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 March 31, 1999 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: (225) 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, 2,669,931 shares outstanding
as of May 13,1999.
<PAGE> 1
Form 10-Q Index
Part I
Financial Information
Financial Statements
Consolidated Balance Sheets,
March 31, 1999, December 31, 1998 and March 31, 1998 3
Consolidated Statements of Income
for the three months ended March 31, 1999 and 1998 4
Consolidated Statements of Changes in Stockholders' Equity
for the three months ended March 31, 1999 and 1998 5
Consolidated Statements of Cash Flows
for the three months ended March 31, 1999 and 1998 6
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
Average Balance Sheets and Interest Rate Analysis
for the three months ended March 31, 1999, December 31, 1998
and March 31, 1998 23
Interest Differentials
for the three months ended March 31, 1999, December 31, 1998
and March 31, 1998 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
<PAGE> 2
<TABLE>
<CAPTION>
Consolidated Balance Sheets Unaudited Unaudited Unaudited
One American Corp. and Subsidiaries March 31, December 31 March 31,
In thousands 1999 1998 1998
<S> <C> <C> <C>
Assets
Cash and Due From Banks $12,399 $12,126 $13,513
Interest Bearing Deposits in Other Banks 10,548 10,629 5,265
Federal Funds Sold and Securities
Purchased Under Resale Agreements 13,725 11,525 15,625
Securities Available for Sale (Amortized Cost of $99,003, 98,588,
and $112,500, respectively) 99,517 99,510 113,176
Loans 186,523 181,992 150,399
Less: Allowance for Loan Losses (3,326) (3,530) (2,621)
Loans, Net 183,197 178,462 147,778
Bank Premises and Equipment 12,238 11,997 11,045
Other Real Estate 249 73 78
Accrued Interest Receivable 1,900 2,133 1,981
Other Assets 2,942 2,921 2,161
Total Assets $336,715 $329,376 $310,622
Liabilities
Deposits:
Noninterest Bearing $58,255 $58,406 $55,130
Interest Bearing 237,509 230,785 215,658
Total Deposits 295,764 289,191 270,788
Accrued Interest Payable 855 825 723
Other Liabilities 1,992 1,560 2,373
Total Liabilities 298,611 291,576 273,884
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 26,712 26,111 24,434
Accumulated Other Comprehensive Income 339 609 446
Treasury Stock - 329,924, 328,922 and 296,900 shares at cost (1,447) (1,420) (642)
Total Stockholders' Equity 38,104 37,800 36,738
Total Liabilities and Stockholders' Equity $336,715 $329,376 $310,622
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Consolidated Statements of Income
One American Corp. and Subsidiaries
for the three months ended March 31, 1999 and 1998 Unaudited Unaudited
In thousands, except per share data 1999 1998
<S> <C> <C>
Interest Income
Interest and Fees on Loans $3,975 $3,504
Interest on Securities:
Taxable Interest 1,242 1,464
Nontaxable Interest 138 150
Total Interest on Securities 1,380 1,614
Other Interest Income 266 229
Total Interest Income 5,621 5,347
Interest Expense on Deposits 2,125 2,008
Net Interest Income 3,496 3,339
Provision for Loan Losses 225 450
Net Interest Income After
Provision for Loan Losses 3,271 2,889
Other Income
Service Charges on Deposit Accounts 498 521
Gain on Securities 0 0
Gain on Purchased Assets 62 260
Other Operating Income 278 217
Total Other Income 838 998
Income Before Other Expenses 4,109 3,887
Other Expenses
Salaries and Employee Benefits 1,262 1,223
Net Occupancy Expense 326 320
Net ORE and Repossession Expense 18 (34)
Other Operating Expenses 898 911
Total Other Expenses 2,504 2,420
Income Before Income Taxes 1,605 1,467
Applicable Income Taxes 523 502
Net Income $1,082 $965
Net Income Per Share $0.41 $0.36
Cash Dividends Per Share $0.18 $0.18
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Consolidated Statements of Changes in Stockholders' Equity
One American Corp. and Subsidiaries
for the three months ended March 31, 1999 and 1998
Unaudited Accumulated
Other Total
Common Retained Comprehensive Treasury Stockholders'
In thousands Stock Surplus Earnings Income Stock Equity
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1999 $7,500 $5,000 $26,111 $609 ($1,420) $37,800
Comprehensive Income:
Net Income 1,082 1,082
Other Comprehensive Income,
Net of Tax:
Net Change in Unrealized Gain (Loss)
on Securities Available-for-Sale (270) (270)
Less: Reclassification Adjustments 0 0
Total Comprehensive Income 812
Treasury Stock Purchased (27) (27)
Cash Dividends (481) (481)
Balances, March 31, 1999 7,500 5,000 26,712 339 (1,447) 38,104
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1998 7,500 5,000 23,943 439 (627) 36,255
Comprehensive Income:
Net Income 965 965
Other Comprehensive Income,
Net of Tax:
Net Change in Unrealized Gain (Loss)
on Securities Available-for-Sale 7 7
Less: Reclassification Adjustments 0 0
Total Comprehensive Income 972
Treasury Stock Purchased (15) (15)
Cash Dividends (474) (474)
Balances, March 31, 1998 $7,500 $5,000 $24,434 $446 ($642) $36,738
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
One American Corp. and Subsidiaries
for the three months ended March 31, 1999 and 1998 Unaudited Unaudited
In thousands 1999 1998
<S> <C> <C>
Cash Flows From Operating Activities
Net Income $1,082 $965
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Gain on Purchased Assets (62) (260)
Provision for Depreciation 226 199
Provision for Loan Losses 225 450
Net Amortization (Accretion) on Securities (21) (84)
Provision (Credit) for Deferred Income Taxes 76 (93)
(Gain) Loss on Sale of Other Real Estate and Repossessions (3) (16)
Changes in Assets and Liabilities:
(Increase) Decrease in Accrued Interest Receivable 233 195
(Increase) Decrease in Other Assets 42 130
Increase (Decrease) in Accrued Interest Payable 30 (54)
Increase (Decrease) in Other Liabilities 467 689
Net Cash Provided by Operating Activities 2,295 2,121
Cash Flows From Investing Activities
Maturities or Calls of Securities Available for Sale 19,685 23,313
Purchases of Securities Available for Sale (20,079) (21,518)
Proceeds from Sale of Securities Available for Sale 0 0
Net (Increase) Decrease in Federal Funds Sold (2,200) (3,475)
Net (Increase) Decrease in Loans (5,128) (1,027)
Proceeds from Sale of Other Real Estate and Repossessions 57 50
Purchases of Premises and Equipment (467) (407)
Proceeds from Other Borrowings 0 0
Repayments of Amounts Borrowed (36) (36)
Net Cash Used in Investing Activities (8,168) (3,100)
Cash Flows From Financing Activities
Net Increase (Decrease) in Demand Deposits, NOW
and Savings Accounts 2,366 6,275
Net Increase (Decrease) in Certificates of Deposits 4,207 856
Dividends Paid (481) (474)
Treasury Stock Purchased (27) (15)
Net Cash Provided By Financing Activities 6,065 6,642
Increase (Decrease) in Cash and Cash Equivalents 192 5,663
Cash and Cash Equivalents - Beginning of Year 22,755 13,115
Cash and Cash Equivalents - End of Year $22,947 $18,778
<FN>
Continued on next page
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
Consolidated Statements of Cash Flows
One American Corp. and Subsidiaries
for the three months ended March 31, 1999 and 1998 Unaudited Unaudited
In thousands 1999 1998
<S> <C> <C>
Supplemental Disclosure of Cash Flow Information:
Income Tax Payments $0 $0
Interest Paid on Deposits $2,095 $2,062
Noncash Investing Activities:
Other Real Estate Acquired in Settlement of Loans $230 $0
Change in Unrealized Gain (Loss) on
Securities Available for Sale ($408) $11
Change in Deferred Tax Effect on
Unrealized Gain (Loss) on Securities Available for Sale ($139) $4
Noncash Financing Activities:
Dividends Declared and Not Paid $481 $474
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 7
Notes to Consolidated Financial Statements
March 31, 1999
(UNAUDITED)
Summary of Significant Accounting Policies
The accounting principles followed by One American Corp. (the
Company), its wholly-owned subsidiary, First American Bank and Trust (the
Bank), and its wholly-owned subsidiary, First American Agency, L.L.C. (the
Agency), 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 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 three months ended March 31, 1999 are no indication of
the expected results for the annual period that ends December 31, 1999.
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, 1998.
Principles of Consolidation - The consolidated financial statements
include the accounts of One American Corp. (the Company), its wholly-owned
subsidiary, First American Bank and Trust (the Bank), and its wholly-owned
subsidiary, First American Agency, L.L.C. (the Agency). All significant
intercompany balances and transactions have been eliminated. Certain
reclassifications to previously published financial statements have been
made to comply with current reporting.
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.
The determination of the adequacy of the allowance for loan losses is
based on estimates that are particularly susceptible to significant changes
in the economic environment and market conditions. In connection with the
determination of estimated losses on loans, management obtains independent
appraisals for significant collateral. The Bank's loans are generally
secured by specific items of collateral including real property, consumer
assets, and business assets. Although the Bank has a diversified loan
portfolio, a substantial portion of its debtors' ability to honor their
contracts is dependent on local conditions in the area. While management
uses available information to recognize losses on loans, further reductions
in the carrying amounts of loans may be necessary based on changes in local
economic conditions. In addition, regulatory agencies, as an integral part
of their examination process, periodically review the estimated losses on
loans. Such agencies may require the Bank to recognize additional losses
based on their judgements about information available to them at the time
of their examination. Because of these factors, it is reasonably possible
that the estimated losses on loans may change materially in the near term.
However, the amount of the change that is reasonably possible cannot be
estimated.
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.
<PAGE> 8
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
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 March 31, 1999 or
1998. 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 Bank 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
maintained at a level which, in management's judgement, is adequate to
absorb credit losses inherent 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 examination 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 on collateral values or the present value of
estimated cash flows. Although management uses available information to
recognize losses on loans, because of uncertainties associated with local
economic conditions, collateral values, and future cash flows on impaired
loans, it is reasonably possible that a material change could occur in the
allowance for loan losses in the near term. However, the amount of the
change that is reasonably possible cannot be estimated.
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 collectability 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
<PAGE> 9
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 March 31, 1999, 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 2,670,425 and 2,702,180 for the three months ended March 31,
1999 and 1998, 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 share for the three
month period ending March 31, 1998 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 31, 1997. This statement
<PAGE> 10
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 components of
comprehensive income are disclosed in the Statements of Changes in
Stockholders Equity for all periods presented.
<PAGE> 11
One American Corp. and Subsidiaries
Management's Discussion and Analysis of Financial
Condition and Results of Operations
March 31, 1999
First Quarter in Review
For the current quarter of 1999, net income was $1.1 million compared
to $965 thousand for the same quarter of 1998. An increase in net interest
income and a decrease in provisions for loan losses primarily accounted for
the increase in net income. Earnings per common share were $0.41 and $0.36
for the first quarters of 1999 and 1998, respectively. Return on average
assets on an annualized basis was 1.33% for the current quarter, and 1.27%
for the same quarter of 1998. For the first quarters of 1999 and 1998,
return on average equity on an annualized basis was 11.55% and 10.71%,
respectively. Cash dividends were $.18 per share for the current quarter
and $.18 per share for the same quarter of 1998.
Net interest income (FTE) for the current quarter was $3.6 million,
$151 thousand greater than that of the first quarter of 1998. The net
interest margin (FTE) was 4.77% for the current quarter and 4.95% for the
same quarter of 1998.
During the first quarter of 1999, in comparison with the same quarter
of 1998, average loans outstanding increased $34.3 million or 23.1% to
$183.1 million. Average total deposits for the current quarter increased
$23.8 million or 8.9% to $290.5 million when compared to the average total
deposits for the same quarter of 1998. Average total assets for the
current quarter increased $25.2 million or 8.3% to $330.2 million when
compared to the total average assets of the first quarter of 1998.
In the first quarter of 1998, First American Agency, L.L.C., a
subsidiary of First American Bank and Trust, was formed. First American
Agency, L.L.C. provides insurance agency services in the Bank's market
area. Also in the first quarter of 1998, First American Agency, L.L.C.
acquired Riverbend Insurance Agency, Inc. of Destrehan, St. Charles Parish,
Louisiana. The ability of the Bank's customers to purchase insurance from
a subsidiary of the Bank provides an additional level of convenience as
well as the opportunity 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 period ending March 31, 1998 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.
<PAGE> 12
Net interest income on a fully tax equivalent basis (FTE) for the
current quarter of 1999 was $3.6 million, 4.4% greater than the same
quarter of 1998. The improvement in net interest income can be primarily
attributed to the change in volume of loans that provided an increase of
$471 thousand in net interest income (FTE) when comparing the first quarter
of 1999 to the first quarter of 1998.
Earning Assets, Interest Bearing Liabilities, and Net Interest Spread
- - During the current quarter of 1999, average earning assets were $303.6
million, an increase of $23.6 million or 8.4% over the first quarter of
1998. 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 an increase in interest
bearing liabilities with the largest growth in certificates of deposit and
money market accounts. The Bank also benefited from an increase in volume
of non interest bearing deposits while at the same time improving 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 1999, the average yield on earning assets
was 7.61%, while the average cost of interest bearing liabilities was
3.67%, producing a net interest spread (FTE) of 3.94%. The net interest
margin (FTE) was 4.77% for the current quarter of 1999. In comparison, the
net interest margin (FTE) for the same quarter of 1998 was 4.95%. The cost
of interest bearing liabilities during the first quarter of 1998 was 3.78%,
while the yield on average earning assets was 7.87%, producing a net
interest spread of 4.09%. The 11 basis point decrease in the average cost
of interest bearing liabilities from the first quarter of 1998 to the same
quarter of 1999, was less than the 26 basis point decrease in the yield on
interest earning assets for the respective quarters.
<PAGE> 13
<TABLE>
<CAPTION>
Average Earning Asset Structure First Fourth First
In thousands Quarter 1999 Quarter 1998 Quarter 1998
% 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 $9,922 3.3% $10,120 3.5% $4,588 1.6%
Federal Funds Sold 12,859 4.2% 11,942 4.0% 14,220 5.1%
Securities
Taxable 88,046 29.0% 85,543 28.8% 101,804 36.4%
Non-Taxable 9,731 3.2% 10,137 3.4% 10,633 3.8%
Loans - Net 183,078 60.3% 179,070 60.3% 148,787 53.1%
Total Average Earning Assets $303,636 100.0% $296,812 100.0% $280,032 100.0%
<CAPTION>
Average Deposit Structure First Fourth First
In thousands Quarter 1999 Quarter 1998 Quarter 1998
Average % of Average % of Average % of
Balances Deposits Balances Deposits Balances Deposits
<S> <C> <C> <C> <C> <C> <C>
Noninterest Bearing Deposits $57,450 19.8% $55,428 19.7% $52,864 19.8%
NOW Accounts 26,566 9.1% 23,769 8.4% 25,641 9.6%
Savings Accounts 31,979 11.0% 31,532 11.2% 31,128 11.7%
Money Market Deposit Accounts 61,648 21.2% 59,207 21.0% 52,356 19.6%
Certificates of Deposits less than $100,000 100,975 34.8% 100,478 35.7% 92,804 34.9%
Total Average Core Deposits 278,618 95.9% 270,414 96.0% 254,793 95.6%
Certificates of Deposits greater than $100,000 11,854 4.1% 11,396 4.0% 11,860 4.4%
Total Average Deposits $290,472 100.0% $281,810 100.0% $266,653 100.0%
Average Interest Bearing Deposits
as a percentage of Earning Assets 76.7% 76.3% 76.3%
Average Core Deposits
as a percentage of Total Average Assets 84.4% 84.1% 83.5%
</TABLE>
The table of Average Balance Sheets and Interest Rate Analysis for the
quarterly periods ended March 31, 1999, December 31, 1998, and March 31,
1998, 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.
<PAGE> 14
Provision for Loan Losses
Provision for Loan Losses was $225 thousand and $450 thousand for the
first quarters of 1999 and 1998, respectively. See the discussion of
"Allowance for Loan Losses".
Other Income
Other income for the current quarter was $838 thousand, a decrease of
$160 thousand or 16.0% compared to $998 thousand for the same quarter of
1998. The primary cause of this decrease was gain on purchased assets,
which decreased $198,000 for the first three months of 1999 when compared
to the same period of 1998.
Gain on purchased assets was $62 thousand for the current quarter and
$260 thousand for the same period of 1998. 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 both the current quarter and
the same respective period in 1998.
Other Expenses
Other expenses were $2.5 million for the first quarter of 1999 , an
increase of $84 thousand or 3.4% over the same quarter of 1998. Salaries
and employee benefits were $1.3 million for the current quarter compared to
$1.2 million for the same of quarter of 1998. Net occupancy expense was
$326 thousand for the current quarter, compared to $320 thousand for the
first quarter of 1998. Other operating expenses were $898 thousand for the
current quarter, a decrease of $13 thousand or 1.5% compared to the same
quarter of 1998.
Applicable Income Taxes
Applicable income taxes for the current quarter were $523 thousand
compared to $502 thousand for the first quarter of 1998. Effective tax
rates are 32.6% for the first quarter of 1998 and 34.2% for the quarter
ended March 31, 1998. 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
$278.6 million or 95.9% of total average deposits and 84.4% 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
<PAGE> 15
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, 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 maturity and repricing period inconsistencies.
Management also measures interest rate risk exposure by the process of
dynamic income simulation. This process measures possible levels of
exposure more accurately given the ability to better identify contractual
maturities and repricing periods. Key assumptions used in the simulation
model include the relative timing of prepayments on mortgage related assets
and the cash flows and maturities of other financial instruments. These
assumptions are intrinsically uncertain and, as a result, the model cannot
specifically estimate net interest income or precisely predict the impact
of a change in interest rates on net income or stockholders' equity.
Actual results will differ from the simulated results due to the timing,
magnitude, and frequency of interest rate changes and changes in market
conditions and management strategies, among other factors.
The Bank's objective is to limit the impact on net interest income
from a gradual change in interest rates of 200 basis points over twelve
months to 10% of projected net interest income. Based on the results of
dynamic income simulation, at March 31, 1999 the Bank would expect an
increase in net interest income of $95,000 in the event of a gradual 200
basis point increase in interest rates and a decrease of $275,000 in the
event of a gradual 200 basis point decrease in interest rates. Both of
these changes are well within the Bank's interest rate risk policy limits.
For gap analysis, prepayment assumptions are applied to loans
reflective of historical experience and employing a "flat-rate" interest
rate change scenario. Decay rate methodology is applied to non-fixed rate
deposit accounts 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 deposit balances
out as far as the FDIC regulatory guidelines allow in FDICIA 305. Decay
rate assumptions implemented are based on a flat rate environment and at
management's discretion.
The Bank has established decay rate assumptions based on historical
data collection 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 the 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, on page 18 presents the Bank's
interest rate sensitivity position at March 31, 1999, using gap analysis,
based on the expected maturity intervals of interest rate sensitive assets
and liabilities. The table indicates that the Company's interest earning
assets exceed its interest bearing liabilities at the one year point in
time suggesting the Bank is positively rate sensitive. This table does not
necessarily reflect the impact of interest rate movements on the Bank's net
income because the effective maturities or repricing of certain assets and
<PAGE> 16
liabilities is subject to competition and other limitations. As a result,
certain assets and liabilities indicated as maturing or repricing within a
stated period may in fact mature or reprice at different times and at
different volumes.
The Bank is 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.
<PAGE> 17
<TABLE>
<CAPTION>
Interest Rate Sensitivity Table
March 31, 1999
In thousands
Expected Maturity, Years Ended:
Non- Fair
3/31/00 3/31/01 3/31/02 3/31/03 3/31/04 Thereafter Sensitive Total Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-Bearing Deposits in
Assets
Investments -
Fixed-Rate Securities $44,194 $30,885 $7,678 $4,928 $2,011 $3,551 $0 $93,247 $93,247
Average Interest Rates 5.79% 5.51% 6.00% 6.24% 6.62% 5.81% 0.00% 5.76%
Variable-Rate Securities 2,737 1,591 489 316 186 951 0 6,270 6,270
Average Interest Rates 5.83% 5.75% 6.70% 6.77% 6.89% 6.88% 0.00% 6.12%
Total Investments 46,931 32,476 8,167 5,244 2,197 4,502 0 99,517 99,517
Average Interest Rates 5.79% 5.52% 6.04% 6.27% 6.64% 6.04% 0.00% 5.78%
Loans -
Fixed-Rate Loans, Net 66,053 20,901 23,548 10,866 16,191 26,290 852 164,701 166,600
Average Interest Rates 8.66% 8.73% 8.61% 8.54% 8.43% 7.75% 0.00% 8.44%
Variable-Rate Loans, Net 9,707 2,748 2,258 1,112 509 2,162 0 18,496 18,547
Average Interest Rates 7.74% 7.69% 7.81% 7.95% 8.09% 8.14% 0.00% 7.81%
Total Loans 75,760 23,649 25,806 11,978 16,700 28,452 852 183,197 185,147
Average Interest Rates 8.54% 8.61% 8.54% 8.49% 8.42% 7.78% 0.00% 8.38%
Interest-Bearing Deposits in
Other Banks 10,548 0 0 0 0 0 0 10,548 10,548
Average Interest Rates 5.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0
Federal Funds Sold 13,725 0 0 0 0 0 0 13,725 13,725
Average Interest Rates 4.53% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 4.53%
Other Assets 29,728 29,728
Total Assets $146,964 $56,125 $33,973 $17,222 $18,897 $32,954 $30,580 $336,715
Liabilities
NOW and Super NOW Deposits $1,801 $6,838 $6,838 $2,579 $2,579 $5,159 $0 $25,794 $24,247
Average Interest Rates 2.18% 2.18% 2.18% 2.18% 2.18% 2.18% 0.00% 2.18%
Insured Money Market Accounts 30,635 16,463 16,463 0 0 0 0 63,561 62,499
Average Interest Rates 3.13% 3.13% 3.13% 0.00% 0.00% 0.00% 0.00% 3.13%
Savings Deposits 2,278 8,662 8,662 3,267 3,267 6,534 0 32,670 31,415
Average Interest Rates 2.53% 2.53% 2.53% 2.53% 2.53% 2.53% 0.00% 2.53%
Variable-Rate Certificates of Deposit 691 2,629 2,629 992 992 1,983 0 9,916 9,816
Average Interest Rates 4.46% 4.46% 4.46% 4.46% 4.46% 4.46% 0.00% 4.46%
Certificates of Deposits 82,814 18,525 1,291 1,342 1,596 0 0 105,568 105,501
Average Interest Rates 4.49% 4.92% 5.32% 5.70% 5.68% 0.00% 0.00% 4.61%
Noninterest Bearing Deposits 21,627 6,662 6,662 5,826 5,826 11,652 0 58,255 58,255
Other Interest-Bearing Liabilities 130 137 146 156 166 255 0 990 1,018
Average Interest Rates 0 0 0 0 0 0 0 0
Other Liabilities 0 0 0 0 0 0 1,857 1,857
Stockholders' Equity 0 0 0 0 0 0 38,104 38,104
Total Liabilities and
Stockholders' Equity $139,976 $59,916 $42,691 $14,162 $14,426 $25,583 $39,961 $336,715
Interest Rate Sensitivity Gap $6,988 ($3,791) ($8,718) $3,060 $4,471 $7,371 ($9,381) $0
Cumulative Interest Rate
Sensitivity Gap $6,988 $3,197 ($5,521) ($2,461) $2,010 $9,381 $0
GAP / Assets 2.08% -1.13% -2.59% 0.91% 1.33% 2.19% -2.79%
Cumulative GAP / Assets 2.08% 0.95% -1.64% -0.73% 0.60% 2.79% 0.00%
</TABLE>
<PAGE> 18
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 March 31, 1999 and 1998, were
$17.8 million and $10.0 million, respectively. The Bank had letters of credit
of $570 thousand issued at March 31, 1999 compared to $562 thousand at March
31, 1998. Additionally, the Bank has deposit customers who have credit
lines available to them through their deposit accounts. At March 31, 1999
the available portion of these credit lines was $377 thousand compared to
$343 thousand at March 31, 1998. 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. The aggregate credit available was $4.8 million
at March 31, 1999 and $3.4 million at March 31, 1998. 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 $3.3 million at March 31, 1999, or
1.8%, of loans outstanding. At March 31, 1998 the Allowance for Loan
Losses was $2.6 million, or 1.7%, of loans outstanding. Net charge-offs
(recoveries) were $430 thousand for the current quarter, versus $19
thousand for the same quarter of 1998. Gross charge-offs as a percentage
of average loans were .24% and .04% in the first quarters of 1999 and 1998,
respectively. Recoveries as a percentage of gross charge-offs for the
current quarter were 3.1% versus 68.9% for the same quarter of 1998.
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 maintains the balance in the Allowance for Loan Losses in
order to accept any adverse loan relationships that have the potential to
occur in the future. Impaired loans are individually evaluated and
specific portions of the allowance are allocated to each loan, based on
collateral values and the present value of estimated cash flows. The
remainder of the allowance is unallocated and is tested for adequacy by
comparing its level to the sum of: a percentage of the balances of loans
graded substandard plus the sum of the non-impaired, non-substandard
remainder of the loan portfolio multiplied by a model-generated "potential
default" factor. The model analyzes various classes of loans by industry
to determine the inherent default risk in each class. These risks are then
quantified into potential default factors, which are applied to each class
of loans in the Bank's portfolio. As the process applies the "potential
<PAGE> 19
default' factor to the non classified portion of the loan portfolio,
additional reserves necessary because of loan growth are accounted for.
Also in determining the level of Allowance for Loan Losses, management
considers the uncertainty in estimating loan losses, including the
possibility of improper risk ratings and specific reserve allocations, as
well as the uncertainty in predicting the future performance of the economy
in the Bank's market area. As the Bank's ratio of loans - to - deposits
continues to increase, so does the potential for problem loans to occur at
a rate uncommon to the Bank's historical loan loss basis given smaller loan
- - to - deposit ratios of the past.
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
March 31, 1999 and 1998 were $33 thousand and $592 thousand, respectively.
Impaired loans having recorded investments of $2.8 million at March 31,
1999 compared to $3.4 million at March 31, 1998 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 was $1.0 million at March
31, 1999 compared to $898 thousand at March 31, 1998. Interest received on
impaired loans amounted to $77 thousand at March 31, 1999 compared to $86
thousand at March 31, 1998. Non-accrual loans not included in impaired
loans were immaterial at March 31, 1999 and 1998.
Other real estate is properties held for sale acquired through
foreclosure or negotiated settlement of debt. Other real estate was $249
thousand at March 31, 1999 and $78 thousand at the close of the first
quarter of 1998. Repossessions are movable assets acquired through
foreclosure or negotiated settlement of debt. Repossessions at March 31,
1999 were insignificant.
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.
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.
<PAGE> 20
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.
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 March 31, December 31, March 31,
1999 1998 1998
<S> <C> <C> <C>
Tier 1 Capital:
Stockholders' Equity $36,988 $36,397 $35,447
Tier 2 Capital:
Allowance for Loan Losses 2,211 2,145 1,851
Total Capital $39,199 $38,542 $37,298
Risk-Weighted Ratios:
Tier 1 Capital 21.0% 21.4% 24.1%
Total Capital 22.3% 22.6% 25.3%
Leverage Ratio 11.2% 11.3% 11.7%
Stockholders' Equity 11.0% 11.1% 11.4%
<CAPTION>
Regulatory Risk-Based Capitalization Requirements
SignificantlyCritically
Well Adequately Under Under Under
CapitalizedCapitalizedCapitalized 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 $3.5 million. The Company carries no
<PAGE> 21
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. The committee has adopted a policy which addresses the issues
approaching the Year 2000 in five phases. The phases include awareness,
assessment, renovation, validation, and implementation. The Bank is
currently in the implementation phase. Management does not believe 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 expensed related to the Year 2000 issue during the
first quarter of 1999 were not material.
The discussion entitled "Year 2000" includes certain "forward looking
statements" within the meaning of the Private Securities Litigation Relief
Act of 1995 (PSLRA). This statement is included for the purpose of
availing the Company of the protections of the safe harbor provisions of
the PSLRA. Management's ability to predict the results or the effects of
Year 2000 issues is inherently uncertain and subject to factors that may
cause actual results to materially differ from those anticipated. Factors
that could affect actual results include the possibility that contingency
plans and remediation efforts will not operate as intended, the Bank's
failure to timely or completely identify all software and hardware
applications that require remediation, unexpected costs, and the general
uncertainty associated with the impact of Year 2000 issues on the banking
industry, the Bank's customers, vendors, and others with whom it conducts
business. Readers are cautioned not to place undue reliance on these
forward looking statements.
<PAGE> 22
<TABLE>
<CAPTION>
AVERAGE BALANCE SHEETS AND INTEREST RATE ANALYSIS
In thousands
First Quarter 1999 Fourth Quarter 1998 First Quarter 1998
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 $9,922 $122.2 5.00% $10,120 $90.8 3.56% $4,588 $43.5 3.85%
Federal Funds Sold and Securities
Purchased under Resale Agreements 12,859 143.7 4.53% 11,942 148.9 4.95% 14,220 185.3 5.28%
Securities:
Taxable 88,046 1,242.1 5.72% 85,543 1,255.3 5.82% 101,804 1,464.3 5.83%
Non-Taxable* 9,731 208.9 8.71% 10,137 217.3 8.50% 10,633 227.9 8.69%
Loans - Net 183,078 3,975.1 8.81% 179,070 4,075.0 9.03% 148,787 3,504.1 9.55%
Total Earning Assets $303,636 5,692.0 7.61% $296,812 5,787.3 7.74% $280,032 5,425.1 7.87%
Allowance for Loan Losses (3,595) (3,478) (2,329)
Nonearning Assets 30,205 28,390 27,386
Total Assets $330,246 $321,724 $305,089
Liabilities and Stockholders' Equity
NOW Accounts $26,566 136.9 2.09% $23,769 122.1 2.04% $25,641 139.7 2.21%
Savings Accounts 31,979 198.1 2.51% 31,532 200.9 2.53% 31,128 194.5 2.53%
Money Market Deposit Accounts 61,648 476.5 3.13% 59,207 455.6 3.05% 52,356 360.0 2.79%
Certificates of Deposits less than $100,000 100,975 1,129.1 4.53% 100,478 1,211.8 4.78% 92,804 1,152.8 5.04%
Certificates of Deposits greater than $100,000 11,854 168.2 5.75% 11,396 138.1 4.81% 11,860 143.7 4.91%
Total Interest Bearing Deposits 233,022 2,108.8 3.67% 226,382 2,128.5 3.73% 213,789 1,990.7 3.78%
Other Borrowings 1,005 15.7 6.34% 1,041 16.5 6.29% 1,147 17.9 6.33%
Total Interest Bearing Liabilities 234,027 2,124.5 3.67% 227,423 2,145.0 3.74% 214,936 2,008.6 3.78%
Noninterest Bearing Deposits 57,450 55,428 52,864
Other Liabilities 1,290 1,682 1,235
Stockholders' Equity 37,479 37,191 36,054
Total Liabilities and Stockholders' Equity $330,246 $321,724 $305,089
Net Interest Income - Tax Equivalent Basis* 3,567.5 3,642.3 3,416.5
Tax Equivalent Adjustment (71.0) (73.9) (77.5)
Net Interest Income $3,496.5 $3,568.4 $3,339.0
Net Interest Income - Spread* 3.94% 4.01% 4.09%
Net Interest Income as a % of Total Earning Assets* 4.77% 4.87% 4.95%
*Tax Equivalent Basis - 34% Rate for the periods dated
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
INTEREST DIFFERENTIALS
In thousands
First Quarter 1999 First Quarter 1999
vs vs
Fourth Quarter 1998 First Quarter 1998
Change due to Total Change due to Total
Volume Rate Change Volume Rate Change
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Interest Bearing Deposit Accounts ($1.8) $33.2 $31.4 $50.6 $28.1 $78.7
Federal Funds Sold 11.4 (16.6) (5.2) (17.7) (23.9) (41.6)
Securities:
Taxable 36.7 (49.9) (13.2) (197.9) (24.3) (222.2)
Non-Taxable* (8.8) 0.4 (8.4) (19.3) 0.3 (19.0)
Loans 91.2 (191.1) (99.9) 807.6 (336.6) 471.0
Total Interest Income 128.7 (224.0) (95.3) 623.3 (356.4) 266.9
Interest Bearing Liabilities:
NOW Accounts 14.4 0.4 14.8 5.0 (7.8) (2.8)
Savings Accounts 2.9 (5.7) (2.8) 5.3 (1.7) 3.6
Money Market Deposit Accounts 18.8 2.1 20.9 63.9 52.6 116.5
Certificates of Deposits less than $100,000 6.0 (88.7) (82.7) 101.5 (125.2) (23.7)
Certificates of Deposits greater than $100,000 5.6 24.5 30.1 (0.1) 24.6 24.5
Other Borrowings (0.6) (0.2) (0.8) (2.2) 0.0 (2.2)
Total Interest Expense 47.1 (67.6) (20.5) 173.4 (57.5) 115.9
Increase (Decrease) in
Interest Differential $81.6 ($156.4) ($74.8) $449.9 ($298.9) $151.0
*Tax Equivalent Basis - 34% Rate for the periods dated
</TABLE>
<PAGE> 24
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 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
None
<PAGE> 25
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
assesses the effectiveness of the system of internal accounting controls
and coordinates 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 the presence of management.
The financial statements as of December 31, 1998, were examined by
Hannis T. Bourgeois, L. L. P. independent public accountants, who rendered
an independent professional opinion. Hannis T. Bourgeois, L. L. P has not
reviewed the financial statements as of March 31, 1999.
<PAGE> 26
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
May 13, 1999
Date
<PAGE> 27
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