SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------------------
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 June 30, 2000
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.
-------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<CAPTION>
LOUISIANA 72-1317124
------------------------------------------------------------- ------------------
<S> <C>
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer
Identification No.)
</TABLE>
101 West Vermilion Street
Lafayette, Louisiana 70501
------------------------------------------------------------- ---------------
(Address of Principal Executive Offices) (Zip Code)
(337)232-4631
----------------------------------------------------
(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 August 8, 2000,
1,414,821 shares of the Registrant's common stock were issued and outstanding.
Of that total, 211,085 shares were held by the Registrant's Employee Stock
Ownership Plan, of which 128,552 were not committed to be released.
1
<PAGE>
ACADIANA BANCSHARES, INC.
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets
(As of June 30, 2000 and December 31, 1999) 3
Consolidated Statements of Income (For the
three and six months ended June 30, 2000 and 1999) 4
Consolidated Statements of Stockholders' Equity
(For the six months ended June 30, 2000 and 1999) 5
Consolidated Statements of Cash Flows (For the
six months ended June 30, 2000 and 1999) 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 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 2. Changes in Securities 24
Item 3. Defaults Upon Senior Securities 24
Item 4. Submission of Matters to a Vote of Security Holders 24
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 24
Signatures 26
2
<PAGE>
<TABLE>
<CAPTION>
ACADIANA BANCSHARES, INC., AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
UNAUDITED
JUNE 30, 2000 AND DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<CAPTION>
2000 1999
-------------- --------------
Cash and Cash Equivalents:
<S> <C> <C>
Cash and Amounts Due from Banks $ 4,239 $ 3,668
Interest Bearing Demand Deposits 7,197 8,254
-------------- --------------
Total Cash and Cash Equivalents 11,436 11,922
Trading Securities 341 285
Securities Available for Sale, at Fair Value 24,936 26,060
Securities Held to Maturity (Fair Value of $11,844
and $11,958, respectively) 11,814 11,921
Federal Home Loan Bank Stock, at Cost 4,014 3,689
Loans Receivable, Net of Allowance for Loan Losses
of $2,774 and $2,747, respectively 261,591 244,996
Investment in Limited Liability Company 798 811
Premises and Equipment, Net 5,050 2,657
Accrued Interest Receivable 1,626 1,543
Other Assets 1,888 1,812
-------------- --------------
TOTAL ASSETS $ 323,494 $ 305,696
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest Bearing $ 11,108 $ 10,382
Interest Bearing 207,727 202,830
-------------- --------------
Total Deposits 218,835 213,212
Short-Term Borrowings 6,510 6,000
Accrued Interest Payable 367 345
Long-Term Debt 69,239 57,850
Accrued and Other Liabilities 1,083 539
-------------- --------------
TOTAL LIABILITIES 296,034 277,946
-------------- --------------
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,
2,731,250 shares issued 27 27
Additional Paid-in Capital 32,367 32,322
Retained Earnings 22,893 22,404
Unearned Common Stock Held by ESOP Trust (1,571) (1,703)
Unearned Common Stock Held by RRP Trust (899) (1,048)
Accumulated Other Comprehensive Income (293) (364)
Treasury Stock, at Cost; 1,316,429 and
1,236,727 Shares, respectively (25,064) (23,888)
-------------- --------------
TOTAL STOCKHOLDERS' EQUITY 27,460 27,750
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 323,494 $ 305,696
============== ==============
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these Financial Statements.
3
<PAGE>
<TABLE>
<CAPTION>
ACADIANA BANCSHARES, INC., AND SUBSIDIARY
CONSOLIDATED INCOME STATEMENTS
UNAUDITED
THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA) Three Months Ended June 30, Six Months Ended June 30,
---------------------------- ----------------------------
2000 1999 2000 1999
------------- ------------ ------------- -------------
INTEREST AND DIVIDEND INCOME:
<S> <C> <C> <C> <C>
Loans, including fees $ 5,130 $ 4,436 $ 10,031 $ 8,855
Debt Securities 654 518 1,311 964
Dividends 122 129 178 332
Trading Account Securities - - 5 3
Interest Bearing Deposits 109 131 202 226
------------- ------------ ------------- -------------
Total Interest and Dividend Income 6,015 5,214 11,727 10,380
------------- ------------ ------------- -------------
INTEREST EXPENSE:
Deposits 2,613 2,280 5,146 4,537
Borrowings 1,079 647 1,971 1,247
------------- ------------ ------------- -------------
Total Interest Expense 3,692 2,927 7,117 5,784
------------- ------------ ------------- -------------
Net Interest Income 2,323 2,287 4,610 4,596
Provision for Loan Losses - - - -
------------- ------------ ------------- -------------
Net Interest Income After Provision for
Loan Losses 2,323 2,287 4,610 4,596
------------- ------------ ------------- -------------
NON-INTEREST INCOME:
Customer Service Fees 213 226 434 444
Loan Servicing Fees 13 13 25 28
Gain on Sale of Loans, Net - 27 - 89
Trading Account (Losses) Gains, Net 18 28 (6) 7
Loss from Investment in Limited Liability -
Company (12) (43) (13) (88)
Other 22 24 48 50
------------- ------------ ------------- -------------
Total Non-Interest Income 254 275 488 530
------------- ------------ ------------- -------------
NON-INTEREST EXPENSE:
Salaries and Employee Benefits 946 845 1,920 1,752
Occupancy 61 72 150 150
Depreciation 82 90 164 178
Data Processing 75 55 146 107
Foreclosed Assets, net 4 12 (76) 24
Deposit Insurance Premium 11 29 22 60
Advertising 53 34 125 66
Bank Shares and Franchise Tax Expense 82 84 172 190
Impairment Loss on Long-Lived Assets 323 - 323 -
Other 419 440 795 852
------------- ------------ ------------- -------------
Total Non-Interest Expense 2,056 1,661 3,741 3,379
------------- ------------ ------------- -------------
Income Before Income Taxes 521 901 1,357 1,747
Income Tax Expense 188 325 483 625
------------- ------------ ------------- -------------
Net Income $ 333 $ 576 $ 874 $ 1,122
============= ============ ============= =============
Earnings Per Share - basic $ 0.27 $ 0.41 $ 0.70 $ 0.77
============= ============ ============= =============
Earnings Per Share - diluted $ 0.27 $ 0.40 $ 0.70 $ 0.75
============= ============ ============= =============
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these Financial Statements.
4
<PAGE>
ACADIANA BANCSHARES, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
UNAUDITED
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Unearned Unearned
Common Common Accumulated Total
Additional Stock Held Stock Other Stock-
Common Paid-In Retained By ESOP Held By Comprehensive Treasury holder's
Stock Capital Earnings Trust RRP Trust Income Stock Equity
--------- ---------- ---------- --------- --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1999 $ 27 $ 32,192 $ 20,932 $ (1,965) $ (1,335) $ 258 $ (17,935) $ 32,174
Comprehensive Income:
Net Income 1,122 1,122
Change in Unrealized Gain
(Loss) on Securities Available
for Sale, Net of Deferred Taxes (541) (541)
--------
Total Comprehensive Income 581
Common Stock Released by ESOP Trust 66 131 197
Common Stock Earned by Participants of
Recognition and Retention Plan Trust (8) 147 139
Common Stock Issued (20) 39 19
Purchase of Treasury Stock (263,469 shares) (4,789) (4,789)
Cash Dividends Declared ($.26 per share) (388) (388)
--------- ---------- ---------- --------- --------- ----------- --------- ---------
BALANCE, JUNE 30, 1999 $ 27 $ 32,230 $ 21,666 $ (1,834) $ (1,188) $ (283) $ (22,685)- $27,933
========= ========== ========== ========= ========= =========== ========= =========
BALANCE, JANUARY 1, 2000 $ 27 $ 32,322 $ 22,404 $ (1,703) $ (1,048) $ (364) $ (23,888) $27,750
Comprehensive Income:
Net Income 874 874
Change in Unrealized Gain (Loss) on
Securities Available for Sale, Net of
Deferred Taxes 71 71
---------
Total Comprehensive Income 945
Common Stock Released by ESOP Trust 39 132 171
Common Stock Earned by Participants of
Recognition and Retention Plan Trust 6 149 155
Purchase of Treasury Stock (79,702 shares) (1,176) (1,176)
Cash Dividends Declared ($.30 per share) (385) (385)
--------- ---------- ---------- ---------- --------- ----------- --------- ---------
BALANCE, JUNE 30, 2000 $ 27 $ 32,367 $ 22,893 $ (1,571) $ (899) $ (293) $ (25,064) $ 27,460
========= ========== ========== ========== ========= =========== ========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these Financial Statements.
5
<PAGE>
<TABLE>
<CAPTION>
ACADIANA BANCSHARES, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(IN THOUSANDS)
------------------------------------------------------------------------------------------------------------
2000 1999
---------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 874 $ 1,122
---------- ----------
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 175 189
Provision for Deferred Income Taxes - (32)
Compensation Expense Recognized on RRP 144 139
ESOP Contribution 171 197
Other gains and losses, net 224 (10)
Loss from Investment in Limited Liability Company 13 88
Net Change in Securities Classified as Trading (56) 149
Accretion of Discounts, Net of Premium Amortization on Securities (2) (7)
Amortization of Deferred Revenues and Unearned Income on Loans 84 58
FHLB Stock Dividend Received (178) (78)
Other Changes in Assets and Liabilities:
(Increase) Decrease in Accrued Interest Receivable (83) (15)
(Increase) Decrease in Other Assets (113) (27)
(Decrease) Increase in Other Liabilities 560 303
---------- ----------
Total Adjustments 939 954
---------- ----------
Net Cash Provided by Operating Activities 1,813 2,076
---------- ----------
Cash Flows from Investing Activities:
Activity in Available for Sale Securities:
Proceeds from Calls, Maturities and Prepayments 1,236 22,076
Purchases - (19,977)
Activity in Held to Maturity Securities:
Proceeds from Calls, Maturities and Prepayments 104 310
Purchase of FHLB stock (147) -
Net Advances on Loans (16,692) (4,109)
Purchase of Premises and Equipment (2,879) (69)
Proceeds from Sale of Premises and Equipment - 7
Proceeds from Sale of Foreclosed Assets 102 20
Capital Costs Incurred on Foreclosed Assets (2) (4)
---------- ----------
Net Cash Provided by (Used in) Investing Activities (18,278) (1,746)
---------- ----------
Cash Flows from Financing Activities:
Net Change in Deposits 5,623 8,118
Net Change in Short-term Borrowings 510 (7,000)
Proceeds from Long-term Debt 11,391 7,500
Repayment of Long-term Debt (2) -
Proceeds from Issuance of Common Stock - 19
Dividends Paid to Shareholders (367) (387)
Purchase of Treasury Stock (1,176) (4,789)
---------- ----------
Net Cash Used in Financing Activities 15,979 3,461
---------- ----------
Net Increase (Decrease) in Cash
and Cash Equivalents (486) 3,791
Cash and Cash Equivalents, Beginning of Period 11,922 7,578
---------- ----------
Cash and Cash Equivalents, End of Period $ 11,436 $ 11,369
========== ==========
Supplemental Schedule of Noncash Activities:
Acquisition of Foreclosed Assets in Settlement of Loans $ 13 $ 56
Supplemental Disclosures:
Cash Paid For:
Interest on Deposits and Borrowings $ 7,095 $ 5,722
Income Taxes $ 300 $ 508
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these Financial Statements.
6
<PAGE>
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 are unaudited and
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
unaudited 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, 1999.
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 recently formed a non-bank wholly owned subsidiary, Acadiana Holdings,
L.L.C., whose purpose is to hold a commercial office building for occupancy by
the Company and the Bank. 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 its wholly owned subsidiaries, namely, the Bank, and Acadiana
Holdings, L.L.C. All significant intercompany balances and transactions have
been eliminated in consolidation.
7
<PAGE>
(2) LOANS RECEIVABLE
Loans receivable at June 30, 2000 and December 31, 1999 are summarized
as follows (in thousands):
<TABLE>
<CAPTION>
2000 1999
------------------------------------------------------------
<S> <C> <C>
Mortgage Loans:
Single-Family Residential 189,819 $179,109
Construction 7,061 12,612
Multi-Family Residential 373 425
Commercial Real Estate 26,917 18,798
Equity Lines of Credit 3,708 3,406
---------- ----------
Total Mortgage Loans 227,878 214,350
Commerical Business Loans 17,783 18,144
Consumer Loans 22,650 21,803
---------- ----------
Total Loans 268,311 254,297
Less:
Allowance for Loan Losses (2,774) (2,747)
Net Deferred Loan Fees (215) (222)
Unadvanced Loan Funds (3,731) (6,332)
---------- ----------
Loans, net $261,591 $244,996
========== ==========
</TABLE>
(3) EARNINGS PER SHARE
Weighted average shares of common stock outstanding for basic EPS
excludes the weighted average shares unreleased by the Employee Stock Ownership
Plan ("ESOP") (133,638 and 155,530 shares for the quarters ending June 30, 2000
and June 30, 1999, respectively) and the weighted average unvested shares in the
Recognition and Retention Plan ("RRP") (63,149 and 79,568 for the quarters
ending June 30, 2000 and June 30, 1999, 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
<PAGE>
<TABLE>
<CAPTION>
Three months ended Six months ended
--------------------------- ----------------------------
2000 1999 2000 1999
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Numerator:
Income Applicable to Common Shares $ 333,000 $ 576,000 $ 874,000 $ 1,122,000
============ ============ ============ =============
Denominator:
Weighted Average Common Shares Outstanding 1,219,107 1,405,631 1,244,410 1,465,803
Effect of Dilutive Securities:
Stock Options Outstanding - 27,207 2,022 26,779
RRP Grants 6,494 11,006 4,817 9,105
------------ ------------ ------------ -------------
Weighted Average Common Shares Outstanding
Assuming Dilution 1,225,601 1,443,844 1,251,249 1,501,687
============ ============ ============ =============
Earnings per Share $ 0.27 $ 0.41 $ 0.70 $ 0.77
============ ============ ============ =============
Earnings per Share - Assuming Dilution $ 0.27 $ 0.40 $ 0.70 $ 0.75
============ ============ ============ =============
</TABLE>
(4) SIGNIFICANT EVENTS
On May 12, 2000, the Company, through its wholly owned subsidiary,
Acadiana Holdings, L.L.C., purchased an office building to be used as its new
corporate headquarters and new main office branch banking facility for the Bank,
located at 200 West Congress Street, Lafayette, Louisiana. Management believes
that this facility will provide a platform to support the future growth of the
Bank and the Company. The acquisition price associated with the purchase was
$2.5 million and the Company anticipates additional renovation costs of
approximately $1.3 million prior to occupancy. The Company expects to utilize
one-third of the facility and will seek to lease the remaining commercial office
space. Currently, approximately one-third of the building space is leased.
(5) RECENT ACCOUNTING PRONOUNCEMENTS
In June, 2000 the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standards ("FAS") Statement No. 138, ACCOUNTING FOR CERTAIN
DERIVATIVE INSTRUMENTS AND CERTAIN HEDGING ACTIVITIES, AN AMENDMENT OF FAS
STATEMENT NO. 133. The new statement addresses a limited number of issues
causing implementation difficulties for a large number of entities getting ready
to apply FAS Statement No.133. There are no conflicts with or modifications to
the basic model of FAS Statement No. 133, and there is no delay in the effective
date of FAS Statement No. 133. FAS Statement No. 138 is effective for fiscal
quarters of all fiscal years beginning after June 15, 2000. The Company has no
derivative financial instruments and no hedging activities at this time.
Implementation of this standard is not expected to have a material impact on
financial position or results of operations.
9
<PAGE>
PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT
In addition to historical information, this Form 10-Q includes certain
"forward-looking statements," as defined in the Securities Act of 1933 and the
Securities Exchange Act of 1934, based on current management expectations. The
Company's actual results could differ materially from those management
expectations. Such forward-looking statements include statements regarding our
intentions, beliefs or current expectations as well as the assumptions on which
such statements are based. Stockholders and potential stockholders are cautioned
that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those contemplated by such forward-looking statements.
Factors that could cause future results to vary from current management
expectations include, but are not limited to, general economic conditions,
legislative and regulatory changes, monetary and fiscal policies of the federal
government, changes in tax policies, rates and regulations of federal, state and
local tax authorities, changes in interest rates, deposit flows, the cost of
funds, demand for loan products, demand for financial services, competition,
changes in the quality or composition of the Company's loan and investment
portfolios, changes in accounting principles, policies or guidelines, the actual
costs incurred in connection with the Company's planned relocation of its
headquarters and the Company's ability to lease additional space to third
parties in such new headquarters building, and other economic, competitive,
governmental and technological factors affecting the Company's operations,
markets, products, services and fees. The Company undertakes no obligation to
update or revise any forward-looking statements to reflect changed assumptions,
the occurrence of unanticipated events or changes to future operating results
over time.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
CHANGES IN FINANCIAL CONDITION
At June 30, 2000, the consolidated assets of the Company totaled $323.5
million, an increase of $17.8 million, or 5.8%, from December 31, 1999. The
primary reason for the increase in consolidated assets was an increase in loans
receivable, net, of $16.6 million, or 6.8%, and an increase in premises and
equipment, net, of $2.4 million, or 90.1%, all of which was partially offset by
a decrease in investment securities available for sale of $1.1 million, or 4.3%,
and a decrease in cash and cash equivalents of $486,000, or 4.1%. Asset growth
was funded primarily by an $11.4 million, or 19.7%, increase in long-term debt,
a $5.6 million, or 2.6%, increase in total deposits, together with an increase
in short-term borrowings of $510,000, or 8.5%, all of which were partially
offset by a decrease in total stockholders' equity of $290,000, or 1.0%.
ASSETS
Cash and cash equivalents decreased $486,000, or 4.1%, to $11.4 million
at June 30, 2000, compared with $11.9 million at December 31, 1999. Net cash
provided by (used in) operating activities, investing activities, and financing
activities amounted to $1.8 million, ($18.3) million, and $16.0 million,
respectively, for the six months ended June 30, 2000. As of
10
<PAGE>
June 30, 2000, cash and cash equivalents funded 3.5% of total assets, compared
with 3.9% at December 31, 1999.
The Company owned $341,000 of trading account securities as of June 30,
2000 compared with $285,000 at December 31, 1999. The Company has no intention
to significantly increase its trading securities portfolio. Trading account
securities are carried at fair value.
Securities available for sale decreased $1.1 million, or 4.3%, to $24.9
million at June 30, 2000, compared with $26.1 million at December 31, 1999. The
primary reason for such decrease was principal repayments of $1.2 million of
investment securities, which were partially offset by an increase in fair value
of the remaining securities of $107,000. Securities available for sale include
U.S. Treasury notes and bonds, federal agency bonds, mortgage-backed securities
issued by the Government National Mortgage Association ("GNMA"), the Federal
National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage
Corporation ("FHLMC"), and triple A rated private issuers, and certain equity
securities. Unrealized gains and losses on securities available for sale are
excluded from earnings and reported, net of applicable income taxes, as other
comprehensive income. As of June 30, 2000, investment securities available for
sale amounted to 7.7% of total assets, compared to 8.5% of total assets at
December 31, 1999.
Securities held to maturity decreased $107,000, or 0.9%, from $11.9
million at December 31, 1999 to $11.8 million at June 30, 2000. Securities held
to maturity include mortgage-backed securities issued by GNMA, FNMA, and FHLMC.
At June 30, 2000, securities held to maturity amounted to 3.7% of total assets,
compared to 3.9% of total assets at December 31, 1999.
Federal Home Loan Bank stock represents an equity interest in the FHLB
that does not have a readily determinable fair value (for purposes of Federal
Accounting Standards Board Statement No. 115) because its ownership is
restricted and there is no market for such stock. It can be sold only to the
FHLB or to another member institution. It is carried at cost. Both cash
dividends and stock dividends are received on FHLB stock and are reported as
income. The stock dividends are redeemable at par value. At June 30, 2000,
Federal Home Loan Bank stock amounted to $4.0 million, or 1.2% of total assets.
Loans receivable, net, increased $16.6 million, or 6.8%, to $261.6
million at June 30, 2000, compared to $245.0 million at December 31, 1999.
Single-family residential loans increased $10.7 million, or 6.0%, from $179.1
million at December 31, 1999, to $189.8 million at June 30, 2000. Construction
loans decreased $5.6 million, or 44.0%, from $12.6 million at December 31, 1999
to $7.1 million at June 30, 2000. Commercial real estate loans increased $8.1
million, or 43.2%, from $18.8 million at December 31, 1999, to $26.9 million at
June 30, 2000. Equity lines of credit increased $302,000, or 8.9%, from $3.4
million at December 31, 1999 to $3.7 million at June 30, 2000. Commercial
business loans decreased $361,000, or 2.0%, from $18.1 million at December 31,
1999, to $17.8 million at June 30, 2000. Consumer loans increased $847,000, or
3.9%, from $21.8 million at December 31, 1999, to $22.7 million at June 30,
2000. Total loans increased $14.0 million, or 5.5%, from $254.3 million at
December 31, 1999, to $268.3 million at June 30, 2000. Loans receivable, net,
amounted to 80.9% of total assets at June 30, 2000, compared to 80.1% of total
assets at December 31, 1999.
11
<PAGE>
Premises and equipment, net, increased $2.4 million, or 90.1%, from
$2.7 million at December 31, 1999 to $5.1 million at June 30, 2000. Such
increase is primarily the result of the acquisition of an office building to be
used as its new corporate headquarters and new main office branch banking
facility for the Bank, as disclosed in Note 4 to the consolidated financial
statements. Premises and equipment, net, amounted to 0.9% and 1.6% of total
assets at December 31, 1999 and June 30, 2000, respectively.
LIABILITIES AND STOCKHOLDERS' EQUITY
The Company's primary funding sources include deposits, borrowings from
the FHLB and stockholders' equity. The discussion that follows summarizes on the
significant changes in this mix during the six months ended June 30, 2000.
The Company's deposits increased by $5.6 million, or 2.6%, to $218.8
million at June 30, 2000, compared to $213.2 million at December 31, 1999.
Interest bearing deposits increased $4.9 million, or 2.4% while non-interest
bearing deposits increased $726,000, or 7.0%. Certificates of deposit,
comprising the largest portion of interest-bearing deposits, amounted to $160.8
million at June 30, 2000 compared to $151.6 million at December 31, 1999. Total
deposits funded 69.7% of total assets at December 31, 1999, compared to 67.6% at
June 30, 2000.
The Company's borrowings include both short-term borrowings (amounts
maturing in one year or less from date of inception) and long-term debt (amounts
maturing more than one year from date of inception). Short-term borrowings
increased $510,000, or 8.5%, from $6.0 million at December 31, 1999, to $6.5
million at June 30, 2000. Short-term borrowings funded 2.0% of assets at June
30, 2000. Long-term debt increased $11.4 million, or 19.7%, to $69.2 million at
June 30, 2000 compared to $57.9 million at December 31, 1999. Long-term debt
funded 21.4% of assets at June 30, 2000. All borrowings are composed of advances
from the FHLB. Advances from the FHLB have been, and are expected to continue to
be, an important source of funding for both existing assets and new asset
growth.
Stockholders' equity provides a source of permanent funding, allows for
future growth, and provides the Company with a cushion to withstand unforeseen,
adverse developments. At June 30, 2000, stockholders' equity totaled $27.5
million, a decrease of $290,000, or 1.0%, compared to $27.8 million at December
31, 1999. The decrease was primarily attributable to $1.2 million of repurchases
of the Company's common stock for treasury, together with $385,000 of dividends
declared on the Company's common stock, all of which was partially offset by net
income for the six months ended June 30, 2000, of $874,000, a $71,000 increase
in the value of securities available for sale, net of deferred taxes, common
stock released by the Company's employee stock ownership plan (the "ESOP") trust
of $132,000, and common stock earned by participants in the Company's
recognition plan (the "RRP") trust of $149,000. Stockholders' equity funded 8.5%
of assets at June 30, 2000, compared to 9.1% at December 31, 1999.
12
<PAGE>
The Company increased its leverage by increasing liabilities (deposits
and borrowings) and decreasing stockholders' equity during the same periods. The
Company's average interest-bearing liabilities increased $30.1 million, or
12.5%, from $240.9 million for the six months ended June 30, 1999, to $271.0
million for the six months ended June 30, 2000, while average stockholders'
equity decreased $3.0 million, or 9.9%, from $30.6 million at June 30, 1999 to
$27.6 million at June 30, 2000.
Federal regulations impose minimum regulatory capital requirements on
all financial institutions with deposits insured by the Federal Deposit
Insurance Corporation (the "FDIC"), which requirements directly affect the
minimum capital levels at the Bank. The Board of Governors of the Federal
Reserve System (the "FRB") also imposes minimum regulatory capital requirements,
which directly affect the minimum capital levels at the Company. At June 30,
2000 the capital of the Bank and the capital of the Company exceeded all minimum
regulatory requirements.
RESULTS OF OPERATIONS
The Company reported a decrease in earnings per share for the quarter
ended June 30, 2000 primarily due to a non-cash write-down of the Company's
existing headquarters and main office facilities. The Company earned 27 cents
per share (basic and diluted) for the quarter ended June 30, 2000, compared to
41 cents per share (40 cents per share diluted) for the quarter ended June 30,
1999. This represents a decrease of 34.1% per common share when compared with
the same quarter last year. The Company acquired an office building to be used
as its new corporate headquarters and new main office branch banking facility
for the Bank. A non-cash charge to income this quarter related to the write-down
of the existing headquarters and main office facilities totaled $213,000
($323,000 before taxes), or, $0.17 (basic and fully diluted) per common share.
Excluding the write-down of the Company's current headquarters and main office,
the Company would have earned $546,000, or $0.45 per share, (basic and diluted)
in the second quarter of 2000, a 9.8% (basic) and 12.5% (diluted) increase over
the year ago quarter.
The Company reported earnings per share of $0.70 (basic and diluted)
for the six months ended June 30, 2000 compared to $0.77 (basic) and $0.75
(diluted) for the six months ended June 30, 1999. Adjusting for the non-cash
charge, the Company would have earned $0.87 per share basic and diluted for the
six months ended June 30, 2000, which would have been an increase of 13.0%
(basic) and 16.0% (diluted), over the same year ago period.
The Company reported net income of $333,000, and $576,000 for the three
months ended June 30, 2000 and 1999, respectively. The $243,000 decrease in net
income for the three months ended June 30, 2000 compared to the three months
ended June 30, 1999 was due primarily to non-cash charges related to the
write-down of the Company's headquarters and main office facilities. Total
interest and dividend income for the three months ended June 30, 2000 increased
$801,000, or 15.4%, from $5.2 million for the three months ended June 30, 1999
to $6.0 million for the three months ended June 30, 2000. Total interest expense
increased $765,000, or 26.1%, from $2.9 million for the three months ended June
30, 1999 to $3.7 million for the three months ended June 30, 2000. Net interest
income increased $36,000, or 1.6%, remaining relatively stable at $2.3 million
for both the three months ended
13
<PAGE>
June 30, 2000 and 1999. Non-interest income decreased $21,000, or 7.6%, from
$275,000 for the three months ended June 30, 1999 to $254,000 for the three
months ended June 30, 2000. Non-interest expenses increased $395,000, or 23.8%,
from $1.7 million for the three months ended June 30, 1999 to $2.1 million for
the three months ended June 30, 2000 (which increase is inclusive of the
$323,000 non-cash write-down of the Company's headquarters and main office
facilities). Without the charge for a non-cash write-down, noninterest expense
would have been $1.7 million for both three-month periods.
The Company reported net income of $874,000, and $1.1 million for the
six months ended June 30, 2000 and 1999, respectively. The $248,000 decrease in
net income for the six months ended June 30, 2000 compared to the six months
ended June 30, 1999 was due primarily to non-cash charges related to the
write-down of the Company's headquarters and main office facilities. Total
interest and dividend income for the six months ended June 30, 2000 increased
$1.3 million, or 13.0%, from $10.4 million for the six months ended June 30,
1999 to $11.7 million for the six months ended June 30, 2000. Total interest
expense increased $1.3 million, or 23.0%, from $5.8 million for the six months
ended June 30, 1999 to $7.1 million for the six months ended June 30, 2000. Net
interest income increased $14,000, or 0.3%, remaining relatively stable at $4.6
million for both the six months ended June 30, 2000 and 1999. Non-interest
income decreased $42,000, or 7.9%, from $530,000 for the six months ended June
30, 1999 to $488,000 for the six months ended June 30, 2000. Non-interest
expenses increased $362,000, or 10.7%, from $3.4 million for the six months
ended June 30, 1999 to $3.7 million for the six months ended June 30, 2000
(which increase is inclusive of the $323,000 non-cash write-down of the
Company's headquarters and main office facilities). Without the charge for a
non-cash write-down, noninterest expense would have been $3.4 million for both
six-month periods.
NET INTEREST INCOME
Net interest income is determined by the combined effects of interest
rate spread (i.e., the difference between the yields earned on interest-earning
assets and the rates paid on interest-bearing liabilities) and changes in the
average amounts of interest-earning assets and interest-bearing liabilities. The
Company's average interest rate spread was 2.51% and 2.75% for the three months
ended June 30, 2000 and 1999, respectively. Both rates (the average yield on
interest-bearing assets and average cost of interest-bearing liabilities) and
volumes (the average balances on interest-bearing assets and average balances of
interest-bearing liabilities) influence net interest margin. The Company's
interest rate margin (i.e., the difference between interest income and interest
expense, multiplied by average earning assets) was 3.03%, and 3.32%, during the
three months ended June 30, 2000 and 1999, respectively. The declining net
interest margin in 2000 compared to 1999 was primarily the result of increases
in the average rates paid on the average balances of interest-bearing deposits
and borrowings increasing faster and more than offsetting the increased average
yields earned on the Company's loans, investment securities, and other earning
assets. Additionally, the increase in average interest-bearing liabilities of
$33.0 million more than offset the increase in average interest-earning assets
of $30.4 million for the three months ended June 30, 2000 as compared to the
three months ended June 30, 1999. The Company's net interest income increased
slightly, by $36,000, or 1.6%, but remained relatively stable at $2.3 million
for the quarters ended June 30, 2000, and 1999.
14
<PAGE>
INTEREST AND DIVIDEND INCOME
Interest and dividend income totaled $6.0 million for the three months
ended June 30, 2000, compared to $5.2 million for the three months ended June
30, 1999, an increase of $801,000, or 15.4%. This increase was mainly due to an
increase in the Company's average interest-earning assets of $30.4 million, or
11.0%, together with a 30 basis point (with 100 basis points being equal to 1%)
increase in the average yield earned. Interest earned on loans increased
$694,000, or 15.6%, from $4.4 million for the three months ended June 30, 1999,
to $5.1 million for the three months ended June 30, 2000. This increase was due
to an increase in the Company's average balance of loans for the three months
ended June 30, 2000 of $33.9 million, or 15.2%, and a three basis point increase
in the yield earned. Interest and dividends earned on investment securities
increased $129,000, or 19.9%, from $647,000 for the three months ended June 30,
1999 to $776,000 for the three months ended June 30, 2000. This increase was due
to a 114 basis point increase in the Company's yield earned on investment
securities for the three months ended June 30, 2000, and by an increase in the
Company's average balance of investment securities of $704,000, or 1.7%. The
increased yield reflects a special dividend on FHLB stock of $61,000, without
which the yield on investment securities would have been 6.94% for the three
months ended June 30, 2000 versus a yield of 6.39% for the year ago three month
period. Interest earned on other earning assets decreased $22,000, or 16.8%,
from $131,000 for the three months ended June 30, 1999, to $109,000 for the
three months ended June 30, 2000. This decrease was primarily due to a decrease
in the Company's average balance of other earning assets of $4.3 million, or
36.7%, from $11.6 million for the three months ended June 30, 1999, to $7.3
million at June 30, 2000, which was partially offset by a 142 basis point
increase in the Company's average yield earned on other earning assets.
Interest and dividend income totaled $11.7 million for the six months
ended June 30, 2000, compared to $10.4 million for the six months ended June 30,
1999, an increase of $1.3 million, or 13.0%. This increase was mainly due to an
increase in the Company's average interest-earning assets of $26.1 million, or
9.5%, together with a 24 basis point (with 100 basis points being equal to 1%)
increase in the yield earned. Interest earned on loans increased $1.2 million,
or 13.3%, from $8.9 million for the six months ended June 30, 1999, to $10.0
million for the six months ended June 30, 2000. This increase was due to an
increase in the Company's average balance of loans for the six months ended June
30, 2000, of $29.0 million, or 12.9%, and a two basis point increase in the
yield earned. Interest and dividends earned on investment securities increased
$195,000, or 15.0%, from $1.3 million for the six months ended June 30, 1999 to
$1.5 million for the six months ended June 30, 2000. This increase was due to an
82 basis point increase in the Company's yield earned on investment securities
for the six months ended June 30, 2000, and by an increase in the Company's
average balance of investment securities of $799,000. The increased yield
reflects a special dividend on FHLB stock of $61,000, without which the yield on
investment securities would have been 6.92% for the six months ended June 30,
2000 versus a yield of 6.39% for the year ago six month period. Interest earned
on other earning assets decreased $24,000, or 10.6%, from $226,000 for the six
months ended June 30, 1999, to $202,000 for the six months ended June 30, 2000.
This decrease was primarily due to a decrease in the Company's average balance
of other earning assets of $3.7 million, or 34.1%, from $10.9 million for the
six months
15
<PAGE>
ended June 30, 1999, to $7.1 million at June 30, 2000, which was partially
offset by a 149 basis point increase in the Company's average yield earned
on other earning assets.
The Company's largest group of interest-earning assets is residential
mortgage loans, comprising 61.8% of total average interest-earning assets for
the six months ended June 30, 2000. Market rates on residential mortgage loans
are heavily influenced by competition and on the rates of interest on longer
term U.S. Treasury Bonds, such as the 10-year and 30-year bonds. Significant
changes in longer term U.S. Government Treasury Bond rates likely translate to
similar changes in market rates of interest for residential mortgage loans. The
average balance of residential mortgage loans increased $21.8 million, or 13.1%,
from $167.2 million for the three months ended June 30, 1999 to $189.0 million
for the three months ended June 30, 2000. The Company's average yield earned on
residential mortgage loans decreased by one basis point from 7.58% for the three
months ended June 30, 1999 to 7.57% for the three months ended June 30, 2000.
The average balance of residential mortgage loans increased $17.9 million, or
10.6%, from $168.3 million for the six months ended June 30, 1999 to $186.2
million for the six months ended June 30, 2000. The Company's average yield
earned on residential mortgage loans decreased by two basis points from 7.59%
for the six months ended June 30, 1999 to 7.57% for the three months ended June
30, 2000.
The Company's largest source of funds is certificates of deposit, which
for the six months ended June 30, 2000, funded 50.8% of total average
interest-earning assets. Market rates on shorter term U.S. Government Notes and
Bonds and rates offered by competing depository institutions, heavily influence
the Company's offering rates on certificates of deposit. Significant changes in
shorter term U.S. Government Notes and Bonds may translate into somewhat similar
changes in offering rates for certificates of deposit.
INTEREST EXPENSE
Interest expense increased $765,000, or 26.1%, from $2.9 million for
the three months ended June 30, 1999, to $3.7 million for the three months ended
June 30, 2000. This increase was due to an increase both in the average balance
of interest-bearing liabilities and in the cost of such liabilities. The average
balance of interest-bearing liabilities increased $33.0 million, or 13.6%, from
$243.3 million for the three months ended June 30, 1999, to $276.3 million for
the three months ended June 30, 2000, and the cost of such interest-bearing
liabilities increased 54 basis points from 4.81% for the three months ended June
30, 1999 to 5.35% for the three months ended June 30, 2000.
Interest expense increased $1.3 million, or 23.0%, from $5.8 million
for the six months ended June 30, 1999, to $7.1 million for the six months ended
June 30, 2000. This increase was due to an increase both in the average balance
of interest-bearing liabilities and in the cost of such liabilities. The average
balance of interest-bearing liabilities increased $30.1 million, or 12.5%, from
$240.9 million for the six months ended June 30, 1999, to $271.0 million for the
six months ended June 30, 2000, and the cost of such interest-bearing
liabilities increased 45 basis points from 4.80% for the six months ended June
30, 1999 to 5.25% for the six months ended June 30, 2000.
16
<PAGE>
The average balance of interest-bearing deposits increased $8.4
million, or 4.3%, from $192.8 million for the three months ended June 30, 1999,
to $201.2 million for the three months ended June 30, 2000. The cost of
interest-bearing deposits increased $333,000, or 14.6%, from $2.3 million for
the three months ended June 30, 1999 to $2.6 million for the three months ended
June 30, 2000. The cost of such average deposits increased 46 basis points for
the quarter ended June 30, 2000 as compared to the quarter ended June 30, 1999.
Interest expense on borrowings increased $432,000, or 66.8%, from $647,000 for
the three months ended June 30, 1999, to $1.1 million for the three months ended
June 30, 2000. The primary reasons for the increase were a $24.6 million, or
48.8%, increase in the average balance of borrowings, and an increase in the
cost of borrowings of 62 basis points.
The average balance of interest-bearing deposits increased $9.1
million, or 4.7%, from $192.2 million for the six months ended June 30, 1999, to
$201.3 million for the six months ended June 30, 2000. The cost of
interest-bearing deposits increased $609,000, or 13.4%, from $4.5 million for
the six months ended June 30, 1999 to $5.1 million for the six months ended June
30, 2000. The cost of such average deposits increased 39 basis points for the
six months ended June 30, 2000 as compared to the six months ended June 30,
1999. Interest expense on borrowings increased $724,000, or 58.1%, from $1.2
million for the six months ended June 30, 1999, to $2.0 million for the six
months ended June 30, 2000. The primary reasons for the increase were a $21.0
million, or 43.1%, increase in the average balance of borrowings, and an
increase in the cost of borrowings of 54 basis points.
17
<PAGE>
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 cost; (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 were actually
received.
<TABLE>
<CAPTION>
Three Months Ended
June 30, 2000
--------------------------------------------------
Average Average
(Dollars in Thousands) Balance Interest Yield/cost
--------------- ------------- --------------
<S> <C> <C> <C>
Interest-earning assets:
Loans receivable:
Residential mortgage loans $ 189,023 $ 3,579 7.57%
Commercial loans 42,700 970 9.09
Consumer and other loans 25,984 581 8.94
--------------- -------------
Total loans 257,707 5,130 7.96
Investment securities (1) 41,200 776 7.53
Other earning assets 7,344 109 5.94
--------------- -------------
Total interest-earning assets 306,251 6,015 7.86
-------------
Noninterest-earning assets 10,938
---------------
Total Assets $ 317,189
===============
Interest-bearing liabilities:
Deposits:
Demand deposits $ 34,160 335 3.92
Savings deposits 13,480 67 1.99
Certificates of deposit 153,558 2,211 5.76
--------------- -------------
Total interest-bearing deposits 201,198 2,613 5.19
Borrowings 75,081 1,079 5.75
--------------- -------------
Total interest-bearing liabilities 276,279 3,692 5.35
-------------
Noninterest-bearing demand deposits 11,627
Other noninterest-bearing liabilities 1,934
---------------
Total liabilities 289,840
---------------
Stockholders' equity 27,349
Total liabilities and stockholders'
---------------
equity $ 317,189
===============
Net interest-earning assets $ 29,972
===============
Net interest income/interest rate spread $2,323 2.51%
============= ==============
Net interest margin 3.03%
==============
Ratio of average interest-earning assets
to average interest-bearing liabilities 110.85%
-------------------------------------------------------- =============
<CAPTION>
Three Months Ended
June 30, 1999
--------------------------------------------------
Average Average
(Dollars in Thousands) Balance Interest Yield/cost
--------------- ------------- ---------------
<S> <C> <C> <C>
Interest-earning assets:
Loans receivable:
Residential mortgage loans $ 167,180 $ 3,168 7.58%
Commercial loans 34,323 750 8.74
Consumer and other loans 22,260 518 9.31
--------------- -------------
Total loans 223,763 4,436 7.93
Investment securities (1) 40,496 647 6.39
Other earning assets 11,595 131 4.52
--------------- -------------
Total interest-earning assets 275,854 5,214 7.56
-------------
Noninterest-earning assets 9,194
---------------
Total Assets $285,048
===============
Interest-bearing liabilities:
Deposits:
Demand deposits $ 35,561 303 3.41
Savings deposits 18,109 78 1.72
Certificates of deposit 139,178 1,899 5.46
--------------- -------------
Total interest-bearing deposits 192,848 2,280 4.73
Borrowings 50,461 647 5.13
--------------- -------------
Total interest-bearing liabilities 243,309 2,927 4.81
-------------
Noninterest-bearing demand deposits 10,631
Other noninterest-bearing liabilities 1,588
---------------
Total liabilities 255,528
---------------
Stockholders' equity 29,520
Total liabilities and stockholders'
---------------
equity $285,048
===============
Net interest-earning assets $ 32,545
===============
Net interest income/interest rate spread $ 2,287 2.75%
============= ===============
Net interest margin 3.32%
===============
Ratio of average interest-earning assets
to average interest-bearing liabilities 113.38%
-------------------------------------------------------- =============
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
--------------------------------------------------
June 30, 2000
--------------------------------------------------
Average Average
(Dollars in Thousands) Balance Interest Yield/cost
--------------- ------------- --------------
<S> <C> <C> <C>
Interest-earning assets:
Loans receivable:
Residential mortgage loans $ 186,150 $ 7,046 7.57%
Commercial loans 41,211 1,850 8.98
Consumer and other loans 25,415 1,135 8.93
--------------- -------------
Total loans 252,776 10,031 7.94
Investment securities (1) 41,425 1,494 7.21
Other earning assets 7,148 202 5.65
--------------- -------------
Total interest-earning assets 301,349 11,727 7.78
-------------
Noninterest-earning assets 10,286
---------------
Total Assets $ 311,635
===============
Interest-bearing liabilities:
Deposits:
Demand deposits $ 34,530 654 3.79
Savings deposits 13,721 137 2.00
Certificates of deposit 153,048 4,355 5.69
--------------- -------------
Total interest-bearing deposits 201,299 5,146 5.11
Borrowings 69,670 1,971 5.66
--------------- -------------
Total interest-bearing liabilities 270,969 7,117 5.25
-------------
Noninterest-bearing demand deposits 11,277
Other noninterest-bearing liabilities 1,820
---------------
Total liabilities 284,066
---------------
Stockholders' equity 27,569
Total liabilities and stockholders'
---------------
equity $ 311,635
===============
Net interest-earning assets $ 30,380
===============
Net interest income/interest rate spread $ 4,610 2.53%
============= ==============
Net interest margin 3.06%
==============
Ratio of average interest-earning assets
to average interest-bearing liabilities 111.21%
-------------------------------------------------------- =============
(1)Includes FHLB stock.
Six Months Ended
--------------------------------------------------
June 30, 1999
--------------------------------------------------
Average Average
(Dollars in Thousands) Balance Interest Yield/cost
--------------- ------------- ---------------
Interest-earning assets:
Loans receivable:
Residential mortgage loans $ 168,250 $ 6,384 7.59%
Commercial loans 33,752 1,454 8.62
Consumer and other loans 21,794 1,017 9.33
--------------- -------------
Total loans 223,796 8,855 7.91
Investment securities (1) 40,626 1,299 6.39
Other earning assets 10,853 226 4.16
--------------- -------------
Total interest-earning assets 275,275 10,380 7.54
-------------
Noninterest-earning assets 8,441
---------------
Total Assets $ 283,716
===============
Interest-bearing liabilities:
Deposits:
Demand deposits $ 33,517 558 3.33
Savings deposits 18,643 159 1.71
Certificates of deposit 140,022 3,820 5.46
--------------- -------------
Total interest-bearing deposits 192,182 4,537 4.72
Borrowings 48,678 1,247 5.12
--------------- -------------
Total interest-bearing liabilities 240,860 5,784 4.80
-------------
Noninterest-bearing demand deposits 10,839
Other noninterest-bearing liabilities 1,427
---------------
Total liabilities 253,126
---------------
Stockholders' equity 30,590
Total liabilities and stockholders'
---------------
equity $ 283,716
===============
Net interest-earning assets $ 34,415
===============
Net interest income/interest rate spread $ 4,596 2.74%
============= ===============
Net interest margin 3.34%
===============
Ratio of average interest-earning assets
to average interest-bearing liabilities 114.29%
-------------------------------------------------------- =============
(1)Includes FHLB stock.
</TABLE>
18
<PAGE>
PROVISION FOR LOAN LOSSES
Provisions for loan losses are charged to earnings in order to bring
the total allowance for loan losses to a level considered appropriate by
management based on methodology implemented by the Company, which is designed to
assess, among other things, historical loan loss experience, the volume and type
of lending conducted by the Company, the amount of the Company's classified
assets, the status of past due principal and interest payments, loan-to-value
ratios of loans in the portfolio, general economic conditions, particularly as
they relate to the Company's market area, and any other factors related to the
collectibility of the Company's loan portfolio. Management of the Company
assesses the allowance for loan losses on at least a quarterly basis and makes
provisions for loan losses as deemed appropriate in order to maintain the
adequacy of the allowance for loan losses. The Company made no provision for
loan losses during the three and six month periods ended June 30, 2000 and 1999.
At June 30, 2000, the Company's allowance for loan losses amounted to
$2.8 million, or 1.0% of total loans and 398.1% of non-performing loans and
troubled debt restructurings. At December 31, 1999, the Company's allowance for
loan losses amounted to $2.7 million, or 1.1% of total loans and 496.7% of
non-performing loans and troubled debt restructurings.
NON-INTEREST INCOME
For the three months ended June 30, 2000, the Company reported a
decrease of $21,000, or 7.6% in non-interest income from $275,000 for the three
months ended June 30, 1999 to $254,000, from the three months ended June 30,
2000. The primary reasons for the decrease were a decrease in net gains on the
sale of loans of $27,000, a decrease in customer service fees of $13,000, a
decrease in net trading account gains of $10,000, and a decrease in other income
of $2,000, all of which were partially offset by a reduction in the loss from
the Company's investment in a limited liability company of $31,000.
For the six months ended June 30, 2000, the Company reported a decrease
of $42,000, or 7.9% in non-interest income from $530,000 for the six months
ended June 30, 1999 to $488,000, from the six months ended June 30, 2000. The
primary reasons for the decrease were a decrease in net gains on the sale of
loans of $89,000, a decrease in customer service fees of $10,000, a decrease in
net trading account gains of $13,000, and a decrease in other income of $2,000,
all of which were partially offset by a reduction in the loss from the Company's
investment in a limited liability company of $75,000.
NON-INTEREST EXPENSE
Non-interest expense includes salaries and employee benefits,
occupancy, depreciation, data processing, net costs related to foreclosed
assets, deposit insurance premiums, advertising and marketing, bank shares and
franchise tax, and other expense items. As disclosed in Note 4, SIGNIFICANT
EVENTS, of the financial statements, the Company recently purchased an office
building to be used as its new corporate headquarters and new main office branch
banking facility for the Bank. Its current headquarters and main office
facilities were evaluated under current accounting standards regarding
ACCOUNTING FOR THE IMPAIRMENT
19
<PAGE>
OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF, resulting in
the recognition of an impairment write-down on such facilities of $323,000
before income taxes. This non-cash charge is included in non-interest expenses
for the three and six month periods ended June 30, 2000.
Non-interest expense amounted to $2.1 million for the three months
ended June 30, 2000, compared to $1.7 million for the three months ended June
30, 1999, reflecting an increase of $395,000, or 23.8%, which increase primarily
consisted of the $323,000 non-cash charge related to the impairment write-down.
Other non-interest expenses changed as follows: salaries and employee benefits
increased $101,000, or 12.0%, data processing expenses increased $20,000, or
36.4%, and advertising expense increased $19,000, or 55.9%. All of such
increases were partially offset by decreases of $11,000, or 15.3%, in occupancy
expenses, $18,000, or 62.1%, in deposit insurance premiums, $2,000, or 2.4%, in
bank shares and franchise tax expenses, $8,000, or 8.9%, in depreciation
expenses, and $21,000, or 4.8%, in all other expenses, together with net
reduction of $8,000, or 66.7%, in the net costs of foreclosed assets.
Non-interest expense amounted to $3.7 million for the six months ended
June 30, 2000, compared to $3.4 million for the six months ended June 30, 1999,
reflecting an increase of $362,000, or 10.7%, which increase primarily consisted
of the $323,000 non-cash charge related to the impairment write-down. Other
non-interest expenses changed as follows: salaries and employee benefits
increased $168,000, or 9.6%, data processing expenses increased $39,000, or
36.4%, and advertising expense (primarily related to the Bank's centennial
celebration) increased $59,000, or 89.4%. All of such increases were partially
offset by decreases of $38,000, or 63.3%, in deposit insurance premiums,
$18,000, or 9.5%, in bank shares and franchise tax expenses, $14,000, or 7.9%,
in depreciation expenses, and $57,000, or 6.7%, in all other expenses, together
with net reduction of $100,000 in the net costs of foreclosed assets.
INCOME TAXES
For the three months ended June 30, 2000 and 1999, the Company incurred
income tax expense of $188,000 and $325,000, respectively. The Company's
effective tax rate amounted to 36.1% and 36.1% during the three months ended
June 30, 2000 and 1999, respectively. The difference between the effective rate
and the statutory tax rate is primarily related to variances in the items that
are either non-taxable or non-deductible.
For the six months ended June 30, 2000 and 1999, the Company incurred
income tax expense of $483,000 and $625,000, respectively. The Company's
effective tax rate amounted to 35.6% and 35.8% during the six months of 2000 and
1999, respectively. The difference between the effective rate and the statutory
tax rate is primarily related to variances in the items that are either
non-taxable or non-deductible.
LIQUIDITY 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
20
<PAGE>
Company's securities available for sale portfolio. 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
securities held to maturity portfolio, and other funds provided from
operations. While scheduled payments from the amortization of loans and
securities and maturing investment securities are relatively predictable
sources of funds, deposit flows, loan prepayments, and securities
prepayments are greatly influenced by general interest rates, economic
conditions and competition. Under current agreements, the Company has the
ability to borrow up to approximately $128.7 million from the FHLB through its
subsidiary Bank, and $4.7 million from the Federal Reserve Bank. Additionally,
using other investments as collateral, the subsidiary Bank could borrow $8.8
million.
Liquidity management is both a daily and long-term function of business
management. The Company uses its primary liquidity to meet its ongoing
commitments, to pay maturing certificates of deposit and deposit withdrawals,
and to fund loan commitments. The Company's excess liquidity and borrowing
capacity provide added readiness to meet ongoing commitments and growth. At June
30, 2000, the total approved commitments to extend credit amounted to $23.3
million. Certificates of deposit scheduled to mature in one year or less at the
same date totaled $82.8 million. Management believes that a significant portion
of maturing deposits will remain with the Company. The Company anticipates it
will continue to have sufficient funds together with available borrowings to
meet its current commitments.
CAPITAL RESOURCES
The Company (on a consolidated basis) and the Bank are subject to
various regulatory capital requirements administered by the federal banking
agencies. Failure to meet minimum capital requirements can initiate certain
mandatory and possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Company's and Bank's
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Company and the Bank must meet
specific capital guidelines that involve quantitative measures of their assets,
liabilities and certain off balance sheet items as calculated under regulatory
accounting practices. The capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings, and
other factors. Prompt corrective action provisions are not applicable to bank
holding companies.
Quantitative measures established by regulation to ensure capital
adequacy require the Company and the Bank to maintain minimum amounts and ratios
(set forth in the following table) of total and Tier 1 capital (as defined in
the regulations) to risk-weighted assets (as defined) and of Tier 1 capital to
average assets (as defined). Management believes, as of June 30, 2000, that the
Company and the Bank met all capital adequacy requirements to which they are
subject.
As of June 30, 2000, the most recent notification from the Federal
Deposit Insurance Corporation categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, an institution must maintain minimum total risk-based, Tier 1
risk-based and Tier 1 leverage ratios as set forth in the following tables.
There are no conditions or events since the notification that management
21
<PAGE>
believes have changed the Bank's category. The Company's and the Bank's actual
capital amounts and ratios as of June 30, 2000 are presented in the table below:
<TABLE>
<CAPTION>
Minumum to be
Minimum Well Capitalized Under
Capital Prompt Corrective
(Dollars in Thousands Actual Requirement Action Provisions
---------------------------- --------------------- ---------------------------
June 30, 2000 Amount Ratio Amount Ratio Amount Ratio
---------------------------------------------- ------------ -------------- ------------ ------- -------------- -----------
Total Capital to Risk Weighted Assets:
<S> <C> <C> <C> <C> <C> <C>
Acadiana Bancshares, Inc. $30,034 16.2% $14,830 8.0% N/A N/A %
LBA Savings Bank 25,567 14.1% 14,512 8.0% 18,538 10.0%
Tier 1 Capital to Risk Weighted Assets:
Acadiana Bancshares, Inc. 27,698 14.9% 12,657 4.0% N/A N/A %
LBA Savings Bank 23,280 12.8% 12,475 4.0% 18,986 6.0%
Tier 1 Capital to Average Assets:
Acadiana Bancshares, Inc. 27,698 8.8% 12,657 4.0% N/A N/A %
LBA Savings Bank 23,280 7.5% 12,475 4.0% 15,594 5.0%
</TABLE>
IMPACT OF INFLATION AND CHANGING PRICES
The preparation of financial statements in accordance with generally
accepted accounting principles 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.
YEAR 2000 CONSIDERATIONS
As of the date hereof, the Company has not experienced any significant
Year 2000 problems with respect to its computer systems or software or the
systems and software of third-party vendors. The Company also is not aware that
Year 2000 issues have adversely affected the ability of its commercial customers
to meet their debt service obligations to the Company or otherwise. The Company
will continue to monitor systems for problems in the future, however, and costs
and/or issues related to that process are not expected to be significant.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND
INTEREST RATE RISK
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.
22
<PAGE>
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 are 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. DeJean, Saloom, and Beacham,
and the Asset/Liability Management Committee ("ALCO"), which is composed of six
officers of the Bank. The Finance Committee meets jointly with the ALCO,
quarterly, to 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 affecting the Company's asset/liability management related activities
based upon estimated market risk sensitivity, policy limits, and overall market
interest rate levels and trends. The Company's 1999 Annual Report to
Stockholders' has further information relating to market risk. The Company does
not believe that its exposure to market risks has changed materially since
December 31, 1999.
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"), which is the primary
component of the Company's earnings. If longer term U.S. Government Treasury
Bond rates fall, and during the same time period, shorter term U.S. Government
Treasury Notes and Bond rates rise, the Company's net interest margin will
likely decrease.
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 Company's 1999
Annual Report to Stockholders' has further information relating to interest rate
risk. The Company does not believe that its exposure to interest rate risk has
changed materially since December 31, 1999.
23
<PAGE>
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.
---------------------------------------------------
On April 26, 2000 the Company held the annual meeting of the
stockholders for the following purposes: (1) to elect three directors
(Lawrence Gankendorff, Don J. O'Rourke, Sr., and Thomas Ortego) for a
three-year term expiring in 2003, and until their successors are
elected and qualified; and (2) to ratify the appointment by the Board
of Directors of Castaing, Hussey, Lolan & Dauterive, LLP as the
Company's independent auditors for the fiscal year ending December 31,
2000.
Votes were cast as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
------------------------- -------------------- ---------------------- --------------------- -------------------------
Lawrence Castaing, Hussey,
Gankendorff Don J. O'Rourke, Sr. Thomas S. Ortego Lolan, & Dauterive, LLP
------------------------- -------------------- ---------------------- --------------------- -------------------------
For 1,210,163 1,210,163 1,210,163 1,214,470
------------------------- -------------------- ---------------------- --------------------- -------------------------
Against N/A N/A N/A 13,450
------------------------- -------------------- ---------------------- --------------------- -------------------------
------------------------- -------------------- ---------------------- --------------------- -------------------------
Abstain N/A N/A N/A 1,693
------------------------- -------------------- ---------------------- --------------------- -------------------------
------------------------- -------------------- ---------------------- --------------------- -------------------------
Withheld 19,450 19,450 19,450 N/A
------------------------- -------------------- ---------------------- --------------------- -------------------------
------------------------- -------------------- ---------------------- --------------------- -------------------------
Total Votes Cast 1,229,613 1,229,613 1,229,613 1,229,613
------------------------- -------------------- ---------------------- --------------------- -------------------------
</TABLE>
There were no broker "non-votes" with respect to the matters considered
at the Annual Meeting.
Item 5. OTHER INFORMATION.
-----------------
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
--------------------------------
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
24
<PAGE>
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.
b) No Form 8-K reports were filed during the quarter.
25
<PAGE>
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: August 11, 2000 By: /s/ GERALD G. REAUX, JR.
-----------------------
Gerald G. Reaux, Jr., President and
Chief Executive Officer
Date: August 11, 2000 By: /s/ EMILE E. SOULIER, III
-------------------------
Emile E. Soulier, III, Vice-President
and Chief Financial Officer
26
<PAGE>
