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[ISB LOGO]
FINANCIAL CORPORATION
1996
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TABLE OF CONTENTS
SECTION 1
Letter to Stockholders.................................................................... 2
Selected Consolidated Financial Data...................................................... 4
Management's Discussion and Analysis of
Financial Condition and Results of Operations....................................... 6
SECTION 2
Report of Independent Auditors............................................................ 18
Consolidated Financial Statements
Consolidated Statements of Financial Condition...................................... 19
Consolidated Statements of Income................................................... 20
Consolidated Statements of Stockholders' Equity..................................... 21
Consolidated Statements of Cash Flows............................................... 22
Notes to Consolidated Financial Statements.......................................... 24
Corporate Information..................................................................... 48
ANNUAL MEETING
The Annual Meeting of Stockholders is scheduled for Wednesday, April
16, 1997 at 3:00 p.m., at Iberia Savings Bank, 1101 E. Admiral Doyle Drive, New
Iberia, Louisiana.
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LETTER TO STOCKHOLDERS
This past year was one of many accomplishments including a significant
growth in assets, increases in quarterly dividends, the completion of a 5% stock
buyback, an announcement to convert to a commercial bank charter, the rollout of
our successful debit card program and the opening of our first supermarket
branches.
The Company earned $5,278,000 or $.80 cents per share in 1996. The
one-time assessment of $2.9 million ($1.9 million after taxes) during the third
quarter to recapitalize the Savings Association Insurance Fund ("SAIF") was the
primary cause for the reduction in net income in 1996 compared to 1995. This
assessment was made on all savings institutions with deposits insured by the
SAIF. The charge did not have a material impact on the Company's capital
position. In fact, the long-term benefits are significant. We expect to realize
annual savings due to lower insurance premiums beginning in 1997.
Assets of the Company increased $320 million during this same period
primarily as a result of two acquisitions. First was the May acquisition of
Royal Bankgroup of Acadiana, Inc. and its subsidiary, the Bank of Lafayette.
With assets of $70 million, the Bank of Lafayette added two important branches
in a key section of our overall market. In addition to these facilities and
deposits, this acquisition gave us the personnel to expand our commercial
lending abilities and to add an experienced automotive dealer lending group.
These efforts facilitated significant increase in new loan volume during the
year. At the time we completed this merger, we opened two supermarket branches
giving Iberia Savings Bank seven locations in Lafayette and a 6% market share of
deposits. We have become a strong competitive force in this growing area.
Second, the purchase of Jefferson Bancorp and its subsidiary, Jefferson
Federal Savings Bank, completed in October, added $266 million in assets and
seven branch offices in the greater New Orleans area. Our challenge here is to
increase lending, introduce new deposit products and services, consolidate and
streamline operations. This effort is underway now and its effect should begin
to be reflected in our financial statements by the end of 1997.
Net loans increased $172 million due, in part, to the acquisitions and
also to new commercial loans and consumer loans originated through a network of
local automobile dealerships. The relevant economic data for our market area
suggests that loan demand will continue to grow.
Our Company increased quarterly dividends per share in April from
$0.075 to $0.080 and again in October to $0.085. We are hopeful that we can
increase dividends again in 1997. In addition to increasing our dividend
payments, we completed a stock repurchase in July for 329,411 shares, or
approximately 5.0% of the then outstanding shares at $14.75 per share. We
believe this stock repurchase was an effective use of our capital since, among
other factors, the purchase price was below book value. Another 5% stock
repurchase was announced in January 1997 but has not yet been completed due to
the increases in per-share price of the Company's common stock. We are
continuing to monitor this and, if deemed prudent, may resume our stock
repurchases.
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In line with our overall strategy to change our loan mix to reflect a
higher percentage of commercial and consumer lending, the Company recently
announced its plan to convert its subsidiary savings banks from a state savings
bank charter to a commercial bank charter. The change should occur in 1997. We
expect to continue our efforts to be a strong originator of one-to-four family
residential mortgage loans but we also intend to increase the amount of loans
sold to investors in our efforts to increase fee income and permit increased
funding of our profitable commercial and consumer loan portfolios. This charter
change is also in response to federal legislative uncertainty for the future of
the savings bank charter.
Our new debit card, ReadyCheck, was introduced in March. The volume
related to this card has rapidly accelerated to approximately 10,500
transactions per month. This card is attractive to customers, reduces check
processing costs and creates fee income for the bank. In addition to our
existing network of 24 ATMs, two new ATMs were recently installed, on a test
basis, in convenience stores.
On behalf of the Directors, Management and Staff, we thank you for the
confidence you have placed in ISB Financial Corporation and look forward to
reporting continued successes and good returns on your investment.
Sincerely,
/s/ LARREY G. MOUTON
LARREY G. MOUTON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
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SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS)
DECEMBER 31,
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1996 1995 1994 1993 1992
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SELECTED FINANCIAL CONDITION DATA:
Total Assets $929,264 $608,830 $487,563 $482,814 $487,836
Cash and cash equivalents 53,385 51,742 9,686 19,674 34,157
Discount on loans purchased 1,460 1,962 2,679 3,876 5,798
Loans receivable, net 571,119 399,542 370,794 343,417 336,404
Investment securities 103,724 87,231 48,088 58,285 52,682
Mortgage-backed securities 150,669 51,646 39,923 41,419 44,875
Deposit accounts 760,284 444,600 434,443 439,500 452,197
Borrowings 47,750 40,490 5,000 -- --
Equity 114,006 119,677 44,840 39,863 32,318
YEAR ENDED DECEMBER 31,
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1996 1995 1994 1993 1992
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SELECTED OPERATING DATA:
Interest income $52,707 $42,334 $36,548 $38,340 $41,221
Interest expense 27,136 21,282 17,294 17,508 20,707
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Net interest income 25,571 21,052 19,254 20,832 20,514
Provision for loan losses 156 239 305 441 2,200
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Net interest income after provision
for loan losses 25,415 20,813 18,949 20,391 18,314
Noninterest income 3,818 2,668 2,425 2,107 2,134
Noninterest expense 20,778(1) 12,693 11,783 11,407 10,942
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Income before income taxes and cumulative
effect of change in accounting principle 8,455 10,788 9,591 11,091 9,506
Income taxes 3,177 3,781 3,354 3,541 3,399
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Income before cumulative effect of change
in accounting principle 5,278 7,007 6,237 7,550 6,107
Cumulative effect of change in accounting
principle -- -- -- -- 452
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Net income $ 5,278(1) $ 7,007 $ 6,237 $ 7,550 $ 6,559
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Earnings per share $ .80 $ .80(2) N/A N/A N/A
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AT OR FOR THE YEAR ENDED DECEMBER 31,
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1996 1995 1994 1993 1992
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SELECTED OPERATING RATIOS (3):
Return on average assets (4) 0.74% 1.26% 1.29% 1.55% 1.39%
Return on average equity (4) 4.49 7.14 14.56 20.77 22.50
Equity to assets at the end of period 12.27 19.66 9.20 8.26 6.62
Interest-earning assets to interest-
bearing liabilities 120.01 119.87 107.69 105.39 108.31
Interest rate spread (5) 2.97 3.16 3.88 4.24 4.32
Net interest margin (5) 3.77 3.95 4.17 4.44 4.51
Noninterest expense to average assets (4) 2.91 2.28 2.44 2.35 2.31
Efficiency ratio (4) (6) 70.70 53.51 54.35 49.73 48.31
ASSET QUALITY DATA:
Non-performing assets to total assets
at end of period (7) 0.38 0.33 0.37 0.46 0.67
Allowance for loan losses to non-performing
loans at end of period 180.27 255.18 304.53 246.60 138.29
Allowance for loan losses to total loans
at end of period 0.79 0.90 1.08 0.99 0.92
CONSOLIDATED CAPITAL RATIOS:
Tier 1 leverage capital ratio 10.34 19.52 9.44 8.21 6.55
Tier 1 risk-based capital ratio 20.91 42.79 19.12 18.24 14.10
Total risk-based capital ratio 21.92 44.14 20.37 19.48 15.69
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(1) Includes a one-time special SAIF assessment of $2.9 million ($1.9 million
after tax effect). Excluding this one-time assessment, net income would
have been $7.2 million in 1996.
(2) 1995 earnings per share have been stated only for a partial period because
of the Bank's conversion to stock form on April 6, 1995.
(3) With the exception of end of period ratios, all ratios are based on average
daily balances during the respective periods and are annualized where
appropriate.
(4) Exclusive of the effect of the one-time special SAIF assessment, return on
average assets would have been 1.01% for 1996, return on average equity
would have been 6.12%, non-interest expense to average assets would have
been 2.51% and the efficiency ratio would have been 60.85%.
(5) Interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities, and net interest margin represents net
interest income as a percentage of average interest-earning assets.
(6) The efficiency ratio represents noninterest expense, as a percentage of the
sum of net interest income and noninterest income.
(7) Non-performing assets consist of non-accruing loans and real estate
acquired through foreclosure, by deed-in-lieu thereof or deemed insubstance
foreclosed.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is intended to assist readers in
understanding the financial condition and results of operations of ISB Financial
Corporation (the "Company") and its subsidiaries for the years ended December
31, 1994 through 1996. This review should be read in conjunction with the
audited consolidated financial statements, accompanying footnotes and
supplemental financial data included herein. FINANCIAL CONDITION
ASSETS
GENERAL - Total assets of the Company increased by $320.4 million, or
52.6%, from $608.8 million at December 31, 1995 to $929.3 million at December
31, 1996. This increase was primarily due to the acquisition of Royal Bankgroup
of Acadiana, Inc. ("Royal") of Lafayette, Louisiana, and its wholly owned
subsidiary, Bank of Lafayette, and the acquisition of Jefferson Bancorp, Inc.
("Jefferson") of Gretna, Louisiana and its wholly owned subsidiary, Jefferson
Federal Savings Bank. The Royal acquisition added $70.2 million of assets and
$64.2 million of liabilities for a total cash price of $9.2 million. Goodwill of
$3.2 million was recognized in the Royal transaction. The Jefferson acquisition
added $266.2 million of assets and $229.4 million of liabilities for a total
cash price of $51.8 million. Goodwill of $11.1 million and a core deposit
intangible of $3.8 million was recognized in the Jefferson transaction. The Bank
of Lafayette was merged with and into the Company's previously existing
subsidiary, Iberia Savings Bank and the two branch offices of the Bank of
Lafayette were added to the branch network of Iberia Savings Bank. Jefferson
Federal Savings Bank was converted to a Louisiana-chartered savings bank upon
its acquisition by the Company and now operates as a separate subsidiary of ISB
Financial Corporation under the name of Jefferson Bank. The following discussion
describes the major changes in the asset mix during 1996.
ASSET MIX
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AT DECEMBER 31, 1996
Single Family Residential Loans 41.9%
Mortgage-Backed Securities 16.2%
Cash & Investments 16.9%
Consumer Loans 13.1%
Other Assets 5.4%
Commercial Business Loans 3.8%
Commercial Real Estate Loans 2.7%
CASH AND CASH EQUIVALENTS - Cash and cash equivalents, which consist of
interest-bearing and noninterest-bearing deposits and cash on hand, increased by
$1.6 million, or 3.2%, to $53.4 million at December 31, 1996 compared to $51.7
million at December 31, 1995. The increase in cash and cash equivalents was due
primarily to an aggregate of $43.5 million of cash acquired from Royal and
Jefferson and $19.1 million in net cash inflow from operations, partially offset
by the $61.0 million of cash used to acquire Royal and Jefferson.
INVESTMENT SECURITIES - Investment securities increased by $16.5
million or 18.9%, to $103.7 million at December 31, 1996 compared to $87.2
million at December 31, 1995. The increased level of investment securities was
the result of an aggregate of $59.5 million of investment securities acquired
from Royal and Jefferson and $12.9 million of investment securities purchased,
which was partially offset by $54.8 million of
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investment securities sold or matured, an $865,000 decrease in the market value
of investment securities available for sale and $182,000 of amortization of
premiums on investment securities.
At December 31, 1996, $101.1 million of the Company's investment
securities were classified as available for sale and had a pre-tax effected net
unrealized gain of $288,000 at such date. In addition, at such date, $95.9
million of the Company's investment securities consisted of U.S. Government and
Federal agency obligations and $56.4 million, or 54.4% of the Company's
investment securities were due within one year. Note 3 to the Consolidated
Financial Statements provides further information on the Company's investment
securities.
MORTGAGE-BACKED SECURITIES - Mortgage-backed securities increased by
$99.0 million, or 191.7%, to $150.7 million at December 31, 1996 compared to
$51.6 million at December 31, 1995. The increased balance of mortgage-backed
securities was the result of an aggregate of $110.9 million of mortgage-backed
securities acquired from Royal and Jefferson, which was partially offset by
$11.9 million of repayments on mortgage-backed securities.
At December 31, 1996, approximately 99.4% of the Company's
mortgage-backed securities were issued or guaranteed by Federal agencies or
government sponsored enterprises. Additional information on the Company's
mortgage-backed securities may be found in Note 4 of the Consolidated Financial
Statements.
LOANS RECEIVABLE, NET - Loans receivable, net, increased by $171.6
million, or 42.9%, to $571.1 million at December 31, 1996 compared to $399.5
million at December 31, 1995. Total mortgage loans increased $75.5 million, or
21.6% during 1996, primarily as the result of a $67.9 million increase in
single-family residential mortgage loans and an $8.5 million increase in
commercial real estate loans. The increase in mortgage loans was the result of
an aggregate of $64.5 million of mortgage loans acquired primarily from
Jefferson and, to a much lesser extent, Royal and $71.9 million of mortgage
loans originated for portfolio during 1996, which was partially offset by $60.9
million in repayments on mortgage loans. Commercial business loans increased
$25.0 million, or 226.4%, during 1996 to $36.1 million at December 31, 1996. The
increase in commercial business loans was the result of $8.3 million of
commercial business loans acquired from Royal and $27.2 million of commercial
business loans originated during 1996, which was partially offset by $10.5
million of repayments on commercial business loans. An increased emphasis on the
origination of commercial real estate and commercial business loans was
initiated during 1996. A significant restructuring and upgrading of the
commercial lending department, including expertise acquired in the Royal
acquisition, was completed in 1996. Consumer loans increased $66.3 million, or
124.1%, during 1996 to $119.8 million at year-end. The increase in consumer
loans was the result of $36.4 million of consumer loans, including $23.2 million
of indirect automobile loans, acquired primarily from Royal and, to a much
lesser extent, Jefferson and $68.5 of consumer loans originated during 1996,
which was partially offset by $38.6 million of repayments on consumer loans. The
Company acquired an experienced department of indirect automobile dealer lenders
as a result of the Royal acquisition. The balance of indirect automobile loans
at December 31, 1996 was $52.0 million. For additional information on loans, see
Note 5 to the Consolidated Financial Statements.
NON-EARNING ASSETS - Premises and equipment increased $6.0 million, or
64.0%, to $15.5 million in 1996, primarily as a result of the acquisitions of
Royal and Jefferson. Goodwill and other intangibles of $17.8 million related to
the acquisitions was included on the balance sheet at December 31, 1996.
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LIABILITY AND EQUITY MIX
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AT DECEMBER 31, 1996
Certificates of Deposit 50.7%
Demand Deposits 18.3%
Regular Savings 12.9%
Stockholders' Equity 12.3%
FHLB Advances 5.1%
Other Liabilities 0.8%
LIABILITIES AND STOCKHOLDERS' EQUITY
GENERAL - The Company's primary funding sources include deposits,
borrowings from the Federal Home Loan Bank ("FHLB") of Dallas and stockholders'
equity. The following discussion focuses on the major changes in the mix during
1996.
DEPOSITS - Deposits increased by $315.7 million, or 71.0%, from $444.6
million at December 31, 1995 to $760.3 million at December 31, 1996. The
increase was the result of an aggregate of $288.3 million of deposits acquired
from Royal and Jefferson, $19.5 million of interest credited and $7.9 million of
net cash deposits. Additional information regarding deposits is provided in Note
8 to the Consolidated Financial Statements.
BORROWINGS - The Company's borrowings are comprised of advances from
the FHLB of Dallas which increased by $7.3 million, or 17.9%, from $40.5 million
at December 31, 1995 to $47.8 million at December 31, 1996. The increase in
outstanding FHLB advances was used to fund the origination of additional
fixed-rate, long-term mortgage loans. For additional information, including
maturities of the Company's borrowings, see Note 9 to the Consolidated Financial
Statements.
STOCKHOLDERS' EQUITY - Stockholders' equity provides a source of
permanent funding, allows for future growth and provides the Company with a
cushion to withstand unforeseen adverse developments. At December 31, 1996,
stockholders' equity totaled $114.0 million, a decrease of $5.7 million from the
previous year-end level. The decrease in stockholders' equity in 1996 reflects,
in part, certain aspects of management's plan to enhance shareholder value. The
decrease in stockholders' equity during 1996 was the result of $2.2 million of
cash dividends declared on the Company's common stock, $4.9 million of the
Company's common stock re-purchased and placed into treasury, $4.7 million of
the Company's common stock purchased to fund the Company's Recognition and
Retention Plan ("RRP") trust, which was charged to stockholders' equity as
unearned compensation, and a $571,000 decrease in net unrealized gain on
securities, which was partially offset by $5.3 million of net income, $1.2
million of common stock released by the Company's Employee Stock Ownership Plan
("ESOP") trust and $211,000 of common stock earned by participants of the RRP
trust.
Federal regulations impose minimum regulatory capital requirements on
all institutions with deposits insured by the Federal Deposit Insurance
Corporation ("FDIC"). The Board of Governors of the Federal Reserve System
("FRB") imposes similar capital regulations on bank holding companies. At
December 31, 1996, the Company exceeded all required regulatory capital ratio
requirements with a tier 1 leverage capital ratio of 10.3%, a tier 1 risk-based
capital ratio of 20.9% and a total risk-based capital ratio of 21.9%. At
December 31, 1996, Iberia Savings Bank exceeded all required regulatory capital
ratio requirements with a tier 1 leverage capital ratio of 10.3%, a tier 1
risk-based capital ratio of 17.9% and a total risk-based capital ratio of 18.9%.
At December 31, 1996, Jefferson
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Bank also exceeded all required regulatory capital ratio requirements with a
tier 1 leverage capital ratio of 7.0%, a tier 1 risk-based capital ratio of
24.6% and a total risk-based capital ratio of 25.4%. These compared to
regulatory requirements of 3.0%, 4.0%, and 8.0% respectively. The graph displays
the Company's, Iberia Savings Bank's and Jefferson Bank's regulatory capital
position as of December 31, 1996, along with the applicable regulatory
requirements.
REGULATORY
CAPITAL
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[CHART]
NET INCOME
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1992 $6,559
1993 $7,550
1994 $6,237
1995 $7,007
1996 $5,278
1996 $7,188 Before Special Assessment
RESULTS OF OPERATIONS
GENERAL - The Company reported net income of $5.3 million, $7.0 million
and $6.2 million for the years ended December 31, 1996, 1995 and 1994,
respectively. The $1.7 million, or 24.7%, decrease in net income in 1996
compared to the prior year was due primarily to the $2.9 million, $1.9 million
net of taxes, special assessment imposed by the FDIC on savings institutions
with deposits insured by the Savings Association Insurance Fund ("SAIF") to
recapitalize the deposit insurance fund for savings institutions. During 1996,
interest income increased $10.4 million, noninterest income increased $1.2
million, interest expense increased $5.9 million, noninterest expense, excluding
the FDIC special assessment, increased $5.2 million and income tax expense
decreased $604,000.
NET INTEREST INCOME - Net interest income is determined by interest
rate spread (i.e. the difference between the yields earned on interest-earning
assets and the rates paid on its interest-bearing liabilities) and the relative
amounts of interest-earning assets and interest-bearing liabilities. The
Company's average interest rate spread was 2.97%, 3.16% and 3.88% during the
years ended December 31, 1996, 1995, and 1994, respectively. The Company's net
interest margin (i.e., net interest income as a percentage of average
interest-earning assets) was 3.77%, 3.95%, and 4.17%, during the years ended
December 31, 1996, 1995, and 1994, respectively.
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NET INTEREST MARGIN
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1992 4.48%
1993 4.41%
1994 4.17%
1995 3.95%
1996 3.77%
Net interest income increased $4.5 million, or 21.5%, in 1996 to $25.6
million compared to $21.1 million in 1995. The reason for such increase was a
$10.4 million, or 24.5%, increase in interest income, which was partially offset
by a $5.9 million, or 27.5%, increase in interest expense. Net interest income
increased $1.8 million, or 9.3%, in 1995 compared to 1994. Such increase was due
to a $5.8 million increase in interest income, which was partially offset by a
$4.0 million increase in interest expense.
INTEREST INCOME - Interest income totaled $52.7 million for the year
ended December 31, 1996, an increase of $10.4 million over the total of $42.3
million for the year ended December 31, 1995. This improvement was mainly due to
an increase in the Company's average interest-earning assets of $145.6 million,
or 27.3%, to $678.3 million for the year ended December 31, 1996, caused
primarily by the two acquisitions that took place during the year. Interest
earned on loans increased $7.4 million, or 22.6%, in 1996. The increase was due
to a $89.4 million, or 23.4%, increase in the average balance of loans, which
was partially offset by a 5 basis point (with 100 basis points being equal to
1%) decrease in the yield earned. Interest earned on investment securities
increased $106,000, or 2.2%, in 1996. The increase was due to a $1.4 million, or
1.8%, increase in the average balance of investment securities together with a 2
basis point increase in the yield earned. Interest earned on mortgage-backed
securities increased $1.7 million, or 58.3%, during 1996. The increase was due
to a $28.1 million, or 63.2%, increase in the average balance of mortgage-backed
securities, which was partially offset by a 19 basis point decrease in the yield
earned. Interest income on other earning assets, primarily interest-bearing
deposits, increased $1.2 million, or 64.0%, during 1996. The increase was due to
a $26.6 million, or 98.9%, increase in the average balance of other earning
assets, which was partially offset by a 120 basis point decrease in the yield
earned. Interest income also is affected by the accretion of discounts on
purchased loans into interest income, which is accounted for as a yield
adjustment. During the years ended December 31, 1996 and 1995, $502,000 and
$717,000, respectively, was accreted into income. At December 31, 1996, the
amount of the Company's remaining unaccreted discount was $1.5 million.
Interest income amounted to $42.3 million and $36.5 million for the
years ended December 31, 1995 and 1994, respectively. The $5.8 million, or
15.8%, increase in interest income in 1995 was due to a $1.8 million, or 6.0%,
increase in interest income on loans, a $1.7 million, or 53.5%, increase in
interest income on investment securities, an $818,000, or 40.4%, increase in
interest income on mortgage-backed securities and a $1.4 million, or 362.8%,
increase in interest income on other earning assets.
INTEREST EXPENSE - Interest expense increased $5.9 million, or 27.5%,
in 1996 to $27.1 million compared to $21.3 million in 1995. The reason for such
increase was a $3.8 million increase in interest expense on deposits and a $2.1
million increase in interest expense on borrowings. The increase in interest
expense on deposits was the result of an $88.7 million, or 20.7%, increase in
the average balance of deposits, primarily as the result of the two acquisitions
during the year, which was partially offset by an 8 basis point decrease in the
average cost of deposits. The increase in interest expense on borrowings was the
result of a $32.1 million, or 206.9%, increase in the average balance of
borrowings, which was partially offset by a 15 basis point decrease in the
average cost of borrowings. During
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1996, the Company increased its utilization of FHLB advances as a result of its
program of originating long-term, fixed-rate residential mortgage loans which
are funded by matching long-term, fixed-rate FHLB advances.
Total interest expense amounted to $21.3 million and $17.3 million for
the years ended December 31, 1995 and 1994, respectively. The $4.0 million, or
23.1%, increase in interest expense in 1995 compared to 1994 was due primarily
to a 69 basis point increase in the average cost of deposits and a $15.5
million increase in the average balance of borrowings.
The following table sets forth, for the periods indicated, information
regarding (i) the total dollar amount of interest income of the Bank from
interest-earning assets and the resultant average yields; (ii) the total dollar
amount of interest expense on interest-bearing liabilities and the resultant
average rate; (iii) net interest income; (iv) interest rate spread; and (v) net
interest margin. Information is based on average daily balances during the
indicated periods.
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
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1996 1995
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YIELD/COST AT AVERAGE AVERAGE
DECEMBER 31, AVERAGE YIELD/ AVERAGE YIELD/
1996 BALANCE INTEREST COST BALANCE INTEREST COST
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Interest-earning assets:
Loans receivable:
Mortgage loans 7.79% $362,663 $29,648 8.18% $321,528 $26,787 8.33%
Commercial business loans 9.49 23,835 2,559 10.74 8,699 838 9.63
Consumer and other loans 9.54 85,017 8,056 9.48 51,885 5,205 10.03
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Total loans 8.27 471,515 40,263 8.54 382,112 32,830 8.59
Mortgage-backed securities 6.35 72,664 4,498 6.19 44,531 2,842 6.38
Investment securities 6.17 80,565 4,926 6.11 79,134 4,820 6.09
Other earning assets 5.72 53,535 3,020 5.64 26,922 1,842 6.84
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Total interest-earning assets 7.55 678,279 52,707 7.77 532,699 42,334 7.95
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Non-interest earning assets 35,572 23,366
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Total assets $713,851 $556,065
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Interest-bearing liabilities:
Deposits:
Demand deposits 2.06 $ 84,921 2,151 2.53 $ 63,035 1,736 2.75
Passbook savings deposits 2.59 69,892 1,860 2.66 53,532 1,520 2.84
Certificates of deposit 5.61 362,745 20,006 5.52 312,326 16,987 5.44
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Total deposits 4.45 517,558 24,017 4.64 428,893 20,243 4.72
Borrowings 6.54 47,610 3,119 6.55 15,511 1,039 6.70
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Total interest-bearing liabilities 4.58 565,168 27,136 4.80 444,404 21,282 4.79
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Non-interest bearing demand deposits 23,603 8,041
Non-interest bearing liabilities 7,597 5,538
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Total liabilities 596,368 457,983
Stockholders' Equity 117,483 98,082
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Total liabilities and stockholders' equity $713,851 $556,065
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Net interest-earning assets $113,111 $ 88,295
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Net interest income/interest rate spread 2.97% $25,571 2.97% $21,052 3.16%
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Net interest margin 3.77% 3.95%
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Ratio of average interest-earning assets to
average interest-bearing liabilities 120.01% 119.87%
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(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
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1994
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AVERAGE
AVERAGE YIELD/
BALANCE INTEREST COST
- -------------------------------------------------------------------------------------
Interest-earning assets:
Loans receivable:
Mortgage loans $300,898 $25,997 8.64%
Commercial business loans 6,092 451 7.40
Consumer and other loans 47,722 4,537 9.51
-------- -------
Total loans 354,712 30,985 8.74
Mortgage-backed securities 41,827 2,024 4.84
Investment securities 57,341 3,141 5.48
Other earning assets 8,173 398 4.87
-------- -------
Total interest-earning assets 462,053 36,548 7.91
-------
Non-interest earning assets 21,756
--------
Total assets $483,809
========
Interest-bearing liabilities:
Deposits:
Demand deposits $ 71,855 1,843 2.56
Passbook savings deposits 58,534 1,611 2.75
Certificates of deposit 298,646 13,838 4.63
-------- -------
Total deposits 429,035 17,292 4.03
Borrowings 29 2 6.90
-------- -------
Total interest-bearing liabilities 429,064 17,294 4.03
-------
Non-interest bearing demand deposits 6,824
Non-interest bearing liabilities 5,097
--------
Total liabilities 440,985
Stockholders' Equity 42,824
--------
Total liabilities and stockholders' equity $483,809
========
Net interest-earning assets $ 32,989
========
Net interest income/interest rate spread $19,254 3.88%
======= =====
Net interest margin 4.17%
=====
Ratio of average interest-earning assets to
average interest-bearing liabilities 107.69%
=======
11
13
The following table sets forth the effects of changing rates and
volumes on net interest income of the Company. Information is provided with
respect to (i) effects on interest income attributable to changes in volume
(changes in volume multiplied by prior rate); (ii) effects on interest income
attributable to changes in rate (changes in rate multiplied by prior volume);
and (iii) changes in rate/volume (change in rate multiplied by change in
volume).
(DOLLARS IN THOUSANDS) YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------
1996/1995 1995/1994
-----------------------------------------------------------------------------------------
CHANGE ATTRIBUTABLE TO CHANGE ATTRIBUTABLE TO
-----------------------------------------------------------------------------------------
TOTAL TOTAL
RATE/ INCREASE RATE/ INCREASE
RATE VOLUME VOLUME (DECREASE) RATE VOLUME VOLUME (DECREASE)
-----------------------------------------------------------------------------------------
Interest-Earning Assets:
Loans receivable:
Mortgage loans $ (502) $ 3,427 $ (64) $ 2,861 $ (929) $ 1,783 $ (64) $ 790
Commercial business loans 96 1,458 167 1,721 136 193 58 387
Consumer and other loans (289) 3,324 (184) 2,851 250 396 22 668
-----------------------------------------------------------------------------------------
Total loans receivable (695) 8,209 (81) 7,433 (543) 2,372 16 1,845
Mortgage-backed securities (85) 1,795 (54) 1,656 645 131 42 818
Investment securities 19 87 0 106 352 1,193 134 1,679
Other earning assets (323) 1,821 (320) 1,178 161 913 370 1,444
-----------------------------------------------------------------------------------------
Total net change in income
on interest-earning assets (1,084) 11,912 (455) 10,373 615 4,609 562 5,786
-----------------------------------------------------------------------------------------
Interest-Bearing Liabilities:
Deposits:
Demand deposits (139) 602 (48) 415 136 (226) (17) (107)
Regular savings deposits (95) 464 (29) 340 51 (138) (4) (91)
Certificates of deposit 238 2,743 38 3,019 2,405 634 110 3,149
-----------------------------------------------------------------------------------------
Total deposits 4 3,809 (39) 3,774 2,592 270 89 2,951
Borrowings (23) 2,150 (47) 2,080 0 1,068 (31) 1,037
-----------------------------------------------------------------------------------------
Total net change in expense on
interest-bearing liabilities (19) 5,959 (86) 5,854 2,592 1,338 58 3,988
-----------------------------------------------------------------------------------------
Net change in net interest
income $(1,065) $ 5,953 $ (369) $ 4,519 $(1,977) $ 3,271 $ 504 $ 1,798
=========================================================================================
PROVISION FOR LOAN LOSSES - Provision for loan losses are charged to
earnings to bring the total allowance for loan losses to a level considered
appropriate by management based on various factors, including historical
experience, the volume and type of lending conducted by the Company, the amount
of the Company's classified assets, the status of past due principal and
interest payments, general economic conditions, particularly as they relate to
the Company's market area, and other factors related to the collectibility of
the Company's loan portfolio. Management of the Company assesses the allowance
for loan losses on a quarterly basis and will make provisions for loan losses as
deemed appropriate in order to maintain the adequacy of the allowance for loan
losses.
12
14
ALLOWANCE FOR LOAN LOSSES
AND AMOUNT OF
NON-PERFORMING LOANS
AT YEAR END
- -------------------------
Non-Performing Loans
1992 $2,353
1993 $1,384
1994 $1,258
1995 $1,468
1996 $2,560
Loan Loss Allowance
1992 $3,254
1993 $3,413
1994 $3,831
1995 $3,746
1996 $4,615
The Company made a provision for loan losses of $156,000 in 1996,
compared to $239,000 and $305,000 for 1995 and 1994, respectively.
The allowance for loan losses amounted to $4.6 million or .79% and
180.3% of total loans and total nonperforming loans, respectively, at December
31, 1996 compared to $3.7 million or .90% and 255.2%, respectively, at December
31, 1995.
Non-performing loans (non-accrual loans and accruing loans 90 days or
more overdue) were $2.6 million and $1.5 million at December 31, 1996 and
December 31, 1995, respectively. The Company's real estate owned, which consists
of real estate acquired through foreclosure or by deed-in-lieu thereof, amounted
to $978,000 and $561,000 at December 31, 1996 and December 31, 1995,
respectively. As a percentage of total assets, the Company's total
non-performing assets, which consists of non-performing loans plus real estate
owned, amounted to $3.7 million or .38% at December 31, 1996 and $2.0 million or
.33% at December 31, 1995.
Although management of the Company believes that the Company's
allowance for loan losses was adequate at December 31, 1996, based on facts and
circumstances available to it, there can be no assurances that additions to such
allowance will not be necessary in future periods, which would adversely affect
the Company's results of operations.
NON-INTEREST INCOME - For 1996, the Company reported non-interest
income of $3.8 million compared to $2.7 million of non-interest income for 1995.
The primary reasons for the $1.1 million, or 43.1%, increase in non-interest
income was a $507,000, or 33.2%, increase in service charges on deposit accounts
reflecting the increased number of deposit accounts due to the Royal and
Jefferson acquisitions, a $398,000, or 78.3%, increase in other income and
$181,000 of gains on the sale of investment securities.
Total non-interest income amounted to $2.7 million and $2.4 million for
the years ended December 31, 1995 and 1994, respectively. The primary reason for
the $243,000 increase in non-interest income during 1995 compared to 1994 was a
$290,000 increase in service charges on deposit accounts. This increase
represents an increase in the number of accounts within the categories in which
the Company imposes service charges.
NON-INTEREST EXPENSE - Non-interest expense includes salaries and
employee benefits, occupancy expense, SAIF deposit insurance premiums
(including, in 1996, the one-time special SAIF assessment), advertising and
marketing expense, computer service expense and other items. Non-interest
expense amounted to $20.8 million, $12.7 million, and $11.8 million for the
three years ended December 31, 1996, 1995, and 1994, respectively. The primary
reasons for the $8.1 million, or 63.7% increase in non-interest expense was the
FDIC special assessment of $2.9 mil-
13
15
lion (pre-tax), the compensation expenses resulting from the ESOP and the RRP
plan and the ongoing expenses of operating 11 additional branch offices, nine of
which were acquired in the Royal and Jefferson acquisitions. Salaries and
employee benefits increased $2.2 million, or 34.0%, occupancy expense increased
$413,000, or 50.6%, advertising expense increased $287,000, or 60.4%, other
expense increased $827,000, or 30.2%, and the amortization of goodwill and
acquisition intangibles increased $310,000, or 348.3%. As of December 31, 1996,
the Company had goodwill and acquisition intangibles of $17.8 million, primarily
from the Royal and Jefferson acquisitions. For 1997, amortization expense
related to the goodwill and acquisition intangibles recorded at December 31,
1996 is expected to amount to $1.6 million. See Note 18 of the Notes to
Consolidated Financial Statements. In addition, franchise and shares tax expense
was $987,000 for 1996, the first year the Company was subject to such taxes.
INCOME TAXES - For the years ended December 31, 1996, 1995, and 1994,
the Company incurred income tax expense of $3.2 million, $3.8 million, and $3.4
million, respectively. The Company's effective tax rate amounted to 37.6%,
35.1%, and 35.0% during 1996, 1995, and 1994 respectively. The difference
between the effective tax rate and the statutory tax rate primarily related to
variances in the items that are either non-taxable or non-deductible, primarily
the non-deductibility of the amortization of goodwill and acquisition
intangibles and the non-deductible portion of the ESOP compensation expense. For
more information, see Note 10 to the Consolidated Financial Statements.
ASSET AND LIABILITY MANAGEMENT
The principal objective of the Company's asset and liability management
function is to evaluate the interest-rate risk included in certain balance sheet
accounts, determine the level of risk appropriate given the Company's business
focus, operating environment, capital and liquidity requirements and performance
objectives, establish prudent asset concentration guidelines and manage the risk
consistent with Board approved guidelines. Through such management, the Company
seeks to reduce the vulnerability of its operations to changes in interest rates
and to manage the ratio of interest-rate sensitive assets to interest-rate
sensitive liabilities within specified maturities or repricing dates. The
Company's actions in this regard are taken under the guidance of the
Asset/Liability Committee ("ALCO"), which is chaired by the Chief Executive
Officer and comprised of members of the Company's senior management. The ALCO
generally meets on a weekly basis, to review, among other things, the
sensitivity of the Company's assets and liabilities to interest rate changes,
local and national market conditions and interest rates. In connection
therewith, the ALCO generally reviews the Company's liquidity, cash flow needs,
maturities of investments, deposits and borrowings, and capital position. The
ALCO reports to the Company's Board of Directors on a quarterly basis.
As part of its asset/liability management strategy, the Company has
emphasized the origination of consumer loans, commercial business loans and
commercial real estate loans, all of which typically have shorter terms than
residential mortgage loans and/or adjustable or variable rates of interest. The
Company has also emphasized the origination for portfolio of adjustable-rate
mortgage ("ARM") loans. As of December 31, 1996, $208.4 million, or 35.8% of the
Company's total loan portfolio had adjustable interest rates. In addition, in
recent periods, the Company has originated fixed-rate, long-term mortgage loans
that are funded by fixed-rate, long-term amortizing advances from the FHLB.
As part of the Company's asset/liability management strategies, the
Company has limited its investments in investment securities to those with an
estimated life of five years or less. In addition, the Company generally has
determined to limit its investments in mortgage-backed securities, all of which
are designated as held to maturity at December 31, 1996, to those which are
backed by ARMs and/or which otherwise have an adjustable rate feature. At
December 31, 1996, $62.5 million or 41.5% of the Company's mortgage-backed
securities were backed by ARMs or
14
16
had adjustable interest rates. In addition, at December 31, 1996, $79.3 million,
or 52.6% of the fixed-rate mortgage-backed securities had a balloon feature (the
mortgage-backed security will mature and repay before the underlying loans have
been fully amortized). All of the balloon mortgage-backed securities were
acquired in the Jefferson acquisition. At December 31, 1996, the Company's
portfolio of mortgage-backed securities with a balloon feature had a weighted
average life of 2.5 years.
The Company's strategy with respect to liabilities in recent periods
has been to emphasize transaction accounts, which are not as sensitive to
changes in interest rates as time certificates of deposit. At December 31, 1996,
38.1% of the Company's deposits were in transaction accounts compared to 27.8%
at December 31, 1995. This change in deposit mix was achieved primarily by the
Royal and Jefferson acquisitions.
The following summarizes the anticipated maturities or repricing of the
Company's interest-earning assets and interest-bearing liabilities as of
December 31, 1996, based on the information and assumptions set forth in the
notes below.
UP TO ONE YEAR TO TWO YEARS TO THREE YEARS FIVE YEARS
ONE YEAR TWO YEARS THREE YEARS TO FIVE YEARS TO TEN YEARS
------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
Interest-earning assets (1):
Loans receivable $ 162,354 $ 59,506 $ 57,838 $ 100,486 $ 137,025
Investment securities (2) 104,524 31,630 7,603 1,982 184
Mortgage-backed securities 80,737 21,396 21,104 22,280 3,185
------------------------------------------------------------------------------
Total 347,615 112,532 86,545 124,748 140,394
------------------------------------------------------------------------------
Interest-bearing liabilities:
Deposits:
NOW accounts(3) 28,487 16,491 10,884 1,902 3,845
Regular savings accounts(3) 20,346 25,828 19,113 9,248 18,060
Money market deposit
accounts ("MMDA")(3) 46,349 1,355 1,206 488 464
Certificates of deposit 301,409 111,653 22,390 33,342 2,259
Borrowings 1,510 1,612 1,720 3,797 11,970
------------------------------------------------------------------------------
Total 398,101 156,939 55,313 48,777 36,598
------------------------------------------------------------------------------
Excess (deficiency) of interest-
earning assets over interest-
bearing liabilities $ (50,486) $ (44,407) $ 31,232 $ 75,971 $ 103,796
==============================================================================
Cumulative excess (deficiency) of
interest-earning assets over
interest-bearing liabilities $ (50,486) $ (94,893) $ (63,661) $ 12,310 $ 116,106
==============================================================================
Cumulative excess (deficiency) of interest-
earning assets over interest-bearing
liabilities as a percent of total assets (5.43)% (10.21)% (6.85)% 1.32% 12.49%
==============================================================================
OVER TEN
YEARS TOTAL
-----------------------------
(DOLLARS IN THOUSANDS)
Interest-earning assets (1):
Loans receivable $ 58,495 $ 575,704
Investment securities (2) -- 145,923
Mortgage-backed securities 1,967 150,669
-----------------------------
Total 60,462 872,296
-----------------------------
Interest-bearing liabilities:
Deposits:
NOW accounts(3) 15,382 76,991
Regular savings accounts(3) 27,090 119,685
Money market deposit
accounts ("MMDA")(3) 8,807 58,669
Certificates of deposit 2 471,055
Borrowings 27,141 47,750
-----------------------------
Total 78,422 774,150
-----------------------------
Excess (deficiency) of interest-
earning assets over interest-
bearing liabilities $ (17,960) $ 98,146
=============================
Cumulative excess (deficiency) of
interest-earning assets over
interest-bearing liabilities $ 98,146
=============================
Cumulative excess (deficiency) of interest-
earning assets over interest-bearing
liabilities as a percent of total assets 10.56%
=============================
(1) Adjustable-rate assets are included in the period in which interest rates
are next scheduled to adjust rather than in the period in which they are
due and fixed-rate assets are included in the periods in which they are
scheduled to be repaid, based on scheduled amortization, in each case as
adjusted to take into account estimated prepayments.
(2) Includes interest-bearing deposits at other institutions.
(3) Although the Company's NOW accounts, passbook savings accounts and MMDAs
are subject to immediate withdrawal, management considers a substantial
amount of such accounts to be core deposits having significantly longer
effective maturities. The decay rates used on these accounts are based on
Federal Home Loan Bank of Atlanta assumptions and should not be regarded as
indicative of the actual withdrawals that may be experienced by the
Company. If all of the Company's NOW accounts, passbook savings accounts
and MMDAs had been assumed to be subject to repricing within one year,
interest-bearing liabilities which were estimated to mature or reprice
within one year would have exceeded interest-earning assets with comparable
characteristics by $210.6 million or 22.67% of total assets.
15
17
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity, represented by cash and cash equivalents, is a
product of its operating, investing and financing activities. The Company's
primary sources of funds are deposits, borrowings, loan and mortgage-backed
security amortizations, prepayments and maturities, maturities of investment
securities and other short-term investments and funds provided from operations.
While scheduled payments from the amortization of loans and mortgage-backed
securities and maturing investment securities and short-term investments are
relatively predictable sources of funds, deposit flows and loan prepayments are
greatly influenced by general interest rates, economic conditions and
competition. In addition, the Company invests excess funds in overnight deposits
and other short-term interest-earning assets which provide liquidity to meet
lending requirements. The Company has been able to generate sufficient cash
through its deposits and borrowings (primarily consisting of advances from the
FHLB of Dallas). At December 31, 1996, the Company had $47.8 million of
outstanding advances from the FHLB of Dallas. Additional advances available at
December 31, 1996 from the FHLB of Dallas amounted to $177.6 million.
Liquidity management is both a daily and long-term function of business
management. Excess liquidity is generally invested in short-term investments
such as overnight deposits. On a longer-term basis, the Company maintains a
strategy of investing in various lending products. The Company uses its sources
of funds primarily to meet its ongoing commitments, to pay maturing certificates
of deposit and deposit withdrawals, to fund loan commitments and to maintain a
portfolio of mortgage-backed and investment securities. At December 31, 1996,
the total approved loan commitments outstanding amounted to $33.1 million. At
the same date, commitments under unused lines of credit, including credit card
lines, amounted to $43.9 million. Certificates of deposit scheduled to mature in
one year or less at December 31, 1996 totaled $277.7 million. Management
believes that a significant portion of maturing deposits will remain on deposit
with the Company. The Company anticipates it will continue to have sufficient
funds together with available borrowings to meet its current commitments.
IMPACT OF INFLATION AND CHANGING PRICES
The consolidated financial statements and related financial data
presented herein have been prepared in accordance with generally accepted
accounting principles, which generally require the measurement of financial
position and operation results in terms of historical dollars, without
considering changes in relative purchasing power over time due to inflation.
Unlike most industrial companies, virtually all of the Company's assets and
liabilities are monetary in nature. As a result, interest rates generally have a
more significant impact on the Company's performance than does the effect of
inflation. Interest rates do not necessarily move in the same direction or in
the same magnitude as the prices of goods and services, since such prices are
affected by inflation to a larger extent than interest rates.
16
18
RECENT ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") 123, Accounting for
Stock-Based Compensation. The statement establishes a fair value based method of
accounting for stock-based compensation plans. It encourages entities to adopt
that method in place of the provisions of Accounting Principles Board ("APB")
Opinion 25, Accounting for Stock Issued to Employees, for all arrangements under
which employees receive shares of stock or other equity instruments of the
employer if the employer incurs liabilities to employees in amounts based on the
price of its stock. The Company will continue using the accounting methods
prescribed by APB Opinion 25 and will disclose in the notes to its consolidated
financial statements information on a fair value basis for its stock-based
compensation plans.
In June 1996, the FASB issued SFAS 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities. This statement
establishes accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities based on the consistent
application of the financialcomponents approach. This approach requires the
recognition of financial assets and servicing assets that are controlled by the
reporting entity, and the derecognition of financial assets and liabilities when
control is extinguished. Liabilities and derivatives incurred or obtained by
transferors in conjunction with the transfer of financial assets are required to
be measured at fair value, if practicable. SFAS 125 also supercedes SFAS 122,
Accounting for Mortgage Servicing Rights.
Servicing assets and other retained interests in transferred assets are
required to be measured by allocating the previous carrying amount between the
assets sold, if any, and the interest that is retained, if any, based on the
relative fair value of the assets at the date of transfer. SFAS 127, Deferral of
the Effective Date of Certain Provisions of FASB Statement No. 125, was issued
in December, 1996 and deferred application of many of the provisions of SFAS 125
until after December 31, 1997.
Management believes adoption of SFAS 125 will not have a material
effect on financial position and the results of operations.
17
19
INDEPENDENT AUDITOR'S REPORT
CHARLES E. CASTAING CASTAING, HUSSEY & LOLAN, LLP MEMBERS
ROGER E. HUSSEY CERTIFIED PUBLIC ACCOUNTANTS AMERICAN INSTITUTE OF
SAMUEL R. LOLAN 525 WEEKS STREET - P.O. BOX 14240 CERTIFIED PUBLIC ACCOUNTANTS
CAROLINE C. BOUDREAUX NEW IBERIA, LOUISIANA 70562-4240 SOCIETY OF
PATRICK J. DAUTERIVE -------------------- LOUISIANA CERTIFIED PUBLIC ACCOUNTANTS
LORI D. PERCLE PH: (318) 364-7221
DEBBIE B. TAYLOR FAX: (318) 364-7235
KATHERINE H. ARMENTOR
- ---------------------
ROBIN G. FREYOU
DAWN K. GONSOULIN
TO THE BOARD OF DIRECTORS
ISB FINANCIAL CORPORATION AND SUBSIDIARIES
NEW IBERIA, LOUISIANA
We have audited the accompanying consolidated statements of financial
condition of ISB Financial Corporation and Subsidiaries as of December 31, 1996
and 1995, and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ISB
Financial Corporation and Subsidiaries as of December 31, 1996 and 1995, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ CASTAING, HUSSEY & LOLAN, LLP
New Iberia, Louisiana
February 7, 1997
18
20
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1996 AND 1995 (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
1996 1995
------------------------
ASSETS
CASH AND CASH EQUIVALENTS:
Cash on Hand and Due from Banks $ 10,822 $ 5,313
Interest Bearing Deposits - Federal Home Loan Bank 42,563 46,429
------------------------
20Total Cash and Cash Equivalents 53,385 51,742
INVESTMENT SECURITIES:
Held to Maturity (fair value of $2,218 and $784, respectively) 2,216 784
Available for Sale, at fair value 101,144 86,058
Trading Account Securities, at fair value 364 389
Mortgage-Backed Securities Held to Maturity (fair value
of $150,014 and $51,872, respectively) 150,669 51,646
Loans Receivable, Net 571,119 399,542
Real Estate Owned 978 561
Premises and Equipment, Net 15,483 9,440
Federal Home Loan Bank Stock, at Cost 5,808 3,739
Accrued Interest Receivable 5,667 4,153
Goodwill and Acquisition Intangibles 17,807 54
Other Assets 4,624 722
------------------------
Total Assets $929,264 $608,830
========================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits $760,284 $444,600
Federal Home Loan Bank Advances 47,750 40,490
Advance Payments by Borrowers for Taxes and Insurance 1,605 1,239
Accrued Interest Payable on Deposits 832 315
Accrued and Other Liabilities 4,787 2,509
------------------------
Total Liabilities 815,258 489,153
------------------------
Commitments and Contingencies
STOCKHOLDERS' EQUITY:
Preferred Stock of $1 Par Value; 5,000,000 shares authorized,
-0- shares issued or outstanding -0- -0-
Common Stock of $1 Par Value; 25,000,000 shares authorized;
7,380,671 shares issued 7,381 7,381
Additional Paid-in Capital 65,725 65,293
Retained Earnings (Substantially Restricted) 54,660 51,584
Unearned Common Stock Held by ESOP (4,612) (5,339)
Unearned Common Stock Held by RRP Trust (4,476) -0-
Treasury Stock, at cost; 329,411 shares (4,859) -0-
Unrealized Gain on Securities, Net of Deferred Taxes 187 758
------------------------
Total Stockholders' Equity 114,006 119,677
------------------------
Total Liabilities and Stockholders' Equity $929,264 $608,830
========================
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
19
21
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AND SHARE DATA)
1996 1995 1994
---------------------------------------
INTEREST INCOME:
Interest on Loans $ 40,263 $ 32,830 $ 30,985
Interest and Dividends on Investment Securities 4,926 4,820 3,141
Interest on Mortgage-Backed Securities 4,498 2,842 2,024
Interest on Deposits 3,020 1,842 398
---------------------------------------
Total Interest Income 52,707 42,334 36,548
---------------------------------------
INTEREST EXPENSE:
Interest on Deposits 24,017 20,243 17,292
Interest on Federal Home Loan Bank Advances 3,119 1,039 2
---------------------------------------
Total Interest Expense 27,136 21,282 17,294
---------------------------------------
Net Interest Income 25,571 21,052 19,254
Provision for Loan Losses 156 239 305
---------------------------------------
Net Interest Income After Provision For Loan Losses 25,415 20,813 18,949
---------------------------------------
NONINTEREST INCOME:
Gain (Loss) on Sale of Investments 181 -0- (15)
Service Charges on Deposit Accounts 2,032 1,525 1,235
Late Charges and Other Fees on Loans 699 635 691
Other Income 906 508 514
---------------------------------------
Total Noninterest Income 3,818 2,668 2,425
---------------------------------------
NONINTEREST EXPENSE:
Salaries and Employee Benefits 8,475 6,324 5,509
SAIF Deposit Insurance Premium 3,679 998 1,009
Depreciation Expense 998 774 826
Occupancy Expense 1,229 816 752
Advertising Expense 762 475 316
Computer Expense 624 505 526
Net (Income) Costs of Real Estate Owned 56 (30) 132
Franchise and Shares Tax Expense 987 -0- -0-
Amortization of Goodwill and Other Acquired Intangibles 399 89 126
Other Expenses 3,569 2,742 2,587
---------------------------------------
Total Noninterest Expense 20,778 12,693 11,783
---------------------------------------
Income Before Income Tax Expense 8,455 10,788 9,591
Income Tax Expense 3,177 3,781 3,354
---------------------------------------
Net Income $ 5,278 $ 7,007 $ 6,237
=======================================
Net Income Per Common Share (Note 13)* $ .80 $ .80 $ N/A
=======================================
Weighted Average Common Shares Outstanding* 6,560,993 6,819,132 N/A
=======================================
*Includes 2nd, 3rd and 4th quarters only for 1995.
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
20
22
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (DOLLARS IN THOUSANDS)
UNEARNED
RETAINED UNEARNED COMMON
ADDITIONAL EARNINGS - COMMON STOCK
COMMON PAID-IN (SUBSTANTIALLY STOCK HELD HELD BY TREASURY
STOCK CAPITAL RESTRICTED) BY ESOP RRP TRUST STOCK
---------------------------------------------------------------
BALANCE, JANUARY 1, 1994 $ -0- $ -0- $39,868 $ -0- $ -0- $ -0-
Net Income for the year ended December 31, 1994 6,237
Change in Unrealized Loss on Securities Available
for Sale, Net of Deferred Taxes
---------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 -0- -0- 46,105 -0- -0- -0-
Net Income for the year ended December 31, 1995 7,007
Cash Dividends Declared (1,528)
Common Stock Issued in Conversion 7,381 65,006 (5,904)
Common Stock Released by ESOP Trust 287 565
Change in Unrealized Gain on Securities
Available for Sale, Net of Deferred Taxes
---------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 7,381 65,293 51,584 (5,339) -0- -0-
Net Income for the year ended December 31, 1996 5,278
Cash Dividends Declared (2,202)
Common Stock Released by ESOP Trust 432 727
Common Stock Acquired by Recognition and
Retention Plan Trust (4,687)
Common Stock Earned by Participants of Recognition
and Retention Plan Trust 211
Treasury Stock Acquired at Cost (4,859)
Change in Unrealized Gain on Securities
Available for Sale, Net of Deferred Taxes
---------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 $7,381 $65,725 $54,660 $(4,612) $(4,476) $(4,859)
===============================================================
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (DOLLARS IN THOUSANDS)
UNREALIZED TOTAL
GAIN (LOSS) STOCK-
ON SECURITIES, HOLDER'S
NET OF DEFERRED TAXES EQUITY
----------------------------------
BALANCE, JANUARY 1, 1994 $ (5) $ 39,863
Net Income for the year ended December 31, 1994 6,237
Change in Unrealized Loss on Securities Available
for Sale, Net of Deferred Taxes (1,260) (1,260)
----------------------------------
BALANCE, DECEMBER 31, 1994 (1,265) 44,840
Net Income for the year ended December 31, 1995 7,007
Cash Dividends Declared (1,528)
Common Stock Issued in Conversion 66,483
Common Stock Released by ESOP Trust 852
Change in Unrealized Gain on Securities
Available for Sale, Net of Deferred Taxes 2,023 2,023
----------------------------------
BALANCE, DECEMBER 31, 1995 758 119,677
Net Income for the year ended December 31, 1996 5,278
Cash Dividends Declared (2,202)
Common Stock Released by ESOP Trust 1,159
Common Stock Acquired by Recognition and
Retention Plan Trust (4,687)
Common Stock Earned by Participants of Recognition
and Retention Plan Trust 211
Treasury Stock Acquired at Cost (4,859)
Change in Unrealized Gain on Securities
Available for Sale, Net of Deferred Taxes (571) (571)
----------------------------------
BALANCE, DECEMBER 31, 1996 $ 187 $114,006
==================================
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
21
23
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (DOLLARS IN THOUSANDS)
1996 1995 1994
-------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 5,278 $ 7,007 $ 6,237
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
Depreciation and Amortization 1,522 973 952
Provision for Loan Losses 156 239 305
Compensation Expensed Recognized on RRP 211 -0- -0-
Write-Down of Real Estate Owned to Market Value 8 -0- 46
Gain on Sale of Premises and Equipment (107) (18) (125)
Loss (Gain) on Sale of Real Estate Owned 32 (42) (45)
Gain on Loans Sold (55) -0- (4)
(Gain) Loss on Sale of Investments (181) -0- 15
Amortization of Premium/Discount on Investments 370 405 775
Current Provision for Deferred Income Taxes 381 381 518
FHLB Stock Dividends (259) (232) (161)
Loans Originated for Resale (4,610) (406) (1,503)
Proceeds From Loans Sold to Others 4,665 406 1,507
Income Reinvested on Marketable Equity Security (306) (296) (205)
ESOP Contribution 1,146 852 -0-
Net Change in Securities Classified as Trading (9) (390) -0-
Changes in Assets and Liabilities:
Decrease (Increase) in Accrued Interest Receivable 588 (1,179) (13)
(Increase) Decrease in Other Assets and Other Liabilities (2,583) (180) (187)
-------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,247 7,520 8,112
-------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds From Sales of Available for Sale Securities 12,207 -0- 18,297
Proceeds From Maturities of Held to Maturity Securities 2,142 145 141
Proceeds From Maturities of Available for Sale Securities 40,625 7,000 15,014
Purchases of Securities Held to Maturity (1,576) -0- -0-
Purchases of Securities Available for Sale (11,034) (42,855) (25,572)
Increase in Loans Receivable, Net (62,919) (29,184) (27,663)
Proceeds from FHLBStock Redemption 24 -0- -0-
Proceeds From Sale of Premises and Equipment 238 70 660
Purchases of Premises and Equipment (1,812) (645) (713)
Proceeds From Disposition of Real Estate Owned 338 248 626
Purchases of Mortgage-Backed Securities -0- (15,532) (4,793)
Principal Collections on Mortgage-Backed Securities 11,903 3,722 6,108
Cash Paid in Excess of Cash Received on Bank Acquisitions (17,521) -0- -0-
Other Investing Activities -0- (20) -0-
-------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (27,385) (77,051) (17,895)
-------------------------------------------
22
24
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (DOLLARS IN THOUSANDS)
1996 1995 1994
---------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Change in Demand, NOW, Money Market and Savings Deposits 16,248 (10,181) (4,302)
Net Change in Time Deposits 11,158 20,338 (755)
(Decrease) Increase in Escrow Funds and Miscellaneous Deposits, Net (180) 172 82
Proceeds From FHLB Advances 8,195 77,481 5,000
Principal Repayments of FHLB Advances (935) (41,991) -0-
Proceeds From Issuance of Common Stock -0- 67,903 -0-
Dividends Paid to Shareholders (2,159) (1,019) -0-
Acquisition of Common Stock by RRP (4,687) -0- -0-
Purchase of Treasury Stock (4,859) -0- -0-
Stock Conversion Costs Incurred -0- (1,116) (230)
---------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 22,781 111,587 (205)
---------------------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 1,643 42,056 (9,988)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 51,742 9,686 19,674
---------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 53,385 $ 51,742 $ 9,686
=============================================
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES:
Acquisition of Real Estate in Settlement of Loans $ 308 $ 197 $ 278
Transfer of Land and Building to Real Estate Owned $ -0- $ -0- $ 481
SUPPLEMENTAL DISCLOSURES:
Cash Paid For:
Interest on Deposits and Borrowings $ 26,618 $ 21,190 $ 17,274
Income Taxes $ 2,818 $ 3,472 $ 2,823
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
23
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF OPERATIONS: ISB Financial Corporation (the "Company") is a
Louisiana corporation organized in November 1995 for the purpose of becoming the
bank holding company for Iberia Savings Bank ("Iberia"). The Board of Directors
of Iberia adopted the Plan of Conversion pursuant to which Iberia converted from
a Louisiana chartered mutual savings bank to a Louisiana chartered stock savings
bank. The Company completed its subscription and community offering in April
1995 and, with a portion of the net proceeds, acquired the capital stock of
Iberia.
Iberia is a wholly owned subsidiary of the Company and provides a full
range of financial services to individuals and corporate customers through its
eighteen branches located throughout southwestern Louisiana. Iberia Financial
Services, Inc. ("IFSI") is a wholly owned subsidiary of Iberia. IFSI's main
source of income was a gain on the sale of real estate in 1996 and commissions
from discount brokerage services in 1995. Finesco, Ltd. ("Finesco") is a wholly
owned subsidiary of IFSI. Finesco's main source of income was derived from
interest earned on financing insurance premiums.
Jefferson Bank, formerly Jefferson Federal Savings Bank, ("Jefferson"),
a Louisiana chartered stock savings bank, was acquired on October 18, 1996 and
is operated as a wholly owned subsidiary of the Company. Jefferson operates
seven full service offices in greater New Orleans. See the related Acquisition
footnote. Metro Service Corporation ("Metro") and Jefferson Insurance
Corporation ("JIC") are wholly owned subsidiaries of Jefferson Bank.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements
include the accounts of ISB Financial Corporation and its wholly owned
subsidiaries, Iberia and Jefferson. The accounts of IFSI, Finesco, Metro and JIC
are also included in the consolidated financial statements. All significant
intercompany balances and transactions have been eliminated in consolidation.
The 1994 financial statements contained herein are those of Iberia Savings Bank
(and Subsidiaries) as the predecessor entity.
USE OF 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 the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant
change relate to the determination of the allowance for losses on loans. In
connection with the determination of the allowances for losses on loans,
management obtains independent appraisals for significant properties.
While management uses available information to recognize losses on
loans and foreclosed real estate, future additions to the allowances 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 Company's allowances for losses on loans and foreclosed real estate. Such
agencies may require the Company to recognize additions to the allowances based
on their judgments about information available to them at the time of their
examination. Because of these factors, it is reasonably possible that the
allowances for losses on loans and foreclosed real estate may change in the near
term.
24
26
CASH AND CASH EQUIVALENTS: For purposes of presentation in the
consolidated statements of cash flows, cash and cash equivalents are defined as
those amounts included in the balance sheet caption "cash and cash equivalents".
INVESTMENT SECURITIES: Investment securities that are held for
short-term resale are classified as trading account securities and carried at
fair value. Debt securities that management has the ability and intent to hold
to maturity are classified as held to maturity and carried at cost, adjusted for
amortization of premiums and accretion of discounts using methods approximating
the interest method. Other marketable securities are classified as available for
sale and are carried at fair value. Realized and unrealized gains and losses on
trading account securities are included in net income. Unrealized gains and
losses on securities available for sale are recognized as direct increases or
decreases in stockholders' equity. The cost of securities sold is recognized
using the specific identification method.
Stock in the Federal Home Loan Bank of Dallas ("FHLB") is carried at
cost. Since Iberia and Jefferson are members of the FHLB, they are required to
maintain an amount of stock based on their total assets. At December 31, 1996
and 1995, the institutions held more than the required level of FHLB stock.
MORTGAGE-BACKED SECURITIES: Mortgage-backed securities are
classified as held to maturity, and are stated at cost, adjusted for
amortization of premiums and accretion of discounts using a method that
approximates level yield. The Company has the intent and ability to hold these
securities to maturity.
REDESIGNATIONS REGARDING INVESTMENT SECURITIES AND MORTGAGE-BACKED
SECURITIES: On November 15, 1995, the Financial Accounting Standards Board
issued a "Special Report", A Guide to Implementation of Statement 115 on
Accounting for Certain Investments in Debt and Equity Securities. In connection
with the "Special Report", accounting principles allowed the Company a one-time
opportunity to reassess the appropriateness of the designations of all its
securities held upon the initial application of the "Special Report". The
Company did not elect to redesignate any of its investment securities or
mortgage-backed securities with the adoption of this "Special Report".
LOANS RECEIVABLE: Loans receivable are stated at unpaid principal
balances, less the allowance for loan losses and net deferred loan origination
fees and discounts.
The allowance for loan losses is maintained at a level which, in
management's judgment, is adequate to absorb credit losses inherent in the loan
portfolio. The amount of the allowance is based on management's evaluation of
various factors, including the collectibility of the loan portfolio, the nature
of the portfolio, credit concentrations, trends in historical loss experience,
specific impaired loans, and economic conditions. Allowances for impaired loans
are generally determined based on collateral values or the present value of
estimated cash flows. The allowance is increased by a provision for loan losses,
which is charged to expense, and reduced by charge-offs, net of recoveries.
INTEREST AND FEES ON LOANS: Interest income on loans is accrued over
the term of the loans based upon the principal balance outstanding.
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as they become
due. When interest accrual is discontinued, all unpaid accrued interest is
reversed. Interest income is subsequently recognized only to the extent cash
payments are received. A loan is considered impaired when it is probable that
all contractual amounts due will not be collected in accordance with the terms
of the loan. Residential mortgage loans and consumer installment loans are
considered to be groups of smaller balance homogeneous loans and are
collectively evaluated for impairment and are not subject to SFAS 114
measurement criteria.
25
27
Net loan fees or costs incurred in the origination of all loans are
deferred and recognized as an adjustment of the yield on loans using the
effective interest method in accordance with Statement of Financial Accounting
Standard ("SFAS") 91, Accounting For Nonrefundable Fees and Costs Associated
with Originating for Acquiring Loans and Initial Direct Costs of Leases. If the
related loan is settled prior to maturity, any remaining balance is immediately
recognized as income or an expense.
PREMISES AND EQUIPMENT: Premises and equipment are being depreciated on
a straight line basis over the estimated useful lives of 15 to 40 years for
buildings and 5 to 10 years for furniture, fixtures and equipment.
LOAN SERVICING: The Company adopted SFAS 122, Accounting for Mortgage
Servicing Rights prospectively as of January 1, 1996. Issued in May 1995, SFAS
122 amends certain provisions of SFAS 65 to eliminate the accounting distinction
between rights to service mortgage loans for others that are acquired through
loan origination activities and rights acquired through purchase transactions.
The statement requires a mortgage banking enterprise, which sells or securitizes
loans and retains the related mortgage servicing rights, to allocate the total
cost of the mortgage servicing rights and the loans (without the mortgage
servicing rights) based on their relative fair values.
When participating interests in loans sold have an average contractual
interest rate, adjusted for normal servicing fees, that differs from the agreed
yield to the purchaser, gains or losses are recognized equal to the present
value of such differential over the estimated remaining life of such loans. The
resulting "excess servicing receivable" or "deferred servicing revenue" is
amortized over the estimated life using a method approximating the interest
method.
The cost of mortgage servicing rights is amortized in proportion to,
and over the period of, estimated net servicing revenues. Impairment of mortgage
servicing rights is assessed based on the fair value of those rights. Fair
values are estimated using discounted cash flows based on a current market
interest rate.
The effect of adopting SFAS 122 did not have a material impact on the
Company's financial condition or the results of operations.
REAL ESTATE AND OTHER ASSETS ACQUIRED IN SETTLEMENT OF LOANS: Real
estate and other assets acquired in settlement of loans are recorded at the
balance of the loan or at estimated fair value minus estimated costs to sell,
whichever is less, at the date acquired, plus capital improvements made
thereafter to facilitate sale. After foreclosure, valuations are periodically
performed by management and the real estate is carried at the lower of cost or
fair value minus estimated costs to sell. Costs of holding real estate acquired
in settlement of loans are shown as charges against income currently. Gains on
sales of such real estate are taken into income based on the buyer's initial and
continuing investment in the property. Other assets acquired in settlement of
loans consist primarily of mobile homes. Valuations are periodically performed
by management, and an allowance for losses is established by a charge to
operations if the carrying value of a property exceeds its fair value minus
estimated costs to sell. The allowance for losses was $-0- at December 31, 1996
and 1995.
LONG-LIVED ASSETS: The Company adopted SFAS 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, in
1996. This statement requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present. Impairment
would be considered when the undiscounted cash flows estimated to be generated
by those assets are less then the assets' carrying amount. Implementation of
this statement had no effect on the consolidated financial statements.
ADVERTISING COSTS: The Company expenses all advertising costs as
incurred. There were no direct-response advertising costs capitalized as of
December 31, 1996.
26
28
GOODWILL AND OTHER INTANGIBLE ASSETS: Goodwill, representing the
purchase price in excess of fair value of identifiable net assets at
acquisition, is amortized over periods not exceeding 25 years. Other acquired
intangible assets, such as core deposit intangibles, are amortized over the
periods benefited, not exceeding 8 years.
EMPLOYEE BENEFITS: SFAS 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions, which is effective for fiscal years beginning
after December 15, 1992, requires recognition of estimated future postretirement
costs over employees' periods of service. SFAS 112, Employers' Accounting for
Postretirement Benefits, which is effective for fiscal years beginning December
15, 1995, requires recognition of estimated future postemployment costs over
employees' periods of service. The Company offers no postretirement health or
medical benefits or postemployment benefits to any of its employees or former
employees.
INCOME TAXES: The Company and all subsidiaries file a consolidated
federal income tax return on a calendar year basis. Deferred income taxes are
recognized for the tax consequences of temporary differences by applying enacted
statutory tax rates applicable to future years to differences between the
financial statements carrying amounts and the tax bases of existing assets and
liabilities in accordance with SFAS 109, Accounting for Income Taxes. The
measurement of deferred tax assets is reduced, if necessary, by the amount of
any tax benefits that, based on available evidence, are not expected to be
realized.
EARNINGS PER SHARE: Net income per share of the Company's common stock
is computed by dividing net income by the weighted average number of shares of
common stock outstanding during each year. The weighted average number of common
shares outstanding excludes the weighted average unreleased shares owned by the
Employee Stock Ownership Plan ("ESOP"). The effect of stock options and unvested
Recognition and Retention Plan ("RRP") shares is calculated using the treasury
stock method. Application of the treasury stock method did not have a material
effect on earnings per share and therefore disclosure of primary and fully
diluted earnings per share is not required. Earnings per share for periods
preceding the three months ended June 30, 1995 are not applicable, as the
Company's conversion from mutual-to-stock form and reorganization into a holding
company format was not completed until April 6, 1995.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The disclosure of the estimated
fair value of financial instruments is made in accordance with the requirements
of SFAS 107, Disclosures about Fair Value of Financial Instruments. The
estimated fair value amounts have been determined by the Company using available
market information and appropriate valuation methodologies. However,
considerable judgment is necessarily required to interpret market data to
develop the estimates of fair value. Accordingly, the estimates presented herein
are not necessarily indicative of amounts the Company could realize in a current
market exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
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 CASH EQUIVALENTS: For those short-terms instruments,
the carrying amounts were a reasonable estimate of fair value.
INVESTMENT SECURITIES: Fair value equals quoted market prices
and dealer quotes.
LOANS: The fair value of mortgage loans receivable was
estimated based on present values using entry-value rates at December
31, 1996 and 1995, weighted for varying maturity dates. Other loans
receivable were valued based on present values using entry-value
interest rates at December 31, 1996 and 1995 applicable to each
category of loans.
27
29
DEPOSITS: The fair value of NOW accounts, money market
deposits and savings accounts was the amount payable on demand at the
reporting date. Certificates of deposit were valued using a weighted
average rate calculated based upon rates at December 31, 1996 and 1995
for deposits of similar remaining maturities.
OFF BALANCE SHEET ITEMS: The Company has outstanding
commitments to extend credit and standby letters of credit. These
off-balance sheet financial instruments are generally exercisable at
the market rate prevailing at the date the underlying transaction will
be completed and, therefore, have no current fair value.
EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS: In October 1995, the
Financial Accounting Standards Board ("FASB") issued SFAS 123, Accounting for
Stock-Based Compensation. The statement establishes a fair value based method of
accounting for stock-based compensation plans. It encourages entities to adopt
that method in place of the provisions of Accounting Principles Board ("APB")
Opinion 25, Accounting for Stock Issued to Employees, for all arrangements under
which employees receive shares of stock or other equity instruments of the
employer if the employer incurs liabilities to employees in amounts based on the
price of its stock. The Company will continue using the accounting methods
prescribed by APB Opinion 25 and will disclose in the footnotes information on a
fair value basis for its stock-based compensation plans.
In June 1996, the FASB issued SFAS 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities. The statement
establishes accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities based on the consistent
application of the financial-components approach. This approach requires the
recognition of financial assets and servicing assets that are controlled by the
reporting entity, and the derecognition of financial assets and liabilities when
control is extinguished. Liabilities and derivatives incurred or obtained by
transferors in conjunction with the transfer of financial assets are required to
be measured at fair value, if practicable. SFAS 125 also supercedes SFAS 122,
Accounting for Mortgage Servicing Rights.
Servicing assets and other retained interests in transferred assets are
required to be measured by allocating the previous carrying amount between the
assets sold, if any and the interest that is retained, if any, based on the
relative fair value of the assets at the date of transfer. SFAS 127, Deferral of
the Effective Date of Certain Provisions of FASBStatement No. 125, was issued in
December 1996 and deferred application of many of the provisions of SFAS 125
until after December 31, 1997.
Management believes adoption of SFAS 125 will not have a material
effect on financial position and the results of operations.
RECLASSIFICATIONS: Certain reclassifications have been made to the 1994
and 1995 consolidated financial statements in order to conform to the
classifications adopted for reporting in 1996.
28
30
NOTE 2 - CASH:
The Company is required to maintain reserves which consist of vault
cash and cash on deposit with the Federal Reserve Bank based on a percentage of
customer deposits. The amount of the reserves at December 31, 1996 and 1995 was
$4,353,000 and $1,263,000, respectively. NOTE 3 - INVESTMENT SECURITIES:
NOTE 3 - INVESTMENT SECURITIES:
The amortized cost and estimated fair values of investment securities
(in thousands) at December 31, 1996 consisted of the following:
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-----------------------------------------------------
Securities Available for Sale:
U.S. Government and Federal Agency Obligations $ 95,549 $378 $(72) $ 95,855
Marketable Equity Security 5,307 -0- (18) 5,289
-----------------------------------------------------
Total Securities Available for Sale $100,856 $378 $(90) $101,144
=====================================================
Securities Held to Maturity:
Obligations of State and Political Subdivisions $ 1,982 $ 3 $ -0- $ 1,985
Other 234 -0- (1) 233
-----------------------------------------------------
Total Securities Held to Maturity $ 2,216 $ 3 $ (1) $ 2,218
=====================================================
The amortized cost and estimated fair value of investment securities at
December 31, 1996, by contractual maturity, are shown below (in thousands).
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.
SECURITIES AVAILABLE SECURITIES
FOR SALE HELD TO MATURITY
------------------------------------------------------
ESTIMATED ESTIMATED
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
------------------------------------------------------
Due in one year or less $ 56,366 $ 56,396 $ -0- $ -0-
Due two through five years 39,183 39,459 2,032 2,035
Due five through ten years -0- -0- 184 183
------------------------------------------------------
Subtotal 95,549 95,855 2,216 2,218
Marketable Equity Security 5,307 5,289 -0- -0-
------------------------------------------------------
Totals $100,856 $101,144 $ 2,216 $ 2,218
======================================================
29
31
Proceeds from the sale of available for sale investment securities
during 1996 were $12,207,000. Gross gains of $174,000, before related income
taxes of $59,000 and gross losses of $-0- were realized on those sales. Proceeds
from the sale of trading securities during 1996 were $85,000. Gross gains of
$7,000, before related income taxes of $2,000 were realized on those sales.
Unrealized gains on trading account securities amounting to $14,000 were
recognized in net income in 1996.
The amortized cost and estimated fair values of investment securities
(in thousands) at December 31, 1995 consisted of the following:
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------------------------------------------------
Securities Available for Sale:
U.S. Government and Federal Agency Obligations $ 79,907 $ 1,158 $ -0- $ 81,065
Marketable Equity Security 5,001 -0- (8) 4,993
----------------------------------------------------
Total Securities Available for Sale $ 84,908 $ 1,158 $ (8) $ 86,058
====================================================
Securities Held to Maturity:
Obligations of State and Political Subdivisions $ 585 $ -0- $ -0- $ 585
Other 199 -0- -0- 199
----------------------------------------------------
Total Securities Held to Maturity $ 784 $ -0- $ -0- $ 784
====================================================
The Company had no sales of investment securities available for sale
during 1995. Unrealized losses on trading securities amounting to $4,000 were
recognized in net income in 1995.
Proceeds from sales of investment securities during 1994 were
$18,297,000. Gross gains of $51,000 and gross losses of $66,000 were realized on
those sales.
NOTE 4 - MORTGAGE-BACKED SECURITIES
All mortgage-backed securities are classified as held to maturity at
December 31, 1996 and 1995 and consisted of the following (in thousands):
DECEMBER 31, 1996
------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------------------------------------------------------
FHLMC $ 80,648 $ 130 $ (603) $ 80,175
FNMA 35,340 232 (146) 35,426
GNMA 13,233 119 -0- 13,352
FNMA CMO 9,697 47 (256) 9,488
FHLMC CMO 10,901 97 (194) 10,804
Privately Issued 850 -0- (81) 769
------------------------------------------------------------
Totals $150,669 $ 625 $ (1,280) $150,014
============================================================
There were no sales of mortgage-backed securities for the year ended
December 31, 1996.
30
32
Mortgage-backed securities include approximately $62,487,000 of
adjustable rate securities and $88,182,000 of fixed rate securities at December
31, 1996. At December 31, 1996, $79,300,000 of the mortgage-backed securities
had a balloon feature (the mortgage-backed security will mature and repay before
the underlying loans have been fully amortized).
DECEMBER 31, 1995
-------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------------------------------------------------------
FHLMC $ 16,434 $ 33 $ (87) $ 16,380
FNMA 15,553 161 (23) 15,691
GNMA 350 3 -0- 353
FNMA CMO 7,209 91 (60) 7,240
FHLMC CMO 10,901 199 -0- 11,100
Privately Issued 1,199 -0- (91) 1,108
-------------------------------------------------------
Totals $ 51,646 $ 487 $ ( 261) $ 51,872
=======================================================
There were no sales of mortgage-backed securities for the years ended
December 31, 1995 and 1994.
Mortgage-backed securities include approximately $51,237,000 of
adjustable rate securities and $409,000 of fixed rate securities at December 31,
1995.
NOTE 5 - LOANS RECEIVABLE:
Loans receivable (in thousands) at December 31, 1996 and 1995 consisted
of the following:
DECEMBER 31,
-----------------------
1996 1995
-----------------------
Mortgage Loans:
Single-family Residential $386,555 $318,705
Multi-family 2,279 1,506
Commercial Real Estate 22,961 14,486
Construction 14,064 15,617
-----------------------
Total Mortgage Loans 425,859 350,314
-----------------------
Commercial Business Loans 36,089 11,055
-----------------------
Consumer Loans:
Home Equity 21,646 15,364
Automobile 7,509 5,873
Indirect Automobile 52,371 619
Mobile Home Loans 4,215 6,077
Educational Loans 9,345 9,262
Credit Card Loans 4,017 3,836
Loans on Savings 12,487 7,481
Other 8,225 4,960
-----------------------
Total Consumer Loans 119,815 53,472
-----------------------
Total Loans Receivable 581,763 414,841
-----------------------
31
33
DECEMBER 31,
-----------------------
1996 1995
-----------------------
Less:
Allowance for Loan Losses (4,615) (3,746)
Loans-in-Process (6,059) (8,399)
Prepaid Dealer Participations 2,555 -0-
Unearned Discount (143) (1)
Deferred Loan Fees, Net (922) (1,191)
Discount on Loans Purchased (1,460) (1,962)
-----------------------
Loans Receivable, Net $571,119 $399,542
=======================
Loans receivable include approximately $208,431,000 and $191,990,000 of
adjustable rate loans and $373,332,000 and $222,851,000 of fixed rate loans at
December 31, 1996 and 1995, respectively.
The amount of loans for which the accrual of interest has been
discontinued totaled approximately $2,491,000 and $1,468,000 at December 31,
1996 and 1995, respectively. Impaired loans are not material to the consolidated
financial statements.
A summary of changes in the allowance for loan losses (in thousands)
for the years ended December 31, 1996, 1995 and 1994 is as follows:
1996 1995 1994
-----------------------------------------
Balance, Beginning of Year $ 3,746 $ 3,831 $ 3,413
Allowance for Loan Losses from Acquisitions 1,114 13 -0-
Provision Charged to Operations 156 239 305
Loans Charged-Off (616) (430) (295)
Recoveries 215 93 408
-----------------------------------------
Balance, End of Year $ 4,615 $ 3,746 $ 3,831
=========================================
Fixed rate loans receivable (in thousands) as of December 31, 1996 are
scheduled to mature and adjustable rate loans are scheduled to reprice as
follows:
UNDER 1 1 TO 5 6 TO 10 YEARS 11
YEAR YEARS YEARS AND OVER TOTAL
---------------------------------------------------------------------
Loans secured by 1 - 4 family residential:
Fixed Rate $ 2,951 $ 16,080 $ 52,775 $159,677 $231,483
Adjustable Rate 47,423 34,810 94,298 1,308 177,839
Other loans secured by real estate:
Fixed Rate 8,047 9,997 4,969 2,595 25,608
Adjustable Rate 10,295 4,603 143 -0- 15,041
All other loans 43,398 70,906 16,765 723 131,792
---------------------------------------------------------------------
Totals $112,114 $136,396 $168,950 $164,303 $581,763
=====================================================================
32
34
NOTE 6 - LOAN SERVICING:
Mortgage loans serviced for others are not included in the accompanying
consolidated statements of financial condition. The unpaid principal balances of
mortgage loans serviced for others was $10,863,000 and $3,006,000 at December
31, 1996 and 1995, respectively.
Custodial escrow balances maintained in connection with the foregoing
portfolio of loans serviced for others, and included in demand deposits, were
approximately $122,000 and $23,000 at December 31, 1996 and 1995, respectively.
Mortgage loan servicing rights of $35,000 were capitalized in 1996.
Amortization of mortgage servicing rights was $5,000 in 1996, and the balance of
mortgage servicing rights at December 31, 1996 was $30,000.
NOTE 7 - PREMISES AND EQUIPMENT:
Premises and equipment (in thousands) at December 31, 1996 and 1995 is
summarized as follows:
DECEMBER 31,
----------------------
1996 1995
----------------------
Land $ 3,053 $ 1,668
Buildings 13,774 8,243
Furniture, Fixtures and Equipment 8,968 4,672
----------------------
25,795 14,583
Less Accumulated Depreciation 10,312 5,143
----------------------
Total Premises and Equipment $ 15,483 $ 9,440
======================
The Company actively engages in leasing office space that it has
available. Leases have different terms ranging from month-to-month rental to
five year leases. At December 31, 1996 the monthly lease income was $28,000 per
month. Total lease income for 1996, 1995 and 1994 was $361,000, $330,000, and
$295,000, respectively. Income from leases was reported as a reduction in
occupancy expense. The total allocated cost of the portion of the buildings held
for lease at December 31, 1996 and 1995 was $2,808,000 and $2,788,000,
respectively with related accumulated depreciation of $833,000 and $737,000,
respectively.
The Company leases certain branch offices, land and ATM facilities
through noncancellable operating leases with terms that range from one to twenty
years, with renewal options thereafter.
Minimum future annual rent commitments under these agreements as of
December 31, 1996, are:
2001 AND
1997 1998 1999 2000 THEREAFTER TOTAL
- ---------------------------------------------------------------------------------------------------------------------------
$225,169 $193,269 $187,405 $186,232 $705,915 $1,497,990
33
35
NOTE 8 - DEPOSITS:
An analysis of deposits (in thousands) as of December 31, 1996 and 1995
is as follows:
DECEMBER 31, 1996
-------------------------------------------------
WEIGHTED PERCENT
AVERAGE RATE BALANCE TO TOTAL
-------------------------------------------------
Non-Interest-Bearing DDA .00% $ 33,884 4.46%
NOW Accounts 1.97% 76,991 10.13
Money Market Deposit 3.35% 58,669 7.72
----------------------------
Total Demand Deposits 169,544 22.31
----------------------------
Regular Savings 2.60% 119,685 15.74
----------------------------
Certificates of Deposit:
Less than 2.99% 100 .01
3.0 to 3.99% 706 .09
4.0 to 4.99% 90,768 11.94
5.0 to 5.99% 258,860 34.05
6.0 to 6.99% 107,022 14.08
7.0 to 7.99% 13,429 1.76
8.0 and over 170 .02
----------------------------
Total Certificates of Deposit 5.60% 471,055 61.95
----------------------------
Total Deposits 4.34% $760,284 100.00%
============================
DECEMBER 31, 1995
-------------------------------------------------
WEIGHTED PERCENT
AVERAGE RATE BALANCE TO TOTAL
-------------------------------------------------
Non-Interest-Bearing DDA .00% $ 9,124 2.05%
NOW Accounts 2.02% 32,472 7.30
Money Market Deposit 3.13% 32,204 7.24
----------------------------
Total Demand Deposits 73,800 16.59
Regular Savings 2.75% 49,920 11.23
Certificates of Deposit:
3.0 to 3.99% 3,840 .86
4.0 to 4.99% 63,805 14.35
5.0 to 5.99% 162,619 36.58
6.0 to 6.99% 74,540 16.77
7.0 to 7.99% 15,953 3.59
8.0 to 8.99% 123 .03
----------------------------
Total Certificates of Deposit 5.53% 320,880 72.18
Total Deposits 4.67% $444,600 100.00%
============================
Certificates of deposit with a balance of $100,000 and over were
$92,364,000 and $70,106,000 at December 31, 1996 and 1995, respectively.
34
36
A schedule of maturities of certificates of deposit (in thousands) at
December 31, 1996 is as follows:
2001 AND
1997 1998 1999 2000 THEREAFTER TOTAL
-------------------------------------------------------------------------------
Less than 2.99% $ 100 $ -0- $ -0- $ -0- $ -0- $ 100
3.0 to 3.99% 581 15 94 -0- 16 706
4.0 to 4.99% 90,245 434 63 7 19 90,768
5.0 to 5.99% 122,349 96,791 30,732 1,749 7,239 258,860
6.0 to 6.99% 55,806 21,862 5,801 7,906 15,647 107,022
7.0 to 7.99% 8,652 1,383 439 2,341 614 13,429
8.0 and over 11 -0- 15 -0- 144 170
-------------------------------------------------------------------------------
Total Certificates of Deposit $277,744 $120,485 $ 37,144 $ 12,003 $ 23,679 $471,055
===============================================================================
Interest expense on deposits (in thousands) is summarized as follows:
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1996 1995 1994
---------------------------------------
NOW Accounts $ 854 $ 674 $ 672
Money Market Deposits 1,297 1,062 1,171
Regular Savings 1,860 1,520 1,611
Certificates of Deposit 20,006 16,987 13,838
---------------------------------------
Total Interest Expense on Deposits $ 24,017 $ 20,243 $ 17,292
=======================================
NOTE 9 - FEDERAL HOME LOAN BANK ADVANCES:
Federal Home Loan Bank advances (in thousands) at December 31, 1996 and
1995 is summarized as follows:
DECEMBER 31,
------------------------
1996 1995
------------------------
5.0% to 5.99% $ 4,967 $ 552
6.0% to 6.99% 38,521 35,633
7.0% to 7.99% 4,262 4,305
------------------------
Total Advances $ 47,750 $ 40,490
========================
Advances at December 31, 1996 have maturities in future years as
follows (in thousands):
YEAR ENDING DECEMBER 31 AMOUNT
-----------------------------------------------------------
2010 $ 9,121
2011 3,376
2015 497
2025 28,297
2026 6,459
-------
$47,750
=======
35
37
All advances are collateralized by a blanket pledge of mortgage loans
and a secondary pledge of FHLB stock and FHLB demand deposits. Total additional
advances available from the FHLB at December 31, 1996 were $213,869,000.
Borrowings in excess of the existing limit can be obtained with a pledge of
investment securities and mortgage-backed securities.
NOTE 10 - INCOME TAXES:
The provision for income tax expense (in thousands) consists of the
following:
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------
1996 1995 1994
--------------------------------------
Current Expense:
Federal $ 2,756 $ 3,379 $ 2,836
State 40 22 -0-
--------------------------------------
Total Current Expense 2,796 3,401 2,836
Deferred Federal Expense 381 380 518
--------------------------------------
Total Income Tax Expense $ 3,177 $ 3,781 $ 3,354
======================================
There was an overpayment of federal income taxes of $1,537,000 at
December 31, 1996 and $33,000 at December 31, 1995. Income tax was allocated to
the Company and its subsidiaries based on its taxable income in relation to
total consolidated taxable income at the effective tax rate. At December 31,
1996, the Company had a federal and state net operating loss carryover of
$1,465,000 and $581,000, respectively, which were assumed by the Company in the
acquisition of Royal Bankgroup.
The provision for federal income taxes differs from the amount computed
by applying the federal income tax statutory rate of 34 percent on income from
operations as indicated in the following analysis (in thousands):
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------
1996 1995 1994
--------------------------------------
Federal Tax Based on Statutory Rate $ 2,875 $ 3,668 $ 3,261
Increase (Decrease) Resulting from:
Effect of Tax-Exempt Income (46) (23) (14)
Amortization of Goodwill and Other Acquired
Intangibles 133 23 37
Interest and Other Nondeductible Expenses 17 10 8
Nondeductible ESOP Expense 142 98 -0-
State Income Tax on Non-Bank Entities 18 22 -0-
Other 38 (17) 62
--------------------------------------
$ 3,177 $ 3,781 $ 3,354
--------------------------------------
36
38
The deferred tax liability (in thousands) at December 31, 1996 and 1995
is as follows:
DECEMBER 31,
------------------------
1996 1995
------------------------
Deferred Tax Asset:
Allowance for Loan Losses $ 465 $ 546
Deferred Loan Fees 24 99
Deferred Directors' Fees 114 96
Writedown of Real Estate Owned to Market Value 113 95
Health Care Accruals in Excess of Claims Paid 121 119
Net Operating Loss 496 -0-
ESOP and RRP 159 42
Investment Securities 16 -0-
Other 64 18
----------------------
Subtotal 1,572 1,015
Deferred Tax Liability:
FHLB Stock (729) (450)
Premises and Equipment (1,057) (225)
Unrealized Gain on Investments Classified as
Available for Sale (100) (391)
Discount Accretion on Investments (168) (107)
----------------------
Subtotal (2,054) (1,173)
----------------------
Net Deferred Tax Liability $ (482) $ (158)
======================
A summary of the changes in the net deferred tax asset (liability) for
the years ended December 31, 1996 and 1995 is as follows (in thousands):
DECEMBER 31,
----------------------
1996 1995
----------------------
Balance, Beginning $ (158) $ 1,265
Deferred Tax Expense, Charged to Operations (381) (380)
Deferred Tax Liability from Acquisition (237) -0-
Unrealized Gain on Available for Sale Securities,
Charged to Equity 294 (1,043)
--------------------
Balance, Ending $ (482) $ (158)
====================
The likelihood of realization of the entire amount of the deferred tax
asset is considered to be more likely than not; therefore, no valuation
allowance has been provided for at December 31, 1996 and 1995.
Retained earnings at December 31, 1996 and 1995, included approximately
$10,891,000 accumulated prior to January 1, 1987 for which no provision for
federal income taxes has been made. If this portion of retained earnings is used
in the future for any purpose other than to absorb bad debts, it will be added
to future taxable income.
37
39
NOTE 11 - CAPITAL REQUIREMENTS AND OTHER REGULATORY MATTERS:
The Company is subject to various regulatory capital requirements
administered by the federal banking agencies. Financial institutions are
segmented into one of five classifications ranging from "well capitalized" to
"critically undercapitalized". Should a financial institution's ratios decline
below the predetermined minimum ratios, the institution would be subject to
increasingly restrictive regulatory action.
To be classified as a well capitalized financial institution, Tier 1
leverage capital, Tier 1 risk-based capital and Total risk-based capital must be
at least five, six and ten percent, respectively. At December 31, 1996 and 1995,
Iberia was classified as well capitalized. At December 31, 1996, Jefferson was
also classified as well capitalized.
The Company met all regulatory capital requirements as follows (dollars
in thousands):
DECEMBER 31, 1996
-------------------------------------------------------
REQUIRED ACTUAL
----------------------- ------------------------
AMOUNT PERCENT AMOUNT PERCENT
-------------------------------------------------------
Tier 1 leverage capital:
ISB Financial Corp. $ 27,878 3.00% $ 96,050 10.34%
Iberia Savings Bank 19,891 3.00% 68,337 10.31%
Jefferson Bank 7,815 3.00% 18,158 6.97%
Tier 1 risk-based capital:
ISB Financial Corp. 18,371 4.00% 96,050 20.91%
Iberia Savings Bank 15,289 4.00% 68,337 17.88%
Jefferson Bank 2,949 4.00% 18,158 24.63%
Total risk-based capital:
ISB Financial Corp. 36,743 8.00% 100,665 21.92%
Iberia Savings Bank 30,578 8.00% 72,377 18.94%
Jefferson Bank 5,897 8.00% 18,733 25.41%
DECEMBER 31, 1995
-------------------------------------------------------
REQUIRED ACTUAL
----------------------- ------------------------
AMOUNT PERCENT AMOUNT PERCENT
-------------------------------------------------------
Tier 1 leverage capital:
ISB Financial Corp. $ 18,268 3.00% $118,869 19.52%
Iberia Savings Bank 17,374 3.00% 82,882 14.31%
Tier 1 risk-based capital:
ISB Financial Corp. 11,112 4.00% 118,869 42.79%
Iberia Savings Bank 11,159 4.00% 82,882 29.71%
Total risk-based capital:
ISB Financial Corp. 22,223 8.00% 122,615 44.14%
Iberia Savings Bank 22,318 8.00% 86,372 30.96%
38
40
Iberia and Jefferson are restricted under applicable laws in the
payment of dividends to an amount equal to current year earnings plus
undistributed earnings for the immediately preceding year, unless prior
permission is received from the Commissioner of Financial Institutions. For
1996, regulatory approval was obtained by Iberia to pay dividends in excess of
this limit in the amount of $21,000,000 to fund the acquisitions. Dividends
payable without permission by Iberia and Jefferson in 1997 will be limited to
1997 earnings.
NOTE 12 - BENEFIT PLANS:
401(k) PROFIT SHARING PLAN
The Company has a non-contributory profit sharing plan covering
substantially all of its employees. Annual employer contributions to the plan
are set by the Board of Directors. Contributions for December 31, 1996, 1995 and
1994, were $-0-, $-0-, and $187,000, respectively. The Company converted the
Profit Sharing Thrift Plan to a 401(k) Profit Sharing Plan effective January 1,
1995. The amended plan provides, among other things, that participants in the
plan be able to direct the investment of their account balances within the
Profit Sharing Plan into alternative investment funds. In addition to the
employer's contributions, participant deferrals under the salary reduction
election may be matched by the employer based on a percentage to be determined
annually by the employer. There was no matching of participant deferrals by the
employer for the years ended December 31, 1996 and 1995.
EMPLOYEE STOCK OWNERSHIP PLAN
In connection with the conversion from mutual to stock form, the
Company established an ESOP for the benefit of all eligible employees. The ESOP
purchased 590,423 shares, or 8 percent of the total stock sold in the Company's
initial public offering, for $5,904,000, financed by a loan from the Company.
The leveraged ESOP is accounted for in accordance with American Institute of
Certified Public Accountants ("AICPA") Statement of Procedures ("SOP") 93-6,
Employers' Accounting for Employee Stock Ownership Plans.
The ESOP was effective upon completion of the conversion. Full-time
employees of the Company who have been credited with at least 1,000 hours of
service during a 12 month period and who have attained age 21 are eligible to
participate in the ESOP. It is anticipated that contributions will be made to
the plan in amounts necessary to amortize the debt to the Company over a period
of 10 years.
Under SOP 93-6, unearned ESOP shares are not considered outstanding and
are shown as a reduction of stockholders' equity. Dividends on unallocated ESOP
shares are considered to be compensation expense. The Company will recognize
compensation cost equal to the fair value of the ESOP shares during the periods
in which they become committed to be released. To the extent that the fair value
of the Company's ESOP shares differ from the cost of such shares, this
differential will be credited to equity. The Company will receive a tax
deduction equal to the cost of the shares released. As the loan is internally
leveraged, the loan receivable from the ESOP to the Company is not reported as
an asset nor is the debt of the ESOP shown as a Company liability. Dividends on
allocated shares will be used to pay the ESOP debt.
39
41
Compensation cost for the years ended December 31, 1996 and 1995 was
$1,146,000 and $852,000, respectively. The fair value of the unearned ESOP
shares, using the closing quoted market price per share for that day was
approximately $8,302,000 and $8,009,000 at December 31, 1996 and 1995,
respectively.
A summary of the ESOP share allocation is as follows:
DECEMBER 31,
----------------------
1996 1995
----------------------
Shares allocated beginning of year 56,469 -0-
Shares allocated during year 72,738 56,469
Shares distributed during the year (354) -0-
----------------------
Total allocated shares held by ESOP at year end 128,853 56,469
Unreleased shares 461,216 533,954
----------------------
Total ESOP shares 590,069 590,423
======================
RECOGNITION AND RETENTION PLAN (RRP)
The Company established the RRP for certain officers and directors
during the year ended December 31, 1996. Following shareholder approval of the
RRP on May 24, 1996, the Company purchased 295,226 shares of the Corporation's
common stock in the open market at $15.875 per share to fully fund the related
trust and to be awarded in accordance with the provisions of the RRP. The cost
of the shares of restricted stock awarded under these plans are recorded as
unearned compensation, a contra equity account. The fair value of the shares on
the date of award will be recognized as compensation expense over the vesting
period, which is seven years. The holders of the restricted stock receive
dividends and have the right to vote the shares. For the year ended December 31,
1996, the amount included in compensation expense was $211,000. The
weighted-average grant-date fair value of the restricted stock granted under the
RRP during the year ended December 31, 1996 was $15.92. A summary of the changes
in restricted stock follows:
UNAWARDED AWARDED
SHARES SHARES
------------------------
Balance, January 1, 1996 -0- -0-
Purchased by Plan 295,226 --
Granted (165,364) 165,364
Forfeited 3,936 (3,936)
Earned and Issued -- --
------------------------
Balance, December 31, 1996 133,798 161,428
========================
1996 STOCK OPTION PLAN
In 1996, the Company adopted a stock option plan for the benefit of
directors, officers, and other key employees. The number of shares of common
stock reserved for issuance under the stock option plan was equal to 738,067
shares or 10 percent of the total number of common shares sold in the Company's
initial public offering of its common stock upon the mutual-to-stock conversion
of Iberia Savings Bank. The option exercise price cannot be
40
42
less than the fair value of the underlying common stock as of the date of the
option grant and the maximum option term cannot exceed ten years. The stock
options granted to directors and officers in 1996 are exercisable in seven equal
annual installments. No compensation expense was recognized in 1996 related to
the stock option plan.
The stock option plan also permits the granting of Stock Appreciation
Rights ("SAR's"). SAR's entitle the holder to receive, in the form of cash or
stock, the increase in the fair value of Company stock from the date of grant to
the date of exercise. No SAR's have been issued under the plan.
The following table summarizes the activity related to stock options:
AVAILABLE OPTIONS
FOR GRANT OUTSTANDING
-------------------------
At inception 738,067 --
Granted (649,118) 649,118
Canceled 9,225 (9,225)
Exercised -- -0-
-------------------------
At December 31, 1996 98,174 639,893
=========================
A total of 628,893 of the outstanding options were issued in May 1996
at an exercise price of $15.875. The remaining 11,000 shares were issued
subsequently and have an exercise price between $17.00 and $18.50. No shares
were exercisable at December 31, 1996. The weighted-average grant-date fair
value of options granted during the year ended December 31, 1996 was $5.19.
In October 1995, the FASB issued SFAS123, Accounting for Stock-Based
Compensation. SFAS 123 requires disclosure of the compensation cost for
stock-based incentives granted after January 31, 1995 based on the fair value at
grant date for awards. Applying SFAS 123 would result in pro forma net income
and earnings per share amounts as follows:
1996
-----------
Net income
As reported $5,278,000
Pro forma $5,054,000
Earnings per share
As reported $ .80
Pro forma $ .77
The fair value of each option is estimated on the date of grant using
an option-pricing model with the following weighted-average assumptions used for
1996 grants: dividend yields of 2.00 percent; expected volatility of 18.97
percent; risk-free interest rate of 6.71 percent; and expected lives of 8.5
years for all options.
NOTE 13 - RELATED PARTY TRANSACTIONS:
The Company makes loans to its directors and principal officers in the
ordinary course of business. These loans are made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other customers and did not involve more than a
normal risk of collectibility.
The Company has entered into an employment agreement with the
President/Chief Executive Officer and severance agreements with its three
Executive Vice Presidents, the Vice President/Chief Financial Officer and the
President/Chief Executive Officer of Jefferson. The total commitments under all
agreements at December 31, 1996 was $965,000.
41
43
NOTE 14 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISKS,
COMMITMENTS AND CONTINGENCIES:
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 and
standby letters of credit. The same credit policies are used in these
commitments as for on-balance-sheet instruments. The Company's exposure to
credit loss in the event of nonperformance by the other parties is represented
by the contractual amount of the financial instruments. The principal
commitments of the Company are as follows:
LOAN COMMITMENTS:
At December 31, 1996 and 1995 the Company had outstanding firm
commitments to originate loans as follows (in thousands):
DECEMBER 31,
-----------------------
1996 1995
-----------------------
Mortgage Loans $ 167 $ 2,548
Undisbursed Mortgage Loans-in-Process 6,426 8,399
Commercial Loans 25,822 3,437
Consumer and Other Loans 702 939
-----------------------
Total Commitments $ 33,117 $ 15,323
=======================
Unused credit card lines were $6,785,000 and $6,439,000 at December 31,
1996 and 1995, respectively.
At December 31, 1996 and 1995, the Company had no outstanding
commitments to sell loans.
LINES AND LETTERS OF CREDIT:
The Company issues letters of credit and approves lines of credit on
substantially the same terms as other commercial loans. At December 31, 1996 and
1995, the letters of credit outstanding were $1,232,000 and $256,000,
respectively. Unfunded approved lines of credit at December 31, 1996 and 1995
were $35,840,000 and $10,981,000, respectively.
LETTERS OF CREDIT ISSUED ON BEHALF OF THE COMPANY:
The Company has outstanding Standby Letters of Credit issued by the
FHLB in favor of customers of the Company. The Company uses these letters of
credit to collateralize public entity deposits in lieu of a direct pledge of
investment securities of the Company. At December 31, 1996 and 1995, outstanding
letters of credit totaled $1,855,000 and $1,200,000, respectively. The Company
has made a blanket pledge of loans to the FHLB to secure all letters of credit
issued on behalf of the Company. This blanket pledge is also used to
collateralize any direct borrowing from the FHLB.
The Company is subject to certain claims and litigation arising in the
ordinary course of business. In the opinion of management, after consultation
with legal counsel, the ultimate disposition of these matters is not expected to
have a material effect on the consolidated financial position of the Company.
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
42
44
and may require payment of a fee. Since many of the commitments are expected to
be drawn upon, the total commitment amounts generally represent future cash
requirements. The Company evaluates each customer's credit-worthiness on a
case-by-case basis. The amount of collateral, if deemed necessary by the Company
upon extension of credit, is based on management's credit evaluation of the
counterparty. Collateral normally consists of real property.
NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS:
The estimated fair value of the Company's financial instruments (in
thousands) are as follows:
DECEMBER 31, 1996 DECEMBER 31, 1995
-------------------------------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------------------------------------------------------
ASSETS
Cash $ 53,385 $ 53,385 $ 51,742 $ 51,742
Investment Securities 103,724 103,726 87,231 87,231
Mortgage-Backed Securities 150,669 150,014 51,646 51,872
Mortgage Loans Receivable 419,800 427,117 343,053 356,375
Other Loans Receivable 155,860 160,157 64,051 66,147
LIABILITIES
Deposits:
Regular Savings, NOW Accounts,
and Money Market Deposits $289,229 $289,229 $123,720 $123,720
Certificates of Deposit 471,055 476,749 320,880 324,770
FHLB Advances 47,750 45,653 40,490 43,225
The fair value estimates presented herein are based upon pertinent
information available to management as of December 31, 1996 and 1995. Although
management is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that date and,
therefore, current estimates of fair value may differ significantly from the
amounts presented herein.
NOTE 16 - CONCENTRATED CREDIT RISKS:
The Company's lending activity is concentrated within the southwestern
part of Louisiana where the main industries are agriculture and oil and gas.
Traditionally, the Company's major emphasis in lending has been the origination
of residential home loans and other loans secured by real estate. In 1996, there
was an increase in originations of commercial loans and indirect automobile
dealer loans. The loans are expected to be paid back from cash flow of the
borrower or proceeds from the sale of the real estate. Losses are limited by the
value of the collateral upon default of the borrowers.
NOTE 17 - CONVERSION FROM MUTUAL TO STOCK ASSOCIATION:
In 1995, Iberia converted from a Louisiana chartered mutual savings
bank to a Louisiana chartered stock savings bank, pursuant to its Plan of
Conversion. The Company issued 7,380,671 shares of common stock at $10 per
share. The Company's ESOP purchased 590,423 shares, financed by a loan from the
Company. The net proceeds received from the conversion was $67,903,000. Total
conversion costs approximated $1,346,000.
43
45
In accordance with regulations, at the time that Iberia converted from
a mutual savings bank to a stock savings bank, Iberia established a liquidation
account in the amount of $43,857,000. Jefferson also has a liquidation account
from its conversion from mutual to stock form in the amount of $12,088,000. The
liquidation accounts will be maintained for the benefit of eligible account
holders and supplemental eligible account holders who continue to maintain their
accounts at Iberia and Jefferson, respectively, after the Conversion. The
liquidation accounts will be reduced annually to the extent that eligible
account holders and supplemental eligible account holders have reduced their
qualifying deposits. Subsequent increases will not restore an eligible account
holder's or supplemental eligible account holder's interest in the liquidation
account. In the event of a complete liquidation of Iberia or Jefferson, each
account holder and supplemental eligible account holder of that institution will
be entitled to receive a distribution from the liquidation account in an amount
proportionate to the current adjusted qualifying balances for accounts then
held. Iberia and Jefferson may not pay a dividend on their capital stock if the
dividend would bring regulatory capital below the balance of the liquidation
account.
Iberia and Jefferson are restricted from declaring or paying cash
dividends or repurchasing any of their shares of common stock if the effect
thereof would cause equity to be reduced below applicable regulatory capital
maintenance requirements or if such declaration and payment would otherwise
violate regulatory requirements.
NOTE 18 - ACQUISITIONS:
On May 3, 1996, the Company completed the acquisition of Royal
Bankgroup of Acadiana, Inc., ("Royal") and its wholly owned subsidiary, The Bank
of Lafayette ("BOL"). Royal was merged into the Company and BOL was merged into
Iberia Savings Bank. The two offices of BOL are operating as branches of Iberia.
The total acquisition costs, including related expenses, was $9,211,000. No
stock was issued in the transaction and the acquisition is accounted for as a
purchase transaction. Total assets of $70,157,000 were acquired, including
$45,214,000 of loans, $15,128,000 in cash, $1,998,000 of investment securities,
$4,191,000 of mortgage-backed securities and $2,352,000 of fixed assets. Total
liabilities of $64,154,000 were assumed, including $63,487,000 of deposits.
Goodwill of $3,208,000 was recognized in the transaction and will be amortized
over 15 years using the straight line method. Total amortization of goodwill in
1996 was $150,000. Results of operations for Royal for the period prior to
acquisition are not included in these statements.
On October 18, 1996, the Company completed the acquisition of Jefferson
Bancorp, Inc. and its wholly owned subsidiary, Jefferson Federal Savings Bank.
Jefferson Bancorp was merged into the Company and Jefferson FSB changed its
charter to a state savings bank, Jefferson Bank, and is operated as a subsidiary
of the Company. The total purchase price was $51,790,000 in cash and the
acquisition is accounted for as a purchase transaction. Total assets of
$266,235,000 were acquired, including $63,907,000 of loans, $28,352,000 in cash,
$57,452,000 of investment securities, $106,755,000 of mortgage-backed securities
and $3,008,000 of fixed assets. Total liabilities of $229,387,000 were assumed,
including $224,803,000 of deposits. Goodwill of $11,116,000 was recognized in
the transaction and is being amortized over 25 years using the straight line
method. A core deposit intangible of $3,825,000 was recognized and will be
amortized over its estimated life of 8 years using accelerated methods. Total
amortization of the intangibles in 1996 was $230,000. Results of operations for
Jefferson are shown from the date of acquisition only.
Had the acquisitions of Royal Bankgroup and Jefferson Bancorp been
consummated as of January 1, 1996 and 1995, respectively, the Company's
consolidated restated pro forma results of operations for the years ended
December 31, 1996 and 1995 would have been as follows:
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Restated Pro Forma Results of Operations:
------------------------
1996 1995
------------------------
Interest Income $ 68,313 $ 64,088
Interest Expense (34,887) (31,492)
Provision for Loan Losses (357) (120)
Noninterest Income 4,805 4,618
Noninterest Expense (29,391) (23,464)
Income Tax Expense (3,722) (5,081)
------------------------
Net Income $ 4,761 $ 8,549
========================
Net Income per Share (includes 2nd, 3rd and 4th quarters only for 1995) $ .73 $ .97
========================
NOTE 19 - CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS:
Condensed financial statements of ISB Financial Corporation (parent
company) are shown below. The parent company has no significant operating
activities.
CONDENSED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(IN THOUSANDS)
1996 1995
------------------------
ASSETS
Cash in Bank $ 8,496 $ 8,759
Trading Account Securities 364 389
Securities Available for Sale -0- 27,178
Investment in Subsidiaries 104,507 83,326
Other Assets 1,336 874
------------------------
Total Assets $114,703 $120,526
========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities 697 849
Stockholders' Equity 114,006 119,677
------------------------
Total Liabilities and Stockholders' Equity $114,703 $120,526
========================
CONDENSED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996 AND 1995
(IN THOUSANDS)
1996 1995
------------------------
OPERATING INCOME:
Dividends from Subsidiaries $ 25,490 $ 5,596
Securities Gains/Losses 181 -0-
Interest Income 1,650 1,558
------------------------
Total Operating Income 27,321 7,154
Operating Expenses 1,483 173
------------------------
Income Before Income Tax Expense and Decrease in Equity in
Undistributed Earnings of Subsidiaries 25,838 6,981
Income Tax Expense 164 472
------------------------
Income Before Decrease in Equity in Undistributed Earnings of Subsidiaries 25,674 6,509
Decrease in Equity in Undistributed Earnings of Subsidiaries (20,396) (1,036)
------------------------
Net Income $ 5,278 $ 5,473
========================
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CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995
(IN THOUSANDS)
PERIOD FROM
APRIL 6, 1995 TO
DECEMBER 31,
1996 1995
------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 5,278 $ 5,473
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Provision for Deferred Income Taxes (80) 12
Decrease in Equity in Net Income of Subsidiaries 20,396 1,036
Decrease (Increase) in Other Assets 402 (827)
Increase in Other Liabilities 147 90
Amortization of Premium/Discount on Investments 37 43
Net Change in Securities Classified as Trading (9) (390)
Gain on Sale of Investments (181) -0-
Compensation Expense Recognized on RRP 211 -0-
------------------------
Net Cash Provided by Operating Activities 26,201 5,437
------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of Securities Available for Sale -0- (33,738)
Proceeds From Sales and Maturities of Securities Available
for Sale 26,832 7,000
Purchase of Capital Stock of Subsidiaries (42,480) (36,193)
Other Investing Activities -0- (20)
------------------------
Net Cash Used In Investing Activities (15,648) (62,951)
------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends Paid to Shareholders (2,159) (1,019)
Capital Contributed to Subsidiaries (173) (89)
Payments Received From ESOP 1,062 824
Net Proceeds From Issuance of Common Stock -0- 67,903
Stock Conversion Costs Incurred -0- (1,346)
Payments to Repurchase Common Stock (9,546) -0-
------------------------
Net Cash (Used In) Provided by Financing Activities (10,816) 66,273
------------------------
Net (Decrease) Increase in Cash and Cash Equivalents (263) 8,759
Cash and Cash Equivalents, Beginning of Period 8,759 -0-
------------------------
Cash and Cash Equivalents, End of Period $ 8,496 $ 8,759
========================
OTHER DISCLOSURES:
The Company was charged $120,000 by Iberia for management and
accounting services during 1996.
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NOTE 20 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):
YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------------------------------------------------------
Total Interest Income $ 11,460 $ 12,408 $ 12,978 $ 15,861
Total Interest Expense 5,912 6,268 6,538 8,418
------------------------------------------------------
Net Interest Income 5,548 6,140 6,440 7,443
Provision for Loan Losses 8 9 26 113
------------------------------------------------------
Net Interest Income After Provision
for Loan Losses 5,540 6,131 6,414 7,330
Noninterest Income 788 885 845 1,300
Noninterest Expense 3,552 4,108 7,475 5,643
------------------------------------------------------
Income Before Income Taxes 2,776 2,908 (216) 2,987
Income Tax Expense (Refund) 997 1,054 (23) 1,149
------------------------------------------------------
Net Income $ 1,779 $ 1,854 $ (193) $ 1,838
======================================================
NET INCOME PER COMMON SHARE $ .26 $ .27 $ (.03) $ .29
======================================================
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------------------------------------------------------
Total Interest Income $ 9,468 $ 10,676 $ 10,870 $ 11,320
Total Interest Expense 4,833 5,173 5,458 5,818
------------------------------------------------------
Net Interest Income 4,635 5,503 5,412 5,502
Provision for Loan Losses 72 133 22 12
------------------------------------------------------
Net Interest Income After Provision
for Loan Losses 4,563 5,370 5,390 5,490
Noninterest Income 569 733 705 661
Noninterest Expense 2,843 3,162 3,195 3,493
------------------------------------------------------
Income Before Income Taxes 2,289 2,941 2,900 2,658
Income Tax Expense 755 1,073 1,009 944
------------------------------------------------------
Net Income $ 1,534 $ 1,868 $ 1,891 $ 1,714
======================================================
NET INCOME PER COMMON SHARE $ N/A $ .27 $ .28 $ .25
======================================================
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CORPORATE INFORMATION
DIRECTORS
ELAINE D. ABELL, Attorney in private practice, Lafayette, La.
HARRY V. BARTON, JR., Certified Public Accountant, Lafayette, La.
WILLIAM R. BIGLER, Retired.
CECIL C. BROUSSARD, Self-employed Investor, New Iberia, La.
HENRY J. DAUTERIVE, JR., Chairman, Retired.
WILLIAM H. FENSTERMAKER, President and Chief Executive Officer of
C.H. Fenstermaker and Associates, Inc., Lafayette, La.
RAY HIMEL, Owner of Himel Motor Supply Corp., Himel Marine and
several Ace Hardware Stores in southern Louisiana.
KAREN L. KNIGHT, Former President and Chief Executive Officer of
Jefferson Federal Savings Bank, Gretna, La.
LARREY G. MOUTON, President and Chief Executive Officer of
ISB Financial Corp.
EMILE J. PLAISANCE, JR., Vice Chairman, Retired.
STEWART SHEA, Vice President of Bayou Management Services, President of Bayou
Pipe Coating, LLC, affiliates of Bayou Management Services, New Iberia, La.
LOUIS J. TAMPORELLO, Retired.
GUYTON H. WATKINS, Secretary, Attorney in private practice.
EXECUTIVE OFFICERS
LARREY G. MOUTON, President/CEO
RONNIE J. FORET, Executive Vice President
WAYNE L. ROBIDEAUX, Executive Vice President
SCOTT T. SUTTON, Executive Vice President
WILLIAM M. LAHASKY, Vice President, CFO
ANNUAL MEETING
Wednesday, April 16, 1997, 3:00 p.m.
Iberia Savings Bank
1101 E. Admiral Doyle Drive
New Iberia, La.
Since April 7, 1995, ISB Financial Corporation's common stock has traded on the
National Association of Security Dealers Automated Quotations (NASDAQ) National
Market, under the symbol "ISBF", as reported to NASDAQ, the price information
reflects high and low sales prices. The following represents high and low
trading prices and dividends declared during each respective quarter since April
7, 1995, and through the year ended December 31, 1996.
1995 HIGH LOW DIVIDEND DECLARED
- ----------------------------------------------------------------------
Second Quarter $15.000 $12.500 $0.075
Third Quarter $16.125 $14.625 $0.075
Fourth Quarter $17.000 $14.875 $0.075
1996 HIGH LOW DIVIDEND DECLARED
- ----------------------------------------------------------------------
First Quarter $16.500 $15.125 $0.080
Second Quarter $16.375 $14.750 $0.080
Third Quarter $15.875 $13.375 $0.085
Fourth Quarter $18.500 $15.250 $0.085
SECURITIES LISTING
ISB Financial Corporation's common stock is traded on the NASDAQ National Market
under the symbol ISBF. Current price information can be found under the
NASDAQ-OTC National Market Listing.
INVESTOR INFORMATION
Investors, analysts and others seeking financial information may contact:
Larrey G. Mouton, President/CEO or
William M. Lahasky, Vice President/CFO
ISB Financial Corporation
1101 E. Admiral Doyle Drive
New Iberia, La. 70560
(318)365-2361
TRANSFER AGENT
Registrar and Transfer Company
10 Commerce Drive
Cranford, NJ 07016
(800)368-5948
INDEPENDENT AUDITORS
Castaing, Hussey & Lolan, L.L.P.
525 Weeks Street
New Iberia, La. 70560
SPECIAL COUNSEL
Elias, Matz, Tiernan & Herrick, L.L.P.
734 15th Street, N.W.
Washington, D.C. 20005
GENERAL COUNSEL
Guyton Watkins
Landry & Watkins
211 E. Main Street
New Iberia, La. 70560
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