-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ErTnIhqiQq1W3CFA0+yQ1tW9i+o2AWgPRL22+DlPjK65l1wUIZ8N2k7nNEMmI3aT IJme0gGszFx89GsEYJpwiQ== 0000950134-99-001681.txt : 19990317 0000950134-99-001681.hdr.sgml : 19990317 ACCESSION NUMBER: 0000950134-99-001681 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990316 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN BANCORP INC/LA CENTRAL INDEX KEY: 0000721238 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 720951347 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-11928 FILM NUMBER: 99566131 BUSINESS ADDRESS: STREET 1: 328 E LANDRY ST STREET 2: P O BOX 1579 CITY: OPELOUSAS STATE: LA ZIP: 70571-1579 BUSINESS PHONE: 3189483056 MAIL ADDRESS: STREET 1: P O BOX 1579 CITY: OPELOUSAS STATE: LA ZIP: 70570 10-K 1 FORM 10-K FOR FISCAL YEAR END DECEMBER 31, 1998 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended December 31, 1998 Commission File Number 0-11928 AMERICAN BANCORP, INC. (Exact name of registrant as specified in its charter) Louisiana 72-0951347 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 328 East Landry Street Opelousas, Louisiana 70570 (Address of principal executive offices) (Zip Code) Registrant's Telephone Number, including area code: (318) 948-3056 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $5.00 Par Value (Title of Class) Indicate by check mark whether the registrant: (l) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes[X] No[ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by non-affiliates* of the registrant: $3,979,560. The number of shares outstanding of each of the issuer's classes of common stock, as of December 31, 1998: Common Stock, $5.00 Par Value, 118,449 shares outstanding. Documents Incorporated by Reference Portions of the annual shareholders' report for the year ended December 31, 1998 are incorporated by reference into Parts I and II. Portions of the proxy statement for the annual shareholders meeting to be held April 14, 1999 are incorporated by reference into Part III. *For purposes of the computation, shares owned by executive officers, directors, 5% shareholders and shares by non-affiliates whose voting rights have been assigned to directors have been excluded. - 1 - 2 PART I Item 1. Business American Bancorp, Inc. (the Company) was incorporated under the laws of the State of Louisiana in 1982. On October 1, 1983, American Bank and Trust Company (the Bank) was reorganized as a subsidiary of the Company. Prior to October 1, 1983, the Company had no material activity. The Company is currently engaged, through its subsidiary, in banking and related business. The Bank is the Company's principal asset and primary source of revenue. The Bank The Bank, incorporated under the State Banking Laws on August 1, 1958 is in the business of gathering funds by accepting checking, savings, and other time-deposit accounts and reemploying these by making loans and investing in securities and other interest-bearing assets. The Bank is a full service commercial bank. Some of the major services which it provides include checking, NOW accounts, Money Market checking, savings, and other time deposits of various types, loans for business, agriculture, real estate, personal use, home improvement, automobile, and a variety of other types of loans and services including letters of credit, safe deposit boxes, bank money orders, wire transfer facilities, and electronic banking facilities. The State of Louisiana, through its various departments and agencies, deposits public funds with the Bank. However, as of December 31, 1998, the State of Louisiana did not have any funds on deposit with the Bank. The Bank's general market area is in St. Landry Parish, which has a population of approximately 81,939. Its primary market is Opelousas, which has a population of approximately 19,540, and has experienced little population growth over the past several years. The commercial banking business in St. Landry Parish is highly competitive. The Depository Institutions Deregulation and Monetary Control Act of 1980 and the Garn-St. Germain Depository Institutions Act of 1982 have eliminated most, if not all, substantive distinctions between the services of commercial banks and thrift institutions. The Bank competes with three banks and two savings and loan institutions located in St. Landry Parish. The following is a list of banks and savings associations in this market with the total deposits and assets as of December 31, 1998.
(In thousands of dollars) Assets Deposits --------- --------- American Bank and Trust Company $ 73,666 $ 63,819 St. Landry Bank and Trust Company $ 220,090 $ 187,346 St. Landry Homestead $ 132,653 $ 109,725 Washington State Bank $ 81,329 $ 63,716 First Federal Savings & Loan $ 65,823 $ 48,474
- 2 - 3 Item 1. Business (continued) In addition to the institutions listed above, further competition is provided by banks and other financial institutions located in Lafayette, Louisiana, which is 20 miles south of Opelousas and Baton Rouge, Louisiana, the state capital, which is 60 miles east of St. Landry Parish. Louisiana Banking Law provides that generally Louisiana banks having capital of one hundred thousand dollars or more may open one or more branch offices within the State or may acquire one or more banks or any or all branches thereof, or both. On July 2, 1986, Louisiana passed an interstate banking law affirmatively permitting Louisiana bank holding companies to immediately acquire out-of-state bank holding companies and banks. On July 1, 1987, bank holding companies located in a fifteen state region were permitted to acquire banks or bank holding companies in Louisiana, and beginning January 1, 1991, out-of-state bank holding companies may acquire banks or bank holding companies provided that the law of the state in which the out-of-state bank holding company has its principal place of business permits Louisiana bank holding companies to acquire banks and bank holding companies in that state. The effect of the new liberalized branching laws and the Louisiana Interstate Banking Law on the Company cannot be predicted at this time, but increased competition is expected. Employees During 1998, the average number of full-time equivalent employees at the Bank was 44. This includes the officers of the Company that are listed under Item 1 below. There are no unions or bargaining units that represent the employees of the Bank. The relation between management and employees is considered to be good. Executive Officers The executive officers of the Company are as follows:
Years of Officer Name Service Age Position Currently Held - ---------------------- -------- --- -------------------------------- Salvador L. Diesi, Sr. 25 68 Chairman of the Board of the Company and the Bank; President of the Company and the Bank Ronald J. Lashute 26 49 Executive Vice-President and Chief Executive Officer of the Bank and Secretary/Treasurer of the Company
- 3 - 4 Item 1. Business (continued) None of the directors and executive officers of the Company or the Bank holds a directorship in any company with a class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended, or subject to the requirements of Section 15(d) of that Act or in any company registered as an investment company under the Investment Company Act of 1940. Salvador L. Diesi, Sr. and Ronald J. Lashute are the nephews of J.C. Diesi. No other family relationships exist among the above named directors or executive officers of the Company. Supervision and Regulation The Bank is subject to regulation and regular examinations by the Louisiana Commissioner of Financial Institutions and by the Federal Deposit Insurance Corporation. Applicable regulations relate to reserves, investments, loans, issuance of securities, establishment of branches, and other aspects of its operations. The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") further expanded the regulatory and enforcement powers of bank regulatory agencies. Among the significant provisions of FDICIA is the requirement that bank regulatory agencies prescribe standards relating to internal controls, information systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits. FDICIA mandates annual examinations of banks by their primary regulators. The Company is a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended (the Act), and is thereby subject to the provisions of the Act and to regulation by the Board of Governors of the Federal Reserve System (the Board). The Act requires the Company to file with the Board an annual report containing such information as the Board may require. The Board is authorized by the Act to examine the Company and all of its activities. The activities that may be engaged in by the Company and its subsidiary are limited by the Act to those so closely related to banking or managing or controlling banks as to be a proper incident thereto. In determining whether a particular activity is a proper incident to banking or managing or controlling banks, the Board must consider whether its performance by an affiliate of a holding company can reasonably be expected to produce benefits to the public, such as greater convenience, increased competition or gains in efficiency that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interest, or unsound banking practices. The Board has adopted regulations implementing the provisions of the Act with respect to the non-banking activities of bank holding companies. Such regulations reflect a determination by the Board that certain specified activities are permissible for a bank holding company. An activity not listed in the regulation may be engaged in if, upon application, the Board determines that the activity meets the criteria described in the preceding paragraph. In each case, a bank holding company must secure the approval of the Board prior to engaging in any of these activities. Whether or not a particular non-banking activity is permitted under the Act, the Board is authorized to require a holding company to terminate any activity, or divest - 4 - 5 Item 1. Business (continued) itself of any non-banking subsidiary, if in its judgment the activity or subsidiaries would be unsound. Under the Act and the Board's regulations, a bank holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with any extension of credit or provision of any property or services. In some cases, the Company must receive the prior approval of the Board in order to repurchase or redeem its outstanding equity securities. With certain exceptions, the Subsidiary Bank is restricted by Sections 22 and 23A of the Federal Reserve Act from extending credit or making loans to or investments in the Company and certain other affiliates as defined in the Federal Reserve Act. Such transactions by the Subsidiary Bank with the Company or any such affiliate are limited in an amount to 10% of the Subsidiary Bank's capital and surplus. Furthermore, loans and extensions of credit are subject to various collateral requirements. The Louisiana bank holding company law, as amended (the "Louisiana Act"), permits bank holding companies to own more than one bank. In addition, a bank holding company and its subsidiaries may not engage in any insurance activity in which a bank may not engage. The Louisiana Commissioner of Financial Institutions is authorized to administer the Louisiana Act and to issue orders and regulations. The Board of Directors of the Company have no present plans or intentions to cause the Company to engage in any substantial business activity which would be permitted to it under the Act or the Louisiana Act but which is not permitted to the Bank; however, a significant reason for formation of the one-bank holding company is to take advantage of the additional flexibility afforded by that structure if the Board of Directors of the Company concludes that such action would be in the best interest of stockholders. Statistical Information The following tables contain additional information concerning the business and operations of the Registrant and its subsidiary and should be read in conjunction with the Consolidated Financial Statements of the Registrant and Management's Discussion and Analysis of Financial Condition and Results of Operations. The 1998 Annual Report to Shareholders is incorporated herein by reference under Item 8. Investment Portfolio The following table sets forth the carrying amount of Investment Securities at the dates indicated (in thousands of dollars):
December 31, ------------------------------------------ 1998 1997 1996 -------- -------- -------- Securities held to maturity: U.S. Treasury $ 2,696 $ 3,692 $ 4,005 U.S. Government Agencies 3,005 10,512 11,513 -------- -------- -------- $ 5,701 $ 14,204 $ 15,518 ======== ======== ========
- 5 - 6 Item 1. Business (continued)
December 31, ------------------------------------------ 1998 1997 1996 -------- -------- -------- Securities available for sale: Mortgage-backed securities $ 4,455 $ 1,210 $ 1,787 U.S. Treasury securities 3,553 2,009 1,002 U.S. Government Agencies 9,002 5,532 3,012 State and Political subdivisions 6,907 3,442 2,870 Equity securities 97 - - -------- -------- -------- $ 24,014 $ 12,193 $ 8,671 ======== ======== ========
The following tables set forth the maturities of investment securities at December 31, 1998, 1997, and 1996 and the weighted average yields of such securities (in thousands of dollars):
December 31, 1998 --------------------------------------------------------------------------------------- After One After Five But Within But Within After Within One Year Five Years Ten Years Ten Years ------------------ ------------------ ------------------- ------------------ Amount Yield Amount Yield Amount Yield Amount Yield ------- ----- ------- ----- ------- ----- ------- ----- Securities held to maturities: U.S. Treasury $ 2,496 6.25% $ 200 4.54% $ - - % $ - - % U.S. Government Agencies 506 6.22 1,999 6.91 500 7.03 - - ------- -------- -------- -------- Total held to maturity 3,002 6.24 2,199 6.69 500 7.03 -0- - ------- -------- -------- -------- Securities available for sale: U.S. Treasury - - 3,553 5.75 - - - - U.S. Government Agencies - - 7,966 6.25 1,036 6.06 - - Mortgage-backed securities - - 669 6.85 2,301 5.77 1,485 6.82 State and Political Subdivisions 222 7.48 3,011 7.16 3,113 7.12 561 7.11 Equity securities 97 - - - - - - - ------- -------- -------- -------- Total available for sale 319 7.48 15,199 6.34 6,450 6.47 2,046 6.90 ------- -------- -------- -------- Total securities $ 3,321 6.33% $ 17,398 6.38% $ 6,950 6.51% $ 2,046 6.90% ======= ===== ======== ===== ======== ===== ======== =====
- 6 - 7 Item 1. Business (continued)
December 31, 1997 --------------------------------------------------------------------------------------- After One After Five But Within But Within After Within One Year Five Years Ten Years Ten Years ------------------ ------------------ ------------------- ------------------ Amount Yield Amount Yield Amount Yield Amount Yield ------- ----- ------- ----- ------- ----- ------- ----- Securities held to maturities: U.S. Treasury $ 1,200 5.95% $ 2,492 6.25% $ - - % $ - - % U.S. Government Agencies 2,498 5.92 7,016 6.49 998 7.16 - - ------- -------- -------- -------- Total held to maturity 3,698 5.93 9,508 6.43 998 7.16 -0- - ------- -------- -------- -------- Securities available for sale: U.S. Treasury 1,001 6.27 1,008 6.28 - - - - U.S. Government Agencies - - 5,532 6.53 - - - - Mortgage-backed securities 4 9.35 407 8.66 68 9.16 731 8.66 State and Political Subdivisions 10 6.43 2,006 7.29 1,221 7.01 205 8.68 ------- -------- -------- -------- Total available for sale 1,015 6.28 8,953 6.76 1,289 7.11 936 8.67 ------- -------- -------- -------- Total securities $ 4,713 6.01% $ 18,461 6.59% $ 2,287 7.13% $ 936 8.67% ======= ===== ======== ===== ======== ===== ======== =====
- 7 - 8 Item 1. Business (continued)
December 31, 1996 --------------------------------------------------------------------------------------- After One After Five But Within But Within After Within One Year Five Years Ten Years Ten Years ------------------ ------------------ ------------------- ------------------ Amount Yield Amount Yield Amount Yield Amount Yield ------- ----- ------- ----- ------- ----- ------- ----- Securities held to maturities: U.S. Treasury $ 1,801 6.15% $ 2,204 5.88% $ - - % $ - - % U.S. Government Agencies 4,496 6.64 7,017 6.56 - - - - ------- -------- -------- -------- Total held to maturity 6,297 6.50 9,221 6.40 -0- - -0- - ------- -------- -------- -------- Securities available for sale: U.S. Treasury - - 1,002 6.27 - - - - U.S. Government Agencies 1,507 7.03 1,505 6.44 - - - - Mortgage-backed securities 124 8.24 906 8.20 757 9.14 - - State and Political Subdivisions - - 1,481 7.81 1,389 7.04 - - ------- -------- -------- -------- Total available for sale 1,631 7.12 4,894 7.15 2,146 7.78 -0- - ------- -------- -------- -------- Total securities $ 7,928 6.63% $ 14,115 6.67% $ 2,146 7.78% $ -0- - % ======= ===== ======== ===== ======== ===== ======== =====
* Weighted average yields have been computed on a fully tax-equivalent basis assuming a rate of 34% for 1998, 1997 and 1996. - 8 - 9 Item 1. Business (continued) Loan Portfolio The amounts of loans outstanding at the indicated dates are shown in the following table according to type of loan (in thousands of dollars):
December 31, ------------------------------------------ 1998 1997 1996 -------- -------- -------- Commercial, financial and agricultural $ 7,666 $ 7,549 $ 7,437 Real Estate - Construction 51 359 285 Real Estate - Mortgage 15,361 15,543 16,278 Installment 4,981 4,984 4,925 -------- -------- -------- Total 28,059 28,435 28,925 Less: Allowance for possible loan losses (596) (600) (614) Unearned income - - - -------- -------- -------- $ 27,463 $ 27,835 $ 28,311 ======== ======== ========
The following table presents information concerning the aggregate amount of nonperforming loans. Nonperforming loans comprise: (a) loans accounted for on a nonaccrual basis; (b) loans contractually past due ninety days or more as to interest or principal payments [but not included in the nonaccrual loans in (a) above]; (c) other loans whose terms have been restructured to provide a reduction or deferral of interest or principal because of a deterioration in the financial position of the borrower [exclusive of loans in (a) or (b) above]; and (d) loans now current where there are serious doubts as to the ability of the borrower to comply with present loan requirement terms (in thousands of dollars):
December 31, ------------------------------------------ 1998 1997 1996 -------- -------- -------- Loans accounted for on a nonaccrual basis $ 145 $ 308 $ 496 Restructured loans which are not on non-accrual 61 70 94 -------- -------- -------- 206 378 590 Other real estate and repossessed assets received in complete or partial satisfaction of loan obligations - 7 14 -------- -------- -------- Total nonperforming assets $ 206 $ 385 $ 604 ======== ======== ======== Loans contractually past due ninety days or more as to principal or interest, but which were not on non-accrual $ 15 $ 9 $ 27 ======== ======== ========
- 9 - 10 Item 1. Business (continued) As of January 1, 1995, the Company adopted SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," which, as it relates to in-substance foreclosures, requires that a creditor continue to classify these assets as loans in the balance sheet unless the creditor receives physical possession of the collateral. The Company had no in-substance foreclosures at the date of adoption of SFAS No. 114. At December 31, 1998, the recorded investment in loans that were considered to be impaired under SFAS No. 114 was $144,797, with the related allowance for loan losses of $100,000. These loans are included in nonaccrual loans. The effect of nonperforming loans on interest income has not been substantial in the past three years. Had interest been accrued on the nonperforming loans, interest income would have been recorded in the amount of $32,424, $53,417 and $59,177, for the years 1998, 1997, and 1996, respectively. Interest income in the amount of $4,796, $5,621 and $6,633 on nonperforming loans during 1998, 1997 and 1996, respectively, was recorded. At December 31, 1998, 1997 and 1996 there were no significant commitments to lend additional funds to debtors whose loans were considered to be nonperforming. The Bank places loans on nonaccrual when the borrower is no longer able to make periodic interest payments due to a deterioration of the borrowers financial condition. At December 31, 1998, the Bank has an insignificant amount of loans for which payments are current, but the borrowers are experiencing financial difficulties. These loans are subject to constant management attention, and their classification is reviewed on a monthly basis. Summary of Loan Loss Experience The following table summarizes loan balances at the end of each period and average loans based on daily average balances for 1998, 1997, and 1996; changes in the allowance for possible loan losses arising from loans charged off and recoveries on loans previously charged off by loan category; and additions to the allowance which have been charged to expense (in thousands of dollars):
1998 1997 1996 -------- -------- -------- Amount of loans outstanding at end of period $ 28,058 $ 28,435 $ 28,926 ======== ======== ======== Average amount $ 28,548 $ 27,797 $ 27,635 ======== ======== ========
- 10 - 11 Item 1. Business (continued) Allowance for Possible Loan Losses (In thousands of dollars)
Year Ended December 31, ------------------------------------------- 1998 1997 1996 -------- -------- -------- Beginning balance $ 600 $ 614 $ 624 Provision charged against income - - - -------- -------- -------- 600 614 624 -------- -------- -------- Charge-offs: Commercial, financial and agricultural loans - (1) - Real estate mortgage loans - - - Real estate construction loans - - - Installment loans (15) (16) (18) -------- -------- -------- Total charge-offs (15) (17) (18) -------- -------- -------- Recoveries: Commercial, financial and agricultural loans - - 5 Real estate mortgage loans - - 1 Real estate construction loans - - - Installment loans 11 3 2 -------- -------- -------- 11 3 8 -------- -------- -------- Net (charge-offs) recoveries (4) (14) (10) -------- -------- -------- Ending balance $ 596 $ 600 $ 614 ======== ======== ======== Ratio of net (charge-offs) recoveries during the period to average loans outstanding during the period (.01)% (.05)% (.04)% ======= ======= =======
The allowance for possible loan losses has been allocated according to the amount deemed to be reasonably necessary to provide for the possibility of losses being incurred within the following categories of loans at the date indicated: Allocation of Allowance for Possible Loan Losses (In thousands of dollars)
December 31, 1998 December 31, 1997 ---------------------------- ---------------------------- % of Loans % of Loans Outstanding Outstanding to Total to Total Allowance Loans Allowance Loans --------- ----------- --------- ------------ Commercial, financial and agricultural loans $ 135 27.32% $ 218 26.55% Real estate construction 1 .18 5 1.27 Real estate mortgage loans 272 54.75 97 54.66 Installment loans 188 17.75 280 17.52 --------- ------- --------- ------- $ 596 100.00% $ 600 100.00% ========= ======= ========= =======
- 11 - 12 Item 1. Business (continued) Allocation of Allowance for Possible Loan Losses (continued) (In thousands of dollars)
December 31, 1996 --------------------------- % of Loans Outstanding to Total Allowance Loans --------- ----------- Commercial, financial and agricultural loans $ 201 25.71% Real estate construction 3 .98 Real estate mortgage loans 146 56.28 Installment loans 264 17.03 --------- ------- $ 614 100.00% ========= =======
Deposits The average amount of deposits, using daily average balances for 1998, 1997, and 1996, is summarized for the periods indicated in the following table (in thousands of dollars):
Year Ended December 31, ------------------------------------------- 1998 1997 1996 -------- -------- -------- Non-interest bearing demand deposits $ 19,070 $ 16,846 $ 15,530 Interest-bearing demand deposits 11,104 11,752 11,510 Savings deposits 9,223 8,374 8,597 Time deposits 19,747 19,003 17,659 -------- -------- -------- $ 59,144 $ 55,975 $ 53,296 ======== ======== ========
Return on equity and assets The ratio of Net Income to Average Shareholders' Equity and to Average Total Assets, and certain other ratios, are as follows:
Year Ended December 31, ------------------------------------------- 1998 1997 1996 -------- -------- -------- Percentage of net income to: Average total assets 1.47% 1.47% 1.70% Average shareholders' equity 11.27% 11.70% 14.32% Percentage of dividends declared per common share to net income per common share 14.76% 13.92% 11.56% Percentage of average shareholders' equity to daily average total assets 13.06% 12.58% 11.88%
- 12 - 13 Item 1. Business (continued) Short-Term Borrowing The Company's short-term borrowing and the average interest rate thereon at the end of the last three years, are as follows (in thousands of dollars):
Year Ended December 31, ------------------------------------------- 1998 1997 1996 -------- -------- -------- Balance at December 31 $ - $ - $ - Weighted average interest rate at year end - % - % - % Maximum amount outstanding at any month's end $ - $ - $ 950 Average amount outstanding during the year $ 29 $ - $ 66 Weighted average interest rate during the year 6.90% - % 4.55%
Item 2. Properties The main office of the Company and the Bank are presently located at 328 East Landry Street, Opelousas, Louisiana, in the downtown business district. The Bank leases four branch sites. The building in which the main office is located is free of all mortgages. For information with respect to the Company obligations under its lease commitments, see Note 12 to the Consolidated Financial Statements, which are incorporated herein by reference under Item 8. Item 3. Legal Proceedings The Company is not involved in any legal actions; however, there are presently pending by the Bank a number of legal proceedings. It is the opinion of management that the resulting liability, if any, from these actions and other pending claims will not materially affect the consolidated financial statements. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders, through the solicitation of proxies or otherwise. - 13 - 14 PART II Item 5. Market for Registrant's Common Stock and Related Security Holder Matters MARKET PRICE AND DIVIDENDS DECLARED
Dividends Year Quarter High Low Per Share ---- ------- ------ ------ --------- 1998 First $ 53 $ 53 $ - Second 55 55 - Third 57 57 - Fourth 60 30 1.25 1997 First $ 30 $ 20 $ - Second 30 30 - Third 30 30 - Fourth 53 30 1.10
Note: The primary market area for American Bancorp, Inc.'s common stock is the Opelousas, Louisiana area with American Bank and Trust Company acting as registrar and transfer agent. There were approximately 540 shareholders of record at December 31, 1998. Source of market price - American Bank & Trust Company acts as the transfer agent for the Company. The stock is thinly traded and the price ranges are based on stated sales price to the transfer agent, which does not represent all sales. RESTRICTIONS ON CASH DIVIDENDS PAYABLE BY THE REGISTRANT: The only source of funds by the Company to pay dividends is dividends paid by the Subsidiary Bank, the payment of which is restricted by applicable federal and state statutes. Federal bank regulatory authorities have authority under the Financial Institutions Supervisory Act to prohibit a bank from engaging in an unsafe or unsound practice. The payment of a dividend by the Bank could, depending upon the financial condition of the Bank and other factors be deemed an unsafe or unsound practice. Applicable Louisiana law prohibits a state bank subsidiary from paying a dividend if its surplus remaining after payment of the dividend would be less than half the aggregate par value of its outstanding stock. In addition, a state bank subsidiary is required to obtain the prior approval of the Commissioner of Financial Institutions of Louisiana before declaring or paying a dividend in a given year if the total of all dividends declared or paid during that year would exceed the total of its net profits for that year combined with the net profits from the immediately preceding year. - 14 - 15 Item 6. Selected Financial Data The information called for by Item 6 is included in Registrant's Annual Report on page 5 in the Section titled "Summary of Operations for the Last Five Years" and is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The information called for by Item 7 is included in the Registrant's Annual Report in the section titled "Management's Discussion and Analysis of Operations" and is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data The following consolidated financial statements of the Registrant and its subsidiary included on pages 28 through 56 in the Annual Report are incorporated herein by reference: Consolidated Balance Sheets - December 31, 1998 and 1997 Consolidated Statements of Income - Years Ended December 31, 1998, 1997, and 1996 Consolidated Statements of Shareholders' Equity - Years Ended December 31, 1998, 1997, and 1996 Consolidated Statements of Cash Flows - Years Ended December 31, 1998, 1997, and 1996 Notes to Consolidated Financial Statements Item 9. Disagreements in Accounting and Financial Disclosure There have been no disagreements with an independent accountant on any matter of accounting principles or practice, financial disclosure, auditing scope or procedure. PART III Item 10. Directors and Executive Officers With the exception of identification of executive officers of the Company, the information called for by Item 10 is omitted pursuant to General Instruction G(3) and is included in Registrant's definitive Proxy Statement filed pursuant to Section 14(a). Executive officers of the Company are identified in Item 1, "Executive Officer," included in Part I of this report. Item 11. Management Remuneration and Transactions The information called for by this item is included in Registrant's definitive Proxy Statement filed pursuant to Section 14(a) of the Securities Exchange Act of 1934 and is incorporated herein by reference. - 15 - 16 Item 12. Security Ownership of Certain Beneficial Owners and Management The information called for by this item is included in Registrant's definitive Proxy Statement filed pursuant to Section 14(a) of the Securities Exchange Act of 1934 and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions The information called for by this item is included in Registrant's definitive Proxy Statement filed pursuant to Section 14(a) of the Securities Exchange Act of 1934 and is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) 1. Financial Statements The following consolidated financial statements of American Bancorp, Inc. and Subsidiary, included in pages 28 through 56 of the Registrant's Annual Report are incorporated by reference in Item 8: Consolidated Balance Sheets - December 31, 1998 and 1997 Consolidated Statements of Income - Years Ended December 31, 1998, 1997 and 1996 Consolidated Statements of Shareholders' Equity - Years Ended December 31, 1998, 1997 and 1996 Consolidated Statements of Cash Flows - Years Ended December 31, 1998, 1997 and 1996 Notes to Consolidated Financial Statements (a) 2. Financial Statement Schedules The Schedules to the consolidated financial statements required by Article 9, and all other schedules to the financial statements of the Registrant required by Article 9 of Regulation S-X are not required under the related instructions or are inapplicable and therefore have been omitted. (a) 3. Exhibits (13) 1998 Annual Report to Shareholders (22) Proxy Statement for Annual Meeting of Shareholders to be held on April 14, 1999 (23) Consent of Independent Auditors (27) Financial data schedule - 16 - 17 Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (continued) (b) Reports on Form 8-K None (c) Exhibits The response to this portion of Item 14 is submitted as a separate section of this report. (d) Financial Statement Schedules The response to this portion of Item 14 is submitted as a separate section of this report. - 17 - 18 Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. American Bancorp, Inc. (Registrant) By: /s/ Salvador L. Diesi, Sr. ----------------------------------- Salvador L. Diesi, Sr., Chairman of the Board of the Company and the Bank; President of the Company and the Bank Date: March 10, 1999 --------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Salvador L. Diesi, Sr. /s/ Jasper J. Artall - ------------------------------------ -------------------------------------- Salvador L. Diesi, Sr., Chairman of Jasper J. Artall, Director the Board of the Company and the Bank; President of the Company and the Bank Date: March 10, 1999 Date: March 10, 1999 ------------------------------ -------------------------------- /s/ Ronald J. Lashute /s/ Walter J. Champagne, Jr. - ------------------------------------ -------------------------------------- Ronald J. Lashute, Executive Vice- Walter J. Champagne, Jr., Director President and Chief Executive Officer of the Bank; Secretary/ Treasurer of the Company Date: March 10, 1999 Date: March 10, 1999 ------------------------------ --------------------------------- /s/ J. C. Diesi -------------------------------------- J. C. Diesi, Director Date: March 10, 1999 --------------------------------- - 18 - 19 EXHIBIT INDEX
Exhibit Number Description ------- ----------- 13.1 1998 Annual Report to shareholders of American Bancorp, Inc. 22.1 1998 Proxy Statement for annual meeting of shareholders. 23.1 Consent of Independent Auditors. 27.1 Financial Data Schedule.
EX-13.1 2 1998 ANNUAL REPORT TO SHAREHOLDERS 1 EXHIBIT 13.1 [LOGO] 1998 ANNUAL REPORT AMERICAN BANCORP, INC. POST OFFICE BOX 1579 OPELOUSAS, LOUISIANA 70570 2 NATURE OF BUSINESS American Bancorp, Inc. is a one-bank holding company whose sole subsidiary is American Bank and Trust Company, a commercial bank whose general business is that of providing banking services to the Opelousas, Louisiana area. The Bank serves the needs of the area through 45 employees at six banking locations. The main office is located at the corner of Landry Street and Union Street in Opelousas. Branch banking-offices are located in the parish of St. Landry in the communities of Lawtell, Krotz Springs, Port Barre and an office on Creswell Lane in South Opelousas. In addition, the Bank has a branch located on Moss Street, in Lafayette, Louisiana. MARKET PRICE AND DIVIDENDS DECLARED
DIVIDENDS YEAR QUARTER HIGH LOW PER SHARE - ---- ------- ---- --- --------- 1998 First $ 53 $ 53 $ -- Second 55 55 -- Third 57 57 -- Fourth 60 30 1.25 1997 First $ 30 $ 20 $ -- Second 30 30 -- Third 30 30 -- Fourth 53 30 1.10
Note: The primary market area for American Bancorp, Inc.'s common stock is the Opelousas, Louisiana area with American Bank and Trust Company acting as registrar and transfer agent. There were approximately 540 shareholders of record at December 31, 1998. Source of market price - American Bank & Trust Company acts as the transfer agent for the Company. The stock is thinly traded and the price ranges are based on stated sales price to the transfer agent, which does not represent all sales. ANNUAL SHAREHOLDERS' MEETING The annual meeting of the shareholders of American Bancorp, Inc. will be held on April 14, 1999 in the Board of Directors Room at the Operations Center located at 328 East Landry Street, Opelousas, Louisiana. FORM 10-K ANNUAL REPORT American Bancorp, Inc. files an annual report with the Securities and Exchange Commission on Form 10-K. A copy of the report filed on Form 10-K will be sent free of charge to any shareholder by writing to: Ronald J. Lashute, Chief Executive Officer and Executive Vice-President, American Bank and Trust Company, Post Office Box 1579, Opelousas, Louisiana 70570. -1- 3 FINANCIAL SUMMARY (In thousands of dollars except per share data and ratios)
1998 1997 1996 ----------- ----------- ----------- FOR THE YEAR Net income .................................... $ 1,008 $ 948 $ 1,038 Return on average shareholders' equity ........ 11.27% 11.70% 14.32% Return on average total assets ................ 1.47% 1.47% 1.70% AT YEAR END Total assets .................................. $ 73,666 $ 64,621 $ 67,254 Total earning assets .......................... $ 67,114 $ 57,377 $ 60,666 Total loans ................................... $ 27,463 $ 27,835 $ 28,311 Total deposits ................................ $ 63,819 $ 55,857 $ 59,367 Total shareholders' equity .................... $ 9,446 $ 8,513 $ 7,656 Common shares outstanding ..................... 118,449 119,962 120,000 PER SHARE Net income .................................... $ 8.47 $ 7.90 $ 8.65 Book value .................................... $ 79.75 $ 70.96 $ 63.80 Cash dividends declared ....................... $ 1.25 $ 1.10 $ 1.00 CAPITAL RATIOS Total risk-based capital ratio ................ 28.72% 27.38% 24.48% Leverage ratio ................................ 13.36% 12.97% 12.44%
-2- 4 C O N T E N T S
PAGE Financial Summary ............................................... 2 A Message to the Shareholders ................................... 4 Management's Discussion and Analysis of Financial Condition and Results of Operations .......................... 5 - 27 Independent Auditors' Report .................................... 28 Consolidated balance sheets ..................................... 29 and 30 Consolidated statements of income ............................... 31 Consolidated statements of changes in shareholders' equity ...... 33 and 34 Consolidated statements of cash flows ........................... 35 and 36 Notes to consolidated financial statements ...................... 37 - 56 Officers and directors of American Bank and Trust Company ....... 57 Officers and directors of American Bancorp, Inc. ................ 58
-3- 5 TO THE SHAREHOLDERS We are pleased to announce that net earnings for American Bancorp, Inc. and American Bank & Trust Company, its sole subsidiary, for 1998 was $1,007,868 up from $947,536 in 1997. Earnings per share this past year was $8.47 compared to $7.90 in 1997. As a result of earnings, the book value of the company's stock increased 12.39% to $79.75 per share at year end. Growth for the company in 1998 also exceeded that of 1997. Average assets for the company during 1998 were $68,472,000 up by $4,088,000 or 6.35% over 1997. The company's average capital ratio at year end was a very healthy 13.36% up from 12.97% at year end 1997. Dividends declared in 1998 represented an increase of 13.64% over the dividends declared in 1997. Asset quality of the company remains at an exceptionally high level. At December 31, 1998, nonperforming assets were .28% of total assets, and net charged off loans were a mere $3,831. With the remarkably good year experienced in 1998, as well as the preceding years during this decade, it is apparent that community banking is alive and well. We are excited about the opportunity to continue serving you and the local community with your banking needs as the new millennium approaches. Your management and Board of Directors are committed to maintain unsurpassed customer service, sustained growth, and increased shareholder value. Our success can be attributed to your support, our customers, and a staff committed to quality and personal service. /s/ DALVADOR L. DIESI Salvador L. Diesi, Sr., Chairman of the Board and President /s/ RONAL J. LASHUTE Ronald J. Lashute, Chief Executive Officer and Executive Vice-President of American Bank & Trust Co. -4- 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SUMMARY OF OPERATIONS FOR THE LAST FIVE YEARS (In thousands of dollars except per share data and ratios)
YEAR ENDED DECEMBER 31, -------------------------------------------------------- 1998 1997 1996 1995 1994 -------------------------------------------------------- Operating Data: Net interest income ........................... $ 3,211 $ 3,085 $ 2,976 $ 3,065 $ 2,567 Provision for possible loan losses ..................................... $ -- $ -- $ -- $ -- $ 12 Net income .................................... $ 1,008 $ 948 $ 1,038 $ 963 $ 962 Per share data: Weighted average number of shares outstanding ......................... 118,965 119,997 120,000 120,000 120,000 Net income .................................... $ 8.47 $ 7.90 $ 8.65 $ 8.03 $ 8.02 Cash dividends declared ....................... $ 1.25 $ 1.10 $ 1.00 $ .85 $ .65 Book value at end of year ..................... $ 79.75 $ 70.96 $ 63.80 $ 56.55 $ 48.49 Balance sheet totals: Average assets ................................ $ 68,472 $ 64,384 $ 61,012 $ 58,733 $ 54,863 Average shareholders' equity .................. $ 8,942 $ 8,099 $ 7,251 $ 6,230 $ 5,356 Relationship between significant financial ratios: Percentage of net income to average total assets ................. 1.47% 1.47% 1.70% 1.64% 1.75% Percentage of net income to average shareholders' equity .................................. 11.27% 11.70% 14.32% 15.46% 17.96% Percentage of dividends declared per common share to net income per common share ................................... 14.76% 13.92% 11.56% 10.59% 8.10% Percentage of average share- holders' equity to average total assets ............................ 13.06% 12.58% 11.88% 10.60% 9.76% Tier 1 risk-based capital ratio ............... 27.47% 26.13% 23.23% 21.92% 18.51% Total risk-based capital ratio ................ 28.72% 27.38% 24.48% 23.17% 19.76% Leverage ratio ................................ 13.36% 12.97% 12.44% 11.36% 10.38%
-5- 7 Management's discussion and analysis of financial condition and results of operations should be read in conjunction with the accompanying financial statements and notes. OVERVIEW The Company reported net income of $1,007,868 in 1998 compared to $947,536 in 1997 and $1,038,309 in 1996. Interest income has increased over the last three years. The increase for 1998 was $.174 million and an increase of $.177 million from 1996 to 1997. Interest expense also increased in 1998. The increase for 1998 was $.049 million and an increase of $.068 million from 1996 to 1997. Net income before taxes has been fairly consistent over the past three years. Average total assets continue to increase. These assets have grown 6.4%, 5.5%, and 3.9% in 1998, 1997, and 1996, respectively. This increase is a result of the growth of non-interest bearing demand deposits in 1998 and time deposits in 1996, 1997 and 1998. Non-interest bearing demand deposits increased $2.224 million in 1998 or 13.2% and an increase of $.744 million in 1997 or 3.9% over the 1996 balance. Time deposits increased $1.550 million or 8.1% in 1998 over the 1997 amounts and $1.344 million or 7.6% in 1997 over the 1996 amounts. The year end balance sheet reflects an increase of $9.045 million or 14.0% in total assets. Federal funds sold reflected an increase of $6.100 million or 248.98% from 1997. During the same period, total securities increased by $3.317 million or 12.60%. In addition, total deposits increased $7.962 million or 14.25% in comparing 1998 to 1997. For the same period, there was an increase of $.933 million in stockholders' equity. STATEMENT OF INCOME ANALYSIS Net interest income on a taxable-equivalent basis was $3.324 million in 1998, an increase of $.165 million, or 5.22% compared to 1997. In 1997, net interest income was $3.159 million, an increase of $.155 million, or 3.74% over the prior year. The net interest margin for 1998 was 5.32% compared to 5.39% in 1997 and 5.49% for 1996. Table 1 summarizes average balances, income and average yields on earning assets and expense and average rates paid on interest bearing liabilities. Table 2 analyzes the change in net interest income for the two most recent annual intervals. The increase in the average balances of loans, securities available for sale, and short-term investments had a positive effect on the change in net interest margin from 1997 to 1998. However, this effect was partially negated by the decrease in average rates earned on these assets. The increase in the average balance on time and saving deposits also had an impact on the change in the net interest margin from 1997 to 1998. PROVISION FOR POSSIBLE LOAN LOSSES. The provision for possible loan losses was $-0- in 1998, 1997 and 1996. As a percentage of outstanding loans, the allowance for possible loans losses was 2.12%, 2.11% and 2.12% at December 31, 1998, 1997 and 1996, respectively. The annual provision is determined by the level of net charge offs, the size of the loan portfolio, the level of nonperforming loans, anticipated economic conditions, and review of financial condition of specific customers. -6- 8 NON-INTEREST INCOME. There have been immaterial variances in most non-interest income accounts for the three year period ended 1998. The Bank's management realizes that non-interest income will become increasingly important as deregulation continues to impact the net interest margin; therefore, we are continuously evaluating new opportunities for fee revenues through proper pricing of services and the development of new sources of non-interest revenue. NON-INTEREST EXPENSE. In comparing 1998 to 1997, there were immaterial variances between years. These increases are mainly due to increases in overall salaries for the three year period. INCOME TAXES. The Company recorded income tax expense of $407,896 in 1998 as compared to an expense of $405,265 in 1997. Effective January 1, 1992, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Due to limitations related to the valuation of deferred tax assets, there was no cumulative effect adjustment at adoption. At December 1996, the valuation reserve was removed resulting in a reduction in income tax expense of $61,938. This change in accounting principle enabled the Company to more clearly reflect the impact of net operating loss carryforwards on results of operations. Previously, these tax benefits were required to be reported as extraordinary income. BALANCE SHEET AND CAPITAL FUNDS ANALYSIS Investment securities are a major use of funds by the Bank. The balance at December 31, 1998 was $29,714,218 which represented a $3,317,108 or 12.57% increase from the $26,397,110 balance outstanding at December 31, 1997. Investment securities serve several purposes. A portion of investment securities provides liquidity or secondary reserves, which management can use, if necessary, to meet loan demand or deposit withdrawals. Investment securities, especially obligations of state and political subdivisions, provide for schools, road construction, sewers, and various other projects. The Bank invests a portion of these funds in the market area as a service to the community in which it operates. The remainder of these funds are invested in obligations of the United States Government or its agencies. It is management's policy to minimize risk in investments and provide liquidity by investing in short-term maturities with quality ratings. While a substantial portion of the investment portfolio is pledged on public deposits (39%), this is less than 1997 pledged percentage of 55%. The amount of public funds on deposit has been increasing slightly for the last three years and management anticipates this source of deposits will not grow substantially in the future. On January 1, 1994, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which requires the classification of securities into one of three categories: trading, available for sale or held to maturity. Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates this classification periodically. The Bank's primary use of funds is to meet loan demand. Loans, net of unearned income, were $28,058,357 at December 31, 1998, compared to $28,434,531 at December 31, 1997. This $376,174 or 1.32% decrease is the result of increased competition in the market area. -7- 9 The Bank attracts deposits from consumers and businesses, and also utilizes its access to the money markets to purchase funds to support the asset side of the balance sheet. The two primary sources of funds may be classified as "interest-bearing deposits" and "non-interest bearing deposits." "Interest-bearing deposits" consist of time deposits, savings accounts, NOW accounts and Money Market deposit accounts. The largest source of "non-interest bearing deposits" is demand deposits, which consist of gross demand deposits less reciprocal balances with our correspondent banks. As of December 31, 1998, total deposits increased $7,962,237 or 14.25% from December 31, 1997. The most significant change in deposits from 1997 to 1998 were increases in NOW and non-interest bearing demand deposit accounts of $2,375,091 or 27.64% and $3,701,505 or 21.37%, respectively. The increase in NOW accounts is attributable to an increase in deposits in 1998 as compared to 1997 by a local public body. The increase in non-interest bearing accounts is attributable to an increase in commercial accounts in 1998. Shareholders' equity increased $932,823 or 10.96% from December 31, 1997 to December 31, 1998. The equity or book value of the Bank is the shareholders' investment in the Bank resulting from the sale of stock and the accumulation of earnings retained by the Bank. The strength of the Bank and its ability to grow depends to a great extent on management's ability to maintain a corresponding growth in shareholders' equity. We declared cash dividends in the amount of $148,134 or $1.25 per share in 1998 and $132,000 or $1.10 per share in 1997. Dividends of $120,000 or $1.00 per share were declared in 1996. NONPERFORMING ASSETS AND PAST DUE LOANS. Nonperforming assets are loans carried on a nonaccrual basis, those classified as restructured loans (loans with below-market interest rates or other concessions due to the deteriorated financial condition of the borrower), repossessed real estate, property in the process of being repossessed and repossessed movable property. A loan is placed on nonaccrual when, in management's judgment, the borrower's financial condition has deteriorated to the point that his ability to service the principal and/or interest is in doubt. At that time, any accrued interest on the loan is reversed and accruing of interest is discontinued. The Company's nonperforming assets consist primarily of a pool of automobile loans by individual borrowers outside of the Bank's market area. Nonperforming assets at December 31, 1998 were $205,549, a decrease of $179,580 or 46.63% from December 31, 1997. The most significant decrease in nonperforming assets from 1997 to 1998 was in the loans on nonaccrual status. This resulted primarily from collections on a group of automobile loans purchased in 1996. Other real estate and repossessed assets also were reduced by $6,899 or 99.99% at December 31, 1998. The Bank has experienced little activity in other real estate since 1994. Management anticipates this favorable trend to continue. As of January 1, 1995, the Company adopted SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," which, as it relates to in-substance foreclosures, requires that a creditor continue to classify these assets as loans on the balance sheet unless the creditor receives physical possession of the collateral. The Company had no in-substance foreclosures in 1998, 1997 or 1996. At December 31, 1998, the recorded investment in loans that were considered to be impaired under SFAS No. 114 was $144,797, with the related reserve for possible loan losses of $100,000. These loans are included in nonaccrual loans in Table 7. -8- 10 LIQUIDITY. Liquidity is the ability to ensure that adequate funds are available to satisfy contractual liabilities, fund operations, meet withdrawal requirements of depositors, and provide for customers' credit needs in a timely manner. The liquidity position of the Bank is founded on a stable base of core deposits. The primary source of liquidity for the Bank is its short-term investments. The Bank has overnight fund lines with correspondent banks providing additional sources of liquidity. Securities available for sale also provide a major source of liquidity to the Bank, as do the cash flows from repayments and maturities of its loan portfolio. The franchise from which the Bank operates allows access to a broad base of retail customers, and management has been successful at attracting additional deposits when a continuing need for further funding has arisen. The Bank's core deposit base is supplemented by public fund time deposits and federal funds obtained through correspondent relationships. At the Parent Company (American Bancorp, Inc.) level, cash is needed to fund operations and to pay dividends. During December 31, 1998, the Parent Company received $216,134 from the Bank in dividends. The majority of these funds were used to pay dividends to stockholders. The purpose of liquidity management is to assure that the Bank has the ability to raise funds to support asset growth, meet deposit withdrawal, maintain reserve requirements and otherwise operate the Bank on a continuing basis. Liquidity for the Bank is provided by the acquisition of additional funds in the form of deposits, borrowing such as federal funds, investment maturities and sales, and loan maturities and repayments. In recognition of the increased pace of deregulation and increasing competition, the Bank will continue to increase its competitive position in the area to assure the availability of funds. The Bank's reputation, capital position and base of deposits will help to insure flexibility and liquidity. CAPITAL ADEQUACY. The management of capital is a continuous process which consists of providing capital for anticipated growth of the Bank. An evaluation of capital adequacy cannot be made solely in terms of total capital or related ratios. A more comprehensive indication of financial strength is management's ability to generate capital through the retention of earnings. The Bank's main source of capital during the last several years has been cumulative earnings derived through profitable operations. In 1992, the Federal Deposit Insurance Corporation (FDIC) issued regulations for the classification of banks based on their capital levels pursuant to the Federal Deposit Insurance Corporation Improvement Act passed by Congress in 1991. The rules place each bank into one of the nine risk categories for assessing risk-based deposit premiums based on capital ratios and on other supervisory information. Three capital categories are used for capital ratios ranging from "well capitalized" to "undercapitalized." The regulations define "well capitalized" banks as those banks with at least 6% Tier 1 risk-based capital ratio, 10% total risk-based capital ratio and a 5% leverage ratio. Banks are also assigned to one of three supervisory subgroups ranging from "healthy" to "substantial supervisory concern." The Bank is included in the top rating categories for both capital ratios and the supervisory subgroup. At December 31, 1998, the Bank had a Tier 1 risk-based capital ratio of 27.47% and 28.72% total risk-based capital ratio. The leverage ratio has increased to 13.36% at December 31, 1998. The Bank presently meets or exceeds all required risk-based capital standards and anticipates no difficulty in maintaining those standards. -9- 11 FAIR VALUES OF FINANCIAL INSTRUMENTS. Statement of Financial Accounting Standards No. 107, "Disclosures About Fair Values of Financial Instruments" requires disclosure of estimated fair values of financial instruments. Financial instruments are defined as cash and contractual rights and obligations that require settlement, directly or indirectly, in cash. Note 15 to the consolidated financial statements provides information regarding the fair values of financial instruments as of December 31, 1998. MARKET RISK. Market risk is the effect that interest rate changes in market interest rates have on a Bank's earnings and its underlying economic value. Changes in interest rates affect a Bank's earnings by changing its net interest income and the level of other sensitive income and operating expenses. The underlying economic value of the Company's assets, liabilities, and off-balance sheet instruments also are affected by changes in interest rates. These changes occur because the present value of future cash flows, and in some cases the cash flows themselves, change when interest rates change. The combined effects of the changes in these present values reflect the change in the Bank's underlying economic value. Table 14 presents the Bank's Interest Rate Sensitivity Analysis. The table is prepared utilizing present value calculations. Present value is the future cash flows of a financial instrument, or portfolio of financial instruments, discounted to the present. The discount rate is constructed by the use of the build-up approach or the risk premium approach. The build-up approach views the discount rate as consisting of four components. They are risk-free rate, credit risk, operating expense, and prepayment option price. Risk-free rate forms the foundation of the discount rate and is derived from the Treasury yield curve. The credit risk component is the annualized yield needed to cover the loss of value expected over the entire life of a portfolio. The operating expense component respresents an annualized cost rate derived from operating expense allocations. This component is used to adjust the risk-free rate in order to compensate for operating expenses. The prepayment option price is the final component, and represents a basis point adjustment to the risk-free rate to reflect the value of imbedded prepayment options. The risk premium approach views the discount rate as the sum of two components: the risk-free rate, and a risk premium. The risk-free rate is the same as defined above. The risk premium is the annualized yield needed to cover the risk reflected in the portfolio. This risk premium incorporates all forms of risk in a single spread to the Treasury yield curve. Consistent with an entry rate concept of selecting a discount rate, the marginal pricing rate for each account serves as the basis for determining an appropriate risk premium to the Treasury yield curve. This risk premium is calculated by subtracting the value on the Treasury yield curve which corresponds to the average maturity of the account from the account's marginal pricing rate. The build-up approach is used for loans, deposits, and short-term borrowing. The risk premium approach is used for securities and short-term investments. The cash flows for all assets and liabilities are estimated based upon reasonable assumptions on the time remaining until maturity, repricing frequency, decay factors, and prepayment rates. These assumptions are either based on historical trends or available industry accepted information. -10- 12 The effect of an increase in 200 basis points from December 31, 1998 rates would be a reduction of $.589 million in total market value of shareholders' equity or a 5.45% decrease in the market value of the portfolio equity. A decrease of 200 basis points from December 31, 1998 rates would result in an increase of $.326 million or a 3.01% increase in the market value of the portfolio equity. The effect on earnings is also reflected in Table 14. A 200 basis point increase on the assets and liabilities outstanding as of December 31, 1998 would result in an increase in net income of $.153 million or a 15.26% increase in net income. A 200 basis point decrease on the assets and liabilities outstanding as of December 31, 1998 would have the opposite effect and would result in a decrease of net income in the amount of $.165 million or a 16.42% decrease in net income. Computation of prospective effects of hypothetical interest rate changes are based on many assumptions, including relative levels of market interest rates, loan prepayments, and deposits decay. They should not be relied upon as indicative of actual results. Further, the computations do not contemplate certain actions that management could undertake in response to changes in interest rates. The Bank does not invest in derivatives and has none in its securities portfolio. YEAR 2000. Many computer systems and software programs which run date-sensitive applications utilize two digits to define an applicable year rather than using four digits. The Year 2000 issue results from the possibility that these systems may read the "00" during the year 2000 as the year 1900. This problem effects all companies and organizations using computerized information systems. American Bancorp, Inc. formed the "Y2K (Year 2000) Steering Committee" in 1997 to address the Year 2000 issue. The objective of this committee was to detail a plan of action for conversion of its computer applications to Year 2000 compliant applications, to ensure compliance with all "Federal Financial Institutions Examination Council" ("FFIEC") regulations regarding the Year 2000 by the end of the second quarter 1999, and to ensure uninterrupted service to its customers. The Bank has undertaken an extensive awareness campaign both internally and externally in an effort to maintain heightened awareness of Year 2000 implications to its employees, Board of Directors, suppliers and customers. The Bank developed a comprehensive inventory and risk assessment plan to identify all systems and processes which could potentially be effected by the century date change. Because core processing systems are acquired from third party vendors, the Bank has very little control over the remediation of these systems. However, the Bank has maintained close contact with its core system and all other vendors identified in the inventory and risk assessment, complying with FFIEC guidelines regarding assessment of the status of these third party vendor's Year 2000 readiness efforts. As of December 31, 1998, all of the Bank's core processing systems had been replaced or upgraded with Year 2000 compliant systems and software. The majority of these systems and processes have been tested. Those systems and processes not tested at year end are scheduled for testing during the first quarter of 1999. As of December 31, 1998, the Bank incurred costs related to the Year 2000 issue of approximately $14,000 and anticipates an additional $3,000 in expenditures for the 1999 fiscal year. -11- 13 The Company's estimated investment costs and estimated time period set forth above are based on management's current estimates, which are based on numerous assumptions about future events. Actual results could differ from those estimates. Because of the critical nature of the Year 2000 issue to the Company, if necessary modifications are not made, operations of the Company could be materially impacted. However, because management feels remediation efforts are on schedule to achieve Year 2000 compliance, an adverse impact on the Company's operations is not expected. THE DISCUSSION ABOVE ENTITLED "YEAR 2000," INCLUDES CERTAIN "FORWARD LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 ("PSLRA"). THIS STATEMENT IS INCLUDED FOR THE EXPRESS PURPOSE OF AVAILING AMERICAN BANCORP, INC. OF THE PROTECTIONS OF THE SAFE HARBOR PROVISIONS OF THE PSLRA. MANAGEMENT'S ABILITY TO PREDICT RESULTS OR EFFECTS OF YEAR 2000 ISSUES IS INHERENTLY UNCERTAIN, AND IS SUBJECT TO FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED. FACTORS THAT COULD AFFECT THE ACTUAL RESULTS INCLUDE THE POSSIBILITY THAT REMEDIATION EFFORTS AND CONTINGENCY PLANS WILL NOT OPERATE AS INTENDED, THE COMPANY'S FAILURE TO TIMELY OR COMPLETELY IDENTIFY ALL SOFTWARE AND HARDWARE APPLICATIONS REQUIRING REMEDIATION, UNEXPECTED COSTS, AND THE UNCERTAINTY ASSOCIATED WITH THE IMPACT OF YEAR 2000 ISSUES ON THE BANKING INDUSTRY AND ON THE COMPANY'S CUSTOMERS, VENDORS, AND OTHERS WITH WHOM IT CONDUCTS BUSINESS. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD LOOKING STATEMENTS. -12- 14 TABLE 1 SUMMARY OF CONSOLIDATED NET INTEREST INCOME Fully taxable equivalent basis (In thousands)
1998 -------------------------------- AVERAGE AVERAGE BALANCE INTEREST RATE -------- -------- -------- ASSETS Short-term investments $ 5,732 $ 309 5.39% Loans, net of unearned income (1) (2) 28,548 2,639 9.24 Securities available for sale (1) (3) 19,113 1,237 6.47 Securities held to maturity 9,092 585 6.43 -------- -------- -------- Total interest earning assets 62,485 4,770 7.63% Allowance for possible loan losses (602) Cash and due from banks 4,093 Other assets 2,496 -------- Total assets $ 68,472 ======== LIABILITIES Interest-bearing demand deposits $ 11,104 $ 216 1.95% Savings deposits 9,223 250 2.71 Time deposits 19,747 978 4.95 Short-term borrowings 29 2 6.90 -------- -------- Total interest-bearing liabilities 40,103 1,446 3.61% -------- -------- Non-interest bearing demand deposits 19,070 Other liabilities 357 -------- Total liabilities 59,530 SHAREHOLDERS' EQUITY Shareholders' equity 8,942 -------- Total liabilities and shareholders' equity $ 68,472 ======== Total interest expense related to earning assets 2.31% -------- Net interest income $ 3,324 ======== Net interest margin 5.32% ========
(1) Interest income earned on nontaxable investment securities and certain loans are exempt from taxation. However, an adjustment has been made for the tax preference item related to nontaxable securities purchased after December 31, 1982. An incremental tax rate of 34% is used to compute the taxable equivalent adjustment for 1998, 1997, and 1996. (2) For purposes of yield computations, non-accrual loans are included in loans outstanding. (3) Yield computations are based on historical cost of securities available for sale. -13- 15
1997 1996 ----------------------------------------------------------------------- AVERAGE AVERAGE AVERAGE AVERAGE BALANCE INTEREST RATE BALANCE INTEREST RATE -------- -------- -------- -------- -------- -------- $ 4,612 $ 251 5.44% $ 4,623 $ 247 5.34% 27,797 2,572 9.25 27,635 2,596 9.39 10,922 756 6.92 16,635 1,041 6.26 15,270 977 6.40 6,537 490 7.50 -------- -------- -------- -------- 58,601 4,556 7.77% 55,430 4,374 7.89% -------- -------- -------- -------- (604) (621) 3,963 3,775 2,424 2,428 -------- -------- $ 64,384 $ 61,012 ======== ======== $ 11,752 $ 229 1.95% $ 11,510 $ 222 1.93% 8,374 227 2.71 8,597 234 2.72 19,003 941 4.95 17,659 870 4.93 -- -- -- 66 3 4.55 -------- -------- -------- -------- 39,129 1,397 3.57% 37,832 1,329 3.51% -------- -------- -------- -------- 16,846 15,530 310 399 -------- -------- 56,285 53,761 8,099 7,251 -------- -------- $ 64,384 $ 61,012 ======== ======== 2.38% 2.40% -------- ======== $ 3,159 $ 3,045 ======== ======== 5.39% 5.49% ======== ========
-14- 16 TABLE 2 RATE/VOLUME ANALYSIS Fully taxable equivalent basis (In thousands)
YEAR ENDED DECEMBER 31, --------------------------- 1998/1997 --------------------------- INCREASE (DECREASE) DUE TO CHANGE IN: (1) --------------------------- AVERAGE AVERAGE NET BALANCE RATE CHANGE --------- -------- ------- Interest income: Short-term investments ............................. $ 61 $ (3) $ 58 Loans, net of unearned income (2) .................. 69 (2) 67 Securities available for sale (3) .................. 549 (68) 481 Securities held to maturity ........................ (396) 4 (392) ----- ----- ----- Total interest income ........................... 283 (69) 214 ----- ----- ----- Interest expense: Demand deposits .................................... (13) -- (13) Savings deposits ................................... 23 -- 23 Time deposits ...................................... 37 -- 37 Short-term borrowing ............................... 1 1 2 ----- ----- ----- Total interest expense .......................... 48 1 49 ----- ----- ----- Taxable-equivalent net interest income ................ $ 235 $ (70) $ 165 ===== ===== =====
(1) The change in interest due to both rate and volume has been allocated to rate and volume changes in proportion to the relationship of the absolute dollar amounts of the change in each. (2) Non-accrual loans are included in loans outstanding. (3) Yield computations are based on historical cost of securities available for sale. -15- 17
YEAR ENDED DECEMBER 31, - --------------------------- 1997/1996 - --------------------------- INCREASE (DECREASE) DUE TO CHANGE IN: (1) - --------------------------- AVERAGE AVERAGE NET BALANCE RATE CHANGE - --------- -------- ------- $ (1) $ 5 $ 4 15 (39) (24) 316 (50) 266 (86) 22 (64) ----- ----- ----- 244 (62) 182 ----- ----- ----- 5 2 7 (6) (1) (7) 66 5 71 (2) (2) (4) ----- ----- ----- 63 4 67 ----- ----- ----- $ 181 $ (66) $ 115 ===== ===== =====
-16- 18 TABLE 3 SECURITIES PORTFOLIO (In thousands)
DECEMBER 31, 1998 DECEMBER 31, 1997 ------------------------------- ------------------------------- HELD TO AVAILABLE HELD TO AVAILABLE MATURITY FOR SALE TOTAL MATURITY FOR SALE TOTAL ------- ------- ------- ------- ------- ------- U.S. Treasury ................ $ 2,696 $ 3,553 $ 6,249 $ 3,692 $ 2,009 $ 5,701 U.S. Government and Agencies .................. 3,005 9,002 12,007 10,512 5,532 16,044 Mortgage-Backed Securities ................ -- 4,455 4,455 -- 1,210 1,210 State and Political Subdivisions .............. -- 6,907 6,907 -- 3,442 3,442 Equity Securities ............ -- 97 97 -- -- -- ------- ------- ------- ------- ------- ------- $ 5,701 $24,014 $29,715 $14,204 $12,193 $26,397 ======= ======= ======= ======= ======= =======
-17- 19 TABLE 4 MATURITY DISTRIBUTION AND SECURITIES PORTFOLIO YIELDS (In thousands)
AFTER AFTER ONE BUT FIVE BUT WITHIN ONE WITHIN FIVE WITHIN TEN YEAR AMT. YIELD YEARS AMT. YIELD YEARS AMT. YIELD ------- ------- ------- ------- ------- ------- December 31, 1998: Held to maturity: U.S. Treasury ......................... $ 2,496 6.25% $ 200 4.54% $ -- -- % U.S. Government and Agencies ....................... 506 6.22 1,999 6.91 500 7.03 ------- ------- ------- ------- ------- ------- Total held to maturity ......... 3,002 6.24% 2,199 6.69% 500 7.03% ------- ------- ------- ------- ------- ------- Available for sale: U.S. Treasury ......................... -- -- % 3,553 5.75% -- -- % U.S. Government and Agencies ....................... -- -- 7,966 6.25 1,036 6.06 Mortgage-Backed Securities (2) ..................... -- -- 669 6.85 2,301 5.77 State and Political Subdivisions (1) ................... 222 7.48 3,011 7.16 3,113 7.12 Equity Securities ..................... 97 -- -- -- -- -- ------- ------- ------- ------- ------- ------- Total available for sale ........ 319 7.48% 15,199 6.34% 6,450 6.47% ------- ------- ------- ------- ------- ------- Total securities ................ $ 3,321 6.33% $17,398 6.38% $ 6,950 6.51% ======= ======= ======= ======= ======= =======
(1) Tax exempt yields are expressed on a fully taxable equivalent basis. (2) Distributed by contractual maturity without regard to repayment schedules or projected payments. -19- 20
AFTER TEN TOTAL YEARS AMT. YIELD AMOUNT YIELD ------- ------- ------- ------- $ -- -- % $ 2,696 6.12% -- -- 3,005 6.81 ------- ------- ------- ------- -0- -- % 5,701 6.49% ------- ------- ------- ------- -- -- % 3,553 5.75% -- -- 9,002 6.23 1,485 6.82 4,455 6.28 561 7.11 6,907 7.15 -- -- 97 -- ------- ------- ------- ------- 2,046 6.90% 24,014 6.43% ------- ------- ------- ------- $ 2,046 6.90% $29,715 6.44% ======= ======= ======= =======
-20- 21 TABLE 5 LOAN PORTFOLIO The amounts of loans outstanding for the three years ended December 31, 1998 are shown in the following table according to type of loan (in thousands).
1998 1997 1996 -------- -------- -------- Commercial, financial and agricultural ...... $ 7,666 $ 7,549 $ 7,437 Real Estate - Construction .................. 51 359 285 Real Estate - Mortgage ...................... 15,361 15,543 16,278 Installment ................................. 4,981 4,984 4,925 -------- -------- -------- Total ............................... 28,059 28,435 28,925 Less: Allowance for possible loan losses ........ (596) (600) (614) Unearned income ........................... -- -- -- -------- -------- -------- $ 27,463 $ 27,835 $ 28,311 ======== ======== ========
- -------------------------------------------------------------------------------- TABLE 6 LOAN MATURITY AND INTEREST RATE SENSITIVITY The following table shows the amount of commercial, financial and agricultural loans, real estate-construction loans and real estate mortgage loans, exclusive of installment loans, outstanding as of December 31, 1998 which, based on remaining scheduled repayments of principal, are due in the amounts indicated. Also, the amounts due after one year are classified according to the sensitivity to the changes in interest rates (in thousands).
ONE YEAR OVER ONE OR TO OVER LESS (1) 5 YEARS 5 YEARS TOTAL ------- ------- ------- ------- Maturity of Loans: Commercial, financial and agricultural ....................... $ 4,620 $ 3,200 $ 195 $ 8,015 Real Estate - mortgage and construction ....................... 2,550 9,280 3,233 15,063 ------- ------- ------- ------- Total ............................ $ 7,170 $12,480 $ 3,428 $23,078 ======= ======= ======= ======= Interest Rate Sensitivity of Loans: With predetermined interest rates .... $ 4,177 $10,377 $ 388 $14,942 With floating interest rates (2) ..... 2,993 2,103 3,040 8,136 ------- ------- ------- ------- Total ............................ $ 7,170 $12,480 $ 3,428 $23,078 ======= ======= ======= =======
(l) Includes demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts. (2) The floating interest rate loans generally fluctuate according to a formula based on a prime rate. -21- 22 TABLE 7 NONPERFORMING ASSETS Nonperforming assets include nonaccrual loans, loans which are contractually 90 days past due, restructured loans, and foreclosed assets. Restructured loans are loans which, due to a deteriorated financial condition of the borrower, have a below-market yield. Interest payments received on nonperforming loans are applied to reduce principal if there is doubt as to the collectibility of the principal; otherwise, these receipts are recorded as interest income. Certain nonperforming loans that are current as to principal and interest payments are classified as nonperforming because there is a question concerning full collection of both principal and interest. Nonperforming assets totaled $205,549 at year ended 1998, a $179,580 (46.63%) decrease from the prior year. Nonperforming assets totaled $385,129 at December 31, 1997, which was a decrease of $218,791 (36.23%) from December 31, 1996. The composition of nonperforming assets for the past three years are illustrated below.
1998 1997 1996 -------- -------- -------- Nonperforming loans: Loans on nonaccrual ....................... $144,797 $308,059 $496,490 Restructured loans which are not on nonaccrual ........................... 60,751 70,170 93,630 -------- -------- -------- Total nonperforming loans ............. 205,548 378,229 590,120 Other real estate and repossessed assets received in complete or partial satisfaction of loan obligations .............................. 1 6,900 13,800 -------- -------- -------- Total nonperforming assets ........... $205,549 $385,129 $603,920 ======== ======== ======== Loans contractually past due 90 days or more as to principal or interest but which are not on nonaccrual .............................. $ 14,718 $ 8,649 $ 27,434 ======== ======== ========
At December 31, 1998, the Bank has loans outstanding to multiple numbers of borrowers engaged in the medical industry and the legal profession. The loans to the medical industry were approximately $5,890,000, while the loans to the legal profession were approximately $2,746,000. There were no significant nonperforming loans outstanding in these two concentrations. -22- 23 TABLE 8 ALLOWANCE FOR POSSIBLE LOAN LOSSES (In Thousands)
YEAR ENDED DECEMBER 31, -------------------------------------------- 1998 1997 1996 -------- -------- -------- Beginning balance ................................ $ 600 $ 614 $ 624 -------- -------- -------- Provision charged against income ................. -0- -0- -0- -------- -------- -------- Charge-offs: Commercial, financial and agricultural loans ... -- (1) -- Real estate mortgage loans ..................... -- -- -- Real estate construction loans ................. -- -- -- Installment loans .............................. (15) (16) (18) -------- -------- -------- Total charge-offs ............................ (15) (17) (18) -------- -------- -------- Recoveries: Commercial, financial and agricultural loans ... -- -- 5 Real estate mortgage loans ..................... -- -- 1 Real estate construction loans ................. -- -- -- Installment loans .............................. 11 3 2 -------- -------- -------- Total recoveries ........................... 11 3 8 -------- -------- -------- Net (charge-offs) recoveries ..................... (4) (14) (10) -------- -------- -------- Ending balance ................................... $ 596 $ 600 $ 614 ======== ======== ======== Ratio of net (charge-offs) recoveries during the period to average loans outstanding during the period .............................. (.01)% (.05)% (.04)% ======== ======== ========
-23- 24 TABLE 9 ALLOCATION FOR POSSIBLE LOAN LOSSES (In thousands) The allowance for possible loan losses has been allocated according to the amount deemed to be reasonably necessary to provide for the possibility of losses being incurred within the following categories of loans at the date indicated.
DECEMBER 31, 1998 DECEMBER 31, 1997 ---------------------- ---------------------- % OF LOANS % OF LOANS OUTSTANDING OUTSTANDING TO TOTAL TO TOTAL ALLOWANCE LOANS ALLOWANCE LOANS -------- -------- -------- -------- Commercial, financial and agricultural loans ............. $ 135 27.32% $ 218 26.55% Real estate construction .......... 1 .18 5 1.27 Real estate mortgage loans ........ 272 54.75 97 54.66 Installment loans ................. 188 17.75 280 17.52 -------- -------- -------- -------- $ 596 100.00% $ 600 100.00% ======== ======== ======== ========
DECEMBER 31, 1996 ------------------------- % OF LOANS OUTSTANDING TO TOTAL ALLOWANCE LOANS -------- ----------- Commercial, financial and agricultural loans ............. $ 201 25.71% Real estate construction .......... 3 .98 Real estate mortgage loans ........ 146 56.28 Installment loans ................. 264 17.03 -------- -------- $ 614 100.00% ======== ========
-24- 25 TABLE 10 DEPOSITS The following table presents the average balance and an average rate paid on deposits (in thousands):
DECEMBER 31, -------------------------------------------------------------------------- 1998 1997 1996 ------------------------- -------------------- ----------------------- AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE BALANCE RATE BALANCE RATE BALANCE RATE --------- --------- --------- -------- --------- --------- Non-interest bearing demand deposits ............ $ 19,070 -- % $ 16,846 -- % $ 15,530 -- % Interest bearing demand deposits ............ 11,104 1.95 11,752 1.95 11,510 1.93 Savings deposits ............. 9,223 2.71 8,374 2.71 8,597 2.72 Time deposits ................ 19,747 4.95 19,003 4.95 17,659 4.93 Short-term borrowings ........ 29 6.90 -- -- 66 4.55 --------- --------- --------- Total ............... $ 59,173 $ 55,975 $ 53,362 ========= ========= =========
- -------------------------------------------------------------------------------- TABLE 11 CERTIFICATES OF DEPOSIT OF $100,000 OR MORE, MATURITY DISTRIBUTION The following table provides the maturities of time certificates of deposit of the Bank in amounts of $100,000 or more (in thousands):
DECEMBER 31, ---------------------------------- 1998 1997 1996 -------- -------- -------- Maturing in: 3 months or less .................... $ 2,587 $ 2,289 $ 2,801 Over 3 months less than 6 months .... 920 700 717 Over 6 months less than 12 months ... 500 300 897 Over 12 months ...................... -- 217 -- -------- -------- -------- Total ......................... $ 4,007 $ 3,506 $ 4,415 ======== ======== ========
-25- 26 TABLE 12 RISK-BASED CAPITAL (In thousands)
DECEMBER 31, -------------------------- 1998 1997 ---------- ---------- Risk-weighted assets ............................. $ 33,315 $ 31,967 ========== ========== Capital: Tier I ........................................ $ 9,153 $ 8,352 Tier II ....................................... 416 400 ---------- ---------- Total capital .............................. $ 9,569 $ 8,752 ========== ========== Ratios: Tier I capital to risk-weighted assets ........ 27.47% 26.13% Tier II capital to risk-weighted assets ....... 1.25 1.25 ---------- ---------- Total capital to risk-weighted assets ...... 28.72% 27.38% ========== ========== Leverage - Tier I capital to total average assets ............................. 13.36% 12.97% ========== ==========
- -------------------------------------------------------------------------------- TABLE 13 RETURN ON EQUITY AND ASSETS The following table shows consolidated operating and capital ratios for each of the last three years:
DECEMBER 31, --------------------------------- 1998 1997 1996 ------- ------- ------- Return on average total assets .............. 1.47% 1.47% 1.70% Return on average shareholders' equity ...... 11.27% 11.70% 14.32% Dividend payout ratio ....................... 14.76% 13.92% 11.56% Average equity to average assets ratio ...... 13.06% 12.58% 11.88%
-26- 27 TABLE 14 INTEREST RATE SENSITIVITY ANALYSIS DECEMBER 31, 1998 (In thousands)
RATES ---------------------- FORECAST +200 BP -200 BP -------- -------- -------- Economic value at risk: Total assets .................................. $ 73,632 Bank equity ................................... $ 9,409 Market value of portfolio equity .............. $ 10,815 $ 10,226 $ 11,141 Market value to book value of equity .................................. 1.15 1.09 1.18 Amount of change in market value of portfolio equity ........................... $ (589) $ 326 Percent change in market value of portfolio equity ........................... (5.45)% 3.01% Total securities market value premium percentage ................................. 1.41% (4.59)% 7.58% Net loans present value premium percentage ................................. 3.13% .59% 5.66% Total deposits present value premium percentage ................................. .79% 2.98% (1.83)% Earnings at risk: January 1 to December 31, 1999 - Interest margin on earning assets ..... 4.90% 5.24% 4.54% Amount of change in interest margin on earning assets ........... .34% (.36)% Net interest income ................... $ 3,153 $ 3,383 $ 2,906 Amount of change in net interest income .................... $ 230 $ (247) Percent change in net interest income ............................. 7.29% (7.84)% Net income ............................ $ 1,002 $ 1,155 $ 837 Amount change in net income ........... $ 153 $ (165) Percent change in net income .......... 15.26% (16.42)%
-27- 28 [BROUSSARD, POCHE, LEWIS & BREAUX, L.L.P. CERTIFIED PUBLIC ACCOUNTANTS LETTERHEAD] INDEPENDENT AUDITORS' REPORT To the Shareholders and Board of Directors American Bancorp, Inc. Opelousas, Louisiana We have audited the accompanying consolidated balance sheets of American Bancorp, Inc. and subsidiary as of December 31, 1998 and 1997, and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 1998. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with 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 consolidated financial position of American Bancorp, Inc. and subsidiary as of December 31, 1998 and 1997, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. /s/ BROUSSARD, POCHE, LEWIS & BREAUX Lafayette, Louisiana January 19, 1999 -28- 29 AMERICAN BANCORP, INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1998 AND 1997
ASSETS 1998 1997 ------------ ------------ Cash and due from banks ............................... $ 4,333,107 $ 4,924,106 Short-term investments: Federal funds sold ................................. 8,550,000 2,450,000 Interest-bearing deposits with banks ............... 1,387,000 694,000 ------------ ------------ 9,937,000 3,144,000 Securities held to maturity (estimated market values $5,744,057 and $14,264,145, respectively) ...................................... 5,700,657 14,203,724 Securities available for sale ......................... 24,013,561 12,193,386 Loans, net of unearned income ($-0- and $-0-, respectively) ................................ 28,058,357 28,434,531 Less: allowance for possible loan losses ........ (595,762) (599,593) ------------ ------------ 27,462,595 27,834,938 Bank premises and equipment ........................... 1,113,368 1,227,409 Other real estate, net of allowances of $112,799 and $105,900, respectively ................ 1 6,900 Accrued interest receivable ........................... 608,776 619,977 Other assets .......................................... 497,239 466,531 ------------ ------------ $ 73,666,304 $ 64,620,971 ============ ============
See Notes to Consolidated Financial Statements. -29- 30
LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1997 ------------ ------------ LIABILITIES Deposits: Non-interest bearing demand deposits ...................... $ 21,026,282 $ 17,324,777 Interest bearing deposits: NOW accounts ........................................... 10,969,200 8,594,109 Money Market accounts .................................. 2,059,420 2,761,187 Savings ................................................ 9,159,284 8,122,017 Time deposits $100,000 or more ......................... 4,006,621 3,506,101 Other time deposits .................................... 16,598,176 15,548,555 ------------ ------------ Total deposits ...................................... 63,818,983 55,856,746 Accrued interest payable ..................................... 144,268 120,167 Other liabilities ............................................ 257,546 131,374 ------------ ------------ Total liabilities ................................... 64,220,797 56,108,287 ------------ ------------ SHAREHOLDERS' EQUITY Common stock, $5 par value; 10,000,000 shares authorized; 120,000 shares issued, 118,449 and 119,962 shares outstanding, respectively .................. 600,000 600,000 Surplus ...................................................... 2,150,000 2,150,000 Retained earnings ............................................ 6,524,015 5,664,281 Net unrealized appreciation on securities available for sale, net of tax of $131,975 and $51,729, respectively ................................. 256,187 100,417 Treasury stock, 1,551 and 38 shares at cost, respectively .... (84,695) (2,014) ------------ ------------ Total shareholders' equity ........................... 9,445,507 8,512,684 ------------ ------------ $ 73,666,304 $ 64,620,971 ============ ============
-30- 31 AMERICAN BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996 ----------- ----------- ----------- Interest income: Interest and fees on loans ...................... $ 2,642,229 $ 2,573,981 $ 2,589,227 Interest on investment securities- Taxable ...................................... 1,478,482 1,509,350 1,351,094 Tax-exempt ................................... 226,872 147,928 118,525 Federal funds sold .............................. 240,724 208,636 186,011 Deposits with banks ............................. 68,220 42,634 60,875 ----------- ----------- ----------- Total interest income ..................... 4,656,527 4,482,529 4,305,732 Interest expense: Interest on deposits ............................ 1,445,816 1,397,264 1,329,455 ----------- ----------- ----------- Net interest income ................................ 3,210,711 3,085,265 2,976,277 Provision for possible loan losses ................. -- -- -- ----------- ----------- ----------- Net interest income after provision for possible loan losses ........................ 3,210,711 3,085,265 2,976,277 ----------- ----------- ----------- Non-interest income: Service charges on deposit accounts ............. 508,135 498,551 539,449 Other ........................................... 104,250 107,847 127,104 ----------- ----------- ----------- Total non-interest income ................. 612,385 606,398 666,553 ----------- ----------- ----------- Non-interest expense: Salary and employee benefits .................... 1,198,730 1,143,226 1,104,448 Net occupancy expense ........................... 293,939 295,030 288,498 Equipment expense ............................... 246,471 267,191 263,411 Net cost (revenue) from other real estate .................................. 299 (610) (4,051) Other ........................................... 667,893 634,025 617,017 ----------- ----------- ----------- Total non-interest expense ................ 2,407,332 2,338,862 2,269,323 ----------- ----------- ----------- Income before income taxes ......................... 1,415,764 1,352,801 1,373,507 Provision for income taxes ......................... 407,896 405,265 335,198 ----------- ----------- ----------- Net income ................................ $ 1,007,868 $ 947,536 $ 1,038,309 =========== =========== =========== Net income per common share ........................ $ 8.47 $ 7.90 $ 8.65 =========== =========== ===========
See Notes to Consolidated Financial Statements. -31- 32 AMERICAN BANCORP, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
COMMON STOCK SHARES AMOUNT SURPLUS ---------- ---------- ---------- Balance, December 31, 1995 ............................ 120,000 $ 600,000 $2,150,000 Comprehensive income Net income for 1996 ........................... -- -- -- Other comprehensive income, net of tax: Changes in unrealized holding gains (losses) on securities available for sale, net of tax of $29,698 .......... -- -- -- Total comprehensive income ............... -- -- -- Dividends paid in 1996 ................................ -- -- -- ---------- ---------- ---------- Balance, December 31, 1996 ............................ 120,000 600,000 2,150,000 Comprehensive income Net income for 1997 ........................... -- -- -- Other comprehensive income, net of tax: Changes in unrealized holding gains (losses) on securities available for sale, net of tax of $51,729 .......... -- -- -- Total comprehensive income ............... -- -- -- Purchase of treasury stock ............................ -- -- -- Dividends paid in 1997 ................................ -- -- -- ---------- ---------- ---------- Balance, December 31, 1997 ............................ 120,000 600,000 2,150,000 Comprehensive income Net income for 1998 ........................... -- -- -- Other comprehensive income, net of tax: Changes in unrealized holding gains (losses) on securities available for sale, net of tax of $131,975 ......... -- -- -- Total comprehensive income ............... -- -- -- Purchase of treasury stock ............................ -- -- -- Dividends paid in 1998 ................................ -- -- -- ---------- ---------- ---------- Balance, December 31, 1998 ............................ 120,000 $ 600,000 $2,150,000 ========== ========== ==========
-33- 33
ACCUMULATED OTHER RETAINED COMPREHENSIVE TREASURY COMPREHENSIVE EARNINGS INCOME STOCK INCOME TOTAL ----------- ----------- ----------- ----------- ----------- $ 3,930,436 $ 105,063 $ -- $ -- $ 6,785,499 1,038,309 -- -- 1,038,309 1,038,309 -- (47,414) -- (47,414) (47,414) ----------- -- -- -- $ 990,895 =========== (120,000) -- -- (120,000) ----------- ----------- ----------- ----------- 4,848,745 57,649 -0- $ -- 7,656,394 947,536 -- -- 947,536 947,536 -- 42,768 -- 42,768 42,768 ----------- -- -- -- $ 990,304 -- =========== -- -- (2,014) (2,014) (132,000) -- -- (132,000) ----------- ----------- ----------- ----------- 5,664,281 100,417 (2,014) $ -- 8,512,684 1,007,868 -- -- 1,007,868 1,007,868 -- 155,770 -- 155,770 155,770 ----------- -- -- -- $ 1,163,638 -- =========== -- -- (82,681) (82,681) (148,134) -- -- (148,134) ----------- ----------- ----------- ----------- $ 6,524,015 $ 256,187 $ (84,695) $ 9,445,507 =========== =========== =========== ===========
-34- 34 AMERICAN BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996 ------------ ------------ ------------ OPERATING ACTIVITIES Net income .................................... $ 1,007,868 $ 947,536 $ 1,038,309 Adjustments to reconcile net income to net cash provided by operating activities: Premium amortization, net of discount accretion on investment securities .............................. 5,846 8,294 (9,613) Depreciation ............................... 165,247 198,377 198,895 (Gain) loss on disposal of assets .......... -- 9,862 345 (Increase) decrease in assets: Write down of other real estate owned ................................ 6,899 6,900 -- Accrued interest receivable ............. 11,201 (52,194) (16,256) Other assets ............................ (21,372) (5,802) 1,561 Increase (decrease) in liabilities: Accrued interest payable ................ 24,101 1,192 15,701 Other liabilities ....................... 45,983 19,317 (414,740) ------------ ------------ ------------ Net cash provided by operating activities ........................ 1,245,773 1,133,482 814,202 ------------ ------------ ------------ INVESTING ACTIVITIES Proceeds from sales and maturities of available for sale securities ........... 4,364,835 1,689,443 594,999 Proceeds from sales and maturities of held to maturity securities ............. 8,700,000 4,300,000 8,000,000 Purchase of available for sale securities ................................. (15,951,986) (5,177,099) (4,114,176) Purchase of held to maturity securities ................................. (199,844) (2,986,173) (7,086,352) (Increase) decrease in loans .................. 372,343 476,533 (1,921,243) Purchases of property and equipment ........... (51,206) (99,249) (100,194) Other ......................................... (9,336) (6,281) 24,459 ------------ ------------ ------------ Net cash used in investing activities ........................... (2,775,194) (1,802,826) (4,602,507) ------------ ------------ ------------
-35- 35
1998 1997 1996 ------------ ------------ ------------ FINANCING ACTIVITIES Increase (decrease) in liabilities: Demand deposits, transaction accounts and savings ............... 6,412,096 (3,830,567) 743,373 Time deposits ......................... 1,550,141 320,682 2,968,543 Dividends paid ........................... (148,134) (132,000) (120,000) Purchase of treasury stock ............... (82,681) (2,014) -- ------------ ------------ ------------ Net cash provided by (used in) financing activities ............ 7,731,422 (3,643,899) 3,591,916 ------------ ------------ ------------ Increase (decrease) in cash and cash equivalents .............................. 6,202,001 (4,313,243) (196,389) Cash and cash equivalents at beginning of year ........................ 8,068,106 12,381,349 12,577,738 ------------ ------------ ------------ Cash and cash equivalents at end of year .................................. $ 14,270,107 $ 8,068,106 $ 12,381,349 ============ ============ ============ SUPPLEMENTAL DISCLOSURES Cash payments for: Interest expense ...................... $ 1,308,437 $ 1,396,072 $ 1,313,754 ============ ============ ============ Income taxes .......................... $ 410,200 $ 433,000 $ 708,049 ============ ============ ============
See Notes to Consolidated Financial Statements. -36- 36 AMERICAN BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Accounting Policies American Bancorp, Inc. (the Company) and its subsidiary, American Bank and Trust Company (the Bank), follow generally accepted accounting principles and reporting practices applicable to the banking industry. Descriptions of significant accounting policies are summarized below: Consolidation: The consolidated financial statements include the accounts of the respective parent Company and its subsidiary. All significant intercompany accounts and transactions have been eliminated. 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 amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Securities: At January 1, 1994, the Bank adopted Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities." SFAS No. 115 requires the classification of securities into one of three categories: trading, available for sale, or held to maturity. Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates this classification periodically. Trading account securities are held for resale in anticipation of short-term market movements. Debt securities are classified as held to maturity when the Bank has the positive intent and ability to hold the securities to maturity. Securities not classified as held to maturity or trading are classified as available for sale. Trading account securities are carried at market value and are included in short-term investments. Gains and losses, both realized and unrealized, are reflected in earnings. Held to maturity securities are stated at amortized cost. Available for sale securities are stated at fair value, with unrealized gains and losses, net of tax, reported in a separate component of shareholders' equity. The amortized cost of debt securities classified as held to maturity or available for sale is adjusted for amortization of premiums and accretion of discounts to maturity or, in the case of mortgage-backed securities, over the estimated life of the security. Amortization, accretion and accruing interest are included in interest income on securities. Realized gains and losses, and declines in value judged to be other than temporary, are included in net securities gains. The cost of securities sold is determined on the specific identification method. -37- 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Loans: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal adjusted for any charge-offs, the allowance for loan losses and unearned income. Interest on loans and accretion of unearned income are computed by methods which approximate a level rate of return on recorded principal. Loan fees and costs associated with originating loans are recognized in the period in which they originate as the amounts involved are immaterial to the basic financial statements. The Company has adopted the policy of deferring all material loan fees and costs associated with originating loans as required by Statement of Financial Accounting Standards No. 91. Commercial loans are placed in nonaccrual status when, in management's opinion, there is doubt concerning full collectibility of both principal and interest. All commercial nonaccrual loans are considered to be impaired in accordance with SFAS No. 114, "Accounting by Creditors for Impairment of a Loan." Consumer loans are generally charged off when any payment of principal or interest is more than 120 days delinquent. Interest payments received on nonaccrual loans are applied to principal if there is doubt as to the collectibility of the principal; otherwise, these receipts are recorded as interest income. A loan remains in nonaccrual status until it is current as to principal and interest, and the borrower demonstrates its ability to fulfill the contractual obligation. Allowance for possible loan losses: The allowance for possible loan losses is maintained to provide for possible losses inherent in the loan portfolio. On January 1, 1995, the Company adopted SFAS No. 114, as amended by SFAS No. 118, "Accounting for Creditors for Impairment of a Loan - Income Recognition and Disclosures." Beginning in 1996, in accordance with SFAS No. 114, the allowance for possible loan losses related to loans that are identified as impaired is based on discounted cash flows using the loan's initial effective interest rate or the fair value of the collateral for certain collateral dependent loans. Prior to 1995, the allowance for possible loan losses related to these loans was based on undiscounted cash flows or the fair value of the collateral for collateral dependent loans. The allowance is based on management's estimate of future losses; actual losses may vary from the current estimate. The estimate is reviewed periodically, taking into consideration the risk characteristics of the loan portfolio, past loss experience, general economic conditions and other factors which deserve current recognition. As adjustments to the estimate of future losses become necessary, they are reflected as a provision (positive or negative) for possible loan losses in current-period earnings. However, because factors such as loan growth, the future collectibility of loans and the amounts and timing of future cash flows expected to be received on impaired loans are uncertain, the level of future provisions (positive or negative), if any, generally cannot be predicted. Actual loan losses are deducted from and subsequent recoveries are added to the reserve. -38- 38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Bank premises and equipment: Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed primarily by the straight-line method. Useful lives utilized for purposes of computing depreciation are as follows: buildings, 10 to 30 years; furniture and equipment, 3 to 10 years. Maintenance, repairs and minor improvements are charged to operating expenses. Gains or losses on dispositions are reflected currently in the Statement of Income. The Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," as of January 1, 1996. The impact on the Company's financial position and results of operations for the year ended December 31, 1996 was not material. Foreclosed assets: Collateral acquired through foreclosure or in settlement of loans is classified as either other real estate owned ("OREO") or other assets and is carried at its fair value, net of estimated costs to sell, or the remaining investment in the loan, whichever is lower. At acquisition, any excess of the recorded loan value over the estimated fair value of the collateral is charged against the allowance for possible loan losses. After acquisition, valuation allowances are established with a charge to current earnings to adjust the reported value of foreclosed assets to reflect changes in the estimate of a property's fair value or selling costs. Revenues and expenses associated with the management of foreclosed assets prior to sale are included in current earnings. Income taxes: The Company files a consolidated federal income tax return with the subsidiary Bank. The Company accounts for income taxes using the liability method. Under this method, deferred tax assets and liabilities are based on the temporary differences between the financial reporting basis and tax basis of the Company's assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. Cash and cash equivalents: Cash and cash equivalents include cash and due from banks, federal funds sold and interest bearing deposits in banks. -39- 39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Recent pronouncements: In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share" and SFAS No. 129, "Disclosure of Information About Capital Structure" which are effective for quarters ending after December 15, 1997, and fiscal years ending after December 15, 1997, respectively. The implementation of these statements did not have a material effect on its results of operations or financial statement disclosures. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information." SFAS No. 130 establishes standards for reporting and display of comprehensive income in the financial statements. Comprehensive income is the total of net income and all other non-owner changes in equity. SFAS No. 131 requires that companies disclose segment data based on how management makes decisions about allocating resources to segments and measuring their performance. SFAS Nos. 130 and 131 are effective for 1998. Adoption of these standards is not expected to have an effect on the Company's financial statements, financial position or results of operations. In March 1998, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position (SOP) 98-1, "Accounting for the Cost of Computer Software Developed or Obtained for Internal Use." SOP 98-1 is effective for financial statements for years beginning after December 15, 1998. The adoption of SOP 98-1 is not expected to have a material impact on the financial condition or operating results of the Company. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which is effective for financial statements for years beginning after June 15, 1999. Because of the limited use of derivatives, management does not anticipate that the adoption of SFAS No. 133 will have a material impact on the financial condition or operating results of the Company. Reclassifications: Certain amounts in the 1997 and 1996 financial statements have been reclassified to conform with the financial statement presentation for 1998 for comparability. These reclassifications had no effect on net income as previously reported for the 1997 and 1996 fiscal years. Note 2. Restrictions on Cash and Due From Bank Accounts The Bank is required to maintain average reserve balances by the Federal Reserve Bank. The average amount of these reserve balances was $632,000 and $534,000 for the years ended December 31, 1998 and 1997, respectively. -40- 40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 3. Investment Securities The carrying amounts of investment securities as shown in the consolidated balance sheets of the Bank and their approximate market values at December 31 were as follows:
DECEMBER 31, 1998 ----------------------------------------------------------- AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ----------- ----------- ----------- ----------- Securities held to maturity: U.S. Treasury Securities ............. $ 2,695,449 $ 22,691 $ 838 $ 2,717,302 U.S. Government and Agencies ......... 3,005,208 21,547 -- 3,026,755 ----------- ----------- ----------- ----------- $ 5,700,657 $ 44,238 $ 838 $ 5,744,057 =========== =========== =========== =========== Securities available for sale: Mortgage-Backed Securities ........... $ 4,425,163 $ 45,982 $ 15,760 $ 4,455,385 U.S. Treasury Securities ............. 3,508,363 44,545 -- 3,552,908 U.S. Government and Agencies ......... 8,932,763 71,699 2,810 9,001,652 State and Political Subdivisions ..... 6,662,209 254,273 9,766 6,906,716 Equity Securities .................... 96,900 -- -- 96,900 ----------- ----------- ----------- ----------- $23,625,398 $ 416,499 $ 28,336 $24,013,561 =========== =========== =========== ===========
-41- 41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 3. Investment Securities (continued)
DECEMBER 31, 1997 ----------------------------------------------------------- AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ----------- ----------- ----------- ----------- Securities held to maturity: U.S. Treasury Securities ................. $ 3,692,308 $ 21,065 $ 322 $ 3,713,051 U.S. Government and Agencies ............. 10,511,416 48,508 8,830 10,551,094 ----------- ----------- ----------- ----------- $14,203,724 $ 69,573 $ 9,152 $14,264,145 =========== =========== =========== =========== Securities available for sale: Mortgage-Backed Securities ............... $ 1,153,434 $ 59,198 $ 2,359 $ 1,210,273 U.S. Treasury Securities ................. 1,994,322 14,395 -- 2,008,717 U.S. Government and Agencies ............. 5,498,493 35,610 2,422 5,531,681 State and Political Subdivisions ......... 3,394,993 50,139 2,417 3,442,715 ----------- ----------- ----------- ----------- $12,041,242 $ 159,342 $ 7,198 $12,193,386 =========== =========== =========== ===========
Securities with book values of $11,604,616 and $14,421,874 at December 31, 1998 and 1997, respectively, were pledged to secure public deposits and other transactions as required by law. There were no gross-realized gains or gross-realized losses on sales of securities for the fiscal years ended December 31, 1998, 1997 or 1996. -42- 42 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The maturities of investment securities at December 31, 1998 were as follows:
SECURITIES TO BE HELD TO MATURITY ------------------------- AMORTIZED FAIR YEARS TO MATURITY COST VALUE ---------- ---------- Less than one ............................... $3,001,304 $3,026,737 Greater than one but less than five ......... 2,199,353 2,213,750 Greater than five but less than ten ......... 500,000 503,570 Greater than ten ............................ -- -- ---------- ---------- $5,700,657 $5,744,057 ========== ==========
SECURITIES AVAILABLE FOR SALE --------------------------- AMORTIZED FAIR YEARS TO MATURITY COST VALUE ----------- ----------- Less than one ............................... $ 318,465 $ 319,270 Greater than one but less than five ......... 15,030,565 15,198,578 Greater than five but less than ten ......... 6,276,743 6,450,070 Greater than ten ............................ 1,999,625 2,045,643 ----------- ----------- $23,625,398 $24,013,561 =========== ===========
Note 4. Loans Major classifications of subsidiary bank's loan portfolio at December 31, are as follows:
1998 1997 1996 ------------ ------------ ------------ Commercial, financial and agricultural ................... $ 7,666,021 $ 7,548,970 $ 7,437,376 Real estate construction .......... 50,622 358,917 285,247 Real estate mortgage .............. 15,361,086 15,543,098 16,277,777 Installment ....................... 4,980,628 4,983,546 4,925,410 ------------ ------------ ------------ 28,058,357 28,434,531 28,925,810 Unearned income ................... -- -- -- ------------ ------------ ------------ Net loans ...................... 28,058,357 28,434,531 28,925,810 Allowance for possible loan losses ......................... (595,762) (599,593) (614,339) ------------ ------------ ------------ $ 27,462,595 $ 27,834,938 $ 28,311,471 ============ ============ ============
-43- 43 The following is a summary of loans classified by type at December 31, 1998: Commercial, financial and agricultural ............................. $ 7,666,021 Real estate construction .................... 50,622 Real estate mortgage ........................ 8,164,528 ----------- Total commercial ......................... 15,881,171 ----------- Residential mortgage ........................ 7,196,558 Installment ................................. 4,980,628 ----------- Total consumer ........................... 12,177,186 ----------- Total loans .............................. $28,058,357 ===========
The following summarizes the non-performing elements of the loan portfolio and total foreclosed assets at December 31:
1998 1997 1996 -------- -------- -------- Nonperforming loans: Loans on nonaccrual ................. $144,797 $308,059 $496,490 Restructured loans which are not on nonaccrual ............ 60,751 70,170 93,630 -------- -------- -------- Total nonperforming loans .... 205,548 378,229 590,120 Other real estate and repossessed assets received in complete or partial satisfaction of loan obligations ......................... 1 6,900 13,800 -------- -------- -------- Total nonperforming assets ... $205,549 $385,129 $603,920 ======== ======== ======== Loans contractually past due 90 days or more as to principal or interest, but which are not on nonaccrual ....................... $ 14,718 $ 8,649 $ 27,434 ======== ======== ========
-44- 44 As discussed in Note 1, the Company adopted SFAS No. 114 effective January 1, 1995. The adoption of SFAS No. 114 did not have a material impact on the financial condition or operating results of the Company. At December 31, 1998, the recorded investment in loans that were considered to be impaired under SFAS No. 114 was $144,797. Included in this amount was $140,576 of the impaired loans for which the related allowance for loan losses was $100,000 and $4,221 of impaired loans that do not have an allowance for loan losses. The average recorded investment in impaired loans during the year ended December 31, 1998 was approximately $231,403. Interest payments received on impaired loans are applied to principal if there is doubt as to the collectibility of the principal; otherwise, these receipts are recorded as interest income. For the year ended December 31, 1998, the Company did not recognized income on impaired loans. As it relates to in-substance foreclosures, SFAS No. 114 requires that a creditor continue to follow loan classification on the balance sheet unless the creditor receives physical possession of the collateral. The Company has had no in-substance foreclosures for any of the periods presented. Interest income in the amount of $32,424 for 1998, $53,417 for 1997 and $59,177 for 1996 would have been recorded on nonperforming loans if they had been classified as performing. The Company recorded $4,796, $5,261 and $6,633 of interest income on nonperforming loans during 1998, 1997 and 1996, respectively. The following is a summary of the allowance for loan losses for the three years ended December 31, 1998:
1998 1997 1996 --------- --------- --------- Balance, beginning of year .......... $ 599,593 $ 614,339 $ 624,122 Provisions charged to operating expense .......................... -- -- -- Recoveries on loans ................. 11,370 2,250 7,946 Loans charged off ................... (15,201) (16,996) (17,729) --------- --------- --------- Balance, end of year ................ $ 595,762 $ 599,593 $ 614,339 ========= ========= =========
Note 5. Related Party Transactions In the ordinary course of business, loans have been made to directors and executive officers and their associates. Such loans to these related parties were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons. Loans to these related parties were approximately $1,400,278 and $1,546,942 at December 31, 1998 and 1997, respectively. The following provides an analysis of the activity with respect to loans to related parties: Balance at January 1, 1998 ............. $ 1,546,942 New loans made ......................... 1,646,016 Repayment on loans ..................... (1,792,680) ----------- Balance at December 31, 1998 ........... $ 1,400,278 ===========
-45- 45 Note 6. Bank Premises and Equipment Bank premises and equipment, at cost, consisted of the following as of December 31:
1998 1997 1996 ---------- ---------- ---------- Land ................................ $ 384,387 $ 384,387 $ 384,387 Premises and leasehold improvements ..................... 1,789,144 1,788,590 1,784,621 Furniture and equipment ............. 1,216,548 1,228,258 1,190,307 ---------- ---------- ---------- 3,390,079 3,401,235 3,359,315 Less accumulated depreciation and amortization ................. 2,276,711 2,173,826 2,022,916 ---------- ---------- ---------- Total .......................... $1,113,368 $1,227,409 $1,336,399 ========== ========== ==========
Depreciation and amortization expense included in non-interest expense was $165,247 in 1998, $198,377 in 1997, and $198,895 in 1996. Note 7. Deposits Deposit account balances at December 31, 1998 and 1997, are summarized as follows:
1998 1997 ----------- ----------- Non-interest bearing ................ $21,026,282 $17,324,777 Interest bearing demand ............. 13,028,620 11,355,296 Savings deposits .................... 9,159,284 8,122,017 Time deposits ....................... 20,604,797 19,054,656 ----------- ----------- $63,818,983 $55,856,746 =========== ===========
Time deposits maturing in years ending December 31, as of December 31, 1998: 1999..................................... $19,078,091 2000..................................... 851,223 2001..................................... 675,483 ----------- $20,604,797 ===========
The Bank held related party deposits of approximately $1,697,000 and $1,927,000 at December 31, 1998 and 1997. -46- 46 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 8. Concentrations of Credit Risk Substantially, all of the Bank's loans, commitments and standby letters of credit have been granted to customers in the Bank's market area of South Louisiana. Investments in state and municipal securities also involve governmental entities within the Bank's market area. The concentrations of credit by type of loan are set forth in Note 4. The distribution of commitments to extend credit approximates the distribution of loans outstanding. Standby letters of credit were granted primarily to commercial borrowers. The Bank, as a matter of policy, does not extend credit to any single borrower or group of related borrowers in excess of $1,375,000. At December 31, 1998, the Bank has loans outstanding to multiple numbers of borrowers engaged in the medical industry and the legal profession. The loans to the medical industry were approximately $5,890,000, while the loans to the legal profession were approximately $2,746,000. There were no significant nonperforming loans outstanding in these two concentrations. Note 9. Earnings Per Share The earnings per share computation are based on weighted average number of shares outstanding during each year of 118,965, 119,997 and 120,000 for the years ended December 31, 1998, 1997 and 1996, respectively. Note 10. Employee Benefit Plan The Bank maintains a 401(k) Savings Plan available to employees with over one year of service. The Bank matches 50% of the salary deferral, up to a maximum of 3% of compensation for 1998 and 1997, which becomes vested after five years of service. Total contributions to the plan by the Bank were $30,528 for 1998 and $15,214 for 1997. The Bank entered into a non-qualified deferred compensation plan for certain executives of the Company in 1995. The total deferred compensation expense for 1998 and 1997 was $11,574 and $10,817, respectively. -47- 47 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 11. Income Taxes The Company adopted SFAS No. 109 effective January 1, 1992. Income tax expense includes amounts currently payable and amounts deferred to or from other years as a result of differences in the timing of recognition of income and expense for financial reporting and deferral tax purposes. The components of income tax expense are as follows:
1998 1997 1996 --------- --------- --------- Current federal income tax expense ............................. $ 418,969 $ 408,433 $ 318,215 Deferred federal income tax expense (benefit) ................... (11,073) (3,168) 16,983 --------- --------- --------- $ 407,896 $ 405,265 $ 335,198 ========= ========= ========= Included in shareholders' equity: Deferred tax expense (benefit) related to the change in net unrealized gain (loss) on securities available for sale .................. $ 80,246 $ 22,031 $ (24,425) ========= ========= =========
The reconciliation of the federal statutory income tax rate to the Company's effective rate is summarized as follows for the years ended December 31:
1998 1997 1996 ------------------------- ------------------------- ------------------------- AMOUNT RATE AMOUNT RATE AMOUNT RATE --------- --------- --------- --------- --------- --------- Tax based on federal statutory rate ................. $ 481,360 34.0% $ 459,953 34.0% $ 466,992 34.0% Effect of tax- exempt income .................. (82,593) (5.8) (60,149) (4.4) (52,782) (3.8) Change in deferral valuation reserve .............. -- -- -- -- (61,938) (4.5) Other ............................. 9,129 .6 5,461 .4 (17,074) (1.3) --------- --------- --------- --------- --------- --------- $ 407,896 28.8% $ 405,265 30.0% $ 335,198 24.4% ========= ========= ========= ========= ========= =========
-48- 48 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Deferred tax assets and liabilities included in other assets or other liabilities at December 31 consist of the following:
1998 1997 -------- -------- Deferred tax assets: Allowance for loan losses ................ $ 14,022 $ 14,022 Foreclosed assets ........................ 38,352 36,006 Deferred executive compensation .......... 12,119 3,935 Other .................................... -- 849 -------- -------- Total deferred tax assets ............... 64,493 54,812 -------- -------- Deferred tax liabilities: Net unrealized appreciation on available for sale securities ...... 131,975 51,729 Accumulated depreciation ................. 30,719 32,111 -------- -------- Total deferred tax liabilities ........ 162,694 83,840 -------- -------- Net deferred tax liability .................. $(98,201) $(29,028) ======== ========
Management estimates realizability of a deferred tax asset based on the Company's ability to generate taxable income in the future. A deferred tax valuation reserve is established, if needed, to limit the net deferred tax asset to its realizable value. Note 12. Lease Commitments The Company leases land, buildings, and equipment under cancelable and noncancelable leases. The leased properties are used primarily for banking purposes. Future minimum payments, by year and in the aggregate, for noncancelable operating leases with initial or remaining terms of one year or more consisted of the following at December 31, 1998:
Year Ending Amount ----------- ---------- 1999......................................... $ 68,360 2000......................................... 45,871 2001......................................... 45,871 2002......................................... 45,871 2003......................................... 40,771 ---------- Total future minimum lease payments $ 246,744 ==========
All leases contain options to extend the lease term upon expiration and will probably be exercised. -49- 49 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The total rental expense on operating leases for the years ended December 31, 1998, 1997, and 1996, amount to $63,409, $60,096 and $58,538, respectively. One of the bank's branch offices is leased from a corporation which is owned by a shareholder and director of the Bank. Lease expense related to this property totaled $20,671 for the 1998 fiscal year. Note 13. Other Operating Expenses The composition of other operating expenses for each of the three years for the period ended December 31 are as follows:
1998 1997 1996 -------- -------- -------- FDIC and Louisiana assessments ......... $ 24,707 $ 21,636 $ 16,046 Advertising ............................ 63,622 26,670 25,179 Office supplies ........................ 70,465 79,418 76,439 Postage ................................ 56,269 52,202 52,358 Other insurance ........................ 12,727 16,390 29,440 ATM expenses ........................... 27,029 25,803 25,836 Director fees .......................... 87,700 89,750 71,850 Other .................................. 325,374 322,156 319,869 -------- -------- -------- $667,893 $634,025 $617,017 ======== ======== ========
-50- 50 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 14. American Bancorp, Inc. (Parent Company Only) The following financial statements of American Bancorp, Inc. (Parent Company Only) include the Bank under the equity method of accounting. BALANCE SHEETS
DECEMBER 31, ---------------------------- 1998 1997 ----------- ----------- ASSETS Cash on deposit with subsidiary ......................... $ 30,816 $ 54,864 Investment in subsidiary ................................ 9,409,206 8,452,334 Due from American Bank .................................. 20,331 11,562 ----------- ----------- Total assets ......................................... $ 9,460,353 $ 8,518,760 =========== =========== LIABILITIES Accrued income taxes payable ............................ $ 14,846 $ 6,077 ----------- ----------- Total liabilities ..................................... 14,846 6,077 ----------- ----------- SHAREHOLDERS' EQUITY Common stock: $5 par value, 10,000,000 shares authorized; 120,000 shares issued, 118,449 and 119,962 shares outstanding, respectively ............. 600,000 600,000 Surplus ................................................. 2,150,000 2,150,000 Retained earnings ....................................... 6,524,015 5,664,283 Net unrealized loss on securities available for sale, net of tax of $131,975 and $51,729, respectively ............................ 256,187 100,414 Treasury stock, 1,551 and 38 shares at cost, respectively .............................. (84,695) (2,014) ----------- ----------- Total shareholders' equity ........................ 9,445,507 8,512,683 ----------- ----------- Total liabilities and shareholders' equity ........ $ 9,460,353 $ 8,518,760 =========== ===========
-51- 51 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS American Bancorp, Inc. (Parent Company Only) STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, ---------------------------------------- 1998 1997 1996 ---------- ---------- ---------- Income: Dividends from bank subsidiary ...... $ 216,134 $ 185,000 $ 123,000 ---------- ---------- ---------- Expenses: Directors fees ...................... 8,400 -- -- Other expenses ...................... 967 890 1,765 ---------- ---------- ---------- 9,367 890 1,765 ---------- ---------- ---------- Earnings before income taxes and equity in undistributed earnings of subsidiary .............. 206,767 184,110 121,235 Provision for income taxes ............. -- -- -- ---------- ---------- ---------- Earnings before equity in undistributed earnings of subsidiary .......................... 206,767 184,110 121,235 Equity in undistributed earnings of subsidiary .............. 801,101 763,426 917,074 ---------- ---------- ---------- Net income ....................... $1,007,868 $ 947,536 $1,038,309 ========== ========== ==========
-52- 52 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS American Bancorp, Inc. (Parent Company Only) STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, --------------------------------------------- 1998 1997 1996 ----------- ----------- ----------- OPERATING ACTIVITIES Net income .................................... $ 1,007,868 $ 947,536 $ 1,038,309 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed earnings of subsidiary ............... (801,101) (763,426) (917,074) (Increase) decrease in other assets ..... (8,769) 24,567 391,833 Increase (decrease) in income taxes payable .............................. 8,769 (24,567) (389,833) ----------- ----------- ----------- Net cash provided by operating activities .............. 206,767 184,110 123,235 ----------- ----------- ----------- FINANCING ACTIVITIES Dividends paid to shareholders ................ (148,134) (132,000) (120,000) ----------- ----------- ----------- Net cash used by financing activities .............. (148,134) (132,000) (120,000) ----------- ----------- ----------- INVESTING ACTIVITIES Purchase of treasury stock .................... (82,681) (2,014) -0- ----------- ----------- ----------- Net cash used by investing activities ............... (82,681) (2,014) -0- ----------- ----------- ----------- Increase (decrease) in cash and cash equivalents ............... (24,048) 50,096 3,235 Cash and cash equivalents at beginning of year ............................. 54,864 4,768 1,533 ----------- ----------- ----------- Cash and cash equivalents at end of year ................................... $ 30,816 $ 54,864 $ 4,768 =========== =========== ===========
-53- 53 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 15. Financial Instruments Generally accepted accounting principles require disclosure of fair value information about financial instruments for which it is practicable to estimate fair value, whether or not the financial instruments are recognized in the financial statements. When quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. The derived fair value estimates cannot be substantiated through comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. Certain financial instruments and all non-financial instruments are excluded from these disclosure requirements. Further, the disclosures do not include estimated fair values for items which are not financial instruments but which represent significant value to the Bank, among them, core deposit intangibles, loan servicing rights and other fee-generating businesses. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The carrying amount of cash and short-term investments and demand deposits approximates the estimated fair value of these financial instruments. The estimated fair value of securities is based on quoted market prices, dealer quotes and prices obtained from independent pricing services. The estimated fair value of loans and interest bearing deposits is based on present values using applicable risk-adjusted spreads to the appropriate yield curve to approximate current interest rates applicable to each category of these financial instruments. Interest rates were not adjusted for changes in credit risk of performing commercial loans for which there are no known credit concerns. Management segregates loans into appropriate risk categories and believes the risk factor embedded in the interest rates results in a fair valuation of these loans on an entry-value basis. Variances between the carrying amount and the estimated fair value of loans reflect both credit risk and interest rate risk. The Bank is protected against changes in credit risk by the allowance for possible loan losses of $595,762 at December 31, 1998. The fair value estimates presented are based on information available to management as of December 31, 1998. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, these amounts have not been revalued for purposes of these financial statements since that date. Therefore, current estimates of fair value may differ significantly from the amounts presented. None of the assets or liabilities included in the table below are held for trading purposes. The Bank issues financial instruments in the normal course of business to meet the financing needs of its customers and to reduce exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit and letters of credit and involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized on the balance sheet. -54- 54 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CARRYING FAIR AMOUNT VALUE ----------- ----------- ASSETS Cash and short-term investments ..... $14,270,107 $14,270,107 Securities held to maturity ......... $ 5,700,657 $ 5,744,057 Securities available for sale ....... $24,013,561 $24,013,561 Commercial loans .................... $ 7,666,021 $ 7,662,000 Consumer loans ...................... $ 4,980,628 $ 4,886,000 Real estate loans ................... $15,411,708 $15,782,000 LIABILITIES Demand deposits ..................... $21,026,282 $21,026,282 NOW accounts ........................ $10,969,200 $10,969,200 Money market accounts ............... $ 2,059,420 $ 2,059,420 Savings ............................. $ 9,159,284 $ 9,159,284 Time Deposits ....................... $20,604,797 $20,756,000
Commitments to extend credit are legally binding, conditional agreements generally having fixed expiration or termination dates and specified interest rates and purposes. These commitments generally require customers to maintain certain credit standards. Collateral requirements and loan-to-value ratios are the same as those for funded transactions and are established based on management's credit assessment of the customer. Commitments may expire without being drawn upon. Therefore, the total commitment amount does not necessarily represent future funding requirements. The Bank's experience has been that most loan commitments are drawn upon by customers. The Bank issues letters of credit and financial guarantees (standby letters of credit) whereby it agrees to honor certain financial commitments in the event its customers are unable to perform. The majority of the standby letters of credit consist of performance guarantees. Management conducts regular reviews of all outstanding standby letters of credit, and the results of these reviews are considered in assessing the adequacy of the Bank's reserve for possible loan losses. The Bank has not incurred any losses in its commitments in 1998 or 1997. Management does not anticipate any material losses related to these instruments. The estimated fair values of off-balance-sheet financial instruments are not material. A summary of the notional amounts of the Bank's financial instruments with off-balance-sheet risk at December 31, 1998 and 1997 are as follows:
1998 1997 ---------- ---------- Commitments to extend credit ................ $4,902,427 $4,568,172 Credit card arrangements .................... $1,902,592 $1,200,902 Standby letters of credit ................... $ 153,007 $ 169,101
-55- 55 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 16. Regulatory Matters The Bank is subject to the dividend restrictions set forth by the Louisiana Commissioner of Financial Institutions. Under such restrictions, the Bank may not, without the prior approval of the Commissioner of Financial Institutions, declare dividends in excess of the sum of the current year and prior year earnings less dividends paid during these periods. The dividends as of December 31, 1998, that the Bank could declare without the approval of the Commissioner of Financial Institutions, amounted to $1,675,270. The Bank is also required to maintain minimum amounts of capital to total "risk weighted" assets, as defined by the banking regulators. At December 31, 1998, the Bank is required to have minimum Tier 1 and Total capital ratios of 4% and 8%, respectively. The Bank's actual ratios at that date were 27.47% and 28.72%, respectively. The Bank's leverage ratio was 13.36% and 12.97% as of December 31, 1998 and 1997, respectively. Under Section 18J of the Federal Deposit Insurance Act, which is subject to Section 23A of the Federal Reserve Act, the Bank cannot make loans, extensions of credit, repurchase agreements, investments, and advances, which exceed 10 percent of its capital stock and surplus, to an affiliate. Such loans must be collateralized by assets with market values of 100% to 130% of loan amounts, depending upon the nature of the collateral. Note 17. Contingencies In the ordinary course of business, the Bank has various outstanding commitments and contingent liabilities that are not reflected in the accompanying consolidated financial statements. In addition, the Bank is a defendant in certain claims and legal actions 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 adverse effect on the consolidated financial condition of the Bank. -56- 56 OFFICERS AND DIRECTORS OF AMERICAN BANK AND TRUST COMPANY CHAIRMAN OF THE BOARD AND PRESIDENT Salvador L. Diesi, Sr. CHIEF EXECUTIVE OFFICER AND EXECUTIVE VICE-PRESIDENT Ronald J. Lashute SENIOR VICE-PRESIDENT Walter J. Champagne, Jr. VICE-PRESIDENTS Charlene Louviere Joan T. Muller, Chief Angel Powell Financial Officer, Peter Strawitz, III Cashier ASSISTANT VICE-PRESIDENTS David Gremillion Christopher Choate ASSISTANT CASHIERS Elaine D. Ardoin Elizabeth Miller Audrey Cormier Bonnie Pavy Sally Hooks Stephanie Richard Cindy Whitmore Audrey Thibodeaux DIRECTORS Walter J. Champagne, Jr. Alvin Haynes II Attaway Darbonne Charles Jagneaux J.C. Diesi Sylvia Sibille Salvador L. Diesi, Sr. OFFICES LOCATED IN OPELOUSAS KROTZ SPRINGS LAFAYETTE PORT BARRE LAWTELL -57- 57 OFFICERS AND DIRECTORS OF AMERICAN BANCORP, INC. CHAIRMAN OF THE BOARD AND PRESIDENT Salvador L. Diesi, Sr. SECRETARY/TREASURER Ronald J. Lashute
BOARD OF DIRECTORS OCCUPATION AND MAIN AFFILIATION Jasper J. Artall Farmer. Walter J. Champagne, Jr. Farmer. J.C. Diesi Automobile Dealer; Diesi Pontiac-Cadillac-Buick, Inc. Salvador L. Diesi, Sr. Chairman of the Board and President, American Bancorp, Inc. and American Bank & Trust Company; Wholesale Beer Distributor, Premium Brands, Inc.; Gas Station, Convenience Store, and Video Poker; Little Capitol of Louisiana, Inc.; Commercial real estate, farming interest; and Attorney at Law. Ronald J. Lashute Chief Executive Officer and Executive Vice President of American Bank & Trust Company and Secretary/Treasurer of American Bancorp, Inc.
-58- EX-22.1 3 1998 PROXY STATEMENT FOR ANNUAL MEETING 1 EXHIBIT 22.1 AMERICAN BANCORP, INC. PROXY STATEMENT FOR ANNUAL MEETING TO BE HELD APRIL 14, 1999 GENERAL The accompanying proxy is solicited by and on behalf of the Board of Directors of American Bancorp, Inc. (the Corporation), for use at the annual meeting of shareholders to be held April 14, 1999, at the time and place set forth in the accompanying Notice of Meeting. The principal executive offices of the Corporation and its wholly-owned subsidiary, American Bank & Trust Company (the Bank), are located at 328 East Landry Street, Opelousas, Louisiana 70570. The date on which this Proxy Statement and the enclosed form of proxy were first sent to shareholders is approximately March 31, 1999. Only shareholders of record at the close of business on February 15, 1999, are entitled to notice of and to vote at the meeting. On that date, the Corporation had outstanding 118,448 shares of common stock, each of which is entitled to one vote on all matters presented to the shareholders at the meeting. To the knowledge of the Corporation, all persons beneficially owning more than five percent (5%) of its outstanding voting securities are listed in the section entitled "Shareholders Owning 5% or More of Outstanding Shares" on page 4 of this Proxy Statement. The shares represented by any proxy in the enclosed form, if it is properly executed and received at or prior to the meeting, will be voted in accordance with the specifications made thereon. Proxies received on which no specification is made will be voted for election as directors of the five nominees named herein and in favor of the remaining proposal as set forth on the enclosed proxy. Proxies are revocable by written notice to the Secretary of the Board of Directors, Ronald J. Lashute, at any time prior to their exercise or by submitting a later dated proxy at or before the annual meeting. Written revocations of proxy may be presented in person or mailed to: Ronald J. Lashute, Executive Vice-President and Chief Executive Officer, American Bank & Trust Company, P. O. Box 1579, Opelousas, Louisiana 70571-1579. Proxies will be deemed revoked by attendance and voting at the annual meeting. All expenses of preparing, printing, and mailing the proxy and any other materials and all expenses incurred in solicitation will be borne by the Corporation. Proxies also may be solicited in person or by telephone or telegraph by directors, officers, and other employees of the Corporation or the Bank, none of whom will receive additional compensation for such services, but who may be reimbursed for any actual expenses incurred, which expenses are estimated not to exceed the aggregate sum of $2,000. The Corporation also may request brokerage houses, custodians, and nominees, if any such persons are listed as record owners of the Corporation's common stock, to forward these materials to the beneficial owners of the stock held of record by them and pay the reasonable expenses of such persons for forwarding the material. 2 SECURITY OWNERSHIP OF MANAGEMENT The five members of the Board of Directors of the Corporation and the two executive officers of the Corporation (both of whom also serve on the Board of Directors), as a group own, directly or indirectly, 46,101 (38.9%) shares of the common stock of the Corporation. See "Election of Directors" for the stock ownership of individual directors. ELECTION OF DIRECTORS The Articles of Incorporation of the Corporation provide that the number of directors will be designated in the Bylaws, or if not so designated, will be the number elected from time to time by the shareholders. The Bylaws provide for a board of five directors. The information below lists each nominee for director of the Corporation, each of whom currently serves as a director, setting forth his address, age, principal occupation or employment, and amount and percentage of beneficial ownership of common stock of the Corporation as of February 15, 1999. Each person listed below has been named as a nominee for election as director at the meeting to which this Proxy Statement relates. Directors are elected to hold office until the next annual meeting of shareholders unless they sooner become disqualified, or until such time as their successors are elected and have qualified. Unless otherwise indicated, all nominees have been with the same organization in essentially the same position as listed below for the past five years, and the nominees beneficially own, with sole voting and investment power, the shares listed below. The nominees, except Jasper J. Artall and Ronald J. Lashute, are also members of the Board of Directors of the Corporation's subsidiary, American Bank & Trust Company. The year listed under the heading "First Elected Director" indicates the year in which the nominee or director was first elected as a director of the Bank prior to formation of the Corporation or the year in which the nominee or director was first elected as a director of the Corporation. Those persons listed on the table below, except Jasper J. Artall and Ronald J. Lashute, first became directors of the Corporation on June 30, 1982. Ronald J. Lashute has been an executive officer of the Corporation and the Bank since 1990. See "Executive Officers." None of the directors of the Corporation holds a directorship in any other company with a class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended, or subject to the requirements of Section 15(d) of that Act or in any company registered as an investment company under the Investment Company Act of 1940. -2- 3
SHARES BENEFICIALLY FIRST OWNED AS OF PRINCIPAL OCCUPATION ELECTED FEBRUARY 15, 1999 NAME AND ADDRESS AGE OR EMPLOYMENT DIRECTOR NUMBER PERCENTAGE - ---------------- --- -------------------- -------- ------ ---------- Jasper J. Artall 57 Farmer 1998 200 .17% P. O. Box 201 Melville, LA 71353 Walter J. Champagne, Jr. 78 Retired; Farming interest; 1958 2,045 1.7% P. O. Box 8 and Vice-Pres./Bank Port Barre, LA 70577 J.C. Diesi (1,3) 78 Diesi Pontiac-Cadillac- 1958 12,009 10.1% 148 W. Smiley Street Buick, Inc., (Automobile Opelousas, LA 70570 Dealer & Service) Salvador L. Diesi, Sr. 68 Chairman of the Board and 1973 15,419 13.0% (1,2,3,4) President, American 1355 Dietlein Blvd. Bancorp, Inc. and Opelousas, LA 70570 American Bank & Trust Company; Wholesale Beer Distributor, Premium Brands, Inc.; Gas Station, Convenience Store, and Video Poker; Little Capitol of Louisiana, Inc.; Commercial real estate, farming interest; and Attorney at Law Ronald J. Lashute 49 Executive Vice-President 1994 16,428 13.9% (2,3,5) and Chief Executive 2057 Jasmine Drive Officer of the Bank and Opelousas, LA 70570 Secretary, Treasurer of the Corporation ------ ---- Total for directors (five persons) 46,101 38.9% ====== ====
(1) J.C. Diesi is Salvador L. Diesi's uncle. (2) Executive Officer of the Corporation who participates in major policy making functions. (3) Ronald J. Lashute is a cousin of Salvador L. Diesi, Sr. and a nephew of J.C. Diesi. (4) Of the 15,419 shares held by Salvador L. Diesi, Sr., 10,137 shares (8.6%) are held by Corporations of which Mr. Diesi owns 51% or more. (5) Of the 16,428 shares held by Ronald J. Lashute, 16,000 shares (13.5% of the Corporation's outstanding common stock) are owned by The Diesi Family Trust. Mr. Ronald J. Lashute is the trustee of The Diesi Family Trust and has sole voting authority with respect to the shares of the Corporation's common stock held by the said trust. See "Shareholder's Owning 5% or More of Outstanding Shares." -3- 4 If elected by the shareholders to serve as the Corporation's Board of Directors, the nominees listed above plan to direct the Chairman of the Board of the Corporation, as the sole shareholder of the Bank, to vote the stock of the Bank owned by the Corporation in favor of the following persons to serve as the Board of Directors of the Bank: Jasper J. Artall, Walter J. Champagne, Jr., J. C. Diesi, Salvador L. Diesi, Charles Jagneaux, Alvin Haynes, II, Sylvia Sibille and Attaway Darbonne. Each of these persons, except Mr. Artall, has served on the Board of Directors of the Bank for the past year. SHAREHOLDERS OWNING 5% OR MORE OF OUTSTANDING SHARES The following table sets forth as of February 15, 1999, information concerning the beneficial ownership of voting stock of American Bancorp, Inc., by persons who are known to the Corporation to be beneficial owners of 5% or more of the Corporation's outstanding shares of voting common stock:
PERCENTAGE AMOUNT AND OF CLASS NAME AND ADDRESS OF NATURE OF BENEFICIAL OF SHARES TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP OWNED - -------------- ------------------- -------------------- ---------- Common stock Salvador L. Diesi, Sr. 15,419 shares 13.0% 1355 Dietlein Blvd. Direct and Indirect (1) Opelousas, LA 70570 Common stock J.C. Diesi 12,009 shares 10.1% 148 W. Smiley St. Direct Opelousas, LA 70570 Common stock Ronald J. Lashute 16,428 shares 13.9% 2057 Jasmine Drive Direct and Indirect (2) Opelousas, LA 70570 Common stock Bobby Dupre 6,022 shares 5.1% 444 King Street Direct and Indirect (3) Opelousas, LA 70570
(1) Mr. Salvador L. Diesi, Sr. directly owns 5,282 shares or 4.5% of the outstanding shares of the Corporation. In addition, he owns 10,137 shares, which is equal to 8.6% of the outstanding shares of the Corporation, indirectly, through his associations with his businesses. (2) Mr. Ronald J. Lashute directly owns 428 shares or .4% of the outstanding shares of the Corporation. Mr. Lashute is the trustee of The Diesi Family Trust. The Trust owns 16,000 shares or 13.5% of the outstanding shares of the Corporation. The Trust is for the benefit of the grandchildren of Frank (a former director of the Corporation) and Marie Diesi. (3) Mr. Bobby Dupre directly owns 2,164 shares or 1.8% of the outstanding shares of the Corporation. In addition, he owns 3,858 or 3.3% of the outstanding shares of the Corporation indirectly, through his associations with his businesses. -4- 5 BOARD MEETINGS AND COMMITTEES During 1998, the Board of Directors of the Corporation held a total of three regular and special meetings. Each director attended seventy-five percent or more of the aggregate number of meetings of the Board of Directors of the Corporation and committees of the Board of Directors of the Corporation on which he served. During 1998, the Board of Directors of the Bank held a total of twelve regular and special meetings. Each director of the Bank attended seventy-five percent or more of the aggregate number of meetings of the Board of Directors of the Bank and committees of the Board of Directors of the Bank on which he served. The Board of Directors of the Corporation has no audit, nominating or compensation committees or committees performing similar functions. The Board of Directors of the Bank has established the following committees: The Loan Discount Committee reviews and approves all large loans. This committee met nine (9) times in 1998 and is composed of Salvador L. Diesi, Sr., Chairman, J.C. Diesi, Charles Jagneaux, Alvin Haynes, II, Walter J. Champagne, Jr. and Attaway Darbonne. The Audit Committee, composed of Walter J. Champagne, Jr., Chairman and Sylvia Sibille did not meet in 1998. The duties of the Audit Committee include, but are not limited to the following: 1. Review the Bond Portfolio, Time and Savings Deposits, Demand Deposits and Loan Portfolio. 2. Analyze the Statement of Condition and the Statement of Income and Expenses. 3. Review the audit report of the external auditors, F.D.I.C. and State Examiners Reports. 4. Review the Bank's insurance policies including the Blanket Bond and Liability Policy. 5. Report results of its review to the Board of Directors. -5- 6 EXECUTIVE OFFICERS The Executive Officers of the Corporation are as follows:
NAME AGE POSITION CURRENTLY HELD ---- --- ----------------------- Salvador L. Diesi, Sr. 68 Chairman of the Board of the Corporation and the Bank since April 14, 1993 and President of the Corporation and the Bank since April 13, 1983. Ronald J. Lashute 49 Secretary/Treasurer of the Corporation and Executive Vice-President and Chief Executive Officer of the Bank since March 1990; Director of the Corporation since December 1994.
Executive Officers are chosen by the Board of Directors to hold office at the pleasure of the Board. Both Mr. Salvador L. Diesi, Sr. and Mr. Ronald Lashute have been officers of the Corporation and the Bank for more than five years. The family relationships among the executive officers of the Corporation are indicated in the list of directors. See "Election of Directors." COMPENSATION AND OTHER TRANSACTIONS DIRECTORS FEES Directors of the Corporation received a board fee of $200 per month for the months of April through December 1998 for their services. In 1998, each director of the Bank received a board fee of $600 per month. In addition, each director of the Bank received a cash bonus of $3,100 in 1998. Directors serving on the Bank's Loan Discount Committee received $150 per month in 1998. COMPENSATION The following table sets forth all compensation paid, distributed or accrued for the account of the persons listed below for the fiscal year ended December 31, 1998 by the Bank to the Executive Officers of the Corporation and the Bank. -6- 7 SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION NAME AND SALARY AND PRINCIPAL DIRECTOR BONUS OTHER ANNUAL ALL OTHER POSITION YEAR FEES($) ($)(1) COMPENSATION($)(2) COMPENSATION($) - -------- ---- ------- ------ ------------------ --------------- Salvador L. Diesi, 1998 38,618 (4) 3,200 -- 226 (3) Sr., Chairman of 1997 36,268 (5) 3,100 -- 337 (3) the Board and 1996 33,922 (6) 3,100 -- 337 (3) President of the Corporation and the Bank Ronald J. Lashute 1998 85,740 (7) 7,100 -- 9,136 (10) Executive Vice- 1997 79,574 (8) 6,142 -- 8,687 (11) President and 1996 73,248 (9) 5,933 -- 8,145 (12) Chief Executive Officer of the Bank and Secre- tary/Treasurer of the Corporation
(1) The Bank had a cash bonus plan in 1998, 1997, and 1996, whereby a bonus was declared by the Board of Directors. The total amount of the Bonus paid to all eligible employees of the Bank was $54,711, $49,950 and $49,471, respectively, for those years. In addition, cash bonuses of $3,100 in 1998, and of $3,000 in 1997 and 1996 were paid to each director of the Bank. Cash bonuses paid to the Executive Officers of the Bank are noted in the table above. (2) No amounts for perquisites and other personal benefits, such as company automobiles, which may accrue to the named executive officers and which, in the opinion of management, are job related and appropriate in connection with the conduct of the Corporation's and the Bank's affairs, are shown. The aggregate amount of such compensation does not exceed 10% of the total of annual salary and bonus reported for the named executive officer. (3) These figures represent term life insurance premiums paid by the Bank. (4) This amount includes $818 that was contributed by the Bank for the account of Mr. Diesi in accordance with the terms of a 401(k) Plan established by the Bank for the benefit of its employees in January 1993 (the 401(k) Plan). (5) This amount includes $818 that was contributed by the Bank for the account of Mr. Diesi in accordance with the terms of the 401(k) plan. (6) This amount includes $540 that was contributed by the Bank for the account of Mr. Diesi in accordance with the terms of the 401(k) plan. (7) This amount includes $2,256 that was contributed by the Bank for the account of Mr. Lashute in accordance with the terms of the 401(k) plan. -7- 8 (8) This amount includes $2,168 that was contributed by the Bank for the account of Mr. Lashute in accordance with the terms of the 401(k) Plan. (9) This amount includes $1,436 that was contributed by the Bank for the account of Mr. Lashute in accordance with the terms of the 401(k) Plan. (10) This amount includes $8,694 of deferred compensation accrued under a supplemental executive retirement plan established by the Bank on September 1, 1995. This amount also includes $442 in term life insurance premiums paid by the Bank. (11) This amount includes $8,125 of deferred compensation accrued under a supplemental executive retirement plan and $562 in term life insurance premiums paid by the Bank. (12) This amount includes $7,593 of deferred compensation accrued under a supplemental executive retirement plan and $552 in term life insurance premiums paid by the Bank. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires officers, directors and beneficial owners of more than 10% of the outstanding shares of the Corporation to file with the Securities and Exchange Commission (the SEC) certain reports describing their stock ownership and changes in their stock ownership. They must also furnish the Corporation with copies of these forms. Based solely on its review of the copies of such forms received by it and written representations from certain reporting persons that they have complied with the relevant filing requirements, the Corporation believes that filing requirements under Section 16(a) were met on a timely basis, except that Mr. Jasper J. Artall inadvertently filed Form 3 four days late after becoming a director of the Corporation. LEGAL PROCEEDINGS No director, officer or affiliate of the Corporation, or owner of more than five (5%) of the outstanding shares of the Corporation, is a party adverse to the Corporation or its subsidiary in any currently pending legal proceeding, nor does any such party have a material interest adverse to the Corporation or the Bank in any currently pending legal proceeding. OTHER TRANSACTIONS The Bank has had, and expects to have in the future, banking transactions in the ordinary course of business with directors, officers and principal stockholders of the Corporation and of the Bank and their associates, affiliates or members of their immediate families. The transactions have been and will continue to be made on the same terms, including interest rates and collateral on loans, as those prevailing at the same time for comparable transactions with others and do not involve more than the normal risk of collectibility or present other unfavorable features. In addition, the Bank has had other transactions, as indicated below, with certain directors of the Bank. Such transactions were made in the ordinary course of business and were on terms competitive with those existing in the community at the time made. -8- 9 The Bank is obligated under a lease for the South Branch location with Little Capitol of Louisiana, Inc., which corporation is owned by Salvador L. Diesi, Sr. and a trust set up by Frank (a former director of the Bank) and Marie Diesi for the benefit of their grandchildren. For the year ended December 31, 1998, the Bank paid Little Capitol of Louisiana, Inc. $20,671 under the terms of the lease. The initial lease expired on May 31, 1997, but was renewed through May 31, 2002. During 1998, the Bank had its vehicles repaired at Diesi Pontiac-Cadillac-Buick, Inc. and paid an aggregate amount of $2,712 for such repairs. Also in 1998, the Bank purchased a car and a truck for $49,269 from Diesi Pontiac-Cadillac-Buick, Inc. Mr. J.C. Diesi, a Director of the Corporation, is an owner of the car dealership. RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS Broussard, Poche', Lewis & Breaux has served as the Corporation's independent Certified Public Accountants for the fiscal years ending December 31, 1986 to 1998. At the 1999 Annual Shareholders Meeting, the following resolution will be subject to ratification by a simple majority vote of shares represented at the meeting: RESOLVED, That the selection of Broussard, Poche', Lewis & Breaux, as the independent Certified Public Accountants of American Bancorp, Inc. and its sole subsidiary, American Bank and Trust Company, for the fiscal year ending December 31, 1999, is hereby ratified. If ratification is not achieved, the selection of an independent Certified Public Accountant will be reconsidered and made by the Board of Directors. Even if selection is ratified, the Board of Directors reserves the right, and in its discretion, may direct the appointment of any other independent Certified Public Accounting firm at any time if the Board decides that such a change would be in the best interests of the Corporation and its shareholders. A representative of Broussard, Poche', Lewis & Breaux is expected to attend the Annual Shareholder's Meeting with the opportunity to make a statement, if desired, and is expected to be available to respond to shareholder's inquiries. SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING Shareholders who desire to present a proposal for inclusion in the proxy material relating to the 2000 annual meeting of shareholders of American Bancorp, Inc. must forward such proposals to Ronald Lashute at the address listed on the first page of this Proxy Statement in time to arrive at the Corporation prior to November 30, 1999. Shareholders who desire to present a proposal at the 2000 annual meeting other than one that will be included in the Corporation's proxy materials must notify the Corporation (by notice to Mr. Lashute at the address listed on the first page of this proxy statement) no later than February 14, 2000. If a shareholder who wishes to present a proposal fails to notify the Corporation by this date, the proxies solicited for the meeting will have discretionary authority to vote on the shareholder's proposal if it is properly brought before the meeting. If a shareholder makes a timely notification, the proxies may still exercise discretionary voting authority under circumstances consistent with the SEC's proxy rules. -9- 10 OTHER MATTERS QUORUM AND VOTING OF PROXIES The presence, in person or by proxy, of a majority of the outstanding shares of common stock of the Corporation is necessary to constitute a quorum. If a quorum is present, the vote of a majority of the shares present or represented by proxy will decide all questions properly brought before the meeting, except that directors will be elected by plurality vote. A shareholder's abstention or refusal to vote on a particular matter will not affect the presence of a quorum or reduce the voting power present. (In effect, therefore, an abstention is counted as a vote against a matter.) A non-vote (including broker non-votes) will have no affect on the items to be addressed at the meeting. All proxies received in the form enclosed will be voted as specified, and, in the absence of instruction to the contrary, will be voted FOR the election of the nominees named above, and FOR the ratification of independent Certified Public Accountants. The Corporation does not know of any matters to be presented at the annual meeting other than those mentioned above. However, if any other matters properly come before the meeting or any adjournment thereof, it is the intention of the persons named on the enclosed proxy to vote the shares represented by them in accordance with their best judgment, unless authority to do so is withheld. ADDITIONAL CORPORATE INFORMATION ANY SHAREHOLDER MAY, BY WRITTEN REQUEST, OBTAIN WITHOUT CHARGE AN ADDITIONAL COPY OF THE CORPORATION'S 1998 ANNUAL REPORT OR A COPY OF THE CORPORATION'S FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. REQUESTS SHOULD BE ADDRESSED TO RONALD LASHUTE, EXECUTIVE VICE-PRESIDENT AND CHIEF EXECUTIVE OFFICER, AMERICAN BANK AND TRUST COMPANY, P. O. BOX 1579, OPELOUSAS, LOUISIANA 70571-1579. -10- EX-23.1 4 CONSENT OF INDEPENDENT AUDITORS 1 EXHIBIT 23.1 [BROUSSARD, POCHE, LEWIS & BREAUX, L.L.P. LETTERHEAD] CONSENT OF INDEPENDENT AUDITORS As Independent Auditors, we hereby consent to the incorporation by reference in this Form 10-K of American Bancorp, Inc. for the years ended December 31, 1998, 1997 and 1996, of our report dated January 19, 1999, which appears on Pages 28 through 56 of the annual report to shareholders. /s/ BROUSSARD, POCHE, LEWIS & BREAUX, L.L.P. Lafayette, Louisiana January 19, 1999 EX-27.1 5 FINANCIAL DATA SCHEDULE
9 1,000 YEAR DEC-31-1998 DEC-31-1998 4,333 1,387 8,550 0 24,014 5,701 5,744 28,058 596 73,666 63,819 0 402 0 600 0 0 8,846 73,666 2,642 1,705 310 4,657 1,446 1,446 3,211 0 0 668 1,416 1,416 0 0 1,008 8.47 0 5.32 145 15 0 0 600 15 11 596 0 0 596
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