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 September 30, 1999
[ ] 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: (225) 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 [X] No [ ]
Shares of common stock, par value $.01 per share, outstanding as of
November 5, 1999: 210,870
Transitional Small Business Disclosure Format (check one):
YES [ ] NO [ X ]
<PAGE>
IBL Bancorp, Inc.
Form 10-QSB
Quarter Ended September 30, 1999
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:
Item 1 - Financial Statements
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION AT PAGE
----
September 30, 1999 (Unaudited) and December 31, 1998................... 3
Consolidated Statements Of Income and Comprehensive Income (Unaudited)
For the Three and Nine Months Ended September 30, 1999 and 1998........ 4
Consolidated Statements Of Changes in Shareholders' Equity (Unaudited)
For The Nine Months Ended September 30, 1999 and 1998.................. 6
Consolidated Statements Of Cash Flows (Unaudited) For the
Nine Months Ended September 30, 1999 and 1998.......................... 7
Notes to Consolidated Financial Statements............................. 8
Item 2 - Management's Discussion and Analysis or Plan
of Operations........................................ 10
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings......................................... 17
Item 2 - Changes in Securities and Use of Proceeds................. 17
Item 3 - Defaults Upon Senior Securities........................... 17
Item 4 - Submission of Matters to a Vote of Security Holders....... 17
Item 5 - Other Information......................................... 17
Item 6 - Exhibits and Reports on Form 8-K.......................... 17
Signatures............................................................. 18
2
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<TABLE>
<CAPTION>
IBL BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
September 30,
1999 December 31,
(UNAUDITED) 1998
------------ ------------
<S> <C> <C>
ASSETS
Cash and amounts due from depository institutions........ $ 589,343 $ 177,068
Interest-bearing deposits in other institutions.......... 2,561,032 1,681,430
------------ ------------
Total cash............................................. 3,150,375 1,858,498
------------ ------------
Time deposits............................................ 1,301,000 795,000
------------ ------------
Mortgage-backed securities held-to-maturity (estimated
market value $2,108,823 and $2,116,824)................. 2,155,995 2,122,507
Mortgage-backed securities available-for-sale (amortized
cost $3,534,639 and $1,454,057)......................... 3,532,154 1,453,613
------------ ------------
Total investment securities............................ 5,688,149 3,576,120
------------ ------------
Loans receivable......................................... 18,699,984 17,620,600
Less allowance for loan losses........................... 405,329 411,621
------------ ------------
Loans receivable, net.................................. 18,294,655 17,208,979
------------ ------------
Premises and equipment, net.............................. 157,467 154,179
Federal Home Loan Bank stock, at cost.................... 177,700 170,800
Accrued interest receivable.............................. 108,596 74,242
Other assets............................................. 74,838 40,200
------------ ------------
Total assets........................................... $ 28,952,780 $ 23,878,018
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits................................................. $ 23,688,799 $ 19,898,684
Advances from Federal Home Loan Bank..................... 1,645,000 495,000
Advances by borrowers for taxes and insurance............ 11,852 12,781
Income taxes payable..................................... - 39,388
Other liabilities and deferrals.......................... 82,167 49,570
------------ ------------
Total liabilities...................................... 25,427,818 20,495,423
------------ ------------
Commitments and contingencies............................ - -
------------ ------------
Preferred stock $.01 par, 2,000,000 shares authorized.... - -
Common stock - $.01 par, 5,000,000 shares authorized,
210,870 shares issued................................... 2,109 2,109
Additional paid-in capital............................... 1,739,885 1,740,254
Unearned ESOP shares..................................... (151,821) (165,971)
Retained earnings - substantially restricted............. 1,936,429 1,806,496
Accumulated other comprehensive loss..................... (1,640) (293)
------------ ------------
Total stockholders' equity............................. 3,524,962 3,382,595
------------ ------------
Total liabilities and equity........................... $ 28,952,780 $ 23,878,018
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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<TABLE>
<CAPTION>
IBL BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
Three and nine months ended september 30, 1999 and 1998
---Three months ended--- ---Nine months ended---
09/30/99 09/30/98 09/30/99 09/30/98
(unaudited) (unaudited) (unaudited) (unaudited)
----------------------- -----------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans.......................................$ 366,768 $ 348,942 $1,098,511 $1,082,912
Mortgage-backed securities.................. 80,766 52,585 192,107 171,274
FHLB stock and other securities............. 2,430 2,639 7,012 10,911
Deposits.................................... 49,873 22,594 123,423 52,228
---------- ---------- ---------- ----------
Total interest income..................... 499,837 426,760 1,421,053 1,317,325
---------- ---------- ---------- ----------
INTEREST EXPENSE
Deposits
Interest-bearing demand deposit accounts... 24,007 22,026 65,048 70,171
Passbook savings accounts.................. 22,478 29,416 70,415 79,580
Certificate of deposit accounts............ 188,599 182,504 542,555 533,492
---------- ---------- ---------- ----------
Total interest on deposits................ 235,084 233,946 678,018 683,243
Advances from Federal Home Loan Bank........ 9,945 - 21,349 11,284
---------- ---------- ---------- ----------
Total interest expense.................... 245,029 233,946 699,367 694,527
---------- ---------- ---------- ----------
Net interest income....................... 254,808 192,814 721,686 622,798
Provision for losses on loans............... 1,744 3,000 7,604 17,960
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR
LOSSES ON LOANS............................ 253,064 189,814 714,082 604,838
---------- ---------- ---------- ----------
NON-INTEREST INCOME
Service charges on deposit accounts......... 20,516 23,936 59,684 64,871
Other....................................... 4,646 3,389 13,538 10,318
---------- ---------- ---------- ----------
Total non-interest income................. 25,162 27,325 73,222 75,189
---------- ---------- ---------- ----------
NON-INTEREST EXPENSES
Compensation and benefits................... 89,470 89,215 276,269 253,461
Occupancy .................................. 6,576 6,446 19,375 19,198
Furniture and equipment .................... 11,136 6,167 24,850 18,275
Deposit insurance premium................... 3,170 3,092 9,468 9,301
Data processing............................. 21,288 15,721 59,923 55,307
Legal and other professional................ 14,723 7,200 59,254 21,600
Advertising................................. 4,536 4,052 11,474 12,789
Office supplies and postage................. 9,313 8,907 25,010 24,571
Other general and administrative............ 15,712 13,946 59,845 43,149
---------- ---------- ---------- ----------
Total non-interest expenses............... 175,924 154,746 545,468 457,651
---------- ---------- ---------- ----------
</TABLE>
Continued. . .
4
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<TABLE>
<CAPTION>
---Three months ended--- ---Nine months ended---
09/30/99 09/30/98 09/30/99 09/30/98
(unaudited) (unaudited) (unaudited) (unaudited)
----------------------- -----------------------
<S> <C> <C> <C> <C>
INCOME BEFORE PROVISION FOR INCOME TAXES....$ 102,302 $ 62,393 $ 241,836 $ 222,376
PROVISION FOR INCOME TAXES.................. 37,797 25,274 88,179 85,843
---------- ---------- ---------- ----------
NET INCOME..................................$ 64,505 $ 37,119 $ 153,657 $ 136,533
========== ========== ========== ==========
Basic earnings per share....................$ .33 $ - $ .79 $ -
========== ========== ========== ==========
COMPREHENSIVE INCOME
Net income..................................$ 64,505 $ 37,119 $ 153,657 $ 136,533
---------- ---------- ---------- ----------
Other comprehensive income
Unrealized holding gains (losses) on
securities during the period............. 19,607 9,267 (2,041) 4,995
Income tax expense (benefit) related to
unrealized holding gains (losses)........ 6,666 3,150 (694) 1,698
---------- ---------- ---------- ----------
Other comprehensive income (loss), net of
tax effects............................... 12,941 6,117 (1,347) 3,297
---------- ---------- ---------- ----------
Comprehensive income........................$ 77,446 $ 43,236 $ 152,310 $ 139,830
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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<TABLE>
<CAPTION>
IBL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Nine months ended september 30, 1999 and 1998
Retained Accumulated
Earnings - Other
Additional Unearned Substan- Compre-
Common Paid - In ESOP tially hensive Total
Stock Capital Shares Restricted Income Equity
-------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
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 . . . . . . . . . . . . . . . . - - - 136,533 - 136,533
Other comprehensive income, net of tax
Unrealized losses on securities. . . . . - - - - 3,297 3,297
-------- ---------- ---------- ---------- ---------- ----------
Comprehensive income . . . . . . . . . . - - - 136,533 3,297 139,830
-------- --------- ---------- ---------- ---------- ----------
Proceeds from issuance of common stock . . 2,109 1,744,811 - - - 1,746,920
Acquisition of unearned ESOP shares. . . . - - (168,690) - - (168,690)
-------- --------- --------- --------- ---------- ----------
BALANCE, SEPTEMBER 30, 1998 (UNAUDITED). . $ 2,109 $1,744,811 $ (168,690) $1,755,544 $ 6,246 $3,340,020
========= ========== ========== ========== ========== ==========
BALANCE, DECEMBER 31, 1998 $ 2,109 $1,740,254 $ (165,971) $1,806,496 $ (293) $3,382,595
--------- ---------- ---------- ---------- ---------- ----------
COMPREHENSIVE INCOME (UNAUDITED)
Net income . . . . . . . . . . . . . . . . - - - 153,657 - 153,657
Other comprehensive income, net of tax
Unrealized losses on securities. . . . . - - - - (1,347) (1,347)
-------- --------- --------- ---------- ---------- -----------
Comprehensive income . . . . . . . . . . - - - 153,657 (1,347) 152,310
-------- --------- --------- ---------- ---------- -----------
ESOP shares released for allocation. . . . - (369) 14,150 - - 13,781
Dividends. . . . . . . . . . . . . . . . . - - - (23,724) - (23,724)
-------- --------- --------- --------- ---------- -----------
BALANCE, SEPTEMBER 30, 1999 (UNAUDITED). . $ 2,109 $1,739,885 $ (151,821) $1,936,429 $ (1,640) $3,524,962
========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
IBL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended september 30, 1999 and 1998
1999 1998
(Unaudited) (Unaudited)
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................... $ 153,657 $ 136,533
---------- ----------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation........................................... 19,512 15,944
Provision for loan losses.............................. 7,604 18,000
ESOP contribution...................................... 13,781 -
Provision for deferred federal income tax credit....... (2,666) (26,107)
Amortization of net premium on investment and mortgage-
backed securities..................................... 14,073 22,567
Net discount charged on installment loans.............. 13,023 35,379
Net loan fees deferred (recognized).................... 1,911 (1,539)
Stock dividends from Federal Home Loan Bank............ (6,900) (10,300)
Net decrease (increase) in interest receivable......... (34,354) 1,347
Net increase in other assets........................... (16,263) (18,444)
Net increase (decrease) in interest payable............ (9,486) (453)
Net decrease in income taxes payable.................. (54,403) (9,676)
Net increase in other liabilities...................... 32,597 85,791
---------- ----------
Total adjustments.................................... (21,571) 112,509
---------- ----------
Net cash provided by operating activities................ 132,086 249,042
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans receivable......................... (1,118,714) (244,564)
Purchases of securities available-for-sale............... (2,440,995) (119,776)
Principal payments received on mortgage-backed securities
available-for-sale...................................... 353,790 442,431
Purchases of securities held-to-maturity................. (450,495) -
Proceeds from sale of foreclosed assets.................. 10,500 -
Principal payments received on mortgage-backed securities
to be held-to-maturity.................................. 409,557 487,421
Maturity of U.S. government obligation................... - 15,152
Purchases of office property and equipment............... (22,800) (13,243)
Certificates of deposits acquired........................ (606,000) -
Maturity of certificates of deposit...................... 100,000 -
Proceeds from sale of Federal Home Loan Bank stock....... - 205,000
---------- ----------
Net cash provided by (used in) investing activities...... (3,765,157) 772,421
---------- ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposit accounts......................... 3,799,601 193,671
Net decrease in advances by borrowers for taxes
and insurance........................................... (929) (3,545)
Cash dividends........................................... (23,724) -
Advances from Federal Home Loan Bank..................... 1,150,000 -
Repayment of advances from Federal Home Loan Bank........ - (610,000)
Net proceeds from sale of common stock................... - 1,746,920
Unearned ESOP shares acquired............................ - (168,690)
---------- ----------
Net cash provided by financing activities................ 4,924,948 1,158,356
---------- ----------
NET INCREASE IN CASH..................................... 1,291,877 2,179,819
Cash - beginning of period............................... 1,858,498 1,110,208
---------- ----------
Cash - end of period..................................... $3,150,375 $3,290,027
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
IBL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1999
A: BASIS OF PRESENTATION
The accompanying consolidated financial statements for the period ended
September 30, 1999 include the accounts of IBL Bancorp, Inc. (the "Company") and
its wholly owned subsidiary, Iberville Building and Loan Association (the
"Association"). Currently, the business and management of IBL Bancorp, Inc. is
primarily the business and management of the Association. All significant
intercompany transactions and balances have been eliminated in the
consolidation.
On June 16, 1998, the Association incorporated IBL Bancorp, Inc. 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. Upon
consummation of the Conversion on September 30, 1998, all of the Association's
outstanding common stock was issued to the Company, the Company became the
holding company for the Association and the Company issued 210,870 shares of
common stock.
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 ("0TS") and the 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 the OFI by letter dated August 14, 1998. The Company also
filed an Application H-(e) 1-S with the Midwest Regional Office of the OTS and
the OFI on or about July 1, 1998, which was conditionally approved by the OTS by
letter dated August 5, 1998 and the OFI by letter dated August 14, 1998.
The members of the Association approved the Plan at a special meeting
held on September 22, 1998, and the subscription and community offering closed
on September 16, 1998.
The Conversion was accounted for under the pooling of interest method
of accounting. In the Conversion, the Company issued 210,870 shares of common
stock, including 16,869 shares acquired by its Employee Stock Ownership Plan,
and the Association issued 1,000 shares of $.01 par value common stock to the
Company.
The accompanying consolidated 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 consolidated financial statements have
been included. The results of operations for the nine months ended September 30,
1999 are not necessarily indicative of the results to be expected for the year
ending December 31, 1999.
8
<PAGE>
B: EMPLOYEE STOCK OWNERSHIP PLAN
The Company sponsors a leveraged employee stock ownership plan
(ESOP)that covers all employees who have at least one year of service with the
Company. The ESOP shares initially were pledged as collateral for the ESOP debt.
The debt is being repaid based on a ten-year amortization and the shares are
released for allocation to active employees annually over the ten-year period.
The shares pledged as collateral are deducted from stockholders' equity as
unearned ESOP shares in the accompanying balance sheets.
As shares are released from collateral, the Company reports
compensation expense equal to the current market price of the shares. Dividends
on allocated ESOP shares are recorded as a reduction of retained earnings;
dividends on unallocated ESOP shares are applied to the ESOP debt and recorded
as a reduction of unearned ESOP shares. ESOP compensation expense was $13,781
for the nine months ended September 30, 1999.
C: EARNINGS PER SHARE
The computation of basic earnings per share includes reported net income in the
numerator and the weighted average number of shares outstanding of 194,853 for
the nine months ended September 30, 1999 and 195,272 for the three months then
ended in the denominator. Because there were no potentially dilutive outstanding
common shares at September 30, 1999, there is no difference in the computation
of basic and fully-diluted earning per share.
Earnings per share for periods ending on or before September 30, 1998 are not
considered meaningful as the Conversion was not completed until September 30,
1998.
9
<PAGE>
IBL BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The following discussion compares the consolidated financial condition
of IBL Bancorp, Inc. and Subsidiary at September 30, 1999 to December 31, 1998
and the results of operations for the three and nine months ended September 30,
1999 with the same periods in 1998. Currently, the business and management of
IBL Bancorp, Inc. is primarily the business and management of the Association.
This discussion should be read in conjunction with the interim consolidated
financial statements and footnotes included herein.
This quarterly report on Form 10-QSB includes statements that may
constitute forward-looking statements, usually containing the words "believe",
"estimate", "expect", "intend" or similar expressions. These statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements inherently involve risks and
uncertainties that could cause actual results to differ materially from those
reflected in the forward-looking statements. Factors that could cause future
results to vary from current expectations include, but are not limited to, the
following: changes in economic conditions (both generally and more specifically
in the markets in which the Company operates); changes in interest rates,
deposit flows, loan demand, real estate values and competition; changes in
accounting principles, policies or guidelines and in government legislation and
regulation (which change from time to time and over which the Company has no
control); and other risks detailed in this quarterly report on Form 10-QSB and
the Company's other Securities and Exchange Commission filings. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
reflect management's analysis only as of the date hereof. The Company undertakes
no obligation to publicly revise these forward-looking statements to reflect
events or circumstances that arise after the date hereof.
IBL Bancorp, Inc. is the holding company for the Association.
Substantially all of the Company's assets are currently held in, and its
operations are conducted through, its sole subsidiary the Association. The
Company's business consists primarily of attracting deposits from the general
public and using such deposits to make loans for the purchase and construction
of residential properties. The Company also originates commercial real estate
loans and various types of consumer loans.
Changes in financial condition
The Company's total assets increased $5,075,000 or 21.3% from $23.9
million at December 31, 1998 to $29.0 million at September 30, 1999. This
increase was primarily due to increases of $1,086,000 in net loan receivables,
$506,000 in time deposits, $2,112,000 in investment securities and $1,292,000 in
cash and cash equivalents. The increase in cash and cash equivalents was due
primarily to the Association beginning to participate in deposits from various
local government entities and a single large deposit of $1,250,000. These new
deposits received from other entities were then invested in interest-earning
assets at other institutions at a positive spread.
10
<PAGE>
Interest-bearing deposits in other institutions increased by $880,000
or 52.3% from $1,681,000 at December 31, 1998 to $2,561,000 at September 30,
1999. This increase was primarily due to the increased deposits the Association
received.
Time deposits increased by $506,000 or 63.6% from $795,000 at December
31, 1998 to $1,301,000 at September 30, 1999. This increase was primarily due to
the purchase of short-term certificates of deposit funded by increases in the
Association's deposit growth and proceeds remaining from the stock conversion.
Management anticipates using this increased liquidity to fund
additional loan growth and has staggered the maturities of time deposits to
provide for additional liquidity needs.
The mortgage-backed securities portfolio increased by $2,112,000 or
59.1% from $3,576,000 at December 31, 1998 to $5,688,000 at September 30, 1999,
due to purchases of $2,668,000 in the first nine months of 1999.
The demand for mortgage loans in the Association's market area
increased during the past nine months. The net loan portfolio increased
$1,086,000 or 6.3% from $17,209,000 at December 31, 1998 to $18,295,000 at
September 30, 1999. This increase consisted mainly of single-family residential
mortgage loans.
Deposits increased by $3,790,000 or 19.0% from $19,899,000 at December
31,1998 to $23,689,000 at September 30, 1999. This increase is primarily due to
the Association beginning to participate in deposits from various local
government entities and a single large deposit of $1,250,000.
Advances from Federal Home Loan Bank increased by $1,150,000 or 232.3%
from $495,000 at December 31, 1998 to $1,645,000 at September 30, 1999. This
increase in advances was used to purchase mortgage-backed securities, some of
which are pledged as collateral against governmental deposits in excess of
$100,000.
Total stockholders' equity increased by $142,000 during the past nine
months. Net income of $154,000 and a $14,000 decrease in unearned ESOP shares
increased stockholders' equity during the period. These factors were offset by
the payment of three quarterly dividends totaling $24,000, an increase of $1,500
in unrealized losses on available-for-sale investment securities and a $500
decrease in additional paid-in capital during this period. Stockholders' equity
at September 30, 1999 totaled $3,525,000 or 12.2% of total assets compared to
stockholders' equity of $3,383,000 or 14.2% of total assets at December 31,
1998.
The Association's total classified assets for regulatory purposes at
September 30, 1999 (excluding loss assets specifically reserved for) amounted to
$428,000, all of which was classified as substandard. The largest classified
asset at September 30, 1999 consisted of a $72,000 adjustable-rate residential
loan. The remaining $356,000 of substandard assets at September 30, 1999
consisted of 11 residential mortgage loans totaling $325,000 and 5 consumer
loans totaling $31,000.
Results of Operations
The profitability of the Company depends primarily on its net interest
income, which is
11
<PAGE>
the difference between interest and dividend income on interest-earning assets,
principally loans, mortgage-backed securities, and investment securities, and
interest expense on interest-bearing deposits and borrowings. Net interest
income is dependent upon the level of interest rates and the extent to which
such rates are changing. The Company's profitability also is dependent, to a
lesser extent, on the level of its non-interest income, provision for loan
losses, non-interest expense and income taxes. In the nine months ended
September 30, 1999 and 1998, net interest income after provision for loan losses
exceeded total non-interest expense. Total non-interest expense consists of
general, administrative and other expenses, such as compensation and benefits,
furniture and equipment expense, federal insurance premiums, and miscellaneous
other expenses.
Net income increased by $27,000 or 73.8% in the quarter ended September
30, 1999 and increased by $17,000 or 12.5% in the nine months ended September
30, 1999 compared to the respective 1998 periods. The increase in the September
30, 1999 quarter was due to an increase in total interest income of $73,000 and
a decrease in provision for losses on loans of $1,000. These factors were
primarily offset by an increase in non-interest expense of $21,000, an increase
in provision for income tax of $13,000, an increase of total interest expense of
$11,000, and a decrease in non-interest income of $2,000. The increased net
income for the nine-month period ending September 30, 1999 was due to an
increase in total interest income of $104,000 and a decrease in provision for
losses on loans of $10,000. These factors were primarily offset by an increase
in total non-interest expense of $88,000, an increase in total interest expense
of $5,000, an increase in provision for income tax of $2,000, and a decrease in
non-interest income of $2,000.
The $62,000 increase in net interest income in the third quarter of
1999 was primarily due to increases in interest-earning assets funded by
increased deposits and advances from Federal Home Loan Bank. This increase in
net interest income can also be attributed to an increase in the average
interest rate spread from 2.93% in the quarter ended September 30, 1998 to 3.15%
in the third quarter of 1999. The average rate on interest-bearing liabilities
decreased from 4.41% in the third quarter of 1998 to 3.88% in the third quarter
of 1999, while the average yield on interest-earning assets decreased from 7.34%
to 7.03% over the same period. The decreased yield on assets was primarily due
to lower yields on the Association's adjustable-rate mortgage loans and
adjustable-rate mortgage-backed securities. This decrease in asset yield can
also be attributed to higher balances of time deposits and interest-earning
deposits in other institutions, which traditionally have a rate of return lower
than loans.
The $99,000 increase in net interest income in the first nine months of
1999 compared to the first nine months of 1998 was also primarily due to
increases in interest-earning assets funded by increased deposits, advances from
Federal Home Loan Bank and net proceeds remaining from the stock conversion. The
higher average balances were partially offset by a decrease in the average
interest rate spread from 3.14% in the nine-month period ended September 30,
1998 to 3.09% in the nine-month period ended September 30, 1999. The average
rate on interest-bearing liabilities decreased from 4.41% in the first nine
months of 1998 to 3.97% in the first nine months of 1999, while the average
yield on interest-earning assets decreased from 7.55% to 7.06% over the same
period. The decreased yield on assets was primarily due to lower yields on the
Association's adjustable-rate mortgage loans and adjustable-rate mortgage-backed
securities.
Total interest income increased by $73,000 or 17.1% in the quarter
ended September 30,
12
<PAGE>
1999 and increased $104,000 or 7.9% for the nine months ended September 30, 1999
over the comparable 1998 periods due to higher balances, offset by lower yields.
Total interest expense increased by $11,000 or 4.7% for the quarter
ended September 30, 1999 and increased $5,000 or .7% for the nine months ended
September 30, 1999 compared to the respective 1998 periods. The increase in the
1999 quarter was primarily due to an increase in interest paid on Federal Home
Loan Bank advances of $10,000 and an increase in total interest paid on deposit
accounts of $1,000. The increase in the nine-month period was primarily due to a
$10,000 increase in interest paid on Federal Home Loan Bank advances, offset by
a $5,000 decrease in total interest on deposits resulting from a decline in the
average rate paid on deposits. The average rate paid on deposits decreased from
4.38% in the first nine months of 1998 to 3.97% in the first nine months of
1999.
The provision for loan losses decreased by $1,000 for the quarter and
decreased $10,000 for the nine months ended September 30, 1999 from the
comparable 1998 periods. At September 30, 1999, the Association's total
non-accruing loans amounted to $193,000. The allowance for loan losses amounted
to $405,000 at September 30, 1999, representing 2.2% of the total loans held in
portfolio and 209.8% of total non-accruing loans at such date. The analysis of
the provision for loan losses led to the conclusion that the allowance for loan
losses was sufficient in light of no charge-offs in the quarter ended September
30, 1999 and the current asset quality of the loan portfolio.
Non-interest income decreased by $2,000 or 7.9% in the quarter ended
September 30, 1999 and decreased $2,000 or 2.6% in the nine months ended
September 30, 1999 from the comparable 1998 periods. The decrease in the quarter
was primarily due to a decrease in service charges on deposit accounts of $3,000
offset mainly by an increase in commission on credit insurance of $1,000. The
decrease in the nine months ended September 30, 1999 was primarily due to a
decrease in service charges on deposit accounts of $5,000 offset mainly by an
increase in commissions on credit insurance of $3,000.
Non-interest expenses increased by $21,000 or 13.7% in the quarter
ended September 30, 1999 and increased by $88,000 or 19.2% in the nine months
ended September 30, 1999 over the comparable 1998 periods. The increase in the
quarter was primarily due to increases of $8,000 in legal and other
professional, $6,000 in data processing, $5,000 in furniture and equipment and
$2,000 in general and administrative expenses. The increase in the nine-month
period was primarily due to increases of $38,000 in legal and other
professional, $23,000 in compensation and benefits, $17,000 in general and
administrative, $6,000 in furniture and equipment and $5,000 in data processing
expenses. These increases in non-interest expenses were partially offset by a
$1,000 decrease in advertising.
The increase of $38,000 in legal and other professional expense for the
nine months ended September 30, 1999 was primarily caused by increased legal and
accounting fees associated with the preparation of our first year's reports as a
public entity. Of this increase, $13,000 was costs associated with accounting
work preformed in 1999 for our 1998 annual audit.
The increase of $23,000 in compensation and benefits for the nine
months ended September 30, 1999 was primarily due to increases of $11,000 in
other employee benefits, $8,000 in compensation of officers and employees,
$9,000 in ESOP contribution, $1,000 in payroll taxes and $4,000 in contributions
to employee retirement plan expenses. These increases
13
<PAGE>
were partially offset by a decrease of $10,000 in compensation of directors. The
$11,000 increase in other employee benefits in the nine-month period ending
September 30, 1999 is partially inflated due to the receipt of a $5,000 rebate
of premiums from our employee health insurance carrier during the same period in
1998.
The increase in provision for income taxes is due primarily to the
increases in pre-tax earnings in both the quarter and the nine moths ended
September 30, 1999.
Liquidity and Capital Resources
The Association 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 up to five
years. 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
September 30, 1999, the Association's liquidity was 18.1% or $3.2 million in
excess of the minimum OTS requirement.
The Association is required to maintain regulatory capital sufficient
to meet tangible, core and risk-based capital ratios of 1.5%, 4.0%, and 8.0%,
respectively. At September 30, 1999, the Association's tangible and core capital
both amounted to $2.8 million or 9.9% of adjusted total assets of $28.3 million,
and the Association's risk-based capital amounted to $3.0 million or 21.3% of
adjusted risk-weighted assets of $14.1 million.
As of September 30, 1999, the Association's unaudited regulatory
capital requirements are as indicated in the following table:
<TABLE>
<CAPTION>
(Dollars In Thousands)
TANGIBLE CORE RISK-BASED
CAPITAL CAPITAL CAPITAL
------ ------ ------
<S> <C> <C> <C>
GAAP Capital ......................... $2,815 $2,816 $2,816
Additional Capital Items:
General Valuation Allowances ..... -- -- 177
------ ------ ------
Regulatory Capital Computed .......... 2,815 2,816 2,993
Minimum Capital Requirement .......... 425 1,134 1,125
------ ------ ------
Regulatory Capital Excess ............ $2,390 $1,682 $1,868
====== ====== ======
Regulatory Capital as a
Percentage ...................... 9.93% 9.93% 21.28%
Minimum Capital Required
as a Percentage ................. 1.50% 4.00% 8.00%
------ ------ ------
Regulatory Capital as a
Percentage in Excess
of Requirements .................. 8.43% 5.93% 13.28%
====== ====== ======
</TABLE>
14
<PAGE>
Based on the above capital ratios, the Association meets the criteria
for a "well capitalized" institution at September 30, 1999. The Association's
management believes that under the current regulations, the Association will
continue to meet its minimum capital requirements in the foreseeable future.
However, events beyond the control of the Association, such as increased
interest rates or a downturn in the economy of the Association's area, could
adversely affect future earnings and consequently, the ability of the
Association to continue to exceed its future minimum capital requirements.
The Year 2000
In accordance with the federal regulatory pronouncements, the
Association's Year 2000 plan addressed issues involving awareness, assessment,
renovation, validation, implementation and contingency planning. These phases
are discussed below.
Awareness and Assessment. The Association's Vice President was
appointed Year 2000 Compliance Officer, responsible for the coordination of the
Association's efforts to becoming Year 2000 compliant. In addition, a Year 2000
Committee was created consisting of the President, Vice President and an outside
board member, to help address Year 2000 issues.
Management has conducted an assessment of the Association's hardware,
software and other computer-controlled systems. In addition, management has
identified and developed an inventory of the Association's technological
components and vendors.
Renovation Phase. The Association's data processing and items
processing are handled by two independent third party data centers, and both
centers have indicated that they have completed their renovation process. The
main software program used by the Association has been certified by its vendor
to be Year 2000 compliant. The Association's computer hardware was reported Year
2000 compliant by its provider; however, after having the hardware reviewed by
an outside consultant, management decided to replace the hardware due to its age
and quality to ensure Year 2000 compliance.
Validation or Testing Phase. During 1998, the Association tested its
loan set up, loan servicing, saving deposits, saving withdrawals, checking
deposits, checking withdrawals, opening accounts, closing accounts, general
ledger activities and other transactions for Year 2000 compliance. Different
critical dates were tested in this Year 2000 environment and all went well.
During 1998, the Association received a cost estimate to switch to a
different data processor in the event its current processor was unable to become
year 2000 compliant in a timely manner. Based on the results of testing,
management does not believe that a switch to a new processor will be necessary.
Implementation Phase. Both the Association's third party data processor
and item processor have upgraded their systems to become Year 2000 compliant. At
this time, the Association is operating online with these updated systems.
15
<PAGE>
Contingency Planning. The Association has adopted contingency plans in
the event that one or more of its internal or external systems fail to operate
on or after January 1, 2000. In a worst case scenario, the Association would
need to post transactions and general ledger entries manually. This manual
system would consist of ledger cards or sheets for every loan, deposit and
general ledger account. The failure of external systems such as utility and
phone companies may also force the Association to operate on a manual processing
system.
The Association has increased liquidity and staggered the maturity of
time deposits to provide for the increased liquidity needs that may arise due to
the Year 2000. The Association can also obtain Federal Home Loan Bank advances
if necessary.
Based on a review of internal bookkeeping practices and the reports by
the Association's third party data processor and software vendor that they are
Year 2000 compliant, management does not expect to incur significant additional
bookkeeping, data processing or other expenses in connection with issues related
to the Year 2000. A budget of $25,000 was set for costs associated with the Year
2000 (all of which has been incurred as of September 30, 1999). $20,000 was
spent for the purchase of new computer hardware and the other $5,000 was spent
on testing with our third party data processor.
Status of Borrowers and Other Customers. The Association's customer
base consists primarily of individuals who use the Association's services for
personal, household or consumer uses. Management believes these customers are
not likely to individually pose material Year 2000 risks directly. It is not
possible at this time to gauge the indirect risks which could be faced if the
employers of these customers encounter unresolved Year 2000 issues. Most of the
Association's loans are residential or consumer in nature. The Association had
eleven commercial loans at September 30, 1999. Management determined that the
risk of Year 2000 issues regarding these borrowers adversely impacting the
Association was not material.
16
<PAGE>
IBL Bancorp, Inc.
Form 10-QSB
Quarter Ended September 30, 1999
PART II - OTHER INORMATION
Item 1 - Legal Proceedings:
There are no matters required to be reported under this item.
Item 2 - Changes in Securities and Use of Proceeds:
There are no matters required to be reported under sections
(a) through (c) of this item.
On September 30, 1998, the Company sold 210,870 shares of its
common stock at $10.00 per share in connection with the
conversion of the Association from the mutual to stock form,
resulting in gross proceeds of $2,108,700. Net proceeds
amounted to $1,746,920, of which 50% was used by the Company
to purchase all of the Association's common stock issued in
the conversion. Of the proceeds retained by the Company,
$168,690 was used to make a loan to the Company's Employee
Stock Ownership Plan ("ESOP") in order to fund the purchase
of 16,869 shares by the ESOP in the conversion. The remaining
net proceeds retained by the Company are being used as the
Company's working capital and have been invested in
investment securities and other interest-earning assets.
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
section.
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
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant
during the quarter ended September 30, 1999.
17
<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: November 5, 1999 BY:/s/G. Lloyd Bouchereau, Jr.
---------------------------
G. Lloyd Bouchereau, Jr.
President and
Chief Executive Officer
DATE: November 5, 1999 BY:/s/Gary K. Pruitt
-----------------
Gary K. Pruitt
Secretary
18
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 589
<INT-BEARING-DEPOSITS> 3,862
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,532
<INVESTMENTS-CARRYING> 2,334
<INVESTMENTS-MARKET> 2,287
<LOANS> 18,700
<ALLOWANCE> 405
<TOTAL-ASSETS> 28,953
<DEPOSITS> 23,689
<SHORT-TERM> 1,645
<LIABILITIES-OTHER> 94
<LONG-TERM> 0
0
0
<COMMON> 2
<OTHER-SE> 3,523
<TOTAL-LIABILITIES-AND-EQUITY> 28,953
<INTEREST-LOAN> 1,099
<INTEREST-INVEST> 199
<INTEREST-OTHER> 123
<INTEREST-TOTAL> 1,421
<INTEREST-DEPOSIT> 678
<INTEREST-EXPENSE> 699
<INTEREST-INCOME-NET> 722
<LOAN-LOSSES> 8
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 545
<INCOME-PRETAX> 242
<INCOME-PRE-EXTRAORDINARY> 242
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 154
<EPS-BASIC> .79
<EPS-DILUTED> .79
<YIELD-ACTUAL> 3.45
<LOANS-NON> 193
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 101
<ALLOWANCE-OPEN> 402
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 405
<ALLOWANCE-DOMESTIC> 118
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 287
</TABLE>
