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, 1998 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, $2.50 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 $2.50 Par Value, 2,696,090 shares outstanding
as of August 13, 1998.
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FORM 10-Q Index
Part I
Financial Information
Financial Statements
Consolidated Balance Sheets,
June 30, 1998, December 31, 1997 and June 30, 1997 3
Consolidated Statements of Income
for the three and six months ended June 30, 1998 and 1997 4
Consolidated Statements of Changes in Stockholders' Equity
for the six months ended June 30, 1998 and 1997 5
Consolidated Statements of Cash Flows
for the six months ended June 30, 1998 and 1997 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Average Balance Sheets and Interest Rate Analysis
for the three and six months ended June 30, 1998,
December 31, 1997 and June 30, 1997 23
Interest Differentials
for the three and six months ended June 30, 1998,
December 31, 1997 and June 30, 1997 24
Part II
Other Information
Legal Proceedings 25
Exhibits and Reports on Form 8-K 25
Management's Responsibility for Financial Reporting 26
Signatures 27
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<TABLE>
Consolidated Balance Sheets
One American Corp. and Subsidiaries Unaudited Unaudited Unaudited
June 30, 1998 and 1997 June 30, December 31 June 30,
In thousands 1998 1997 1997
<S> <C> <C> <C>
Assets
Cash and Due From Banks $12,258 $10,219 $12,390
Interest Bearing Deposits in Other Banks 3,438 2,896 3,988
Federal Funds Sold and Securities
Purchased Under Resale Agreements 2,775 12,150 8,900
Securities
Available for Sale (Amortized Cost of $113,505, $114,212
and $111,940, respectively) 114,124 114,877 112,199
Total Securities 114,124 114,877 112,199
Loans 163,509 149,165 142,625
Less: Allowance for Loan Losses (3,010) (2,190) (2,752)
Loans, Net 160,499 146,975 139,873
Bank Premises and Equipment 11,008 10,837 9,635
Other Real Estate 36 78 23
Accrued Interest Receivable 2,146 2,176 1,917
Other Assets 2,431 2,186 2,200
Total Assets $308,715 $302,394 $291,125
Liabilities
Deposits:
Noninterest Bearing $52,224 $52,015 $49,844
Interest Bearing 216,699 211,642 204,235
Total Deposits 268,923 263,657 254,079
Accrued Interest Payable 798 777 634
Other Liabilities 1,858 1,705 1,418
Total Liabilities 271,579 266,139 256,131
Stockholders' Equity
Common Stock-$2.50 par value;
Authorized-10,000,000 shares;
Issued-3,000,000 shares 7,500 7,500 7,500
Surplus 5,000 5,000 5,000
Retained Earnings 25,021 23,943 22,948
Unrealized Gain (Loss) on Securities Available for Sale, Net 409 439 171
Treasury Stock - 303,910, 296,900 and 296,770 shares at cost (794) (627) (625)
Total Stockholders' Equity 37,136 36,255 34,994
Total Liabilities and Stockholders' Equity $308,715 $302,394 $291,125
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
Consolidated Statements of Income
One American Corp. and Subsidiaries Three Months Ended Six Months Ended
for the three and six months ended June 30, 1998 and 1997 Unaudited Unaudited Unaudited Unaudited
In thousands, except per share data 1998 1997 1998 1997
<S> <C> <C> <C> <C>
Interest Income
Interest and Fees on Loans $3,665 $3,294 $7,169 $6,453
Interest on Securities:
Taxable Interest 1,551 1,508 3,015 2,988
Nontaxable Interest 144 135 294 269
Total Interest on Securities 1,695 1,643 3,309 3,257
Other Interest Income 196 187 425 421
Total Interest Income 5,556 5,124 10,903 10,131
Interest Expense on Deposits 2,046 1,882 4,054 3,737
Net Interest Income 3,510 3,242 6,849 6,394
Provision for Loan Losses 300 150 750 225
Net Interest Income After
Provision for Loan Losses 3,210 3,092 6,099 6,169
Other Income
Service Charges on Deposit Accounts 498 522 1,019 1,043
Gain on Securities - 166 - 190
Gain on Purchased Assets 165 170 425 281
Other Operating Income 267 205 484 395
Total Other Income 930 1,063 1,928 1,909
Income Before Other Expenses 4,140 4,155 8,027 8,078
Other Expenses
Salaries and Employee Benefits 1,294 1,176 2,517 2,276
Net Occupancy Expense 309 312 629 605
Net ORE and Repossession Expense 14 (18) (20) (27)
Other Operating Expenses 975 917 1,886 1,927
Total Other Expenses 2,592 2,387 5,012 4,781
Income Before Income Taxes 1,548 1,768 3,015 3,297
Applicable Income Taxes 490 577 992 1,134
Net Income $1,058 $1,191 $2,023 $2,163
Net Income Per Share $0.39 $0.44 $0.75 $0.80
Cash Dividends Per Share $0.17 $0.15 $0.35 $0.30
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
Consolidated Statements of Changes in Stockholders' Equity
One American Corp. and Subsidiaries
for the period ended June 30, 1998 and 1997 Unaudited Unaudited
In thousands 1998 1997
<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 $23,943 $21,596
Net Income 2,023 2,163
Cash Dividends (945) (811)
Balance - End of Period $25,021 $22,948
Unrealized Gain (Loss) on Securities Available for Sale, Net
Balance - Beginning of Period $439 $64
Net Change in Unrealized Gain (Loss) (30) 107
Balance - End of Period $409 $171
Treasury Stock
Balance - Beginning of Period ($627) ($625)
Treasury Stock Purchased (7,010 shares ) (167) -
Balance - End of Period ($794) ($625)
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
Consolidated Statements of Cash Flows
One American Corp. and Subsidiaries
for the period ended June 30, 1998 and 1997 Unaudited Unaudited
In thousands 1998 1997
<S> <C> <C>
Cash Flows From Operating Activities
Net Income $2,023 $2,163
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Gain on Purchased Assets (425) (280)
Provision for Depreciation 399 371
Provision for Loan Losses 750 225
Net Amortization (Accretion) on Securities (164) (59)
Provision (Credit) for Deferred Income Taxes (201) (141)
(Gain) Loss on Sale of Other Real Estate and Repossessions (23) (33)
(Gain) Loss on Securities - (189)
Changes in Assets and Liabilities:
(Increase) Decrease in Accrued Interest Receivable 30 114
(Increase) Decrease in Other Assets (28) 308
Increase (Decrease) in Accrued Interest Payable 21 (59)
Increase (Decrease) in Other Liabilities 57 282
Net Cash Provided by Operating Activities 2,439 2,702
Cash Flows From Investing Activities
Maturities or Calls of Securities Available for Sale 35,520 28,606
Purchases of Securities Available for Sale (34,650) (28,687)
Proceeds from Sale of Securities Available for Sale - 189
Net (Increase) Decrease in Federal Funds Sold 9,375 4,425
Net (Increase) Decrease in Loans (13,883) (7,068)
Proceeds from Sale of Other Real Estate and Repossessions 99 104
Purchases of Premises and Equipment (570) (361)
Proceeds from Other Borrowings (70) (42)
Net Cash Used in Investing Activities (4,179) (2,834)
Cash Flows From Financing Activities
Net Increase (Decrease) in Demand Deposits, NOW
and Savings Accounts 3,329 (1,159)
Net Increase (Decrease) in Certificates of Deposits 1,937 4,534
Dividends Paid (945) (811)
Net Cash Provided By Financing Activities 4,321 2,564
Increase (Decrease) in Cash and Cash Equivalents 2,581 2,432
Cash and Cash Equivalents - Beginning of Period 13,115 13,946
Cash and Cash Equivalents - End of Period $15,696 $16,378
Supplemental Disclosure of Cash Flow Information:
Income Tax Payments $1,167 $921
Interest Paid on Deposits $4,032 $3,796
Noncash Investing Activities:
Other Real Estate Acquired in Settlement of Loans $34 $26
Change in Unrealized Gain (Loss) on
Securities Available for Sale ($45) $162
Change in Deferred Tax Effect on
Unrealized Gain (Loss) on Securities Available for Sale ($15) $55
Noncash Financing Activities:
Dividends Declared and Not Paid $472 $406
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
June 30, 1998
(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 to generally
accepted accounting principles and have been applied on a
consistent basis. The principles that 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,
1998 are no indication of the expected results for the annual
period that ends December 31, 1998. 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, 1997.
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.
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.
Material estimates that are particularly susceptible to
change in the near-term relate to the determination of the
allowance for loan losses and the valuation of real estate
acquired in connection with foreclosures or in satisfaction of
loans. In connection with the determination of the allowance for
loan losses and real estate owned, the Bank obtains independent
appraisals for significant properties.
Securities - Management determines the appropriate
classification of debt securities (Held to Maturity, Available
for Sale, or Trading) at the time of purchase and re-evaluates
this classification periodically. Securities that management has
both the intent and ability to hold to maturity regardless of
changes in market conditions, liquidity needs or changes in
general economic conditions are classified as securities held to
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maturity. These securities are carried at cost adjusted for
amortization of premium and accretion of discount, computed by
various methods approximating the interest method over their
contractual lives.
Securities that may be sold prior to maturity are classified
as securities available for sale. 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
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. The Bank had no securities classified
as held to maturity or trading at June 30, 1998 or 1997.
Securities purchased for trading purposes are classified as
trading securities and are carried at market value with market
adjustments included in non-interest income.
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.
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. The classifies loans as impaired if,
based on current information and events, it is possible that the
Bank will be unable to collect the scheduled payments of
principal and interest when due according to the contractual
terms of the loan agreement. The measurement of impaired loans
is based on the present value of the expected future cash flows
discounted at the loan's effective interest rate or the loan's
observable market price or based on the fair value of the
collateral if the loan is collateral-dependent.
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. Allowances for impaired
loans are generally determined based upon collateral value or the
present value of estimated cash flows.
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
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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.
Deferred taxes are provided utilizing a liability method
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 - In February 1997, Statement of
Financial Accounting Standard No. 128 "Earnings Per Share" ("SFAS
NO. 128") was issued which establishes standards for computing
and presenting earnings per share (EPS). Under SFAS No. 128,
primary EPS is replaced with basic EPS. Basic EPS is computed by
dividing income applicable to common shares by the weighted
average shares outstanding; no dilution for any potentially
convertible shares is included in the calculation. Fully diluted
EPS, now called diluted EPS, reflects the potential dilution that
could occur if securities or other contracts to issue common
stock were exercised or converted into common stock or resulted
in the issuance of common stock that then shared in the earnings
of the company. At June 30, 1998, the company had no convertible
shares or other contracts to issue common stock. The weighted
average number of shares of common stock used to calculate basic
EPS was 2,699,960 and 2,703,230 for the second quarters of 1998
and 1997, respectively; and 2,701,077 and 2,703,230 for the six
month periods ending June 30, 1998 and 1997, respectively.
On April 22, 1998, the organization reduced the par value of
its common shares from $5.00 to $2.50 per share to effect a 2 -
for - 1 stock split issued May 8, 1998. The earnings per common
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share for the three month and six month period ending June 30,
1997 have been retroactively restated for this stock split.
Statements of Cash Flows - For purposes of reporting cash
flows, cash and cash equivalents includes cash on hand and
amounts due from banks (including cash items in process of
clearing).
Comprehensive Income - The Financial Accounting Standards
Board issued Statement No. 130 "Reporting Comprehensive Income,"
which became effective for fiscal years beginning after December
15, 1997. This statement establishes standards for reporting and
display of comprehensive income and its components which are
revenues, expenses, gains, and losses that under GAAP are
included in comprehensive income but excluded from net income.
The company adopted this statement in 1998. The only component
of comprehensive income affecting the financial statements was
unrealized gain or loss on securities available for sale that was
immaterial for all periods presented.
Acquisitions - On March 5, 1998, First American Agency,
L.L.C., a subsidiary of First American Bank and Trust, acquired
Riverbend Insurance Agency, Inc of Destrehan, St Charles Parish,
Louisiana. The results of its operations are included in the
financial statements for the three month and six month periods
ended June 30, 1998.
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One American Corp. and Subsidiaries
Management's Discussion and Analysis of Financial
Condition and Results of Operations
June 30, 1998
Second Quarter in Review
For the current quarter of 1998, net income was $1.1 million
compared to $1.2 million for the same quarter of 1997. An
increase in provision for loan losses and increase in non-
interest expense accounted for the decrease in net income.
Earnings per common share were $.39 and $.44 for the second
quarters of 1998 and 1997, respectively. Return on average
assets on an annualized basis was 1.37% for the current quarter,
and 1.65% for the same quarter of 1997. For the second quarters
of 1998 and 1997, return on average equity on an annualized basis
was 11.59% and 13.84%, respectively. Cash dividends were $.17
per share for the current quarter and $.15 per share for the same
quarter of 1997.
For the first six months of 1998, net income was $2.0
million compared to $2.2 million for the same period of 1996.
The reason for the decrease in net income for the first six
months of 1998 compared to 1997 is also due to greater provisions
for loan losses and increases in non-interest expense. Earnings
per common share were $.75 and $.80 for the first six months of
1998 and 1997, respectively. Return on average assets on an
annualized basis was 1.32% and 1.50% for the first six months of
1998 and 1997, respectively. For the first six months of 1998
and 1997, return on average equity on an annualized basis was
11.22% and 12.80%, respectively. Cash dividends were $.35 per
share and $.30 per share for the first six months of 1998 and
1997, respectively
Net interest income (FTE) for the current quarter was $3.6
million, $270 thousand greater than that of the second quarter of
1997. The net interest margin (FTE) was 5.04% for the current
quarter and 4.97% for the same quarter of 1997. For the first six
months of 1998, net interest income (FTE) was $7.0 million
compared to $6.5 million for the same period of 1997. The
resulting net interest margin (FTE) for the first six months of
1998 was 4.99% compared to 4.94% for the same period of 1997.
During the second quarter of 1998, in comparison with the
same quarter of 1997, average loans outstanding increased $14.6
million or 10% to $155.8 million. Average total deposits for the
current quarter increased $17.5 million or 7% to $270.8 million
when compared to the average total deposits for the same quarter
of 1997. Average total assets for the current quarter increased
$20.3 million or 7% to $309.7 million when respectively compared
to the total average assets of the second quarter of 1997. For
the first six months of 1998, in comparison with the same period
of 1997, average loans outstanding increased $13.6 million or 10%
to $152.3 million. Average total deposits for the current six
month period increased $16.1 million or 6% to $268.7 million when
compared to the average total deposits for the same period of
1997. Average total assets for the current six month period
increased $19.0 million or 7% to $307.2 million when respectively
compared to the total average assets of the same period of 1997.
On February 28, 1998, First American Agency, L.L.C., a
subsidiary of First American Bank and Trust, was formed. First
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American Agency, L.L.C. was formed to provide insurance needs for
the Bank's market area. On March 5, 1998, First American Agency,
L.L.C. acquired Riverbend Insurance Agency, Inc of Destrehan, St
Charles Parish, Louisiana. Management intends to provide the
Bank's customer base the ability to obtain insurance. The
ability for the Bank's customer base to obtain insurance from a
subsidiary of the Bank provides an additional level of
convenience to the Bank's customer base and the ability for the
Bank to increase non-interest income.
On April 22, 1998, the organization reduced the par value of
its common shares from $5.00 to $2.50 per share to effect a 2 -
for - 1 stock split issued May 8, 1998. The earnings per common
share for the three month and six month period ending June 30,
1997 have been retroactively adjusted for this stock split.
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 1998 was $3.6 million, 8% greater than
the same quarter of 1997. The improvement in net interest income
can be attributed to the change in volume of loans that provided
an increase of $270 thousand in net interest income (FTE) when
comparing the second quarter of 1998 to the second quarter of
1997. Net interest income (FTE) for the first six months of 1998
was $7.0 million, an increase of $467 thousand or 7% over the
same period of 1997. The improvement in net interest income for
the first six months of 1998 over the same period of 1997 can
also be attributed to an increase in the volume of loans.
Earning Assets, Interest Bearing Liabilities, and Net
Interest Spread - During the current quarter of 1998, average
earning assets were $285.4 million, an increase of $17.9 million
or 7% over the second quarter of 1997. The trend in earning
assets over the quarters compared continues to show 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
that 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 a strong economic climate.
The trend over the quarters compared shows the mix of
interest bearing liabilities shifting to certificates of deposit
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and money market accounts from NOW accounts. As an additional
note, the Bank continues to benefit from the increase in non-
interest bearing deposits while at the same time improve 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 1998, the average yield on
earning assets was 7.91%, while the average cost of interest
bearing liabilities was 3.78%, producing a net interest spread
(FTE) of 4.13%. The net interest margin (FTE) was 5.04% for the
current quarter of 1998. In comparison, the net interest margin
(FTE) for the same quarter of 1997 was 4.97%. The cost of
interest bearing liabilities during the second quarter of 1997
was 3.68%, while the yield on average earning assets was 7.80%,
producing a net interest spread of 4.12%. The 10 basis point
increase in the average cost of interest bearing liabilities from
the second quarter of 1997 to the same quarter of 1998, was less
than the 11 basis point increase in the yield on interest earning
assets for the respective quarters.
For the first six months of 1998, the average yield of
earning assets was 7.88% while the cost of interest bearing
liabilities were 3.79%, resulting in a net interest spread (FTE)
of 4.09%. Net interest margin (FTE) was 4.99% for the first six
months of 1998 compared to 4.94% for the same period of 1997.
The table of Average Balance Sheets and Interest Rate
Analysis for the quarterly periods ended June 30, 1998, December
31, 1997, and June 30, 1997, 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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<TABLE>
Earning Asset Structure Second First Second
In thousands Quarter 1998 Quarter 1998 Quarter 1997
% 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 $2,844 1.0% $4,569 1.6% $2,524 0.9%
Federal Funds Sold 9,925 3.4% 14,220 5.1% 10,976 4.1%
Securities
Taxable 106,643 37.4% 101,804 36.4% 103,367 38.7%
Non-Taxable 10,147 3.6% 10,633 3.8% 9,374 3.5%
Loans - Net 155,801 54.6% 148,787 53.1% 141,226 52.8%
Total Earning Assets $285,360 100.0% $280,013 100.0% $267,467 100.0%
Deposit Structure Second First Second
Quarter 1998 Quarter 1998 Quarter 1997
Average % of Average % of Average % of
Balances Deposits Balances Deposits Balances Deposits
<S> <C> <C> <C> <C> <C> <C>
Noninterest Bearing Deposits $55,090 20.3% $52,864 19.8% $48,796 19.3%
NOW Accounts 23,587 8.7% 25,641 9.6% 25,995 10.3%
Savings Accounts 31,650 11.7% 31,128 11.7% 32,617 12.9%
Money Market Deposit Accounts 54,780 20.2% 52,356 19.7% 49,822 19.7%
Certificates of Deposits
less than $100,000 94,303 34.9% 92,804 34.8% 84,923 33.4%
Total Core Deposits 259,410 95.8% 254,793 95.6% 242,153 95.6%
Certificates of Deposits
greater than $100,000 11,345 4.2% 11,860 4.4% 11,112 4.4%
Total Deposits $270,755 100.0% $266,653 100.0% $253,265 100.0%
Interest Bearing Liabilities as a
percentage of Earning Assets 75.6% 76.3% 76.4%
Core Deposits as a percentage
of Total Average Assets 83.8% 83.5% 83.7%
</TABLE>
Provision for Loan Losses
Provision for Loan Losses was $300 thousand and $150
thousand for the second quarters of 1998 and 1997, respectively.
Net charge-offs (recoveries) were ($89) thousand for the current
quarter, versus $570 thousand for the same quarter of 1997.
Gross charge-offs as a percentage of average loans were .03% and
.42% in the second quarters of 1998 and 1997, respectively.
Recoveries as a percentage of gross charge-offs for the current
quarter were 323% versus 3% for the same quarter of 1997.
Management provided $100 thousand per month to provision for loan
losses during the second quarter of 1998 due to a need to
increase the unallocated portion of Allowance for Loan Losses.
For the first six months of 1998, Provision for Loan Losses
was $750 thousand compared to $225 thousand for the same period
last year. Net charge-offs (recoveries) were ($70) thousand for
14
<PAGE>
the first six months of 1998, versus $557 thousand for the same
period of 1997. Gross charge-offs as a percentage of average
loans were .07% in the first six months of 1998 and .5% in the
same period of 1997. Recoveries as a percentage of gross charge-
offs for the first six months of 1998 were 169% versus 20% for
the same period of 1997. 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 past impaired credits that
utilized a portion of the unallocated Allowance for Loan Losses.
Other Income
Other income, including gains and losses from security
transactions for the current quarter, was $930 thousand, a
decrease of $133 thousand or 13% compared to the same quarter of
1997. Exclusive of security transactions, other income for the
current quarter increased $33 thousand or 4% from the same period
of 1997. Exclusive of security transactions, other income for
the first six months of 1998 increased $209 thousand or 12% from
the same period of 1997.
Gain on purchased assets was $165 thousand for the current
quarter, a decrease of $5 thousand from the same quarter of 1997.
For the first six months of 1998, gain on purchased assets was
$425 thousand, an increase of $144 thousand or 51% from the same
period of 1997. These gains are recognition of the collection of
principal on certain loans acquired as a result of past bank
acquisitions. The Bank continues to pursue the collection of
these loans. However, the amount of future gains, if any are
indeterminable.
The Bank did not experience any gains from security
transactions involving Available for Sale securities during the
current quarter. However, the Bank experienced $166 thousand as
gains from security transactions involving Available for Sale
securities during the second quarter of 1997.
Other Expenses
Other expenses were $2.6 million for the second quarter of
1998 and an increase of $205 thousand or 9% for the same quarter
of 1997. Salaries and employee benefits were $1.3 million for
the current quarter compared to $1.2 million for the same of
quarter of 1997. Net occupancy expense was $309 thousand for the
current quarter, compared to $312 thousand for the second quarter
of 1997. Other operating expenses were $975 thousand for the
current quarter, an increase of $58 thousand or 6% compared to
the same quarter of 1997.
For the first six months of 1998, other expenses were $5.0
million, an increase of $231 thousand or 5% from the same period
of 1997. Salaries and employee benefits were $2.5 million for
the six month period compared to $2.3 million for the same period
of 1997. Net occupancy expense was $629 thousand for the first
six months of 1998, compared to $605 thousand for the same period
of 1997. Other operating expenses were $1.9 million for the
first six months of 1997, a decrease of $41 thousand compared to
the same period of 1997.
15
<PAGE>
Applicable Income Taxes
Applicable income taxes for the current quarter were $490
thousand compared to $577 thousand for the second quarter of
1997. Effective tax rates are 32% and 33%, respectively. For
the first six months of 1998, applicable income taxes were $992
thousand compared to $1.1 million for the same period of 1997.
Effective tax rates are 33% and 34%, respectively for the first
six months of 1998 and 1997. 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.
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 Bank's core deposit base. During the quarter,
average core deposits were approximately $259.4 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
the investment portfolio, loan maturities and repayments, and
sources of short term borrowings. 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 the maturities of the investment portfolio; cash
flows from the loan portfolio; and the ability of short term
borrowings; 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
16
<PAGE>
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, 1998. The table
indicates that the Company's interest bearing liabilities slightly
exceed its earning assets out to the one year point in time,
suggesting liabilities may reprice at a faster rate than assets.
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.
<TABLE>
Interest Rate Sensitivity Table
June 30, 1998
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 $12,262 $31,401 $55,678 $14,783 - $114,124
Loans, Net of Unearned Income 24,577 40,894 55,647 38,572 809 160,499
Federal Funds Sold 2,775 - - - - 2,775
Other Assets 3,438 - - - 27,879 31,317
Total Assets $43,052 $72,295 $111,325 $53,355 $28,688 $308,715
Liabilities
NOW and Super NOW Deposits $378 $1,128 $16,249 $4,437 - $22,192
Insured Money Market Accounts 390 27,676 28,741 - - 56,806
Savings Deposits 975 2,923 21,288 6,287 - 31,473
Certificates of Deposits 31,165 52,587 20,414 2,062 - 106,228
Noninterest Bearing Deposits 4,796 14,514 22,480 10,434 - 52,224
Other Liabilities 36 109 672 283 1,556 2,656
Stockholders' Equity - - - - 37,136 37,136
Total Liabilities and
Stockholders' Equity $37,740 $98,937 $109,843 $23,503 $38,692 $308,715
Interest Rate Sensitivity Gap $5,312 ($26,642) $1,482 $29,852 ($10,004) -
Cumulative Interest Rate
Sensitivity Gap $5,312 ($21,330) ($19,848) $10,004 -
GAP / Assets 1.7% -8.6% 0.5% 9.7% -3.2%
Cumulative GAP / Assets 1.7% -6.9% -6.4% 3.2% -
</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
17
<PAGE>
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, 1998 and 1997, were $6.5
million and $8.6 million, respectively. The Bank had letters of
credit of $553 thousand issued at June 30, 1998 compared to $470
thousand at June 30, 1997. Additionally, the Bank has deposit
customers who have credit lines available to them through their
deposit accounts. At June 30, 1998 the available portion of
these credit lines was $349 thousand compared to $628 thousand at
June 30, 1997. 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
issues credit cards. As of June 30, 1998, the aggregate credit
available was $3.4 million, and $3.3 million at June 30, 1997.
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.
Allowance for Loan Losses
The allowance for loan losses was $3.0 million at June 30,
1998 or 1.8% of loans outstanding. At June 30, 1997, the
allowance for loan losses was $2.8 million or 1.9% 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 that 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 that utilized a portion of the
unallocated Allowance for Loan Losses during the third quarter of
1997.
Management feels a necessity to replenish the unallocated
portion of Allowance for Loan Losses which was utilized by this
non-domestic credit. Management funded Allowance for Loan Losses
from Provision for Loan Losses in the amount of $100 thousand per
month during the second quarter of 1998. Management intends to
continue funding the unallocated portion of Allowance for Loan
Losses at an acceptable level until Allowance for Loan Losses is
within an acceptable range based on modeling of the loan
18
<PAGE>
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 June 30, 1998 and 1997 were
$292 thousand and $258 thousand, respectively. Impaired loans
having recorded investments of $4.1 million at June 30, 1998
compared to $3.5 million at June 30, 1997 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 $1.1
million at June 30, 1998 compared to $937 thousand at June 30,
1997. Interest received on impaired loans amounted to $217
thousand at June 30, 1998 compared to $115 thousand at June 30,
1997. Non-accrual loans not included in impaired loans were
immaterial at June 30, 1998 and 1997.
Other real estate is properties held for sale acquired
through foreclosure or negotiated settlements of debt. Other
real estate was $36 thousand at June 30, 1998 and $78 thousand at
the close of the second quarter of 1997. Repossessions are
movable assets acquired through foreclosure or negotiated
settlements of debt. No repossessions existed at June 30, 1998.
In the process of reviewing the loan portfolio, management
acknowledges certain potential problem loans that 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
19
<PAGE>
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.
20
<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>
Capital Adequacy Ratios
In Thousands June 30, December 31, June 30,
1998 1997 1997
<S> <C> <C> <C>
Tier 1 Capital:
Stockholders' Equity $35,900 $34,954 $33,928
Tier 2 Capital:
Allowance for Loan Losses 1,922 1,833 1,747
Total Capital $37,822 $36,787 $35,675
Risk-Weighted Ratios:
Tier 1 Capital 23.5% 23.9% 24.4%
Total Capital 24.8% 25.1% 25.7%
Leverage Ratio 11.6% 11.7% 11.8%
Stockholders' Equity 11.6% 11.6% 11.7%
Regulatory Risk-Based Capitalization Requirements
SignificantlyCritically
Well Adequately Under Under Under
CapitalizedCapitalizedCapitalizedCapitalized 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 $4.2 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.
The Year 2000
The Bank has formed a Year 2000 committee. The purpose of
the committee is to identify potential costs and uncertainties
relating to the Year 2000. To date the committee has written a
policy which addresses the issues approaching the Year 2000 in
five phases. The phases include awareness, assessment,
renovation, validation, and implementation. The committee feels
that the Bank is currently in the assessment phase. While only
in the assessment phase, management does not feel that issues
related to the Year 2000 are reasonably likely to have or will
have a material effect on the Company's liquidity, capital
resources, or results of operation. The costs capitalized and /
or expensed related to the Year 2000 issue during 1998 were
immaterial.
21
<PAGE>
<TABLE>
AVERAGE BALANCE SHEETS AND INTEREST RATE ANALYSIS
In thousands
Second Quarter 1998 First Quarter 1998 Second Quarter 1997
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 $2,844 $55.1 7.77% $4,569 $43.5 3.86% $2,524 $36.6 5.82%
Federal Funds Sold and Securities
Purchased under Resale Agreements 9,925 140.3 5.67% 14,220 185.3 5.28% 10,976 150.8 5.51%
Securities:
Taxable 106,643 1,550.6 5.83% 101,804 1,464.3 5.83% 103,367 1,508.0 5.85%
Non-Taxable* 10,147 217.6 8.60% 10,633 227.9 8.69% 9,374 205.0 8.77%
Loans - Net 155,801 3,664.9 9.44% 148,787 3,504.1 9.55% 141,226 3,294.6 9.36%
Total Earning Assets 285,360 5,628.5 7.91% 280,013 5,425.1 7.86% 267,467 5,195.0 7.80%
Allowance for Loan Losses (2,742) (2,329) (2,748)
Nonearning Assets 27,107 27,406 24,749
Total Assets $309,725 $305,090 $289,468
Liabilities and Stockholders' Equity
NOW Accounts $23,587 119.4 2.03% $25,641 139.7 2.21% $25,995 137.1 2.12%
Savings Accounts 31,650 200.3 2.54% 31,128 194.5 2.53% 32,617 205.2 2.52%
Money Market Deposit Accounts 54,780 421.9 3.09% 52,356 360.0 2.79% 49,822 348.7 2.81%
Certificates of Deposits less than $100,000 94,303 1,148.8 4.89% 92,804 1,152.8 5.04% 84,923 1,055.8 4.99%
Certificates of Deposits greater than $100,000 11,345 136.4 4.82% 11,860 143.7 4.91% 11,112 123.4 4.46%
Total Interest Bearing Deposits 215,665 2,026.8 3.77% 213,789 1,990.7 3.78% 204,469 1,870.2 3.67%
Other Borrowings 1,111 17.8 6.43% 1,147 17.9 6.33% 727 11.7 6.46%
Total Interest Bearing Liabilities 216,776 2,044.6 3.78% 214,936 2,008.6 3.78% 205,196 1,881.9 3.68%
Noninterest Bearing Deposits 55,090 52,864 48,796
Other Liabilities 1,349 1,236 1,046
Stockholders' Equity 36,510 36,054 34,430
Total Liabilities and Stockholders' Equity $309,725 $305,090 $289,468
Net Interest Income - Tax Equivalent Basis* 3,583.9 3,416.5 3,313.1
Tax Equivalent Adjustment (74.0) (77.5) (69.7)
Net Interest Income $3,509.9 $3,339.0 $3,243.4
Net Interest Income - Spread* 4.13% 4.09% 4.12%
Net Interest Income as a % of Total Earning Assets* 5.04% 4.95% 4.97%
*Tax Equivalent Basis - 34% Rate for the periods dated
</TABLE>
22
<PAGE>
<TABLE>
AVERAGE BALANCE SHEETS AND INTEREST RATE ANALYSIS
In thousands
Six Months Ended Six Months Ended
June 30, 1998 June 30, 1997
AVERAGE INCOME/ YIELD/AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest Bearing Deposit Accounts $3,760 $98.6 5.29% $3,128 $85.0 5.48%
Federal Funds Sold and Securities
Purchased under Resale Agreements 12,061 325.6 5.44% 12,659 336.0 5.35%
Securities:
Taxable 104,237 3,014.9 5.83% 102,525 2,988.0 5.88%
Non-Taxable* 10,389 445.5 8.65% 9,387 407.6 8.76%
Loans - Net 152,313 7,168.9 9.49% 138,734 6,453.1 9.38%
Total Earning Assets 282,760 11,053.5 7.88% 266,433 10,269.7 7.77%
Allowance for Loan Losses (2,537) (2,944)
Nonearning Assets 26,970 24,681
Total Assets $307,193 $288,170
Liabilities and Stockholders' Equity
NOW Accounts $24,607 253.5 2.08% $26,450 276.8 2.11%
Savings Accounts 31,391 394.9 2.54% 32,280 403.8 2.52%
Money Market Deposit Accounts 53,575 812.5 3.06% 51,115 710.9 2.80%
Certificates of Deposits less than $100,000 93,140 2,276.5 4.93% 83,087 2,067.1 5.02%
Certificates of Deposits greater than $100,000 11,999 280.1 4.71% 11,652 255.0 4.41%
Total Interest Bearing Deposits 214,712 4,017.5 3.77% 204,584 3,713.6 3.66%
Other Borrowings 1,129 35.7 6.38% 738 23.6 6.45%
Total Interest Bearing Liabilities 215,841 4,053.2 3.79% 205,322 3,737.2 3.67%
Noninterest Bearing Deposits 54,003 48,011
Other Liabilities 1,288 1,041
Stockholders' Equity 36,061 33,796
Total Liabilities and Stockholders' Equity $307,193 $288,170
Net Interest Income - Tax Equivalent Basis* 7,000.3 6,532.5
Tax Equivalent Adjustment (151.5) (138.6)
Net Interest Income $6,848.8 $6,393.9
Net Interest Income - Spread* 4.09% 4.10%
Net Interest Income as a % of Total Earning Assets* 4.99% 4.94%
*Tax Equivalent Basis - 34% Rate for the periods dated
</TABLE>
23
<PAGE>
<TABLE>
INTEREST DIFFERENTIALS
In thousands
Six Months Ended
Second Quarter 1998 Second Quarter 1998 June 30, 1998
vs vs vs
First Quarter 1998 Second Quarter 1997 June 30, 1997
Change due to Total Change due to Total Change due Total
Volume Rate Change Volume Rate Change VolumeRateChange
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Interest Bearing Deposit Accounts ($16.4)$28.0 $11.6 $4.6 $13.9 $18.5 $17.2 ($3.6) $13.6
Federal Funds Sold (56.0) 11.0 (45.0) (14.4) 3.9 (10.5) (15.9) 5.5 (10.4)
Securities:
Taxable 69.6 16.7 86.3 47.8 (5.2) 42.6 49.9 (23.0) 26.9
Non-Taxable* (10.4) 0.1 (10.3) 16.9 (4.3) 12.6 43.5 (5.6) 37.9
Loans 165.2 (4.4) 160.8 340.0 30.3 370.3 631.6 84.2 715.8
Total Interest Income 152.0 51.4 203.4 394.9 38.6 433.5 726.3 57.4 783.8
Interest Bearing Liabilities:
NOW Accounts (11.2) (9.1) (20.3) (12.7) (5.0) (17.7) (19.3) (4.0) (23.3)
Savings Accounts 3.3 2.5 5.8 (6.1) 1.2 (4.9) (11.1) 2.2 (8.9)
Money Market Deposit Accounts 16.7 45.2 61.9 34.7 38.5 73.2 34.2 67.4 101.6
Certificates of Deposits less than $100,000 18.6 (22.6) (4.0) 116.6 (23.6) 93.0 250.1 (40.7) 209.4
Certificates of Deposits greater than $100,000 (6.2) (1.1) (7.3) 2.6 10.4 13.0 7.6 17.5 25.1
Other Borrowings (0.6) 0.5 (0.1) 6.2 (0.1) 6.1 12.5 (0.4) 12.1
Total Interest Expense 20.6 15.4 36.0 141.3 21.4 162.7 274.0 42.0 316.0
Increase (Decrease) in
Interest Differential $131.4 $36.0 $167.4 $253.6 $17.2 $270.8 $452.3 $15.4 $467.8
*Tax Equivalent Basis - 34% Rate for the periods dated
</TABLE>
24
<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
At the annual shareholder's meeting of the Company held on
April 22, 1998, the following matters were submitted for a vote:
STOCK SPLIT PROPOSAL
The Board of Directors unanimously recommends that the
shareholders authorize a two-for-one stock split of all of the
Common Stock of the Company issued and outstanding on April 22,
1998, and, in connection therewith, adopt an amendment (the
"Amendment") to ARTICLE FOUR of the Company's Restated Articles
of Incorporation, as amended (the "Articles"), to restate the par
value of the Company's Common Stock at $2.50 per share. The text
of Article Four is set forth below.
ARTICLE FOUR: STOCK
The Corporation is authorized to issue
one class of shares to be designated as
"common". The total number of shares which
the Corporation is authorized to issue is
10,000,000 shares and the par value of each
share is $2.50. Shares redeemed by the
Corporation shall be restored to the status
of authorized but unissued shares of the
Corporation.
The stock split proposal was approved at the
Annual Shareholder's Meeting on April 22, 1998 by a
vote of 1,115,397 shares in favor, 0 shares against and
6,490 shares abstaining.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
None
25
<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, 1997, 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 June 30, 1998, have not been reviewed by Hannis
T. Bourgeois, L. L. P.
26
<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/ Frank J. Bourgeois
Frank J. Bourgeois, President
August 13, 1998
Date
27
<PAGE>
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<PERIOD-START> JAN-01-1998
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