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 September 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 November 6, 1997.
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FORM 10-Q Index
Part I
Financial Information
Financial Statements
Consolidated Balance Sheets,
September 30, 1997, December 31, 1996 and September 30,1996 3
Consolidated Statements of Income
for the three and nine months ended September 30, 1997
and 1996 4
Consolidated Statements of Changes in Stockholders' Equity
for the nine months ended September 30, 1997 and 1996 5
Consolidated Statements of Cash Flows
for the nine months ended September 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 nine months ended September 30, 1997,
June 30, 1997 September 30, 1996 20
Interest Differentials
for the three and nine months ended September 30, 1997,
June 30, 1997 September 30, 1996 22
Part II
Other Information
Legal Proceedings 23
Exhibits and Reports on Form 8-K 23
Management's Responsibility for Financial Reporting 24
Signatures 25
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<TABLE>
<CAPTION>
Consolidated Balance Sheets
One American Corp. and Subsidiaries Unaudited Unaudited Unaudited
September 30,December 31, September 30,
In thousands 1997 1996 1996
<S> <C> <C> <C>
Assets
Cash and Due From Banks $12,179 $11,176 $12,949
Interest Bearing Deposits in Other Banks 3,501 2,770 1,039
Federal Funds Sold and Securities
Purchased Under Resale Agreements 10,975 13,325 9,925
Securities:
Available for Sale (Amortized Cost of $108,030, $111,797
and $115,433, respectively) 108,568 111,894 115,285
Total Securities 108,568 111,894 115,285
Loans 146,108 135,859 132,348
Less: Allowance for Loan Losses (1,711) (3,083) (3,328)
Loans, Net 144,397 132,776 129,020
Bank Premises and Equipment 10,593 9,645 9,146
Other Real Estate 128 68 51
Accrued Interest Receivable 2,060 2,031 2,191
Other Assets 3,210 2,426 2,547
Total Assets $295,611 $286,111 $282,153
Liabilities
Deposits
Noninterest Bearing $49,244 $45,907 $46,689
Interest Bearing 208,383 204,797 200,636
Total Deposits 257,627 250,704 247,325
Accrued Interest Payable 686 693 618
Other Liabilities 1,532 1,179 1,456
Total Liabilities 259,845 252,576 249,399
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 23,536 21,596 20,977
Unrealized Gain (Loss) on Securities Available for Sale, Net 355 64 (98)
Treasury Stock - 148,385 shares at cost (625) (625) (625)
Total Stockholders' Equity 35,766 33,535 32,754
Total Liabilities and Stockholders' Equity $295,611 $286,111 $282,153
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Consolidated Statements of Income
One American Corp. and Subsidiaries Three Months Ended Nine Months Ended
for the three and nine months ended September 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 3,404 3,005 9,857 8,498
Interest on Securities:
Taxable Interest 1,489 1,709 4,477 5,353
Nontaxable Interest 153 135 422 425
Total Interest on Securities 1,642 1,844 4,899 5,778
Other Interest Income 162 100 583 407
Total Interest Income 5,208 4,949 15,339 14,683
Interest Expense on Deposits 1,940 1,809 5,677 5,380
Net Interest Income 3,268 3,140 9,662 9,303
Provision for Loan Losses 300 75 525 165
Net Interest Income After
Provision for Loan Losses 2,968 3,065 9,137 9,138
Other Income
Service Charges on Deposit Accounts 522 554 1,565 1,556
Gain or (Loss) on Securities 0 0 190 285
Gain on Purchased Assets 125 133 406 717
Other Operating Income 255 196 650 550
Total Other Income 902 883 2,811 3,108
Income Before Other Expenses 3,870 3,948 11,948 12,246
Other Expenses
Salaries and Employee Benefits 1,192 1,070 3,468 3,131
Net Occupancy Expense 326 313 931 855
Net ORE Expense (32) (5) (59) (17)
Other Operating Expenses 930 845 2,857 2,365
Total Other Expenses 2,416 2,223 7,197 6,334
Income Before Income Taxes 1,454 1,725 4,751 5,912
Applicable Income Taxes 460 536 1,594 1,887
Net Income $994 $1,189 $3,157 $4,025
Net Income Per Share $0.73 $0.88 $2.33 $2.98
Cash Dividends Per Share $0.30 $0.25 $0.90 $0.75
<FN>
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 nine months ended September 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 3,157 4,025
Cash Dividends (1,217) (1,014)
Balance - End of Period $23,536 $20,977
Unrealized Gain (Loss) on Securities Available for Sale, Net
Balance - Beginning of Period $64 $371
Net Change in Unrealized Gain (Loss) 291 (469)
Balance - End of Period $355 ($98)
Treasury Stock
Balance - Beginning and End of Period ($625) ($625)
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
One American Corp. and Subsidiaries
for the nine months ended September 30, 1997 and 1996 Unaudited Unaudited
In thousands 1997 1996
<S> <C> <C>
Cash Flows From Operating Activities
Net Income $3,157 $4,025
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Gain on Purchased Assets (405) (717)
Provision for Depreciation 562 512
Provision for Loan Losses 525 165
Net Amortization (Accretion) on Securities (89) (68)
Provision (Credit) for Deferred Income Taxes 232 (59)
(Gain) Loss on Sale of Other Real Estate (59) (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 (29) (79)
(Increase) Decrease in Other Assets (1,166) (710)
Increase (Decrease) in Accrued Interest Payable (7) 15
Increase (Decrease) in Other Liabilities 413 (418)
Net Cash Provided by Operating Activities 2,945 2,374
Cash Flows From Investing Activities
Maturities or Calls of Securities Available for Sale 44,159 53,674
Purchases of Securities Available for Sale (40,302) (37,000)
Proceeds from Sale of Securities Available for Sale 189 276
Net (Increase) Decrease in Federal Funds Sold 2,350 (2,550)
Net (Increase) Decrease in Loans (11,872) (24,202)
Proceeds from Sale of Other Real Estate 130 11
Proceeds from Sale of Premises, Equipment, and Other Assets 0 0
Purchases of Premises and Equipment (1,509) (1,197)
Net Cash Used in Investing Activities (6,855) (10,988)
Cash Flows From Financing Activities
Net Increase (Decrease) in Demand Deposits, NOW and Savings Accounts (7,586) (2,098)
Net Increase (Decrease) in Certificates of Deposits 14,509 9,700
(Repayment) Proceeds of Other Borrowings (64) 782
Dividends Paid (1,215) (1,014)
Net Cash Provided (Used) By Financing Activities 5,644 7,370
Increase (Decrease) in Cash and Cash Equivalents 1,734 (1,244)
Cash and Cash Equivalents - Beginning of Year 13,946 15,232
Cash and Cash Equivalents - End of Period $15,680 $13,988
Supplemental Disclosure of Cash Flow Information
Income Tax Payments $1,231 $1,961
Interest Paid on Deposits $5,684 $5,365
Noncash Investing Activities
Other Real Estate Acquired in Settlement of Loans $131 $54
Change in Unrealized Gain (Loss) on Securities Available for Sale $441 ($711)
Change in Deferred Tax Effect on
Unrealized Gain (Loss) on Securities Available for Sale $150 ($242)
Noncash Financing Activities
Dividends Declared and Not Paid $406 $338
<FN>
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
September 30, 1997
(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 nine months ended
September 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
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various factors, including significant movements in interest
rates, changes in the maturity mix of the Bank's assets and
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 requires 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
September 30, 1997
Third Quarter in Review
Net income for the current quarter of 1997 was $1.0 million
compared to $1.2 million for the same quarter of 1996. The
decrease in net income is a result of an increase in provision
for loan losses and an increase in non-interest expenses.
Earnings per common share were $.73 and $.88 for the third
quarters of 1997 and 1996, respectively. Return on average
assets on an annualized basis was 1.37% for the current quarter,
and 1.64% in the same quarter of 1996. For the third quarters of
1997 and 1996, return on average equity on an annualized basis
was 11.40% and 13.81%, respectively. Cash dividends were $.30
per share for the current quarter and $.25 per share for the same
quarter of 1996.
For the first nine months of 1997, net income was $3.2
million compared to $4.0 million for the same period of 1996.
The reason for the decrease in net income for the first nine
months of 1997 compared to 1996 is due to greater provisions for
loan losses, decreases in non-interest income and increases in
non-interest expenses. Earnings per common share were $2.33 and
$2.98 for the first nine months of 1997 and 1996, respectively.
Return on average assets on an annualized basis was 1.47% and
1.93% for the first nine months of 1997 and 1996, respectively.
For the first nine months of 1997 and 1996, return on average
equity on an annualized basis was 12.40% and 17.10%,
respectively. Cash dividends were $.90 per share and $.75 per
share for the first nine months of 1997 and 1996, respectively.
Net interest income (FTE) for the current quarter was $3.3
million, $138 thousand greater than that of the third quarter of
1996. The net interest margin (FTE) was 4.95% for the current
quarter and 4.98% for the same quarter of 1996. For the first
nine months of 1997, net interest income (FTE) was $9.9 million
compared to $9.5 million for the same period of 1996. The
resulting net interest margin (FTE) for the first nine months of
1997 was 4.94% compared to 4.93% for the same period of 1996.
During the third quarter of 1997, in comparison with the
same quarter of 1996, average loans outstanding increased $20.1
million or 16% to $143.6 million. Average total deposits for
the current quarter increased $13.3 million or 6% to $254.6
million when compared to the average total deposits for the same
quarter of 1996. Average total assets for the current quarter
increased $15.9 million or 6% to $291.6 million when respectively
compared to the total average assets of the second quarter of
1996. For the first nine months of 1997, in comparison with the
same period of 1996, average loans outstanding increased $24.8
million or 21% to $140.4 million. Average total deposits for
the current nine month period increased $9.3 million or 4% to
$253.4 million when compared to the average total deposits for
the same period of 1996. Average total assets for the current
six month period increased $12.1 million or 4% to $289.6 million
when respectively compared to the total average assets of the
same period of 1996.
The Bank opened a full service office in Napoleonville,
Assumption Parish, Louisiana on September 2, 1997. The opening
of this office increases the Bank's full service offices to
sixteen. This office currently operates from a temporary
facility, however renovation of a permanent facility will begin
within the next quarter. Management anticipates the completion
of the permanent facility during the second quarter of 1998. The
Assumption Parish trade area is very similar to the Bank's other
rural trade areas. On September 18, 1997, the Bank purchased
real estate in Hammond, Tangipahoa Parish, Louisiana. This real
estate is intended for a future branch site in Hammond with plans
to build a new office sometime in 1998. This will provide the
Bank its second office in Hammond, one of the fastest growing
areas of the State.
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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, 3% greater than
that of the same quarter of 1996. A slight increase in the net
interest spread during the current quarter, supported by a
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 $138 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 $268.5 million, an increase of $12.7 million
or 3% over the third 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 improves 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 7.82%, while the average cost of interest
bearing liabilities was 3.72%, producing a net interest spread
(FTE) of 4.11%. The net interest margin (FTE) was 4.95% for the
current quarter of 1997. In comparison, the net interest margin
(FTE) for the same quarter of 1996 was 4.98%. The cost of
interest bearing liabilities during the third quarter of 1996 was
3.63%, while the yield on average earning assets was 7.79%,
producing a net interest spread of 4.17%. The 9 basis point
increase in the average cost of interest bearing liabilities from
the third quarter of 1996 to the same quarter of 1997, was
greater than the 3 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 nine months of 1997, the average yield of
earning assets was 7.79% while the cost of interest bearing
liabilities were 3.68%, resulting in a net interest spread (FTE)
of 4.10%. Net interest margin (FTE) was 4.94% for the first nine
months of 1997 compared to 4.93% for the same period of 1996.
The table of Average Balance Sheets and Interest Rate
Analysis for the quarterly and nine month periods ended September
30, 1997, December 31, 1996, and September 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.
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Provision for Loan Losses
Provision for Loan Losses was $300 thousand and $75 thousand
for the third quarters of 1997 and 1996, respectively. Net
charge-offs (recoveries) were $1.3 million for the current
quarter, versus $13 thousand for the same quarter of 1996. The
net charge-off position for the current quarter related primarily
to a non-domestic impaired credit which lacked the necessary
collateral value to support liquidation. Gross charge-offs as a
percentage of average loans were .9% in the current quarter and
insignificant in the third quarter of 1996. Recoveries as a
percentage of gross charge-offs for the current quarter were .8%
versus 55.2% for the same quarter of 1996. Management has
increased the provision for loan losses during the third quarter
of 1997 due to a need to increase the unallocated portion of the
Allowance for Loan Losses.
For the first nine months of 1997, Provision for Loan Losses
was $525 thousand compared to $165 thousand for the same period
last year. Net charge-offs (recoveries) were $2,048 thousand for
the first nine months of 1997, versus $110 thousand for the same
period of 1996. The net charge-off position for the first nine
months of 1997 also primarily related to the same non-domestic
impaired credit which was mentioned in the previous paragraph.
As a percentage of average loans, net charge-offs (recoveries)
were 1.3% in the first nine months of 1997 and .2% in the same
period of 1996. Gross charge-offs as a percentage of average
loans were 1.5% in the first nine months of 1997 and .4% in the
same period of 1996. Recoveries as a percentage of gross charge-
offs for the first nine months of 1997 were 7.3% 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 the funding
of Allowance for Loan Losses was created due to the non-domestic
credit which utilized a portion of the unallocated Allowance for
Loan Losses.
12
<PAGE>
<TABLE>
<CAPTION>
Earning Asset Structure Third Second Third
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> <C>
Interest Bearing Deposits $2,124 0.8% $2,524 0.9% $1,103 0.5%
Federal Funds Sold 9,857 3.7% 10,976 4.1% 6,186 2.4%
Securities
Taxable 102,015 38.0% 103,367 38.6% 115,299 45.1%
Non-Taxable 10,850 4.0% 9,374 3.4% 9,479 3.7%
Loans - Net 143,618 53.5% 141,225 52.8% 123,537 48.3%
Total Earning Assets $268,464 100.0% $267,466 100.0% $255,604 100.0%
<CAPTION>
Deposit Structure Third Second Third
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 $48,522 19.1% $48,796 19.3% $44,351 18.4%
NOW Accounts 25,546 10.0% 25,995 10.3% 24,031 10.0%
Savings Accounts 32,394 12.7% 32,617 12.9% 32,065 13.3%
Money Market Deposit Accounts 48,893 19.2% 49,823 19.8% 52,313 21.7%
Certificates of Deposits less than $100,000 87,564 34.4% 84,923 33.5% 77,618 32.2%
Total Core Deposits 242,919 95.4% 242,153 95.6% 230,378 95.5%
Certificates of Deposits greater than $100,000 11,643 4.6% 11,114 4.4% 10,906 4.5%
Total Deposits $254,562 100.0% $253,266 100.0% $241,284 100.0%
Interest Bearing Liabilities as a percentage
of Earning Assets 76.7% 76.4% 77.0%
Core Deposits as a percentage
of Total Average Assets 83.3% 83.7% 83.6%
</TABLE>
Other Income
Other income, including gains and losses from security
transactions for the current quarter, was $902 thousand, an
increase of $19 thousand or 2% compared to the same quarter of
1996. For the first nine months of 1997, other income, including
gains and losses from security transactions for the current
quarter, was $2.8 million, a decrease of $297 thousand or 10%
from the same period of 1996. Exclusive of security
transactions, other income for the first nine months of 1997
decreased $202 thousand or 7% from the same period of 1996.
Gain on purchased assets was $125 thousand for the current
quarter, a decrease of $8 thousand or 6% 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 nine months of 1997, gain
on purchased assets was $406 thousand, a decrease of $311
thousand or 43% from the same period of 1996.
The Bank did not experience any gains from security
transactions involving available - for - sale securities during
13
<PAGE>
the current quarter or third 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 nine 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 nine 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 third quarter of
1997, an increase of $193 thousand or 9% from the same quarter of
1996. Salaries and employee benefits were $1.2 million for the
current quarter compared to $1.1 million for the same of quarter
of 1996. Net occupancy expense was $326 thousand for the current
quarter, compared to $313 thousand for the third quarter of 1996.
Other operating expenses were $930 thousand for the current
quarter, an increase of $85 thousand or 10% compared to the same
quarter of 1996. The increase in other operating expenses is
related to legal and professional expenses associated with the
non-domestic credit. Management anticipates the level of legal
and professional expenses to decrease once the related impaired
credits liquidate. Further, management anticipates final
liquidation of these credits during the fourth quarter of 1997.
Effective October 21, 1997, management disposed of the collateral
associated with the non domestic impaired credit which increased
legal and professional expenses for the current quarter and first
nine months of 1997.
For the first nine months of 1997, other expenses were $7.2
million, an increase of $863 thousand or 14% from the same period
of 1996. Salaries and employee benefits were $3.5 million for
the nine month period compared to $3.1 million for the same
period of 1996. Net occupancy expense was $931 thousand for the
first nine months of 1997, compared to $855 thousand for the same
period of 1996. Other operating expenses were $2.9 million for
the first nine months of 1997, an increase of $494 thousand or
21% compared to the same period of 1996. The increase in other
operating expenses is related to legal and professional expenses
associated with the impaired credit along with increased expenses
associated with technology enhancements.
Applicable Income Taxes
Applicable income taxes for the current quarter were $460
thousand compared to $536 thousand for the third quarter of 1996.
Effective tax rates are 32% 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 nine months of 1997,
applicable income taxes were $1.6 million compared to $1.9
million for the same period of 1996. Effective tax rates are 34%
and 32%, respectively for the first nine 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 $242.9 million or 95% of total
average deposits and 83% of total average assets. For a
comparison with prior period quarters see the table entitled
Deposit Structure. Other sources of liquidity are maturities in
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.
14
<PAGE>
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
September 30, 1997. The table indicates that the Company's
interest bearing liabilities slightly exceed its earning assets
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.
15
<PAGE>
<TABLE>
<CAPTION>
Interest Rate Sensitivity Table
September 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 $27,631 $16,531 $57,069 $7,337 - $108,568
Loans, Net of Unearned Income 26,953 38,033 60,096 18,881 434 144,397
Federal Funds Sold 10,975 - - - - 10,975
Other Assets 3,501 - - - 28,170 31,671
Total Assets $69,060 $54,564 $117,165 $26,218 $28,604 $295,611
Liabilities
NOW and Super NOW Deposits $1,099 $3,294 $14,101 $4,625 - $23,119
Insured Money Market Accounts 296 22,576 24,553 - - 47,425
Savings Deposits 1,353 4,036 19,821 6,311 - 31,521
Certificates of Deposit 35,257 45,242 23,648 2,171 - 106,318
Noninterest Bearing Deposits 2,608 7,998 28,808 9,830 - 49,244
Other Liabilities 21 68 427 180 1,522 2,218
Stockholders' Equity - - - - 35,766 35,766
Total Liabilities and
Stockholders' Equity $40,634 $83,214 $111,358 $23,117 $37,288 $295,611
Interest Rate Sensitivity Gap $28,426 ($28,650) $5,807 $3,101 ($8,684) -
Cumulative Interest Rate
Sensitivity Gap $28,426 ($224) $5,583 $8,684 $0
GAP / Assets 9.6% -9.7% 2.0% 1.0% -2.9%
Cumulative GAP / Assets 9.6% -0.1% 1.9% 2.9% 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 September 30, 1997 and 1996, were
$9.7 million and $6.9 million, respectively. The Bank had
letters of credit of $657 thousand issued at
September 30, 1997 compared to $729 thousand at September 30,
1996. Additionally, the Bank has deposit customers who have
credit lines available to them through their deposit accounts.
At September 30, 1997 the available portion of these credit lines
was $569 thousand compared to $621 thousand at September 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. As of September 30, 1997, the
aggregate credit available was $3.4 million, and $2.8 million at
September 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.
16
<PAGE>
Securities
Included in the category of Securities of Other US
Government Agencies at September 30, 1997 is $18.5 million par
value of structured notes, with an amortized cost of $18.5
million and a fair value of $18.4 million, resulting in an
unrealized loss in the amount of $104 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 $1.7 million at September
30, 1997 or 1% of loans outstanding. At September 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. The Bank is increasing the
balance in Allowance for Loan Losses in order to accept any
adverse loan relationships which have the potential to occur in
the future.
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.
Management feels a need to increase the unallocated portion of
the Allowance for Loan Losses. The need to increase the
Allowance for Loan Losses was created due primarily to a non-
domestic impaired credit which utilized a portion of the
unallocated Allowance for Loan Losses.
Management feels a necessity to replenish the unallocated
portion of the Allowance for Loan Losses which was utilized by
this non-domestic credit. It is management's intention to fund
Allowance for Loan Losses from Provision for Loan Losses in the
amount of $150 thousand per month until the unallocated portion
of Allowance for Loan Losses is back within an acceptable range
based on modeling of the loan portfolio and the status of the
allocated and unallocated portion of the Allowance for Loan
Losses.
Nonperforming Assets
Nonperforming assets include nonaccrual loans, impaired
loans, repossessions 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 September 30, 1997 and 1996
were $259 thousand and $546 thousand, respectively. Impaired
loans having recorded investments of $3.6 million at September
30, 1997 compared to $4.0 million at September 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 $725 thousand at September 30, 1997 compared to $1.6 million
at September 30, 1996. Interest received on impaired loans
amounted to $299 thousand at September 30, 1997 compared to $371
thousand at September 30, 1996. Non-accrual loans not included
in impaired loans was immaterial at
September 30, 1997 and 1996.
17
<PAGE>
Other real estate is properties held for sale acquired
through foreclosure or negotiated settlements of debt. Other
real estate was $128 thousand at September 30, 1997 and
insignificant at the close of the third quarter of 1996.
Repossessions are movable assets acquired through foreclosure or
negotiated settlements of debt. Repossessions at September 30,
1997 were $425 thousand. The assets held as repossessions
constitute the collateral associated with the non-domestic credit
discussed earlier in the management's discussion and results of
operation. Management disposed of this asset on October 21,
1997.
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.
18
<PAGE>
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.
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 September 30, December 31, September 30,
1997 1996 1996
<S> <C> <C> <C>
Tier 1 Capital:
Stockholders' Equity $34,533 $32,549 $31,912
Tier 2 Capital:
Allowance for Loan Losses 1,711 1,706 1,684
Total Capital $36,244 $34,255 $33,596
Risk-Weighted Ratios:
Tier 1 Capital 22.8% 24.1% 24.0%
Total Capital 24.0% 25.3% 25.2%
Leverage Ratio 11.9% 11.8% 11.7%
Stockholders' Equity 11.7% 11.4% 11.3%
Regulatory Risk-Based Capitalization Requirements
Significantly Critically
Well Adequately Under Under Under
Capitalized Capitalized Capitalized Capitalized Capitalized
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 $5.1 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.
19
<PAGE>
<TABLE>
<CAPTION>
AVERAGE BALANCE SHEETS AND INTEREST RATE ANALYSIS
In thousands
Third Quarter 1997 Second Quarter 1997 Third 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 $2,124 $25.1 4.69% $2,524 $36.6 5.82% $1,103 $15.1 5.43%
Federal Funds Sold and Securities
Purchased under Resale Agreements 9,857 137.2 5.52% 10,976 150.8 5.51% 6,186 80.8 5.18%
Securities:
Taxable 102,015 1,489.0 5.79% 103,367 1,508.0 5.85% 115,299 1,713.6 5.90%
Non-Taxable* 10,850 232.6 8.50% 9,374 205.0 8.77% 9,479 203.8 8.53%
Loans - Net 143,618 3,403.7 9.40% 141,225 3,294.6 9.36% 123,537 3,005.0 9.65%
Total Earning Assets 268,464 5,287.6 7.82% 267,465 5,195.0 7.79% 255,604 5,018.3 7.79%
Allowance for Loan Losses (2,209) (2,748) (3,291)
Nonearning Assets 25,358 24,749 23,423
Total Assets $291,613 $289,466 $275,736
Liabilities and Stockholders' Equity
NOW Accounts $25,546 137.7 2.14% $25,995 137.1 2.12% $24,031 126.9 2.10%
Savings Accounts 32,394 206.8 2.53% 32,617 205.2 2.52% 32,065 205.1 2.54%
Money Market Deposit Accounts 48,893 345.3 2.80% 49,822 348.7 2.81% 52,313 356.8 2.71%
Certificates of Deposits less than $100,000 87,564 1,109.9 5.03% 84,922 1,055.7 4.99% 77,618 986.3 5.04%
Certificates of Deposits greater than $100,000 11,643 129.1 4.40% 11,113 123.4 4.45% 10,906 121.2 4.41%
Total Interest Bearing Deposits 206,040 1,928.8 3.71% 204,470 1,870.1 3.67% 196,933 1,796.3 3.62%
Other Borrowings 706 11.4 6.41% 727 11.8 6.51% 789 12.7 6.39%
Total Interest Bearing Liabilities 206,746 1,940.2 3.71% 205,197 1,881.9 3.68% 197,722 1,809.0 3.62%
Noninterest Bearing Deposits 48,522 48,796 44,351
Other Liabilities 1,228 1,044 1,236
Stockholders' Equity 35,117 34,430 32,427
Total Liabilities and Stockholders' Equity $291,613 $289,466 $275,736
Net Interest Income - Tax Equivalent Basis* 3,347.4 3,313.1 3,209.3
Tax Equivalent Adjustment (79.1) (69.7) (69.3)
Net Interest Income $3,268.3 $3,243.4 $3,140.0
Net Interest Income - Spread* 4.11% 4.11% 4.17%
Net Interest Income as a % of Total Earning Assets* 4.95% 4.97% 4.98%
*Tax Equivalent Basis - 34% Rate for the periods dated
20
<PAGE>
<CAPTION>
AVERAGE BALANCE SHEETS AND INTEREST RATE ANALYSIS
In thousands
Nine Months Ended Nine Months Ended
September 30 1997 September 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 $2,790 $110.0 5.27% $1,531 $59.0 5.13%
Federal Funds Sold and Securities
Purchased under Resale Agreements 11,715 473.3 5.40% 8,752 343.7 5.23%
Securities:
Taxable 102,407 4,477.1 5.85% 121,386 5,357.3 5.88%
Non-Taxable* 9,880 640.2 8.66% 9,825 643.9 8.73%
Loans - Net 140,380 9,856.8 9.39% 115,575 8,498.0 9.79%
Total Earning Assets 267,172 15,557.4 7.79% 257,069 14,901.9 7.72%
Allowance for Loan Losses (2,697) (3,261)
Nonearning Assets 25,148 23,682
Total Assets $289,623 $277,490
Liabilities and Stockholders' Equity
NOW Accounts $26,145 414.4 2.12% $25,063 400.2 2.13%
Savings Accounts 32,318 610.6 2.53% 32,334 614.5 2.53%
Money Market Deposit Accounts 50,481 1,056.2 2.80% 54,078 1,133.3 2.79%
Certificates of Deposits less than $100,000 84,730 3,177.1 5.01% 76,659 2,866.5 4.98%
Certificates of Deposits greater than $100,000 11,649 384.1 4.41% 10,423 337.7 4.32%
Total Interest Bearing Deposits 205,323 5,642.4 3.68% 198,557 5,352.2 3.59%
Other Borrowings 727 35.0 6.44% 790 27.8 4.69%
Total Interest Bearing Liabilities 206,050 5,677.4 3.68% 199,347 5,380.0 3.60%
Noninterest Bearing Deposits 48,051 45,478
Other Liabilities 1,086 1,286
Stockholders' Equity 34,436 31,379
Total Liabilities and Stockholders' Equity $289,623 $277,490
Net Interest Income - Tax Equivalent Basis* 9,880.0 9,521.9
Tax Equivalent Adjustment (217.7) (218.9)
Net Interest Income $9,662.3 $9,303.0
Net Interest Income - Spread* 4.11% 4.13%
Net Interest Income as a % of Total Earning Assets* 4.94% 4.93%
*Tax Equivalent Basis - 34% Rate for the periods dated
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
INTEREST DIFFERENTIALS
In thousands
Nine Months Ended
Third Quarter 1997 Third Quarter 1997 September 30, 1997
vs vs vs
Second Quarter 1997 Third Quarter 1996 September 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 ($5.8) ($5.7) ($11.5) $14.0 ($4.0) $10.0 $49 $2 $51
Federal Funds Sold (15.4) 1.8 (13.6) 47.9 8.5 56.4 116 13 130
Securities:
Taxable (19.7) 0.7 (19.0) (197.4) (27.2) (224.6) (838) (43) (880)
Non-Taxable* 32.3 (4.7) 27.6 29.5 (0.7) 28.8 4 (7) (4)
Loans 55.8 53.3 109.1 488.5 (89.8) 398.7 1,824 (465) 1,359
Total Interest Income 47.2 45.3 92.6 382.4 (113.2) 269.3 1,155 (499) 655
Interest Bearing Liabilities:
NOW Accounts (2.4) 3.0 0.6 8.0 2.8 10.8 17 (3) 14
Savings Accounts (1.4) 3.0 1.6 2.1 (0.4) 1.7 (0) (4) (4)
Money Market Deposit Accounts (6.5) 3.1 (3.4) (23.3) 11.8 (11.5) (75) (2) (77)
Certificates of Deposits less than $100,000 32.8 21.4 54.2 126.4 (2.8) 123.6 302 9 311
Certificates of Deposits greater than $100,000 5.9 (0.2) 5.7 8.2 (0.3) 7.9 40 7 46
Other Borrowings (0.3) (0.1) (0.4) (1.3) 0.0 (1.3) (2) 9 7
Total Interest Expense 28.1 30.2 58.3 120.0 11.2 131.2 281 17 297
Increase (Decrease) in
Interest Differential $19.1 $15.2 $34.3 $262.4 ($124.3) $138.1 $874 ($516) $358
*Tax Equivalent Basis - 34% Rate for the periods dated
</TABLE>
22
<PAGE>
Part II
Item 1. Legal Proceedings
During the normal course of business, the Company is
involved in various 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
None
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, L. L. P. independent public
accountant, who rendered an independent professional opinion on
the financial statements prepared by management. The financial
statements as of September 30, 1997, have not been reviewed by
Hannis T. Bourgeois, 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> SEP-30-1997
<PERIOD-TYPE> 6-MOS
<CASH> 12179
<INT-BEARING-DEPOSITS> 3501
<FED-FUNDS-SOLD> 10975
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 108568
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 146108
<ALLOWANCE> 1711
<TOTAL-ASSETS> 195611
<DEPOSITS> 257627
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2218
<LONG-TERM> 0
<COMMON> 7500
0
0
<OTHER-SE> 28276
<TOTAL-LIABILITIES-AND-EQUITY> 295611
<INTEREST-LOAN> 9857
<INTEREST-INVEST> 4899
<INTEREST-OTHER> 524
<INTEREST-TOTAL> 15339
<INTEREST-DEPOSIT> 110
<INTEREST-EXPENSE> 5677
<INTEREST-INCOME-NET> 9662
<LOAN-LOSSES> 525
<SECURITIES-GAINS> 190
<EXPENSE-OTHER> 7197
<INCOME-PRETAX> 4751
<INCOME-PRE-EXTRAORDINARY> 4751
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3157
<EPS-PRIMARY> 2.33
<EPS-DILUTED> 2.33
<YIELD-ACTUAL> 7.79
<LOANS-NON> 434
<LOANS-PAST> 259
<LOANS-TROUBLED> 826
<LOANS-PROBLEM> 2027
<ALLOWANCE-OPEN> 3083
<CHARGE-OFFS> 2047
<RECOVERIES> 150
<ALLOWANCE-CLOSE> 1711
<ALLOWANCE-DOMESTIC> 725
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 986
</TABLE>
