Item 2 - Properties
The principal properties of Bancshares and the Bank (collectively, the Company), are its main offices located at 110 Franklin Street, Napoleonville, Louisiana, a motor branch in Napoleonville, Louisiana, an automatic teller machine (ATM) in Belle Rose, Louisiana, and branch offices in Pierre Part and Labadieville, Louisiana. The Bank owns all of these properties with no encumbrances. The Bank also owns certain leasehold improvements associated with its LaPlace branch.
Item 3
Item 3 - Legal Proceedings
The Company is a party to various ordinary routine legal proceedings incidental to its business, none of which it is believed by management, after consulting with counsel, will have a material effect on the financial position or results of operations of either Bancshares or the Bank.
Item 4
Item 4 - Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.
Item 4a - Executive Officers of the Registrant
The executive officers of Bancshares and the Bank are Joseph H. Montero and Harold F. Templet. Mr. Montero, 62, is the President and Chief Executive Officer of Bancshares and the Bank and has served as an executive officer of the Bank since 1971. Mr. Templet, 50, has been an executive officer of the Bank since 1981; he currently serves as Bancshares' Secretary and Treasurer and the Bank's Senior Vice President.
PART II
Item 5
Item 5 - Market Price of, and Dividends on, the Registrant's Common Equity andRelated Stockholder Matters
The primary market area for Bancshares' common stock is the Assumption Parish area. There is no established trading market for the common stock. The limited number of transactions that have come to the attention of management during the past two years have occurred at prices ranging from $27 to $42 per share. No assurance can be given that this range of prices per share represents the actual market value of Bancshares' common stock.
The approximate number of holders of record of each class of Bancshares' equity securities as of December 31, 1996, was as follows:
Title of Class Number of Record Holders _______________ _________________________
Common stock, $5 par value 732
Bancshares' declared annual dividends to its stockholders of $416,000 ($2.60 per share) during each of 1996 and 1995. Future dividends are dependent upon the future earnings of Bancshares and management's discretion.
Item 6
Item 6 - Selected Financial Data
Selected financial data of Bancshares and the Bank for each of the years in the five-year period ended December 31, 1996, is shown below. The selected financial data should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and the related notes thereto for the three years ended December 31, 1996, included in Items 7 and 8, respectively (dollars in thousands, except per share data).
SELECTED FINANCIAL DATA
Item 7
Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion focuses primarily on the Bank and should be read in conjunction with the consolidated financial statements, the related notes thereto, and other financial information presented herein.
Overview of 1996 Performance
The Bank recorded consolidated net income of $1,133,000 or $7.08 per share in 1996 as compared to a net income of $1,077,000 or $6.73 per share in 1995, and a net income of $1,166,000 or $7.29 per share in 1994. Equity capital was 8.90% and 8.40% of assets as of December 31, 1996 and 1995, respectively.
The Bank's net income increased slightly in 1996 due primarily to two factors. First, net interest income increased from $4,374,000 in 1995 to $4,725,000 in 1996. Loan demand in the Bank's trade area has increased significantly since early 1994. The resulting growth in the loan portfolio has helped the Bank achieve a higher yield on earning assets. This increase in income earned was partially offset by higher balances of interest-bearing liabilities. The Bank's net interest margin increased from 4.51% in 1995 to 4.70% in 1996.
Secondly, as a result of the continued low level of charge- offs experienced by the Bank, the provision for loan losses was $36,000 in 1996, as compared to $136,000 in 1995. The growth in the loan portfolio over the past years resulted in an increase in the provision during 1995.
The factors described above which contributed to the increase in net income during 1996 are offset by an increase in other expenses from $3,582,000 in 1995 to $3,723,000 in 1996. The increase is due primarily to a $203,000 increase in legal and consulting fees as a result of the merger negotiations discussed below.
The Bank's effective income tax rate increased to approximately 26% during 1996, up from approximately 17% in 1995. Although the Bank's tax exempt income earned on state and municipal obligations remained consistent, the tax exempt income as a percentage of total income decreased. In addition, professional fees related to the merger negotiations discussed below of approximately $180,000 are not deductible for tax purposes. These two factors increased the Bank's effective income tax rate and income tax expense for 1996.
Liquidity and Capital Resources
The Bank's deposits increased approximately $2,030,000 at December 31, 1996 as compared to December 31, 1995. Equity as a percentage of year-end assets increased from 8.04% at December 31, 1995 to 8.90% at December 31, 1996. Net earnings of $1,133,000 for the year ended December 31, 1996, offset by a decrease in the fair value of securities classified as available-for-sale of $48,000, and dividends of $416,000 resulted in a net increase in stockholders' equity of $669,000. The increase in cash and cash equivalents was due primarily to the increase in deposits, and the normal cycle of cash flow by the agricultural customers in the Bank's trade area.
In prior years, fluctuating interest rates and competitive forces in the financial services industry have intensified the need for management and matching of maturities of various assets and liabilities. During the recent past, interest rates earned on loans and newly-acquired securities have generally stabilized. However, elimination of rate ceilings and maturity restrictions on a major segment of the Bank's interest-bearing deposit accounts, the introduction of money market accounts and the general deregulation of the financial services industry have intensified competition for funds, resulting in the need for management of all maturities. This process involves maintaining liquidity and controlling interest sensitivity. The goal of liquidity management is to ensure funds are available for customer needs. Interest sensitivity management attempts to match shifts in earning asset yields with interest paying liability rates.
Increased competition for funds and loans have created risks for institutions without adequate liquidity and favorable opportunities for those which have their resources structured to take advantage of income opportunities as they appear. The Bank has an aggregate of approximately $38 million of cash and due from banks, federal funds sold, securities and loans maturing within one year. Management believes the Bank currently has sufficient liquidity. Further liquidity may be provided for the Bank, should the need arise, by acquiring additional deposits and through borrowing from the federal funds market or through the use of repurchase agreements.
The dividends declared and paid in 1996, 1995 and 1994 were $2.60, $2.60, and $2.25 per share, respectively. The continuation of the dividend is dependent upon the future profitability of the Bank. While management expects the Bank to be profitable in the future, future profitability cannot be predicted with certainty.
The Federal Reserve Board has adopted a risk-based capital measure which is applicable to bank holding companies and banks. The guidelines for measuring compliance with the risk-based capital require a minimum total capital standard of 8% at December 31, 1996, of which 4.00% must consist of "core" capital (common stockholders' equity). At December 31, 1996, the Bank was in compliance with the risk-based capital requirements having a core capital ratio of 17.69% and a total capital ratio of 18.94%. Management is not aware of any recommendations by regulatory authorities which are reasonably likely to have a material effect on the Bank's liquidity, capital resources or operations.
Securities
Securities which totaled $34,094,000 at December 31, 1996, decreased approximately $3,271,000 or 9% from 1995. During 1996, the Bank experienced loan growth of approximately $3,700,000 which was funded primarily through sales and maturities of investments. The securities portfolio is managed with the primary objective of generating interest income while maintaining an appropriate level of asset liquidity and controlling the Bank's net interest rate risk position.
The Bank adopted the provisions of Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities (Statement 115) at December 31, 1993. Under Statement 115, held-to-maturity securities are those securities which the Bank has the ability and intent to hold until maturity. Trading securities are bought and held principally for the purpose of selling them in the near future. The Bank has not established a trading portfolio. All other securities not included in trading or held-to-maturity are classified as available-for-sale. Trading and available-for-sale securities are recorded at fair value. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums and discounts.
During November 1995, the Financial Accounting Standards Board (FASB) issued a "A Guide to Implementation of Statement 115 on Accounting for Certain Investments in Debt and Equity Securities" (Implementation Guide). In accordance with the Implementation Guide, the Bank reclassified securities with an amortized cost of $10,899,000 and a net unrealized gain of $14,600 from held- to-maturity to available-for-sale as of December 31, 1995. After the reclassification, the carrying value of securities available-for-sale included $37,000 in net unrealized losses, net of taxes, as of December 31, 1995.
As of December 31, 1996, securities with a fair value of $20,339,000 have been identified as available-for-sale. Falling bond prices caused a decrease in the market values of these securities during 1996. Amortized cost of securities classified as available-for-sale exceeded their fair market value by $16,000. Included in other assets at December 31, 1996, is $5,000 to reflect the tax effect of unrealized holding losses. A net unrealized loss on securities of $11,000 is included in stockholders' equity at December 31, 1996. Management considers the unrealized losses in the securities portfolio to be temporary in nature.
Allowance and Provision for Loan Losses
The provision for loan losses was $36,000 in 1996, compared to $136,000 in 1995, respectively. This relatively low provision is due to the continued low level of charge-offs experienced by the Bank. The higher provision in 1995 was a result of the growth of the loan portfolio over the past years. The Bank's allowance for loan losses as a percentage of gross loans was 1.96% and 2.09% at December 31, 1996 and 1995, respectively. The provision for loan losses is based upon management's evaluation of the loan portfolio and the prevailing local economy. Management continues to evaluate the adequacy of the allowance for loan losses on an ongoing basis and believes, based on its analysis, that the allowance is adequate to absorb losses relating to these and other credits in the portfolio.
The level of nonperforming assets, which includes other real estate and nonaccrual loans, increased to approximately $880,000 at December 31, 1996 compared to $874,000 and $681,000 at December 31, 1995 and 1994, respectively. This increase in nonperforming assets is not the result of a single borrower; rather, it is due to several residential and commercial real estate loans being placed on nonaccrual status during 1995. As a percentage of total loans plus foreclosed assets, nonperforming assets were 1.4%, 1.5%, and 1.3% at December 31, 1996, 1995 and 1994, respectively. Management does not believe there has been an overall deterioration in asset quality as a result of these changes.
Net Interest Income
The primary factors which impact net interest income are the gross amount and mix of interest-earning assets and interest-bearing liabilities, their respective yields, and relative sensitivity to changes in market interest rates.
Net interest income in 1996 was $4,725,000, up from $4,374,000 in 1995 and $4,509,000 in 1994. Although interest rates increased during 1995 and remained stable during 1996, the Bank's yield on loans increased slightly during the current year. The Bank's yields on loans have traditionally lagged the current interest rate environment. The continued growth in the loan portfolio since early 1994 has also helped the Bank achieve a higher yield on earning assets. During 1996, the Bank also experienced increased balances in its deposit liabilities with stable rates compared to 1995. The net result is an increase in the Bank's net interest margin for 1996. The table entitled Distribution of Assets, Liabilities and Stockholders' Equity; Interest Rates and Interest Differential appearing under the heading Statistical Information in Item 1 above reveals how increasing volumes of interest-earning assets, increasing rates earned on the loan portion of those assets combined with higher volumes of interest-bearing liabilities than the previous year resulted in a $351,000 higher net interest income when compared with 1995.
Other Income
Other income in 1996 was $587,000, down from the 1995 amount of $637,000, and up slightly from $531,000 in 1994. The fluctuations in other income for 1996, 1995 and 1994 are primarily due to recognition of approximately $31,000 of interest on prior year income tax refunds received in 1995, rental income received on other real estate in 1995, security losses in 1994 and changes in service charges earned on deposit accounts.
Other Expenses
Other expenses in 1996 totaled $3,723,000, up from $3,582,000 in 1995 and $3,539,000 in 1994. The increase is due primarily to a $203,000 increase in legal and consulting fees relating to the merger negotiations discussed below. The Bank also experienced an increase in its ad valorem taxes and taxes assessed on capital as a result of consistent increases in capital over the past years and reassessments of the Bank's value by the respective taxing authorities. These increases are partially offset by a decrease in the Bank's FDIC premiums. During 1995, the Bank Insurance Fund (BIF) administered by the FDIC, became fully funded and, as a result, the Bank's FDIC insurance premiums decreased from approximately $50,000 per quarter to $500 per quarter. Expenses to maintain other real estate also decreased during 1996 due to the Bank's low level of foreclosures.
Other expenses increased from $3,539,000 in 1994 to $3,582,000 in 1995 primarily due to an increase in salaries and employee benefits expense. Salaries and employee benefits increased $87,000 during 1995 due to the addition of three new employees, as well as an increase in pension costs.
Income Taxes
Note 8 to the consolidated financial statements includes a reconciliation of income tax expense for the years ended December 31, 1996, 1995, and 1994 to the expected income tax expense, based on the statutory federal income tax rate of 34%. Tax-exempt interest of $746,000, $721,000 and $501,000 was earned during 1996, 1995 and 1994, respectively. Although there was a slight increase in 1996, the tax exempt income as a percentage of total income decreased. In addition, professional fees of approximately $180,000 related to the merger negotiations discussed below are not deductible for tax purposes. These two factors increased the Bank's effective income tax rate for 1996.
Fair Value of Financial Instruments
The Bank adopted the provisions of Statement of Financial Accounting Standards No. 107, Disclosures About Fair Value of Financial Instruments (Statement 107) at December 31, 1995. Under Statement 107, the Bank has disclosed fair value information for its financial instruments. Refer to note 11 to the consolidated financial statements for further detail.
The fair value of financial instruments is based upon quoted market prices or management's best estimate of the values at which the instruments could be exchanged in a transaction between willing parties. Estimates of fair values are based on present value and other valuation techniques, which are significantly affected by the assumptions used, including discount rates and estimates of future cash flows. As such, the derived fair value estimates may not be realizable in an immediate settlement of the instruments.
It is not management's intention to immediately dispose of a significant portion of its financial instruments; thus, any unrealized gains or losses should not be interpreted as a forecast of future earnings and cash flows.
Effect of Inflation
Inflation is not a material factor affecting the Bank's business. General operating expenses such as salaries and employee benefits are, however, subject to normal inflationary pressures.
Effects of Financial Accounting Standards Issued but not Adopted
In June 1996, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (Statement 125). Statement 125 is applicable to transfers and servicing of financial assets and extinguishments of liabilities occurring after the effective date and is to be applied prospectively. The effective date is January 1, 1997 for certain provisions of Statement 125 and January 1, 1998 for the remaining provisions. This Statement provides accounting and reporting standards for transfers and servicing of financial assets and extinguishments of liabilities based on consistent application of a financial- components approach that focuses on control. It distinguishes transfers of financial assets that are sales from transfers that are secured borrowings. Management of the Bank does not expect that adoption of Statement 125 will have a material impact on the Bank's financial position, results of operations, or liquidity.
Merger Negotiations
On November 20, 1996, the Boards of Directors of Assumption Bancshares, Inc. and ArgentBank announced that they have unanimously approved a Definitive Agreement which provides for the merger of Assumption Bank and Trust, a wholly-owned subsidiary of Assumption Bancshares, Inc. with ArgentBank for $21.5 million, or approximately $134 per share, payable in a combination of cash and ArgentBank common stock. The transaction is subject to regulatory and shareholder approvals and the satisfaction of certain other conditions. ArgentBank is headquartered in Thibodaux, Louisiana and operates in Lafourche, Terrebonne and Assumption parishes.
Item 8
Item 8 - Financial Statements and Supplementary Data
Independent Auditors' Report
Consolidated Statements of Condition as of December 31, 1996 and 1995
Consolidated Statements of Operations for the years ended December 31, 1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements for the years ended December 31, 1996, 1995 and 1994
All schedules have been omitted because they are not applicable or the required information is presented in the consolidated financial statements or notes thereto.
Independent Auditors' Report
The Board of Directors Assumption Bancshares, Inc.:
We have audited the accompanying consolidated statements of condition of Assumption Bancshares, Inc. and subsidiary as of December 31, 1996 and 1995, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Assumption Bancshares, Inc. and subsidiary at December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three- year period ended December 31, 1996, in conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP KPMG PEAT MARWICK LLP
New Orleans, Louisiana January 11, 1997
ASSUMPTION BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Condition
December 31, 1996 and 1995
Assets 1996 1995 ______ ____ ____
Cash and due from banks $ 4,266,633 6,293,399 Federal funds sold 10,400,000 5,950,000 ____________ ___________
Cash and cash equivalents 14,666,633 12,243,399
Interest-bearing time deposits 99,000 99,000 Securities: Held-to-maturity (market values of $13,988,010 and $14,765,181 at December 31, 1996 and 1995, respectively) 13,754,817 14,677,589 Available-for-sale (amortized cost of $20,355,567 and $22,630,690 at December 31, 1996 and 1995, respectively) 20,339,424 22,686,923
Loans 60,830,935 57,086,118 Less allowance for loan losses 1,190,245 1,195,517 ____________ ___________
59,640,690 55,890,601
Other real estate 30,194 20,717 Bank premises and equipment, net 2,092,022 2,230,281 Accrued interest receivable 850,752 814,196 Other assets 328,650 444,794 ____________ ___________
$ 111,802,182 109,107,500
ASSUMPTION BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Condition, continued
1996 1995 ______ ______ Liabilities and Stockholders' Equity ____________________________________
Deposits: Noninterest-bearing deposits $ 14,294,965 12,542,093 Interest-bearing deposits 87,082,783 86,806,028 ____________ __________ 101,377,748 99,348,121
Accrued interest payable 368,598 340,500 Other liabilities and accrued expenses 220,702 252,980 ____________ __________
Total liabilities 101,967,048 99,941,601 ____________ ___________ Stockholders' equity: Common stock - $5 par value. Authorized 1,000,000 shares; issued and outstanding 160,000 shares in 1996 and 1995 800,000 800,000 Paid-in capital 450,000 450,000 Retained earnings 8,595,789 7,878,785 Unrealized gain (loss) on securities, net of income taxes (10,655) 37,114 ______________ ___________ Total stockholders' equity 9,835,134 9,165,899 ______________ ___________ Commitments $ 111,802,182 109,107,500 ============== ============ See accompanying notes to consolidated financial statements.
ASSUMPTION BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Operations
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994 _____ _____ _____ Interest income: Interest and fees on loans $ 5,510,430 4,818,574 4,258,766 Interest on securities: Taxable 1,436,440 1,800,819 2,177,923 Exempt from federal income taxes 739,605 709,192 489,820 Interest on federal funds sold 243,989 163,735 146,561 Interest on deposits with banks 5,956 6,510 4,810 _____________ __________ __________ Total interest income 7,936,420 7,498,830 7,077,880
Interest expense on deposits 3,210,932 3,124,468 2,568,689 _____________ __________ __________ Net interest income 4,725,488 4,374,362 4,509,191
Provision for loan losses 36,000 136,000 60,000 ____________ __________ __________ Net interest income after provision for loan losses 4,689,488 4,238,362 4,449,191 ____________ __________ __________ Other income: Service charges on customer accounts 442,916 422,508 382,879 Securities gains (losses) 7,496 (9,318) (48,997) Other 136,537 223,327 197,340 ____________ ___________ __________
586,949 636,517 531,222
Other expenses 3,723,389 3,581,629 3,539,335 ____________ ___________ ___________ Income before income taxes 1,553,048 1,293,250 1,441,078
Income tax expense 420,044 216,019 274,859 ____________ ___________ ___________ Net income $ 1,133,004 1,077,231 1,166,219 ============ =========== =========== Per share data:
Net income $ 7.08 6.73 7.29 ============ =========== =========== Number of shares used in computations 160,000 160,000 160,000 ============ =========== =========== See accompanying notes to consolidated financial statements.
ASSUMPTION BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1996, 1995 and 1994
ASSUMPTION BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994 ---- ---- ---- Cash flows from operating activities: Net income $ 1,133,004 1,077,231 1,166,219 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 221,400 201,625 199,800 Provision for loan losses 36,000 136,000 60,000 Securities losses (gains) (7,496) 9,318 48,997 Writedown of other real estate - - 63,554 Decrease (increase) in accrued interest receivable (36,556) 5,620 (46,862) Increase (decrease) in accrued interest payable 28,098 147,026 (18,941) Other 101,776 113,205 11,057 _________ _________ _________ Net cash provided by operating activities 1,476,226 1,690,025 1,483,824
Cash flows from investing activities: Proceeds from sales of securities available-for-sale 1,749,568 5,213,282 11,523,329 Maturities of and principal payments on securities held-to-maturity 920,267 2,256,336 5,075,055 Purchases of securities available-for- sale (2,780,211) (489,431) (458,675) Maturities of and principal payments on securities available-for-sale 3,315,766 1,503,873 3,250,573 Purchases of securities held-to- maturity - (2,323,160) (14,780,358) Loans originated, net of principal collected (3,840,191) (6,577,548) (7,055,327) Proceeds from sales of other real estate 51,323 228,733 - Capital expenditures (83,141) (384,184) (613,554) ___________ ___________ __________ Net cash used in investing activities (666,619) (572,099) (3,058,957) ___________ ___________ __________
ASSUMPTION BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows, continued
1996 1995 1994 ---- ---- ----
Cash flows from financing activities: Net increase (decrease) in demand deposits, NOW accounts, money market accounts and savings and IRA accounts $ 716,216 (778,149) 1,712,634 Net increase (decrease) in certificates of deposit 1,313,411 1,873,503 (981,814) Dividends paid (416,000) (416,000) (360,000) _____________ ___________ ___________
Net cash provided by financing activities 1,613,627 679,354 370,820 _____________ ___________ ___________ Net increase (decrease) in cash and cash equivalents 2,423,234 1,797,280 (1,204,313)
Cash and cash equivalents at beginning of year 12,243,399 10,446,119 11,650,432 ____________ ___________ ___________ Cash and cash equivalents at end of year $ 14,666,633 12,243,399 10,446,119 ============ =========== =========== Supplemental disclosures: Interest paid $ 3,182,834 2,977,442 2,587,630 ============ =========== =========== Income taxes paid $ 340,000 250,000 310,000 ============ =========== =========== See accompanying notes to consolidated financial statements.
ASSUMPTION BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
(1) Summary of Significant Accounting Policies __________________________________________
(a) Organization _____________
Assumption Bancshares, Inc. (Bancshares) was incorporated under the laws of the State of Louisiana in 1984. On July 31, 1984, Assumption Bank and Trust Company (the Bank) was reorganized as a subsidiary of Bancshares. Prior to July 31, 1984, Bancshares had no significant activity. Bancshares is currently engaged, through the Bank subsidiary, in banking activities. The Bank is the principal asset and primary source of revenue for Bancshares.
The Bank is subject to competition from other financial institutions and the regulations of certain government agencies. The government regulatory authorities periodically examine the Bank's financial condition and regulatory compliance.
(b) Basis of Presentation _____________________
The consolidated financial statements include the financial statements of Bancshares and the Bank. All significant intercompany balances and transactions have been eliminated in consolidation. All references to the "Bank" appearing hereafter shall mean the consolidated balances of Bancshares and the Bank.
(c) Securities __________
The Bank adopted the provisions of Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities (Statement 115) at December 31, 1993. Under Statement 115, the Bank classifies its securities in one of three categories: trading, available-for-sale, or held-to-maturity. Trading securities are bought and held principally for the purpose of selling them in the near future. The Bank has not established a trading portfolio. Held-to-maturity securities are those securities in which the Bank has the ability and intent to hold until maturity. All other securities not included in trading or held-to-maturity are classified as available-for- sale.
Trading and available-for-sale securities are recorded at fair value. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Unrealized holding gains and losses on trading securities are included in earnings. Unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are reported as a separate component of stockholders' equity until realized. Transfers of securities between categories are recorded at fair value at the date of transfer. Unrealized holding gains and losses are recognized in earnings for transfers into trading securities. Unrealized holding gains or losses associated with transfers of securities from held-to- maturity to available-for-sale are recorded as a separate component of stockholders' equity. The
(Continued)
ASSUMPTION BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
unrealized holding gains or losses included in the separate component of equity for securities transferred from available-for-sale to held-for-maturity are maintained and amortized into earnings over the remaining life of the security as an adjustment to yield in a manner consistent with the amortization or accretion of premium or discount on the associated security.
A decline in the market value of any available-for-sale or held-to-maturity security below cost that is deemed other than temporary results in a charge to earnings resulting in the establishment of a new cost basis for the security.
Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using the effective interest method. Interest income is recognized when earned. Realized gains and losses for securities classified as available-for-sale and held-to- maturity are included in earnings and are derived using the specific identification method for determining the cost of securities sold.
(d) Allowance for Loan Losses _________________________
Management considers the allowance for loan losses adequate to absorb losses on the loans outstanding as of each reporting date. The determination of the allowance for loan losses, using the Bank's procedures and methods, is based upon various judgments and assumptions. The factors which influence management's judgment in determining the level of the allowance for loan losses and the amount which is charged to operating expenses are: (1) past loan loss experience; (2) composition of the loan portfolio; (3) evaluation of potential future losses; (4) current economic conditions; (5) specific identification and anticipation of problem and nonperforming loans, and (6) other relevant factors affecting loans. No assurance can be given that the Bank will not, in any particular period, sustain loan losses which are sizable in relation to the amount reserved or that subsequent evaluations of the loan portfolio, in light of conditions and factors then prevailing, will not require significant changes in the allowance for loan losses. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for loan losses. Such agencies may require the Bank to recognize additions to the allowance based on their judgment about information available to them at the time of their examinations.
During the first quarter of 1995, the Bank adopted Statement of Financial Accounting Standard No. 114, Accounting by Creditors for Impairment of a Loan (Statement 114) and Statement of Financial Accounting Standards No. 118, Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures (Statement 118). The Bank applied the provisions of Statement 114 and Statement 118 to all of its loans, except for its consumer installment loans which are collectively evaluated for impairment. Pursuant to Statement 114 and Statement 118, a loan is considered to be impaired when,
(Continued)
ASSUMPTION BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
based on current information and events, it is probable that the Bank will be unable to collect principal and interest amounts due according to the contractual terms of the loan agreement. When a loan is impaired, the measurement of its impairment can be determined in one of three ways, as follows: (1) the present value of the expected cash flows of the loan discounted at the loan's original effective interest rate, (2) the observable market price of the impaired loan, or (3) the fair value of the collateral of a collateral-dependent loan. The amount by which the recorded investment in the loan exceeds the measure of the impaired loan is recognized by recording a valuation allowance with a corresponding charge to the provision for possible loan losses. The effect of adopting Statement 114 and Statement 118 on the Bank's financial condition and results of operations was immaterial.
(e) Other Real Estate _________________
Other real estate consists of properties that were acquired through foreclosure or through acceptance of a deed in lieu of foreclosure. These properties are recorded at the lower of cost or fair value, net of estimated selling costs. When a reduction from the carrying value of the loan to the fair value of the property is required at the time of foreclosure, the difference is charged to the allowance for loan losses. Revenues and expenses associated with operating these properties are recorded during the period in which they are received or incurred.
The process of determining the appropriate valuation of other real estate involves judgments and estimates that are particularly susceptible to change.
(f) Bank Premises and Equipment ___________________________
Bank premises and equipment are stated at cost, less accumulated depreciation. Depreciation of bank premises and equipment is calculated using a combination of straight-line and accelerated methods over the estimated useful lives of the assets. Estimated useful lives range up to 39 years for buildings, 3-10 years for furniture and equipment and the shorter of the lease term or the useful life for leasehold improvements.
(Continued)
ASSUMPTION BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(g) Interest Income on Loans ________________________
Accrual of interest on loans is discontinued when management believes, after considering economic and business conditions and collection efforts, that the borrowers' financial condition is such that collection of interest is doubtful.
(h) Income Taxes ____________
Effective January 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (Statement 109). Under the asset and liability method of Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
(i) Pension Plan ____________
The Bank participates in a noncontributory defined-benefit pension plan organized by the Louisiana Bankers' Association which covers substantially all employees. Pension costs are actuarially determined and include the amortization of prior service costs over the estimated remaining service periods of the Bank's employees. Funding is based on a review of the specific requirements and an evaluation of the assets and liabilities of the defined-benefit pension plan. The Bank does not provide any postretirement or postemployment benefits, except for those provided under the pension plan.
(j) Advertising Cost ________________
The costs of advertising are expensed as incurred.
(k) Reclassification ________________
Certain reclassifications were made to the consolidated financial statements of prior years to conform with the presentation for 1996.
(Continued)
ASSUMPTION BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(l) Use of Estimates ________________
Management of the Bank has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates.
(m) Earnings per Share __________________
Earnings per share have been computed on the basis of the weighted average number of shares of common stock outstanding during the year.
(n) Statements of Cash Flows ________________________
For purposes of the consolidated statements of cash flows, the Bank considers due from banks and federal funds sold to be cash equivalents.
(2) Securities __________
The amortized cost, gross unrealized holding gains, gross unrealized holding losses and fair value of held-to-maturity and available-for-sale securities by major security type at December 31, 1996 and 1995, were as follows:
Gross Gross Amortized unrealized unrealized Fair 1996 cost gains losses value ____ ___________ ___________ __________ __________
Held-to-maturity: Mortgage-backed securities $ 3,404,847 55,659 (23,915) 3,436,591 State and municipal obligations 9,909,065 166,409 (80,845) 9,994,629 Collateralized mortgage obligations 440,905 115,885 - 556,790 ____________ ___________ ____________ ____________ Total held-to- maturity 13,754,817 337,953 (104,760) 13,988,010 ____________ ___________ ____________ _____________
(Continued)
ASSUMPTION BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Gross Gross Amortized unrealized unrealized Fair 1996 cost gains losses value ____ ___________ ___________ __________ __________
Available-for-sale: Mortgage-backed securities $ 13,489,693 75,198 (158,857) 13,406,034 Other U.S. Government agencies 2,411,155 34,253 (30,551) 2,414,857 State and municipal obligations 4,166,230 36,440 (30,844) 4,171,826 Collateralized mortgage obligations 288,489 58,218 - 346,707 ____________ ___________ ____________ _____________ Total available- for-sale 20,355,567 204,109 (220,252) 20,339,424 ____________ ___________ ____________ _____________ Total securities $ 34,110,384 542,062 (325,012) 34,327,434 ============ =========== ============ =============
____
Held-to-maturity: Mortgage-backed securities $ 4,252,551 81,325 (23,588) 4,310,288 State and municipal obligations 9,970,032 152,595 (160,637) 9,961,990 Collateralized mortgage obligations 455,006 37,897 - 492,903 ____________ ___________ ____________ _____________ Total held-to- maturity 14,677,589 271,817 (184,225) 14,765,181 ____________ ___________ ____________ _____________ Available-for-sale: Mortgage-backed securities 16,748,075 121,091 (137,987) 16,731,179 Other U.S. Government agencies 1,420,185 70,755 (9,263) 1,481,677 State and municipal obligations 4,174,676 32,747 (48,128) 4,159,295 Collateralized mortgage obligations 287,754 27,018 - 314,772 ____________ ___________ ____________ _____________ Total available- for-sale 22,630,690 251,611 (195,378) 22,686,923 ____________ ___________ ____________ _____________ Total securities $ 37,308,279 523,428 (379,603) 37,452,104 ========== ======= ========= ========== (Continued)
ASSUMPTION BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
The amortized cost and fair values of securities at December 31, 1996, by remaining contractual maturity are shown below (in thousands of dollars). Expected maturities will differ from contractual maturities on mortgage-backed securities and other securities which may have prepayment provisions.
Amortized Fair cost value __________ _______ Held-to-maturity: Due after one year through five years $ 501 504 Due after five years through ten years 7,071 7,135 Due after ten years 2,337 2,356 Mortgage-backed securities and collateral mortgage obligations 3,846 3,993 ________ ________ Total held-to-maturity 13,755 13,988 ________ ________ Available-for-sale: Due in one year or less 1,639 1,671 Due after one year through five years 3,631 3,619 Due after five years through ten years 1,307 1,297 Mortgage-backed securities and collateral mortgage obligations 13,778 13,752 ________ ________ Total available-for-sale 20,355 20,339 ________ ________ Total securities $ 34,110 34,327 ======== ========
During November 1995, the Financial Accounting Standards Board (FASB) issued "A Guide to Implementation of Statement 115 on Accounting for Certain Investments in Debt and Equity Securities" (Implementation Guide). In accordance with the Implementation Guide, the Bank reclassified securities with an amortized cost of $10,899,000 and a net unrealized gain of $14,600, from the held-to-maturity category to the available-for-sale category as of December 31, 1995.
During 1996, 1995 and 1994, gross gains of $10,001 $40,457 and $55,929, respectively, were realized on sales of securities. Gross losses of $2,505, $49,775 and $104,926 were realized on sales during 1996, 1995 and 1994, respectively.
Securities having a carrying value of approximately $17,678,000 and $21,609,000 at December 31, 1996 and 1995, respectively, were pledged to secure public deposits as required by law.
At December 31, 1996, the Bank held no securities issued by a single issuer which exceeded 10% of stockholders' equity. At December 31, 1995, the Bank held securities issued by Assumption Parish totaling $980,000, which exceeded 10% of stockholders' equity.
(Continued)
ASSUMPTION BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(3) Loans and Allowance for Loan Losses ____________________________________
A summary of the types of loans follows:
1996 1995 ____ ____ Commercial, financial and agricultural $ 2,680,514 3,497,583 Real estate 50,412,576 46,695,271 Individuals 7,737,845 6,893,264 ____________ ___________ $ 60,830,935 57,086,118 ============ ===========
A summary of the changes in the allowance for loan losses for 1996, 1995 and 1994 follows:
1996 1995 1994 ____ ____ ____
Balance at beginning of year $ 1,195,517 1,103,823 1,129,774 Provision charged to income 36,000 136,000 60,000 ____________ __________ __________
1,231,517 1,239,823 1,189,774 ____________ __________ __________ Loans charged-off (133,053) (87,602) (140,623) Recoveries on loans charged-off 91,781 43,296 54,672 ____________ __________ ___________ Net loans charged-off (41,272) (44,306) (85,951) ____________ __________ ___________ Balance at end of year $ 1,190,245 1,195,517 1,103,823 ============ ========== ===========
The Bank had loans of approximately $850,000 and $853,000 on nonaccrual at December 31, 1996 and 1995, respectively. The amount of additional interest income on nonaccrual loans, which would have been recognized for 1996, 1995 and 1994, had the related loans been performing according to their original terms was not material. Interest income recognized on the cash basis on loans in nonaccrual status was approximately $53,000, $48,500 and $39,000 for 1996, 1995 and 1994, respectively.
At December 31, 1996 and 1995, impaired loans, all of which were on nonaccrual, totaled $850,000 and $853,000, requiring a total impairment allowance of $235,000 and $235,000, respectively. The average recorded investment in impaired loans was approximately $791,000 and $768,000 during the year ended December 31, 1996 and 1995, respectively. For all impaired loans, the impairment amount was measured using the fair value of the underlying collateral.
For purposes of the consolidated statements of cash flows, noncash investing and financing transactions include other real estate and assets acquired in settlement of loans of approximately $54,000, $23,000, and $58,000 during 1996, 1995 and 1994, respectively.
ASSUMPTION BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
The Bank has extended loans, in the ordinary course of business, to officers and directors of Bancshares and the Bank, their immediate families and companies in which the directors are principal owners. In the opinion of management, such transactions are on substantially the same terms as those prevailing at the time for comparable transactions with others. The amount of loans to these persons and their interests and the related activity for 1996 and 1995 is summarized as follows:
1996 1995 ____ ____
Balance at beginning of year $ 1,888,846 1,056,766 Additions 2,691,550 4,618,705 Payments and renewals (2,350,380) (3,786,625) ____________ ___________ Balance at year end $ 2,230,016 1,888,846 ============ ===========
(4) Bank Premises and Equipment ___________________________
Bank premises and equipment are summarized as follows:
Accumulated Cost depreciation Net ____ ____________ ___
December 31, 1996: Land $ 256,532 - 256,532 Banking houses 1,699,888 (715,368) 984,520 Leasehold improvements 108,198 (102,420) 5,778 Furniture and fixtures 2,769,461 (1,924,269) 845,192 __________ ___________ __________
$4,834,079 (2,742,057) 2,092,022 ========== =========== ==========
December 31, 1995: Land 256,532 - 256,532 Banking houses 1,678,007 (667,967) 1,010,040 Leasehold improvements 108,198 (68,280) 39,918 Furniture and fixtures 2,708,200 (1,784,409) 923,791 __________ ___________ __________
$ 4,750,937 (2,520,656) 2,230,281 ========== =========== ========== (Continued)
ASSUMPTION BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(5) Pension Plan ____________
The Bank participates in a noncontributory defined-benefit pension plan organized by the Louisiana Bankers' Association, which covers substantially all of its employees. The following table sets forth the plan's funded status and amounts recognized in the Bank's consolidated statements of condition at December 31, 1996 and 1995.
1996 1995 ____ ____ Pension benefit obligation: Accumulated benefit obligations: Vested $ 2,154,571 1,866,974 Nonvested 110,123 165,697 ____________ __________
2,264,694 2,032,671 Additional benefits based on estimated future salary levels 435,876 440,659 ___________ __________
Projected benefit obligation 2,700,570 2,473,330
Plan assets at fair value 2,343,655 2,134,586 ___________ __________ Plan assets less than projected benefit obligation (356,915) (338,744)
Unrecognized net asset being amortized over 14 years 446,115 387,737 ___________ __________ Prepaid pension cost included in other assets $ 89,200 48,993 =========== ==========
Plan assets for the defined benefit pension plan consist primarily of common stocks, corporate bonds, U.S. Government obligations and cash equivalents.
Net pension expense for 1996, 1995 and 1994 included the following:
1996 1995 1994 ____ ____ _____ Service cost - benefits earned during the period $ 57,211 53,927 61,063 Interest cost on projected benefit obligation 175,574 163,421 151,513 Actual return on plan assets (192,975) (303,418) 29,188 Amortization of transition assets 8,783 136,132 (202,234) _________ ________ _________ Net pension expense $ 48,593 50,062 39,530 ========= ======== =========
(Continued)
ASSUMPTION BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Assumptions used in determining the pension expense for the years ended December 31, 1996, 1995 and 1994 were:
1996 1995 1994 ____ ____ ____
Discount rate 7.50% 8.05% 7.25% Rates of increase in compensation levels 3.50 3.50 4.00 Expected long-term rate of return on assets 9.00 9.00 9.00 ====== ====== ======
(6) Deposits _________
A summary of deposit accounts at December 31, 1996 and 1995 follows:
1996 1995 ---- ----
Noninterest-bearing $ 14,294,965 12,542,093
Interest-bearing: NOW accounts 19,740,118 20,518,595 Money market accounts 10,583,829 10,699,688 Savings and IRA accounts 21,573,867 22,393,243 Certificates of deposit $100,000 and over 3,650,360 3,577,697 Other certificates of deposit 30,857,553 28,778,502 Other time deposits $100,000 and over 677,056 838,303 ____________ ___________ 87,082,783 86,806,028 ____________ ___________ $ 101,377,748 99,348,121 ============ ===========
Interest expense related to certificates of deposit and other time deposits, $100,000 and over totaled $204,731, $185,470, and $105,364 during 1996, 1995 and 1994, respectively. (Continued)
ASSUMPTION BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(7) Other Expenses ______________
Details of other expenses are as follows:
1996 1995 1994 ____ ____ ____
Salaries and employee benefits $ 1,835,239 1,797,053 1,709,801 Repairs and maintenance 284,207 277,247 241,800 Depreciation 221,400 201,625 199,800 Stationery and supplies 180,960 195,577 190,886 Occupancy 154,767 149,663 142,037 Data processing 17,889 19,930 17,753 Professional services 386,965 202,413 162,420 Directors' fees 107,250 91,550 91,600 FDIC insurance and state assessments 24,198 130,024 239,968 Taxes, other than on income 113,252 88,026 75,017 Telephone 68,138 79,683 83,378 Postage 59,720 60,000 61,783 Other real estate 3,892 29,004 93,544 Conventions and seminars 29,200 30,261 43,796 Advertising and marketing 109,341 104,934 92,297 Other 126,971 124,639 93,455 ___________ _________ __________ $ 3,723,389 3,581,629 3,539,335 =========== ========= =========== (8) Income Taxes ____________
Income tax expense for the years ended December 31, 1996, 1995 and 1994 consists of:
1996 1995 1994 ____ ____ ____
Income from continuing operations: Current $ 366,060 253,850 292,560 Deferred 53,984 (37,831) (17,701) __________ _________ _________ 420,044 216,019 274,859
Deferred tax expense (benefit) recorded in stockholders' equity for unrealized gains (losses) on securities available-for-sale (24,608) 303,400 (423,981) ___________ _________ __________ $ 395,436 519,419 (149,122) =========== ========= ==========
ASSUMPTION BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Total income tax expense differed from the amounts computed by applying the U.S. federal income tax rates to income before income taxes as a result of the following:
1996 1995 1994 ____ ____ ____
U.S. federal income tax rate 34% 34% 34%
Computed "expected" income tax $ 528,036 439,884 474,432 Increase (decrease) in income taxes resulting from: Tax-exempt interest (258,182)(249,440) (173,066) Non-deductible professional fees 61,200 - - Other, net 88,990 25,575 (26,507) __________ ________ __________ Total income tax expense $ 420,044 216,019 274,859 ========== ======== ==========
The tax effects of temporary differences that give rise to the net deferred tax asset at December 31, 1996 and 1995 are presented below:
1996 1995 ____ ____
Deferred tax assets: Allowance for possible loan losses $ 278,951 266,635 Unrealized losses on securities available-for-sale 5,488 - Other real estate due to writedowns 21,608 21,608 Minimum tax credit carryforward - 19,438 Other 488 3,316 ___________ __________ Total deferred tax assets 306,535 310,997 ___________ __________ Deferred tax liabilities: Unrealized gains on securities available-for-sale - 19,120 Bank premises and equipment, principally due to differences in cost basis and depreciation 77,867 60,367 Securities, principally due to differences cost basis and discount accretion 90,553 76,953 Pension, principally due to accrual for tax and not financial reporting purposes 31,135 18,201 ___________ __________ Total deferred tax liabilities 199,555 174,641 ___________ __________ Net deferred tax asset $ 106,980 136,356 =========== ==========
No valuation allowance was recorded against the deferred tax asset because management believes that it is more likely than not that the net deferred tax asset will be realized in full.
ASSUMPTION BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(9) Parent Company Condensed Financial Information _______________________________________________
Summarized financial information for Assumption Bancshares, Inc. (parent company only) follows:
Balance Sheets -------------- Assets December 31, ------ ------------ 1996 1995 ---- ----
Cash $ 704 1,854 Investment in 100% of the outstanding common stock of bank subsidiary 9,834,430 9,164,045 _________ _________ $ 9,835,134 9,165,899 ========== ========= Liabilities and Stockholders' Equity ____________________________________
Stockholders' equity: Common stock 800,000 800,000 Paid-in capital 450,000 450,000 Retained earnings 8,595,789 7,878,785 Unrealized gain (loss) on securities, net of income taxes (10,655) 37,114 ___________ __________ $ 9,835,134 9,165,899 =========== ========== Statements of Operations ________________________
Years ended December 31, ________________________ 1996 1995 1994 ---- ---- ---- Equity in net income of bank subsidiary $ 1,135,154 1,077,756 1,167,955 Assessments from state banking commission (2,150) (525) (1,736) ____________ __________ __________ Net income $ 1,133,004 1,077,231 1,166,219 ============ ========== ========= (Continued)
ASSUMPTION BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Statements of Cash Flows ------------------------
Years ended December 31, ------------------------ 1996 1995 1994 ---- ---- ----
Net income $ 1,133,004 1,077,231 1,166,219 Adjustments to reconcile net income to net cash used by operating activities: Equity in net income of bank subsidiary (1,135,154) (1,077,756) (1,167,955) ___________ ___________ ___________ Net cash used by operating activities (2,150) (525) (1,736) ___________ ___________ ___________ Cash used in financing activities - dividends paid to shareholders (416,000) (416,000) (360,000) ___________ ____________ __________ Cash provided by investing activities - dividends received from subsidiary 417,000 416,000 364,000 ___________ ____________ __________
Net increase (decrease) in cash (1,150) (525) 2,264
Cash at beginning of year 1,854 2,379 115 ___________ ____________ ___________ Cash at end of year $ 704 1,854 2,379 =========== ============ ===========
Bancshares' primary source of working capital is dividends from the Bank. Certain restrictions exist under Federal law regarding the ability of the subsidiary bank to transfer funds to Bancshares in the form of cash dividends. In addition, regulatory authorities also consider the adequacy of the Bank's capital in relation to its assets and other considerations. Therefore, such capital adequacy may limit the availability of undistributed earnings by a varying amount.
(10) Commitments -----------
The Bank is a party to financial instruments with off- balance-sheet risk which are executed in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate (market) risk in addition to the amounts reflected in the accompanying consolidated statements of condition.
The Bank's exposure to loss in the event of nonperformance by the other parties to these financial instruments is limited to the contractual amount of such instruments. The Bank employs the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. (Continued)
ASSUMPTION BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Financial instruments whose contract amounts represent credit risk as of December 31, 1996 and 1995 are as follows:
1996 1995 ---- ----
Commitments to extend credit $ 3,530,235 4,185,759 Stand-by letters of credit 923,807 1,016,624 ___________ __________ $ 4,454,042 5,202,383 =========== ==========
Commitments to extend credit are agreements to extend credit to a customer under certain terms and conditions. Commitments generally have fixed expiration dates of less than one year and other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer's creditworthiness on an individual basis. The amount of collateral required, if deemed necessary by the Bank upon extension of credit, is based on management's evaluation of the creditworthiness of the counterparty, and the terms of the agreement. Collateral held varies, but generally includes: accounts receivable, inventory, property, plant, and equipment, and real estate.
Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Letters of credit can be secured by cash or non-cash items. Those secured by non- cash items are backed by a note signed by the customer.
(11) Fair Value of Financial Instruments -----------------------------------
Statement of Financial Accounting Standards No. 107, Disclosures About Fair Value of Financial Instruments (Statement 107), requires the disclosure of estimated fair values for financial instruments. Quoted market prices, if available, are utilized as an estimate of the fair value of financial instruments. Because no quoted market prices exist for a significant part of the Bank's financial instruments, the fair value of such instruments has been derived based on management's assumptions with respect to future economic conditions, the amount and timing of future cash flows and estimated discount rates. Different assumptions could significantly affect these estimates. Additionally, these estimates are only indicative of individual financial instruments' values and should not be considered an indication of the fair value of the Bank taken as a whole. (Continued)
ASSUMPTION BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
The estimated fair value of financial instruments at December 31, 1996 is as follows (in thousands of dollars):
Carrying Fair Amount Value ------ -----
Financial assets: Cash and cash equivalents $ 14,667 14,667 Interest-bearing deposits 99 99 Securities: Held-to-maturity 13,755 13,988 Available-for-sale 20,339 20,339 Loans receivable, net 59,641 60,584
Financial liabilities - deposits 101,378 101,414 ========= =======
The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
Cash and cash equivalents: The carrying amounts reported in the consolidated balance sheet for cash and short-term instruments approximate those assets' fair values. The Bank's investment in interest-bearing deposits with maturities of greater than three months are quoted at market value.
Securities: Fair values for investment securities are based on quoted market prices or dealer quotes.
Loans: For loans with maturities of three months or less, fair value is considered to approximate carrying value. The fair value of other loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings for the same remaining maturities.
Deposits: The carrying value for all deposits without fixed maturities, and for time deposits with maturities of three months or less, is considered to approximate fair value. The fair value for time deposits greater than $100,000 with maturities greater than three months as well as time deposits less than $100,000 is based upon the appropriate discount rate for similar pools. The fair value of demand deposits is the amount payable on demand, and is not adjusted for any value derived from retaining those deposits for an expected future period of time. That component, commonly referred to as deposit base intangible, was not estimated at December 31, 1996 and is not considered in the fair value amounts nor is it recorded as an intangible asset in the statement of condition. (Continued)
ASSUMPTION BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Commitments to extend credit, standby letters of credit and letters of credit: Pricing of these financial instruments is based on the credit quality and relationship, fees, interest rates, compensating balances and other covenants or requirements. Many of these commitments are expected to, and typically do, expire without being drawn upon. Carrying amounts which are comprised of the unamortized fee income and, where necessary, reserves for any expected credit losses from these financial instruments, are immaterial. Because these instruments are generally priced at the time they are funded, there is no gain or loss embedded in these transactions.
(12) Regulatory Capital ------------------
The Bank's regulatory capital is summarized as follows:
1996 1995 ---- ----
Tier I capital $ 9,834,430 9,164,045 Tier II capital 695,080 668,606 ____________ ___________ Total capital $ 10,529,510 9,832,651 ============ ===========
Risk adjusted assets $ 55,606,399 53,488,441 ============ ===========
Regulatory Minimums ------------------- Adequately Well capitalized capitalized ----------- ------------ Risk-based capital ratios: Tier I 4% 6% 17.69% 17.13% Total 8 10 18.94 18.38 Tier I leverage ratio 4 5 9.17 8.64
The Bank's risk-based capital and Tier I leverage ratios substantially exceed the regulatory required minimums at December 31, 1996 and 1995.
(13) Pending Merger --------------
On November 20, 1996, the Boards of Directors of Assumption Bancshares, Inc. and ArgentBank announced that they have unanimously approved a Definitive Agreement which provides for the merger of Assumption Bank and Trust, a wholly-owned subsidiary of Assumption Bancshares, Inc. with ArgentBank for $21.5 million, or approximately $134 per share, payable in a combination of cash and ArgentBank common stock. The transaction is subject to regulatory and shareholder approvals and the satisfaction of certain other conditions. ArgentBank is headquartered in Thibodaux, Louisiana and operates in Lafourche, Terrebonne and Assumption parishes.
Item 9
Item 9 - Disagreements on Accounting and Financial Disclosure ----------------------------------------------------
There have been no changes or disagreements with the Company's independent certified public accountants on any matter of accounting principles or practice, financial statement disclosure or auditing scope or procedure within the twenty-four months prior to December 31, 1996.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
Information with Respect to Directors
The following table sets forth certain information with respect to each director of the Company. Each person has been engaged in the principal occupation shown for the past five years. All of the directors are also directors of Assumption Bank & Trust Company (the "Bank"), the sole subsidiary of the Company.
________________ (1) Mr. Cancienne, Mr. C. Savoie and Mr. F. Savoie are cousins.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's directors and executive officers to file with the Securities and Exchange Commission initial reports of beneficial ownership, and changes in beneficial ownership, of the Common Stock. In 1996, Felix H. Savoie, Jr., a director of the Company, inadvertently failed to file a report required by Section 16(a) of the Exchange Act reporting one transaction related to the acquisition of shares of Common Stock.
Item 11.
Item 11. Executive Compensation
Summary of Executive Compensation
The following table provides certain information regarding the compensation of Joseph H. Montero, II, President and Chief Executive Officer of the Company and the Bank, for each of the preceding three years.
Summary Compensation Table
Annual Compensation ------------------- Other Name and Annual Principal Position Year Salary Bonus Compensation(1) ------------------ ---- ------ ----- --------------- Joseph H. Montero, II, 1996 $103,555 $4,900 $6,750 President and Chief 1995 103,555 5,300 6,000 Executive Officer 1994 103,555 6,000 6,000
_______________________
(1) Consists of director fees. ________________________
Compensation of Directors
Directors do not receive fees for attending meetings of the Company's Board. Each director of the Bank receives a fee of $500 per month if present and $250 per month if not present at the Bank's board meetings. Bank committee meetings are held from time to time as necessary, and directors, other than the President and Chief Executive Officer, are paid $100 per committee meeting attended.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information concerning the beneficial ownership of the Common Stock of the Company by (i) each director, (ii) each executive officer named in the Summary Compensation Table and (iii) all directors and executive officers of the Company as a group, as of February 28, 1997. Beneficial ownership of the shares of Common Stock has been determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934 (the "Exchange Act"). Unless otherwise indicated, all shares shown as beneficially owned are held with sole voting and investment power.
Name Shares Percent Common Stock of Beneficially Class Owned F. N. Carrier, Jr. 1,790 1.12% Ridley J. Gros, Phd. 200 * Leonard C. Guedry, Jr. 200 * Robert J. Tregre 400 * Patrick E. Cancienne, Sr. 1,300 * Joseph H. Montero, II 2,000 1.25% Clarence J. Savoie, II 925(1) * Stanley S. Sternfels 1,250 * Nelson A. Cox, Sr., M.D. 1,870 1.17% Felix H. Savoie, Jr. 1,090 * Nicess P. Templet 978 * Risley C. Triche 1,293(2) * All Directors and Executive Officers as a Group (13 Persons) 13,601 8.50%
_______________________ * Less than one percent. (1) Includes 60 shares as to which Mr. Savoie shares voting and investment power. (2) Includes 50 shares as to which Mr. Triche shares voting and investment power. ________________________
Management is not aware of any person or group of persons who beneficially owns more than five percent of the Common Stock.
Item 13.
Item 13. Certain Relationships and Related Transactions
Directors and executive officers of the Company and the Bank and their associates have been customers of and have had loan transactions with the Bank, and such transactions are expected to continue in the future. In the opinion of management, all loans to such persons were made in the ordinary course of business, were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with others, and did not involve when made and have not involved since they were made, more than the normal risk of collectibility or present other unfavorable features.
PART IV
Item 14
Item 14 - Exhibits, Financial Statements, Schedules and Reports on Form 8-K -----------------------------------------------------------------
(a) 1. Financial Statements --------------------
Independent Auditors' Report
Consolidated Statements of Condition as of December 31, 1996 and 1995
Consolidated Statements of Operations for the years ended December 31, 1996, 1995, and 1994
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996, 1995, and 1994
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995, and 1994
Notes to Consolidated Financial Statements for the years ended December 31, 1996, 1995, and 1994
2. Financial Statement Schedules -----------------------------
All schedules have been omitted because they are not applicable or the required information is presented in the consolidated financial statements or notes thereto.
3. Exhibits ________
2.1 Agreement and Plan of Merger by and among Argent Bank and Assumption Bancshares, Inc. and Assumption Bank & Trust Company.
3(i) Articles of Incorporation of Bancshares (incorporated by reference to Exhibit 3(i) to Bancshares Form 10-K for the year ended December 31, 1994.)
3(ii) Bylaws of Bancshares (incorporated by reference to Exhibit 3(ii) to Bancshares Form 10-K for the year ended December 31, 1994.
21 Subsidiaries of Bancshares (incorporated by reference to Bancshares Form 10-K for the year ended December 31, 1994.)
27 Financial Data Schedule.
(b) Reports on Form 8-K -------------------
No reports on Form 8-K were filed by Bancshares during the quarter ended December 31, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Bancshares duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ASSUMPTION BANCSHARES, INC.
By: /s/ Joseph H. Montero ________________________ Joseph H. Montero President and Chief Executive Officer (Principal Executive and Financial Officer)
Dated: February 19, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date _________ _____ ____
/s/ Clarence J. Savoie, II __________________________ Clarence J. Savoie, II Chairman of the Board February 19, 1997
/s/ Patrick E. Cancienne, Sr. _____________________________ Patrick E. Cancienne, Sr. Director February 19, 1997
/s/ F. N. Carrier, Jr. _____________________________ F. N. Carrier, Jr. Director February 19, 1997
/s/ Dr. Nelson A. Cox, Sr. _____________________________ Dr. Nelson A. Cox, Sr. Director February 19, 1997
/s/ Dr. Ridley J. Gros _____________________________ Dr. Ridley J. Gros Director February 19, 1997
/s/ Felix H. Savoie, Jr. _____________________________ Felix H. Savoie, Jr. Director February 19, 1997
/s/ Risley C. Triche _____________________________ Risley C. Triche Director February 19, 1997
/s/ Stanley S. Sternfels _____________________________ Stanley S. Sternfels Director February 19, 1997
/s/ Joseph H. Montero _____________________________ Joseph H. Montero Director February 19, 1997
/s/ Leonard C. Guedry, Jr. _____________________________ Leonard C. Guedry, Jr. Director February 19, 1997
/s/ Robert J. Tregre _____________________________ Robert J. Tregre Director February 19, 1997
/s/ Nicess P. Templet _____________________________ Nicess P. Templet Director February 19, 1997
EXHIBIT INDEX
Exhibit No. Description _______ ____________
2.1 Agreement and Plan of Merger by and among Argent Bank and Assumption Bancshares, Inc. and Assumption Bank & Trust Company.
3(i) Articles of Incorporation of Bancshares (incorporated by reference to Exhibit 3(i) to Bancshares Form 10-K for the year ended December 31, 1994.
3(ii) Bylaws of Bancshares (incorporated by reference to Exhibit 3(ii) to Bancshares Form 10-K for the year ended December 31, 1994.
21 Subsidiaries of Bancshares (incorporated by reference to Bancshares Form 10-K for the year ended December 31, 1994.)
27 Financial Data Schedule.