UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the
Quarter Ended June 30, 1997 Commission File Number: 0-12437
One American Corp.
(Exact name of registrant as specified in its charter)
Louisiana 72-0948181
(State or other jurisdiction of (IRS Employer Identification No.)
Incorporation of Organization)
2785 LA Hwy. 20 West
P. O. Box 550
Vacherie, Louisiana 70090-0550
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (504) 265-2265
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $5.00 Par Value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Common stock $5 Par Value, 1,351,615 shares outstanding as
of August 8, 1997.
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FORM 10-Q Index
Part I
Financial Information
Financial Statements
Consolidated Balance Sheets,
June 30, 1997, December 31, 1996 and June 30, 1996 3
Consolidated Statements of Income
for the three and six months ended June 30, 1997 and 1996 4
Consolidated Statements of Changes in Stockholders' Equity
for the six months ended June 30, 1997 and 1996 5
Consolidated Statements of Cash Flows
for the six months ended June 30, 1997 and 1996 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Average Balance Sheets and Interest Rate Analysis
for the three and six months ended June 30, 1997,
March 31, 1997 and June 30, 1996 19
Interest Differentials
for the three and six months ended June 30, 1997,
March 31, 1997 and June 30, 1996 20
Part II
Other Information
Legal Proceedings 21
Exhibits and Reports on Form 8-K 21
Management's Responsibility for Financial Reporting 23
Signatures 24
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Consolidated Balance Sheets
One American Corp. and Subsidiaries Unaudited Unaudited Unaudited
June 30, December 31, June 30,
In thousands 1997 1996 1996
<S> <C> <C> <C>
Assets
Cash and Due From Banks $12,390 $11,176 $10,716
Interest Bearing Deposits in Other Banks 3,988 2,770 2,092
Federal Funds Sold and Securities
Purchased Under Resale Agreements 8,900 13,325 4,900
Securities:
Available for Sale (Amortized Cost of $111,940, $111,797
and $129,747, respectively) 112,199 111,894 128,884
Total Securities 112,199 111,894 128,884
Loans 142,625 135,859 121,029
Less: Allowance for Loan Losses (2,752) (3,083) (3,265)
Loans, Net 139,873 132,776 117,764
Bank Premises and Equipment 9,635 9,645 8,775
Other Real Estate 23 68 0
Accrued Interest Receivable 1,917 2,031 2,148
Other Assets 2,200 2,426 2,146
Total Assets $291,125 $286,111 $277,425
Liabilities
Deposits
Noninterest Bearing $49,844 $45,907 $45,160
Interest Bearing 204,235 204,797 198,795
Total Deposits 254,079 250,704 243,955
Accrued Interest Payable 634 693 580
Other Liabilities 1,418 1,179 1,458
Total Liabilities 256,131 252,576 245,993
Stockholders' Equity
Common Stock-$5.00 par value;
Authorized-10,000,000 shares;
Issued-1,500,000 shares 7,500 7,500 7,500
Surplus 5,000 5,000 5,000
Retained Earnings 22,948 21,596 20,127
Unrealized Gain (Loss) on Securities Available for Sale, Net 171 64 (570)
Treasury Stock - 148,385 shares at cost ($625) ($625) ($625)
Total Stockholders' Equity 34,994 33,535 31,432
Total Liabilities and Stockholders' Equity $291,125 $286,111 $277,425
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
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Consolidated Statements of Income
One American Corp. and Subsidiaries Three Months Ended Six Months Ended
for the three and six months ended June 30, 1997 and 1996 Unaudited Unaudited Unaudited Unaudited
In thousands, except per share data 1997 1996 1997 1996
<S> <C> <C> <C> <C>
Interest Income
Interest and Fees on Loans $3,294 $2,833 $6,453 $5,493
Interest on Securities:
Taxable Interest 1,508 1,847 2,988 3,644
Nontaxable Interest 135 134 269 290
Total Interest on Securities 1,643 1,981 3,257 3,934
Other Interest Income 187 102 421 307
Total Interest Income 5,124 4,916 10,131 9,734
Interest Expense on Deposits 1,882 1,791 3,737 3,571
Net Interest Income 3,242 3,125 6,394 6,163
Provision for Loan Losses 150 60 225 90
Net Interest Income After
Provision for Loan Losses 3,092 3,065 6,169 6,073
Other Income
Service Charges on Deposit Accounts 522 510 1,043 1,002
Gain or (Loss) on Securities 166 139 190 285
Gain on Purchased Assets 170 387 281 584
Other Operating Income 205 175 395 354
Total Other Income 1,063 1,211 1,909 2,225
Income Before Other Expenses 4,155 4,276 8,078 8,298
Other Expenses
Salaries and Employee Benefits 1,176 1,038 2,276 2,061
Net Occupancy Expense 312 270 605 542
Net ORE Expense (18) (10) (27) (12)
Other Operating Expenses 917 768 1,927 1,520
Total Other Expenses 2,387 2,066 4,781 4,111
Income Before Income Taxes 1,768 2,210 3,297 4,187
Applicable Income Taxes 577 693 1,134 1,351
Net Income $1,191 $1,517 $2,163 $2,836
Net Income Per Share $0.88 $1.12 $1.60 $2.10
Cash Dividends Per Share $0.30 $0.25 $0.60 $0.50
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Consolidated Statements of Changes in Stockholders' Equity
One American Corp. and Subsidiaries
for the six months ended June 30, 1997 and 1996 Unaudited Unaudited
In thousands 1997 1996
<S> <C> <C>
Common Stock
Balance - Beginning and End of Period $7,500 $7,500
Surplus
Balance - Beginning and End of Period $5,000 $5,000
Retained Earnings
Balance - Beginning of Period $21,596 $17,966
Net Income 2,163 2,836
Cash Dividends (811) (675)
Balance - End of Period $22,948 $20,127
Unrealized Gain (Loss) on Securities Available for Sale, Net
Balance - Beginning of Period $64 $371
Net Change in Unrealized Gain (Loss) 107 (941)
Balance - End of Period $171 ($570)
Treasury Stock
Balance - Beginning and End of Period ($625) ($625)
The accompanying notes are an integral part of these financial statements.
</TABLE>
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Consolidated Statements of Cash Flows
One American Corp. and Subsidiaries
for the six months ended June 30, 1997 and 1996 Unaudited Unaudited
In thousands 1997 1996
<S> <C> <C>
Cash Flows From Operating Activities
Net Income $2,163 $2,836
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Gain on Purchased Assets (280) (584)
Provision for Depreciation 371 341
Provision for Loan Losses 225 90
Net Amortization (Accretion) on Securities (59) (51)
Provision (Credit) for Deferred Income Taxes (141) (38)
(Gain) Loss on Sale of Other Real Estate (33) (8)
(Gain) Loss on Sale of Equipment 0 0
(Gain) Loss on Securities (189) (284)
Changes in Assets and Liabilities:
(Increase) Decrease in Accrued Interest Receivable 114 (36)
(Increase) Decrease in Other Assets 308 (87)
Increase (Decrease) in Accrued Interest Payable (59) (23)
Increase (Decrease) in Other Liabilities 282 (434)
Net Cash Provided by Operating Activities 2,702 1,722
Cash Flows From Investing Activities
Maturities or Calls of Securities Available for Sale 28,606 39,343
Purchases of Securities Available for Sale (28,687) (37,000)
Proceeds from Sale of Securities Available for Sale 189 276
Net (Increase) Decrease in Federal Funds Sold 4,425 2,475
Net (Increase) Decrease in Loans (7,068) (12,953)
Proceeds from Sale of Other Real Estate 104 11
Proceeds from Sale of Premises, Equipment, and Other Assets 0 0
Purchases of Premises and Equipment (361) (655)
Net Cash Used in Investing Activities (2,792) (8,503)
Cash Flows From Financing Activities
Net Increase (Decrease) in Demand Deposits, NOW and Savings Accounts (1,159) (1,709)
Net Increase (Decrease) in Certificates of Deposits 4,534 5,940
(Repayment) Proceeds of Other Borrowings (42) 802
Dividends Paid (811) (676)
Net Cash Provided (Used) By Financing Activities 2,522 4,357
Decrease in Cash and Cash Equivalents 2,432 (2,424)
Cash and Cash Equivalents - Beginning of Year 13,946 15,232
Cash and Cash Equivalents - End of Period $16,378 $12,808
Supplemental Disclosure of Cash Flow Information
Income Tax Payments $921 $1,295
Interest Paid on Deposits $3,796 $3,594
Noncash Investing Activities
Other Real Estate Acquired in Settlement of Loans $26 $3
Change in Unrealized Gain (Loss) on Securities Available for Sale $162 ($1,426)
Change in Deferred Tax Effect on
Unrealized Gain (Loss) on Securities Available for Sale $55 ($485)
Noncash Financing Activities
Dividends Declared and Not Paid $406 $338
The accompanying notes are an integral part of these financial statements.
</TABLE>
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One American Corp. and Subsidiaries
Notes to Consolidated Financial Statements
(UNAUDITED)
Summary of Significant Accounting Policies
The accounting principles followed by One American Corp.
(the Company) and its wholly-owned Subsidiaries, First American
Bank and Trust (the Bank), and One American Agency, Inc. are
those which are generally practiced within the banking industry.
The methods of applying those principles conform with generally
accepted accounting principles and have been applied on a
consistent basis. The principles which significantly affect the
determination of financial position, results of operations,
changes in stockholders' equity, and cash flows are summarized
below.
Presentation - The accompanying unaudited consolidated
interim financial statements do not include all of the
information and footnotes required by generally accepting
accounting principles. Management is of the opinion that the
following unaudited interim financial statements reflect all
normal, recurring accrual adjustments necessary to provide a fair
statement of the results for the interim periods presented. It
is noted that the results of the first six months ended June 30,
1997 are no indication of the expected results for the annual
period which ends December 31, 1997. Additional information
concerning the audited financial statements and notes can be
obtained from One American Corp.'s annual report and Form 10-K
filed for the period ended December 31, 1996.
Principles of Consolidation - The consolidated financial
statements include the accounts of One American Corp. and its
wholly-owned subsidiaries, First American Bank and Trust, and One
American Agency, Inc. All significant intercompany balances and
transactions have been eliminated. Certain reclassifications to
previously published financial statements have been made to
comply with current reporting requirements.
One American Corp., a Louisiana corporation, was
incorporated on May 14, 1982. At a special meeting on December
14, 1982, the stockholders of First American Bank and Trust
(Bank) approved a Joint Agreement of Merger and Plan of
Reorganization by and among the Bank, First American Interim Bank
(FAIB) and One American Corp. On January 21, 1983, the Bank was
merged into FAIB and the surviving Bank, First American Bank and
Trust became a wholly-owned subsidiary of One American Corp.,
through a one-for-one exchange for all of the outstanding common
stock of First American Bank and Trust. The organization has
been accounted for as a pooling-of-interest.
On July 14, 1983, One American Agency, Inc. was incorporated
under the laws of the State of Louisiana. The primary business
of the Agency is the sale of insurance. The Agency is a wholly-
owned subsidiary of One American Corp.
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 reported amounts of revenues and expenses during
the period. Actual results could differ from those estimates.
Securities - Securities are being accounted for in
accordance with Statement of Financial Accounting Standards
(SFAS) No. 115, "Accounting for Investments in Debt and Equity
Securities," which requires the classification of securities as
held to maturity, trading, or available for sale.
Securities classified as held to maturity are those debt
securities the Bank has both the intent and ability to hold to
maturity regardless of changes in market conditions, liquidity
needs or changes in general economic conditions. Securities
classified as trading are those securities held for resale in
anticipation of short term market movements. The Bank has no
securities classified as held to maturity or trading.
Securities classified as available for sale are those debt
securities that the Bank intends to hold for an indefinite period
of time but not necessarily to maturity. Any decision to sell a
security classified as available for sale would be based on
various factors, including significant movements in interest
rates, changes in the maturity mix of the Bank's assets and
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liabilities, liquidity needs, regulatory capital considerations,
and other similar factors. Securities available for sale are
carried at fair value. Unrealized gains or losses are reported
as increases or decreases in stockholders' equity, net of the
related deferred tax effect. Realized gains or losses,
determined on the basis of the cost of specific securities sold,
are included in earnings.
Loans - Loans are stated at principal amounts outstanding,
less unearned income and allowance for loan losses. Interest on
commercial loans is accrued daily based on the principal
outstanding. Interest on installment loans is recognized and
included in interest income using the sum-of-the-digits method,
which does not differ materially from the interest method.
Impaired loans are being accounted for in accordance with
statement of Financial Accounting Standard (SFAS) No. 114,
"Accounting for Creditors for Impairment of a Loan," as amended
by Statement No. 118, "Accounting by Creditors for Impairment of
a Loan - Income Recognition and Disclosure." The statement
generally require impaired loans to be measured on the present
value of expected future cash flows discounted at the loan's
effective interest rate, or as an expedient, at the loan's
observable market price or the fair value of the collateral if
the loan is collateral dependent.
A loan is impaired when it is probable the creditor will be
unable to collect all contractual principal and interest payments
due in accordance with the terms of the loan agreement. Interest
on impaired loans is discontinued when, in management's opinion ,
the borrower may be unable to meet payments as they become due.
Generally, the Bank discontinues the accrual of interest income
when a loan becomes 90 days past due as to principal or interest.
When a loan is placed on non-accrual status, previously
recognized but uncollected interest is reversed to income or
charged to the allowance for loan losses. Interest income is
subsequently recognized only to the extent cash payments are
received.
Allowance for Loan Losses - The allowance for loan losses is
an amount which in management's judgment is adequate to absorb
potential losses in the loan portfolio. The allowance for loan
losses is based upon management's review and evaluation of the
loan portfolio. Factors considered in the establishment of the
allowance for loan losses include management's evaluation of
specific loans, the level and composition of classified loans,
historical loss experience, results of examinations by regulatory
agencies, an internal asset review process, expectations of
future economic conditions and their impact on particular
borrowers, and other judgmental factors.
The allowance for loan losses is based on estimates of
potential future losses, and ultimate losses may vary from the
current estimates. These estimates are reviewed periodically and
as adjustments become necessary, the effect of the change in
estimate is charged to operating expenses in the period incurred.
All losses are charged to the allowance for loan losses when the
loss actually occurs or when management believes that the
collectibility of the principal is unlikely. Recoveries are
credited to the allowance at the time of recovery.
Bank Premises and Equipment - Bank premises and equipment
are stated at cost less accumulated depreciation. Depreciation
is provided at rates based upon estimated useful service lives
(ten to thirty years for buildings, three to ten years for
equipment) using the straight-line method for financial reporting
purposes and accelerated methods for income tax purposes.
The cost of assets retired or otherwise disposed of and the
related accumulated depreciation are eliminated from the accounts
in the year of disposal and the resulting gains or losses are
included in current operations.
Expenditures for maintenance and repairs are charged to
operations as incurred. Costs of major additions and
improvements are capitalized.
Other Real Estate - Other real estate is comprised of
properties acquired through foreclosure or negotiated settlement.
The carrying value of these properties is lower of cost or fair
value less estimated selling expenses. Loan losses arising from
the acquisition of these properties are charged against the
allowance for loan losses. Any subsequent market reductions
required are charged to other real estate expense. Revenues and
expenses associated with maintaining or disposing of foreclosed
properties are recorded during the period in which they are
incurred.
Income Taxes - The provision for income taxes is based on
income as reported in the financial statements after interest
income from state and municipal securities is excluded. Also
certain items of income and expenses are recognized in different
time periods for financial statement purposes than for income tax
purposes. Thus, provisions for deferred taxes are recorded in
recognition of such timing differences.
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Deferred taxes are provided utilizing a liability method in
accordance with SFAS No. 109 whereby deferred tax assets are
recognized for deductible temporary differences and operating
loss and tax credit carryforwards and deferred tax liabilities
are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of
assets and liabilities and their tax bases. Deferred tax assets
are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in
tax laws and rates on the date of enactment.
The Company and its subsidiaries file a consolidated federal
income tax return. In addition, state income tax returns are
filed individually by the Companies in accordance with state
statutes.
Earnings per Common Share - The computation of earnings per
share and other per share amounts of common stock is based on the
weighted average number of shares of common stock outstanding
during each year, which is 1,351,615 for all periods presented.
Statements of Cash Flows - For purposes of reporting cash
flows, cash and cash equivalents include cash on hand and amounts
due from banks (including cash items in process of clearing).
Acquisitions - On September 23, 1996, the Bank acquired the
First American Bank of Tangipahoa located in Hammond, Tangipahoa
Parish, Louisiana for a purchase price of $1.8 million. Pursuant
to the Merger and Acquisition Agreement, the Bank acquired assets
with a fair value of $6.9 million and assumed $5.7 million of
deposits and specific liabilities. The excess of the purchase
price over the value of the net tangible assets has been assigned
to goodwill and is being amortized over fifteen years. This
acquisition was accounted for using the purchase method of
accounting, and the results of operations are included in the
consolidated financial statements from the date of acquisition.
Gain on purchased assets is recognized from acquired loans
from previous bank acquisitions on a cost recovery method as
principal payments are made and is included in the financial
statements as Gain on Purchased Assets.
Current Accounting Developments - The Financial Accounting
Standards Board has issued Statement No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities." This statement became effective for transfers
and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996. This statement
provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities.
The statement generally requires that after a transfer of
financial assets, an entity would recognize all financial assets
and servicing it controls and liabilities it has incurred, and
would not recognize financial assets when control has been
surrendered or liabilities when they have been extinguished. The
Bank has addressed the impact of the application of this
statement, and considers it to be immaterial.
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One American Corp. and Subsidiaries
Management's Discussion and Analysis of Financial
Condition and Results of Operations
June 30, 1997
Second Quarter in Review
Net income for the current quarter of 1997 was $1.2 million
compared to $1.5 million for the same quarter of 1996. The
decrease in net income is a result of an increase in provision
for loan losses, decrease in non-interest income and an increase
in non-interest expenses. Earnings per common share were $.88
and $1.12 for the second quarters of 1997 and 1996, respectively.
Return on average assets on an annualized basis was 1.64% for the
current quarter, and 2.18% in the same quarter of 1996. For the
second quarters of 1997 and 1996, return on average equity on an
annualized basis was 13.84% and 19.32%, respectively. Cash
dividends were $.30 per share for the current quarter and $.25
per share for the same quarter of 1996.
For the first six months of 1997, net income was $2.2
million compared to $2.8 million for the same period of 1996.
The reason for the decrease in net income for the first six
months of 1997 compared to 1996 is also due to greater provisions
for loan losses, decreases in non-interest income and increases
in non-interest expenses. Earnings per common share were $1.60
and $2.10 for the first six months of 1997 and 1996,
respectively. Return on average assets on an annualized basis
was 1.50% and 2.04% for the first six months of 1997 and 1996,
respectively. For the first six months of 1997 and 1996, return
on average equity on an annualized basis was 12.80% and 18.71%,
respectively. Cash dividends were $.60 per share and $.50 per
share for the first six months of 1997 and 1996, respectively
Net interest income (FTE) for the current quarter was $3.3
million, $118 thousand greater than that of the second quarter of
1996. The net interest margin (FTE) was 4.97% for the current
quarter and 4.95% for the same quarter of 1996. For the first
six months of 1997, net interest income (FTE) was $6.5 million
compared to $6.3 million for the same period of 1996. The
resulting net interest margin (FTE) for the first six months of
1997 was 4.92% compared to 4.94% for the same period of 1996.
During the second quarter of 1997, in comparison with the
same quarter of 1996, average loans outstanding increased $25.9
million or 23% to $141.2 million. Average total deposits for
the current quarter increased $8.0 million or 3% to $253.2
million when compared to the average total deposits for the same
quarter of 1996. Average total assets for the current quarter
increased $10.8 million or 4% to $289.5 million when respectively
compared to the total average assets of the second quarter of
1996. For the first six months of 1997, in comparison with
the same period of 1996, average loans outstanding increased
$27.2 million or 24% to $138.7 million. Average total deposits
for the current six month period increased $7.3 million or 3% to
$252.6 million when compared to the average total deposits for
the same period of 1996. Average total assets for the current
six month period increased $10.4 million or 4% to $288.2 million
when respectively compared to the total average assets of the
same period of 1996.
Earnings Analysis
Net Interest Income - The primary source of earnings for
the Bank is net interest income; the difference between interest
and fees generated from interest-earning assets less interest
expense for interest-bearing liabilities. For analytical
purposes, net interest income is presented on a tax equivalent
basis, using a 34% tax rate. Certain earning assets are exempt
from income taxes, therefore a tax equivalent adjustment is
included so that tax exempt earning assets are tax equivalent and
comparable with other taxable earning assets. The primary
factors that affect net interest income are changes in volume and
mix of earning assets and interest-bearing liabilities, along
with changes in market rates.
Net interest income on a fully tax equivalent basis (FTE)
for the current quarter of 1997 was $3.3 million, 4% greater than
that of the same quarter of 1996. A slight increase in the net
interest spread during the current quarter, supported by a
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greater increase in the volume of loans than the increase in
volume of interest bearing liabilities accounted for the increase
in net interest income (FTE) of $118 thousand over the same
quarter of 1996.
Earning Assets, Interest Bearing Liabilities, and Net
Interest Spread - During the current quarter of 1997, average
earning assets were $267.5 million, an increase of $8.8 million
or 3% over the second quarter of 1996. The trend in earning
assets over the quarters compared shows a shift in the mix of
earning assets toward the loan portfolio from the securities
portfolio as shown in the table Earning Asset Structure.
Management's continued strategy is to increase the Bank's earning
asset mix to include a greater percentage of higher yielding
loans over lower yielding securities. The Bank's primary market
area continues to produce levels of loan demand which has
enhanced the Bank's earning asset structure. Management
continues to believe that greater levels of loan demand will
exist in the near future due to opportunities that were non-
existent in the Bank's primary market area. However, there is no
guarantee that the Bank will continue to experience the loan
growth enjoyed over the last twelve months. The current loan
demand, in the Bank's primary market area, appears to be the
result of an improving economic climate. The trend over the
quarters compared shows the mix of interest bearing liabilities
shifting to higher interest bearing certificates of deposit from
lower interest bearing money market accounts. As an additional
note, the Bank continues to benefit from the increase in non-
interest bearing deposits while at the same time maintains the
relationship as a percentage of total deposits. The growth is
attributed to a concertive effort by the Bank to attract a
broader core deposit base consisting of commercial and personal
customers.
For the current quarter of 1997, the average yield on
earning assets was 7.80%, while the average cost of interest
bearing liabilities was 3.68%, producing a net interest spread
(FTE) of 4.12%. The net interest margin (FTE) was 4.97% for the
current quarter of 1997. In comparison, the net interest margin
(FTE) for the same quarter of 1996 was 4.95%. The cost of
interest bearing liabilities during the second quarter of 1996
was 3.60%, while the yield on average earning assets was 7.73%,
producing a net interest spread of 4.13%. The 8 basis point
increase in the average cost of interest bearing liabilities from
the second quarter of 1996 to the same quarter of 1997, was
greater than the 7 basis point increase in the yield on interest
earning assets for the respective quarters. Also, a larger
volume of dollars were funded into loans which provided for the
improvement in net interest income (FTE), while the spread
between the two periods decreased slightly.
For the first six months of 1997, the average yield of
earning assets was 7.73% while the cost of interest bearing
liabilities were 3.65%, resulting in a net interest spread (FTE)
of 4.08%. Net interest margin (FTE) was 4.92% for the first six
months of 1997 compared to 4.94% for the same period of 1996.
The table of Average Balance Sheets and Interest Rate
Analysis for the quarterly and six month periods ended June 30,
1997, December 31, 1996, and June 30, 1996, and the corresponding
table of Interest Differentials detail the effect a change in
average balance outstanding of assets and liabilities and the
change interest yield and interest costs have on net interest
income for the respective periods. Also, the tables of Earning
Asset Structure and Deposit Structure show a more condensed,
descriptive analysis of the common size percentage changes in
earning assets and deposit mix over the quarterly periods
analyzed.
Provision for Loan Losses
Provision for Loan Losses was $150 thousand and $60 thousand
for the second quarters of 1997 and 1996, respectively. Net
charge-offs (recoveries) were $570 thousand for the current
quarter, versus $207 thousand for the same quarter of 1996. As a
percentage of average loans, net charge-offs (recoveries) were
.4% in the current quarter and .25 in the second quarter of 1996.
Gross charge-offs as a percentage of average loans were .4% in
the current quarter and .3% in the second quarter of 1996.
Recoveries as a percentage of gross charge-offs for the current
quarter were 3.4% versus 44.1% for the same quarter of 1996.
Management has increased the provision for loan losses due to a
need to increase the unallocated portion of the Allowance for
Loan Losses. The net charge-off position for the current quarter
related primarily to a non-domestic impaired credit which
management feels lacks the necessary collateral value to support
liquidation.
For the first six months of 1997, Provision for Loan Losses
was $225 thousand compared to $90 thousand for the same period
last year. Net charge-offs (recoveries) were $557 thousand for
the first six months of 1997, versus $280 thousand for the same
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period of 1996. As a percentage of average loans, net charge-
offs (recoveries) were .4% in the first six months of 1997 and .2
in the same period of 1996. Gross charge-offs as a percentage of
average loans were .5% in the first six months of 1997 and .4% in
the same period of 1996. Recoveries as a percentage of gross
charge-offs for the first six months of 1997 were 20.0% versus
45.1% for the same period of 1996. As mentioned in the previous
paragraph, management feels a need to increase the unallocated
portion of the Allowance for Loan Losses. The need to increase
Allowance for Loan Losses was created due to impaired credits
which have utilized a portion of the unallocated Allowance for
Loan Losses.
<TABLE>
<CAPTION>
Earning Asset Structure Second First Second
In thousands Quarter 1997 Quarter 1997 Quarter 1996
% of % of % of
Average Earning Average Earning Average Earning
Balances Assets Balances Assets Balances Assets
<S> <C> <C> <C> <C> <C> <S>
Interest Bearing Deposits $2,523 0.9% $3,739 1.4% $1,046 -
Federal Funds Sold 10,976 4.1% 14,362 5.4% 6,630 2.6%
Securities
Taxable 103,367 38.6% 101,838 38.3% 126,270 48.8%
Non-Taxable 9,374 3.5% 9,400 4.5% 9,479 2.7%
Loans - Net 141,226 52.8% 136,214 51.3% 115,277 44.6%
Total Earning Assets $267,466 100.0% $265,553 100.0% $258,702 100.0%
<CAPTION>
Deposit Structure Second First Second
In thousands Quarter 1997 Quarter 1997 Quarter 1996
Average % of Average % of Average % of
Balances Deposits Balances Deposits Balances Deposits
<S> <C> <C> <C> <C> <C> <C>
Noninterest Bearing Deposits $48,796 19.3% $46,806 18.5% $46,460 18.9%
NOW Accounts 25,995 10.3% 26,909 10.5% 24,667 10.1%
Savings Accounts 32,617 12.9% 31,938 12.7% 32,836 13.4%
Money Market Deposit Accounts 49,822 19.7% 52,421 20.9% 53,640 21.9%
Certificates of Deposits less than $100,000 84,923 33.5% 81,874 32.5% 77,426 31.6%
Total Core Deposits 242,153 95.6% 239,948 95.2% 235,029 95.8%
Certificates of Deposits greater than $100,000 11,112 4.4% 11,968 4.8% 10,194 4.2%
Total Deposits $253,265 100.0% $251,916 100.0% $245,223 100.0%
Interest Bearing Liabilities as a percentage
of Earning Assets 76.4% 77.2% 76.8%
Core Deposits as a percentage
of Total Average Assets 83.7% 83.5% 84.3%
</TABLE>
Other Income
Other income, including gains and losses from security
transactions for the current quarter, was $1.1 million, a
decrease of $148 thousand or 12% compared to the same quarter of
1996. Exclusive of security transactions, other income for the
current quarter decreased $175 thousand or 20% from the second
quarter of 1996. For the first six months of 1997, other income,
including gains and losses from security transactions for the
current quarter, was $1.9 million, a decrease of $316 thousand
or 14% from the same period of 1996. Exclusive of security
transactions, other income for the first six months of 1997
decreased $221 thousand or 11% from the same period of 1996.
12
<PAGE>
Gain on purchased assets was $170 thousand for the current
quarter, a decrease of $217 thousand or 56% from the same quarter
of 1996. These gains are recognition of the collection of
principal on certain doubtful loans acquired as a result of past
bank acquisitions. The Bank continues to pursue the collection
of these doubtful loans. However, the amount of future gains, if
any are indeterminable. For the first six months of 1997, gain
on purchased assets was $281 thousand, a decrease of $303
thousand or 52% from the same period of 1996.
Gains from security transactions involving available - for -
sale securities were $166 thousand for the current quarter,
compared to $139 thousand for the second quarter of 1996. The
Bank recovered $166 thousand as gains from security transactions
during the second quarter of 1997 from Louisiana Agricultural
Finance Authority Bonds and Louisiana Housing Finance Authority
Bonds which were partially written off in accordance with
regulatory directives in May of 1992. More specifics can be
found on the gains recognized from the Guaranteed Investment
Contracts in the discussion section entitled Non-performing
Assets. For the first six months of 1997, gains from security
transactions involving available - for - sale securities were
$190, compared to $285 thousand for the same period of 1996. The
gains resulting from the first six months of 1997 are also a
result of the Louisiana Agricultural Finance Authority Bonds and
Louisiana Housing Finance Authority Bonds.
Other Expenses
Other expenses were $2.4 million for the second quarter of
1997, an increase of $321 thousand or 15% from the same quarter
of 1996. Salaries and employee benefits were $1.2 million for
the current quarter compared to $1.0 million for the same of
quarter of 1996. Net occupancy expense was $312 thousand for the
current quarter, compared to $270 thousand for the second quarter
of 1996. Other operating expenses were $916 thousand for the
current quarter, an increase of $148 thousand or 19% compared to
the same quarter of 1996. The increase in other operating
expenses is related to legal and professional expenses associated
with impaired credits. Management anticipates the level of legal
and professional expenses to decrease once the related impaired
credits are liquidated. Further, management anticipates
liquidating these credits during the third quarter of 1997.
However, management has no guarantee that the disposition of said
credits will transact during the third quarter.
For the first six months of 1997, other expenses were $4.8
million, an increase of $670 thousand or 16% from the same period
of 1996. Salaries and employee benefits were $2.3 million for
the six month period compared to $2.0 million for the same period
of 1996. Net occupancy expense was $605 thousand for the first
six months of 1997, compared to $542 thousand for the same period
of 1996. Other operating expenses were $1.9 million for the
first six months of 1997, an increase of $407 thousand or 27%
compared to the same period of 1996. The increase in other
operating expenses is related to legal and professional expenses
associated with impaired credits.
Applicable Income Taxes
Applicable income taxes for the current quarter were $577
thousand compared to $693 thousand for the second quarter of
1996. Effective tax rates are 33% and 31%, respectively. The
Company's effective income tax expense as a percentage of pretax
income is different from statutory rates due to tax-exempt
interest income earned from investments in state and municipal
bonds. Interest income from state and municipal bonds is
generally exempt from federal income taxes. For the first six
months of 1997, applicable income taxes were $1.1 million
compared to $1.4 million for the same period of 1996. Effective
tax rates are 34% and 32%, respectively for the first six months
of 1997.
Liquidity
Liquidity management is the process of ensuring that the
Company's asset and liability structure is the proper mix to meet
the withdrawals of its' depositors, and to fund loan commitments
and other funding requirements. Management's primary source of
funds is the core deposit base. During the quarter, average core
deposits were approximately $242.2 million or 96% of total
average deposits and 84% of total average assets. For a
comparison with prior period quarters see the table entitled
Deposit Structure. Other sources of liquidity are maturities in
13
<PAGE>
the investment portfolio and loan maturities and repayments.
Management continually evaluates the maturities and mix of its
earning assets and interest-bearing liabilities to monitor its
ability to meet current and future obligations and to achieve
maximum net interest income. Due to the stability of the core
deposit base as noted above and the maturities of the investment
portfolio, management does not anticipate any difficulties in
meeting the needs of its depositors nor the ability to fund
future loan commitments.
Interest Rate Sensitivity
Interest rate risk is the measurement of risk exposure or
changes in net interest income and subsequently net income given
changes in the external interest rate markets. This possible
risk exposure is produced by the different repricing intervals of
interest earning assets and interest bearing liabilities, given
changes in the mix of such assets and liabilities, and the growth
of such assets and liabilities. One measurement of interest rate
risk is gap analysis. The gap matches the repricing of interest
rate sensitive assets and liabilities for selective intervals.
GAP analysis, is a static measurement based on an individual
point in time. This interest rate risk measurement process may
not indicate actual rate exposure given contractual maturities
and repricing period inconsistencies. Management also measures
interest rate risk exposure by process of dynamic income
simulation. The latter process measures possible levels of
exposure more accurately given the ability to better identify
contractual maturities and repricing periods.
For gap analysis, a decay rate methodology is used to arrive
at the principal and interest cash flows used in the market value
calculations given FDIC regulatory guidelines as set forth in
FDICIA 305. First, rate sensitive and non-rate sensitive
balances are separated. Higher decay rates force rate sensitive
cash flows to occur within one year. Decay rates are then input
for the non-rate sensitive funds. These decay rates spread the
non-rate sensitive balances out as far as the FDIC regulatory
guidelines allow in FDICIA 305. Decay rates assumptions
implemented are based on a flat rate environment and at
management's discretion.
The Bank has established decay rate assumptions given data
collection over the last 10 or so years on MMDA, Savings
Accounts, Now Accounts, and Non-interest Bearing Accounts. The
assumptions are based on account type sensitivity patterns given
the change in the Bank's benchmark for pricing and the change in
relationship each account type has to total deposits. Decay
rates are updated at each modeling session if warranted by rate
changes in the market or changes in non-rate sensitivity patterns
given the account type. The identification of the non-rate
sensitive portion of such accounts provides a more complete
picture of the actual core deposit base which may not reprice in
the same manner as the rate sensitive portion.
The Interest Rate Sensitivity Table presents the Bank's
interest rate sensitivity position at June 30, 1997. The table
indicates that the Company's earning assets exceed its interest
bearing liabilities out to the one year point in time, suggesting
an increase in net interest income in a flat rate environment.
This may not be the case in reality given that mentioned above as
it pertains to GAP analysis.
In May 1994 the Bank enhanced its interest rate management
tools by becoming a member of the Federal Home Loan Bank of
Dallas (FHLB). The FHLB provides the Bank the ability to further
match the rates and maturities of its funding with those of
earning assets. Also, the FHLB provides the Bank the ability to
offer long term, fixed rate loans to its customer base with
minimal additional interest rate risk exposure.
14
<PAGE>
<TABLE>
<CAPTION>
Interest Rate Sensitivity Table
June 30, 1997
In thousands
0-90 91-365 1 Year - Over 5 Non-
Days Days 5 Years Years Sensitive Total
<S> <C> <C> <C> <C> <S><C>
Assets
Securities $32,640 $19,627 $52,961 $6,971 - $112,199
Loans, Net of Unearned Income 23,117 38,027 56,985 20,460 1,284 139,873
Federal Funds Sold 8,900 - - - - 8,900
Other Assets 3,988 - - - 26,165 30,153
Total Assets $68,645 $57,654 $109,946 $27,431 $27,449 $291,125
Liabilities
NOW and Super NOW Deposits $1,586 $4,748 $14,287 $5,151 - $25,772
Insured Money Market Accounts 176 23,463 25,541 - - 49,180
Savings Deposits 1,788 5,374 19,185 6,584 - 32,931
Certificates of Deposit 27,939 43,365 22,849 2,199 - 96,352
Noninterest Bearing Deposits 2,925 8,864 28,097 9,958 - 49,844
Other Liabilities 24 72 442 204 1,310 2,052
Stockholders' Equity - - - - 34,994 34,994
Total Liabilities and
Stockholders' Equity $34,438 $85,886 $110,401 $24,096 $36,304 $291,125
Interest Rate Sensitivity Gap $34,208 ($28,232) ($455) $3,335 ($8,855) -
Cumulative Interest Rate
Sensitivity Gap $34,208 $5,975 $5,520 $8,855 $0
GAP / Assets 11.8% -9.7% -0.2% 1.1% -3.0%
Cumulative GAP / Assets 11.8% 2.1% 1.9% 3.0% 0.0%
</TABLE>
Financial Instruments
In the normal course of business the Company enters into
agreements which, for accounting purposes, are considered off -
balance sheet activities. These agreements are loans and lines
of credit commitments to customers to extend credit at specified
rates, duration, and purpose. The commitments adhere to normal
lending policy, collateral requirements, and credit reviews.
Available loan commitments at June 30, 1997 and 1996, were $8.6
million and $10.3 million, respectively. The Bank had letters of
credit of $470 thousand issued at June 30, 1997 compared to $808
thousand at June 30, 1996. Additionally, the Bank has deposit
customers who have credit lines available to them through their
deposit accounts. At June 30, 1997 the available portion of
these credit lines was $628 thousand compared to $644 thousand at
June 30, 1996. These credit lines are immediately cancelable by
the Bank. The credit lines provide a source of income to the
Bank through service fees charged and interest earned on balances
outstanding. The credit lines are reviewed regularly and do not
pose a material credit risk to the Bank. To date the Bank does
not have instruments outstanding that can be specifically
described as a financial guarantee which guarantees the
performance of a customer to a third party other than the
financial standby letters of credit described above. The Bank
began issuing credit cards during the third quarter of 1992. As
of June 30, 1997, the aggregate credit available was $3.3
million, and $2.8 million at June 30, 1996. Applicants are
reviewed through normal lending policies and credit reviews.
The Bank is not a party to financial instruments defined as
interest rate exchange agreements, financial futures, or
financial options. Therefore, the Bank is not exposed to
interest rate risk in excess of the amount recognized in the
consolidated balance sheets as that risk may apply to interest
rate exchange agreements, financial futures, or financial
options.
15
<PAGE>
Securities
Included in the category of Securities of Other US
Government Agencies at June 30, 1997 is $18.5 million par value
of structured notes, with an amortized cost of $18.5 million and
a fair value of $18.2 million, resulting in an unrealized loss in
the amount of $166 thousand. The structured notes, which are
issued by US government sponsored agencies, are debt securities
whose cash flows are dependent on one or more indices in ways
that create interest rate risk. The majority of the securities
held as structured notes are considered deleveraged bonds. The
rate on these securities are 40 - 50% of the 10 year CMT plus 60
- - 170 basis points. These securities are variable in nature and
reprice on a monthly, quarterly, or semi-annual basis. However,
the majority of the securities reprice quarterly. The majority
of the related securities mature during the first and second
quarter of 1998. A fluctuation in interest rates should in no
way effect the principal balance of these securities at maturity.
Management understands the risks associated with these types of
instruments and has the capability to effectively monitor the
notes activity. Although classified in the available for sale
category, it is management's intention to hold the structured
notes until the notes mature at par value. Based on the variable
nature of said securities and the securities percentage
relationship to earning assets, a +/- 200 basis point interest
rate shock and income simulation on the security class showed
minimal impact on earnings. Further, management is of the
opinion that earning trends indicate the ability to accept any
adverse risk associated with the possible sale of said securities
should the decision to hold the structured notes to maturity
change.
Allowance for Loan Losses
The allowance for loan losses was $2.8 million at June 30,
1997 or 2% of loans outstanding. At June 30, 1996, the allowance
for loan losses was $3.3 million or 3% of loans outstanding. The
allowance for loan losses account represents amounts available
for possible future losses based on modeling and management's
evaluation of the loan portfolio. To ascertain the potential
losses in the portfolio, management reviews past due loans on a
monthly basis. Additionally, the loan review department performs
an ongoing review of the loan portfolio. Loans are reviewed for
compliance to the Bank's lending policy and the borrower's
current financial condition and ability to meet scheduled
repayment terms. Based on these functions and management's
knowledge of the Bank's borrowers, the allowance for loan losses
in management's judgment, is adequate to absorb potential loan
losses based on current review of the quality of the loan
portfolio. The Bank has established the balances in allowance
for loan losses in order to accept any adverse loan relationships
which have the potential to occur. As the Bank's loan - to -
deposit relationship continues to increase, so does the potential
to experience adverse loans at a rate uncommon to the Bank's
historical loan loss basis given, the smaller loan - to - deposit
relationships of the past.
Nonperforming Assets
Nonperforming assets include nonaccrual and impaired loans
and other real estate. Generally, loans are considered
nonaccrual when the interest becomes 90 days past due or when
there is uncertainty about the repayment of principal and
interest in accordance with the terms of the loans. Loans past
due 90 days and still accruing at June 30, 1997 and 1996 were
$258 thousand and $124 thousand, respectively. Impaired loans
having recorded investments of $3.5 million at June 30, 1997
compared to $4.4 million at June 30, 1996 have been recognized in
conformity with SFAS No. 114 as amended by SFAS No. 118. The
total allowance for loan losses related to these loans is $937
thousand at June 30, 1997 compared to $1.6 million at June 30,
1996. Interest received on impaired loans amounted to $115
thousand at June 30, 1997 compared to $225 thousand at June 30,
1996. Non-accrual loans not included in impaired loans was
immaterial at June 30, 1997 and 1996.
Other real estate is properties held for sale acquired
though foreclosure or negotiated settlements of debt. Other real
estate was insignificant at the close of the current and second
quarter of 1996.
16
<PAGE>
In the process of reviewing the loan portfolio, management
acknowledges certain potential problem loans which are not
classified as impaired, non-accrual, greater than 90 days
delinquent, or restructured. Management does not feel that any
of these potential problem loans are reasonably likely to have or
will have a material effect on the Company's liquidity, capital
resources, or results of operations.
The Bank also has approximately $153 thousand in par value
of Louisiana Agricultural Finance Authority Bonds and Louisiana
Housing Finance Authority Bonds with a book value of $1, on
nonaccrual status. Under a directive from state regulatory
agencies the original $2.35 million in par value of the
Guaranteed Investment Contracts were placed on nonaccrual status
in May, 1992. Due to the directive, the bonds were written down
to $.20 on the dollar or $470 thousand. While management has
written down these bonds in accordance with regulatory policy as
mentioned above, management continues to feel that the fair value
was not representative of the potential liquidation value of
these bonds. Management is of the opinion that the permanent
impairment of the bonds was not in excess of the prescribed
regulatory write downs. A class action suit was filed on behalf
of the bondholders. In summary, the suit sought a determination
of the priority treatment the bondholders would receive under
California statutes in the liquidation of Executive Life
Insurance Company. Under Priority 5 the Guaranteed Investment
Contracts (GICs), which support the municipal bonds, would be
treated as insurance policies and would have the same payout
ratio as other policies. Under Priority 6, the GICs would have
the status of a general unsecured creditor. On November 15,
1992, the Superior Court in California ruled the GICs were a
Priority 5. As a result of pending litigation, continued
settlement proposals are taking place between the guarantors of
the bonds and the bondholders. To date, the Bank has recovered
approximately $2.21 million as partial payments of the $2.35
million in original par value. Of the $2.21 million, $1.74
million were recognized as gains on securities available for sale
since the original write down. The remaining $470 thousand was
applied against the book value. Of the $1.74 million in gains
recognized since the write down, $190 thousand was recognized in
1997, $227 thousand was recognized in 1996, and $1.31 million was
recognized prior to 1996. The Bank continues to pursue the
collection of principal on these securities. However, the amount
of any future fulfillment of these collection actions remain
uncertain.
Regulatory Matters
The Bank is subject to various capital requirements
administered by the federal Banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory - and
possibly discretionary - actions by regulators that, if
undertaken, could have a material effect on the Bank's financial
statements. Various regulations require the Bank to meet
specific capital adequacy guidelines that involve quantitative
measures of the Bank's assets, liabilities, and certain off -
balance - sheet items as calculated under regulatory accounting
practices. The Bank's capital classification is also subject to
qualitative judgments by the regulators about components, risk
weightings, and other factors. Quantitative measures established
by regulation to ensure capital adequacy require the Bank to
maintain minimum amounts and ratios as set forth in the section
entitled Capital Adequacy below.
Management is unaware, regulatory or otherwise, of any known
trends, events or uncertainties which are reasonably likely to
have or will have a material effect on the Company's liquidity,
capital resources, or results of operations.
Capital Adequacy
The strength of a company is measured by the company's
capital, earnings history, asset quality, and management.
Capital can be increased by the retention of earnings and
issuance of equity stock. Management feels the current trend of
earnings and dividend distribution is sufficient to maintain its
capital adequacy requirements.
The Bank is required to maintain minimum amounts of capital
to total risk-weighted assets, as defined by the regulators. The
guidelines require total capital of 8.00%, half of which must be
Tier 1 capital. The computation of risk-weighted ratios follow
the transitional rule, which currently does not include the
unrealized gain (loss) on securities available for sale in Tier 1
capital.
17
<PAGE>
The leverage ratio consists of Tier 1 capital as a
percentage of average total assets. The minimum leverage ratio
for all banks and bank holding companies is 3.00%. This minimum
ratio is dependent upon the strength of the individual bank or
holding company and may be increased by regulatory authorities on
an individual basis. The 3.00% minimum was established to make
certain that all banks have a minimum capital level to support
their assets, regardless of risk profile. As shown in the table
Capital Adequacy Ratios below, the Company's ratios for the
reporting periods exceed regulatory minimums.
<TABLE>
<CAPTION>
Capital Adequacy Ratios
In Thousands June 30, December 31, June 30,
1997 1996 1996
<S> <C> <C> <C>
Tier 1 Capital:
Stockholders' Equity $33,928 $32,549 $31,604
Tier 2 Capital:
Allowance for Loan Losses 1,747 1,706 1,559
Total Capital $35,675 $34,255 $33,163
Risk-Weighted Ratios:
Tier 1 Capital 24.4% 24.1% 25.7%
Total Capital 25.7% 25.3% 27.0%
Leverage Ratio 11.8% 11.8% 11.4%
Stockholders' Equity 11.7% 11.4% 11.4%
Regulatory Risk-Based Capitalization Requirements
Significantly Critically
Well Adequately Under Under Under
Capitalized Capitalized Capitalized Capitalized Capitalized
<S> <C> <C> <C> <C> <C>
Risk-Weighted Ratios:
Tier 1 Capital 6.0% 4.0% < 4.0% < 3.0%
Total Capital 10.0% 8.0% < 8.0% < 6.0%
Leverage Ratio 5.0% 4.0% < 4.0% < 3.0% <= 2.0% tangible
equity
</TABLE>
The Company's dividends are determined by its Board of
Directors. The current policy is to maintain dividends at a
level which ensures that the Company is able to maintain
sufficient regulatory capital levels. The Company's primary
source of funds is the dividends received from the Bank. Under
current dividend limitations, the Bank could pay, without
regulatory approval, dividends of approximately $5.9 million.
The Company carries no debt, therefore future liquidity needs are
limited to the payment of any declared dividends. Should a
regulatory agency limit the Bank from paying dividends, the
Company maintains sufficient liquidity to maintain its
operations.
18
<PAGE>
<TABLE>
<CAPTION>
AVERAGE BALANCE SHEETS AND INTEREST RATE ANALYSIS
In thousands
Second Quarter 1997 First Quarter 1997 Second Quarter 1996
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Interest Bearing Deposit Accounts $2,524 $36.6 5.82% $3,739 $48.4 5.25% $1,046 $10.3 3.95%
Federal Funds Sold and Securities
Purchased under Resale Agreements 10,976 150.8 5.51% 14,362 185.2 5.23% 6,630 91.4 5.53%
Securities:
Taxable 103,367 1,508.0 5.85% 101,838 1,480.2 5.89% 126,270 1,846.9 5.87%
Non-Taxable* 9,374 205.0 8.77% 9,400 202.4 8.73% 9,479 203.8 8.62%
Loans - Net 141,226 3,294.6 9.36% 136,214 3,159.5 9.41% 115,277 2,833.0 9.86%
Total Earning Assets 267,466 5,195.0 7.80% 265,553 5,075.7 7.76% 258,702 4,985.4 7.73%
Allowance for Loan Losses (2,748) (3,142) (3,233)
Nonearning Assets 24,749 25,047 23,167
Total Assets $289,467 $287,458 $278,636
Liabilities and Stockholders' Equity
NOW Accounts $25,995 137.1 2.12% $26,909 139.7 2.11% $24,667 129.7 2.11%
Savings Accounts 32,617 205.2 2.52% 31,938 198.6 2.52% 32,836 207.2 2.53%
Money Market Deposit Accounts 49,822 348.7 2.81% 52,421 362.2 2.80% 53,640 372.6 2.79%
Certificates of Deposits less than $100,000 84,923 1,055.8 4.99% 81,874 1,003.6 4.97% 77,426 963.5 4.99%
Certificates of Deposits greater than $100,000 11,112 123.4 4.45% 11,968 139.4 4.72% 10,194 107.8 4.24%
Total Interest Bearing Deposits 204,469 1,870.2 3.67% 205,110 1,843.5 3.65% 198,763 1,780.8 3.59%
Other Borrowings 727 11.7 6.45% 749 11.8 6.39% 790 10.1 5.13%
Total Interest Bearing Liabilities 205,196 1,881.9 3.68% 205,859 1,855.3 3.66% 199,553 1,790.9 3.60%
Noninterest Bearing Deposits 48,796 46,806 46,460
Other Liabilities 1,046 1,039 1,211
Stockholders' Equity 34,430 33,754 31,412
Total Liabilities and Stockholders' Equity $289,467 $287,458 $278,636
Net Interest Income - Tax Equivalent Basis* 3,313.1 3,220.4 3,194.5
Tax Equivalent Adjustment (69.7) (68.8) (69.3)
Net Interest Income $3,243.4 $3,151.6 $3,125.2
Net Interest Income - Spread* 4.12% 4.10% 4.13%
Net Interest Income as a % of Total Earning Assets* 4.97% 4.92% 4.95%
*Tax Equivalent Basis - 34% Rate for the periods dated
19
<PAGE>
<CAPTION>
AVERAGE BALANCE SHEETS AND INTEREST RATE ANALYSIS
In thousands
Six Months Ended Six Months Ended
June 30 1997 June 30 1996
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest Bearing Deposit Accounts $3,128 $85.0 5.45% $1,748 $44.0 5.08%
Federal Funds Sold and Securities
Purchased under Resale Agreements 12,659 336.0 5.32% 10,049 262.9 5.28%
Securities:
Taxable 102,525 2,988.0 5.84% 124,463 3,642.4 5.90%
Non-Taxable* 9,387 407.6 8.71% 10,005 440.2 8.87%
Loans - Net 138,734 6,453.1 9.33% 111,551 5,493.4 9.93%
Total Earning Assets 266,433 10,269.7 7.73% 257,816 9,882.9 7.73%
Allowance for Loan Losses (2,944) (3,246)
Nonearning Assets 24,680 23,164
Total Assets $288,169 $277,734
Liabilities and Stockholders' Equity
NOW Accounts $26,450 276.8 2.10% $25,583 273.3 2.15%
Savings Accounts 32,280 403.8 2.51% 32,470 409.4 2.54%
Money Market Deposit Accounts 51,115 710.9 2.79% 54,865 764.7 2.81%
Certificates of Deposits less than $100,000 83,087 2,067.1 4.99% 76,175 1,891.7 5.01%
Certificates of Deposits greater than $100,000 11,652 255.0 4.39% 10,179 216.5 4.29%
Total Interest Bearing Deposits 204,584 3,713.6 3.65% 199,272 3,555.6 3.60%
Other Borrowings 738 23.6 6.41% 790 15.1 3.85%
Total Interest Bearing Liabilities 205,322 3,737.2 3.65% 200,062 3,570.7 3.60%
Noninterest Bearing Deposits 48,011 46,041
Other Liabilities 1,041 1,312
Stockholders' Equity 33,796 30,319
Total Liabilities and Stockholders' Equity $288,169 $277,734
Net Interest Income - Tax Equivalent Basis* 6,532.5 6,312.2
Tax Equivalent Adjustment (138.6) (149.7)
Net Interest Income $6,393.9 $6,162.5
Net Interest Income - Spread* 4.08% 4.13%
Net Interest Income as a % of Total Earning Assets* 4.92% 4.94%
*Tax Equivalent Basis - 34% Rate for the periods dated
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
INTEREST DIFFERENTIALS
In thousands
Six Months Ended
Second Quarter 1997 Second Quarter 1997 June 30, 1997
vs vs vs
First Quarter 1997 Second Quarter 1996 June 30, 1996
Change due to Total Change due to Total Change due to Total
Volume Rate Change Volume Rate Change Volume Rate Change
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Interest Bearing Deposit Accounts ($15.7) $3.9 ($11.8) $14.6 $11.7 $26.3 $35 $6 $41
Federal Funds Sold (43.7) 9.3 (34.4) 59.9 (0.5) 59.4 68 5 73
Securities:
Taxable 22.2 5.6 27.8 (335.0) (3.9) (338.9) (642) (12) (654)
Non-Taxable* (0.5) 3.1 2.6 (2.3) 3.5 1.3 (27) (5) (33)
Loans 116.2 18.9 135.1 637.7 (176.1) 461.6 1,339 (379) 960
Total Interest Income 78.5 40.8 119.3 374.9 (165.3) 209.7 772 (386) 387
Interest Bearing Liabilities:
NOW Accounts (4.7) 2.1 (2.6) 7.0 0.4 7.4 9 (6) 4
Savings Accounts 4.2 2.4 6.6 (1.4) (0.6) (2.0) (2) (3) (6)
Money Market Deposit Accounts (18.0) 4.5 (13.5) (26.5) 2.6 (23.9) (52) (2) (54)
Certificates of Deposits less than $100,000 37.4 14.8 52.2 93.3 (1.0) 92.3 172 4 175
Certificates of Deposits greater than $100,000 (10.0) (6.0) (16.0) 9.7 5.9 15.6 31 7 39
Other Borrowings (0.3) 0.2 (0.1) (0.8) 2.4 1.6 (1) 9 9
Total Interest Expense 8.6 18.0 26.6 81.3 9.7 91.0 157 10 167
Increase (Decrease) in
Interest Differential $69.9 $22.8 $92.7 $293.6 ($175.0) $118.7 $616 ($396) $220
*Tax Equivalent Basis - 34% Rate for the periods dated
</TABLE>
21
<PAGE>
Part II
Item 1. Legal Proceedings
In February 1997, a party filed a $5.1 million suit against
the Bank in the Twenty-fourth Judicial Court for the Parish of
Jefferson, State of Louisiana. On the 14th of April, 1997, the
party dismissed with prejudice the said suit.
During the normal course of business, the Company is
involved in various other legal proceedings. In the opinion of
management and counsel, any liability resulting from such
proceedings would not have a material adverse effect on the
Company's financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
At the annual shareholder's meeting of the Company held on
April 23, 1997 the following matters were submitted for a vote:
(1) a proposal (the "Classified Board Proposal") that the
Company's Articles of Incorporation (the "Articles") be amended
to provide for three classes of directors with each serving for a
three year term.
(2) a proposal (the "Proposal to Reduce Vulnerability to
Takeover") that the Company's Articles be further amended to add
certain provisions designed to reduce the Company's vulnerability
to an unsolicited takeover not deemed by the Board of Directors
of the Company to be in the best interest of the stockholders.
(3) Election of Directors.
(a) Electing five (5) Class I directors to serve until the 1998
Annual Meeting of Shareholders and until their successors are
elected and qualified.
(b) Electing six (6) Class II directors to serve until the 1999
Annual Meeting of Shareholders and until their successor's are
elected and qualified.
(c) Electing six (6) Class III directors to serve until the 2000
Annual Meeting of Shareholders and until their successors are
elected and qualified.
Classified Board Proposal: The Board of Directors of the
Company sought the consent of the stockholders to a proposed
provision to the Company's Articles which would provide for three
Classes of Directors. Each Class of Directors will be elected
for a three year term, except for the initial terms of Class I
and Class II. The initial terms of Class I and Class II shall be
one year and two years, respectively. This provision is designed
in part to make it more difficult and time-consuming for certain
persons to obtain control of the Company or to obtain majority
control of the Board of Directors of the Company, and thus reduce
the vulnerability of the Company to an unsolicited takeover
proposal.
The Classified Board Proposal was approved at the Annual
Shareholders Meeting on April 23, 1997 by a vote of 1,130,448
shares in favor, and 0 shares against with 4,616 shares
abstaining.
Proposal to Reduce Vulnerability to Takeover The Board of
Directors of the Company sought the consent of the shareholders
to several proposed provisions to the Company's Articles. The
Proposal to Reduce Vulnerability to Takeover will provide for the
inclusion in the Company's Articles a "super majority" provision
requiring a higher percentage of stockholders than would
otherwise be required to approve certain business combinations
unless such business combinations have been approved by the
majority of Continuing Directors and a provision requiring a
higher percentage of stockholders than would otherwise be
required to amend, alter, change or repeal certain provisions of
the Articles.
These provisions are designed in part to make it more
difficult and time-consuming for certain persons to obtain
control of the Company unless they pay a certain value to the
Company's stockholders or to obtain majority control of the
Company, and thus reduce the vulnerability of the Company to an
unsolicited takeover proposal. These provisions are designed to
enable the Company to develop its business in a manner which will
foster its long term growth, with the threat of a takeover not
deemed by the Board to be in the best interest of the Company and
its stockholders, and the potential disruption entailed by such a
threat, reduced to the extent practicable.
The Proposal to Reduce Vulnerability to Takeover was approved at
the Annual Shareholders Meeting on April 23, 1997 by a vote of
1,126,743 shares in favor, and 3,845 shares against with 4,476
shares abstaining.
22
<PAGE>
Election of Directors. Set out below is the list of nominees
submitted to the shareholder's for approval as directors as well
as the resulting votes that were cast:
<TABLE>
<CAPTION>
Total Total Total
Votes Votes Votes
For Against Abstaining
<S> <C> <S>
A Class I Directors Craig G. Brazan 1,135,064 - -
1 year term Michael J. Cazenave 1,135,064
Dean T. Falgoust 1,135,064
J. B. Falgoust 1,135,064
Albert J. Waguespack 1,135,064
B Class II Directors E. V. Cazenave, Jr. 1,135,064
2 year term Preston L. Falgoust 1,135,064
Marcel T. Graugnard, Jr. 1,135,064
Ozane J. Gravois, III 1,135,064
David J. Vial, M.D. 1,131,254 3,810
Craig A. Vitrano, M.D. 1,135,064
C Class III Directors Frank J. Bourgeois 1,135,064
3 year term A. Earle Cefalu, Jr. 1,135,064
Honora F. Gravois 1,135,064
Gloria A. Kliebert 1,135,064
Anthony J. Nobile 1,135,064
Carl J. Poche, M.D. 1,135,064
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
None
23
<PAGE>
Management's Responsibility for Financial Reporting
The management of One American Corp. and Subsidiaries is
responsible for the preparation of the financial statements,
related financial data and other information in this quarterly
report. The financial statements are prepared in accordance with
generally accepted accounting principles and include some amounts
that are necessarily based on management's informed estimates and
judgments, with consideration given to materiality. All
financial information contained in this quarterly report is
consistent with that in the financial statements.
Management fulfills its responsibility for the integrity,
objectivity, consistency and fair presentation of the financial
statements and financial information through an accounting system
and related internal accounting controls that are designed to
provide reasonable assurance that assets are safeguarded and that
transactions are authorized and recorded in accordance with
established policies and procedures. The concept of reasonable
assurance is based on the recognition that the cost of a system
of internal accounting controls should not exceed the related
benefits. As an integral part of the system of internal
accounting controls, One American Corp. and Subsidiaries has a
professional staff who monitors compliance with and assess the
effectiveness of the system of internal accounting controls and
coordinate audit coverage with the independent public accountant.
The Audit Committee of the Board of Directors, composed
solely of outside directors, meets periodically with management,
and the independent public accountant to review matters relating
to financial reporting, internal accounting control and the
nature, extent and results of the audit effort. The independent
public accountant has direct access to the Audit Committee with
or without management present.
The financial statements as of December 31, 1996, were
examined by Hannis T. Bourgeois & Co., L. L. P. independent
public accountant, who rendered an independent professional
opinion on the financial statements prepared by management. The
financial statements as of June 30, 1997, have not been reviewed
by Hannis T. Bourgeois & Co., L. L. P.
24
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
One American Corp.
By:/s/ J. B. Falgoust, Chairman
J. B. Falgoust, Chairman
August 8, 1997
Date
25
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<PERIOD-TYPE> 6-MOS
<CASH> 12390
<INT-BEARING-DEPOSITS> 3988
<FED-FUNDS-SOLD> 8900
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 112199
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 142625
<ALLOWANCE> 2752
<TOTAL-ASSETS> 291125
<DEPOSITS> 254079
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2052
<LONG-TERM> 0
<COMMON> 7500
0
0
<OTHER-SE> 27494
<TOTAL-LIABILITIES-AND-EQUITY> 291125
<INTEREST-LOAN> 6453
<INTEREST-INVEST> 3257
<INTEREST-OTHER> 336
<INTEREST-TOTAL> 10046
<INTEREST-DEPOSIT> 85
<INTEREST-EXPENSE> 3737
<INTEREST-INCOME-NET> 6394
<LOAN-LOSSES> 225
<SECURITIES-GAINS> 190
<EXPENSE-OTHER> 4781
<INCOME-PRETAX> 3297
<INCOME-PRE-EXTRAORDINARY> 3297
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2163
<EPS-PRIMARY> 1.60
<EPS-DILUTED> 1.60
<YIELD-ACTUAL> 7.73
<LOANS-NON> 1284
<LOANS-PAST> 258
<LOANS-TROUBLED> 850
<LOANS-PROBLEM> 1342
<ALLOWANCE-OPEN> 3083
<CHARGE-OFFS> 696
<RECOVERIES> 139
<ALLOWANCE-CLOSE> 2751
<ALLOWANCE-DOMESTIC> 937
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1814
</TABLE>
