Item 1
Description of Business
Supplemental financial Information:
Average Balance Sheets and Interest Yield Analysis
Interest Differentials
Securities Portfolio
Loan Portfolio
Non-Performing Loans
Summary of Loan Loss Experience
Deposits
Return on Equity and Assets
Item2
Description of Properties
Item 3
Legal Proceedings
Item 4
Submission of matters to a Vote of Security Holders
Part II
Item 5
Market for Registrant's Common Stock
And Related Security Holder matters
Item 6
Selected Financial Data
Item 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 8
Financial Statements and Supplementary Data
Item 9
Disagreements on Accounting and Financial Disclosure
Part III
Item 10
Directors and Officers of the Registrant
Item 11
Executive Compensation
Item 12
Security ownership of Certain Beneficial Owners and Management
Item 13
Certain Relationships and Related Transactions
Part IV
Item 14
Exhibits, Financial Statement Schedules and Reports on Form 8-K
Signatures
Part I
Item 1. Business
The Registrant
One American Corp., (the "Company") was incorporated in Louisiana on May 14, 1982. At a special meeting on December 14, 1982, the stockholders of First American Bank and Trust, (the "Bank") approved a Joint Agreement of Merger and Plan of Reorganization by and among the Bank, First American Interim Bank, ("FAIB") and One American Corp. On January 21, 1983, the Bank was merged into FAIB and the surviving Bank, First American Bank and Trust became a wholly-owned subsidiary of the Company through a one-for-one exchange for all of the outstanding common stock (150,000 shares) of the Bank. The reorganization has been accounted for as a pooling-of-interests. The Company is now engaged, through its subsidiary, in the banking business. The Bank is the Company's principal asset and primary source of revenue.
The Bank
The Bank (formerly Bank of Vacherie) was incorporated under the laws of the State of Louisiana on December 3, 1910, and was licensed by the Louisiana State Banking Department and commenced operations as a Louisiana State chartered bank on February 11, 1911. The name of the bank was changed from Bank of Vacherie to First American Bank and Trust on January 17, 1978. The Bank's securities consist of one class of common stock of which there were 150,000 shares held 100% by its parent, the Company, as of March 8, 2001.
The Bank presently has a main office at LA Highway 20 West, Vacherie, St. James Parish, Louisiana, and nineteen branch offices and one loan production office. Four offices are located in St. James Parish in the cities of Vacherie, Gramercy, and Lutcher. Two offices are located in Lafourche Parish in the city of Thibodaux. Six offices are located in St. Charles Parish in the cities of Boutte, Des Allemands, Luling, Norco, and St. Rose. Two offices are located in Jefferson Parish, one in the city of Kenner, the other in Metairie. One office is located in St. John Parish in the city of LaPlace. One office is located in Tangipahoa Parish in the city of Hammond. Two offices are located in Assumption Parish, one in the in the city of Napoleonville, and one in the city of Pierre Part. One office is located in Ascension Parish in the city of Donaldsonville. This facility opened for business in August 2000. One loan production office is located in St. Tammany Parish in the city of Mandeville. In addition, the Luling office, as well as the office of First American Agency, L.L.C., a subsidiary of the Bank, was relocated into a larger facility in July 2000.
The branches located in St. James Parish were approved on July 9, 1969, November 11, 1974, July 30, 1979, April 16, 1984, respectively, by the Commissioner of Financial Institutions of the State of Louisiana and by the Federal Deposit Insurance Corporation. The two Thibodaux branches were approved on July 7, 1988 and September 2, 1997, respectively by the Federal Deposit Insurance Corporation and on July 5, 1988 and August 29, 1997, respectively, by the Commissioner of Financial Institutions of the State of Louisiana. The six branches located in St. Charles Parish were acquired from the Federal Deposit Insurance Corporation on November 2, 1989 and were approved on that date by the Commissioner of Financial Institutions of the State of Louisiana and the Federal Deposit Insurance Corporation. The two branches located in Jefferson Parish were acquired from the Federal Deposit Insurance Corporation on February 14, 1991 and were approved on that date by the Commissioner of Financial Institutions of the State of Louisiana and the Federal Deposit Insurance Corporation. The one branch located in St. John Parish was acquired from the Resolution Trust Corporation on August 26, 1994 and was approved on that date by the Commissioner of Financial Institutions of the State of Louisiana and the Federal Deposit Insurance Corporation. The one branch located in Tangipahoa Parish was acquired from First American Bank of Tangipahoa on September 23, 1996, and was approved on that date by the Commissioner of Financial Institutions of the State of Louisiana and the Federal Deposit Insurance Corporation. The Napoleonville branch was approved on August 4, 1997 by the Commissioner of Financial Institutions of the State of Louisiana and on July 24, 1997 by the Federal Deposit Insurance Corporation. The Pierre Part branch was approved by the Commissioner of Financial Institutions of the State of Louisiana and the Federal Deposit Insurance Corporation on April 24, 1998 and April 23, 1998, respectively. The Donaldsonville branch was approved on December 16, 1998 by the Federal
Deposit Insurance Corporation and on December 28, 1998 by the Commissioner of Financial Institutions of the State of Louisiana. The Mandeville loan production office was approved on October 2, 1997 by the Commissioner of Financial Institutions of the State of Louisiana.
The Bank is engaged in primarily the same business operations as any independent commercial bank, with special emphasis in retail banking, including the acceptance of checking and saving deposits, and the making of commercial, real estate, personal, home improvement, automobile and other installment and term loans. The Bank also offers travelers' cheques, safe deposit boxes, note collection, escrow and other customary bank services to its customers with the exception of trust services. In addition, the Bank offers drive-up teller services, automated teller machines, and night depository facilities. Through its wholly-owned subsidiary, First American Agency, L.L.C. (the Agency), the Bank provides general insurance agent services related to property and casualty, credit life, accident and health, and general liability insurance as well. First American Bank and Trust is insured under the Federal Deposit Insurance Act, but is not a member of the Federal Reserve System.
The three main areas in which the Bank has directed its lending activity are (1) real estate loans; (2) loans to individuals for household, family, and other consumer expenditures; and (3) commercial loans. As of December 31, 2000, these three categories accounted for approximately 85.5%, 6.1%, and 8.4%, respectively, of the loan portfolio of the Bank. (See Note E in the 2000 Form 10-K section titled "Financial Statements and Supplementary Data" for a detailed analysis of the loan portfolio.)
The majority of the deposits of the Bank are from individuals, farmers, and small business-related sources. The average deposit balance is relatively small. This makes the Bank less subject to the adverse effects from the loss of a substantial depositor who may be seeking higher yields in other markets, or have need of money on deposit in the Bank. In addition to the deposits mentioned above, the Bank is a depository for some governmental agencies. At December 31, 2000, State and Political Subdivisions maintained time deposits and money market deposits account balances of $7.2 million, interest bearing demand deposits of $5.1 million, and non-interest bearing demand deposits of $1.4 million. Although no agreements or understandings exist between these particular customers and the Bank regarding time deposits, management does not believe that these time deposit balances will substantially decrease or increase. In connection with the deposits of these State and Political Subdivisions, the Bank is required to pledge securities to secure such deposits (except for the first $100,000 of such deposits, which is insured by the Federal Deposit Insurance Corporation).
As of December 31, 2000, the Bank had 16,006 demand deposit accounts with a total balance of $63.0 million, 1,034 NOW and Super NOW accounts with a total balance of $22.0 million, 2,730 Insured Money Market Accounts with a balance of $73.6 million, 15,085 savings accounts with a total balance of $30.3 million, and 8,785 other time deposit accounts with a total balance of $140.0 million.
There are no securities held by the Bank that are subject to repurchase agreements.
The Bank holds no patents, registered trademarks, licenses (other than licenses required to be obtained from appropriate bank regulatory agencies), franchises, or concessions. In 1998, First American Agency, L.L.C., a wholly-owned subsidiary of the Bank, was formed. Through this subsidiary, the Bank provides insurance services in its market area. Other than this entry into the insurance business, there has been no significant change in the kinds of services offered by the Bank during the last three fiscal years.
The Bank has not engaged in any research activities relating to the development of new services or the improvement of existing services except in the normal course of the business activities. The Bank presently has no plans for any new line of business requiring the investment of a material amount to total assets.
Most of the business of the Bank originates from within the Louisiana parishes of St. James, St. Charles, Jefferson, Lafourche, St. John, Tangipahoa, Assumption, and Ascension; however, some business originates in the communities immediately surrounding these parishes. There has been no material effect upon the capital expenditures of the Bank, earnings, or competitive position as a result of federal, state, or local environmental regulations.
The Agency
On February 28, 1998, First American Agency, L.L.C. (the "Agency"), a wholly-owned subsidiary of the Bank was formed. On March 5, 1998, the Agency acquired Riverbend Insurance Agency, Inc. of Destrehan, St Charles Parish, Louisiana. Through this subsidiary, the Bank is engaged in the insurance agency business.
As a result of this acquisition, the Company's Board of Directors voted to dissolve One American Agency, Inc., the Company's former insurance agency subsidiary. One American Agency, Inc. previously provided limited insurance products as dictated by Federal regulations. Effective December 31, 1998, the assets of One American Agency, Inc., which were insignificant, were merged into the Company.
The Agency operates out of offices at 13919 River Road, Suite 110, Luling, St. Charles Parish, Louisiana. The Agency relocated to this office from its former office in Destrehan, St. Charles Parish, Louisiana in July 2000. The Agency provides general insurance agent services for the Company and its subsidiary. The Agency also provides agent services in relation to property and casualty, credit life, accident and health, and general liability insurance that may be related to the extension of credit or other financial services of the Bank.
Competition
The Company's general market area contains approximately 221 thousand households. It's primary market place consists of St. James Parish, St. John Parish, St. Charles Parish, the northern portion of Lafourche Parish, the portion of Jefferson Parish located on the east bank of the Mississippi river, the south central portion of Tangipahoa Parish, Assumption Parish, Ascension Parish, and St. Tammany Parish, all located in Louisiana. These parishes have experienced moderate population growth over the last several years.
In the primary market area, there are several banks, credit unions, and branches of savings and loan institutions aggressively pursuing loans, deposits and other accounts.
Interest rates on loans made and deposits received were mostly deregulated by law in 1983, and are substantially the same among banks operating in the area served. Competition among banks for loan customers is generally governed by such factors as loan terms other than interest charges, restrictions on borrowers and compensating balances, and the services offered by the bank. Competition for deposits is governed primarily by the services offered, including convenience of location.
In addition, federal regulations have significantly broadened the powers of savings and loan institutions with the result that such institutions may now engage in certain activities formerly permitted only to banks. The Company has experienced no major effects from this legislation at this time.
Employees
The Company has approximately 180 full time employees and 7 part-time employees. Management considers its relationship with the employees to be good.
Supervision and Regulation
The Company is a bank holding company within the meaning of the Bank Holding Company Act of 1956 (the "Act"), as amended, is subject to the provisions of the Act and to regulation by the Board of Governors of the Federal Reserve System (the "Board").
The Act requires the Company to file with the Board annual reports containing such information as the Board may require. The Board is authorized by the Act to examine the Company and all of its activities. The activities that may be engaged in by the Company and its subsidiaries are limited by the Act to those closely related to banking, managing, or controlling banks as to be a proper incident thereto. In determining whether a particular activity is a proper incident to banking or managing or controlling banks, the Board must consider whether its performance by an affiliate of a holding company can reasonably be expected to produce benefits to the public, such as convenience, increased competition, or gains in efficiency that outweigh possible adverse effects, such as undue concentration of resources, unfair competition, conflicts of interest, or unsound banking practices.
The Board has adopted regulations implementing the provisions of the Act with respect to the activities of bank holding companies. Such regulations reflect a determination by the Board that the following activities are permissible for bank holding companies: (1) making, for its own account or for the account of others, loans such as would be made, for example, by a mortgage, finance or factoring company; (2) operating as an industrial bank; (3) servicing loans; (4) acting as a fiduciary; (5) acting as an investment or financial advisor, including acting in such capacity for a mortgage investment trust or real estate investment trust; (6) leasing personal or real property, where the lease is to serve as the functional equivalent of an extension of credit to the lessee of the property; (7) investing in community welfare corporations or projects; (8) providing bookkeeping and data processing services for a bank holding company and its subsidiaries, or storing and processing certain other banking, financial, or related economic data; (9) acting as an insurance agent, principally insurance issued in connection with extensions of credit by the holding company or any of its subsidiaries; (10) underwriting credit life and credit accident and health insurance related to extensions of credit; (11) providing courier services for documents and papers related to banking transactions; (12) providing management consulting advice to non-affiliated banks; and (13) selling money orders, travelers cheques and U.S. Savings Bonds. In each case, the Company must secure the approval of the Board before engaging in any of these activities.
Whether or not a particular non-banking activity is permitted under the Act, the Board is authorized to require a holding company to terminate any activity or divest itself of any non-banking subsidiary if in its judgment the activity or subsidiaries would be unsound.
Under the Act and the Board's regulations, a bank holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with any extensions of credit or provision of any property or services.
In addition to the limitation of Louisiana law with respect to the ownership of banks, as described below, the ownership or control of voting shares of a second bank by a bank holding company, such as One American Corp., is restricted by the Act unless the prior approval of the Board is obtained. The Act prohibits the Board from approving an application from a bank holding company to acquire shares of a bank located outside the state in which the operations of the holding company's subsidiaries are principally conducted, unless such an acquisition is specifically authorized by statue of the state in which the bank whose shares are to be acquired is located.
The Louisiana Bank Holding Company Act, as amended in 1984, authorized multi-bank holding companies within the state. Certain limitations and restrictions were set, which expired July 1, 1989. These restrictions limit acquisitions of additional banks to those that have been in existence for at least five years. The State Commissioner of Financial Institutions is authorized to administer the Louisiana Act by issuance of orders and regulations.
In addition, Louisiana banking laws were changed in 1985 and 1986 to allow interparish banking, limited statewide branching beginning January 1, 1987, and regional banking beginning July 1, 1987. These changes have
allowed Louisiana banks, regional banks, and other financial institutions to engage in a wider range of activities than were previously allowed to such institutions. The restrictions on state banking were repealed in 1988, with the intention of allowing state charted banks to establish branch offices state wide.
Also effective January 1, 1991, Louisiana's reciprocal interstate banking laws allowed bank holding companies domiciled in any state of the United States to acquire Louisiana banks and bank holding companies, if the state in which the bank holding company is domiciled allows Louisiana banks and bank holding companies the same opportunities.
In 1997, the State of Louisiana enacted the Financial Institution Insurance Sales Law. The Financial Institution Sales Law made it possible for the Bank to sell all forms of insurance through its subsidiary, First American Agency, L.L.C.
Additional information regarding supervision and regulation can be found in the 2000 Form 10-K in the Section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and incorporated herein by reference.
Regulatory Matters
The capital ratios for the Company and the Bank currently exceed the regulatory capital requirements at December 31, 2000. The capital ratios are included in the 2000 Form 10-K in the Section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and incorporated herein by reference.
Capital Adequacy
The Company's dividends are determined by its Board of Directors. The current policy is to maintain dividends at a level which ensures the Company and Bank are able to maintain sufficient regulatory capital levels. The Company's primary source of funds is the dividend received from the Bank. Under current regulatory limitations, the Bank could pay in dividends without regulatory approval approximately $4.5 million. The Company carries no debt, therefore future liquidity needs are limited to the payment of any declared dividends. The Company maintains sufficient liquidity to maintain its operations should a regulatory agency limit the Bank from paying dividends.
The Bank is subject to regulation and regular examination by the Federal Deposit Insurance Corporation, and the Office of Financial Institutions of the State of Louisiana. Applicable regulations relate to reserves, investments, loans, issuance of securities, the level of capital, establishment of branches and other aspects of its operations. Should the Bank fail to comply with current regulations, the Federal Deposit Insurance Corporation may initiate sanctions and other administrative proceedings for failure to comply with current regulations and may cease deposit insurance.
Statistical Information
The following data contains information concerning the business and operations of One American Corp., its wholly-owned subsidiary, First American Bank and Trust , and its wholly-owned subsidiary, First American Agency, L.L.C. This information should be read in conjunction with Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations.
Average Balance Sheets and Interest Yield Analysis
The following information called for by Item 1 is included in the 2000 Form 10-K Section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and is incorporated herein by reference.
Average Balance Sheets and Interest Rate Analysis
for the years ended December 31, 2000, 1999, and 1998
Interest Differential
The following information called for by Item 1 is included in the 2000 Form 10-K Section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and is incorporated herein by reference.
Interest Differentials
for the years ended December 31, 2000, 1999, and 1998
Securities Portfolio
The following information called for by Item 1 is included in the 2000 Form 10-K Section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and is incorporated herein by reference.
Securities
Also, the following information called for by Item 1 is included in the 2000 Form 10-K Section titled "Notes to Consolidated Financial Statements" and is incorporated herein by reference.
See Note D titled Securities in the 2000 Form 10-K for a detailed analysis of the security portfolio.
There were no securities held by the Company at December 31, 2000, that exceeded, in aggregate by issuer, 10% of Stockholders' Equity.
Loan Portfolio
The following information called for by Item 1 is included in the 2000 Form 10-K Section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and is incorporated herein by reference.
Loans
for the years ended December 31, 2000, 1999, 1998, 1997, and 1996
Non-Performing Loans
The following information called for by Item 1 is included in the 2000 Form 10-K Section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and is incorporated herein by reference.
Non-Performing Loans
for the years ended December 31, 2000, 1999, 1998, 1997, and 1996
Summary of Loan Loss Experience
The following information called for by Item 1 is included in the 2000 Form 10-K Section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and is incorporated herein by reference.
Summary of Loan Loss Experience
for the years ended December 31, 2000, 1999, 1998, 1997, and 1996
Deposits
The following information called for by Item 1 is included in the 2000 Form 10-K Section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and is incorporated herein by reference.
Average Balance Sheets and Interest Rate Analysis
for the years ended December 31, 2000, 1999, and 1998
Also, the following information called for by Item 1 is included in the 2000 Form 10-K Section titled "Notes to Consolidated Financial Statements" and is incorporated herein by reference.
Maturities of time deposits of $100,000 or more at December 31, 2000, are summarized below:
In thousands
3 Months or Less
$8,333
Over 3 through 6 Months
4,741
Over 6 through 12 Months
10,035
Over 12 Months
1,422
$24,531
Return on Equity and Assets
The following information called for by Item 1 is included in the 2000 Form 10-K in the Section titled Item 6. "Selected Financial Data" and is incorporated herein by reference.
Average Total Assets
December 31, 2000, 1999, 1998, 1997, and 1996
Average Stockholders' Equity
December 31, 2000, 1999, 1998, 1997, and 1996
Selected Ratios
for the years ended December 31, 2000, 1999, 1998, 1997, and 1996
Per Share
for the years ended December 31, 2000, 1999, 1998, 1997, and 1996
Item 2.
Item 2. Description of Properties
One American Corp. is located in Vacherie, Louisiana in the main office building of First American Bank and Trust. Through its subsidiary First American Bank and Trust, the Company owns the premises in which its main office, operation center, and sixteen of its branch offices are located and holds a lease for the two remaining branch offices. The Bank also leases the premises from which its Loan Production Office and First American Agency, L.L.C. operate. In addition, the Bank acquired a site for a future branch office in Mandeville, St. Tammany Parish, Louisiana.
The Company considers all properties to be suitable and adequate for their intended purposes and its leases to be fair and reasonable.
Item 3.
Item 3. 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.
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 year ended December 31, 2000.
Part II
Item 5.
Item 5. Market for Registrant's Common Stock and Related Security Holder's Matters
Common Stock - One American Corp.'s (the Company) stock is not listed on any security exchange. Due to the lack of an active trading market, One American Corp. does not have the available information to furnish the high and low sales price or the range of bid and ask quotations for its stock. Based upon limited inquiries by management, it is believed that the stock of the Company traded at the following amounts:
First Quarter
$28.00
$27.00
Second Quarter
$28.00
$27.00
Third Quarter
$28.00
$27.00
Fourth Quarter
$28.00
$28.00
There can be no assurance that these limited inquiries adequately reflect the actual high and low bids or prices for the stock of the Company.
Information - Request for additional information or copies of Form 10-K filed with the Securities and Exchange Commission in Washington, DC should be directed to:
Frank J. Bourgeois
General Counsel
President
Martin, Himel, Peytavin & Nobile
One American Corp.
P. O. Box 278
P. O. Box 550
Lutcher, LA 70071-0278
Vacherie, LA 70090-0550
Transfer Agent and Registrar
Independent Accountants
First American Bank and Trust
Hannis T. Bourgeois, L L P
P. O. Box 550
2322 Tremont Drive, Suite 200
Vacherie, LA 70090-0550
Baton Rouge, LA 70809
Item 6.
Item 6. Selected Financial Data
SELECTED QUARTERLY DATA
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
One American Corp. and Subsidiaries
for the quarter periods in the years ended December 31, 2000 and 1999
FOURTH
THIRD
SECOND
FIRST
($ in thousands, except per share data)
QUARTER
QUARTER
QUARTER
QUARTER
Interest Income
$7,049
$6,947
$6,636
$6,303
Interest Expense
3,093
2,979
2,702
2,513
Net Interest Income
3,956
3,968
3,934
3,790
Provision for Loan Losses
Net Interest Income after Provision
for Loan Losses
3,731
3,743
3,709
3,640
Noninterest Income
1,102
1,271
Noninterest Expense
3,005
3,031
3,103
2,761
Income before Income Taxes
1,417
1,814
1,522
2,150
Applicable Income Taxes
Net Income
$993
$1,287
$1,057
$1,447
Per Share:
Net Income
$0.38
$0.49
$0.40
$0.54
Dividends
$0.19
$0.19
$0.18
$0.18
FOURTH
THIRD
SECOND
FIRST
($ in thousands, except per share data)
QUARTER
QUARTER
QUARTER
QUARTER
Interest Income
$6,072
$6,001
$5,919
$5,621
Interest Expense
2,345
2,274
2,214
2,125
Net Interest Income
3,727
3,727
3,705
3,496
Provision for Loan Losses
Net Interest Income after Provision
for Loan Losses
3,502
3,502
3,480
3,271
Noninterest Income
1,494
Noninterest Expense
2,920
2,852
2,804
2,504
Income before Income Taxes
1,323
1,630
2,170
1,605
Applicable Income Taxes
Net Income
$916
$1,115
$1,456
$1,082
Per Share:
Net Income
$0.34
$0.42
$0.54
$0.41
Dividends
$0.19
$0.18
$0.18
$0.18
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
One American Corp. and Subsidiaries
Management's Discussion and
Analysis of Financial Condition and Results of Operations
The Businesses of One American Corp.
One American Corp. (the Company) is comprised of one subsidiary, First American Bank and Trust (the Bank). The Company's operations relate principally to its investment in the Bank.
First American Bank and Trust is engaged in primarily the same business operations as any independent commercial bank, with special emphasis in retail banking, including the acceptance of checking and saving deposits, and the making of commercial, real estate, personal, home improvement, automobile and other term loans. The Bank also offers travelers' cheques, safe deposit boxes, note collection, escrow and other customary bank services to its customers with the exception of trust services. In addition, the Bank offers drive-up teller services, automated teller machines and night depository facilities. Through its wholly-owned subsidiary, First American Agency, L.L.C. (the Agency), the Bank provides general insurance agent services related to property and casualty, credit life, accident and health, and general liability insurance.
Overview of 2000
Net income for the year 2000 was $4.8 million compared to $4.6 million for the year 1999. For the year ended 2000, earnings per share were $1.81 compared to $1.71 in 1999. Return on average assets was 1.31% and 1.34% for the years ended 2000 and 1999 respectively. For the years ended 2000 and 1999, return on average stockholders' equity was 11.65% and 11.76%, respectively.
Net interest income for 2000 was $15.6 million, a 6.8% increase over the $14.7 million for 1999. The net interest margin on a fully tax equivalent basis (FTE) was 4.71% for the current year and 4.77% for the same period of 1999.
During the year 2000, in comparison with the same period of 1999, average loans outstanding increased $33.1 million or 16.8% due to continued efforts to grow the percentage of earning assets represented by loans and taking advantage of an increased loan demand. Average total deposits for the year 2000 increased $22.2 million or 7.4% when compared to the average total deposits for the same period of 1999. Average total assets for the current year increased $25.4 million or 7.5% when compared to the total average assets of the year 1999. Average stockholders' equity for 2000 was $41.1 million, an increase of 5.6% over the average stockholders' equity for 1999.
A new full-service office was opened in the city of Donaldsonville, Ascension Parish, Louisiana in August 2000. With the opening of this facility, the Bank had in operation a total of nineteen full-service offices and one loan production office. In addition, the Luling, Louisiana full-service office as well as the office of the Agency was relocated into a new, larger facility in Luling in July 2000.
Earnings Analysis
Net Interest Income - Net interest income is the difference between interest and fees generated from interest earning assets and the interest expense for interest bearing liabilities and is the primary source of earnings for the Bank. For analytical purposes, net interest income is presented on a tax equivalent basis. A 34% tax rate is used for all periods presented. Certain earning assets are exempt from income taxes; therefore, a tax equivalent adjustment is included so that tax-exempt earning assets will be compatible with other earning assets. The primary factors that affect net interest income are the changes in volume and mix of earning assets and interest-bearing liabilities, along with the change in market rates.
Net interest income on a fully tax equivalent basis (FTE) increased $998 thousand or 6.7%. Net interest income (FTE) for 2000 was $15.9 million compared to $14.9 million for the prior year. Net interest income (FTE) for 1998 was $14.2 million.
Earning Assets, Interest Bearing Liabilities, and Net Interest Spread - Average earning assets increased $25.1 million or 8.0% to $338.0 million during 2000. Average earning assets were $313.0 million in 1999 and $287.8 million in 1998. The trend in earning assets over the years compared shows a shift in the mix of earning assets toward the loan portfolio from the securities portfolio as shown in Table 1, "Average Earning Asset Structure and Average Deposit 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 primary market area of the Bank currently enjoys a strong economic climate that provides lending opportunities that did not exist in the past. The level of growth in the loan portfolio has remained stable in the years 2000 and 1999, however, the percent of average loans to average earning assets increased from 63.0% to 68.2%. Also, there is no assurance that either similar levels of growth or the current strong economic climate will continue into the future.
The trend over the years compared shows an increase in interest bearing liabilities with the largest growth occurring in certificates of deposit and money market deposit accounts. Also beneficial was the increase in the levels of non interest bearing deposits, although its relationship as a percentage of total deposits remained relatively stable. The Bank continually strives to attract a broad core deposit base consisting of individual and commercial customers.
For the year ended 2000, the average yield on earning assets was 8.05%, while the average cost of interest bearing funds was 4.31%, producing a net interest spread (FTE) of 3.74%. The net interest margin (FTE) was 4.71% for the year ended 2000. The net interest margin decreased when compared to the net interest margins of 4.77% and 4.94% for the years ended 1999 and 1998, respectively, because the yield on earning assets increased by fewer basis points than did the increase in the cost of interest bearing liabilities.
Table 5, "Average Balance Sheets and Interest Rate Analysis", and Table 6, "Interest Differentials", for the periods ended December 31, 2000, 1999, and 1998 detail the effect the changes in average balances outstanding and the changes in interest yield and costs have had on net interest income for the respective periods. Also, Table 1, "Average Earning Asset Structure and Average Deposit Structure" shows a more condensed, descriptive analysis of the common size percentage changes in average earning assets and average deposit mix over the annual periods analyzed.
Provision for Loan Losses
Provision for loan losses was $825 thousand in 2000, a decrease of $75 thousand from the provision for loan losses of $900 thousand in 1999. The provision for loan losses in 1998 was $1.2 million. See the sections entitled Allowance for Loan Losses and Non-Performing Assets for more details on the Provision for Loan Losses.
Noninterest Income
Noninterest income was $4.0 million for 2000 and $4.1 million for 1999. Service charges on deposit accounts were $2.2 million for 2000 and 1999. Gain on purchased assets decreased $287 thousand to $699 thousand for 2000 when compared to the prior year. These gains are recognition of collection of principal on certain loans acquired in past Bank acquisitions. The Bank continues to pursue the collection of these loans. However, the amount of future gains, if any are indeterminable.
Other operating income for 2000 was $1.0 million compared to $900 thousand in 1999. Included in other operating income are fees from bankcard services, safe deposit box rentals, and other operating fees associated with the daily operations of the Bank.
The Bank recovered $7 thousand as gains from security transactions during the year 2000. These securities included Louisiana Agricultural Finance Authority Bonds and Louisiana Housing Finance Authority Bonds that were partially written off in accordance with regulatory directives in May of 1992.
Noninterest Expense
Noninterest expense totaled $11.9 million in 2000, a 7.4% increase over the 1999 total of $11.1 million. Salaries and employee benefits increased $420 thousand or 7.3%, to $6.2 million for 2000 compared to 1999. The increase in salaries was due to an increase in personnel from the opening of new and projected full service offices in addition to normal annual salary adjustments. Net occupancy expense was $1.6 million for 2000 and $1.4 million for 1999. Equipment expense was $1.5 million for 2000 and 1999. Other operating expenses totaled $2.6 million and $2.4 million, respectively, for 2000 and 1999, an increase of $133 thousand or 5.5%. For a further analysis of other operating expenses see Note K.
Net other real estate and repossession expense was a $5 thousand benefit for 2000, compared to a $19 thousand expense in 1999. Net other real estate and repossession expense is the operating expense of other real estate and repossessed assets less the income generated by other real estate and the net gains from the sale of other real estate and repossessed assets. During 2000, expenses of carrying other real estate and other repossessed assets totaled $6 thousand. These costs were offset by the income generated from the operations of other real estate of $11 thousand.
For 1999, net other real estate and repossession expense produced a cost of $19 thousand. Expenses from other real estate totaled $2 thousand and losses from the sale of other real estate totaled $27 thousand, both of which were offset by income from the operations of other real estate of $10 thousand. Management strives to convert these non-performing assets into investable funds at values beneficial to the earnings of the Bank.
Applicable Income Taxes
Applicable income taxes for 2000, 1999, and 1998 were $2.1 million, $2.2 million, and $1.9 million, respectively, producing an effective tax rate of 31%, 32%, and 32%, respectively. The Company's effective income tax expense as a percentage of pretax income is different from statutory rates because of tax-exempt income and the related nondeductible interest expense. A portion of the Company's interest income is from investments in state and municipal bonds and is generally exempt from federal income taxes. Interest expense on funds used for tax-exempt investments is generally nondeductible for federal income taxes.
Table 1-
Average Earning Asset Structure
In thousands
% of
% of
% of
Average
Earning
Average
Earning
Average
Earning
Balances
Assets
Balances
Assets
Balances
Assets
Interest Bearing Deposits
$4,248
1.3%
$5,679
1.8%
$5,128
1.8%
Federal Funds Sold
10,153
3.0%
10,107
3.2%
11,144
3.9%
Securities
Taxable
83,050
24.6%
90,429
29.0%
97,988
34.0%
Non-Taxable
10,147
3.0%
9,460
3.0%
10,263
3.6%
Loans - Net
230,468
68.1%
197,291
63.0%
163,321
56.7%
Total Average Earning Assets
$338,066
100.0%
$312,966
100.0%
$287,844
100.0%
Average Deposit Structure
In thousands
Average
% of
Average
% of
Average
% of
Balances
Deposits
Balances
Deposits
Balances
Deposits
Noninterest Bearing Deposits
$60,780
19.0%
$58,107
19.5%
$54,161
19.9%
NOW Accounts
21,947
6.8%
23,938
8.0%
24,063
8.8%
Savings Accounts
31,389
9.8%
32,150
10.8%
31,277
11.4%
Money Market Deposit Accounts
69,914
21.8%
64,252
21.6%
55,992
20.4%
Certificates of Deposits less than $100,000
112,436
35.1%
102,085
34.2%
93,909
34.4%
Total Average Core Deposits
296,466
92.5%
280,532
94.1%
259,402
94.9%
Certificates of Deposits greater than $100,000
23,940
7.5%
17,718
5.9%
13,876
5.1%
Total Average Deposits
$320,406
100.0%
$298,250
100.0%
$273,278
100.0%
Average Interest Bearing Deposits
as a percentage of Average Earning Assets
76.8%
76.7%
76.1%
Average Core Deposits
as a percentage of Total Average Assets
81.1%
82.5%
83.0%
Liquidity
Liquidity management is the process of ensuring that the Bank's asset and liability structure can meet the withdrawal demands of its depositors, fund loan commitments, and provide for other funding requirements. Management's primary source of funds is the core deposit base of the Bank. At December 31, 2000, average core deposits were approximately $296.5 million or 93% of total average deposits and 81% of total average assets. For a comparison with prior period year ends, see the table entitled Average Deposit Structure. Other sources of liquidity are maturities in the investment portfolio and loan maturities and repayments. Management continually evaluates the maturities and mix of its earning assets and interest bearing liabilities to monitor its ability to meet current and future obligations and to achieve maximum net interest income. Due to the stability of the core deposit base as noted above and the maturities of the investment portfolio, management does not anticipate any difficulty in either meeting the needs of its depositors or funding future loan commitments.
Interest Rate Risk
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 December 31, 2000 the Bank would expect a decrease in net interest income of $46,000 in the event of a gradual 200 basis point increase in interest rates and an increase of $49,000 in the event of a gradual 200 basis point decrease in interest rates. Both of these changes are well within the interest rate risk policy limits of the Bank.
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 Noninterest 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.
Table 2, "Interest Rate Sensitivity Table", presents the Bank's interest rate sensitivity position at December 31, 2000, using gap analysis, based on the expected maturity intervals of interest rate sensitive assets and liabilities. Table 2 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 net income of the Bank because the effective maturities or repricing of certain assets and liabilities is subject to competition and other limitations. Therefore, 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.
Table 2-
Financial Instruments
In the normal course of business the Bank enters into agreements which, for accounting purposes, are considered off-balance sheet activities. These agreements are loan and line 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. Total commitments were $25.1 million and $22.1 million at December 31, 2000 and 1999, respectively. Available loan commitments at December 31, 2000, were $19.0 million and $16.2 million at December 31, 1999. The Bank had letters of credit of $500 thousand issued at December 31, 2000. Additionally, the Bank has deposit customers who have credit lines available to them through their deposit accounts. At December 31, 2000, the available portion of these credit lines was $184 thousand. 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 also issues credit cards. The aggregate credit available was $5.4 million and $5.2 million at December 31, 2000 and 1999. Applicants are evaluated through normal lending policies and credit reviews.
The Bank is not a party to financial instruments defined as interest rate exchange agreements, financial futures, or financial options. Therefore, the Bank is not exposed to the additional interest rate risk inherent in those instruments.
Loans
An analysis of the loan portfolio at December 31, 2000, 1999, 1998, 1997 and 1996, is as follows:
($ in thousands)
Commercial, Financial and Agricultural
$20,022
$16,223
$17,526
$15,811
$10,444
Real Estate
Construction
23,792
16,647
1,334
3,987
3,184
Mortgage
180,089
165,973
144,815
113,117
105,800
Individuals
14,703
15,974
15,120
13,892
13,559
Foreign
1,361
All Other Loans
3,199
2,395
1,576
Total Loans
239,251
215,286
181,994
149,202
135,924
Unearned Income
(2)
(37)
(65)
Allowance for Loan Losses
(4,465)
(4,155)
(3,530)
(2,190)
(3,083)
Total Loans, Net
$234,786
$211,131
$178,462
$146,975
$132,776
Allowance for Loan Losses
The Allowance for Loan Losses was $4.5 million at December 31, 2000, or 1.87%, of loans outstanding. At December 31, 1999, the Allowance for Loan Losses was $4.2 million, or 1.93%, of loans outstanding. Net charge-offs (recoveries) were $515 thousand for the current year, versus $275 thousand for 1999. Gross charge-offs as a percentage of average loans were .25% and .27% for 2000 and 1999, respectively. Recoveries as a percentage of gross charge-offs for 2000 were 11.2% versus 48.1% for 1999.
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 with the Bank's lending policy and the borrower's current financial condition and ability to meet scheduled repayment terms are assessed.
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 loan in the portfolio of the Bank. As the process applies these potential default factors 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.
Table 3, "Activity in Allowance for Loan Losses", below presents an analysis of activity in the allowance for loan losses for the past five years.
Table 3-
The allowance for loan losses has been allocated according to the type of loan described in the table below, at December 31, 2000 1999, 1998, 1997, and 1996:
($ in thousands)
Real Estate
$587
$974
$1,094
$636
$1,231
Commercial, Financial, and Agricultural
Individual and Others
Unallocated
3,474
2,734
2,091
1,342
1,106
Total Allowance
$4,465
$4,155
$3,530
$2,190
$3,083
Non-Performing Assets
Non-performing assets include non-accrual loans, impaired loans, repossessions, and other real estate. Generally, loans are considered non-accrual 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. Non-accrual loans at December 31, 2000 were $1.3 million compared with non-accrual loans of $1.4 million at December 31, 1999. At December 31, 2000, non-accrual loans were .53% of gross loans outstanding and 28.4% of the allowance for loan losses. The same ratios for December 31, 1999 were .66% and 30.0%, respectively. Loans past due 90 days and still accruing at December 31, 2000 and 1999 were $316 thousand and $415 thousand, respectively. Impaired loans having recorded investments of $4.2 million at December 31, 2000 compared to $6.1 million at December 31, 1999 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 $991 thousand and $1.4 million at December 31, 2000 and December 31, 1999. Interest recognized on impaired loans amounted to $429 thousand at December 31, 2000 compared to $474 thousand at December 31, 1999.
Other real estate is properties held for sale acquired through foreclosure or negotiated settlement of debt. Other real estate was $19 thousand at December 31, 2000 and December 31, 1999, respectively.
In the process of reviewing the loan portfolio, management acknowledges certain potential problem loans that are not classified as impaired, non-accrual, greater than 90 days delinquent, or restructured. Management is of the opinion that these potential problem loans are not likely to have a material effect on the Company's liquidity, capital resources, or results of operations.
The following table presents information on the amount of non-performing loans at December 31, 2000, 1999, 1998, 1997, and 1996:
($ in thousands)
Non-accrual
$1,268
$1,430
$730
$285
$174
Past due 90 days or more
Restructured and Impaired
2,999
4,723
3,685
2,965
3,826
$4,583
$6,568
$4,657
$3,614
$4,395
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 financial statements of the Bank. 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 capital classification of the Bank 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 not aware, based on recent regulatory examinations or otherwise, of any known trends, events, or uncertainties which are reasonably likely to have or will have a material effect on the Company's liquidity, capital resources, or results of operations.
Capital Adequacy
The strength of a company is measured by the company's capital, earnings history, asset quality, and management. The retention of earnings and issuance of equity stock can increase capital. Management feels the current trend of earnings and dividend distribution is sufficient to maintain its capital adequacy requirements.
The Company 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 Table 4, "Capital Adequacy Ratios", the Company's consolidated ratios for the reporting periods exceed regulatory minimums. Capital adequacy ratios for the "Bank only" are not materially different.
The Company's dividends are determined by its Board of Directors. The current policy is to maintain dividends at a level which ensures the Company and Bank are able to maintain sufficient regulatory capital levels. The Company's primary source of funds is dividends received from the Bank. Under current dividend limitations, the Bank could pay dividends of approximately $4.5 million without regulatory approval. The Company carries no debt; therefore, future liquidity needs are limited to the payment of any declared dividends. The Company maintains sufficient liquidity to maintain its operations should a regulatory agency limit the Bank from paying dividends.
Table 4-
Capital Expenditures
The Bank continued to expand its branch office network with the opening of a full-service office in Donaldsonville, Ascension Parish, Louisiana in August 2000. With the new Donaldsonville office open, the Bank has in operation a total of nineteen full-service banking locations and one loan production office. In addition, a new facility is under construction at the Kenner, Jefferson Parish, Louisiana office, replacing an outdated building located at the same site.
Pending Acquisition Transaction
On February 5, 2001, the Company and Schwegmann Bank and Trust Company (Schwegmann) announced the execution of a definitive agreement whereby the Company will acquire all of Schwegmann's common stock for cash. The closing of this transaction is subject to the approval of Schwegmann 's shareholders, regulatory approval, and other customary conditions, and is expected to be complete in the second quarter of 2001.
Schwegmann operates four offices, two in Jefferson Parish, Louisiana, and two in Orleans Parish, Louisiana. At December 31, 2000, Schwegmann had assets of $34,026,000 and stockholders' equity of $2,342,000.
Forward-Looking Statements
This Annual Report includes statements that may constitute forward-looking statements, usually containing the words "believe", "estimate", "expect", "intend", or similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from those reflected in
the forward-looking statements. Factors that could cause future results to vary from current expectations include, but are not limited to, the following: changes in economic conditions (both generally and more specifically in the markets in which the Company operates); changes in interest rates, deposit flows, and loan demand; changes in real estate values; changes in competition; changes in accounting principles, policies, or guidelines; and changes in government legislation and regulation (which change from time to time and over which the Company has no control); and other risks detailed in this Annual Report and the Company's other Securities and Exchange Commission filings. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.
Table 5 -
Table 6 -
Item 8.
Item 8. Financial Statements and Supplementary Data
One American Corp. and Subsidiaries
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 annual 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 in this annual 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 the 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 monitor compliance with and assess the effectiveness of the system of internal accounting controls while coordinating audit coverage with the independent public accountants.
The Audit Committee of the Board of Directors, composed solely of outside directors, meets periodically with management, and the independent public accountants to review matters relating to financial reporting, internal accounting controls and the nature, extent and results of the audit effort. The independent public accountants have direct access to the Audit Committee with or without management present.
The financial statements as of December 31, 2000 and 1999 were audited by Hannis T. Bourgeois, LLP, independent public accountants, who rendered an independent professional opinion on the financial statements prepared by management.
Report of Independent Auditor
January 18, 2001
To the Shareholders
and Board of Directors of
One American Corp. and Subsidiaries
Vacherie, Louisiana
We have audited the accompanying Consolidated Balance Sheets of One American Corp. and Subsidiaries as of December 31, 2000 and 1999, and the related Consolidated Statements of Income, Changes in Stockholders' Equity, and Cash Flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 financial statements referred to above present fairly, in all material respects, the financial position of One American Corp. and Subsidiaries as of December 31, 2000 and 1999, and the results of their operations, changes in their stockholders' equity and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America.
Respectfully submitted,
/s/ Hannis T. Bourgeois, LLP
Hannis T. Bourgeois, L L P
Baton Rouge, Louisiana
Consolidated Statements of Cash Flows
One American Corp. and Subsidiaries
for the years ended December 31, 2000, 1999, and 1998
In thousands
Cash Flows From Operating Activities
Net Income
$4,784
$4,569
$4,061
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Gain on Purchased Assets
(699)
(986)
(609)
Provision for Depreciation
Provision for Loan Losses
1,200
Net Amortization (Accretion) on Securities
(317)
(191)
(261)
Provision (Credit) for Deferred Income Taxes
(93)
(302)
(435)
(Gain) Loss on Sale of Other Real Estate and Repossessions
(3)
(6)
Charitable Contribution of Bank Property
(Gain) Loss on Securities
(7)
(5)
Changes in Assets and Liabilities:
(Increase) Decrease in Accrued Interest Receivable
(226)
(Increase) Decrease in Other Assets
(36)
(386)
Increase (Decrease) in Accrued Interest Payable
Increase (Decrease) in Other Liabilities
(1)
(17)
(11)
Net Cash Provided by Operating Activities
5,549
5,401
4,467
Cash Flows From Investing Activities
Maturities or Calls of Securities Available for Sale
38,949
59,770
67,370
Purchases of Securities Available for Sale
(40,842)
(54,689)
(51,485)
Proceeds from Sale of Securities Available for Sale
2,000
Net (Increase) Decrease in Federal Funds Sold
(3,350)
5,825
Net (Increase) Decrease in Loans
(23,843)
(32,999)
(32,166)
Proceeds from Sale of Other Real Estate and Repossessions
Purchases of Premises and Equipment
(2,542)
(1,544)
(1,988)
Net Cash Used in Investing Activities
(31,559)
(21,164)
(17,540)
Cash Flows From Financing Activities
Net Increase (Decrease) in Demand Deposits, NOW
and Savings Accounts
9,905
1,633
18,019
Net Increase (Decrease) in Certificates of Deposit
17,107
11,067
7,515
Proceeds from Other Borrowings
7,000
Repayments of Amounts Borrowed
(7,205)
(175)
(142)
Dividends Paid
(1,964)
(1,922)
(1,886)
Treasury Stock Purchased
(737)
(142)
(793)
Net Cash Provided By Financing Activities
24,106
11,031
22,713
Increase (Decrease) in Cash and Cash Equivalents
(1,904)
(4,732)
9,640
Cash and Cash Equivalents - Beginning of Year
18,023
22,755
13,115
Cash and Cash Equivalents - End of Year
$16,119
$18,023
$22,755
Continued on next page
One American Corp. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2000, 1999, and 1998
NOTE A
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.
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 the Bank's 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 requirements.
Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
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. 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 amortized cost of specific securities sold, are included in earnings. Securities purchased for trading purposes are classified as trading securities and are carried at market value with market adjustments included in non-interest income. The Bank had no securities classified as held to maturity or trading at December 31, 2000, or 1999.
Loans - Loans are stated at principal amounts outstanding, less the allowance for loan losses. Interest on
commercial and individual loans is accrued daily based on the principal outstanding. Gain on purchased assets is recognized on acquired loans from previous bank acquisitions on a cost recovery method as principal payments are made.
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. Subsequent cash receipts on non-accrual loans are accounted for on the cost recovery method until the loans qualify for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. The Bank classifies loans as impaired if, based on current information and events, it is probable 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. Impairment is measured on a loan by loan basis by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's observable market price, or based on the fair value of 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 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. 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 - 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. 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 December 31, 2000, 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 2,648,897 for the year ended December 31, 2000, 2,668,449 for the year ended December 31, 1999, and 2,686,389 for the year ended December 31, 1998.
Statements of Cash Flows - For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks and interest bearing deposits in other banks.
Comprehensive Income - Components of comprehensive income are revenues, expenses, gains, and losses that under GAAP are included in comprehensive income but excluded from net income. The components of comprehensive income are disclosed in the Statements of Changes in Stockholders Equity for all periods presented.
NOTE B
Acquisitions
On March 5, 1998, First American Agency, L.L.C., a subsidiary of First American Bank and Trust, acquired Riverbend Insurance Agency, Inc. of Destrehan, St Charles Parish, Louisiana. Equity earnings from First American Agency, L.L.C. in the amount of $258 thousand, $198 thousand, and $54 thousand, respectively, are included in Other Income of the Company for the years ended December 31, 2000, 1999, and 1998. The net equity in First American Agency, L.L.C of $1.2 million and $938 thousand, respectively, is reflected in Other Assets in the Balance Sheet as of December 31, 2000 and 1999.
On February 5, 2001, the Company and Schwegmann Bank and Trust Company (Schwegmann) announced the execution of a definitive agreement whereby the Company will acquire all of Schwegmann's common stock for cash. The closing of this transaction is subject to the approval of Schwegmann 's shareholders, regulatory approval, and other customary conditions, and is expected to be complete in the second quarter of 2001. At December 31, 2000, Schwegmann had total assets of approximately $34 million.
NOTE C
Cash and Due from Banks
The Bank is required to maintain average cash reserve balances. The amounts of those reserves at December 31, 2000 and 1999, were approximately $4.9 million and $4.4 million, respectively.
NOTE D
Securities
Amortized costs and fair values of securities available for sale as of December 31, 2000 and 1999 are summarized as follows:
Gross
Gross
Amortized
Unrealized
Unrealized
Fair
($ in thousands)
Cost
Gains
Losses
Value
U. S. Treasury Securities
$15,995
$17
($21)
$15,991
Securities of Other U. S. Government Agencies
36,545
(31)
36,740
Mortgage-Backed Securities
27,065
(135)
27,149
Obligations of State and Political Subdivisions
12,945
(32)
13,052
Equity Securities
1,355
1,355
Totals
$93,905
$601
($219)
$94,287
Gross
Gross
Amortized
Unrealized
Unrealized
Fair
($ in thousands)
Cost
Gains
Losses
Value
U. S. Treasury Securities
$31,997
$1
($188)
$31,810
Securities of Other U. S. Government Agencies
23,977
(249)
23,729
Mortgage-Backed Securities
24,575
(718)
23,899
Obligations of State and Political Subdivisions
9,962
(77)
9,986
Equity Securities
1,184
1,184
Totals
$91,695
$145
($1,232)
$90,608
The following table shows the amortized cost, fair value, maturity distribution, and weighted average yield of the securities available for sale as of December 31, 2000. Maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying the securities may be called or repaid without any penalties.
($ in thousands)
Amortized
Fair
Average
Cost
Value
Yield
U. S. Treasury Securities
Within 1 Year
$15,995
$15,991
5.36%
After 1 but Within 5 Years
0.00%
After 5 but Within 10 Years
0.00%
After 10 Years
0.00%
15,995
15,991
5.36%
Securities of Other U. S. Government Agencies
Within 1 Year
21,170
21,179
6.41%
After 1 but Within 5 Years
15,375
15,561
6.59%
After 5 but Within 10 Years
0.00%
After 10 Years
0.00%
36,545
36,740
6.49%
Mortgage-Backed Securities
Within 1 Year
5.66%
After 1 but Within 5 Years
12,586
12,517
5.59%
After 5 but Within 10 Years
7,433
7,479
6.73%
After 10 Years
6,733
6,840
6.87%
27,065
27,149
6.23%
Obligations of State and Political Subdivisions
Within 1 Year
1,663
1,669
8.00%
After 1 but Within 5 Years
3,364
3,380
7.13%
After 5 but Within 10 Years
6,511
6,563
7.15%
After 10 Years
1,407
1,440
7.59%
12,945
13,052
7.30%
Equity Securities
1,355
1,355
7.47%
Totals
$93,905
$94,287
6.35%
* Tax Equivalent Basis - 34%
Securities available for sale with a carrying amount of $30.9 million and $29.7 million at December 31, 2000 and 1999, respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law.
The Bank has invested in Federal Home Loan Bank of Dallas and First National Bankers Bankshares stock which are included in Equity Securities and are reflected at the lower of cost or fair value in these financial statements. The cost of these securities was $1.3 million and $1.2 million, which approximates fair value, at December 31, 2000 and 1999 respectively. At December 31, 2000, $1.3 million of Federal Home Loan Bank of Dallas stock was pledged to secure advances from the Federal Home Loan Bank.
Gross realized gains and losses from the sale of securities for the years ended December 31, 2000, 1999, and 1998 are as follows:
($ in thousands)
Realized gains
$7
$2
$5
Realized losses
$7
$2
$5
NOTE E
Loans
An analysis of the loan portfolio at December 31, 2000 and 1999, is as follows:
($ in thousands)
Commercial, Financial, and Agricultural
$20,022
$16,223
Real Estate - Construction
23,792
16,647
Real Estate - Mortgage
180,089
165,973
Individuals
14,703
15,974
All Other Loans
Total Loans
239,251
215,286
Impaired loans having recorded investments of $4.2 million at December 31, 2000 have been recognized in conformity with FASB Statement No. 114 as amended by FASB Statement No. 118. The average recorded investment in impaired loans during the year ended December 31, 2000 was approximately $5.2 million. Impaired loans at December 31, 1999 were $6.1 million. The allowance for loan losses related to these loans was $991 thousand at December 31, 2000 and $1.4 million at December 31, 1999. Interest recognized on impaired loans amounted to $429 thousand and $474 thousand at December 31, 2000 and 1999, respectively. All non-accrual loans were considered impaired at December 31, 2000, and 1999.
The Bank is permitted, under the laws of the State of Louisiana, to make extensions of credit to its executive officers and directors and their affiliates in the ordinary course of business. An analysis of the aggregate loans, for December 31, 2000 and 1999, are as follows:
($ in thousands)
Balance - Beginning of Year
$3,785
$5,671
New Loans
2,418
Repayments
(3,463)
(2,690)
Balance - End of Year
$2,740
$3,785
Maximum Balance During the Year
$4,722
$5,900
NOTE F
Allowance for Loan Losses
Following is a summary of the activity in the allowance for loan losses:
($ in thousands)
Balance - Beginning of Year
$4,155
$3,530
$2,190
Current Provision from Income
1,200
Recoveries on Loans Charged-Off
Loans Charged-Off
(580)
(531)
(258)
Balance - End of Year
$4,465
$4,155
$3,530
Ratio of Allowance for Loan Losses to
Impaired Loans at End of Year
104.64%
67.54%
79.95%
Ratio of Allowance for Loan Losses to Loans
Outstanding at End of Year
1.87%
1.93%
1.94%
Ratio of Net Loans Charged-Off to
Loans Outstanding at End of Year
0.22%
0.13%
-0.08%
NOTE G
Bank Premises and Equipment
Bank premises and equipment costs and the related accumulated depreciation at December 31, 2000 and 1999, are as follows:
($ in thousands)
Land
$3,962
$3,483
Bank Premises
11,323
10,662
Furniture and Equipment
7,931
6,820
23,216
20,965
Accumulated Depreciation
(9,180)
(8,367)
$14,036
$12,598
Depreciation charged to operating expenses for the three years ended December 31, 2000, 1999 and 1998, respectively, was $921 thousand, $943 thousand, and $828 thousand.
NOTE H
Deposits
Following is a detail of deposits as of December 31, 2000 and 1999:
($ in thousands)
Non-interest Bearing Accounts
$63,253
$56,208
NOW and Super NOW Accounts
22,031
21,519
Insured Money Market Accounts
73,608
69,667
Savings Accounts
30,037
31,628
Certificates of Deposit over $100,000
24,531
18,275
Other Certificates of Deposit
115,443
104,594
Total Deposits
$328,903
$301,891
Following is a detail of certificate of deposit maturities as of December 31, 2000:
Certificates of Deposit Maturities
($ in thousands)
December 31, 2001
$122,185
December 31, 2002
14,856
December 31, 2003
2,416
December 31, 2004
December 31, 2005 & thereafter
Total Certificates of Deposit
$139,974
Interest expense on Certificates of Deposit over $100 thousand at December 31, 2000, 1999, and 1998, amounted to $1.2 million, $799 thousand, and $676 thousand, respectively.
Public Fund deposits at December 31, 2000 and 1999, were $13.7 million and $13.1 million, respectively.
NOTE I
Stockholders' Equity and Regulatory Matters
Stockholders' Equity of the Company includes the undistributed earnings of the Bank. Dividends are paid by the Company from its assets, which are provided primarily by dividends from the Bank. Dividends are payable only out of retained earnings and current earnings of the Company. Certain restrictions exist regarding the ability of the Bank to transfer funds to the Company in the form of cash dividends. Louisiana statutes require approval to pay dividends in excess of a state bank's earnings in the current year plus retained net profits for the preceding year. As of January 1, 2001, the Bank had retained earnings of $17.5 million of which $4.5 million was available for distribution without prior regulatory approval.
The Company and the Bank are subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum regulatory capital requirements can initiate certain mandatory, and possible additional discretionary actions by regulators, that if undertaken, could have a direct material affect on both the Company's and the Bank's financial statements. Under the capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines involving quantitative measures of assets, liabilities, and certain, off-balance-sheet items as calculated under regulatory accounting practices. The Company's and the Bank's capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Prompt corrective action provisions are not applicable to bank holding companies.
Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios. As detailed below, as of December 31, 2000 and 1999, the Company and the Bank met all of the capital adequacy requirements to which each is subject.
As of December 31, 2000 and 1999, the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since the most recent notification that management believes have changed the prompt corrective action category.
Following is a summary of capital ratios of the Company (consolidated) and the Bank at December 31, 2000, and 1999:
To Be Well
Capitalized
Under
Required for
Prompt
Capital
Corrective
Actual
Adequacy
Actions
As of December 31, 2000
Ratios
Purposes
Provision
Total Capital (to Risk Weighted Assets)
One American Corp.
19.4%
8.00%
N/A
First American Bank and Trust
18.7%
8.00%
10.00%
Tier 1 Capital (to Risk Weighted Assets)
One American Corp.
18.2%
4.00%
N/A
First American Bank and Trust
17.4%
4.00%
6.00%
Tier 1 Leveraged Capital (to Average Assets)
One American Corp.
11.0%
4.00%
N/A
First American Bank and Trust
10.5%
4.00%
5.00%
As of December 31, 1999
Total Capital (to Risk Weighted Assets)
One American Corp.
20.9%
8.00%
N/A
First American Bank and Trust
19.9%
8.00%
10.00%
Tier 1 Capital (to Risk Weighted Assets)
One American Corp.
19.6%
4.00%
N/A
First American Bank and Trust
18.6%
4.00%
6.00%
Tier 1 Leveraged Capital (to Average Assets)
One American Corp.
11.3%
4.00%
N/A
First American Bank and Trust
10.7%
4.00%
5.00%
Under current regulations, the Bank is limited in the amount it may loan to its Parent. Loans to the Parent may not exceed 10% of the Bank's capital and surplus. There were no loans outstanding at December 31, 2000 or 1999.
NOTE J
Employee Benefit Plans
The Bank maintains a Salary Deferral Plan qualified under Internal Revenue Service Code Section 401(k) for all employees who are 21 years of age and have completed one year of service. Covered employees may elect to contribute 1% to 15% of gross pay to the plan. The majority of the plan's assets are invested in mutual funds. As part of the plan, the Bank has, at its discretion, the ability to match the contributions or make supplemental contributions. No amounts were contributed by the Bank for either 2000 or 1999.
The Bank maintains a noncontributory defined benefit pension plan covering all employees who qualify as to age and length of service. Current policy is to fund annual pension costs as they accrue. The majority of the plan's assets are invested in money market funds or mutual funds. The following table sets forth the plan's funded status at December 31, 2000 and 1999.
($ in thousands)
Change in Benefit Obligation:
Benefit Obligation at Beginning of Year
$7,112
$7,335
Service Cost
Interest Cost
Plan Participants' Contributions
Actuarial (Gain)/Loss
(944)
Benefits Paid
(243)
(226)
Benefit Obligation at End of Year
$8,094
$7,112
Change in Plan Assets:
Fair Value of Plan Assets at Beginning of Year
$7,661
$7,135
Actual return on Plan Assets
Employer Contributions
Plan Participant's Contributions
Benefits and Expenses Paid
(243)
(226)
Fair Value of Plan Assets at End of Year
$7,971
$7,661
Funded Status
($122)
$549
Unrecognized Net Actuarial Loss (Gain)
(338)
Unrecognized transaction obligation (asset)
(266)
(310)
Unrecognized Prior Service Cost
Prepaid (Accrued) Benefit Cost
$26
$33
Assumptions used in the determination of pension plan information consisted of the following:
Discount Rate
7.75%
7.75%
Rate of Increase in Compensation Levels
5.50%
5.50%
Expected Long-Term Rate of Return
on Plan Assets
9.00%
9.00%
Net pension expense for 2000, 1999, and 1998 included the following components:
($ in thousands)
Service Cost
$440
$448
$379
Interest Cost
Expected Return on Assets
(691)
(630)
(547)
Amortization of Prior Service Cost
Transition (Asset)/Obligation Recognition
(44)
(44)
(44)
Net Periodic Benefit Cost
$289
$298
$254
The Bank's employee benefit program also includes self-funded health and dental insurance plans for all full-time employees. The costs of these plans are completely funded by the Bank. The employees can also elect to purchase dependent coverage under the plans. The Bank pays a premium to a reinsurer for coverage on losses and claims that exceed $20,000 per individual per plan year. Amounts paid by the Bank in association with these plans totaled $686 thousand, $607 thousand, and $582 thousand for the years ended December 31, 2000 , 1999, and 1998 respectively. The Bank had set aside reserves in the amount of $585 thousand for payment of unreported claims with dates of service through December 31, 2000.
NOTE K
Other Operating Expenses
The analysis of other operating expense for the years ended December 31, 2000, 1999, and 1998, are as follows:
($ in thousands)
Advertising and Public Relations
$380
$320
$390
Armored Courier Service
Director Fees
Insurance
Legal and Professional
Postage and Shipping
Regulatory Assessments
Service Charges-Other Institutions
Stationery, Printing, and Supplies
Other
$2,560
$2,427
$2,391
NOTE L
Income Taxes
The total provision for income taxes charged to income amounted to $2.1 million for 2000, $2.1 million for 1999, and $1.9 million for 1998. The provisions represent effective tax rates of 31% for 2000 and 32% for both 1999 and 1998. Following is a reconciliation between income tax expense based on the federal statutory tax rates and income taxes reported in the statements of income.
($ in thousands)
Income Taxes Based on Statutory Rates -
34% for periods shown
$2,347
$2,288
$2,022
Tax Exempt Income
(178)
(174)
(198)
Other - Net
(50)
$2,119
$2,159
$1,885
The components of consolidated income tax expense (benefit) are:
($ in thousands)
Provision for Current Taxes
$2,212
$2,461
$2,320
Provision (Credit) for Deferred Taxes
(93)
(302)
(435)
$2,119
$2,159
$1,885
A deferred income tax asset of $951 thousand and $1.3 million is included in other assets at December 31, 2000 and 1999, respectively. The deferred tax provision (credit) consists of the following timing differences:
($ in thousands)
Stock Dividends Received
$28
$38
$0
Depreciation Expense for Tax Reporting
in Excess of (Less Than) Amount for Financial Reporting
(27)
(5)
Provision for Loan Losses for Financial
Reporting in Excess of Amount for
Tax Reporting
(166)
(281)
(391)
Accretion Income for Financial Reporting
in Excess of Tax Reporting
(6)
(Increase) Decrease in Insurance Reserve
(33)
Increase (Decrease) in Prepaid Pension
(11)
(86)
(15)
($93)
($302)
($435)
The net deferred tax asset consists of the following components at December 31, 2000 and 1999:
($ in thousands)
Stock Dividends
($66)
($38)
Depreciation
(324)
(351)
Provision for Loan Losses
1,404
1,238
Accretion Income
(104)
(30)
Insurance Reserve
Prepaid Pension
(11)
Unrealized (Gain) Loss on Securities
Available for Sale
(130)
Total Deferred Tax Asset
$951
$1,358
NOTE M
Borrowings
The Bank maintains an open line of credit with the Federal Home Loan Bank of Dallas. The total line of credit with Federal Home Loan Bank of Dallas amounts to approximately $26.0 million at December 31, 2000. This amount is computed based upon the Bank's investment in Federal Home Loan Bank stock and 65% of the Bank's qualifying loans. The agreement provides for interest based upon the federal funds rate on short term advances and a certain spread above the treasury yield curve for longer term advances. Drawings on the line included in other liabilities, were $1.2 million and $1.4 million at December 31, 2000 and 1999, respectively. The line is collateralized by the Bank's investment in Federal Home Loan Bank stock and a blanket lien on qualifying loans. Qualifying loans consist of 1-4 family mortgage loans and certain small business, small farm, and small agricultural loans. Maturities on these advances are as follows:
(in thousands)
December 31,
$199
2005 and thereafter
$1,216
The Bank also maintains open lines of credit with two correspondents to assist in maintaining short-term liquidity. The agreements provide for interest based upon the federal funds rate on outstanding balances. These lines totaling $9.5 million were unfunded at
December 31, 2000 and December 31, 1999. Additionally, the Bank maintains a borrowing facility with the Federal Reserve Discount Window. Any drawings on the line would be collateralized by the Bank's securities portfolio. The line was unfunded at December 31, 2000 and 1999.
NOTE N
Commitments
The Bank has entered into leasing agreements for a building which houses one of its full service branches and First American Agency, L.L.C. The leases, which are treated as operating leases, began February 1, 2000 and expire January 31, 2015 with two five year renewal options. The rent expense for First American Agency, L.L.C. is charged to its operating expenses. Amounts charged to the Bank's net occupancy expense associated with the leased branch amounted to $49,500 for the year ended December 31, 2000. Future minimum rental payments required under these operating leases follow:
(in thousands)
December 31,
$93
2005 and thereafter
1,232
$1,622
NOTE O
Off-Balance Sheet Instruments
The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, financial guarantees, and letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Balance Sheets.
The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as they do for on-balance sheet instruments.
In the normal course of business the Company has made commitments to extend credit of $25.1 million at December 31, 2000. This amount includes unfunded commitments aggregating $24.5 million and letters of credit of $500 thousand.
NOTE P
Concentrations of Credit
The Bank's business activities are with customers in the Bank's market area, which consists primarily of the southeast region of the State of Louisiana. Investments in state and municipal securities also involve governmental entities within the Bank's market area. The concentrations of credit by type of loan are shown in Note E. Most of the Bank's credits are to individuals and small businesses secured by real estate. The Bank, as a matter of policy, does not extend credit to any single borrower or group of related borrowers in excess of the Bank's legal lending limits. Included in Cash and Due From Banks, Federal Funds Sold, and Interest Bearing Deposits in Other Banks are amounts deposited in various institutions in excess of federally insured limits.
NOTE Q
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Cash and Short-Term Investments - For those short-term instruments, the carrying amount is a reasonable estimate of fair value.
Securities - Fair value of securities held to maturity and available for sale is based on quoted market prices or dealer quotes. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.
Loans - The fair value for loans is estimated using discounted cash flow analyses, with interest rates currently being offered for similar loans to borrowers with similar credit rates. Loans with similar classifications are aggregated for purposes of the calculations. The allowance for loan losses, which was used to measure the credit risk, is subtracted from loans.
Deposits - The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using discounted cash flow analyses, with interest rates currently offered for deposits of similar remaining maturities.
Commitments to Extend Credit and Standby Letters of Credit - The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the parties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of letters of credit were considered insignificant.
The estimated approximate fair values of the Bank's financial instruments as of December 31, 2000 and 1999 are as follows:
($ in thousands)
Carrying
Carrying
Financial Assets:
Amount
Fair Value
Amount
Fair Value
Cash and
Short-Term Investments
$25,169
$25,169
$23,723
$23,723
Securities
94,287
94,287
90,608
90,608
Loans - Net
234,786
233,538
211,131
209,839
$354,242
$352,994
$325,462
$324,170
Financial Liabilities:
Deposits
$328,903
$325,363
$301,891
$296,456
Other Borrowings
1,216
1,224
1,421
1,386
$330,119
$326,587
$303,312
$297,842
Note R
Litigation and Contingencies
During the normal course of business, the Company is involved in various legal proceedings. In the opinion of management and counsel, any liability from such proceedings would not have a material adverse effect on the Company's financial statements.
Note S
Parent Company Financial Statements
The financial statements for One American Corp. (Parent Company Only) are presented below:
BALANCE SHEETS
December 31, 2000 and 1999
($ in thousands)
Assets
Cash
$2,232
$2,563
Income Tax Receivable
Investment in Subsidiary
40,300
36,926
Total Assets
$42,636
$39,629
Liabilities
Accrued Dividend Payable
$502
$494
Payables to Subsidiary
Stockholders' Equity
Common Stock
7,500
7,500
Surplus
5,000
5,000
Retained Earnings
31,809
28,027
Treasury Stock - 360,452 and 334,140 shares at cost
(2,298)
(1,561)
Total Stockholders' Equity
42,011
38,966
Total Liabilities and Stockholders' Equity
$42,636
$39,629
STATEMENTS OF INCOME
for the years ended December 31, 2000, 1999, and 1998
($ in thousands)
Income
Interest Income
$56
$57
$46
Dividends from Subsidiaries
2,400
2,475
2,487
Total Income
2,456
2,532
2,533
Expenses
Operating Expenses
Total Expenses
Income before Income Taxes and Equity in
Undistributed Net Income of Subsidiaries
2,370
2,490
2,447
Income Tax Expense (Benefit)
(10)
(13)
Income before Equity in Undistributed
Net Income of Subsidiaries
2,380
2,485
2,460
Equity in Undistributed Net Income of Subsidiaries
2,404
2,084
1,601
Net Income
$4,784
$4,569
$4,061
STATEMENTS OF CASH FLOWS
for the years ended December 31, 2000, 1999, and 1998
($ in thousands)
Cash Flows From Operating Activities:
Net Income
$4,784
$4,569
$4,061
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Equity in Undistributed Net Income of Subsidiaries
(2,404)
(2,084)
(1,601)
Changes in Assets and Liabilities:
Increase (Decrease) in Payables to Subsidiaries
(46)
(Increase) Decrease in Receivables from Subsidiaries
(Increase) Decrease in Income Tax Receivables
(41)
(87)
Net Cash Provided by Operating Activities
2,370
2,491
2,473
Cash Flows From Investing Activities:
Proceeds From Liquidation of Subsidiary
Net Cash Provided by Investing Activities
Cash Flows From Financing Activities:
Treasury Stock Purchased
(737)
(142)
(793)
Dividends Paid
(1,964)
(1,922)
(1,886)
Net Cash Used in Financing Activities
(2,701)
(2,064)
(2,679)
Net Increase (Decrease) in Cash
(331)
Cash - Beginning of Year
2,563
2,136
2,107
Cash - End of Year
$2,232
$2,563
$2,136
Noncash Financing Activities:
Dividends Declared and Not Paid
$502
$494
$481
Change in Unrealized Gain (Loss) on Securities Available
For Sale, Net
$970
($1,327)
$170
Item 9.
Item 9. Disagreements on Accounting and Financial Disclosures
Not Applicable.
Part III
Items 10, 11, 12, and 13.
The information required by items 10, 11, 12 and 13 is included in the Company's Proxy Statement, for the 2001 Annual Meeting of Stockholders and is incorporated herein by reference.
Part IV
Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K
(a) Financial Statements
1. The financial statements of One American Corp. in the Company's 2000 Form 10-K are incorporated by reference in Item 8.
2. Other financial statement schedules are either omitted because they are inapplicable or included in the financial statements or related notes.
(b) Reports on Form 8-K
There were no Forms 8-K filed in the quarter ended December 31, 2000.
(c) Exhibits
3. Articles of Incorporation and by-laws of One American Corp. are incorporated by reference to the Company's Registration Statement on Form S-14 filed October 29, 1982, with the Securities and Exchange Commission.
22. Subsidiaries of the Registrant
First American Bank and Trust, incorporated under the laws of the State of Louisiana.
23. Definitive Proxy Statement for the 2001 Annual Meeting of Stockholders' of One American Corp.
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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.
/s/ Frank J. Bourgeois
Frank J. Bourgeois
President
Dated March 8, 2001
Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following persons in the capacities indicated on March 8, 2001:
/s/ Frank J. Bourgeois, President (principal executive, financial, and accounting officer) and Director
Frank J. Bourgeois
/s/ Craig G. Brazan, Director
Craig G. Brazan
/s/ Michael J. Cazenave, Director
Michael J. Cazenave
/s/ Steven G. Cazenave, Director
Steven G. Cazenave
/s/ A. Earle Cefalu, Director
A. Earle Cefalu
/s/ Dean T. Falgoust, Director
Dean T. Falgoust
/s/ Preston L. Falgoust, Director
Preston L. Falgoust
/s/ Marcel T. Graugnard, Jr., Director
Marcel T. Graugnard, Jr.
/s/ Ozane J. Gravois, III, Director
Ozane J. Gravois, III
/s/ Gloria A. Kliebert, Secretary / Treasurer and Director
Gloria A. Kliebert
/s/ Anthony J. Nobile, Director
Anthony J. Nobile
/s/ Carl J. Poche, M.D., Director
Carl J. Poche, M.D.
/s/ Debra Dufresne Vial, Director
Debra Dufresne Vial
Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K
(a) Financial Statements
1. The financial statements of One American Corp. in the Company's 2000 Form 10-K are incorporated by reference in Item 8.
2. Other financial statement schedules are either omitted because they are inapplicable or included in the financial statements or related notes.
(b) Reports on Form 8-K
There were no Forms 8-K filed in the quarter ended December 31, 2000.
(c) Exhibits
3. Articles of Incorporation and by-laws of One American Corp. are incorporated by reference to the Company's Registration Statement on Form S-14 filed October 29, 1982, with the Securities and Exchange Commission.
22. Subsidiaries of the Registrant
First American Bank and Trust, incorporated under the laws of the State of Louisiana.
23. Definitive Proxy Statement for the 2001 Annual Meeting of Stockholders' of One American Corp.
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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.
/s/ Frank J. Bourgeois
Frank J. Bourgeois
President
Dated March 8, 2001
Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following persons in the capacities indicated on March 8, 2001:
/s/ Frank J. Bourgeois, President (principal executive, financial, and accounting officer) and Director
Frank J. Bourgeois
/s/ Craig G. Brazan, Director
Craig G. Brazan
/s/ Michael J. Cazenave, Director
Michael J. Cazenave
/s/ Steven G. Cazenave, Director
Steven G. Cazenave
/s/ A. Earle Cefalu, Director
A. Earle Cefalu
/s/ Dean T. Falgoust, Director
Dean T. Falgoust
/s/ Preston L. Falgoust, Director
Preston L. Falgoust
/s/ Marcel T. Graugnard, Jr., Director
Marcel T. Graugnard, Jr.
/s/ Ozane J. Gravois, III, Director
Ozane J. Gravois, III
/s/ Gloria A. Kliebert, Secretary / Treasurer and Director
Gloria A. Kliebert
/s/ Anthony J. Nobile, Director
Anthony J. Nobile
/s/ Carl J. Poche, M.D., Director
Carl J. Poche, M.D.
/s/ Debra Dufresne Vial, Director
Debra Dufresne Vial