UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED SEPTEMBER 30, 1996
Commission file number 2-90033
ASSUMPTION BANCSHARES, INC.
(Exact name of registrant specified in its charter)
Louisiana
(State or other jurisdiction of incorporation or organization)
72-0121470
(I.R.S. Employer Identification No.)
P.O. Box 398
110 Franklin Street
Napoleonville, Louisiana
(Address of principal executive office)
70390
(Zip code)
(504) 369-7269
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
Number of shares outstanding as of September 30, 1996:
160,000 Common Shares
ASSUMPTION BANCSHARES, INC.
Condensed Consolidated Statements of Condition
(Unaudited)
September 30, 1996 and December 31, 1995
September 30, December 31,
Assets 1996 1995
______ _____ _____
Cash and due from banks $ 4,485,582 6,293,399
Federal funds sold 450,000 5,950,000
_______________ ______________
Cash and cash equivalents 4,935,582 12,243,399
Interest-bearing time deposits 99,000 99,000
Securities:
Held-to-maturity (market value of $13,991,000
and $14,765,000 at September 30, 1996 and December 31,
1995, respectively) 13,972,935 14,677,589
Available-for-sale (amortized cost of $20,959,000
and $22,631,000 at September 30, 1996 and
DecemberE31, 1995, respectively) 20,665,572 22,686,923
Loans 62,177,060 57,086,118
Less allowance for loan losses 1,232,547 1,195,517
______________ ______________
Net loans 60,944,513 55,890,601
Other real estate 31,759 20,717
Bank premises and equipment, net 2,131,565 2,230,281
Accrued interest receivable 880,053 814,196
Other assets 511,258 444,794
_______________ _____________
$ 104,172,237 109,107,500
=============== =============
Liabilities and Stockholders' Equity
Deposits:
Noninterest-bearing demand 10,877,209 12,542,093
NOW accounts 15,653,515 20,518,595
Money market accounts 9,522,746 10,699,688
Savings and IRA accounts 22,347,979 22,393,243
Certificates and other time deposits, $100,000
and over 4,253,571 4,416,000
Other certificates of deposit 31,058,988 28,778,502
_______________ ______________
93,714,008 99,348,121
Accrued interest payable 448,115 340,500
Other liabilities and accrued expenses 308,614 252,980
_______________ ______________
Total liabilities 94,470,737 99,941,601
_______________ ______________
Stockholders' equity:
Common stock 800,000 800,000
Paid-in capital 450,000 450,000
Retained earnings 8,645,692 7,878,785
Net unrealized (loss) gain on securities (194,192) 37,114
______________ ______________
Total stockholders' equity 9,701,500 9,165,899
______________ ______________
$ 104,172,237 109,107,500
============== ==============
See accompanying notes to condensed consolidated financial statements.
ASSUMPTION BANCSHARES, INC.
Condensed Consolidated Statements of Income
(Unaudited)
Three months and nine months ended September 30, 1996 and 1995
Three months ended Nine months ended
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
_____ _____ _______ ______
Interest income:
Interest and fees on loans $ 1,399,684 1,233,249 4,098,441 3,515,364
Interest on securities:
Taxable 346,522 407,395 1,106,277 1,397,997
Exempt from federal
income taxes 185,484 185,887 553,289 523,020
Interest on federal funds
sold 47,123 27,257 198,775 145,201
Interest on deposits with
banks 1,497 1,497 4,459 5,012
_____________ ____________ ___________ ____________
Total interest
income 1,980,310 1,855,285 5,961,241 5,586,594
Interest expense on deposits 808,623 782,418 2,422,978 2,300,844
Interest on federal funds
purchased - 5,445 - 5,445
____________ _____________ ____________ ____________
Total interest
expense 808,623 787,863 2,422,978 2,306,289
____________ _______________ ___________ ___________
Net interest income 1,171,687 1,067,422 3,538,263 3,280,305
Provision for loan losses 9,000 34,000 27,000 52,000
_____________ ______________ ____________ ___________
Net interest income
after provision
for loan losses 1,162,687 1,033,422 3,511,263 3,228,305
Other income 147,309 148,825 451,072 423,622
Other expenses (963,703) (886,399) (2,704,428) (2,669,056)
_____________ _____________ __________ ____________
Income before
income taxes 346,293 295,848 1,257,907 982,871
Income tax expense (70,100) (69,200) (251,000) (226,850)
_____________ _____________ _____________ ____________
Net income $ 276,193 226,648 1,006,907 756,021
============= ============= ============= ============
Per share data:
Net income $ 1.73 1.42 6.29 4.73
============= ============ ============= ============
Number of shares used in
computation 160,000 160,000 160,000 160,000
============ =========== ============= ============
See accompanying notes to condensed consolidated financial statements.
ASSUMPTION BANCSHARES, INC.
Condensed Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
Nine months ended September 30, 1996 and 1995
Net
unrealized
gain Total
Common Paid-in Retained (loss) on stockholders'
stock capital earnings securities equity
_____________ ___________ ___________ ____________ _____________
Balances at
December 31,
1994 $ 800,000 450,000 7,217,554 (551,837) 7,915,717
Net income for nine
months ended
September 30, 1995 - - 756,021 - 756,021
Change in net
unrealized gain
(loss) on
securities - - - 528,629 528,629
____________ ___________ ___________ ___________ ____________
Balances at
September 30,
1995 $ 800,000 450,000 7,973,575 (23,208) 9,200,367
=========== =========== ============ =========== ============
Balances at
December 31, 1995 800,000 450,000 7,878,785 37,114 9,165,899
Net income for nine
months ended
September 30, 1996 - - 1,006,907 - 1,006,907
Dividends declared,
$1.50 per common
share - - (240,000) - (240,000)
Change in net
unrealized gain
(loss) on
securities - - - (231,306) (231,306)
____________ __________ ____________ ____________ ___________
Balances at
September 30,
1996 $ 800,000 450,000 8,645,692 (194,192) 9,701,500
============ ========== ============ ============ ===========
See accompanying notes to condensed consolidated financial statements.
ASSUMPTION BANCSHARES, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended September 30, 1996 and 1995
1996 1995
_______ ______
Cash flows from operating activities:
Net income $ 1,006,907 756,021
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 166,050 151,675
Provision for loan losses 27,000 52,000
Net (gain) loss on sale of securities available-
for-sale (7,496) 6,629
Gain on sale of other assets acquired in
settlement of loans (6,698) (16,032)
Increase in accrued interest receivable (65,857) (7,875)
Increase in accrued interest payable 107,615 212,307
Increase in other assets and other
liabilities 108,328 118,507
__________ __________
Net cash provided by operating
activities 1,335,849 1,273,232
Cash flows from investing activities:
Proceeds from sales of securities available-
for-sale 1,767,052 5,215,291
Maturities of and principal payments
on securities held-to-maturity 702,149 1,751,168
Purchases of securities available-for-sale (2,780,211) (489,531)
Maturities of and principal payments
on securities available-for-sale 2,694,047 1,110,162
Purchases of securities held-to-maturity - (2,323,160)
Loans originated, net of principal collections (5,135,014)(6,642,634)
Proceeds from sales of other real estate 49,758 185,134
Capital expenditures (67,334) (357,240)
___________ ___________
Net cash used in investing activities (2,769,553)(1,550,810)
___________ ___________
Cash flows from financing activities:
Net decrease in demand deposits, NOW accounts,
money market accounts and savings accounts (1,664,884)(9,637,412)
Net (decrease) increase in certificates of deposit
and other time deposits of $100,000 and over (3,969,229) 915,187
Net increase in federal funds purchased - 3,200,000
Dividends paid (240,000) -
___________ ___________
Net cash used in financing activities (5,874,113)(5,522,225)
___________ ___________
Net decrease in cash and cash
equivalents (7,307,817)(5,799,803)
Cash and cash equivalents at beginning of period 12,243,399 10,446,119
___________ ___________
Cash and cash equivalents at end of period $ 4,935,582 4,646,316
=========== ===========
Supplemental disclosures:
Interest paid $ 2,315,363 2,088,538
=========== ===========
Income taxes paid $ 250,000 185,000
=========== ===========
See accompanying notes to condensed consolidated financial statements.
ASSUMPTION BANCSHARES, INC.
Notes to Condensed Consolidated Financial Statements
Nine months ended September 30, 1996 and 1995
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the nine-month period ended
September 30, 1996, are not necessarily indicative of the results that may
be expected for the year ending December 31, 1996. For further
information, refer to the audited consolidated financial statements and
notes included in Assumption Bancshares' annual report on Form 10-K for the
year ended December 31, 1995.
Cash and Cash Equivalents
For purposes of the condensed consolidated statements of cash flows, cash
and cash equivalents represent cash and due from banks and federal funds
sold.
Securities
The Bank classifies its securities in one of three categories: trading,
available-for-sale, or held-to-maturity. Trading securities are bought and
held principally for the purpose of selling them in the near future. Held-
to-maturity securities are those securities in which the Bank has the
ability and intent to hold the security until maturity. All other
securities not included in trading or held-to-maturity are classified as
available-for-sale.
Trading and available-for-sale securities are recorded at fair value.
Held-to-maturity securities are recorded at amortized cost, adjusted for
the amortization or accretion of premiums or discounts. Unrealized holding
gains and losses on trading securities are included in earnings.
Unrealized holding gains and losses, net of the related tax effect, on the
available-for-sale securities are excluded from earnings and are reported
as a separate component of stockholders' equity until realized. Transfers
of securities between categories are recorded at fair value at the date of
transfer. Unrealized holding gains and losses are recognized in earnings
for transfers into trading securities. Unrealized holding gains or losses
associated with transfers of securities from held-to-maturity to available-
for sale are recorded as a separate component of stockholders' equity. The
unrealized holding gains or losses included in the separate component of
equity for securities transferred from available-for-sale to held-to-
maturity are maintained and amortized into earnings over the remaining life
of the security as an adjustment to yield in a manner consistent with the
amortization or accretion of premium or discount on the associated
security.
A decline in the market value of any available-for-sale or held-to-maturity
security below cost that is deemed other than temporary results in a charge
to earnings resulting in the establishment of a new cost basis for the
security.
Premiums and discounts are amortized or accreted over the life of the
related held-to-maturity security as an adjustment to yield using the
effective interest method. Interest income is recognized when earned.
Realized gains
(Continued)
ASSUMPTION BANCSHARES, INC.
Notes to Condensed Consolidated Financial Statements
and losses for securities classified as available-for-sale and held-to-
maturity are included in earnings and are derived using the specific
identification method for determining the cost of securities sold.
Accounting by Creditors for Impairment of a Loan
During the first quarter of 1995, the Bank adopted Statement of Financial
Accounting Standards No. 114, Accounting by Creditors for Impairment of a
Loan (SFAS No. 114) and Statement of Financial Accounting Standards No.
118, Accounting by Creditors for Impairment of a Loan - Income Recognition
and Disclosures (SFAS No. 118). The Bank adopted the provisions of SFAS
No. 114 and SFAS No. 118 to all of its loans, except for its consumer
installment loans which are collectively evaluated for impairment.
Pursuant to SFAS No. 114 and SFAS No. 118, a loan is considered to be
impaired when it is probable that a creditor will be unable to collect
principal and interest amounts due according to the contractual terms of
the loan agreement. When a loan is impaired, the measurement of its
impairment can be determined in one of three ways, as follows: (1) the
present value of the expected cash flows of the loan discounted at the
loan's original effective interest rate, (2) the observable market price of
the impaired loan, or (3) the fair value of the collateral of a collateral-
dependent loan. The amount by which the recorded investment in the loan
exceeds the measure of the impaired loan is recognized by recording a
valuation allowance with a corresponding charge to the provision for
possible credit losses. The effect of adopting SFAS No. 114 and SFAS No.
118 on the Bank's financial condition and results of operations was
immaterial.
At September 30, 1996, impaired loans, all of which were on nonaccrual,
totaled $1,211,000, of which $94,000 required a total impairment allowance
of $50,000. The average recorded investment in impaired loans was
approximately $761,000 and $876,000 during the nine months and three months
ended September 30, 1996, respectively. The Bank has recognized $47,000
interest income on these impaired loans in the first nine months of 1996.
For all impaired loans, the impairment amount was measured using the fair
value of the underlying collateral.
Earnings Per Share
Earnings per share have been computed on the basis of the weighted average
number of shares outstanding.
ASSUMPTION BANCSHARES, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Net interest income for the nine months ended September 30, 1996 was
approximately $260,000 higher than amounts for the nine-month period ended
September 30, 1995. Loan demand in the Bank's trade area has increased
significantly since early 1994. The resulting growth in the loan portfolio
has helped the bank achieve a higher yield on earning assets. This
increase in income earned was partially offset by higher rates on and
higher balances of interest bearing liabilities. The Bank's net interest
margins were 4.23% and 4.09% at September 30, 1996 and 1995, respectively.
Other expenses at September 30, 1996 totaled $2,704,000, up slightly from
$2,669,000 for the first nine months of 1995. During 1995, the Bank
Insurance Fund (BIF) administered by the FDIC became fully funded. As a
result, the Bank's 1996 FDIC insurance premiums decreased from $55,000 per
quarter to $500 per quarter. This decrease in other expenses was offset by
an increase in salaries and employee benefits of $40,000, and an increase
of $80,000 in legal and consulting fees due principally to the merger
negotiations discussed below.
The provision for income taxes is based on management's estimate of the
expected effective tax rate for the entire year.
Liquidity and Capital Resources
Fluctuating interest rates and competitive forces in the financial services
industry have intensified the need for management of and matching
maturities of various assets and liabilities. This process involves
maintaining liquidity and controlling interest rate sensitivity. The goal
of liquidity management is to ensure funds are available for customer
needs. Interest rate sensitivity management attempts to match shifts in
earning asset yields with interest paying liability rates.
Net earnings for the first nine months of 1996 of $1,007,000 offset by
unrealized losses on securities classified as available-for-sale of
$231,000 and dividends of $240,000, resulted in a net increase in equity
for the first nine months of 1996 of $536,000. Except for the merger
negotiations discussed below, management is not aware of any
recommendations by regulatory authorities or other matters which are
reasonably likely to have a material effect on the Bank's capital
resources, liquidity or operations.
Securities, comprised primarily of obligations of states and municipalities
and government guaranteed mortgage-backed securities, represented 33% and
34% of total assets at September 30, 1996 and December 31, 1995,
respectively. The securities portfolio is managed with the primary
objective of generating interest income while maintaining an appropriate
level of asset liquidity and controlling the Bank's net interest rate risk
position.
The market value of the securities portfolio at September 30, 1996 was
99.2% of book value, compared to 100.4% at December 31, 1995. Management
does not anticipate any significant effect on future earnings, liquidity or
capital resources as a result of the amounts of unrealized gains or
unrealized losses in the securities portfolio.
(Continued)
ASSUMPTION BANCSHARES, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Securities Available-for-Sale
As of September 30, 1996, available-for-sale securities includes securities
with an aggregate amortized cost of $20,960,000 and a market value of
$20,666,000.
Falling bond prices caused a decrease in the market values of these
securities during 1996. Management considers the unrealized losses in the
securities portfolio to be temporary in nature. A net unrealized loss, net
of tax, $194,000, is included as a separate component of stockholders'
equity at September 30, 1996. The net unrealized loss before taxes
included gross unrealized gains of $133,000 and gross unrealized losses of
$428,000. Stockholders' equity reflected net unrealized losses, net of
tax, of $262,000 at the end of last quarter and $23,000 at September 30,
1995.
Asset Quality
Nonperforming assets, which include nonaccrual loans, restructured loans
and foreclosed assets, totaled $1,242,000 at September 30, 1996, compared
to $559,000 at June 30, 1996, $874,000 at year-end 1995, and $839,500 at
September 30, 1995. The current quarter increase in nonaccrual loans is
due to several residential and commercial real estate loans which became 90
days delinquent during the third quarter of 1996. Management does not
believe that there has been an overall deterioration of asset quality as a
result of these changes.
As a percentage of total loans plus foreclosed assets, nonperforming assets
were 2.0% at September 30, 1996, compared to 1.0% at June 30, 1996, 1.5% at
year-end 1995, and 1.5% at September 30, 1995.
The following table sets forth the past due and nonaccrual loans (in
thousands of dollars):
September 30,
1996 1995
_________ ________
Loans past due 90 days or more $ 196 153
========= ========
Nonaccrual loans, all of which are impaired:
Real estate 1,211 808
Individual - 31
_________ _______
Total $ 1,211 839
========= =======
As discussed above, nonaccrual loans at September 30, 1996 have increased
compared to September 30, 1995. Loans are placed on nonaccrual status when
management's assessment of the borrowers' financial condition indicates
that collection of interest is doubtful. In making this determination,
management considers current economic and business conditions, the nature
of the collateral, collection efforts and regulatory guidelines.
(Continued)
ASSUMPTION BANCSHARES, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Management has identified approximately $221,000 of potential problem
loans, which are loans for which payments are contractually current but the
borrowers are presently experiencing financial difficulties at September
30, 1996, which are not otherwise identified as past due or nonaccrual.
The provision for loan losses for the first nine months of 1996 was
$27,000, compared to $52,000 for the first nine months of 1995. This
relatively low provision is due to the continued low level of charge-offs
experienced by the Bank. Net recoveries for the nine months ended
September 30, 1996 were $10,000. Additionally, the Bank's allowance for
loan losses as a percentage of gross loans has remained consistent at 1.99%
and 2.09% at September 30, 1996 and December 31, 1995, respectively.
Management evaluates the adequacy of the allowance for loan losses on an
ongoing basis and believes, based on its analysis, that the allowance is
adequate to absorb losses in the portfolio.
Changes in the total allowance for loan losses for the nine months ended
September 30, 1996 and 1995 were as follows:
Nine months ended
1996 1995
______ ______
Balance at beginning of period $ 1,195,517 1,103,823
Charge-offs (60,822) (74,608)
Recoveries 70,852 43,288
____________ ____________
Net recoveries (charge-offs) 10,030 (31,320)
Provision for loan losses 27,000 52,000
____________ ____________
Balance at end of period $ 1,232,547 1,124,503
============ ============
Ratio of net charge-offs (recoveries)
during the period to average loans
outstanding during the period (.02)% .05%
============ ============
The allowance for possible loan losses as a percent of nonperforming loans
was 99%, 231%, 140% and 134% at September 30, 1996, June 30, 1996, December
31, 1995, and September 30, 1995, respectively. Management has determined
that the allowance for possible loan losses at September 30, 1996, is
adequate to cover losses inherent in its loan portfolio.
The amount of additional interest income on nonaccrual loans, which would
have been recognized for the nine months ended September 30, 1996 and 1995,
had the related loans been performing according to their original terms was
not material. Interest income recognized on the cash basis on loans in
nonaccrual status was approximately $47,000 and $17,000 for the nine months
ended September 30, 1996 and 1995, respectively.
(Continued)
ASSUMPTION BANCSHARES, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Merger Negotiations
On August 23, 1996, the Boards of Directors of Assumptions Bancshares, Inc.
and ArgentBank announced that they had commenced negotiations regarding an
acquisition of Assumption Bank & Trust Company, a wholly-owned subsidiary
of Assumption Bancshares, Inc., (Assumption Bank) for $21.5 million, or
approximately $134 per share. ArgentBank is headquartered in Thibodaux,
Louisiana and operates in Lafourche, Terrebonne and Assumption parishes.
The purchase price would be payable in a combination of cash and ArgentBank
common stock and would provide for the merger of the Assumption Bank with
ArgentBank. The transaction is subject to negotiation and execution of a
definitive agreement, due diligence by both parties, as well as regulatory
and shareholder approvals.
PART II
Items 1 through 5 are not applicable.
Item 6. Exhibits and Reports on Form 8-K. No Form 8-K was required to be
filed during the quarter ended September 30, 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
/s/ Joseph H. Montero
_________________________
Joseph H. Montero,
President and
Chief Executive Officer
Date: November 1, 1996