UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ----------- to -------------
Commission File Number 0-21165
FIRST ALLEN PARISH BANCORP, INC.
(Name of small business issuer in its charter)
Delaware 72-1331593
- -----------------------------------------------------------------
(State or other (I.R.S. Employer Identification
jurisdiction of No.)
incorporation or organization)
222 South 10th Street, Oakdale, Louisiana 71463
- -----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(318) 335-2031
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of class)
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past 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 ---.
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained herein, and no
disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The Registrant's revenues for the fiscal year ended December
31, 1996 were $2,135,358.
As of January 29, 1997, there were issued and outstanding
264,506 shares of the Registrant's Common Stock. The
Registrant's voting stock is not regularly and actively traded,
and there are no regularly quoted bid and asked prices for the
Registrant's voting stock. Accordingly, the Registrant is unable
to determine the aggregate market value of the voting stock held
by non-affiliates.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Parts II and III of Form 10-KSB - Portions of Annual Report
to Stockholders for the fiscal year ended December 31, 1996.
Part III of Form 10-KSB - Portions of Proxy Statement for
1997 Annual Meeting of Stockholders.
<PAGE>
PART I
Item 1. Description of Business
General
First Allen Parish Bancorp, Inc. ("First Allen Parish
Bancorp" and, with its subsidiaries, the "Company") was formed in
June 1996 at the direction of First Federal Savings and Loan
Association of Allen Parish ("First Federal" or the
"Association") for the purpose of owning all of the outstanding
stock of the Association issued upon the conversion of the
Association from the mutual to stock form (the "Conversion"). On
September 27, 1996, First Allen Parish Bancorp acquired all of
the shares of the Association in connection with the completion
of the Conversion. All references to the Company, unless
otherwise indicated, at or before September 27, 1996 refer to the
Association. The Company's common stock is quoted on the
National Security Quotation System "Pink Sheets" under the symbol
"FALN".
First Federal is a federally-chartered stock savings and
loan association headquartered in Oakdale, Louisiana. First
Federal was originally chartered in 1962. Its deposits are
insured up to the maximum allowable amount by the Savings
Association Insurance Fund ("SAIF") of the Federal Deposit
Insurance Corporation (the "FDIC"). Through its office in
Oakdale, First Federal serves communities located in Allen Parish
and in the surrounding parishes in the State of Louisiana. At
December 31, 1996, the Company had total assets of $31.5 million,
deposits of $25.7 million and stockholders' equity of $4.3
million.
The Association has been, and intends to continue to be, a
community-oriented financial institution offering selected
financial services to meet the needs of the communities it
serves. The Association attracts deposits from the general
public and historically has used such deposits, together with
other funds, to originate loans secured by real estate, including
one- to four-family residential mortgage loans, commercial real
estate loans, land loans, construction loans and loans secured by
other properties. At December 31, 1996, 83.6% of the
Association's gross loan portfolio consisted of loans secured by
real estate. The Association also originates consumer and other
loans consisting primarily of loans secured by automobiles,
manufactured homes, loans secured by deposits ("share loans") and
lines of credit. At December 31, 1996, consumer and other loans
constituted 25.3% of the Association's gross loan portfolio. In
order to supplement its loan originations, the Association has
invested a significant portion of its assets in mortgage-backed
securities, which are insured or guaranteed by federal agencies,
as well as other investments. At December 31, 1996, the
Association's mortgage-backed securities portfolio totaled $17.2
million, or 54.6% of total assets. See "- Investment
Activities."
The executive office of the Company and the Association is
located at 222 South 10th Street, Oakdale, Louisiana 71463 and
its telephone number is (318) 335-2031.
Market Area and Competition
First Federal serves Allen Parish, Louisiana and the
surrounding parishes, from its office in Oakdale, Louisiana.
Allen Parish consists of small farms and residential communities
of predominantly one- to four-family residences. The
Association's market for deposits is concentrated in Allen
Parish. The Association is the only independent financial
institution headquartered in Allen Parish.
The economy of the Association's market area consists
primarily of small farming communities, the timber and wood
industry and state and local government. The largest employers
in the Association's market area are the Federal Bureau of
Prisons, which operates a corrections facility, Boise Cascade
Corporation, a wood manufacturer, Arizona Chemical, a division of
International Paper Co., Grand Casino, which is operated by the
Coushatta Indians and the Allen Parish School Board. In recent
years the oil and gas industry has become a growing segment of
the Association's economy.
The Association's business and operating results are
significantly affected by the general economic conditions
precedent in the Association's market area. As of March 31,
1996, the unemployment rate in the Association's market area was
7.8%. During the period between 1990 and 1994, per capita income
growth in the Association's market area
<PAGE>
was below that experienced in the state of Louisiana and the
nation as a whole. Management believes that the population in
the Association's market area will remain stable in the
foreseeable future.
The Association faces significant competition in attracting
deposits from commercial banks, other savings institutions and
credit unions. The Association faces additional competition for
deposits from short-term money market funds, from other corporate
and government securities funds and from brokerage funds and
insurance companies. The Association also faces significant
competition in the origination of loans from savings
institutions, mortgage banking companies, credit unions and
commercial banks.
Lending Activities
General. The Association's loan portfolio consists
primarily of loans secured by real estate which consist primarily
of loans secured by one- to four-family residences, commercial
real estate loans, construction loans and loans secured by other
properties. The Association also originates consumer and other
loans consisting primarily of loans secured by automobiles,
manufactured homes, share loans, lines of credit and other
consumer loans. At December 31, 1996, the Association's gross
loans totaled $13.0 million, of which $7.3 million or 56.1% were
one-to four-family residential mortgage loans. Of the one- to
four-family mortgage loans outstanding at that date, 26.1% were
fixed-rate loans, and 73.9% were adjustable-rate loans. At
December 31, 1996, $1.5 million or 11.5% of gross loans were
secured by commercial real estate properties consisting of retail
shops and churches, $487,000, or 3.7%, of gross loans were
construction loans for the construction of owner-occupied homes,
and $451,000, or 3.5% of gross loans consisted of land loans. At
that date, consumer and other loans totaled $3.0 million or 23.2%
of the Association's gross loan portfolio, of which $795,000, or
6.1%, consisted of share loans, $475,000, or 3.7%, consisted of
automobile loans, $1,003,000, or 7.7%, consisted of lines of
credit to small farms and businesses, $22,000 or 0.17% consisted
of loans on manufactured homes and $721,000 or 5.5% consisted of
other loans (consisting of personal loans, disaster relief loans,
and loans to governmental entities and non-profit organizations).
The Association also invests in mortgage-backed securities.
At December 31, 1996, mortgage-backed and related securities
totaled $17.2 million. See "- Investment Activities."
The Association's loans-to-one borrower limit is generally
the greater of 15% of unimpaired capital and surplus or $500,000.
At December 31, 1996, the maximum amount which the Association
could have lent under this limit to any one borrower and the
borrower's related entities was approximately $615,000. At
December 31, 1996, the Association had no loans or groups of
loans to related borrowers with outstanding balances in excess of
this amount. The Association's largest lending relationship at
December 31, 1996 was $540,000 in loans to one borrower which was
comprised of ten loans, seven of which were secured by real
estate and three of which were unsecured commercial loans. The
Association's second largest lending relationship at December 31,
1996 was $375,770 in loans to one borrower which was comprised of
nine loans, eight of which were secured by real estate and one of
which was an unsecured commercial loan. The Association's third
largest lending relationship totaled $332,760, which consisted of
two commercial real estate loans. At December 31, 1996, all of
these loans were performing in accordance with their terms.
<PAGE>
Loan Portfolio Composition. Set forth below is data relating
to the composition of the Association's loan portfolio by type of
loan as of the dates indicated.
<TABLE>
At December 31,
1996 1995 1994
----------------- ----------------- -----------------
Amount Percent Amount Percent Amount Percent
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Real estate loans:
One- to four-family residential $ 7,279 60.97% $ 7,918 70.50% $ 8,710 75.96%
Commercial real estate loans 1,519 12.73 1,208 10.76 881 7.68
Construction 487 4.08 260 2.32 162 1.41
Land loans 451 3.78 203 1.81 181 1.58
Other real estate loans 237 1.99 131 1.17 235 2.05
Total first mortgage loans 9,973 83.55 9,720 86.55 10,169 88.69
Consumer and other loans
Automobile 475 3.97 496 4.42 460 4.01
Manufactured homes 22 0.19 12 0.11 21 0.18
Share loans 795 6.66 800 7.12 765 6.67
Lines of credit 1,003 8.41 440 3.92 165 1.44
Other loans 721 6.04 415 3.70 346 3.01
Total consumer and other loans 3,016 25.27 2,163 19.26 1,757 15.31
Total loans receivable 12,989 108.82 11,883 105.82 11,926 104.00
Less:
Undisbursed loans proceeds (755) (6.34) (335) (2.98) (131) (1.13)
Unearned discounts -- -- -- -- (1) (.01)
Allowance for loan losses (296) (2.48) (317) (2.82) (328) (2.86)
Total loans receivable, net $11,938 100.00% $11,231 100.00% $11,466 100.00%
</TABLE>
One-to Four-Family Mortgage Loans. The Association's
primary lending activity is the origination of one- to four-
family, owner-occupied, residential mortgage loans secured by
property located in the Association's market area. Loans are
generated through the Association's marketing efforts, its
existing customers and referrals, real estate brokers, builders
and local businesses. The Association generally has limited its
real estate loan originations to the financing of properties
located within its market area and will not make out of state
loans. At December 31, 1996, the Association had $7.3 million,
or 56.1% of its gross loan portfolio, invested in mortgage loans
secured by one- to four-family residences.
The Association originates for retention in its portfolio
fixed-rate residential one- to four-family loans with terms of up
to 15 years. The Association's fixed-rate mortgage loans
amortize monthly with principal and interest due each month.
Residential real estate loans often remain outstanding for
significantly shorter periods than their contractual terms
because borrowers may refinance or prepay loans at their option.
The Association currently offers ARM loans with amortization
periods ranging up to 30 years. The Association generally offers
ARM loans that either adjust every year or every three years from
the date of origination, with interest rate adjustment
limitations up to two percentage points per adjustment and with a
cap of up to six percentage points on total interest rate
increases over the life of the loan. Currently, ARM loans are
originated with a minimum interest rate of five percent and a
maximum rate of 15% regardless of the initial rate. In a rising
interest rate environment, such rate limitations may prevent ARM
loans from repricing to market interest rates, which would have
an adverse effect on net interest income. The Association has
used different interest indices for ARM loans in the past, and
currently uses the National Average Contract Interest Rate for
Major Lenders on the Purchase of Previously Occupied Loans as its
index. ARM loans secured by residential one- to four-family real
estate totaled $5.4 million, or 73.9% of the Association's total
one- to four-family residential real estate loans receivable at
December 31, 1996. The origination of fixed-rate mortgage loans
versus ARM loans is monitored on an ongoing basis and is affected
significantly by the level of market interest rates, customer
preference, the Association's interest rate gap position and loan
products offered by the Association's competitors. Particularly
in a relatively low interest rate
<PAGE>
environment, borrowers may prefer fixed-rate loans to ARM loans.
During the year ended December 31, 1996, the Association
originated $162,000 in fixed-rate residential mortgage loans and
428,000 of ARM loans.
The primary purpose of offering ARM loans is to make the
Association's loan portfolio more interest rate sensitive.
However, as the interest income earned on ARM loans varies with
prevailing interest rates, such loans do not offer the
Association predictable cash flows as would long-term, fixed-rate
loans. ARM loans carry increased credit risk associated with
potentially higher monthly payments by borrowers as general
market interest rates increase. It is possible, therefore,
during periods of rising interest rates, that the risk of
delinquencies and defaults on ARM loans may increase due to the
upward adjustment of interest costs to the borrower, resulting in
increased loan losses.
The Association's residential first mortgage loans
customarily include due-on-sale clauses, which are provisions
giving the Association the right to declare a loan immediately
due and payable in the event, among other things, that the
borrower sells or otherwise disposes of the underlying real
property serving as security for the loan. Due-on-sale clauses
are a means of imposing assumption fees and increasing the
interest rate on the Association's mortgage portfolio during
periods of rising interest rates.
Effective December 19, 1993, all financial institutions were
required to adopt and maintain comprehensive written real estate
lending policies that are consistent with safe and sound banking
practices. These lending policies must reflect consideration of
the Interagency Guidelines for Real Estate Lending Policies
adopted by the Federal banking agencies, including the OTS, in
December 1992 ("Guidelines"). The Guidelines set forth, pursuant
to the mandates of the FDICIA, uniform regulations prescribing
standards for real estate lending. Real estate lending is
defined as extension of credit secured by liens on interests in
real estate or made for the purpose of financing the construction
of a building or other improvements to real estate, regardless of
whether a lien has been taken on the property.
The policies must address certain lending considerations set
forth in the Guidelines, including loan-to-value ("LTV") limits,
loan administration procedures, underwriting standards, portfolio
diversification standards, and documentation, approval and
reporting requirements. These policies must also be appropriate
based upon the size of the institution and the nature and scope
of its operations, and must be reviewed and approved by the
institution's board of directors at least annually. The LTV
ratio framework, with an LTV ratio being the total amount of
credit to be extended divided by the appraised value of the
property at the time the credit is originated, must be
established for each category of real estate loans. If not a
first lien, the lender must combine all senior liens when
calculating this ratio. The Guidelines, among other things,
establish the following supervisory LTV limits: raw land (65%);
land development (75%); construction (commercial, multi-family
and nonresidential) (80%); improved property (85%); and owner
occupied one- to four-family residential (no maximum ratio,
however, any LTV ratio in excess of 90% requires appropriate
insurance or readily marketable collateral).
Certain institutions are permitted to make real estate loans
that do not conform with the established LTV ratio limits up to
100% of the institution's total capital. Within this aggregate
limit, total loans for all commercial, agricultural, multi-family
and other non-one- to four-family residential properties should
not exceed 30% of total capital. An institution will come under
increased supervisory scrutiny as the total of such loans
approaches these levels. Certain loans are exempt from the LTV
ratios (e.g., those guaranteed by a government agency, loans to
facilitate the sale of real estate owned, loans renewed,
refinanced or restructured by the original lender(s) to the same
borrower(s) where there is no advancement of new funds, etc.).
<PAGE>
Regulations limit the amount that a savings association may
lend relative to the appraised value of the real estate securing
the loan, as determined by an appraisal at the time of loan
origination. Such regulations permit a maximum LTV ratio of 95%
for residential property (and 100% for loans guaranteed by the
Veterans Administration) and 90% for all other real estate loans.
The Association's lending policies, however, generally limit the
maximum LTV ratio on fixed-rate and ARM loans to 95% of the
lesser of the appraised value or the purchase price of the
property securing the loan in the case of loans secured by one-
to four-family owner-occupied properties. The maximum LTV ratio
on other types of real estate loans is generally the lesser of
80% of the appraisal value or the purchase price of the property.
When underwriting residential real estate loans, the
Association reviews and verifies each loan applicant's
employment, income and credit history. Management believes that
stability of income and past credit history are integral parts in
the underwriting process. Generally, the applicant's total
monthly mortgage payment, including all escrow amounts, is
limited to 28% of the applicant's total monthly income. In
addition, total monthly obligations of the applicant, including
mortgage payments, should not generally exceed 42% of total
monthly income. Written appraisals are generally required on
real estate property offered to secure an applicant's loan. For
real estate loans with LTV ratios of between 80% and 95%, the
Association requires private mortgage insurance. The Association
requires fire, casualty and where necessary flood insurance on
all properties securing real estate loans. The Association
requires title insurance, and an attorney's title opinion.
Commercial Real Estate Loans. The Association originates
commercial real estate loans typically secured by retail
facilities, churches and office buildings. At December 31, 1996,
$1.5 million, or 11.5% of the Association's gross loan portfolio
consisted of commercial real estate loans. At December 31, 1996,
all of the Association's commercial real estate loans were
secured by properties within the State of Louisiana. The maximum
loan to value ratio for commercial real estate loans originated
by the Association is 80%. At December 31, 1996, the largest
commercial real estate loan had a principal balance of $259,000,
and was secured by commercial real estate. The loan was
performing in accordance with its terms at December 31, 1996.
The underwriting standards employed by the Association for
commercial real estate loans include a determination of the
applicant's credit history and an assessment of the applicant's
ability to meet existing obligations and payments on the proposed
loan. Written appraisals are obtained on all commercial real
estate loans. The Association assesses the creditworthiness of
the applicant by reviewing a credit report, financial statements
and tax returns on the applicant.
Loans secured by commercial real estate generally involve a
greater degree of credit risk than one- to four-family mortgage
loans. The increased risk is the result of several factors,
including the effects of general economic conditions in income
producing properties and the successful operation or management
of the properties securing the loans. Furthermore, the repayment
of loans secured by commercial real estate is typically dependent
upon the successful operation of the related business and real
estate property. If the cash flow from the project is reduced,
the borrower's ability to repay the loan may be impaired.
Land Loans. The Association offers land loans, primarily
loans to purchase and develop single family homesites, which may
consist of individual lots or large acreage tracts. At December
31, 1996, $451,000, or 3.5% of the Association's gross loan
portfolio consisted of land loans. The maximum loan amount
generally does not exceed 75% of the appraised value of the
property. The terms of land loans are negotiated on a case by
case basis; however, fixed rate loans are typically originated
for terms of 5 years or less; adjustable rate land loans are
originated for terms up to 15 years and will either adjust at a
premium over the prime rate or will be based upon the National
Average Contract Interest Rate for Major Lenders on the Purchase
of Previously Occupied Loans. The Association will make a
limited number of land loans for speculation purposes. Land loans
are typically made to companies or individuals with whom the
Association has had a prior business relationship.
<PAGE>
Construction Lending. At December 31, 1996, the Association
had $487,000 or 3.7% of its gross loan portfolio, invested in
construction loans. First Federal offers loans to both builders
and individuals for the construction of one- to four-family
residences. Currently, such loans are offered with fixed- or
adjustable-rates of interest, with loan terms of six months. The
interest rates of construction loans are typically at a margin
over the prime rate or the National Average Contract Interest
Rate for Major Lenders on the Purchase of Previously Owned Homes.
The maximum loan amount will not exceed 80% of the appraised
value of the project. The Association requires the builder to
submit plans, specifications and cost projections. In addition,
the Association reviews the borrower's existing financial
condition, including total outstanding debt. Funds are dispersed
as the construction project progresses. Following the
construction period, these loans may convert to permanent loans,
generally with terms for up to 15 years if the interest rate is
fixed and up to 30 years if the interest rate is adjustable. At
December 31, 1996, none of the Association's construction loans
were non-performing.
Construction lending and land loans are generally considered
to involve a higher level of credit risk than one- to four-family
residential lending since the risk of loss on construction loans
is dependent largely upon the accuracy of the initial estimate of
the individual property's value upon completion of the project
and the estimated cost (including interest) of the project. If
the cost estimate proves to be inaccurate, the Association may be
required to advance funds beyond the amount originally committed
to permit completion of the project.
Consumer and Other Lending. First Federal offers a variety
of consumer loans, including loans secured by deposits, lines of
credit, automobile and home improvement loans. The Association
currently originates substantially all of its consumer loans in
its primary market area generally to its existing customers. At
December 31, 1996, the Association's consumer and other loan
portfolio totaled $3.0 million, or 23.2% of its gross loan
portfolio.
The Association offers loans secured by the borrower's
savings deposits ("share loans"). At December 31, 1996, share
loans totaled $795,000, or 6.1% of the Association's gross loan
portfolio.
First Federal originates home improvement loans. Home
equity and home improvement loans secured by second mortgages,
together with loans secured by all prior liens, are generally
limited to 80% or less of the appraised value of the home.
Generally, such loans have a maximum term of up to 15 years. As
of December 31, 1996, home improvement loans amounted to $88,000,
which represented 0.68% of the Association's gross loan
portfolio.
The Association also originates lines of credit for
businesses. These loans are made on both a secured and unsecured
basis. Lines of credit may be secured by real estate, equipment
and inventory. They are generally originated with interest rates
that adjust at a premium above the prime rate. All lines of
credit are reviewed annually by the Association. Lines of credit
loans amounted to approximately $1.0 million at December 31,
1996, which represented 7.7% of the Association's gross loan
portfolio.
Another component of the Association's consumer loan
portfolio consists of automobile loans. The Association
originates automobile loans on a direct basis, where the
Association extends credit directly to the borrower. These loans
generally have terms that do not exceed five years and carry a
fixed-rate of interest. Generally, loans on new vehicles are
made in amounts up to 80% of dealer cost and loans on used
vehicles are made in amounts up to 80% of the vehicle's published
NADA value. At December 31, 1996, the Association's automobile
loans totaled $475,000 or 3.7% of the Association's gross loan
portfolio.
Consumer loan terms vary according to the type and value of
collateral, length of contract and creditworthiness of the
borrower. The underwriting standards employed by the Association
for consumer loans include an application, a determination of the
applicant's payment history on other debts and an assessment of
ability to meet existing obligations and payments on the proposed
loan. Although creditworthiness of the applicant is a primary
consideration, the underwriting process also includes a
comparison of the value of the security, if any, in relation to
the proposed loan amount.
Consumer loans entail greater credit risk than do
residential mortgage loans, particularly in the case of consumer
loans which are unsecured or are secured by rapidly depreciable
assets, such as automobiles. Further, any repossessed collateral
for a defaulted consumer loan may not provide an adequate source
of repayment of the
<PAGE>
outstanding loan balance as a result of the greater likelihood of
damage, loss or depreciation. In addition, consumer loan
collections are dependent on the borrower's continuing financial
stability, and thus are more likely to be affected by adverse
personal circumstances. Furthermore, the application of various
federal and state laws, including bankruptcy and insolvency laws,
may limit the amount which can be recovered on such loans.
Management believes that its level of delinquencies is relatively
low in comparison with other financial institutions, and that its
low level of consumer loan delinquencies is attributable to the
Association's policy of aggressively contacting borrowers who
become delinquent in repaying their loans. At December 31, 1996,
$0 in consumer loans were non-performing. See "- Delinquencies
and Classified Assets." There can be no assurances, however,
that delinquencies will not increase in the future.
Loan Maturity Schedule
The following table sets forth certain information at
December 31, 1996, regarding the dollar amount of loans maturing
in the Association's portfolio based on their contractual terms
to maturity. Demand loans, loans having no stated schedule of
repayments and no stated maturity, and overdrafts are reported as
due in one year or less.
<TABLE>
Within 1-3 3-5 5-10 10-20 Beyond 20
1 Year Years Years Years Years Years Total
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
First mortgage loans:
One- to four-family residential $ 112 $ 210 $ 642 $ 1,972 $ 3,219 $ 1,124 $ 7,279
Other properties 351 93 379 435 647 302 2,207
Construction 141 -- -- 90 221 35 487
Consumer and other loans 1,919 576 503 18 -- -- 3,016
Total $2,523 $ 879 $1,524 $ 2,515 $ 4,087 $ 1,461 $12,989
</TABLE>
The following table sets forth the dollar amount of all
loans at December 31, 1996 that have predetermined interest rates
and have floating or adjustable interest rates and which are due
after December 31, 1997.
<TABLE>
Floating or
Fixed-Rates Adjustable Rates Total
-------------------------------------------
(In Thousands)
<S> <C> <C> <C>
First mortgage loans:
One- to four-family residential $ 1,724 $ 5,443 $ 7,167
Other properties 1,060 796 1,856
Construction 346 -- 346
Consumer and other loans 1,097 -- 1,097
Total $ 4,227 $ 6,239 $10,466
</TABLE>
<PAGE>
Origination of Loans
Loan originations are developed from continuing business
with depositors and borrowers, soliciting realtors, builders,
walk-in customers and third-party sources. All real estate loans
must be approved by the Association's board of directors.
Consumer and other loans up to $15,000 may be approved by the
Association's President. All other consumer and other loans must
be approved by the Board of Directors.
While the Association originates both adjustable-rate and
fixed-rate loans, its ability to originate loans to a certain
extent is dependent upon the relative customer demand for loans
in its market, which is affected by the interest rate
environment, among other factors. For the year ended December
31, 1996, the Association originated $4.2 million in fixed-rate
loans and $1.7 million in adjustable rate loans.
In recent years the Association has neither purchased, nor
sold loans. All loans originated by the Association are retained
in the Association's portfolio.
Set forth below is a table showing the Association's loan
originations and repayments for the periods indicated.
<TABLE>
Year Ended December 31,
1996 1995 1994
(In Thousands)
<S> <C> <C> <C>
Total loans receivable at beginning of
period $11,883 $11,926 $11,431
First mortgage loans:
One- to four-family residential 590 482 1,006
Construction 664 243 493
Other properties 1,025 257 160
Consumer and other loans:
Automobile 308 359 554
Manufactured home 5 38 11
Other 2,564 773 540
Refinancing 755 764 933
Total originations 5,911 2,916 3,697
Transfers of mortgage to foreclosed
real estate (74) -- (91)
Repayments (4,731) (2,959) (3,111)
Net loan activity 1,106 (42) 495
Total loans receivable at end of period $12,989 $11,883 $11,926
</TABLE>
Delinquencies and Classified Assets
The Association's collection procedures provide that when a
loan is 15 days past due, a computer-generated late charge notice
is sent to the borrower requesting payment plus a late charge. If
the loan remains delinquent a telephone call is made or a letter
is sent to the borrower stressing the importance of reinstating
the loan and obtaining reasons for the delinquency before the
loan becomes delinquent after 30 days. After 45 days a written
commitment to bring the loan current is required. When a loan
continues in a delinquent status for 90 days or more, and a
repayment schedule has not been made or adhered to by the
borrower, a notice of intent to foreclose upon the underlying
property is sent to the borrower by the Association's attorney,
giving the borrower 10 days to cure the delinquency. If not
cured, foreclosure proceedings are initiated.
In recent years the Association has increased its collection
efforts by more closely monitoring delinquent loans and employing
diligent collection efforts. Management believes that these
efforts have contributed to the loan portfolio's low delinquency
levels. At December 31, 1996, 1995 and 1994 the percentage of
total loans delinquent 90 days or more to net loans receivable
were 0%, .06% and 0%, respectively.
<PAGE>
Delinquent Loans and Nonperforming Assets. Generally, when
a loan becomes more than 90 days delinquent, the Association will
place the loan on non-accrual status and previously accrued
interest income on the loan is charged against current income.
The loan will remain on a non-accrual status as long as the loan
is more than 90 days delinquent.
Real estate acquired through foreclosure or by deed-in-lieu
of foreclosure is classified as real estate owned until such time
as it is sold. When real estate owned is acquired, it is
recorded at the lower of the unpaid principal balance of the
related loan, or its fair market value, less estimated selling
expenses. Any further write-down of real estate owned is charged
against earnings. At December 31, 1996, the Association owned
approximately $75,000 of property classified as real estate
owned.
Delinquent consumer loans are handled in a similar manner as
to those described above; however, shorter time frames for each
step apply due to the type of collateral generally associated
with such types of loans. The Association's procedures for
repossession and sale of consumer collateral are subject to
various requirements under Louisiana and federal consumer
protection laws.
The following table sets forth information with respect to
the Association's delinquent loans and other problem assets at
December 31, 1996.
<TABLE>
At December 31, 1996
Balance Number
(In Thousands)
<S< <C> <C>
One- to four-family residential real estate:
Loans 60 to 89 days delinquent $105 3
Loans 90 days or more delinquent -- --
Other properties:
Loans 60 to 89 days delinquent 5 --
Loans 90 days or more delinquent -- --
Construction:
Loans 60 to 89 days delinquent 5 2
Loans 90 days or more delinquent -- --
Consumer and other loans:
Loans 60 to 89 days delinquent -- --
Loans 90 days or more delinquent -- --
Foreclosed real estate and repossessions 75 2
Other nonperforming assets -- --
Restructured loans within the meaning of
Statement of Financial Accounting Standards
No. 15 (not included in other nonperforming
categories above) 154 7
Loans to facilitate sale of real estate owned 538 23
</TABLE>
<PAGE>
The following table sets forth information regarding
delinquent loans and real estate owned by the Association at the
dates indicated. At December 31, 1996, the Association had
$154,000 in restructured loans within the meaning of SFAS 15.
<TABLE>
Year Ended December 31,
1996 1995 1994
(In Thousands)
<S> <C> <C> <C>
Non-accruing loans:
First mortgage loans:
One- to four-family residential $ 44 $ 144 $ 62
Other properties -- -- --
Construction -- -- --
Consumer and other loans -- 11 --
Total non-accruing loans 44 155 62
Accruing loans past due 90 day or more:
First mortgage loans:
One- to four-family residential $ -- $ -- $ --
Other properties -- -- --
Construction -- -- --
Consumer and other loans -- 6 --
Total accruing loans delinquent
90 days or more -- 6 --
Total non-performing loans 44 161 62
Total real estate owned 75 39 45
Total non-performing assets $ 119 $ 200 $ 107
Performing troubled debt restructurings $ 154 $ 191 $ 121
Total non-performing assets and
troubled debt restructurings $ 273 $ 391 $ 228
Total loans delinquent 90 days or
more to net loans receivable 0.00% 0.06% 0.00%
Total loans delinquent 90 days or
more to total assets 0.00% 0.02% 0.00%
Total non-performing loans and
REO to total assets 0.38% 0.69% 0.50%
Total non-performing assets and
troubled debt restructurings total
assets 0.87% 1.35% 0.85%
</TABLE>
<PAGE>
Delinquent Loans
The following table sets forth information with respect to
loans past due 60-89 days in the Association's portfolio at the
dates indicated.
<TABLE>
At December 31,
1996 1995 1994
(In Thousands)
<S> <C> <C> <C>
Loans past due 60-89 days:
First mortgage loans:
One- to four-family residential $105 $15 $32
Other properties 5 -- --
Construction -- -- --
Consumer and other loans 5 10 12
</TABLE>
For the year ended December 31, 1996 gross interest income
which would have been recorded had the non-accruing loans been
current in accordance with their original terms amounted to
$5,800. The amount that was included in interest income on such
loans was $3,000 for the year ended December 31, 1996.
Classified Assets. Federal regulations provide for the
classification of loans and other assets, such as debt and equity
securities, considered by the OTS to be of lesser quality, as
"substandard," "doubtful" or "loss." An asset is considered
"substandard" if it is inadequately protected by the current net
worth and paying capacity of the obligor or the collateral
pledged, if any. "Substandard" assets include those
characterized by the "distinct possibility" that the insured
institution will sustain "some loss" if the deficiencies are not
corrected. Assets classified as "doubtful" have all of the
weaknesses inherent in those classified "substandard" with the
added characteristic that the weaknesses present make "collection
or liquidation in full" on the basis of currently existing facts,
conditions and values, "highly questionable and improbable."
Assets classified as "loss" are those considered "uncollectible"
and of such little value that their continuance as assets without
the establishment of a specific loss reserve is not warranted.
When an insured institution classifies problem assets as
either substandard or doubtful, it may establish general
allowances for losses in an amount deemed prudent by management.
General allowances represent loss allowances which have been
established to recognize the inherent risk associated with
lending activities, but which, unlike specific allowances, have
not been allocated to particular problem assets. When an insured
institution classifies problem assets as "loss," it is required
either to establish a specific allowance for losses equal to 100%
of that portion of the asset so classified or to charge-off such
amount. An institution's determination as to the classification
of its assets and the amount of its valuation allowances is
subject to review by the regulatory authorities, who may order
the establishment of additional general or specific loss
allowances.
In connection with the filing of its periodic reports with
the OTS and in accordance with its classification of assets
policy, the Association regularly reviews loans in its portfolio
to determine whether such assets require classification in
accordance with applicable regulations. On the basis of
management's review of its assets, at December 31, 1996, the
Association had classified a total of $164,000 of its assets as
substandard, $0 as doubtful, and $21,000 as loss. At
December 31, 1996, total classified assets comprised $185,000, or
4.3% of the Association's capital, or .59% of the Association's
total assets.
Other Loans of Concern. Other than the non-performing loans
set forth in the tables above, as of March 31, 1996, there were
no loans classified by the Association with respect to which
known information about the possible credit problems of the
borrowers or the cash flows of the security properties have
caused management to have some doubts as to the ability of the
borrowers to comply with present loan repayment terms and which
may result in the future inclusion of such items in the non-
performing asset categories.
<PAGE>
Allowance for Loan Losses. The allowance for loan losses is
established through a provision for loan losses based on
management's evaluation of the risk inherent in its loan
portfolio and changes in the nature and volume of its loan
activity, including those loans which are being specifically
monitored by management. Such evaluation, which includes a
review of loans for which full collectibility may not be
reasonably assured, considers among other matters, the loan
classifications discussed above, the estimated fair value of the
underlying collateral, economic conditions, historical loan loss
experience, the amount of loans outstanding and other factors
that warrant recognition in providing for an adequate loan loss
allowance.
Real estate properties acquired through foreclosure are
recorded at the lower of cost or fair value minus estimated cost
to sell. If fair value at the date of foreclosure is lower than
the balance of the related loan, the difference will be
charged-off to the allowance for loan losses at the time of
transfer. Valuations are periodically updated by management and
if the value declines, a specific provision for losses on such
property is established by a charge to operations. At December
31, 1996, the Association had properties with a net book value of
$75,000 which were acquired through foreclosure.
Although management believes that it uses the best
information available to determine the allowance, unforeseen
market conditions could result in adjustments and net earnings
could be significantly affected if circumstances differ
substantially from the assumptions used in making the final
determination. Future additions to the Association's allowance
for loan losses will be the result of periodic loan, property and
collateral reviews and thus cannot be predicted in advance. In
addition, federal regulatory agencies, as an integral part of the
examination process, periodically review the Association's
allowance for loan losses. Such agencies may require the
Association to increase the allowance based upon their judgment
of the information available to them at the time of their
examination. At December 31, 1996, the Association had a total
allowance for loan losses of $296,000, representing 670.8% of
total non-performing loans and 2.5% of the Association's loans,
net. See Note 5 of the Notes to Consolidated Financial
Statements.
<PAGE>
The following table sets forth the allocation for loan
losses by category for the periods indicated.<PAGE>
<TABLE>
At December 31,
1996 1995 1994
--------------------- ---------------------- ----------------------
% of Loans % of Loans % of Loans
In Each In Each In Each
Category to Category to Category to
Amount Total Loans Amount Total Loans Amount Total Loans
<S> <C> <C> <C> <C> <C> <C>
First mortgage loans:
1-4 family residential $217 56.04% $230 66.63% $242 73.04%
Other properties 37 16.99 37 12.98 36 10.88
Construction -- 3.75 -- 2.19 -- 1.36
Consumer and other loans 42 23.22 50 18.20 50 14.72
Balance, end of period $296 100.00% $317 100.00% $328 100.00%
</TABLE>
The following table sets forth information with respect to
the Association's allowance for loan losses at the dates
indicated.
<TABLE>
Year Ended December 31,
1996 1995 1994
(In Thousands)
<S> <C> <C> <C>
Balance at beginning of period $ 317 $ 328 $ 333
Charge-offs:
First mortgage loans (10) -- --
Consumer and other loans (8) (7) (14)
Recoveries:
First mortgage loans -- -- --
Consumer and other loans 5 17 7
Net charge offs (13) 10 (7)
Provision for loan losses (recoveries) (8) (21) 2
Balance, at end of period $ 296 $ 317 $ 328
Allowance for loan losses as a
percent of net loans receivable at
end of period 2.48% 2.83% 2.86%
Ratio of net loans charged off during
the period to average loans outstanding
during the period (0.11)% 0.09% (0.07)%
Ratio of allowance for loan losses
to total noon-performing loans at
end of period 670.81% 196.90% 529.04%
Ratio of allowance for loan losses
to total non-performing loans and
REO at end of period 249.02% 158.50% 306.54%
</TABLE>
<PAGE>
Investment Activities
General. First Federal must maintain minimum levels of
investments that qualify as liquid assets under OTS regulations.
Liquidity may increase or decrease depending upon the
availability of funds and comparative yields on investments in
relation to the return on loans. Historically, the Association
has generally maintained liquid assets at levels above the
minimum requirements imposed by the OTS regulations and at levels
believed adequate to meet the requirements of normal operations,
including repayments of maturing debt and potential deposit
outflows. Cash flow projections are regularly reviewed and
updated to assure that adequate liquidity is maintained. At
December 31, 1996, the Association's liquidity ratio (liquid
assets as a percentage of net withdrawable savings deposits and
current borrowings) was 7.8%. See"Regulation - Liquidity."
Federally chartered savings institutions have the authority
to invest in various types of liquid assets, including United
States Treasury obligations, securities of various federal
agencies, certain certificates of deposit of insured banks and
savings institutions, certain bankers' acceptances, repurchase
agreements and federal funds. Subject to various restrictions,
federally chartered savings institutions may also invest their
assets in commercial paper, investment grade corporate debt
securities and mutual funds whose assets conform to the
investments that a federally chartered savings institution is
otherwise authorized to make directly.
Generally, the investment policy of the Association, as
established by the Board of Directors, is to invest funds among
various categories of investments and maturities based upon the
Association's liquidity needs, asset/liability management
policies, investment quality, marketability and performance
objectives.
Mortgage-backed and Related Securities. The Association
purchases mortgage-backed and related securities to supplement
residential loan production and as part of its asset/liability
strategy. The type of securities purchased is based upon the
Association's asset/liability management strategy and balance
sheet objectives. For instance, substantially all of the
mortgage-backed and related investments purchased by the
Association over the last several years have had adjustable rates
of interest. Management believes that the adjustable rate
feature of the mortgages underlying adjustable rate mortgage-
backed and related securities generally will help to reduce
changes in the value of the mortgage-backed and related security
in response to normal interest rate fluctuations. As the
interest rates on the mortgages underlying the adjustable rate
mortgage-backed and related securities are reset periodically,
the yields of such securities will gradually align themselves to
reflect changes in the market rates so that the market value of
such securities will remain relatively constant as compared to
fixed rate instruments. The Association has invested primarily
in federal agency securities, principally Freddie Mac (formerly
the Federal Home Loan Mortgage Corporation), Government National
Mortgage Association ("GNMA"), Federal National Mortgage
Association ("FNMA") and Small Business Association ("SBA")
obligations. At December 31, 1996, the Association's investment
in mortgage-backed and related securities totaled $17.2 million
or 54.6% of its total assets. At December 31, 1996, $13.2
million of the Association's mortgage-backed and related
securities were classified as held-to-maturity and $4.0 million
were classified as available for sale. See Note 4 of the Notes
to Consolidated Financial Statements.
The FNMA, Freddie Mac and GNMA certificates are modified
pass-through mortgage-backed and related securities that
represent undivided interests in underlying pools of fixed-rate,
or certain types of adjustable-rate, single-family residential
mortgages issued by these government-sponsored entities. As a
result, the interest rate risk characteristics of the underlying
pool of mortgages, i.e., fixed rate or adjustable rate, as well
as prepayment risk, are passed on to the certificate holder.
FNMA and Freddie Mac provide the certificate holder a guarantee
of timely payments of interest and ultimate collection of
principal, whether or not they have been collected. GNMA's
guarantee to the holder timely payments of principal and interest
and are backed by the full faith and credit of the U.S.
government. The FNMA, Freddie Mac, GNMA and SBA certificates are
modified pass-through mortgage-backed and related securities that
represent undivided interests in underlying pools of fixed-rate,
or certain types of adjustable-rate, single-family residential
mortgages, or in the case of the SBA certificates, the portion of
commercial and/or real estate loans guaranteed by the SBA. As a
result, the interest rate characteristics of the underlying pool
of mortgages, i.e., fixed-rate or adjustable-rate, as well as
prepayment risk, are passed on to the certificate holder. FNMA
and Freddie Mac provide the certificate holder a guarantee of
timely payments of interest and ultimate collection of principal,
whether or not they have been collected.
<PAGE>
Mortgage-backed and related securities generally yield less
than the loans that underlie such securities, because of the cost
of payment guarantees or credit enhancements that reduce credit
risk. In addition, mortgage-backed and related securities are
more liquid than individual mortgage loans and may be used to
collateralize obligations of the Association. In general,
mortgage-backed securities issued or guaranteed by FNMA and
Freddie Mac are weighted at no more than 20% for risk-based
capital purposes, and mortgage-backed securities issued or
guaranteed by GNMA are weighted at 0% for risk-based capital
purposes, compared to an assigned risk weighting of 50% to 100%
for whole residential mortgage loans. These types of securities
thus allow the Association to optimize regulatory capital to a
greater extent than non-securitized whole loans. The Association
has sought to improve the yield on its mortgage-backed securities
portfolio by investing in mortgage-backed securities with
maturities in excess of 10 years.
While mortgage-backed securities carry a reduced credit risk
as compared to whole loans, such securities remain subject to the
risk that a fluctuating interest rate environment, along with
other factors such as the geographic distribution of the
underlying mortgage loans, may alter the prepayment rate of such
mortgage loans and so affect both the prepayment speed, and
value, of such securities.
Set forth below is a table showing the Association's
purchases and repayments of mortgage-backed securities for the
periods indicated. The Association did not sell any mortgage-
backed securities during the periods indicated.
<TABLE>
Year Ended December 31,
1996 1995 1994
(In Thousands)
<S> <C> <C> <C>
Mortgage-backed securities at
beginning of period $15,391 $13,257 $13,943
Purchases 3,915 4,275 2,290
Repayments (2,078) (2,069) (2,845)
Discount (premium) amortization (42) (72) (131)
Mortgage-backed securities at end
of period $17,186 $15,391 $13,257
</TABLE>
At December 31, 1996, the Association's investment
securities consisted solely of FHLB stock totaling $259,200. The
Association invests excess liquidity in FHLB overnight deposits.
OTS regulations restrict investments in corporate debt and
equity securities by the Association. These restrictions include
prohibitions against investments in the debt securities of any
one issuer in excess of 15% of the Association's unimpaired
capital and unimpaired surplus as defined by federal regulations,
plus an additional 10% if the investments are fully secured by
readily marketable collateral. At December 31, 1996, the
Association was in compliance with this regulation. See
"Regulation - Federal Regulation of Savings Associations" for a
discussion of additional restrictions on the Association's
investment activities.
The following table sets forth the carrying value of the
Association's FHLB stock and mortgage-backed securities at the
dates indicated. At December 31, 1996, the market value of the
Association's mortgage-backed portfolios and investment
securities was approximately $16.9 million and $259,200,
respectively.
<TABLE>
At December 31,
1996 1995 1994
(In Thousands)
<S> <C> <C> <C>
Mortgage-backed securities $17,186 $15,391 $13,257
Federal Home Loan Bank stock 259 260 248
Total investments $17,448 $15,651 $13,505
</TABLE>
PAGE
<PAGE>
Mortgage-Backed and Investment Portfolio Maturities.
The following table sets forth the scheduled maturities,
carrying values, market values and average yields for the
Association's investment securities at December 31, 1996.
<TABLE>
At December 31, 1996
One Year or Less One to Five Years Five to Ten Years Beyond Ten Years Total Investment Portfolio
Carrying Average Carrying Average Carrying Average Carrying Average Carrying Market Average
Value Yield Value Yield Value Yield Value Yield Value Value Yield
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage-backed
and investment
securities held
to maturity:
GNMA
certificates $ -- --% $ 6 6.24% $ 8 8.00% $ 356 6.64% $ 370 $ 371 6.67%
Freddie Mac
certificates -- -- -- -- 15 7.25 4,497 6.10 4,512 4,429 6.10
FNMA
certificates -- -- -- -- -- -- 8,285 6.25 8,285 8,115 6.25
Collateralized
mortgage
obligations -- -- -- -- -- -- 72 7.25 72 64 7.25
FHLB Stock -- -- -- -- -- -- 259 5.90 259 259 5.90
Total $ -- --% $ 6 6.24% $ 23 7.53% $13,469 6.21% $13,498 $13,238 6.21%
Mortgage-backed
and investment
securities available
for sale:
GNMA
certificates $ -- --% $ -- --% $ -- --% $ 536 6.70% $ 536 $ 536 6.70%
Freddie Mac
certificates -- -- -- -- 10 7.38 719 7.13 729 729 7.13
FNMA
certificates -- -- 173 7.14 -- -- 1,135 6.77 1,308 1,308 6.82
SBA
certificates -- -- -- -- -- -- 1,374 6.13 1,374 1,374 6.13
Total $ -- --% $ 173 7.14% $ 10 7.38% $ 3,764 6.59% $ 3,947 $ 3,947 6.62%
</TABLE>
PAGE
<PAGE>
The Association's investment securities portfolio at
December 31, 1996, contained neither tax-exempt securities nor
securities of any issuer with an aggregate book value in excess
of 10% of the Association's retained earnings, excluding those
issued by the U.S. government, or its agencies.
Sources of Funds
General. The Association's primary sources of funds are
deposits, receipt of principal and interest on loans and
securities, interest-earning deposits with other banks, FHLB
advances, and other funds provided from operations.
FHLB advances are used to support lending activities and to
assist in the Association's asset/liability management strategy.
See "- Asset/Liability Management." Typically, the Association
does not use other forms of borrowings. At December 31, 1996,
the Association had $1.2 million in FHLB advances.
Deposits. First Federal offers a variety of deposit
accounts having a wide range of interest rates and terms. The
Association's deposits consist of passbook, commercial demand,
NOW, money market deposit and certificate accounts. The
certificate accounts currently range in terms from 30 days to
five years.
The Association relies primarily on advertising, competitive
pricing policies and customer service to attract and retain these
deposits. Currently, First Federal solicits deposits from its
market area only, and does not use brokers to obtain deposits.
The flow of deposits is influenced significantly by general
economic conditions, changes in money market and prevailing
interest rates and competition.
The Association has become more susceptible to short-term
fluctuations in deposit flows as customers have become more
interest rate conscious. The Association endeavors to manage the
pricing of its deposits in keeping with its profitability
objectives giving consideration to its asset/liability
management. Notwithstanding the foregoing, a significant
percentage of the Association's deposits are for terms of less
than one year. At December 31, 1996, $14.9 million or 58.1% of
the Association's deposits were in certificates of deposits with
terms of 11 months or less. The Association believes that upon
maturity most of these deposits will remain at the Association.
The ability of the Association to attract and maintain savings
accounts and certificates of deposit, and the rates paid on these
deposits, has been and will continue to be significantly affected
by market conditions.
<PAGE>
Savings Portfolio
Deposits in the Association as of December 31, 1996, were
represented by the various types of deposit programs described
below.
<TABLE>
Weighted
Average Percentage
Interest Minimum Checking and Minimum of Total
Rate Term Savings Amount Balance Savings
- ----------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C< <C>
0.00% None Non interest-bearing
demand $5,000 $ 456 1.77%
2.06 None Passbook accounts 50 2,758 10.71
2.39 None Money market 2,500 833 3.24
1.80 None NOW accounts 100 3,222 12.51
Certificates of Deposit
4.88% 1-5 mos Fixed term, fixed rate 2,500 10,365 40.25
5.14 6-11 mos Fixed term, fixed rate 2,500 4,583 17.80
5.13 12-17 mos Fixed term, fixed rate 1,000 1,988 7.72
5.34 18-23 mos Fixed term, fixed rate 1,000 1,261 4.90
5.66 24-29 mos Fixed term, fixed rate 1,000 129 0.50
5.69 30-35 mos Fixed term, fixed rate 1,000 39 0.15
7.67 36-47 mos Fixed term, fixed rate 1,000 33 0.13
5.84 48-53 mos Fixed term, fixed rate 1,000 30 0.12
5.93 54-59 mos Fixed term, fixed rate 1,000 53 0.20
-- 60 mos or
greater Fixed term, fixed rate 1,000 --
$25,750 100.00%
</TABLE>
Deposit Activity
The following table sets forth the deposit activities of the
Association for the periods indicated:
<TABLE>
Year Ended December 31,
1996 1995 1994
(In Thousands)
<S> <C> <C> <C>
Deposits, beginning of period $26,583 $24,523 $25,525
Deposits 55,778 57,787 46,051
Withdrawals (57,752) (56,808) (47,846)
Net increase (decrease) before
interest credited (1,947) 979 (1,795)
Interest credited 1,141 1,081 793
Net increase (decrease) in deposits (833) 2,060 (1,002)
Deposits, end of period $25,750 $26,583 $24,523
</TABLE>
PAGE
<PAGE>
Deposit Flow
The following table sets forth the change in dollar amount
of savings deposits in the various types of savings accounts
offered by the Association between the dates indicated.
<TABLE>
At December 31,
1996 1995 1994
Balance Percent Change Balance Percent Change Balance Percent
---------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Now interest-bearing demand $ 456 1.77% $ 331 $ 331 1.25% $ 39 $ 292 1.19%
NOW Accounts 3,222 12.51 249 2,973 11.18 (177) 3,150 12.85
Passbook savings 2,758 10.71 (156) 2,914 10.96 (489) 4,304 13.88
Money market deposit accounts 833 3.24 (174) 1,007 3.79 (324) 1,331 5.43
Time deposits:
which mature
within 12 months 14,948 58.05 (1,122) 16,070 60.45 3,232 12,838 52.35
within 12-24 months 3,249 12.62 659 2,590 9.74 108 2,482 10.12
beyond 24 months 284 1.10 (414) 698 2.64 (329) 1,027 4.19
Total $25,750 100.00% $ (833) $26,583 100.00% $2,060 $24,523 100.00%
</TABLE>
The following table indicates the amount of the
Association's certificates of deposit of $100,000 or more by time
remaining until maturity at December 31, 1996.
<TABLE>
Certificates
of Deposits
(In thousands)
<S> <C>
Three months or less $1,243
Over three through six months 304
Over six through twelve months 400
Over twelve months 1,232
Total $3,179
</TABLE>
Time Deposits by Rates
The following table sets forth the time deposits in the
Association classified by rates as of the dates indicated.
<TABLE>
Year Ended December 31,
1996 1995 1994
(In Thousands)
<S> <C> <C> <C>
Rates:
3.99% or less $ 5 $ 172 $ 8,552
4.00%-5.99% 18,409 17,180 6,803
6.00%-7.99% -- 1,961 946
8.00%-8.75% 67 45 46
Total $18,481 $19,358 $16,347
</TABLE>
<PAGE>
Time Deposit Maturity Schedule
The following table sets forth the amount and maturities of
time deposits at December 31, 1996.
<TABLE>
One Year 1-2 2-3 3-4 4-5 Five and more
or Less Years Years Years Years Years Total
<S> <C> <C> <C> <C> <C> <C> <C>
Rate:
3.99% or less $ 5 $ -- $ -- $ -- $ -- $ -- $ 5
4.00-5.99% 14,943 3,250 216 -- -- -- 18,409
6.00-7.99% -- -- -- -- -- -- --
8.00-9.99% -- -- 67 -- -- -- 67
Total $14,948 $3,250 $ 283 $ -- $ -- $ -- $18,481
</TABLE>
Borrowings. First Federal's borrowings historically have
consisted of advances from the FHLB of Dallas. Such advances may
be made pursuant to different credit programs, each of which has
its own interest rate and range of maturities. Federal law
limits an institution's borrowings from the FHLB to 20 times the
amount paid for capital stock in the FHLB, subject to regulatory
collateral requirements. At December 31, 1996, the Association
had $1.2 million in advances from the FHLB. The Association has
the ability to purchase additional capital stock from the FHLB.
For additional information regarding the term to maturity and
average rate paid on FHLB advances, see Note 11 of the Notes to
Financial Statements.
The following table sets forth the maximum month-end balance
and average balance of FHLB advances.
<TABLE>
Year Ended December 31,
1996 1995 1994
(In Thousands)
<S> <C> <C> <C>
FHLB advances
Maximum balance $1,500 $-- $500
Average $ 175 $62 $316
</TABLE>
Regulation
General
As a federally chartered savings institution, the
Association is subject to extensive regulation by the OTS. Both
the OTS and FDIC, as insurer of deposit accounts, periodically
examine the Association for compliance with various regulatory
requirements. The Association must file reports with the OTS
describing its activities and financial condition. The
Association is also subject to certain reserve requirements
promulgated by the Board of Governors of the Federal Reserve
System ("Federal Reserve Board"). This supervision and
regulation is intended primarily for the protection of
depositors. The regulatory structure also gives the regulatory
authorities extensive discretion in connection with their
supervisory and enforcement activities and examination policies,
including policies with respect to the classification of assets
and the establishment of adequate loan loss reserves for
regulatory purposes. Any change in such regulation, whether by
the OTS, the FDIC or the Congress could have a material adverse
impact on the Company, the Association
<PAGE>
and their operations. As a savings association holding company,
the Company is subject to OTS regulation, examination,
supervision and reporting requirements.
Federal Regulation of Savings Associations
The OTS has extensive authority over the operations of
savings associations. As part of this authority, the Association
is required to file periodic reports with the OTS and is subject
to periodic examinations by the OTS and the FDIC. The last
regular OTS and FDIC examinations of the Association were as of
May 1996. When these examinations are conducted by the OTS and
the FDIC, the examiners may require the Association to provide
for higher general or specific loan loss reserves.
All savings associations are subject to a semi-annual
assessment, based upon the savings association's total assets.
The Association's OTS assessment for the fiscal year ended
December 31, 1996, was approximately $10,200.
The OTS also has extensive enforcement authority over all
savings institutions and their holding companies, including the
Association and the Holding Company. This enforcement authority
includes, among other things, the ability to assess civil money
penalties, to issue cease-and-desist or removal orders and to
initiate injunctive actions. In general, these enforcement
actions may be initiated for violations of laws and regulations
and unsafe or unsound practices. Other actions or inactions may
provide the basis for enforcement action, including misleading or
untimely reports filed with the OTS. Except under certain
circumstances, public disclosure of final enforcement actions by
the OTS is required.
In addition, the investment, lending and branching authority
of the Association is prescribed by federal laws, and
regulations, and it is prohibited from engaging in any activities
not permitted by such laws and regulations. For instance, no
savings institution may invest in non-investment grade corporate
debt securities. In addition, the permissible level of
investment by federal associations in loans secured by non-
residential real property may not exceed 400% of total capital,
except with approval of the OTS. Federal savings associations
are also generally authorized to branch nationwide. The
Association is in compliance with the noted restrictions.
The Association's general permissible lending limit for
loans-to-one-borrower is equal to the greater of $500,000 or 15%
of unimpaired capital and surplus (except for loans fully secured
by certain readily marketable collateral, in which case this
limit is increased to 25% of unimpaired capital and surplus).
The Association is in compliance with the loans to one borrower
limitation.
The OTS, as well as the other federal banking agencies, has
adopted guidelines establishing safety and soundness standards on
such matters as loan underwriting and documentation, internal
controls and audit systems, interest rate risk exposure and
compensation and other employee benefits. Any institution which
fails to comply with these standards must submit a capital
compliance plan. A failure to submit a plan or to comply with an
approved plan will subject the institution to further enforcement
action. The OTS and the other federal banking agencies have also
proposed additional guidelines on asset quality and earnings
standards. No assurance can be given as to whether or in what
form the proposed regulations will be adopted. The guidelines
are not expected to materially effect the Association.
Insurance of Accounts and Regulation by the FDIC
First Federal is a member of the SAIF, which is administered
by the FDIC. Deposits are insured up to applicable limits by the
FDIC and such insurance is backed by the full faith and credit of
the United States Government. As insurer, the FDIC imposes
deposit insurance premiums and is authorized to conduct
examinations of and to require reporting by FDIC-insured
institutions. It also may prohibit any FDIC-insured institution
from engaging in any activity the FDIC determines by regulation
or order to pose a serious risk to the FDIC. The FDIC also has
the authority to initiate enforcement actions against savings
associations, after giving the OTS an opportunity to take such
action, and
<PAGE>
may terminate the deposit insurance if it determines that the
institution has engaged or is engaging in unsafe or unsound
practices, or is in an unsafe or unsound condition.
The FDIC's deposit insurance premiums for SAIF-insured
institutions are assessed through a risk-based system under which
all insured depository institutions are placed into one of nine
categories and assessed insurance premiums, ranging from .23% to
.31% of deposits, based upon their level of capital and
supervisory evaluation. Under the system, institutions
classified as well capitalized (i.e., a core capital ratio of at
least 5%, a ratio of core capital to risk-weighted assets of at
least 6% and a risk-based capital ratio of at least 10%) and
considered healthy would pay the lowest premium while
institutions that are less than adequately capitalized (i.e., a
core capital or core capital to risk-based capital ratios of less
than 4% or a risk-based capital ratio of less than 8%) and
considered of substantial supervisory concern would pay the
highest premium. Risk classification of all insured institutions
will be made by the FDIC for each semi-annual assessment period.
The FDIC is authorized to increase assessment rates, on a
semiannual basis, if it determines that the reserve ratio of the
SAIF will be less than the designated reserve ratio of 1.25% of
SAIF insured deposits. In setting these increased assessments,
the FDIC must seek to restore the reserve ratio to that
designated reserve level, or such higher reserve ratio as
established by the FDIC. The FDIC may also impose special
assessments on SAIF members to repay amounts borrowed from the
United States Treasury or for any other reason deemed necessary
by the FDIC.
In September 1996, Congress enacted legislation to
recapitalize the SAIF by a one-time assessment on all SAIF-
insured deposits held as of March 31, 1995. The assessment was
65.7 basis points per $100 in deposits, payable on November 30,
1996. For the Association, the assessment amounted to $170,000
(or $112,000 when adjusted for taxes), based on the Association's
deposits on March 31, 1995. In addition, beginning January 1,
1997, pursuant to the legislation, interest payments on FICO
bonds issued in the late 1980's by the Financing Corporation to
recapitalize the now defunct Federal Savings and Loan Insurance
Corporation will be paid jointly by BIF-insured institutions and
SAIF-insured institutions. The FICO assessment will be 1.29
basis points per $100 in BIF deposits and 6.44 basis points per
$100 in SAIF deposits. Beginning January 1, 2000, the FICO
interest payments will be paid pro rata by banks and thrifts
based on deposits (approximately 2.4 basis points per $100 in
deposits).
The legislation further provides that the BIF and SAIF will
merge on January 1, 1999 if there are no more savings
associations as of that date. Several bills have been introduced
in the current Congress that would eliminate the federal thrift
charter and OTS. The bills would require that all federal
savings associations convert to national banks or state
depository institutions by no later than January 1, 1998 in one
bill and June 30, 1998 in the other and would treat all state
savings associations as state banks for purposes of federal
banking laws. Subject to a narrow grandfathering, all savings
and loan holding companies would become subject to the same
regulation as bank holding companies under the pending
legislative proposals. Under such proposals, any lawful activity
in which a savings association participates would be permitted
for up to two years following the effective date of its
conversion to the new charter, with two additional one-year
extensions which may be granted as the discretion of the
regulator. The legislative proposals would also abolish the OTS
and transfer its functions to the federal bank regulators with
respect to the institutions and to the Federal Reserve Board with
respect to the regulation of holding companies. The Association
is unable to predict whether the legislation will be enacted or,
given such uncertainty, determine the extent to which the
legislation, if enacted, would affect its business. The
Association is also unable to predict whether the SAIF and BIF
funds will eventually be merged.
While the legislation has reduced the disparity between
premiums paid on BIF deposits and SAIF deposits, and has relieved
the thrift industry of a portion of the contingent liability
represented by the FICO bonds, the premium disparity between
SAIF-insured institutions, such as the Association, and BIF-
insured institutions will continue until at least January 1,
1999. Under the legislation, the Association anticipates that
its ongoing annual SAIF premiums will be approximately $16,000.
<PAGE>
Regulatory Capital Requirements
Federally insured savings associations, such as the
Association, are required to maintain a minimum level of
regulatory capital. The OTS has established capital standards,
including a tangible capital requirement, a leverage ratio (or
core capital) requirement and a risk-based capital requirement
applicable to such savings associations. Generally, these
capital requirements must be generally as stringent as the
comparable capital requirements for national banks. The OTS is
also authorized to impose capital requirements in excess of these
standards on individual associations on a case-by-case basis.
The capital regulations require tangible capital of at least
1.5% of adjusted total assets (as defined by regulation).
Tangible capital generally includes common stockholders' equity
and retained income, and certain noncumulative perpetual
preferred stock and related income. In addition, all intangible
assets, other than a limited amount of purchased mortgage
servicing rights, must be deducted from tangible capital for
calculating compliance with the requirement. Further, the
valuation allowance applicable to the write-down of investments
and mortgage-backed securities in accordance with SFAS No. 115 is
excluded from the regulatory capital calculation. At December
31, 1996, the Association had no intangible assets and an
unrealized loss on investment securities available for sale net
of tax of $6,004.
At December 31, 1996, the Association had tangible capital
of $4.5 million, or 14.4% of adjusted total assets, which is
approximately $4.1 million above the minimum requirement of 1.5%
of adjusted total assets in effect on that date.
The capital standards also require core capital of at least
3% of adjusted total assets. Core capital generally consists of
tangible capital plus certain intangible assets, including a
limited amount of purchased credit card relationships. As a
result of the prompt corrective action provisions discussed
below, however, a savings association must maintain a core
capital ratio of at least 4% to be considered adequately
capitalized unless its supervisory condition is such to allow it
to maintain a 3% ratio. At December 31, 1996, the Association
had no intangible assets which were subject to these tests.
At December 31, 1996, the Association had core capital equal
to $4.5 million, or 14.4% of adjusted total assets, which is $3.6
million above the minimum leverage ratio requirement of 3% as in
effect on that date.
The OTS risk-based requirement requires savings
associations to have total capital of at least 8% of risk-
weighted assets. Total capital consists of core capital, as
defined above, and supplementary capital. Supplementary capital
consists of certain permanent and maturing capital instruments
that do not qualify as core capital and general valuation loan
and lease loss allowances up to a maximum of 1.25% of risk-
weighted assets. Supplementary capital may be used to satisfy
the risk-based requirement only to the extent of core capital.
The OTS is also authorized to require a savings association to
maintain an additional amount of total capital to account for
concentration of credit risk and the risk of non-traditional
activities. At December 31, 1996, the Association had no capital
instruments that qualify as supplementary capital and $158,000 of
general loss reserves, which was less than 1.25% of risk-weighted
assets.
Certain exclusions from capital and assets are required to
be made for the purpose of calculating total capital. Such
exclusions consist of equity investments (as defined by
regulation) and that portion of land loans and nonresidential
construction loans in excess of an 80% loan-to-value ratio and
reciprocal holdings of qualifying capital instruments. The
Association had exclusions from capital and assets at December
31, 1996 of $19,000.
In determining the amount of risk-weighted assets, all
assets, including certain off-balance sheet items, will be
multiplied by a risk weight, ranging from 0% to 100%, based on
the risk inherent in the type of asset. For example, the OTS has
assigned a risk weight of 50% for prudently underwritten
permanent one- to four-family first lien mortgage loans not more
than 90 days delinquent and having a loan to value ratio of not
more than 80% at origination unless insured to such ratio by an
insurer approved by the FNMA or FHLMC.
<PAGE>
The OTS has adopted a final rule that requires every savings
association with more than normal interest rate risk exposure to
deduct from its total capital, for purposes of determining
compliance with such requirement, an amount equal to 50% of its
interest-rate risk exposure multiplied by the present value of
its assets. This exposure is a measure of the potential decline
in the net portfolio value of a savings association, greater than
2% of the present value of its assets, based upon a hypothetical
200 basis point increase or decrease in interest rates (whichever
results in a greater decline). Net portfolio value is the
present value of expected cash flows from assets, liabilities and
off-balance sheet contracts. The rule provides for a two quarter
lag between calculating interest rate risk and recognizing any
deduction from capital. Any savings association with less than
$300 million in assets and a total risk-based capital ratio in
excess of 12% is exempt from this requirement unless the OTS
determines otherwise.
On December 31, 1996, the Association had total capital of
$4.6 million (including $4.5 million in core capital and
$188,000 in qualifying supplementary capital) and risk-weighted
assets of $12.6 million (including $0 in converted off-balance
sheet assets); or total capital of 37.2% of risk-weighted assets.
This amount was 29.2% above the 8% requirement in effect on that
date.
Pursuant to FDICIA, the federal banking agencies, including
the OTS, have also proposed regulations authorizing the agencies
to require a depository institution to maintain additional total
capital to account for concentration of credit risk and the risk
of non-traditional activities. No assurance can be given as to
the final form of any such regulation.
The OTS and the FDIC are authorized and, under certain
circumstances required, to take certain actions against savings
associations that fail to meet their capital requirements.
Effective December 19, 1992, the federal banking agencies,
including the OTS, were given additional enforcement authority
over undercapitalized depository institutions. The OTS is
generally required to take action to restrict the activities of
an "undercapitalized association" (generally defined to be one
with less than either a 4% core capital ratio, a 4% Tier 1
risked-based capital ratio or an 8% risk-based capital ratio).
Any such association must submit a capital restoration plan and
until such plan is approved by the OTS may not increase its
assets, acquire another institution, establish a branch or engage
in any new activities, and generally may not make capital
distributions. The OTS is authorized to impose the additional
restrictions that are applicable to significantly
undercapitalized associations.
As a condition to the approval of the capital restoration
plan, any company controlling an undercapitalized association
must agree that it will enter into a limited capital maintenance
guarantee with respect to the institution's achievement of its
capital requirements.
Any savings association that fails to comply with its
capital plan or is "significantly undercapitalized" (i.e., Tier 1
risk-based or core capital ratios of less than 3% or a risk-based
capital ratio of less than 6%) must be made subject to one or
more of additional specified actions and operating restrictions,
which may cover all aspects of its operations and include a
forced merger or acquisition of the association. An association
that becomes "critically undercapitalized" (i.e., a tangible
capital ratio of 2% or less) is subject to further mandatory
restrictions on its activities in addition to those applicable to
significantly undercapitalized associations. In addition, the
OTS must appoint a receiver (or conservator with the concurrence
of the FDIC) for a savings association, with certain limited
exceptions, within 90 days after it becomes critically
undercapitalized. Any undercapitalized association is also
subject to the general enforcement activity of the OTS and the
FDIC, including the appointment of a receiver or conservator.
The OTS is also generally authorized to reclassify an
association into a lower capital category and impose restrictions
applicable to such category if the institution is engaged in
unsafe or unsound practices or is in an unsafe or unsound
condition.
The imposition by the OTS or the FDIC of any of these
measures on First Federal may have a substantial adverse effect
on the Association's operations and profitability and the value
of the Company's common stock purchased in the Conversion. The
Company's shareholders do not have preemptive rights, and
therefore, if the Company is directed by the OTS or the FDIC to
issue additional shares of Common Stock, such issuance may result
in the dilution in the percentage of ownership of the Company of
the Company's shareholders.
<PAGE>
Limitations on Dividends and Other Capital Distributions
OTS regulations impose various restrictions or requirements
on associations with respect to their ability to pay dividends or
make other distributions of capital. OTS regulations prohibit an
association from declaring or paying any dividends or from
repurchasing any of its stock if, as a result, the regulatory
capital of the association would be reduced below the amount
required to be maintained for the liquidation account established
in connection with its mutual to stock conversion.
The OTS utilizes a three-tiered approach to permit
associations, based on their capital level and supervisory
condition, to make capital distributions which include dividends,
stock redemptions or repurchases, cash-out mergers and other
transactions charged to the capital account. See "- Regulatory
Capital Requirements."
Generally, Tier 1 associations, which are associations that
before and after the proposed distribution meet their fully
phased-in capital requirements, may make capital distributions
during any calendar year equal to the greater of 100% of net
income for the year-to-date plus 50% of the amount by which the
lesser of the association's tangible, core or risk-based capital
exceeds its fully phased-in capital requirement for such capital
component, as measured at the beginning of the calendar year, or
the amount authorized for a Tier 2 association. However, a
Tier 1 association deemed to be in need of more than normal
supervision by the OTS may be downgraded to a Tier 2 or Tier 3
association as a result of such a determination. The Association
meets the requirements for a Tier 1 association and has not been
notified of a need for more than normal supervision. Tier 2
associations, which are associations that before and after the
proposed distribution meet their current minimum capital
requirements, may make capital distributions of up to 75% of net
income over the most recent four quarter period.
Tier 3 associations (which are associations that do not meet
current minimum capital requirements) that propose to make any
capital distribution and Tier 2 associations that propose to make
a capital distribution in excess of the noted safe harbor level
must obtain OTS approval prior to making such distribution.
Tier 2 associations proposing to make a capital distribution
within the safe harbor provisions and Tier 1 associations
proposing to make any capital distribution need only submit
written notice to the OTS 30 days prior to such distribution. As
a subsidiary of the Holding Company, the Association will also be
required to give the OTS 30 days' notice prior to declaring any
dividend on its stock. The OTS may object to the distribution
during that 30-day period based on safety and soundness concerns.
See "- Regulatory Capital Requirements."
The OTS has proposed regulations that would revise the
current capital distribution restrictions. The proposal
eliminates the current tiered structure and the safe-harbor
percentage limitations. Under the proposal a savings association
may make a capital distribution without notice to the OTS (unless
it is a subsidiary of a holding company) provided that it has a
CAMEL 1 or 2 rating, is not in troubled condition and would
remain adequately capitalized (as defined by regulation)
following the proposed distribution. Savings associations that
would remain adequately capitalized following the proposed
distribution but do not meet the other noted requirements must
notify the OTS 30 days prior to declaring a capital distribution.
The OTS stated it will generally regard as permissible that
amount of capital distributions that do not exceed 50% of the
institution's excess regulatory capital plus net income to date
during the calendar year. A savings association may not make a
capital distribution without prior approval of the OTS and the
FDIC if it is undercapitalized before, or as a result of, such a
distribution. A savings association will be considered in
troubled condition if it has a CAMEL rating of 4 or 5, is subject
to an enforcement action relating to its safety and soundness or
financial viability or has been informed in writing by the OTS
that it is in troubled condition. As under the current rule, the
OTS may object to a capital distribution if it would constitute
an unsafe or unsound practice. No assurance may be given as to
whether or in what form the regulations may be adopted.
<PAGE>
Liquidity
All savings associations, including the Association, are
required to maintain an average daily balance of liquid assets
equal to a certain percentage of the sum of its average daily
balance of net withdrawable deposit accounts and borrowings
payable in one year or less. For a discussion of what the
Association includes in liquid assets, see "Business - Investment
Activities." This liquid asset ratio requirement may vary from
time to time (between 4% and 10%) depending upon economic
conditions and savings flows of all savings associations. At the
present time, the minimum liquid asset ratio is 5%.
In addition, short-term liquid assets (e.g., cash, certain
time deposits, certain bankers acceptances and short-term United
States Treasury obligations) currently must constitute at least
1% of the association's average daily balance of net withdrawable
deposit accounts and current borrowings. Penalties may be
imposed upon associations for violations of either liquid asset
ratio requirement. At December 31, 1996, the Association was in
compliance with both requirements, with an overall liquid asset
ratio of 7.8% and a short-term liquid assets ratio of 6.4%.
Accounting
An OTS policy statement applicable to all savings
associations clarifies and re-emphasizes that the investment
activities of a savings association must be in compliance with
approved and documented investment policies and strategies, and
must be accounted for in accordance with GAAP. Under the policy
statement, management must support its classification of and
accounting for loans and securities (i.e., whether held for
investment, sale or trading) with appropriate documentation.
The OTS has adopted an amendment to its accounting
regulations, which may be made more stringent than GAAP by the
OTS, to require that transactions be reported in a manner that
best reflects their underlying economic substance and inherent
risk and that financial reports must incorporate any other
accounting regulations or orders prescribed by the OTS. The
Association is in compliance with these amended rules.
Qualified Thrift Lender Test
All savings associations, including the Association, are
required to meet a qualified thrift lender ("QTL") test to avoid
certain restrictions on their operations. This test requires a
savings association to have at least 65% of its portfolio assets
(as defined by regulation) in qualified thrift investments on a
monthly average for nine out of every 12 months on a rolling
basis. Such assets primarily consist of residential housing
related loans and investments. At December 31, 1996, the
Association complied with the QTL requirement.
Any savings association that fails to meet the QTL test must
convert to a national bank charter, unless it requalifies as a
QTL and thereafter remains a QTL. If an association does not
requalify and converts to a national bank charter, it must remain
SAIF-insured until the FDIC permits it to transfer to the BIF.
If such an association has not yet requalified or converted to a
national bank, its new investments and activities are limited to
those permissible for both a savings association and a national
bank, and it is limited to national bank branching rights in its
home state. In addition, the association is immediately
ineligible to receive any new FHLB borrowings and is subject to
national bank limits for payment of dividends. If such
association has not requalified or converted to a national bank
within three years after the failure, it must divest of all
investments and cease all activities not permissible for a
national bank. In addition, it must repay promptly any
outstanding FHLB borrowings, which may result in prepayment
penalties. If any association that fails the QTL test is
controlled by a holding company, then within one year after the
failure, the holding company must register as a bank holding
company and become subject to all restrictions on bank holding
companies. See "- Holding Company Regulation."
Community Reinvestment Act
Under the Community Reinvestment Act ("CRA"), every FDIC
insured institution has a continuing and affirmative obligation
consistent with safe and sound banking practices to help meet the
credit needs of its entire community, including low and moderate
income neighborhoods. The CRA does not establish specific
lending
<PAGE>
requirements or programs for financial institutions nor does it
limit an institution's discretion to develop the types of
products and services that it believes are best suited to its
particular community, consistent with the CRA. The CRA requires
the OTS, in connection with the examination of the Association,
to assess the institution's record of meeting the credit needs of
its community and to take such record into account in its
evaluation of certain applications, such as a merger or the
establishment of a branch, by the Association. An unsatisfactory
rating may be used as the basis for the denial of an application
by the OTS.
The federal banking agencies, including the OTS, have
recently revised the CRA regulations and the methodology for
determining an institution's compliance with the CRA. Due to the
heightened attention being given to the CRA in the past few
years, the Association may be required to devote additional funds
for investment and lending in its local community. The
Association was examined for CRA compliance in 1996 and received
a rating of "Satisfactory", as indicated in the OTS Community
Reinvestment Act Performance Evaluation public disclosure dated
April 1, 1996.
Transactions with Affiliates
Generally, transactions between a savings association or its
subsidiaries and its affiliates are required to be on terms as
favorable to the association as transactions with non-affiliates.
In addition, certain of these transactions, such as loans to an
affiliate, are restricted to a percentage of the association's
capital. Affiliates of the Association include the Holding
Company and any company which is under common control with the
Association. In addition, a savings association may not lend to
any affiliate engaged in activities not permissible for a bank
holding company or acquire the securities of most affiliates.
Certain transactions with directors, officers or controlling
persons are also subject to conflict of interest regulations
enforced by the OTS. These conflict of interest regulations and
other statutes also impose restrictions on loans to such persons
and their related interests. Among other things, such loans must
be made on terms substantially the same as for loans to
unaffiliated individuals.
Holding Company Regulation
The Company is a unitary savings and loan holding company
subject to regulatory oversight by the OTS. As such, the Company
is required to register and file reports with the OTS and is
subject to regulation and examination by the OTS. In addition,
the OTS has enforcement authority over the Company and its non-
savings association subsidiaries which also permits the OTS to
restrict or prohibit activities that are determined to be a
serious risk to the subsidiary savings association.
As a unitary savings and loan holding company, the Company
generally is not subject to activity restrictions. If the
Company acquires control of another savings association as a
separate subsidiary, it would become a multiple savings and loan
holding company, and the activities of the Company and any of its
subsidiaries (other than the Association or any other SAIF-
insured savings association) would become subject to such
restrictions unless such other associations each qualify as a QTL
and were acquired in a supervisory acquisition.
If the Association fails the QTL test, the Company must
obtain the approval of the OTS prior to continuing after such
failure, directly or through its other subsidiaries, any business
activity other than those approved for multiple savings and loan
holding companies or their subsidiaries. In addition, within one
year of such failure the Holding Company must register as, and
will become subject to, the restrictions applicable to bank
holding companies. The activities authorized for a bank holding
company are more limited than are the activities authorized for a
unitary or multiple savings and loan holding company. See "-
Qualified Thrift Lender Test."
The Company must obtain approval from the OTS before
acquiring control of any other SAIF-insured association. Such
acquisitions are generally prohibited if they result in a
multiple savings and loan holding company controlling savings
associations in more than one state. However, such interstate
acquisitions are permitted based on specific state authorization
or in a supervisory acquisition of a failing savings association.
<PAGE>
Federal Securities Law
The stock of the Company is registered with the SEC under
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Company is subject to the information, proxy
solicitation, insider trading restrictions and other requirements
of the SEC under the Exchange Act.
Company stock held by persons who are affiliates (generally
officers, directors and principal stockholders) of the Company
may not be resold without registration or unless sold in
accordance with certain resale restrictions. If the Company
meets specified current public information requirements, each
affiliate of the Company is able to sell in the public market,
without registration, a limited number of shares in any three-
month period.
Federal Reserve System
The Federal Reserve Board requires all depository
institutions to maintain non-interest bearing reserves at
specified levels against their transaction accounts (primarily
checking, NOW and Super NOW checking accounts). At December 31,
1996, the Association was in compliance with these reserve
requirements. The balances maintained to meet the reserve
requirements imposed by the Federal Reserve Board may be used to
satisfy liquidity requirements that may be imposed by the OTS.
See "- Liquidity."
Savings associations are authorized to borrow from the
Federal Reserve Bank "discount window," but Federal Reserve Board
regulations require associations to exhaust other reasonable
alternative sources of funds, including FHLB borrowings, before
borrowing from the Federal Reserve Bank.
Federal Home Loan Bank System
The Association is a member of the FHLB of Dallas, which is
one of 12 regional FHLBs, that administers the home financing
credit function of savings associations. Each FHLB serves as a
reserve or central bank for its members within its assigned
region. It is funded primarily from proceeds derived from the
sale of consolidated obligations of the FHLB System. It makes
loans to members (i.e., advances) in accordance with policies and
procedures established by the board of directors of the FHLB.
These policies and procedures are subject to the regulation and
oversight of the Federal Housing Finance Board. All advances
from the FHLB are required to be fully secured by sufficient
collateral as determined by the FHLB. In addition, all long-term
advances are required to provide funds for residential home
financing.
As a member, the Association is required to purchase and
maintain stock in the FHLB of Dallas. At December 31, 1996, the
Association had $259,200 of FHLB stock, which was in compliance
with this requirement. In past years, the Association has
received substantial dividends on its FHLB stock. Over the past
five fiscal years such dividends have averaged 4.87% and were
5.9% for the year ended December 31, 1996. No assurance can be
given that such dividends will continue in the future at such
levels.
Under federal law, the FHLBs are required to provide funds
for the resolution of troubled savings associations and to
contribute to low- and moderately priced housing programs through
direct loans or interest subsidies on advances targeted for
community investment and low- and moderate-income housing
projects. These contributions have affected adversely the level
of FHLB dividends paid and could continue to do so in the future.
These contributions could also have an adverse effect on the
value of FHLB stock in the future. A reduction in value of the
Association's FHLB stock may result in a corresponding reduction
in the Association's capital.
Federal and State Taxation
Federal Taxation. Savings associations such as the
Association that meet certain definitional tests relating to the
composition of assets and other conditions prescribed by the
Internal Revenue Code of 1986, as amended (the "Code"), are
permitted to establish reserves for bad debts and to make annual
additions thereto which may, within specified formula limits, be
taken as a deduction in computing taxable income for federal
income tax purposes. The amount of the bad debt reserve
deduction for "non-qualifying loans" is computed under the
experience method. For tax years beginning before December 31,
1995, the amount of the bad debt reserve deduction for
"qualifying real
<PAGE>
property loans" (generally, loans secured by improved real
estate) may be computed under either the experience method or the
percentage of taxable income method (based on an annual
election). If a savings association elected the latter method,
it could claim, each year, a deduction based on a percentage of
taxable income, without regard to actual bad debt experience.
Under the experience method, the bad debt reserve deduction
is an amount determined under a formula based generally upon the
bad debts actually sustained by the savings association over a
period of years.
Under recently enacted legislation, the percentage of
taxable income method has been repealed for years beginning after
December 31, 1995, and "large" associations, i.e., the quarterly
average of the association's total assets or of the consolidated
group of which it is a member, exceeds $500 million for the year,
may no longer be entitled to use the experience method of
computing additions to their bad debt reserve. A "large"
association must use the direct write-off method for deducting
bad debts, under which charge-offs are deducted and recoveries
are taken into taxable income as incurred. If the Association is
not a "large" association, the Association will continue to be
permitted to use the experience method. The Association will be
required to recapture (i.e., take into income) over a six-year
period its applicable excess reserves, i.e, the balance of its
reserves for losses on qualifying loans and nonqualifying loans,
as of the close of the last tax year beginning before January 1,
1996, over the greater of (a) the balance of such reserves as of
December 31, 1987 (pre-1988 reserves) or (b) in the case of a
bank which is not a "large" association, an amount that would
have been the balance of such reserves as of the close of the
last tax year beginning before January 1, 1996, had the bank
always computed the additions to its reserves using the
experience method. Postponement of the recapture is possible for
a two-year period if an association meets a minimum level of
mortgage lending for 1996 and 1997. As of December 31, 1996, the
Association's bad debt reserve subject to recapture over a six-
year period totaled approximately $101,000.
If an association ceases to qualify as a "bank" (as defined
in Code Section 581) or converts to a credit union, the pre-1988
reserves and the supplemental reserve are restored to income
ratably over a six-year period, beginning in the tax year the
association no longer qualifies as a bank. The balance of the
pre-1988 reserves are also subject to recapture in the case of
certain excess distributions to (including distributions on
liquidation and dissolution), or redemptions of, shareholders.
In addition to the regular federal income tax, corporations,
including savings associations such as the Association, generally
are subject to a minimum tax. An alternative minimum tax is
imposed at a minimum tax rate of 20% on alternative minimum
taxable income, which is the sum of a corporation's regular
taxable income (with certain adjustments) and tax preference
items, less any available exemption. The alternative minimum tax
is imposed to the extent it exceeds the corporation's regular
income tax and net operating losses can offset no more than 90%
of alternative minimum taxable income. For taxable years
beginning after 1986 and before 1996, corporations, including
savings associations such as the Association, are also subject to
an environmental tax equal to 0.12% of the excess of alternative
minimum taxable income for the taxable year (determined without
regard to net operating losses and the deduction for the
environmental tax) over $2 million.
To the extent earnings appropriated to a savings
association's bad debt reserves for "qualifying real property
loans" and deducted for federal income tax purposes exceed the
allowable amount of such reserves computed under the experience
method and to the extent of the Association's supplemental
reserves for losses on loans ("Excess"), such Excess may not,
without adverse tax consequences, be utilized for the payment of
cash dividends or other distributions to a shareholder (including
distributions on redemption, dissolution or liquidation) or for
any other purpose (except to absorb bad debt losses). As of
December 31, 1996, the Association's excess for tax purposes
totaled approximately $368,000.
The Association files federal income tax returns on a
calendar year basis using the cash method of accounting. The
Company has filed a separate federal income tax return from the
Association. Savings associations, such as the Association, that
file federal income tax returns as part of a consolidated group
are required by applicable Treasury regulations to reduce their
taxable income for purposes of computing the percentage bad debt
deduction for losses attributable to activities of the
non-savings association members of the consolidated group that
are functionally related to the activities of the savings
association member.
<PAGE>
The Association has not been audited by the IRS recently
with respect to federal income tax returns. In the opinion of
management, any examination of still open returns would not
result in a deficiency which could have a material adverse effect
on the financial condition of the Association.
State Taxation. The Louisiana Corporation Income Tax Act
provides for an exemption from the Louisiana Corporation Income
Tax for mutual savings banks and for banking corporations, which
includes stock association (e.g., the Association). However,
this exemption does not extend to non-banking entities such as
the Company. The non-banking subsidiaries of the Association (as
well as the Company) are subject to the Louisiana Corporate
Income Tax based on their Louisiana taxable income, as well as
franchise taxes. The Louisiana Corporation Income Tax applies at
graduated rates from 4% upon the first $25,000 of Louisiana
taxable income to 8% on all Louisiana taxable income in excess of
$200,000. For these purposes, "Louisiana taxable income" means
net income which is earned within or derived from sources within
the State of Louisiana, after adjustments permitted under
Louisiana law including a federal income tax deduction and an
allowance for net operating losses, if any. In addition, the
Association will become subject to the Louisiana Shares Tax after
the Conversion, which will be imposed on the assessed value of
the Association's stock. The formula for deriving the assessed
value is to calculate 15% of the sum of (i) 20% of a
corporation's capitalized earnings, plus (ii) 80% of a
corporation's taxable stockholders' equity, and to subtract from
that amount 50% of a corporation's real and personal property
assessment. Other various items may also be subtracted in
calculating a corporation's capitalized earnings.
Delaware Taxation. As a Delaware holding company, the
Company is exempted from Delaware corporate income tax but is
required to file an annual report with and pay an annual fee to
the State of Delaware. The Company is also subject to an annual
franchise tax imposed by the State of Delaware.
Employees
At December 31, 1996, the Association had a total of 12
full-time and 2 part-time employees. The Association's employees
are not represented by any collective bargaining group.
Management considers its employee relations to be excellent.
Executive Officers of the Association and the Company Who Are Not
Directors
Betty Jean Parker. Mrs. Parker, age 52, is the Treasurer
and Chief Financial Officer of the Association. Until June 1996,
Mrs. Parker was also Corporate Secretary of the Association.
Mrs. Parker is responsible for the supervision of the accounting
department and reporting to the regulatory authorities.
Item 2. Description of Property
The Company conducts its business through one office,
located in Oakdale, Louisiana in Allen Parish. The following
table sets forth information relating to the Association's office
as of December 31, 1996. The total net book value of the
Company's premises and equipment (including land, buildings and
leasehold improvements and furniture, fixtures and equipment) at
December 31, 1996 was approximately $282,000.
<TABLE>
Total
Approx.
Year Square Net Book Value at
Location Opened Footage December 31, 1996
- -------------------------------------------------------------
<S> <C> <C> <C>
Main Office: 1975 4,100 $282,000
222 South 10th Street
Oakdale, Louisiana
</TABLE>
<PAGE>
Item 3. Legal Proceedings
The Company is involved, from time to time, as plaintiff or
defendant in various legal actions arising in the normal course
of their businesses. While the ultimate outcome of these
proceedings cannot be predicted with certainty, it is the opinion
of management, after consultation with counsel representing the
Company in the proceedings, that the resolution of these
proceedings should not have a material effect on the Company's
financial position or results of operations on a consolidated
basis.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders
during the fourth quarter of the fiscal year ended December 31,
1996.
PART II
Item 5. Market for the Registrant's Common Stock and Related
Security Holder Matters
Pages 47 to 48 of the attached 1996 Annual Report to
Shareholders is herein incorporated by reference.
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Pages 6 to 16 of the attached 1996 Annual Report to
Shareholders are herein incorporated by reference.
Item 7. Financial Statements
Pages 17 to 46 of the attached 1996 Annual Report to
Shareholders are herein incorporated by reference.
Item 8. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
There has been no Current Report on Form 8-K filed within 24
months prior to the date of the most recent financial statements
reporting a change of accountants and/or reporting disagreements
on any matter of accounting principle or financial statement
disclosure.
PART III
Item 9. Directors and Executive Officers of the Registrant
Information concerning Directors of the Registrant is
incorporated herein by reference from the Company's definitive
Proxy Statement for the Annual Meeting of Shareholders scheduled
to be held on April 24, 1997.
Item 10. Executive Compensation
Information concerning executive compensation is
incorporated herein by reference from the Company's definitive
Proxy Statement for the Annual Meeting of Shareholders scheduled
to be held on April 24, 1997.
Item 11. Security Ownership of Certain Beneficial Owners and
Management
Information concerning security ownership of certain
beneficial owners and management is incorporated herein by
reference from the Company's definitive Proxy Statement for the
Annual Meeting of Shareholders scheduled to be held on April 24,
1997.
<PAGE>
Item 12. Certain Relationships and Related Transactions
Information concerning certain relationships and
transactions is incorporated herein by reference from the
Company's definitive Proxy Statement for the Annual Meeting of
Shareholders scheduled to be held on April 24, 1997.
Item 13. Exhibits List and Reports on Form 8-K
(a) (1) Financial Statements:
The following information appearing in the Registrant's
Annual Report to Shareholders for the year ended December 31,
1996, is incorporated by reference in this Form 10-KSB Annual
Report as Exhibit 13.
<TABLE>
Page in
Annual Report Section Annual Report
<S> <C>
Report of Independent Auditors 17
Consolidated Statements of Financial Condition
at December 31, 1996 and 1995 18
Consolidated Statements of Income for the Years
ended December 31, 1996 and 1995 19
Consolidated Statements of Stockholders' Equity
for the Years ended December 31, 1996 and 1995 20
Consolidated Statements of Cash Flows for the
Years ended December 31, 1996 and 1995 21-22
Notes to Consolidated Financial Statements 23-46
</TABLE>
(a)(2) Financial Statement Schedules - All financial
statement schedules have been omitted as the information is
either inapplicable or not required under the related
instructions.
(a)(3) Exhibits - The following exhibits are either filed
or attached as part of this report or are incorporated herein by
reference.
PAGE
<PAGE>
<TABLE>
Reference to
Regulation Prior Filing or
S-B Exhibit Exhibit Number
Number Document Attached Hereto
- ----------------------------------------------------------------------
<S> <C> <C>
2 Plan of acquisition, reorganization, None
arrangement, liquidation or succession
3 Certificate of Incorporation and *
Bylaws
4 Instruments defining the rights of *
security holders, including indentures
9 Voting trust agreement None
10.1 Employment Agreement with Charles L. *
Galligan
10.2 Employment Agreement with Betty Jean *
Parker
10.3 Employee Stock Ownership Plan *
11 Statement re: computation of per None
share earnings
12 Statement re: computation or ratios Not required
13 Annual Report to Security Holders 13
16 Letter re: change in certifying None
accountant
18 Letter re: change in accounting None
principles
21 Subsidiaries of Registrant 21
22 Published report regarding matters None
submitted to vote of security holders
23 Consent of experts and counsel None
24 Power of Attorney Not Required
27 Financial Data Schedule 27
28 Information from reports furnished to None
State insurance regulatory authorities
99 Additional exhibits None
___________________
</TABLE>
*Filed on June 25, 1996, as exhibits to the Registrant's Form SB-2
registration statement (Registration No. 333-6803), pursuant to the Securities
Act of 1933. All of such previously filed documents are hereby incorporated
herein by reference in accordance with Item 601 of Regulation S-B.
(b) Reports on Form 8-K - No Form 8-K was filed during
the last quarter of the year covered by this Form 10-KSB.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, there-
unto duly authorized.
FIRST ALLEN PARISH BANCORP, INC.
Date: March 27, 1997 By: /s/ Charles L. Galligan
-----------------------------------
Charles L. Galligan, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Charles Galligan By: /s/ Betty Jean Parker
------------------------- -------------------------
Charles L. Galligan, Betty Jean Parker,
President and Chief Executive Treasurer (Principal
Office (Principal Executive Financial and Accounting
Officer) Officer)
Date: March 27, 1997 Date: March 27, 1997
By: /s/ Dr. James D. Sandefur By: /s/ Jesse Boyd, Jr.
------------------------- -------------------------
Dr. James D. Sandefur, Jesse Boyd, Jr.,
Chairman Director
Date: March 27, 1997 Date: March 27, 1997
By: /s/ James E. Riley By: /s/ J.C. Smith
------------------------- -------------------------
James E. Riley, Director J.C. Smith, Director
Date: March 27, 1997 Date: March 27, 1997
By: /s/ Leslie A. Smith
By: -------------------------
Leslie A. Smith, Director
Date: March 27, 1997
<PAGE>
Index to Exhibits
Exhibit 13 1996 Annual Report to Stockholders
Exhibit 21 Subsidiaries of the Registrant
Exhibit 27 Financial Data Schedule
<PAGE>
FIRST ALLEN PARISH BANCORP, INC.
---------------------------------------------
ANNUAL REPORT
---------------------------------------------
1996
<PAGE>
TABLE OF CONTENTS
Page
President's Message 1
General Information 3
Selected Consolidated Financial and Other Data of the
Company 4
Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Consolidated Financial Statements 17
Stockholder Information 47
Corporate Information 48
<PAGE>
March 21, 1997
Dear Stockholder:
We are pleased to provide you with the Annual Report on the
Consolidated Financial Statements of First Allen Parish Bancorp,
Inc., holding company of First Federal Savings and Loan
Association of Allen Parish (First Federal), for the year ended
December 31, 1996.
Our first full quarter of operation as a public stock company
ended with our year ended December 31, 1996, contributing to a
year of solid performance. Consolidated assets of First Allen
Parish Bancorp, Inc., totalled $31.5 million at December 31,
1996, an increase of $2.6 million over the year ended December
31, 1995. Total stockholders' equity was $4.3 million,
representing an increase of $2.3 million over the year ended
December 31, 1995. This increase in equity was a direct result
of the conversion of First Federal from a mutual to a public
stock institution on September 27, 1996, and the coinciding
issuance of 264,506 shares of $0.01 par value common stock issued
at $10.00 per share.
Although net income of $167,000 was realized for the year ended
December 31, 1996, net income decreased from $290,000 for the
year ended December 31, 1995. The Company expensed $170,000 of
deposit insurance premiums in 1996 because of a one-time special
assessment levied by the Federal Deposit Insurance Corporation to
recapitalize the Savings Association Insurance Fund (SAIF). The
effect of this federal legislation was a one-time special
assessment levied against the earnings of all FDIC-SAIF insured
savings and loan associations. The positive effect of resolving
this issue is that going forward, our annual FDIC-SAIF insurance
premium will be significantly reduced. Based on current figures,
we should save approximately $45,000 annually on FDIC-SAIF
premiums, enough to recoup the $170,000 assessment in four years
or less.
Knowing that the FDIC-SAIF issue is finally resolved should have
a very positive effect on all FDIC-SAIF insured stock
institutions, such as First Federal. The initial market price of
our stock as of September 30, 1996 was $10.00, compared to $14.38
at December 31, 1996.
<PAGE>
Interest-bearing and non-interest bearing deposits and Federal
Home Loan Bank stock increased $111,000, from $1.6 million at
December 31, 1995, to $1.7 million at December 31, 1996.
Mortgage-backed securities increased $1.8 million, from $15.4
million at December 31, 1995, to $17.2 million at December 31,
1996.
Loans receivable increased $707,000, from $11.2 million at
December 31, 1995, to $11.9 million, at December 31, 1996.
Deposits were $26.6 million, at December 31, 1995, as compared to
$25.7 million at December 31, 1996. Federal Home Loan Bank
(FHLB) advances were $1.2 million at December 31, 1996.
Your Board of Directors, management and staff remain committed to
building strong stockholder value. Since its origination in
1962, First Federal has been, and intends to continue to be, a
community-oriented financial institution, offering a full range
of banking services aimed at meeting the financial needs of the
communities it serves. Our customers appreciate the fact that we
are accessible and are here for them to serve their financial
needs.
Thank you for your investment in First Allen Parish Bancorp, Inc.
and First Federal. We are looking forward to a long and
prosperous relationship.
Sincerely,
/s/ Charles Galligan
- ------------------------------
Charles Galligan,
President and CEO
<PAGE>
GENERAL INFORMATION
First Allen Parish Bancorp, Inc. (the Company) is a Delaware
Corporation which is the holding company for First Federal
Savings and Loan Association of Allen Parish (the Association).
The Company was organized by the Association for the purpose of
acquiring all of the capital stock of the Association in
connection with the conversion of the Association from mutual to
stock form, which was completed on September 27, 1996 (the
Conversion). The only significant assets of the Company are the
capital stock of the Association, the Company's loan to an
employee stock ownership plan, and investment securities in
United States government and agency obligations. The business of
the Company initially consists of the business of the
Association.
The Association, which was originally chartered in 1962 as a
federal chartered mutual savings and loan association, is
headquartered in Oakdale, Louisiana. Its deposits are insured up
to the maximum allowable amount by the Federal Deposit Insurance
Corporation (FDIC). The Association serves communities located
in Allen Parish and in the surrounding parishes in Louisiana
through its office located at 222 South 10th Street, Oakdale,
Louisiana.
The Association has been and intends to continue to be, a
community-oriented financial institution offering financial
services to meet the needs of the market area it serves. The
Association attracts deposits from the general public and uses
such funds together with FHLB advances to originate loans secured
by real estate, including one-to-four family residential mortgage
loans, commercial real estate loans, land loans, construction
loans and loans secured by other properties. The Association
also originates consumer and other loans consisting primarily of
loans secured by automobiles, manufactured homes, share loans and
lines of credit. The Association has also invested a significant
portion of its assets in mortgage-backed and related securities
and other investments.
<PAGE>
SELECTED CONSOLIDATED FINANCIAL
AND OTHER DATA OF THE COMPANY
Set forth below are selected consolidated financial and
other data of the Company. The financial data is derived in part
from, and should be read in connection with, the Consolidated
Financial Statements, and Notes thereto presented elsewhere in
this Annual Report.
<TABLE>
<CAPTION>
At
December 31,
------------
1996 1995
---- ----
<S> <C> <C>
(In thousands)
Selected Financial Condition Data:
Total assets $31,490 $28,858
Cash and cash equivalents 1,474 1,363
Loans receivable, net
Real estate 9,410 9,315
Consumer and other 2,528 1,916
Mortgage-backed and related securities 17,185 15,391
FHLB stock 259 260
Deposits 25,750 26,583
FHLB advances 1,200 -
Total stockholders' equity 4,319 2,059
</TABLE>
<TABLE>
Years Ended
December 31,
----------------
1996 1995
---- ----
(In thousands, except
share information)
<S> <C> <C>
Selected Operating Data:
Interest income $ 2,135 $ 2,005
Interest expense 1,151 1,078
Net interest income 984 927
Recovery from loan losses 8 21
Net interest income after recovery
from loan losses 992 948
Total non-interest income 249 241
Total non-interest expense 986 748
Earnings before income taxes 255 441
Income tax expense 88 151
Net earnings $ 167 $ 290
======== ========
Net earnings per share $ 0.69 $ -
======== ========
Average common shares outstanding 243,346 -
======== ========
</TABLE>
<PAGE>
<TABLE>
At or for the Years
Ended December 31,
------------------
1996 1995
--------- ------
<S> <C> <C>
Key Financial Ratios and Other Data:
Performance Ratios:
Return on average assets (net income divided
by average total assets) .55% 1.00%
Return on average equity (net income divided
by average equity) 6.29% 13.98%
Net interest rate spread (difference between
average yield on interest-earning assets
and average cost of interest-bearing
liabilities) 3.08% 3.05%
Net interest margin (net interest income as a
percentage of average interest-earning assets) 3.37% 3.31%
Net interest income to non-interest expense 99.82% 123.97%
Average interest-earning assets to average
interest-bearing liabilities 107.50% 106.59%
Net interest income after recovery from loan
losses, to total non-interest expense 100.63% 126.78%
Non-interest expense to average assets (1) 3.26% 2.58%
Asset Quality Ratios:
Non-performing loans to total loans .37% 1.44%
Non-performing assets to total assets .38% .69%
Allowance for loan losses to non-performing
loans 670.81% 196.90%
Allowance for loan losses to non-performing
assets 249.02% 158.50%
Capital Ratios (2):
Equity to assets at year end 13.71% 7.14%
Equity to average assets ratio
(Average equity divided by average total
assets) 8.83% 7.34%
Other Data:
Number of full-service offices 1 1
</TABLE>
(1) Without the SAIF assessment of $170,000, non-interest
expense would have been $816,000 for 1996 or 2.7% of average
total assets.
(2) For a discussion of the Company's regulatory capital ratios,
see Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital
Resources.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
First Allen Parish Bancorp, Inc. was formed in June, 1996 by
First Federal Savings and Loan Association of Allen Parish to
become the holding company of the Association. The acquisition
of the Association by First Allen Parish Bancorp, Inc. was
consummated on September 27, 1996 in connection with the
Association's conversion from the mutual to the stock form. All
references to the Company prior to September 27, 1996, except
where otherwise indicated, are to the Association.
The Company's results of operations depend primarily on its
level of net interest income, which is the difference between
interest earned on interest-bearing assets, consisting primarily
of mortgage and consumer loans and investments, and the interest
paid on interest-bearing liabilities, consisting primarily of
deposits and Federal Home Loan Bank (FHLB) advances. Net
interest income is a function of the Company's "interest rate
spread," which is the difference between the average yield earned
on interest-bearing assets and the average rate paid on interest-
bearing liabilities, as well as a function of the average balance
of interest-bearing assets as compared to interest-bearing
liabilities. The interest rate spread is affected by regulatory,
economic and competitive factors that influence interest rates,
loan demand and deposit flows. The Company, like other financial
institutions, is subject to interest-rate risk to the degree that
its interest-earning assets mature or reprice at different times,
or on a different basis, than its interest-bearing liabilities.
The Company's operating results are also affected by the amount
of its non-interest income, including loan fees and service
charges and other income. Non-interest expense consists
principally of employee compensation and employee benefits,
occupancy expenses, data processing, federal deposit insurance
premiums, stationery and printing and other operating expenses.
The Company's operating results are affected by general economic
and competitive conditions, in particular, the changes in market
interest rates, government policies and actions by regulatory
authorities.
Financial Condition
Total assets increased $2.6 million, or 9.12%, to $31.5
million at December 31, 1996 from $28.9 million at December 31,
1995. The increase was primarily funded by the issuance of
264,506 shares of common stock in the Conversion, which provided
$2.3 million in proceeds, net of conversion costs. The proceeds
from the issuance of common stock were used to finance a $1.8
million increase in mortgage-backed securities and $707,000
increase in net loans receivable.
Net loans receivable increased by $707,000, or 6.29%, to
$11.9 million at December 31, 1996 from $11.2 million at December
31, 1995 due primarily to an increase in consumer and other
loans.
Mortgage-backed and related securities and cash equivalents
increased $1.9 million, or 11.4% to $18.7 million at December 31,
1996 from $16.8 million at December 31, 1995. This increase was
financed from the proceeds of the stock conversion as mentioned
above.
<PAGE>
Deposits decreased $833,000 or 3.13% to $25.7 million at
December 31, 1996 from $26.6 million at December 31, 1995. FHLB
advances increased to $1.2 million at 1996 from none at December
31, 1995.
Total equity increased $2.3 million to $4.3 million at
December 31, 1996 from $2.06 million at December 31, 1995.
Earnings for the year provided a $167,000 increase, which was
offset by unearned ESOP shares. The issuance of common stock in
the Conversion raised $2.3 million, net of conversion costs,
which was the significant factor in the increase in total equity.
The Company's capital exceeded all of the capital
requirements imposed by FIRREA. OTS regulations provide that an
institution that exceeds all capital requirements before and
after a proposed capital distribution and, like the Company, has
not been notified of a need for more than normal supervision
could, after prior notice but without approval by the OTS, make
capital distributions during the calendar year of up to 100% of
its net income to date during the calendar year plus the amount
that would reduce by one-half its "surplus capital ratio" (the
excess capital over its capital requirements) at the beginning of
the calendar year. Any additional capital distributions would
require prior regulatory approval.
The Association did not declare any dividends in 1996
subsequent to its conversion to a stock company on September 27,
1996.
Results of Operations
The Company's results of operations depend primarily on the
level of its net interest income and non-interest income and its
control of operating expenses. Net interest income depends upon
the volume of interest-earning assets and interest-bearing
liabilities and the interest rates earned or paid on them.
The Company's non-interest income consists primarily of fees
charged on transaction accounts and fees charged for delinquent
payments received on mortgage and consumer loans. In addition,
non-interest income is derived from insurance commissions, loan
origination and servicing fees and other operating revenues.
The schedule on the following page presents, for the periods
indicated, the total dollar amount of interest income from
average interest-earning assets and the resultant yields, as well
as the total dollar amount of interest expense on average
interest-bearing liabilities and resultant rates. All average
balances are monthly average balances. Management does not
believe that the use of monthly balances instead of daily
balances has caused a material difference in the information
presented. Nonaccruing loans have been included as loans
carrying a zero yield.
PAGE
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------
1996 1995
------------------------------- ------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans(1) $ 8,997 $ 839 9.32% $ 9,290 $ 864 9.30%
Consumer and other loans 2,392 210 8.77 1,911 182 9.52
Mortgage-backed securities 15,702 986 6.29 15,258 859 5.63
FHLB stock 256 15 5.90 256 16 6.25
Other interest-bearing deposits 1,817 85 4.68 1,282 84 6.47
Total interest-earning assets 29,164 2,135 7.32 27,997 2,005 7.16
Non-interest earning assets 1,016 -- 0.00 1,016 -- 0.00
Total average assets $30,180 $2,135 7.07% $29,013 $2,005 6.91%
Interest-bearing liabilities:
Passbook accounts $ 3,005 $ 63 2.09% $ 2,952 $ 68 2.30%
NOW and money market accounts 6,000 88 1.46 4,073 91 2.17
Certificates 17,949 991 5.52 19,178 916 4.78
FHLB advances 175 9 5.14 62 3 4.84
Total interest-bearing
liabilities 27,129 1,151 4.24 26,265 1,078 4.10
Non-interest income $ 984 $ 927
Net interest rate spread(2) 3.08% 3.05%
Net interest margin(3) 3.37% 3.31%
Average interest-earning assets
to average interest-bearing liabilities 107.50 106.59%
- --------------------------
(1) Average balances include non-accrual loans.
(2) Net interest rate spread represents the difference between the average yield on interest-earning assets and
the average rate on interest-bearing liabilities.
(3) Net interest margin represents net interest income divided by average interest-earning assets.
</TABLE>
PAGE
<PAGE>
Rate/Volume Analysis
The table below sets forth certain information regarding
changes in interest income and interest expense of the Company
for the years indicated. For each category of interest-earning
assets and interest-bearing liabilities, information is provided
on changes attributable to (i) changes in volume (changes in
volume multiplied by old rate); (ii) changes in rate (change in
rate multiplied by old volume); and the net change. For purposes
of this table, changes attributable to both rate and volume,
which cannot be segregated, have been allocated proportionally to
the changes due to volume and the changes due to rate.
<TABLE>
Years Ended December 31,
1996 vs. 1995
------------------------
Increase/(Decrease)
due to
-------------------
Total
Increase
Volume Rate (Decrease)
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Interest-earnings assets:
Mortgage loans $(27) $ 1 $(26)
Consumer and other loans 40 (13) 27
Mortgage-backed securities 26 103 129
FHLB stock -- (1) (1)
Other 6 (4) 2
Total interest-earning assets 45 86 131
Interest-bearing liabilities:
Passbook accounts 1 (5) (4)
NOW and money market accounts 8 (12) (4)
Certificate accounts (52) 128 76
Federal Home Loan Bank advances 6 -- 6
Total interest-bearing liabilities (37) 111 74
Net change in interest income 82 (25) 57
</TABLE>
<PAGE>
Comparison of Operating Results for the Years Ended December 31,
1996 and 1995
General. Net earnings for the year ended December 31, 1996
decreased by $123,000 or 42.1% to $167,000 or $0.69 per share,
from $290,000, for the year ended December 31, 1995. The
decrease was primarily due to the combined effects of a $44,000
increase in net interest income after recovery from loan losses
and a $63,000 decrease in income taxes offset by a $171,000
increase in SAIF deposit insurance premiums , a $25,000 increase
in compensation and employee benefits, a $19,000 increase in
stationery and printing and a $20,000 increase in other non-
interest expenses. For the years ended December 31, 1996 and
1995, the returns on average assets were .55% and 1.00%,
respectively, while the returns on average equity were 6.29% and
13.98%, respectively.
A provision in the Omnibus Appropriations Bill passed by
Congress and signed by President Clinton on September 30, 1996
included an anticipated special assessment to recapitalize the
Savings Association Insurance Fund (SAIF). The 65.7 cents per
$100 of qualifying accounts as of March 31, 1995 created a pre-
tax expense of $170,000 to the Company. Without the SAIF
assessment, net income would have been $280,000, return on
average assets would have been .92%, return on average equity
would have been 10.50% and earnings per share would have been
$1.15 for the year ended December 31, 1996.
The recapitalization of SAIF is anticipated to reduce the
future deposit insurance premiums from 23 cents per $100 of
deposits to 6.4 cents per $100 of deposits. The 6.4 cent premium
is projected for the years 1997 through 1999, then decreasing
further to 2.4 cents from 2000 until 2017, assuming a merger of
SAIF and the Bank Insurance Fund (BIF).
Interest Income. For the year ended December 31, 1996, net
interest income increased by $57,000 to $984,000 from $927,000
for the year ended December 31, 1995. This reflects an increase
of $130,000 in interest income to $2.1 million from $2.0 million
and an increase of $73,000 in interest expense to $1.2 million
from $1.1 million. The increase in interest income was due to
both an increase in total interest-earning assets and an increase
in rates earned. The increase in interest expense was due to
increased rates paid.
Interest income on loans and other interest earning assets
remained relatively flat from 1995 to 1996. Interest income on
mortgage-backed and related securities increased $128,000 or
14.9% to $987,000 for the year ended December 31, 1996 from
$859,000 for the year ended December 31, 1995. The increase in
interest income from mortgage-backed and related securities was
primarily due to increased rates earned.
Interest Expense. Interest expense for the year ended
December 31, 1996 increased $73,000 to $1.2 million from $1.1
million for the year ended December 31, 1995. The increase was
primarily due to an increase in the average rate paid on
certificates of deposit. Although certificates of deposit
decreased from 1995 to 1996, interest rates paid on them
increased resulting in a slightly higher cost of funds. Average
balances in certificates of deposit decreased $1.2 million to
$17.9 million at December 31, 1996 from $19.2 million at
December 31, 1995. Average non-certificate balances increased
$2.0 million to $9.0 million from $7.0 million from 1995 to 1996.
Interest expense on FHLB advances increased to $9,000 for the
year ended December 31, 1996 from $3,000 for the prior year. The
Association borrowed $1.2 million compared to $-0- at December
31, 1995.
<PAGE>
Provision for Loan Losses. The Association maintains an
allowance for loan losses based upon management's periodic
evaluation of known and inherent risks in the loan, the
Association's past loss experience, adverse conditions that may
affect the borrower's ability to repay loans, estimated value of
the underlying collateral and current and expected market
conditions. The allowance for loan losses was $296,452 at
December 31, 1996 and $317,406 at December 31, 1995. The
provision for loan losses is the method by which the allowance
for losses is adjusted during the period. The Association did
not establish a provision for loan losses for the year ended
December 31, 1996 since the Association experienced recoveries on
loans for which reserves had previously been established. The
recovery of $8,000 was primarily due to the payment of consumer
loans for which provisions had been made in prior periods.
Management's focus on asset quality since 1991 has resulted in an
increased allowance for loan losses to net loans receivable to
2.48% at December 31, 1996 from 1.88% at December 31, 1991. The
ratio of nonperforming loans to total loans has also declined to
.37% at December 31, 1996 from 3.92% at December 31, 1991.
Because of the improvement in asset quality and increased
coverage of the allowance for loan losses to total loans,
management believes its allowance for loan losses is at a level
that is considered to be adequate to provide for estimated
losses; however; there can be no assurance that further additions
will not be made to the loss allowance and that such losses will
not exceed the estimated amount.
Non-interest Income. For the year December 31, 1996, non-
interest income was $249,000 compared to $241,000 for the year
ended December 31, 1995. The increase of $8,000 was due to
increases of $6,000 in insurance commissions earned and $10,000
in loan origination and servicing fees offset by a $5,000
decrease in gains on foreclosed real estate.
Non-interest Expense. Non-interest expense increased
$238,000 or 31.8% to $986,000 for the year ended December 31,
1996 from $748,000 for the year ended December 31, 1995. The
majority of the increase was due to the one-time SAIF assessment
of $170,000 (see Note 20 in the consolidated financial
statements) mandated by the FDIC on September 30, 1996.
Compensation and employee benefits increased $25,000 or 6.8% to
$394,000 for the year ended December 31, 1996 from $369,000 for
the year ended December 31, 1995. Increases in occupancy and
equipment expenses, stationery and printing and other expenses of
$5,000, $19,000 and $20,000 respectively, resulted in higher non-
interest expense for 1996 compared to 1995.
Income Taxes. Income taxes decreased $63,000 or 41.7% to
$88,000 for the year ended December 31, 1996 from $151,000 for
the year ended December 31, 1995. The decrease in income taxes
was the result of the higher non-interest expenses incurred,
primarily from the one-time SAIF assessment referred to above.
<PAGE>
Interest Rate Sensitivity
Net Portfolio Value. In order to encourage associations to
reduce their interest rate risk, the OTS adopted a rule
incorporating an interest rate risk ("IRR") component into the
risk-based capital rules. The IRR component is a dollar amount
that will be deducted from total capital for the purpose of
calculating an institution's risk-based capital requirement and
is measured in terms of the sensitivity of its net portfolio
value ("NPV") to changes in interest rates. NPV is the
difference between incoming and outgoing discounted cash flows
from assets, liabilities, and off-balance sheet contracts. An
institution's IRR is measured as the change to its NPV as a
result of a hypothetical 200 basis point ("bp") change in market
interest rates. A resulting change in NPV of more than 2% of the
estimated market value of its assets will require the institution
to deduct from its capital 50% of that excess change. The rules
provide that the OTS will calculate the IRR component quarterly
for each institution. The Company, based on asset size and risk-
based capital, has been informed by the OTS that it is exempt
from this rule. Nevertheless, the following table presents the
Company's NPV at December 31, 1996 as calculated by the OTS,
based on information provided to the OTS by the Company.
<TABLE>
Change in
Interest Rates December 31, 1996
In Basis Points Net Portfolio Value
(Rate Shock) Amount Change
(Dollars in thousands)
<S> <C> <C>
400 3,772 (24)%
300 4,204 (15)%
200 4,553 (8)
100 4,796 (3)
Static 4,932
(100) 4,996 1
(200) 5,078 3
(300) 5,244 6
(400) 5,513 12
</TABLE>
As shown in the above table, increase in interest rates will
result in net decreases in the Company's NPV, while decrease in
interest rates will result in smaller net increases in the NPV.
For example, the table reflects the Company's NPV decreasing 15%
if interest rates increased by 300bp, whereas the NPV would
increase by 6% if interest rates decreased by 300bp.
Certain shortcomings are inherent in the method of analysis
presented in both the computation of NPV and in the analysis of
the maturing and repricing of interest-earning assets and
interest-bearing liabilities. Although certain assets and
liabilities may have similar maturities or periods within which
they will reprice, they may react differently to changes in
market interest rates. The interest rates on certain types of
assets and liabilities may fluctuate in advance of changes in
market interest rates, while interest rates on other types may
lag behind changes in market rates. Additionally, adjustable-
rate mortgages
<PAGE>
have features which restrict changes in interest rates on a
short-term basis and over the life of the asset. The proportion
of adjustable-rate loans could be reduced in future periods if
market interest rates would decrease and remain at lower levels
for a sustained period, due to increased refinancing activity.
Further, in the event of a change in interest rates, prepayment
and early withdrawal levels would likely deviate significantly
from those assumed in the table. Finally, the ability of many
borrowers to service their adjustable-rate debt may decrease in
the event of a sustained interest rate increase.
Liquidity and Capital Resources
The Company's primary sources of funds are deposits,
borrowings, principal and interest payments on loans, mortgage-
backed and investment securities. In the event that the Company
should require funds beyond its ability to generate them
internally, additional sources of funds are available through the
use of FHLB advances. While scheduled loan repayments and
maturing investments are relatively predictable, deposit flows
and early loan repayments are more influenced by interest rates,
general economic conditions and competition.
Federal regulations require the Association to maintain
minimum levels of liquid assets. The required percentage has
varied from time to time based upon economic conditions and
savings flows and is currently 5 percent of net withdrawable
savings deposits and borrowings payable on demand in one year or
less during the preceding calendar month. Liquid assets for
purposes of this ratio include cash, certain time deposits, U. S.
Government, government agency and other securities and
obligations generally having remaining maturities of less than
five years. The Association's most liquid assets are cash and
cash equivalents, short-term investments and mortgage-backed and
related securities. The levels of these assets are dependent on
the Association's operating, financing, lending and investing
activities during any given period. At December 31, 1996 and
1995, liquidity eligible assets totaled $2.0 million and $2.1
million, respectively. At those dates, the Association's
liquidity ratios were 7.8% and 8.2%, respectively, in excess of
the 5% minimum regulatory requirement.
The Company uses its liquid resources principally to meet
ongoing commitments, to fund maturing certificates of deposit and
deposit withdrawals, to invest, to fund existing and future loan
commitments, to maintain liquidity and to meet operating
expenses. At December 31, 1996, the Association had outstanding
commitments to extend credit which amounted to $416,550.
Management believes that loan repayments and other sources of
funds will be adequate to meet the Company's foreseeable
liquidity needs.
At December 31, 1996, the Association had $14.9 million in
certificates of deposit due within one year and $7.3 million in
savings and checking accounts. Based on past experience,
management expects that most of the deposits will be retained or
replaced by new deposits.
The primary investment activities of the Company are the
origination of one- to four- family residential, commercial real
estate, one- to four- family construction, land and consumer
loans, and the purchase of investment and mortgage-backed
securities. During the years ended December 31, 1996 and 1995,
the Company
<PAGE>
originated loans totaling $5.9 million and $2.9 million,
respectively. During those same periods, the Company purchased
mortgage-backed securities totaling $3.9 million and $4.3
million, respectively. These activities were funded primarily by
deposits and principal repayments on loans and mortgage-backed
securities. The Company increased its purchases of mortgage-
backed securities with proceeds from its stock conversion. The
continued increase in mortgage-backed securities and relatively
flat lending activity could adversely affect the Company's
interest rate spreads.
In connection with its conversion on September 27, 1996 from
a federally chartered mutual savings and loan association to a
federally chartered stock savings and loan association, the
Association's capital structure increased substantially with the
issuance of stock and the formation of its holding company, First
Allen Parish Bancorp, Inc.
The Company issued 264,506 shares of common stock that
resulted in $2,645 of common stock and $2,298,842 of additional
paid-in capital net of conversion costs of $345,577. The
resulting capital ratios (see Note 21 in the consolidated
financial statements) at December 31, 1996 increased
substantially from prior years due to stockholders' equity. The
Association had tangible capital of $4.5 million or 14.4% of
total assets, which is approximately $4.0 million above the
minimum requirement of 1.5% of total assets. The Association had
core capital of $4.5 million or 14.4% of total assets, which is
$3.6 million above the minimum leverage ratio of 3.0%. The
Association had total risk-based capital of $4.7 million and
total risk-weighted assets of $12.6 million, or total capital of
37.2% of risk-weighted assets. This was $3.7 million above the
8.0% requirement.
The deposits of savings associations such as the Association
are presently insured by the SAIF which along with the BIF is one
of the two insurance funds administered by the FDIC. On
September 30, 1996, President Clinton signed into law the fiscal
year 1997 Omnibus Appropriations Bill which included the Deposit
Insurance Funds Act of 1996. Provisions of the bill included a
one-time assessment on SAIF-insured deposits. The Company's
assessment of $170,000 was recorded in the 1996 consolidated
financial statements. Following the recapitalization, SAIF
premiums will be reduced to the same level as for BIF deposits.
Separately, Financing Corporation (FICO) bond payments will
be shared by SAIF and BIF-insured financial institutions with
SAIF-insured institutions paying 80% of the annual cost and BIF-
insured institutions paying 20% of the annual cost through
December 31, 1999, after which assessments will be paid on a pro
rata basis. Until then, the FICO assessment will be 1.3 basis
points for banks versus 6.4 basis points for thrifts per $100 of
deposits. Previously, the minimum combined SAIF and FICO
assessments for thrifts had been 23 basis points. Although the
special one-time assessment significantly increased non-interest
expense for the current year, the anticipated reduction in the
premium schedule will reduce the Company's federal insurance
premiums for future periods.
<PAGE>
Recent Accounting Developments
In March 1995, the FASB issued SFAS 121 Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of. SFAS 121 is effective for fiscal years beginning
after December 15, 1995. The statement requires a company to
assess whether an asset (or group of assets) that will continue
to be used is impaired and whether an adjustment to the carrying
value is required. Certain events, such as a significant
decrease in the asset's market value, a physical change in the
asset or the way the asset is used, among others, are indicators
that impairment may exist. If an asset is determined to be
impaired, and the estimated cash flows from the asset are less
than the carrying value of the asset, then fair market value is
calculated, and the carrying value is adjusted if it is less than
the fair market value. Assets to be disposed of are reported at
the lower of the carrying amount or fair value less cost to sell.
In May 1995, the FASB issue SFAS 122, Accounting for
Mortgage Servicing Rights. SFAS 122 is effective for fiscal
years beginning after December 15, 1995. SFAS 122 requires
capitalization of servicing rights for both purchased loans and
in-house originations. Prior to the issuance of this statement,
only servicing rights associated with purchased loans were
capitalized. When a financial institution sells a loan and
retains the servicing rights, SFAS 122 requires that the total
cost of the loan (including loan fees and origination costs) be
allocated between the loan and the mortgage servicing rights
based on their relative fair values. The cost of the mortgage
servicing rights is recognized as a separate asset and amortized
in proportion to the estimated net servicing income. If it is
not practical to estimate fair values, the loan cost is allocated
entirely to the loan.
SFAS No. 123, Accounting for Stock-Based Compensation was
adopted by the Company during 1996. This statement establishes
financial accounting and reporting standards for stock-based
employee compensation plans. These plans include all
arrangements by which employees receive shares of stock or other
equity investments of the employer or the employer incurs
liabilities to employees in amounts based on the price of the
employer's stock. This statement also applies to transactions in
which an entity issues its equity instruments to acquire goods
and services from nonemployees.
SFAS No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, supersedes
SFAS No. 122 and will be effective for all transfers and
servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996. This statement provides
accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities based on
consistent application of a financial-components approach that
focuses on control. It distinguishes transfers of financial
assets that are sales from transfers that are secured borrowings.
Under the financial-components approach, after a transfer of
financial assets, an entity recognizes all financial and
servicing assets it controls and liabilities it has incurred and
recognizes financial assets it no longer controls and liabilities
that have been extinguished. The financial-components approach
focuses on the assets and liabilities that exist after the
transfer. Many of these assets and liabilities are components of
financial assets that existed prior to the transfer. If a
transfer does not meet the criteria for a sale, the transfer is
accounted for as a secured borrowing with pledge of collateral.
<PAGE>
Management believes adoption of SFAS Nos. 121, 122, 123 and
125 will not have a material effect on the financial position or
results of operations, nor will adoption require additional
capital resources.
Impact of Inflation and Changing Prices
The audited Consolidated Financial Statements and Notes
thereto presented herein have been prepared in accordance with
generally accepted accounting principles. These principles
generally require the measurement of financial position and
operating results in terms of historical dollars, without
considering changes in the relative purchasing power of money
over time due to inflation.
The primary assets and liabilities of the Company and
savings institutions such as the Association are monetary in
nature. As a result, interest rates have a more significant
impact on the Company's performance than the effects of general
levels of inflation. Interest rates, however, do not necessarily
move in the same direction or with the same magnitude as the
prices of goods and services, since such prices are affected by
inflation. In a period of rapidly rising interest rates, the
liquidity and maturity structure of the Company's assets and
liabilities are critical to the maintenance of acceptable
performance levels.
The principal effect of inflation, as distinct from levels
of interest rates, on the Company's earnings is in the area of
non-interest expense. Expense items such as employee
compensation and benefits, occupancy and equipment costs may be
subject to increases as a result of inflation. An additional
effect of inflation is the possible increase in the dollar value
of the collateral securing loans made by the Company. The
Company is unable to determine the extent, if any, to which the
properties securing its loans have appreciated in dollar value
due to inflation.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
First Allen Parish Bancorp, Inc. and Subsidiary
Oakdale, Louisiana
We have audited the accompanying consolidated statements of
financial condition of First Allen Parish Bancorp, Inc. and
Subsidiary as of December 31, 1996 and 1995, and the related
consolidated statements of income, changes in stockholders'
equity and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of First Allen Parish Bancorp, Inc. and
Subsidiary as of December 31, 1996 and 1995, and the results of
their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
Darnall, Sikes, Kolder, Frederick & Rainey
A Corporation of Certified Public Accountants
Lafayette, Louisiana
January 23, 1997
<PAGE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
December 31, 1996 and 1995
<TABLE>
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Interest-bearing $ 847,896 $ 1,040,626
Non-interest bearing 626,409 321,969
Mortgage-backed and related securities
held to maturity (estimated market
value of $12,979,395 and $12,393,239) 13,238,771 12,433,279
Mortgage-backed and related securities
available for sale, estimated
market value 3,946,564 2,958,167
Loans receivable, net 11,937,990 11,230,728
Accrued interest receivable 206,457 198,584
Other receivables 42,800 47,120
Foreclosed real estate, net of allowance
for losses of $25,807 and $25,807 74,856 38,568
Federal Home Loan Bank stock, at cost 259,200 259,600
Premises and equipment at cost, less
accumulated depreciation 282,353 309,796
Other assets 26,574 19,677
Total assets $31,489,870 $28,858,144
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits $25,749,999 $26,582,879
Advances from Federal Home Loan bank 1,200,000 --
Advances by borrowers for taxes and
insurance 31,854 43,033
Current 2,843 --
Deferred 122,265 116,982
Accrued expenses and other liabilities 44,624 41,462
Deferred income 18,818 15,172
Total liabilities 27,170,403 26,799,528
Stockholders' Equity
Serial preferred stock (.01 par value,
100,000 shares authorized, none issued
or outstanding) -- --
Common stock (.01 par value, 900,000 shares
authorized, 264,506 shares issued and
outstanding 2,645 --
Additional paid-in capital 2,298,842 --
Retained earnings, substantially restricted 2,230,294 2,063,367
Unrealized loss on mortgage-backed and
related securities held available for
sale, net of tax benefit at $3,093
and $2,459 (6004) (4,781)
Unearned employee benefits (206,310) --
Total stockholders' equity 4,319,467 2,058,586
Total liabilities and stockholders'
equity $31,489,870 $28,858,114
</TABLE>
The accompanying notes are an integral part of this statement.
PAGE
<PAGE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
Years Ended December 31, 1996 and 1995
<TABLE>
1996 1995
----------- -----------
<S> <C> <C>
Interest income:
Loan receivable:
First mortgage loans $ 838,531 $ 864,381
Consumer and other loans 209,692 182,381
Mortgage-backed and related securities 987,064 858,903
Other interest earning assets 100,071 99,246
Total interest income 2,135,358 2,004,602
Interest expense:
Deposits 1,142,332 1,074,698
Borrowed funds 8,909 3,158
Total interest expense 1,151,241 1,077,856
Net interest income 984,117 926,746
Recovery from loan losses 7,972 21,020
Net interest income after recovery from
loan losses 992,089 947,766
Non-interest income:
Service charges on deposits 190,176 191,862
Insurance commissions earned 11,512 5,549
Loan origination and servicing fees 31,329 21,473
Net other real estate expense (3,502) (717)
Gain on foreclosed real estate 1,408 6,467
Other operating revenues 17,890 16,759
Total non-interest income 248,813 241,393
Non-interest expense:
Compensation and employee benefits 394,039 369,033
Occupancy and equipment expenses 58,565 53,474
SAIF deposit insurance premiums 228,542 58,217
Stationery and printing 58,250 38,902
Data processing 58,575 60,191
Other expenses 187,906 168,303
Total non-interest expense 985,877 748,120
Earnings before income taxes 255,025 441,039
Income tax expense 88,098 150,543
Net earnings $ 166,927 $ 290,496
Net earnings per share $ 0.69 $ --
Average common shares outstanding 243,346
The accompanying notes are an integral part of this statement.
</TABLE>
PAGE
<PAGE>
<TABLE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders' Equity
Years Ended December 31, 1996 and 1995
Unrealized loss on
Mortgage-backed and
Additional Related Securities Unearned
Common Paid-in Retained Available-for-sale Employee
Stock Capital Earnings Net of Tax Benefit Benefits Total
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $ -- $ -- $1,772,871 $(103,570) $ -- $1,669,301
Net earnings, as restated for the year
ended December 31, 1995 -- -- 290,496 -- -- 290,496
Change in unrealized loss on securities
available-for-sale (net of tax
benefit of $50,895) -- -- -- 98,789 -- 98,789
Balance, December 31, 1995 -- -- 2,063,367 (4,781) -- 2,058,586
Sale of common stock, net of offering
costs of $345,577 2,645 2,296,839 -- -- -- 2,299,484
Unearned ESOP shares -- -- -- -- (211,600) (211,600)
Net earnings -- -- 166,927 -- -- 166,927
Allocation of ESOP shares -- 2,003 -- -- 5,290 7,293
Change in unrealized loss on securities
available-for-sale (net of tax
benefit of $630) -- -- -- (1,223) -- (1,223)
Balance, December 31, 1996 $2,645 $2,298,842 $2,230,294 $ (6,004) $(206,310) $4,319,467)
The accompanying notes are an integral part of this statement.
</TABLE>
PAGE
<PAGE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years Ended December 31, 1996 and 1995
<TABLE>
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 166,927 $ 32,775
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation of premises and
equipment 36,332 32,755
Recovery from loan losses (7,972) (21,020)
Gain on sale of foreclosed
real estate (1,408) (6,467)
Premium amortization net of
discount accretion 43,481 36,945
Deferred income taxes 5,787 41,370
Stock dividend on FHLB stock (14,800) (12,100)
Changes in assets and liabilities-
Increase in accrued interest
receivable (7,873) (39,248)
Increase in prepaid assets (3,358) (12,264)
Increase in accrued expenses
and other liabilities 3,162 8,463
Increase (decrease) in current
income taxes payable 2,843 (54,649)
(Increase) decrease in deferred
income 3,646 (7,979)
Decrease in other receivables 4,320 --
Total adjustments 64,160 (34,174)
Net cash provided by operating
activities 231,087 265,322
CASH FLOWS FROM INVESTING ACTIVITIES
Principal repayment of mortgage-backed
and related securities-held to
maturity 1,700,147 1,168,081
Principal repayments of mortgage-backed
and related securities -
available-for-sale 385,904 990,909
Purchase of mortgage-backed and
related securities - held-to-maturity (2,699,731) (3,244,087)
Purchase of mortgage-backed and
related securities -
available-for-sale (1,468,195) (979,459)
Net decrease (increase) in loans
made to customers (699,290) 262,428
Proceeds from sale of foreclosed
real estate 30,000 7,300
Purchase of property and equipment (8,890) (51,524)
Improvements on foreclosed real estate (14,746) --
Net cash used by investing
activities (2,774,801) (1,846,352)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand
deposits, NOW accounts, passbook
savings accounts, and certificates
of deposits (832,880) 2,054,727
Increase (decrease) in advances from
FHLB 1,200,000 (500,000)
Net increase (decrease) in advances by
borrowers for taxes and insurance (11,179) 5,715
Issuance of common stock 2,299,483 --
Net cash provided by financing
activities 2,655,424 1,560,442
Net increase (decrease) in cash
and cash equivalents 111,710 (29,588)
CASH AND CASH EQUIVALENTS, beginning 1,362,595 1,392,183
of period
CASH AND CASH EQUIVALENTS, end of period $ 1,474,305 $ 1,362,595
(continued)
<PAGE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows (continued)
Years Ended December 31, 1996 and 1995
Supplemental Disclosures
Cash paid for:
Interest on deposits, advances, and
other borrowings $ 1,151,362 $ 1,081,451
Income taxes 82,811 109,173
Transfers from loans to real estate
acquired through foreclosure 74,252 --
Proceeds from sales of foreclosed real
estate financed through loans 30,00 --
Total (increase) decrease in unrealized
loss on mortgage-backed and related
securities available-for-sale, net of
tax benefit (1,223) 98,789
Issuance of unearned ESOP shares 211,600 --
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(1) Conversion and Acquisition of the Association by the Company
First Allen Parish Bancorp, Inc. (the Company) was
incorporated in June, 1996 for the purpose of becoming the
savings and loan holding company of First Federal Savings and
Loan Association of Allen Parish (the Association) in connection
with the Association's conversion from a federally chartered
mutual savings and loan to a federally chartered stock savings
and loan. Pursuant to its Plan of Conversion, on September 27,
1996, the Company issued and sold 264,506 shares of its common
stock, in a subscription and community offering to the
Association's depositors and borrowers, the Company's employee
stock ownership plan, and the general public. Total proceeds of
the offering, net of conversion costs and funding the ESOP were
$2,087,923. The Company utilized $1,149,742 of the net proceeds
to acquire all of the common stock issued by the Association in
connection with its conversion. The remaining proceeds were
retained by the Company and invested in government and agency
securities.
The acquisition of the Association by the Company was
accounted for in a manner similar to the pooling-of-interests
method. Accordingly, the accounting basis of the assets,
liabilities and equity accounts of the Association remained the
same as prior to the conversion and acquisition and were not
adjusted to their fair values, and no purchase accounting
adjustments were recorded. All intercompany accounts and
transactions are eliminated in consolidation.
In order to grant priority to eligible account holders in
the event of future liquidation, the Association, at the time of
conversion established a liquidation account in the amount equal
to the Association's capital as of March 31, 1996 ($2,113,937).
In the event of the future liquidation of the Association,
eligible account holders and supplemental eligible account
holders who continue to maintain their deposit accounts shall be
entitled to receive a distribution from the liquidation account.
The total amount of the liquidation account will be decreased as
the balance of the eligible account holders and supplemental
eligible account holders is reduced subsequent to the conversion,
based on an annual determination of such balances. The
Association may not declare or pay a cash dividend to the Company
on, or repurchase any of its common stock if the effect thereof
would cause the retained earnings of the Association to be
reduced below the amount required for the liquidation account.
Except for such restrictions, the existence of the liquidation
account does not restrict the use or application of the
Association's retained earnings.
<PAGE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (Continued)
(2) Summary of Significant Accounting Policies
The accounting and reporting policies of First Allen Parish
Bancorp, Inc. and Subsidiary and the methods of applying those
policies conform with generally accepted accounting principles.
The accounting and reporting policies and the methods of applying
those policies which significantly affect the determination of
financial position, results of operations, and cash flows are
summarized below.
A. Cash and Cash Equivalents
Cash and cash equivalents consist of cash and interest-
bearing deposits due from other institutions. For purposes of
the statements of cash flows, the Company considers all of these
highly liquid financial instruments with original maturities,
when purchased of three months or less to be cash equivalents.
Cash and cash equivalents at December 31 include the
following:
<TABLE>
1996 1995
<S> <C> <C>
Interest-bearing deposits
in other institutions $ 847,896 $1,040,626
Non-interest bearing deposits 626,409 321,969
Total $1,474,305 $1,362,595
</TABLE>
B. Mortgage-Backed and Related Securities
The Company follows Statement of Financial Accounting
Standards No. 115 regarding classification of all debt securities
and certain equity securities.
Mortgage-backed and related securities that management
has the ability and intent to hold to maturity are classified as
held-to-maturity and carried at cost, adjusted for amortization
of premium and accretion of discounts using methods approximating
the interest method. Other mortgage-backed and related
securities are classified as available-for-sale and are carried
at fair value. Unrealized holding gains and losses, net of tax,
on securities available-for-sale are recognized as direct
increases or decreases in retained earnings until realized.
<PAGE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
At December 31, 1996, the Company had no outstanding
commitments to sell securities. Should any be sold, gains and
losses are recognized based on the specific identification
method. All sales are made without recourse. Gross unrealized
losses in the held-to-maturity portfolio and in the available-
for-sale portfolio are as follows:
<TABLE>
December 31,
-----------------------
1996 1995
Gross Gross
Unrealized Unrealized
Loss Loss
-----------------------
<S> <C> <C>
Held-to-maturity
securities $259,376 $40,040
Available-for-sale
securities 9,097 7,240
</TABLE>
C. Loans Receivable
Loans receivable are stated at unpaid principal balances,
less the allowance for loan losses, and net deferred loan
origination fees and discounts.
Discounts on consumer loans are recognized over the lives
of the loans using the interest method.
A loan (including a loan defined as impaired under SFAS 114)
is classified as nonaccrual when the loan becomes 90 days or more
past due. Any unpaid interest previously accrued on those loans
is reversed from income. Interest income generally is not
recognized on specific impaired loans unless the likelihood of
further loss is remote. Interest payments received on such loans
are applied as a reduction of the loan principal balances.
Interest income on other nonaccrual loans is recognized only to
the extent of interest payments received.
The allowance for loan losses is established through a
provision for loan losses based on management's evaluation of the
risk inherent in its loan portfolio and changes in the nature and
volume of its loan activity, including those loans which are
being specifically monitored by management. Such evaluation,
which includes a review of loans for which full collectibility
may not be reasonably assured, considers among other matters, the
loan classifications discussed above, the estimated fair value of
the underlying collateral, economic conditions, historical loan
loss experience, the amount of loans
<PAGE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
outstanding and other factors that warrant recognition in
providing for an adequate loan loss allowance. Allowances for
impaired loans are generally determined based on collateral
values or the present value of estimated cash flows. The Company
applies FASB Statement No. 114 Accounting by Creditors for
Impairment of a Loan, which requires that impaired loans that are
within the scope of this statement be measured based on the
present value of expected future cash flows discounted at the
loan's effective interest rate or at the loan's market price or
the fair value of the collateral if the loan is collateral
dependent. The Company uses the loan-by-loan measurement method
for all loans, however, residential mortgage loans and consumer
installment loans are considered to be groups of smaller balance
homogenous loans and are collectively evaluated for impairment
and are not subject to SFAS 114 measurement criteria. A loan is
considered impaired when it is probable that all contractual
amounts due will not be collected in accordance with the terms of
the loan. A loan is not deemed to be impaired if a delay in
receipt of payment is expected to be less than 60 days or if,
during a longer period of delay, the Company expects to collect
all amounts due, including interest accrued at the contractual
rate during the period of the delay. Factors considered by
management include the property location, economic conditions and
any unique circumstances affecting the loan. Due to the
composition of the Company's loan portfolio, the fair value of
collateral is utilized to measure virtually all of the Company's
impaired loans. If the fair value of an impaired loan is less
than the related recorded amount, a valuation allowance is
established or the writedown is charged against the allowance for
loan losses if the impairment is considered to be permanent.
FASB Statement No. 118, Accounting by Creditors for
Impairment of a Loan-Income Recognition and Disclosures, amended
SFAS No. 114 to allow a creditor to use existing methods for
recognizing interest income on impaired loans. The Company has
elected to continue to use its existing nonaccrual methods for
recognizing interest on impaired loans.
D. Loan Origination Fees, Commitment Fees and Related Costs
FASB Statement No. 91, Accounting for Non-refundable Fees
and Costs Associated with Originating or Acquiring Loans and
Initial Direct Costs of Leases, states that loan fees and
certain direct loan origination costs are normally deferred and
the net fee or cost is recognized as an adjustment to interest
<PAGE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
income using a method which does not differ materially from the
interest method, over the contractual life of the loans, adjusted
for estimated prepayments based on the Company's historical
prepayment experience. Commitment fees and costs relating to
commitments whose likelihood of exercise is remote should be
recognized over the commitment period on a straight-line basis.
If the commitment is subsequently exercised during the commitment
period, the remaining unamortized commitment fee at the time of
exercise should be recognized over the life of the loan as an
adjustment of yield. Loan fees and certain direct loan
origination costs are not deferred at the Company, however, due
to immateriality. These fees are recognized in the period
collected. The Company does not charge commitment fees.
E. Foreclosed Real Estate
Real estate properties acquired through, or in lieu of loan
foreclosures are initially recorded at the lower of cost or fair
value minus estimated costs to sell at the date of foreclosure.
Costs relating to development and improvement of property are
capitalized, whereas costs relating to the holding of property
are expensed.
Valuations are periodically performed by management, and an
allowance for losses is established by a charge to operations if
the carrying value of a property exceeds its estimated net
realizable value.
F. Federal Home Loan Bank Stock
Federal Home Loan Bank (FHLB) stock is carried at cost due
to its lack of marketability and restricted ownership. FHLB
stock can be sold back only at its par value and only to FHLB or
other member institutions. FHLB stock is evaluated annually for
impairment.
G. Income Taxes
Provisions for income taxes are based on taxes payable for
the current year and include deferred income taxes on temporary
differences in the recognition of income and expenses for tax and
financial statement purposes, primarily from preparing tax
returns on the cash basis of accounting and preparing the
financial statements on the accrual basis. Deferred taxes are
computed utilizing the method prescribed in FASB Statement 109,
Accounting for Income Taxes.
<PAGE>
H. Premises and Equipment
Land is carried at cost. Buildings, furniture, fixtures,
and equipment are carried at cost, less accumulated depreciation.
Maintenance, repairs, and minor renewals are expensed as
incurred. Property retired or sold, and the accumulated
depreciation is removed from the accounts in the year of sale or
retirement. Gains or losses on disposition are taken into
income.
The Company computes depreciation by use of the straight-
line method over the following estimated useful lives:
<TABLE>
<S> <C>
Buildings 40 years
Furniture and fixtures 7-10 years
Automobiles 5 years
</TABLE>
For income tax purposes, depreciation of assets acquired
prior to January 1, 1981 is calculated on the straight-line
method, and depreciation of assets acquired after December 31,
1980 is calculated using the Accelerated Cost Recovery System
(ACRS) and Modified Accelerated Cost Recovery System (MACRS) of
the Internal Revenue Service. Provision is made for deferred
income taxes applicable to the difference in depreciation
charges.
I. Deferred Income
Interest on loans collected in advance is deferred and is
recognized to interest income over the contractual life of the
loans. Profits from repossessed real estate sale transactions
for which the proceeds were financed by the Company are deferred
and recognized to income based upon the amount, composition, and
source of the down payment made by the buyer and periodic cash
payments by the buyer.
J. Earnings Per Share
Earnings per share is based upon the weighted average common
and common equivalent shares outstanding, less unallocated ESOP
shares. For 1996, earnings per share is based upon the total
number of common shares outstanding after the conversion and
acquisition described above and are presented as if those shares
had been outstanding for the entire year. The 1996 computation
does not reflect the pro forma effect of any investment income
that would have been earned if the net proceeds from conversion
had been received at the beginning of the year.
<PAGE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
K. Use of Estimates
Management of the Association has made a number of estimates
and assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent assets and
liabilities to prepare these consolidated financial statements in
conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
L. New Accounting Pronouncements
In March 1995, the FASB issued SFAS 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of. SFAS 121 is effective for fiscal years beginning
after December 15, 1995. The statement requires a company to
assess whether an asset (or group of assets) that will continue
to be used is impaired and whether an adjustment to the carrying
value is required. Certain events, such as a significant
decrease in the asset's market value, a physical change in the
asset or the way the asset is used, among others, are indicators
that impairment may exist. If an asset is determined to be
impaired, and the estimated cash flows from the asset are less
than the carrying value of the asset, then fair market value is
calculated, and the carrying value is adjusted if it is less than
the fair market value. Assets to be disposed of are reported at
the lower of the carrying amount or fair value less cost to sell.
In May 1995, the FASB issued SFAS 122, Accounting for
Mortgage Servicing Rights. SFAS 122 is effective for fiscal
years beginning after December 15, 1995. SFAS 122 requires
capitalization of servicing rights for both purchased loans and
in-house originations. Prior to the issuance of this statement,
only servicing rights associated with purchased loans were
capitalized. When a financial institution sells a loan and
retains the servicing rights, SFAS 122 requires that the total
cost of the loan (including loan fees and origination costs) be
allocated between the loan and the mortgage servicing rights
based on their relative fair values. The cost of the mortgage
servicing rights is recognized as a separate asset and amortized
in proportion to the estimated net servicing income. If it is
not practical to estimate fair values, the loan cost is allocated
entirely to the loan.
SFAS No. 123, Accounting for Stock-Based Compensation, was
adopted by the Company during 1996. This statement establishes
financial accounting and reporting standards for stock-based
<PAGE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
employee compensation plans. These plans include all
arrangements by which employees receive shares of stock or other
equity investments of the employer or the employer incurs
liabilities to employees in amounts based on the price of the
employer's stock. This statement also applies to transactions in
which an entity issues its equity instruments to acquire goods
and services from nonemployees.
SFAS No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, supersedes
SFAS No. 122 and will be effective for all transfers and
servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996. This statement provides
accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities based on
consistent application of a financial-components approach that
focuses on control. It distinguishes transfers of financial
assets that are sales from transfers that are secured borrowings.
Under the financial-components approach, after a transfer of
financial assets, an entity recognizes all financial and
servicing assets it controls and liabilities it has incurred and
recognizes financial assets it no longer controls and liabilities
that have been extinguished. The financial-components approach
focuses on the assets and liabilities that exist after the
transfer. Many of these assets and liabilities are components of
financial assets that existed prior to the transfer. If a
transfer does not meet the criteria for a sale, the transfer is
accounted for as a secured borrowing with pledge of collateral.
Management believes adoption of SFAS Nos. 121, 122, 123 and
125 will not have a material effect on the financial position or
results of operations, nor will adoption require additional
capital resources.
M. Reclassified Items
Certain items of the prior years have been reclassified in
order to conform to current presentation.
(3) Federal Home Loan Bank Stock
The carrying values of the FHLB stock at December 31, 1996
and 1995 are $259,200 and $259,600, respectively. FHLB stock was
not considered impaired at December 31, 1996 or 1995 and was
carried at cost.
<PAGE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
(4) Mortgage-Backed and Related Securities
The carrying values and estimated market values of mortgage-
backed and related securities at December 31 are summarized as
follows:
<TABLE>
Held-to-Maturity Securities December 31, 1996
-------------------------------------------------------------
Net Unamortized
Premium Gross Estimated
Principal (Unearned Carrying Unrealized Market
Balance Discounts) Value Gain (Loss) Value
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GNMA certificates $ 369,772 $ 562 $ 370,334 $ 1,178 $ 371,512
FHLMC certificates 4,530,875 (19,200) 4,511,675 (82,826) 4,428,849
FNMA certificates 8,234,043 51,024 8,285,067 (170,188) 8,114,879
Collateralized
mortgage obligations 66,481 5,214 71,695 (7,540) 64,155
$13,201,171 $ 37,600 $13,238,771 $(259,376) $12,979,395
</TABLE>
<TABLE>
Available-for-Sale Securities December 31, 1996
-------------------------------------------------------------
Net Unamortized
Premium Gross Estimated
Principal (Unearned Carrying Unrealized Market
Balance Discounts) Value Gain (Loss) Value
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GNMA certificates $ 530,391 $ 11,902 $ 542,293 $ (6,560) $ 535,733
FHLMC certificates 721,216 3,136 724,352 4,944 729,296
FNMA certificates 1,303,828 8,622 1,312,450 (4,073) 1,308,377
SBA certificates 1,363,155 13,411 1,376,566 (3,408) 1,373,158
$ 3,918,590 $ 37,071 $ 3,955,661 $ (9,097) $ 3,946,564
</TABLE>
<PAGE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
<TABLE>
Held-to-Maturity Securities December 31, 1995
-------------------------------------------------------------
Net Unamortized
Premium Gross Estimated
Principal (Unearned Carrying Unrealized Market
Balance Discounts) Value Gain (Loss) Value
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GNMA certificates $ 418,052 $ (581) $ 417,471 $ 1,887 $ 419,358
FHLMC certificates 4,498,102 (1,915) 4,496,187 36,458 4,532,645
FNMA certificates 7,337,799 89,590 7,427,389 (72,935) 7,354,454
Collaterialized
mortgage obligations 85,525 6,707 92,232 (5,450) 86,782
$12,339,478 $ 93,801 $12,433,279 $ (40,040) $12,393,239
</TABLE>
<TABLE>
Available-for-Sale Securities December 31, 1995
-------------------------------------------------------------
Net Unamortized
Premium Gross Estimated
Principal (Unearned Carrying Unrealized Market
Balance Discounts) Value Gain (Loss) Value
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GNMA certificates $ 594,133 $ 13,332 $ 607,465 $ (8,854) $ 598,611
FHLMC certificates 827,686 2,741 830,427 3,791 834,218
FNMA certificates 1,519,237 8,278 1,527,515 (2,177) 1,525,338
$ 2,941,056 $ 24,351 $ 2,965,407 $ (7,240) $ 2,958,167
</TABLE>
PAGE
<PAGE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
(5) Loans Receivable
Major classification of loans at December 31 are as follows:
<TABLE>
1996 1995
<S> <C> <C>
First mortgage loans (principally conventional):
Principal balances -
Secured by one-to-four family residences $ 7,278,520 $ 7,918,939
Land loans 450,955 202,613
Commercial loans 1,519,441 1,208,388
Construction loans 486,815 260,000
Other real estate loans 237,293 131,281
9,973,024 9,721,221
Less: Undisbursed portion of first mortgage
loans (308,529) (143,245)
Total first mortgage loans 9,664,495 9,577,976
Consumer and other loans:
Principal balances -
Automobile 474,424 495,609
Manufactured home 22,093 11,666
Share loans 795,101 800,305
Lines of credit 1,003,407 440,040
Other consumer loans 721,446 414,639
3,016,471 2,162,259
Less: Undisbursed portion of consumer loans (446,524) (192,024)
Unearned discounts - (77)
Total consumer and other loans 2,569,947 1,970,158
Less: Allowance for loan losses (296,452) (317,406)
Loans receivable, net $11,937,990 $11,230,728
</TABLE>
Activity in the allowance for loan losses for the years
ended December 31 is summarized as follows:
<TABLE>
1996 1995
<S> <C> <C>
Balance, beginning of year $317,406 $328,386
Recovery from operations (7,972) (21,020)
Charge offs less recoveries (12,982) 10,040
Balance, end of year $296,452 $317,406
</TABLE>
<PAGE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
The Company had loans with unpaid principal balances
totaling $44,193 and $155,135 at December 31, 1996 and 1995,
respectively, upon which interest was no longer being accrued due
to their delinquent status. Had the accrual of interest not been
discontinued on these loans, interest income would have been
increased by approximately $2,818 and $11,399, respectively. The
Company is not committed to lend additional funds to debtors
whose loans have been modified.
(6) Troubled Debt Restructuring
In accordance with FASB Statement No. 114, Accounting by
Creditors for Impairment of a Loan, as amended by FASB Statement
No. 118, Accounting by Creditors for Impairment of a Loan-Income
Recognition and Disclosures, management has classified loans
receivable at December 31, 1996 and 1995, in the amounts of
$153,649 and $190,805, respectively, as troubled debt
restructuring due to modification of terms. The interest income
that would have been recognized if those loans had been current
with their original terms was $15,287 and $17,530 for the years
ended December 31, 1996 and 1995, respectively. Interest income
totalling $13,933 and $15,839 was included in income for the
years ended December 31, 1996 and 1995, respectively. The
Company is not committed to lend additional funds to debtors
whose loans have been restructured. No impaired loans existed
at December 31, 1996 and 1995.
(7) Accrued Interest Receivable
Accrued interest receivable at December 31 is summarized as
follows:
<TABLE>
1996 1995
<S> <C> <C>
Mortgage-backed and related securities $120,473 $113,802
Loans receivable 85,984 84,782
$206,457 $198,584
</TABLE>
<PAGE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
(8) Allowance for Losses on Foreclosed Real Estate
Activity in the allowance for losses for foreclosed real
estate for the years ended December 31 is as follows:
<TABLE>
1996 1995
<S> <C> <C>
Balance, beginning of year $ 25,807 $ 25,807
Provisions charged to operations -- --
Charge-offs less recoveries -- --
Balance, end of year $ 25,807 $ 25,807
</TABLE>
(9) Premises and Equipment
Premises and equipment at December 31 consisted of the
following:
<TABLE>
1996 1995
<S> <C> <C>
Land and buildings $ 342,138 $ 342,138
Furniture, fixtures and equipment 277,668 268,778
619,806 610,916
Less: Accumulated depreciation (337,453) (301,120)
$ 282,353 $ 309,796
</TABLE>
Depreciation for the years ended December 31, 1996 and 1995
was $36,332 and $32,775, respectively.
<PAGE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
(10) Deposits
Deposits at December 31 are summarized as follows:
<TABLE>
Weighted
Average
Rate at 1996 1995
12/31/96 Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C>
Demand and NOW
accounts,
including
non-interest
bearing deposits
of $456,542 and
$330,705 1.80% $ 3,678,782 14.28 $ 3,305,082 12.43
Money market 2.39% 833,048 3.23 1,006,630 3.79
Passbook savings 2.06% 2,757,739 10.70 2,913,566 10.96
7,269,569 28.21 7,225,278 27.18
Certificates
of deposit:
3.99% or less 3.60% 4,809 0.00 171,939 .65
4.00% to 5.99% 5.01% 18,408,487 71.76 17,179,541 64.63
6.00% to 7.99% - - 0.00 1,961,306 7.38
8.00% to 9.99% 8.00% 67,134 0.03 44,815 .16
18,480,430 71.79 19,357,601 72.82
$25,749,999 100.00 $26,582,879 100.00
</TABLE>
The aggregate amount of short-term jumbo certificates of
deposit with a minimum denomination of $100,000 was
approximately, $3,179,379 and $3,485,098 at December 31, 1996 and
1995, respectively.
At December 31, 1996 scheduled maturities of certificates of
deposit are as follows:
<TABLE>
Year Ending December 31,
1997 1998 1999 2000 2001
<S> <S> <C> <C> <C> <C>
3.99 percent or less $ 4,809 $ - $ - $ - $ -
4.00 to 5.99 percent 14,943,199 2,905,260 344,538 205,490 10,000
6.00 to 7.99 percent - - - - -
8.00 to 8.99 percent - - - 67,134 -
$14,948,008 $2,905,260 $344,538 $272,624 $10,000
</TABLE>
<PAGE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
Interest expense on deposits for the years ended December 31
is summarized as follows:
<TABLE>
1996 1995
<S> <C> <C>
Money market and NOW
accounts $ 88,399 $ 91,928
Passbook savings 62,108 66,777
Certificates of
deposits 991,825 915,993
$1,142,332 $1,074,698
</TABLE>
Income from early withdrawal penalties amounted to $6,524
and $6,753 for the years ended December 31, 1996 and 1995,
respectively.
(11) Advances from Federal Home Loan Bank
Borrowed funds at December 31, 1996 consisted of the
following:
<TABLE>
Rate Amount
<S> <C> <C>
Advances from Federal Home Loan Bank 5.61% $1,200,000
</TABLE>
Pursuant to a blanket floating lien with the Federal Home
Loan Bank, the advance at December 31, 1996 was secured by
$1,559,387 in mortgage-backed securities. At December 31, 1996,
the $1,200,000 advance matures on January 7, 1997.
(12) Deferred Income
Deferred income at December 31 consisted of the following:
<TABLE>
1996 1995
<S> <C> <C>
Interest on loans collected in advance $ 4,976 $ 3,222
Unrealized profit from the sale of
repossessed property 13,842 11,950
Totals $18,818 $15,172
</TABLE>
<PAGE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
(13) Interest Income on Other Interest Earning Assets
Details of interest income on other interest earning assets
included in interest income for the years ended December 31 are
provided below:
<TABLE>
1996 1995
<S> <C> <C>
Interest on demand in other institutions $ 84,976 $82,875
Federal Home Loan Bank dividends 15,095 16,371
Totals $100,071 $99,246
</TABLE>
(14) Other Noninterest Expenses
Details of other expenses included in noninterest expenses
for the years ended December 31 are provided below:
<TABLE>
1996 1995
<S> <C> <C>
Bank clearing charges $ 87,335 $ 70,570
Insurance 20,431 18,643
Professional fees 37,571 37,553
Telephone 12,274 10,940
Advertising 15,620 12,280
Property taxes 6,887 6,773
Dues and subscriptions 5,000 5,384
Miscellaneous other
expenses 2,788 6,160
Total $187,906 $168,303
</TABLE>
(15) Retirement Plans
Profit Sharing Plan
In 1988, the Company adopted a contributory profit sharing
plan for all full time employees. Contributions are to be made
annually based on participants' salaries. The contributions for
the years ended December 31, 1996 and 1995 included in
compensation and employee benefits expense were $31,711 and
$29,967, respectively.
<PAGE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
Employee Stock Ownership Plan (ESOP)
All employees meeting age and service requirements are
eligible to participate in an ESOP. Under the terms of the ESOP,
contributions are allocated to participants using a formula based
on compensation. Participants vest over five years.
In connection with the conversion described in Note 1, the
ESOP purchased 21,160 shares of Company common stock. The
remaining unamortized cost of such shares purchased is reflected
as unearned employee benefits in the accompanying balance sheet.
On December 31, 1996, 529 shares were allocated to participants.
The fair value of such shares, $7,293, was charged to expense.
The fair value of the remaining unallocated shares at December
31, 1996 totalled $284,460.
(16) Officer's Deferred Compensation Contract
The Company has a deferred compensation contract with one
member of the Board of Directors. The agreement provides for a
lump sum payment to be made to the director upon retirement or to
his beneficiary in the event of death before retirement. The
agreement is terminated should the director resign before the
stated date of retirement.
At December 31, 1996 and 1995, $24,831 and $16,531,
respectively, had been accrued as deferred compensation payable.
(17) Income Taxes
The Company utilizes FASB Statement 109 to account for
income taxes.
The components of income tax expense for the years ended
December 31 are as follows:
<TABLE>
1996 1995
<S> <C> <C>
Income taxes current:
Federal $ 82,811 $109,173
Deferred taxes due to
timing differences 5,287 41,370
Total income tax
expense $ 88,098 $150,543
</TABLE>
<PAGE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
The total provision for federal income taxes differs from
that computed by applying statutory corporate tax rates as
follows for the years ended December 31:
<TABLE>
1996 1995
<S> <C> <C>
Computed at the expected
statutory rate 34.0 % 34.0%
Other .5 .1
34.5% 34.1%
</TABLE>
Temporary differences giving rise to the deferred tax
amounts consist primarily of converting the financial statements
from accrual to cash basis for tax purposes and by the excess of
tax bad debts over book bad debts since 1987.
Amounts for deferred tax liabilities at December 31 are as
follows:
<TABLE>
1996 1995
<S> <C> <C>
Deferred tax assets $ 22,767 $ 16,542
Deferred tax liabilities 145,032 133,524
Net deferred tax liabilities $122,265 $116,982
</TABLE>
No valuation allowances were recorded against deferred tax
assets as of December 31, 1996 and December 31, 1995.
Under the Internal Revenue Code, the Company is allowed
to deduct the greater of an experience method bad debt
deduction based on actual charge-offs or a statutory bad
debt deduction based on a percentage (8%) of taxable income
before such deduction. This deduction is an addition to tax
bad debt reserves established for the purpose of absorbing
losses. The allowable deduction under the percentage of
taxable income method is subject to certain statutory
limitations, which applied at December 31, 1995. Under the
Small Business Job Protection Act (The Act) of 1996, the
allowable deduction under the taxable income method was
terminated for tax years beginning after 1995 and will not
be available to the Company for future years. The Act also
provides that federal income tax bad debt reserves in excess
of the base year reserves will be included in taxable income
over a six year inclusion period. The Association has
established a deferred tax liability of approximately
$34,000 for this recapture. Postponement of the recapture
is possible for a two-year period if an association meets a
minimum level of mortgage lending for 1996 and 1997.
<PAGE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
Retained earnings of the Company at December 31, 1996 and
1995 includes approximately $368,500, for which provision for
federal income tax has been made. This amount represents
allocations of income to bad debt deductions for tax purposes
only. Reduction of amounts allocated for purposes other than tax
bad debt losses will create income for tax purposes only, which
will be subject to the then current corporate income tax rate.
The accompanying statement of income for the year ended
December 31, 1995 has been restated to correct an error in income
tax expense. The effect of the restatement was to decrease net
income for the year as follows:
<TABLE>
As Originally Decrease in
Reported As Corrected Net Income
<S> <C> <C> <C>
1995 $312,091 $290,496 $21,595
</TABLE>
(18) Related Party Transactions
In the ordinary course of business, the Company makes loans
to its directors, officers, and employees. These loans are made
on the same terms as loans to other customers. The activity of
such loans outstanding for the years ended December 31 are as
follows:
<TABLE>
1996 1995
<S> <C> <C>
Balance, beginning of year $293,138 $284,350
Additions 14,657 143,281
Payments (93,074) (134,503)
Balance, end of year $214,721 $293,138
</TABLE>
(19) Concentration of Credit
The majority of the Company's loans and its standby letters
of credit have been granted to customers in the Company's market
area, which is primarily Allen Parish, Louisiana. The Parish is
largely a rural area and relies heavily on the agricultural
industry and government employment. The concentrations of credit
by type of loan are set forth in the note on loans receivable as
presented earlier in this report. The Company, as a matter of
policy, does not extend credit to any borrower or group of
related borrowers in excess of its legal lending limit of
approximately $615,000.
<PAGE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
(20) Federal Deposit Insurance Premiums
The deposits of the Company are presently insured by the
Savings Association Insurance Fund (SAIF), which together with
the Bank Insurance Fund (BIF), are the two insurance funds
administered by the FDIC. In the third quarter of 1995, the FDIC
lowered the premium schedule for BIF-insured institutions in
anticipation of the BIF achieving its statutory reserve ratio.
The reduced premium created a significant disparity in deposit
insurance expense, causing a competitive advantage for BIF
members. Legislation enacted on September 30, 1996 provided for
a one-time special assessment of .657% of the Company's SAIF
insured deposits at March 31, 1995. The purpose of the
assessment is to bring the SAIF to its statutory reserve ratio.
Based on the above formula, the Company's SAIF assessment of
$170,020 was recorded in the 1996 consolidated financial
statements. Although the special one-time assessment
significantly increased noninterest expense for the year, the
anticipated reduction in the premium schedule will reduce the
Company's federal insurance premiums for future periods.
(21) Regulatory Capital Requirements
The Association is 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 consolidated financial statements. Under
capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Association must meet specific
capital guidelines that involve quantitative measures of the
Association's assets, liabilities and certain off-balance sheet
items as calculated under regulatory accounting practices. The
Association's capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk
weightings and other factors.
Quantitative measures established by regulation to ensure
capital adequacy require the Association to maintain minimum
amounts and ratios (set forth in the table below) of risk-based
capital, as defined in the regulations, to risk-weighted assets,
as defined, and of tangible and core capital, as defined, to
total assets, as defined. Management believes, as of December
31, 1996, that the Association meets all capital adequacy
requirements to which it is subject.
As of May 20, 1996, the most recent notification from the
Office of Thrift Supervision (OTS) categorized the Association as
well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized, the
Association must maintain minimum total risk-based, tangible and
core capital ratios as set forth in the table. There are no
conditions or events since that notification that management
believes have changed the institution's category.
<PAGE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
<TABLE>
Tangible Core Risk-based
<S> <C> <C> <C>
Regulatory capital $4,531,781 $4,531,781 $4,671,281
Minimum capital requirement 472,348 944,696 1,004,800
Regulatory capital in excess of
of minimum capital
requirements $4,059,433 $3,587,085 $3,666,481
Minimum capital requirement 1.5% 3.0% 8.0%
The Association's regulatory
capital 14.4% 14.4% 37.2%
</TABLE>
(22) Financial Instruments with Off-Balance-Sheet
Risk/Commitments
The Company is a party to financial instruments with off-
balance-sheet risk in the normal course of business to meet the
financing needs of its customers and to reduce its own exposure
to fluctuations in interest rates. These financial instruments
include commitments to extend credit and standby letters of
credit. Those instruments involve, to varying degrees, elements
of credit and interest rate risk in excess of the amount
recognized in the statement of financial position. The contract
or notional amount of those instruments reflect the extent of the
Company's involvement in particular classes of financial
instruments.
The Company's exposure to credit loss in the event of
nonperformance by the other party to the financial instrument for
loan commitments to extend credit and standby letters of credit
is represented by the contractual notional amount of those
instruments. The Company uses the same credit policies in making
commitments and conditional obligations as it does for on-
balance-sheet instruments.
Unless noted otherwise, the Company does not require
collateral or other security to support financial instruments
with credit risk.
Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses. Since many of the
commitments are expected to expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash
requirements. The Company evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral
obtained, if it is deemed
<PAGE>
necessary by the Company upon extension of credit, is based on
management's credit evaluation of the counterparty. Collateral
held varies but may include accounts receivable; inventory,
property, plant, and equipment; and income-producing commercial
properties. In addition to undisbursed loan proceeds,
outstanding mortgage commitments amounted to:
<TABLE>
Ranges
Variable Interest Commitment
Rate Rates Terms
<S> <C> <C> <C>
December 31, 1996 $326,800 8.50% - 9.25% 182 days
December 31, 1995 $124,945 9.00% - 10.00% 44-150 days
</TABLE>
<TABLE>
Ranges
Fixed Interest Commitment
Rate Rates Terms
<S> <C> <C> <C>
December 31, 1996 $ 89,750 8.00% - 14.00% 159-182 days
December 31, 1995 $219,557 8.00% - 12.00% 44-150 days
</TABLE>
Standby letters of credit are conditional commitments issued
by the Company to guarantee the performance of a customer to a
third party. Those guarantees are primarily issued to support
public and private borrowing arrangements, including commercial
paper, bond financing, and similar transactions. The Company had
short-term standby letters of credit outstanding of $2,000 and
$4,970 at December 31, 1996 and 1995, respectively.
(23) Estimated Fair Value of Financial Instruments
The following methods and assumptions were used by the
Company in estimating fair values of financial instruments as
disclosed herein:
Cash and cash equivalents - The carrying amounts of cash and
short-term instruments approximate their fair value.
Securities to be held to maturity and securities available-
for-sale - Fair values for investment securities, excluding
<PAGE>
FIRST ALLEN PARISH BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
restricted equity securities, are based on quoted market prices.
The carrying values of restricted equity securities approximate
fair values.
Loans receivable - Fair values for variable and fixed rate
loans are estimated using discounted cash flow analysis, using
interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality.
Deposit liabilities - The fair values disclosed for demand
deposits are, by definition, equal to the amount payable on
demand at the reporting date (that is, their carrying amounts).
The carrying amounts of variable-rate, fixed-term money market
accounts and certificates of deposit approximate their fair
values at the reporting date. Fair values for fixed-rate
certificates of deposit are estimated using a discounted cash
flow calculation that applies interest rates currently being
offered on the certificates to a schedule of aggregated expected
monthly maturities on time deposits.
Short-term borrowings - Fair values of borrowed funds are
estimated using discounted cash flow analyses based on the
Company's current incremental borrowing rates for similar types
of borrowing arrangements.
Accrued interest - The carrying amounts of accrued interest
approximate their fair values.
Off-balance sheet items - The fair value of these items
approximate their contractual amounts.
The estimated fair values of the Company's financial
instruments were as follows:
<TABLE>
December 31, 1996 December 31, 1995
Carrying Fair Carrying Fair
Value Value Value Value
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks $ 1,474,305 $ 1,474,305 $ 1,362,595 $ 1,362,595
Securities to be held to
maturity 13,238,771 12,979,395 12,433,279 12,393,239
Securities available for sale 3,946,564 3,946,564 2,958,167 2,958,167
Loans 11,937,990 11,794,550 11,230,728 11,331,594
Accrued interest receivable 206,457 206,457 198,584 198,584
Other receivables 42,800 42,800 47,120 47,120
Federal Home Loan Bank stock,
at cost 259,200 259,200 259,600 259,600
Financial liabilities:
Deposit liabilities 25,749,999 25,790,309 26,582,579 26,653,000
Borrowed funds 1,200,000 1,200,000 -- --
Advances by borrowers for
taxes and insurance 31,854 31,854 43,033 43,033
Current federal income
taxes payable 2,843 2,843 -- --
Accrued expenses and other
liabilities 44,624 44,624 41,462 41,462
Off-balance sheet items
Standby letters of credit 2,000 2,000 4,970 4,970
Commitments to extend credit 416,550 416,550 344,502 344,502
</TABLE>
PAGE
<PAGE>
FIRST ALLEN PARISH BANCORP, INC.
Stockholder Information
ANNUAL MEETING:
The Annual Meeting of Stockholders will be held at 4:00
p.m., Oakdale, Louisiana time on Thursday, April 24, 1997, at the
Hardwood Mill Restaurant, Magnolia Room, 1194 Old River Mill
Road, Oakdale, Louisiana 71463.
STOCK LISTING:
First Allen Parish Bancorp, Inc. common stock is traded on
the National Association of Securities Dealers, Inc. (NASDAQ)
"Pink Sheets" under the symbol "FALN".
PRICE RANGE OF COMMON STOCK:
The per share price range of the common stock for each
quarter since conversion was as follows:
1996 High Low Dividends
Fourth Quarter $14.38 $10.00 $ -
The stock price information set forth in the table above was
provided by Trident Securities, Inc., 1275 Peachtree Street N.
E., Suite 460, Atlanta, Georgia 30309.
At December 31, 1996, there were 264,506 shares of First
Allen Parish Bancorp, Inc. common stock issued and outstanding
(including unallocated ESOP shares) and there were 103 registered
holders of record.
STOCKHOLDERS AND GENERAL INQUIRIES:
Charles L. Galligan, President/CEO
First Allen Parish Bancorp, Inc.
222 South 10th Street
Oakdale, Louisiana 71463
(318) 335-2031
TRANSFER AGENT:
Registrar and Transfer Co.
10 Commerce Drive
Cranford, New Jersey 07016
(800) 368-5948
ANNUAL AND OTHER REPORTS:
A copy of the First Allen Parish Bancorp, Inc. Annual Report
on Form 10-K for the year ended December 31, 1996, as filed with
the Securities and Exchange Commission (SEC), may be obtained
without charge by contacting Charles L. Galligan, President and
Chief Executive Officer, First Allen Parish Bancorp, Inc., 222
South 10th Street (Post Office Box 706), Oakdale, Louisiana
71463.
<PAGE>
FIRST ALLEN PARISH BANCORP, INC.
Corporate Information
COMPANY AND ASSOCIATION ADDRESS:
First Allen Parish Bancorp, Inc.
222 South 10th Street
Post Office Box 706 Telephone: (318) 335-2031
Oakdale, Louisiana 71463 Telefax: (318) 335-2941
OFFICERS:
Dr. James D. Sandefur, Chairman of the Board
Charles L. Galligan, President and Chief Executive Officer
Leslie A. Smith, Secretary
Betty Jean Parker, Treasurer and Chief Financial Officer
BOARD OF DIRECTORS:
Dr. James D. Sandefur. Dr. Sandefur has served as Chairman
of the Board since January 1996. Dr. Sandefur was a practicing
optometrist, and was the owner of the Vision Clinic located in
Oakdale, Louisiana from March 1968 until June 1996. Dr. Sandefur
is currently semi-retired and works as a consultant for the
Vision Clinic.
Charles L. Galligan. Mr. Galligan has served as the
President and Chief Executive Officer since joining the
Association in 1991. In these capacities, he is responsible for
overseeing the day-to-day operations of the Association. Prior
to joining the Association, Mr. Galligan was President of
Vermilion Federal Savings Bank located in Abbeville, Louisiana.
Jesse Boyd, Jr. Mr. Boyd is the owner and president of Boyd
Buick- Cadillac-Chevrolet-Pontiac-Olds-GMC, Inc., a car
dealership, and Boyd Oil Company, a bulk oil distributorship,
located in Oakdale and Glenmora, Louisiana, respectively.
James E. Riley. Mr. Riley owned and operated a pharmacy in
Oberlin, Louisiana until his retirement in 1990.
J. C. Smith. Mr. Smith's principal business is farming. He
is also involved in J. C. Smith & Sons, Partnership, a farming
operation, and J. C. Smith & Sons Auto and Home Service Center, a
retail hardware store, both located in Oberlin, Louisiana.
Leslie A. Smith. Mr. Smith is the principal of Oakdale
Elementary School.
In 1994, Mr. T. H. Mayes, who had served as a director of
the Association since 1965, retired from the board and was named
a director emeritus.
INDEPENDENT AUDITORS:
Darnall, Sikes, Kolder, Frederick & Rainey
125 Rue Beauregard
Lafayette, Louisiana 70502
(318) 232-3312
SPECIAL COUNSEL:
Robert I. Lipsher, Esq.
Luse, Lehman, Gorman, Pomerenk & Schick
5335 Wisconsin Avenue, N. W.
Suite 400
Washington, DC 20015
(202) 274-2000
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Parent
First Allen Parish Bancorp, Inc.
<TABLE>
State of
Subsidiary* Percentage Owned Incorporation
<S> <C> <C>
First Federal Savings and Loan 100% Federal
Association of Allen Parish
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 626
<INT-BEARING-DEPOSITS> 848
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3947
<INVESTMENTS-CARRYING> 13239
<INVESTMENTS-MARKET> 12979
<LOANS> 11938
<ALLOWANCE> 296
<TOTAL-ASSETS> 31490
<DEPOSITS> 25750
<SHORT-TERM> 1200
<LIABILITIES-OTHER> 220
<LONG-TERM> 0
<COMMON> 3
0
0
<OTHER-SE> 4317
<TOTAL-LIABILITIES-AND-EQUITY> 31490
<INTEREST-LOAN> 1048
<INTEREST-INVEST> 987
<INTEREST-OTHER> 100
<INTEREST-TOTAL> 2135
<INTEREST-DEPOSIT> 1142
<INTEREST-EXPENSE> 1151
<INTEREST-INCOME-NET> 984
<LOAN-LOSSES> 8
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 986
<INCOME-PRETAX> 255
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 167
<EPS-PRIMARY> .69
<EPS-DILUTED> .69
<YIELD-ACTUAL> 7.32
<LOANS-NON> 44
<LOANS-PAST> 0
<LOANS-TROUBLED> 154
<LOANS-PROBLEM> 154
<ALLOWANCE-OPEN> 317
<CHARGE-OFFS> 26
<RECOVERIES> 5
<ALLOWANCE-CLOSE> 296
<ALLOWANCE-DOMESTIC> 296
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
