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
<PAGE>
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.
2
<PAGE>
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.
3
<PAGE>
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>
