<PAGE>
PROSPECTUS
IBL BANCORP, INC.
(Proposed Holding Company for The Iberville Building and Loan Association)
Minimum of 204,000 and Maximum of 276,000 Shares of Common Stock
(Subject to Increase to Up to 317,400 Shares)
$10.00 per Share
IBL Bancorp, Inc. (the "Company"), a Louisiana corporation, is offering
a minimum of 204,000 shares and a maximum of 276,000 shares of its common stock,
par value $.01 per share (the "Common Stock"), in connection with the conversion
of The Iberville Building and Loan Association ("Iberville" or the
"Association") from a Louisiana-chartered mutual association to a
Louisiana-chartered stock association pursuant to the Association's plan of
conversion (the "Plan" or "Plan of Conversion"). Under certain circumstances,
the Company may increase the amount of Common Stock offered hereby to up to
317,400 shares. The simultaneous conversion of the Association to stock form,
the issuance of the Association's stock to the Company and the offer and sale of
the Common Stock by the Company are referred to herein as the "Conversion."
Nontransferable rights to subscribe for the Common Stock have been
granted, in order of priority, to certain depositors of the Association, to the
Company's Employee Stock Ownership Plan ("ESOP"), to certain other depositors
and borrowers of the Association, and to directors, officers and employees of
the Association, subject to the limitations described herein (the "Subscription
Offering"). Subject to the exercise of such priority subscription rights, the
Company may elect to offer the shares of Common Stock not subscribed for in the
Subscription Offering, if any, for sale in a community offering (the "Community
Offering") commencing prior to or upon completion of the Subscription Offering
(collectively, the "Offerings"). The purchase price in the Offerings is $10.00
per share (the "Purchase Price").
It is unlikely that an active and liquid trading market for the Common
Stock will develop. See "Risk Factors - Absence of Market for the Common Stock."
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
INVESTORS, SEE "RISK FACTORS" BEGINNING ON PAGE 16.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE OFFICE OF THRIFT SUPERVISION, OR ANY OTHER
FEDERAL AGENCY OR STATE SECURITIES COMMISSION, NOR HAS ANY SUCH
COMMISSION, OFFICE OR AGENCY PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Estimated
Underwriting Estimated
Subscription Fees and Other Net
Price(1) Expenses(2) Proceeds(3)
<S> <C> <C> <C>
Minimum Per Share $10.00 $1.84 $8.16
Midpoint Per Share $10.00 $1.56 $8.44
Maximum Per Share $10.00 $1.36 $8.64
Maximum Per Share, as adjusted $10.00 $1.18 $8.82
Total Minimum(1) $2,040,000 $375,000 $1,665,000
Total Midpoint(1) $2,400,000 $375,000 $2,025,000
Total Maximum(1) $2,760,000 $375,000 $2,385,000
Total Maximum, as adjusted(4) $3,174,000 $375,000 $2,799,000
</TABLE>
(Footnotes on next page)
TRIDENT SECURITIES, INC.
The date of this Prospectus is August 12, 1998.
<PAGE>
(Footnotes from page 1)
- --------------------------
(1) Determined in accordance with an independent appraisal prepared by
Ferguson & Company ("Ferguson") dated June 5, 1998, which states that the
estimated pro forma market value of the Common Stock ranged from
$2,040,000 to $2,760,000 (the "Estimated Valuation Range"), or between
204,000 and 276,000 shares of Common Stock at the Purchase Price. See "The
Conversion - Stock Pricing and Number of Shares to be Issued."
(2) Consists of the estimated costs to the Company and the Association arising
from the Conversion, including a marketing fee of $75,000 and expenses of
up to $37,500 to be paid to Trident Securities, Inc. ("Trident") in
connection with the Offerings. The fee and expenses to be paid to Trident
may be deemed to be underwriting fees and expenses. See "The Conversion -
Marketing Arrangements." The actual fees and expenses may vary from the
estimates. See "Pro Forma Data."
(3) Actual net proceeds may vary substantially from estimated amounts.
Includes the purchase of shares of Common Stock by the ESOP, which
initially will be deducted from the Company's stockholders' equity. For
the effects of such purchase, see "Capitalization" and "Pro Forma Data."
(4) Reflects a 15% increase in the Estimated Valuation Range, which may occur
without a resolicitation of subscribers or any right of cancellation, to
reflect changes in market and financial conditions prior to completion of
the Conversion or to fill the order of the ESOP.
The Subscription Offering will close at 12:00 noon, Central Time, on
September 15, 1998 (the "Expiration Date"), unless extended by the Company and
the Association, with regulatory approval if necessary, as will the Community
Offering unless extended. Any Community Offering must be completed within 45
days after the close of the Subscription Offering, or October 30, 1998, unless
extended by the Company and the Association, with regulatory approval if
necessary. No single extension can exceed 90 days, and the extensions may not go
beyond September 22, 2000. Orders submitted are irrevocable until the completion
or termination of the Conversion; provided that, if the Conversion is not
completed within the 45-day period referred to above, unless such period has
been extended, all subscribers will have their funds returned promptly with
interest, and all withdrawal authorizations will be cancelled. Any extension of
the Offerings will be conducted in accordance with the terms described herein.
See "The Conversion -- Subscription Offering and Subscription Rights."
Purchase Limitations. With the exception of the ESOP, the maximum amount
that any person (including all persons on a joint account) may purchase in any
particular priority category in the Offerings is generally limited to $60,000 or
6,000 shares of Common Stock (subject to adjustment). No person, together with
associates and persons acting in concert with such person, may purchase in the
aggregate more than $100,000 or 10,000 shares of Common Stock in the Conversion
(subject to adjustment). The minimum purchase is 25 shares. See "The Conversion
- -- Limitations on Common Stock Purchases."
Required Approvals. The consummation of the Conversion is subject to the
receipt of various regulatory approvals and the approval of the members of the
Association.
2
<PAGE>
[Map to be inserted which shows the State of Louisiana, with an
enlargement of Iberville and West Baton Rouge Parishes showing Baton
Rouge and Plaquemine]
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENT AGENCY.
3
<PAGE>
SUMMARY
This summary is qualified in its entirety by the more detailed
information regarding the Association and the Financial Statements of the
Association and notes thereto appearing elsewhere in this Prospectus.
IBL Bancorp, Inc.
IBL Bancorp, Inc. is a Louisiana corporation organized in June 1998 by
the Association for the purpose of becoming a unitary savings and loan holding
company of the Association. The Company will purchase all of the capital stock
of the Association to be issued in the Conversion in exchange for 50% of the net
Conversion proceeds and will retain the remaining 50% of the net proceeds as its
initial capitalization. Immediately following the Conversion, the only
significant assets of the Company will be the capital stock of the Association,
the Company's loan to the ESOP, and the remainder of the net Conversion proceeds
retained by the Company. The business and management of the Company will
initially primarily consist of the business and management of the Association.
See "Business" and "Regulation - The Company."
The Company's executive office is located at the home office of the
Association at 23910 Railroad Avenue, Plaquemine, Louisiana 70764, and its
telephone number is (504) 687-6337.
The Iberville Building and Loan Association
Iberville is a Louisiana-chartered mutual building and loan association
that was originally formed in 1915. Iberville conducts business from its office
in Plaquemine, Louisiana. At March 31, 1998, Iberville had $22.8 million of
total assets, $21.1 million of total liabilities, including $20.5 million of
deposits, and $1.7 million of retained earnings (representing 7.3% of total
assets).
Iberville is primarily engaged in attracting deposits from the general
public and using those funds to originate loans secured primarily by
single-family residences (one-to-four units) located in its primary market area
of Iberville and West Baton Rouge Parishes in Louisiana. The Association's
single-family residential loans amounted to $11.5 million or 67.2% of the
Association's total loan portfolio and 50.6% of total assets at March 31, 1998.
To a lesser extent, the Association originates consumer loans, which amounted to
$4.0 million or 23.3% of the total loan portfolio at such date, and purchases
mortgage-backed securities, which amounted to $4.0 million at March 31, 1998.
Iberville also originates single-family construction loans, commercial real
estate loans and land loans to a limited extent, which loans amounted to 2.5%,
5.4% and 1.7%, respectively, of the total loan portfolio at March 31, 1998.
Iberville is a community-oriented savings institution which emphasizes
retail lending and deposit products, customer service and convenience. The
Association generally has sought to achieve long-term financial strength and
stability by (i) increasing the amount and stability of its net interest income,
(ii) managing its assets and liabilities to reduce its vulnerability to changes
in interest rates, and (iii) maintaining a low level of non-performing assets.
Highlights of Iberville's business strategy include the following:
Emphasis on Traditional Lending and Investment Activities. Iberville's
primary lending emphasis is the origination of loans secured by first liens on
single-family residences and, to a lesser extent, consumer loans, such as home
equity and improvement loans and automobile loans. The Association intends to
continue to emphasize the origination of single-family residential loans and
consumer loans. At March 31, 1998, the Association's net loans amounted to $16.4
million or 72.1% of the Association's total assets. In addition, $4.0 million or
17.6% of Iberville's total assets at March 31, 1998 consisted of mortgage-backed
securities, which are backed by single-family residential loans.
Interest Rate Risk Management. The primary elements of Iberville's
strategy to manage its interest rate risk include (i) emphasizing the
origination of adjustable-rate mortgages ("ARMs"), (ii) purchasing
adjustable-rate mortgage-backed securities, (iii) since mid-1996, originating
15-year, fixed-rate single-family residential loans to meet
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<PAGE>
customer demand, and (iv) maintaining lower-costing passbook and negotiable
order of withdrawal ("NOW") accounts. Based upon certain repricing assumptions,
the Association's interest-earning assets repricing or maturing within one year
exceeded its interest-bearing liabilities with similar characteristics by $3.3
million or 14.4% of total assets at March 31, 1998.
Emphasis on Retail Deposits. The Association's liability strategy
emphasizes retail deposits primarily obtained from persons in its market area.
The Association's lower-costing passbook savings and NOW accounts aggregated
$5.5 million or 27.0% of the Association's total deposits at March 31, 1998. For
the three months ended March 31, 1998, the average rate paid on the
Association's passbook savings and NOW accounts amounted to 2.74%, as compared
to the average rate paid on the Association's certificates of deposits of 4.99%
during such period.
Asset Quality. Total non-performing assets were 0.72% of total assets
at March 31, 1998 compared to 1.48% and 1.24% of total assets at December 31,
1997 and 1996, respectively. Non-accruing single-family residential loans and
consumer loans represented 100% of the total non-performing assets at March 31,
1998 and December 31, 1997 and 1996. At March 31, 1998, the Association's
allowance for loan losses equalled $403,000, representing 2.4% of total loans
outstanding and 246% of total non-accruing loans.
Maintain Sufficient Levels of Regulatory Capital. At March 31, 1998,
Iberville's tangible, core and risk-based capital ratios amounted to 7.34%,
7.34% and 15.47%, respectively, which exceeded the minimum requirements of 1.5%,
3.0% and 8.0% by $1.3 million, $1.0 million and $879,000, respectively. The
Conversion will further increase Iberville's regulatory capital, as the
Association's pro forma tangible capital ratio will increase to 10.20% if shares
are sold at the midpoint of the Estimated Valuation Range. The pro forma capital
levels may initially result in the Company's return on equity being below the
industry average. See "Risk Factors -- Low Return on Equity Following the
Conversion; Uncertainty as to Future Growth Opportunities." To manage its
capital levels, the Company intends to consider stock repurchases and/or returns
of capital as soon as permissible following the Conversion. See "Use of
Proceeds."
For selected summary information as of June 30, 1998, see "Summary of
Recent Developments."
The Association is subject to examination and comprehensive regulation
by the Louisiana Office of Financial Institutions ("OFI"), which is the
Association's chartering authority, and by the Office of Thrift Supervision
("OTS"), which is the Association's primary federal regulator. The Association
is also regulated by the Federal Deposit Insurance Corporation ("FDIC"), which
insures its deposits up to applicable limits. Such regulation and supervision
establishes a comprehensive framework of activities in which an institution may
engage and is intended primarily for the protection of depositors and the
Savings Association Insurance Fund ("SAIF") administered by the FDIC. The
Association is also a member of the Federal Home Loan Bank ("FHLB") of Dallas,
which is one of the 12 banks which comprise the FHLB System. The Association is
further subject to regulations of the Board of Governors of the Federal Reserve
System ("Federal Reserve Board") governing reserves required to be maintained
against deposits and certain other matters.
Iberville's executive office is located at 23910 Railroad Avenue,
Plaquemine, Louisiana 70764, and its telephone number is (504) 687-6337.
The Conversion
On April 7, 1998, the Board of Directors of the Association adopted the
Plan of Conversion pursuant to which the Association is converting from a
Louisiana-chartered mutual savings and loan association to a Louisiana-chartered
stock savings and loan association, all the common stock of which will be
acquired by the Company in exchange for 50% of the net Conversion proceeds. The
other 50% of the net Conversion proceeds will be retained by the Company. The
Plan of Conversion was subsequently amended by the Board of Directors on June
16, 1998. The Conversion is subject to OTS and OFI approval, which have been
conditionally received, and is subject to approval of the Association's members
at a special meeting to be held for this purpose on September
5
<PAGE>
22, 1998. In addition, the Company has received the conditional approval of the
OTS and the OFI to become a savings and loan holding company and as such will be
subject to regulation by the OTS. See "Use of Proceeds" and "The Conversion."
Upon completion of the Conversion, depositors and mortgage loan
borrowers will no longer be entitled to vote as members of the Association.
Instead, all voting rights in the Association will be held by the Company as the
sole stockholder of the Association, and all voting rights with respect to the
Company will be held by the holders of the Common Stock.
The Offerings
Pursuant to the Plan and in connection with the Conversion, the Company
is offering up to 276,000 shares of Common Stock in the Offerings, which may be
increased to up to 317,400 shares if the Estimated Valuation Range is increased
by up to 15%. The Common Stock is first being offered in the Subscription
Offering with nontransferable subscription rights being granted, in the
following order of priority, to (i) depositors of the Association with account
balances of $50.00 or more as of the close of business on December 31, 1996
("Eligible Account Holders"), (ii) the ESOP, (iii) depositors of the Association
with account balances of $50.00 or more as of the close of business on June 30,
1998 ("Supplemental Eligible Account Holders"), (iv) depositors of the
Association as of the close of business on August 7, 1998 (other than Eligible
Account Holders and Supplemental Eligible Account Holders), and borrowers of the
Association whose loans are secured by real estate as of the close of business
on August 7, 1998 ("Other Members"), and (v) directors, officers and employees
of the Association (primarily for the benefit of any such persons who do not
qualify in one of the above categories). All holders of a joint deposit account
are deemed to be a single person for purposes of the subscription rights created
by such joint account. Subscription rights will expire if not exercised by noon,
Central Time, on September 15, 1998, unless extended.
Subject to the prior rights of holders of subscription rights, the
Company may elect to offer any shares of Common Stock not subscribed for in the
Subscription Offering in a Community Offering commencing prior to or upon
completion of the Subscription Offering, with preference given to natural
persons residing in Iberville Parish, Louisiana. Any Community Offering will
commence at such time as the Company delivers a copy of this Prospectus to
members of the general public who do not hold subscription rights. The Company
and the Association reserve the absolute right to reject or accept any orders in
the Community Offering, in whole or in part, either at the time of receipt of an
order or as soon as practicable following the Expiration Date or any extension
thereof.
Payments for subscriptions made by cash, check or money order will be
placed in a segregated account at the Association and will earn interest at the
Association's passbook rate (3.0% as of the date of this Prospectus) from the
date of receipt until the Conversion is completed or terminated. Payments
authorized by withdrawal from deposit accounts at the Association will continue
to earn interest at the contractual rate until the Conversion is completed or
terminated; these funds will be otherwise unavailable to the depositor until
such time. If a withdrawal is authorized to fund the purchase of Common Stock,
the funds will be withdrawn upon consummation of the Conversion without penalty.
Wire transfers into any account and payments from other private third parties
will not be accepted for the purchase of Common Stock.
The Company and the Association have retained Trident as consultant and
advisor in connection with the Offerings and to assist in soliciting
subscriptions in the Offerings. Trident is not obligated to take or purchase any
shares of Common Stock in the Offerings. See "The Conversion - Subscription
Offering and Subscription Rights," "-- Community Offering" and "-- Marketing
Arrangements."
Restrictions on Transfer of Subscription Rights
Prior to the completion of the Conversion, no person may transfer or
enter into any agreement or understanding to transfer the legal or beneficial
ownership of the subscription rights issued under the Plan or the shares
6
<PAGE>
of Common Stock to be issued upon their exercise. Each person exercising
subscription rights will be required to certify that the purchase of Common
Stock is solely for the purchaser's own account and that there is no agreement
or understanding regarding the sale or transfer of such shares. See "The
Conversion -- Restrictions on Transfer of Subscription Rights and Shares."
Subscription rights are nontransferable and persons found to be attempting to
transfer subscription rights will be subject to the forfeiture of such rights
and possible further sanctions and penalties imposed by the OTS. The Company and
the Association intend to pursue any and all legal and equitable remedies in the
event they become aware of the transfer of subscription rights and will not
honor orders known by them to involve the transfer of such rights.
Purchase Limitations
With the exception of the ESOP, which intends to purchase up to an
aggregate of 8% of the number of shares of Common Stock issued in the
Conversion (16,320 shares, 22,080 shares and 25,392 shares at the minimum,
maximum and 15% above the maximum of the Estimated Valuation Range,
respectively), the maximum amount that any person (including all persons on a
joint account) may purchase in any priority category in the Subscription
Offering, as well as in any Community Offering, is generally limited to
$60,000 or 6,000 shares of Common Stock. No person, together with associates
of or persons acting in concert with such person, may purchase in the
aggregate more than $100,000 or 10,000 shares of Common Stock sold in the
Conversion as a whole, or 3.6% at the maximum of the Estimated Valuation
Range. At any time during the Offerings, and without further approval by the
members of the Association, the Company and the Association may in their sole
discretion increase the individual purchase limitations up to 5% of the
shares offered ($138,000 at the maximum of the Estimated Valuation Range). If
a purchase limitation is increased, persons who submitted an order for 6,000
shares of Common Stock will be given the opportunity to increase their order.
The purchase limitations may also be decreased to as low as 1% of the shares
offered ($20,400 at the minimum of the Estimated Valuation Range). In the
event of a decrease in the purchase limitation, any orders in excess of the
revised purchase limitation will be reduced to the extent necessary. The
minimum purchase is 25 shares. See "The Conversion - Limitations on Common
Stock Purchases." In the event of an oversubscription, shares will be
allocated in accordance with the Plan as described in "The Conversion --
Subscription Offering and Subscription Rights" and "-- Community Offering."
The term "acting in concert" means (i) knowing participation in a joint
activity or interdependent conscious parallel action towards a common goal
whether or not pursuant to an express agreement; or (ii) a combination or
pooling of voting or other interests in the securities of an issuer for a common
purpose pursuant to any contract, understanding, relationship, agreement or
other arrangement, whether written or otherwise. The Company and the Association
may presume that certain persons are acting in concert based upon, among other
things, joint account relationships, common addresses and the fact that such
persons have filed joint Schedule 13Ds with the Securities and Exchange
Commission ("SEC") with respect to other companies. The term "associate" of a
person is defined in the Plan of Conversion to mean (i) any corporation or
organization (other than the Company, the Association or a majority-owned
subsidiary of the Association or the Company) of which such person is a
director, officer or partner or is, directly or indirectly, the beneficial owner
of 10% or more of any class of equity securities; (ii) any trust or other estate
in which such person has a substantial beneficial interest or as to which such
person serves as trustee or in a similar fiduciary capacity (excluding
tax-qualified employee benefit plans of the Company or the Association); and
(iii) any relative or spouse of such person, or any relative of such spouse, who
either has the same home as such person or who is a director or officer of the
Company or the Association or any of their subsidiaries.
Stock Pricing and Number of Shares to be Issued in the Conversion
Federal regulations require the aggregate purchase price of the Common
Stock to be consistent with an independent appraisal of the estimated pro forma
market value of the Common Stock. Ferguson, an independent appraiser, has
advised the Association that in its opinion, dated June 5, 1998, the Estimated
Valuation Range ranged from $2,040,000 to $2,760,000, with a midpoint of
$2,400,000. The full text of the appraisal report of Ferguson describes the
procedures followed, the assumptions made, limitations on the review undertaken
and matters
7
<PAGE>
considered. The appraisal report has been filed as an exhibit to the
Registration Statement and Application for Conversion of which this Prospectus
is a part, and is available in the manner set forth under "Additional
Information." This appraisal of the Common Stock is not intended and should not
be construed as a recommendation of any kind as to the advisability of
purchasing such stock, nor can any assurance be given that purchasers of the
Common Stock will be able to sell such shares after the Conversion at or above
the Purchase Price.
All shares of Common Stock issued in the Conversion will be sold at the
Purchase Price of $10.00 per share, which was established by the Boards of
Directors of the Company and the Association. The actual number of shares to be
issued in the Conversion will be determined by the Company and the Association
based upon the final updated valuation of the estimated pro forma market value
of the Common Stock at the completion of the Offerings. The number of shares of
Common Stock to be issued is expected to range from a minimum of 204,000 shares
to a maximum of 276,000 shares. Subject to approval of the OTS and the OFI, the
Estimated Valuation Range may be increased or decreased to reflect market and
economic conditions prior to the completion of the Conversion or to fill the
order of the ESOP, and under such circumstances the Company and the Association
may increase or decrease the number of shares of Common Stock to be issued in
the Conversion. No resolicitation of subscribers will be made and subscribers
will not be permitted to modify or cancel their subscriptions unless the gross
proceeds from the sale of the Common Stock are less than the minimum or more
than 15% above the maximum of the current Estimated Valuation Range. An
affirmative response to any resolicitation must be received by the Association
in order to confirm subscriptions. In connection with a resolicitation, to the
extent that subscriptions are cancelled, rescinded or reduced, all funds
delivered to the Company or the Association will be promptly returned with
interest earned from the date of receipt, and withdrawal authorizations will be
reduced or cancelled. See "Pro Forma Data," "Risk Factors -- Dilutive Effect of
Possible Issuance of Additional Shares" and "The Conversion -- Stock Pricing and
Number of Shares to be Issued."
Benefits of Conversion to Officers and Directors
General. In connection with the Conversion, the Company's directors and
executive officers as a group (six persons) and their associates have proposed
to purchase 38,000 shares of Common Stock, or 18.6%, 13.8% and 12.0% of the
Common Stock at the minimum, maximum and 15% above the maximum of the Estimated
Valuation Range, respectively.
The ESOP. The Company has adopted the ESOP, a tax-qualified benefit
plan for officers and employees of the Company and the Association, which
intends to purchase 8% of the shares of Common Stock offered in the
Conversion, or 16,320 shares ($163,200), 22,080 shares ($220,800) and 25,392
shares ($253,920) at the minimum, maximum and 15% above the maximum of the
Estimated Valuation Range, respectively. The Company intends to use a portion
of the net proceeds retained by it to make a loan directly to the ESOP to
enable the ESOP to purchase such shares. In the event that the total number
of shares of Common Stock sold in the Offerings is increased to an amount
greater than the number of shares representing the maximum of the Estimated
Valuation Range, the ESOP will have a priority right to purchase such
increased number up to an aggregate of 8% of the Common Stock. See
"Management -- New Stock Benefit Plans -- Employee Stock Ownership Plan."
Stock Option Plan. Following consummation of the Conversion, the
Company intends to adopt a stock option plan for the benefit of the directors,
officers and employees of the Company and the Association (the "Stock Option
Plan"), pursuant to which the Company intends to reserve a number of shares of
Common Stock equal to an aggregate of 10% of the Common Stock issued in the
Conversion (27,600 shares and 31,740 shares at the maximum and 15% above the
maximum of the Estimated Valuation Range, respectively) for issuance pursuant to
stock options and stock appreciation rights. The Stock Option Plan will not be
implemented prior to the receipt of stockholder approval of the plan. It is
currently expected that stock options will be granted to each of the four
non-employee directors and to Messrs. Bouchereau and Strickland, although no
determination has been made at this time as to the amount of such stock options.
All of the stock options will be granted at no cost to the recipients, although
the recipients will be required to pay the applicable exercise price at the time
of exercise in order to receive the
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<PAGE>
underlying shares of Common Stock. The Company currently anticipates that it
will not implement the Stock Option Plan until after one year following the
Conversion, although it reserves the right to do so as early as the first
meeting of stockholders following the Conversion, which is expected to be held
in April 1999, if such meeting is at least six months after the Conversion and
the necessary revisions are made to the plan to comply with OTS regulations
applicable to plans implemented within one year of the Conversion. See
"Management -- New Stock Benefit Plans -- Stock Option Plan."
Recognition and Retention Plan. Following consummation of the
Conversion, the Company intends to adopt a recognition and retention plan for
the benefit of the directors, officers and employees of the Company and the
Association (the "Recognition Plan" or "RRP"). The Recognition Plan will not be
implemented prior to the receipt of stockholder approval of the plan. It is
expected that the Recognition Plan will be submitted to stockholders for
approval at the same time as the Stock Option Plan. Upon the receipt of such
approval, the Recognition Plan is expected to purchase a number of shares of
Common Stock either from the Company or in the open market equal to an aggregate
of 4% of the Common Stock issued in the Conversion (11,040 shares or $110,400 at
the maximum of the Estimated Valuation Range and 12,696 shares or $126,960 at
15% above the maximum of such range), and to award such shares to certain
directors, officers and employees at no cost to the recipients. It is currently
expected that shares available under the Recognition Plan will be granted to
each of the four non-employee directors and to Messrs. Bouchereau and
Strickland, although no determination has been made at this time as to the
amount of such awards. See "Management -- New Stock Benefit Plans -- Recognition
Plan."
In the event that the Recognition Plan purchases shares of Common Stock
in the open market with funds contributed by the Company, the cost of such
shares initially will be deducted from the Company's stockholders' equity, but
the number of outstanding shares of Common Stock will not increase and
stockholders accordingly will not experience dilution of their ownership
interest. In the event that the Recognition Plan purchases shares of Common
Stock from the Company with funds contributed by the Company, total
stockholders' equity would neither increase nor decrease, but under such
circumstances stockholders would experience an approximate 3.8% dilution of
their ownership interests and per share stockholders' equity and per share net
earnings would decrease as a result of an increase in the number of outstanding
shares of Common Stock. In either case, the Company will incur operating expense
and increases in stockholders' equity as the shares held by the Recognition Plan
are granted and issued in accordance with the terms thereof. For a presentation
of the effects of anticipated purchases of Common Stock by the Recognition Plan,
see "Risk Factors -- Dilutive Effect of Possible Issuance of Additional Shares,"
"Risk Factors -- Increased Compensation Expense After the Conversion" and "Pro
Forma Data."
Employment Agreements. Upon consummation of the Conversion, the Company
and the Association intend to enter into three-year employment agreements with
Messrs. Bouchereau and Strickland, and each of the officers are presently
expected to have an initial annual salary of less than $100,000. If the
employment of such officers is terminated as a result of a change in control of
the Company, Messrs. Bouchereau and Strickland would each be entitled to a cash
severance amount equal to three times his average annual compensation over his
most recent five taxable years. If a change in control was to occur in 1998
subsequent to consummation of the Conversion, then Messrs. Bouchereau and
Strickland would be entitled to severance of approximately $218,000 and
$108,000, respectively. At least 30 days prior to each annual anniversary date
of the employment agreement, the Boards of Directors of the Company and the
Association shall determine whether or not to extend the term of the agreements
for an additional one year. See "Management -- Employment Agreements."
Prospectus Delivery and Procedure for Purchasing Shares
To ensure that each purchaser receives a Prospectus at least 48 hours
prior to the Expiration Date in accordance with Rule 15c2-8 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), no Prospectus will be
mailed any later than five days prior to such date or hand delivered any later
than two days prior to such date. Execution of the order form will confirm
receipt or delivery of the Prospectus in accordance with Rule 15c2-8. Order
forms will only be distributed with a Prospectus. The Company and the
Association will accept for processing only orders submitted on original order
forms. Copies of order forms, order forms unaccompanied by
9
<PAGE>
an executed certification form, payments from other private third parties and
wire transfers into any account will not be accepted for the purchase of Common
Stock. Payment by check, money order, cash or debit authorization to an existing
account at Iberville must accompany the order form.
In order to ensure that Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members are properly identified as to their stock
purchase priorities, depositors as of the close of business on the Eligibility
Record Date (December 31, 1996) or the Supplemental Eligibility Record Date
(June 30, 1998), and/or depositors and certain borrowers as of the close of
business on the Voting Record Date, August 7, 1998, must list all accounts on
the stock order form giving all names on each account and the account numbers.
See "The Conversion -- Procedure for Purchasing Shares in the Subscription and
Community Offerings."
Use of Proceeds
The net proceeds from the sale of Common Stock in the Conversion are
estimated to be between $1.7 million and $2.4 million ($2.8 million assuming
a 15% increase in the Estimated Valuation Range), depending on the number of
shares sold and the expenses of the Conversion. See "Pro Forma Data." The
Company will purchase all of the capital stock of the Association to be
issued in the Conversion in exchange for 50% of the net Conversion proceeds
and will retain the remaining 50% of the net proceeds as its initial
capitalization. The Company intends to use a portion of the net proceeds
retained by it to make a loan directly to the ESOP to enable the ESOP to
purchase up to 8% of the Common Stock. The amount of the loan is expected to
be $163,200, $220,800 and $253,920 at the minimum, maximum and 15% above the
maximum of the Estimated Valuation Range, respectively. See "Management --
New Stock Benefit Plans -- Employee Stock Ownership Plan." The remaining net
proceeds retained by the Company initially may be used to invest in
mortgage-backed securities issued by U.S. Government agencies and
government-sponsored enterprises, U.S. Government and federal agency
securities of various maturities, deposits in either the Association or other
financial institutions, or a combination thereof. Ultimately, the portion of
net proceeds retained by the Company may be used to support the Association's
lending activities, to support the future expansion of operations through
establishment of branch offices or other customer facilities, expansion into
other lending markets or diversification into other banking related
businesses (although no such transactions are specifically being considered
at this time), and for other business and investment purposes, including the
payment of regular or special cash dividends, possible repurchases of the
Company's Common Stock or tax-free returns of capital. See "Dividend Policy."
Funds contributed to the Association from the Company will be used for
general business purposes. The proceeds will be used to support the
Association's lending and investment activities and thereby enhance the
Association's capabilities to serve the borrowing and other financial needs
of the communities it serves. See "Use of Proceeds."
Dividends
The Board of Directors of the Company intends to pay quarterly cash
dividends on the Common Stock at an initial rate of $.15 per share per annum
(representing 1.5% of the Purchase Price), commencing with the first full
calendar quarter following consummation of the Conversion. Declarations of
dividends by the Company's Board of Directors will depend upon a number of
factors, including the amount of the net proceeds retained by the Company in the
Conversion, investment opportunities available to the Company or the
Association, capital requirements, the Company's and the Association's financial
condition and results of operations, tax considerations, statutory and
regulatory limitations, and general economic conditions. There can be no
assurances that dividends will in fact be paid on the Common Stock or that, if
paid, such dividends will not be reduced or eliminated in future periods. For a
more detailed discussion of the factors that may affect the payment of
dividends, see "Dividend Policy."
Risk Factors
See "Risk Factors" for a discussion of certain factors that should be
considered by prospective investors.
10
<PAGE>
SELECTED FINANCIAL DATA
(Unaudited)
(Dollars in Thousands)
The following selected financial and other data of Iberville does not
purport to be complete and is qualified in its entirety by reference to the more
detailed financial information contained elsewhere herein.
<TABLE>
<CAPTION>
December 31,
March 31, ---------------------------
1998(1) 1997 1996
---------------- ------------- ----------
<S> <C> <C> <C>
Selected Financial
Condition and Other Data:
Total assets $22,764 $22,395 $21,804
Cash and cash equivalents(2) 1,697 1,110 1,809
Securities available for sale 1,811 1,948 1,427
Securities held to maturity 2,212 2,401 2,750
Loans receivable, net 16,418 16,318 15,194
Real estate owned -- -- --
Deposits 20,534 20,026 20,278
FHLB advances 452 610 --
Total equity 1,671 1,622 1,454
Full service offices 1 1 1
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
-------------------------- --------------------------
1998(1) 1997(1) 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Selected Operating Data:
Total interest income $ 455 $ 417 $1,691 $1,645
Total interest expense 230 226 917 908
-------- -------- ----- -----
Net interest income 225 191 774 737
Provision for loan losses 12 12 42 39
-------- -------- ----- -----
Net interest income after
provision 213 179 732 698
for losses
Noninterest income 24 21 98 131
Noninterest expenses 158 147 568 703
-------- -------- ----- -----
Income before provision for income 79 53 262 126
taxes
Provision for federal income 26 20 98 70
-------- -------- ----- -----
taxes
Net income 53 33 164 56
Other comprehensive income (loss),
net of tax effects (4) (6) 4 (3)
----- ------ ------ -----
Comprehensive income $ 49 $ 27 $ 168 $ 53
----- ------ ------ -----
----- ------ ------ -----
</TABLE>
(Table continued on next page)
11
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
-------------------------- --------------------------
1998(1) 1997(1) 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Selected Ratios (3):
Return on average assets 0.94% 0.60% 0.74% 0.26%
Return on average equity 12.79 8.95 10.64 3.83
Average equity to average assets 7.32 6.73 6.99 6.77
Equity to assets at end of period 7.34 6.74 7.24 6.67
Interest rate spread(4) 3.40 3.26 3.24 3.17
Net interest margin(4) 3.72 3.53 3.55 3.46
Non-performing loans to total
loans at end of period(5) 0.96 2.19 1.93 1.70
Non-performing assets to total
assets at end of period(5) 0.72 1.60 1.48 1.24
Allowance for loan losses to total
non-accruing loans 245.73 106.55 121.69 134.07
Average interest-earning assets to
average interest-bearing 107.69 106.65 107.42 106.65
liabilities
Net interest income after
provision
for loan losses to total 134.81 121.77 128.87 99.29
noninterest expenses
Noninterest expenses to average
total assets 2.79 2.68 2.58 3.25
</TABLE>
- ------------------------
(1) In the opinion of management, financial information at March 31, 1998
and for the three months ended March 31, 1998 and 1997 reflect all
adjustments (consisting only of normal recurring accruals) which are
necessary for a fair presentation of the information as of such date
and for such periods. The operating and other data for the three months
ended March 31, 1998 may not be indicative of the operations of
Iberville on an annualized basis.
(2) Includes cash and due from banks as well as interest-earning deposits
in other institutions.
(3) With the exception of end of period ratios, all ratios are based on
average monthly balances. The ratios for the three month periods have
been annualized where appropriate.
(4) Interest rate spread represents the difference between the average
yield on interest-earning assets and the average rate on
interest-bearing liabilities. Net interest margin represents net
interest income as a percentage of average interest-earning assets.
(5) Non-performing loans consist of non-accrual loans, and non-performing
assets consist of non-performing loans and, where applicable, real
estate acquired by foreclosure.
12
<PAGE>
SUMMARY OF RECENT DEVELOPMENTS
The selected financial and other data of Iberville set forth below does
not purport to be complete and should be read in conjunction with, and is
qualified in its entirety by, the more detailed information, including the
Financial Statements and related Notes, appearing elsewhere herein.
<TABLE>
<CAPTION>
At At
June 30, December 31,
1998(1) 1997
--------------------------- ---------------------------
(Dollars in Thousands)
<S> <C> <C>
Selected Financial Condition
and Other Data:
Total assets $22,882 $22,395
Cash and cash equivalents(2) 1,661 1,110
Securities available for sale 1,744 1,948
Securities held to maturity 2,052 2,401
Loans receivable, net 16,921 16,318
Real estate owned -- --
Deposits 21,048 20,026
FHLB advances -- 610
Total equity 1,718 1,622
Full service offices 1 1
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ -------------------------------
1998(1) 1997(1) 1998(1) 1997(1)
------- ------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Selected Operating Data:
Total interest income $436 $432 $891 $849
Total interest expense 231 227 461 453
--- --- --- ---
Net interest income 205 205 430 396
Provision for loan losses 3 11 15 23
--- --- --- ---
Net interest income after provision
for loan losses 202 194 415 373
Noninterest income 24 30 48 51
Noninterest expenses 145 148 303 295
--- --- --- ---
Income before provision for income taxes 81 76 160 129
Provision for federal income taxes 35 29 61 49
--- --- --- ---
Net income 46 47 99 80
Other comprehensive income (loss),
net of tax effects 1 5 (3) (1)
--- --- --- ---
Comprehensive income $ 47 $ 52 $ 96 $ 79
--- --- --- ---
--- --- --- ---
</TABLE>
(Table continued on next page)
13
<PAGE>
<TABLE>
<CAPTION>
At or For the At or For the
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- ---------------------------
1998(1) 1997(1) 1998(1) 1997(1)
--------------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Selected Ratios (3):
Return on average assets 0.81% 0.86% 0.87% 0.73%
Return on average equity 11.32 12.39 12.07 10.70
Average equity to average assets 7.14 6.93 7.23 6.83
Equity to assets at end of period 7.51 6.97 7.51 6.97
Interest rate spread(4) 3.06 3.48 3.37 3.36
Net interest margin(4) 3.35 3.79 3.84 3.66
Non-performing loans to total
loans at end of period(5) 1.18 1.19 1.18 1.19
Non-performing assets to total
assets at end of period(5) 0.91 0.88 0.91 0.88
Allowance for loan losses to total
non-accruing loans 195.19 197.94 195.19 197.94
Average interest-earning assets to
average interest-bearing liabilities 107.18 107.27 107.67 106.95
Net interest income after provision for
loan losses to total noninterest 139.31 131.08 136.96 126.44
expenses
Noninterest expenses to average total 2.55 2.71 2.67 2.69
assets
</TABLE>
- ------------------
(1) In the opinion of management, financial information at June 30, 1998
and for the three and six months ended June 30, 1998 and 1997 reflect
all adjustments (consisting only of normal recurring accruals) which
are necessary for a fair presentation of the information as of such
date and for such periods. The operating and other data for the three
and six months ended June 30, 1998 may not be indicative of the
operations of Iberville on an annualized basis.
(2) Includes cash and due from banks as well as interest-earning deposits
in other institutions.
(3) With the exception of end of period ratios, all ratios are based on
average monthly balances during the indicated periods and are
annualized where appropriate.
(4) Interest rate spread represents the difference between the average
yield on interest-earning assets and the average rate paid on
interest-bearing liabilities. Net interest margin represents net
interest income as a percent of average interest-earning assets.
(5) Non-performing loans consist of non-accruing loans, and non-performing
assets consist of non-performing loans and real estate acquired by
foreclosure where applicable.
14
<PAGE>
The Association's total assets increased by $487,000 or 2.2% from
December 31, 1997 to June 30, 1998. This increase was primarily due to increases
of $603,000 in net loans receivable and $551,000 in cash and cash equivalents,
and these increases were partially offset by an aggregate decrease of $553,000
in securities. The Association continues to emphasize the origination of higher
yielding loans over the purchase of lower yielding mortgage-backed securities.
The Association's total classified assets for regulatory purposes at
June 30, 1998 (excluding loss assets specifically reserved for) amounted to
$506,000, all of which was classified as substandard. See "Business - Asset
Quality - Classified Assets." The largest classified asset at June 30, 1998
consisted of a $114,000 adjustable-rate residential loan. The remaining $392,000
of substandard assets at June 30, 1998 consisted of 12 residential mortgage
loans totalling $326,000 and 10 consumer loans totalling $66,000.
Deposits increased by $1.0 million or 5.1% in the first half of 1998.
As a result of the increase in deposits, the Association repaid all of its FHLB
advances, which amounted to $610,000 at December 31, 1997. Total equity
increased by $96,000 or 5.9% in the first half of 1998.
Net income decreased by $1,000 or 2.1% in the quarter ended June 30,
1998 and increased by $19,000 or 23.8% in the six months ended June 30, 1998
compared to the respective 1997 periods. The decrease in the June 30, 1998
quarter was due to a decrease in noninterest income and an increase in the
effective tax rate. The increased net income for the first half of 1998 was
primarily due to an increase in net interest income and, to a lesser extent, a
decline in the provision for loan losses.
Total interest income and interest expense increased slightly in the
three and six months ended June 30, 1998 over the respective 1997 periods. Net
interest income was the same for the three months ended June 30, 1998 and 1997,
and net interest income increased by $34,000 or 8.6% in the first half of 1998
over the comparable 1997 period.
The provision for loan losses decreased by $8,000 in each of the three
and six months ended June 30, 1998 over the comparable 1997 periods. At June 30,
1998, the Association's total non-accruing loans amounted to $207,000. The
allowance for loan losses amounted to $405,000 at June 30, 1998, representing
2.3% of the total loan portfolio and 195.2% of total non-accruing loans at such
date.
Noninterest income decreased by $6,000 or 20.0% in the three months
ended June 30, 1998 and by $3,000 or 5.9% in the six months ended June 30, 1998
from the comparable 1997 periods. The declines were primarily due to lower
commissions from the sale of annuities and credit life insurance.
Noninterest expenses nominally declined in the quarter ended June 30,
1998 and increased by $8,000 or 2.7% in the first half of 1998 compared to the
respective 1997 periods. The increase in the first half of 1998 was primarily
due to increases of $5,000 related to becoming Year 2000 computer compliant and
$3,000 for office supplies.
The provision for federal income taxes increased by $6,000 or 20.7% in
the three months ended June 30, 1998 and by $12,000 or 24.5% in the six months
ended June 30, 1998 over the respective 1997 periods. The increases were
primarily due to increases in pre-tax income and, in the quarter ended June 30,
1998, an increase in the effective tax rate to 43.2% from 38.2% in the
comparable 1997 quarter.
At June 30, 1998, the Association's tangible and core capital both
amounted to $1.7 million or 7.51% of adjusted total assets of $22.9 million, and
the Association's risk-based capital amounted to $1.9 million or 15.47% of
adjusted risk-weighted assets of $12.1 million.
15
<PAGE>
RISK FACTORS
The following risk factors, in addition to those discussed elsewhere in
this Prospectus, should be carefully considered by investors in deciding whether
to purchase the Common Stock offered hereby.
Low Return on Equity Following the Conversion; Uncertainty as to Future Growth
Opportunities
At March 31, 1998, the Association's ratio of equity to assets was
7.3%. The Company's equity position will be significantly increased as a result
of the Conversion. On a pro forma basis as of March 31, 1998, assuming the sale
of Common Stock at the midpoint of the Estimated Valuation Range, the Company's
ratio of equity to assets would be 10.20%. The Association's returns on average
equity for the three and six months ended June 30, 1998 were 11.32% and 12.07%,
respectively, on an annualized basis, which returns were higher than the
national average for all savings institutions of approximately 8.80% for the 12
months ended March 31, 1998 based on a recent industry publication. However, the
Company's equity upon completion of the Conversion will possibly be more than
double the Association's equity prior to the Conversion, without a proportionate
increase in net income. See "Pro Forma Data."
Because the Company's ability to leverage this increased capital will
be significantly affected by industry competition for loans and deposits and
because it will take time to prudently deploy such capital, the Company's return
on equity initially is expected to be below the industry average after the
Conversion. In light of OTS restrictions on stock repurchases and returns of
capital following the Conversion, and the time it may take to prudently deploy
the new capital, the Company's return on equity is likely to be lower than the
industry average for at least the first two years following the Conversion. The
Company's return on equity following the Conversion will be dependent upon
numerous factors, including loan demand, the interest rate environment and how
quickly the new capital can be prudently deployed. In an effort to fully deploy
post-Conversion capital, in addition to attempting to increase its loan and
deposit growth, the Company may seek to expand its banking franchise by opening
branch offices. Neither the Company nor the Association has any specific plans,
arrangements or understandings regarding any such expansions or acquisitions at
this time.
Absence of Market for the Common Stock
The Company and the Association have never issued capital stock, other
than 100 shares issued in connection with the incorporation of the Company,
which shares will be cancelled upon completion of the Conversion. Consequently,
there is no existing market for the Common Stock. Following the completion of
the Offerings, it is anticipated that the Common Stock will be traded on the
over-the-counter market with quotations available through the OTC Bulletin
Board. Trident has indicated its intention to make a market in the Common Stock.
If the Common Stock cannot be quoted and traded on the OTC Bulletin Board, it is
expected that transactions in the Common Stock will be reported in the pink
sheets published by the National Quotation Bureau, Inc. Making a market may
include the solicitation of potential buyers and sellers in order to match buy
and sell orders. However, Trident will not be subject to any obligation with
respect to such efforts. The development of a liquid public trading market
depends upon the existence of willing buyers and sellers, the presence of which
is not within the control of the Company, the Association or any market maker.
It is unlikely that an active and liquid trading market for the Common Stock
will develop due to the relatively small size of the Offerings and the small
number of stockholders expected following the Conversion. Accordingly,
purchasers should consider the illiquid, long-term nature of an investment in
the Common Stock. Furthermore, there can be no assurance that purchasers will be
able to sell their shares at or above the Purchase Price. See "Market for Common
Stock."
Potential Effects of Changes in Interest Rates and the Current Interest Rate
Environment
The operations of the Association are substantially dependent on its
net interest income, which is the difference between the interest income earned
on its interest-earning assets and the interest expense paid on its
interest-bearing liabilities. Like most savings institutions, the Association's
earnings are affected by changes in
16
<PAGE>
market interest rates and other economic factors beyond its control. While the
Association's average interest rate spread increased to 3.40% in the first
quarter of 1998 from 3.26% for the comparable 1997 quarter, no assurance can be
given that the Association's average interest rate spread will not decrease in
future periods. Any future decrease in the Association's average interest rate
spread could adversely affect the Association's net interest income. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Market Risk Analysis."
If an institution's interest-earning assets have longer effective
maturities than its interest-bearing liabilities, the yield on the institution's
interest-earning assets generally will adjust more slowly than the cost of its
interest-bearing liabilities and, as a result, the institution's net interest
income generally would be adversely affected by material and prolonged increases
in interest rates and positively affected by comparable declines in interest
rates. The Association attempts to reduce the vulnerability of its operations to
changes in interest rates by maintaining significant amounts of assets with
relatively short terms and/or adjustable rates of interest. Based upon certain
repricing assumptions, the Association's interest-earning assets repricing or
maturing within one year exceeded its interest-bearing liabilities with similar
characteristics by $3.3 million or 14.4% of total assets. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Market Risk Analysis."
In addition to affecting interest income and expense, changes in
interest rates also can affect the value of the Association's interest-earning
assets, which are comprised of fixed and adjustable-rate instruments, and the
ability to realize gains from the sale of such assets. Generally, the value of
fixed-rate instruments fluctuates inversely with changes in interest rates. At
March 31, 1998, the Association had $1.8 million of investment and
mortgage-backed securities available for sale ($209,000 of which had fixed-rates
of interest). The Association had $1,500 of net unrealized losses with respect
to such securities at March 31, 1998, which were included as a separate
component in the Association's total net worth, net of tax benefit, as of such
date.
The OTS has implemented an interest rate risk component into its
risk-based capital rules, which is designed to calculate on a quarterly basis
the extent to which the value of an institution's assets and liabilities would
change if interest rates increase or decrease. If the net portfolio value of an
institution would decline by more than 2% of the estimated market value of the
institution's assets in the event of a 200 basis point increase or decrease in
interest rates, then the institution is deemed to be subject to a greater than
"normal" interest rate risk and must deduct from its capital 50% of the amount
by which the decline in net portfolio value exceeds 2% of the estimated market
value of the institution's assets, as of an effective date to be determined. As
of March 31, 1998, if interest rates decreased by 200 basis points, the
Association's net portfolio value would decrease by $114,000 or .5% of the
estimated portfolio value of the Association's assets, while the net portfolio
value would increase by $91,000 or .4% if interest rates increased by 200 basis
points, in each case as calculated by the OTS. These results are primarily due
to the Association's significant holdings of adjustable-rate loans and
mortgage-backed securities. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Market Risk Analysis."
Changes in interest rates also can affect the average life of loans and
mortgage-related securities. Decreases in interest rates in recent periods have
resulted in increased prepayments of loans and mortgage-backed securities, as
borrowers refinanced to reduce borrowing costs. Under these circumstances, the
Association is subject to reinvestment risk to the extent that it is not able to
reinvest such prepayments at rates which are comparable to the rates on the
maturing loans or securities. See "Business -- Lending Activities."
In addition, at March 31, 1998, the Association had $20.5 million of
deposits, of which $9.7 million or 47.1% consisted of certificates of deposit
maturing in one year or less. An increase in interest rates could result in a
decline in deposits, a higher average cost of deposits, or both.
Investment in Mortgage-Backed Securities
At March 31, 1998, the Association had $4.0 million of mortgage-backed
securities, representing 17.6% of its total assets. Mortgage-backed securities
generally yield less than the loans which underlie such securities. In the
17
<PAGE>
first quarter of 1998, the average yield on the Association's mortgage-backed
securities was 6.08%, compared to an average yield of 8.71% on its loan
portfolio. The investment in mortgage-backed securities adversely affects the
average yield on the Association's total interest-earning assets.
Despite the lower yields, the Association intends to maintain its
mortgage-backed securities portfolio, which consists of securities issued by
U.S. Government agencies and government-sponsored enterprises. These securities
offer nominal credit risk due to payment guarantees or credit enhancements, are
an integral part of the Association's strategy of reducing its risk exposure to
increases in interest rates, are more liquid than individual loans and may be
used to collateralize the Association's FHLB advances.
Risks Related to Consumer Loans
At March 31, 1998, the Association had $4.0 million or 23.3% of its
total loan portfolio in consumer loans. These loans generally involve more risk
than mortgage loans because of the type and nature of the collateral and, in
certain cases, the absence of collateral. The consumer loan portfolio includes
$908,000 of unsecured loans at March 31, 1998. For a further discussion of the
risks associated with consumer loans, see "Business -- Lending Activities --
Consumer Loans." A total of $432,000 of consumer loans were delinquent 30 or
more days at March 31, 1998. See "Business -- Asset Quality -- Delinquent
Loans."
Risks Related to Commercial Real Estate, Construction and Land Loans
Commercial real estate, construction and land lending generally is
considered to involve a higher degree of risk than single-family residential
lending due to a variety of factors, including generally larger loan
balances, the dependency on successful operation of the project for
repayment, loan terms which often do not require full amortization of the
loan over its term, and the need to successfully develop and/or sell the
property. In addition, risk of loss on a construction loan is dependent
largely upon the accuracy of the initial estimate of the property's value at
completion of construction or development and the estimated cost (including
interest) of construction. During the construction phase, a number of factors
could result in delays and cost overruns. If the estimate of value proves to
be inaccurate, the Association may be confronted, at or prior to the maturity
of the loan, with a project, when completed, having a value which is
insufficient to assure full repayment. Commercial real estate loans may
involve large loan balances to single borrowers or groups of related
borrowers, with the repayment of such loans typically dependent on the
successful operations and income stream of the borrower. Such risks can be
significantly affected by economic conditions. In addition, commercial real
estate lending generally requires substantially greater oversight efforts
compared to residential real estate lending. See "Business --Lending
Activities Commercial Real Estate Loans." As of March 31, 1998, the
Association had $931,000 of commercial real estate loans, $420,000 of
construction loans, and $287,000 of land loans, none of which were
non-performing at March 31, 1998. These loans aggregated $1.6 million or 9.5%
of the Association's total loan portfolio at March 31, 1998. See "Business --
Asset Quality -- Non-Performing Assets." For information on the Association's
five largest loans or groups of loans to one borrower, all of which were
performing in accordance with their terms at March 31, 1998, see "Business --
Lending Activities -- General."
Strong Competition Within Iberville's Market Area
Competition in the banking and financial services industry is intense.
In its market area, the Association competes with commercial banks, savings
institutions, mortgage brokerage firms, credit unions, finance companies, mutual
funds, insurance companies, and brokerage and investment banking firms operating
locally and elsewhere. Many of these competitors have substantially greater
resources and lending limits than the Association and may offer certain services
that the Association does not or cannot provide. The profitability of the
Association depends upon its continued ability to successfully compete in its
market area.
18
<PAGE>
Geographic Concentration of Loans
Iberville's market area consists primarily of Iberville and West Baton
Rouge Parishes in Louisiana. The Association's real estate loans are primarily
secured by properties located in its market area, and all of the Association's
loans are primarily made to residents of its market area. Accordingly, the asset
quality of the Association's loan portfolio is highly dependent upon the economy
and the unemployment rate in its market area. As shown in Ferguson's conversion
valuation report, the unemployment rate for Iberville and West Baton Rouge
Parishes was 10.84% and 9.51%, respectively, in 1990, compared to 9.48% for
Louisiana and 6.24% for the United States. In addition, the per capita income
for Iberville and West Baton Rouge Parishes in such year was $11,857 and
$11,400, respectively, compared to $12,345 for Louisiana and $16,738 for the
United States. No assurance can be given that downturns in the economy in the
Association's market area may not adversely affect the Association's operations
in the future.
Reliance on Key Officers
The Association's executive officers consist of G. Lloyd Bouchereau,
Jr., President and Chief Executive Officer, and Danny M. Strickland, Loan
Officer. These officers have 32 and three years, respectively, of experience
with the Association. The loss of one or both of the executive officers could
have an adverse effect on the Association, particularly the loss of the
President and Chief Executive Officer. While the Company and the Association
intend to enter into three-year employment agreements with Messrs. Bouchereau
and Strickland upon consummation of the Conversion, the Company and the
Association do not have and currently do not intend to obtain key-man life
insurance policies on these officers.
Certain Anti-Takeover Provisions
Provisions in the Company's Governing Instruments and Louisiana Law.
Certain provisions of the Company's Articles of Incorporation and Bylaws, as
well as certain provisions in Louisiana law, will assist the Company in
maintaining its status as an independent publicly owned corporation. Provisions
in the Company's Articles of Incorporation and Bylaws provide, among other
things, (i) that the Board of Directors of the Company shall be divided into
three classes; (ii) that special meetings of stockholders may only be called by
the Board of Directors or the President of the Company or by holders of at least
50% of the outstanding Common Stock; (iii) that stockholders generally must
provide the Company advance notice of stockholder proposals and nominations for
director and provide certain specified related information; (iv) for
noncumulative voting for the election of directors; (v) for a period of five
years following the Conversion, that no person may acquire more than 10% of the
issued and outstanding shares of any class of equity security of the Company
except under certain circumstances; (vi) the authority to issue shares of
authorized but unissued Common Stock and preferred stock and to establish the
terms of any one or more series of Preferred Stock, including voting rights; and
(vii) for supermajority voting requirements to remove directors without cause or
to amend various provisions in the Articles of Incorporation or Bylaws.
Provisions under Louisiana law applicable to the Company, among other things,
establish certain uniform price provisions for certain business combinations and
provide that persons who acquire more than 20% of the outstanding voting stock
may not vote such shares unless the disinterested stockholders approve such
shares having voting rights. The above provisions may discourage potential proxy
contests and other potential takeover attempts, particularly those which have
not been negotiated with the Board of Directors, and thus generally may serve to
perpetuate current management. Based on the proposed purchases of directors and
executive officers in the Conversion, the shares to be acquired by the ESOP, and
the proposed purchase of shares by the Recognition Plan assuming stockholder
approval is received, the directors and officers may be in a position to block
certain transactions requiring a supermajority vote, even if a majority of the
stockholders believe such transactions are in their best interest. See "Proposed
Management Purchases" and "Restrictions on Acquisition of the Company and the
Association."
Voting Control of Officers and Directors. Directors and executive
officers of the Company (and their associates) expect to purchase approximately
18.6%, 13.8% or 12.0% of the shares of Common Stock outstanding based upon the
minimum, the maximum and 15% above the maximum of the Estimated Valuation Range,
19
<PAGE>
respectively. See "Proposed Management Purchases." The directors who act as
trustees of the ESOP are also expected to immediately control the voting of 8%
of the shares of Common Stock issued in the Conversion through the ESOP, at
least until an allocation has been made under the ESOP. Under the terms of the
ESOP, after an allocation has been made, the unallocated shares will generally
be voted by the trustees in the same proportion as the allocated shares are
voted by the ESOP participants.
No earlier than the first meeting of stockholders following the
Conversion, which is expected to be held in April 1999, the Company intends to
seek stockholder approval of the Company's proposed Recognition Plan, which is a
non-tax-qualified restricted stock plan for the benefit of directors, officers
and employees of the Company and the Association. Assuming the receipt of
stockholder approval, the Company expects to acquire Common Stock on behalf of
the Recognition Plan, in an amount equal to 4% of the Common Stock issued in the
Conversion, or 8,160 shares, 11,040 shares and 12,696 shares at the minimum,
maximum and 15% above the maximum of the Estimated Valuation Range,
respectively. These shares will be acquired either through open market
purchases, if permissible, or from authorized but unissued Common Stock. Under
the terms of the Recognition Plan, recipients of awards will be entitled to
instruct the trustee of the Recognition Plan as to how the underlying shares
should be voted, and the trustee will be entitled to vote all unallocated shares
in its discretion. If the shares are purchased in the open market, directors and
executive officers would have effective control over 22.6%, 17.8% or 16.0% of
the Common Stock outstanding at such time based upon the minimum, the maximum
and 15% above the maximum of the Estimated Valuation Range, respectively, before
giving effect to the potential exercise of additional stock options by directors
and officers of the Company and the Association and shares held by the ESOP. If
approved by stockholders at no earlier than the first meeting of stockholders
following the Conversion, the Company intends to reserve for future issuance
pursuant to the Stock Option Plan a number of authorized shares of Common Stock
equal to an aggregate of 10% of the Common Stock issued in the Conversion
(27,600 shares based on the maximum and 31,740 shares based on 15% above the
maximum of the Estimated Valuation Range). See "Management -- New Stock Benefit
Plans." Management's potential voting control could, together with additional
stockholder support, preclude or make more difficult takeover attempts that
certain stockholders deem to be in their best interest and may tend to
perpetuate existing management.
Provisions of Stock Benefit Plans and Employment Agreements. If the
Stock Option Plan and the Recognition Plan are not implemented until more
than one year following completion of the Conversion, such plans will provide
for accelerated vesting in the event of a change in control of the Company.
These plans will be implemented only if approved by stockholders. The ESOP
also provides for accelerated vesting in the event of a change in control. In
addition, upon consummation of the Conversion, the Company and the
Association will enter into employment agreements with their two executive
officers, which agreements will provide for severance pay in the event of a
change in control. These provisions may have the effect of increasing the
cost of acquiring the Company, thereby discouraging future attempts to take
over the Company or the Association. See "Restrictions on Acquisition of the
Company and the Association -- Restrictions in the Company's Articles of
Incorporation and Bylaws," "Management -- Employment Agreements" and
"Management -- New Stock Benefit Plans."
Legislation Limiting Deduction of Bad Debt Reserves
Under Section 593 of the Internal Revenue Code of 1986, as amended (the
"Code"), until the first tax year beginning on or after January 1, 1996, savings
institutions such as the Association generally were permitted to establish a tax
reserve for bad debts and to make annual additions thereto, which additions,
within specified limitations, could be deducted in arriving at their taxable
income. The Association's deduction with respect to "qualifying loans" was
computed using an amount based on the Association's actual loss experience (the
"Experience Method") or a percentage equal to 8% of the Association's taxable
income (the "PTI Method"). Under recently enacted legislation, the PTI Method
was repealed. As a result, the Association is permitted to deduct only actual
bad debts as they occur and cannot utilize the percentage of taxable income
method to make additions to its bad debt reserves in the future to reduce its
effective tax rate. In addition, the Association is required to recapture for
tax purposes (i.e., take into income) over a six-year period commencing January
1, 1996, the excess of the balance of its bad debt reserves as of December 31,
1995 over the balance of such reserves as of December 31, 1987. The
20
<PAGE>
Association's excess amounted to $85,000 (for which deferred taxes have been
provided). See "Taxation - Federal Taxation."
Regulatory Oversight and Legislation
The Association is subject to extensive regulation, supervision and
examination by the OFI, as its chartering authority, by the OTS as its primary
federal regulator, and by the FDIC as insurer of its deposits up to applicable
limits. The Association is a member of the FHLB System and is subject to certain
limited regulations promulgated by the Federal Reserve Board. As the holding
company of the Association, the Company also will be subject to regulation and
oversight by the OTS. Such regulation and supervision govern the activities in
which an institution can engage and are intended primarily for the protection of
the insurance fund and depositors. Regulatory authorities have been granted
extensive discretion in connection with their supervisory and enforcement
activities which are intended to strengthen the financial condition of the
banking and thrift industries, including the imposition of restrictions on the
operation of an institution, the classification of assets by the institution and
the adequacy of an institution's allowance for loan losses. Any change in such
regulation and oversight, whether by the OFI, the OTS, the FDIC or Congress,
could have a material impact on the Company, the Association and their
respective operations. See "Regulation."
On September 30, 1996, the Deposit Insurance Funds ("DIF") Act of 1996
was enacted into law. The DIF Act contemplates the development of a common
charter for all federally chartered depository institutions and the abolition of
separate charters for national banks and federal savings institutions. It is not
known what form the common charter may take and what effect, if any, the
adoption of a new charter would have on the financial condition or results of
operations of the Association. See "Regulation -- The Association."
Legislation is proposed periodically providing for a comprehensive
reform of the banking and thrift industries, and has included provisions that
would (i) require federal savings institutions to convert to a national bank or
a state-chartered bank or thrift, (ii) require all savings and loan holding
companies to become bank holding companies, and (iii) abolish the OTS. It is
uncertain when or if any of this type of legislation will be passed, and, if
passed, in what form the legislation would be passed. As a result, management
cannot accurately predict the possible impact of such legislation on the
Association.
In May 1998, the U.S. House of Representatives passed H.R. 10, which
among things would (1) prohibit new unitary thrift holding companies applied for
after March 31, 1998, such as the Company, from engaging in activities other
than those permissible for bank holding companies, (2) prohibit savings
institutions from affiliating with insurance companies and securities firms
unless they are grandfathered unitary thrift holding companies, which the
Company is not, (3) make membership in the FHLB system voluntary as of January
1, 1999, and (4) allow banks, insurance companies and securities firms to own
one another through financial holding companies regulated by the Federal Reserve
Board. The Company is unable to predict whether this legislation will be enacted
or what the impact of the legislation would be on the Company.
Possible Increase in Number of Shares Issued in the Conversion
The number of shares to be sold in the Conversion may be increased as a
result of an increase in the Estimated Valuation Range of up to 15% to reflect
changes in market and financial conditions prior to completion of the Conversion
or to fill the order of the ESOP. In the event that the Estimated Valuation
Range is so increased, it is expected that the Company will issue up to 317,400
shares of Common Stock at the Purchase Price for an aggregate price of up to
$3,174,000. An increase in the number of shares will decrease net income per
share and stockholders' equity per share on a pro forma basis and will increase
the Company's consolidated stockholders' equity and net income. Such an increase
will also increase the Purchase Price as a percentage of pro forma stockholders'
equity per share and net income per share.
21
<PAGE>
The ESOP currently intends to purchase 8% of the Common Stock, which
purchase may be increased to up to 10% of the Common Stock. In the event that
the number of shares to be sold in the Conversion are increased as a result of
an increase in the Estimated Valuation Range, the ESOP shall have a first
priority to purchase all of such shares sold in the Conversion in excess of
276,000 shares, up to a maximum of 10% of the total number of shares issued in
the Conversion. See "Pro Forma Data" and "The Conversion -- Stock Pricing and
Number of Shares to be Issued."
Dilutive Effect of Possible Issuance of Additional Shares
If the Recognition Plan is approved by stockholders of the Company, the
Recognition Plan intends to acquire an amount of Common Stock equal to 4% of the
shares of Common Stock issued in the Conversion. If such shares are acquired at
a per share price equal to the Purchase Price, the cost of such shares would be
$110,400, assuming the Common Stock sold in the Conversion is equal to the
maximum of the Estimated Valuation Range. Such shares of Common Stock may be
acquired in the open market with funds provided by the Company, if permissible,
or from authorized but unissued shares of Common Stock. In the event that the
Recognition Plan acquires authorized but unissued shares of Common Stock from
the Company, the interests of existing stockholders will be diluted. The
issuance of authorized but unissued shares of Common Stock to such plan in an
amount equal to 4% of the Common Stock issued in the Conversion would dilute the
voting interests of existing stockholders by approximately 3.8%, and net income
per share and stockholders' equity per share would be decreased by a
corresponding amount. See "Pro Forma Data" and "Management -- New Stock Benefit
Plans -- Recognition Plan."
If the Stock Option Plan is approved by stockholders of the Company,
the Company intends to reserve for future issuance pursuant to such plan a
number of shares of Common Stock equal to an aggregate of 10% of the Common
Stock issued in the Conversion (27,600 shares and 31,740 shares based on the
maximum and 15% above the maximum of the Estimated Valuation Range,
respectively). Such shares may be authorized but previously unissued shares,
treasury shares or shares purchased by the Company in the open market or from
private sources. If only authorized but previously unissued shares are used
under such plan, the issuance of the total number of shares available under such
plan would dilute the voting interests of existing stockholders by approximately
9.1%, and net income per share and stockholders' equity per share would be
decreased by a corresponding amount. See "Pro Forma Data" and "Management -- New
Stock Benefit Plans."
The Company currently intends to submit the Recognition Plan and the
Stock Option Plan to stockholders for approval following the one-year
anniversary of the Conversion. However, the Company reserves the right to submit
such plans to stockholders at the first meeting following the Conversion, which
is expected to be held in April 1999, provided that such meeting is at least six
months following the Conversion. In such event, the proposed benefit plans would
need to be revised to include a mandatory five-year vesting schedule for stock
options and restricted stock awards, a prohibition on accelerated vesting in the
event of retirement or a change in control, and limitations on the amount of
stock options and restricted stock awards that could be granted to individuals
or to non-employee directors as a group, which provisions are required by
current OTS regulations for plans implemented within one year following the
Conversion.
Increased Compensation Expense After the Conversion
In November 1993, the American Institute of Certified Public
Accountants ("AICPA") issued Statement of Position 93-6 entitled "Employers'
Accounting for Employee Stock Ownership Plans" ("SOP 93-6"). SOP 93-6 requires
an employer to record compensation expense in an amount equal to the fair value
of shares committed to be released to employees from an employee stock ownership
plan instead of an amount equal to the cost basis of such shares. If the shares
of Common Stock appreciate in value over time, SOP 93-6 will result in increased
compensation expense with respect to the ESOP as compared with prior guidance
which required the recognition of compensation expense based on the cost of
shares acquired by the ESOP. It is impossible to determine at this time the
extent of such impact on future net income. See "Pro Forma Data." In addition,
after consummation of the Conversion, the Company intends to implement, subject
to stockholder approval (which approval cannot be obtained
22
<PAGE>
earlier than six months subsequent to the Conversion), the Recognition Plan.
Upon implementation, the release of shares of Common Stock from the Recognition
Plan will result in additional compensation expense. See "Pro Forma Data" and
"Management -- New Stock Benefit Plans Recognition Plan."
Possible Adverse Income Tax Consequences of the
Distribution of Subscription Rights
The Company and the Association have received an opinion of Ferguson
that subscription rights granted to Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members have no value. However, this opinion
is not binding on the Internal Revenue Service ("IRS"). If the subscription
rights granted to Eligible Account Holders, Supplemental Eligible Account
Holders and Other Members are deemed to have an ascertainable value, receipt of
such rights would be taxable probably only to those Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members who exercise the
subscription rights (either as capital gain or ordinary income) in an amount
equal to such value. Based upon the opinion from Ferguson, the Company does not
believe that the receipt of subscription rights should be a taxable event.
However, whether subscription rights are considered to have an ascertainable
value is an inherently factual determination.
See "The Conversion -- Effects of Conversion" and "-- Tax Aspects."
Irrevocability of Orders; Potential Delay in Completion of Offerings
Orders submitted in the Subscription Offering and/or any Community
Offering are irrevocable. Funds submitted in connection with any purchase of
Common Stock in the Offerings will be held by the Company until the completion
or termination of the Conversion, including any extension of the Expiration
Date. Because, among other factors, completion of the Conversion will be subject
to an update of the independent appraisal prepared by Ferguson, there may be one
or more delays in the completion of the Conversion. Subscribers will have no
access to subscription funds and/or shares of Common Stock until the Conversion
is completed or terminated.
PROPOSED MANAGEMENT PURCHASES
The following table sets forth, for each of the Company's directors and
executive officers (and their associates) and for all of the directors and
executive officers as a group, the proposed purchases of Common Stock, assuming
sufficient shares are available to satisfy their subscriptions. The amounts
include shares that may be purchased through individual retirement accounts.
<TABLE>
<CAPTION>
Number of
Name Shares Amount Percent (1)
- -------------------- -------- -------- -------
<S> <C> <C> <C> <C>
G. Lloyd Bouchereau, Jr.(2) 10,000 $100,000 4.2%
John L. Delahaye(2) 7,500 75,000 3.1
Gary K. Pruitt(2) 7,000 70,000 2.9
Bobby E. Stanley(2) 10,000 100,000 4.2
Edward J. Steinmetz 1,000 10,000 .4
Danny M. Strickland 2,500 25,000 1.0
------ ------- ------
All directors and executive
officers as a group (six
persons) 38,000 $380,000 15.8%
------ ------- ------
------ ------- ------
</TABLE>
- ------------------
(1) Based upon the midpoint of the Estimated Valuation Range.
23
<PAGE>
(2) Includes shares expected to be purchased by associates. Messrs.
Bouchereau and Stanley intend to purchase the maximum number of shares
in conjunction with their associates.
In addition, the ESOP currently intends to purchase 8% of the Common
Stock issued in the Conversion for the benefit of officers and employees. Stock
options and stock grants may also be granted in the future to directors,
officers and employees upon the receipt of stockholder approval of the Company's
proposed stock benefit plans. See "Management -- New Stock Benefit Plans" for a
description of these plans.
USE OF PROCEEDS
Although the actual net proceeds from the sale of the Common Stock
cannot be determined until the Conversion is completed, it is presently
anticipated that the net proceeds from the sale of the Common Stock will be
between $1.7 million and $2.4 million ($2.8 million assuming an increase in the
Estimated Valuation Range by 15%). See "Pro Forma Data" and "The Conversion --
Stock Pricing and Number of Shares to be Issued" as to the assumptions used to
arrive at such amounts.
The Company will purchase all of the capital stock of the
Association to be issued in the Conversion in exchange for 50% of the net
Conversion proceeds, and the Company will retain the remaining 50% of the net
proceeds. The Company intends to use a portion of the net proceeds to make a
loan directly to the ESOP to enable the ESOP to purchase up to 8% of the
Common Stock. Based upon the issuance of 204,000 shares or 276,000 shares at
the minimum and maximum of the Estimated Valuation Range, respectively, the
loan to the ESOP would be $163,200 and $220,800, respectively. See
"Management -- New Stock Benefit Plans -- Employee Stock Ownership Plan." The
remaining net proceeds retained by the Company initially may be used to
invest in mortgage-backed securities issued by U.S. Government agencies and
government-sponsored enterprises, U.S. Government and federal agency
securities of various maturities, deposits in either the Association or other
financial institutions, or a combination thereof. The portion of the net
proceeds retained by the Company may ultimately be used to support the
Association's lending activities, to support the future expansion of
operations through establishment of branch offices or other customer
facilities, expansion into other lending markets or diversification into
other banking related businesses (although no such transactions are
specifically being considered at this time), and for other business and
investment purposes, including the payment of regular or special cash
dividends, possible repurchases of the Common Stock or returns of capital.
Neither the Association nor the Company has any specific plans, arrangements,
or understandings regarding any branch acquisitions or diversification of
activities at this time.
Applicable OTS conversion regulations require the Company to sell
Common Stock in the Conversion in an amount equal to its estimated pro forma
market value, as determined by an independent appraisal. See "The Conversion --
Stock Pricing and Number of Shares to be Issued." As a result, the Company may
be required to sell more shares in the Conversion than it may otherwise desire.
To the extent the Company has excess capital upon completion of the Conversion,
the Company intends to consider stock repurchases, dividends and returns of
capital to the extent permitted by the OTS and deemed appropriate by the Board
of Directors. The Company and the Association have committed to the OTS that
they will not take any action toward paying a tax-free return of capital during
the one-year period following consummation of the Conversion.
Stock repurchases will be considered by the Company's Board of
Directors following the completion of the Conversion based upon then existing
facts and circumstances, as well as applicable statutory and regulatory
requirements. Such facts and circumstances may include but not be limited to (i)
market and economic factors such as the price at which the stock is trading in
the market, the volume of trading, the attractiveness of other investment
alternatives in terms of the rate of return and risk involved in the investment,
the ability to increase the book value and/or earnings per share of the
remaining outstanding shares, and an improvement in the Company's return on
equity; (ii) the avoidance of dilution to stockholders by not having to issue
additional shares to cover the exercise of stock options or to fund employee
stock benefit plans; and (iii) any other circumstances in which repurchases
would be in the best interests of the Company and its stockholders. Any stock
repurchases will be subject to the determination of the Company's Board of
Directors that the Association will be capitalized in excess of all applicable
regulatory requirements after any such repurchases. The payment of dividends or
repurchase of stock, however,
24
<PAGE>
would be prohibited if the Association's net worth would be reduced below the
amount required for the liquidation account to be established for the benefit
of Eligible Account Holders and Supplemental Eligible Account Holders. As of
the date of this Prospectus, the initial balance of the liquidation account
would be approximately $1.7 million. See "Dividend Policy," "The Conversion
- -- Liquidation Rights" and "-- Certain Restrictions on Purchase or Transfer
of Shares After the Conversion."
The Company will be a unitary savings and loan holding company
which, under existing laws, would generally not be restricted as to the types
of business activities in which it may engage, provided that the Association
continues to be a qualified thrift lender ("QTL"). See "Regulation -- The
Company" for a description of certain regulations applicable to the Company.
However, the types of businesses in which the Company may engage may be
restricted if pending legislation is adopted. See "Risk Factors -- Regulatory
Oversight and Legislation."
The portion of the net proceeds used by the Company to purchase the
capital stock of the Association will be added to the Association's general
funds to be used for general corporate purposes, including increased lending
activities and purchases of investment and mortgage-backed securities. While the
amount of net proceeds received by the Association will further strengthen the
Association's capital position, which already exceeds all regulatory
requirements, it should be noted that the Association is not converting
primarily to raise capital. After the Conversion, the Association's tangible
capital ratio will be 10.20% (based upon the midpoint of the Estimated Valuation
Range). As a result, the Association will be a well-capitalized institution.
The net proceeds may vary because total expenses of the Conversion may
be more or less than those estimated. The net proceeds will also vary if the
number of shares to be issued in the Conversion is adjusted to reflect a change
in the estimated pro forma market value of the Association. Payments for shares
made through withdrawals from existing deposit accounts at the Association will
not result in the receipt of new funds for investment by the Association but
will result in a reduction of the Association's interest expense and liabilities
as funds are transferred from interest-bearing certificates or other deposit
accounts.
DIVIDEND POLICY
Upon completion of the Conversion, the Board of Directors of the
Company will have the authority to declare dividends on the Common Stock,
subject to statutory and regulatory requirements. The Board of Directors intends
to pay quarterly cash dividends on the Common Stock at an initial rate of $.15
per share per annum (representing 1.5% of the Purchase Price), commencing with
the first full calendar quarter following consummation of the Conversion.
Notwithstanding the foregoing, the rate of such dividends and the initial or
continued payment thereof will depend upon a number of factors, including the
amount of net proceeds retained by the Company in the Conversion, investment
opportunities available to the Company or the Association, capital requirements,
the Company's and the Association's financial condition and results of
operations, tax considerations, statutory and regulatory limitations, and
general economic conditions. No assurances can be given that any dividends will
be paid or that, if paid, will not be reduced or eliminated in future periods.
Special cash dividends, stock dividends or tax-free returns of capital may be
paid in addition to, or in lieu of, regular cash dividends (however, the Company
and the Association have committed to the OTS that they will not take any action
toward paying a tax-free return of capital during the one-year period following
consummation of the Conversion).
Dividends from the Company may eventually depend, in part, upon receipt
of dividends from the Association, because the Company initially will have no
source of income other than dividends from the Association, earnings from the
investment of proceeds from the sale of Common Stock retained by the Company,
and interest payments with respect to the Company's loan to the ESOP. A
regulation of the OTS imposes limitations on "capital distributions" by savings
institutions, including cash dividends, payments by a savings institution to
repurchase or otherwise acquire its stock, payments to stockholders of another
savings institution in a cash-out merger and other distributions charged against
capital. As of March 31, 1998, the Association was a Tier 1 savings institution
and is expected to continue to so qualify immediately following the consummation
of the Conversion. Based on the Association's regulatory capital and its net
income for the quarter ended March 31, 1998, the Association would have
25
<PAGE>
been permitted to make a capital distribution to the Company of up to
approximately $475,000 as of April 1, 1998. See "Regulation -- The
Association -- Capital Distributions."
Any payment of dividends by the Association to the Company which would
be deemed to be drawn out of the Association's bad debt reserves would require a
payment of taxes at the then-current tax rate by the Association on the amount
of earnings deemed to be removed from the reserves for such distribution. The
Association does not intend to make any distribution to the Company that would
create such a federal tax liability. See "Taxation."
Unlike the Association, the Company is not subject to the
aforementioned regulatory restrictions on the payment of dividends to its
stockholders, although the source of such dividends may eventually be dependent,
in part, upon dividends from the Association in addition to the net proceeds
retained by the Company and earnings thereon. The Company is subject, however,
to the requirements of Louisiana law, which generally permits the payment of
dividends out of surplus, except when (1) the corporation is insolvent or would
thereby be made insolvent, or (2) the declaration or payment thereof would be
contrary to any restrictions contained in the articles of incorporation. If
there is no surplus available for dividends, a Louisiana corporation may pay
dividends out of its net profits for the then current or the preceding fiscal
year or both, except that no dividend may be paid if the corporation's assets
are exceeded by its liabilities or if its net assets are less than the amount
which would be needed, under certain circumstances, to satisfy any preferential
rights of stockholders.
MARKET FOR COMMON STOCK
The Company and the Association have never issued capital stock, other
than 100 shares issued in connection with the incorporation of the Company,
which shares will be cancelled upon completion of the Conversion. Consequently,
there is no established market for the Common Stock at this time. Following the
completion of the Offerings, it is anticipated that the Common Stock will be
traded on the over-the-counter market with quotations available through the OTC
Bulletin Board. Trident has indicated its intention to make a market in the
Common Stock. If the Common Stock cannot be quoted and traded on the OTC
Bulletin Board, it is expected that transactions in the Common Stock will be
reported in the pink sheets published by the National Quotation Bureau, Inc.
Making a market may include the solicitation of potential buyers and sellers in
order to match buy and sell orders. However, Trident will not be subject to any
obligation with respect to such efforts. The development of a liquid public
market depends upon the existence of willing buyers and sellers, the presence of
which is not within the control of the Company, the Association or any market
maker. It is unlikely that an active and liquid trading market for the Common
Stock will develop due to the relatively small size of the Offerings and the
small number of stockholders expected following the Conversion. Under such
circumstances, investors in the Common Stock could have difficulty disposing of
their shares on short notice and should not view the Common Stock as a
short-term investment. Accordingly, purchasers should consider the illiquid,
long-term nature of an investment in the Common Stock. Furthermore, there can be
no assurance that purchasers will be able to sell their shares at or above the
Purchase Price. See "Risk Factors -- Absence of Market for the Common Stock."
REGULATORY CAPITAL
At March 31, 1998, the Association exceeded all of the regulatory
capital requirements applicable to it. The table on the following page sets
forth the Association's historical capital under generally accepted accounting
principles ("GAAP") and regulatory capital at March 31, 1998 and the pro forma
GAAP and regulatory capital of the Association after giving effect to the
Conversion, based upon the sale of the number of shares shown in the table. The
pro forma GAAP and regulatory capital amounts reflect the receipt by the
Association of 50% of the net Conversion proceeds, minus the amounts to be
loaned to the ESOP and contributed to the RRP. The pro forma risk-based capital
amounts assume the investment of the net proceeds received by the Association in
assets which have a risk-weight of 50% under applicable regulations, as if such
net proceeds had been received and so applied at March 31, 1998.
26
<PAGE>
<TABLE>
<CAPTION>
Pro Forma at March 31, 1998 Based on
------------------------------------------------------------------------------------
204,000 240,000 276,000 317,400
Shares Sold Shares Sold Shares Sold Shares Sold
Historical at at $10.00 at $10.00 at $10.00 at $10.00
March 31, 1998 Per Share Per Share Per Share Per Share
------------------- -------------------- -------------------- -------------------- -------------------
Percent of Percent Percent Percent Percent
Amount Assets(1) Amount of Assets(1) Amount of Assets(1) Amount of Assets(1) Amount of Assets(1)
------ ---------- ------ ----------- ------ ------------ ------ ------------ ------ ------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP capital $1,671 7.34% $2,259 9.67% $2,396 10.20% $2,533 10.72% $2,690 11.31%
------ ----- ------ ------ ------ ------ ------ ------ ------ ------
------ ----- ------ ------ ------ ------ ------ ------ ------ ------
Tangible capital:
Actual $1,672 7.34% $2,260 9.68% $2,397 10.20% $2,534 10.73% $2,691 11.31%
Requirement 341 1.50 350 1.50 352 1.50 354 1.50 357 1.50
------ ----- ------ ------ ------ ------ ------ ------ ------ ------
Excess $1,331 5.84% $1,910 8.18% $2,045 8.70% $2,180 9.23% $2,334 9.81%
------ ----- ------ ------ ------ ------ ------ ------ ------ ------
------ ----- ------ ------ ------ ------ ------ ------ ------ ------
Core capital(2):
Actual $1,672 7.34% $2,260 9.68% $2,397 10.20% $2,534 10.73% $2,691 11.31%
Requirement 683 3.00 701 3.00 705 3.00 709 3.00 714 3.00
------ ----- ------ ------ ------ ------ ------ ------ ------ ------
Excess $ 989 4.34% $1,559 6.68% $1,692 7.20% $1,825 7.73% $1,977 8.31%
------ ----- ------ ------ ------ ------ ------ ------ ------ ------
------ ----- ------ ------ ------ ------ ------ ------ ------ ------
Risk-based capital(2):
Actual $1,821 15.47% $2,409 19.82% $2,546 20.80% $2,683 21.77% $2,840 22.87%
Requirement 942 8.00 972 8.00 979 8.00 986 8.00 993 8.00
------ ----- ------ ------ ------ ------ ------ ------ ------ ------
Excess $ 879 7.47% $1,437 11.82% $1,567 12.80% $1,697 13.77% $1,847 14.87%
------ ----- ------ ------ ------ ------ ------ ------ ------ ------
------ ----- ------ ------ ------ ------ ------ ------ ------ ------
</TABLE>
- ------------------------------
(1) Adjusted total or adjusted risk-weighted assets, as appropriate.
(2) Does not reflect the interest rate risk component to be added to the
risk-based capital requirements or, in the case of the core capital
requirement, the 4.0% requirement to be met in order for an institution
to be "adequately capitalized" under applicable laws and regulations.
See "Regulation -- The Association -- Prompt Corrective Action."
27
<PAGE>
CAPITALIZATION
The following table presents the historical capitalization of the
Association at March 31, 1998, and the pro forma consolidated capitalization of
the Company after giving effect to the Conversion, based upon the sale of the
number of shares shown below and the other assumptions set forth under "Pro
Forma Data."
<TABLE>
<CAPTION>
The Company - Pro Forma
Based Upon Sale at $10.00 Per Share
-------------------------------------------------------------------------
204,000 240,000 276,000 317,400
Shares Shares Shares Shares(1)
(Minimum of (Midpoint of (Maximum of (15% above
The Association Estimated Estimated Estimated Maximum of
- Historical Valuation Valuation Valuation Estimated
Capitalization Range) Range) Range) Valuation Range)
------------------ --------------- --------------- ---------------- -------------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Deposits(2) $20,534 $20,534 $20,534 $20,534 $20,534
Borrowings 452 452 452 452 452
------ ------ ------ ------ ------
Total deposits and
borrowings $20,986 $20,986 $20,986 $20,986 $20,986
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Stockholders' equity:
Preferred Stock, $.01 par
value, 2,000,000 shares
authorized; none to be
issued $ -- $ -- $ -- $ -- $ --
Common Stock, $.01
par value, 5,000,000
shares authorized;
shares to be issued as
reflected(3) -- 2 2 3 3
Additional paid-in
capital(3) -- 1,663 2,023 2,382 2,796
Retained earnings(4) 1,672 1,672 1,672 1,672 1,672
Net unrealized loss on
securities available for (1) (1) (1) (1) (1)
sale
Less:
Common Stock acquired
by the ESOP(5) -- (163) (192) (221) (254)
Common Stock to be
acquired by the
RRP(6) -- (82) (96) (110) (127)
------ ------ ------ ------ ------
Total stockholders' equity
(retained earnings,
substantially restricted,
at March 31, 1998) $1,671 $ 3,091 $ 3,408 $ 3,725 $ 4,089
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
(Footnotes on following page)
28
<PAGE>
- ------------------------------------
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Valuation Range of up
to 15% to reflect changes in market and financial conditions prior to
the completion of the Conversion or to fill the order of the ESOP.
(2) Does not reflect withdrawals from deposit accounts for the purchase of
Common Stock in the Conversion. Such withdrawals would reduce pro forma
deposits by the amount of such withdrawals.
(3) The sum of the par value and additional paid-in capital accounts
equals the net Conversion proceeds. No effect has been given to the
issuance of additional shares of Common Stock pursuant to the Company's
proposed Stock Option Plan. The Company intends to adopt a Stock Option
Plan and to submit such plan to stockholders at a meeting of
stockholders to be held at least six months following completion of the
Conversion. If the plan is approved by stockholders, an amount equal to
10% of the shares of Common Stock will be reserved for issuance under
such plan. See "Pro Forma Data" and "Management -- New Stock Benefit
Plans -- Stock Option Plan."
(4) The retained earnings of the Association will be substantially
restricted after the Conversion. See "The Conversion -- Liquidation
Rights."
(5) Assumes that 8% of the Common Stock will be purchased by the ESOP. The
Common Stock acquired by the ESOP is reflected as a reduction of
stockholders' equity. Assumes the funds used to acquire the ESOP shares
will be borrowed from the Company. See Note 1 to the table set forth
under "Pro Forma Data" and "Management -- New Stock Benefit Plans --
Employee Stock Ownership Plan."
(6) Gives effect to the Recognition Plan which is expected to be adopted by
the Company following the Conversion and presented to stockholders for
approval at a meeting of stockholders to be held at least six months
following completion of the Conversion. No shares will be purchased by
the Recognition Plan in the Conversion, and such plan cannot purchase
any shares until stockholder approval has been obtained. If the
Recognition Plan is approved by stockholders, the plan intends to
acquire an amount of Common Stock equal to 4% of the shares of Common
Stock issued in the Conversion, or 8,160, 9,600, 11,040 and 12,696
shares at the minimum, midpoint, maximum and 15% above the maximum of
the Estimated Valuation Range, respectively. The table assumes that
stockholder approval has been obtained and that such shares are
purchased in the open market at the Purchase Price. The Common Stock so
acquired by the Recognition Plan is reflected as a reduction in
stockholders' equity. If the shares are purchased at prices higher or
lower than the Purchase Price, such purchases would have a greater or
lesser impact, respectively, on stockholders' equity. If the
Recognition Plan purchases authorized but unissued shares from the
Company, such issuance would dilute the voting interests of existing
stockholders by approximately 3.8%. See "Pro Forma Data" and
"Management -- New Stock Benefit Plans -- Recognition Plan."
29
<PAGE>
PRO FORMA DATA
The actual net proceeds from the sale of the Common Stock cannot be
determined until the Conversion is completed. However, net proceeds are
currently estimated to be between $1.7 million and $2.4 million (or $2.8 million
in the event the Estimated Valuation Range is increased by 15%) based upon the
following assumptions: (i) all shares of Common Stock will be sold in the
Subscription Offering; and (ii) total expenses, including the marketing fees to
be paid to Trident, will be $375,000. Actual expenses may vary from those
estimated.
Pro forma net income and stockholders' equity have been calculated for
the three months ended March 31, 1998 and the year ended December 31, 1997 as if
the Common Stock to be issued in the Offerings had been sold at the beginning of
the periods. The tables assume that the net proceeds had been invested at 6.27%
for the three months ended March 31, 1998 and 6.14% for the year ended December
31, 1997, which represent the arithmetic average of the average yield on total
interest-earning assets and the average rate paid on deposits in each of the
periods. The effect of withdrawals from deposit accounts for the purchase of
Common Stock has not been reflected. A combined effective federal and state
income tax rate of 38% has been assumed, resulting in after-tax yields of 3.89%
and 3.81% for the three months ended March 31, 1998 and the year ended December
31, 1997, respectively. Historical and pro forma per share amounts have been
calculated by dividing historical and pro forma amounts by the indicated number
of shares of Common Stock, as adjusted to give effect to the shares purchased by
the ESOP with respect to the net income per share calculations. See Notes 2 and
4 to the Pro Forma Data tables. No effect has been given in the pro forma
stockholders' equity calculations for the assumed earnings on the net proceeds.
As discussed under "Use of Proceeds," the Company intends to retain 50% of the
net Conversion proceeds.
The following pro forma information may not be representative of the
financial effects of the Conversion at the date on which the Conversion actually
occurs and should not be taken as indicative of future results of operations.
Pro forma stockholders' equity represents the difference between the stated
amount of assets and liabilities of the Company computed in accordance with
GAAP. The pro forma stockholders' equity is not intended to represent the fair
market value of the Common Stock and may be different than amounts that would be
available for distribution to stockholders in the event of liquidation. No
effect has been given in the table to the possible issuance of additional shares
equal to 10% of the Common Stock to be reserved for future issuance pursuant to
the Stock Option Plan to be adopted by the Board of Directors of the Company,
nor does book value give any effect to the liquidation account to be established
for the benefit of Eligible Account Holders and Supplemental Eligible Account
Holders or to the bad debt reserve. See "Management -- New Stock Benefit Plans"
and "The Conversion -- Liquidation Rights." The table below gives effect to the
Recognition Plan, which is expected to be adopted by the Company following the
Conversion and presented (together with the Stock Option Plan) to stockholders
for approval no earlier than the first meeting of stockholders, which is
expected to be held in April 1999. If the Recognition Plan is approved by
stockholders, the Recognition Plan intends to acquire an amount of Common Stock
equal to 4% of the shares of Common Stock issued in the Conversion, either
through open market purchases, if permissible, or from authorized but unissued
shares of Common Stock. The tables below assume that stockholder approval has
been obtained and that the shares acquired by the Recognition Plan are purchased
in the open market at $10.00 per share. There can be no assurance that
stockholder approval of the Recognition Plan will be obtained, that the shares
will be purchased in the open market or that the purchase price will be $10.00
per share.
The tables on the following pages summarize historical consolidated
data of the Association and pro forma data of the Company at or for the dates
and periods indicated based on the assumptions set forth above and in the tables
and should not be used as a basis for projections of the market value of the
Common Stock following the Conversion.
30
<PAGE>
<TABLE>
<CAPTION>
At or For the Three Months Ended March 31, 1998
----------------------------------------------------------------
204,000 240,000 276,000 317,400
Shares Sold Shares Sold Shares Sold Shares Sold
at $10.00 at $10.00 at $10.00 at $10.00
Per Share Per Share Per Share Per Share (15%
(Minimum (Midpoint (Maximum above Maximum
of Range) of Range) of Range) of Range)(8)
------------- ------------- ------------- ------------------
(Dollars in Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Gross proceeds $ 2,040 $ 2,400 $ 2,760 $ 3,174
Less offering expenses (375) (375) (375) (375)
-------- ------- ------- -------
Estimated net Conversion proceeds 1,665 2,025 2,385 2,799
Less: Common Stock acquired by
the ESOP (163) (192) (221) (254)
Common Stock to be acquired by
the RRP (82) (96) (110) (127)
-------- ------- ------- -------
Estimated adjusted net proceeds(1) $ 1,420 $ 1,737 $ 2,054 $ 2,418
-------- ------- ------- -------
-------- ------- ------- -------
Net income:
Historical $ 53 $ 53 $ 53 $ 53
Pro forma adjustments:
Income on adjusted net proceeds(1) 14 17 20 24
ESOP(2) (3) (3) (3) (4)
RRP(3) (3) (3) (3 ) (4)
-------- ------- ------- -------
Pro forma $ 61 $ 64 $ 67 $ 69
-------- ------- ------- -------
-------- ------- ------- -------
Net income per share(4):
Historical $ .28 $ .24 $ .21 $ .18
Pro forma adjustments:
Income on adjusted net proceeds(1) .07 .07 .07 .08
ESOP(2) (.02) (.01) (.01) (.01)
RRP(3) (.01) (.01) (.01)
-------- ------- ------- -------
(.01)
Pro forma $ .32 $ .29 $ .26 $ .24
-------- ------- ------- -------
-------- ------- ------- -------
Pro forma price to earnings ("P/E")
ratio(4) 7.81x 8.62x 9.62x 10.42x
Number of shares used in net income
per share calculations(4) 188,088 221,280 254,472 292,643
Stockholders' equity:
Historical $1,671 $1,671 $1,671 $1,671
Estimated net Conversion proceeds 1,665 2,025 2,385 2,799
Less: Common Stock acquired
by the ESOP(2) (163) (192) (221) (254)
Common Stock to be acquired
by the RRP(3) (82) (96) (110) (127)
-------- ------- ------- -------
Pro forma stockholders' equity(5)(6) $ 3,091 $ 3,408 $ 3,725 $ 4,089
-------- ------- ------- -------
-------- ------- ------- -------
Stockholders' equity per share(7):
Historical $ 8.19 $ 6.96 $ 6.05 $ 5.26
Estimated net Conversion proceeds 8.16 8.44 8.64 8.82
Less: Common Stock acquired
by the ESOP(2) (.80) (.80) (.80) (.80)
Common Stock to be acquired
by the RRP(3) (.40) (.40) (.40) (.40)
-------- ------- ------- -------
Pro forma stockholders' equity
per share(3)(5)(6) $ 15.15 $ 14.20 $ 13.49 $ 12.88
-------- ------- ------- -------
-------- ------- ------- -------
Pro forma price to book ratio(7) 66.0% 70.4% 74.1% 77.6%
-------- ------- ------- -------
-------- ------- ------- -------
Number of shares used in book value
per share calculations(7) 204,000 240,000 276,000 317,400
-------- ------- ------- -------
-------- ------- ------- -------
</TABLE>
(Footnotes on second following page)
31
<PAGE>
<TABLE>
<CAPTION>
At or For the Year Ended December 31, 1997
----------------------------------------------------------------
204,000 240,000 276,000 317,400
Shares Sold Shares Sold Shares Sold Shares Sold
at $10.00 at $10.00 at $10.00 at $10.00
Per Share Per Share Per Share Per Share (15%
(Minimum (Midpoint (Maximum above Maximum
of Range) of Range) of Range) of Range)(8)
------------- ------------- ------------- ------------------
(Dollars in Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Gross proceeds $ 2,040 $ 2,400 $ 2,760 $ 3,174
Less offering expenses (375) (375) (375) (375)
------- ------- ------- -------
Estimated net Conversion proceeds 1,665 2,025 2,385 2,799
Less: Common Stock acquired by
the ESOP (163) (192) (221) (254)
Common Stock to be acquired by
the RRP (82) (96) (110) (127)
------- ------- ------- -------
Estimated adjusted net proceeds(1) $ 1,420 $ 1,737 $ 2,054 $ 2,418
------- ------- ------- -------
------- ------- ------- -------
Net income:
Historical $ 164 $ 164 $ 164 $ 164
Pro forma adjustments:
Income on adjusted net proceeds(1) 54 66 78 92
ESOP(2) (10) (12) (14) (16)
RRP(3) (10) (12) (14) (16)
------- ------- ------- -------
Pro forma $ 198 $ 206 $ 214 $ 224
------- ------- ------- -------
------- ------- ------- -------
Net income per share(4):
Historical $ .87 $ .73 $ .64 $ .55
Pro forma adjustments:
Income on adjusted net proceeds(1) .28 .29 .30 .31
ESOP(2) (.05) (.05) (.05) (.05)
RRP(3) (.05) (.05) (.05) (.05)
------- ------- ------- -------
Pro forma $ 1.05 $ .92 $ .84 $ .76
------- ------- ------- -------
------- ------- ------- -------
Pro forma P/E ratio(4) 9.52x 10.87x 11.90x 13.16 x
------- ------- ------- -------
------- ------- ------- -------
Number of shares used in net income
per share calculations(4) 189,312 222,720 256,128 294,547
Stockholders' equity:
Historical $1,622 $1,622 $1,622 $1,622
Estimated net Conversion proceeds 1,665 2,025 2,385 2,799
Less: Common Stock acquired
by the ESOP(2) (163) (192) (221) (254)
Common Stock to be acquired
by the RRP(3) (82) (96) (110) (127)
------- ------- ------- -------
Pro forma stockholders' equity(5)(6) $ 3,042 $ 3,359 $ 3,676 $ 4,040
------- ------- ------- -------
------- ------- ------- -------
Stockholders' equity per share(7):
Historical $ 7.95 $ 6.76 $ 5.88 $ 5.11
Estimated net Conversion proceeds 8.16 8.44 8.64 8.82
Less: Common Stock acquired
by the ESOP(2) (.80) (.80) (.80) (.80)
Common Stock to be acquired
by the RRP(3) (.40) (.40) (.40) (.40)
------- ------- ------- -------
Pro forma stockholders' equity
per share(3)(5)(6) $ 14.91 $ 14.00 $ 13.32 $ 12.73
------- ------- ------- -------
------- ------- ------- -------
Pro forma price to book ratio(7) 67.1% 71.4% 75.1% 78.6%
------- ------- ------- -------
------- ------- ------- -------
Number of shares used in book value
per share calculations(7) 204,000 240,000 276,000 317,400
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
(Footnotes on following page)
32
<PAGE>
- --------------------
(1) Estimated adjusted net proceeds consist of the estimated net Conversion
proceeds, minus (i) the proceeds attributable to the purchase by the
ESOP and (ii) the value of the shares to be purchased by the
Recognition Plan after the Conversion, subject to stockholder approval,
at an assumed purchase price of $10.00 per share.
(2) It is assumed that 8% of the shares of Common Stock issued in the
Conversion will be purchased by the ESOP. For purposes of this table,
the funds used to acquire such shares are assumed to have been borrowed
by the ESOP from the Company. The Company and the Association intend to
make quarterly contributions to the ESOP over a ten-year period in an
amount at least equal to the principal and interest requirement of the
debt. The pro forma net income assumes (i) that the loan to the ESOP is
payable over 10 years, with the ESOP shares having an average fair
value of $10.00 per share in accordance with SOP 93-6, entitled
"Employers' Accounting for Employee Stock Ownership Plans," of the
AICPA, (ii) that the loan to the ESOP bears a fixed interest rate of
8.5%, (iii) that the ESOP expense for the period is equivalent to the
principal payment for the period and was made at the end of the period;
(iv) that 408, 480, 552 and 635 shares were committed to be released
with respect to the three months ended March 31, 1998 and 1,632, 1,920,
2,208 and 2,539 shares were committed to be released with respect to
the year ended December 31, 1997, in each case at the minimum,
midpoint, maximum and 15% above the maximum of the Estimated Valuation
Range, respectively; (v) in accordance with SOP 93-6 entitled
"Employers' Accounting for Employee Stock Ownership Plans," only the
ESOP shares committed to be released during the period were considered
outstanding for purposes of the net income per share calculations; and
(vi) the effective tax rate was 38% for the period. See "Risk
Factors -- Increased Compensation Expense After the Conversion" and
"Management -- New Stock Benefit Plans -- Employee Stock Ownership
Plan."
(3) The adjustment is based upon the assumed purchases by the Recognition
Plan of 8,160, 9,600, 11,040 and 12,696 shares at the minimum,
midpoint, maximum and 15% above the maximum of the Estimated Valuation
Range, assuming that: (i) stockholder approval of the Recognition Plan
has been received; (ii) the shares were acquired by the Recognition
Plan at the beginning of the periods presented in open market purchases
at the Purchase Price; (iii) the amortized expense for the three months
ended March 31, 1998 and for the year ended December 31, 1997 was 5%
and 20%, respectively, of the amount contributed; and (iv) the
effective tax rate applicable to such employee compensation expense was
38%. If the Recognition Plan purchases authorized but unissued shares
instead of making open market purchases, then (i) the voting interests
of existing stockholders would be diluted by approximately 3.8%, (ii)
the pro forma net income per share for the three months ended March 31,
1998 would be $.32, $.28, $.25 and $.23, and pro forma stockholders'
equity per share at March 31, 1998 would be $14.95, $14.04, $13.36 and
$12.77, in each case at the minimum, midpoint, maximum and 15% above
the maximum of the Estimated Valuation Range, respectively, and (iii)
pro forma net income per share for the year ended December 31, 1997
would be $1.02, $.90, $.82 and $.75, and pro forma stockholders' equity
per share at December 31, 1997 would be $14.72, $13.84, $13.19 and
$12.62, in each case at the minimum, midpoint, maximum and 15% above
the maximum of the Estimated Valuation Range, respectively. See
"Management -- New Stock Benefit Plans -- Recognition Plan."
(4) Net income per share computations are determined by taking the number
of shares assumed to be sold in the Conversion and, in accordance with
SOP 93-6, subtracting the ESOP shares which have not been committed for
release during the respective period. See Note 2 above. The P/E ratios
for the three months ended March 31, 1998 are annualized.
(5) No effect has been given to the issuance of additional shares of Common
Stock pursuant to the Stock Option Plan, which is expected to be
adopted by the Company following the Conversion and presented to
stockholders for approval at a meeting of stockholders to be held at
least six months following completion of the Conversion. If the Stock
Option Plan is approved by stockholders, an amount equal to 10% of the
Common Stock issued in the Conversion, or 20,400, 24,000, 27,600 and
31,740 shares at the minimum,
33
<PAGE>
midpoint, maximum and 15% above the maximum of the Estimated Valuation
Range, respectively, will be reserved for future issuance upon the
exercise of options to be granted under the Stock Option Plan. The
issuance of authorized but previously unissued shares of Common Stock
pursuant to the exercise of options under such plan would dilute
existing stockholders' interests. Assuming stockholder approval of the
plan, that all the options were exercised at the beginning of the
period at an exercise price of $10.00 per share, and that the shares to
fund the Recognition Plan are acquired through open market purchases at
the Purchase Price, (i) pro forma net income per share for the three
months ended March 31, 1998 would be $.31, $.27, $.24 and $.22 and pro
forma stockholders' equity per share at March 31, 1998 would be $14.68,
$13.82, $13.18, and $12.62, in each case at the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Valuation Range,
respectively, and (ii) pro forma net income per share for the year
ended December 31, 1997 would be $.98, $.87, $.79 and $.73, and pro
forma stockholders' equity per share at December 31, 1997 would be
$14.47, $13.63, $13.02 and $12.48, in each case at the minimum,
midpoint, maximum and 15% above the maximum of the Estimated Valuation
Range, respectively.
(6) The retained earnings of the Association will be substantially
restricted after the Conversion. See "Dividend Policy" and "The
Conversion -- Liquidation Rights."
(7) Based on the number of shares sold in the Conversion.
(8) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Valuation Range of up
to 15% to reflect changes in market and financial conditions prior to
completion of the Conversion or to fill the order of the ESOP.
34
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The profitability of Iberville depends primarily on its net interest
income, which is the difference between interest and dividend income on
interest-earning assets, principally loans, mortgage-backed securities and
interest-earning deposits in other institutions, and interest expense on
interest-bearing deposits and FHLB advances. Net interest income is dependent
upon the level of interest rates and the extent to which such rates are
changing. Iberville's profitability also is dependent, to a lesser extent, on
the level of its noninterest income, provision for loan losses, noninterest
expense and income taxes. During the first quarter of 1998 and during 1997, net
interest income after provision for loan losses exceeded total noninterest
expense. In 1996, total noninterest expense was slightly greater than the
Association's net interest income after provision for loan losses, due to the
one-time special SAIF assessment paid in 1996. Total noninterest expense
consists of general, administrative and other expenses, such as compensation and
benefits, occupancy and equipment expenses, deposit insurance premiums, and
miscellaneous other expenses.
The Association had net income of $53,000 in the first quarter of 1998,
$164,000 in 1997 and $56,000 in 1996. Net income was adversely affected in 1996
by the special SAIF assessment paid in 1996, which amounted to $75,000 after
taxes. Excluding the impact of the special SAIF assessment, the increases in net
income have been primarily due to increases in net interest income.
The Association's operations and profitability are subject to changes
in interest rates, applicable statutes and regulations and general economic
conditions, as well as other factors beyond the Association's control.
Market Risk Analysis
Qualitative Analysis
Consistent net interest income is largely dependent upon the
achievement of a positive interest rate spread that can be sustained during
periods of fluctuating market interest rates. Interest rate sensitivity is a
measure of the difference between amounts of interest-earning assets and
interest-bearing liabilities which either reprice or mature within a given
period of time. The difference, or the interest rate repricing "gap," provides
an indication of the extent to which an institution's interest rate spread will
be affected by changes in interest rates. A gap is considered positive when the
amount of interest-rate sensitive assets repricing or maturing within a
specified period exceeds the amount of interest-rate sensitive liabilities
repricing or maturing within such period, and is considered negative when the
amount of interest-rate sensitive liabilities repricing or maturing within a
specified period exceeds the amount of interest-rate sensitive assets repricing
or maturing within such period. Generally, during a period of rising interest
rates, a negative gap within shorter maturities would adversely affect net
interest income, while a positive gap within shorter maturities would result in
an increase in net interest income, and during a period of falling interest
rates, a negative gap within shorter maturities would result in an increase in
net interest income while a positive gap within shorter maturities would have
the opposite effect. However, the effects of a positive or negative gap are
impacted, to a large extent, by consumer demand and by discretionary pricing by
the Association's management.
At March 31, 1998, the Association had a positive one-year gap of $3.3
million or 14.4% of total assets, based upon certain repricing assumptions. The
interest rate sensitivity of Iberville's assets and liabilities in the table set
forth below could vary substantially if different assumptions are used or if
actual experience differs from the historical experience on which the
assumptions are based. Certain shortcomings are inherent in the repricing
assumptions table used to calculate the Association's gap, as shown in the table
below, as well as the method of calculating the effect of changes in interest
rates on the Association's net portfolio value, as discussed further below.
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
35
<PAGE>
may fluctuate in advance of changes in market interest rates, while interest
rates on other types may lag behind changes in market rates. In addition,
adjustable-rate assets have features which restrict changes in interest rates on
a short-term basis and over the life of the assets. The proportion of
adjustable-rate loans could be reduced in future periods if market interest
rates should decline 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 could deviate significantly from
those assumed in the tables. Finally, the ability of many borrowers to service
their adjustable-rate debt may decrease in the event of a sustained interest
rate increase.
The Association attempts to manage its interest rate risk by
maintaining a high percentage of its assets in ARMs and adjustable-rate
mortgage-backed securities. From 1984 until mid-1996, the only residential
mortgages originated by the Association were ARMs. The Association continues to
emphasize the origination of single-family, residential ARMs, but it has also
been originating since mid-1996 15-year, fixed-rate mortgages for retention in
its portfolio. At March 31, 1998, the Association's residential ARMs amounted to
$9.7 million or 56.7% of the total loan portfolio and 42.5% of total assets.
Commercial real estate ARMs were $931,000 or 4.1% of total assets at March 31,
1998, and adjustable-rate mortgage-backed securities amounted to $3.0 million or
13.2% of total assets at such date. The interest rate on ARMs and a portion of
the adjustable-rate mortgage-backed securities, however, adjusts no more
frequently than once a year, with the amount of the change subject to annual
limitations, whereas the interest rates on deposits can change more frequently
and are not subject to annual limitations. A portion of the Association's
adjustable-rate mortgage-backed securities have interest rates which adjust
monthly or semi-annually, with limitations on the amount of the increase.
The Association also emphasizes the origination of consumer loans as
most of these loans have shorter terms and higher yields than residential
mortgages. At March 31, 1998, $1.6 million or 40.7% of the consumer loans either
mature or are deemed to be subject to repricing within one year.
Interest-earning deposits in other institutions, all of which are
subject to repricing within three months, amounted to $1.6 million or 6.8% of
total assets at March 31, 1998.
The Association has increased its transaction accounts to $5.8 million
or 28.3% of total deposits at March 31, 1998 from $5.0 million or 24.9% of total
deposits at December 31, 1996. This increase was primarily due to a $608,000
increase in passbook accounts, which the Association considers to be core
deposits. In addition, the Association has increased its noninterest-bearing
checking accounts, which amounted to $432,000 at March 31, 1998.
Of the $14.7 million of certificates of deposit at March 31, 1998, $9.7
million or 65.7% mature within one year. While the Association attempts to
lengthen the maturity of these deposits by offering higher rates on longer-term
certificates, the longer-term certificates are not widely accepted in the
current interest rate environment.
36
<PAGE>
Quantitative Analysis. The following table presents the difference
between Iberville's interest-earning assets and interest-bearing liabilities
within specified maturities at March 31, 1998. This table does not necessarily
indicate the impact of general interest rate movements on Iberville's net
interest income, because the repricing of certain assets and liabilities is
subject to competitive and other limitations. As a result, certain assets and
liabilities indicated as maturing or otherwise repricing within a stated period
may in fact mature or reprice at different times and at different volumes.
<TABLE>
<CAPTION>
March 31, 1998
----------------------------------------------------------------------------------------
0 Months Over Three Over One Over Three Over Five
Through Through Through Through Through Over Ten
Three Months 12 Months Three Years Five Years Ten Years Years Total
------------ --------- ----------- ---------- --------- ----- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable(1)(2):
Single-family residential:
Adjustable-rate $ 2,983 $ 6,728 $ -- $ -- $ -- $ -- $ 9,711
Fixed-rate 5 10 87 119 703 873 1,797
Construction -- 420 -- -- -- -- 420
Commercial real estate 381 445 105 -- -- -- 931
Land 21 82 -- 19 130 35 287
Consumer 433 1,191 1,461 530 64 310 3,989
Mortgage-backed securities 3 -- 522 320 18 3,145 4,008
Investment securities -- 15 -- -- -- -- 15
FHLB stock 205 -- -- -- -- 163 368
Interest-earning deposits 1,556 -- -- -- -- -- 1,556
------- ------- ------- ------- ------- ------- -------
Total interest-earning assets 5,587 8,891 2,175 988 915 4,526 23,082
------- ------- ------- ------- ------- ------- -------
Interest-bearing liabilities:
Passbook, money market and NOW
accounts (3) 269 804 2,144 2,144 -- -- 5,361
Certificates of deposit (4) 3,009 6,658 4,419 623 -- -- 14,709
FHLB Advances 452 -- -- -- -- -- 452
------- ------- ------- ------- ------- ------- -------
Total interest-bearing liabilities 3,730 7,462 6,563 2,767 -- -- 20,522
------- ------- ------- ------- ------- ------- -------
Interest rate sensitivity gap $ 1,857 $ 1,429 $(4,388) $(1,779) $ 915 $ 4,526 $ 2,560
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
Cumulative interest rate sensitivity gap $ 1,857 $ 3,286 $(1,102) $(2,881) $(1,966) $ 2,560
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
Percentage of cumulative gap
to total assets 8.2% 14.4% (4.8)% (12.7)% (8.6)% 11.2%
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
Cumulative ratio of interest-
earning assets to interest-
bearing liabilities 149.79% 129.36% 93.79% 85.96% 90.42% 112.47%
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
</TABLE>
(Footnotes are on following page)
37
<PAGE>
- --------------------------
(1) Loans receivable are gross of loans in process, deferred fees, unearned
discounts, and allowance for loan losses.
(2) Adjustable-rate assets are included in the period in which interest
rates are next scheduled to adjust rather than in the period in which
they are due, and fixed-rate assets are included in the periods in
which they are scheduled to mature, without reflecting scheduled
amortization or any estimated prepayments.
(3) Although Iberville's passbook, money market and NOW accounts are
generally subject to immediate withdrawal, management considers a
substantial amount of these accounts to be core deposits having
significantly longer effective maturities based on Iberville's
retention of such deposits in changing interest rate environments. The
decay rate used on these accounts was 20% per year over the first five
years, even though Iberville's total transaction accounts have actually
increased since December 31, 1996. If all of Iberville's passbook,
money market and NOW accounts had been assumed to be subject to
repricing within one year, interest-bearing liabilities which were
estimated to mature or reprice within one year would have exceeded
interest-earning assets with comparable characteristics by $1.0 million
or 4.4% of total assets. Excludes $432,000 of noninterest-bearing
checking accounts.
(4) It is assumed that certificates of deposit will not be withdrawn prior
to maturity. Excludes $32,000 of accrued interest payable.
Management also presently monitors and evaluates the potential
impact of interest rate changes upon the market value of Iberville's
portfolio equity on a quarterly basis, in an attempt to ensure that interest
rate risk is maintained within limits established by the Board of Directors.
As discussed under "Regulation -- The Association -- Regulatory Capital
Requirements," the OTS adopted a final rule in August 1993 incorporating an
interest rate risk component into the risk-based capital rules. Under the
rule, an institution with a greater than "normal" level of interest rate risk
will be subject to a deduction of its interest rate risk component from total
capital for purposes of calculating the risk-based capital requirement,
although the OTS has indicated that no institution will be required to deduct
capital for interest rate risk until further notice. An institution with a
greater than "normal" interest rate risk is defined as an institution that
would suffer a loss of net portfolio value ("NPV") exceeding 2.0% of the
estimated market value of its assets in the event of a 200 basis point
increase or decrease in interest rates. NPV is the difference between
incoming and outgoing discounted cash flows from assets, liabilities, and
off-balance sheet contracts. A resulting change in NPV of more than 2% of the
estimated market value of an institution's assets will require the
institution to deduct from its risk-based capital 50% of that excess change.
The rule provides that the OTS will calculate the interest rate risk
component quarterly for each institution. Because a 200 basis point increase
in interest rates would have actually increased the Association's NPV and a
200 basis point decrease would have resulted in the Association's NPV
declining by less than 2% of the estimated market value of the Association's
assets as of March 31, 1998, the Association would not have been subject to
any capital deduction as of March 31, 1998 if the regulation had been
effective as of such date. The following table presents the Association's NPV
as of March 31, 1998, as calculated by the OTS, based on information provided
to the OTS by the Association.
38
<PAGE>
<TABLE>
<CAPTION>
Change in Change in
Interest Rates Net Portfolio Value NPV as % of NPV as % of
in Basis Points --------------------------------------- Portfolio Value Portfolio Value
(Rate Shock) Amount $ Change % Change of Assets of Assets(1)
------------ ------ -------- -------- --------- ------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
400 $2,384 $(99) (4.0)% 10.4% (.4)%
300 2,509 26 1.0 10.9 .1
200 2,574 91 3.7 11.1 .4
100 2,562 79 3.2 11.0 .3
Static 2,483 -- -- 10.6 --
(100) 2,402 (81) (3.3) 10.2 (.3)
(200) 2,369 (114) (4.6) 10.0 (.5)
(300) 2,382 (101) (4.1) 10.0 (.4)
(400) 2,428 (55) (2.2) 10.1 (.2)
</TABLE>
- -------------------
(1) Based on the portfolio value of the Association's assets assuming no
change in interest rates.
As shown by the table above, decreases in interest rates will result in
declines in the Association's net portfolio value based on OTS calculations as
of March 31, 1998, primarily due to the Association's significant holdings of
adjustable-rate loans and mortgage-backed securities. See "Risk Factors --
Potential Effects of Changes in Interest Rates and the Current Interest Rate
Environment."
Changes in Financial Condition
Assets. The Association's total assets increased by $960,000 or 4.4% to
$22.8 million at March 31, 1998 from $21.8 million at December 31, 1996. The
increase was primarily due to a $1.2 million or 8.1% increase in the net loan
portfolio, as commercial real estate loans, single-family residential loans and
automobile loans each increased. The net loan portfolio amounted to $16.4
million or 72.1% of total assets at March 31, 1998.
Mortgage-backed securities amounted to $4.0 million or 17.6% of total
assets at March 31, 1998. All of the Association's mortgage-backed securities
are either insured or guaranteed by the Federal Home Loan Mortgage Corporation
("FHLMC"), the Federal National Mortgage Association ("FNMA") or the Government
National Mortgage Association ("GNMA"). Mortgage-backed securities increase the
quality of the Association's assets by virtue of the guarantees that support
them, require fewer personnel and overhead costs than individual residential
mortgage loans, are more liquid than individual mortgage loans and may be used
to collateralize borrowings or other obligations of Iberville. However,
mortgage-backed securities typically yield less than individual residential
mortgage loans.
Non-accruing loans totalled $164,000, $332,000 and $270,000 at March
31, 1998 and December 31, 1997 and 1996, respectively, or .96%, 1.93% and 1.70%
of the total loan portfolio at such dates. The Association had no real estate
owned or troubled debt restructurings at any of such dates. At March 31, 1998,
Iberville's allowance for loan losses amounted to $403,000 or 2.4% of the total
loan portfolio and 246% of total non-accruing loans. See "Business - Asset
Quality."
Cash and cash equivalents, which include interest-earning deposits in
other institutions, amounted to $1.7 million or 7.5% of total assets at March
31, 1998, compared to $1.1 million and $1.8 million at December 31, 1997 and
1996, respectively. The decline as of December 31, 1997 was due to the
Association using cash and cash
39
<PAGE>
equivalents to fund deposit outflows. The Association's regulatory liquidity
ratio amounted to 8.9% at March 31, 1998. The Association expects that the net
Conversion proceeds to be received by the Association will initially increase
the Association's regulatory liquidity ratio.
Deposits. The Association's deposits increased by $508,000 or 2.5% in
the first quarter of 1998 to $20.5 million at March 31, 1998, after decreasing
by $252,000 or 1.2% in 1997. The increase in the first quarter of 1998 was
primarily due to increases in passbook and NOW accounts, which also increased in
1997. Total transaction accounts were $5.8 million or 28.3% of total deposits at
March 31, 1998, compared to $5.0 million or 24.9% of total deposits at December
31, 1996. Certificates of deposit increased slightly in the first quarter of
1998, after decreasing by $555,000 or 3.7% in 1997. At March 31, 1998, $9.7
million or 65.7% of the total certificates of deposit mature in one year or
less, and $2.1 million or 14.3% of the total certificates of deposit had
balances of $100,000 or more. The Association believes that it can adjust the
interest rates offered on certificates of deposit to retain such funds to the
extent desired and that it has adequate resources to fund withdrawals.
Retained Earnings. The Association's retained earnings increased by
$49,000 or 3.0% in the first quarter of 1998 to $1.7 million at March 31, 1998.
The increase was due to $53,000 of net income, which was partially offset by a
small unrealized loss on securities available for sale, net of applicable
deferred income tax. The unrealized loss is deducted from retained earnings in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." Retained
earnings amounted to $1.7 million or 7.3% of total assets at March 31, 1998. The
Company's total stockholders' equity will be significantly higher upon
consummation of the Conversion than the Association's current retained earnings.
See "Pro Forma Data."
Results of Operations
Net Income. The Association's net income increased by $20,000 or 60.6%
in the first quarter of 1998 and by $108,000 or 193.3% in 1997 over the
respective prior periods. The increase in 1997 was primarily due to a $156,000
decline in deposit insurance premiums, which resulted from the one-time, special
SAIF assessment paid by the Association on September 30, 1996 in the amount of
$123,000 ($75,000 after taxes). A special SAIF assessment equal to $.657 per
$100 of insured deposits was paid by all savings institutions in order to
recapitalize the SAIF, and the regular premium rate was reduced from 23 basis
points to 6.4 basis points effective January 1, 1997. See "Regulation - The
Association - Insurance of Accounts."
The Association's net interest income is determined by its average
interest rate spread (i.e., the difference between the average yields earned on
its interest-earning assets and the average rates paid on its deposits), the
relative amounts of interest-earning assets and interest-bearing liabilities,
and the degree of mismatch in the maturity and repricing characteristics of its
interest-earning assets and interest-bearing liabilities. The Association's net
interest income increased by $34,000 or 17.8% in the first quarter of 1998 and
by $37,000 or 5.0% in 1997 over the respective prior periods. The increases were
due to increases in both the average interest rate spread and net
interest-earning assets. In addition, the increase in the first quarter of 1998
was partly due to the recognition of $17,000 of income received on a
non-accruing loan that was brought current.
The increase in net interest income in the first quarter of 1998 was
mostly offset by increases of $11,000 in total noninterest expense and $7,000 in
federal income tax expenses.
Because the Company currently anticipates that it will take time to
prudently deploy the new capital raised in the Conversion, the Company's return
on equity initially is expected to be below the industry average after the
Conversion. See "Risk Factors -- Low Return on Equity Following the Conversion;
Uncertainty as to Future Growth Opportunities." The increase in net income shown
under "Pro Forma Data" as a result of the investment of the net Conversion
proceeds is not necessarily indicative of future results of operations.
40
<PAGE>
Average Balances, Net Interest Income and Yields Earned and Rates Paid.
The following table presents for the periods indicated the total dollar amount
of interest income from Iberville's average interest-earning assets and the
resultant yields, as well as the interest expense on average interest-bearing
liabilities, expressed both in dollars and rates, and the net interest margin.
All average balances are based on monthly balances. Iberville does not believe
that the monthly averages differ significantly from what the daily averages
would be.
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1998 March 31, 1997 1997
---------------------------- ---------------------------- ---------
Average Yield/ Average Yield/ Average
Balance Interest Rate(1) Balance Interest Rate Balance
------- -------- ------- ------- -------- ---- -------
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable(2) $16,408 $ 374 8.71% $15,168 $ 329 8.68% $15,735
Mortgage-backed securities 4,143 63 6.08 4,155 62 5.97 4,176
Investment securities(3) 380 6 6.32 359 4 4.46 367
Interest-earning deposits 1,449 12 3.31 1,964 22 4.48 1,519
------ ---- ----- ------ ---- ---- ------
Total interest-earning 22,380 455 7.83 21,646 417 7.71 21,797
assets ---- ----- ---- ----
Noninterest-earning assets 253 278 253
------ ------ ------
Total assets $22,633 $21,924 $22,050
====== ====== ======
Interest-bearing liabilities:
Deposits(4) $20,240 223 4.41 $20,297 226 4.45 $20,154
FHLB advances 542 7 5.17 -- -- -- 138
------ ---- ----- ------- ---- ---- -------
Total interest-bearing 20,782 230 4.43 20,297 226 4.45 20,292
liabilities ---- ----- ---- -----
Noninterest-bearing liabilities 194 152 216
------ ------ -------
Total liabilities 20,976 20,449 20,508
Stockholders' equity 1,657 1,475 1,542
------ ------ -------
Total liabilities and
stockholders' equity $22,633 $21,924 $22,050
====== ====== ======
Net interest income; average
interest rate spread $ 225 3.40% $ 191 3.26%
==== ===== ==== ====
Net interest margin(5) 3.72% 3.53%
===== ====
Average interest-earning assets
to average interest-bearing 107.69% 106.65% 107.42%
liabilities ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
1997 1996
------------------- --------------------------------
Yield/ Average Yield/
Interest Rate Balance Interest Rate
-------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable(2) $1,346 8.55% $14,727 $1,269 8.62%
258 6.18 4,282 259 6.05
Mortgage-backed securities 22 5.99 478 32 6.69
Investment securities(3) 65 4.28 1,815 85 4.68
Interest-earning deposits ----- ---- ----- ------ ----
1,691 7.76 21,302 1,645 7.72
Total interest-earning ----- ---- ----- ----
assets
Noninterest-earning assets 316
------
Total assets $ 21,618
Interest-bearing liabilities: 910 4.52 $19,974 908 4.55
Deposits(4) 7 5.07 -- -- --
FHLB advances ------ ---- ----- ---- ----
917 4.52 19,974 908 4.55
Total interest-bearing ----- ---- ---- ----
liabilities 180
Noninterest-bearing liabilities ------
20,154
Total liabilities 1,464
Stockholders' equity ------
Total liabilities and
stockholders' equity $21,618
-------
Net interest income; average
interest rate spread $ 774 3.24% $ 737 3.17%
Net interest margin(5) 3.55% 3.46%
Average interest-earning assets 106.65%
to average interest-bearing
liabilities
</TABLE>
- -------------------
(1) The average yield on loans receivable for the first quarter of 1998
excludes the effect of $17,000 of income received on a non-accruing
loan. At March 31, 1998, the weighted average yields earned and rates
paid were as follows: loans receivable, 8.31%; mortgage-backed
securities, 6.05%; investment securities, 5.97%; other interest-earning
assets, 5.96%, total interest-earning assets, 7.72%; deposits, 4.50%;
FHLB advances, 5.55%; total interest-bearing liabilities, 4.52%; and
average interest rate spread, 3.20%.
(2) Includes non-accruing loans.
(3) Includes FHLB stock.
(4) Includes noninterest-bearing checking accounts.
(5) Equals net interest income divided by average interest-earning assets.
41
<PAGE>
Rate/Volume Analysis. The following table describes the extent to which
changes in interest rates and changes in volume of interest-related assets and
liabilities have affected Iberville's interest income and expense during the
periods indicated. For each category of interest-earning assets and
interest-bearing liabilities, information is provided on changes attributable to
(i) changes in volume (change in volume multiplied by prior year rate), and (ii)
changes in rate (change in rate multiplied by prior year volume). The combined
effect of changes in both rate and volume has been allocated proportionately to
the change due to rate and the change due to volume.
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
1998 vs. 1997 1997 vs. 1996
------------------------------------ -------------------------------------
Increase(Decrease) Total Increase(Decrease) Total
Due to Increase Due to Increase
--------------------- ----------------------
Rate Volume (Decrease) Rate Volume (Decrease)
--------- ---------- ------------- ---------- ---------- ------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable $ 18 $ 27 $ 45 $ (9) $ 86 $ 77
Mortgage-backed securities 1 -- 1 5 (6) (1)
Investment securities(1) 2 -- 2 (3) (7) (10)
Interest-earning deposits (5 ) (5) (10) (7) (13) (20)
----- ----- ------ ------ ------ -------
Total interest-earning assets 16 22 38 (14) 60 46
------ ----- ----- -------- ------ -------
Interest-bearing liabilities:
Deposits (2) (1) (3) (6) 8 2
FHLB advances -- 7 7 -- 7 7
------ ---- ---- ------ ---- ----
Total interest-bearing liabilities (2) 6 4 (6) 15 9
------- ---- ----- ------ ----- ----
Increase (decrease) in net interest
income $ 18 $ 16 $ 34 $ (8) $ 45 $ 37
------- ---- ----- ------ ----- ----
------- ---- ----- ------ ----- ----
</TABLE>
- --------------
(1) Includes FHLB stock.
Interest Income. Interest and fees on loans increased by $45,000 or
13.7% in the first quarter of 1998 and by $77,000 or 6.1% in 1997 over the
respective prior periods. The increases were due to increases in the average
loan volume of 8.2% in the first quarter of 1998 and 6.8% in 1997 over the
respective prior periods. The increases in the average balance are primarily due
to increases in commercial real estate, single-family residential and automobile
loans. In addition, the increased income in the first quarter of 1998 was partly
due to the recognition of $17,000 received on a non-accruing loan that was
brought current. Excluding the effect of such $17,000, the average loan yield
increased slighly to 8.71% in the first quarter of 1998 from 8.68% in the first
quarter of 1997.
Interest on mortgage-backed securities has been relatively stable,
varying by only $1,000. The average balance of mortgage-backed securities
decreased by .3% in the first quarter of 1998 and by 2.5% in 1997 from the
respective prior periods, as the amount purchased has declined slightly. The
average yield on mortgage-backed securities increased to 6.08% in the first
quarter of 1998 from 5.97% in the comparable 1997 quarter and increased to 6.18%
in 1997 from 6.05% in 1996. The increases in average yields were primarily due
to upward adjustments in the interest rate on adjustable-rate mortgage-backed
securities.
Interest and dividends on investment securities, which consist of FHLB
stock and a $15,000 U.S. government agency security at March 31, 1998, increased
nominally in the first quarter of 1998 over the comparable
42
<PAGE>
1997 quarter. Interest and dividends on investment securities decreased by
$10,000 or 31.3% in 1997 from 1996, as the average balance declined by 23.2% and
the average yield declined to 5.99% in 1997 from 6.69% in 1996. The decline in
the average balance was due to $185,000 of the Association's $200,000 investment
in a government agency security being called in 1996.
Interest on interest-earning deposits in other institutions decreased
by $10,000 or 45.5% in the first quarter of 1998 and by $20,000 or 23.5% in 1997
from the respective prior periods. The decreases were due to declines in both
the average balance and the average yield. The average balance decreased by
$515,000 or 26.2% in the first quarter of 1998 and by $296,000 or 16.3% in 1997
from the respective prior periods, and the average yield decreased by 117 basis
points in the first quarter of 1998 and by 40 basis points in 1997 from the
respective prior periods. As the average yields decreased, the Association
shifted a portion of this excess liquidity into higher yielding loans.
Total interest income increased by $38,000 or 9.1% in the first quarter
of 1998 and by $46,000 or 2.8% in 1997 over the respective prior periods. The
increase in the first quarter of 1998 was due to an increase in the average
yield to 7.83% from 7.71% in the 1997 quarter and to a 3.4% increase in the
average balance of interest-earning assets. The increase in 1997 was due to a
2.3% increase in the average balance and a slight increase in the average yield.
Interest Expense. Interest on deposits decreased by $3,000 or 1.3% in
the first quarter of 1998 after increasing by $2,000 or .2% in 1997 compared to
the respective prior periods. The decrease in the 1998 quarter was due to a
decline in the average rate paid to 4.41% from 4.45% and to a $57,000 or .3%
decline in the average balance. The average rate paid also declined slightly in
1997 compared to 1996, but this decline was offset by a $180,000 or .9% increase
in the average balance. The average balance of lower rate passbook and NOW
accounts has increased in recent periods, while the average balance of money
market deposit accounts and certificates of deposit has generally declined.
The Association had not utilized FHLB advances in recent years until
the fourth quarter of 1997, when the Association used FHLB advances to fund the
purchase of mortgage-backed securities. Because the average rate on the FHLB
advances exceeds the average rate of the Association's deposits, the Association
has been repaying its FHLB advances in recent months as deposits have increased.
Interest on FHLB advances amounted to $7,000 in the first quarter of 1998 and
$7,000 in 1997.
Net Interest Income. Net interest income increased by $34,000 or 17.8%
in the first quarter of 1998 and by $37,000 or 5.0% in 1997 over the respective
prior periods. The average interest rate spread increased to 3.40% in the 1998
quarter from 3.26% in the 1997 quarter and increased to 3.24% in 1997 from 3.17%
in 1996. The increased spreads were primarily due to increases in the average
yields on interest-earning assets. In addition, net interest-earning assets
increased in the first quarter of 1998 and in 1997 over the respective prior
periods.
Provision for Loan Losses. The Association's provisions for loan losses
were $12,000 in the first quarter of both 1998 and 1997. The provision for loan
losses increased by $3,000 or 7.7% in 1997 over 1996. The allowance for loan
losses amounted to $403,000 at March 31, 1998, representing 2.4% of the total
loan portfolio and 246% of total non-accruing loans at such date. See "Business
- - Asset Quality."
Noninterest Income. Service charges and fees, which primarily consist
of charges for checking accounts, overdrafts and late payments, increased by
$4,000 or 21.9% in the first quarter of 1998 after decreasing by $2,000 or 3.3%
in 1997 compared to the respective prior periods.
In 1996, the Association owned a 14% interest in General Financial Life
Insurance Company ("General Financial"), a Louisiana-chartered life insurance
company that underwrote mortgage and credit life insurance and annuities. In
March 1996, General Financial was sold and the Association's share of the
proceeds was $106,000, generating a gain on the sale of $34,000. No other
investment securities were sold in the first quarter of 1998 or in 1997 or 1996.
43
<PAGE>
Other noninterest income declined slightly in the first quarter of 1998
after increasing by $4,000 or 16.8% in 1997 compared to the respective prior
periods.
Total noninterest income increased by $4,000 or 17.5% in the first
quarter of 1998 after decreasing by $33,000 or 24.9% in 1997 compared to the
respective prior periods. Excluding the gain on the sale of the interest in
General Financial in 1996, total noninterest income would have increased
slightly in 1997 over 1996.
Noninterest Expense. Compensation and benefits increased by $3,000 or
3.2% in the first quarter of 1998 and by $42,000 or 15.4% in 1997 over the
respective prior periods. The increase in the first quarter of 1998 was
primarily due to normal salary increases. The increase in 1997 was primarily due
to increases of $23,000 in aggregate directors' fees, $9,000 in contributions to
the Association's profit sharing plan, and $6,000 in normal salary increases.
For periods subsequent to the Conversion, the shares of Common Stock to be
purchased by the ESOP and the Recognition Plan will result in additional
compensation expense being recognized over periods of 10 and five years,
respectively. Based on the assumptions set forth under "Pro Forma Data," the
increased compensation expense after taxes is estimated to be $14,000 per year
each for the ESOP and the Recognition Plan at the maximum of the Estimated
Valuation Range. However, the amount for the ESOP may vary significantly
depending upon the impact of SOP 93-6. See "Risk Factors - Increased
Compensation Expense After the Conversion." In addition, the exercise of
compensatory or non-qualified stock options in the future would result in
additional compensation expense for federal income tax purposes (but not for
financial statement purposes) equal to the difference between the aggregate
market value of the Common Stock received and the aggregate exercise price.
Occupancy expense decreased by $3,000 or 36.5% in the first quarter of
1998 after increasing by $3,000 or 10.2% in 1997 compared to the respective
prior periods.
Furniture and equipment expense decreased by $1,000 or 13.0% in the
first quarter of 1998 and decreased slightly in 1997 from the respective prior
periods.
Deposit insurance premiums increased by $2,000 or 336.9% in the first
quarter of 1998 after decreasing by $34,000 or 76.4% in 1997 compared to the
respective prior periods. The increase in the first quarter of 1998 was due to a
credit received in the first quarter of 1997. Excluding the credit, the
insurance premium would have decreased slightly in the first quarter of 1998
from the comparable 1997 quarter due to a decline in deposits in 1997. The lower
insurance premium in 1997 compared to 1996 was primarily due to a decline in the
premium rate. After the SAIF was recapitalized on September 30, 1996, the
regular premium rate was substantially reduced. See "Regulation - The
Association - Insurance of Accounts." The special SAIF assessment in 1996
amounted to $123,000, or $75,000 after taxes.
Data processing expense decreased nominally in the first quarter of
1998 and by $8,000 or 12.1% in 1997 from the respective prior periods. The
decrease in 1997 was due to the payment in 1996 of a one-time licensing fee of
$8,400.
Legal and other professional expenses increased by $3,000 or 59.8% in
the first quarter of 1998 and by $3,000 or 15.2% in 1997 over the respective
prior periods. These expenses primarily consist of fees paid to the
Association's auditors and, to a lesser extent, the retainer paid to the
Association's general counsel. See "Management--Certain Transactions." These
expenses are expected to increase following the Conversion due to increased
legal and accounting fees as a result of being a public company and preparing
and filing various public reports.
Marketing expense increased by $1,000 or 20.1% in the first quarter of
1998 after decreasing by $8,000 or 39.5% in 1997 compared to the respective
prior periods. The decrease in 1997 was due to several marketing programs in
1996 that were not repeated in 1997.
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<PAGE>
Office supplies and postage expense increased by $3,000 or 37.7% in the
first quarter of 1998 after decreasing by $2,000 or 8.7% in 1997 compared to the
respective prior periods. Postage and mailing costs are likely to increase
following the Conversion due to the expense of mailing annual reports and proxy
materials to shareholders.
Other noninterest expense increased by $3,000 or 22.3% in the first
quarter of 1998 after decreasing by $8,000 or 11.4% in 1997 compared to the
respective prior periods. This expense is likely to increase following the
Conversion due to fees to be paid to the Company's transfer agent and registrar,
as well as other miscellaneous costs associated with being a public company.
Total noninterest expense increased by $11,000 or 7.6% in the first
quarter of 1998 after decreasing by $135,000 or 19.2% in 1997 compared to the
respective prior periods. The increase in the 1998 quarter was due to increases
in other noninterest expense, compensation and benefits and deposit insurance
premiums. The decrease in 1997 was primarily due to the special SAIF assessment
paid in 1996. Excluding the effects of such one-time assessment, total
noninterest expense would have decreased by $12,000 or 2.1% in 1997 compared to
1996, primarily due to decreases in regular deposit insurance premiums and in
professional, data processing and other miscellaneous expenses, partially offset
by an increase in compensation and benefits expense.
Federal Income Tax Expense. The federal income tax expense increased by
$6,000 or 30.0% in the first quarter of 1998 and by $28,000 or 40.4% in 1997
over the respective prior periods. The increases were due to increases in
pre-tax income of 49.1% in the first quarter of 1998 and 108.3% in 1997 over the
respective prior periods. In addition, the decrease in 1997 was partly due to a
lower effective tax rate in 1997 as the result of a $30,000 deferred tax expense
in 1996 relating to the Association's bad debt reserve. For additional
information, see Note J of Notes to Financial Statements.
Liquidity and Capital Resources
Iberville is required under applicable federal regulations to maintain
specified levels of "liquid" investments in qualifying types of U.S. Government,
federal agency and other investments having maturities of five years or less.
Current OTS regulations require that a savings institution maintain liquid
assets of not less than 4% of its average daily balance of net withdrawable
deposit accounts and borrowings payable in one year or less. At March 31, 1998,
Iberville's liquidity was 8.9% or $962,000 in excess of the minimum OTS
requirement.
Cash was generated by Iberville's operating activities during the first
quarter of 1998 and in 1997 and 1996 primarily as a result of net income in each
period. The adjustments to reconcile net income to net cash provided by
operations during the periods presented consisted primarily of the provisions
for loan losses, the provisions for depreciation and amortization, accretion of
the premiums on mortgage-backed securities, amortization of the discount on
consumer loans, the FHLB stock dividends, and increases or decreases in various
receivable and payable accounts. The primary investing activities of Iberville
are the origination of loans and the purchase of mortgage-backed securities,
which are primarily funded with the proceeds from repayments and prepayments on
existing loans and mortgage-backed securities and the maturity of
mortgage-backed securities. Investing activities used net cash in 1997 and 1996,
primarily due to increases in the net loan portfolio. In the first quarter of
1998, investing activities provided net cash as the principal payments on
mortgage-backed securities exceeded the increase in the loan portfolio. The
primary financing activity consists of deposits and FHLB advances. Financing
activities provided net cash in the first quarter of 1998 and in 1996 due to
increases in deposits and in 1997 due to an increase in FHLB advances. Total
cash and cash equivalents increased by $587,000 in the first quarter of 1998,
decreased by $698,000 in 1997, and increased by $851,000 in 1996. Total cash and
cash equivalents amounted to $1.7 million at March 31, 1998.
At March 31, 1998, Iberville had outstanding commitments to originate
$65,000 of single-family residential loans and $106,000 of undisbursed
construction loans. In addition, as of March 31, 1998, the Association had
committed to acquire up to a $500,000 participation interest in a $5.5 million
land development loan. The actual participation interest was subsequently
determined to be $385,000. See "Business--Lending Activities--Land
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<PAGE>
Loans." At the same date, the total amount of certificates of deposit which were
scheduled to mature in the following 12 months was $9.7 million. Iberville
believes that it has adequate resources to fund all of its commitments and that
it can adjust the rate on certificates of deposit to retain deposits in changed
interest rate environments. If Iberville requires funds beyond its internal
funding capabilities, advances from the FHLB of Dallas are available as an
additional source of funds.
Iberville is required to maintain regulatory capital sufficient to
meet tangible, core and risk-based capital ratios of at least 1.5%, 3.0% and
8.0%, respectively. At March 31, 1998, Iberville exceeded each of its capital
requirements, with tangible, core and risk-based capital ratios of 7.34%,
7.34% and 15.47%, respectively. See "Regulatory Capital," Regulation -- The
Association -- Regulatory Capital Requirements" and Note O of Notes to
Financial Statements.
Assuming the sale of Common Stock at the midpoint of the Estimated
Valuation Range, the Company's ratio of equity to assets would be 10.20% on a
pro forma basis at March 31, 1998. See "Regulatory Capital." Both the Company
and the Association will be well-capitalized upon consummation of the
Conversion. The Company anticipates that the net Conversion proceeds contributed
to the Association will initially increase the Association's liquidity.
Impact of Inflation and Changing Prices
The financial statements and related financial data presented herein
have been prepared in accordance with GAAP, which generally require the
measurement of financial position and operating results in terms of historical
dollars, without considering changes in relative purchasing power over time due
to inflation. Unlike most industrial companies, virtually all of Iberville's
assets and liabilities are monetary in nature. As a result, interest rates
generally have a more significant impact on Iberville's performance than does
the effect of inflation. Interest rates do not necessarily move in the same
direction or in the same magnitude as the prices of goods and services, since
such prices are affected by inflation to a larger extent than interest rates.
The Year 2000
The Association has reviewed its computer and data processing issues
relating to the Year 2000 and has developed a written Year 2000 Policy as well
as a written Year 2000 Contingency Plan. Management believes that most of the
Association's hardware and terminals will not need to be replaced but that
certain software will need to be upgraded. The Association's data processing is
handled by an independent third party data center, and management is monitoring
the data center's progress and timetable to resolving issues relating to the
Year 2000. Testing with the data center is scheduled to occur in mid-September
1998. If the data center is able to become Year 2000 compliant in a timely
manner, then management believes that issues related to the Year 2000 will not
have a material adverse effect on the Company's liquidity, capital resources or
consolidated results of operations. The Association currently estimates the
total cost of becoming Year 2000 compliant to be approximately $15,000 (of which
$5,000 has been incurred) and expects to be Year 2000 compliant by the end of
1998.
In the event the third party data center is unable to become Year 2000
compliant in a timely manner, the Association has established a contingency plan
to switch to another data center. The Association is in the process of receiving
an estimate from another data center as to the cost of conversion to their data
center. While the costs of switching to another data center have not yet been
quantified, management currently does not believe that such costs would have a
material adverse effect on the Company's liquidity, capital resources or
consolidated results of operations.
Recent Accounting Standards
For a discussion of recently published accounting standards, none of
which are expected to have a material effect on the Company, see Note S of Notes
to Financial Statements.
46
<PAGE>
BUSINESS
Lending Activities
General. At March 31, 1998, Iberville's net loan portfolio totalled
$16.4 million, representing approximately 72.1% of Iberville's $22.8 million of
total assets at that date. The principal lending activity of Iberville is the
origination of single-family residential loans and consumer loans. At March 31,
1998, conventional first mortgage, single-family residential loans (excluding
construction loans) amounted to $11.5 million or 67.2% of the total loan
portfolio and consumer loans amounted to $4.0 million or 23.3% of the total loan
portfolio, in each case before net items. To a lesser extent, the Association
originates construction loans, commercial real estate loans and land loans. At
March 31, 1998, construction loans amounted to $420,000 or 2.5% of the total
loan portfolio, commercial real estate loans totalled $931,000 or 5.4% of the
total loan portfolio, and land loans amounted to $287,000 or 1.7% of the total
loan portfolio, in each case before net items.
The types of loans that the Association may originate are subject to
federal and state laws and regulations. Interest rates charged by the
Association on loans are affected principally by the demand for such loans and
the supply of money available for lending purposes and the rates offered by its
competitors. These factors are, in turn, affected by general and economic
conditions, the monetary policy of the federal government, including the Federal
Reserve Board, legislative and tax policies, and governmental budgetary matters.
A savings institution generally may not make loans to one borrower and
related entities in an amount which exceeds the greater of (i) 15% of its
unimpaired capital and surplus, although loans in an amount equal to an
additional 10% of unimpaired capital and surplus may be made to a borrower if
the loans are fully secured by readily marketable securities, and (ii) $500,000.
At March 31, 1998, the Association's limit on loans-to-one borrower was $500,000
and its five largest loans or groups of loans-to-one borrower, including related
entities, aggregated $342,000, $245,000, $242,000, $238,000 and $200,000. All of
the Association's five largest loans or groups of loans were performing in
accordance with their terms at March 31, 1998. The $342,000 borrowing
relationship consists of five loans to a director of the Association (including
a loan to a related company). See "Management--Indebtedness of Management."
Subsequent to March 31, 1998, the Association agreed to a $385,000 participation
interest in a $5.5 million land development loan to an unaffiliated borrower.
See "--Land Loans."
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<PAGE>
Loan Portfolio Composition. The following table sets forth the
composition of Iberville's loan portfolio by type of loan at the dates
indicated.
<TABLE>
<CAPTION>
December 31,
---------------------------------------------
March 31, 1998 1997 1996
----------------------- ---------------------- --------------------
Amount % Amount % Amount %
---------- ---------- ---------- ---------- ---------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Real estate loans:
Single-family residential $11,508 67.2% $11,531 67.1% $10,752 67.7%
Construction(1) 420 2.4 420 2.4 464 2.9
Commercial real estate 931 5.4 943 5.5 757 4.8
Land 287 1.7 271 1.6 211 1.3
-------- -------- ------- -------- ------- --------
Total real estate loans 13,146 76.7 13,165 76.6 12,184 76.7
-------- -------- ------- -------- ------- --------
Consumer loans:
Home equity and improvement 1,089 6.4 1,172 6.8 1,221 7.7
Loans secured by savings accounts 774 4.5 786 4.6 670 4.2
Automobile 1,125 6.6 1,066 6.2 814 5.1
Unsecured 908 5.3 924 5.4 924 5.8
Other 93 .5 65 .4 77 .5
----- ---- ---- ---- ------- -----
Total consumer loans 3,989 23.3 4,013 23.4 3,706 23.3
-------- -------- ------- -------- ------- --------
Total loans 17,135 100.0% 17,178 100.0% 15,890 100.0%
-------- -------- --------
-------- -------- --------
Less:
Unearned discounts 200 189 160
Loans in process 106 260 169
Deferred fees and discounts 8 7 5
Allowance for loan losses 403 404 362
------ ------ ------
Total loans receivable, net $ 16,418 $16,318 $15,194
-------- ------- -------
-------- ------- -------
</TABLE>
- -----------------
(1) Consists solely of single-family residential construction loans.
48
<PAGE>
Contractual Terms to Final Maturities. The following table sets forth
certain information as of December 31, 1997 regarding the dollar amount of loans
maturing in the Association's portfolio, based on the contractual date of the
loan's final maturity, before giving effect to net items. Demand loans, loans
having no stated schedule of repayments and no stated maturity, and overdrafts
are reported as due in one year or less. The amounts shown below do not reflect
normal principal amortization; rather, the balance of each loan outstanding at
December 31, 1997 is shown in the appropriate year of the loan's final maturity.
<TABLE>
<CAPTION>
Single-
family Commercial
residential Construction real estate Land Consumer Total
------------ ------------ ---------------- ------ ----------- ----------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Amounts due after December 31, 1997 in:
One year or less $22 $420 $-- $ 3 $1,057 $ 1,502
After one year through two years 21 -- -- 5 531 557
After two years through three years 49 -- -- -- 565 614
After three years through five years 317 -- 106 40 828 1,291
After five years through ten years 1,899 -- -- 177 790 2,866
After ten years through fifteen years 3,075 -- 235 46 203 3,559
After fifteen years 6,148 -- 602 -- 39 6,789
------- ---- ---- ---- ------ -------
Total(1) $11,531 $420 $943 $271 $4,013 $17,178
------- ---- ---- ---- ------ -------
------- ---- ---- ---- ------ -------
</TABLE>
- ------------------------------------
(1) Gross of unearned discount, loans in process, deferred loan origination
fees and discounts, and the allowance for loan losses.
The following table sets forth the dollar amount of all loans, before
net items, due after one year from December 31, 1997 as shown in the preceding
table, which have fixed interest rates or which have floating or adjustable
interest rates.
<TABLE>
<CAPTION>
Floating or
Fixed-Rate Adjustable-Rate Total
------------------- --------------------- ------------------
(In Thousands)
<S> <C> <C> <C>
Single-family residential $2,063 $9,446 $11,509
Commercial real estate -- 943 943
Land 113 155 268
Consumer 2,260 696 2,956
----- ------ ------
Total $4,436 $11,240 $15,676
----- ------ ------
----- ------ ------
</TABLE>
Scheduled contractual maturities of loans do not necessarily reflect
the actual expected term of Iberville's portfolio. The average life of mortgage
loans is substantially less than their average contractual terms because of
prepayments. The average life of mortgage loans tends to increase when current
mortgage loans rates are higher than rates on existing mortgage loans and,
conversely, decrease when rates on existing mortgage loans are lower than
current mortgage loan rates (due to refinancing of adjustable-rate and
fixed-rate loans at lower rates). Under the
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<PAGE>
latter circumstance, the weighted average yield on loans decreases as higher
yielding loans are repaid or refinanced at lower rates.
Origination of Loans. The lending activities of Iberville are subject
to the written underwriting standards and loan origination procedures
established by Iberville's Board of Directors and management. Loan originations
are obtained through a variety of sources, including referrals from real estate
brokers, builders and existing customers. Written loan applications are taken by
lending personnel, and the loan department supervises the procurement of credit
reports, appraisals and other documentation involved with a loan. Property
valuations are performed by independent outside appraisers approved by
Iberville's Board of Directors.
Under Iberville's real estate lending policy, either a title opinion
signed by an approved attorney or a title insurance policy must be obtained for
each real estate loan. Iberville also requires fire and extended coverage
casualty insurance, in order to protect the properties securing its real estate
loans. Borrowers must also obtain flood insurance policies when the property is
in a flood hazard area as designated by the Department of Housing and Urban
Development. Borrowers may be required to advance funds on a monthly basis
together with each payment of principal and interest to a mortgage loan account
from which Iberville makes disbursements for items such as real estate taxes,
hazard insurance premiums and private mortgage insurance premiums as they become
due.
Iberville's loan approval process is intended to assess the borrower's
ability to repay the loan, the viability of the loan and the adequacy of the
value of the property that will secure the loan. The Association's lending
policies permit the Association's President or loan officer to approve all types
of loans not exceeding $30,000. Loans over $30,000 up to $150,000 may be
approved by the Association's President or loan officer and two other directors
of the Association. Loans in excess of $150,000 and all commercial real estate
loans must be approved by the entire Board of Directors, excluding Mr. Delahaye
who abstains from voting due to his involvement in a majority of the
Association's real estate loan closings.
The following table shows total loans originated and repaid during the
periods indicated. No loans were purchased or sold during the periods shown.
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
----------------------- -------------------------------------
1998 1997 1997 1996 1995
----------- ---------- ----------- ---------- -----------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Loan originations:
Single-family residential $441 $211 $1,638 $1,266 $1,737
Construction(1) -- 140 620 465 112
Commercial real estate -- -- 225 250 155
Land 73 -- 110 90 122
Consumer 413 310 1,545 2,146 1,642
---- ---- ----- ----- -----
Total loans originated 927 661 4,138 4,217 3,768
Loan principal reductions (957) (492) (2,851) (3,359) (2,399)
Increase (decrease) due to
other items, net(2) 130 (80) (163) (180) 14
---- ---- ----- ----- -----
Net increase in loan portfolio $ 100 $ 89 $1,124 $ 678 $1,383
---- ---- ----- ----- -----
---- ---- ----- ----- -----
</TABLE>
- --------------------
(1) Consists solely of single-family residential construction loans.
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<PAGE>
(2) Other items, net include the effects relating to unearned discount,
loans in process, deferred loan origination fees and discounts, and the
allowance for loan losses.
Although Louisiana laws and regulations permit state-chartered savings
institutions, such as Iberville, to originate and purchase loans secured by real
estate located throughout the United States, Iberville's present lending is done
primarily within its primary market area, which consists of Iberville and West
Baton Rouge Parishes in Louisiana. The Association's lending policies provide
that a maximum of 10% of the total loan portfolio shall be secured by properties
outside of these two parishes. Subject to Iberville's loans-to-one borrower
limitation, Iberville is permitted to invest without limitation in residential
mortgage loans and up to 400% of its capital in loans secured by non-residential
or commercial real estate. Iberville may also invest in secured and unsecured
consumer loans in an amount not exceeding 35% of Iberville's total assets. This
35% limitation may be exceeded for certain types of consumer loans, such as home
equity and property improvement loans secured by residential real property. In
addition, Iberville may invest up to 10% of its total assets in secured and
unsecured loans for commercial, corporate, business or agricultural purposes. At
March 31, 1998, Iberville was well within each of the above lending limits.
Single-Family Residential Real Estate Loans. The primary real estate
lending activity of Iberville is the origination of loans secured by first
mortgage liens on single-family residences. At March 31, 1998, $11.5 million or
67.2% of Iberville's total loan portfolio, before net items, consisted of
conventional first mortgage, single-family residential loans (excluding
construction loans).
The loan-to-value ratio, maturity and other provisions of the loans
made by Iberville generally have reflected the policy of making less than the
maximum loan permissible under applicable regulations, in accordance with sound
lending practices, market conditions and underwriting standards established by
Iberville. Iberville's lending policies on single-family residential mortgage
loans generally limit the maximum loan-to-value ratio to 80% of the lesser of
the appraised value or purchase price of the property. The single-family
residential loans which have a loan-to-value ratio in excess of an 80% require
private mortgage insurance. Residential mortgage loans are amortized on a
monthly basis with principal and interest due each month. The loans generally do
not include "due-on-sale" clauses.
Various legislative and regulatory changes have given Iberville the
authority to originate and purchase mortgage loans which provide for periodic
interest rate adjustments subject to certain limitations. Iberville has been
actively marketing ARMs in order to decrease the vulnerability of its operations
to changes in interest rates. At March 31, 1998, single-family residential ARMs
represented $9.7 million or 56.7% of the total loan portfolio, before net items.
Iberville's single-family residential ARMs are fully amortizing loans
with contractual maturities of up to 30 years. These loans have interest rates
which are scheduled to adjust periodically in accordance with a designated
index. Iberville currently offers ARMs on which the interest rate adjusts every
year based upon the national average contract interest rate for all major types
of lenders on the purchase of previously occupied homes, plus a specified
margin. The margin above the index is generally .25%. There is a 2% cap on the
rate adjustment per period and a 13% cap on the maximum interest rate during the
life of the loan. The adjustable-rate loans in Iberville's loan portfolio are
not convertible by their terms into fixed-rate loans, are not assumable without
the Association's consent, do not contain prepayment penalties and do not
produce negative amortization.
The Association qualifies borrowers based on the initial interest rate
on the ARM rather than the fully indexed rate. In a rising interest rate
environment, the interest rate on the ARM will increase on the next adjustment
date, resulting in an increase in the borrower's monthly payment. To the extent
the increased rate adversely affects the borrower's ability to repay his loan,
the Association is exposed to increased credit risk. As of March 31, 1998, the
Association's non-accruing residential loans were $106,000. See "- Asset
Quality."
The demand for adjustable-rate loans in Iberville's primary market area
has been a function of several factors, including the level of interest rates,
and the difference between the interest rates offered by competitors for
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<PAGE>
fixed-rate loans and adjustable-rate loans. Due to the generally lower rates of
interest prevailing in recent periods, consumer preference for fixed-rate loans
has increased. In mid-1996, the Association began offering 15-year, fixed-rate
residential loans for retention in its portfolio, which loans totalled $973,000
at March 31, 1998.
Construction Loans. At March 31, 1998, $420,000 or 2.5% of Iberville's
total loan portfolio, before net items, consisted of two loans for the
construction of single-family residences. Construction loans are not being
actively marketed and are offered primarily as a service to existing customers.
The two loans were for $220,000 and $200,000 at March 31, 1998, gross of the
undisbursed portion. The two construction loans each bear a fixed interest rate
during the construction phase based upon the amount of funds disbursed, and the
loans are structured to be converted to adjustable-rate permanent loans at the
end of the construction phase. The adjustable-interest rate is not determined
until the end of the construction phase, and the Association does not charge an
additional loan origination fee when the construction loan is converted to a
permanent loan.
Construction lending is generally considered to involve a higher degree
of risk of loss than long-term financing on improved, owner-occupied real estate
because of the uncertainties of construction, including the possibility of costs
exceeding the initial estimates and the need to obtain a tenant or purchaser if
the property will not be owner-occupied. Iberville generally attempts to
mitigate the risks associated with construction lending by, among other things,
lending primarily in its market area, using conservative underwriting
guidelines, and closely monitoring the construction process.
Commercial Real Estate Loans. The Association's commercial real estate
loan portfolio primarily consists of loans secured by retail establishments and
two trailer parks located within the Association's primary market area.
Commercial real estate loans amounted to $931,000 or 5.4% of the total loan
portfolio at March 31, 1998. The largest commercial real estate loan at March
31, 1998 was a loan to a director of the Association secured by a trailer park
and amounted to $218,000 at such date. The average balance of the commercial
real estate loans at March 31, 1998 was approximately $116,000.
Nonresidential real estate loans may have terms up to 30 years and
generally have adjustable rates of interest. The Association uses the same index
for commercial real estate loans as it uses for single-family residential loans,
except that the margin for commercial real estate loans is 1.25% above the
index. There is a 2% cap on the rate adjustment per period and a 13% cap on the
maximum interest rate during the life of the loan. As part of its commitment to
loan quality, the Association's senior management reviews each nonresidential
loan prior to approval by the Board of Directors. All loans are based on the
appraised value of the secured property, and commercial real estate loans are
generally not made in amounts in excess of 80% of the appraised value of the
secured property. All appraisals are performed by an independent appraiser
designated by the Association and are reviewed by management. In originating
nonresidential loans, the Association considers the quality of the property, the
credit of the borrower, the historical and projected cash flow of the project,
the location of the real estate and the quality of the property management. A
total of $225,000 of commercial real estate loans were originated in 1997, and
none were originated in the first quarter of 1998.
Commercial real estate lending is generally considered to involve a
higher degree of risk than single-family residential lending. Such lending
typically involves large loan balances concentrated in a single borrower or
groups of related borrowers for rental or business properties. In addition, the
payment experience on loans secured by income-producing properties is typically
dependent on the success of the operation of the related project and thus is
typically affected by adverse conditions in the real estate market and in the
economy. Iberville generally attempts to mitigate the risks associated with
commercial real estate lending by, among other things, lending primarily in its
market area and using low loan-to-value ("LTV") ratios in the underwriting
process.
Land Loans. As of March 31, 1998, the Association's land loans are
secured by vacant lots. These loans are generally for a maximum of seven years
and are fully amortizing. At March 31, 1998, the Association's land loans
amounted to $287,000 or 1.7% of the total loan portfolio. Of such amount,
$166,000 of the land loans had fixed interest rates while $121,000 had
adjustable interest rates.
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<PAGE>
The Association has recently agreed to participate in a $5.5 million
loan with seven other financial institutions to finance the development of 400
acres of land in the Association's market area. The Association has a $385,000
or 7% interest in the loan, and the funds will be disbursed as the development
progresses. The land will be developed into an 18-hole golf course and into
vacant lots for single-family residences. The loan bears an interest rate of 1%
below a specified prime rate, and the loan will be repaid as the lots are sold.
Land development and acquisition loans involve significant additional
risks when compared with loans on existing residential properties. These loans
typically involve large loan balances to single borrowers, and the payment
experience is dependent on the successful development of the land and the sale
of the lots. These risks can be significantly impacted by supply and demand
conditions. The Association reviewed a feasibility study and market analyses
with respect to the above project. In addition, the land was already owned by
the developer and serves as collateral for the loan.
Consumer Loans. Subject to restrictions contained in applicable federal
laws and regulations, the Association is authorized to make loans for a wide
variety of personal or consumer purposes. At March 31, 1998, $4.0 million or
23.3% of the Association's total loan portfolio consisted of consumer loans.
The Association originates consumer loans in order to provide a full
range of financial services to its customers and because such loans generally
have shorter terms and higher interest rates than residential mortgage loans.
The consumer loans offered by the Association include home equity and
improvement loans, loans secured by deposit accounts in the Association,
automobile loans, mobile home loans and other miscellaneous loans.
Home equity and improvement loans are originated by the Association for
generally up to 80% of the appraised value, less the amount of any existing
prior liens on the property. The Association secures the loan with a mortgage on
the property (generally a second mortgage) and will originate the loan even if
another institution holds the first mortgage. The loans have a maximum term of
15 years. At March 31, 1998, home equity and improvement loans totalled $1.1
million or 6.4% of the Association's total loan portfolio.
The Association offers loans secured by deposit accounts in the
Association, which loans amounted to $774,000 or 4.5% of the Association's total
loan portfolio at March 31, 1998. Such loans are originated for up to 90% of the
account balance, with a hold placed on the account restricting the withdrawal of
the account balance. The interest rate on the loan is equal to the interest rate
paid on the account plus 2%, subject to a minimum interest rate of 7% on the
loan.
The Association offers automobile loans on both new and used vehicles,
with most of the loans secured by used vehicles. The automobile loans have fixed
interest rates and terms of up to five years for new vehicles and four years for
used vehicles. Automobile loans amounted to $1.1 million or 6.6% of the total
loan portfolio at March 31, 1998, compared to $814,000 at December 31, 1996.
The unsecured loans originated by the Association are generally for a
maximum of $5,000 and a maximum term of 36 months, although the Association's
policy permits up to a $10,000 unsecured loan for a term of up to 48 months.
These loans bear a fixed interest rate and require monthly payments of principal
and interest. The amount of unsecured loans has been relatively stable in recent
periods, and such loans amounted to $908,000 or 5.3% of the total loan portfolio
at March 31, 1998.
Other consumer loans primarily consist of mobile home loans and
overdrafts. These loans amounted to $93,000 or .5% of the total loan portfolio
at March 31, 1998. Mobile home loans and overdrafts totalled
$80,000 at March 31, 1998, and the Association originates these loans only to a
limited extent.
Consumer loans generally have shorter terms and higher interest rates
than mortgage loans but generally involve more credit risk than mortgage loans
because of the type and nature of the collateral and, in certain cases, the
absence of collateral. In addition, consumer lending collections are dependent
on the borrower's continuing
53
<PAGE>
financial stability, and thus are more likely to be adversely affected by job
loss, divorce, illness and personal bankruptcy. In many cases, any repossessed
collateral for a defaulted consumer loan will not provide an adequate source of
repayment of the outstanding loan balance because of improper repair and
maintenance of the underlying security. The remaining deficiency often does not
warrant further substantial collection efforts against the borrower. The
Association believes that the generally higher yields earned on consumer loans
compensate for the increased credit risk associated with such loans and that
consumer loans are important to its efforts to increase rate sensitivity,
shorten the average maturity of its loan portfolio and provide a full range of
services to its customers.
Loan Origination and Other Fees. In addition to interest earned on
loans, the Association receives loan origination fees or "points" for
originating loans. Loan points are a percentage of the principal amount of the
mortgage loan and are charged to the borrower in connection with the origination
of the loan.
In accordance with SFAS No. 91, which deals with the accounting for
non-refundable fees and costs associated with originating or acquiring loans,
the Association's loan origination fees and certain related direct loan
origination costs are offset, and the resulting net amount is deferred and
amortized as interest income over the contractual life of the related loans as
an adjustment to the yield of such loans. At March 31, 1998, the Association had
$8,000 of loan fees which had been deferred and are being recognized as income
over the contractual maturities of the related loans.
Asset Quality
General. When a borrower fails to make a required payment on a loan,
the Association attempts to cure the deficiency by contacting the borrower and
seeking payment. Late charges are generally imposed following the thirtieth day
after a payment is due on mortgage loans and after 15 days on consumer loans. In
most cases, deficiencies are cured promptly. If a delinquency extends beyond 30
days, the loan and payment history is reviewed and efforts are made to collect
the loan. While the Association generally prefers to work with borrowers to
resolve such problems, when the account becomes 90 days delinquent, the
Association institutes foreclosure or other collection proceedings, as
necessary, to minimize any potential loss.
Loans are placed on non-accrual status when, in the judgment of
management, the probability of collection of interest is deemed to be
insufficient to warrant further accrual. When a loan is placed on non-accrual
status, previously accrued but unpaid interest is deducted from interest income.
As a matter of policy, the Association discontinues the accrual of interest
income when the loan becomes 90 days past due as to principal or interest.
Specific reserves are established when a consumer loan becomes 90 days past due.
Real estate acquired by the Association as a result of foreclosure or
by deed-in-lieu of foreclosure and loans deemed to be in-substance foreclosed
under generally accepted accounting principles are classified as real estate
owned until sold. The Association had no real estate owned at March 31, 1998 or
at December 31, 1997 or 1996.
Delinquent Loans. The following table sets forth information concerning
delinquent loans at March 31, 1998, in dollar amount and as a percentage of
Iberville's total loan portfolio. The amounts presented represent the total
outstanding principal balances of the related loans, rather than the actual
payment amounts which are past due. At March 31, 1998, Iberville had no
commercial real estate loans, construction loans or land loans which were
delinquent 30 or more days.
<TABLE>
<CAPTION>
Single-family
Residential Consumer Total
Amount % Amount % Amount %
------ - ------ - ------ -
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Loans delinquent for:
30 - 59 days $ 837 4.9% $319 1.9% $1,156 6.8%
60 - 89 days 136 .8 55 .3 191 1.1
90 days and over 106 .6 58 .3 164 .9
----- --- --- ---- ----- ----
Total delinquent loans $1,079 6.3% $432 2.5% $1,511 8.8%
------ --- ---- ---- ------ -----
</TABLE>
54
<PAGE>
Non-Performing Assets. The following table sets forth the amounts and
categories of Iberville's non-performing assets at the dates indicated.
Iberville did not have any accruing loans 90 days or more delinquent or troubled
debt restructurings at any of the dates presented.
<TABLE>
<CAPTION>
March 31, December 31,
-----------------------------------------
1998 1997 1996
-------------------- ------------------- --------------------
(Dollars in Thousands)
<S> <C> <C> <C>
Non-accruing loans:
Single-family residential $ 106 $ 267 $ 214
Consumer 58 65 56
----- ----- -----
Total non-accruing loans 164 332 270
Real estate owned -- -- --
----- ----- -----
Total non-performing assets $ 164 $ 332 $ 270
----- ----- -----
----- ----- -----
Total non-performing loans as a percentage
of total loans 0.96% 1.93% 1.70%
----- ----- -----
----- ----- -----
Total non-performing assets as a
percentage of total assets 0.72% 1.48% 1.24%
----- ----- -----
----- ----- -----
</TABLE>
The $164,000 of non-accruing loans at March 31, 1998 consisted of three
single-family residential loans, of which the largest loan was for $54,000, and
19 consumer loans.
If the $332,000 of non-accruing loans at December 31, 1997 had been
current in accordance with their terms during 1997, the gross interest income on
such loans would have been $32,000. A total of $29,000 of interest income on
these non-accruing loans was actually recorded in 1997.
Classified Assets. Federal regulations require that each insured
savings institution classify its assets on a regular basis. In addition, in
connection with examinations of insured institutions, federal examiners have
authority to identify problem assets and, if appropriate, classify them. There
are three classifications for problem assets: "substandard," "doubtful" and
"loss." Substandard assets have one or more defined weaknesses and are
characterized by the distinct possibility that the insured institution will
sustain some loss if the deficiencies are not corrected. Doubtful assets have
the weaknesses of substandard assets with the additional characteristic that the
weaknesses make collection or liquidation in full on the basis of currently
existing facts, conditions and values questionable, and there is a high
possibility of loss. An asset classified loss is considered uncollectible and of
such little value that continuance as an asset of the institution is not
warranted. Another category designated "special mention" also must be
established and maintained for assets which do not currently expose an insured
institution to a sufficient degree of risk to warrant classification as
substandard, doubtful or loss. Assets classified as substandard or doubtful
require the institution to establish general allowances for loan losses. If an
asset or portion thereof is classified loss, the insured institution must either
establish specific allowances for loan losses in the amount of 100% of the
portion of the asset classified loss, or charge-off such amount. General loss
allowances established to cover possible losses related to assets classified
substandard or doubtful may be included in determining an institution's
regulatory capital, while specific valuation allowances for loan losses do not
qualify as regulatory capital. Federal examiners may disagree with an insured
institution's classifications and amounts reserved.
55
<PAGE>
All loans are reviewed on a regular basis under the Association's asset
classification policy. The Association's total classified assets at March 31,
1998 (excluding loss assets specifically reserved for) amounted to $457,000, all
of which was classified as substandard. The largest classified asset at March
31, 1998 consisted of a $114,000 adjustable-rate residential loan. The remaining
$343,000 of substandard assets at March 31, 1998 consisted of 11 residential
mortgage loans totalling $298,000 and eight consumer loans totalling $45,000.
Allowance for Loan Losses. At March 31, 1998, Iberville's allowance for
loan losses amounted to $403,000 or 2.4% of the total loan portfolio.
Iberville's loan portfolio consists primarily of single-family residential
loans, consumer loans and, to a lesser extent, commercial real estate loans,
construction loans and land loans. The loan loss allowance is maintained by
management at a level considered adequate to cover probable losses that are
currently anticipated based on prior loan loss experience, known and inherent
risks in the portfolio, adverse situations that may affect the borrower's
ability to repay, the estimated value of any underlying collateral, general
economic conditions, and other factors and estimates which are subject to change
over time. Although management believes that it uses the best information
available to make such determinations, future adjustments to allowances may be
necessary, and net income could be significantly affected, if circumstances
differ substantially from the assumptions used in making the initial
determinations.
The following table sets forth an analysis of Iberville's allowance for
loan losses during the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
------------------------------ -----------------------------
1998 1997 1997 1996
------------- ------------- ------------- ------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Total loans outstanding at end of period $17,135 $16,056 $17,178 $15,890
------- ------- ------- -------
------- ------- ------- -------
Average loans outstanding $16,408 $15,168 $15,735 $14,727
------- ------- ------- -------
------- ------- ------- -------
Balance at beginning of period $ 404 $ 362 $ 362 $ 318
Charge-offs(1) 13 -- 2 --
Recoveries(2) -- -- 2 5
------- ------- ------- -------
Net charge-offs (recoveries) 13 -- -- (5)
Provision for loan losses 12 12 42 39
------- ------- ------- -------
Balance at end of period $ 403 $ 374 $ 404 $ 362
------- ------- ------- -------
------- ------- ------- -------
Allowance for loan losses as a percent of
total loans outstanding 2.35% 2.33% 2.35% 2.28%
------- ------- ------- -------
------- ------- ------- -------
Ratio of net charge-offs (recoveries) to
average loans outstanding 0.08% --% --% (.03)%
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
(1) All charge-offs during the periods shown were on consumer loans.
(2) Includes $1,000 of recoveries on consumer loans in each of 1997 and
1996. All other recoveries were on mortgage loans.
56
<PAGE>
The following table presents the allocation of Iberville's allowance
for loan losses by type of loan at each of the dates indicated.
<TABLE>
<CAPTION>
March 31, December 31,
---------------------------------------------------------
1998 1997 1996
------------------------ -------------------------- -----------------------------
Loan Loan Loan
Category Category Category
Amount as a % Amount as a % Amount as a %
of of Total of of Total of of Total
Allowance Loans Allowance Loans Allowance Loans
----------- ---------- ----------- ------------ -------------- ------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Single-family residential $350 67.2% $338 67.1% $294 67.7%
Construction -- 2.4 -- 2.4 -- 2.9
Commercial real estate -- 5.4 -- 5.5 -- 4.8
Land -- 1.7 -- 1.6 -- 1.3
Consumer 53 23.3 66 23.4 68 23.3
---- ----- --- ----- ---- -----
Total $403 100.0% $404 100.0% $362 100.0%
---- ------ ---- ------ ---- ------
---- ------ ---- ------ ---- ------
</TABLE>
Mortgage-Backed Securities
Mortgage-backed securities represent a participation interest in a pool
of single-family or multi-family mortgages, the principal and interest payments
on which are passed from the mortgage originators, through intermediaries
(generally U.S. Government agencies and government-sponsored enterprises) that
pool and repackage the participation interests in the form of securities, to
investors such as the Association. Such U.S. Government agencies and
government-sponsored enterprises, which guarantee the payment of principal and
interest to investors, primarily include the FHLMC, the FNMA and the GNMA.
The FHLMC, which is a corporation chartered by the U.S. Government,
issues participation certificates backed principally by conventional mortgage
loans. The FHLMC guarantees the timely payment of interest and the ultimate
return of principal on participation certificates. The FNMA is a private
corporation chartered by the U.S. Congress with a mandate to establish a
secondary market for mortgage loans. The FNMA guarantees the timely payment of
principal and interest on FNMA securities. The GNMA is a government agency
within the Department of Housing and Urban Development which is intended to help
finance government-assisted housing programs. GNMA securities are backed by
loans insured by the Federal Housing Administration ("FHA") or guaranteed by the
Veterans Administration ("VA"), and the timely payment of principal and interest
on GNMA securities are guaranteed by the GNMA and backed by the full faith and
credit of the U.S. Government. Because the FHLMC, the FNMA and the GNMA were
established to provide support for low- and middle-income housing, there are
limits to the maximum size of loans that qualify for these programs. For
example, the FNMA and the FHLMC currently limit their loans secured by a
single-family, owner-occupied residence to $227,000. To accommodate larger-sized
loans, and loans that, for other reasons, do not conform to the agency programs,
a number of private institutions have established their own home-loan
origination and securitization programs.
Mortgage-backed securities typically are issued with stated principal
amounts, and the securities are backed by pools of mortgages that have loans
with interest rates that are within a range and have varying maturities. The
underlying pool of mortgages, i.e., fixed-rate or adjustable-rate, as well as
prepayment risk, are passed on to the
57
<PAGE>
certificate holder. The life of a mortgage-backed pass-through security thus
approximates the life of the underlying mortgages.
At March 31, 1998, the carrying value of the Association's
mortgage-backed securities amounted to $4.0 million, which represented 17.6% of
the Association's $22.8 million of total assets at that date. All of the
Association's $4.0 million of mortgage-backed securities at March 31, 1998 were
insured or guaranteed by the GNMA, the FHLMC or the FNMA, and all of the
mortgage-backed securities had adjustable rates of interest at March 31, 1998.
The amortized cost of mortgage-backed securities being held to maturity at March
31, 1998 was $2.2 million with a fair value of $2.2 million. The amortized cost
of mortgage-backed securities available for sale at March 31, 1998 was $1.8
million with a fair value of $1.8 million. For information regarding the
maturities of the Association's mortgage-backed securities, see Note E of Notes
to Financial Statements.
Mortgage-backed securities generally yield less than the loans which
underlie such securities because of their payment guarantees or credit
enhancements which offer nominal credit risk. In addition, mortgage-backed
securities are more liquid than individual mortgage loans and may be used to
collateralize borrowings or other obligations of the Association.
The following table sets forth the composition of Iberville's
mortgage-backed securities portfolio at each of the dates indicated.
<TABLE>
<CAPTION>
March 31, December 31,
----------------------------------
1998 1997 1996
---------------- ---------------- ----------------
(In Thousands)
<S> <C> <C> <C>
Mortgage-backed securities held to maturity:
FNMA $ 1,126 $ 1,173 $ 1,226
FHLMC 918 1,050 1,309
GNMA 153 163 200
----- ----- ------
Subtotal 2,197 2,386 2,735
Mortgage-backed securities
available for sale:
FNMA 1,811 1,948 1,427
------ ------ ------
Total $ 4,008 $ 4,334 $ 4,162
------ ------ ------
------ ------ ------
</TABLE>
The following table sets forth the activity in Iberville's
mortgage-backed securities portfolio during the periods indicated.
<TABLE>
<CAPTION>
At or For the At or For the Year
Three Months Ended
Ended March 31, December 31,
------------------------- -------------------------------
1998 1997 1997 1996
----------- ----------- --------------- -------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Mortgage-backed securities at
beginning of period (cost) $ 4,329 $4,164 $ 4,164 $ 3,938
Purchases -- 466 917 1,031
Repayments 312 315 734 786
Premium amortization (7) (4) (18) (19)
------ ------ ------ ------
Mortgage-backed securities at end
of period (cost) $ 4,010 $4,311 $ 4,329 $ 4,164
------ ------ ------ ------
------ ------ ------ ------
Mortgaged-backed securities at end
of period (fair value) $ 4,002 $4,247 $ 4,322 $ 4,124
------ ------ ------ ------
------ ------ ------ ------
Weighted average yield at end of
period 6.05% 6.39% 6.36% 6.31%
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
58
<PAGE>
Investment Securities
The Association has authority to invest in various types of liquid
assets, including United States Treasury obligations, securities of various
federal agencies and of state and municipal governments, certificates of deposit
at federally-insured banks and savings institutions, certain bankers'
acceptances and federal funds. Each purchase of an investment security is
approved by the Board of Directors. The Association's investment securities are
carried in accordance with GAAP. All of the Association's investment securities
were accounted for as held-to-maturity at March 31, 1998.
The following table sets forth certain information relating to
Iberville's investment securities portfolio at the dates indicated.
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------
March 31,
1998 1997 1996
--------------------------- -------------------------- ----------------------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
------------- ----------- ------------ ------------ ------------- -------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. agency $ 15 $ 15 $ 15 $ 15 $ 15 $ 15
securities
</TABLE>
The following table sets forth the amount of Iberville's investment
securities which mature during each of the periods indicated and the weighted
average yields for each range of maturities at March 31, 1998.
None of the investments mature after five years.
<TABLE>
<CAPTION>
At March 31, 1998
--------------------------------------------------------------------------
Weighted Over One Weighted
One Year or Average Year Through Average
Less Yield Five Years Yield
------------------ -------------- ------------------- ---------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
U.S. agency securities $ 15 5.15% $ -- --%
</TABLE>
Sources of Funds
59
<PAGE>
General. Deposits are the primary source of Iberville's funds for
lending and other investment purposes. In addition to deposits, the Association
derives funds primarily from principal and interest payments on loans and
mortgage-backed securities. Loan repayments are a relatively stable source of
funds, while deposit inflows and outflows are significantly influenced by
general interest rates and money market conditions. Borrowings may be used on a
short-term basis to compensate for reductions in the availability of funds from
other sources. They may also be used on a longer-term basis for general business
purposes.
Deposits. Iberville's deposits are attracted principally from within
its primary market area. Deposit account terms vary, with the principal
differences being the minimum balance required, the time periods the funds must
remain on deposit and the interest rate.
The Association's deposits are obtained primarily from residents of
Iberville Parish and West Baton Rouge Parish. Management of the Association
estimates that less than 1% of the Association's deposits are obtained from
customers residing outside of Louisiana. The Association does not pay fees to
brokers to solicit funds for deposit with the Association or actively solicit
negotiable-rate certificates of deposit with balances of $100,000 or more.
Interest rates paid, maturity terms, service fees and withdrawal
penalties are established by the Association on a periodic basis. Determination
of rates and terms are predicated on funds acquisition and liquidity
requirements, rates paid by competitors, growth goals and federal and state
regulations.
The following table sets forth the dollar amount of deposits in the
various types of deposit programs offered by Iberville at the dates indicated.
<TABLE>
<CAPTION>
March 31, December 31,
------------------------------------------------
1998 1997 1996
----------------------- ----------------------- -----------------------
Amount % Amount % Amount %
---------- ---------- ---------- ---------- ---------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Certificate accounts:
2.00% - 3.99% $ -- --% $ -- --% $ 81 .4%
--
4.00% - 5.99% 13,060 63.6 12,424 62.0 11,564 57.0
6.00% - 7.99% 1,649 8.0 2,213 11.1 3,547 17.5
------ ----- ------ ----- ------ -----
Total certificate
accounts 14,709 71.6 14,637 73.1 15,192 74.9
------ ----- ------ ----- ------ -----
Transaction accounts:
Passbook accounts 3,421 16.7 3,095 15.4 2,813 13.9
Money market accounts 258 1.2 293 1.5 338 1.7
NOW accounts(1) 2,114 10.3 1,968 9.8 1,891 9.3
------ ----- ------ ----- ------ -----
Total transaction
accounts 5,793 28.2 5,356 26.7 5,042 24.9
------ ----- ------ ----- ------ -----
Accrued interest payable 32 .2 33 .2 44 .2
------ ----- ------ ----- ------ -----
Total deposits $20,534 100.0% $20,026 100.0% $20,278 100.0%
------ ----- ------ ----- ------ -----
------ ----- ------ ----- ------ -----
</TABLE>
- -----------------------
(1) Includes noninterest-bearing checking accounts, which amounted to
$432,000 at March 31, 1998.
60
<PAGE>
The following table presents the average balance of each type of
deposit and the average rate paid on each type of deposit for the periods
indicated.
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
------------------------------------------------ -----------------------------------------------
1998 1997 1997 1996
------------------------ ---------------------- ---------------------- --------------------
Average Average Average Average
Average Rate Average Rate Average Rate Average Rate
Balance Paid Balance Paid Balance Paid Balance Paid
---------- ----------- ---------- ---------- --------- ---------- --------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Passbook savings accounts $ 3,233 2.92% $ 2,881 3.01% $ 2,982 3.03% $ 2,859 3.30%
Demand and NOW
accounts(1) 2,031 2.46 2,028 2.64 2,027 2.70 1,911 2.84
Money market deposit
accounts 270 4.91 321 4.64 309 4.61 395 5.68
Certificates of deposit 14,706 4.99 15,067 4.99 14,836 5.06 14,809 4.98
------ ---- ------ ---- ------ ---- ------ ----
Total interest-bearing
deposits(2) $20,240 4.41% $20,297 4.45% $20,154 4.52% $19,974 4.55%
------ ---- ------ ---- ------ ---- ------ ----
------ ---- ------ ---- ------ ---- ------ ----
</TABLE>
- -------------------
(1) Includes noninterest-bearing checking accounts.
(2) Excludes accrued interest payable.
The following table sets forth the activity in Iberville's deposits
during the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31, December 31,
----------------------------- -----------------------------
1998 1997 1997 1996
------------ ------------ ------------ ------------
(In Thousands)
<S> <C> <C> <C> <C>
Net increase (decrease) before
interest credited(1) $ 286 $ (96) $(1,151) $ (179)
Interest credited 223 227 910 908
------ ----- ------- ------
Net increase (decrease) in
deposits(2) $ 509 $ 131 $ (241) $ 729
------ ----- ------- ------
------ ----- ------- ------
</TABLE>
- ---------------------
(1) The information provided is net of deposits and withdrawals because the
gross amount of deposits and withdrawals is not readily available.
(2) Excludes accrued interest payable on deposits.
Iberville attempts to control the flow of deposits by pricing its
accounts to remain generally competitive with other financial institutions in
its market area, but does not necessarily seek to match the highest rates paid
by competing institutions. Iberville has generally not taken a position of price
leadership in its markets, and deposits decreased in 1997 and 1996 before
interest credited partially due to the higher rates offered by competitors.
61
<PAGE>
The following table shows the interest rate and maturity information
for Iberville's certificates of deposit at March 31, 1998.
<TABLE>
<CAPTION>
Maturity Date
--------------------------------------------------------------------------------------
One Year Over 1 Over 2 Over
or Less to 2 Years to 3 Years 3 Years Total
--------------- --------------- --------------- --------------- ---------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
4.00% - 5.99% $ 8,824 $ 2,510 $ 1,212 $ 514 $ 13,060
6.00% - 7.99% 843 240 457 109 1,649
------ ----- ----- ----- ------
Total $ 9,667 $2,750 $1,669 $ 623 $14,709
------ ----- ----- ----- ------
------ ----- ----- ----- ------
</TABLE>
The following table sets forth the maturities of Iberville's
certificates of deposit having principal amounts of $100,000 or more at March
31, 1998.
<TABLE>
<CAPTION>
Certificates of deposit maturing
in quarter ending: Amount
- ------------------------------------------------ -----------------------------
(In Thousands)
<S> <C>
June 30, 1998 $ 535
September 30, 1998 623
December 31, 1998 100
March 31, 1999 418
After March 31, 1999 423
-----
Total certificates of deposit with
balances of $100,000 or more $2,099
-----
-----
</TABLE>
Borrowings. Iberville may obtain advances from the FHLB of Dallas upon
the security of the common stock it owns in that bank and certain of its
residential mortgage loans and mortgage-backed securities, provided certain
standards related to creditworthiness have been met. Such advances are made
pursuant to several credit programs, each of which has its own interest rate and
range of maturities. Such advances are generally available to meet seasonal and
other withdrawals of deposit accounts and to permit increased lending. See
"Regulation -- The Association -- Federal Home Loan Bank System."
As of March 31, 1998, the Association was permitted to borrow up to an
aggregate of $11.0 million from the FHLB of Dallas. The Association had $452,000
of FHLB advances outstanding at March 31, 1998, compared to $610,000 and $0 at
December 31, 1997 and 1996, respectively. Specific mortgage-backed securities,
with a fair value of approximately $815,000 and a carrying value of $817,000 at
March 31, 1998, were pledged to the FHLB as collateral for the advances.
62
<PAGE>
The following table sets forth certain information regarding short-term
borrowings at or for the dates indicated:
<TABLE>
<CAPTION>
At or For the At or For the
Three Months Year Ended
Ended March 31, December 31,
------------------ -----------------
1998 1997 1997 1996
-------- -------- -------- -------
(Dollars in Thousands)
<S> <C> <C>
FHLB advances:
Average balance outstanding $ 542 -- $ 138 --
Maximum amount outstanding
at any month-end during
the period $ 610 -- $ 695 --
Balance outstanding at end
of period $ 452 -- $ 610 --
Average interest rate
during the period 5.17% -- 5.07% --
Weighted average interest rate
at end of period 5.55% -- 5.90% --
</TABLE>
Subsidiary
At March 31, 1998, the Association had no subsidiaries. Under Louisiana
law, a state-chartered association may invest up to 10% of its assets in service
organizations or corporations.
Employees
Iberville had six full-time employees and one part-time employee at
March 31, 1998. None of these employees are represented by a collective
bargaining agent, and Iberville believes that it enjoys good relations with its
personnel.
Market Area
The Association's primary market area for lending and deposits consists
of Iberville and West Baton Rouge Parishes in Louisiana. These parishes maintain
a large commuter population with residents commuting to jobs in Baton Rouge. The
population of Iberville Parish was approximately the same in 1996 as in 1990,
while the population of West Baton Rouge Parish increased by approximately 4.9%
during this period. As shown in Ferguson's conversion valuation report, the
unemployment rate for Iberville and West Baton Rouge Parishes was 10.84% and
9.51%, respectively, in 1990, compared to 9.48% for Louisiana and 6.24% for the
United States. In addition, the per capita income for Iberville and West Baton
Rouge Parishes in such year was $11,857 and $11,400, respectively, compared to
$12,345 for Louisiana and $16,738 for the United States.
Major employers in the two parishes are Dow USA, Iberville School
Systems, Novartis and Georgia Gulf. In addition, the Port of Greater Baton Rouge
is a major port which provides export and import shipping, and there is a large
concentration of petro-chemical complexes and refineries that utilize the port's
facilities. Baton Rouge is also the state capital of Louisiana.
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<PAGE>
Competition
Iberville faces significant competition both in attracting deposits and
in making loans. Its most direct competition for deposits has come historically
from commercial banks, credit unions and other savings institutions located in
its primary market area, including many large financial institutions which have
greater financial and marketing resources available to them. In addition,
Iberville faces significant competition for investors' funds from short-term
money market securities, mutual funds and other corporate and government
securities. Iberville does not rely upon any individual group or entity for a
material portion of its deposits. The ability of the Association to attract and
retain deposits depends on its ability to generally provide a rate of return,
liquidity and risk comparable to that offered by competing investment
opportunities.
Iberville's competition for real estate loans comes principally from
mortgage banking companies, commercial banks, other savings institutions and
credit unions. Iberville competes for loan originations primarily through the
interest rates and loan fees it charges, and the efficiency and quality of
services it provides borrowers. Factors which affect competition include general
and local economic conditions, current interest rate levels and volatility in
the mortgage markets. Competition may increase as a result of the continuing
reduction of restrictions on the interstate operations of financial institutions
and the anticipated slowing of refinancing activity.
Properties
At March 31, 1998, Iberville conducted its business from its
headquarters at 23910 Railroad Avenue Plaquemine, Louisiana 70764. The estimated
net book value of the electronic data processing and other office equipment
owned by Iberville was $31,000 at March 31, 1998. The following table sets forth
certain information with respect to the office of Iberville at March 31, 1998.
<TABLE>
<CAPTION>
Net Book Value
Description/Address Leased/Owned of Property Deposits
- ----------------------- ---------------- ------------------ ------------
(In Thousands)
<S> <C> <C> <C>
Home Office:
23910 Railroad Avenue Owned $ 129 $20,534
Plaquemine, LA 70764
</TABLE>
Legal Proceedings
Iberville is involved in routine legal proceedings occurring in the
ordinary course of business which, in the aggregate, are believed by management
to be immaterial to the financial condition and results of operations of
Iberville.
REGULATION
The following discussion of certain laws and regulations which are
applicable to the Company and Iberville, as well as descriptions of laws and
regulations contained elsewhere herein, summarizes the aspects of such laws and
regulations which are deemed to be material to the Company and Iberville.
However, the summary does not purport to be complete and is qualified in its
entirety by reference to applicable laws and regulations.
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<PAGE>
The Company
Holding Company Acquisitions. Upon consummation of the Conversion, the
Company will become a savings and loan holding company within the meaning of the
Home Owners' Loan Act, as amended ("HOLA"), and will be required to register
with the OTS. The HOLA and OTS regulations generally prohibit a savings and loan
holding company, without prior OTS approval, from acquiring, directly or
indirectly, the ownership or control of any other savings institution or savings
and loan holding company, or all, or substantially all, of the assets or more
than 5% of the voting shares thereof. These provisions also prohibit, among
other things, any director or officer of a savings and loan holding company, or
any individual who owns or controls more than 25% of the voting shares of such
holding company, from acquiring control of any savings institution not a
subsidiary of such savings and loan holding company, unless the acquisition is
approved by the OTS.
Holding Company Activities. The Company will operate as a unitary
savings and loan holding company. Generally, there are limited restrictions on
the activities of a unitary savings and loan holding company and its non-savings
institution subsidiaries. However, if the Director of the OTS determines that
there is reasonable cause to believe that the continuation by a savings and loan
holding company of an activity constitutes a serious risk to the financial
safety, soundness or stability of its subsidiary savings institution, the
Director may impose such restrictions as deemed necessary to address such risk,
including limiting (i) payment of dividends by the savings institution; (ii)
transactions between the savings institution and its affiliates; and (iii) any
activities of the savings institution that might create a serious risk that the
liabilities of the holding company and its affiliates may be imposed on the
savings institution. Notwithstanding the above rules as to permissible business
activities of unitary savings and loan holding companies, if the savings
institution subsidiary of such a holding company fails to meet the QTL test, as
discussed under "--The Association--Qualified Thrift Lender Test," then such
unitary holding company also shall become subject to the activities restrictions
applicable to multiple savings and loan holding companies and, unless the
savings institution requalifies as a QTL within one year thereafter, shall
register as, and become subject to the restrictions applicable to, a bank
holding company. See "--The Association--Qualified Thrift Lender Test."
The HOLA requires every savings institution subsidiary of a savings and
loan holding company to give the OTS at least 30 days' advance notice of any
proposed dividends to be made on its guarantee, permanent or other
non-withdrawable stock, or else such dividend will be invalid. See "--The
Association--Capital Distributions."
Affiliate Restrictions. Transactions between a savings institution and
its "affiliates" are subject to quantitative and qualitative restrictions under
Sections 23A and 23B of the Federal Reserve Act and OTS regulations. Affiliates
of a savings institution include, among other entities, the savings
institution's holding company and companies that are controlled by or under
common control with the savings institution.
In general, Sections 23A and 23B and OTS regulations issued in
connection therewith limit the extent to which a savings institution or its
subsidiaries may engage in certain "covered transactions" with affiliates to an
amount equal to 10% of the institution's capital and surplus, in the case of
covered transactions with any one affiliate, and to an amount equal to 20% of
such capital and surplus, in the case of covered transactions with all
affiliates. In addition, a savings institution and its subsidiaries may engage
in covered transactions and certain other transactions only on terms and under
circumstances that are substantially the same, or at least as favorable to the
savings institution or its subsidiary, as those prevailing at the time for
comparable transactions with nonaffiliated companies. A "covered transaction" is
defined to include a loan or extension of credit to an affiliate; a purchase of
investment securities issued by an affiliate; a purchase of assets from an
affiliate, with certain exceptions; the acceptance of securities issued by an
affiliate as collateral for a loan or extension of credit to any party; or the
issuance of a guarantee, acceptance or letter of credit on behalf of an
affiliate.
In addition, under the OTS regulations, a savings institution may not
make a loan or extension of credit to an affiliate unless the affiliate is
engaged only in activities permissible for bank holding companies; a savings
institution may not purchase or invest in securities of an affiliate other than
shares of a subsidiary; a savings institution and its subsidiaries may not
purchase a low-quality asset from an affiliate; and covered transactions and
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<PAGE>
certain other transactions between a savings institution or its subsidiaries and
an affiliate must be on terms and conditions that are consistent with safe and
sound banking practices. With certain exceptions, each loan or extension of
credit by a savings institution to an affiliate must be secured by collateral
with a market value ranging from 100% to 130% (depending on the type of
collateral) of the amount of the loan or extension of credit.
The OTS regulations generally exclude all non-bank and non-savings
institution subsidiaries of savings institutions from treatment as affiliates,
except to the extent that the OTS or the Federal Reserve Board decides to treat
such subsidiaries as affiliates. The regulation also requires savings
institutions to make and retain records that reflect affiliate transactions in
reasonable detail, and provides that certain classes of savings institutions may
be required to give the OTS prior notice of affiliate transactions.
Federal Securities Laws. The Company has filed with the SEC a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), for the registration of the Common Stock to be issued
pursuant to the Conversion. Upon consummation of the Conversion, the Company
intends to register its Common Stock with the SEC under Section 12(g) of the
Exchange Act, in which case the Company will then be subject to the proxy and
tender offer rules, insider trading reporting requirements and restrictions, and
certain other requirements under the Exchange Act. Pursuant to OTS regulations
and the Plan of Conversion, the Company has agreed to maintain such registration
for a minimum of three years following the Conversion.
The registration under the Securities Act of the shares of Common Stock
to be issued in the Conversion does not cover the resale of such shares. Shares
of Common Stock purchased by persons who are not affiliates of the Company may
be sold without registration. Shares purchased by an affiliate of the Company
will be subject to the resale restrictions of Rule 144 under the Securities Act.
If the Company meets the current public information requirements of Rule 144
under the Securities Act, each affiliate of the Company who complies with the
other conditions of Rule 144 (including those that require the affiliate's sale
to be aggregated with those of certain other persons) would be able to sell in
the public market, without registration, a number of shares not to exceed, in
any three-month period, the greater of (i) 1% of the outstanding shares of the
Company or (ii) the average weekly volume of trading in such shares during the
preceding four calendar weeks.
The Association
General. As part of the Conversion, the Association will convert
from a Louisiana-chartered mutual savings and loan association to a
Louisiana-chartered stock savings and loan association. The OFI will be the
Association's chartering authority, and the OTS will be the Association's
primary federal regulator. The OFI and the OTS have extensive authority over
the operations of Louisiana-chartered savings institutions. As part of this
authority, Louisiana-chartered savings institutions are required to file
periodic reports with the OFI and the OTS and are subject to periodic
examinations by the OFI, the OTS and the FDIC. The Association also is
subject to regulation and examination by the FDIC, which insures the deposits
of the Association to the maximum extent permitted by law, and requirements
established by the Federal Reserve Board. The investment and lending
authority of savings institutions are prescribed by federal laws and
regulations, and such institutions are prohibited from engaging in any
activities not permitted by such laws and regulations. Such regulation and
supervision is primarily intended for the protection of depositors.
The OTS' enforcement authority over all savings institutions and their
holding companies 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.
Insurance of Accounts. The deposits of the Association are insured to
the maximum extent permitted by the SAIF, which is administered by the FDIC, and
are backed by the full faith and credit of the U.S. Government. As insurer, the
FDIC is authorized to conduct examinations of, and to require reporting by,
FDIC-insured institutions.
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<PAGE>
It also may prohibit any FDIC-insured institution from engaging in any activity
the FDIC determines by regulation or order to pose a serious threat to the FDIC.
The FDIC also has the authority to initiate enforcement actions against savings
institutions, after giving the OTS an opportunity to take such action.
Under current FDIC regulations, SAIF-insured institutions are assigned
to one of three capital groups which are based solely on the level of an
institution's capital--"well capitalized," "adequately capitalized," and
"undercapitalized"--which are defined in the same manner as the regulations
establishing the prompt corrective action system discussed below. These three
groups are then divided into three subgroups which reflect varying levels of
supervisory concern, from those which are considered to be healthy to those
which are considered to be of substantial supervisory concern. The matrix so
created results in nine assessment risk classifications, with rates ranging
prior to September 30, 1996 from .23% for well capitalized, healthy institutions
to .31% for undercapitalized institutions with substantial supervisory concerns.
The insurance premiums for the Association for 1994, 1995 and the first nine
months of 1996 were .23% (per annum) of insured deposits.
The deposits of the Association are currently insured by the SAIF. Both
the SAIF and the Bank Insurance Fund ("BIF") are required by law to attain and
thereafter maintain a reserve ratio of 1.25% of insured deposits. The BIF
achieved a fully funded status first, and therefore as discussed below,
effective January 1, 1996 the FDIC substantially reduced the average deposit
insurance premium paid by BIF-insured banks. On November 14, 1995, the FDIC
approved a final rule regarding deposit insurance premiums. The final rule
reduced deposit insurance premiums for BIF member institutions to zero basis
points (subject to a $2,000 minimum) for institutions in the lowest risk
category, while holding deposit insurance premiums for SAIF members at their
then current levels (23 basis points for institutions in the lowest risk
category). The reduction was effective with respect to the semiannual premium
assessment beginning January 1, 1996.
On September 30, 1996, President Clinton signed into law legislation
which eliminated the premium differential between SAIF-insured institutions and
BIF-insured institutions by recapitalizing the SAIF's reserves to the required
ratio. The legislation required all SAIF member institutions to pay a one-time
special assessment to recapitalize the SAIF, with the aggregate amount to be
sufficient to bring the reserve ratio to 1.25% of insured deposits. The
legislation also provides for the merger of the BIF and the SAIF, with such
merger being conditioned upon the prior elimination of the thrift charter.
Implementing FDIC regulations imposed a one-time special assessment
equal to 65.7 basis points for all SAIF-assessable deposits as of March 31,
1995, which was accrued as an expense on September 30, 1996. The Association's
one-time special assessment amounted to $123,000. Net of related tax benefits,
the one-time special assessment amounted to $75,000. The payment of the special
assessment had the effect of immediately reducing the Association's capital by
such amount. However, management does not believe that this one-time special
assessment had a material adverse effect on the Association's financial
condition.
In the fourth quarter of 1996, the FDIC lowered the assessment rates
for SAIF members to reduce the disparity in the assessment rates paid by BIF and
SAIF members. Beginning October 1, 1996, effective SAIF rates generally range
from zero basis points to 27 basis points, except that during the fourth quarter
of 1996, the rates for SAIF members ranged from 18 to 27 basis points in order
to include assessments paid to the Financing Corporation ("FICO"). From 1997
through 1999, SAIF members will pay 6.4 basis points to fund the FICO, while BIF
member institutions will pay approximately 1.3 basis points. The Association's
insurance premiums, which had amounted to 23 basis points, were thus reduced to
6.4 basis points effective January 1, 1997. Based on the Association's $20.2
million of assessable deposits at December 31, 1996, the premium reduction
resulted in a pre-tax cost savings of approximately $33,000 in 1997 for the
Association.
The FDIC may terminate the deposit insurance of any insured depository
institution, including the Association, if it determines after a hearing that
the institution has engaged or is engaging in unsafe or unsound practices, is in
an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, order or any condition imposed by an agreement with
the FDIC. It also may suspend deposit insurance temporarily
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<PAGE>
during the hearing process for the permanent termination of insurance, if the
institution has no tangible capital. If insurance of accounts is terminated, the
accounts at the institution at the time of the termination, less subsequent
withdrawals, shall continue to be insured for a period of six months to two
years, as determined by the FDIC. Management is aware of no existing
circumstances which would result in termination of the Association's deposit
insurance.
Regulatory Capital Requirements. Federally insured savings institutions
are required to maintain minimum levels of regulatory capital. The OTS has
established capital standards applicable to all savings institutions. These
standards generally must be as stringent as the comparable capital requirements
imposed on national banks. The OTS also is authorized to impose capital
requirements in excess of these standards on individual institutions on a
case-by-case basis.
Current OTS capital standards require savings institutions to satisfy
three different capital requirements. Under these standards, savings
institutions must maintain "tangible" capital equal to at least 1.5% of adjusted
total assets, "core" capital equal to at least 3.0% of adjusted total assets and
"total" capital (a combination of core and "supplementary" capital) equal to at
least 8.0% of "risk-weighted" assets. For purposes of the regulation, core
capital generally consists of common stockholders' equity (including retained
earnings). Tangible capital is given the same definition as core capital but is
reduced by the amount of all the savings institution's intangible assets, with
only a limited exception for purchased mortgage servicing rights. The
Association had no intangible assets at March 31, 1998 which are required to be
considered in computing regulatory capital. Both core and tangible capital are
further reduced by an amount equal to a savings institution's debt and equity
investments in subsidiaries engaged in activities not permissible to national
banks (other than subsidiaries engaged in activities undertaken as agent for
customers or in mortgage banking activities and subsidiary depository
institutions or their holding companies). These adjustments do not affect the
Association's regulatory capital.
In determining compliance with the risk-based capital requirement, a
savings institution is allowed to include both core capital and supplementary
capital in its total capital, provided that the amount of supplementary capital
included does not exceed the savings institution's core capital. Supplementary
capital generally consists of general allowances for loan losses up to a maximum
of 1.25% of risk-weighted assets, together with certain other items. In
determining the required amount of risk-based capital, total assets, including
certain off-balance sheet items, are multiplied by a risk weight based on the
risks inherent in the type of assets. The risk weights assigned by the OTS for
principal categories of assets are (i) 0% for cash and securities issued by the
U.S. Government or unconditionally backed by the full faith and credit of the
U.S. Government; (ii) 20% for securities (other than equity securities) issued
by U.S. Government-sponsored agencies and mortgage-backed securities issued by,
or fully guaranteed as to principal and interest by, the FNMA or the FHLMC,
except for those classes with residual characteristics or stripped
mortgage-related securities; (iii) 50% for prudently underwritten permanent
single-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 the FHLMC, qualifying
residential bridge loans made directly for the construction of single-family
residences and qualifying multi-family residential loans; and (iv) 100% for all
other loans and investments, including consumer loans, commercial loans, and
single-family residential real estate loans more than 90 days delinquent, and
for repossessed assets.
In August 1993, the OTS adopted a final rule incorporating an
interest-rate risk component into the risk-based capital regulation. Under the
rule, an institution with a greater than "normal" level of interest rate risk
will be subject to a deduction of its interest rate risk component from total
capital for purposes of calculating its risk-based capital. As a result, such an
institution will be required to maintain additional capital in order to comply
with the risk-based capital requirement. An institution with a greater than
"normal" interest rate risk is defined as an institution that would suffer a
loss of net portfolio value exceeding 2.0% of the estimated economic value of
its assets in the event of a 200 basis point increase or decrease (with certain
minor exceptions) in interest rates. The interest rate risk component will be
calculated, on a quarterly basis, as one-half of the difference between an
institution's measured interest rate risk and 2.0% multiplied by the economic
value of its assets. The rule also authorizes the Director of the OTS, or his
designee, to waive or defer an institution's interest rate risk component on a
case-by-case
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basis. The final rule was originally effective as of January 1, 1994, subject
however to a two quarter "lag" time between the reporting date of the data used
to calculate an institution's interest rate risk and the effective date of each
quarter's interest rate risk component. However, in October 1994 the Director of
the OTS indicated that it would waive the capital deductions for institutions
with a greater than "normal" risk until the OTS published an appeals process. On
August 21, 1995, the OTS released Thrift Bulletin 67 which established (i) an
appeals process to handle "requests for adjustments" to the interest rate risk
component and (ii) a process by which "well-capitalized" institutions may obtain
authorization to use their own interest rate risk model to determine their
interest rate risk component. The Director of the OTS indicated, concurrent with
the release of Thrift Bulletin 67, that the OTS will continue to delay the
implementation of the capital deduction for interest rate risk pending the
testing of the appeals process set forth in Thrift Bulletin 67.
Effective November 28, 1994, the OTS revised its interim policy issued
in August 1993 under which savings institutions computed their regulatory
capital in accordance with SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." Under the revised OTS policy, savings institutions
must value securities available for sale at amortized cost for regulatory
capital purposes. This means that in computing regulatory capital, savings
institutions should add back any unrealized losses and deduct any unrealized
gains, net of income taxes, on debt securities reported as a separate component
of GAAP capital.
At March 31, 1998, Iberville exceeded all of its regulatory capital
requirements, with tangible, core and risk-based capital ratios of 7.34%, 7.34%
and 15.47%, respectively. The following table sets forth Iberville's compliance
with each of the above-described capital requirements as of March 31, 1998.
<TABLE>
<CAPTION>
Tangible Core Risk-Based
Capital Capital(1) Capital(2)
-------- ---------- ----------
(Dollars in Thousands)
<S> <C> <C> <C>
Capital under GAAP $1,671 $1,671 $1,671
Additional capital items:
Unrealized loss on securities available
for sale, net of taxes 1 1 1
General valuation allowances(3) -- -- 149
------ ------ ------
Regulatory capital 1,672 1,672 1,821
Minimum required regulatory capital(4) 341 683 942
------ ------ ------
Excess regulatory capital $1,331 $ 989 $ 879
------ ------ ------
------ ------ ------
Regulatory capital as a percentage 7.34% 7.34% 15.47%
Minimum capital required as a
percentage(4) 1.50% 3.00% 8.00%
------ ------ ------
Regulatory capital as a percentage
in excess of requirements 5.84% 4.34% 7.47%
------ ------ ------
------ ------ ------
</TABLE>
(Footnotes on next page)
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- -----------------------------
(1) Does not reflect the 4.0% requirement to be met in order for an
institution to be "adequately capitalized." See "--Prompt Corrective
Action."
(2) Does not reflect the interest-rate risk component in the risk-based
capital requirement, the effective date of which has been postponed as
discussed above.
(3) General valuation allowances are only used in the calculation of
risk-based capital. Such allowances are limited to 1.25% of
risk-weighted assets.
(4) Tangible and core capital are computed as a percentage of adjusted
total assets of $22.8 million. Risk-based capital is computed as a
percentage of adjusted risk-weighted assets of $11.8 million.
Any savings institution that fails any of the capital requirements is
subject to possible enforcement actions by the OTS or the FDIC. Such actions
could include a capital directive, a cease and desist order, civil money
penalties, the establishment of restrictions on the institution's operations,
termination of federal deposit insurance and the appointment of a conservator or
receiver. The OTS' capital regulation provides that such actions, through
enforcement proceedings or otherwise, could require one or more of a variety of
corrective actions.
Prompt Corrective Action. Under the prompt corrective action
regulations of the OTS, an institution is deemed to be (i) "well capitalized" if
it has total risk-based capital of 10.0% or more, has a Tier 1 risk-based
capital ratio of 6.0% or more, has a Tier 1 leverage capital ratio of 5.0% or
more and is not subject to any order or final capital directive to meet and
maintain a specific capital level for any capital measure, (ii) "adequately
capitalized" if it has a total risk-based capital ratio of 8.0% or more, a Tier
1 risk-based capital ratio of 4.0% or more and a Tier 1 leverage capital ratio
of 4.0% or more (3.0% under certain circumstances) and does not meet the
definition of "well capitalized," (iii) "undercapitalized" if it has a total
risk-based capital ratio that is less than 8.0%, a Tier 1 risk-based capital
ratio that is less than 4.0% or a Tier 1 leverage capital ratio that is less
than 4.0% (3.0% under certain circumstances), (iv) "significantly
undercapitalized" if it has a total risk-based capital ratio that is less than
6.0%, a Tier 1 risk-based capital ratio that is less than 3.0% or a Tier 1
leverage capital ratio that is less than 3.0%, and (v) "critically
undercapitalized" if it has a ratio of tangible equity to total assets that is
equal to or less than 2.0%. Under specified circumstances, a federal banking
agency may reclassify a well capitalized institution as adequately capitalized
and may require an adequately capitalized institution or an undercapitalized
institution to comply with supervisory actions as if it were in the next lower
category (except that the FDIC may not reclassify a significantly
undercapitalized institution as critically undercapitalized).
An institution generally must file a written capital restoration plan
which meets specified requirements with its appropriate federal banking agency
within 45 days of the date that the institution receives notice or is deemed to
have notice that it is undercapitalized, significantly undercapitalized or
critically undercapitalized. A federal banking agency must provide the
institution with written notice of approval or disapproval within 60 days after
receiving a capital restoration plan, subject to extensions by the agency. An
institution which is required to submit a capital restoration plan must
concurrently submit a performance guaranty by each company that controls the
institution. In addition, undercapitalized institutions are subject to various
regulatory restrictions, and the appropriate federal banking agency also may
take any number of discretionary supervisory actions.
At March 31, 1998, the Association was deemed a well capitalized
institution for purposes of the above regulations and as such is not subject to
the above mentioned restrictions.
Safety and Soundness Guidelines. The OTS and the other federal banking
agencies have established guidelines for safety and soundness, addressing
operational and managerial standards, as well as compensation matters for
insured financial institutions. Institutions failing to meet these standards are
required to submit compliance plans
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<PAGE>
to their appropriate federal regulators. The OTS and the other agencies have
also established guidelines regarding asset quality and earnings standards for
insured institutions. The Association believes that it is in compliance with
these guidelines and standards.
Liquidity Requirements. All savings institutions 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. The liquidity requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings institutions. At the present time, the required minimum
liquid asset ratio is 4%. At March 31, 1998, the Association's liquidity ratio
was 8.9%.
Capital Distributions. OTS regulations govern capital distributions by
savings institutions, which include cash dividends, stock redemptions or
repurchases, cash-out mergers, interest payments on certain convertible debt and
other transactions charged to the capital account of a savings institution to
make capital distributions. Generally, the regulation creates a safe harbor for
specified levels of capital distributions from institutions meeting at least
their minimum capital requirements, so long as such institutions notify the OTS
and receive no objection to the distribution from the OTS. Savings institutions
and distributions that do not qualify for the safe harbor are required to obtain
prior OTS approval before making any capital distributions.
Generally, a savings institution that before and after the proposed
distribution meets or exceeds its fully phased-in capital requirements (Tier 1
institutions) may make capital distributions during any calendar year equal to
the higher of (i) 100% of net income for the calendar year-to-date plus 50% of
its "surplus capital ratio" at the beginning of the calendar year or (ii) 75% of
net income over the most recent four-quarter period. The "surplus capital ratio"
is defined to mean the percentage by which the institution's tangible, core or
risk-based capital ratio exceeds its tangible, core or risk-based capital
requirement. Failure to meet minimum capital requirements will result in further
restrictions on capital distributions, including possible prohibition without
explicit OTS approval. See "--Regulatory Capital Requirements."
In order to make distributions under these safe harbors, Tier 1 and
Tier 2 institutions must submit 30 days written notice to the OTS prior to
making the distribution. The OTS may object to the distribution during that
30-day period based on safety and soundness concerns. In addition, a Tier 1
institution deemed to be in need of more than normal supervision by the OTS may
be downgraded to a Tier 2 or Tier 3 institution as a result of such a
determination. At March 31, 1998, the Association was a Tier 1 institution for
purposes of this regulation.
On December 5, 1994, the OTS published a notice of proposed rulemaking
to amend its capital distribution regulation. Under the proposal, institutions
would be permitted to only make capital distributions that would not result in
their capital being reduced below the level required to remain "adequately
capitalized," as defined above under "--Prompt Corrective Action." Because the
Association will become a subsidiary of a holding company, the proposal would
require the Association to provide notice to the OTS of its intent to make a
capital distribution. The Association does not believe that the proposal will
adversely affect its ability to make capital distributions if it is adopted
substantially as proposed.
Community Reinvestment Act and the Fair Lending Laws. Savings
institutions have a responsibility under the Community Reinvestment Act of 1977
("CRA") and related regulations of the OTS to help meet the credit needs of
their communities, including low- and moderate-income neighborhoods. In
addition, the Equal Credit Opportunity Act and the Fair Housing Act (together,
the "Fair Lending Laws") prohibit lenders from discriminating in their lending
practices on the basis of characteristics specified in those statutes. An
institution's failure to comply with the provisions of CRA could, at a minimum,
result in regulatory restrictions on its activities, and failure to comply with
the Fair Lending Laws could result in enforcement actions by the OTS, as well as
other federal regulatory agencies and the Department of Justice.
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<PAGE>
Qualified Thrift Lender Test. All savings institutions are required to
meet a QTL test to avoid certain restrictions on their operations. Under
Section 2303 of the Economic Growth and Regulatory Paperwork Reduction Act of
1996, a savings institution can comply with the QTL test by either qualifying
as a domestic building and loan association as defined in Section 7701(a)(19)
of the Code or meeting the second prong of the QTL test set forth in Section
10(m) of the HOLA. A savings institution that does not meet the QTL test
must either convert to a bank charter or comply with the following
restrictions on its operations: (i) the institution may not engage in any new
activity or make any new investment, directly or indirectly, unless such
activity or investment is permissible for a national bank; (ii) the branching
powers of the institution shall be restricted to those of a national bank;
(iii) the institution shall not be eligible to obtain any new advances from
its FHLB, other than special liquidity advances with the approval of the OTS;
and (iv) payment of dividends by the institution shall be subject to the
rules regarding payment of dividends by a national bank. Upon the expiration
of three years from the date the savings institution ceases to be a QTL, it
must cease any activity and not retain any investment not permissible for a
national bank and immediately repay any outstanding FHLB advances (subject to
safety and soundness considerations).
Currently, the prong of the QTL test that is not based on the Code
requires that 65% of an institution's "portfolio assets" (as defined) consist
of certain housing and consumer-related assets on a monthly average basis in
nine out of every 12 months. Assets that qualify without limit for inclusion
as part of the 65% requirement are loans made to purchase, refinance,
construct, improve or repair domestic residential housing and manufactured
housing; home equity loans; mortgage-backed securities (where the mortgages
are secured by domestic residential housing or manufactured housing); stock
issued by the FHLB of Dallas; and direct or indirect obligations of the FDIC.
In addition, the following assets, among others, may be included in meeting
the test subject to an overall limit of 20% of the savings institution's
portfolio assets: 50% of residential mortgage loans originated and sold
within 90 days of origination; 100% of consumer and educational loans
(limited to 10% of total portfolio assets); and stock issued by the FHLMC or
the FNMA. Portfolio assets consist of total assets minus the sum of (i)
goodwill and other intangible assets, (ii) property used by the savings
institution to conduct its business, and (iii) liquid assets up to 20% of the
institution's total assets. At March 31, 1998, the qualified thrift
investments of the Association were approximately 98.4% of its portfolio
assets.
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 institutions. 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. At March 31, 1998, the Association had $452,000 of
FHLB advances. See Note G of Notes to Financial Statements.
As a member, the Association is required to purchase and maintain stock
in the FHLB of Dallas in an amount equal to at least 1% of its aggregate
unpaid residential mortgage loans, home purchase contracts or similar
obligations at the beginning of each year. At March 31, 1998, the
Association had $368,000 in FHLB stock, which was in compliance with this
requirement.
The FHLBs are required to provide funds for the resolution of troubled
savings institutions and to contribute to affordable housing programs through
direct loans or interest subsidies on advances targeted for community
investment and low- and moderate-income housing projects. These
contributions have adversely affected the level of FHLB dividends paid in the
past and could do so in the future. These contributions also could have an
adverse effect on the value of FHLB stock in the future. The dividend yield
on the Association's FHLB stock was 5.89% in three months ended March 31,
1998 compared to 5.92% in 1997 and 5.87% in 1996.
Federal Reserve System. The Federal Reserve Board requires all
depository institutions to maintain reserves against their transaction
accounts (primarily NOW and Super NOW checking accounts) and non-personal
time deposits. As of March 31, 1998, no reserves were required to be
maintained on the first $4.4 million of transaction accounts, reserves of 3%
were required to be maintained against the next $46.3 million of net
transaction accounts (with such dollar amounts subject to adjustment by the
Federal Reserve Board), and a reserve of 10%
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(which is subject to adjustment by the Federal Reserve Board to a level
between 8% and 14%) against all remaining net transaction accounts. Because
required reserves must be maintained in the form of vault cash or a
noninterest-bearing account at a Federal Reserve Bank, the effect of this
reserve requirement is to reduce an institution's earning assets.
Thrift Charter. Congress has been considering legislation in various
forms that would require savings institutions, such as the Association, to
convert their charters to national or state bank charters. Recent
legislation required the Treasury Department to prepare for Congress a
comprehensive study on the development of a common charter for savings
institutions and commercial banks; and, in the event that the thrift charter
was eliminated by January 1, 1999, would require the merger of the BIF and
the SAIF into a single Deposit Insurance Fund on that date. The Association
cannot determine whether, or in what form, such legislation may eventually be
enacted and there can be no assurance that any legislation that is enacted
would not adversely affect the Association and its parent holding company.
See also "Risk Factors -- Regulatory Oversight and Legislation" for a
discussion of pending legislation.
Louisiana Regulation. As a Louisiana-chartered savings association, the
Association also is subject to regulation and supervision by the OFI. The
Association is required to file periodic reports with and is subject to
periodic examinations at least once every two years by the OFI. The lending
and investment authority of the Association is prescribed by Louisiana laws
and regulations, as well as applicable federal laws and regulations, and the
Association is prohibited from engaging in any activities not permitted by
such laws and regulations.
The Association is required by Louisiana law and regulations to comply
with certain reserve and capital requirements. At March 31, 1998, the
Association was in compliance with all applicable reserve and capital
requirements.
Louisiana law and regulations also restrict the lending and investment
authority of Louisiana-chartered savings institutions. Such laws and
regulations restrict the amount a Louisiana-chartered savings association can
lend to any one borrower to an amount which, in the aggregate, does not
exceed the lesser of (i) 10% of the association's savings deposits or (ii)
the sum of the association's paid-in capital, surplus, reserves for losses,
and undivided profits. Federal law imposes more restrictive limitations. See
"Business -- Lending Activities." Notwithstanding the foregoing, Louisiana
and federal law permits any such association to lend to any one borrower an
aggregate amount of at least $500,000.
In addition, Louisiana law restricts the ability of Louisiana-chartered
savings associations to invest in, among other things, (i) commercial real
estate loans (including commercial construction real estate loans) up to 40%
of total assets; (ii) real estate investments for other than the
association's offices up to 10% of total assets; (iii) consumer loans,
commercial paper and corporate debt securities up to 30% of total assets;
(iv) commercial, corporate, business or agricultural loans up to 10% of total
assets; and (v) capital stock, obligations and other securities of service
organizations up to 10% of total assets. Louisiana law also sets forth
maximum loan-to-value ratios with respect to various types of loans.
Applicable federal regulations impose more restrictive limitations in certain
instances. See "Business -- Lending Activities -- General."
The investment authority of Louisiana-chartered savings associations is
broader in many respects than that of federally-chartered savings and loan
associations. However, state-chartered savings associations, such as the
Association, are generally prohibited from acquiring or retaining any equity
investment, other than certain investments in service corporations, of a type
or in an amount that is not permitted for a federally-chartered savings
association. This prohibition applies to equity investments in real estate,
investments in equity securities and any other investment or transaction that
is in substance an equity investment, even if the transaction is nominally a
loan or other permissible transaction. At March 31, 1998, the Association
was in compliance with such provisions.
Furthermore, effective January 1, 1990, a state-chartered savings
association may not engage as principal in any activity not permitted for
federal associations unless the FDIC has determined that such activity would
pose
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no significant risk to the affected deposit insurance fund and the
association complies with all applicable capital requirements. When certain
activities are permissible for a federal association, the state association
may engage in the activity in a higher amount if the FDIC has not determined
that such activity would pose a significant risk of loss to the affected
deposit insurance fund and the association meets the fully phased-in capital
requirements. This increased investment authority does not apply to
investments in nonresidential real estate loans. At March 31, 1998, the
Association had no investments which were affected by the foregoing
limitations.
Under Louisiana law, a Louisiana-chartered savings association may
establish or maintain a branch office anywhere in Louisiana with prior
regulatory approval. In addition, an out-of-state savings association or
holding company may acquire a Louisiana-chartered savings association or
holding company if the OFI determines that the laws of such other state
permit a Louisiana-chartered savings association or holding company to
acquire a savings association or holding company in such other state. Any
such acquisition would require the out-of-state entity to apply to the OFI
and receive OFI approval.
TAXATION
Federal Taxation
General. The Company and Iberville are subject to the generally
applicable corporate tax provisions of the Code, and Iberville is subject to
certain additional provisions of the Code which apply to thrift and other
types of financial institutions. The following discussion of federal
taxation is intended only to summarize certain pertinent federal income tax
matters relevant to the taxation of the Company and the Association and is
not a comprehensive discussion of the tax rules applicable to the Company and
Iberville.
Fiscal Year. The Company and the Association will file federal income
tax returns on the basis of a calendar year ending on December 31, and it is
expected that separate returns will be filed for 1998 and 1999.
Bad Debt Reserves. In August 1996, legislation was enacted that
repealed the reserve method of accounting (including the percentage of
taxable income method) previously used by many savings institutions to
calculate their bad debt reserve for federal income tax purposes. Savings
institutions with $500 million or less in assets may, however, continue to
use the experience method. As a result, the Association must recapture that
portion of its reserve which exceeds the amount that could have been taken
under the experience method for post-1987 tax years. At December 31, 1995,
the Association's post-1987 excess reserves amounted to approximately
$85,000. The recapture will occur over a six-year period, the commencement
of which was January 1, 1996. The legislation also requires savings
institutions to account for bad debts for federal income tax purposes on the
same basis as commercial banks for tax years beginning after December 31,
1995. This change in accounting method and reversal and excess bad debt
reserves is adequately provided for in the Association's deferred tax
liability.
At March 31, 1998, the federal income tax reserves of the Association
included $111,000 for which no federal income tax has been provided. Because
of these federal income tax reserves and the liquidation account to be
established for the benefit of certain depositors of the Association in
connection with the Conversion, the retained earnings of the Association are
substantially restricted.
Distributions. If the Association were to distribute cash or property
to its stockholders, and the distribution was treated as being from its
accumulated bad debt reserves, the distribution would cause the Association
to have additional taxable income. A distribution is deemed to have been
made from accumulated bad debt reserves to the extent that (a) the reserves
exceed the amount that would have been accumulated on the basis of actual
loss experience, and (b) the distribution is a "non-qualified distribution."
A distribution with respect to stock is a non-qualified distribution to the
extent that, for federal income tax purposes, (i) it is in redemption of
shares, (ii) it is pursuant to a liquidation of the institution, or (iii) in
the case of a current distribution, together with all other such
distributions during the taxable year, it exceeds the institution's current
and post-1951 accumulated earnings and
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profits. The amount of additional taxable income created by a non-qualified
distribution is an amount that when reduced by the tax attributable to it is
equal to the amount of the distribution.
Minimum Tax. The Code imposes an alternative minimum tax at a rate of
20%. The alternative minimum tax generally applies to a base of regular
taxable income plus certain tax preferences ("alternative minimum taxable
income" or "AMTI") and is payable to the extent such AMTI is in excess of an
exemption amount. The Code provides that an item of tax preference is the
excess of the bad debt deduction allowable for a taxable year pursuant to the
percentage of taxable income method over the amount allowable under the
experience method. Other items of tax preference that constitute AMTI
include (a) depreciation and (b) 75% of the excess (if any) of (i) adjusted
current earnings as defined in the Code, over (ii) AMTI (determined without
regard to this preference and prior to reduction by net operating losses).
Net Operating Loss Carryovers. A financial institution may carry back
net operating losses ("NOLs") to the preceding three taxable years and
forward to the succeeding 15 taxable years. This provision applies to losses
incurred in taxable years beginning after 1986. At March 31, 1998, the
Association had no NOL carryforwards for federal income tax purposes.
Capital Gains and Corporate Dividends-Received Deduction. Corporate net
capital gains are taxed at a maximum rate of 35%. Corporations which own 20%
or more of the stock of a corporation distributing a dividend may deduct 80%
of the dividends received. Corporations which own less than 20% of the stock
of a corporation distributing a dividend may deduct 70% of the dividends
received. However, a corporation that receives dividends from a member of
the same affiliated group of corporations may deduct 100% of the dividends
received.
Other Matters. Federal legislation is introduced from time to time that
would limit the ability of individuals to deduct interest paid on mortgage
loans. Individuals are currently not permitted to deduct interest on
consumer loans. Significant increases in tax rates or further restrictions
on the deductibility of mortgage interest could adversely affect the
Association.
The Association's federal income tax returns for the tax years ended
1995, 1996 and 1997 are open under the statute of limitations and are subject
to review by the IRS. The Association's tax return for 1994 was audited by
the IRS without material adjustment.
State Taxation
The Company is subject to the Louisiana Corporation Income Tax based on
its Louisiana taxable income. The 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 by the
Company within or derived from sources within the State of Louisiana, after
adjustments permitted under Louisiana law, including a federal income tax
deduction. In addition, the Association will be subject to the Louisiana
Shares Tax which is imposed on the assessed value of a company's stock. The
formula for deriving the assessed value is to calculate 15% of the sum of (a)
20% of a company's capitalized earnings, plus (b) 80% of the company's
taxable stockholders' equity, and to subtract from that figure 50% of the
company's real and personal property assessment. Various items may also be
subtracted in calculating a company's capitalized earnings. The Association
believes that the Louisiana Shares Tax, which applies at rates up to 16% on
the assessed value of its stock, will not result in a material tax liability
following the Conversion.
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MANAGEMENT
Management of the Company
The Board of Directors of the Company is divided into three classes,
each of which contains approximately one-third of the Board. The directors
shall be elected by the stockholders of the Company for staggered
three-year terms, or until their successors are elected and qualified. No
director is related to any other director or executive officer of the
Association by first cousin or closer. The following table sets forth
certain information regarding the directors of the Company, all of whom are
also directors of the Association.
<TABLE>
<CAPTION>
Position with
Iberville and
Principal Occupation Director of Year
During the Iberville Term
Name Age(1) Past Five Years Since Expires
- ------------------------- ----- ------------------------------------- ----------- -------
<S> <C> <C> <C> <C>
G. Lloyd Bouchereau, Jr. 56 Director; President and Chief 1968 1999
Executive Officer of the Association
since 1978 and employed by the
Association since 1966
John L. Delahaye 51 Director; Attorney with the law 1984 2001
firm of Borron & Delahaye in
Plaquemine, Louisiana since 1974
Gary K. Pruitt 56 Director; Secretary-Treasurer of the 1995 2000
Association since 1996; Executive
Director of the Greater Baton
Rouge Port Commission in Port
Allen, Louisiana since 1987
Bobby E. Stanley 57 Director; self employed public 1988 1999
accountant
Edward J. Steinmetz 46 Director; Plant Manager of 1997 2000
Ashland Chemical Co., a methanol
plant in Plaquemine, Louisiana
since 1995; prior thereto, Plant
Technical Manager at Ashland
Chemical Co.
Danny M. Strickland 31 Director; Loan Officer of the 1998 2001
Association since 1995; Branch
Manager of Transamerica Financial
Services in Lafayette, Louisiana
from July 1993 to December 1994;
prior thereto, Assistant Branch
Management of Transamerica
Financial Services
</TABLE>
- -------------------
(1) Age as of March 31, 1998.
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Directors of the Company initially will not be compensated by the
Company but will serve with and be compensated by the Association. It is not
anticipated that separate compensation will be paid to directors of the
Company until such time as such persons devote significant time to the
separate management of the Company's affairs, which is not expected to occur
until the Company becomes actively engaged in additional businesses other
than holding the stock of the Association. The Company may determine that
such compensation is appropriate in the future.
The executive officers of the Company are elected annually and hold
office until their respective successors have been elected and qualified or
until death, resignation or removal by the Board of Directors.
Management of the Association
The directors and executive officers of the Association are the same as
the directors and executive officers of the Company. Information concerning
the names, ages, principal occupations during the past five years and term of
office of the directors and executive officers of the Association is set
forth under "-- Management of the Company." The Association's mutual Articles
of Incorporation require the Board of Directors to be elected each year.
Following the Conversion, the Association's stock Articles of Incorporation
will require the Board of Directors to be divided into three classes as
nearly equal in number as possible. The members of each class will be
elected for a term of three years or until their successors are elected and
qualified, with one class of directors elected annually.
Board Meetings and Committees
Regular meetings of the Board of Directors of the Association are held
once a month and special meetings of the Board of Directors of the
Association are held from time-to-time as needed. There were 18 meetings of
the Board of Directors of the Association held during 1997. No director
attended fewer than 75% of the total number of meetings of the Board of
Directors of the Association held during 1997 and the total number of
meetings held by all committees of the Board on which the director served
during such year.
The Board of Directors does not have any separate executive, audit,
compensation or nominating committees. The Board has an Investment
Committee, which currently consists of all the directors of the Association.
The Investment Committee met twice in 1997 in conjunction with regular Board
meetings.
Directors' Compensation
Each director of the Association receives $600 for each meeting of the
Board of Directors or a committee of the Board. Directors are paid for up to
two excused absences from meetings per year.
Executive Compensation
The following table sets forth the compensation paid by the Association
for services rendered in all capacities during the year ended December 31,
1997 to the President and Chief Executive Officer of the Association. No
executive officer of the Association received total compensation in excess of
$100,000 during 1997.
<TABLE>
<CAPTION>
Annual Compensation
----------------------------------
Name and Principal All Other
Position Year Salary (1) Bonus Other(2) Compensation(3)
- ------------------------ ---- ---------- ----- -------- ----------------
<S> <C> <C> <C> <C> <C>
G. Lloyd Bouchereau, Jr., 1997 $75,600 $6,400 $ -- $10,680
President and Chief 1996 69,600 6,200 -- 10,290
Executive Officer 1995 66,800 7,000 -- 10,050
</TABLE>
(Footnotes on next page)
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- ----------------------
(1) Includes directors' fees of $10,800, $7,200 and $6,800 in 1997, 1996
and 1995, respectively.
(2) Annual compensation does not include amounts attributable to other
miscellaneous benefits received by Mr. Bouchereau. The costs to the
Association of providing such benefits during 1997 did not exceed 10%
of the total salary and bonus paid to or accrued for the benefit of
such individual executive officer.
(3) Consists of amounts allocated, accrued or paid by the Association on
behalf of Mr. Bouchereau pursuant to the Association's Profit Sharing
Plan.
Employment Agreements
In connection with the Conversion, the Company and the Association (the
"Employers") intend to enter into employment agreements with each of Messrs.
Bouchereau and Strickland. The Employers have agreed to employ the
executives for a term of three years, in each case in their current
respective positions. The agreements provide that Messrs. Bouchereau and
Strickland will initially be paid their current salary levels of $67,200 and
$38,400, respectively. The executives' compensation and expenses shall be
paid by the Company and the Association in the same proportion as the time
and services actually expended by the executives on behalf of each respective
Employer. The employment agreements will be reviewed annually, and the term
of the executives' employment agreements shall be extended each year for a
successive additional one-year period upon the approval of the Employers'
Boards of Directors, unless either party elects, not less than 30 days prior
to the annual anniversary date, not to extend the employment term.
Each of the employment agreements shall be terminable with or without
cause by the Employers. The executives shall have no right to compensation
or other benefits pursuant to the employment agreements for any period after
voluntary termination or termination by the Employers for cause, disability
or retirement. The agreements provide for certain benefits in the event of
the executive's death. In the event that (i) either executive terminates his
employment because of failure to comply with any material provision of the
employment agreement or the Employers change the executive's title or duties
or (ii) the employment agreement is terminated by the Employers other than
for cause, disability, retirement or death or by the executive as a result of
certain adverse actions which are taken with respect to the executive's
employment following a change in control of the Company, as defined, then the
executives will be entitled to a cash severance amount equal to three times
his average annual compensation for the last five calendar years (or such
shorter period that he has worked with the Association), plus the
continuation of certain miscellaneous fringe benefits, subject to reduction
pursuant to Section 280G of the Code as set forth below in the event of a
change in control.
A change in control is generally defined in the employment agreements to
include any change in control of the Company required to be reported under
the federal securities laws, as well as (i) the acquisition by any person of
20% or more of the Company's outstanding voting securities and (ii) a change
in a majority of the directors of the Company during any three-year period
without the approval of at least two-thirds of the persons who were directors
of the Company at the beginning of such period.
Each employment agreement provides that, in the event that any of the
payments to be made thereunder or otherwise upon termination of employment
are deemed to constitute "parachute payments" within the meaning of Section
280G of the Code, then such payments and benefits received thereunder shall
be reduced by the amount which is the minimum necessary to result in the
payments not exceeding three times the recipient's average annual
compensation from the employer which was includable in the recipient's gross
income during the most recent five taxable years (the "Section 280G Limit").
As a result, none of the severance payments will be subject to a 20% excise
tax, and the Employers will be able to deduct such payments as compensation
expense for federal income tax purposes. If a change in control was to occur
in 1998 subsequent to consummation of the Conversion, the Section 280G Limit
for Messrs. Bouchereau and Strickland would be approximately $218,000 and
$108,000, respectively.
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Although the above-described employment agreements could increase the
cost of any acquisition of control of the Company, management of the Company
does not believe that the terms thereof would have a significant
anti-takeover effect. The Company and/or the Association may determine to
enter into similar employment agreements with other officers in the future.
Profit Sharing Plan
The Association maintains an Employee Profit Sharing Plan (the "Profit
Sharing Plan"), which is a tax-qualified defined contribution plan. Full-time
employees who have been credited with at least one year of service and who
have attained age 21 are eligible to participate in the Profit Sharing Plan.
The Association generally contributes each year an amount to the Profit
Sharing Plan equal to 15% of the gross salaries of eligible employees, and
the contributions for 1997 and 1996 were $31,000 and $23,000, respectively.
Employees become vested as to their account balances at the rate of 20% per
year after three years of service and are 100% vested after seven years of
service. Benefits are payable upon retirement, death or disability.
New Stock Benefit Plans
Employee Stock Ownership Plan. The Company has established the ESOP for
employees of the Company and the Association to become effective upon the
Conversion. Full-time employees of the Company and the Association who have
been credited with at least 1,000 hours of service during a 12-month period
and who have attained age 21 are eligible to participate in the ESOP.
As part of the Conversion, in order to fund the purchase of up to 8% of
the Common Stock sold in the Offerings, it is anticipated that the ESOP will
borrow funds from the Company. It is anticipated that such loan will equal
100% of the aggregate purchase price of the Common Stock acquired by the
ESOP. The loan to the ESOP will be repaid principally from the Company's and
the Association's contributions to the ESOP over a period of 10 years, and
the collateral for the loan will be the Common Stock purchased by the ESOP.
The interest rate for the ESOP loan is expected to be a fixed rate of 8.5%.
The Company may, in any plan year, make additional discretionary
contributions for the benefit of plan participants in either cash or shares
of Common Stock, which may be acquired through the purchase of outstanding
shares in the market or from individual stockholders, upon the original
issuance of additional shares by the Company or upon the sale of treasury
shares by the Company. Such purchases, if made, would be funded through
additional borrowings by the ESOP or additional contributions from the
Company. The timing, amount and manner of future contributions to the ESOP
will be affected by various factors, including prevailing regulatory
policies, the requirements of applicable laws and regulations and market
conditions.
Shares purchased by the ESOP with the proceeds of the loan will be held
in a suspense account and released to participants on a pro rata basis as
debt service payments are made. Shares released from the ESOP will be
allocated to each eligible participant's ESOP account based on the ratio of
each such participant's base compensation to the total base compensation of
all eligible ESOP participants. Forfeitures will be reallocated among
remaining participating employees and may reduce any amount the Company might
otherwise have contributed to the ESOP. Upon the completion of three years
of service, the account balances of participants within the ESOP will become
20% vested and will continue to vest at the rate of 20% for each additional
year of service completed by the participant, such that a participant will
become 100% vested upon the completion of seven years of service. Credit is
given for years of service with the Association prior to adoption of the
ESOP. In the case of a "change in control," as defined, however,
participants will become immediately fully vested in their account balances.
Benefits may be payable upon retirement or separation from service. The
Company's contributions to the ESOP are not fixed, so benefits payable under
the ESOP cannot be estimated.
Messrs. Bouchereau, Stanley and Strickland will serve as trustees of the
ESOP. Under the ESOP, the trustees must generally vote all allocated shares
held in the ESOP in accordance with the instructions of the participating
employees, and unallocated shares will generally be voted in the same ratio
on any matter as those
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<PAGE>
allocated shares for which instructions are given, in each case subject to
the requirements of applicable law and the fiduciary duties of the trustees.
See "Risk Factors -- Increased Compensation Expense After the Conversion"
for a discussion of SOP 93-6, which requires that the compensation expense
recorded by employers for leveraged ESOPs be based on the fair value of the
ESOP shares.
GAAP requires that any third party borrowing by the ESOP be reflected as
a liability on the Company's statement of financial condition. Since the
ESOP is borrowing from the Company, such obligation is not treated as a
liability, but will instead be excluded from stockholders' equity. If the
ESOP purchases newly issued shares from the Company, total stockholders'
equity would neither increase nor decrease, but per share stockholders'
equity and per share net earnings would decrease as the newly issued shares
are allocated to the ESOP participants.
The ESOP will be subject to the requirements of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and the regulations of the
IRS and the Department of Labor thereunder.
Stock Option Plan. Following consummation of the Conversion, the Board
of Directors of the Company intends to adopt a Stock Option Plan, which will
be designed to attract and retain qualified personnel in key positions,
provide directors, officers and key employees with a proprietary interest in
the Company as an incentive to contribute to the success of the Company and
reward key employees for outstanding performance. The Stock Option Plan will
provide for the grant of incentive stock options intended to comply with the
requirements of Section 422 of the Code ("incentive stock options"),
non-incentive or compensatory stock options, stock appreciation rights and
limited rights which will be exercisable only upon a change in control of the
Company (collectively "Awards"). Awards may be granted to directors and key
employees of the Company and any subsidiaries. The Stock Option Plan will be
administered and interpreted by a committee of the Board of Directors
("Committee"). Unless sooner terminated, the Stock Option Plan shall
continue in effect for a period of 10 years from the date the Stock Option
Plan is adopted by the Board of Directors. Subject to any applicable OTS
regulations, upon exercise of "Limited Rights" in the event of a change in
control, the employee will be entitled to receive a lump sum cash payment
equal to the difference between the exercise price of the related option and
the fair market value of the shares of Common Stock subject to the option on
the date of exercise of the right in lieu of purchasing the stock underlying
the option.
Under the Stock Option Plan, the Committee will determine which
directors, officers and key employees will be granted Awards, whether options
will be incentive or compensatory options, the number of shares subject to
each Award, the exercise price of each option, whether options may be
exercised by delivering other shares of Common Stock and when such options
become exercisable. The per share exercise price of an incentive stock
option must at least equal the fair market value of a share of Common Stock
on the date the option is granted (110% of fair market value in the case of
incentive stock options granted to employees who are 5% stockholders).
At a meeting of stockholders of the Company following the Conversion,
which under applicable OTS regulations may be held no earlier than six months
after the completion of the Conversion, the Board of Directors intends to
present the Stock Option Plan to stockholders for approval and to reserve an
amount equal to 10% of the shares of Common Stock sold in the Offerings
(27,600 shares or 31,740 shares based on the maximum and 15% above the
maximum of the Estimated Valuation Range, respectively), for issuance under
the 1998 Stock Option Plan. OTS regulations provide that, in the event such
plan is implemented within one year following the Conversion, no individual
officer or employee of the Association may receive more than 25% of the
options granted under the Stock Option Plan and non-employee directors may
not receive more than 5% individually, or 30% in the aggregate of the options
granted under the Stock Option Plan. OTS regulations also provide that the
exercise price of any options granted under any such plan must be at least
equal to the fair market value of the Common Stock as of the date of grant.
Each stock option or portion thereof will be exercisable at any time on or
after it vests and will be exercisable until 10 years after its date of grant
or for periods of up to one year following the death, disability or other
termination of the optionee's employment or service as a director. However,
failure to exercise incentive stock
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options within three months after the date on which the optionee's employment
terminates may result in the loss of incentive stock option treatment.
At the time an Award is granted pursuant to the Stock Option Plan, the
recipient will not be required to make any payment in consideration for such
grant. With respect to incentive or compensatory stock options, the optionee
will be required to pay the applicable exercise price at the time of exercise
in order to receive the underlying shares of Common Stock. The shares
reserved for issuance under the Stock Option Plan may be authorized but
previously unissued shares, treasury shares, or shares purchased by the
Company on the open market or from private sources. In the event of a stock
split, reverse stock split or stock dividend, the number of shares of Common
Stock under the Stock Option Plan, the number of shares to which any Award
relates and the exercise price per share under any option or stock
appreciation right shall be adjusted to reflect such increase or decrease in
the total number of shares of Common Stock outstanding. In the event the
Company declares a special cash dividend or return of capital following the
implementation of the Stock Option Plan in an amount per share which exceeds
10% of the fair market value of a share of Common Stock as of the date of
declaration, the per share exercise price of all previously granted options
which remain unexercised as of the date of such declaration shall, subject to
certain limitations, be proportionately adjusted to give effect to such
special cash dividend or return of capital as of the date of payment of such
special cash dividend or return of capital.
Under current provisions of the Code, the federal income tax treatment
of incentive stock options and compensatory stock options is different. As
regards incentive stock options, an optionee who meets certain holding period
requirements will not recognize income at the time the option is granted or
at the time the option is exercised, and a federal income tax deduction
generally will not be available to the Company at any time as a result of
such grant or exercise. With respect to compensatory stock options, the
difference between the fair market value on the date of exercise and the
option exercise price generally will be treated as compensation income upon
exercise, and the Company will be entitled to a deduction in the amount of
income so recognized by the optionee. Upon the exercise of a stock
appreciation right, the holder will realize income for federal income tax
purposes equal to the amount received by him, whether in cash, shares of
stock or both, and the Company will be entitled to a deduction for federal
income tax purposes in the same amount.
Recognition Plan. Following consummation of the Conversion, the Board
of Directors of the Company intends to adopt a Recognition Plan for
directors, officers and employees. The objective of the Recognition Plan
will be to enable the Company to provide directors, officers and employees
with a proprietary interest in the Company as an incentive to contribute to
its success. The Company intends to present the Recognition Plan to
stockholders for their approval at a meeting of stockholders which, pursuant
to applicable OTS regulations, may be held no earlier than six months
subsequent to completion of the Conversion.
The Recognition Plan will be administered by a committee of the Board of
Directors, which will have the responsibility to invest all funds contributed
to the trust created for the Recognition Plan (the "Trust"). The Company will
contribute sufficient funds to the Trust so that the Trust can purchase,
following the receipt of stockholder approval, a number of shares equal to an
aggregate of 4% of the Common Stock sold in the Offerings (11,040 shares or
12,696 shares based on the maximum and 15% above the maximum of the Estimated
Valuation Range, respectively). Shares of Common Stock granted pursuant to
the Recognition Plan generally will be in the form of restricted stock
vesting at a rate to be determined by the Board of Directors or a committee
thereof. For accounting purposes, compensation expense in the amount of the
fair market value of the Common Stock at the date of the grant to the
recipient will be recognized pro rata over the period during which the shares
are payable. A recipient will be entitled to all voting and other
stockholder rights, except that the shares, while restricted, may not be
sold, pledged or otherwise disposed of and are required to be held in the
Trust. Under the terms of the Recognition Plan, recipients of awards will be
entitled to instruct the trustees of the Recognition Plan as to how the
underlying shares should be voted, and the trustees will be entitled to vote
all unallocated shares in their discretion. If a recipient's employment is
terminated as a result of death or disability, all restrictions will expire
and all allocated shares will become unrestricted. The Board of Directors of
the Company can terminate the Recognition Plan at any time, and if it does
so, any shares not allocated will revert to the Company. Recipients of
grants under the Recognition Plan
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will not be required to make any payment at the time of grant or when the
underlying shares of Common Stock become vested, other than payment of
withholding taxes.
Certain Transactions
John L. Delahaye, a director of the Association, is a partner in the law
firm of Borron & Delahaye, which serves as general counsel to the
Association. During 1997, Borron & Delahaye received a monthly retainer of
$400 from the Association and approximately $27,000 of legal fees in
connection with real estate loan closings. All of the loan closing fees were
paid by the borrowers rather than the Association.
Management believes that the above transactions were on terms at least
as favorable to the Association as could be obtained from unaffiliated third
parties.
Indebtedness of Management
In the ordinary course of business, the Association makes loans
available to its directors, officers and employees. Such loans are made on
the same terms as comparable loans to other borrowers. It is the belief of
management that these loans neither involve more than the normal risk of
collectibility nor present other unfavorable features. At March 31, 1998,
the Association had 20 loans outstanding to directors and executive officers
of the Association, or members of their immediate families. These loans
totalled approximately $1.0 million or 59.8% of the Association's retained
earnings at March 31, 1998.
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The following table sets forth certain information with respect to
each current director or executive officer of the Association, or members
of their immediate families, whose aggregate indebtedness exceeded $60,000
during the period indicated.
<TABLE>
<CAPTION>
Highest
Principal
Year Balance from Principal Interest
Nature of Loan 1/1/97 to Balance at Rate as of
Name and Position Indebtedness Made 3/31/98 3/31/98 3/31/98
- ------------------------------- -------------------- ---- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
G. Lloyd Bouchereau, Jr., Residential mortgage 1995 $92,602 $76,936 7.92%(1)
President and Chief Executive Residential
Officer mortgage(2) 1978 31,123 29,053 8.50
Second mortgage(2) 1998 37,000 36,724 8.00
Residential
mortgage(2) 1996 11,915 10,897 8.50
Residential
mortgage(2) 1992 62,832 60,237 8.17(1)
Second mortgage(2) 1994 24,975 24,968 10.00
Share loan(2) 1990 20,000 20,000 7.25
Automobile loan(2) 1996 23,008 16,227 8.50
Second mortgage(2) 1997 52,000 51,122 8.50
Residential
mortgage(2) 1977 26,452 23,951 8.50
Share loan(2) 1997 900 801 7.50
Gary K. Pruitt, Residential mortgage 1997 60,000 56,227 7.31(1)
Director
Bobby E. Stanley, Residential mortgage 1986 67,468 60,428 7.12(1)
Director Residential mortgage 1995 25,539 22,775 8.92(1)
Commercial real
estate 1994 224,773 217,970 8.77(1)
Commercial real
estate 1995 10,124 3,580 10.00
Commercial real
estate 1997 38,500 37,220 7.32(1)
Residential
mortgage(2) 1997 140,000 121,868 7.71(1)
Commercial real
estate(2) 1997 125,000 123,445 7.31(1)
</TABLE>
- ----------------------
(1) The interest rate adjusts annually.
(2) Represents a loan to an immediate family member.
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THE CONVERSION
THE BOARD OF DIRECTORS OF THE COMPANY AND THE ASSOCIATION HAVE APPROVED
THE PLAN OF CONVERSION, AS HAS THE OTS AND THE OFI, SUBJECT TO APPROVAL BY
THE MEMBERS OF IBERVILLE ENTITLED TO VOTE ON THE MATTER AND THE
SATISFACTION OF CERTAIN OTHER CONDITIONS. SUCH OTS AND OFI APPROVALS,
HOWEVER, DO NOT CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE
PLAN BY EITHER OF SUCH AGENCIES.
General
On April 7, 1998, the Board of Directors of the Association unanimously
adopted the Plan, pursuant to which the Association will be converted from a
Louisiana-chartered mutual savings and loan association to a
Louisiana-chartered stock savings and loan association to be known as "The
Iberville Building and Loan Association," and the Company will offer and sell
the Common Stock. The Plan of Conversion was subsequently amended on June
16, 1998. It is intended that all of the common stock of the Association
following the Conversion will be held by the Company, which is incorporated
under Louisiana law. The Plan has been approved by the OTS and the OFI,
subject to, among other things, approval of the Plan by the members of the
Association. A Special Meeting has been called for this purpose to be held
on September 22, 1998.
In adopting the Plan, the Board of Directors of the Association
determined that the Conversion was advisable and in the best interests of its
members and the Association and further determined that the interests of
certain holders of its deposit accounts in the net worth of the Association
would be equitably provided for and that the Conversion would not have any
adverse impact on the reserves and net worth of the Association.
The Company has received approval from the OTS and the OFI to become a
savings and loan holding company and to acquire all of the common stock of
the Association to be issued in connection with the Conversion. The Company
plans to retain 50% of the net proceeds from the sale of the Common Stock,
with all the remaining proceeds used to purchase all of the then to be issued
and outstanding capital stock of the Association. Based on the minimum and
maximum of the Estimated Valuation Range, approximately $163,200 and
$220,800, respectively, of the net proceeds retained by the Company are
intended to be used to loan funds to the ESOP to enable the ESOP to purchase
up to 8% of the Common Stock. The Conversion will be effected only upon
completion of the sale of all of the shares of Common Stock to be issued
pursuant to the Plan.
The Plan provides generally that, in connection with the Conversion, the
Company will offer shares of Common Stock for sale in the Subscription
Offering to the Association's Eligible Account Holders, ESOP, Supplemental
Eligible Account Holders, Other Members, and officers, directors and
employees of the Association. In addition, subject to the prior rights of
holders of subscription rights, the Company may elect to offer the shares of
Common stock not subscribed for in the Subscription Offering, if any, for
sale in a Community Offering commencing prior to or upon completion of the
Subscription Offering. See "-- Subscription Offering and Subscription Rights"
and "-- Community Offering." The Company and the Association have the right
to accept or reject, in whole or in part, any orders to purchase shares of
Common Stock received in the Community Offering.
The aggregate price of the shares of Common Stock to be issued in the
Conversion within the Estimated Valuation Range, currently estimated to be
between $2,040,000 and $2,760,000, will be determined based upon an
independent appraisal of the estimated pro forma market value of the Common
Stock. All shares of Common Stock to be issued and sold in the Conversion
will be sold at the same price. The independent appraisal will be affirmed
or, if necessary, updated at the completion of the Offerings. The appraisal
has been performed by Ferguson, a consulting firm experienced in the
valuation and appraisal of savings institutions. See "-- Stock Pricing and
Number of Shares to be Issued" for more information as to the determination
of the estimated pro forma market value of the Common Stock.
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The following discussion of the Conversion summarizes the material
aspects of the Plan of Conversion. The summary is qualified in its entirety
by reference to the provisions of the Plan. A copy of the Plan is available
for inspection at the offices of the Association and at the offices of the
OTS. The Plan is also filed as an exhibit to the Registration Statement of
which this Prospectus is a part, copies of which may be obtained from the
SEC. See "Additional Information."
Purposes of Conversion
The Association, as a Louisiana-chartered mutual savings and loan
association, does not have stockholders and has no authority to issue capital
stock. By converting to the capital stock form of organization, the
Association will be structured in the form used by commercial banks, most
business entities and a growing number of savings institutions. The
Conversion will result in an increase in the capital base of the Association
and the Company, which will support the operations of the Association and
Company.
The Conversion will permit the Association's customers and possibly
other members of the local community and of the general public to become
equity owners and to share in the future of the Company and the Association.
The Conversion will also provide additional funds for lending and investment
activities, facilitate future access to the capital markets, enhance the
ability of the Company to diversify and expand into other markets and enable
the Association to compete more effectively with other financial institutions.
The holding company form of organization will provide additional
flexibility to diversify the Company's and the Association's business
activities through existing or newly formed subsidiaries, or through
acquisition of or mergers with other financial institutions, as well as other
companies. Although there are no current arrangements, understandings or
agreements regarding any such opportunities, the Company will be in a
position after the Conversion, subject to regulatory limitations and the
Company's financial position, to take advantage of any such opportunities
that may arise.
After completion of the Conversion, the unissued common and preferred
stock authorized by the Company's Articles of Incorporation will permit the
Company, subject to market conditions and applicable regulatory approvals, to
raise additional equity capital through further sales of securities, and to
issue securities in connection with possible acquisitions. At the present
time, the Company has no plans with respect to additional offerings of
securities, other than the possible issuance of additional shares to the
Recognition Plan or upon exercise of stock options. Following the
Conversion, the Company will also be able to use stock-related incentive
programs to attract and retain executive and other personnel for itself and
its subsidiaries. See "Management -- New Stock Benefit Plans."
Effects of Conversion
General. Prior to the Conversion, each depositor in the Association has
both a deposit account in the institution and a pro rata ownership interest
in the net worth of the Association based upon the balance in his account,
which interest may only be realized in the event of a liquidation of the
Association. However, this ownership interest is tied to the depositor's
account and has no tangible market value separate from such deposit account.
Any person who opens a deposit account obtains a pro rata ownership interest
in the net worth of the Association without any additional payment beyond the
amount of the deposit. A depositor who reduces or closes his account
receives a portion or all of the balance in the account but nothing for his
ownership interest in the net worth of the Association, which is lost to the
extent that the balance in the account is reduced.
Consequently, the depositors of the Association normally have no way to
realize the value of their ownership interest, which has realizable value
only in the unlikely event that the Association is liquidated. In such
event, the depositors of record at that time, as owners, would share pro rata
in any residual surplus and reserves of the Association after other claims,
including claims of depositors to the amount of their deposits, are paid.
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<PAGE>
When the Association converts to stock form, permanent nonwithdrawable
capital stock will be created to represent the ownership of the net worth of
the Association, and the Association will become a wholly owned subsidiary of
the Company. The Common Stock of the Association and the Company is separate
and apart from deposit accounts of the Association and cannot be and is not
insured by the FDIC or any other governmental agency. Certificates are issued
to evidence ownership of the permanent stock of the Association and the
Company. The stock certificates are transferable, and therefore the stock
may be sold or traded if a purchaser is available with no effect on any
account the seller may hold in the Association.
Continuity. While the Conversion is being accomplished, the normal
business of the Association of accepting deposits and making loans will
continue without interruption. The Association will continue to be subject
to regulation by the OTS, the OFI and the FDIC. After the Conversion, the
Association will continue to provide services for depositors and borrowers
under current policies by its present management and staff.
The directors and officers of the Association at the time of the
Conversion will continue to serve as directors and officers of the
Association after the Conversion. The directors and officers of the Company
consist of individuals currently serving as directors and officers of the
Association, and they will retain their positions in the Association after
the Conversion.
Effect on Deposit Accounts. Under the Plan, each depositor in the
Association at the time of the Conversion will automatically continue as a
depositor after the Conversion, and each such deposit account will remain the
same with respect to deposit balance, interest rate and other terms, except
to the extent that funds in the account are withdrawn to purchase the Common
Stock and except with respect to voting and liquidation rights. Each such
account will be insured by the FDIC to the same extent as before the
Conversion. Depositors will continue to hold their existing certificates,
passbooks and other evidences of their accounts.
Effect on Loans. No loan outstanding from the Association will be
affected by the Conversion, and the amount, interest rate, maturity and
security for each loan will remain as they were contractually fixed prior to
the Conversion.
Effect on Voting Rights of Members. At present, all depositors and
certain borrowers of the Association are members of, and have voting rights
in, the Association as to all matters requiring membership action. Upon
completion of the Conversion, depositors and borrowers will cease to be
members and will no longer be entitled to vote at meetings of the
Association. Upon completion of the Conversion, all voting rights in the
Association will be vested in the Company as the sole stockholder of the
Association. Exclusive voting rights with respect to the Company will be
vested in the holders of Common Stock. Depositors of and borrowers from the
Association will not have voting rights in the Company after the Conversion,
except to the extent that they become stockholders of the Company.
Tax Effects. Consummation of the Conversion is conditioned on prior
receipt by the Company and the Association of rulings or opinions with regard
to federal and Louisiana income taxation which indicate that the adoption and
implementation of the Plan of Conversion described herein will not be taxable
for federal or Louisiana income tax purposes to the Company and the
Association or the Association's Eligible Account Holders or Supplemental
Eligible Account Holders, except as discussed below. The Association has
received favorable opinions regarding the federal and Louisiana income tax
consequences of the Conversion. See "-- Tax Aspects."
Effect on Liquidation Rights. Were the Association to liquidate, all
claims of the Association's creditors (including those of depositors, to the
extent of their deposit balances) would be paid first. Thereafter, if there
were any assets remaining, members of the Association would receive such
remaining assets, pro rata, based upon the deposit balances in their deposit
accounts at the Association immediately prior to liquidation. In the
unlikely event that the Association were to liquidate after the Conversion,
all claims of creditors (including those of depositors, to the extent of
their deposit balances) would also be paid first, followed by distribution of
the "liquidation account" to certain depositors (see "-- Liquidation Rights"),
with any assets remaining thereafter distributed to the Company
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<PAGE>
as the holder of the Association's capital stock. Pursuant to the rules and
regulations of the OTS, a post-Conversion merger, consolidation, sale of bulk
assets or similar combination or transaction with another insured savings
institution would not be considered a liquidation and, in such a transaction,
the liquidation account would be required to be assumed by the surviving
institution.
Stock Pricing and Number of Shares to be Issued
The Plan of Conversion requires that the purchase price of the Common
Stock must be based on the appraised pro forma market value of the Common
Stock, as determined on the basis of an independent valuation. The
Association has retained Ferguson to make such valuation. For its services
in making such appraisal and assistance in preparing a business plan,
Ferguson's fees and out-of-pocket expenses are estimated to be $23,000. The
Association has agreed to indemnify Ferguson and any employees of Ferguson
who act for or on behalf of Ferguson in connection with the appraisal and the
business plan against any and all loss, cost, damage, claim, liability or
expense of any kind (including claims under federal and state securities
laws) arising out of any misstatement or untrue statement of a material fact
or an omission to state a material fact in the information supplied by the
Association to Ferguson, unless Ferguson is determined to be negligent or
otherwise at fault.
An appraisal has been made by Ferguson in reliance upon the information
contained in this Prospectus, including the Financial Statements. Ferguson
also considered the following factors, among others: the present and
projected operating results and financial condition of the Company and the
Association and the economic and demographic conditions in the Association's
existing marketing area; certain historical, financial and other information
relating to the Association; a comparative evaluation of the operating and
financial statistics of the Association with those of other similarly
situated publicly traded savings institutions located in Louisiana and other
regions of the United States; the aggregate size of the offering of the
Common Stock; the impact of the Conversion on the Association's net worth and
earnings potential; the proposed dividend policy of the Company and the
Association; and the trading market for securities of comparable institutions
and general conditions in the market for such securities. In its review of
the appraisal provided by Ferguson, the Board of Directors reviewed the
methodologies and the appropriateness of the assumptions used by Ferguson in
addition to the factors enumerated above, and the Board of Directors believes
that such assumptions were reasonable. The projected operating results
reviewed by Ferguson covered periods through March 31, 2001. The financial
projections assume (i) a flat interest rate environment based on interest
rates prevailing in late May 1998, (ii) the Association's lending and
investment activities continue to emphasize single-family loan originations
and purchases of mortgage-backed securities, (iii) gradual asset growth
funded primarily by interest-bearing deposits and borrowings, and (iv) the
net Conversion proceeds retained by the Company are primarily invested in
short-term investment securities.
In determining the amount of the Appraisal, Ferguson reviewed the
Association's P/E, price/book ("P/B") and price/assets ("P/A") ratios on a
pro forma basis giving effect to the net Conversion proceeds to the
comparable ratios for a peer group consisting of 12 savings institution
holding companies. The peer group included companies with assets below $100
million, non-performing assets below 1.5% of total assets, loans receivable
equal to at least 60% of total assets, equity equal to more than 10% of
assets but less than 24% of assets, and positive core earnings for the most
recent 12 months and the most recent quarter. Ten of the resulting peer
group members are located in the Midwest region, one is located in the
Northeast region, and one is located in the Mid-Atlantic region of the
country. At the midpoint of the Appraisal, the Association's pro forma P/E
and P/A ratios as of or for the three months ended March 31, 1998 were 10.87x
and 9.80%, respectively, compared to ratios for the peer group of 21.50x and
20.4%, respectively. Also at the midpoint of the Appraisal, the
Association's pro forma P/B ratio at March 31, 1998 was 71.4%, compared to
77.4% for recently completed conversions listed on major stock exchanges and
73.0% for recently completed "Pink Sheet" conversions.
On the basis of the foregoing, Ferguson has advised the Company and the
Association that in its opinion, dated June 5, 1998, the estimated pro forma
market value of the Common Stock ranged from a minimum of $2,040,000 to a
maximum of $2,760,000, with a midpoint of $2,400,000. The Boards of
Directors of the Company and the Association determined that the Common Stock
should be sold at $10.00 per share, resulting in a range of
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204,000 to 276,000 shares of Common Stock being offered. The Estimated
Valuation Range may be amended with the approval of the OTS and the OFI, if
required, or if necessitated by subsequent developments in the financial
condition of the Company and the Association or market conditions generally,
or to fill the order of the ESOP. In the event the Estimated Valuation Range
is updated to amend the value of the Association below $2,040,000 or above
$3,174,000 (the maximum of the Estimated Valuation Range, as adjusted by
15%), the new appraisal will be filed with the SEC by post-effective
amendment.
Based upon current market and financial conditions and recent practices
and policies of the OTS, in the event the Company receives orders for Common
Stock in excess of $2,760,000 (the maximum of the Estimated Valuation Range)
and up to $3,174,000 (the maximum of the Estimated Valuation Range, as
adjusted by 15%), the Company may be required by the OTS to accept all such
orders. No assurances, however, can be made that the Company will receive
orders for Common Stock in excess of the maximum of the Estimated Valuation
Range or that, if such orders are received, that all such orders will be
accepted because the Company's final valuation and number of shares to be
issued are subject to the receipt of an updated appraisal from Ferguson which
reflects such an increase in the valuation and the approval of such increase
by the OTS. In addition, an increase in the number of shares above 276,000
shares will first be used, if necessary, to fill the order of the ESOP.
There is no obligation or understanding on the part of management to take
and/or pay for any shares in order to complete the Conversion.
Ferguson's valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing such shares.
Ferguson did not independently verify the Financial Statements and other
information provided by the Association, nor did Ferguson value independently
the assets or liabilities of the Association. The valuation considers the
Association as a going concern and should not be considered as an indication
of the liquidation value of the Association. Moreover, because such
valuation is necessarily based upon estimates and projections of a number of
matters, all of which are subject to change from time to time, no assurance
can be given that persons purchasing Common Stock in the Conversion will
thereafter be able to sell such shares at prices at or above the Purchase
Price or in the range of the foregoing valuation of the pro forma market
value thereof.
Prior to completion of the Conversion, the maximum of the Estimated
Valuation Range may be increased up to 15% and the number of shares of Common
Stock may be increased to up to 317,400 shares to reflect changes in market
and financial conditions or to fill the order of the ESOP, without the
resolicitation of subscribers. See "-- Limitations on Common Stock Purchases"
as to the method of distribution and allocation of additional shares that may
be issued in the event of an increase in the Estimated Valuation Range to
fill unfilled orders in the Subscription Offering.
No sale of shares of Common Stock in the Conversion may be consummated
unless prior to such consummation Ferguson confirms that nothing of a
material nature has occurred which, taking into account all relevant factors,
would cause it to conclude that the Purchase Price is materially incompatible
with the estimate of the pro forma market value of a share of Common Stock
upon consummation of the Conversion. If such is not the case, a new
Estimated Valuation Range may be set and a new Subscription and Community
Offering may be held or such other action may be taken as the Company and the
Association shall determine and the OTS and the OFI may permit or require.
Depending upon market or financial conditions following the commencement
of the Subscription Offering, the total number of shares of Common Stock may
be increased or decreased without a resolicitation of subscribers, provided
that the product of the total number of shares times the Purchase Price is
not below the minimum or more than 15% above the maximum of the Estimated
Valuation Range. In the event market or financial conditions change so as to
cause the aggregate Purchase Price of the shares to be below the minimum of
the Estimated Valuation Range or more than 15% above the maximum of such
range, purchasers will be resolicited (i.e., permitted to continue their
orders, in which case they will need to affirmatively reconfirm their
subscriptions prior to the expiration of the resolicitation offering or their
subscription funds will be promptly refunded with interest at the
Association's passbook rate of interest, or be permitted to modify or rescind
their subscriptions). Any change in the Estimated
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Valuation Range must be approved by the OTS. If the number of shares of
Common Stock issued in the Conversion is increased due to an increase of up
to 15% in the Estimated Valuation Range to reflect changes in market or
financial conditions or to fill the order of the ESOP, persons who subscribed
for the maximum number of shares will be given the opportunity to subscribe
for the adjusted maximum number of shares. See "-- Limitations on Common
Stock Purchases."
An increase in the number of shares of Common Stock as a result of an
increase in the estimated pro forma market value would decrease both a
subscriber's ownership interest and the Company's pro forma net income and
stockholders' equity on a per share basis while increasing pro forma net
income and stockholders' equity on an aggregate basis. A decrease in the
number of shares of Common Stock would increase both a subscriber's ownership
interest and the Company's pro forma net income and stockholders' equity on a
per share basis while decreasing pro forma net income and stockholders'
equity on an aggregate basis. See "Risk Factors -- Possible Increase in
Number of Shares Issued in the Conversion" and "Pro Forma Data."
The appraisal report of Ferguson has been filed as an exhibit to the
Company's Registration Statement and the Association's Application for
Conversion, of which this Prospectus is a part, and is available for
inspection in the manner set forth under "Additional Information."
Subscription Offering and Subscription Rights
In accordance with the Plan of Conversion, rights to subscribe for the
purchase of Common Stock have been granted under the Plan of Conversion to
the following persons in the following order of descending priority: (1)
Eligible Account Holders, (2) the ESOP, (3) Supplemental Eligible Account
Holders, (4) Other Members, and (5) directors, officers and employees of the
Association. All subscriptions received will be subject to the availability
of Common Stock after satisfaction of all subscriptions of all persons having
prior rights in the Subscription Offering and to the maximum and minimum
purchase limitations set forth in the Plan of Conversion and as described
below under "-- Limitations on Common Stock Purchases."
Priority 1: Eligible Account Holders. Each Eligible Account Holder
will receive, without payment therefor, first priority, nontransferable
subscription rights to subscribe for in the Subscription Offering up to the
greater of (i) $60,000 of Common Stock, (ii) one-tenth of one percent (0.10%)
of the total offering of shares of Common Stock or (iii) 15 times the product
(rounded down to the next whole number) obtained by multiplying the total
number of shares of Common Stock to be issued by a fraction, of which the
numerator is the amount of the Eligible Account Holder's qualifying deposit
and the denominator of which is the total amount of qualifying deposits of
all Eligible Account Holders, in each case as of the close of business on
December 31, 1996 (the "Eligibility Record Date"), subject to the overall
purchase limitations. See "-- Limitations on Common Stock Purchases."
If there are not sufficient shares available to satisfy all
subscriptions, shares first will be allocated among subscribing Eligible
Account Holders so as to permit each such Eligible Account Holder, to the
extent possible, to purchase a number of shares sufficient to make his total
allocation equal to the lesser of the number of shares subscribed for or 100
shares. Thereafter, any shares remaining after each subscribing Eligible
Account Holder has been allocated the lesser of the number of shares
subscribed for or 100 shares will be allocated among the subscribing Eligible
Account Holders whose subscriptions remain unfilled in the proportion that
the amounts of their respective eligible deposits bear to the total amount of
eligible deposits of all subscribing Eligible Account Holders whose
subscriptions remain unfilled, provided that no fractional shares shall be
issued. Subscription Rights of Eligible Account Holders will be subordinated
to the priority rights of Tax-Qualified Employee Stock Benefit Plans to
purchase shares in excess of the maximum of the Estimated Valuation Range.
To ensure proper allocation of stock, each Eligible Account Holder must
list on his subscription order form all accounts in which he has an ownership
interest. Failure to list an account could result in fewer shares being
allocated than if all accounts had been disclosed. The subscription rights
of Eligible Account Holders who are also
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directors or officers of the Association or their associates will be
subordinated to the subscription rights of other Eligible Account Holders to
the extent attributable to increased deposits in the year preceding December
31, 1996.
Priority 2: Employee Stock Ownership Plan. The ESOP will receive,
without payment therefor, second priority, nontransferable subscription
rights to purchase, in the aggregate, up to 10% of the Common Stock,
including any increase in the number of shares of Common Stock after the date
hereof as a result of an increase of up to 15% in the maximum of the
Estimated Valuation Range. The ESOP intends to purchase 8% of the shares of
Common Stock, or 16,320 shares and 22,080 shares based on the minimum and
maximum of the Estimated Valuation Range, respectively. Subscriptions by the
ESOP will not be aggregated with shares of Common Stock purchased directly by
or which are otherwise attributable to any other participants in the
Subscription and Community Offerings, including subscriptions of any of the
Association's directors, officers, employees or associates thereof. In the
event that the total number of shares offered in the Conversion is increased
to an amount greater than the number of shares representing the maximum of
the Estimated Valuation Range ("Maximum Shares"), the ESOP will have a
priority right to purchase any such shares exceeding the Maximum Shares up to
an aggregate of 10% of the Common Stock. See "-- Limitations on Common Stock
Purchases" and "Risk Factors -- Dilutive Effect of Possible Issuance of
Additional Shares."
Priority 3: Supplemental Eligible Account Holders. To the extent that
there are sufficient shares remaining after satisfaction of subscriptions by
Eligible Account Holders and the ESOP, each Supplemental Eligible Account
Holder will receive, without payment therefor, third priority,
nontransferable subscription rights to subscribe for in the Subscription
Offering up to the greater of (i) $60,000 of Common Stock, (ii) one-tenth of
one percent (0.10%) of the total offering of shares of Common Stock or (iii)
15 times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Common Stock to be issued by a
fraction, of which the numerator is the amount of the Supplemental Eligible
Account Holder's qualifying deposit and the denominator of which is the total
amount of qualifying deposits of all Supplemental Eligible Account Holders,
in each case as of the close of business on June 30, 1998 (the "Supplemental
Eligibility Record Date"), subject to the overall purchase limitations. See
"-- Limitations on Common Stock Purchases."
If there are not sufficient shares available to satisfy all
subscriptions of all Supplemental Eligible Account Holders, available shares
first will be allocated among subscribing Supplemental Eligible Account
Holders so as to permit each such Supplemental Eligible Account Holder, to
the extent possible, to purchase a number of shares sufficient to make his
total allocation equal to the lesser of the number of shares subscribed for
or 100 shares. Thereafter, any shares remaining available will be allocated
among the Supplemental Eligible Account Holders whose subscriptions remain
unfilled in the proportion that the amounts of their respective eligible
deposits bear to the total amount of eligible deposits of all subscribing
Supplemental Eligible Account Holders whose subscriptions remain unfilled,
provided that no fractional shares shall be issued.
Priority 4: Other Members. To the extent that there are sufficient
shares remaining after satisfaction of subscriptions by Eligible Account
Holders, the ESOP and Supplemental Eligible Account Holders, each Other
Member will receive, without payment therefor, fourth priority,
nontransferable subscription rights to subscribe for Common Stock in the
Subscription Offering up to the greater of (i) $60,000 of Common Stock or
(ii) one-tenth of one percent (0.10%) of the total offering of shares of
Common Stock, subject to the overall purchase limitations. See "--
Limitations on Common Stock Purchases."
In the event the Other Members subscribe for a number of shares which,
when added to the shares subscribed for by Eligible Account Holders, the ESOP
and Supplemental Eligible Account Holders, is in excess of the total number
of shares of Common Stock offered in the Conversion, available shares first
will be allocated so as to permit each subscribing Other Member, to the
extent possible, to purchase a number of shares sufficient to make his total
allocation equal to the lesser of the number of shares subscribed for or 100
shares. Thereafter, any remaining shares will be allocated among such
subscribing Other Members on a pro rata basis in the same proportion as each
Other Member's subscription bears to the total subscriptions of all
subscribing Other Members, provided that no fractional shares shall be issued.
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Priority 5: Directors, Officers and Employees. To the extent that
there are sufficient shares remaining after satisfaction of all subscriptions
by Eligible Account Holders, the ESOP, Supplemental Eligible Account Holders
and Other Members, then directors, officers and employees of the Association
will receive, without payment therefor, fifth priority, nontransferable
subscription rights to subscribe for, in this category, an aggregate of up to
20% of the shares of Common Stock offered in the Subscription Offering. The
ability of directors, officers and employees to purchase Common Stock under
this category is in addition to rights which are otherwise available to them
under the Plan as they may fall within higher priority categories, and the
Plan generally allows such persons to purchase in the aggregate up to 35% of
Common Stock sold in the Conversion. See "-- Limitations on Common Stock
Purchases."
In the event of an oversubscription in this category, subscription
rights will be allocated among the individual directors, officers and
employees on a point system basis, whereby such individuals will receive
subscription rights in the proportion that the number of points assigned to
each of them bears to the total points assigned to all directors, officers
and employees, provided that no fractional shares shall be issued. One point
will be assigned for each year of service with the Association, one point for
each salary increment of $5,000 per annum and five points for each office
presently held in the Association, including directorships. For information
as to the number of shares proposed to be purchased by certain of the
directors and officers, see "Proposed Management Purchases."
Expiration Date for the Subscription Offering. The Subscription
Offering will expire at 12:00 noon, Central Time, on September 15, 1998
(the "Expiration Date"), unless extended for up to 45 days or for such
additional periods by the Company and the Association as may be approved by
the OTS and the OFI. The Subscription Offering may not be extended beyond
September 22, 2000. Subscription rights which have not been exercised
prior to the Expiration Date (unless extended) will become void.
The Company and the Association will not execute orders until at least
the minimum number of shares of Common Stock (204,000 shares) have been
subscribed for or otherwise sold. If all shares have not been subscribed for
or sold within 45 days after the Subscription Expiration Date, unless such
period is extended with the consent of the OTS and the OFI, all funds
delivered to the Association pursuant to the Subscription Offering will be
returned promptly to the subscribers with interest and all withdrawal
authorizations will be cancelled. If an extension beyond the 45-day period
following the Expiration Date is granted, the Company and the Association
will notify subscribers of the extension of time and of any rights of
subscribers to modify or rescind their subscriptions.
Community Offering
To the extent that shares remain available for purchase after
satisfaction of all subscriptions of Eligible Account Holders, the ESOP,
Supplemental Eligible Account Holders, Other Members and directors, officers
and employees of the Association, the Company and the Association may elect
to offer such shares either prior to or upon completion of the Subscription
Offering to certain members of the general public, with preference given to
natural persons residing in Iberville Parish, Louisiana (such natural persons
referred to as "Preferred Subscribers"). Such persons, together with
associates of and persons acting in concert with such persons, may purchase
up to the greater of (i) $60,000 or 6,000 shares of Common Stock, or (ii)
one-tenth of one percent (0.10%) of the total offering of shares of Common
Stock, subject to the maximum purchase limitations. See "-- Limitations on
Common Stock Purchases." This amount may be increased at the sole discretion
of the Company and the Association up to 5% or decreased to as low as 1% of
the total offering of shares in the Subscription Offering. The opportunity
to subscribe for shares of Common Stock in the Community Offering category is
subject to the right of the Company and the Association, in their sole
discretion, to accept or reject any such orders in whole or in part either at
the time of receipt of an order or as soon as practicable following the
Expiration Date.
If there are not sufficient shares available to fill the orders of
Preferred Subscribers after completion of the Subscription and Community
Offerings, such stock will be allocated first to each Preferred Subscriber
whose order is accepted by the Company, in an amount equal to the lesser of
100 shares or the number of shares subscribed for
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by each such Preferred Subscriber, if possible. Thereafter, unallocated
shares will be allocated among the Preferred Subscribers whose accepted
orders remain unsatisfied in the same proportion that the unfilled
subscription of each (up to 2% of the total offering) bears to the total
unfilled subscriptions of all Preferred Subscribers whose accepted orders
remains unsatisfied, provided that no fractional shares shall be issued.
Orders for Common Stock in the Community Offering will first be filled to a
maximum of 2% of the total number of shares of Common Stock sold in the
Conversion and thereafter any remaining shares shall be allocated on an equal
number of shares basis per order until all orders have been filled. If there
are any shares remaining, shares will be allocated to other members of the
general public who subscribe in the Community Offering applying the same
allocation described above for Preferred Subscribers.
Persons in Nonqualified States or Foreign Countries
The Company and the Association will make reasonable efforts to comply
with the securities laws of all states in the United States in which persons
entitled to subscribe for stock pursuant to the Plan reside. However, the
Company and the Association are not required to offer stock in the
Subscription Offering to any person who resides in a foreign country or
resides in a state of the United States with respect to which: (a) the
number of persons otherwise eligible to subscribe for shares under the Plan
who reside in such jurisdiction is small; (b) the granting of subscription
rights or the offer or sale of shares of Common Stock to such persons would
require any of the Company and the Association or their officers, directors
or employees, under the laws of such jurisdiction, to register as a broker,
dealer, salesman or selling agent or to register or otherwise qualify its
securities for sale in such jurisdiction or to qualify as a foreign
corporation or file a consent to service of process in such jurisdiction; and
(c) such registration, qualification or filing in the judgment of the Company
and the Association would be impracticable or unduly burdensome for reasons
of costs or otherwise. Where the number of persons eligible to subscribe for
shares in one state is small, the Company and the Association will base their
decision as to whether or not to offer the Common Stock in such state on a
number of factors, including but not limited to the size of accounts held by
account holders in the state, the cost of registering or qualifying the
shares or the need to register the Company, its officers, directors or
employees as brokers, dealers or salesmen.
Limitations on Common Stock Purchases
The Plan includes the following limitations on the number of shares of
Common Stock which may be purchased in the Conversion:
(1) No fewer than 25 shares of Common Stock may be purchased, to
the extent such shares are available;
(2) Each Eligible Account Holder may subscribe for and purchase
in the Subscription Offering up to the greater of (i) $60,000 or 6,000
shares of Common Stock, (ii) one-tenth of one percent (0.10 %) of the
total offering of shares of Common Stock or (iii) 15 times the product
(rounded down to the next whole number) obtained by multiplying the
total number of shares of Common Stock to be issued by a fraction, of
which the numerator is the amount of the qualifying deposit of the
Eligible Account Holder and the denominator is the total amount of
qualifying deposits of all Eligible Account Holders, in each case as
of the close of business on the Eligibility Record Date, subject to
the overall limitation in clause (7) below;
(3) The ESOP may purchase in the aggregate up to 10% of the
shares of Common Stock, including any additional shares issued in the
event of an increase in the Estimated Valuation Range, although at
this time it intends to purchase only 8% of such shares;
(4) Each Supplemental Eligible Account Holder may subscribe for
and purchase in the Subscription Offering up to the greater of (i)
$60,000 or 6,000 shares of Common Stock, (ii) one-tenth of one percent
(0.10%) of the total offering of shares of Common Stock or (iii) 15
times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Common Stock to
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be issued by a fraction, of which the numerator is the amount of the
qualifying deposit of the Supplemental Eligible Account Holder and the
denominator is the total amount of qualifying deposits of all
Supplemental Eligible Account Holders, in each case as of the close of
business on the Supplemental Eligibility Record Date, subject to the
overall limitation in clause (7) below;
(5) Each Other Member or any Person purchasing shares of Common
Stock in the Community Offering may subscribe for and purchase in the
Subscription Offering or Community Offering, as the case may be, up to
the greater of (i) $60,000 or 6,000 shares of Common Stock or (ii)
one-tenth of one percent (0.10%) of the total offering of shares of
Common Stock, subject to the overall limitation in clause (7) below;
(6) Persons purchasing shares of Common Stock in the Community
Offering may purchase in the Community Offering up to $60,000 or 6,000
shares of Common Stock, subject to the overall limitation in clause
(7) below;
(7) Except for the ESOP and certain Eligible Account Holders and
Supplemental Eligible Account Holders whose subscription rights are
based upon the amount of their deposits, the maximum number of shares
of Common Stock subscribed for or purchased in all categories of the
Conversion by any person, together with associates of and groups of
persons acting in concert with such persons, shall not exceed $100,000
or 10,000 shares of Common Stock issued in the Conversion, or 3.6% at
the maximum of the Estimated Valuation Range; and
(8) No more than 20% of the total number of shares offered for
sale in the Subscription Offering may be purchased by directors and
officers of the Association in the fourth priority category in the
Subscription Offering. No more than 35% of the total number of shares
offered for sale in the Conversion may be purchased by directors and
officers of the Association and their associates in the aggregate,
excluding purchases by the ESOP.
Subject to any required regulatory approval and the requirements of
applicable laws and regulations, but without further approval of the members
of the Association, the individual amount permitted to be subscribed for may
be increased up to a maximum of 5% of the number of shares sold in the
Conversion and both the individual and the overall purchase limitations may
be decreased to a minimum of 1% of the number of shares sold in the
Conversion at the sole discretion of the Company and the Association. If
such amount is increased, subscribers for the maximum amount will be, and
certain other large subscribers in the sole discretion of the Company and the
Association may be, given the opportunity to increase their subscriptions up
to the then applicable limit.
In the event of an increase in the total number of shares of Common
Stock offered in the Conversion due to an increase in the Estimated Valuation
Range of up to 15% (the "Adjusted Maximum"), the additional shares will be
allocated in the following order of priority in accordance with the Plan:
(i) to fill the ESOP's subscription of 8% of the Adjusted Maximum number of
shares; (ii) in the event that there is an oversubscription by Eligible
Account Holders, to fill unfulfilled subscriptions of Eligible Account
Holders, inclusive of the Adjusted Maximum; (iii) in the event that there is
an oversubscription by Supplemental Eligible Account Holders, to fill
unfulfilled subscriptions of Supplemental Eligible Account Holders, inclusive
of the Adjusted Maximum; (iv) in the event that there is an oversubscription
by Other Members, to fill unfulfilled subscriptions of Other Members,
inclusive of the Adjusted Maximum; (v) in the event there is an
oversubscription by directors, officers and employees of the Company and the
Association, to fill unfulfilled subscriptions of directors, officers and
employees, inclusive of the Adjusted Maximum; and (vi) to fill unfulfilled
subscriptions in the Community Offering to the extent possible, inclusive of
the Adjusted Maximum.
The term "associate" of a person is defined to mean (i) any corporation
or other organization (other than the Company and the Association or a
majority-owned subsidiary of the Association) of which such person is a
director, officer or partner or is directly or indirectly the beneficial
owner of 10% or more of any class of equity
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securities; (ii) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee
or in a similar fiduciary capacity, provided, however, that such term shall
not include any tax-qualified employee stock benefit plan of the Company and
the Association in which such person has a substantial beneficial interest or
serves as a trustee or in a similar fiduciary capacity; and (iii) any
relative or spouse of such person, or any relative of such spouse, who either
has the same home as such person or who is a director or officer of the
Company and the Association or any of their subsidiaries.
The term "acting in concert" is defined to mean (1) knowing
participation in a joint activity or interdependent conscious parallel action
towards a common goal whether or not pursuant to an express agreement, or (2)
a combination or pooling of voting or other interests in the securities of an
issuer for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise.
The Company and the Association may presume that certain persons are acting
in concert based upon, among other things, joint account relationships,
common addresses and the fact that such persons have filed joint Schedules
13D with the SEC with respect to other companies.
Marketing Arrangements
The Company and the Association have engaged Trident as a financial
advisor and marketing agent in connection with the offering of the Common
Stock, and Trident has agreed to use its best efforts to solicit
subscriptions and purchase orders for shares of Common Stock in the
Offerings. Trident is a member of the National Association of Securities
Dealers, Inc. ("NASD") and an SEC-registered broker-dealer. Trident is
headquartered in Raleigh, North Carolina, and its telephone number is (919)
781-8900. Trident will provide various services including, but not limited
to, (i) training and educating the Association's directors, officers and
employees regarding the mechanics and regulatory requirements of the stock
sales process; (2) providing its employees to staff the Stock Sales Center to
assist the Association's customers and internal stock purchasers and to keep
records of orders for shares of Common Stock; and (3) targeting the Company's
sales efforts, including assisting in the preparation of marketing materials.
Based upon negotiations between the Company and the Association concerning
fee structure, Trident will receive a fee of $75,000 payable upon
consummation of the Conversion. In the event that a selected dealers
agreement is entered into in connection with a Syndicated Community Offering,
the Association will pay to such selected dealers a fee at the commission
rate to be agreed upon by the Company, the Association and Trident, for
shares sold by an NASD member firm pursuant to a selected dealers agreement.
Fees to Trident and to any other broker-dealer may be deemed to be
underwriting fees, and Trident and such broker-dealers may be deemed to be
underwriters. Trident will also be reimbursed for its reasonable legal fees
and out-of-pocket expenses in an amount not to exceed $37,500, of which
$10,000 has been paid to date. The Company and the Association have agreed
to indemnify Trident and each person, if any, who controls Trident against
all losses, claims, damages or liabilities, joint or several, and all legal
and other expenses reasonably incurred by them in connection with certain
claims that may arise as a result of the Conversion, including liabilities
under the Securities Act, except those that are due to Trident's willful
misconduct or gross negligence.
Directors and executive officers of the Company and the Association may
participate in the solicitation of offers to purchase Common Stock by mailing
written materials to members of the Association and other prospective
investors, responding to inquiries of prospective investors, and performing
ministerial or clerical work. In each jurisdiction in which the securities
laws require that the offer and/or sale of the Common Stock be made through a
broker-dealer registered in such jurisdiction, all written materials will be
mailed under cover of a letter from Trident. Other employees of the
Association may participate in the Offerings in ministerial capacities or
providing clerical work in effecting a sales transaction. Such other
employees have been instructed not to solicit offers to purchase Common Stock
or provide advice regarding the purchase of Common Stock. Questions of
prospective purchasers will be directed to executive officers or registered
representatives. The Company will rely on Rule 3a4-1 under the Exchange Act,
and sales of Common Stock will be conducted within the requirements of Rule
3a4-1, so as to permit officers, directors and employees to participate in
the sale of Common Stock. No officer, director or employee of the Company
and the Association will be compensated in connection with his participation
by the
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payment of commissions or other remuneration based either directly or
indirectly on the transactions in the Common Stock.
Procedure for Purchasing Shares in the Subscription and Community Offerings
To ensure that each purchaser receives a prospectus at least 48 hours
before the Expiration Date (unless extended) in accordance with Rule 15c2-8
of the Exchange Act, no prospectus will be mailed any later than five days
prior to such date or hand delivered any later than two days prior to such
date. Execution of the order form will confirm receipt or delivery in
accordance with Rule 15c2-8. Order forms will only be distributed with a
prospectus.
To purchase shares in the Subscription and Community Offerings, an
executed order form with the required payment for each share subscribed for,
or with appropriate authorization for withdrawal from a deposit account at
the Association (which may be given by completing the appropriate blanks in
the order form), must be received by the Association by noon, Central Time,
on the Expiration Date (unless extended). In addition, the Company and the
Association will require a prospective purchaser to execute a certification
in the form required by applicable OTS regulations in connection with any
sale of Common Stock. Order forms which are not received by such time or are
executed defectively or are received without full payment (or appropriate
withdrawal instructions) are not required to be accepted. Copies of order
forms, order forms unaccompanied by an executed certification form, payments
from other private third parties and wire transfers will not be accepted.
The Company and the Association have the right to waive or permit the
correction of incomplete or improperly executed forms, but do not represent
that they will do so. Once received, an executed order form may not be
modified, amended or rescinded without the consent of the Company and the
Association, unless the Conversion has not been completed within 45 days
after the end of the Subscription Offering, unless such period has been
extended.
In order to ensure that Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members are properly identified as to their stock
purchase priority, depositors as of the close of business on the Eligibility
Record Date (December 31, 1996) or the Supplemental Eligibility Record Date
(June 30, 1998) and depositors and borrowers as of the close of business on
the Voting Record Date (August 7, 1998) must list all accounts on the stock
order form giving all names in each account and the account numbers.
Payment for subscriptions may be made (i) in cash if delivered in person
at the main office of the Association, (ii) by check or money order, or (iii)
by authorization of withdrawal from deposit accounts maintained with the
Association. Interest will be paid on payments made by cash, check or money
order at the Association's passbook rate of interest from the date payment is
received until completion or termination of the Conversion. If payment is
made by authorization of withdrawal from deposit accounts, the funds
authorized to be withdrawn from a deposit account will continue to accrue
interest at the contractual rates until completion or termination of the
Conversion, but a hold will be placed on such funds, thereby making them
unavailable to the depositor until completion or termination of the
Conversion.
If a subscriber authorizes the Association to withdraw the amount of the
purchase price from his deposit account, the Association will do so as of the
effective date of the Conversion. The Association will waive any applicable
penalties for early withdrawal from certificate accounts. If the remaining
balance in a certificate account is reduced below the applicable minimum
balance requirement at the time that the funds actually are transferred under
the authorization, the certificate will be cancelled at the time of the
withdrawal, without penalty, and the remaining balance will earn interest at
the passbook rate.
The ESOP will not be required to pay for the shares subscribed for at
the time it subscribes, but rather may pay for such shares of Common Stock
subscribed for by it at the Purchase Price upon consummation of the
Subscription and Community Offerings, provided that there is in force from
the time of its subscription until such time, a loan commitment from an
unrelated financial institution or the Company to lend to the ESOP, at such
time, the aggregate Purchase Price of the shares for which it subscribed.
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Owners of self-directed individual retirement accounts ("IRAs") may use
the assets of such IRAs to purchase shares of Common Stock in the
Subscription and Community Offerings, provided that such IRAs are not
maintained at the Association. Persons with IRAs maintained at the
Association must have their accounts transferred to an unaffiliated
institution or broker to purchase shares of Common Stock in the Subscription
and Community Offerings. In addition, ERISA provisions and IRS regulations
require that officers, directors and 10% stockholders who use self-directed
IRA funds to purchase shares of Common Stock in the Subscription and
Community Offerings make such purchases for the exclusive benefit of the
IRAs. Any interested parties wishing to use IRA funds for stock purchases
are advised to contact the Stock Sales Center for additional information and
allow sufficient time for the account to be transferred as required.
Certificates representing shares of Common Stock purchased will be
mailed to purchasers at the last address of such persons appearing on the
records of the Association, or to such other address as may be specified in
properly completed order forms, as soon as practicable following consummation
of the Conversion. Any certificates returned as undeliverable will be
disposed of in accordance with applicable law.
Restrictions on Transfer of Subscription Rights and Shares
Pursuant to the rules and regulations of the OTS, no person with
subscription rights may transfer or enter into any agreement or understanding
to transfer the legal or beneficial ownership of the subscription rights
issued under the Plan or the shares of Common Stock to be issued upon their
exercise. Such rights may be exercised only by the person to whom they are
granted and only for his account. Each person exercising such subscription
rights will be required to certify that he is purchasing shares solely for
his own account and that he has no agreement or understanding regarding the
sale or transfer of such shares. Federal regulations also prohibit any
person from offering or making an announcement of an offer or intent to make
an offer to purchase such subscription rights or shares of Common Stock prior
to the completion of the Conversion.
The Company and the Association will pursue any and all legal and
equitable remedies in the event they become aware of the transfer of
subscription rights and will not honor orders known by them to involve the
transfer of such rights.
Liquidation Rights
In the unlikely event of a complete liquidation of the Association in
its present mutual form, each depositor of the Association would receive his
pro rata share of any assets of the Association remaining after payment of
claims of all creditors (including the claims of all depositors to the
withdrawal value of their accounts). Each depositor's pro rata share of such
remaining assets would be in the same proportion as the value of his deposit
account was to the total value of all deposit accounts in the Association at
the time of liquidation. After the Conversion, each depositor, in the event
of a complete liquidation of the Association, would have a claim as a
creditor of the same general priority as the claims of all other general
creditors of the Association. However, except as described below, his claim
would be solely in the amount of the balance in his deposit account plus
accrued interest. He would not have an interest in the value or assets of
the Association above that amount.
The Plan provides for the establishment, upon the completion of the
Conversion, of a special "liquidation account" for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders in an amount equal
to the Association's net worth as of the date of its latest statement of
financial condition contained in the final prospectus utilized in the
Conversion. As of the date of this Prospectus, the initial balance of the
liquidation account would be approximately $1.7 million. Each Eligible
Account Holder and Supplemental Eligible Account Holder, if he were to
continue to maintain his deposit account at the Association, would be
entitled, upon a complete liquidation of the Association after the
Conversion, to an interest in the liquidation account prior to any payment to
the Company as the sole stockholder of the Association. Each Eligible
Account Holder and Supplemental Eligible Account Holder would have an initial
interest in such liquidation account for each deposit account, including
passbook accounts, NOW accounts, money market deposit accounts, and
certificates of deposit, held in the
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Association at the close of business on December 31, 1996 or June 30, 1998,
as the case may be. Each Eligible Account Holder and Supplemental Eligible
Account Holder will have a pro rata interest in the total liquidation account
for each of his deposit accounts based on the proportion that the balance of
each such deposit account on the December 31, 1996 eligibility record date
(or the June 30, 1998 supplemental eligibility record date, as the case may
be) bore to the balance of all deposit accounts in the Association on such
dates.
If, however, on any December 31 annual closing date of the Association,
commencing December 31, 1998, the amount in any deposit account is less than
the amount in such deposit account on December 31, 1996 or June 30, 1998, as
the case may be, or any other annual closing date, then the interest in the
liquidation account relating to such deposit account would be reduced by the
proportion of any such reduction, and such interest will cease to exist if
such deposit account is closed. In addition, no interest in the liquidation
account would ever be increased despite any subsequent increase in the
related deposit account. Any assets remaining after the claims of general
creditors (including the claims of all depositors to the withdrawal value of
their accounts) and the above liquidation rights of Eligible Account Holders
and Supplemental Eligible Account Holders are satisfied would be distributed
to the Company as the sole stockholder of the Association.
Tax Aspects
Consummation of the Conversion is expressly conditioned upon prior
receipt of either a ruling or an opinion of counsel with respect to federal
tax laws, and either a ruling or an opinion with respect to Louisiana tax
laws, to the effect that consummation of the transactions contemplated hereby
will not result in a taxable reorganization under the provisions of the
applicable codes or otherwise result in any adverse tax consequences to the
Association, the Company or to account holders receiving subscription rights,
except to the extent, if any, that subscription rights are deemed to have
fair market value on the date such rights are issued.
Elias, Matz, Tiernan & Herrick L.L.P., Washington, D.C., has issued an
opinion to the Company and the Association to the effect that, for federal
income tax purposes: (i) the Association's change in form from mutual to
stock ownership will constitute a reorganization under Section 368(a)(1)(F)
of the Code and neither the Association nor the Company will recognize any
gain or loss as a result of the Conversion; (ii) no gain or loss will be
recognized by the Association or the Company upon the purchase of the
Association's capital stock by the Company; (iii) no gain or loss will be
recognized by Eligible Account Holders and Supplemental Eligible Account
Holders upon the issuance to them of deposit accounts in the Association in
its stock form plus their interests in the liquidation account in exchange
for their deposit accounts in the mutual Association; (iv) assuming the
non-transferable subscription rights to purchase Common Stock have no value,
the tax basis of the depositors' deposit accounts in the Association
immediately after the Conversion will be the same as the basis of their
deposit accounts immediately prior to the Conversion; (v) assuming the
non-transferable subscription rights to purchase Common Stock have no value,
the tax basis of each Eligible Account Holder's and Supplemental Eligible
Account Holder's interest in the liquidation account will be zero; and (vi)
the tax basis to the stockholders of the Common Stock of the Company
purchased in the Conversion will be the amount paid therefor, and the holding
period for the shares of Common Stock purchased by such persons will begin on
the date of consummation of the Conversion if purchased through the exercise
of subscription rights and on the day after the date of purchase if purchased
in the Community Offering. L.A. Champagne & Co., L.L.P., Baton Rouge,
Louisiana, has also rendered an opinion to the effect that the foregoing tax
effects of the Conversion under Louisiana law are substantially the same as
they are under federal law.
In the opinion of Ferguson, the subscription rights do not have any
value, based on the fact that such rights are acquired by the recipients
without cost, are nontransferable and of short duration, and afford the
recipients the right only to purchase the Common Stock at a price equal to
its estimated fair market value, which will be the same price as the Purchase
Price for the unsubscribed shares of Common Stock. If the subscription
rights granted to eligible subscribers are deemed to have an ascertainable
value, receipt of such rights would be taxable probably only to those
eligible subscribers who exercise the subscription rights (either as a
capital gain or ordinary income) in an amount equal to such value, and the
Company and the Association could recognize gain on such distribution.
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Eligible subscribers are encouraged to consult with their own tax advisor as
to the tax consequences in the event that such subscription rights are deemed
to have an ascertainable value.
Unlike private rulings, an opinion is not binding on the IRS, and the
IRS could disagree with conclusions reached therein. In the event of such
disagreement, there can be no assurance that the IRS would not prevail in a
judicial or administrative proceeding.
Delivery of Certificates
Certificates representing Common Stock issued in the Conversion will be
mailed by the Company's transfer agent to the persons entitled thereto at the
addresses of such persons appearing on the stock order form as soon as
practicable following consummation of the Conversion. Any certificates
returned as undeliverable will be held by the Company until claimed by
persons legally entitled thereto or otherwise disposed of in accordance with
applicable law. Until certificates for Common Stock are available and
delivered to subscribers, such subscribers may not be able to sell the shares
of Common Stock for which they have subscribed, even though trading of the
Common Stock may have commenced.
Required Approvals
Various approvals of the OTS and OFI are required in order to consummate
the Conversion. The OTS and OFI have approved the Plan of Conversion,
subject to approval by the Association's members and other standard
conditions. The Company's holding company application is currently pending.
The Company is required to make certain filings with state securities
regulatory authorities in connection with the issuance of Common Stock in the
Conversion.
Certain Restrictions on Purchase or Transfer of Shares After the Conversion
All shares of Common Stock purchased in connection with the Conversion
by a director or an executive officer of the Company and the Association will
be subject to a restriction that the shares not be sold for a period of one
year following the Conversion, except in the event of the death of such
director or executive officer or pursuant to a merger or similar transaction
approved by the OTS. Each certificate for restricted shares will bear a
legend giving notice of this restriction on transfer, and appropriate
stop-transfer instructions will be issued to the Company's transfer agent.
Any shares of Common Stock issued at a later date within this one year period
as a stock dividend, stock split or otherwise with respect to such restricted
stock will be subject to the same restrictions. The directors and executive
officers of the Company will also be subject to the insider trading rules
promulgated pursuant to the Exchange Act as long as the Common Stock is
registered pursuant to Section 12(g) of the Exchange Act.
Purchases of Common Stock of the Company by directors, executive
officers and their associates during the three-year period following
completion of the Conversion may be made only through a broker or dealer
registered with the SEC, except with the prior written approval of the OTS.
This restriction does not apply, however, to negotiated transactions
involving more than 1% of the Company's outstanding Common Stock or to
certain purchases of stock pursuant to an employee stock benefit plan, such
as the ESOP, or by any non-tax-qualified employee stock benefit plan, such as
the Recognition Plan.
Pursuant to OTS regulations, the Company will generally be prohibited
from repurchasing any shares of the Common Stock within one year following
consummation of the Conversion. During the second and third years following
consummation of the Conversion, the Company may not repurchase any shares of
its Common Stock other than pursuant to (i) an offer to all stockholders on a
pro rata basis which is approved by the OTS; (ii) the repurchase of
qualifying shares of a director, if any; (iii) purchases in the open market
by a tax-qualified or non-tax-qualified employee stock benefit plan in an
amount reasonable and appropriate to fund the plan; or (iv) purchases that
are part of an open-market stock repurchase program not involving more than
5% of its outstanding capital stock during a
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12-month period, if the repurchases do not cause the Association to become
undercapitalized and the Association provides to the Regional Director of the
OTS no later than 10 days prior to the commencement of a repurchase program
written notice containing a full description of the program to be undertaken
and such program is not disapproved by the Regional Director. The OTS may
permit stock repurchases in excess of such amounts prior to the third
anniversary of the Conversion if exceptional circumstances are shown to exist.
RESTRICTIONS ON ACQUISITION OF THE COMPANY
AND THE ASSOCIATION
General
As described below, certain provisions in the Company's Articles of
Incorporation and Bylaws and in the Company's and the Association's proposed
benefit plans, together with provisions of Louisiana corporate law and OTS
regulations, may have anti-takeover effects. In addition, regulatory
restrictions may make it difficult for persons or companies to acquire
control of either the Company or the Association.
Restrictions in the Company's Articles of Incorporation and Bylaws
General. A number of provisions of the Company's Articles of
Incorporation and Bylaws deal with matters of corporate governance and
certain rights of stockholders. The following discussion of the Company's
Articles of Incorporation and Bylaws summarizes the material provisions which
might be deemed to have a potential "anti-takeover" effect. These provisions
may have the effect of discouraging a future takeover attempt which is not
approved by the Board of Directors but which individual Company stockholders
may deem to be in their best interests or in which stockholders may receive a
substantial premium for their shares over then current market prices. As a
result, stockholders who might desire to participate in such a transaction
may not have an opportunity to do so. Such provisions will also render the
removal of the current Board of Directors or management of the Company more
difficult. The following description of certain of the provisions of the
Articles of Incorporation and Bylaws of the Company is necessarily general
and reference should be made in each case to such Articles of Incorporation
and Bylaws, which are incorporated herein by reference. See "Additional
Information" as to how to obtain a copy of these documents.
Limitation on Voting Rights. Article 10.A of the Company's Articles of
Incorporation provides that for a period of five years from the date of the
Conversion, no person shall directly or indirectly offer to acquire or
acquire the beneficial ownership of (i) more than 10% of the issued and
outstanding shares of any class of an equity security of the Company, or (ii)
any securities convertible into, or exercisable for, any equity securities of
the Company if, assuming conversion or exercise by such person of all
securities of which such person is the beneficial owner which are convertible
into, or exercisable for, such equity securities (but of no securities
convertible into, or exercisable for, such equity securities of which such
person is not the beneficial owner), such person would be the beneficial
owner of more than 10% of any class of an equity security of the Company.
The term "person" is broadly defined to prevent circumvention of this
restriction.
The foregoing restrictions do not apply to (i) any offer with a view
toward public resale made exclusively to the Company by underwriters or a
selling group acting on its behalf, (ii) any tax-qualified employee benefit
plan or arrangement established by the Company or the Association and any
trustee of such a plan or arrangement, and (iii) any other offer or
acquisition approved in advance by the affirmative vote of two-thirds of the
Company's entire Board of Directors. In the event that shares are acquired
in violation of Article 10.A, all shares beneficially owned by any person in
excess of 10% shall be considered "Excess Shares" and shall not be counted as
shares entitled to vote and shall not be voted by any person or counted as
voting shares in connection with any matters submitted to stockholders for a
vote, and the Board of Directors may cause such Excess Shares to be
transferred to an independent trustee for sale on the open market or
otherwise, with the expenses of such trustee to be paid out of the proceeds
of sale.
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Board of Directors. Article 6.B of the Articles of Incorporation of the
Company contains provisions relating to the Board of Directors and provides,
among other things, that the Board of Directors shall be divided into three
classes as nearly equal in number as possible, with the term of office of one
class expiring each year. See "Management -- Management of the Company." The
classified Board is intended to provide for continuity of the Board of
Directors and to make it more difficult and time consuming for a stockholder
group to fully use its voting power to gain control of the Board of Directors
without the consent of the incumbent Board of Directors of the Company.
Cumulative voting in the election of directors is not permitted.
Directors may be removed without cause at a duly constituted meeting of
stockholders called expressly for that purpose upon the vote of the holders
of at least 75% of the total votes eligible to be cast by stockholders, and
with cause by the affirmative vote of a majority of the total votes eligible
to be cast by stockholders. Cause for removal shall exist only if the
director whose removal is proposed has been either declared of unsound mind
by an order of a court of competent jurisdiction, convicted of a felony or of
an offense punishable by imprisonment for a term of more than one year by a
court of competent jurisdiction, or deemed liable by a court of competent
jurisdiction for gross negligence or misconduct in the performance of such
director's duties to the Company. Any vacancy occurring in the Board of
Directors for any reason (including an increase in the number of authorized
directors) may be filled by the affirmative vote of a majority of the
remaining directors, whether or not a quorum of the Board of Directors is
present, and a director appointed to fill a vacancy shall serve until the
expiration of the term to which he was appointed.
Article 6.F of the Articles of Incorporation governs nominations for
election to the Board, and requires all nominations for election to the Board
of Directors other than those made by the Board to be made by a stockholder
eligible to vote at an annual meeting of stockholders who has complied with
the notice provisions in that section. Written notice of a stockholder
nomination must be delivered to, or mailed to and received at, the principal
executive offices of the Company not later than 120 days prior to the
anniversary date of the initial mailing of proxy materials by the Company in
connection with the immediately preceding annual meeting of stockholders of
the Company, provided that, with respect to the first scheduled annual
meeting following completion of the Conversion, notice must be received no
later than the close of business on Friday, January 15, 1999. Each such
notice shall set forth (a) the name, age, business address and residence
address of the stockholder who intends to make the nomination and of the
person or persons to be nominated; (b) the principal occupation or employment
of the stockholder submitting the notice and of each person being nominated;
(c) the class and number of shares of the Company's stock beneficially owned
by the stockholder submitting the notice, by any person who is acting in
concert with or who is an affiliate or associate of such stockholder (as such
terms are defined in the Articles of Incorporation), by any person who is a
member of any group with such stockholder with respect to the Company's stock
or who is known by such stockholder to be supporting such nominee(s) on the
date the notice is given to the Company, by each person being nominated, and
by each person who is in control of, is controlled by or is under common
control with any of the foregoing persons (if any of the foregoing persons is
a partnership, corporation, limited liability company, association or trust,
information must be provided regarding the name and address of, and the class
of number of shares of Company stock which are beneficially owned by, each
partner in such partnership, each director, executive officer and stockholder
in such corporation, each member in such limited liability company or
association, and each trustee and beneficiary of such trust, and in each case
each person controlling such entity and each partner, director, executive
officer, stockholder, member or trustee of any entity which is ultimately in
control of such partnership, corporation, limited liability company,
association or trust); (d) a representation that the stockholder is a holder
of record of stock of the Company entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the person
or persons specified in the notice; (e) a description of all arrangements or
understandings between the stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination
or nominations are to be made by the stockholder; (f) such other information
regarding the stockholder submitting the notice, each nominee proposed by
such stockholder and any other person covered by clause (c) of this paragraph
as would be required to be included in a proxy statement filed pursuant to
the proxy rules of the SEC; and (g) the consent of each nominee to serve as a
director of the Company if so elected.
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Article 8.A of the Articles of Incorporation provides that a director or
officer of the Company will not be personally liable for monetary damages for
any action taken, or any failure to take any action, as a director or officer
except to the extent that by law a director's or officer's liability for
monetary damages may not be limited. This provision does not eliminate or
limit the liability of the Company's directors and officers for (a) any
breach of the director's or officer's duty of loyalty to the Company or its
stockholders, (b) any acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) any unlawful
dividend, stock repurchase or other distribution, payment or return of assets
to stockholders, or (d) any transaction from which the director or officer
derived an improper personal benefit. This provision may preclude
stockholder derivative actions and may be construed to preclude other
third-party claims against the directors and officers.
The Company's Articles of Incorporation also provide that the Company
shall indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
including actions by or in the right of the Company, whether civil, criminal,
administrative or investigative, by reason of the fact that such person is or
was a director, officer, employee or agent of the Company, or is or was
serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise. Such indemnification is furnished to the full extent provided by
law against expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement actually and reasonably incurred in connection
with such action, suit or proceeding. The indemnification provisions also
permit the Company to pay reasonable expenses in advance of the final
disposition of any action, suit or proceeding as authorized by the Company's
Board of Directors, provided that the indemnified person undertakes to repay
the Company if it is ultimately determined that such person was not entitled
to indemnification.
The rights of indemnification provided in the Company's Articles of
Incorporation are not exclusive of any other rights which may be available
under the Company's Bylaws, any insurance or other agreement, by vote of
stockholders or directors (regardless of whether directors authorizing such
indemnification are beneficiaries thereof) or otherwise. In addition, the
Articles of Incorporation authorize the Company to maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the Company, whether or not the Company would have the power to provide
indemnification to such person. By action of the Board of Directors, the
Company may create and fund a trust fund or other fund or form of
self-insurance arrangement of any nature, and may enter into agreements with
its officers, directors, employees and agents for the purpose of securing or
insuring in any manner its obligation to indemnify or advance expenses
provided for in the provisions in the Articles of Incorporation and Bylaws
regarding indemnification. These provisions are designed to reduce, in
appropriate cases, the risks incident to serving as a director, officer,
employee or agent and to enable the Company to attract and retain the best
personnel available.
The provisions regarding director elections and other provisions in the
Articles of Incorporation and Bylaws are generally designed to protect the
ability of the Board of Directors to negotiate with the proponent of an
unfriendly or unsolicited proposal to take over or restructure the Company by
making it more difficult and time-consuming to change majority control of the
Board, whether by proxy contest or otherwise. The effect of these provisions
will be to generally require at least two (and possibly three) annual
stockholders' meetings, instead of one, to effect a change in control of the
Board of Directors of the Company even if holders of a majority of the
Company's capital stock believed that a change in the composition of the
Board of Directors was desirable. Because a majority of the directors at any
given time will have prior experience as directors, these requirements will
help to ensure continuity and stability of the Company's management and
policies and facilitate long-range planning for the Company's business. The
provisions relating to removal of directors and filling of vacancies are
consistent with and supportive of a classified board of directors.
The procedures regarding stockholder nominations will provide the Board
of Directors with sufficient time and information to evaluate a stockholder
nominee to the Board and other relevant information, such as existing
stockholder support for the nominee. The proposed procedures, however, will
provide incumbent directors advance notice of a dissident slate of nominees
for directors, and will make it easier for the Board to solicit proxies
resisting
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such nominees. This may make it easier for the incumbent directors to retain
their status as directors, even when certain stockholders view the
stockholder nominations as in the best interests of the Company or its
stockholders.
Authorized Shares. Article 4 of the Articles of Incorporation
authorizes the issuance of 7,000,000 shares of stock, of which 2,000,000
shares shall be shares of serial Preferred Stock, and 5,000,000 shall be
Common Stock. The shares of Common Stock and Preferred Stock were authorized
in an amount greater than that to be issued in the Conversion to provide the
Company's Board of Directors with as much flexibility as possible to effect,
among other transactions, financings, acquisitions, stock dividends, stock
splits and employee stock options. However, these additional authorized
shares may also be used by the Board of Directors consistent with its
fiduciary duty to deter future attempts to gain control of the Company. The
Board of Directors also has sole authority to determine the terms of any one
or more series of Preferred Stock, including voting rights, conversion rates,
and liquidation preferences. As a result of the ability to fix voting rights
for a series of Preferred Stock, the Board has the power, to the extent
consistent with its fiduciary duty, to issue a series of Preferred Stock to
persons friendly to management in order to attempt to block a post-tender
offer merger or other transaction by which a third party seeks control, and
thereby assist management to retain its position. The Company's Board
currently has no plans for the issuance of additional shares, other than the
issuance of additional shares pursuant to stock benefit plans.
Special Meetings of Stockholders and Stockholder Proposals. Article 9.B
of the Articles of Incorporation provides that special meetings of the
Company's stockholders may only be called by (i) the President, (ii) a
majority of the Board of Directors, and (iii) by persons who beneficially own
an aggregate of at least 50% of the outstanding voting shares, except as may
otherwise be provided by law. The Articles of Incorporation also provide
that any action permitted to be taken at a meeting of stockholders may be
taken without a meeting if a consent in writing, setting forth the action so
taken, is given by the holders of all outstanding shares entitled to vote and
filed with the Secretary of the Company.
Article 9.D of the Company's Articles of Incorporation provides that
only such business as shall have been properly brought before an annual
meeting of stockholders shall be conducted at the annual meeting. In order
to be properly brought before an annual meeting following completion of the
Conversion, business must be (a) brought before the meeting by or at the
direction of the Board of Directors or (b) otherwise properly brought before
the meeting by a stockholder who has given timely and complete notice thereof
in writing to the Company. For stockholder proposals to be included in the
Company's proxy materials, the stockholder must comply with all the timing
and informational requirements of Rule 14a-8 of the Exchange Act. With
respect to stockholder proposals to be considered at the annual meeting of
stockholders but not included in the Company's proxy materials, the
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Company not later than 120 days prior to
the anniversary date of the initial mailing of proxy materials by the Company
in connection with the immediately preceding annual meeting; provided,
however, that with respect to the first scheduled annual meeting following
completion of the Conversion, such written notice must be received by the
Company not later than the close of business on Friday, January 15, 1999. A
stockholder's notice shall set forth as to each matter the stockholder
proposes to bring before the annual meeting (a) a description of the proposal
desired to be brought before the annual meeting, (b) the name and address, as
they appear on the Company's books, of the stockholder proposing such
business, and, to the extent known, any other stockholders known by such
stockholder to be supporting such proposal, (c) the class and number of
shares of the Company which are beneficially owned by the stockholder
submitting the notice, by any person who is acting in concert with or who is
an affiliate or associate of such stockholder (as such terms are defined in
the Articles of Incorporation), by any person who is a member of any group
with such stockholder with respect to the Company's stock or who is known by
such stockholder to be supporting such proposal on the date the notice is
given to the Company, and by each person who is in control of, is controlled
by or is under common control with any of the foregoing persons (if any of
the foregoing persons is a partnership, corporation, limited liability
company, association or trust, information must be provided regarding the
name and address of, and the class and number of shares of Company stock
which are beneficially owned by, each partner in such partnership, each
director, executive officer and stockholder in such corporation, each member
in such limited liability company or association, and each trustee and
beneficiary of such trust, and in each case each person controlling such
entity and each partner, director, executive officer, stockholder,
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member or trustee of any entity which is ultimately in control of such
partnership, corporation, limited liability company, association or trust),
(d) the identification of any person retained or to be compensated by the
stockholder submitting the proposal, or any person acting on his or her
behalf, to make solicitations or recommendations to stockholders for the
purpose of assisting in the passage of such proposal and a brief description
of the terms of such employment, retainer or arrangement for compensation,
and (e) any material interest of the stockholder in such business.
The procedures regarding stockholder proposals are designed to provide
the Board with sufficient time and information to evaluate a stockholder
proposal and other relevant information, such as existing stockholder support
for the proposal. The proposed procedures, however, will give incumbent
directors advance notice of a stockholder proposal. This may make it easier
for the incumbent directors to defeat a stockholder proposal, even when
certain stockholders view such proposal as in the best interests of the
Company or its stockholders.
Amendment of Articles of Incorporation and Bylaws. Article 11 of the
Company's Articles of Incorporation generally provides that any amendment of
the Articles of Incorporation must be first approved by a majority of the
Board of Directors and then by the holders of at least 75% of the shares of
the Company entitled to vote in an election of directors ("Voting Shares"),
except that if the amendment is approved by at least two-thirds of the Board
of Directors, the amendment shall only need stockholder approval if required
by the Louisiana Business Corporation Law ("BCL") and then only by the
affirmative vote of the holders of a majority of the Voting Shares.
The Bylaws of the Company may be amended by a majority of the Board of
Directors or by the affirmative vote of a majority of the Voting Shares,
except that the affirmative vote of at least 75% of the Voting Shares shall
be required to amend, adopt, alter, change or repeal any provision
inconsistent with certain specified provisions of the Bylaws.
Louisiana Corporate Law
In addition to the provisions contained in the Company's Articles of
Incorporation, the BCL includes certain provisions applicable to Louisiana
corporations, such as the Company, which may be deemed to have an
anti-takeover effect. Such provisions include (i) rights of stockholders to
receive the fair value of their shares of stock following a control
transaction from a controlling person or group and (ii) requirements relating
to certain business combinations.
The BCL provides that any person who acquires "control shares" will be
able to vote such shares only if the right to vote is approved by the
affirmative vote of at least a majority of both (1) all the votes entitled to
be cast by stockholders and (2) all the votes entitled to be cast by
stockholders excluding "interested shares." "Control shares" is defined to
include shares that would entitle the holder thereof, assuming the shares had
full voting rights, to exercise voting power within any of the following
ranges: (a) 20% or more but less than one-third of all voting power; (b)
one-third or more but less than a majority of all voting power; or (c) a
majority or more of all voting power. Any acquisition that would result in
the ownership of control shares in a higher range would require an additional
vote of stockholders. "Interested shares" includes control shares and any
shares held by an officer or employee director of the corporation. If the
control shares are provided full voting rights, all stockholders have
dissenters' rights entitling them to receive the "fair cash value" of their
shares, which shall not be less than the highest price paid per share to
acquire the control shares.
The BCL defines a "Business Combination" generally to include (a) any
merger, consolidation or share exchange of the corporation with an
"Interested Shareholder" or affiliate thereof, (b) any sale, lease, transfer
or other disposition, other than in the ordinary course of business, of
assets equal to 10% or more of the market value of the corporation's
outstanding stock or of the corporation's net worth to any Interested
Shareholder or affiliate thereof in any 12-month period, (c) the issuance or
transfer by the corporation of equity securities of the corporation with an
aggregate market value of 5% or more of the total market value of the
corporation's outstanding stock to any Interested Shareholder or affiliate
thereof, except in certain circumstances, (d) the adoption of any plan or
proposal
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for the liquidation or dissolution of the corporation in which anything other
than cash will be received by an Interested Shareholder or affiliate thereof,
or (e) any reclassification of the corporation's stock or merger which
increases by 5% or more the ownership interest of the Interested Shareholder
or any affiliate thereof. "Interested Shareholder" includes any person who
beneficially owns, directly or indirectly, 10% or more of the corporation's
outstanding voting stock, or any affiliate thereof who had such beneficial
ownership during the preceding two years, excluding in each case the
corporation, its subsidiaries and their benefit plans.
Under the BCL, a Business Combination must be approved by any vote
otherwise required by law or the articles of incorporation, and by the
affirmative vote of at least each of the following: (1) 80% of the total
outstanding voting stock of the corporation; and (2) two-thirds of the
outstanding voting stock held by persons other than the Interested
Shareholder. However, the supermajority vote requirement shall not be
applicable if the Business Combination meets certain minimum price
requirements and other procedural safeguards, or if the transaction is
approved by the Board of Directors prior to the time that the Interested
Shareholder first became an Interested Shareholder.
The BCL authorizes the board of directors of Louisiana business
corporations to create and issue (whether or not in connection with the
issuance of any of its shares or other securities) rights and options
granting to the holders thereof (1) the right to convert shares or
obligations into shares of any class, or (2) the right or option to purchase
shares of any class, in each case upon such terms and conditions as the
Company may deem expedient.
Anti-Takeover Effects of the Articles of Incorporation and Bylaws and Management
Remuneration Adopted in the Conversion
The foregoing provisions of the Articles of Incorporation and Bylaws of
the Company and Louisiana law could have the effect of discouraging an
acquisition of the Company or stock purchases in furtherance of an
acquisition, and could accordingly, under certain circumstances, discourage
transactions which might otherwise have a favorable effect on the price of
the Company's Common Stock.
In addition, the proposed employment agreements with the Association's
executive officers and certain provisions in the Association's proposed stock
benefit plans provide for accelerated benefits to participants in the event
of a change in control of the Company or the Association, as applicable. See
"Management -- Employment Agreements" and "-- New Stock Benefit Plans." The
foregoing provisions and limitations may make it more costly for companies or
persons to acquire control of the Company.
The Board of Directors believes that the provisions described above are
prudent and will reduce vulnerability to takeover attempts and certain other
transactions that are not negotiated with and approved by the Board of
Directors of the Company. The Board of Directors believes that these
provisions are in the best interests of the Company and its future
stockholders. In the Board of Directors' judgment, the Board of Directors is
in the best position to determine the true value of the Company and to
negotiate more effectively for what may be in the best interests of its
stockholders. Accordingly, the Board of Directors believes that it is in the
best interests of the Company and its future stockholders to encourage
potential acquirors to negotiate directly with the Board of Directors and
that these provisions will encourage such negotiations and discourage hostile
takeover attempts. It is also the Board of Directors' view that these
provisions should not discourage persons from proposing a merger or other
transaction at prices reflective of the true value of the Company and where
the transaction is in the best interests of all stockholders.
Despite the Board of Directors' belief as to the benefits to the
Company's stockholders of the foregoing provisions, these provisions also may
have the effect of discouraging a future takeover attempt in which
stockholders might receive a substantial premium for their shares over then
current market prices and may tend to perpetuate existing management. As a
result, stockholders who might desire to participate in such a transaction
may not have an opportunity to do so. The Board of Directors, however, has
concluded that the potential benefits of these provisions outweigh their
possible disadvantages.
104
<PAGE>
The Board of Directors of the Company and the Association are not aware
of any effort that might be made to acquire control of the Company or the
Association.
Regulatory Restrictions
The Change in Bank Control Act provides that no person, acting directly
or indirectly or through or in concert with one or more other persons, may
acquire control of a savings institution unless the OTS has been given at
least 60 days' prior written notice. The HOLA provides that no company may
acquire "control" of a savings institution without the prior approval of the
OTS. Any company that acquires such control becomes a savings and loan
holding company subject to registration, examination and regulation by the
OTS. Pursuant to federal regulations, control of a savings institution is
conclusively deemed to have been acquired by, among other things, the
acquisition of more than 25% of any class of voting stock of the institution
or the ability to control the election of a majority of the directors of an
institution. Moreover, control is presumed to have been acquired, subject to
rebuttal, upon the acquisition of more than 10% of any class of voting stock,
or of more than 25% of any class of stock, of a savings institution where
certain enumerated "control factors" are also present in the acquisition.
The OTS may prohibit an acquisition if (i) it would result in a monopoly or
substantially lessen competition, (ii) the financial condition of the
acquiring person might jeopardize the financial stability of the institution,
or (iii) the competence, experience or integrity of the acquiring person
indicates that it would not be in the interest of the depositors or of the
public to permit the acquisition of control by such person. The foregoing
restrictions do not apply to the acquisition of a savings institution's
capital stock by one or more tax-qualified employee stock benefit plans,
provided that the plan or plans do not have beneficial ownership in the
aggregate of more than 25% of any class of equity security of the savings
institution.
For three years following the Conversion, OTS regulations prohibit any
person from acquiring, either directly or indirectly, or making an offer to
acquire more than 10% of the stock of any converted savings institution or
its holding company, without the prior written approval of the OTS, except
for (i) any offer with a view toward public resale made exclusively to the
institution or its holding company or to underwriters or a selling group
acting on its behalf, (ii) offers that if consummated would not result in the
acquisition by such person during the preceding 12-month period of more than
1% of such stock, (iii) offers in the aggregate for up to 24.9% by the ESOP
or other tax-qualified plans of the Company or the Association, and (iv) an
offer to acquire or acquisition of beneficial ownership of more than 10% of
the common stock of the savings institution or its holding company by a
corporation whose ownership is or will be substantially the same as the
ownership of the savings institution, provided that the offer or acquisition
is made more than one year following the date of completion of the
Conversion. Such prohibition also is applicable to the acquisition of the
Common Stock. In the event that any person, directly or indirectly, violates
this regulation, the securities beneficially owned by such person in excess
of 10% shall not be counted as shares entitled to vote and shall not be voted
by any person or counted as voting shares in connection with any matters
submitted to a vote of stockholders. The definition of beneficial ownership
for this regulation extends to persons holding revocable or irrevocable
proxies for the stock of an institution or its holding company under
circumstances that give rise to a conclusive or rebuttable determination of
control under OTS regulations.
In addition to the foregoing, the Plan prohibits any person, prior to
the completion of the Conversion, from offering, or making an announcement of
an intent to make an offer, to purchase subscription rights for Common Stock.
See "The Conversion -- Restrictions on Transfer of Subscription Rights and
Shares."
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
General
The Company is authorized to issue 7,000,000 shares of capital stock, of
which 5,000,000 are shares of common stock, par value $.01 per share (the
"Common Stock") and 2,000,000 are shares of preferred stock, par value $.01
per share (the "Preferred Stock"). The Company currently expects to issue up
to a maximum of 276,000 shares of Common Stock and no shares of Preferred
Stock in the Conversion. Each share of the Company's Common Stock
105
<PAGE>
issued in the Conversion will have the same relative rights as, and will be
identical in all respects with, each other share of Common Stock issued in
the Conversion. Upon payment of the Purchase Price for the Common Stock in
accordance with the Plan of Conversion, all such stock will be duly
authorized, fully paid and nonassessable based on the laws and regulations in
effect as of the date of consummation of the Conversion.
The Common Stock of the Company will represent nonwithdrawable capital,
will not be an account of an insurable type, and will not be insured by the
FDIC.
Common Stock
Dividends. The Company can pay dividends if, as and when declared by
its Board of Directors, subject to compliance with limitations which are
imposed by law. See "Dividend Policy." The holders of Common Stock of the
Company will be entitled to receive and share equally in such dividends as
may be declared by the Board of Directors of the Company out of funds legally
available therefor. If the Company issues Preferred Stock, the holders
thereof may have a priority over the holders of the Common Stock with respect
to dividends.
Voting Rights. Upon completion of the Conversion, the holders of Common
Stock of the Company will possess exclusive voting rights in the Company.
They will elect the Company's Board of Directors and act on such other
matters as are required to be presented to them under Louisiana law or the
Company's Articles of Incorporation or as are otherwise presented to them by
the Board of Directors. Except as discussed in "Restrictions on Acquisition
of the Company and the Association," each holder of Common Stock will be
entitled to one vote per share and will not have any right to cumulate votes
in the election of directors. If the Company issues Preferred Stock, holders
of the Preferred Stock may also possess voting rights.
Liquidation. In the event of any liquidation, dissolution or winding up
of the Association, the Company, as the sole holder of the Association's
capital stock, would be entitled to receive, after payment or provision for
payment of all debts and liabilities of the Association (including all
deposit accounts and accrued interest thereon) and after distribution of the
balance in the special liquidation account to Eligible Account Holders and
Supplemental Eligible Account Holders (see "The Conversion -- Liquidation
Rights"), all assets of the Association available for distribution. In the
event of any liquidation, dissolution or winding up of the Company, the
holders of its Common Stock would be entitled to receive, after payment or
provision for payment of all its debts and liabilities, all of the assets of
the Company available for distribution. If Preferred Stock is issued, the
holders thereof may have a priority over the holders of the Common Stock in
the event of liquidation or dissolution.
Preemptive Rights. Holders of the Common Stock of the Company will not
be entitled to preemptive rights with respect to any shares which may be
issued in the future. The Common Stock is not subject to any required
redemption.
Preferred Stock
None of the shares of the Company's authorized Preferred Stock will be
issued in the Conversion. Such stock may be issued with such preferences and
designations as the Board of Directors may from time to time determine. The
Board of Directors can, without stockholder approval, issue preferred stock
with voting, dividend, liquidation and conversion rights which could dilute
the voting strength of the holders of the Common Stock and may assist
management in impeding an unfriendly takeover or attempted change in control.
EXPERTS
The financial statements of the Association as of December 31, 1997 and
1996 and for each of the years ended December 31, 1997 and 1996 included in
this Prospectus have been included herein in reliance upon the report
106
<PAGE>
of L.A. Champagne & Co., L.L.P., independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
Ferguson has consented to the publication herein of the summary of its
report to the Association and the Company setting forth its opinion as to the
estimated pro forma market value of the Common Stock to be outstanding upon
completion of the Conversion and its opinion with respect to subscription
rights.
LEGAL MATTERS
The legality of the Common Stock and the federal income tax consequences
of the Conversion will be passed upon for the Association and the Company by
Elias, Matz, Tiernan & Herrick L.L.P., Washington, D.C., special counsel to
the Association and the Company. The Louisiana income tax consequences of
the Conversion will be passed upon for the Association and the Company by
L.A. Champagne & Co., L.L.P., Baton Rouge, Louisiana. Certain legal matters
will be passed upon for Trident by Breyer & Aguggia LLP, Washington, D.C.
ADDITIONAL INFORMATION
The Company has filed with the SEC a Registration Statement under the
Securities Act with respect to the Common Stock offered hereby. As permitted
by the rules and regulations of the SEC, this Prospectus does not contain all
the information set forth in the Registration Statement. Such information,
including the appraisal report which is an exhibit to the Registration
Statement, can be examined without charge at the public reference facilities
of the SEC located at 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of such material can be obtained from the SEC at prescribed rates. In
addition, the SEC maintains a web site that contains registration statements
and other reports regarding registrants that file electronically with the SEC
(such as the Company). The address of the SEC's web site is
http://www.sec.gov. The statements contained in this Prospectus as to the
contents of any contract or other document filed as an exhibit to the
Registration Statement summarize the provisions of such contracts or other
documents which are deemed to be material. However, such summary is, of
necessity, a brief description of the provisions and is not necessarily
complete; each such statement is qualified by reference to such contract or
document.
The Association has filed an Application for Conversion with the OTS and
OFI with respect to the Conversion. This Prospectus omits certain
information contained in that application. The application may be examined
at the principal office of the OTS, 1700 G Street, N.W., Washington, D.C.
20552 and at the Midwest Regional Office of the OTS located at 122 W. John
Carpenter Freeway, Suite 600, Irving, Texas 75039-2010.
In connection with the Conversion, the Company will register its Common
Stock with the SEC under Section 12(g) of the Exchange Act, and, upon such
registration, the Company and the holders of its stock will become subject to
the proxy and tender offer rules, insider trading reporting requirements and
restrictions on stock purchases and sales by directors, officers and greater
than 10% stockholders, and certain other requirements of the Exchange Act.
Under the Plan, the Company has undertaken that it will not terminate such
registration for a period of at least three years following the Conversion.
107
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report F-1
Statements of Financial Condition as of March 31, 1998 (unaudited) and
December 31, 1997 and 1996 (audited) F-2
Statements of Income and Comprehensive Income for the three months ended
March 31, 1998 and 1997 (unaudited) and the years ended December
31, 1997 and 1996 (audited) F-3
Statements of Changes in Equity for the three months ended March 31, 1998
and 1997 (unaudited) and the years ended December 31, 1997 and
1996 (audited) F-5
Statements of Cash Flows for the three months ended March 31, 1998 and
1997 (unaudited) and the years ended December 31, 1997 and
1996 (audited) F-6
Notes to Financial Statements F-8
</TABLE>
All financial statement schedules are omitted because the required
information either is not applicable or is shown in the financial statements
or in the notes thereto.
IBL Bancorp, Inc. was incorporated in June 1998. Its current
capitalization is $1,000, and it has engaged in only minimal activities to
date; accordingly, the financial statements of the Company have been omitted
because of their immateriality.
108
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Members and Directors
The Iberville Building and Loan Association
We have audited the accompanying statements of financial condition of The
Iberville Building and Loan Association (a mutual association) as of December
31, 1997 and 1996, and the related statements of income and comprehensive
income, changes in equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Association's management.
Our responsibility is to express an opinion on these 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 financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the 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 financial statements referred to above present fairly, in
all material respects, the financial position of The Iberville Building and
Loan Association as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
As discussed in Note P, the 1997 and 1996 financial statements have been
restated to present comprehensive income as required under the provisions of
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income. The financial statements have also been restated to reflect
adjustments in the computation of deferred income taxes, and to include
information regarding the fair value of financial instruments as required by
Statement of Financial Accounting Standards No. 107, Disclosures About Fair
Value of Financial Instruments.
January 16, 1998
(except for Notes P, Q, R, and S as to which the date is May 13, 1998)
F-1
<PAGE>
THE IBERVILLE BUILDING AND LOAN ASSOCIATION
STATEMENTS OF FINANCIAL CONDITION
March 31, 1998, and December 31, 1997 and 1996
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997 1996
(Unaudited) (Restated - Note P)
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Cash and amounts due from depository
institutions.............................. $ 141,432 $ 142,714 $ 71,302
Interest-earning deposits in
other institutions........................ 1,555,814 967,494 1,737,198
---------- ---------- ----------
Total cash............................... 1,697,246 1,110,208 1,808,500
---------- ---------- ----------
Investment securities held-to-maturity
(estimated market value $15,099, $15,085
and $14,967).............................. 15,152 15,152 15,152
Mortgage-backed securities held-to-maturity
(estimated market value $2,191,087,
$2,374,282 and $2,697,348)................ 2,196,928 2,385,948 2,735,107
Mortgage-backed securities available-for-
sale (amortized cost $1,812,919,
$1,943,217 and $1,428,965)................ 1,811,389 1,947,685 1,426,688
---------- ---------- ----------
Total investment securities.............. 4,023,469 4,348,785 4,176,947
---------- ---------- ----------
Loans receivable........................... 16,820,266 16,722,127 15,556,060
Less allowance for loan losses............. 402,621 403,768 361,857
---------- ---------- ----------
Loans receivable, net.................... 16,417,645 16,318,359 15,194,203
---------- ---------- ----------
Premises and equipment, net................ 159,603 163,330 171,656
Federal Home Loan Bank stock, at cost...... 368,400 363,100 342,400
Accrued interest receivable................ 78,473 80,394 77,268
Other assets............................... 18,889 10,822 33,421
---------- ---------- ----------
Total assets............................. $22,763,725 $22,394,998 $21,804,395
-----------------------------------------
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND EQUITY
Deposits................................... $20,533,840 $20,026,417 $20,278,324
Advances from Federal Home Loan Bank....... 452,100 610,000 -
Advances by borrowers for taxes and
insurance................................. 14,399 15,004 16,680
Federal income taxes payable............... 25,105 47,657 -
Other liabilities and deferrals............ 67,610 73,960 55,457
---------- ---------- ----------
Total liabilities........................ 21,093,054 20,773,038 20,350,461
---------- ---------- ----------
Commitments and contingencies.............. - - -
-----------------
---------- ---------- ----------
Retained earnings - substantially
restricted................................ 1,671,681 1,619,011 1,455,267
Accumulated other comprehensive income
(loss).................................... (1,010) 2,949 (1,333)
---------- ---------- ----------
Total equity............................. 1,670,671 1,621,960 1,453,934
---------- ---------- ----------
Total liabilities and equity............. $22,763,725 $22,394,998 $21,804,395
-----------------------------------------
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
THE IBERVILLE BUILDING AND LOAN ASSOCIATION
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Three Months Ended March 31, 1998 and 1997
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Three months ended Years ended
-------March 31,------- ------December 31,-----
1998 1997 1997 1996
(Unaudited) (Unaudited) (Restated - Note P)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans......................... $ 373,569 $ 328,533 $ 1,346,487 $ 1,269,276
Mortgage-backed securities.... 63,121 62,391 258,333 259,189
FHLB stock and other
securities................... 5,567 4,335 20,880 31,518
Deposits...................... 12,238 21,989 65,009 84,559
---------- ---------- ---------- ----------
Total interest income....... 454,495 417,248 1,690,709 1,644,542
---------- ---------- ---------- ----------
INTEREST EXPENSE
Deposits
Interest-bearing demand
deposit accounts............ 15,808 17,119 69,005 76,627
Passbook savings accounts.... 23,604 21,663 90,325 94,304
Certificate of deposit
accounts..................... 183,459 187,781 750,420 737,015
---------- ---------- ---------- ----------
Total interest on deposits.. 222,871 226,563 909,750 907,946
Advances from Federal Home
Loan Bank.................... 6,923 - 7,003 -
---------- ---------- ---------- ----------
Total interest expense...... 229,794 226,563 916,753 907,946
---------- ---------- ---------- ----------
Net interest income......... 224,701 190,685 773,956 736,596
Provision for losses on loans. 11,960 12,000 42,147 38,868
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOSSES ON LOANS 212,741 178,685 731,809 697,728
---------- ---------- ---------- ----------
NON-INTEREST INCOME
Service charges on deposit
accounts..................... 20,871 17,118 70,888 73,296
Gain on sale of captive life
insurance company............ - - - 34,087
Other......................... 3,701 3,786 27,135 23,223
---------- ---------- ---------- ----------
Total non-interest income... 24,572 20,904 98,023 130,606
---------- ---------- ---------- ----------
</TABLE>
Continued . . .
F-3
<PAGE>
<TABLE>
<CAPTION>
Three months ended Years ended
-------March 31,------- ------December 31,-----
1998 1997 1997 1996
(Unaudited) (Unaudited) (Restated - Note P)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NON-INTEREST EXPENSE
Compensation and benefits..... $ 87,087 $ 84,372 $ 316,209 $ 274,056
Occupancy..................... 4,656 7,332 32,133 29,159
Furniture and equipment....... 6,477 7,446 26,822 27,256
Deposit insurance premium..... 3,124 715 10,347 43,858
Special SAIF assessment....... - - - 122,565
Data processing............... 14,261 14,660 57,305 65,179
Legal and other professional.. 7,200 4,505 24,105 20,922
Advertising................... 5,176 4,310 12,340 20,388
Office supplies and postage... 11,369 8,259 25,763 28,225
Other general and
administrative expenses...... 18,832 15,398 62,930 70,991
---------- ---------- ---------- ----------
Total non-interest expense.. 158,182 146,997 567,954 702,599
---------- ---------- ---------- ----------
INCOME BEFORE PROVISION FOR
FEDERAL INCOME TAXES......... $ 79,131 $ 52,592 $ 261,878 $ 125,735
PROVISION FOR FEDERAL INCOME
TAXES........................ 26,461 19,760 98,134 69,912
---------- ---------- ---------- ----------
NET INCOME.................... 52,670 32,832 163,744 55,823
---------- ---------- ---------- ----------
Other comprehensive income:
Unrealized holding gains
(losses) on securities
arising during the period.. (5,998) (9,303) 6,745 (4,343)
Income tax expense (benefit)
related to unrealized
holding gains (losses)..... (2,039) (2,993) 2,463 (1,646)
---------- ---------- ---------- ----------
Other comprehensive income
(loss), net of tax effects... (3,959) (6,310) 4,282 (2,697)
---------- ---------- ---------- ----------
Comprehensive income.......... $ 48,711 $ 26,522 $ 168,026 $ 53,126
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
THE IBERVILLE BUILDING AND LOAN ASSOCIATION
STATEMENTS OF CHANGES IN EQUITY
Three Months Ended March 31, 1998 and 1997
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Retained Accumulated
Earnings - Other
Substan- Compre-
tially hensive Total
Restricted Income Equity
---------- ---------- ----------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1996, AS PREVIOUSLY
REPORTED................................. $ 1,477,100 $ (1,333) $ 1,475,767
Prior period adjustment................... (21,833) - (21,833)
---------- ---------- ----------
BALANCE, DECEMBER 31, 1996, AS RESTATED... 1,455,267 (1,333) 1,453,934
COMPREHENSIVE INCOME (Unaudited)
Net income................................ 32,832 - 32,832
Other comprehensive income, net of tax
Unrealized losses on securities......... - (6,310) (6,310)
---------- ---------- ----------
BALANCE, MARCH 31, 1997 (Unaudited)....... $ 1,488,099 $ (7,643) $ 1,480,456
---------- ---------- ----------
---------- ---------- ----------
BALANCE, DECEMBER 31, 1997, AS PREVIOUSLY
REPORTED................................. $ 1,638,709 $ 2,949 $ 1,641,658
Prior period adjustment................... (19,698) - (19,698)
---------- ---------- ----------
BALANCE, DECEMBER 31, 1997, AS RESTATED... 1,619,011 2,949 1,621,960
COMPREHENSIVE INCOME (Unaudited)
Net income................................ 52,670 - 52,670
Other comprehensive income, net of tax
Unrealized losses on securities......... - (3,959) (3,959)
---------- ---------- ----------
BALANCE, MARCH 31, 1998 (Unaudited)....... $ 1,671,681 $ (1,010) $ 1,670,671
---------- ---------- ----------
---------- ---------- ----------
BALANCE, DECEMBER 31, 1995................ $ 1,399,444 $ 1,364 $ 1,400,808
COMPREHENSIVE INCOME
Net income, as restated................... 55,823 - 55,823
Other comprehensive income, net of tax
Unrealized losses on securities......... - (2,697) (2,697)
---------- ---------- ----------
BALANCE, DECEMBER 31, 1996 (Restated)..... $ 1,455,267 $ (1,333) $ 1,453,934
---------- ---------- ----------
---------- ---------- ----------
BALANCE, DECEMBER 31, 1996, AS PREVIOUSLY
REPORTED................................. $ 1,477,100 $ (1,333) $ 1,475,767
Prior period adjustment................... (21,833) - (21,833)
---------- ---------- ----------
BALANCE, DECEMBER 31, 1996, AS RESTATED... 1,455,267 (1,333) 1,453,934
COMPREHENSIVE INCOME
Net income, as restated................... 163,744 - 163,744
Other comprehensive income, net of tax
Unrealized losses on securities......... - 4,282 4,282
---------- ---------- ----------
BALANCE, DECEMBER 31, 1997 (Restated)..... $ 1,619,011 $ 2,949 $ 1,621,960
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
THE IBERVILLE BUILDING AND LOAN ASSOCIATION
STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1998 and 1997
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Three months ended Years ended
-------March 31,------- ------December 31,-----
1998 1997 1997 1996
(Unaudited) (Unaudited) (Restated - Note P)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income.................... $ 52,670 $ 32,832 $ 163,744 $ 55,823
---------- ---------- ---------- ----------
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation................ 5,745 6,750 23,031 27,182
Provision for loan losses... 12,000 12,000 42,147 38,868
Provision for deferred
federal income tax (tax
credit).................... 1,346 (247) (432) 17,497
Amortization of net premium
on investment and mortgage-
backed securities.......... 7,071 3,700 18,106 21,070
Gain on sale of investment
in captive life insurance
company.................... - - - (34,087)
Net discount charged on
installment loans.......... 11,079 11 28,265 40,756
Net loan fees deferred
(recognized)............... 1,109 (343) 1,975 (141)
Deferred profit recognized
on sale of real estate..... - - (76) (78)
Stock dividends from Federal
Home Loan Bank............. (5,300) (4,800) (20,700) (19,300)
Net decrease (increase) in
interest receivable........ 1,921 (1,659) (3,126) 13,075
Net decrease (increase) in
other assets............... (8,067) 19,291 22,599 22,318
Net decrease in interest
payable.................... (1,503) (10,206) (10,998) (7,951)
Net increase (decrease) in
federal income taxes
payable.................... (22,552) 20,007 47,657 -
Net increase (decrease) in
other liabilities.......... (5,657) 1,343 16,548 (17,589)
---------- ---------- ---------- ----------
Total adjustments......... (2,808) 45,847 164,996 101,620
---------- ---------- ---------- ----------
Net cash provided by operating
activities................... 49,862 78,679 328,740 157,443
---------- ---------- ---------- ----------
</TABLE>
Continued . . .
F-6
<PAGE>
<TABLE>
<CAPTION>
Three months ended Years ended
-------March 31,------- ------December 31,-----
1998 1997 1997 1996
(Unaudited) (Unaudited) (Restated - Note P)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM INVESTING
ACTIVITIES
Net increase in loans
receivable................... $ (123,474) $ (100,827) $(1,196,543) $ (757,297)
Purchases of securities
available-for-sale........... - (310,998) (762,465) (1,031,484)
Principal payments received on
mortgage-backed securities
available-for-sale........... 127,037 191,594 242,415 373,510
Proceeds from disposition of
investment in captive life
insurance company............ - - - 105,614
Purchases of securities
held-to-maturity............. - (154,850) (154,850) -
Proceeds from maturing U. S.
government obligations....... - - - 884,848
Principal payments received on
mortgage-backed securities
held-to-maturity............. 185,210 122,695 491,701 412,263
Purchases of office property
and equipment................ (2,018) - (14,705) (15,425)
---------- ---------- ---------- ----------
Net cash used in investing
activities................... 186,755 (252,386) (1,394,447) (27,971)
---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Net increase (decrease) in
deposit accounts............. 508,926 130,843 (240,909) 728,927
Net increase (decrease) in
advances by borrowers for
taxes and insurance.......... (605) 518 (1,676) (7,149)
Advances from Federal Home
Loan Bank.................... - - 695,000 -
Repayment of advances from
Federal Home Loan Bank....... (157,900) - (85,000) -
---------- ---------- ---------- ----------
Net cash provided by financing
activities................... 350,421 131,361 367,415 721,778
---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN
CASH......................... 587,038 (42,346) (698,292) 851,250
Cash - beginning of period.. 1,110,208 1,808,500 1,808,500 957,250
---------- ---------- ---------- ----------
Cash - end of period........ $ 1,697,246 $ 1,766,154 $ 1,110,208 $ 1,808,500
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
THE IBERVILLE BUILDING AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
March 31, 1998, and December 31, 1997 and 1996
A: SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies followed by The Iberville
Building and Loan Association (a mutual association) are in accor dance
with generally accepted accounting principles and conform to general
practices within the savings and loan industry. The more significant of
the principles used in preparing the financial statements are briefly
described below.
Interim period financial information
The statement of financial condition as of March 31, 1998, and the
related statements of income and comprehensive income, changes in
equity and cash flows for the three months ended March 31, 1998, and
the related statements of income and comprehensive income and cash
flows for the three months ended March 31, 1997, are unaudited. These
statements have been prepared in accordance with generally accepted
accounting principles including the requirements for presentation of
interim financial statements. Management believes that all normal
recurring adjustments that are necessary for a fair presentation of
interim period financial information have been reflected in these
financial statements.
Nature of operations
The Association is a state chartered financial institution whose
deposits are insured by the Federal Deposit Insurance Corporation
(FDIC). The Association is subject to regulation by the Office of
Thrift Supervision, the Office of Financial Institutions for the State
of Louisiana, and the FDIC. The Association provides a variety of
banking services to individuals and businesses. Its primary deposit
products are demand deposits and certificates of deposit, and its
primary lending products are real estate mortgage loans and consumer
loans. The Association primarily serves the parishes of Iberville and
West Baton Rouge from its only office location in Plaquemine,
Louisiana.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Material estimates that are particularly susceptible to significant
change relate to the determination of the allowance for losses on
loans. A majority of the Association's loan portfolio consists of
F-8
<PAGE>
A: SIGNIFICANT ACCOUNTING POLICIES (Continued)
single-family residential loans in Iberville and West Baton Rouge
parishes. The ultimate collectibility of a substantial portion of the
Association's loan portfolio is susceptible to changes in local
economic conditions.
While management uses available information to establish the allowance
for losses on loans, future additions to the allowance may be necessary
based on changes in local economic conditions. In addition, regulatory
agencies, as an integral part of their examina tion process,
periodically review the Association's allowance for losses on loans.
Such agencies may require the Association to recognize additions to the
allowance based on their judgments about information available to them
at the time of their examination. Because of these factors,
management's estimate of credit losses inherent in the loan portfolio
and the related allowance may change in the near term. However, the
amount of the change that is reasonably possible cannot be estimated.
Investment securities
Trading securities -- Debt securities and equity securities with
readily determinable fair values that are acquired with the intention
of being resold in the near term are classified as trading securities
and are recorded at their fair values. Realized and unrealized gains
and losses on trading account securities are recognized in current
earnings. The Association did not hold any securities for trading
purposes during the periods covered by these financial statements.
Securities held-to-maturity -- Debt securities which the Association
both positively intends and has the ability to hold to maturity are
reported at cost, adjusted for amortization of premiums and accretion
of discounts that are recognized in interest income using the interest
method over the period to maturity.
Securities available-for-sale -- Securities not meeting the criteria of
either trading securities or securities held to maturity are classified
as available for sale and carried at fair value. Unrealized holding
gains and losses for these securities are recognized, net of related
tax effects, as a separate component of comprehensive income and
equity. Realized gains and losses on the sale of securities
available-for-sale are determined using the specific-identification
method based on original cost. The amortization of premiums and the
accretion of discounts are recognized in interest income using the
interest method over the period to maturity.
Declines in the fair value of individual held-to-maturity and avail
able-for-sale securities below their cost that are other than tempor
ary result in write-downs of the individual securities to their fair
value. The related write-downs are included in earnings as realized
losses.
F-9
<PAGE>
A: SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loans receivable
Loans receivable are stated at unpaid principal balances, less the
allowance for loan losses and net deferred loan origination fees.
Interest on consumer loans with maturities of sixty months or less made
on a discount basis is recognized and included in interest income using
the sum-of-the-months-digits method over the term of the loan. Interest
on all other loans is accrued periodically based on the principal
balance outstanding. Interest accrued on such loans is included in
accrued interest receivable.
When, in the judgement of management, collection of accrued interest on
a loan becomes doubtful, or when a loan becomes ninety day delinquent,
further accrual of interest income is suspended and the loan is placed
on a non-accrual status. Interest accrued on such loans during the
current year, but uncollected, is reversed against operations.
Subsequent payments are generally applied to reduce the principal
amount outstanding.
Loans determined to be impaired under the provisions of Statement of
Accounting Standards No. 114 (SFAS 114), Accounting by Creditors for
Impairment of a Loan and SFAS 118, Accounting by Creditors for
Impairment of a Loan -- Income Recognition and Disclo sures are carried
at either the discounted present value of expected future cash flows or
the fair value of underlying collateral if the loan is collateral
dependent. A loan is considered impaired when it is probable that
principal and interest will not be collected under the terms of the
loan. All nonaccrual loans are considered impaired. The provisions of
SFAS 114 and SFAS 118 do not apply to large groups of smaller balance
homogeneous loans including certain smaller balance home equity and
improvement loans and other consumer loans that are collectively
evaluated for impairment. Losses on impaired loans are included in the
allowance for loan losses.
Allowance for losses
It is the Association's policy to provide a valuation allowance for
losses on loans. Various factors including the composition of the loan
portfolio, past loan loss experience, current economic conditions and
a specific provision for impaired loans provide a basis for
management's determination of the amount of the valuation allowance for
loan losses. Additions to the allowance are charged against current
operations. Loans or portions of loans, including impaired loans,
deemed to be uncollectible are charged off against the allowance for
loan losses, and subsequent recoveries, if any, are credited to the
allowance.
Loan origination fees
Loan origination fees and certain direct costs of underwriting and
closing loans are deferred and amortized to income over the contract
ual life of the related loans using the level yield method.
F-10
<PAGE>
A: SIGNIFICANT ACCOUNTING POLICIES (Continued)
Real estate acquired in settlement of loans
Real estate acquired in settlement of loans is recorded at the lower of
cost, that is, the balance of the loan, or its estimated fair value
less estimated selling costs on the date acquired. Capital improvements
made thereafter to facilitate sale are added to the carrying value, and
adjustments are made to reflect declines, if any, in net realizable
values below the recorded amounts. Costs of holding real estate
acquired in settlement of loans are reflected in income currently.
Gains and losses realized on sales of such real estate are reflected in
current income based on the property's initial recorded value plus
capital improvements.
When sales of real estate are facilitated by financing, the adjusted
sales price is determined to be the sum of the cash proceeds, if any,
and the discounted present value of the loan. Gains and losses are
determined with reference to the adjusted sales price, and are
recognized currently except in certain circumstances when the cash paid
in is deemed insufficient, in which case, any gains resulting from the
sale are deferred and recognized as the debt principal is recognized.
Premises and equipment
Premises and equipment are stated at cost, less accumulated deprecia
tion. Depreciation is computed on the straight-line basis or under
various accelerated methods over estimated useful lives as follows:
Office building........................... 30-40 years
Furniture, fixtures and equipment......... 5-10 years
Cost of major additions are capitalized while repair and maintenance
costs are charged to operations as incurred.
Recognition of FHLB stock dividends
In accordance with current industry practice, stock dividends from the
FHLB are recorded as income when declared based upon a par value of
$100 per share for the number of shares issued.
Income taxes
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus
deferred taxes which are determined under the liability method.
Deferred taxes are related primarily to the differences between the
financial and income tax bases of certain assets and liabilities,
including accumulated depreciation on premises and equipment, deferred
loan fees and costs, interest discount and accruals, allowance for
losses on loans, Federal Home Loan Bank stock, and de ferred gain on
property sales. Deferred tax assets and liabilities represent the
future tax return consequences of those differences which will either
be taxable or deductible when the assets and liabilities are recovered
or settled.
F-11
<PAGE>
A: SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash flows
Cash consists of cash and interest-earning and non interest-earning
deposits due from other financial institutions. For purposes of the
statements of cash flows, the Association considers these highly liquid
deposits including certificates of deposits with maturities of three
months or less when purchased to be "cash." All other debt securities
and investments regardless of maturities are classified as investment
securities.
Off-balance-sheet financial instruments
In the ordinary course of business, the Association enters into
transactions that produce off-balance-sheet financial instruments
consisting of letters of credit and other commitments to extend credit.
Such financial instruments are recorded in the financial statements
when they are funded.
Loan servicing
None of the Association's loan servicing rights were obtained after
December 15, 1995. Consequently, the cost of loan servicing rights has
not been capitalized.
Advertising
The Association expenses advertising costs as they are incurred.
Advertising expense is reflected in the accompanying statements of
income and comprehensive income.
B: LOANS RECEIVABLE
Loans receivable as of March 31, 1998, and December 31, 1997 and 1996
consisted of the following:
<TABLE>
<CAPTION>
March 31,
1998 ------December 31,-----
(Unaudited) 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
First mortgage loans
Single-family residential............ $11,508,304 $11,531,849 $10,752,291
Construction......................... 420,000 420,000 464,500
Commercial real estate............... 931,110 942,556 756,702
Land................................. 287,144 271,163 210,503
---------- ---------- ----------
13,146,558 13,165,568 12,183,996
Less: undisbursed loans in process... 106,098 260,145 169,057
deferred loan fees............. 8,346 7,237 5,262
allowance for losses........... 349,524 337,524 293,524
---------- ---------- ----------
Net first mortgage loans.............. 12,682,590 12,560,662 11,716,153
---------- ---------- ----------
Home equity and improvement loans..... 1,088,499 1,172,307 1,221,468
Share loans........................... 774,185 785,886 669,835
</TABLE>
F-12
<PAGE>
B: LOANS RECEIVABLE (Continued)
<TABLE>
<CAPTION>
March 31,
1998 ------December 31,-----
(Unaudited) 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Other consumer and single-pay loans... $ 2,125,133 $ 2,054,334 $ 1,815,401
Less: unearned discount.............. 199,665 188,586 160,321
---------- ---------- ----------
Net other consumer loans.............. 1,925,468 1,865,748 1,655,080
---------- ---------- ----------
Total consumer loans.................. 3,788,152 3,823,941 3,546,383
Less: allowance for losses........... 53,097 66,244 68,333
---------- ---------- ----------
Net consumer loans.................... 3,735,055 3,757,697 3,478,050
---------- ---------- ----------
Net loans receivable.................. $16,417,645 $16,318,359 $15,194,203
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
At March 31, 1998, and December 31, 1997 and 1996, unpaid balances of
impaired loans upon which the accrual of interest had been suspended,
all of which had allowances determined in accordance with SFAS No. 114
and No. 118, amounted to $163,942, $331,771 and $270,363, respectively.
The allowance for loan losses related to impaired loans amounted to
$56,427, $62,173 and $57,880 at March 31, 1998, and December 31, 1997
and 1996, respectively. Interest income on impaired loans of $28,915,
$28,864 and $22,909 was recognized for cash payments received in the
three months ended March 31, 1998, and the years ended December 31,
1997 and 1996, respectively. The average recorded investment in
impaired loans for those periods was $247,857, $301,037 and $237,975,
respectively.
The Association is not committed to lend additional funds to debtors
whose loans have been classified as nonperforming.
At March 31, 1998, and December 31, 1997 and 1996, directors and
officers (related parties) owed the Association $495,614, $507,705, and
$460,100 , respectively. During the three month period ended March 31,
1998, and the year ended December 31, 1996, no new loans were made to
such related parties. During the year ended December 31, 1997, new
loans to such related parties amounted to $98,500. Principal repayments
by such related parties amounted to $12,091, $50,895 and $58,307 for
the three month period ended March 31, 1998, and the years ended
December 31, 1997 and 1996, respectively. Such loans were made in the
ordinary course of business on substantially the same terms, including
interest rates and collateral, as those prevailing at the time in
comparable trans-actions with others. These loans do not involve more
than a normal risk of collectibility or carry other terms unfavorable
to the Association.
F-13
<PAGE>
C: ALLOWANCE FOR LOSSES
A summary of the changes in the allowance for loan losses for the three
months ended March 31, 1998 and 1997, and the years ended December 31,
1997 and 1996, is as follows:
<TABLE>
<CAPTION>
Three months ended
--------March 31,------ Years ended
1998 1997 ------December 31,-----
(Unaudited) (Unaudited) 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balance - beginning
of year................. $ 403,768 $ 361,857 $ 361,857 $ 317,857
Provision for loan losses 12,000 12,000 42,147 38,868
Charge-offs.............. (13,147) - (2,089) -
Recoveries............... - - 1,853 5,132
---------- ---------- ---------- ----------
$ 402,621 $ 373,857 $ 403,768 $ 361,857
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
There were no other real estate holdings or related allowance for real
estate losses as of March 31, 1998, or as of December 31, 1997 and
1996.
D: PREMISES AND EQUIPMENT
Premises and equipment as of March 31, 1998, and December 31, 1997 and
1996 are summarized by major classifications as follows:
<TABLE>
<CAPTION>
March 31,
1998 ------December 31,-----
(Unaudited) 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Land.................................. $ 22,416 $ 22,416 $ 22,416
Office building....................... 255,262 255,262 255,262
Furniture, fixtures and equipment..... 173,156 171,138 156,433
---------- ---------- ----------
450,834 448,816 434,111
Less: accumulated depreciation........ 291,231 285,486 262,455
---------- ---------- ----------
$ 159,603 $ 163,330 $ 171,656
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
Three months ended
--------March 31,------ Years ended
1998 1997 ------December 31,-----
(Unaudited) (Unaudited) 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Depreciation expense..... $ 5,745 $ 6,750 $ 23,031 $ 27,182
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
E: INVESTMENT SECURITIES
The amortized cost and estimated market value of investments in
securities are as follows as of March 31, 1998, and December 31, 1997
and 1996:
F-14
<PAGE>
E: INVESTMENT SECURITIES (Continued)
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Securities
Available-for-Sale:
March 31, 1998 (Unaudited)
--------------------------
FNMA mortgage-backed securities $1,812,919 $ 5,292 $ 6,822 $1,811,389
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Decmeber 31, 1997
-----------------
FNMA mortgage-backed securities $1,943,217 $ 8,696 $ 4,228 $1,947,685
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
December 31, 1996
-----------------
FNMA mortgage-backed securities $1,428,965 $ 2,893 $ 5,170 $1,426,688
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Securites
Held-to-Maturity:
March 31, 1998 (Unaudited)
--------------------------
U. S. Treasury securities
and obligations of U.S.
government corporations
and agencies.................. $ 15,152 $ - $ 53 $ 15,099
--------- --------- --------- ---------
Mortgage-backed securities
FNMA.......................... 1,125,557 3,715 14,389 1,114,883
GNMA.......................... 153,169 2,511 - 155,680
FHLMC......................... 918,202 7,882 5,560 920,524
--------- --------- --------- ---------
2,196,928 14,108 19,949 2,191,087
--------- --------- --------- ---------
$2,212,080 $ 14,108 $ 20,002 $2,206,186
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Decmeber 31, 1997
-----------------
U. S. Treasury securities
and obligations of U.S.
government corporations
and agencies.................. $ 15,152 $ - $ 67 $ 15,085
--------- --------- --------- ---------
Mortgage-backed securities
FNMA.......................... 1,173,209 5,945 17,772 1,161,382
GNMA.......................... 162,842 2,893 136 165,599
FHLMC......................... 1,049,897 8,289 10,885 1,047,301
--------- --------- --------- ---------
2,385,948 17,127 28,793 2,374,282
--------- --------- --------- ---------
$2,401,100 $ 17,127 $ 28,860 $2,389,367
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Decmeber 31, 1996
-----------------
U. S. Treasury securities
and obligations of U.S.
government corporations
and agencies.................. $ 15,152 $ - $ 185 $ 14,967
--------- --------- --------- ---------
</TABLE>
F-15
<PAGE>
E: INVESTMENT SECURITIES (Continued)
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Mortgage-backed securities
FNMA.......................... 1,225,348 172 27,296 1,198,224
GNMA.......................... 199,727 2,529 231 202,025
FHLMC......................... 1,310,032 7,710 20,643 1,297,099
--------- --------- --------- ---------
2,735,107 10,411 48,170 2,697,348
--------- --------- --------- ---------
$2,750,259 $ 10,411 $ 48,355 $2,712,315
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
The following is a summary of maturities of securities held-to-
maturity and available-for-sale as of March 31, 1998 and December 31,
1997:
As of March 31, 1998 (Unaudited)
--------------------------------
<TABLE>
<CAPTION>
-------Held-to-Maturity------ ------Available-for-Sale-----
Weighted Weighted
Average Amortized Fair Average Amortized Fair
Yield Cost Value Yield Cost Value
-------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Due in one
year or less....... 5.46% $ 17,935 $ 17,882 - $ - $ -
-----
Due from one
to five years...... 5.83% 633,950 627,040 6.48% 207,002 208,818
----- ------- ------- ----- ------- -------
Due from five
to ten years....... 8.44% 17,697 18,370 - - -
-----
Due after ten
years.............. 6.36% 1,542,498 1,542,894 5.79% 1,605,917 1,602,571
----- --------- --------- ----- --------- ---------
--------- --------- --------- ---------
6.22% $2,212,080 $2,206,186 5.87% $1,812,919 $1,811,389
----- -----
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
As of December 31, 1997
-----------------------
<TABLE>
<CAPTION>
-------Held-to-Maturity------ ------Available-for-Sale-----
Weighted Weighted
Average Amortized Fair Average Amortized Fair
Yield Cost Value Yield Cost Value
-------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Due in one year
or less............ 5.38% $ 17,652 $ 17,584 - $ - $ -
-----
Due from one to
five years......... 5.94% 352,207 348,449 6.58% 242,642 244,434
----- -----
Due from five to
ten years.......... 5.68% 342,198 337,277 - - -
-----
Due after ten
years.............. 6.33% 1,689,043 1,686,057 6.66% 1,700,575 1,703,251
----- -----
--------- --------- --------- ---------
6.17% $2,401,100 $2,389,367 6.65% $1,943,217 $1,947,685
----- -----
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
The amortized cost and fair value of mortgage-backed securities are
presented by contractual maturity in the preceding tables. Expected
maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations without call or
prepayment penalties.
F-16
<PAGE>
E: INVESTMENT SECURITIES (Continued)
Mortgage-backed securities with a carrying amount of $212,175, $228,133
and $91,450 were pledged to secure deposits as required or permitted by
law at March 31, 1998, and December 31, 1997 and 1996, respectively.
See also Note G.
F: DEPOSITS
An analysis of customers' deposit accounts by interest rates as of
March 31, 1998, and December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
-------1998------- December 31,
Amount -------1997------- -------1996-------
(Unaudited) % Amount % Amount %
----------- - ------ - ------ -
Balances by
interest rate
--------------
<S> <C> <C> <C> <C> <C> <C>
Passbook and full-paid
accounts 3.0%............ $ 3,421,037 16.66% $ 3,095,126 15.45% $ 2,813,249 13.88%
---------- ------- ---------- ------- ---------- -------
Certificate accounts
3.0% to 4.0%............ - 0.00% - 0.00% 81,593 0.40%
4.2% to 5.7%............ 13,060,605 63.61% 11,914,079 59.49% 10,773,925 53.13%
5.8% to 6.7%............ 1,538,731 7.49% 2,613,125 13.05% 4,226,911 20.84%
6.8% to 7.7%............ 110,000 0.54% 110,000 0.55% 110,000 0.54%
---------- ------- ---------- ------- ---------- -------
14,709,336 71.64% 14,637,204 73.09% 15,192,429 74.91%
---------- ------- ---------- ------- ---------- -------
NOW accounts and money
market accounts
non-interest bearing..... 432,204 2.10% 403,533 2.02% 365,006 1.80%
2.3% to 3.0%............ 1,939,534 9.45% 1,857,322 9.27% 1,863,410 9.19%
---------- ------- ---------- ------- ---------- -------
2,371,738 11.55% 2,260,855 11.29% 2,228,416 10.99%
---------- ------- ---------- ------- ---------- -------
20,502,111 99.85% 19,993,185 99.83% 20,234,094 99.78%
Accrued interest
payable.................. 31,729 0.15% 33,232 0.17% 44,230 0.22%
---------- ------- ---------- ------- ---------- -------
$20,533,840 100.00% $20,026,417 100.00% $20,278,324 100.00%
---------- ------- ---------- ------- ---------- -------
---------- ------- ---------- ------- ---------- -------
</TABLE>
The aggregate amount of jumbo certificates of deposit with a minimum
denomination of $100,000 was $2,099,468, $2,089,962 and $2,060,430 at
March 31, 1998, and December 31, 1997 and 1996, respectively. Deposit
amounts in excess of $100,000 are not federally insured.
F-17
<PAGE>
F: DEPOSITS (Continued)
Maturities of certificates of deposit accounts are as follows:
<TABLE>
<CAPTION>
March 31,
1998 December 31,
(Unaudited) 1997
------------ ------------
<S> <C> <C>
One year or less............. $ 9,667,378 $10,078,592
Over one to two years........ 2,750,009 2,405,992
Over two to three years...... 1,668,889 1,477,653
Over three years............. 623,060 674,967
---------- ----------
$14,709,336 $14,637,204
---------- ----------
---------- ----------
</TABLE>
Interest paid on deposits during 1997 and 1996 was $920,214 and
$919,472, respectively, and $224,729 and $234,294 for the three months
ended March 31, 1998 and 1997, respectively.
Officers' and directors' savings accounts amounted to $234,393 at March
31, 1998, and $376,477 and $445,190 at December 31, 1997 and 1996,
respectively.
G: ADVANCES FROM FHLB AND OTHER BORROWED MONEY
Advances from the Federal Home Loan Bank as of March 31, 1998 total
$452,100, carry an interest rate of 5.55% and mature on April 21, 1998.
Advances outstanding as of December 31, 1997, carrying an interest rate
of 5.9% and maturing on January 8, 1998, amounted to $610,000.
These advances are collateralized by pledge of certain FNMA participa
tion certificates with outstanding principal balances net of unamor
tized purchase premiums and discounts of $816,819 at March 31, 1998 and
$651,309 at December 31, 1997.
Interest paid on advances from the Federal Home Loan Bank for the three
month period ending March 31, 1998 was $6,923 and $7,003 for the year
ended December 31, 1997.
The Association had no advances from the FHLB or other borrowed money
during 1996, or for the three month period ending March 31, 1997.
Consequently, no interest was paid on borrowings for those periods.
H: LOAN SERVICING
Mortgage loans serviced for others are not included in the accompanying
statements of financial condition. The unpaid principal balances of
these loans at March 31, 1998 and December 31, 1997 and 1996 are
summarized as follows:
F-18
<PAGE>
H: LOAN SERVICING (Continued)
<TABLE>
<CAPTION>
March 31,
1998 ------December 31,-----
(Unaudited) 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Mortgage loans underlying FHLMC
mortgage-backed securities.......... $ 735,465 $ 772,342 $ 936,306
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Revenue from loan servicing is as follows:
<TABLE>
<CAPTION>
Three months ended
-------March 31,------- Years ended
1998 1997 ------December 31,-----
(Unaudited) (Unaudited) 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C>
$ 803 $ 1,019 $ 3,780 $ 4,723
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
Custodial escrow balances maintained in connection with the foregoing
loan servicing were $2,823, $3,229 and $3,184 at March 31, 1998, and
December 31, 1997 and 1996, respectively.
I: ACCRUED INTEREST RECEIVABLE
Accrued interest receivable at March 31, 1998, and December 31, 1997
and 1996 is summarized as follows:
<TABLE>
<CAPTION>
March 31,
1998 ------December 31,-----
(Unaudited) 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Investment securities.......... $ 65 $ 260 $ 1,000
Mortgage-backed securities..... 26,616 28,932 28,460
Loans receivable............... 51,792 51,202 47,808
---------- ---------- ----------
$ 78,473 $ 80,394 $ 77,268
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
J: FEDERAL INCOME TAXES
Income tax expense for the three months ended March 31, 1998 and 1997
and the years ended December 31, 1997 and 1996 is summarized as
follows:
<TABLE>
<CAPTION>
Three months ended Years ended
--------March 31,------ ------December 31,-----
1998 1997 1997 1996
(Unaudited) (Unaudited) (Restated - Note P)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Current expense.......... $ 25,115 $ 20,007 $ 98,566 $ 52,415
Deferred expense
(benefit)............... 1,346 (247) (432) 17,497
---------- ---------- ---------- ----------
$ 26,461 $ 19,760 $ 98,134 $ 69,912
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
F-19
<PAGE>
J: FEDERAL INCOME TAXES (Continued)
Deferred income tax assets and liabilities are reflected in the
accompanying balance sheets as follows:
<TABLE>
<CAPTION>
March 31, ------December 31,-----
1998 1997 1996
(Unaudited) (Restated - Note P)
---------- ---------- ----------
<S> <C> <C> <C>
Deferred tax liabilities....... $ (76,615) $ (76,001) $ (64,681)
Deferred tax assets............ 112,451 110,733 91,858
Deferred tax asset valuation
allowance..................... (51,523) (51,112) (41,526)
---------- ---------- ----------
Net deferred tax liability
(included in other liabilities
and deferrals)............... $ (15,687) $ (16,380) $ (14,349)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Provision for federal income taxes differs from that computed at the
statutory 34% corporate tax rate, as follows:
<TABLE>
<CAPTION>
Three months ended March 31, Years Ended December 31,
-------1998------- -------1997------- -------1997-------- --------1996-------
Effec- Effec- Amount Effec- Amount Effec-
tive tive (Restated - tive (Restated - tive
Amount Rate Amount Rate Note P) Rate Note P) Rate
--------- ------ --------- ------ ---------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tax at statutory rate.... $ 26,905 34% $ 17,881 34% $ 89,039 34% $ 42,750 34%
Increase (decrease) in
taxes:
Effect of graduated tax
rates................ - - (1,086) -2% (1,970) -1% (8,067) -6%
Deferred tax effect
thrift bad debt
reserve adjustment.... - - - - - - 29,058 23%
Other.................. (444) -1% 2,965 6% 11,065 4% 6,171 5%
--------- ------ --------- ------ ---------- ------ ---------- ------
$ 26,461 33% $ 19,760 38% $ 98,134 37% $ 69,912 56%
--------- ------ --------- ------ ---------- ------ ---------- ------
--------- ------ --------- ------ ---------- ------ ---------- ------
</TABLE>
The Association paid income taxes of $50,910 and $41,926 during the
years ended December 31, 1997 and 1996, respectively and $47,667 during
the three month period ending March 31, 1998. No income taxes were paid
during the three month period ending March 31, 1997.
In prior years, the Association was allowed special bad debt deduc
tions under various income tax provisions. If the amounts that
qualified as deductions for federal income tax purposes are later used
for purposes other than bad debt losses, they become subject to federal
income tax at the then current corporate rate. Retained earnings at
March 31, 1998, and December 31, 1997 and 1996, include $110,577 for
which federal income tax has not been provided. The unrecorded de
ferred liability on this amount is approximately $37,600. Additionally,
With the repeal in 1996 of the thrift bad debt reserve method that
allowed for bad debt deductions based upon a percentage of taxable
income, the Association is required to recapture over a six year period
the $85,465 portion of its bad debt reserves accumulated under that
method that exceeds allowable reserves under the experience method.
F-20
<PAGE>
K: COMMITMENTS AND CONTINGENCIES
The Association 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. These financial instruments consist primarily of
commitments to extend credit. These instruments involve, to varying
degrees, elements of credit risk in excess of the amounts recog nized
in the balance sheet. The contract or notional amounts of those
instruments reflect the extent of the involvement the Association has
in particular classes of financial instruments. 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. The Associa
tion evaluates each customer's credit worthiness on a case-by-case
basis. The Association's exposure to credit loss in the event of
nonperformance by the other party to the financial instruments is
represented by the contractual notional amount of those instruments.
As of March 31, 1998, and December 31, 1997 and 1996, the Association
was committed to grant adjustable-rate mortgage loans with contract
notional amounts of $564,800, $518,400 and $28,000, respectively.
Additionally, the Association had issued lines of credit with contract
notional amounts of the unused portion totalling $85,884, $105,716 and
$108,733 as of March 31, 1998, and December 31, 1997 and 1996,
respectively.
L: PROFIT-SHARING PLAN
The Association provides a non-contributory defined contribution
retirement plan for all eligible employees. Contributions to the plan
are based upon employee compensation at rates not to exceed 15% as
determined annually by the Board of Directors. Contributions to the
plan were $31,151 and $22,575 for the years ended December 31, 1997 and
1996, respectively. No contributions were made to the plan during the
three month periods ended March 31, 1998 and 1997.
M: NONCASH INVESTING AND FINANCING ACTIVITIES
There were no noncash investing and financing activities for the years
ended December 31, 1997 and 1996 or for the three month periods ended
March 31, 1998 and 1997.
N: RELATED PARTY TRANSACTIONS
An Association director is a partner in a local law firm which provides
legal services to the Association. Fees paid to the law firm amounted
to $4,800 and $3,600 for the years ended December 31, 1997 and 1996,
respectively, and $1,200 in each of the three month periods ended March
31, 1998 and 1997.
F-21
<PAGE>
O: REGULATORY MATTERS
The Association is subject to various regulatory capital requirements
administered by its primary federal regulator, the Office of Thrift
Supervision ("OTS"). Failure to meet the minimum regulatory capital
requirements can trigger certain mandatory, and possible additional
discretionary actions by regulators, that if undertaken, could have a
direct material affect on the Association and its financial state
ments. Under the regulatory capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Association must
meet specific capital guidelines involving 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 under the prompt corrective action
guidelines 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 rati
os of: total risk-based capital and Tier I capital to risk-weighted
assets (as defined in the regulations), Tier I capital to adjusted
total assets (as defined), and tangible capital to adjusted total
assets (as defined). As discussed in greater detail below, as of March
31, 1998 and December 31, 1997 and 1996, the Association meets the
capital adequacy requirements to which it is subject.
As of March 31, 1998, and December 31, 1997 and 1996, based upon the
most recent regulatory filings with OTS, the Association was catego
rized as well capitalized under the regulatory framework for prompt
corrective action. To remain categorized as well capitalized, the
Association will have to maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as disclosed in the table below.
The actual and required capital amounts and ratios applicable to the
Association are presented in the table below, including a reconcilia
tion of capital under generally accepted accounting principles ("GAAP")
to such amounts reported for regulatory purposes.
<TABLE>
<CAPTION>
To Be Well
Capitalized
Minimum For Prompt
for Capital Corrective
Adequacy Action
Actual Purposes Provisions
--------------- --------------- ---------------
Ratio Amount Ratio Amount Ratio Amount
----- ------ ----- ------ ----- ------
(Thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
March 31, 1998 (Unaudited)
--------------------------
Total equity, and ratio
to total assets................ 7.3% $ 1,671
------
------
Unrealized losses on securities
available for sale............. 1
------
Tangible capital, and ratio to
adjusted total assets.......... 7.3% $ 1,672 1.5% $ 341
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
F-22
<PAGE>
O: REGULATORY MATTERS (Continued)
<TABLE>
<CAPTION>
To be Well
Capitalized
Minimum For Prompt
for Capital Corrective
Adequacy Action
Actual Purposes Provisions
--------------- --------------- ---------------
Ratio Amount Ratio Amount Ratio Amount
----- ------ ----- ------ ----- ------
(Thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
March 31, 1998 (Unaudited)
--------------------------
Tier 1 (core) capital, and ratio
to adjusted total assets....... 7.3% $ 1,672 3.0% $ 683 5.0% $ 1,138
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
Tier 1 (core) capital, and ratio
to risk-weighted assets........ 14.2% $ 1,672 6.0% $ 707
------ ------ ------
------ ------ ------
Allowance for loan losses....... 149
------
Total risk-based capital, and
ratio to risk-weighted assets.. 15.5% $ 1,821 8.0% $ 942 10.0% $ 1,178
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
Total assets.................... $22,764
------
------
Adjusted total assets........... $22,765
------
------
Risk-weighted assets............ $11,775
------
------
December 31, 1997 (Restated)
----------------------------
Total equity, and ratio
to total assets................ 7.2% $ 1,622
------
------
Unrealized gains on securities
available for sale............. (3)
------
Tangible capital, and ratio to
adjusted total assets.......... 7.2% $ 1,619 1.5% $ 336
------ ------ ------ ------
------ ------ ------ ------
Tier 1 (core) capital, and ratio
to adjusted total assets....... 7.2% $ 1,619 3.0% $ 672 5.0% $ 1,120
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
Tier 1 (core) capital, and ratio
to risk-weighted assets........ 14.1% $ 1,619 6.0% $ 691
------ ------ ------
------ ------ ------
Allowance for loan losses....... 146
------
Total risk-based capital, and
ratio to risk-weighted assets.. 15.3% $ 1,765 8.0% $ 921 10.0% $ 1,151
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
Total assets.................... $22,395
------
------
Adjusted total assets........... $22,392
------
------
Risk-weighted assets............ $11,513
------
------
</TABLE>
F-23
<PAGE>
O: REGULATORY MATTERS (Continued)
<TABLE>
<CAPTION>
To Be Well
Capitalized
Minimum For Prompt
for Capital Corrective
Adequacy Action
Actual Purposes Provisions
--------------- --------------- ---------------
Ratio Amount Ratio Amount Ratio Amount
----- ------ ----- ------ ----- ------
(Thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
December 31, 1996 (Restated)
----------------------------
Total equity, and ratio
to total assets................ 6.7% $ 1,454
------
------
Unrealized losses on securities
available for sale............. 1
------
Tangible capital, and ratio to
adjusted total assets.......... 6.7% $ 1,455 1.5% $ 327
------ ------ ------ ------
------ ------ ------ ------
Tier 1 (core) capital, and ratio
to adjusted total assets....... 6.7% $ 1,455 3.0% $ 654 5.0% $ 1,090
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
Tier 1 (core) capital, and ratio
to risk-weighted assets........ 13.7% $ 1,455 6.0% $ 636
------ ------ ------ ------
------ ------ ------ ------
Allowance for loan losses....... 134
------
Total risk-based capital, and
ratio to risk-weighted assets.. 15.0% $ 1,589 8.0% $ 849 10.0% $ 1,061
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
Total assets.................... $21,804
------
------
Adjusted total assets........... $21,805
------
------
Risk-weighted assets............ $10,607
------
------
</TABLE>
P: RESTATEMENTS AND PRIOR PERIOD ADJUSTMENT
Financial statements as of and for the years ended December 31, 1997
and 1996 have been restated. The accompanying statements now include a
presentation of comprehensive income as required under the provi sions
of Statement of Financial Accounting Standards No. ("SFAS") 130
Reporting of Comprehensive Income, which is effective for periods
beginning after December 15, 1997, and requires presentation of
comprehensive income for prior periods presented on a comparative
basis.
In addition, disclosure of information about the fair value of
financial instruments under SFAS No. 107 as of December 31, 1997 and
1996, not previously required under the provisions of SFAS No. 126
Exemption From Certain Required Disclosures About Financial Instru
ments For Certain Nonpublic Entities, is presented in Note Q.
F-24
<PAGE>
P: RESTATEMENTS AND PRIOR PERIOD ADJUSTMENT (Continued)
The December 31, 1997 and 1996 financial statements have also been
restated to correct certain errors in those periods in order to reflect
adjustments to deferred income tax expense and related assets and
liabilities. Such adjustments give effect to timing differences related
to the recognition of stock dividends from the Federal Home Loan Bank
and changes to the income tax bad debt reserves precipitated by income
tax law changes in August, 1996. Deferred tax assets included in other
assets have been decreased by $3,318 and $7,484 in 1997 and 1996,
respectively. Deferred tax liabilities included in other liabilities
and deferrals have been increased by $16,380 and $14,349 in 1997 and
1996, respectively. As a result, the provision for federal income taxes
was decreased and net income was increased by $2,135 in 1997, and in
1996, the provision for federal income taxes was increased and net
income was reduced by $21,833. Accordingly, previously reported
retained earnings as of December 31, 1996 was decreased by $21,833, and
by $19,698 as of December 31, 1997.
Q: ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure is made in accordance with the requirements of
SFAS No. 107, Disclosures About Fair Value of Financial Instruments.
Financial instruments are defined as cash and contractual rights and
obligations that require settlement, directly or indi rectly, in cash.
In cases where quoted market prices are not available, fair values have
been estimated using the present value of future cash flows or other
valuation techniques. The results of these techniques are highly
sensitive to the assumptions used, such as those concerning appropriate
discount rates and estimates of future cash flows, which require
considerable judgement. Accordingly, estimates presented herein are not
necessarily indicative of the amounts the Association could realize in
a current settlement of the underlying financial instruments. SFAS No.
107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. These disclosures should
not be interpreted as representing an aggregate measure of the
underlying value of the Association.
The Association does not maintain any investment or participation in
financial instruments or agreements whose value is linked to, or
derived from, changes in the value of some underlying asset or index.
Such instruments or agreements include futures, forward contracts,
option contracts, interest-rate swap agreements, and other financial
arrangements with similar characteristics, and are commonly referred to
as derivatives.
F-25
<PAGE>
Q: ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
The estimated fair value of the Association's financial instruments
were as follows:
<TABLE>
<CAPTION>
-March 31, 1998- -----------December 31,-----------
(Unaudited) ------1997------ ------1996------
Estimated Estimated Estimated
Carrying Fair Carrying Fair Carrying Fair
Amount Value Amount Value Amount Value
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL ASSETS: (All amounts in thousands of dollars)
Cash and amounts due from
depository institutions... $ 141 $ 141 $ 143 $ 143 $ 71 $ 71
Interest-bearing deposits
with other institutions... 1,556 1,556 967 967 1,737 1,737
Investment securities...... 4,023 4,018 4,349 4,337 4,177 4,139
Loans receivable, net...... 16,418 16,936 16,318 16,679 15,194 15,480
Accrued interest receivable 78 78 80 80 77 77
FHLB stock................. 368 368 363 363 342 342
FINANCIAL LIABILITIES:
Deposits................... $20,534 $20,555 $20,026 $20,042 $20,278 $20,328
Advances from FHLB......... 452 452 610 610 - -
Advances by borrowers for
taxes and insurance....... 14 14 15 15 17 17
Other liabilities.......... 80 80 109 109 45 45
</TABLE>
The following significant methods and assumptions were used by the
Association in estimating the fair value of financial instruments.
Cash and short-term investments
The carrying value of highly liquid instruments, such as cash on hand
and amounts due from depository institutions, and interest-earning
deposits in other institutions, provides a reasonable estimate of their
fair value.
Investment securities
Fair value estimates for investment securities are based on quoted
market prices, where available. If quoted market prices are not
available, fair values are based on quoted market prices of comparable
instruments. The carrying amount of accrued interest on securities
approximates its fair value.
Loans receivable, net of allowance
The fair values for loans are estimated through discounted cash flow
analysis, using current rates at which loans with similar terms would
be made to borrowers of similar credit quality. Appropriate adjustments
are made to reflect probable credit losses. The carrying amount of
accrued interest on loans approximated its fair value.
Federal Home Loan Bank Stock
The value of Federal Home Loan Bank stock is set by the Bank's board at
$100 per share.
F-26
<PAGE>
Q: ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Deposits
SFAS No. 107 specifies that the fair value of deposit liabilities with
no defined maturity is the amount payable on demand at the reporting
date, i.e., their carrying or book value. These deposits, which include
interest and non-interest bearing checking, passbook and full- paid
share savings, and money market accounts, represented approximately
28%, 27% and 25% of total deposits at March 31, 1998 and December 31,
1997 and 1996, respectively. The fair value of fixed-rate certificates
of deposit is estimated using a discounted cash flow calculation that
applies interest rates currently offered on certifi cates of similar
remaining maturities to a schedule of aggregate expected cash flows on
time deposits.
The carrying amount of accrued interest payable on deposits approxi
mates its fair value.
Advances from Federal Home Loan Bank
The carrying amounts of borrowings from the Federal Home Loan Bank,
because of their short-term maturity, approximate their fair values.
Advances by borrowers for taxes and insurance (escrows) The carrying
amount of escrow accounts approximate fair value.
Off-balance-sheet instruments
Off-balance-sheet financial instruments include commitments to extend
credit, letters of credit, and other financial guarantees. The fair
value of such instruments is estimated using fees currently charged for
similar arrangements in the marketplace, adjusted for changes in terms
and credit risk as appropriate. The estimated fair value for these
instruments was not significant at March 31, 1998, or December 31, 1997
and 1996. The contract or notional amounts of the Associa tion's
financial instruments with off-balance-sheet risk are disclosed in Note
K.
R: ADOPTION OF PLAN OF CONVERSION (UNAUDITED)
On April 7, 1998, the Board of Directors of The Iberville Building and
Loan Association adopted a Plan of Conversion ("the Plan"), which
proposes the conversion of the Association from a Louisiana-chartered
mutual savings and loan association to a Louisiana-chartered stock
savings and loan association to be known as "The Iberville Building and
Loan Association" (the "Association", in its mutual or stock form, as
the sense of the reference requires) and the concurrent issuance of its
capital stock to IBL Bancorp, Inc. ("the newly formed Holding
Company").
F-27
<PAGE>
R: ADOPTION OF PLAN OF CONVERSION (UNAUDITED) (Continued)
The Plan provides that non-transferable subscription rights to purchase
Common Stock of IBL Bancorp, Inc. will be offered first to Eligible
Account Holders of record as of the close of business on December 31,
1996; then to Tax-Qualified Employee Stock Ownership Plan; then to
Supplemental Eligible Account Holders of record as of the close of
business on June 30, 1998; then to Other Members which include other
depositors as of a date to be specified and borrowers on that date
whose loans are secured by real estate; and, then to directors,
officers and employees of the Association not otherwise qualified.
Shares of Common Stock remaining unsold after the Subscription
Offering, if any, will be offered for sale to the public through a
Community Offering, as determined by the Boards of Directors of the
Holding Company and the Association in their sole discretion. The
common stock will be offered at a price to be determined by the Board
of Directors based upon an appraisal to be made by an indepen dent
appraisal firm. The exact number of shares to be offered will be
determined by the Board of Directors in conjunction with the deter
mination of the price at which shares will be sold. The costs of
issuing the common stock will be deferred and deducted from the sale
proceeds. The Association had incurred no stock issuance costs as of
March 31, 1998. If the conversion is not completed, deferred costs will
be charged to operations.
In accordance with OTS Regulations, at the time that the Association
converts from a mutual savings and loan association to a stock savings
and loan association, the Association will establish a liquidation
account with an initial balance equal to the Association's retained
earnings as of the date of the latest balance sheet appearing in the
prospectus. The liquidation account will be maintained for the benefit
of eligible holders who continue to maintain their accounts at the
Association after the Conversion. The liquidation account will be
reduced annually to the extent that the eligible account holders have
reduced their qualifying deposits. Subsequent increases will not
restore an eligible account holder's interest in the liquidation
account. In the event of a complete liquidation of the Association, and
only in such event, each account holder will be entitled to receive a
distribution from the liquidation account in an amount proportionate to
the adjusted qualifying account balances then held. The Association may
not pay dividends or repurchase its common stock if such dividends or
repurchases would reduce its equity below applicable regulatory capital
requirements or the required liquidation account amount.
Under current OTS regulations, limitations have been imposed on all
"capital distributions" by savings institutions, including cash
dividends, stock repurchases and other transactions charged to the
capital account. The regulation establishes a three-tiered system of
restrictions, with the greatest flexibility afforded to savings
institutions which are both well-capitalized and given favorable
qualitative examination ratings by the OTS. Generally, such an insti
tution which has "capital" in excess of its fully-phased-in regulatory
F-28
<PAGE>
R: ADOPTION OF PLAN OF CONVERSION (UNAUDITED) (Continued)
capital requirements may, after notifying the OTS, make capital
distributions in any year equal to the higher of (i) net income for the
year-to-date plus 50% of its "surplus capital ratio" at the beginning
of the calendar year or (ii) 75% of net income over the most recent
four quarter period. Other savings institutions would be subject to
more stringent procedural and substantive requirements, the most
restrictive being a requirement for prior OTS approval of any capital
distribution. OTS regulations also preclude stock repurchases during
the first three years following the conversion unless certain criteria
are satisfied.
S: NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 128 (SFAS 128),
Earnings per Share, is effective for interim and annual periods ending
after December 31, 1997. This statement specifies new computation,
presentation, and disclosure standards relative to earnings per share
data for entities with publicly held common stock. Iberville is
presently a mutual association and earnings per share disclosures are
not applicable. However, the provisions of the statement will be
adopted and applied upon conversion of the Association as outlined in
Note R above.
Statement of Financial Accounting Standards No. 129 (SFAS 129),
Disclosure of Information about Capital Structure, is effective for
financial statements for periods ending after December 15, 1997. This
statement establishes standards for disclosure of information about an
entity's capital structure. The Association's capital structure as it
is presently constituted is presented in conformity with the provi
sions of this pronouncement.
Statement of Financial Accounting Standards No. 130 (SFAS 130),
Reporting Comprehensive Income, is effective for fiscal years beginning
after December 15, 1997. This statement establishes standards for the
determination, reporting and presentation of comprehensive income and
its components in financial statements. This statement has already been
adopted by the Association effective January 1, 1998, and as indicated
in Note P above, prior periods have been restated and reclassified to
reflect the presentation and disclosure of comprehensive income in
accordance with the provisions of this statement.
Statement of Financial Accounting Standards No. 131 (SFAS 131),
Disclosures about Segments of an Enterprise and Related Information, is
effective for fiscal years beginning after December 15, 1997. This
statement requires that public business enterprises report certain
information about operating segments in complete sets of financial
statements of the enterprise and in condensed financial statements of
interim periods issued to shareholders. It also requires the enterprise
to report certain information about its products and
F-29
<PAGE>
S: NEW ACCOUNTING STANDARDS (Continued)
services, the geographic areas in which it operate, and its major
customers. Since the Association currently has only one operating
segment, management believes that the additional reporting and
disclosure requirements of this statement will not materially affect
the presentation of the Association's financial position or results of
its operations.
Statement of Financial Accounting Standards No. 132 (SFAS 132),
Employers' Disclosures about Pensions and Other Postretirement
Benefits, is effective for fiscal years beginning after December 15,
1997. This statement requires that employers' make certain disclo sures
about pension and other postretirement benefit plans. The Association
presently has no defined-benefit pension or other postretirement
benefit plans, and disclosures regarding the defined-contribution,
profit-sharing plan are in conformity with the provi sions of the
statement.
Statement of Financial Accounting Standards No. 133 (SFAS 133),
Accounting for Derivative Instruments and Hedging Activities, is
effective for all fiscal quarters of all fiscal years beginning after
June 15, 1999. Early application of the provisions of this statement is
encouraged, but it shall not be applied retroactively to financial
statements of prior periods. This statement establishes additional
accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts,
(collectively referred to as derivatives) and for hedging activities.
It requires that an entity recognize all derivatives as either assets
or liabilities in the statement of financial position and measure those
instruments at fair value. The Association does not currently have any
financial instruments that meet the Standard's definition of a
derivative. Consequently, the provisions of this pronouncement will not
materially affect the financial position or the results of operations
of the Association. Early adoption of the provisions of this statement
is not anticipated, and presently, management is not contemplating
any transfers of securities classified as held-to-maturity to the
available-for-sale or trading categories nor any transfers of
available-for-sale securities to the trading category.
F-30
<PAGE>
No dealer, salesman or any other person has been authorized
to give any information or to make any representation not
contained in this Prospectus in connection with the offering
made hereby, and, if given or made, such information or
representation must not be relied upon as having been
authorized by the Company, the Association or Trident. This
Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any of the securities offered hereby to any
person in any jurisdiction in which such offer or solicitation is
not authorized or in which the person making such offer or
solicitation is not qualified to do so, or to any person to whom
it is unlawful to make such offer or solicitation in such
jurisdiction. Neither the delivery of this Prospectus nor any
sale hereunder shall under any circumstances create any
implication that there has been no change in the affairs of the
Company or the Association since any of the dates as of which
information is furnished herein or since the date hereof.
---------------------
TABLE OF CONTENTS
---------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Summary of Recent Developments . . . . . . . . . . . . . . . . . . . . . . . 13
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Proposed Management Purchases. . . . . . . . . . . . . . . . . . . . . . . . 23
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Dividend Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Market for Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Regulatory Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Pro Forma Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Management's Discussion and Analysis
of Financial Condition and Results of
Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
The Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Restrictions on Acquisition of the
Company and the Association . . . . . . . . . . . . . . . . . . . . . . . . 99
Description of Capital Stock of the
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Index to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 108
</TABLE>
Until November 10, 1998 or 90 days after commencement of
the Syndicated Community Offering, if any, whichever is later,
all dealers effecting transactions in the registered securities,
whether or not participating in this distribution, may be
required to deliver a Prospectus. This is in addition to the
obligation of dealers to deliver a Prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
276,000 Shares
(Anticipated Maximum)
(Subject to Increase to Up to 317,400 Shares)
IBL BANCORP, INC.
(Proposed Holding Company for
The Iberville Building and Loan Association)
COMMON STOCK
---------------------
PROSPECTUS
---------------------
Trident Securities, Inc.
August 12, 1998
