<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
- ------- TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from --------- to ---------
Commission File Number 333-2770
ALGIERS BANCORP, INC.
(Exact name of small business issuer as specified in its charter)
LOUISIANA 72 - 1317594
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
#1 WESTBANK EXPRESSWAY, NEW ORLEANS, LOUISIANA 70114
(Address of principal executive offices)
Issuer's telephone number, including area code: (504) 367-8221
Check mark whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the issuer was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No X*
----- -----
Shares of common stock, par value $.01 per share, outstanding as of
March 31, 1996: 100
Transitional Small business Disclosure Format (check one):
Yes No X .
----- -----
*The issuer just became subject to the filing requirements of
Section 13 or 15(d) when its Form SB-2 was declared effective on
May 13, 1996.
<PAGE>
ALGIERS BANCORP, INC.
FORM 10-QSB
QUARTER ENDED MARCH 31, 1996
PART I - FINANCIAL INFORMATION
Interim Financial Information required by Rule 10-01 of Regulation S-X and
Item 303 of Regulation S-B is included in this Form 10-Q as referenced below:
Item 1 - Financial Statements
Statement of Financial Condition at March 31, 1996 ................Page 3
Statement of Income From February 5, 1996 (Date
of Incorporation) To March 31,1996 .............................. 4
Statement of Cash Flows From February 5, 1996 (Date of
Incorporation) To March 31, 1996 ................................ 5
Notes to Financial Statements ..................................... 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations ................................... 7
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings ............................................. 8
Item 2 - Changes in Securities ......................................... 8
Item 3 - Defaults Upon Senior Securities ............................... 8
Item 4 - Submission of Matters to a Vote of Security-Holders ........... 8
Item 5 - Other Information ............................................. 8
Item 6 - Exhibits and Reports on Form 8-K .............................. 8
Signatures ............................................................. 9
2
<PAGE>
Algiers Bancorp, Inc.
STATEMENT OF FINANCIAL CONDITION
March 31, 1996
(Unaudited)
ASSETS
Assets:
Receivable $ 1,000
---------
Total Assets $ 1,000
=========
LIABILITIES AND STOCKHOLDER EQUITY
Liabilities $ -
---------
Total Liabilities $ -
Stockholders' Equity:
Common Stock, Par Value $.01, 10,000,000
Shares Authorized; 100 Shares Issued and
Outstanding $ 1
Paid in Capital in Excess of Par 999
Retained Earnings -
---------
Total Stockholder Equity $ 1,000
---------
Total Liabilities and Stockholder
Equity $ 1,000
=========
See accompanying notes to financial statements.
3
<PAGE>
Algiers Bancorp, Inc.
STATEMENT OF INCOME
For the Period from February 5, 1996
(Date of Incorporation) to March 31, 1996
(Unaudited)
Total Income $ -
Total Expense $ -
---------
Net Income $ -
=========
Earnings Per Share $ -
=========
See accompanying notes to financial statements.
4
<PAGE>
Algiers Bancorp, Inc.
STATEMENT OF CASH FLOWS
For the Period from February 5, 1996
(Date of Incorporation) to March 31, 1996
(Unaudited)
Operations:
Net Cash Provided by Operations $ -
Investing Activities:
Net Cash Provided by Investing Activities -
Financing Activities:
Proceeds from Stock Issuance 1,000
---------
Net Cash Provided by Financing Activities 1,000
---------
Increase in Cash and Cash Equivalents 1,000
Cash and Cash Equivalents at Beginning of Period -
---------
Cash and Cash Equivalents at End of Period $ 1,000
=========
See accompanying notes to financial statements.
5
<PAGE>
Algiers Bancorp, Inc.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
March 31, 1996
Note 1 - Basis of Presentation -
On February 5, 1996, Algiers Homestead Association (the "Homestead")
incorporated Algiers Bancorp, Inc., (the "Company") to facilitate the
conversion of the Homestead from mutual to stock form (the "Conversion"). In
connection with the Conversion, the Company is offering its common stock to
the depositors and borrowers of the Homestead as of specified dates, to an
employee stock ownership plan and to members of the general public. Upon
consummation of the Conversion, all of the Homestead's to be outstanding
common stock will be issued to the Company, and the Company will become the
holding company for the Homestead.
The Company filed a Form SB-2 with the Securities and Exchange
Commission ("SEC") on March 26, 1996, which as amended was declared effective
by the SEC on May 13, 1996. The Homestead filed a Form AC with the Office of
Thrift Supervision ("OTS") and the Office of Financial Institutions ("OFI")
on March 26, 1996. The Form AC and related offering and proxy materials, as
amended, were conditionally approved by the OTS and OFI by letters dated May
13, 1996 and May 14, 1996. The Company also filed an Application H-(e) 1-S
with the OTS and the OFI on March 26, 1996, which was conditionally approved
by the OTS by letter dated May 13, 1996. The Application H-(e) 1-S is
currently pending with the OFI.
Consummation of the Conversion is contingent upon approval of the plan
by the members of the Homestead and the sale of a sufficient number of shares
of common stock consistent with an independent appraisal of the pro forma
market value of the common stock. The members of the Association are
scheduled to vote upon the Plan at a special meeting to be held on June 27,
1996, and the subscription and community offering closed on June 24, 1996.
In connection with the incorporation of the Company, the Company issued
100 shares of common stock to the Association. The shares will be canceled
upon consummation of the Conversion, which will be accounted for under the
pooling of interests method of accounting.
The accompanying unaudited financial statements were prepared in
accordance with instructions for Form 10-QSB 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 adjustments (consisting only of
normal recurring accruals) which, in the opinion of management, are necessary
for a fair presentation of the financial statements have been included.
6
<PAGE>
Note 2 - Earnings Per Share -
Earnings per share is not considered meaningful as the Conversion has
not yet been completed, the Company has not yet engaged in operations, and
the 100 shares currently held by the Association will be canceled upon
consummation of the Conversion.
7
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Algiers Bancorp, Inc is a Louisiana corporation organized in February,
1996 by the Homestead for the purpose of becoming a unitary holding company
of the Homestead. The Company will purchase all of the capital stock of
the Homestead to be issued in the Conversion in exchange for 50% of the net
conversion proceeds and will retain the remaining 50% of the net conversion
proceeds as its initial capitalization. Immediately following the
Conversion, the only significant assets of the Company will be the capital
stock of the Homestead, the Company's loan to the ESOP, and the remainder
of the net Conversion proceeds retained by the Company. Initially, the
business and management of the Company will primarily consist of the
business and management of the Homestead. Initially, the Company will
neither own nor lease any property, but will instead use the premises,
equipment and furniture of the Homestead. At the present time, the Company
does not intend to employ any persons other than officers of the
Association, and the Company will utilize the support staff of the
Homestead from time to time. Additional employees will be hired as
appropriate to the extent the Company expands or changes its business in
the future.
Management believes that the holding company structure will provide
the Company with additional flexibility to diversify, should it decide
to do so, its business activities through existing or newly formed
subsidiaries, or through acquisitions of or mergers with other financial
institutions and financial services related companies. Although there are
no current arrangements, understandings or agreements, written or oral,
regarding any such opportunities or transactions, the Company will be in a
position after the Conversion, subject to regulatory limitations and the
Company's financial position, to take advantage of any such acquisition
and expansion opportunities that may arise. The initial activities of the
Company are anticipated to be funded by the proceeds retained by the
Company and earnings thereon or, alternatively, through dividends from the
Association.
To date, the Company has not engaged in any business activities other
than those related to the Conversion.
8
<PAGE>
Algiers Bancorp, Inc.
Form 10-QSB
Quarter Ended March 31, 1996
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings:
There are no matters required to be reported under this item.
Item 2 - Changes in Securities:
There are no matters required to be reported under this item.
Item 3 - Defaults Upon Senior Securities:
There are no matters required to be reported under this item.
Item 4 - Submission of Matters to a Vote of Security Holders:
On March 20, 1996, the Association executed a consent of sole
stockholder pursuant to which it (1) approved the division of the
directors of the Company into three classes, as follows: The first
class, consisting of Messrs. LeBoeuf and Humphrey, III, for a term of
office expiring in 1999; the second class, consisting of Messrs. Gary
and Dang, for a term of office expiring in 1998; and the third class,
consisting of Mr. Hugh E. Humphrey, Jr., for a term of office expiring
in 1997, or until their successors are elected and appointed; and
(2) ratified the appointment of LaPorte, Sehrt, Romig & Hand as the
Company's independent public accountants for the fiscal year ending
December 31, 1996.
Item 5 - Other Information:
There are no matters required to be reported under this item.
Item 6 - Exhibits and Reports on Form 8-K:
(a) The following exhibits are filed herewith:
EXHIBIT NO. DESCRIPTION
27.1 Financial Data Schedule
99.1 Financial statements for Algiers Homestead
Association as of March 31, 1996 and for the
quarter ended March 31, 1996, including
management's discussion and analysis of financial
condition and results of operations.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during the
quarter ended March 31, 1996.
9
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Issuer, caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALGIERS BANCORP, INC.
REGISTRANT
DATE: JUNE 24, 1996 BY: /s/ HUGH E. HUMPHREY, JR.
-----------------------------------
HUGH E. HUMPHREY, JR., CHAIRMAN
OF THE BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
DATE: JUNE 24, 1996 BY: /s/ DENNIS J. MCCLUER
-----------------------------------
DENNIS J. MCCLUER
VICE PRESIDENT
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EXHIBIT 99.1
FOR ALGIERS HOMESTEAD ASSOCIATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1625
<INT-BEARING-DEPOSITS> 1225
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 6916
<INVESTMENTS-CARRYING> 22880
<INVESTMENTS-MARKET> 22654
<LOANS> 9654
<ALLOWANCE> (521)
<TOTAL-ASSETS> 43505
<DEPOSITS> 39206
<SHORT-TERM> 0
<LIABILITIES-OTHER> 182
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 4117
<TOTAL-LIABILITIES-AND-EQUITY> 43505
<INTEREST-LOAN> 169
<INTEREST-INVEST> 516
<INTEREST-OTHER> 7
<INTEREST-TOTAL> 692
<INTEREST-DEPOSIT> 454
<INTEREST-EXPENSE> 454
<INTEREST-INCOME-NET> 238
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 29
<EXPENSE-OTHER> 208
<INCOME-PRETAX> 87
<INCOME-PRE-EXTRAORDINARY> 87
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 2.344
<LOANS-NON> 9
<LOANS-PAST> 9
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 530
<CHARGE-OFFS> 0
<RECOVERIES> 9
<ALLOWANCE-CLOSE> 521
<ALLOWANCE-DOMESTIC> 521
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE>
CONTENTS
Financial Statements:
Statements of Financial Condition -
March 31, 1996 (Unaudited)
and December 31, 1995........................................ Page 2
Statements of Income (Unaudited) -
For the Three Months Ended March 31, 1996
and 1995..................................................... 4
Statement of Retained Earnings
(Unaudited) - for the Three Months Ended
March 31, 1996............................................... 5
Statements of Cash Flows (Unaudited ) -
For the Three Months Ended March 31, 1996
and 1995..................................................... 6
Notes to consolidated financial Statements..................... 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 10
<PAGE>
ALGIERS HOMESTEAD ASSOCIATION
STATEMENTS OF FINANCIAL CONDITION
AS OF MARCH 31, 1996 AND DECEMBER 31, 1995
ASSETS
(UNAUDITED)
MARCH 31, DECEMBER 31,
1996 1995
------------ ------------
(IN THOUSANDS)
Cash and Cash Equivalents $ 1,625 $ 1,452
Investments Available-for-Sale-at
Fair Value 0 697
Investment Securities Held-to-Maturity -
Fair Value of $ 1,204 and $ 1,204
at December 31, 1995 and March 31, 1996,
respectively 1,225 1,225
Loans Receivable - Net 9,654 9,690
Mortgage-Backed Securities -
Available-for-Sale at Fair Value 6,916 7,688
Mortgage-Backed Securities Held to Maturity
Fair Value $ 19,883 and $ 22,654
at December 31, 1995 and March 31, 1996,
respectively 22,880 20,461
Stock in Federal Home Loan Bank 436 430
Accrued Interest Receivable 205 229
Real Estate Owned - Net 45 92
Office Properties and Equipment, at Cost -
Furniture, Fixtures and Equipment, Less
Accumulated Depreciation of $ 165 and
$ 170 at December 31, 1995 and March
31, 1996, respectively 225 227
Deferred Charges 80 5
Other Assets 4 3
Deferred Tax Asset 59 59
Income Tax Receivable 151 192
------------ ------------
Total Assets $ 43,505 $ 42,450
------------ ------------
------------ ------------
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
ALGIERS HOMESTEAD ASSOCIATION
STATEMENTS OF FINANCIAL CONDITION
AS OF MARCH 31, 1996 AND DECEMBER 31, 1995
LIABILITIES AND RETAINED EARNINGS
(UNAUDITED)
MARCH 31, DECEMBER 31,
1996 1995
------------ ------------
(IN THOUSANDS)
Deposits $ 39,206 $ 38,203
Advance Payments from Borrowers for
Insurance and Taxes 137 152
Accrued Interest Payable on Depositors'
Accounts 7 3
Other Liabilities 38 52
------------- ------------
Total Liabilities 39,388 38,410
------------- ------------
Retained Earnings 4,134 4,077
Unrealized Loss on Securities Available-for-
Sale, Net of Applicable Deferred Income
Tax (17) (37)
------------- ------------
Total Retained Earnings 4,117 4,040
------------- ------------
Total Liabilities and Retained
Earnings $ 43,505 $ 42,450
------------- ------------
------------- ------------
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
ALGIERS HOMESTEAD ASSOCIATION
STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED) (UNAUDITED)
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1996 1995
------------- ------------
(IN THOUSANDS)
INTEREST INCOME
Loans $ 169 $ 199
Mortgage-Backed Securities 469 401
Investment Securities 47 21
Other Interest-Earning Assets 7 6
------------- ------------
Total Interest Income 692 627
------------- ------------
INTEREST EXPENSE
Deposits 454 387
FHLB Advances - 5
------------- ------------
Total Interest Expense 454 392
NET INTEREST INCOME BEFORE
PROVISION (CREDIT) FOR LOAN LOSSES 238 235
PROVISION (CREDIT) FOR LOAN LOSSES - 8
------------- ------------
NET INTEREST INCOME AFTER PROVISION
(CREDIT) FOR LOAN LOSSES 238 243
------------- ------------
NON-INTEREST INCOME
Service Charges and Fees 28 20
Lawsuit Proceeds -
Recapture of Allowance on GIC Bonds
Gain on Sale of Investments 29
Miscellaneous Income 4
------------- ------------
Total Non-Interest Income 57 24
------------- ------------
NON-INTEREST EXPENSES
Compensation and Benefits 116 109
Occupancy and Equipment 24 24
Computer 6 6
Deposit Insurance Premium 25 22
Recovery of Losses on Real Estate
Owned - -
Real Estate Owned Expense - Net 2 10
Other 35 59
------------- ------------
Total Non-Interest Expense 208 230
INCOME BEFORE FEDERAL
INCOME TAX EXPENSE 87 37
FEDERAL INCOME TAX EXPENSE 30 12
------------- ------------
NET INCOME $ 57 $ 25
------------- ------------
------------- ------------
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
ALGIERS HOMESTEAD ASSOCIATION
STATEMENT OF RETAINED EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
Balance, Beginning of Period $ 4,077
Net Income 57
----------
Balance, End of Period $ 4,134
----------
----------
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
ALGIERS HOMESTEAD ASSOCIATION
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED) (UNAUDITED)
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1996 1995
------------- ------------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 57 $ 25
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Depreciation and Amortization 5 3
Premium Amortization Net of Discount
Accretion (3) 1
Increase in Accrued Interest Payable 4 1
Decrease in Other Liabilities (23) (30)
Decrease in Accrued Interest Receivable 24 23
Decrease in Income Tax Payable - (91)
Recovery of Loan Losses (8)
Recovery of Losses on Real Estate Owned (2) (6)
Decrease in Other Assets - 3
Decrease in Deferred Loan Fees (75) (36)
(Increase) Decrease in Prepaid
Income Taxes 40 (7)
Decrease in Deferred Income Taxes - 65
----------- -------------
Net Cash Provided by (Used In)
Operating Activities 27 (57)
----------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Maturities of Investment Securities -
Held-to-Maturity - 99
Maturities of Investment Securities -
Available-for-Sale 700 100
Purchases of Mortgage Backed Securities -
Held-to-Maturity (2,845) -
Maturities of Mortgage Backed Securities -
Held-to-Maturity 444 584
Maturities of Mortgage Backed Securities -
Available-for-Sale 772 278
Principal Collected on Loans 395 400
Loans Made to Customers (349) (267)
Non-Cash Dividend - FHLB (6) (6)
Purchase of Furniture and Fixtures (3) (2)
Proceeds from Sales of Foreclosed Real
Estate 50 51
----------- -------------
Net Cash Provided by (Used In)
Investing Activities (842) 1,237
----------- -------------
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
ALGIERS HOMESTEAD ASSOCIATION
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED) (UNAUDITED)
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1996 1995
-------------- --------------
(IN THOUSANDS)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase (Decrease) in Deposits $ 1,003 $ (854)
Net Increase (Decrease) in Advances
from Borrowers for Taxes and Insurance (15) (12)
Repayment of Federal Home Loan Bank
Advance - (400)
------------- -----------
Net Cash (Used in) Financing
Activities 988 (1,266)
------------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 173 (86)
CASH AND CASH EQUIVALENTS -
BEGINNING OF YEAR 1,452 501
------------- -----------
CASH AND CASH EQUIVALENTS -
END OF YEAR $ 1,625 $ 415
------------- -----------
------------- -----------
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
ALGIERS HOMESTEAD ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
QUARTER ENDED MARCH 31, 1996
(UNAUDITED)
Note 1 - Basis of Presentation -
The accompanying unaudited financial statements were prepared in accordance
with instructions for Form 10-QSB 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 adjustments (consisting only of normal
recurring accruals) which, in the opinion of management, are necessary for a
fair presentation of the financial statements have been included.
The results of operations for the three months ended March 31, 1996 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1996. The unaudited financial statements and notes thereto
should be read in conjunction with the financial statements and notes thereto
of Algiers Homestead Association contained in the Company's prospectus dated
May 13, 1996.
The provision for income taxes is based upon the effective tax rate expected
to be applicable for the entire fiscal year.
Note 2 - Adoption of Plan of Conversion -
On January 16, 1996, the Board of Directors of Algiers Homestead Association
adopted a Plan of Conversion ("the Plan"), which proposed the conversion of the
Association from a Louisiana chartered mutual savings and loan association to a
Louisiana chartered stock savings and loan association to be known as Algiers
Homestead Association ("the Homestead"), in its mutual or stock form, as the
sense of the reference requires) and the concurrent issuance of its capital
stock to Algiers Bancorp, Inc. ("the Holding Company").
The Plan provides that non-transferable subscription rights to purchase common
stock will be offered first to Eligible Account Holders of record as of the
Eligibility Record Date, then to Tax-Qualified Employee Stock Benefit Plans,
then to Supplemental Eligible Account Holders, then to Other Members, and then
to Directors, Officers and Employees. Shares of common stock remaining unsold
after the Subscription Offering, if any, will be offered for sale to the public
through a Community Offering and/or Syndicated Community Offering, as determined
by the Board of Directors of the Holding Company and the Homestead.
Consummation of the conversion is contingent upon approval by the members of the
Homestead and the sale of a sufficient number of shares of common stock
consistent with an independent appraisal of the pro forma market value of the
common stock. The members of the Homestead are scheduled to vote upon the Plan
at a special meeting to be held on June 27, 1996, and the subscription and
community offering closed on June 24, 1996.
The costs of issuing the common stock will be deferred and deducted from the
sale proceeds. The Homestead had incurred $ 40,852 in stock issuance costs as
of March 31, 1996. If the conversion is not completed, these deferred costs
will be charged to operations.
8
<PAGE>
The Company filed a Form SB-2 with the Securities and Exchange Commission
("SEC") on March 26, 1996, which as amended was declared effective by the SEC on
May 13, 1996. The Company filed a Form AC with the Office of Thrift Supervision
("OTS") and the Office of Financial Institutions ("OFI") on March 26, 1996. The
Form AC and related offering and proxy materials, as amended, were conditionally
approved by the OTS and OFI by letters dated May 13, 1996 and May 14, 1996. The
Company also filed an Application H- (e) 1-S with the OTS and OFI on March 26,
1996, which was conditionally approved by the OTS by letter dated May 13 1996.
The Application H- (e) 1-S is currently pending with the OFI.
9
<PAGE>
ALGIERS HOMESTEAD ASSOCIATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The profitability of the Homestead depends primarily on its net interest income,
which is the difference between interest and dividend income on interest-earning
assets, principally mortgage-backed securities, loans and investments
securities, and interest expense on interest-bearing deposits. Net interest
income is dependent upon the level of interest rates and the extent to which
such rates are changing. The Homestead's profitability also is dependent, to a
lesser extent, on the level of its noninterest income, provision (credit) for
loan losses, noninterest expense and income taxes. In each of the three months
ended March 31, 1996 and 1995, net interest income before provision (credit) for
loan losses exceeded total noninterest expense. Total noninterest expense
consists of general, administrative and other expenses, such as compensation and
benefits, occupancy and equipment expense, federal insurance premiums, and
miscellaneous other expenses.
RESULTS OF OPERATIONS
The Homestead's net income increased by $32,000 or 128.0% in the three months
ended March 31, 1996 from the three months ended March 31, 1995. The
increase was due to an increase of $9,000 or 3.9% in net interest income, an
increase of $37,000 or 185.0% in noninterest income, and a decrease of $4,000
or 1.9% in noninterest expense, which factors were partially offset by an
increase of $18,000 or 150.0% in income taxes.
The increased net interest income was due to an increase in the average
interest rate spread from 2.01% in the March 31, 1995 quarter to 2.15% in the
March 31, 1996 quarter. The yield on interest-earning assets increased
faster than the average rate on deposits as the Homestead was able to control
the rate of increase on deposits thorough discretionary pricing. The average
rate on deposits increased from 4.14% in the first quarter of 1995 to 4.71%
in the first quarter of 1996, while the average yield on interest-earning
assets increased from 6.15% to 6.86% over the same period. The increased
yield on assets was primarily due to higher yields on the Homestead's
adjustable-rate mortgage loans and adjustable-rate mortgage-backed
securities. In addition, in the first quarter of 1996, the Homestead used a
portion of its maturing investment securities to fund the purchase of
mortgage-backed securities, which are higher yielding than investment
securities. Mortgage-backed securities increased to $29.8 millon or 68.5% of
total assets at March 31, 1996.
Total interest income increased by $71,000 or 11.4% in the first quarter of
1996 compared to the first quarter of 1995, due to the increase in the
average yield. Total interest expense increased by $62,000 or 15.8% in the
first quarter of 1996 compared to the first quarter of 1995, primarily due to
the increase in the average rate. In addition, average deposits increased by
$1.1 million or 2.9% in the first quarter of 1996 over the comparable 1995
quarter.
The Homestead had no provision or credit for loan losses in the quarters
ended March 31, 1996 and 1995. Total nonperforming loans and troubled debt
restructurings totalled $75,000 at March 31, 1996, and the allowance for loan
losses at such date was $525,000.
10
<PAGE>
The increase in total noninterest income was primarily due to a $26,000 gain on
the sale of a mortgage-backed security that was available for sale during the
first quarter of 1996.
The decrease in total noninterest expense was due to a $14,000 decrease in
professional fees and a $9,000 decrease in miscellaneous expenses, which
decreases were partially offset by increases of $13,000 in compensation and
benefits, $4,000 in deposit insurance premiums and $2,000 in occupancy expense.
The increase in income tax expense was primarily due to an increase of $50,000
or 135.1% in pre-tax income.
LIQUIDITY AND CAPITAL RESOURCES
The Homestead is required under applicable federal regulations to maintain
specified levels of "liquid" investments in qualifying types of U.S. Government,
federal agency and other investments having maturities of five years or less.
Current OTS regulations require that a savings institution maintain liquid
assets of not less than 5 % of its average daily balance of net withdrawable
deposit accounts and borrowings payable in one year or less, of which short-term
liquid assets must consist of not less than 1 %. At March 31, 1996, the
Homestead's liquidity was 9.2 % or $ 1.6 million in excess of the minimum OTS
requirement.
The Homestead is required to maintain regulatory capital sufficient to meet
tangible, core and risk-based capital ratios of 1.5 %, 3.0 %, and 8.0 %,
respectively. At March 31, 1996, the Homestead's tangible and core capital both
amounted to $4.1 million or 9.50% of adjusted total assets of $43.5 million, and
the Homestead's risk-based capital amounted to $4.1 million or 36.50% of
adjusted risk-weighted assets of $11.3 million.
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