 1,647
Change in Unrealized Gain (Loss)
on Securities Available for Sale,
Net of Deferred Taxes (421) (421)
----------
Total Comprehensive Income 1,226
Common Stock Released by ESOP Trust 299
Common Stock Earned by Participants of
Recognition and Retention Plan Trust 207
Common Stock Issued 39 15
Repurchase of Common Stock (5,896) (5,896)
Cash Dividends Declared (561)
---------- ------- ----------
BALANCE, SEPTEMBER 30, 1999 $ (23,792) $ (163) $ 27,464
========== ======= ==========
</TABLE>
5
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ACADIANA BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
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<CAPTION>
For the Nine Months
------------------------------
September 30, September 30,
1999 1998
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,647 $ 1,912
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 282 297
Provision for deferred income taxes (30) (52)
Provision for losses on loans - 90
Compensation expense recognized on RRP 207 174
ESOP contribution 299 361
Other gains and losses, net (15) (17)
Net change in securities classified as trading 266 147
Loss from investment in limited liability company 124 -
Gain on sale of loans held for sale (89) (175)
Proceeds from sale of loans held for sale 8,464 14,464
Originations of loans held for sale (8,375) (14,289)
Accretion of discounts, net of premium amortization on securities (6) (34)
Amortization of deferred revenues and unearned income on loans 88 (32)
FHLB stock dividend received (119) (112)
Changes in assets and liabilities:
Increase (decrease) in accrued interest receivable (202) 86
Increase in other assets (230) (1,064)
Increase (decrease) in accounts payable and accrued expenses 459 (271)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,770 1,485
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from calls and maturities of securities available for sale 19,425 7,998
Purchases of securities available for sale (24,976) (6,978)
Principal collections on mortgage-backed securities available for sale 4,029 4,717
Principal collections on mortgage-backed securities held to maturity 373 298
Purchase of FHLB stock - (879)
Net advances on loans (13,719) (8,301)
Purchase of premises and equipment (99) (292)
Proceeds from sale of premises and equipment 8 -
Proceeds from sale of real estate owned and other property acquired 46 311
Capital costs incurred on real estate owned and other property acquired (10) (9)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (14,923) (3,135)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in demand, NOW and savings deposits 751 11,018
Net change in time deposits 12,891 1,212
Net change in mortgage escrow funds 203 181
Proceeds from FHLB advances 84,000 5,100
Payments on FHLB advances (77,378) -
Dividends paid to shareholders (567) (780)
Common stock issued 15 -
Purchase of treasury stock (5,896) (6,730)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 14,019 10,001
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,866 8,351
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,578 14,157
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,444 $ 22,508
======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES:
Acquisition of real estate in settlement of loans $ 183 $ 115
Unrealized loss on securities $ (638) $ (84)
SUPPLEMENTAL DISCLOSURES:
Cash paid for:
Interest on deposits and borrowings $ 8,827 $ 8,873
Income taxes $ 878 $ 1,143
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ACADIANA BANCSHARES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying consolidated financial statements were prepared in
accordance with instructions to Form 10-Q, and therefore, do not include
information or footnotes necessary for a complete presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. However, all normal, recurring adjustments,
which, in the opinion of management, are necessary for a fair presentation of
financial statements, have been included. These interim financial statements
should be read in conjunction with the audited financial statements and the
notes thereto for Acadiana Bancshares, Inc. (the "Company") previously filed
with the Securities and Exchange Commission in the Company's Annual Report and
Form 10-K for the year ended December 31, 1998.
BUSINESS
The Company's principal business is conducted through its wholly
owned subsidiary, LBA Savings Bank, (the "Bank") which conducts business from
its main office and three branch offices, all located in Lafayette, Louisiana,
one branch office in New Iberia, Louisiana, and one loan production office in
Eunice, Louisiana. Through its continuing operation of the Bank, the Company's
principal business has been, and continues to be, attracting deposits from its
customers and investing such funds in residential real estate loans and other
loans. The Company, as a bank holding company, is subject to regulation and
supervision by the Board of Governors of the Federal Reserve System ("Federal
Reserve Board" or "FRB"). The Bank is subject to examination and comprehensive
regulation by the Office of Financial Institutions of the State of Louisiana
("OFI"), which is the Bank's chartering authority and primary regulator. The
Bank is also subject to regulation by the Federal Deposit Insurance Corporation
("FDIC"), as the administrator of the SAIF, and to certain reserve requirements
established by the FRB. The Bank is a member of the Federal Home Loan Bank
("FHLB") of Dallas, which is one of twelve regional banks comprising the FHLB
System. The Bank is a Savings Association Insurance Fund ("SAIF")-insured,
Louisiana chartered, stock savings bank.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
the Bank. All significant intercompany balances and transactions have been
eliminated in consolidation.
7
<PAGE> 8
(2) Loans Receivable
Loans receivable (in thousands) at September 30, 1999 and December 31, 1998
consisted of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
-------- --------
Mortgage Loans:
<S> <C> <C>
Single Family Residential $174,612 $168,533
Single Family Construction 11,083 11,651
Multi-family Residential 440 481
Commercial Real Estate 5,880 9,371
-------- --------
Total Mortgage loans 192,015 190,036
-------- --------
Commercial Business Loans 32,079 23,143
Consumer Loans 23,878 21,388
-------- --------
Total Loans 247,972 234,567
Less:
Allowance for Loan Losses 2,741 2,726
Unearned Discounts/Deferred
Premiums (20) (57)
Net Deferred Loan Origination
Fees 254 357
Loans in Process 5,791 5,789
-------- --------
Net Loans $239,206 $225,752
======== ========
</TABLE>
(3) EARNINGS PER SHARE
The Company adopted FAS ("Financial Accounting Standard") 128, Earnings Per
Share, as of December 31, 1997. Weighted average shares of common stock
outstanding for basic EPS excludes the weighted average shares unreleased by the
Employee Stock Ownership Plan ("ESOP") (150,028 and 171,920 shares for the
quarters ending September 30, 1999 and September 30, 1998, respectively) and the
weighted average unvested shares in the Recognition and Retention Plan ("RRP")
(79,353 and 94,611 for the quarters ending September 30, 1999 and September 30,
1998, respectively). The effect on diluted EPS of stock option shares
outstanding and unvested RRP shares are calculated using the treasury stock
method. The following is a reconcilement of the numerator and denominator for
basic and diluted Earnings Per Share:
8
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<TABLE>
<CAPTION>
Three months ended Nine months ended
--------------------------------------- --------------------------------------
September 30, 1999 September 30, 1998 September 30, 1999 September 30, 1998
------------------ ------------------ ------------------ ------------------
BASIC EPS
<S> <C> <C> <C> <C>
Income available to Common Stockholders $ 525,000 $ 520,000 $1,647,000 $1,912,000
========== ========== ========== ==========
Weighted average shares of common stock
outstanding 1,305,738 2,095,365 1,412,448 2,220,506
========== ========== ========== ==========
Per-Share Amount $ 0.40 $ 0.25 $ 1.17 $ 0.86
========== ========== ========== ==========
DILUTED EPS
Effect of Dilutive Securities:
Stock Options Outstanding 31,525 43,067 28,361 53,284
Restricted Stock Grants 14,404 16,664 10,871 15,792
---------- ---------- ---------- ----------
Weighted average shares of common stock
outstanding 1,351,667 2,155,096 1,451,680 2,289,582
========== ========== ========== ==========
Per-Share Amount $ 0.39 $ 0.24 $ 1.13 $ 0.84
========== ========== ========== ==========
</TABLE>
This Form 10-Q contains certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995, which may
be identified by the use of such words as "believe," "expect," "anticipate,"
"should," "planned," "estimated" and "potential". Examples of forward-looking
statements include, but are not limited to, estimates with respect to the
financial condition, results of operations and business of the Company that are
subject to various factors which could cause actual results to differ materially
from the estimates. These factors include, but are not limited to, general
economic conditions, changes in interest rates, deposit flows, loan demand, real
estate values, and competition; changes in accounting principles, or policies,
or guidelines; changes in legislation or regulation; and other economic,
competitive, governmental, regulatory, and technological factors affecting the
Company's operations, pricing, products and services.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
CHANGES IN FINANCIAL CONDITION
At September 30, 1999, the consolidated assets of the Company
totaled $298.3 million, an increase of $16.2 million, or 5.7%, from December 31,
1998. The primary reasons for the increase in consolidated assets were an
increase in cash and cash equivalents of $1.9 million, or 24.6%, an increase in
mortgage-backed securities available for sale of $5.5 million, or 47.8%, and an
increase in loans receivable, net, of $13.5 million, or 6.0%, all of which were
partially offset by a decrease in investment securities available for sale of
$4.6 million, or 30.4%. Asset growth was funded primarily by an increase in
total deposits of $13.6 million, or 6.8%, together with an increase of $6.6
million, or 14.0%, in advances from Federal Home Loan Bank, which were partially
offset by a decrease in total stockholders' equity of $4.7 million, or 14.6%.
9
<PAGE> 10
Cash and cash equivalents increased $1.9 million, or 24.6%, to $9.4
million at September 30, 1999, compared with $7.6 million at December 31, 1998.
Net cash provided by (used in) operating activities, investing activities, and
financing activities amounted to $2.8 million, ($14.9) million, and $14.0
million, respectively, for the nine months ended September 30, 1999. As of
September 30, 1999, cash and cash equivalents funded 3.2% of total assets,
compared with 2.7% at December 31, 1998.
The Company owned $309,000 of trading securities as of September 30,
1999 compared with $575,000 at December 31, 1998. The Company has no intention
to increase significantly its trading securities portfolio. Trading securities
are carried at fair value.
Investment securities available for sale decreased $4.6 million, or
30.4%, to $10.4 million at September 30, 1999, compared with $15.0 million at
December 31, 1998. The primary reason for such decrease was the redemption of
$19.4 million of investment securities, which was partially offset by the
purchase of $15.0 million of investment securities. As of September 30, 1999,
investment securities available for sale amounted to 3.5% of assets and
consisted of U.S. Government and Federal agency obligations.
The mortgage-backed securities available for sale portfolio
increased $5.5 million, or 47.8%, to $16.9 million at September 30, 1999 as
compared with $11.4 million at December 31, 1998. The increase reflects
purchases of $10.0 million, which were partially offset by principal repayments
of $4.0 million and a $525,000 decrease in unrealized gains on such securities.
Mortgage-backed securities available for sale amounted to 5.7% of total assets
at September 30, 1999 compared with 4.0% at December 31, 1998. Mortgage-backed
securities held to maturity decreased $380,000, or 3.1%, to $12.0 million at
September 30, 1999 compared with $12.4 million at December 31, 1998. Such
decrease was the result of principal repayments. Mortgage-backed securities held
to maturity amounted to 4.0% of total assets at September 30, 1999 compared with
4.4% at December 31, 1998.
Loans receivable, net, increased $13.5 million, or 6.0%, to $239.2
million at September 30, 1999, compared with $225.8 million at December 31,
1998. Single family residential loans increased $5.5 million, or 3.1%, to $185.7
million at September 30, 1999 compared with $180.2 million at December 31, 1998.
Commercial business loans increased $8.9 million, or 38.6%, to $32.1 million at
September 30, 1999 and consumer loans increased $2.5 million, or 11.6%, to $23.9
million at September 30, 1999. These increases were partially offset by a $3.5
million, or 37.3%, decrease in commercial real estate mortgage loans, and a
$41,000, or 8.5%, decrease in multi-family residential mortgage loans. Loans
receivable, net, were 80.2% of total assets as of September 30, 1999 compared
with 80.0% at December 31, 1998.
Deposits increased $13.6 million, or 6.8%, to $214.3 million at
September 30, 1999, from $200.6 million at December 31, 1998. The increase in
deposits is primarily attributable to growth in the Company's certificate of
deposit accounts, and the new Fleur de Lis accounts, which are interest-bearing
demand accounts. Total certificates of deposit accounts increased $12.9 million,
or 9.1%, and total interest-bearing demand accounts increased $5.6 million, or
19.8%, during the nine months ended September 30, 1999, all of which were
partially offset during the same period by a $1.0 million, or 9.1%, decrease in
non-interest bearing demand accounts, and a $3.8 million, or 19.3%, decrease
10
<PAGE> 11
in savings accounts. Total deposits funded 71.8% of total assets at September
30, 1999 compared to 71.1% at December 31, 1998.
Advances from the FHLB of Dallas increased $6.6 million, or 14.0%,
to $53.9 million at September 30, 1999 from $47.2 million at December 31, 1998.
Of the Company's total outstanding FHLB advances, $16.0 million are
contractually due within twelve months, while an additional $5.0 million are
callable in November of 1999, and quarterly thereafter. No payments are
scheduled prior to the earlier of maturity or call dates. Under an existing
blanket collateral agreement, the Company has the ability to borrow up to
approximately $98.5 million from the FHLB of Dallas, which together with the
current advances, would be secured by mortgage loans and by Federal Home Loan
Bank Stock. Advances from the FHLB of Dallas funded 18.1% and 16.7% of assets at
September 30, 1999 and December 31, 1998, respectively.
Total stockholders' equity decreased $4.7 million, or 14.6%, to
$27.5 million at September 30, 1999, compared with $32.2 million at December 31,
1998. The decrease was primarily attributable to the Company's program of
repurchasing shares of common stock for the treasury in the amount of $5.9
million, $561,000 in cash dividends declared on common stock, and a decrease in
accumulated other comprehensive income of $421,000. These decreases were
partially offset by $1.6 million of net income, $299,000 of common stock
released by the ESOP Trust, $207,000 of common stock earned by participants of
the Recognition and Retention Plan, and proceeds of exercised common stock
options of $15,000. The ratio of stockholders' equity to total assets was 9.2%
and 11.4% at September 30, 1999 and December 31, 1998, respectively.
RESULTS OF OPERATIONS
The Company reported net income of $525,000 for the three months ended
September 30, 1999, compared with net income of $520,000 for the three months
ended September 30, 1998. Income per common share, basic and diluted, was 40
cents and 39 cents, respectively for the quarter ended September 30, 1999,
compared with 25 cents and 24 cents, respectively, for the quarter ended
September 30, 1998. While net income increased $5,000 in the third quarter of
1999 compared with the third quarter of 1998, income per common share, basic and
diluted, each increased 15 cents per share. Because of the fewer average number
of common shares outstanding at September 30, 1999, compared with September 30,
1998, the only slightly higher net income produces higher earnings per share.
The $5,000, or 1.0%, increase in net income for the quarter ended September 30,
1999 compared with the quarter ended September 30, 1998, is primarily associated
with a decrease in income tax expense of $33,000, because of a lower effective
income tax rate this quarter, compared with the same period last year. Net
income decreased $265,000, or 13.9%, for the nine months ended September 30,
1999, compared to the same period a year ago. This decrease is primarily
associated with a decrease in net interest income of $402,000, or 5.6%, and an
increase in non-interest expenses of $160,000, or 3.2%, all of which was
partially offset by a decrease in income tax expense of $205,000, or 18.5% for
the nine months ended September 30, 1999, compared to the same period a year
ago.
11
<PAGE> 12
Average Balances, Net Interest Income, and Yields Earned and Rates Paid.
The following table sets forth, for the periods indicated, information regarding
(i) the dollar amount of interest income of the Company from interest-earning
assets and the resultant average yields; (ii) the total dollar amount of
interest expense on interest-bearing liabilities and the resultant rate; (iii)
net interest income; (iv) interest rate spread; and (v) net interest margin.
Non-accrual loans have been included in the appropriate average balance loan
category, but interest on non-accrual loans has been included for purposes of
determining interest income only to the extent that cash payments are actually
received.
<TABLE>
<CAPTION>
Three Months Ended September 30,
---------------------------------------------------------------------------------------
1999 1998
------------------------------------------ -------------------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
-------------- ------------ ----------- --------------- ------------ -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable:
Real estate mortgage loans $ 180,650 $ 3,423 7.58% $ 181,537 $ 3,490 7.69%
Commercial business loans 29,243 644 8.81% 18,793 431 9.17%
Consumer and other loans 23,494 541 9.21% 19,465 465 9.56%
-------------- ------------ --------------- ------------
Total loans 233,387 4,608 7.90% 219,795 4,386 7.98%
Mortgage-backed securities 29,324 497 6.78% 26,449 460 6.96%
Investment securities (1) 10,921 165 6.04% 9,325 138 5.92%
Other earning assets 7,362 89 4.84% 33,297 441 5.30%
-------------- ------------ --------------- ------------
Total interest-earning assets 280,994 5,359 7.63% 288,866 5,425 7.51%
------------ ------------
Noninterest-earning assets 9,779 6,483
-------------- ---------------
Total Assets $ 290,773 $ 295,349
============== ===============
Interest-bearing liabilities:
Deposits:
Demand deposits $ 35,724 312 3.49% $ 27,842 243 3.49%
Passbook savings deposits 16,512 72 1.74% 20,834 109 2.09%
Certificates of deposit 150,765 2,084 5.53% 144,418 2,080 5.76%
-------------- ------------ --------------- ------------
Total deposits 203,001 2,468 4.86% 193,094 2,432 5.04%
Advance from FHLB 47,744 631 5.29% 49,550 679 5.48%
-------------- ------------ --------------- ------------
Total interest-bearing liabilities 250,745 3,099 4.94% 242,644 3,111 5.13%
------------ ------------
Noninterest-bearing demand deposits 9,339 8,518
Other noninterest-bearing liabilities 2,978 2,947
-------------- ---------------
Total liabilities 263,062 254,109
Equity 27,711 41,240
-------------- ---------------
Total liabilities and equity $ 290,773 $ 295,349
============== ===============
Net interest-earning assets $ 30,249 $ 46,222
============== ===============
Net interest income/interest rate spread $ 2,260 2.69% $ 2,314 2.38%
============ ====== ============ ======
Net interest margin 3.22% 3.20%
====== ======
Ratio of average interest-earning assets
to average interest-bearing liabilities 112.06% 119.05%
============ ============
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------------------------------------------------------------
1999 1998
-------------------------------------------- ----------------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
--------------- -------------- ----------- -------------- ------------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable:
Real estate mortgage loans $ 178,819 $ 10,183 7.59% $ 182,823 $ 10,686 7.79%
Commercial business loans 25,813 1,673 8.64% 17,387 1,223 9.38%
Consumer and other loans 22,360 1,537 9.17% 17,534 1,244 9.46%
--------------- -------------- -------------- -------------
Total loans 226,992 13,393 7.87% 217,744 13,153 8.05%
Mortgage-backed securities 29,111 1,461 6.69% 28,317 1,485 6.99%
Investment securities (1) 11,388 498 5.83% 11,759 550 6.24%
Other earning assets 9,689 319 4.39% 26,382 1,017 5.14%
--------------- -------------- -------------- -------------
Total interest-earning assets 277,180 15,671 7.54% 284,202 16,205 7.60%
-------------- -------------
Noninterest-earning assets 8,886 6,466
--------------- --------------
Total Assets $ 286,066 $ 290,668
=============== ==============
Interest-bearing liabilities:
Deposits:
Demand deposits $ 35,363 870 3.28% $ 23,140 557 3.21%
Passbook savings deposits 17,933 231 1.72% 22,070 363 2.19%
Certificates of deposit 143,603 5,904 5.48% 143,328 6,127 5.70%
--------------- -------------- -------------- -------------
Total deposits 196,899 7,005 4.74% 188,538 7,047 4.98%
Advance from FHLB 48,366 1,878 5.18% 47,559 1,968 5.52%
--------------- -------------- -------------- -------------
Total interest-bearing liabilities 245,265 8,883 4.83% 236,097 9,015 5.09%
-------------- -------------
Noninterest-bearing demand deposits 8,498 8,242
Other noninterest-bearing liabilities 2,673 2,693
--------------- --------------
Total liabilities 256,436 247,032
Equity 29,630 43,636
--------------- --------------
Total liabilities and equity $ 286,066 $ 290,668
=============== ==============
Net interest-earning assets $ 31,915 $ 48,105
=============== ==============
Net interest income/interest rate spread $ 6,788 2.71% $ 7,190 2.51%
============== ======= ============= ========
Net interest margin 3.27% 3.37%
======= ========
Ratio of average interest-earning assets
to average interest-bearing liabilities 113.01% 120.38%
============== =============
</TABLE>
(1) Includes FHLB stock.
12
<PAGE> 13
NET INTEREST INCOME
Net interest income decreased by $54,000, or 2.3%, to $2.3 million
for the three months ended September 30, 1999, remaining relatively flat
compared with $2.3 million for the three months ended September 30, 1998.
Average net interest earning assets for the three months ended September 30,
decreased $16.0 million, or 34.6%, from $46.2 million at September 30, 1998 to
$30.2 million at September 30, 1999. The net interest rate spread increased 31
basis points from 2.38% at September 30, 1998 to 2.69% at September 30, 1999.
The primary reason for the decrease in average net interest earning assets was
the Company's utilization of its cash to fund common stock repurchases. The
average yield on interest-earning assets increased 12 basis points from 7.51%
for the three months ended September 30, 1998, to 7.63% for the three months
ended September 30, 1999, while the average cost of interest-bearing liabilities
decreased 19 basis points, from 5.13% for the three months ended September 30,
1998 to 4.94% for the three months ended September 30, 1999. Such changes in
average yields and rates primarily reflect changes in market rates of interest.
Net interest income decreased by $402,000, or 5.6%, to $6.8 million
for the nine months ended September 30, 1999, compared with $7.2 million for the
nine months ended September 30, 1998. Average net interest earning assets for
the nine months ended September 30, decreased $16.2 million, or 33.7%, from
$48.1 million at September 30, 1998, to $31.9 million at September 30, 1999. The
net interest rate spread increased 20 basis points from 2.51% at September 30,
1998 to 2.71% at September 30, 1999. The primary reason for the decrease in
average net interest earning assets was the Company's utilization of its cash to
fund common stock repurchases. Although the average yield on interest-earning
assets decreased six basis points from 7.60% at September 30, 1998, to 7.54% for
the nine months ended September 30, 1999, the average cost of interest-bearing
liabilities decreased 26 basis points, from 5.09% for the nine months ended
September 30, 1998 to 4.83% at September 30, 1999. Such changes in average
yields and rates primarily reflect changes in market rates of interest.
INTEREST INCOME
Interest income decreased $66,000, or 1.2%, to $5.4 million for the
three months ended September 30, 1999 remaining relatively flat compared to $5.4
million for the three months ended September 30, 1998. The decline in interest
income resulted from a decline in average interest-earning assets, which was
partially offset by a higher overall average yield on interest-earning assets.
Average interest-earning assets decreased $7.9 million, or 2.7%, from $288.9
million at September 30, 1998 to $281.0 million at September 30, 1999. The
three-month yield on average interest-earning assets increased 12 basis points,
from 7.51% at September 30, 1998, to 7.63% at September 30, 1999. Interest
income on loans increased because of a higher level of average loans, partially
offset by a decline in yields. Interest income from loans increased $222,000, or
5.1%, from $4.4 million for the quarter ended September 30, 1998 to $4.6 million
for the quarter ended September 30, 1999. The average balance of loans increased
$13.6 million, or 6.2%, from $219.8 million at September 30, 1998 to $233.4
million at September 30, 1999. The yield on loans decreased eight basis points,
from 7.98% for the quarter ended September 30, 1998 to 7.90% for the quarter
ended September 30, 1999. Interest income from mortgage-backed securities
increased $37,000, or 8.0%, from $460,000 for the quarter ended September 30,
1998 to $497,000 for the
13
<PAGE> 14
quarter ended September 30, 1999. The increase in interest income from
mortgage-backed securities resulted from a higher average balance of
mortgage-backed securities, partially offset by a lower average yield on such
securities. The average balance of mortgage-backed securities increased $2.9
million, or 10.9%, from $26.4 million for the three months ended September 30,
1998 to $29.3 million for the three months ended September 30, 1999. The average
yield on mortgage-backed securities decreased 18 basis points, from 6.96% for
the quarter ended September 30, 1998 to 6.78% for the quarter ended September
30, 1999. Interest income from investment securities increased because of an
increase in yields thereon, and because of a higher level of such investments.
Interest income from investment securities increased $27,000, or 19.6%, from
$138,000 for the quarter ended September 30, 1998 to $165,000 for the quarter
ended September 30, 1999. The average balance of investment securities increased
$1.6 million, or 17.1%, from $9.3 million at September 30, 1998 to $10.9 million
at September 30, 1999. The yield on investment securities increased 12 basis
points, from 5.92% for the quarter ended September 30, 1998 to 6.04% for the
quarter ended September 30, 1999. Interest income from other earning assets
decreased $352,000, or 79.8%, from $441,000 for the quarter ended September 30,
1998 to $89,000 for the quarter ended September 30, 1999. The decline in
interest income from other earning assets resulted from a lower level of average
other earning assets, compounded by a lower overall yield on other earning
assets. The average balance of other earning assets decreased $25.9 million, or
77.9%, from $33.3 million for the three months ended September 30, 1998 to $7.4
million for the three months ended September 30, 1999. The yield on other
earning assets decreased 46 basis points, from 5.30% for the quarter ended
September 30, 1998 to 4.84% for the quarter ended September 30, 1999.
Interest income decreased $534,000, or 3.3%, to $15.7 million for
the nine months ended September 30, 1999 from $16.2 million for the nine months
ended September 30, 1998. The decline in interest income resulted from a decline
in average interest-earning assets, compounded by a lower overall average yield
on interest-earning assets. Average interest-earning assets decreased $7.0
million, or 2.5%, from $284.2 million at September 30, 1998 to $277.2 million at
September 30, 1999. The nine-month yield on average interest-earning assets
decreased six basis points, from 7.60% at September 30, 1998, to 7.54% at
September 30, 1999. Interest income on loans increased because of a higher level
of average loans, partially offset by a decline in yields. Interest income from
loans increased $240,000, or 1.8%, from $13.2 million for the nine months ended
September 30, 1998 to $13.4 million for the nine months ended September 30,
1999. The average balance of loans increased $9.2 million, or 4.2%, from $217.7
million at September 30, 1998 to $227.0 million at September 30, 1999. The yield
on loans decreased 18 basis points, from 8.05% for the nine months ended
September 30, 1998 to 7.87% for the nine months ended September 30, 1999.
Interest income from mortgage-backed securities decreased slightly, by $24,000,
or 1.6%, remaining relatively flat at $1.5 million for the nine months ended
September 30, 1998 and 1999. The decrease in interest income from
mortgage-backed securities resulted from a lower overall yield of
mortgage-backed securities, partially offset by higher average balance on such
securities. The average balance of mortgage-backed securities increased
$794,000, or 2.8%, from $28.3 million for the nine months ended September 30,
1998 to $29.1 million for the nine months ended September 30, 1999. The average
yield on mortgage-backed securities decreased 30 basis points, from 6.99% for
the nine months ended September 30, 1998 to 6.69% for the nine months ended
September 30, 1999. Interest income from investment securities decreased because
of a decline in yields thereon, compounded by a lower level of such investments.
Interest income from investment securities decreased $52,000, or 9.5%, from
$550,000 for the nine months ended September 30, 1998 to
14
<PAGE> 15
$498,000 for the nine months ended September 30, 1999. The average balance of
investment securities decreased $371,000, or 3.2%, from $11.8 million at
September 30, 1998 to $111.4 million at September 30, 1999. The yield on
investment securities decreased 41 basis points, from 6.24% for the nine months
ended September 30, 1998 to 5.83% for the nine months ended September 30, 1999.
Interest income from other earning assets decreased $698,000, or 68.6%, from
$1.0 million for the nine months ended September 30, 1998 to $319,000 for the
nine months ended September 30, 1999. The decline in interest income from other
earning assets resulted from a substantially lower level of average other
earning assets, compounded by a lower overall yield on other earning assets. The
average balance of other earning assets decreased $16.7 million, or 63.3%, from
$26.4 million for the nine months ended September 30, 1998 to $9.7 million for
the nine months ended September 30, 1999. The yield on other earning assets
decreased 75 basis points, from 5.14% for the nine months ended September 30,
1998 to 4.39% for the nine months ended September 30, 1999.
INTEREST EXPENSE
Interest expense decreased $12,000, or 0.4%, for the three months
ended September 30, 1999, compared with the three months ended September 30,
1998, remaining relatively flat for both periods at $3.1 million. The lower
three-month average cost of funds more than offset the higher three-month
average balance of interest-bearing liabilities. Average interest-bearing
liabilities increased $8.1 million, or 3.3%, to $250.7 million at September 30,
1999, compared with $242.6 million at September 30, 1998. The cost of
interest-bearing liabilities decreased 19 basis points, from 5.13% for the three
months ended September 30, 1998 to 4.94% for the three months ended September
30, 1999. Interest expense from interest-bearing deposits increased $36,000, or
1.5%, to $2.5 million for the three months ended September 30, 1999, compared
with $2.4 million the three months ended September 30, 1998. The cost of
interest-bearing deposits decreased 18 basis points, from 5.04% for the three
months ended September 30, 1998 to 4.86% for the three months ended September
30, 1999. The three-month average balances of interest-bearing deposits
increased $9.9 million, or 5.1%, from $193.1 million at September 30, 1998, to
$203.0 million at September 30, 1999. The three-month average balance of
advances from the Federal Home Loan Bank decreased $1.8 million, from $49.6
million at September 30, 1998 to $47.7 million at September 30, 1999. The
average cost of borrowing from the Federal Home Loan Bank decreased 19 basis
points, from 5.48% at September 30, 1998 to 5.29% at September 30, 1999.
Interest expense on advances from the Federal Home Loan Bank decreased $48,000,
or 7.1%, from $679,000 for the three months ended September 30, 1998 to $631,000
for the three months ended September 30, 1999. The lower level of average
borrowing was enhanced by a decrease in the cost of advances from the Federal
Home Loan Bank.
Interest expense decreased $132,000, or 1.5%, for the nine months
ended September 30, 1999 to $8.9 million, compared with $9.0 million for the
nine months ended September 30, 1998. A higher nine-month average balance of
interest-bearing liabilities was more than offset by a lower cost of maintaining
such balances. Average interest-bearing liabilities increased $9.2 million, or
3.9 %, to $245.3 million at September 30, 1999, compared with $236.1 million at
September 30, 1998. The cost of interest-bearing liabilities decreased 26 basis
points, from 5.09% for the nine months ended September 30, 1998 to 4.83% for the
nine months ended September 30, 1999. The average balances of interest-bearing
deposits increased $8.4 million, or 4.4%, from $188.5 million at September 30,
1998, to $196.9 million at September 30, 1999. A higher nine-month average
balance
15
<PAGE> 16
in interest-bearing deposits was more than offset by a lower cost of maintaining
such deposits. Interest expense from interest-bearing deposits decreased
$42,000, or 0.6%, remaining relatively flat at $7.0 million for the two nine
month periods ended September 30, 1999 and 1998. The cost of interest-bearing
deposits decreased 24 basis points, from 4.98% for the nine months ended
September 30, 1998 to 4.74% for the nine months ended September 30, 1999. The
nine-month average balance of advances from the Federal Home Loan Bank increased
$807,000, from $47.6 million at September 30, 1998 to $48.4 million at September
30, 1999. A decrease in the cost of advances from the Federal Home Loan Bank
more than offset the cost associated with an increase in average borrowings. The
average cost of borrowing from the Federal Home Loan Bank decreased 34 basis
points, from 5.52% at September 30, 1998 to 5.18% at September 30, 1999.
Interest expense on advances from the Federal Home Loan Bank decreased $90,000,
or 4.6%, from $2.0 million for the nine months ended September 30, 1998 to $1.9
million for the nine months ended September 30, 1999.
PROVISION FOR LOAN LOSSES
The Company made no provision for loan losses for the three months
ended September 30, 1999 or 1998. The Company makes loans in and around the area
of Lafayette, Louisiana. The Lafayette regional economy has demonstrated a heavy
dependence on the oil and gas industry, which was in severe economic decline in
the 1980s due to low prices of such commodities. The Company recognizes that oil
and gas prices declined in 1998 and most of the second quarter of 1999. Although
there are some recent signs of a possible price recovery, the potential economic
impact of a continued slowdown in the oil and gas sector caused by prolonged
historically low prices may cause a significant adverse change in the
performance of the Company's loan portfolio. The allowance for loan losses to
total loans was 1.11%, and 1.16% at September 30, 1999, and 1998, respectively.
The Company's non-performing assets amounted to 0.10% of total
assets at September 30, 1999 compared with 0.16% at December 31, 1998. As of
September 30, 1999, no loans were past due ninety days or more and still
accruing. Non-accrual loans amounted to $248,000, and troubled debt restructings
amounted to $484,000, respectively, as of September 30, 1999, compared with
$190,000 and $490,000, respectively, at December 31, 1998. In addition, the
ratio of the Company's allowance for loan losses to non-performing loans and
troubled debt restructurings was 374.73% at September 30, 1999 compared with
290.32% at December 31, 1998. For the three months ended September 30, 1999,
loan recoveries exceeded loan charge-offs by $17,000. For the three months ended
September 30, 1998, loan charge-offs exceeded loan recoveries by $15,000.
NON-INTEREST INCOME
Non-interest income increased $86,000, or 52.4%, to $250,000 for the
three months ended September 30, 1999, from $164,000 for the three months ended
September 30, 1998. The Company realized a loss of $49,000 from securities and
other investments for the three months ended September 30, 1999 compared with
$117,000 from losses on sales of securities and other investments, net of gains
from sale of loans for the three months ended September 30, 1998. Absent gains
and losses related to investments and sales of loans and investments,
non-interest
16
<PAGE> 17
income consists of servicing fees and charges on loans and deposits, and
miscellaneous income. Income from these sources increased $18,000, or 6.4%, from
$281,000 for the three months ended September 30, 1998 to $299,000 for the three
months ended September 30, 1999.
Non-interest income increased $2,000, or .2%, to $850,000 for the
nine months ended September 30, 1999, from $848,000 for the nine months ended
September 30, 1998. The Company realized a loss of $41,000 from securities and
other investments, net of gains from sale of loans for the nine months ended
September 30, 1999 compared with net gains of $61,000 from gains and losses on
sales of loans and investments for the nine months ended September 30, 1998.
Absent gains and losses related to investments and sales of loans and
investments, non-interest income consists of servicing fees and charges on loans
and deposits, and miscellaneous income. Income from these sources increased
$104,000, or 13.2%, from $787,000 for the nine months ended September 30, 1998
to $891,000 for the nine months ended September 30, 1999.
NON-INTEREST EXPENSE
Non-interest expense increased $60,000, or 3.6%, from $1.6 million
for the three months ended September 30, 1998 to $1.7 million for the three
months ended September 30, 1999. Salaries and employee benefits, which account
for more than half of all non-interest expenses, increased $31,000, or 3.6%, to
$885,000 for the three months ended September 30, 1999, from $854,000 for the
three months ended September 30, 1998. Occupancy expenses increased $21,000, and
other expenses increased $80,000, all of which, together with salaries and
employee benefits, were partially offset by a decreases in depreciation expense
of $14,000, in net costs of real estate owned of $9,000, in advertising expenses
of $25,000, and in the Louisiana bank share and franchise tax of $24,000.
Non-interest expense increased $160,000, or 3.2%, from $4.9 million
for the nine months ended September 30, 1998 to $5.1 million for the nine months
ended September 30, 1999. Salaries and employee benefits, which account for more
than half of all non-interest expenses, increased $88,000, or 3.5%, to $2.6
million for the nine months ended September 30, 1999, from $2.5 million for the
nine months ended September 30, 1998. Occupancy expenses increased $33,000, net
costs of real estate owned increased $41,000, and other expenses increased
$158,000, all of which, together with salaries and employee benefits, were
partially offset by a decreases in depreciation expense of $13,000, in
advertising expenses of $127,000, and in the Louisiana bank share and franchise
tax of $20,000.
INCOME TAX EXPENSE
Income tax expense decreased $33,000, or 10.6%, to $277,000 for the
three months ended September 30, 1999, from $310,000 for the three months ended
September 30, 1998. The decrease in income tax expense relates primarily to a
lower effective tax rate applied to income before taxes, and to a decrease in
taxable income. Income before taxes decreased $28,000, or 3.4%, to $802,000 for
the three months ended September 30, 1999, from $830,000 for the three months
ended September 30, 1998.
17
<PAGE> 18
Income tax expense decreased $205,000, or 18.5%, to $902,000 for the
nine months ended September 30, 1999, from $1.1 million for the nine months
ended September 30, 1998. The decrease in income tax expense relates primarily
to a slightly lower effective tax rate applied to income before taxes, and to a
decrease in taxable income. Income before taxes decreased $470,000, or 15.6%, to
$2.5 million for the nine months ended September 30, 1999, from $3.0 million for
the nine months ended September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary liquidity, represented by cash and cash
equivalents, is a product of its operating, investing and financing activities.
Excess liquidity includes the Company's portfolios of investment securities held
for sale and mortgage-backed securities held for sale. The Company's primary
sources of funds are deposits, borrowings, proceeds from sale of stock, and
amortization, prepayments and maturities from its loan portfolio and its held to
maturity investment securities and mortgage-backed securities portfolios, and
other funds provided from operations. While scheduled payments from the
amortization of loans and mortgage-backed securities and maturing investment
securities are relatively predictable sources of funds, deposit flows, loan
prepayments, and mortgage-backed securities prepayments are greatly influenced
by general interest rates, economic conditions and competition. Under an
existing blanket collateral agreement covering residential mortgage loans, the
Company has the ability to borrow up to approximately $98.5 million from the
FHLB through its subsidiary bank. Pursuant to a safekeeping agreement with the
FHLB regarding certain of its investments and mortgage-backed securities, the
Company has an additional $19.2 million of collateral which would be
automatically available to secure additional advances, if the existing blanket
collateral agreement becomes exhausted. Additionally, the Company has arranged
for borrowing from the Federal Reserve Bank of Atlanta, should for any reason
its ability to borrow from the FHLB of Dallas be interrupted. At September 30,
1999, the Bank had $53.9 million outstanding advances from the FHLB of Dallas,
and no other borrowings.
Liquidity management is both a daily and long-term function of
business management. Excess liquidity is generally invested in short-term
investments such as overnight deposits. On a longer-term basis, the Bank
maintains a strategy of investing in various lending products. The Bank uses its
sources of funds primarily to meet its ongoing commitments and maintain a
portfolio of mortgage-backed and investment securities. At September 30, 1999,
the total approved loan commitments outstanding amounted to $3.3 million and the
undisbursed loans in process totaled $9.9 million. At the same date, commitments
under unused lines of credit and standby letters of credit amounted to $9.8
million and $1,000 respectively. Certificates of deposit scheduled to mature in
one year or less at September 30, 1999 totaled $69.8 million. Management
believes that a significant portion of maturing deposits will remain with the
Bank. The Bank anticipates that even with interest rates at lower levels than
have been experienced in recent years, which has caused a disintermediation of
funds, it will continue to have sufficient funds to meet its current
commitments.
Federally insured state-chartered banks are required to maintain
minimum levels of regulatory capital. Under current FDIC regulations, insured
state-chartered banks generally must maintain (i) a ratio of Tier 1 leverage
capital to total assets of at least 3.0% (4.0% to 5.0% for all but the most
highly rated banks) and (ii) a ratio of Tier 1 capital risk weighted assets of
at least 4.0% and a ratio of total
18
<PAGE> 19
capital risk weighted assets of at least 8.0%. At September 30, 1999, the Bank
complied with all applicable regulatory capital requirements.
The following reflects the Bank's actual levels of regulatory
capital and applicable regulatory capital requirements at September 30, 1999.
<TABLE>
<CAPTION>
Required Actual Excess
------------------------------ ----------------------------- ----------------------------
Percent Amount Percent Amount Percent Amount
------------ ------------- ---------- ------------- ----------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Tier 1 leverage capital ratio 4.00% $ 11,444 8.37% $ 23,952 4.37% $ 12,508
Risk-based capital ratios:
Tier 1 4.00 6,694 14.31 23,952 10.31 17,258
Total risk-based capital 8.00 $ 13,389 15.57 $ 26,061 7.57 $12,672
</TABLE>
The Company, as a separately incorporated holding company, has no
significant operations other than serving as sole stockholder of the Bank. On an
unconsolidated basis, the Company has no paid employees. The Company's assets
consist of its investment in the Bank, the Company's loan to the Bank's ESOP and
other investments, and its sources of income consists primarily of earnings from
the investment of such funds as well as any dividends from the Bank. The
expenses incurred by the Company relate to its reporting obligations under the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and related
expenses as a publicly traded company. Management believes that the Company has
adequate liquidity available to respond to liquidity demands.
IMPACT OF INFLATION AND CHANGING PRICES
The Consolidated Financial Statements and related financial data
presented herein have been prepared in accordance with generally accepted
accounting principles, which generally require the measurement of financial
position and operation results in terms of historical dollars, without
considering changes in relative purchasing power over time due to inflation.
Unlike most industrial companies, virtually all of the Company's assets and
liabilities are monetary in nature. Consequently, interest rates generally have
a more significant impact on the Company's performance than does the effect of
inflation. Interest rates do not necessarily move in the same direction or in
the same magnitude as the prices of goods and services, since such prices are
affected by inflation to a larger extent than interest rates.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND
INTEREST RATE RISK
YEAR 2000
The Year 2000 date change is possibly the largest technological
challenge ever faced by the business and financial community. Many computer
systems may not be able to distinguish between the year 2000 and the year 1900,
which is a critical issue as the new millennium approaches. Most computers were
originally programmed to record years using two-digit fields, rather than
four-digit
19
<PAGE> 20
fields. Being Year 2000 ready means that software can appropriately distinguish
between the year 1900 and the year 2000, as well as correctly interpreting
certain other esoteric dates, which could otherwise lead to incorrect
calculations or other problems.
The Company completed its awareness and assessment phases of its
Year 2000 planning process. Several large third-party vendors provide the
Company's essential information technology ("IT") systems. Based on successful
test results, third-party vendors providing essential IT for the Company's
financial and operation systems have made representations to the Company or the
Bank that such products are Year 2000 ready. The Company has completed in its
off-site and on-site testing and validation phase of its Year 2000 plan, which
tests of its essential information technology systems did validate successful
test results by its third party vendors. Such test results have substantially
validated and continue to reaffirm the Year 2000 compliance of the Company's
mission critical systems. The status of these activities is provided to the
Company's Board of Directors, and the Company's regulators monitor Year 2000
efforts. Such renovated products are installed and running at the Company,
without any material change in recurring or ongoing operational costs relating
to product support services or renovation of existing products and services
provided by third party vendors. The Company has estimated total costs of
completion of its Year 2000 process to be less than $10,000. The Company has
completed its assessment of issues related to the impact of the year 2000 on its
critical IT and non-critical IT systems. Based on its assessment, the Company
believes that there will be no consequences of its Year 2000 issues that will be
material to the Company's business, results of operations or financial
condition. The Company has developed written contingency plans to minimize any
potential disruptions that may be associated with the Year 2000. Such
contingency plans are being tested during the fourth quarter of 1999.
The discussion above entitled "Year 2000" includes certain
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 ("PSLRA"). This statement is included for the
express purpose of availing the Company of the protections of the safe harbor
provisions of the PSLRA. Management's ability to predict results or effects of
Year 2000 issues is inherently uncertain, and is subject to factors that may
cause actual results to differ materially from those projected. Factors that
could affect the actual results include the possibility that remediation efforts
and contingency plans will not operate as intended, the Company's failure to
timely or completely identify all software and hardware applications requiring
remediation, unexpected costs, and the uncertainty associated with the impact of
Year 2000 issues on the banking industry and on the Company's customers,
vendors, and others with whom it conducts business. Readers are cautioned not to
place undue reliance on these forward-looking statements.
MARKET RISK
Market risk is the risk of loss in a financial instrument arising
from adverse changes in market rates or prices such as interest rates, foreign
currency exchange rates, commodity prices, and equity prices. The Company's
primary market risk exposure is interest rate risk. The ongoing monitoring and
management of this risk is an important component of the Company's
asset/liability management process which is governed by policies established by
its Board of Directors that is reviewed and approved annually. The Company's
actions with respect to interest rate risk and its asset/liability gap
management are taken under guidance of the Finance Committee of the Board of
Directors of the Bank, which is composed of Messrs. O'Rourke, Beacham, and
Ortego, and the Asset/Liability
20
<PAGE> 21
Management Committee ("ALCO"), which is composed of six officers of the Bank.
The Finance Committee meets jointly with the ALCO, quarterly, to, among other
things, set interest rate risk targets and review the Company's current
composition of assets and liabilities in light of the prevailing interest rate
environment. The committee assesses its interest rate risk strategy quarterly,
which is then reviewed by the full Board of Directors. The Board of Directors
delegates responsibility for carrying out the asset/liability management
policies to the ALCO. In its capacity, the ALCO develops guidelines and
strategies influencing the Company's asset/liability management related
activities based upon estimated market risk sensitivity, policy limits, and
overall market interest rate levels and trends.
INTEREST RATE RISK
Interest rate risk represents the sensitivity of earnings to changes
in market interest rates. As interest rates change, the interest income and
interest expense streams associated with the Company's financial instruments
also change, thereby affecting net interest income ("NII"), and the primary
component of the Company's earnings. The ability to maximize net interest income
is largely dependent upon the achievement of a positive interest-rate spread
that can be sustained during fluctuations of interest rates. Interest rate
sensitivity is a measure of the difference between amounts of interest-earning
assets and interest-bearing liabilities that either reprice or mature within a
given period. The difference, or the interest rate repricing "gap," provides an
indication of the extent to which an institution's interest rate spread will be
affected by changes in interest rates. A gap is considered positive when the
amount of interest-rate sensitive assets exceeds the amount of interest-rate
sensitive liabilities, and is considered negative when the amount of
interest-rate sensitive liabilities exceeds the amount of interest-rate
sensitive assets, in a given period. Generally, during a period of rising
interest rates, a negative gap within shorter maturities would adversely affect
net interest income, while a positive gap within shorter maturities would result
in an increase in net interest income. During a period of falling interest
rates, a negative gap within shorter maturities would result in an increase in
net interest income while a positive gap within shorter maturities would have
the opposite effect.
The ALCO utilizes the results of a detailed and dynamic simulation
model to quantify the estimated exposure to NII to sustained interest rate
changes. While the ALCO routinely monitors simulated NII sensitivity over a
rolling two-year horizon, it also uses additional tools to monitor potential
longer-term rate risk. More information may be found in Item 7A of the Company's
Annual Report, on Form 10-K for the year ended December 31, 1998. Management
believes that there has been no material change in the Company's interest rate
risk or market risk since December 31, 1998.
21
<PAGE> 22
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security-Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
a) Rider B.
3.1* Articles of Incorporation of Acadiana Bancshares, Inc.
3.2* Bylaws of Acadiana Bancshares, Inc.
4.0* Form of Stock Certificate of Acadiana Bancshares, Inc.
10.1** Stock Option Plan
10.2** 1996 Recognition and Retention Plan and Trust Agreement for
Employees and Non-Employee Directors
10.3** Employment Agreement between LBA Savings Bank and Gerald G.
Reaux, Jr.
10.4* Form of Severance Agreement between Acadiana Bancshares, Inc.,
LBA Savings Bank and Lawrence Gankendorff, James J. Montelaro,
Gregory King, Mary Anne Bertrand, Wayne Bares, Emile E.
Soulier, III and Thomas F. Debaillon.
27.0 Financial Date Schedule
____________________
(*) Incorporated herein by reference from the Registration
Statement on Form S-1 (Registration No. 333-1396) filed by the
Registrant with the SEC on February 15, 1996, as subsequently
amended.
(**) Incorporated herein by reference from the definitive proxy
statement, dated December 16, 1996, filed by the Registrant
with the SEC (Commission File No. 1-4364).
(***) Incorporated herein by reference from the Annual Report on Form
10-K (File No. 1-14364) filed by the Registrant with the
SEC on March 31, 1997.
22
<PAGE> 23
b) No Form 8-K reports were filed during the quarter.
23
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ACADIANA BANCSHARES, INC.
Date: November 8, 1999 By: /s/ GERALD G. REAUX, JR.
-----------------------------------------
Gerald G. Reaux, Jr., President and
Chief Executive Officer
Date: November 8, 1999 By: /s/ EMILE E. SOULIER, III
-----------------------------------------
Emile E. Soulier, III, Vice-President and
Chief Financial Officer
24
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