UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 000-24907
IBL BANCORP, INC.
(Exact name of small business issuer as specified in its charter)
LOUISIANA 72 - 1421499
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23910 RAILROAD AVENUE, PLAQUEMINE, LOUISIANA
70764 (Address of principal executive offices)
Issuer's telephone number, including area code: (504) 687-6337
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [ ] No [ X ]
Shares of common stock, par value $.01 per share, outstanding as of June
30, 1998: 0
Transitional Small business Disclosure Format (check one): Yes [ ] No [X]
* The issuer just became subject to the filing requirements of Section 13
or 15(d) when its Form SB-2 was declared effective on August 12, 1998.
<PAGE>
IBL Bancorp, Inc.
Form 10-QSB
Quarter Ended June 30, 1998
PART I - FINANCIAL INFORMATION
Interim Financial Information required by Rule 10-01 of Regulation S-X and Item
303 of Regulation S-B is included in this Form 10-QSB as referenced below:
Page
----
Item 1 - Financial Statements
Statement of Financial Condition at June 30, 1998.............. 3
Statement of Income (Unaudited) From June 16,
1998 (Date of Incorporation) to June 30, 1998.................. 4
Statement of Cash Flows (Unaudited) From June 16,
1998 (Date of Incorporation) To June 30, 1998.................. 5
Notes to Financial Statements.................................. 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 7
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings....................................... 8
Item 2 - Changes in Securities................................... 8
Item 3 - Defaults Upon Senior Securities......................... 8
Item 4 - Submission of Matters to a Vote of Security-Holders..... 8
Item 5 - Other Information....................................... 8
Item 6 - Exhibits and Reports on Form 8-K........................ 8
Signatures........................................................... 9
2
<PAGE>
<TABLE>
<CAPTION>
IBL Bancorp, Inc.
STATEMENT OF FINANCIAL CONDITION
June 30, 1998
(Unaudited)
ASSETS
<S> <C>
Assets:
Total Assets ..................................... $ --
LIABILITIES AND STOCKHOLDER EQUITY
Liabilities
Total Liabilities ...................................... $ --
Stockholder's Equity:
Common Stock, Par Value $.01, 5,000,000
Shares Authorized; 0 Shares Issued and
Outstanding ...................................... --
Retained Earnings ...................................... --
Total Stockholder's Equity ....................... --
Total Liabilities and Stockholder's
Equity ................................................. $ --
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
IBL Bancorp, Inc.
STATEMENT OF INCOME
(Unaudited)
For the Period from
June 12, 1998
(Date of Incorporation)
to June 30, 1998
----------------------------
<S> <C>
Total Income ............................... $--
Total Expense .............................. --
-----
Net Income .............................. $--
=====
Earnings Per Share ......................... $--
=====
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
IBL Bancorp, Inc.
STATEMENT OF CASH FLOWS
For the Period from June 16, 1998 (Date
of Incorporation) To June 30, 1998
(Unaudited)
<S> <C>
Cash Flows from Operating Activities:
Net Income ............................................. $ --
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Changes in Assets and Liabilities:
(Increase) Decrease in Receivable ........ --
Net Cash Provided by Operating Activities .......... --
Cash Flows from Investing Activities:
Net Cash Provided by Investing Activities .......... --
Cash Flows from Financing Activities:
Net Cash Provided by Financing Activities .......... --
Increase in Cash and Cash Equivalents .................... --
Cash and Cash Equivalents at Beginning of Period ......... --
Cash and Cash Equivalents at End of Period ............... $ --
==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
IBL Bancorp, Inc.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
June 30, 1998
Note 1 - Basis of Presentation -
On June 16, 1998, The Iberville Building and Loan Association (the
"Association") incorporated IBL Bancorp, Inc. (the "Company") to facilitate the
conversion of the Association from mutual to stock form (the "Conversion"). In
connection with the Conversion, the Company offered its common stock to the
depositors and borrowers of the Association as of specified dates, to an
employee stock ownership plan and to members of the general public. The
Conversion is expected to be consummated on September 28, 1998, at which time
the Company will become the holding company for the Association and issue shares
of its common stock to the general public.
The Company filed a Form SB-2 with the Securities and Exchange Commission
("SEC") on June 24, 1998, which as amended was declared effective by the SEC on
August 12, 1998. The Association filed a Form AC with the Office of Thrift
Supervision ("OTS") and the Louisiana Office of Financial Institutions ("OFI")
on or about June 24, 1998. The Form AC and related offering and proxy materials,
as amended, were conditionally approved by the OTS by letters dated August 5 and
August 12, 1998 and by the OFI by letter dated August 14, 1998. The Company also
filed an Application H-(e) 1-S with the OTS and OFI on or about July 1, 1998,
which was conditionally approved by the OTS and OFI by letters dated August 5
and August 14, 1998, respectively. The members of the Association approved the
Plan at a special meeting held on September 22, 1998, and the subscription and
community offerings closed on September 16, 1998.
In connection with the incorporation of the Company, the Company issued
100 shares of common stock to the Association subsequent to June 30, 1998. The
shares will be cancelled upon consummation of the Conversion, and the Conversion
will be accounted for under the pooling of interests method of accounting.
The Company received orders for 210,870 shares of common stock in the
subscription and community offerings at a price of $10.00 per share, for
aggregate gross proceeds of $2,108,700. The consummation of the Conversion is
subject to regulatory approval of the final appraisal update and satisfaction of
other customary conditions.
The accompanying unaudited financial statements were prepared in
accordance with instructions for Form 10-QSB and, therefore, do not include
information or footnotes necessary for a complete presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. However, all adjustments (consisting only of
normal recurring accruals) which, in the opinion of management, are necessary
for a fair presentation of the financial statements have been included.
6
<PAGE>
Note 2 - Earnings Per Share -
Earnings per share is not considered meaningful as the Conversion has not
yet been completed, the Company has not engaged in any operations other
than to facilitate the Conversion, and no shares were issued and
outstanding at June 30, 1998.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
IBL Bancorp, Inc is a Louisiana corporation organized in June 1998 by
the Association for the purpose of becoming a unitary holding company of
the Association. The Company will acquire all of the capital stock of the
Association in exchange for 50% of the net Conversion proceeds and will
issue shares of its common stock to persons who submitted orders in the
subscription and community offerings. 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.
Initially, the business and management of the Company will primarily
consist of the business and management of the Association. Initially, the
Company will neither own nor lease any property, but will instead use the
premises, equipment and furniture of the Association. At the present time,
the Company does not intend to employ any persons other than officers of
the Association, and the Company will utilize the support staff of the
Association from time to time. Additional employees will be hired as
appropriate to the extent the Company expands or changes its business in
the future.
Management believes that the holding company structure will provide
the Company with additional flexibility to diversify, should it decide to
do so, its business activities through existing or newly formed
subsidiaries, or through acquisitions of or mergers with other financial
institutions and financial services related companies. Although there are
no current arrangements, understandings or agreements, written or oral,
regarding any such opportunities or transactions, the Company will be in a
position, subject to regulatory limitations and the Company's financial
position, to take advantage of any such opportunities that may arise. The
initial activities of the Company are anticipated to be funded by the
proceeds retained by the Company and earnings thereon or, alternatively,
through dividends from the Association.
To date, the Company has not engaged in any business activities other than
those related to the Conversion.
7
<PAGE>
IBL Bancorp, Inc.
Form 10-QSB
Quarter Ended March 31, 1998
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings:
There are no matters required to be reported under this item.
Item 2 - Changes in Securities:
There are no matters required to be reported under this item.
Item 3 - Defaults Upon Senior Securities:
There are no matters required to be reported under this item.
Item 4 - Submission of Matters to a Vote of Security Holders:
There are no matters required to be reported under this item.
Item 5 - Other Information:
There are no matters required to be reported under this item.
Item 6 - Exhibits and Reports on Form 8-K:
(a) The following exhibit is filed herewith:
EXHIBIT NO. DESCRIPTION
----------- -----------
27.1 Financial Data Schedule
99.1 Information for the Association in the
format of a Form 10-QSB for the quarter
ended June 30, 1998.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during the
quarter ended June 30, 1998.
8
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
IBL BANCORP, INC.
Registrant
Date: September 22, 1998 By:/s/ G. Lloyd Bouchereau, Jr.
----------------------------
G. Lloyd Bouchereau, Jr.
President and Chief Executive
Officer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 0
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 0
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 0
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 0
<INTEREST-LOAN> 0
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 0
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 0
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 0
<INCOME-PRETAX> 0
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE>
<CAPTION>
THE IBERVILLE BUILDING AND LOAN ASSOCIATION
STATEMENTS OF FINANCIAL CONDITION
June 30, 1998 and December 31, 1997
June 30, December 31,
1998 1997
(Unaudited) (Restated)
---------- ----------
<S> <C> <C>
ASSETS
Cash and amounts due from depository institutions..... $ 199,861 $ 142,714
Interest-bearing deposits in other institutions....... 1,461,374 967,494
---------- ----------
Total cash.......................................... 1,661,235 1,110,208
---------- ----------
Investment securities held-to-maturity (estimated
market value $15,133 and $15,085).................... 15,152 15,152
Mortgage-backed securities held-to-maturity (esti-
mated market value $2,031,445 and $2,374,282)........ 2,036,437 2,385,948
Mortgage-backed securities available-for-sale (amor-
tized cost $1,744,271 and $1,943,217)................ 1,744,475 1,947,685
---------- ----------
Total investment securities......................... 3,796,064 4,348,785
---------- ----------
Loans receivable...................................... 17,327,012 16,722,127
Less allowance for loan losses........................ 405,621 403,768
---------- ----------
Loans receivable, net............................... 16,921,391 16,318,359
---------- ----------
Premises and equipment, net........................... 155,559 163,330
Federal Home Loan Bank stock, at cost................. 165,900 363,100
Accrued interest receivable........................... 88,609 80,394
Other assets.......................................... 92,983 10,822
---------- ----------
Total assets........................................ $22,881,741 $22,394,998
========== ==========
LIABILITIES AND EQUITY
Deposits.............................................. $21,048,433 $20,026,417
Advances from Federal Home Loan Bank.................. - 610,000
Advances by borrowers for taxes and insurance......... 12,086 15,004
Federal income taxes payable.......................... 39,044 47,657
Other liabilities and deferrals....................... 63,624 73,960
---------- ----------
Total liabilities................................... 21,163,187 20,773,038
---------- ----------
Commitments and contingencies......................... - -
---------- ----------
Retained earnings - substantially restricted.......... 1,718,425 1,619,011
Accumulated other comprehensive income................ 129 2,949
---------- ----------
Total equity........................................ 1,718,554 1,621,960
---------- ----------
Total liabilities and equity........................ $22,881,741 $22,394,998
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE IBERVILLE BUILDING AND LOAN ASSOCIATION
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Three Months Ended June 30, 1998 and 1997
Six Months Ended June 30, 1998 and 1997
--Three months ended--- ----Six months ended---
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans....................... $ 360,401 $ 347,281 $ 733,970 $ 675,814
Mortgage-backed securities.. 55,568 63,242 118,689 125,633
FHLB stock and other
securities................. 2,705 5,398 8,272 9,733
Deposits.................... 17,396 16,409 29,634 38,398
---------- ---------- ---------- ----------
Total interest income..... 436,070 432,330 890,565 849,578
---------- ---------- ---------- ----------
INTEREST EXPENSE
Deposits
Interest-bearing demand
deposit accounts.......... 32,337 17,732 48,145 34,851
Passbook savings accounts.. 26,560 22,556 50,164 44,219
Certificate of deposit
accounts.................. 167,529 186,268 350,988 374,049
---------- ---------- ---------- ----------
Total interest on deposits 226,426 226,556 449,297 453,119
Advances from Federal Home
Loan Bank.................. 4,361 - 11,284 -
---------- ---------- ---------- ----------
Total interest expense.... 230,787 226,556 460,581 453,119
---------- ---------- ---------- ----------
Net interest income....... 205,283 205,774 429,984 396,459
Provision for losses on
loans...................... 3,000 11,000 14,960 23,000
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOSSES ON
LOANS...................... 202,283 194,774 415,024 373,459
---------- ---------- ---------- ----------
NON-INTEREST INCOME
Service charges on deposit
accounts................... 20,064 18,894 40,935 36,012
Other....................... 3,228 11,061 6,929 14,847
---------- ---------- ---------- ----------
Total non-interest income. 23,292 29,955 47,864 50,859
---------- ---------- ---------- ----------
</TABLE>
Continued . . .
<PAGE>
<TABLE>
<CAPTION>
--Three months ended--- ----Six months ended---
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NON-INTEREST EXPENSES
Compensation and benefits... $ 77,159 $ 83,160 $ 164,246 $ 167,532
Occupancy................... 8,096 9,084 12,752 16,416
Furniture and equipment..... 5,631 8,212 12,108 15,658
Deposit insurance premium... 3,085 3,264 6,209 3,979
Data processing............. 22,027 12,858 36,288 27,518
Legal and other professional 7,200 7,200 14,400 11,705
Advertising................. 3,561 3,304 8,737 7,614
Office supplies and postage. 4,295 6,967 15,664 15,226
Other general and
administrative expenses.... 13,669 13,980 32,501 29,378
---------- ---------- ---------- ----------
Total non-interest
expenses................. 144,723 148,029 302,905 295,026
---------- ---------- ---------- ----------
INCOME BEFORE PROVISION FOR
FEDERAL INCOME TAXES....... 80,852 76,700 159,983 129,292
PROVISION FOR FEDERAL INCOME
TAXES...................... 34,108 29,628 60,569 49,388
---------- ---------- ---------- ----------
NET INCOME.................. 46,744 47,072 99,414 79,904
---------- ---------- ---------- ----------
Other comprehensive income,
before tax:
Unrealized holding gains
(losses) on securities
arising during the period 1,726 8,293 (4,272) (1,010)
Income tax expense (benefit)
related to unrealized
holding gains (losses)... 587 3,167 (1,452) (174)
---------- ---------- ---------- ----------
Other comprehensive income
(loss), net of tax effects. 1,139 5,126 (2,820) (836)
---------- ---------- ---------- ----------
Comprehensive income........ $ 47,883 $ 52,198 $ 96,594 $ 79,068
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE IBERVILLE BUILDING AND LOAN ASSOCIATION
STATEMENTS OF CHANGES IN EQUITY
Six Months Ended June 30, 1998 and 1997
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
Net income................................ 79,904 - 79,904
Other comprehensive income, net of tax
Unrealized losses on securities......... - (836) (836)
---------- ---------- ----------
BALANCE, JUNE 30, 1997 (Unaudited)........$ 1,535,171 $ (2,169) $ 1,533,002
========== ========== ==========
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
Net income, as restated................... 99,414 - 99,414
Other comprehensive income, net of tax
Unrealized losses on securities......... - (2,820) (2,820)
---------- ---------- ----------
BALANCE, JUNE 30, 1998 (Unaudited)........$ 1,718,425 $ 129 $ 1,718,554
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE IBERVILLE BUILDING AND LOAN ASSOCIATION
STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1998 and 1997
----Six months ended---
June 30, June 30,
1998 1997
(Unaudited) (Unaudited)
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................ $ 99,414 $ 79,904
---------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation........................................ 10,499 13,500
Provision for loan losses........................... 15,000 24,000
Provision for deferred federal income tax (tax
credit)............................................ (27,791) 228
Amortization of net premium on investment and
mortgage-backed securities......................... 15,723 9,497
Net discount charged on installment loans........... 18,594 12,508
Net loan fees deferred.............................. 2,396 61
Stock dividends from Federal Home Loan Bank......... (7,800) (10,000)
Net decrease (increase) in interest receivable...... (8,215) 1,689
Net decrease (increase) in other assets............. (69,298) 19,154
Net increase (decrease) in interest payable......... 4,997 (5,670)
Net increase (decrease) in federal income taxes
payable............................................ (8,613) 23,722
Net increase in other liabilities................... 6,044 14,458
---------- ----------
Total adjustments................................. (48,464) 103,147
---------- ----------
Net cash provided by operating activities............. 50,950 183,051
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans receivable...................... (639,022) (448,913)
Purchases of securities available-for-sale............ (119,776) (156,148)
Principal payments received on mortgage-backed
securities available-for-sale........................ 310,522 116,803
Purchase of securities held-to-maturity............... - (154,850)
Principal payments received on mortgage-backed
securities held-to-maturity.......................... 341,980 288,174
Purchases of office property and equipment............ (2,728) (3,565)
Proceeds from sale of Federal Home Loan Bank stock.... 205,000 -
---------- ----------
Net cash provided by (used in) investing activities.. 95,976 (358,499)
---------- ----------
</TABLE>
Continued . . .
<PAGE>
<TABLE>
<CAPTION>
----Six months ended---
June 30, June 30,
1998 1997
(Unaudited) (Unaudited)
---------- ----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposit accounts...................... $ 1,017,019 $ 69,678
Net decrease in advances by borrowers for
taxes and insurance.................................. (2,918) (1,872)
Repayment of advances from Federal Home Loan Bank..... (610,000) -
---------- ----------
Net cash provided by financing activities............. 404,101 67,806
---------- ----------
NET INCREASE (DECREASE) IN CASH....................... 551,027 (107,642)
Cash - beginning of year............................ 1,110,208 1,808,500
---------- ----------
Cash - end of year.................................. $ 1,661,235 $ 1,700,858
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
THE IBERVILLE BUILDING AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
June 30, 1998 and 1997
A: SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies followed by The Iberville
Building and Loan Association (a mutual association) are in accordance
with generally accepted accounting principles and conform to general
practices within the savings and loan industry.
The accompanying unaudited financial statements were prepared in
accordance with instructions for Form 10-QSB and, therefore do not
include information or footnotes necessary for a complete presentation
of financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. Manage-ment
believes that all normal recurring adjustments that are neces-sary for
a fair presentation of interim period financial information have been
reflected in these financial statements.
Comprehensive Income
Statement of Financial Accounting Standards No. 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. The Association adopted this
statement in 1998. The only component of comprehensive income included
in the financial statements was unrealized gain (loss) on securities
available for sale.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The profitability of The Iberville Building and Loan Association
("Iberville" or the "Association") 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 Federal Home Loan Bank ("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 each of the periods reported herein, net
interest income after provision for loan losses exceeded total noninterest
expense. Total noninterest expense consists of general, administrative and other
expenses, such as compensation and benefits, occupancy and equipment expenses,
deposit insurance premiums, and miscellaneous other expenses.
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.
Changes in Financial Condition
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. 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 totaling $326,000 and 10 consumer loans totaling
$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.
Results of Operations
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.
<PAGE>
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.
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 Office of Thrift Supervision ("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 June 30, 1998, Iberville's liquidity was in excess of the minimum
OTS requirement.
Cash was generated by Iberville's operating activities during the first
half of 1998 and 1997 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 the first half of 1997,
primarily due to increases in the net loan portfolio and purchases of
securities. In the first half of 1998, investing activities provided net cash as
<PAGE>
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 half of both 1998
and 1997 due to an increase in deposits. Total cash and cash equivalents
increased by $551,000 in the first half of 1998 and decreased by $108,000 in the
first half of 1997. Total cash and cash equivalents amounted to $1.7 million at
June 30, 1998.
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 June 30, 1998, Iberville exceeded each of its capital
requirements, with tangible, core and risk-based capital ratios of 7.51%, 7.51%
and 15.47%, respectively.
Impact of Inflation and Changing Prices
The financial statements and related financial data presented herein
have been prepared in accordance with generally accepted accounting principles
which generally require the measurement of financial position and 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 commenced 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 Association'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 as of June 30, 1998) 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 Association's liquidity, capital resources or
consolidated results of operations.
