SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM l0-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the fiscal year ended December 31, 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.
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(Name of small business issuer in its charter)
LOUISIANA 72 - 1421499
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23910 RAILROAD AVE., PLAQUEMINE, LOUISIANA 70764
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(Address of principal executive offices)
Issuer's telephone number, including area code: (225)687-6337
Securities registered pursuant to Section 12(b) of the Act:
Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.0l per share
--------------------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the 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 [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure
will be contained, to the best of Issuer's knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of this Form 10-KSB. [X]
Issuer's revenues for the fiscal year ended December 31, 1999:
$1,983,618
As of March 17, 2000, the aggregate market value of the 136,411 shares
of Common Stock of the Issuer held by non-affiliates, which excludes
74,459 shares held by all directors, executive officers and employee
benefit plans of the Issuer, was approximately $1.36 million. This
figure is based on the average of the bid and asked prices of $10.00
per share of the Issuer's Common Stock on March 17, 2000.
<PAGE>
Number of shares of Common Stock outstanding on March 17, 2000: 210,870
Transitional Small Business Disclosure Format (check one) :
Yes [ ] No [X]
DOCUMENTS INCORPORATED BY REFERENCE:
(1) Portions of the Annual Report to Stockholders for the
year ended December 31, 1999 are incorporated into Part II, Items 5
through 8 and Part III, Item 13 of this Form l0-KSB.
(2) Portions of the definitive proxy statement for the 1999
Annual Meeting of Stockholders filed on March 24, 2000 are incorporated
into Part III, Items 9 through 12 of this Form l0-KSB.
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PART I.
Item 1. Description of Business.
IBL Bancorp, Inc. (the "Company") is a Louisiana corporation
organized in June 1998 by Iberville Building and Loan Association (the
"Association") for the purpose of becoming a unitary holding company of
the Association. The only significant assets of the Company are the
capital stock of the Association, the Company's loan to its Employee Stock
Ownership Plan (the "ESOP"), and the remainder of the net proceeds
retained by the Company in connection with the conversion of the
Association from mutual to stock form on September 30, 1998 (the
"Conversion"). The business and management of the Company primarily
consists of the business and management of the Association. The Company
neither owns nor leases any property, but instead uses the premises,
equipment and furniture of the Association. The Company does not intend to
employ any persons other than officers of the Association, and the Company
utilizes 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.
The Association is a Louisiana-chartered stock savings and
loan association that was originally formed in 1915. The Association
conducts business from its office in Plaquemine, Louisiana. At December
31, 1999, the Company had $28.8 million of total assets, $25.3 million of
total liabilities, including $22.9 million of deposits, and $3.5 million
of total stockholders' equity (representing 12.2% of total assets).
The Association is primarily engaged in attracting deposits
from the general public and using those and other available sources of
funds to originate loans secured primarily by single-family residences
(one-to-four units) located mainly in the parishes of Iberville and West
Baton Rouge. To a lesser extent, the Association also originates consumer
loans, construction loans and commercial real estate loans. At December
31, 1999, the Company's net loans receivable totaled $18.1 million or
63.1% of the Company's total assets. Conventional first mortgage, one- to
four-family residential loans (excluding construction loans) amounted to
$12.4 million or 64.1% of the Company's total loan portfolio at December
31, 1999. In addition, the Association invests in mortgaged-backed
securities and certificates of deposit. The Company had $6.1 million of
mortgage-backed securities at December 31, 1999, representing 21.2% of
total assets. Of the $6.1 million of mortgage-backed securities, $320,000
matures within five years of December 31, 1999. Also at December 31, 1999,
the Company had $1.1 million or 3.8% of total assets in certificates of
deposits with other financial institutions, all of which will mature
within the next four years.
The Association is a community-oriented savings institution,
which emphasizes retail lending and deposit products, customer service and
convenience. The Association has generally 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 the
Association's business strategy include the following.
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Capital Position. As of December 31, 1999, the Association
had total stockholder's equity of $2.9 million and exceeded all of its
regulatory capital requirements, with tangible, core and risk-based
capital ratios of 10.2%, 10.2% and 22.2%, respectively, as compared to the
minimum requirements of 1.5%, 3.0% and 8.0%, respectively.
Profitability. The Company has been profitable in each of
the last three years. At December 31, 1999 net income was $184,000
compared to $195,000 and $164,000 in 1998 and 1997, respectively.
Asset Quality. The Company's total non-performing assets
were 0.4% of total assets at December 31, 1999 compared to 1.0% and 1.5%
of total assets at December 31, 1998 and 1997, respectively. Non-accruing
single-family residential loans and consumer loans represented 100% of the
total non-performing assets at December 31, 1999, 1998 and 1997. At
December 31, 1999, the Company's allowance for loan losses amounted to
$406,000 or 2.2% of the total loan portfolio.
Interest Rate Risk. The primary elements of the Company'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 fixed-rate single-family residential loans to meet customer
demand, and (iv) maintaining lower-costing passbook and negotiable order
of withdrawal ("NOW") accounts. Based upon certain repricing assumptions,
the Company's interest-earning assets repricing or maturing within one
year exceeded its interest-bearing liabilities with similar
characteristics by $1.1 million or 3.7% of total assets at December 31,
1999.
Community Orientation. The Company is committed to meeting
the financial needs of the communities in which it operates. Management
believes the Association is large enough to provide a full range of
personal financial services, yet small enough to be able to provide
services on a personalized and efficient basis. At December 31, 1999, most
of the Company's loans were to residents of its primary market area of
Iberville and West Baton Rouge parishes. The Company intends to continue
its practice of investing in loans in its primary market area in
accordance with its underwriting standards, subject to economic conditions
and the availability of reasonable investment alternatives.
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"), the administrator of the Savings
Association Insurance Fund ("SAIF"), which insures deposits in the
Association to the maximum extent provided by law. The Association is also
subject to certain reserve requirements established by the Board of
Governors of the Federal Reserve System ("FRB") and is a member of the
Federal Home Loan Bank ("FHLB") of Dallas, which is one of the 12 regional
banks comprising the FHLB System.
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The executive office for the Company and the Association is
located at 23910 Railroad Ave., Plaquemine, LA 70764, and its telephone
number is (225) 687-6337.
Market Area
The Company's primary market area 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 1999 as in
1990, while the population of West Baton Rouge Parish increased by
approximately 5.3% during this period. The unemployment rate for Iberville
and West Baton Rouge Parishes was 10.7% and 5.0%, respectively, in 1996,
compared to 6.6% for Louisiana and 5.3% for the United States. In
addition, the per capita income for Iberville and West Baton Rouge
Parishes in 1994 was $16,000 and $17,300, respectively, compared to
$18,100 for Louisiana and $22,000 for the United States.
Major employers in the two parishes are Dow USA, Iberville
and West Baton Rouge School Systems, Novartis and Georgia Gulf. In
addition, The Port of Greater Baton Rouge, located in West Baton Rouge
Parish, is a major port which provides export and import shipping. There
is also a large concentration of petro-chemical complexes and refineries
that utilize the port's facilities as well as the Mississippi River for
transportation of their products. Due to this large concentration of
petro-chemical complexes and refineries, any downturn in these industries
could have a significant impact on the Company's consolidated financial
statements and results of operations.
Lending Activities
Loan Portfolio Composition. At December 31, 1999, the
Company's net loan portfolio totaled $18.1 million, representing
approximately 63.1% of the Company's $28.8 million of total assets at that
date. All of the loans included in the loan portfolio at December 31, 1999
were loans originated by the Association. The principal lending activity
of the Association is the origination of single-family residential loans,
consumer loans, construction loans and to a lesser extent commercial real
estate loans and land loans. At December 31, 1999, single-family
residential and consumer loans amounted to 64.1% and 23.0%, respectively,
of the Company's total loan portfolio, while construction loans and
commercial real estate loans represented 4.0% and 6.8%, respectively, of
the total loan portfolio, in each case before net items.
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<PAGE>
Loan Portfolio Composition. The following table sets forth
the composition of the Company's loan portfolio by type of loan at the
dates indicated.
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------------------------------
1999 1998 1997
--------------------- ---------------------- ---------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Real estate loans
Single-family residential $12,387 64.10% $ 12,488 67.47% $ 11,531 67.13%
Construction 776 4.02% 692 3.74% 420 2.44%
Commercial real estate 1,309 6.78% 896 4.84% 943 5.49%
Land 401 2.08% 238 1.29% 271 1.58%
------- ----- -------- ----- -------- -----
Total real estate loans 14,873 76.98% 14,314 77.34% 13,165 76.64%
Consumer loans
Home equity and improvement 956 4.95% 1,005 5.43% 1,172 6.82%
Loans secured by savings accounts 555 2.87% 617 3.33% 786 4.58%
Automobile 1,466 7.59% 1,251 6.76% 1,066 6.21%
Unsecured 1,339 6.93% 1,228 6.63% 924 5.38%
Other 131 0.68% 94 0.51% 65 0.38%
------- ----- -------- ----- -------- -----
Total consumer loans 4,447 23.02% 4,195 22.66% 4,013 23.36%
------- ----- -------- ----- -------- -----
Total loans 19,320 100.00% 18,509 100.00% 17,178 100.00%
====== ====== ======
Less:
Unearned discount 244 229 189
Loans in process 517 650 260
Deferred fees 10 9 7
Allowance for loan losses 406 412 404
------- -------- --------
Total loans receivable, net $18,143 $ 17,209 $ 16,318
======= ======== ========
</TABLE>
6
<PAGE>
Contractual Terms to Final Maturities. The following table
sets forth certain information as of December 31, 1999 regarding the
dollar amount of loans maturing in the Company's portfolio, based on the
contractual date of the loan's final maturity, before giving effect to net
items. Demand loans and loans having no stated schedule of repayments and
no stated maturity 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, 1999 is shown in the
appropriate year of the loan's final maturity.
<TABLE>
<CAPTION>
Single- Commercial
family real
residential Construction estate Land Consumer Total
----------- ------------ ------ ---- -------- -----
(Dollars in Thousands)
Amounts due after December 31, 1999 in:
<S> <C> <C> <C> <C> <C> <C>
One year or less $ 21 $ 776 $ 163 $ - $ 1,433 $ 2,393
After one through two years 119 - 345 11 318 793
After two through three years 111 - 58 7 521 697
After three through five years 212 - - 42 1,450 1,704
After five through ten years 2,371 - - 267 524 3,162
After ten through fifteen years 2,838 - 374 74 201 3,487
After fifteen years 6,715 - 369 - - 7,084
------- ----- ------- ----- ------- --------
Total loans (1) $12,387 $ 776 $ 1,309 $ 401 $ 4,447 $ 19,320
======= ===== ======= ===== ======= ========
</TABLE>
(1) Gross of unearned discount, loans in process, deferred loan origination fees
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, 1999 as
shown in the preceding table, which have fixed interest rates or which
have floating or adjustable interest rates.
<TABLE>
<CAPTION>
Due After One Year From
December 31, 1999
-----------------
Floating or
Fixed Adjustable
Rates Rates Total
----- ----- -----
(Dollars in Thousands)
<S> <C> <C> <C>
Single-family residential loans $2,462 $ 9,904 $12,366
Commercial real estate loans - 1,146 1,146
Land loans 253 148 401
Consumer loans 2,614 400 3,014
------ ------- -------
Total loans $5,329 $11,598 $16,927
====== ======= =======
</TABLE>
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<PAGE>
Scheduled contractual maturities of loans do not necessarily
reflect the actual term of the Company's loan portfolio. The average life
of mortgage loans is substantially less than their average contractual
terms because of loan prepayments. The average life of mortgage loans
tends to increase when current mortgage loan rates substantially exceed
rates on existing mortgage loans and, conversely, decrease when rates on
existing mortgage loans substantially exceed current mortgage loan rates.
Origination of Loans. The lending activities of the
Association are subject to the written, non-discriminatory, underwriting
standards and lending policies established by the Association'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, newspaper and billboard advertising, and walk-in
customers. 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
generally performed by independent outside appraisers approved by the
Association's Board of Directors. The Association generally requires title
insurance (or an attorney's opinion of title) and hazard insurance on
property securing first mortgage loans. Title insurance is not required
for consumer loans.
The Association'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 allow its President or loan officer
authority to approve all types of loans not exceeding $30,000. Loan
amounts over $30,000 up to $150,000 may be approved by the Association's
President or loan officer and two other members of the board of directors.
Loans in excess of $150,000 must be approved by the Association's entire
board of directors, excluding the Association's attorney who abstains from
voting on loans due to his involvement in the majority of the
Association's real estate loan closings.
Generally, the Association originates substantially all of
the loans in its portfolio and holds them until maturity.
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<PAGE>
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>
December 31,
------------
1999 1998 1997
------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C>
Loan originations
Single-family residential
Loans for portfolio $ 2,696 $ 2,484 $ 1,638
Construction 776 692 620
Commercial real estate 52 507 225
Land 269 93 110
Consumer 2,421 1,989 1,545
------- ------- -------
Total loans originated 6,214 5,765 4,138
------- ------- -------
Reductions
Loan principal reductions (6,381) (4,421) (2,851)
------- ------- -------
Increase (decrease) due to other items - net (1) 1,101 (453) (163)
------- ------- -------
Net increase in loan portfolio $ 934 $ 891 $ 1,124
======== ======== ========
</TABLE>
(1) Other items, net include the effects relating to unearned discount,
loans in process, deferred loan origination fees and the allowance for
loan losses.
Real Estate Lending Standards and Underwriting Policies.
Effective March 19, 1993, all financial institutions were required to
adopt and maintain comprehensive written real estate lending policies that
are consistent with safe and sound banking practices. These lending
policies must reflect consideration of the Interagency Guidelines for Real
Estate Lending Policies adopted by the federal banking agencies, including
the OTS, in December 1992 ("Guidelines"). The Guidelines set forth uniform
regulations prescribing standards for real estate lending. Real estate
lending is defined as extensions of credit secured by liens on interests
in real estate or made for the purpose of financing the construction of a
building or other improvements to real estate, regardless of whether a
lien has been taken on the property.
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An institution's lending policy must address certain lending
considerations set forth in the Guidelines, including loan-to-value
("LTV") limits, loan administration procedures, underwriting standards,
portfolio diversification standards, and documentation, approval and
reporting requirements. The policy must also be appropriate to the size of
the institution and the nature and scope of its operations, and must be
reviewed and approved by the institution's board of directors at least
annually. The LTV ratio framework, with the LTV ratio being the total
amount of credit to be extended divided by the appraised value or purchase
price of the property at the time the credit is originated, must be
established for each category of real estate loans. If a loan is not
secured by a first lien, the lender must combine all senior liens when
calculating this ratio.
Certain institutions can make real estate loans that do not
conform with the established LTV ratio limits up to 100% of the
institution's total capital. Within this aggregate limit, total loans for
all commercial, agricultural, multi-family and other non-one-to-four
family residential properties should not exceed 30% of total capital. An
institution will come under increased supervisory scrutiny as the total of
such loans approaches these levels. Certain loans are exempt from the LTV
ratios (e.g., those guaranteed by a government agency, loans to facilitate
the sale of real estate owned, loans renewed or restructured by the
original lender(s) to the same borrower(s) where there is no advancement
of funds, etc.).
The Association is in compliance with the above standards.
Although Louisiana laws and regulations permit
state-chartered savings institutions, such as the Association, to
originate and purchase loans secured by real estate located throughout the
United States, the Association's present lending is done primarily within
its primary market area, which consists of Iberville and West Baton Rouge
Parishes in Louisiana. Subject to the Association's loans-to-one borrower
limitation, the Association 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. The Association may also
invest in secured and unsecured consumer loans in an amount not exceeding
35% of the Association'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, the
Association may invest up to 10% of its total assets in secured and
unsecured loans for commercial, corporate, business or agricultural
purposes. At December 31, 1999, the Association was well within each of
the above lending limits.
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 December 31, 1999, 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 amounted to
$396,000, $385,000, $310,000, $247,000, and $243,000, respectively, at
such date. All of the Association's five largest loans or groups of loans
were performing in accordance of their terms at December 31, 1999. The
$396,000 borrowing relationship consists of a
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commercial real estate loan in the amount of $345,000, a single-family
residential loan in the amount of $18,500 and three consumer loans with
total balances of $32,500.
Loans on Existing Residential Properties. The primary real
estate lending activity of the Association is the origination of loans
secured by first mortgage liens on single-family residences. At December
31, 1999, $12.4 million or 64.1% of the Company's total loan portfolio,
before net items, consisted of single-family residential loans.
The loan-to-value ratio, maturity and other provisions of
the loans made by the Association 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 the Association. The
Association'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, and generally the
single-family residential loans in excess of an 80% loan-to-value ratio
require private mortgage insurance. Residential mortgage loans are
amortized on a monthly basis with principal and interest due each month
and customarily do not include "due-on-sale" clauses.
Various legislative and regulatory changes have given the
Association the authority to originate and purchase mortgage loans which
provide for periodic interest rate adjustments subject to certain
limitations. The Association has been actively marketing ARMs in order to
decrease the vulnerability of its operations to changes in interest rates.
At December 31, 1999, single-family residential ARMs represented $9.9
million or 51.3% of the total loan portfolio, before net items.
The Association'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. The Association 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
purchases 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 the Association's loan
portfolio are not convertible 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 December 31, 1999, the Company's non-accruing
residential loans were $65,000. See "-Asset Quality."
The demand for adjustable-rate loans in the Association's
primary market area has been a function of several factors, including the
level of interest rates and the
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<PAGE>
difference between the interest rates offered by competitors for
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 totaled $2.5 million at December 31, 1999.
Construction Loans. At December 31, 1999, $776,000 or 4.0%
of the Association's total loan portfolio, before net items, consisted of
seven 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 seven single-family construction loans
were for $211,000, $150,000, $120,000, $120,000, $100,000, $50,000 and
$25,000 at December 31, 1999, including amounts not yet disbursed. The
construction loans each bear a fixed interest rate during the construction
phase and 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. The Association 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 $1.3 million
or 6.8% of the total loan portfolio at December 31, 1999. The largest
commercial real estate loan at December 31, 1999 was a loan secured by
several commercial properties, a rental house and a personal residence and
amounted to $345,000 at such date. The average balance of commercial real
estate loans at December 31, 1999 was approximately $131,000.
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 loans as it uses for single-family
residential loans, except that the margin for commercial loans is
generally 1.25% above the index. 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
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<PAGE>
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 $507,000 of commercial real estate loans
were originated in 1998, and $52,000 were originated in 1999.
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. The Association
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 LTV ratios in the underwriting process.
Land Loans. As of December 31, 1999, 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 December 31, 1999, the
Association's land loans amounted to $401,000 or 2.1% of the total loan
portfolio. Of such amount, $253,000 of the land loans had fixed rates
while $148,000 had adjustable interest rates. In 1998, the Association
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. As of December 31, 1999, $330,000 had been disbursed by the
Association on this project. The land is being developed into an 18-hole
golf course and into vacant lots for single-family residences. As of the
filing of this report, 44 lots had been sold, four houses were complete
and six other homes were in various stages of construction. 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
December 31, 1999, $4.4 million or 23.0% of the 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 improvement loans, loans secured by deposit accounts in the
Association, automobile loans, mobile home loans, unsecured loans and
other miscellaneous loans.
13
<PAGE>
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 December
31, 1999, home equity and improvement loans totaled $1.0 million or 5.0%
of the total loan portfolio.
The Association offers loans secured by deposit accounts in
the Association, which loans amounted to $555,000 or 2.9% of the total
loan portfolio at December 31, 1999. 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 rates of interest and terms of up to five years for new
vehicles and four years for used vehicles. Automobile loans amounted to
$1.5 million or 7.6% of the total loan portfolio at December 31, 1999.
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 $10,000 unsecured loans
for a term of up to 48 months. These loans bear a fixed rate of interest
and generally require monthly payments of principal and interest. The
amount of unsecured loans at December 31, 1999 was $1.3 million or 6.9% of
the total loan portfolio.
Other consumer loans primarily consist of mobile home loans
and overdrafts and amounted to $131,000 or 0.7% of the total loan
portfolio at December 31, 1999.
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 collateral and, in
certain cases, the absence of collateral. In addition, consumer lending
collections are dependent on the borrower's continuing 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 can 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.
14
<PAGE>
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
conjunction with the origination of the loan.
In accordance with SFAS No. 91, which deals with the
accounting for non-refundable fees and cost 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
December 31, 1999, the Association had $10,000 of loan fees which had been
deferred and are being recognized as income over the contractual life of
the related loans.
Asset Quality
Delinquent Loans. The following table sets forth information
concerning delinquent loans at December 31, 1999, in dollar amounts and as
a percentage of the Company'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 December 31,
1999, the Company had no commercial real estate loans, construction loans
or land loans which were delinquent 30 or more days.
<TABLE>
<CAPTION>
December 31, 1999
-----------------
Single-family
Residential Consumer Total
--------------------- ---------------------- ---------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Loans Delinquent for:
- ---------------------
30-59 days $ 491 2.54% $ 157 0.81% $ 648 3.35%
60 - 89 days 52 0.27% - 0.00% 52 0.27%
90 days and over 65 0.34% 54 0.28% 119 0.62%
----- ---- ----- ---- ----- ----
Total delinquent loans $ 608 3.15% $ 211 1.09% $ 819 4.24%
===== ==== ===== ==== ===== ====
</TABLE>
15
<PAGE>
Non-Performing Assets. When a borrower fails to make a
required loan payment, the Association attempts to cause the default to be
cured by contacting the borrower. 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 defaults 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
judgement 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. Specific reserves are established when a consumer loan becomes
90 days past due.
If foreclosure is effected, the property is sold at a
sheriff's sale. If the Association is the successful bidder, the acquired
real estate property is then included in the Association's "real estate
owned" account until it is sold. The Association is permitted under
applicable regulations to finance sales of real estate owned by "loans to
facilitate" which may involve more favorable interest rates and terms than
generally would be granted under the Association's underwriting
guidelines. At December 31, 1999, the Association had no real estate
owned.
16
<PAGE>
The following table sets forth the amounts and categories of
the Association's non-performing assets at the dates indicated.
<TABLE>
<CAPTION>
December 31,
------------
1999 1998 1997
----- ----- -----
(Dollars in Thousands)
<S> <C> <C> <C>
Nonaccrual loans:
Single-family residential $ 65 $ 147 $ 267
Construction - - -
Commercial real estate - - -
Land - - -
Consumer 54 95 65
----- ----- -----
Total non-accrual loans 119 242 332
Real estate owned - - -
----- ----- -----
Total non-performing assets $ 119 $ 242 $ 332
===== ===== =====
Total non-performing loans as a percent
of total loans 0.62% 1.31% 1.93%
==== ==== ====
Total non-performing assets as a percent
of total assets 0.41% 1.01% 1.48%
==== ==== ====
</TABLE>
The $119,000 of non-accruing loans at December 31, 1999
consisted of 2 single-family residential loans, of which the largest was
$45,000, and 13 consumer loans.
If the $119,000 of non-accruing loans at December 31, 1999
had been current in accordance with their terms during 1999, the gross
interest income on such loans would have been $8,109. A total of $5,030 of
interest income on these non-accruing loans was actually recorded in 1999.
Classified Assets. All loans are reviewed on a regular basis
under the Association's asset classification policy. The Association's
total classified assets at December 31, 1999 (excluding loss assets
specifically reserved for), amounted to $398,000, all of which was
classified as substandard. The largest classified asset at December 31,
1999 consisted of a $71,000 adjustable-rate single-family dwelling. The
remaining $327,000 of substandard assets at December 31, 1999 consisted of
10 residential mortgage loans totaling $309,000 and 4 consumer loans
totaling $18,000.
Allowance for Loan Losses. At December 31, 1999, the
Company's allowance for loan losses amounted to $406,000 or 2.2% of the
total loan portfolio. The Association's loan portfolio consists primarily
of single-family residential loans, consumer loans and, to a lesser
extent, commercial real estate loans, construction loans
17
<PAGE>
and land loans. The loan loss allowance is maintained by management at a
level considered adequate to cover possible 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 summarizes changes in the allowance for
loan losses and other selected statistics for the periods presented:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1999 1998 1997
------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C>
Total loans outstanding at end of period $19,320 $ 18,509 $ 17,178
======= ======== ========
Average loans outstanding $18,066 $ 16,611 $ 15,735
======= ======== ========
Balance at beginning of period $ 412 $ 404 $ 362
Charge offs (1) 16 13 2
Recoveries (2) 1 - 2
------- -------- --------
Net charge offs 15 13 -
Provision for loan losses 9 21 42
------- -------- --------
Balance at end of period $ 406 $ 412 $ 404
======= ======== ========
Allowance for loan losses as a percent of
total loans outstanding 2.10% 2.23% 2.35%
======= ======== ========
Ratio of net charge-offs to average
loans outstanding 0.08% 0.08% 0.00%
======= ======== ========
</TABLE>
(1) Consists solely of consumer loans.
(2) Includes consumer loans of $1,000 in 1999 and $1,000 in 1997, all other
recoveries are on mortgage loans.
18
<PAGE>
The following table presents the allocation of the allowance
for loan losses by type of loan at each of the dates indicated.
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------------------------
1999 1998 1997
------------------------ ----------------------- ---------------------
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>
Loan Type
Single-family residential $ 338 64.10% $ 358 67.47% $ 338 67.13%
Construction - 4.02% - 3.74% - 2.44%
Commercial real estate - 6.78% - 4.84% - 5.49%
Land - 2.08% - 1.29% - 1.58%
Consumer 68 23.02% 54 22.66% 66 23.36%
----- ----- ----- ----- ----- -----
Total real estate loans $ 406 100.00% $ 412 100.00% $ 404 100.00%
===== ====== ===== ====== ===== ======
</TABLE>
Mortgage-Backed Securities
Mortgage-backed securities represent a participation
interest in a pool of single-family or multi-family residential 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 Company. Such U.S. Government agencies and government-sponsored
enterprises, which guarantee the payment of principal and interest to
investors, primarily include the Fredddie Mac, the Fannie Mae and the
Ginnie Mae.
The Freddie Mac, which is a corporation chartered by the
U.S. Government, issues participation certificates backed principally by
conventional mortgage loans. The Freddie Mac guarantees the timely payment
of interest and the ultimate return of principal on participation
certificates. The Fannie Mae is a private corporation chartered by the
U.S. Congress with a mandate to establish a secondary market for mortgage
loans. The Fannie Mae guarantees the timely payment of principal and
interest on Fannie Mae securities. The Ginnie Mae is a government agency
within the Department of Housing and Urban Development, which is intended
to help finance government-assisted housing programs. Ginnie Mae
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 Ginnie Mae
securities are guaranteed by the Ginnie Mae and backed by the full faith
and credit of the U.S. Government. Because the Freddie Mac, the Fannie Mae
and the Ginnie Mae were established to provide support for low- and
middle-income housing, there are
19
<PAGE>
limits to the maximum size of the loans that qualify for these programs.
For example, the Fannie Mae and the Freddie Mac 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.
Of the $6.1 million of mortgage-backed securities at
December 31, 1999, $2.4 million was accounted for as held to maturity and
had an aggregate market value of $2.3 million at such date. The remaining
$3.7 million of mortgage-backed securities at December 31, 1999 are
accounted for as available for sale and are thus carried at market value.
For additional information relating to the Company's mortgage-backed
securities, see Note E of Notes to Consolidated Financial Statements in
the Company's 1999 Annual Report to Stockholders, which is filed as
Exhibit 13.0 hereto ("1999 Annual Report").
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
Company. In general, mortgage-backed pass-through securities are weighted
at no more than 20% for risk-based capital purposes, compared to an
assigned risk weighting of 50% to 100% for whole residential mortgage
loans. As a result, these types of securities allow the Company to
optimize regulatory capital to a greater extent than non-securitized whole
loans. While mortgage-backed securities carry a reduced credit risk as
compared to whole loans, such securities remain subject to the risk that a
fluctuating interest rate environment, along with other factors such as
the geographic distribution of the underlying mortgage loans, may alter
the prepayment rate of such mortgage loans and so affect both the
prepayment speed and value of such securities.
<PAGE>
The following table sets forth the composition of the
Company's mortgage-backed securities at each of the dates indicated.
<TABLE>
<CAPTION>
December 31,
------------
1999 1998 1997
------ ------ ------
(Dollars in Thousands)
<S> <C> <C> <C>
Mortgage-backed securities held to maturity
Fannie Mae $1,461 $1,402 $1,173
Freddie Mac 819 601 1,050
Gennie Mae 92 119 163
------ ------ ------
Subtotal - held to maturity 2,372 2,122 2,386
------ ------ ------
Mortgage-backed securities available for sale
Fannie Mae 2,147 1,348 1,948
Freddie Mac 436 - -
Gennie Mae 1,149 106 -
------ ------ ------
Subtotal - available for sale 3,732 1,454 1,948
------ ------ ------
Total $6,104 $3,576 $4,334
====== ====== ======
</TABLE>
20
<PAGE>
Information regarding the contractual maturities and
weighted average yield of the Company's mortgage-backed securities
portfolio at December 31, 1999 is presented below. Due to repayments of
the underlying loans, the actual maturities of mortgage-backed securities
generally are substantially less than the scheduled maturities.
The following table sets forth the purchases and principal
repayments of the Company's mortgage-backed securities during the periods
indicated. There were no sales during the periods shown.
<TABLE>
<CAPTION>
At or For The Year Ended
December 31,
------------
1999 1998 1997
------ ------ ------
(Dollars in Thousands)
<S> <C> <C> <C>
Mortgage-backed securities at
beginning of period (cost) $3,576 $4,329 $4,164
Purchases 3,574 559 917
Repayments 1,021 1,284 734
Discount accretion / (premium amortization) (18) (28) (18)
------ ------ ------
Mortgage-backed securities at end of period (cost) $6,111 $3,576 $4,329
====== ====== ======
Mortgage-backed securities at end of
period ( fair value) $6,041 $3,570 $4,322
====== ====== ======
Weighted average yield at end of period 6.12% 5.76% 6.36%
====== ====== ======
</TABLE>
21
<PAGE>
Investment Securities
The Association has the 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, and the
Company has broader investing authority. Each purchase of an investment
security is approved by the Board of Directors. The Company's investment
securities are carried in accordance with generally accepted accounting
principles ("GAAP"). All of the Company's investment securities were
accounted for as held-to-maturity at December 31, 1999.
Investment securities (excluding FHLB stock) totaled $1.1
million or 3.8% of total assets at December 31, 1999, consisting of
certificates of deposits in other financial institutions. At December 31,
1999, the Company had no other investment securities.
Sources of Funds
General. Deposits are the primary source of the Company's
funds for lending and other investment purposes. In addition to deposits,
the Company derives funds 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. The Association's deposits are attracted
principally from within the Association's primary market area through the
offering of a broad selection of deposit instruments, including NOW
accounts, money market deposit accounts, regular savings accounts, and
term certificate accounts. Included among these deposit products are
individual retirement account certificates of approximately $2.0 million
or 8.5% of total deposits at December 31, 1999. 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 large variety of deposit accounts offered by the
Association has increased the Association's ability to retain deposits and
allowed it to be more competitive in obtaining new funds, but has not
eliminated the threat of disintermediation (the flow of funds away from
savings institutions into direct investment vehicles such as government
and corporate securities). In addition, the Association is subject to
short-term fluctuations in deposit flows. The Association's ability to
attract and maintain deposits is affected by the rate consciousness of its
customers and their willingness to move funds into higher-yielding
accounts. The Association's cost of funds has been, and will continue to
be, affected by money market conditions.
22
<PAGE>
The following table shows the distribution of, and certain
other information relating to, the Association's deposits by type of
deposit, as of the dates indicated.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------
1999 1998 1997
Percent of Percent of Percent of
Amount Total Amount Total Amount Total
------ ----- ------ ----- ------ -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Certificate accounts
2.00% - 3.99% $ - 0.00% $ - 0.00% $ - 0.00%
4.00% - 5.99% 13,556 59.24% 12,491 62.77% 12,424 62.04%
6.00% - 7.99% 1,410 6.16% 1,735 8.72% 2,213 11.05%
------- ------ ------- ------ ------- ------
Total certificate accounts 14,966 65.40% 14,226 71.49% 14,637 73.09%
------- ------ ------- ------ ------- ------
Transaction accounts
Passbook accounts 3,302 14.43% 3,323 16.70% 3,095 15.45%
Money market accounts 177 0.77% 153 0.77% 293 1.46%
NOW accounts (1) 4,405 19.25% 2,159 10.85% 1,968 9.83%
------- ------ ------- ------ ------- ------
Total transaction accounts 7,884 34.45% 5,635 28.32% 5,356 26.75%
------- ------ ------- ------ ------- ------
Total deposit accounts 22,850 99.85% 19,861 99.81% 19,993 99.84%
Accrued interest payable 34 0.15% 38 0.19% 33 0.16%
------- ------ ------- ------ ------- ------
Total deposits $ 22,884 100.00% $19,899 100.00% $20,026 100.00%
======== ====== ======= ====== ======= ======
</TABLE>
(1) Includes noninterest-bearing checking accounts.
23
<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>
Year Ended December 31,
-----------------------------------------------------------------------------------
1999 1998 1997
Average Average Average
Average Rate Average Rate Average Rate
Balance Paid Balance Paid Balance Paid
------- ---- ------- ---- ------- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Passbook savings accounts $ 3,396 3.14% $ 3,434 3.03% $ 2,982 3.03%
Demand and NOW accounts (1) 3,398 2.37% 2,312 3.27% 2,027 2.70%
Money market deposit accounts 164 6.66% 216 5.68% 309 4.61%
Certificates of deposit 15,465 4.56% 14,594 4.84% 14,836 5.06%
-------- ---- -------- ---- -------- ----
Total interest-bearing deposits (2) $ 22,423 4.03% $ 20,556 4.37% $ 20,154 4.51%
======== ==== ======== ==== ======== ====
</TABLE>
(1) Includes noninterest-bearing checking accounts.
(2) Excludes accrued interest payable.
The following table sets forth the savings flows of the
Association during the periods indicated.
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------
1998 1997 1996
------ ------ ------
(Dollars in Thousands)
<S> <C> <C> <C>
Net increase (decrease) before interst credited (1) $2,086 $(1,030) $(1,151)
Interest credited 904 898 910
------ ------ ------
Net increase (decrease) in deposits (2) $2,990 $ (132) $ (241)
====== ====== ======
</TABLE>
(1) The information provided is the net of deposits and withdrawals because
the gross amount of deposits and withdrawals is not readily available.
(2) Excludes accrued interest payable on deposits.
24
<PAGE>
The Association 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. The Association has
generally not taken a position of price leadership in its markets, except
when there has been an opportunity to market longer-term deposits.
The principal methods used by the Association to attract
deposits include the offering of a wide variety of services and accounts,
competitive interest rates and a convenient office location. The
Association does not advertise for deposits outside of its market area.
The following table presents, by various interest rate
categories, the amount of certificates of deposit at December 31, 1999,
which mature during the periods indicated.
<TABLE>
<CAPTION>
Certificates of Deposit
- -----------------------
As of December 31, 1999
- -----------------------
Maturity Date
One Year Over One to Over Two to Over Three
or Less Two Years Three Years Years Total
------- --------- ----------- ----- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
4.00% - 5.99% $ 9,906 $ 2,038 $ 521 $ 1,091 $ 13,556
6.00% - 7.99% 1,053 150 104 103 1,410
-------- ------- ----- ------- --------
Total $ 10,959 $ 2,188 $ 625 $ 1,194 $ 14,966
======== ======= ===== ======= ========
<CAPTION>
Certificates of Deposit - $100,000 or more
- ------------------------------------------
Dollars in
Thousands
Maturing in quarter ending:
March 31, 2000 $ 1,701
June 30, 2000 306
September 30, 2000 409
December 31, 2000 355
After December 31, 2000 539
-------
Total certificates of
deposit - $100,000 or more $ 3,310
=======
</TABLE>
25
<PAGE>
Borrowings. The Association 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, investment securities and
mortgage-backed securities, provided certain standards related to credit
worthiness have been met. See "Regulation -The Association - Federal Home
Loan Bank System." 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.
As of December 31, 1999, the Association was permitted to
borrow up to an aggregate of $10.6 million from the FHLB of Dallas. The
Association had $2.3 million of FHLB advances outstanding at December 31,
1999. Pursuant to collateral agreements with the FHLB, the December 31,
1999 advances are secured by a blanket floating lien on first mortgage
loans.
The following table sets forth certain information regarding
borrowings at or for the dates indicated.
<TABLE>
<CAPTION>
At or for the Year Ended
December 31,
------------
1999 1998 1997
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
FHLB advances:
Average balance outstanding $1,067 $ 293 $ 138
Maximum amount outstanding at any
month-end during the period $2,300 $ 610 $ 695
Balance outstanding at end of period $2,300 $ 495 $ 610
Average interest rate during the period 4.59% 5.80% 5.07%
Weighted average interest rate at end of period 5.58% 4.61% 5.90%
</TABLE>
26
<PAGE>
Subsidiary
At December 31, 1999, 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
The Association had eight full-time employees at December
31, 1999. None of these employees are represented by a collective
bargaining agent, and the Association believes that it enjoys good
relations with its personnel.
Competition
The Association 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, the Association faces
additional significant competition for investors' funds from short-term
money market mutual funds and issuers of corporate and government
securities. The Association 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.
The Association's competition for real estate loans comes
principally from mortgage banking companies, commercial banks, other
savings institutions and credit unions. The Association 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.
37
<PAGE>
REGULATION
The following discussion of certain laws and regulations
which are applicable to the Company and the Association, 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 the Association. However, the summary does not
purport to be complete and is qualified in its entirety by reference to
applicable laws and regulations.
The Company
General. The Company, as a registered savings and loan
holding company within the meaning of the Home Owners' Loan Act, as
amended ("HOLA"), is subject to OTS regulations, examinations, supervision
and reporting requirements. As a subsidiary of a savings and loan holding
company, the Association is subject to certain restrictions in its
dealings with the Company and affiliates thereof.
Activities Restrictions. There are generally no restrictions
on the activities of a savings and loan holding company which holds only
one subsidiary savings institution. 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."
If the Company were to acquire control of another savings
institution, other than through merger or other business combination with
the Association, the Company would thereupon become a multiple savings and
loan holding company. Except where such acquisition is pursuant to the
authority to approve emergency thrift acquisitions and where each
subsidiary savings institution meets the QTL test, as set forth below, the
activities of the Company and any of its subsidiaries (other than the
Association or other subsidiary savings institutions) would thereafter be
subject to further restrictions. Among other things, no multiple savings
and loan holding company or subsidiary thereof which is not a savings
institution shall commence or continue for a limited period of time after
becoming a multiple savings and loan holding company or subsidiary thereof
any business activity, except upon prior notice to and no objection by the
OTS, other than: (i) furnishing or performing management services for a
subsidiary savings institution; (ii) conducting an insurance agency or
escrow business; (iii) holding, managing, or liquidating assets owned by
or acquired from a subsidiary
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<PAGE>
savings institution; (iv) holding or managing properties used or occupied
by a subsidiary savings institution; (v) acting as trustee under deeds of
trust; (vi) those activities authorized by regulation as of March 5, 1987
to be engaged in by multiple savings and loan holding companies; or (vii)
unless the Director of the OTS by regulation prohibits or limits such
activities for savings and loan holding companies, those activities
authorized by the FRB as permissible for bank holding companies. Those
activities described in (vii) above also must be approved by the Director
of the OTS prior to being engaged in by a multiple savings and loan
holding company.
Limitations on Transactions with Affiliates. Transactions
between savings institutions and any affiliate are governed by Sections
23A and 23B of the Federal Reserve Act and OTS regulations. Affiliates of
a savings institution include any company or entity which controls, is
controlled by or is under common control with the savings institution. In
a holding company context, the parent holding company of a savings
institution (such as the Company) and any companies which are controlled
by such parent holding company are affiliates of the savings institution.
Generally, such provisions (i) limit the extent to which the savings
institution or its subsidiaries may engage in "covered transactions" with
any one affiliate to an amount equal to 10% of such institution's capital
stock and surplus, and contain an aggregate limit on all such transactions
with all affiliates to an amount equal to 20% of such capital stock and
surplus and (ii) require that all such transactions be on terms
substantially the same, or at least as favorable, to the institution or
subsidiary as those provided to a non-affiliate. The term "covered
transaction" includes the making of loans, purchase of assets, issuance of
a guarantee and other similar transactions. In addition to the
restrictions imposed by such provisions, no savings institution may (i)
loan or otherwise extend credit to an affiliate, unless the affiliate is
engaged only in activities permissible for bank holding companies, or (ii)
purchase or invest in any stocks, bonds, debentures, notes or similar
obligations of any affiliate, except for affiliates which are subsidiaries
of the saving institution.
In addition, Sections 22(h) and (g) of the Federal Reserve
Act place restrictions on loans to executive officers, directors and
principal stockholders. Under Section 22(h), loans to a director, an
executive officer and to a greater than 10% stockholder of a savings
institution, and certain affiliated interests of either, may not exceed,
together with all other outstanding loans to such person and affiliated
interests, the savings institution's loans to one borrower limit
(generally equal to 15% of the institution's unimpaired capital and
surplus). Section 22(h) also requires that loans to directors, executive
officers and principal stockholders be made on terms substantially the
same as offered in comparable transactions to other persons (except for
preferential terms offered to all employees) and also requires prior board
approval for certain loans. In addition, the aggregate amount of
extensions of credit by a savings institution to all insiders cannot
exceed the institution's unimpaired capital and surplus. Furthermore,
Section 22(g) places additional restrictions on loans to executive
officers. At December 31, 1999, the Association was in compliance with the
above restrictions.
Restrictions on Acquisitions. Except under limited
circumstances, savings and loan holding companies are prohibited from
acquiring, without prior approval of the Director of the OTS, (i) control
of any other savings institution or savings and loan
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<PAGE>
holding company or substantially all the assets thereof or (ii) more than
5% of the voting shares of a savings institution or holding company
thereof which is not a subsidiary. Except with the prior approval of the
Director of the OTS, no director or officer of a savings and loan holding
company or person owning or controlling by proxy or otherwise more than
25% of such company's stock, may acquire control of any savings
institution, other than a subsidiary savings institution, or of any other
savings and loan holding company.
The Director of the OTS may only approve acquisitions
resulting in the formation of a multiple savings and loan holding company
which controls savings institutions in more than one state if (i) the
multiple savings and loan holding company involved controls a savings
institution which operated a home or branch office located in the state of
the institution to be acquired as of March 5, 1987; (ii) the acquirer is
authorized to acquire control of the savings institution pursuant to the
emergency acquisition provisions of the Federal Deposit Insurance Act
("FDIA"); or (iii) the statutes of the state in which the institution to
be acquired is located specifically permit institutions to be acquired by
the state-chartered institutions or savings and loan holding companies
located in the state where the acquiring entity is located (or by a
holding company that controls such state-chartered savings institutions).
Under the Bank Holding Company Act of 1956, the FRB is
authorized to approve an application by a bank holding company to acquire
control of a savings institution. In addition, a bank holding company that
controls a savings institution may merge or consolidate the assets and
liabilities of the savings institution with, or transfer assets and
liabilities to, any subsidiary bank which is a member of the Bank
Insurance Fund ("BIF") with the approval of the appropriate federal
banking agency and the FRB. As a result of these provisions, there have
been a number of acquisitions of savings institutions by bank holding
companies in recent years.
The Association
General. The OFI is the Association's chartering authority,
and the OTS is the Association's primary federal regulator. The OTS and
the OFI have extensive authority over the operations of
Louisiana-chartered savings institutions. As part of this authority,
savings institutions are required to file periodic reports with the OTS
and the OFI and are subject to periodic examinations by the OTS, the OFI
and the FDIC. 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 and
unsound practices. Other actions or inactions may provide the basis for
enforcement actions, including misleading or untimely reports filed with
the OTS.
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<PAGE>
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. 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, 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 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 BlF, the federal deposit insurance fund that
covers commercial bank deposits, are required by law to 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
commercial banks.
On November 14, 1995, the FDIC approved a final rule
regarding deposit insurance premiums. The final rule reduced deposit
insurance premiums for BlF 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 in the SAIF to 1.25% of insured deposits. The legislation also
provided 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 one-time special assessment
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<PAGE>
for the Association amounted to $123,000. Net of related tax benefits, the
one-time special assessment amounted to $75,000. The payment of such
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 basis points to 27 basis points in order to include
assessments paid to the Financing Corporations ("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. The
Association paid approximately $13,000 in insurance premiums in 1999.
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 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. At December 31, 1999,
the Association had no intangible assets which are deducted in computing
its tangible capital. Both core and tangible capital are further reduced
by an amount equal to a savings institution's debt and equity investments
in subsidiaries
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<PAGE>
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). At December 31, 1999, the Association had no
subsidiaries.
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 Fannie Mae or the Freddie Mac, 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 Fannie Mae or the Freddie Mac,
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 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
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<PAGE>
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.
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. This decreased the Association's
regulatory capital at December 31, 1999 by approximately $4,675.
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<PAGE>
At December 31, 1999, the Association exceeded all of its
regulatory capital requirements, with tangible, core and risk-based
capital ratios of 10.2%, 10.2% and 22.2%, respectively. The following
table sets forth the Association's compliance with each of the
above-described capital requirements as of December 31, 1999.
<TABLE>
<CAPTION>
Tangible Core Risk-based
Capital Capital Capital (1)
------- ------- -----------
(Dollars in Thousands)
<S> <C> <C> <C>
Capital under GAAP $2,862 $ 2,862 $ 2,862
Additional capital items:
Unrealized loss on securities available for sale,
net of taxes - 5 5
General valuation allowances (2) - - 172
------ ------- -------
Regulatory Capital 2,862 2,867 3,039
Minimum required regulatory capital 423 1127 1093
------ ------- -------
Excess regulatory capital $2,439 $ 1,740 $ 1,946
------ ------- -------
Regulatory capital as a percentage of assets (3) 10.16% 10.18% 22.23%
Minimum capital required as a percentage of
assets 1.50% 4.00% 8.00%
------ ------- -------
Regulatory capital as a percentage in
excess of requirements 8.66% 6.18% 14.23%
====== ======= =======
</TABLE>
(1) Does not reflect the interest-rate risk component in the minimum
risk-based capital requirement, the effective date of which has been
postponed as discussed above.
(2) General valuation allowances are used only in the calculation of
risk-based capital. Such allowances are limited to 1.25% of risk weighted
assets.
(3) Tangible and core capital are computed as a percentage of adjusted total
assets of $28.2 million. Risk-based capital is computed as a percentage of
adjusted risk-weighted assets of $13.7 million.
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<PAGE>
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 December 31, 1999, 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.
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<PAGE>
Safety and Soundness. The OTS and 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 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 December 31, 1999, the Association's liquidity ratio was 14.85%.
Capital Distributions. OTS regulations govern capital
distributions by savings institutions, which include cash dividends, stock
redemptions or repurchases, and other transactions charged to the capital
account of a savings institution to make capital distributions. A savings
institution must file an application for OTS approval of the capital
distribution if either (1) the total capital distributions for the
applicable calendar year exceed the sum of the institution's net income
for that year to date plus the institution's retained net income for the
preceding two years, (2) the institution would not be at least adequately
capitalized following the distribution, (3) the distribution would violate
any applicable statute, regulation, agreement or OTS-imposed condition, or
(4) the institution is not eligible for expedited treatment of its filing.
If an application is not required to be filed, savings institutions which
are a subsidiary of a holding company (as well as certain other
institutions) must still file a notice with the OTS at least 30 days
before the board of directors declares a dividend or approves a capital
distribution.
Loans to One Borrower. The permissible amount of
loans-to-one borrower now generally follows the national bank standard for
all loans made by savings institutions. The national bank standard
generally does not permit loans-to-one borrower to exceed the greater of
$500,000 or 15% of unimpaired capital and surplus. Loans in an amount
equal to an additional l0% of unimpaired capital and surplus also may be
made to a borrower if the loans are fully secured by readily marketable
securities. For information about the largest borrowers from the
Association, see "Description of Business - Lending Activities - Real
Estate Lending Standards and Underwriting Policies."
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
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<PAGE>
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 up to certain amounts, 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. See "Description of Business - Asset
Quality - Classified Assets."
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.
Qualified Thrift Lender Test. All savings institutions are
required to meet a QTL test in order to avoid certain restrictions on
their operations. 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 Internal Revenue Code of 1986, as amended
("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
advances from its FHLB; 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 meet the QTL test, 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).
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<PAGE>
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 very 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 December 31, 1999, the qualified thrift
investments of the Association were approximately 99.29% 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.
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 December 31,
1999, the Association had $180,200 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 continue to do so in the future.
Federal Reserve System. The FRB 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 December 31, 1999, no reserves were required to be
maintained on the first $5.0 million of transaction accounts, reserves of
3% were required to be maintained against the next $44.3 million of net
transaction accounts (with such dollar amounts subject to adjustment by
the FRB), and a reserve of 10% (which is subject to adjustment by the FRB
to a level between 8% and 14%) is required against all remaining net
transaction accounts. Because required reserves must be maintained in the
form of vault cash or a non-interest-bearing account at a Federal Reserve
Bank, the effect of this reserve requirement is to reduce an institution's
earning assets.
39
<PAGE>
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 development of a common charter for
savings institutions and commercial banks. 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.
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 law and regulations.
The Association is required by Louisiana law and regulations
to comply with certain reserve and capital requirements. At December 31,
1999, 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-Real Estate Lending Standards and Underwriting Policies."
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
40
<PAGE>
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 December 31, 1999, the Association was in
compliance with such provisions.
Furthermore, 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 no
significant risk to the affected deposit insurance fund and the
Association is in compliance 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 December 31, 1999, 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.
41
<PAGE>
TAXATION
Federal Taxation
General. The Company and the Association are subject to the
generally applicable corporate tax provisions of the Code, and the
Association is subject to certain additional provisions of the Code which
apply to thrifts and other types of financial institutions. The following
discussion of federal taxation is intended only to summarize certain
pertinent federal income tax matters material to the taxation of the
Company and the Association and is not a comprehensive discussion of the
tax rules applicable to the Company and the Association.
Year. The Company and the Association 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 1999 and 2000.
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,
1999, the Association's post-1987 excess reserves amounted to
approximately $43,000. 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 December 31, 1999, the federal income tax reserves of the
Association included $110,577 for which no federal income tax has been
provided. Because of these federal income tax reserves and the liquidation
account established for the benefit of certain depositors of the
Association in connection with the conversion of the Association to stock
form, the retained earnings of the Association are substantially
restricted.
Distributions. If the Association were to distribute cash or
property to its sole stockholder, 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 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.
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<PAGE>
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).
Capital Gains and Corporate Dividends-Received Deduction.
Corporate net capital gains are taxed at a maximum rate of 35%. The
corporate dividends-received deduction is 80% in the case of dividends
received from corporations with which a corporate recipient does not file
a consolidated tax return, and corporations which own less than 20% of the
stock of a corporation distributing a dividend may deduct only 70% of
dividends received or accrued on their behalf. However, a corporation may
deduct 100% of dividends from a member of the same affiliated group of
corporations.
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 1997, 1998 and 1999 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, as well as franchise taxes. 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 within or derived from sources within the
State of Louisiana, after adjustments permitted under Louisiana law,
including a federal income tax deduction and an allowance for net
operating losses, if any. In addition, beginning in 1999, the Association
is subject to the Louisiana Shares Tax, which is imposed on the assessed
value of its stock. The formula for deriving the assessed value is to
calculate 15% of the sum of (a) 20% of the 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. In 1999 the Louisiana Shares Tax for the
Company amounted to $34,097.
43
<PAGE>
Item 2. Description of Property.
At December 31, 1999, the Company and the Association
conducted their business from the Association's main office in Plaquemine,
Louisiana. The following table sets forth the net book value (including
furnishings and equipment) and certain other information with respect to
the offices and other properties of the Company at December 31, 1999.
<TABLE>
<CAPTION>
As of December 31, 1999
-----------------------
Net Book
Leased / Value of
Description / Address Owned Property Deposits
--------------------- ----- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Home Office:
23910 Railroad Avenue
Plaquemine, Louisiana Owned $ 125 $22,884
Branch Office
None - - -
</TABLE>
The estimated net book value of electronic data processing and other office
equipment owned by the Association was $29,000 at December 31, 1999.
Item 3. Legal Proceedings.
The Company and the Association are 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
consolidated financial condition and results of operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
PART II.
Item 5. Market for Common Equity and Related Stockholder Matters.
The information required herein, to the extent applicable,
is incorporated by reference on pages 3 and 48 of the Company's 1999
Annual Report.
44
<PAGE>
Item 6. Management's Discussion and Analysis or Plan of Operation.
The information required herein is incorporated by reference
from pages 6 to 16 of the 1999 Annual Report.
Item 7. Financial Statements.
The information required herein is incorporated by reference
from pages 17 to 47 of the 1999 Annual Report.
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
Not applicable.
PART III.
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16 (a) of the Exchange Act.
The information required herein is incorporated by reference
from pages 3 and 7 of the definitive proxy statement of the Company for
the Annual Meeting of Stockholders to be held on April 26, 2000, which was
filed on March 24, 2000 ("Definitive Proxy Statement")
Item 10. Executive Compensation.
The information required herein is incorporated by reference
from pages 8 to 12 the Definitive Proxy Statement.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The information required herein is incorporated by reference
from pages 5 to 7 the Definitive Proxy Statement.
Item 12. Certain Relationships and Related Transactions.
The information required herein is incorporated by reference
from pages 12 to 13 the Definitive Proxy Statement.
45
<PAGE>
Item 13. Exhibits, List and Reports on Form 8-K.
(a) Documents Filed as Part of this Report
(1) The following financial statements are incorporated by
reference from Item 7 hereof (see Exhibit 13):
Independent Auditor's Report.
Consolidated Statements of Financial Condition as of
December 31, 1999 and 1998.
Consolidated Statements of Income and Comprehensive Income
for the Years Ended December 31, 1999 and 1998.
Consolidated Statements of Changes in Shareholders' Equity
for the Years ended December 31, 1999 and 1998.
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999 and 1998.
Notes to Consolidated Financial Statements.
(2) All schedules for which provision is made in the
applicable accounting regulations of the Securities and Exchange
Commission ("SEC") are omitted because of the absence of conditions under
which they are required or because the required information is included in
the consolidated financial statements and related notes thereto.
(3) The following exhibits are filed as part of this Form
l0-KSB, this list includes the Exhibit Index.
Exhibit Index
2.1* Plan of Conversion
3.1* Articles of Incorporation of IBL Bancorp, Inc.
3.2* Bylaws of IBL Bancorp, Inc.
4.1* Stock Certificate of IBL Bancorp, Inc.
10.1* Employment Agreement among IBL Bancorp, Inc.,
Iberville Building and Loan Association and G. Lloyd
Bouchereau, Jr., dated September 30, 1998
10.2* Employment Agreement among IBL Bancorp, Inc.,
Iberville Building and Loan Asociation and Danny M.
Strickland, dated September 30, 1998
10.3 1999 Stock Option Plan
10.4 1999 Recognition and Retention Plan and Trust
Agreement
13.0 1999 Annual Report to Stockholders
27.0 Financial Data Schedule
(*) Incorporated herein by reference from the Company's
Registration Statement on Form SB-2 (Registration No. 333-57623) filed by
the Company with the SEC on June 24, 1998, as subsequently amended.
46
<PAGE>
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
fourth quarter of the year ended December 31, 1999.
47
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act,
the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
IBL BANCORP, INC.
By: /s/G. Lloyd Bouchereau, Jr.
---------------------------
G. Lloyd Bouchereau, Jr.
President and
Chief Executive Officer
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant and in
the capacities and on the date indicated.
Name Title Date
---- ----- ----
/s/ G. Lloyd Bouchereau, Jr. President and Chief March 17, 2000
----------------------------
G. Lloyd Bouchereau, Jr. Executive Officer
/s/ Bobby E. Stanley Director March 17, 2000
-------------------- -
Bobby E. Stanley
/s/ John L. Delahaye Director March 17, 2000
--------------------
John L. Delahaye
/s/ Gary K. Pruitt Director March 17, 2000
------------------
Gary K. Pruitt
/s/ Edward J. Steinmetz Director March 17, 2000
-----------------------
Edward J. Steinmetz
/s/ Danny M. Strickland Director March 17, 2000
-----------------------
Danny M. Strickland
IBL BANCORP, INC.
1999 STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
IBL Bancorp, Inc. (the "Corporation") hereby establishes this 1999
Stock Option Plan (the "Plan") upon the terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
The purpose of this Plan is to improve the growth and profitability of
the Corporation and its Subsidiary Companies by providing Employees and
Non-Employee Directors with a proprietary interest in the Corporation as an
incentive to contribute to the success of the Corporation and its Subsidiary
Companies, and rewarding Employees and Non-Employee Directors for outstanding
performance. All Incentive Stock Options issued under this Plan are intended to
comply with the requirements of Section 422 of the Code, and the regulations
thereunder, and all provisions hereunder shall be read, interpreted and applied
with that purpose in mind. Each recipient of an Award hereunder is advised to
consult with his or her personal tax advisor with respect to the tax
consequences under federal, state, local and other tax laws of the receipt
and/or exercise of an Award hereunder.
ARTICLE III
DEFINITIONS
3.01 "Association" means The Iberville Building and Loan Association, a
wholly owned subsidiary of the Corporation.
3.02 "Award" means an Option or Stock Appreciation Right granted
pursuant to the terms of this Plan.
3.03 "Board" means the Board of Directors of the Corporation.
3.04 "Change in Control of the Corporation" shall mean the occurrence
of any of the following: (i) the acquisition of control of the Corporation as
defined in 12 C.F.R. ss.574.4, unless a presumption of control is successfully
rebutted or unless the transaction is exempted by 12 C.F.R. ss.574.3(c)(vii), or
any successor to such sections; (ii) an event that would be required to be
reported in response to Item 1(a) of Form 8-K or Item 6(e) of Schedule 14A of
Regulation 14A pursuant to the Exchange Act, or any successor thereto, whether
or not any class of securities of the Corporation is registered under the
Exchange Act; (iii) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 20% or more of the combined voting power of the
Corporation's then outstanding securities; (iv) during any period of thirty-six
consecutive months during the term of an Award, individuals who at the beginning
of such period constitute the Board of Directors of the Corporation, and any new
director whose election by the Board of Directors or nomination for election by
the Corporation's
1
<PAGE>
stockholders was approved by a vote of at least two-thirds of the directors then
still in office who either were directors at the beginning of the three-year
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority of the Board of
Directors; (v) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other than a merger
or consolidation that would result in the voting securities of the Corporation
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of the surviving corporation outstanding immediately after such
merger or consolidation; or (vi) the stockholders of the Corporation approve a
plan of complete liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or substantially all of the Corporation's
assets. If any of the events enumerated in clauses (i) through (iv) occur, the
Board shall determine the effective date of the Change in Control resulting
therefrom for purposes of the Plan.
3.05 "Code" means the Internal Revenue Code of 1986, as amended.
3.06 "Committee" means a committee of two or more directors appointed
by the Board pursuant to Article IV hereof, each of whom shall be a Non-Employee
Director as defined in Rule 16b-3(b)(3)(i) of the Exchange Act or any successor
thereto and within the meaning of Section 162(m) of the Code and the regulations
promulgated thereunder.
3.07 "Common Stock" means shares of common stock, par value $.01 per
share, of the Corporation.
3.08 "Disability" means any physical or mental impairment which
qualifies an individual for disability benefits under the applicable long-term
disability plan maintained by the Corporation or a Subsidiary Company, or, if no
such plan applies, which would qualify such individual for disability benefits
under the Federal Social Security System.
3.09 "Effective Date" means the date this Plan is approved by the
stockholders of the Corporation, which shall not be earlier than the one-year
anniversary of the consummation of the Association's conversion from mutual to
stock form.
3.10 "Employee" means any person who is employed by the Corporation,
the Association or any Subsidiary Company, or is an Officer of the Corporation,
the Association or any Subsidiary Company, but not including directors who are
not also Officers of or otherwise employed by the Corporation, the Association
or any Subsidiary Company.
3.11 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
3.12 "Fair Market Value" shall be equal to the fair market value per
share of the Corporation's Common Stock on the date an Award is granted. For
purposes hereof, the Fair Market Value of a share of Common Stock shall be the
closing sale price of a share of Common Stock on the date in question (or, if
such day is not a trading day in the U.S. markets, on the nearest preceding
trading day), as reported with respect to the principal market (or the composite
of the markets, if more than one) or national quotation system in which such
shares are then traded, or if no such closing prices are reported, the mean
between the high bid and low asked prices that day on the principal market or
national quotation system then in use, or if no such
2
<PAGE>
quotations are available, the price furnished by a professional securities
dealer making a market in such shares selected by the Committee.
3.13 "Incentive Stock Option" means any Option granted under this Plan
which the Board intends (at the time it is granted) to be an incentive stock
option within the meaning of Section 422 of the Code or any successor thereto.
3.14 "Non-Employee Director" means a member of the Board of the
Corporation or Board of Directors of the Association or any successor thereto,
including an advisory director or a director emeritus of the Boards of the
Corporation and/or the Association, who is not an Officer or Employee of the
Corporation or any Subsidiary Company.
3.15 "Non-Qualified Option" means any Option granted under this Plan
which is not an Incentive Stock Option.
3.16 "Offering" means the subscription and community offering of Common
Stock to the public in connection with the conversion of the Association from
the mutual structure to the stock holding company structure.
3.17 "Officer" means an Employee whose position in the Corporation or a
Subsidiary Company is that of a corporate officer, as determined by the Board.
3.18 "Option" means a right granted under this Plan to purchase Common
Stock.
3.19 "Optionee" means an Employee or Non-Employee Director or former
Employee or Non- Employee Director to whom an Option is granted under the Plan.
3.20 "Retirement" means a termination of employment which constitutes a
"retirement" under any applicable qualified pension benefit plan maintained by
the Corporation or a Subsidiary Corporation, or, if no such plan is applicable,
which would constitute "retirement" under the Corporation's pension benefit
plan, if such individual were a participant in that plan. With respect to
Non-Employee Directors, retirement means retirement from service on the Board of
Directors of the Corporation or the Association or any successor thereto
(including service as a director emeritus) after attaining the age of 70.
3.21 "Stock Appreciation Right" means a right to surrender an Option in
consideration for a payment by the Corporation in cash and/or Common Stock, as
provided in the discretion of the Board or the Committee in accordance with
Section 8.10.
3.22 "Subsidiary Companies" means those subsidiaries of the
Corporation, including the Association, which meet the definition of "subsidiary
corporations" set forth in Section 424(f) of the Code, at the time of granting
of the Option in question.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Duties of the Committee. The Plan shall be administered and
interpreted by the Committee, as appointed from time to time by the Board
pursuant to Section 4.02. The Committee shall have the
3
<PAGE>
authority to adopt, amend and rescind such rules, regulations and procedures as,
in its opinion, may be advisable in the administration of the Plan, including,
without limitation, rules, regulations and procedures which (i) deal with
satisfaction of an Optionee's tax withholding obligation pursuant to Section
12.01 hereof, (ii) include arrangements to facilitate the Optionee's ability to
borrow funds for payment of the exercise or purchase price of an Award, if
applicable, from securities brokers and dealers, (iii) establish the method and
arrangements by which an optionee may defer the recognition of income upon the
exercise of a Non- Qualified Option or Stock Appreciation Right pursuant to
Article XIII hereof, and (iv) include arrangements which provide for the payment
of some or all of such exercise or purchase price by delivery of previously-
owned shares of Common Stock or other property and/or by withholding some of the
shares of Common Stock which are being acquired. The interpretation and
construction by the Committee of any provisions of the Plan, any rule,
regulation or procedure adopted by it pursuant thereto or of any Award shall be
final and binding in the absence of action by the Board.
4.02 Appointment and Operation of the Committee. The members of the
Committee shall be appointed by, and will serve at the pleasure of, the Board.
The Board from time to time may remove members from, or add members to, the
Committee, provided the Committee shall continue to consist of two or more
members of the Board, each of whom shall be a Non-Employee Director, as defined
in Rule 16b- 3(b)(3)(i) of the Exchange Act or any successor thereto. In
addition, each member of the Committee shall be an "outside director" within the
meaning of Section 162(m) of the Code and regulations thereunder at such times
as is required under such regulations. The Committee shall act by vote or
written consent of a majority of its members. Subject to the express provisions
and limitations of the Plan, the Committee may adopt such rules, regulations and
procedures as it deems appropriate for the conduct of its affairs. It may
appoint one of its members to be chairman and any person, whether or not a
member, to be its secretary or agent. The Committee shall report its actions and
decisions to the Board at appropriate times but in no event less than one time
per calendar year.
4.03 Revocation for Misconduct. The Board or the Committee may by
resolution immediately revoke, rescind and terminate any Option, or portion
thereof, to the extent not yet vested, or any Stock Appreciation Right, to the
extent not yet exercised, previously granted or awarded under this Plan to an
Employee who is discharged from the employ of the Corporation or a Subsidiary
Company for cause, which, for purposes hereof, shall mean termination because of
the Employee's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order. Options granted
to a Non-Employee Director who is removed for cause pursuant to the
Corporation's Articles of Incorporation and Bylaws or the Association's Charter
and Bylaws shall terminate as of the effective date of such removal.
4.04 Limitation on Liability. Neither the members of the Board nor any
member of the Committee shall be liable for any action or determination made in
good faith with respect to the Plan, any rule, regulation or procedure adopted
pursuant thereto or any Awards granted hereunder. If a member of the Board or
the Committee is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of anything done or not done by him
in such capacity under or with respect to the Plan, the Corporation shall,
subject to the requirements of applicable laws and regulations, indemnify such
member against all liabilities and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in the best interests of the
Corporation and its Subsidiary
4
<PAGE>
Companies and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
4.05 Compliance with Law and Regulations. All Awards granted hereunder
shall be subject to all applicable federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency as may be required.
The Corporation shall not be required to issue or deliver any certificates for
shares of Common Stock prior to the completion of any registration or
qualification of or obtaining of consents or approvals with respect to such
shares under any federal or state law or any rule or regulation of any
government body, which the Corporation shall, in its sole discretion, determine
to be necessary or advisable. Moreover, no Option or Stock Appreciation Right
may be exercised if such exercise would be contrary to applicable laws and
regulations.
4.06 Restrictions on Transfer. The Corporation may place a legend upon
any certificate representing shares acquired pursuant to an Award granted
hereunder noting that the transfer of such shares may be restricted by
applicable laws and regulations.
ARTICLE V
ELIGIBILITY
Awards may be granted to such Employees and Non-Employee Directors of
the Corporation and its Subsidiary Companies as may be designated from time to
time by the Board or the Committee. Awards may not be granted to individuals who
are not Employees or Non-Employee Directors of either the Corporation or its
Subsidiary Companies. Non-Employee Directors shall be eligible to receive only
Awards of Non- Qualified Options pursuant to this Plan.
ARTICLE VI
COMMON STOCK COVERED BY THE PLAN
6.01 Option Shares. The aggregate number of shares of Common Stock
which may be issued pursuant to this Plan, subject to adjustment as provided in
Article IX, shall be 21,087, which is equal to 10% of the shares of Common Stock
issued in the Offering. None of such shares shall be the subject of more than
one Award at any time (provided that Stock Appreciation Rights and the related
Options shall be deemed to be a single Award), but if an Option as to any shares
is surrendered before exercise, or expires or terminates for any reason without
having been exercised in full, or for any other reason ceases to be exercisable,
the number of shares covered thereby shall again become available for grant
under the Plan as if no Awards had been previously granted with respect to such
shares. Notwithstanding the foregoing, if an Option is surrendered in connection
with the exercise of a Stock Appreciation Right, the number of shares covered
thereby shall not be available for grant under the Plan.
6.02 Source of Shares. The shares of Common Stock issued under the Plan
may be authorized but unissued shares, treasury shares or shares purchased by
the Corporation on the open market or from private sources for use under the
Plan.
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ARTICLE VII
DETERMINATION OF
AWARDS, NUMBER OF SHARES, ETC.
The Board or the Committee shall, in its discretion, determine from
time to time which Employees and Non-Employee Directors will be granted Awards
under the Plan, the number of shares of Common Stock subject to each Award,
whether each Option will be an Incentive Stock Option or a Non-Qualified Stock
Option (in the case of Employees) and the exercise price of an Option. In making
all such determinations there shall be taken into account the duties,
responsibilities and performance of each respective Employee and Non-Employee
Director, his present and potential contributions to the growth and success of
the Corporation, his salary and such other factors deemed relevant to
accomplishing the purposes of the Plan.
ARTICLE VIII
OPTIONS AND STOCK APPRECIATION RIGHTS
Each Option granted hereunder shall be on the following terms and
conditions:
8.01 Stock Option Agreement. The proper Officers on behalf of the
Corporation and each Optionee shall execute a Stock Option Agreement which shall
set forth the total number of shares of Common Stock to which it pertains, the
exercise price, whether it is a Non-Qualified Option or an Incentive Stock
Option, and such other terms, conditions, restrictions and privileges as the
Board or the Committee in each instance shall deem appropriate, provided they
are not inconsistent with the terms, conditions and provisions of this Plan.
Each Optionee shall receive a copy of his executed Stock Option Agreement.
8.02 Option Exercise Price.
(a) Incentive Stock Options. The per share price at which the
subject Common Stock may be purchased upon exercise of an Incentive Stock Option
shall be no less than one hundred percent (100%) of the Fair Market Value of a
share of Common Stock at the time such Incentive Stock Option is granted, except
as provided in Section 8.09(b), and subject to any applicable adjustment
pursuant to Article IX hereof.
(b) Non-Qualified Options. The per share price at which the
subject Common Stock may be purchased upon exercise of a Non-Qualified Option
shall be established by the Committee at the time of grant, but in no event
shall be less than one hundred percent (100%) of the Fair Market Value of a
share of Common Stock at the time such Non-Qualified Option is granted, subject
to any applicable adjustment pursuant to Article IX hereof.
8.03 Vesting and Exercise of Options.
(a) General Rules. Incentive Stock Options and Non-Qualified
Options granted hereunder shall become vested and exercisable at the rate, to
the extent and subject to such limitations as may be specified by the Board or
the Committee. Notwithstanding the foregoing, except as provided in Section
8.03(b) hereof, no Option granted to an Employee or a Non-Employee Director
shall continue to vest on or after the date the Optionee's service with the
Corporation and all Subsidiary Companies (or any successor companies), including
as a Non-Employee Director, is terminated. In determining the number of shares
of
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Common Stock with respect to which Options are vested and/or exercisable,
fractional shares shall be rounded up to the nearest whole number if the
fraction is 0.5 or higher, and down if it is less.
(b) Accelerated Vesting. Unless the Board or the Committee
shall specifically state otherwise at the time an Option is granted, all Options
granted under this Plan shall become vested and exercisable in full on the date
an Optionee terminates his employment with the Corporation or a Subsidiary
Company or service as a Non-Employee Director because of his death, Disability
or Retirement. In addition, all outstanding Options shall become immediately
vested and exercisable in full in the event that there is a Change in Control of
the Corporation.
8.04 Duration of Options.
(a) General Rule. Except as provided in Sections 8.04(b) and
8.09, each Option or portion thereof granted to an Employee shall be exercisable
at any time on or after it vests and remain exercisable until the earlier of (i)
ten (10) years after its date of grant or (ii) six (6) months after the date on
which the Employee ceases to be employed by the Corporation and all Subsidiary
Companies, unless the Board or the Committee in its discretion decides at the
time of grant or thereafter to extend such period of exercise upon termination
of employment to a period not exceeding five (5) years.
Except as provided in Section 8.04(b), each Option or portion thereof
granted to a Non-Employee Director shall be exercisable at any time on or after
it vests and remain exercisable until the earlier of (i) ten (10) years after
its date of grant or (ii) three (3) years after the date on which the
Non-Employee Director ceases to serve as a director of the Corporation and all
Subsidiary Companies, unless the Board or the Committee in its discretion
decides at the time of grant or thereafter to extend such period of exercise
upon termination of service to a period not exceeding five (5) years.
(b) Exceptions. Unless the Board or the Committee shall
specifically provide otherwise, (i) if an Employee terminates his employment
with the Corporation or a Subsidiary Company as a result of Disability or
Retirement without having fully exercised his Options, the Employee shall have
the right, during the three (3) year period following his termination due to
Disability or Retirement (or such longer period as may have been provided under
Section 8.04(a) hereof), to exercise such Options, and (ii) if a Non-Employee
Director terminates his service as a director with the Corporation or a
Subsidiary Company as a result of Disability or Retirement without having fully
exercised his Options, the Non- Employee Director shall have the right, during
the three (3) year period following his termination due to Disability or
Retirement (or such longer period as may have been provided under Section
8.04(a) hereof), to exercise such Options.
Unless the Board or the Committee shall specifically state otherwise at
the time an Option is granted, if an Employee or Non-Employee Director
terminates his employment or service with the Corporation or a Subsidiary
Company following a Change in Control of the Corporation without having fully
exercised his Options, the Optionee shall have the right to exercise such
Options during the remainder of the original ten (10) year term (or five-year
term if Section 8.09(b) hereof is applicable) of the Option from the date of
grant.
If an Optionee dies while in the employ or service of the Corporation
or a Subsidiary Company or terminates employment or service with the Corporation
or a Subsidiary Company as a result of Disability or Retirement and dies without
having fully exercised his Options, the executors, administrators, legatees or
distributees of his estate shall have the right, during the one (1) year period
following his death, to exercise such Options.
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In no event, however, shall any Option be exercisable more than ten
(10) years from the date it was granted.
8.05 Nonassignability. Options shall not be transferable by an Optionee
except by will or the laws of descent or distribution, and during an Optionee's
lifetime shall be exercisable only by such Optionee or the Optionee's guardian
or legal representative. Notwithstanding the foregoing, or any other provision
of this Plan, an Optionee who holds vested Non-Qualified Options may transfer
such Options to his or her spouse, lineal ascendants, lineal descendants, or to
a duly established trust for the benefit of one or more of these individuals.
Options so transferred may thereafter be transferred only to the Optionee who
originally received the grant or to an individual or trust to whom the Optionee
could have initially transferred the Option pursuant to this Section 8.05.
Options which are transferred pursuant to this Section 8.05 shall be exercisable
by the transferee according to the same terms and conditions as applied to the
Optionee.
8.06 Manner of Exercise. Options may be exercised in part or in whole
and at one time or from time to time. The procedures for exercise shall be set
forth in the written Stock Option Agreement provided for in Section 8.01 above.
8.07 Payment for Shares. Payment in full of the purchase price for
shares of Common Stock purchased pursuant to the exercise of such Option shall
be made to the Corporation upon exercise of such Option. All shares sold under
the Plan shall be fully paid and nonassessable. Payment for shares may be made
by the Optionee (i) in cash or by check, (ii) by delivery of a properly executed
exercise notice, together with irrevocable instructions to a broker to sell the
shares and then to properly deliver to the Corporation the amount of sale
proceeds to pay the exercise price, all in accordance with applicable laws and
regulations, (iii) at the discretion of the Board or the Committee, by
delivering shares of Common Stock (including shares acquired pursuant to the
exercise of an Option) equal in Fair Market Value to the purchase price of the
shares to be acquired pursuant to the Option, (iv) at the discretion of the
Board or the Committee, by withholding some of the shares of Common Stock which
are being purchased upon exercise of an Option, or (v) any combination of the
foregoing. With respect to subclause (iii) hereof, the shares of Common Stock
delivered to pay the purchase price must have either been (x) purchased in open
market transactions or (y) issued by the Corporation pursuant to a plan thereof,
in each case more than six months prior to the exercise date of the Option.
8.08 Voting and Dividend Rights. No Optionee shall have any voting or
dividend rights or other rights of a stockholder in respect of any shares of
Common Stock covered by an Option prior to the time that his name is recorded on
the Corporation's stockholder ledger as the holder of record of such shares
acquired pursuant to an exercise of an Option.
8.09 Additional Terms Applicable to Incentive Stock Options. All
Options issued under the Plan as Incentive Stock Options will be subject, in
addition to the terms detailed in Sections 8.01 to 8.08 above, to those
contained in this Section 8.09.
(a) Notwithstanding any contrary provisions contained
elsewhere in this Plan and as long as required by Section 422 of the Code, the
aggregate Fair Market Value, determined as of the time an Incentive Stock Option
is granted, of the Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by the Optionee during any calendar year
under this Plan, and stock options that satisfy the requirements of Section 422
of the Code under any other stock option plan or plans maintained by the
Corporation (or any parent or Subsidiary Company), shall not exceed $100,000.
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(b) Limitation on Ten Percent Stockholders. The price at which
shares of Common Stock may be purchased upon exercise of an Incentive Stock
Option granted to an individual who, at the time such Incentive Stock Option is
granted, owns, directly or indirectly, more than ten percent (10%) of the total
combined voting power of all classes of stock issued to stockholders of the
Corporation or any Subsidiary Company, shall be no less than one hundred and ten
percent (110%) of the Fair Market Value of a share of the Common Stock of the
Corporation at the time of grant, and such Incentive Stock Option shall by its
terms not be exercisable after the earlier of the date determined under Section
8.03 or the expiration of five (5) years from the date such Incentive Stock
Option is granted.
(c) Notice of Disposition; Withholding; Escrow. An Optionee
shall immediately notify the Corporation in writing of any sale, transfer,
assignment or other disposition (or action constituting a disqualifying
disposition within the meaning of Section 421 of the Code) of any shares of
Common Stock acquired through exercise of an Incentive Stock Option, within two
(2) years after the grant of such Incentive Stock Option or within one (1) year
after the acquisition of such shares, setting forth the date and manner of
disposition, the number of shares disposed of and the price at which such shares
were disposed of. The Corporation shall be entitled to withhold from any
compensation or other payments then or thereafter due to the Optionee such
amounts as may be necessary to satisfy any withholding requirements of federal
or state law or regulation and, further, to collect from the Optionee any
additional amounts which may be required for such purpose. The Committee or the
Board may, in its discretion, require shares of Common Stock acquired by an
Optionee upon exercise of an Incentive Stock Option to be held in an escrow
arrangement for the purpose of enabling compliance with the provisions of this
Section 8.09(c).
8.10 Stock Appreciation Rights.
(a) General Terms and Conditions. The Board or the Committee
may, but shall not be obligated to, authorize the Corporation, on such terms and
conditions as it deems appropriate in each case, to grant rights to Optionees to
surrender an exercisable Option, or any portion thereof, in consideration for
the payment by the Corporation of an amount equal to the excess of the Fair
Market Value of the shares of Common Stock subject to the Option, or portion
thereof, surrendered over the exercise price of the Option with respect to such
shares (each such right being hereinafter referred to as a "Stock Appreciation
Right"). Such payment, at the discretion of the Board or the Committee, may be
made in shares of Common Stock valued at the then Fair Market Value thereof, or
in cash, or partly in cash and partly in shares of Common Stock.
The terms and conditions with respect to a Stock Appreciation Right may
include (without limitation), subject to other provisions of this Section 8.10
and the Plan: the period during which, date by which or event upon which the
Stock Appreciation Right may be exercised; the method for valuing shares of
Common Stock for purposes of this Section 8.10; a ceiling on the amount of
consideration which the Corporation may pay in connection with exercise and
cancellation of the Stock Appreciation Right; and arrangements for income tax
withholding. The Board or the Committee shall have complete discretion to
determine whether, when and to whom Stock Appreciation Rights may be granted.
(b) Time Limitations. If a holder of a Stock Appreciation
Right terminates service with the Corporation as an Officer or Employee, the
Stock Appreciation Right may be exercised only within the period, if any, within
which the Option to which it relates may be exercised.
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(c) Effects of Exercise of Stock Appreciation Rights or
Options. Upon the exercise of a Stock Appreciation Right, the number of shares
of Common Stock available under the Option to which it relates shall decrease by
a number equal to the number of shares for which the Stock Appreciation Right
was exercised. Upon the exercise of an Option, any related Stock Appreciation
Right shall terminate as to any number of shares of Common Stock subject to the
Stock Appreciation Right that exceeds the total number of shares for which the
Option remains unexercised.
(d) Time of Grant. A Stock Appreciation Right granted in
connection with an Incentive Stock Option must be granted concurrently with the
Option to which it relates, while a Stock Appreciation Right granted in
connection with a Non-Qualified Option may be granted concurrently with the
Option to which it relates or at any time thereafter prior to the exercise or
expiration of such Option.
(e) Non-Transferable. The holder of a Stock Appreciation Right
may not transfer or assign the Stock Appreciation Right otherwise than by will
or in accordance with the laws of descent and distribution, and during a
holder's lifetime a Stock Appreciation Right may be exercisable only by the
holder.
ARTICLE IX
ADJUSTMENTS FOR CAPITAL CHANGES
The aggregate number of shares of Common Stock available for issuance
under this Plan, the number of shares to which any outstanding Award relates,
and the exercise price per share of Common Stock under any outstanding Option
shall be proportionately adjusted for any increase or decrease in the total
number of outstanding shares of Common Stock issued subsequent to the effective
date of this Plan resulting from a split, subdivision or consolidation of shares
or any other capital adjustment, the payment of a stock dividend, or other
increase or decrease in such shares effected without receipt or payment of
consideration by the Corporation. If, upon a merger, consolidation,
reorganization, liquidation, recapitalization or the like of the Corporation,
the shares of the Corporation's Common Stock shall be exchanged for other
securities of the Corporation or of another corporation, each recipient of an
Award shall be entitled, subject to the conditions herein stated, to purchase or
acquire such number of shares of Common Stock or amount of other securities of
the Corporation or such other corporation as were exchangeable for the number of
shares of Common Stock of the Corporation which such optionees would have been
entitled to purchase or acquire except for such action, and appropriate
adjustments shall be made to the per share exercise price of outstanding
Options. Notwithstanding any provision to the contrary herein and to the extent
permitted by applicable laws and regulations and interpretations thereof, the
exercise price of shares subject to outstanding Awards shall be proportionately
adjusted upon the payment by the Corporation of a special cash dividend or
return of capital 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, provided that
the adjustment to the per share exercise price shall satisfy the criteria set
forth in Emerging Issues Task Force 90-9 (or any successor thereto) so that the
adjustments do not result in compensation expense, and provided further that if
such adjustment with respect to Incentive Stock Options would be treated as a
modification of the outstanding incentive stock options with the effect that,
for purposes of Sections 422 and 425(h) of the Code, and the rules and
regulations promulgated thereunder, new Incentive Stock Options would be deemed
to be granted hereunder, then no adjustment to the per share exercise price of
outstanding Incentive Stock Options shall be made.
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ARTICLE X
AMENDMENT AND TERMINATION OF THE PLAN
The Board may, by resolution, at any time terminate or amend the Plan
with respect to any shares of Common Stock as to which Awards have not been
granted, subject to any required stockholder approval or any stockholder
approval which the Board may deem to be advisable for any reason, such as for
the purpose of obtaining or retaining any statutory or regulatory benefits under
tax, securities or other laws or satisfying any applicable stock exchange
listing requirements. The Board may not, without the consent of the holder of an
Award, alter or impair any Award previously granted or awarded under this Plan
except as specifically authorized herein.
ARTICLE XI
EMPLOYMENT AND SERVICE RIGHTS
Neither the Plan nor the grant of any Awards hereunder nor any action
taken by the Committee or the Board in connection with the Plan shall create any
right on the part of any Employee or Non-Employee Director to continue in such
capacity.
ARTICLE XII
WITHHOLDING
12.01 Tax Withholding. The Corporation may withhold from any cash
payment made under this Plan sufficient amounts to cover any applicable
withholding and employment taxes, and if the amount of such cash payment is
insufficient, the Corporation may require the Optionee to pay to the Corporation
the amount required to be withheld as a condition to delivering the shares
acquired pursuant to an Award. The Corporation also may withhold or collect
amounts with respect to a disqualifying disposition of shares of Common Stock
acquired pursuant to exercise of an Incentive Stock Option, as provided in
Section 8.09(c).
12.02 Methods of Tax Withholding. The Board or the Committee is
authorized to adopt rules, regulations or procedures which provide for the
satisfaction of an Optionee's tax withholding obligation by the retention of
shares of Common Stock to which the Employee would otherwise be entitled
pursuant to an Award and/or by the Optionee's delivery of previously owned
shares of Common Stock or other property.
ARTICLE XIII
DEFERRED PAYMENTS
13.01 Deferral of Options and Stock Appreciation Rights.
Notwithstanding any other provision of this Plan, any Optionee who is either a
Non-Employee Director or an executive officer of the Corporation or the
Association may elect, with the concurrence of the Committee and consistent with
any requirements established by the Board (which requirements may include the
adoption of a separate deferred compensation plan or trust by the Corporation),
to defer the recognition of ordinary income resulting from the exercise of any
Non-Qualified Option not transferred under the provisions of Section 8.05 hereof
and of any Stock Appreciation Rights.
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13.02 Timing of Election. The election to defer the recognition of
ordinary income resulting from the exercise of any eligible Non-Qualified Option
or Stock Appreciation Right must be made at least six (6) months prior to the
date such Option or Stock Appreciation Right is exercised or at such other time
as the Committee may specify. Deferrals of eligible Non-Qualified Options or
Stock Appreciation Rights shall only be allowed for exercises of Options and
Stock Appreciation Rights that occur while the Participant is in active service
with the Corporation or one of its Subsidiary Companies. Any election to defer
the ordinary income resulting from the exercise of an eligible Non-Qualified
Option or Stock Appreciation Right shall be irrevocable as long as the Optionee
remains an Employee or a Non-Employee Director of the Corporation or one of its
Subsidiary Companies.
ARTICLE XIV
EFFECTIVE DATE OF THE PLAN; TERM
14.01 Effective Date of the Plan. This Plan shall become effective on
the Effective Date, and Awards may be granted hereunder no earlier than the date
that this Plan is approved by stockholders of the Corporation and no later than
the termination of the Plan, provided that this Plan is approved by stockholders
of the Corporation pursuant to Article XV hereof.
14.02 Term of the Plan. Unless sooner terminated, this Plan shall
remain in effect for a period of ten (10) years ending on the tenth anniversary
of the adoption of this Plan by the Board of Directors, which date of adoption
was July 28, 1999. Termination of the Plan shall not affect any Awards
previously granted and such Awards shall remain valid and in effect until they
have been fully exercised or earned, are surrendered or by their terms expire or
are forfeited.
ARTICLE XV
STOCKHOLDER APPROVAL
The Corporation shall submit this Plan to stockholders for approval at
a meeting of stockholders of the Corporation held within twelve (12) months
following the Effective Date in order to meet the requirements of Sections
162(m) and 422 of the Code and regulations thereunder, and any other applicable
statutory, regulatory or stock market requirements.
ARTICLE XVI
MISCELLANEOUS
16.01 Governing Law. To the extent not governed by federal law, this
Plan shall be construed under the laws of the State of Louisiana.
16.02 Pronouns. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun, and the singular shall include the plural.
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IBL BANCORP, INC.
1999 RECOGNITION AND RETENTION PLAN AND TRUST AGREEMENT
ARTICLE I
ESTABLISHMENT OF THE PLAN AND TRUST
1.01 IBL Bancorp, Inc. (the "Corporation") hereby establishes the 1999
Recognition and Retention Plan (the "Plan") and Trust (the "Trust") upon the
terms and conditions hereinafter stated in this 1999 Recognition and Retention
Plan and Trust Agreement (the "Agreement").
1.02 The Trustee hereby accepts this Trust and agrees to hold the Trust
assets existing on the date of this Agreement and all additions and accretions
thereto upon the terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
The purpose of the Plan is to retain personnel of experience and
ability in key positions by providing Employees and Non-Employee Directors with
a proprietary interest in the Corporation and its Subsidiary Companies as
compensation for their contributions to the Corporation and its Subsidiary
Companies and as an incentive to make such contributions in the future. Each
Recipient of a Plan Share Award hereunder is advised to consult with his or her
personal tax advisor with respect to the tax consequences under federal, state,
local and other tax laws of the receipt of a Plan Share Award hereunder.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Agreement with an
initial capital letter, unless the context clearly indicates otherwise, shall
have the meanings set forth below. Wherever appropriate, the masculine pronouns
shall include the feminine pronouns and the singular shall include the plural.
3.01 "Association" means The Iberville Building and Loan Association, a
wholly owned subsidiary of the Corporation.
3.02 "Beneficiary" means the person or persons designated by a
Recipient to receive any benefits payable under the Plan in the event of such
Recipient's death. Such person or persons shall be designated in writing on
forms provided for this purpose by the Committee and may be changed from time to
time by similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Recipient's surviving spouse, if any,
or if none, his estate.
3.03 "Board" means the Board of Directors of the Corporation.
3.04 "Change in Control of the Corporation" shall mean the occurrence
of any of the following: (i) the acquisition of control of the Corporation as
defined in 12 C.F.R.ss.574.4, unless a presumption of control is successfully
rebutted or unless the transaction is exempted by 12 C.F.R.ss.574.3(c)(vii), or
any
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successor to such sections; (ii) an event that would be required to be reported
in response to Item 1(a) of Form 8-K or Item 6(e) of Schedule 14A of Regulation
14A pursuant to the Exchange Act or any successor thereto, whether or not any
class of securities of the Corporation is registered under the Exchange Act;
(iii) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 20% or more of the combined voting power of the
Corporation's then outstanding securities; (iv) during any period of thirty-six
consecutive months during the term of a Plan Share Award, individuals who at the
beginning of such period constitute the Board of Directors of the Corporation,
and any new director whose election by the Board of Directors or nomination for
election by the Corporation's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of the three-year period or whose election or nomination for
election was previously so approved, cease for any reason to constitute at least
a majority of the Board of Directors; (v) the stockholders of the Corporation
approve a merger or consolidation of the Corporation with any other corporation,
other than a merger or consolidation that would result in the voting securities
of the Corporation outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than 50% of the combined voting power of the voting
securities of the surviving corporation outstanding immediately after such
merger or consolidation; or (vi) the stockholders of the Corporation approve a
plan of complete liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or substantially all of the Corporation's
assets. If any of the events enumerated in clauses (i) through (iv) occur, the
Board shall determine the effective date of the Change in Control resulting
therefrom for purposes of the Plan.
3.05 "Code" means the Internal Revenue Code of 1986, as amended.
3.06 "Committee" means the committee appointed by the Board pursuant to
Article IV hereof.
3.07 "Common Stock" means shares of common stock, par value $.01 per
share, of the Corporation.
3.08 "Disability" means any physical or mental impairment which
qualifies an individual for disability benefits under the applicable long-term
disability plan maintained by the Corporation or a Subsidiary Company or, if no
such plan applies, which would qualify such individual for disability benefits
under the Federal Social Security System.
3.09 "Effective Date" means the date this Plan is approved by the
stockholders of the Corporation, which shall not be earlier than the one-year
anniversary of the consummation of the Association's conversion from mutual to
stock form.
3.10 "Employee" means any person who is employed by the Corporation,
the Association, or any Subsidiary Company, or is an Officer of the Corporation,
the Association, or any Subsidiary Company, but not including directors who are
not also Officers of or otherwise employed by the Corporation, the Association
or a Subsidiary Company.
3.11 "Employer Group" means the Corporation and any Subsidiary which,
with the consent of the Board, agrees to participate in the Plan.
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3.12 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
3.13 "Non-Employee Director" means a member of the Board of the
Corporation or the Board of Directors of the Association or any successor
thereto, including an advisory director or a director emeritus of the Boards of
the Corporation and/or the Association (or any successor company), who is not an
Officer or Employee of the Corporation, the Association or any Subsidiary
Company.
3.14 "Offering" means the subscription and community offering of Common
Stock to the public in connection with the conversion of the Association from
the mutual structure to the stock holding company structure.
3.15 "Officer" means an Employee whose position in the Corporation or a
Subsidiary Company is that of a corporate officer, as determined by the Board.
3.16 "Performance Share Award" means a Plan Share Award granted to a
Recipient pursuant to Section 7.05 of the Plan.
3.17 "Performance Goal" means an objective for the Corporation or any
Subsidiary Company or any unit thereof or any Employee with respect to any of
the foregoing that may be established by the Committee for a Performance Share
Award to become vested, earned or exercisable. The establishment of Performance
Goals are intended to make the applicable Performance Share Awards "performance-
based" compensation within the meaning of Section 162(m) of the Code, and the
Performance Goals shall be based on one or more of the following criteria:
(i) net income, as adjusted for
non-recurring items; (ii) cash earnings;
(iii) earnings per share; (iv) cash earnings
per share; (v) return on average equity;
(vi) return on average assets; (vii) asset
quality; (viii) stock price; (ix) total
stockholder return; (x) capital; (xi) net
interest income; (xii) market share; (xiii)
cost control or efficiency ratio; and (xiv)
asset growth.
3.18 "Plan Shares" or "Shares" means shares of Common Stock held in the
Trust which may be distributed to a Recipient pursuant to the Plan.
3.19 "Plan Share Award" or "Award" means a right granted under this
Plan to receive a distribution of Plan Shares upon completion of the service
requirements described in Article VII, and includes Performance Share Awards.
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3.20 "Recipient" means an Employee or Non-Employee Director who
receives a Plan Share Award or Performance Share Award under the Plan.
3.21 "Retirement" means a termination of employment which constitutes a
"retirement" under any applicable qualified pension benefit plan maintained by
the Corporation or a Subsidiary Company, or, if no such plan is applicable,
which would constitute "retirement" under the Corporation's pension benefit
plan, if such individual were a participant in that plan. With respect to
Non-Employee Directors, retirement means retirement from service on the Board of
Directors of the Corporation or the Association or any successor thereto
(including service as a director emeritus) after attaining the age of 70.
3.22 "Subsidiary Companies" means those subsidiaries of the
Corporation, including the Association, which meet the definition of "subsidiary
corporation" set forth in Section 424(f) of the Code, at the time of the
granting of the Plan Share Award in question.
3.23 "Trustee" means such firm, entity or persons approved by the Board
to hold legal title to the Plan and the Plan assets for the purposes set forth
herein.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Duties of the Committee. The Plan shall be administered and
interpreted by the Committee, which shall consist of two or more members of the
Board, each of whom shall be a Non- Employee Director, as defined in Rule
16b-3(b)(3)(i) of the Exchange Act. In addition, each member of the Committee
shall be an "outside director" within the meaning of Section 162(m) of the Code
and the regulations thereunder at such times as is required under such
regulations. The Committee shall have all of the powers allocated to it in this
and other sections of the Plan. The interpretation and construction by the
Committee of any provisions of the Plan or of any Plan Share Award granted
hereunder shall be final and binding in the absence of action by the Board. The
Committee shall act by vote or written consent of a majority of its members.
Subject to the express provisions and limitations of the Plan, the Committee may
adopt such rules, regulations and procedures as it deems appropriate for the
conduct of its affairs. The Committee shall report its actions and decisions
with respect to the Plan to the Board at appropriate times, but in no event less
than once per calendar year.
4.02 Role of the Board. The members of the Committee and the Trustee
shall be appointed or approved by, and will serve at the pleasure of, the Board.
The Board may in its discretion from time to time remove members from, or add
members to, the Committee, and may remove or replace the Trustee, provided that
any directors who are selected as members of the Committee shall be Non-Employee
Directors as defined in Rule 16b-3(b)(3)(i) of the Exchange Act..
4.03 Limitation on Liability. No member of the Board or the Committee
shall be liable for any determination made in good faith with respect to the
Plan or any Plan Shares or Plan Share Awards granted under it. If a member of
the Board or the Committee is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of anything done or not
done by him in such capacity under or with respect to the Plan, the Corporation
shall, subject to the requirements of applicable laws and regulations, indemnify
such member against all liabilities and expenses (including attorneys' fees),
judgments, fines and amounts
4
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paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in the best interests of the Corporation and any
Subsidiaries and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
4.04 Compliance with Laws and Regulations. All Awards granted hereunder
shall be subject to all applicable federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency or stockholders as
may be required.
4.05 Restrictions on Transfer. The Corporation may place a legend upon
any certificate representing shares issued pursuant to a Plan Share Award noting
that such shares may be restricted by applicable laws and regulations.
ARTICLE V
CONTRIBUTIONS
5.01 Amount and Timing of Contributions. The Board shall determine the
amount (or the method of computing the amount) and timing of any contributions
by the Corporation and any Subsidiaries to the Trust established under this
Plan. Such amounts may be paid in cash or in shares of Common Stock and shall be
paid to the Trust at the designated time of contribution. No contributions by
Employees or Non-Employee Directors shall be permitted.
5.02 Investment of Trust Assets; Number of Plan Shares. Subject to
Section 8.02 hereof, the Trustee shall invest all of the Trust's assets
primarily in Common Stock. The aggregate number of Plan Shares available for
distribution pursuant to this Plan shall be 8,434 shares of Common Stock,
subject to adjustment as provided in Section 10.01 hereof, which shares shall be
purchased (from the Corporation and/or, if permitted by applicable regulations,
from stockholders thereof) by the Trust with funds contributed by the
Corporation.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 Awards. Plan Share Awards and Performance Share Awards may be made
to such Employees and Non-Employee Directors as may be selected by the Board or
the Committee. In selecting those Employees and Non-Employee Directors to whom
Plan Share Awards and/or Performance Share Awards may be granted and the number
of Shares covered by such Awards, the Board or the Committee shall consider the
duties, responsibilities and performance of each respective Employee and
Non-Employee Director, his present and potential contributions to the growth and
success of the Corporation, his salary and such other factors as deemed relevant
to accomplishing the purposes of the Plan. The Board or the Committee may but
shall not be required to request the written recommendation of the Chief
Executive Officer of the Corporation other than with respect to Plan Share
Awards and/or Performance Share Awards to be granted to him.
6.02 Form of Allocation. As promptly as practicable after an allocation
pursuant to Section
6.01 that a Plan Share Award or a Performance Share Award is to be
issued, the Board or the Committee
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shall notify the Recipient in writing of the grant of the Award, the number of
Plan Shares covered by the Award, and the terms upon which the Plan Shares
subject to the Award shall be distributed to the Recipient. The date on which
the Board or the Committee makes such determination with respect to an Award
shall be considered the date of grant of the Plan Share Award or the Performance
Share Award. The Board or the Committee shall maintain records as to all grants
of Plan Share Awards or Performance Share Awards under the Plan.
6.03 Allocations Not Required to any Specific Employee or Non-Employee
Director. No Employee or Non-Employee Director shall have any right or
entitlement to receive a Plan Share Award hereunder, as the granting of Awards
is subject to the total discretion of the Board or the Committee.
ARTICLE VII
EARNING AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 Earning Plan Shares; Forfeitures.
(a) General Rules. Subject to the terms hereof, Plan Share
Awards granted shall be earned by a Recipient at the rate specified by the Board
or the Committee. If the employment of an Employee or service as a Non-Employee
Director is terminated for any reason prior to the Plan Share Award being fully
earned (except as specifically provided in subsections (b), (c) and (d) below),
the Recipient shall forfeit the right to any Shares subject to the Award which
have not theretofore been earned. In the event of a forfeiture of the right to
any Shares subject to an Award, such forfeited Shares shall become available for
allocation pursuant to Section 6.01 hereof as if no Award had been previously
granted with respect to such Shares. No fractional shares shall be distributed
pursuant to this Plan. In determining the number of Shares which are earned as
of any annual anniversary date, fractional shares shall be rounded up to the
nearest whole number if the fraction is 0.5 or higher, and down if it is less.
(b) Exception for Terminations Due to Death, Disability or
Retirement. Notwithstanding the general rule contained in Section 7.01(a), all
Plan Shares subject to a Plan Share Award held by a Recipient whose employment
with the Corporation or any Subsidiary or service as a Non- Employee Director
terminates due to death, Disability or Retirement shall be deemed earned as of
the Recipient's last day of employment with or service to the Corporation or any
Subsidiary Company (provided, however, no such accelerated vesting shall occur
in the event of Disability if a Recipient remains employed by at least one
member of the Employer Group) and shall be distributed as soon as practicable
thereafter.
(c) Exception for a Change in Control of the Corporation.
Notwithstanding the general rule contained in Section 7.01(a), all Plan Shares
subject to a Plan Share Award held by a Recipient shall be deemed to be earned
as of the effective date of a Change in Control of the Corporation.
(d) Revocation for Misconduct. Notwithstanding anything in
this Plan to the contrary, the Board may by resolution immediately revoke,
rescind and terminate any Plan Share Award or Performance Share Award or portion
thereof, previously awarded under this Plan, to the extent Plan Shares have not
been distributed hereunder to the Recipient, whether or not yet earned, in the
case of an Employee who is discharged from the employ of the Corporation or any
Subsidiary Company for cause (as hereinafter defined). Termination for cause
shall mean termination because of the Employee's personal
6
<PAGE>
dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties, willful violation
of any law, rule, or regulation (other than traffic violations or similar
offenses) or final cease-and-desist order. Plan Share Awards granted to a Non-
Employee Director who is removed for cause pursuant to the Corporation's
Articles of Incorporation and Bylaws or the Association's Charter and Bylaws
shall terminate as of the effective date of such removal.
7.02 Distribution of Dividends. Any cash dividends, stock dividends or
returns of capital declared in respect of each unvested Plan Share Award
(including a Performance Share Award) will be held by the Trust for the benefit
of the Recipient on whose behalf such Plan Share Award (including a Performance
Share Award) is then held by the Trust (whether declared before or after the
applicable Award was granted), and such dividends or returns of capital,
including any interest thereon, will be paid out proportionately by the Trust to
the Recipient thereof as soon as practicable after the Plan Share Awards become
earned. Any cash dividends, stock dividends or returns of capital declared in
respect of each vested Plan Share (whether declared before or after the
applicable Award was granted) held by the Trust will be paid by the Trust, as
soon as practicable after the Trust's receipt thereof, to the Recipient on whose
behalf such Plan Share is then held by the Trust.
7.03 Distribution of Plan Shares.
(a) Timing of Distributions: General Rule. Subject to the
provisions of Section
7.03(b) hereof, Plan Shares shall be distributed to the Recipient or his
Beneficiary, as the case may be, as soon as practicable after they have been
earned.
(b) Timing: Exception for 10% Stockholders. Notwithstanding
Section 7.03(a) above, no Plan Shares may be distributed prior to the date which
is five years from the date of consummation of the Association's conversion from
mutual to stock form to the extent the Recipient or Beneficiary, as the case may
be, would after receipt of such Shares own in excess of 10% of the issued and
outstanding shares of Common Stock, unless specifically approved by two-thirds
of the Board. Any Plan Shares remaining undistributed solely by reason of the
operation of this Section 7.03(b) shall be distributed to the Recipient or his
Beneficiary on the date which is five years from the date of consummation of the
Association's conversion from mutual to stock form.
(c) Form of Distributions. All Plan Shares, together with any
Shares representing stock dividends, shall be distributed in the form of Common
Stock. One share of Common Stock shall be given for each Plan Share earned and
distributable. Payments representing cash dividends or returns of capital shall
be made in cash.
(d) Withholding. The Trustee may withhold from any cash
payment or Common Stock distribution made under this Plan sufficient amounts to
cover any applicable withholding and employment taxes, and if the amount of a
cash payment is insufficient, the Trustee may require the Recipient or
Beneficiary to pay to the Trustee the amount required to be withheld as a
condition of delivering the Plan Shares. The Trustee shall pay over to the
Corporation or any Subsidiary Company which employs or employed such Recipient
any such amount withheld from or paid by the Recipient or Beneficiary.
(e) Restrictions on Selling of Plan Shares. Plan Share Awards
may not be sold, assigned, pledged or otherwise disposed of prior to the time
that they are earned and distributed pursuant
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<PAGE>
to the terms of this Plan. Upon distribution, the Board or the Committee may
require the Recipient or his Beneficiary, as the case may be, to agree not to
sell or otherwise dispose of his distributed Plan Shares except in accordance
with all then applicable federal and state securities laws, and the Board or the
Committee may cause a legend to be placed on the stock certificate(s)
representing the distributed Plan Shares in order to restrict the transfer of
the distributed Plan Shares for such period of time or under such circumstances
as the Board or the Committee, upon the advice of counsel, may deem appropriate.
7.04 Voting of Plan Shares. After a Plan Share Award (other than a
Performance Share Award) has been made, the Recipient shall be entitled to
direct the Trustee as to the voting of the Plan Shares which are covered by the
Plan Share Award and which have not yet been earned and distributed to him
pursuant to Section 7.03, subject to rules and procedures adopted by the
Committee for this purpose. All shares of Common Stock held by the Trust which
have not been awarded under a Plan Share Award, shares subject to Performance
Share Awards which have not yet vested and shares which have been awarded as to
which Recipients have not directed the voting shall be voted by the Trustee in
its discretion.
7.05 Performance Share Awards
(a) Designation of Performance Share Awards. The Committee may
determine to make any Plan Share Award a Performance Share Award by making such
Plan Share Award contingent upon the achievement of a Performance Goal or any
combination of Performance Goals. Each Performance Share Award shall be
evidenced by a written agreement ("Award Agreement"), which shall set forth the
Performance Goals applicable to the Performance Share Award, the maximum amounts
payable and such other terms and conditions as are applicable to the Performance
Share Award. Each Performance Share Award shall be granted and administered to
comply with the requirements of Section 162(m) of the Code.
(b) Timing of Grants. Any Performance Share Award shall be
made not later than 90 days after the start of the period for which the
Performance Share Award relates and shall be made prior to the completion of 25%
of such period. All determinations regarding the achievement of any Performance
Goals will be made by the Committee. The Committee may not increase during a
year the amount of a Performance Share Award that would otherwise be payable
upon achievement of the Performance Goals but may reduce or eliminate the
payments as provided for in the Award Agreement.
(c) Restrictions on Grants. Nothing contained in this Plan
will be deemed in any way to limit or restrict the Committee from making any
Award or payment to any person under any other plan, arrangement or
understanding, whether now existing or hereafter in effect.
(d) Rights of Recipients. Notwithstanding anything to the
contrary herein, a Participant who receives a Performance Share Award payable in
Common Stock shall have no rights as a stockholder until the Common Stock is
issued pursuant to the terms of the Award Agreement.
(e) Transferability. A Participant's interest in a Performance
Share Award may not
be sold, assigned, transferred, pledged, or otherwise encumbered.
(f) Distribution. No Performance Share Award or portion
thereof that is subject to the attainment or satisfaction of a condition of a
Performance Goal shall be distributed or considered to
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<PAGE>
be earned or vested until the Committee certifies in writing that the conditions
or Performance Goal to which the distribution, earning or vesting of such Award
is subject have been achieved.
ARTICLE VIII
TRUST
8.01 Trust. The Trustee shall receive, hold, administer, invest and
make distributions and disbursements from the Trust in accordance with the
provisions of the Plan and Trust and the applicable directions, rules,
regulations, procedures and policies established by the Committee pursuant to
the Plan.
8.02 Management of Trust. It is the intent of this Plan and Trust that
the Trustee shall have complete authority and discretion with respect to the
arrangement, control and investment of the Trust, and that the Trustee shall
invest all assets of the Trust in Common Stock to the fullest extent
practicable, except to the extent that the Trustee determines that the holding
of monies in cash or cash equivalents is necessary to meet the obligations of
the Trust. In performing its duties, the Trustee shall have the power to do all
things and execute such instruments as may be deemed necessary or proper,
including the following powers:
(a) To invest up to one hundred percent (100%) of all Trust
assets in Common Stock without regard to any law now or hereafter in force
limiting investments for trustees or other fiduciaries. The investment
authorized herein may constitute the only investment of the Trust, and in making
such investment, the Trustee is authorized to purchase Common Stock from the
Corporation or from any other source, and such Common Stock so purchased may be
outstanding, newly issued or treasury shares.
(b) To invest any Trust assets not otherwise invested in
accordance with (a) above, in such deposit accounts, certificates of deposit,
obligations of the United States Government or its agencies or such other
investments as shall be considered the equivalent of cash.
(c) To sell, exchange or otherwise dispose of any property at
any time held or acquired by the Trust.
(d) To cause stocks, bonds or other securities to be
registered in the name of a nominee, without the addition of words indicating
that such security is an asset of the Trust (but accurate records shall be
maintained showing that such security is an asset of the Trust).
(e) To hold cash without interest in such amounts as may in
the opinion of the Trustee be reasonable for the proper operation of the Plan
and Trust.
(f) To employ brokers, agents, custodians, consultants and
accountants.
(g) To hire counsel to render advice with respect to its
rights, duties and obligations hereunder, and such other legal services or
representation as it may deem desirable.
(h) To hold funds and securities representing the amounts to
be distributed to a Recipient or his Beneficiary as a consequence of a dispute
as to the disposition thereof, whether in a segregated account or held in common
with other assets of the Trust.
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Notwithstanding anything herein contained to the contrary, the Trustee
shall not be required to make any inventory, appraisal or settlement or report
to any court, or to secure any order of court for the exercise of any power
herein contained, or give bond.
8.03 Records and Accounts. The Trustee shall maintain accurate and
detailed records and accounts of all transactions of the Trust, which shall be
available at all reasonable times for inspection by any legally entitled person
or entity to the extent required by applicable law, or any other person
determined by the Board or the Committee.
8.04 Expenses. All costs and expenses incurred in the
operation and administration of this Plan shall be borne by the Corporation or,
in the discretion of the Corporation, the Trust.
8.05 Indemnification. Subject to the requirements of applicable laws
and regulations, the Corporation shall indemnify, defend and hold the Trustee
harmless against all claims, expenses and liabilities arising out of or related
to the exercise of the Trustee's powers and the discharge of its duties
hereunder, unless the same shall be due to the Trustee's gross negligence or
willful misconduct.
ARTICLE IX
DEFERRED PAYMENTS
9.01 Deferral of Plan Shares. Notwithstanding any other provision of
this Plan, any Recipient who is either a Non-Employee Director or an executive
officer of the Corporation or the Association may elect, with the concurrence of
the Committee and consistent with any requirements established by the Board
(which requirements may include the adoption of a separate deferred compensation
plan or trust by the Corporation), to defer the receipt of Plan Shares subject
to Awards granted hereunder.
9.02 Timing of Election. The election to defer the receipt of any Plan
Shares must be made no later than the last day of the calendar year preceding
the calendar year in which the Recipient would otherwise have an unrestricted
right to receive such Plan Shares, provided that a Recipient may not elect to
defer Shares subject to a Performance Share Award. Deferrals of eligible Plan
Shares shall only be allowed for those Plan Shares scheduled to vest while the
Recipient is in active service with the Corporation or one of its Subsidiary
Companies. Any election to defer the receipt of eligible Plan Shares shall be
irrevocable as long as the Recipient remains an Employee or a Non-Employee
Director of the Corporation or one of its Subsidiary Companies.
ARTICLE X
MISCELLANEOUS
10.01 Adjustments for Capital Changes. The aggregate number of Plan
Shares available for distribution pursuant to the Plan Share Awards and the
number of Shares to which any unvested Plan Share Award relates shall be
proportionately adjusted for any increase or decrease in the total number of
outstanding shares of Common Stock issued subsequent to the effective date of
the Plan resulting from any split, subdivision or consolidation of shares or
other capital adjustment, the payment of a stock dividend or other increase or
decrease in such shares effected without receipt or payment of consideration by
the Corporation. If, upon a merger, consolidation, reorganization, liquidation,
recapitalization or the like of
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the Corporation or of another corporation, each recipient of a Plan Share Award
shall be entitled, subject to the conditions herein stated, to receive such
number of shares of Common Stock or amount of other securities of the
Corporation or such other corporation as were exchangeable for the number of
shares of Common Stock of the Corporation which such Recipients would have been
entitled to receive except for such action.
10.02 Amendment and Termination of the Plan. The Board may, by
resolution, at any time amend or terminate the Plan and the Trust, subject to
any required stockholder approval or any stockholder approval which the Board
may deem to be advisable for any reason, such as for the purpose of obtaining or
retaining any statutory or regulatory benefits under tax, securities or other
laws or satisfying any applicable stock exchange listing requirements. The Board
may not, without the consent of the Recipient, alter or impair any Plan Share
Award previously granted under this Plan except as specifically authorized
herein. Termination of this Plan shall not affect Plan Share Awards previously
granted, and such Plan Share Awards shall remain valid and in effect until they
(a) have been fully earned, (b) are surrendered, or (c) expire or are forfeited
in accordance with their terms.
10.03 Nontransferable. Plan Share Awards and Performance Share Awards
and rights to Plan Shares shall not be transferable by a Recipient, and during
the lifetime of the Recipient, Plan Shares may only be earned by and paid to the
Recipient who was notified in writing of the Award pursuant to Section 6.02. No
Recipient or Beneficiary shall have any right in or claim to any assets of the
Plan or Trust, nor shall the Corporation or any Subsidiary be subject to any
claim for benefits hereunder.
10.04 Employment or Service Rights. Neither the Plan nor any grant of a
Plan Share Award, Performance Share Award or Plan Shares hereunder nor any
action taken by the Trustee, the Committee or the Board in connection with the
Plan shall create any right on the part of any Employee or Non- Employee
Director to continue in such capacity.
10.05 Voting and Dividend Rights. No Recipient shall have any voting or
dividend rights or other rights of a stockholder in respect of any Plan Shares
covered by a Plan Share Award or Performance Share Award, except as expressly
provided in Sections 7.02, 7.04 and 7.05 above, prior to the time said Plan
Shares are actually earned and distributed to him.
10.06 Governing Law. To the extent not governed by federal
law, the Plan and Trust shall be governed by the laws of the State of Louisiana.
10.07 Effective Date. This Plan shall be effective as of the Effective
Date, and Awards may be granted hereunder no earlier than the date this Plan is
approved by the stockholders of the Corporation and no later than the
termination of the Plan. Notwithstanding the foregoing or anything to the
contrary in this Plan, the implementation of this Plan is subject to the
approval of the Corporation's stockholders.
10.08 Term of Plan. This Plan shall remain in effect until the earlier
of (1) ten (10) years from the Effective Date, (2) termination by the Board, or
(3) the distribution to Recipients and Beneficiaries of all the assets of the
Trust.
10.09 Tax Status of the Trust. It is intended that the trust
established hereby be treated as a Grantor Trust of the Corporation under the
provisions of Section 671 et seq. of the Code, as the same may be amended from
time to time.
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IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its duly authorized officers and its corporate seal to be affixed
and duly attested, and the initial Trustees of the Trust established pursuant
hereto have duly and validly executed this Agreement, all on this 28th day of
July 1999.
ATTEST: IBL BANCORP, INC.
/s/ Gary K. Pruitt By:/s/ G. Lloyd Bouchereau, Jr.
- -------------------- ----------------------------
Gary K. Pruitt G. Lloyd Bouchereau, Jr.
Secretary President and Chief Executive Officer
TRUSTEES:
/s/ Gary K. Pruitt
------------------
Gary K. Pruitt
/s/ Bobby E. Stanley
--------------------
Bobby E. Stanley
/s/ Edward J. Steinmetz
-----------------------
Edward J. Steinmetz
12
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IBL Bancorp, Inc.
23910 Railroad Ave.
Plaquemine, LA 70764
To Our Stockholders:
The books are now closed on fiscal 1999 and we are pleased with the
progress that we have made during our first complete year as a stock
association. We are delighted to present this annual report to the stockholders
of IBL Bancorp, Inc.
With the coming of the new millennium, the Company is positioned to
begin a new era of service to the community. Loan demand has increased in 1999
and we hope to continue to expand our loan portfolio. We plan to take advantage
of the opportunities afforded us in this very competitive marketplace.
We are confident of the Association's sound financial condition and
look forward to the future with optimism and energy. We appreciate your
investment in the Company and invite your continued support of the Association,
which is Iberville and West Baton Rouge Parishes truly home-owned community
Association.
We invite you to review this Annual Report which discusses our
performance during fiscal year 1999.
Sincerely,
G. Lloyd Bouchereau, Jr.
President & CEO
1
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IBL BANCORP, INC.
IBERVILLE BUILDING & LOAN ASSOCIATION
IBL BANCORP, INC. ("our holding company" or the "Company") was
incorporated under the laws of the State of Louisiana in 1998 to serve as the
holding company for Iberville Building & Loan Association (the "Association")
following our conversion from mutual to stock form (the "Conversion"). The
Company and the Association are collectively referred to as "us," "we," etc. On
September 30, 1998, we consummated the Conversion, and the Company completed its
offering of Common Stock through the sale and issuance of 210,870 shares of
common stock at a price of $10.00 per share, realizing gross proceeds of $2.1
million. The Company purchased all of the capital stock of the Association in
exchange for 50% of the net Conversion proceeds. Prior to September 30, 1998,
the Company had no material assets or liabilities and engaged in no business
activities. Accordingly, the information set forth in this report, including the
audited Consolidated Financial Statements and related data, relates primarily to
the Association.
Our holding company's executive offices are located at 23910 Railroad
Avenue, Plaquemine, Louisiana 70764, and its telephone number is (225) 687-6337.
IBERVILLE BUILDING & LOAN ASSOCIATION. The Association was organized as
a state chartered mutual savings institution in 1915. We currently operate
through one full service banking office located in Plaquemine, Louisiana. At
December 31, 1999, we had total assets of $28.8 million, deposits of $22.9
million and stockholders' equity of $3.5 million or 12.2% of total assets.
We attract deposits from the general public and invest those funds in
loans secured by first mortgages on owner-occupied single-family residences,
commercial real estate loans and consumer loans. We also maintain an investment
portfolio, primarily of mortgage-backed securities issued by the Federal Home
Loan Mortgage Corporation ("FHLMC") or the Federal National Mortgage Association
("FNMA") and obligations of the federal government and agencies.
We derive our income principally from interest earned on loans,
investment securities and other interest-earning assets. Our principal expenses
are interest expense on deposits and noninterest expenses such as employee
compensation, deposit insurance and miscellaneous other expenses. Funds for our
activities are provided principally by deposit growth, repayments of outstanding
loans and investment securities, other operating revenues and advances from the
Federal Home Loan Bank of Dallas.
As a state chartered savings institution, we are subject to extensive
regulation by the Office of Financial Institutions, State of Louisiana ("OFI")
and by the Office of Thrift Supervision ("OTS"). Our lending activities and
other investments must comply with state and various federal regulatory
requirements, and these regulatory agencies periodically examine us for
compliance with various regulatory requirements. The Federal Deposit Insurance
Corporation ("FDIC") also has the authority to conduct special examinations. We
must also file reports with the OTS describing our activities and financial
condition and are subject to certain monetary reserve requirements promulgated
by the Board of Governors of the Federal Reserve System.
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MARKET FOR COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
Market for Common Stock. The Company's common stock was first quoted
and began trading on the Nasdaq Small Cap Market System on October 1, 1998,
under the symbol "IBLB". At that date there were 210,870 shares of the Company's
common stock outstanding, and there were approximately 222 record holders of the
Company's common stock. Due to the relatively small size of the offering and
small number of stockholders, there was only limited trading activity in 1999.
There were twelve known trades in 1999, the lowest of which was at $9.25 per
share and the highest was at $10.75 per share.
The payment of dividends on the common stock is subject to
determination and declaration by the Board of Directors of our holding company.
The Company's first four quarterly cash dividends were paid at a rate of $0.15
per share per annum. The Board of Directors intends to pay quarterly cash
dividends at a rate of $0.17 per share per annum commencing with the Company's
fifth dividend paid in January 2000. The payment of future dividends will be
subject to the requirements of applicable law and the determination by our
holding company's Board of Directors that our net income, capital and financial
condition, thrift industry trends and general economic conditions justify the
payment of dividends, and we cannot assure you that dividends will continue to
be paid in the future.
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SELECTED FINANCIAL AND OTHER DATA
At December 31,
1998 1999
---- ----
(Dollars in thousands)
Selected Financial Condition Data:
Total assets $28,776 $23,878
Loans receivable, net 18,143 17,209
Other cash and amounts due
from depository institutions . 2,892 1,858
Investment securities:
Available for sale 3,732 1,454
Held to maturity 2,372 2,123
Deposits 22,884 19,899
Borrowed money 2,300 495
Stockholders' equity 3,504 3,383
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
---- ---- ----
(Dollars in thousands)
Selected Operating Data:
<S> <C> <C> <C>
Interest income $ 1,886 $ 1,736 $ 1,691
Interest expense 953 915 917
------- ------- -------
Net interest income before
provision for loan losses 933 821 774
Provision for loan losses 9 21 42
------- ------- -------
Net interest income after
provision for loan losses 924 800 732
Non-interest income 97 101 98
Non-interest expense 744 604 568
------- ------- -------
Income before income taxes 277 297 262
Income taxes 93 102 98
------- ------- -------
Net income 184 195 164
Other comprehensive income (loss), net (4) (3) 4
------- ------- -------
4 Comprehensive income $ 180 $ 192 $ 168
------- ------- -------
</TABLE>
4
Selected Ratios
<TABLE>
<CAPTION>
At or for the
Year Ended December 31,
-----------------------
1999 1998 1997
---- ---- ----
Performance Ratios:
Return on average assets (net income
<S> <C> <C> <C>
divided by average total assets) .......... .68% .84% .74%
Return on average equity (net income
divided by average equity) ................ 5.41 9.04 10.64
Interest rate spread (average yield on assets
minus average rate on liabilities) ........ 3.09 3.19 3.24
Net interest margin (net interest income
divided by average interest-earning assets) 3.54 3.59 3.55
Ratio of average interest-earning assets
to average interest-bearing liabilities ... 112.24 109.78 107.42
Ratio of non-interest expense to average
total assets .............................. 2.74 2.60 2.58
Efficiency ratio (non-interest expense
divided by total of net interest income
and non-interest income) .................. 72.21 65.51 65.13
Dividend pay out ratio (dividends paid during
the year divided by net income) ........... 17.39 -- --
Asset Quality Ratios:
Non-performing assets to total assets at
end of period ............................ .41 1.01 1.48
Non-performing loans to total loans at
end of period ............................ .62 1.31 1.93
Allowance for loan losses to total loans
at end of period ......................... 2.19 2.34 2.41
Allowance for loan losses to non-performing
loans at end of period ................... 341.18 170.25 121.69
Provision for loan losses to total loans ..... .05 .12 .25
Net charge-offs to average loans
outstanding ............................... .08 .08 .01
</TABLE>
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Our principal business consists of attracting deposits from the general
public and investing those funds in loans secured by one-to four-family
residential properties located in our primary market area, which consists of
mainly Iberville and West Baton Rouge Parishes. We also originate consumer
loans, a limited amount of commercial real estate loans and maintain a portfolio
of investment securities. Our investment securities portfolio consists of U.S.
Treasury notes, U.S. government agency securities and mortgage-backed securities
which are guaranteed as to principal and interest by the FHLMC, FNMA or other
governmental agencies. We also maintain an investment in Federal Home Loan Bank
of Dallas common stock.
Our net income primarily depends on our net interest income, which is
the difference between interest income earned on loans and investment securities
and interest paid on customers' deposits and borrowings. Our net income is also
affected by non-interest income, such as service charges on customers' deposit
accounts, loan service charges and other fees, and by non-interest expense,
primarily consisting of compensation expense, deposit insurance and other
expenses incidental to our operations.
Our operations and those of the thrift industry as a whole are
significantly affected by prevailing economic conditions, competition and the
monetary and fiscal policies of governmental agencies. Our lending activities
are influenced by demand for and supply of housing and competition among lenders
and the level of interest rates in our market area. Our deposit flows and costs
of funds are influenced by prevailing market rates of interest, primarily on
competing investments, account maturities and the levels of personal income and
savings in our market area.
This Annual Report includes statements that may constitute
forward-looking statements, usually containing the words "believe," "estimate,"
"project," "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 we operate); 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 we have no control); and other
risks detailed in this Annual Report and in our other Securities and Exchange
Commission fillings. Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect our analysis only as of the date
hereof. We undertake no obligation to publicly revise these forward-looking
statements to reflect events or circumstances that arise after the date hereof.
6
<PAGE>
The Year 2000
The Year 2000 seems to have come without any complications or
difficulties. The Association's data processing is handled by an independent
third party data center and we experienced no interruption in service due to the
year 2000. We do not expect to incur significant additional expenses in
connection with issues related to the Year 2000; however, we will continue to
monitor our data processing. Management and the Board of Directors are committed
to providing uninterrupted service to our customers throughout the new
millenium.
Asset/Liability Management
Net interest income, the primary component of our net income, is
determined by the difference or "spread" between the yield earned on our
interest-earning assets and the rates paid on our interest-bearing liabilities,
and the relative amounts of such assets and liabilities. Key components of an
asset/liability strategy are the monitoring and managing of interest rate
sensitivity on both the interest-earning assets and interest-bearing
liabilities. The matching of our assets and liabilities may be analyzed by
examining the extent to which our assets and liabilities are interest rate
sensitive and by monitoring the expected effects of interest rate changes on our
net portfolio value.
An asset or liability is interest rate sensitive within a specific time
period if it will mature or reprice within that time period. If our assets
mature or reprice more quickly or to a greater extent than our liabilities, our
net portfolio value and net interest income would tend to increase during
periods of rising interest rates but decrease during periods of falling interest
rates. If our assets mature or reprice more slowly or to a lesser extent than
our liabilities, our net portfolio value and net interest income would tend to
decease during periods of rising interest rates but increase during periods of
falling interest rates. Our policy has been to mitigate the interest rate risk
inherent in the traditional savings institution business of originating
long-term loans funded by short-term deposits by pursuing the following
strategies: (1) we have historically maintained liquidity and capital levels to
compensate for unfavorable movements in market interest rates; and (2) in order
to mitigate the adverse effect of interest rate risk on future operations, we
emphasize the origination of adjustable-rate mortgage loans and shorter term
consumer loans and the purchase of adjustable-rate mortgage-backed securities.
The OTS requires us to measure our interest rate risk by computing
estimated changes in the net portfolio value ("NPV") of our cash flows from
assets, liabilities and off-balance sheet items in the event of a range of
assumed changes in market interest rates. These computations estimate the effect
on our NPV of sudden and sustained 1% to 3% increases and decreases in market
interest rates. Our board of directors has adopted an interest rate risk policy
which establishes maximum decreases in our estimated NPV in the event of 1%, 2%
and 3% increases and decreases in market interest rates, respectively. Under OTS
regulations, 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%
7
<PAGE>
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 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 or decrease in interest rates would not have
resulted in the Association's NPV declining by more than 200 basis points of the
estimated market value of the Association's assets as of December 31, 1999, the
Association would not have been subject to any capital deductions if the
regulation had been effective for such date.
The following table presents the Association's NPV as of December 31,
1999 as calculated by the OTS, based on information provided to the OTS by the
Association:
<TABLE>
<CAPTION>
Net Portfolio Value NPV as % of Portfolio Change in NPV as % of
Change in Rates $Amount $Change %Change Value of Assets Portfolio Value of Assets(1)
--------------- ------- ------- ------- --------------- -------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
+300 bp $2,983 $ (316) (10) % 10.75 % (1.11) %
+200 bp 3,161 (137) (4) 11.27 (.48)
+100 bp 3,273 (26) (1) 11.57 (.09)
0 bp 3,299 -- -- 11.60 --
-100 bp 3,256 (43) (1) 11.41 (.15)
-200 bp 3,246 (53) (2) 11.33 (.19)
-300 bp 3,262 (37) (1) 11.32 (.13)
</TABLE>
(1) Based on the portfolio value of the Association's assets
assuming no change in interest rates.
As with any method of measuring interest rate risk, certain
shortcomings are inherent in the method of analysis presented in the foregoing
table. For example, although certain assets and liabilities may have similar
maturities or periods to repricing, they may react in different degrees to
changes in market interest rates. Also, the interest rates on certain types of
assets and liabilities may fluctuate in advance of changes in market interest
rates, while interest rates on other types may lag behind changes in market
rates. Additionally, certain assets, such as adjustable-rate mortgage loans,
have features which restrict changes in interest rates on a short-term basis and
over the life of the asset. Further, in the event of a change in interest rates,
expected rates of prepayments on loans and early withdrawals from certificates
could deviate significantly from those assumed in calculating the table.
Our Board of Directors is responsible for reviewing our asset and
liability policies. On at least a quarterly basis, the Board reviews interest
rate risk and trends, as well as liquidity and capital ratios and requirements.
Our management is responsible for administering the policies and determinations
of the Board of Directors with respect to our asset and liability goals and
strategies.
8
<PAGE>
Average Balances, Net Interest Income and Average Yields
The following table sets forth information about our average
interest-earning assets and interest-bearing liabilities and reflects the
average yield of interest-earning assets and the average cost of
interest-bearing liabilities for the periods and at the date indicated. Average
balances are derived from month-end balances. Investment securities include the
aggregate of securities available for sale and held to maturity. The average
balance and average yield on investment securities is based on the fair value of
securities available for sale and the amortized cost of securities held to
maturity. The average balance of loans receivable includes delinquent loans,
which are not considered significant. The average balance of stockholders'
equity includes the net unrealized loss on available for sale securities. The
following table does not reflect any effect of income taxes.
9
<PAGE>
<TABLE>
<CAPTION>
IBL Bancorp, Inc.
Average Balances, Net Interest Income, Yields Earned and Rates Paid
Year Ended Year Ended Year Ended
December 31, 1999 December 31, 1998 December 31, 1997
Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ---- ------- -------- ----
Interest-earning Assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans receivable 18,066 1,441 7.98% 16,611 1,407 8.47% 15,735 1,346 8.55%
Mortgage-backed securities 4,576 266 5.81% 3,788 223 5.89% 4,176 258 6.18%
FHLB stock and other investment securities 175 9 5.14% 224 13 5.80% 367 22 5.99%
Interest-bearing deposits 3,548 170 4.79% 2,265 93 4.11% 1,519 65 4.28%
------ ----- ---- ------ ----- ---- ------ ----- ----
Total interest-earning assets 26,365 1,886 7.15% 22,888 1,736 7.58% 21,797 1,691 7.76%
----- ---- ----- ---- ----- ----
Non-interest earning assets 753 340 253
------ ------ ------
Total assets 27,118 23,228 22,050
====== ====== ======
INTEREST-BEARING LIABILITIES
Interest-bearing Liabilities:
Deposits (3) 22,423 904 4.03% 20,556 898 4.37% 20,154 910 4.52%
FHLB advances 1,067 49 4.59% 293 17 5.80% 138 7 5.07%
------ ----- ---- ------ ----- ---- ------ ----- ----
Total interest-bearing liabilities 23,490 953 4.06% 20,849 915 4.39% 20,292 917 4.52%
----- ---- ----- ---- ----- ----
Non-interest bearing liabilities 229 221 216
------ ------- -------
Total liabilities 23,719 21,070 20,508
Stockholders' Equity 3,399 2,158 1,542
------ ------- -------
Total liabilities and equity 27,118 23,228 22,050
====== ======= =======
Net interest income/average interest rate spread $ 933 3.09% $ 821 3.19% $ 774 3.24%
====== ===== ===== ===== ===== =====
Net interest margin 3.54% 3.59% 3.55%
===== ==== =====
Interest-earning assets to interest-bearing
Liabilities 112.24% 109.78% 107.42%
====== ====== ======
</TABLE>
(1) At December 31, 1999, the weighted average yields earned and rates paid
were as follows: loans receivable, 7.98%; mortgage backed securities,
6.12%; investment securities, 5.75%; other interest bearing deposits,
4.93%; total interest earning assets, 7.24%; deposits 4.57%; FHLB advances,
5.58%; total interest-bearing liabilities, 4.68%; and, average interest
rate spread, 2.56%.
(2) Includes non-accuring loans.
(3) Includes noninteresting-bearing checking accounts.
(4) Equals net interest income divided by average interest-earning assets.
10
<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 our interest income and expenses 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>
IBL Bancorp, Inc.
Rate - Volume Analysis
Year Ended Year Ended
December 31, 1999 vs. 1998 December 31, 1998 vs. 1997
-------------------------- --------------------------
Increase / (Decrease) Increase / (Decrease)
Due to Total Due to Total
------ Increase ------ Increase
Rate Volume (Decrease) Rate Volume (Decrease)
---- ------ ---------- ---- ------ ----------
(Dollars in Thousands)
Interest-earning Assets:
<S> <C> <C> <C> <C> <C> <C>
Loans receivable $ (85) $ 119 $ 34 $ (13) $ 74 $ 61
Mortgage-backed securities
(3) 46 43 (12) (23) (35)
FHLB stock and other investment securities
(1) (3) (4) (1) (8) (9)
Interest-bearing deposits
18 59 77 (3) 31 28
---------- ---------- ---------- ---------- ---------- ----------
Total interest-earning assets
(71) 221 150 (29) 74 45
---------- ---------- ---------- ---------- ---------- ----------
Interest-bearing Liabilities:
Deposits
(72) 78 6 (30) 18 (12)
FHLB advances
(4) 36 32 1 9 10
---------- ---------- ---------- ---------- ---------- ----------
Total interest-bearing liabilities
(76) 114 38 (29) 27 (2)
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net interest income $ 5 $ 107 $ 112 $ - $ 47 $ 47
========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE>
Comparison of Financial Condition at December 31, 1999 and December 31, 1998
Total assets increased $4.9 million, or 20.5%, from $23.9 million at
December 31, 1998 to $28.8 million at December 31, 1999.
Loans receivable increased slightly from December 31, 1998 to December
31, 1999 as originations exceeded repayments for the period by approximately
$929,000. Our market area has experienced an increase in refinancing activity
during this period. The increase in loans receivable in 1999 was primarily
caused by increases in our commercial real estate and consumer loans.
Investment securities increased from December 31, 1998 to December 31,
1999 by $2.5 million. During the year we purchased $3.6 million of
mortgage-backed securities.
Total deposits increased by $3.0 million from $19.9 million at December
31, 1998 to $22.9 million at December 31, 1999. The increase was primarily due
to the Association beginning to participate in deposits from various local
government entities.
Our total stockholders' equity increased $121,000 from $3,383,000 at
December 31, 1998 to $3,504,000 at December 31, 1999. The increase was due to
$184,000 of net income and a $18,000 decrease in unearned ESOP shares. These
factors were partially offset by the purchase of $44,000 of our stock to
partially fund the Recognition and Retention Plan, the payment of four quarterly
dividends totaling $32,000 and an increase of $5,000 in unrealized losses on
available-for-sale investment securities.
Comparison of Results of Operations for the Years Ended December 31, 1999, 1998
and 1997
Net income was $184,000 for the year ended December 31, 1999 compared
to $195,000 for 1998 and $164,000 for 1997. The lower net income in 1999 was
primarily attributable to an increase in non-interest expense, particularly an
increase in legal and other professional services in the amount of $55,000,
parish and city tax assessment in the amount of $34,000 and other general and
administrative expenses increasing by $22,000. Net income for 1999 resulted in a
return on average assets of .68% compared to .84% and .74% for 1998 and 1997,
respectively.
Interest Income: Interest income totaled $1.9 million, $1.7 million and
$1.7 million for 1999, 1998 and 1997, respectively. The increase in total
interest income in 1999 was primarily due to increases in interest-earning
assets funded by increased deposits and advances from the Federal Home Loan Bank
of Dallas. The average balance of interest-earning assets increased $3.5 million
in 1999 and $1.1 million in 1998. The average yield on interest-earning assets
in 1997 was7.76%, decreasing slightly in 1998 to 7.58% and further decreasing in
1999 to 7.15%. The decreased yields on assets were primarily due to lower yields
on our adjustable-rate mortgage loans and adjustable-rate mortgage-backed
securities.
12
<PAGE>
Our primary source of interest income for the three-year period ended
December 31, 1999 was from loans receivable. Interest income from loans
receivable was $1.4 million, $1.4 million and $1.3 million for 1999, 1998 and
1997, respectively. The average balances of loans receivable also increased
during the period with a $1.5 million increase in 1999, an $876,000 increase in
1998 and a $1.1 million increase in 1997 due to increased loan demand in our
market area.
Interest income on interest-bearing deposits increased in 1999 by
$78,000 due to an increase in average balances of $1.3 million and an increase
in average rates paid. Interest income on interest-bearing deposits also
increased in 1998 due to an increase in average balances. Interest income on
investment securities increased in 1999 by $42,000 due to an increase in average
balances of $788,000, and decreased in 1998 by $16,000 due to a decrease in
average balances of $388,000 and a decrease in average rates paid. These
increases in interest income were offset by a decrease in interest income on
Federal Home Loan Bank Stock in 1999 by $4,000.
Interest Expense: Interest on deposits increased by $5,300 or less than
1% in 1999 after decreasing by $11,300 or 1.3% in 1998 compared to the
respective prior periods. The increase in 1999 was due to a $1.9 million or 9.1%
increase in the average balance of deposits, while the average rate paid
decreased from 4.37% in 1998 to 4.03% in 1999. The lower rate was mainly due to
the average balance of lower rate passbook, and NOW accounts increasing in 1999,
while the average balance of money market deposit accounts and certificates of
deposit declined.
Interest on advances from the Federal Home Loan Bank increased by
$32,500 or 195% over 1998, and in 1998 increased by $9,700 or 138% over 1997 due
to the fact the Association utilized advances in 1999 and 1998 to purchase
mortgage-backed securities and certificates of deposits in other financial
institutions.
Net Interest Income: Net interest income was $933,000, $821,000 and
$774,000 for 1999, 1998 and 1997, respectively. The increases in net interest
income reflect increases in average interest-earning assets over average
interest-bearing liabilities each year. These increases were offset by decreases
in our average interest rate spread from 3.24% for 1997 to 3.19% for 1998 and to
3.09% for 1999. Our net interest margin was 3.54%, 3.59% and 3.55% for 1999,
1998 and 1997.
Provisions for Loan Losses: The net provision for loan losses decreased
by $12,000 in 1999, which decreased our allowance for loan losses to $406,000 or
2.2% of the loan portfolio. In 1998, the net provision for loan losses was
$21,000, which increased our allowance for loan losses to $412,000 or 2.3% of
the loan portfolio. In 1997, the provision was $42,000, which increased our
allowance for loan losses to $404,000 or 2.4% of the loan portfolio. With
non-performing assets at December 31, 1999, 1998, and 1997 being $119,000,
$241,000 and $332,000, our analysis of the provision for loan losses led to the
conclusion that the allowance for loan losses was sufficient to meet the modest
charge off and the current asset quality of the loan portfolio.
13
<PAGE>
Non-interest Income: Non-interest income for 1999, 1998 and 1997 was
$97,000, $101,000 and $98,000, respectively. Non-interest income consisted
primarily of customer service fees related to customers' deposit accounts and
loan service charges.
Non-interest Expense: Non-interest expense for 1999, 1998 and 1997 was
$744,000, $604,000 and $568,000, respectively. The increase in non-interest
expense in 1999 was $140,000 or 23.2% over 1998 primarily due to an increase in
legal and other professional, parish and city tax assessment, other general and
administrative, furniture and equipment, occupancy, and compensation and
benefits. Legal and other professional increased by $55,000 due to accounting
and legal fees incurred in the preparation of our SEC reports. The parish and
city tax assessment in the amount of $34,000 was the first assessment on the
stock of the company. Other general and administrative expense increased by
$22,000 mainly due to the added cost of stockholder record keeping and
preparation and mailing of the dividends and proxy statements. Compensation and
benefits increased by $21,000 primarily due to increased cost of medical
insurance, increased compensation and increased ESOP expense. Furniture and
equipment expense increased by $6,000 due to the replacement of several
computers to ensure Year 2000 compliance. Occupancy expense increased by $4,000
primarily to an increase in utilities. These increases were slightly offset by a
$2,000 decrease in advertising in 1999. The increase in non-interest expense in
1998 was primarily due to an increase in compensation and benefits, data
processing, office supplies and postage and other expenses.
Our operating efficiency, measured by our efficiency ratio
(non-interest expense divided by the total of net interest income and
non-interest income, was 72.2%, 65.5%, and 65.1% for 1999, 1998 and 1997,
respectively. The higher operating efficiency for 1999 is due to the higher
legal and other professional expense, ESOP expense and the holding company's
recognition and retention plan, which was implemented in 1999. The ratios of
non-interest expense to average total assets were 2.7%, 2.6% and 2.6% for 1999,
1998, and 1997, respectively.
Income Taxes: Our effective tax rate was 34%, 34% and 37% for 1999,
1998 and 1997, respectively. See Note J of the Notes to Consolidated Financial
Statements.
Sources of Capital and Liquidity
We have historically maintained substantial levels of capital. The
assessment of capital adequacy depends on several factors, including asset
quality, earnings trends, liquidity and economic conditions. We seek to maintain
high levels of regulatory capital to give us maximum flexibility in the changing
regulatory environment and to respond to changes in market and economic
conditions. These levels of capital have been achieved through consistent
earnings enhanced by low levels of non-interest expense and have been maintained
at those high levels as a result of our policy of moderate growth generally
confined to our market area. At December 31, 1999, we exceeded all current
regulatory capital requirements and met the definition of a "well-capitalized"
institution. See Note Q of the Notes to Consolidated Financial Statements.
The primary business of our holding company is holding the stock of the
Association. The net proceeds of the Conversion retained by our holding company
on September 30, 1998 have provided sufficient funds for the Company's initial
operations. Our holding company's
14
<PAGE>
primary sources of liquidity in the future will be dividends paid by the
Association, repayment of the ESOP loan and income from investments in
securities and other financial institutions. We are subject to certain
regulatory limitations with respect to the payment of dividends to our holding
company.
We are required to maintain minimum levels of liquid assets as defined
by OTS regulations. This requirement, which may be varied at the discretion of
the OTS depending on economic conditions and deposit outflows, is based upon a
percentage of deposits and, if any, short-term borrowings. At December 31, 1999,
current OTS regulations required 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, of which short-term
liquid assets must consist of not less than 1%. At December 31, 1999, our
liquidity, as measured for regulatory purposes, was 14.8% or $2.6 million in
excess of the minimum OTS liquidity requirement of 4%. We seek to maintain a
relatively high level of liquidity in order to retain flexibility in terms of
lending and investment opportunities and deposit pricing, and in order to meet
funding needs of deposit outflows and loan commitments. Historically, we have
been able to meet our liquidity demands through internal sources of funding.
Deposits are our primary source of funds for lending and other
investment purposes. In addition to deposits, we derive funds from the payment
of principal and interest on loans and investment securities. While scheduled
principal and interest payments on loans and investment securities are a
relatively predictable source of funds, deposit flows and loan and investment
securities prepayments are greatly influenced by general interest rates,
economic conditions, competition and other factors. We do not solicit deposits
outside of our market area through brokers or other financial institutions.
We have also designated certain securities as available for sale in
order to meet liquidity demands. At December 31, 1999, we had designated
securities with a fair value of $3.7 million as available for sale. In addition
to internal sources of funding, we are a member of the Federal Home Loan Bank of
Dallas and have substantial borrowing authority with the Federal Home Loan Bank
of Dallas. Our use of a particular source of funds is based on need, comparative
total costs and availability.
At December 31, 1999, we had outstanding approximately $211,000 in
commitments to originate loans and unused lines of credit. At the same date, the
total amount of certificates of deposit which were scheduled to mature in one
year or less was $10.9 million. We anticipate that we will have resources to
meet our current commitments through internal funding sources described above.
Historically, we have been able to retain a significant amount of our deposits
as they mature.
Impact of Inflation and Changing Prices
The financial statements and related notes appearing elsewhere in this
report have been prepared in accordance with generally accepted accounting
principles, which require the measurement of financial position and operating
results in terms of historical dollars without considering the change in the
relative purchasing power of money over time due to inflation.
15
<PAGE>
Virtually all of our assets and liabilities are monetary. As a result, changes
in interest rates have a greater impact on our performance than do the effects
of general levels of inflation. Interest rates do not necessarily move in the
same direction or to the same extent as the prices of goods and services.
Impact of New Accounting Standards
The following are recently issued accounting standards which we have
yet to adopt. For information about recent accounting standards which we have
adopted, see Note X of the Notes to Consolidated Financial Statements.
The Statement of Financial Accounting Standards No. 133 (SFAS 133),
Accounting of Derivative Instruments and Hedging Activities, which establishes
additional accounting and reporting standards for derivative instruments
embedded in other contracts and hedging activities is effective for all fiscal
quarters of all fiscal years beginning after June 15, 1999. Statement of
Financial Accounting Standards No. 137 (SFAS 137), Deferral of the Effective
Date of FASB Statement No. 133, delayed the effective date to all fiscal
quarters of all fiscal years beginning after June 15, 2000. We do 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 our consolidated financial position or results of operations.
16
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Shareholders and Directors
IBL Bancorp, Inc.
We have audited the accompanying consolidated statements of financial
condition of IBL Bancorp, Inc. and its wholly-owned subsidiary, The
Iberville Building and Loan Association, as of December 31, 1999 and 1998,
and the related consolidated statements of income and comprehensive income,
changes in shareholders'equity, and cash flows for the years then ended.
These financial statements are the responsibility of the Bancorp'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 consolidated financial position of IBL
Bancorp, Inc. and its wholly-owned subsidiary, The Iberville Building and
Loan Association as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
As discussed in Notes A and T, IBL Bancorp, Inc. was formed in 1998 as the
holding company for The Iberville Building and Loan Association which was
acquired by the Bancorp under a plan for business reorganization of
entities under common control carried out in a manner similar to a pooling
of interest. The accompanying financial statements for 1998 are based on
the assumption that the Bancorp and the Association were combined for the
full year.
January 25, 2000
<PAGE>
<TABLE>
<CAPTION>
IBL BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, 1999 and 1998
1999 1998
---- ----
ASSETS
<S> <C> <C>
Cash and amounts due from depository institutions........ $ 770,481 $ 177,068
Interest-bearing deposits in other institutions.......... 2,121,112 1,681,430
------------ ------------
Total cash............................................. 2,891,593 1,858,498
------------ ------------
Time deposits............................................ 1,101,000 795,000
------------ ------------
Mortgage-backed securities held-to-maturity (estimated
market value $2,308,395 and $2,116,824)................. 2,371,700 2,122,507
Mortgage-backed securities available-for-sale (amortized
cost $3,739,649 and $1,454,057)......................... 3,732,565 1,453,613
------------ ------------
Total investment securities............................ 6,104,265 3,576,120
------------ ------------
Loans receivable......................................... 18,549,659 17,620,600
Less allowance for loan losses........................... 406,329 411,621
------------ ------------
Loans receivable, net.................................. 18,143,330 17,208,979
------------ ------------
Premises and equipment, net.............................. 154,248 154,179
Federal Home Loan Bank stock, at cost.................... 180,200 170,800
Accrued interest receivable.............................. 108,581 74,242
Other assets............................................. 93,134 40,200
------------ ------------
Total assets........................................... $ 28,776,351 $ 23,878,018
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITYDeposits.... ........ $ 22,884,393 $ 19,898,684
19,898,684
Advances from Federal Home Loan Bank..................... 2,300,000 495,000
Advances by borrowers for taxes and insurance............ 12,821 12,781
Income taxes payable..................................... 477 39,388
Other liabilities and deferrals.......................... 74,622 49,570
------------ ------------
Total liabilities...................................... 25,272,313 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............................... 1,740,201 1,740,254
Unearned ESOP shares..................................... (147,603) (165,971)
Unearned RRP shares...................................... (44,193) -
Retained earnings - substantially restricted............. 1,958,199 1,806,496
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulated other comprehensive loss..................... (4,675) (293)
------------ ------------
Total stockholders' equity............................. 3,504,038 3,382,595
------------ ------------
Total liabilities and stockholders' equity............. $ 28,776,351 $ 23,878,018
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
IBL BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
Years ended December 31, 1999 and 1998
1999 1998
---- ----
INTEREST INCOME
<S> <C> <C>
Loans.................................................... $ 1,440,951 $ 1,407,096
Mortgage-backed securities............................... 265,684 223,105
FHLB stock and other securities.......................... 9,588 13,353
Deposits................................................. 170,220 92,613
----------- -----------
Total interest income.................................. 1,886,443 1,736,167
----------- -----------
INTEREST EXPENSE
Deposits
Interest-bearing demand deposit accounts................ 91,325 87,811
Passbook savings accounts............................... 106,512 103,940
Certificate of deposit accounts......................... 705,898 706,649
----------- -----------
Total interest on deposits............................. 903,735 898,400
Advances from Federal Home Loan Bank..................... 49,215 16,700
----------- -----------
Total interest expense................................. 952,950 915,100
----------- -----------
Net interest income.................................... 933,493 821,067
Provision for losses on loans............................ 8,604 20,926
----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR
LOSSES ON LOANS......................................... 924,889 800,141
----------- -----------
NON-INTEREST INCOME
Service charges on deposit accounts...................... 79,119 86,834
Other.................................................... 18,056 14,023
----------- -----------
Total non-interest income.............................. 97,175 100,857
----------- -----------
NON-INTEREST EXPENSES
Compensation and benefits................................ 353,551 332,770
Occupancy ............................................... 31,729 27,662
Furniture and equipment ................................. 32,759 26,896
Deposit insurance premium................................ 13,018 12,323
Data processing.......................................... 71,503 70,946
Legal and other professional............................. 72,350 17,289
Advertising.............................................. 13,356 15,720
Office supplies and postage.............................. 31,268 31,518
Other taxes - shareholder assessment..................... 34,097 -
Other general and administrative......................... 90,602 68,825
----------- -----------
Total non-interest expenses............................ 744,233 603,949
----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES................. 277,831 297,049
PROVISION FOR INCOME TAXES............................... 93,442 101,656
----------- -----------
NET INCOME............................................... $ 184,389 $ 195,393
=========== ===========
Basic earnings per share................................. $ .95 $ 1.01
=========== ===========
Diluted earnings per share............................... $ .94 $ 1.01
=========== ===========
</TABLE>
Continued...
<PAGE>
<TABLE>
<CAPTION>
1999 1998
---- ----
COMPREHENSIVE INCOME
<S> <C> <C>
Net income............................................... $ 184,389 $ 195,393
----------- -----------
Other comprehensive income
Unrealized holding losses on
securities arising during the period.................. (6,640) (4,912)
Income tax benefit related to
unrealized holding losses............................. 2,258 1,670
----------- -----------
Other comprehensive loss, net of
tax effects............................................ (4,382) (3,242)
----------- -----------
Comprehensive income..................................... $ 180,007 $ 192,151
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
IBL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended December 31, 1999 and 1998
Retained
Earnings-
Additional Unearned Unearned Substan-
Common Paid - In ESOP RRP tially
Stock Capital Shares Shares Restricted
BALANCE, DECEMBER 31, 1997, AS PREVIOUSLY
<S> <C> <C> <C> <C> <C>
REPORTED ............................. $ -- $ -- $ -- $ -- $ 1,638,709
Prior period adjustment ............... -- -- -- -- (19,698)
--------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1997, AS RESTATED -- -- -- -- 1,619,011
--------- ----------- ----------- ----------- -----------
COMPREHENSIVE INCOME
Net income ............................ -- -- -- -- 195,393
Other comprehensive income, net of tax
Unrealized losses on securities ..... -- -- -- -- --
--------- ----------- ----------- ----------- -----------
Comprehensive income ................ -- -- -- -- 195,393
Proceeds from issuance of common stock 2,109 1,740,254 -- -- --
Acquisition of unearned ESOP shares ... -- -- (168,690) -- --
ESOP shares released for allocation ... -- -- 2,719 -- --
Dividends ............................. -- -- -- -- (7,908)
--------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1998 ............ 2,109 1,740,254 (165,971) -- 1,806,496
COMPREHENSIVE INCOME
Net income ............................ -- -- -- -- 184,389
Other comprehensive income, net of tax
Unrealized losses on securities ..... -- -- -- -- --
--------- ----------- ----------- ----------- -----------
Comprehensive income ................ -- -- -- -- 184,389
--------- ----------- ----------- ----------- -----------
ESOP shares released for allocation ... -- (53) 18,368 -- --
Acquisition of RRP shares ............. -- -- -- (69,875) --
RRP shares issued ..................... -- -- -- 25,682 --
Dividends ............................. -- -- -- -- (32,686)
--------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1999 ............ $ 2,109 $ 1,740,201 $ (147,603) $ (44,193) $ 1,958,199
========= =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
IBL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended December 31, 1999 and 1998
Accumulated
Other
Compre-
hensive Total
Income Equity
BALANCE, DECEMBER 31, 1997, AS PREVIOUSLY
<S> <C> <C>
REPORTED ............................. $ 2,949 $ 1,641,658
Prior period adjustment ............... -- (19,698)
----------- -----------
BALANCE, DECEMBER 31, 1997, AS RESTATED 2,949 1,621,960
----------- -----------
COMPREHENSIVE INCOME
Net income ............................ -- 195,393
Other comprehensive income, net of tax
Unrealized losses on securities ..... (3,242) (3,242)
----------- -----------
Comprehensive income ................
(3,242) 192,151
Proceeds from issuance of common stock -- 1,742,363
Acquisition of unearned ESOP shares ... -- (168,690)
ESOP shares released for allocation ... -- 2,719
Dividends ............................. -- (7,908)
----------- -----------
BALANCE, DECEMBER 31, 1998 ............ (293) 3,382,595
COMPREHENSIVE INCOME
Net income ............................ -- 184,389
Other comprehensive income, net of tax
Unrealized losses on securities ..... (4,382) (4,382)
----------- -----------
Comprehensive income ................ (4,382) 180,007
----------- -----------
ESOP shares released for allocation ... -- 18,315
Acquisition of RRP shares ............. -- (69,875)
RRP shares issued ..................... -- 25,682
Dividends ............................. -- (32,686)
----------- -----------
BALANCE, DECEMBER 31, 1999 ............ $ (4,675) $ 3,504,038
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
IBL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1999 and 1998
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income............................................... $ 184,389 $ 195,393
---------- ----------
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation........................................... 27,013 22,394
Provision for loan losses.............................. 8,604 20,925
ESOP compensation...................................... 18,315 2,719
Release of RRP shares.................................. 25,682 -
Provision for deferred federal income tax (tax benefit) 19,279 (36,354)
Amortization of net premium on mortgage-backed
securities............................................ 18,462 27,604
Net discount charged on installment loans.............. 14,564 40,692
Net loan fees deferred................................. 571 1,865
Deferred profit recognized on sale of real estate...... (98) (85)
Stock dividends from Federal Home Loan Bank............ (9,400) (12,700)
Net decrease (increase) in interest receivable......... (34,339) 6,152
Net increase in income taxes receivable................ (67,053) -
Net increase in other assets........................... (2,902) (7,734)
Net increase (decrease) in interest payable............ (4,204) 4,704
Net decrease in income taxes payable................... (38,911) (8,269)
Net increase (decrease) in other liabilities........... 24,096 (15,833)
---------- ----------
Total adjustments.................................... (321) 46,080
---------- ----------
Net cash provided by operating activities................ 184,068 241,473
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans receivable......................... (968,590) (954,102)
Purchases of securities available-for-sale............... (2,838,544) (119,776)
Principal payments received on mortgage-backed securities
available-for-sale...................................... 543,442 593,732
Purchases of securities held-to-maturity................. (735,934) (438,975)
Maturity of U. S. Government obligation.................. - 15,152
Proceeds from sale of Federal Home Loan Bank stock....... - 205,000
Principal payments received on mortgage-backed securities
held-to-maturity........................................ 477,789 690,016
Proceeds from sale of foreclosed assets.................. 10,500 -
Purchases of office property and equipment............... (27,082) (13,243)
Certificates of deposits acquired........................ (606,000) (795,000)
Maturities of certificates of deposit.................... 300,000 -
---------- ----------
Net cash used in investing activities.................... (3,844,419) (817,196)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposit accounts.............. 2,989,913 (132,437)
Net increase (decrease) in advances by borrowers for
taxes and insurance..................................... 40 (2,223)
Cash dividends........................................... (31,632) -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Advances from Federal Home Loan Bank..................... 1,805,000 495,000
Repayment of advances from Federal Home Loan Bank........ - (610,000)
Net proceeds from sale of common stock................... - 1,573,673
Acquisition of RRP shares................................ (69,875) -
---------- ----------
Net cash provided by financing activities................ 4,693,446 1,324,013
---------- ----------
NET INCREASE IN CASH..................................... 1,033,095 748,290
Cash - beginning of period............................... 1,858,498 1,110,208
---------- ----------
Cash - end of period..................................... $2,891,593 $1,858,498
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
IBL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
A: SIGNIFICANT ACCOUNTING POLICIES
Nature of operations
IBL Bancorp, Inc.(Bancorp) was organized as a Louisiana corporation on
June 16, 1998. The Bancorp was essentially inactive until September 30,
1998, when it acquired The Iberville Building and Loan Association
(Association) under a plan for business reorganization of entities
under common control carried out in a manner similar to a pooling of
interest. The Association became a wholly owned subsidiary of the
Bancorp through the exchange of all of its stock then outstanding. The
accompanying financial statements for 1998 are based on the assumption
that the Bancorp and the Association were combined for the full year.
References herein to the Bancorp include the Association unless the
context otherwise requires.
The Association is a state chartered financial institution whose
deposits are insured by the Federal Deposit Insurance Corporation
(FDIC). It is subject to regulation of the FDIC, the Office of Thrift
Supervision, and the Office of Financial Institutions for the State of
Louisiana. 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. The Association primarily serves the
parishes of Iberville and West Baton Rouge from its only office
location in Plaquemine, Louisiana.
Principles of consolidation
The accompanying consolidated financial statements include the accounts
of the Bancorp and its wholly-owned subsidiary, the Association. In
consolidation, intercompany accounts and transactions have been
eliminated.
Basis of financial statement presentation
The accounting and reporting policies followed by the Bancorp and the
Association are in accordance 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.
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
<PAGE>
A: SIGNIFICANT ACCOUNTING POLICIES (Continued)
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
and real estate owned. A majority of the Association's loan portfolio
consists of 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 recognize losses on
loans, future additions to the allowances may be necessary based on
changes in local economic conditions. In addition, regulatory agencies,
as an integral part of their examination process, periodically review
the Association's allowances for losses on loans and foreclosed real
estate. Such agencies may require the Association to recognize
additions to the allowances 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
Bancorp does not currently hold any securities for trading purposes.
Securities held-to-maturity - Debt securities which the Bancorp 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 methods
approximating 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
<PAGE>
A: SIGNIFICANT ACCOUNTING POLICIES (Continued)
interest income using methods approximating the interest method over
the period to maturity.
Declines in the fair value of individual held-to-maturity and
available-for-sale securities below their cost that are other than
temporary result in write-downs of the individual securities to their
fair value. The related write-downs are included in earnings as
realized losses.
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 which
approximates the level-yield method. Interest on all other loans is
accrued periodically based on the principal balance outstanding.
Interest accrued on such loans but unpaid 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 days 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 (SFAS) No. 114, Accounting by Creditors for
Impairment of a Loan and SFAS No. 118, Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures 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 Nos. 114 and 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 Bancorp's policy to provide a valuation allowance for
estimated 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
<PAGE>
A: SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 life of the
related loans using the level yield method.
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 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
depreciation. 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
Costs 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.
<PAGE>
A: SIGNIFICANT ACCOUNTING POLICIES (Continued)
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, allowances for
losses on loans, Federal Home Loan Bank stock, ESOP and RRP benefits,
and deferred 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.
Cash flows
Cash consists of cash and interest-earning deposits due from other
financial institutions. For purposes of the statement of cash flows,
the Bancorp considers highly liquid deposits including certificates of
deposits with maturities of three months or less when purchased to be
"cash." All other deposits, debt securities and investments regardless
of maturities are classified as time deposits or investment securities.
Off-balance-sheet financial instruments
In the ordinary course of business, the Bancorp 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 Bancorp's loan servicing rights was obtained after December
15, 1995. Consequently, the cost of loan servicing rights has not been
capitalized.
Advertising
The Bancorp expenses advertising costs as they are incurred.
Advertising expense is reflected in the accompanying statements of
income and comprehensive income.
<PAGE>
B: LOANS RECEIVABLE
Loans receivable as of December 31, 1999 and 1998 consisted of the
following:
1999 1998
---- ----
First mortgage loans
Single-family residential............ $ 12,386,972 $ 12,488,381
Construction......................... 776,000 692,000
Commercial real estate............... 1,308,717 896,156
Land................................. 401,455 237,977
----------- -----------
14,873,144 14,314,514
Less: undisbursed loans in process... 516,655 650,000
deferred loan fees............. 9,673 9,102
allowance for losses........... 337,905 358,524
----------- -----------
Net first mortgage loans.............. 14,008,911 13,296,888
----------- -----------
Home equity and improvement loans..... 956,482 1,004,651
Share loans........................... 555,140 617,093
Other consumer and single-pay loans... 2,935,063 2,572,722
Less: unearned discount.............. 243,842 229,278
----------- -----------
Net other consumer loans.............. 2,691,221 2,343,444
----------- -----------
Total consumer loans.................. 4,202,843 3,965,188
Less: allowance for losses........... 68,424 53,097
----------- -----------
Net consumer loans.................... 4,134,419 3,912,091
----------- -----------
Net loans receivable.................. $ 18,143,330 $ 17,208,979
=========== ===========
At December 31, 1999 and 1998, 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 $118,647 and $241,731, respectively. None of the allowance
for loan losses related to impaired loans at December 31, 1999 and
1998. Interest income on impaired loans of $15,157 and $51,475 was
recognized for cash payments received in 1999 and 1998, respectively.
The average recorded investment in impaired loans for those periods was
$180,189 and $255,275, respectively.
The Association is not committed to lend additional funds to debtors
whose loans have been classified as nonperforming.
At December 31, 1999 and 1998, the directors and officers (related
parties) owed the Association $521,316 and $474,853, respectively.
<PAGE>
B: LOANS RECEIVABLE (Continued)
During the years ended December 31, 1999 and 1998, new loans to such
related parties amounted to $122,610 and $47,465, respectively.
Principal repayments by such related parties amounted to $76,147 and
$80,317 for the years ended December 31, 1999 and 1998, 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 transactions with others.
These loans do not involve more than a normal risk of collectibility or
carry other terms unfavorable to the Association.
C: ALLOWANCE FOR LOSSES
A summary of the changes in the allowance for loan losses for the years
ended December 31, 1999 and 1998, is as follows:
1999 1998
---- ----
Balance - beginning of year........... $ 411,621 $ 403,768
Provision for loan losses............. 8,604 20,926
Charge-offs........................... (15,792) (13,148)
Recoveries............................ 1,896 75
----------- -----------
$ 406,329 $ 411,621
=========== ===========
There were no other real estate holdings or related allowance for real
estate losses at December 31, 1999 and 1998.
D: PREMISES AND EQUIPMENT
Premises and equipment as of December 31, 1999 and 1998 are summarized
by major classifications as follows:
1999 1998
---- ----
Land.................................. $ 22,416 $ 22,416
Office building....................... 266,688 261,578
Furniture, fixtures and equipment..... 160,234 160,327
----------- -----------
449,338 444,321
Less: accumulated depreciation....... 295,090 290,142
----------- -----------
$ 154,248 $ 154,179
=========== ===========
Depreciation expense for the year.... $ 27,013 $ 22,394
=========== ===========
<PAGE>
E: INVESTMENT SECURITIES
The amortized cost and estimated market value of investments in
securities are as follows as of December 31, 1999 and 1998:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
Securities Available-for-Sale:
December 31, 1999
------------------------------
Mortgage-backed securities
<S> <C> <C> <C> <C>
FNMA......................... $ 2,155,644 $ 5,873 $ 14,485 $ 2,147,032
GNMA......................... 1,146,440 5,689 2,459 1,149,670
FHLMC........................ 437,565 - 1,702 435,863
---------- --------- ---------- ----------
$ 3,739,649 $ 11,562 $ 18,646 $ 3,732,565
========== ========= ========== ==========
December 31, 1998
------------------------------
Mortgage-backed securities
FNMA......................... $ 1,347,574 $ 3,182 $ 3,406 $ 1,347,350
GNMA......................... 106,483 - 220 106,263
---------- --------- ---------- ----------
$ 1,454,057 $ 3,182 $ 3,626 $ 1,453,613
========== ========= ========== ==========
Securities Held-to-Maturity:
December 31, 1999
------------------------------
Mortgage-backed securities
FNMA......................... $ 1,460,934 $ - $ 37,679 $ 1,423,255
GNMA......................... 91,779 - 267 91,512
FHLMC........................ 818,987 1,495 26,854 793,628
---------- --------- ---------- ----------
$ 2,371,700 $ 1,495 $ 64,800 $ 2,308,395
========== ========= ========== ==========
December 31, 1998
------------------------------
Mortgage-backed securities
FNMA......................... $ 1,402,165 $ 4,510 $ 12,374 $ 1,394,301
GNMA......................... 119,337 1,152 - 120,489
FHLMC........................ 601,005 3,848 2,819 602,034
---------- --------- ---------- ----------
$ 2,122,507 $ 9,510 $ 15,193 $ 2,116,824
========== ========= ========== ==========
</TABLE>
<PAGE>
E: INVESTMENT SECURITIES (Continued)
The following is a summary of maturities of securities held-to-maturity
and available-for-sale as of December 31, 1999 and 1998:
Weighted
Average Amortized Fair
Yield Cost Value
December 31, 1999
---------------------------
Available-for-Sale
------------------
Due in one year or less.... 5.60% $ 6,835 $ 6,835
Due from one to five years. - - -
Due from five to ten years. - - -
Due after ten years........ 6.20% 3,732,814 3,725,730
----------- ----------
6.20% $ 3,739,649 $ 3,732,565
=========== ==========
Held-to-Maturity
----------------
Due in one year or less.... 5.60% $ 159,721 $ 158,326
Due from one to five years. 5.60% 153,163 149,232
Due from five to ten years. 6.20% 1,117,619 1,081,010
Due after ten years........ 6.10% 941,197 919,827
----------- ----------
6.00% $ 2,371,700 $ 2,308,395
=========== ==========
December 31, 1998
---------------------------
Available-for-Sale
------------------
Due in one year or less.... 6.62% $ 115,237 $ 116,082
Due from one to five years. - - -
Due from five to ten years. - - -
Due after ten years........ 6.21% 1,338,820 1,337,531
----------- ----------
6.25% $ 1,454,057 $ 1,453,613
=========== ==========
Held-to-Maturity
----------------
Due in one year or less.... 7.80% $ 37,474 $ 37,804
Due from one to five years. 4.71% 456,042 453,864
Due from five to ten years. 5.71% 449,367 450,013
Due after ten years........ 6.08% 1,179,624 1,175,143
----------- ----------
5.74% $ 2,122,507 $ 2,116,824
=========== ==========
<PAGE>
E: INVESTMENT SECURITIES (Continued)
The amortized cost and fair value of mortgage-backed securities are
presented by contractual maturity in the preceding table. Expected
maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations without call or
prepayment penalties.
Mortgage-backed securities with a carrying amount of $3,920,680 and
$484,080 were pledged to secure deposits as required or permitted by
law at December 31, 1999 and 1998, respectively. See Note G also.
F: DEPOSITS
<TABLE>
<CAPTION>
An analysis of customers deposit accounts by interest rates as of
December 31, 1999 and 1998 follows:
<S> <C> <C> <C> <C>
----------1999-------- ----------1998--------
Balances by interest rate Amount Percent Amount Percent
------------------------- ------ ------- ------ -------
Passbook and full-paid
accounts 2.5% to 3.0%......... $ 3,301,972 14.43% $ 3,322,644 16.70%
----------- ------ ----------- ------
Certificates and money-
market accounts
3.2 to 4.1%.................. 2,519,029 11.01% - -
4.2 to 5.7%.................. 10,711,551 46.81% 12,173,341 61.18%
5.8 to 6.7%.................. 1,735,624 7.58% 1,942,451 9.76%
6.8 to 7.7%.................. - - 110,000 0.55%
----------- ------ ----------- ------
14,966,204 65.40% 14,225,792 71.49%
----------- ------ ----------- ------
NOW accounts
non-interest bearing.......... 550,048 2.40% 356,666 1.79%
2.3 to 3.0%................... 4,032,436 17.62% 1,955,646 9.83%
----------- ------ ----------- ------
4,582,484 20.02% 2,312,312 11.62%
----------- ------ ----------- ------
22,850,660 99.85% 19,860,748 99.81%
Accrued interest payable....... 33,733 0.15% 37,936 0.19%
----------- ------ ----------- ------
$ 22,884,393 100.00% $ 19,898,684 100.00%
=========== ====== =========== ======
</TABLE>
The aggregate amount of jumbo certificates of deposit with a minimum
denomination of $100,000 was $3,309,692 and $2,417,099 at December 31,
1999 and 1998, respectively. Deposit amounts in excess of $100,000 are
not federally insured.
<PAGE>
F: DEPOSITS (Continued)
Maturities of certificates of deposit accounts are as follows at
December 31, 1999:
One year or less................. $ 10,958,590
Over one to two years............ 2,187,520
Over two to three years.......... 625,497
Over three years................. 1,194,597
---------
$ 14,966,204
===========
Interest paid on deposits during 1999 and 1998 was $907,938 and
$893,695, respectively.
Officers' and directors' savings accounts amounted to $134,022 and
$126,138 at December 31, 1999 and 1998, respectively.
G: ADVANCES FROM FHLB AND OTHER BORROWED MONEY
Advances from the Federal Home Loan Bank (FHLB) consisted of the
following:
Maturity Contract
Date Rate 1999 1998
-------- -------- ----------- ----------
01-20-2000 5.85% $ 700,000 $ -
01-20-2000 6.00% 400,000 -
01-25-2000 5.74% 705,000 -
07-28-2000 4.58% 198,000 198,000
10-01-2001 4.60% 99,000 99,000
10-22-2001 4.51% 99,000 99,000
09-03-2003 4.77% 99,000 99,000
----------- ----------
$ 2,300,000 $ 495,000
=========== ==========
Pursuant to collateral agreements with the FHLB, advances are secured
by a blanket floating lien on first mortgage loans.
Interest paid on advances from the Federal Home Loan Bank for 1999 and
1998 was $42,279 and $14,799, respectively.
<PAGE>
H: LOAN SERVICING
Mortgage loans serviced for others are not included in the
accom-panying statements of financial condition. The unpaid principal
balances of these loans at December 31, 1999 and 1998 are summarized as
follows:
1999 1998
----------- -----------
Mortgage loans underlying FHLMC
mortgage-backed securities........... $ 306,389 $ 569,347
=========== ===========
Revenue from loan servicing was $1,687 and $2,877 for the years ended
December 31, 1999 and 1998, respectively.
Custodial escrow balances maintained in connection with the foregoing
loan servicing were $1,742 and $2,562 at December 31, 1999 and 1998,
respectively.
I: ACCRUED INTEREST RECEIVABLE
Accrued interest receivable at December 31, 1999 and 1998 is summarized
as follows:
1999 1998
----------- -----------
Time deposits and other
investment securities................ $ 11,222 $ 3,970
Mortgage-backed securities............ 34,633 20,694
Loans receivable...................... 62,726 49,578
----------- -----------
$ 108,581 $ 74,242
=========== ===========
J: FEDERAL INCOME TAXES
Income tax expense for the years ended December 31, 1999 and 1998 is
summarized as follows:
1999 1998
----------- -----------
Current............................... $ 74,163 $ 138,010
Deferred.............................. 19,279 (36,354)
----------- -----------
$ 93,442 $ 101,656
=========== ===========
<PAGE>
J: FEDERAL INCOME TAXES (Continued)
Deferred income tax assets and liabilities are reflected in the
accompanying balance sheets as follows:
1999 1998
----------- -----------
Deferred tax liabilities.............. $ (67,951) $ (44,711)
Deferred tax assets................... 133,464 123,446
Deferred tax asset valuation allowance (60,890) (57,091)
----------- -----------
Net deferred tax asset (included in
other assets)........................ $ 4,623 $ 21,644
=========== ===========
Provision for federal income taxes differs from that computed at the
statutory 34% corporate tax rate, as follows:
<TABLE>
<CAPTION>
----------1999-------- ----------1998--------
Effective Effective
Amount Rate Amount Rate
------ ---- ------ ----
<S> <C> <C> <C> <C>
Tax at statutory rate.......... $ 94,463 34% $ 101,997 34%
Increase (decrease) in taxes:
Permanent differences and
other........................ (1,021) - (341) -
----------- --- ----------- ---
$ 93,442 34% $ 101,656 34%
=========== === =========== ===
</TABLE>
The Bancorp paid income taxes of $177,991 and $146,279 during the years
ended December 31, 1999 and 1998, respectively.
In prior years, the Association was allowed a special bad debt
deduction 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
December 31, 1999 and 1998 include $110,577 for which federal income
tax has not been provided. The unrecorded deferred liability on these
amounts was 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 that exceeds allowable reserves under the
experience method.
K: COMMITMENTS
The Bancorp 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
<PAGE>
K: COMMITMENTS (Continued)
varying degrees, elements of credit risk in excess of the amount
recognized in the balance sheet. The contract or notional amounts of
those instruments reflect the extent of the involvement the Bancorp 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 Bancorp
evaluates each customer's credit worthiness on a case-by-case basis.
The Bancorp'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 December 31, 1999 and 1998, the Bancorp was committed to grant
adjustable-rate mortgage loans with contract notional amounts of
$117,399 and $313,500, respectively. Additionally, the Bancorp held a
$50,000 open letter of credit at December 31, 1999, and had issued
lines of credit with contract notional amounts of the unused portion
totalling $94,138 and $98,570 as of December 31, 1999 and 1998,
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 $21,985 and $28,532 for 1999 and 1998, respectively.
M: EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
During 1998, the Bancorp established an employee stock ownership plan.
The IBL Bancorp, Inc. Employee Stock Ownership Plan enables eligible
employees of the Bancorp and the Association to share in the growth of
the Bancorp through the acquisition of stock. Employees are generally
eligible to participate in the ESOP after completion of one year of
service and attaining age 21.
The ESOP acquired 16,869 shares of Bancorp stock at $10 a share in the
Bancorp's initial public offering. The acquisition was funded by a loan
from the Bancorp which bears interest at 8.5% and is being repaid
principally from employer contributions to the ESOP over a period of
ten years. The loan agreement requires quarterly interest and principal
payments of $6,303. The loan is secured by the pledge of the common
stock purchased. Contributions to the ESOP must be sufficient for debt
service, but the company may, in any plan year, make additional
discretionary contributions for the benefit of plan participants in the
form of cash or shares of common stock.
<PAGE>
M: EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) (Continued)
In the event of plan or participant termination, or upon the
participant's death, disability or retirement, the Bancorp may be
required to purchase, subject to certain limitations, the shares from
the participants at the then fair market value.
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. As the Bancorp and the Association
make contributions to the ESOP sufficient to meet the principal and
interest requirements on the loan, shares are released from collateral.
The Bancorp accounts for its ESOP in accordance with Statement of
Position 93-6. Accordingly, the debt of the ESOP is not recorded as a
note receivable by the Bancorp, but the shares pledged as collateral
are reported as unearned ESOP shares on the statement of financial
condition. As shares are released from collateral, the Bancorp reports
compensation expense equal to the fair market value of the shares. ESOP
compensation expense was $18,315 and $2,719 for the years ended
December 31, 1999 and 1998, respectively. Any excess or deficit of fair
value over the cost of the ESOP shares released is recorded in the
equity section of the statement of financial condition as additional
paid-in-capital. The cost of all unallocated shares held by the ESOP is
reflected on the statement of financial condition as a contra equity
account.
The ESOP shares as of December 31, 1999 were as follows:
Allocated shares................. 2,109
Shares committed to be released.. -
Unreleased shares................ 14,760
-----------
Total ESOP shares................ 16,869
===========
Fair value of unreleased shares.. $ 158,670
===========
N: RECOGNITION AND RETENTION PLAN
On December 10, 1999, the Bancorp established a Recognition and
Retention Plan (RRP) as an incentive to retain personnel of experience
and ability in key positions. The shareholders approved a total of
8,434 shares of stock to be acquired for the Plan, of which 7,169
shares have been allocated for distribution to key employees and
directors. As shares are acquired for the plan, the purchase price of
these shares is recorded as unearned compensation, a contra equity
account. As the shares are distributed, the contra equity account is
reduced.
<PAGE>
N: RECOGNITION AND RETENTION PLAN (Continued)
The allocated shares are earned by participants as plan share awards
ratably over a specified period. If an employee or non-employee
director plan participant is terminated prior to the end of the vesting
period for any reason other than death, disability, retirement or a
change in control, the recipient shall forfeit the right to any shares
subject to the award which have not been earned. The compensation cost
associated with the plan is based on the market price of the stock as
of the date on which the plan shares are earned. Compensation expense
pertaining to the Recognition and Retention Plan was $25,682 for the
year ended December 31, 1999.
A summary of the changes in restricted stock follows:
Unawarded Awarded
Shares Shares
Balance, January 1, 1999.............. - -
Purchased by Plan..................... 6,500 -
Granted............................... (7,169) 7,169
Earned and issued..................... - (2,390)
----------- -----------
Balance, December 31, 1999............ (669) 4,779
=========== ===========
O: STOCK OPTION PLAN
On November 19, 1999, the Bancorp adopted a stock option plan for the
benefit of directors, officers, and other key employees. An amount
equal to 10% of the total number of common shares issued in the initial
public offering or 21,087 shares are reserved for issuance under the
stock option plan. The option exercise price cannot be less than the
fair value of the underlying common stock as of the date of the option
grant and the maximum option term cannot exceed ten years.
The Stock Option Plan also permits the granting of Stock Appreciation
Rights (SARs). SARs entitle the holder to receive, in the form of cash
or stock, the increase in fair value of Bancorp stock from the date of
the grant to the date of exercise. No SARs have been issued under the
plan.
<PAGE>
O: STOCK OPTION PLAN (Continued)
The following table summarizes the activity related to stock options:
Exercise Available Options
Price for Grant Outstanding
----- --------- -----------
At inception............. 21,087 -
Granted.................. $ 10.50 (17,925) 17,925
Cancelled................ - -
Exercised................ - -
----------- -----------
At December 31, 1999..... 3,162 17,925
=========== ===========
P: NONCASH INVESTING AND FINANCING ACTIVITIES
There were no noncash investing and financing activities for the years
ended December 31, 1999 and 1998.
Q: 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 initiate certain mandatory, and possible additional
discretionary actions by regulators that, if undertaken, could have a
direct material affect on the Association and its financial statements.
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 judgements by the regulators
about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Association to maintain minimum amounts and ratios
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 December 31, 1999
and 1998, the Association meets the capital adequacy requirements to
which it is subject.
As of December 31, 1999 and 1998, based upon the most recent regulatory
filings with OTS, the Association was categorized as well capitalized
under the regulatory framework for prompt corrective
<PAGE>
Q: REGULATORY MATTERS (Continued)
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 following table.
The actual and required capital amounts and ratios applicable to the
Association are presented in the table below (dollars in thousands).
<TABLE>
<CAPTION>
Minimum Required
To Be Well
Minimum Required Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purpose Action Provisions
Amount Ratio Amount Ratio Amount Ratio
As of December 31, 1999:
Total risk-based capital (To
<S> <C> <C> <C> <C> <C> <C>
risk-weighted assets).......... $ 3,039 22.23% $ 1,093 8.0% $ 1,367 10.0%
Tier I capital (To
risk-weighted assets).......... 2,867 20.98% 547 4.0% 820 6.0%
Tier I capital (To
adjusted total assets)......... 2,867 10.18% 1,127 4.0% 1,408 5.0%
As of December 31, 1998:
Total risk-based capital (To
risk-weighted assets).......... $ 2,841 22.77% $ 998 8.0% $ 1,248 10.0%
Tier I capital (To
risk-weighted assets).......... 2,683 21.51% 499 4.0% 749 6.0%
Tier I capital (To
adjusted total assets)......... 2,683 11.24% 955 4.0% 1,194 5.0%
</TABLE>
R: RELATED PARTY TRANSACTIONS
A Bancorp director is a partner in a local law firm that provides legal
services to the Bancorp. Fees paid to the law firm amounted to $4,800
for each of the years ended December 31, 1999 and 1998.
S: 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 indirectly, 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 Bancorp 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
<PAGE>
S: ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
not be interpreted as representing an aggregate measure of the
underlying value of the Bancorp.
The Bancorp 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.
The estimated fair value of the Bancorp's financial instruments
(dollars in thousands) was as follows:
<TABLE>
<CAPTION>
----------1999-------- ----------1998--------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
FINANCIAL ASSETS:
Cash and amounts due from
<S> <C> <C> <C> <C>
depository institutions....... $ 771 $ 771 $ 177 $ 177
Interest-bearing deposits
with other institutions....... 2,121 2,121 1,681 1,681
Time deposits.................. 1,101 1,101 795 795
Investment securities.......... 6,104 6,041 3,576 3,570
Loans receivable, net.......... 18,143 17,921 17,209 17,707
Accrued interest receivable.... 109 109 74 74
FHLB stock..................... 180 180 171 171
FINANCIAL LIABILITIES:
Deposits....................... $ 22,884 $ 22,929 $ 19,899 $ 19,939
Advances from FHLB............. 2,300 2,284 495 495
Advances by borrowers for
taxes and insurance........... 13 13 13 13
Other liabilities.............. 75 75 89 89
</TABLE>
The Bancorp in estimating the fair value of financial instruments used
the following significant methods and assumptions.
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.
Time deposits
Time deposits bear interest rates that in the aggregate are presently
considered fair in current market conditions. Therefore, the carrying
amounts reported in the statement of financial condition for these
financial instruments approximate fair value.
Investment securities
Fair value estimates for investment securities are based on quoted
market prices, where available. If quoted market prices are not
<PAGE>
S: ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
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 Federal Home Loan Bank's board sets the value of Federal Home Loan
Bank stock at $100 per share.
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 34%
and 28% of total deposits at December 31, 1999 and 1998, 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 certificates of similar remaining maturities to a
schedule of aggregate expected cash flows on time deposits.
The carrying amount of accrued interest payable on deposits
approximates its fair value.
Advances from Federal Home Loan Bank
Advances from Federal Home Loan Bank bear interest rates that in the
aggregate are presently considered fair in current market conditions.
Therefore, the carrying amounts reported in the statement of financial
condition for these financial instruments approximate fair value.
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 December 31, 1999 and 1998. The
contract or notional amounts of the
<PAGE>
S: ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Association's financial instruments with off-balance-sheet risk are
disclosed in Note K.
T: CONVERSION FROM A MUTUAL TO A STOCK ASSOCIATION
On September 30, 1998, The Iberville Building and Loan Association
converted from a Louisiana-chartered mutual savings and loan
association to a Louisiana-chartered stock savings and loan association
known as "The Iberville Building and Loan Association" (the
Association). The Association issued and sold 1,000 shares of stock to
IBL Bancorp, Inc. for $871,182 and became a wholly-owned subsidiary of
the Bancorp.
In conjunction with the conversion, the Bancorp issued and sold 210,870
shares of its common stock at $10 per share. Net proceeds from the
initial public offering amounted to $1,573,673 after costs associated
with the offering, registration and conversion in the amount of
$366,337.
In accordance with OTS Regulations, the Association established, upon
conversion, a "liquidation account" totalling $1,671,681, the amount of
its retained earnings at March 31, 1998, the latest date shown in the
prospectus issued in conjunction with the plan of conversion. 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.
U: CONCENTRATION OF CREDIT RISK
The Bancorp's loan portfolio consists of the various types of loans
described in Note B above. Real estate or other assets secure most
loans. The majority of these loans have been made to individuals and
businesses in Iberville, West Baton Rouge, and Pointe Coupee parishes
that are dependent on the area economy for their livelihood and
servicing of their loan obligations.
<PAGE>
U: CONCENTRATION OF CREDIT RISK (Continued)
The Bancorp maintains deposits in other financial institutions that may
from time to time exceed the federally insured deposit limits.
V: DIVIDEND DECLARED
On December 15, 1999, the board of directors of IBL Bancorp, Inc.
declared a $.0425 per share dividend to stockholders of record at
January 12, 2000, payable on January 28, 2000. The total dividend
payable of $8,962 is included in other liabilities.
W: EARNINGS PER SHARE
The following table provides a reconciliation between basic and diluted
earnings per share:
For the Year Ended 1999
-----------------------
Weighted
Average
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Net income............... $ 184,389
----------
Basic earnings per share
Income available to
common stockholders..... 184,389 194,875 $ 0.95
=========
Effect of dilutive
securities
RRP shares granted....... - 275
---------- ---------
Diluted earnings per
share
Income available to
common stockholders +
assumed conversions..... $ 184,389 195,150 $ 0.94
========== ========= ==========
Options to purchase 17,925 shares of common stock awarded on November
19, 1999 at $10.50 per share were not included in the computation of
the diluted earnings per share because the options' exercise was
greater than the average market price of the common shares. The
options, which expire on November 17, 2009, were still outstanding at
the end of year 1999.
The computation of basic earnings per share for 1998 included reported
net income in the numerator and the weighted average number of shares
outstanding of 194,002 in the denominator.
<PAGE>
X: NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 133 (SFAS 133),
Accounting of Derivative Instruments and Hedging Activities, is
effective for all fiscal quarters of all fiscal years beginning after
June 15, 1999. Statement of Financial Accounting Standards No. 137
(SFAS 137), Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133,
delayed the effective date to all fiscal quarters of all fiscal years
beginning after June 15, 2000. Early application of the provisions of
SFAS 133 was encouraged, but the retroactive application to financial
statements of prior periods was prohibited. SFAS 133 established
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 required that entities recognize all derivatives as
either assets or liabilities in the statement of financial position and
measure those instruments at fair value. The Bancorp 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 consolidated financial position or the
consolidated results of operations of the Bancorp. Presently,
management is not contemplating any transfers of securities
held-to-maturity to the available-for-sale or trading categories nor
any transfers of available-for-sale securities to the trading category.
Y: PARENT COMPANY FINANCIAL STATEMENTS
The financial statements for IBL Bancorp, Inc. (parent company),
prepared on an unconsolidated basis are
presented below:
<TABLE>
<CAPTION>
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
1999 1998
---- ----
ASSETS
<S> <C> <C>
Cash...................................................... $ 49,256 $ 708,099
Time deposits............................................. 407,000 -
Mortgage-backed securities held-to-maturity (estimated
market value $189,375)................................... 200,000 -
Accrued interest receivable............................... 6,609 -
Investment in The Iberville Building and Loan Association
at equity in underlying net assets....................... 2,862,071 2,682,921
----------- -----------
Total assets............................................ $ 3,524,936 $ 3,391,020
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Y: PARENT COMPANY FINANCIAL STATEMENTS (Continued)
1999 1998
---- ----
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
<S> <C> <C>
Due to subsidiary......................................... $ 11,459 $ -
Other liabilities......................................... 9,439 8,425
----------- -----------
20,898 8,425
----------- -----------
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par, 2,000,000 shares authorized.... - -
Common stock, $.01 par, 5,000,000 shares authorized,
210,870 shares issued and outstanding.................... 2,109 2,109
Additional paid-in capital................................ 1,740,201 1,740,254
Unearned ESOP shares...................................... (147,603) (165,971)
Unearned RRP shares....................................... (44,193) -
Retained earnings - substantially restricted............. 1,958,199 1,806,496
Accumulated other comprehensive income.................... (4,675) (293)
----------- -----------
Total shareholders' equity.............................. 3,504,038 3,382,595
----------- -----------
Total liabilities and shareholders' equity.............. $ 3,524,936 $ 3,391,020
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME AND RETAINED EARNINGS
YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
---- ----
INCOME
Interest income
<S> <C> <C>
Mortgage-backed securities............................... $ 11,692 $ -
Deposits................................................. 20,255 -
Other.................................................... 13,749 3,589
----------- -----------
45,696 3,589
----------- -----------
EXPENSES
Legal..................................................... 30,953 -
Other general and administrative.......................... 13,409 700
----------- -----------
44,362 700
----------- -----------
INCOME BEFORE EQUITY IN UNDISTRIBUTED EARNINGS OF THE
IBERVILLE BUILDING AND LOAN ASSOCIATION.................. 1,334 2,889
Equity in undistributed earnings of The Iberville
Building and Loan Association............................ 183,532 193,021
----------- -----------
INCOME BEFORE INCOME TAXES................................ 184,866 195,910
PROVISION FOR INCOME TAXES................................ 477 517
----------- -----------
NET INCOME................................................ 184,389 195,393
Retained earnings - beginning of year..................... 1,806,496 1,619,011
Less dividends declared................................... (32,686) (7,908)
----------- -----------
Retained earnings - end of year........................... $ 1,958,199 $ 1,806,496
=========== ===========
</TABLE>
<PAGE>
Y: PARENT COMPANY FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income................................................ $ 184,389 $ 195,393
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity in undistributed earnings of The Iberville
Building and Loan Association.......................... (183,532) (193,021)
ESOP compensation....................................... 18,315 2,719
Release of RRP shares................................... 25,682 -
Increase in accrued interest receivable................. (6,609) -
Increase in due to subsidiary........................... 11,459 -
Increase (decrease) in other liabilities................ (40) 517
----------- -----------
Net cash provided by operating activities................. 49,664 5,608
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of The Iberville Building and Loan Association - (871,182)
Purchase of security held to maturity..................... (200,000) -
Certificates of deposit acquired.......................... (407,000) -
----------- -----------
Net cash used in investing activities..................... (607,000) (871,182)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from sale of common stock.................... - 1,573,673
Acquisition of RRP shares................................. (69,875) -
Cash dividends............................................ (31,632) -
----------- -----------
Net cash provided by (used in) financing activities....... (101,507) 1,573,673
----------- -----------
NET INCREASE (DECREASE) IN CASH........................... (658,843) 708,099
Cash - beginning of year.................................. 708,099 -
----------- -----------
Cash - end of year........................................ $ 49,256 $ 708,099
=========== ===========
</TABLE>
<PAGE>
CORPORATE INFORMATION
Directors:
G. Lloyd Bouchereau, Jr.
President and Chief Executive Officer
John L. Delahaye
Attorney
Plaquemine, Louisiana
Gary K. Pruitt
Retired
Greater Baton Rouge Port Commission
Port Allen, Louisiana
Bobby E. Stanley
Self Employed Accountant
Port Allen, Louisiana
Edward J. Steinmetz
Regional Manufacturing Manager
Borden Chemical Inc.
Donaldsonville, Louisiana
Danny M. Strickland
Vice-President
Executive Officers:
G. Lloyd Bouchereau, Jr.
President and Chief Executive Officer
Danny M. Strickland
Vice-President
<PAGE>
Annual Stockholders Meeting:
April 26, 2000; 10:00 a.m.
23910 Railroad Avenue
Plaquemine, Louisiana
Record Date: March 6, 2000
Main Office:
23910 Railroad Avenue
Plaquemine, Louisiana
Independent Auditor:
L.A. Champagne & Co., L.L.P.
Baton Rouge, Louisiana
General Counsel:
Borron & Delahaye
Plaquemine, Louisiana
Securities and Regulatory Counsel:
Elias, Matz, Tiernan & Herrick L.L.P.
Washington, D. C.
Stock Registrar & Transfer Agent:
Registrar and Transfer Company
Cranford, New Jersey
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 770
<INT-BEARING-DEPOSITS> 3,222
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,732
<INVESTMENTS-CARRYING> 2,552
<INVESTMENTS-MARKET> 2,488
<LOANS> 18,550
<ALLOWANCE> 406
<TOTAL-ASSETS> 28,776
<DEPOSITS> 22,884
<SHORT-TERM> 2,300
<LIABILITIES-OTHER> 88
<LONG-TERM> 0
0
0
<COMMON> 2
<OTHER-SE> 3,502
<TOTAL-LIABILITIES-AND-EQUITY> 28,776
<INTEREST-LOAN> 1,441
<INTEREST-INVEST> 275
<INTEREST-OTHER> 170
<INTEREST-TOTAL> 1,886
<INTEREST-DEPOSIT> 904
<INTEREST-EXPENSE> 953
<INTEREST-INCOME-NET> 933
<LOAN-LOSSES> 9
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 744
<INCOME-PRETAX> 278
<INCOME-PRE-EXTRAORDINARY> 278
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 184
<EPS-BASIC> .95
<EPS-DILUTED> .94
<YIELD-ACTUAL> 3.54
<LOANS-NON> 119
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 82
<ALLOWANCE-OPEN> 405
<CHARGE-OFFS> 0
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 406
<ALLOWANCE-DOMESTIC> 122
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 284
</TABLE>
