-----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, OnZojalykTlrmrIPcOcXTqNcVLJgR+J/Io09S+QGFjWSHRdDQAO1o5rvvHnFMlNt 05NnQJftocojMFbqy+bpjA== 0000912057-97-027570.txt : 19970814 0000912057-97-027570.hdr.sgml : 19970814 ACCESSION NUMBER: 0000912057-97-027570 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ISB FINANCIAL CORP/LA CENTRAL INDEX KEY: 0000933141 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 721280718 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-25756 FILM NUMBER: 97658766 BUSINESS ADDRESS: STREET 1: 1101 E ADMIRAL DOYLE DR CITY: NEW IBERIA STATE: LA ZIP: 70560 BUSINESS PHONE: 3183652361 MAIL ADDRESS: STREET 1: 1101 EAST ADMIRAL DOYLE DR CITY: NEW IBERIA STATE: LA ZIP: 70560 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ___________ Commission File Number 0-25756 ISB Financial Corporation ---------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Louisiana 72-1280718 ------------------------------- --------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 1101 East Admiral Doyle Drive New Iberia, Louisiana 70560 -------------------------------- --------------------- (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (318) 365-2361 Common Stock (par value $1.00 per share) --------------------------------------------- (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X___ No ____ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of July 30, 1997, 6,900,710 shares of the Registrant's common stock were issued and outstanding. Of that total, 590,069 shares are held by the Registrant's Employee Stock Ownership Plan, of which 426,327 shares were not committed to be released. ISB FINANCIAL CORPORATION AND SUBSIDIARIES TABLE OF CONTENTS Page ---- Part I. Financial Information Item 1. Financial Statements Consolidated Statements of Financial Condition (As of June 30, 1997 and December 31, 1996).............. 3 Consolidated Statements of Income (For the three months and six months ended June 30, 1997 and 1996)...... 4 Consolidated Statements of Stockholders' Equity (For the six months ended June 30, 1997 and 1996)............. 5 Consolidated Statements of Cash Flows (For the six months ended June 30, 1997 and 1996)..................... 6 Notes to Consolidated Financial Statements............... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............ 10 Part II. Other Information Item 1. Legal Proceedings........................................ 18 Item 2. Changes in Securities.................................... 18 Item 3. Defaults Upon Senior Securities.......................... 18 Item 4. Submission of Matters to a Vote of Security Holders...... 18 Item 5. Other Information........................................ 18 Item 6. Exhibits and Reports on Form 8-K......................... 18 Signatures......................................................... 19 2 ISB FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited) (Dollars in Thousands, Except Per Share Data)
June 30, December 31, 1997 1996 ---------- ------------ Assets Cash and Cash Equivalents: Cash on Hand and Due from Banks..................................... $ 13,412 $ 10,822 Interest Bearing Deposits........................................... 24,090 42,563 Investment Securities: Held to Maturity (fair value of $1,814 and $2,218, respectively)............................................. 1,810 2,216 Available for Sale, at fair value................................... 104,397 101,144 Trading Account Securities, at fair value........................... 480 364 Mortgage-Backed Securities Held to Maturity (fair value of $134,423 and $150,014, respectively)................. 134,508 150,669 Loans Receivable, Net................................................. 616,031 571,119 Real Estate Owned..................................................... 560 978 Premises and Equipment, Net........................................... 17,643 15,483 Federal Home Loan Bank Stock, at Cost................................. 5,978 5,808 Accrued Interest Receivable........................................... 5,928 5,667 Goodwill and Acquisition Intangibles.................................. 17,021 17,807 Other Assets.......................................................... 5,249 4,624 -------- -------- Total Assets.......................................................... $947,107 $929,264 -------- -------- -------- -------- Liabilities and Stockholders' Equity Liabilities: Deposits.............................................................. $776,590 $760,284 Federal Home Loan Bank Advances....................................... 47,247 47,750 Advance Payments by Borrowers for Taxes and Insurance................. 1,816 1,605 Accrued Interest Payable on Deposits.................................. 470 832 Accrued and Other Liabilities......................................... 6,955 4,787 -------- -------- Total Liabilities..................................................... 833,078 815,258 -------- -------- Stockholders' Equity: Preferred Stock of $1 par value; 5,000,000 shares authorized.......... 0 0 -0- shares issued or outstanding Common Stock of $1.00 par value, authorized 25,000,000 shares, 7,380,671 shares issued............................................ 7,381 7,381 Additional Paid-in Capital............................................ 66,150 65,725 Retained Earnings (Substantially Restricted).......................... 56,865 54,660 Unearned Common Stock Held by ESOP.................................... (4,263) (4,612) Unearned Common Stock Held by RRP Trust............................... (4,276) (4,476) Treasury Stock, at cost; 479,961 shares............................... (7,948) (4,859) Unrealized Gain on Securities, Net of Deferred Taxes.................. 120 187 -------- -------- Total Stockholders' Equity............................................ 114,029 114,006 -------- -------- Total Liabilities and Stockholders' Equity............................ $947,107 $929,264 -------- -------- -------- --------
See Notes to Unaudited Consolidated Financial Statements 3 ISB FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Dollars in Thousands, Except Per Share Data)
For the Three Months For the Six Months Ended June 30, Ended June 30, -------------------- ----------------- 1997 1996 1997 1996 -------- -------- -------- -------- Interest Income: Interest on Loans...................................... $12,799 $ 9,651 $25,132 $18,193 Interest and Dividends on Investment Securities........ 1,522 1,046 3,169 2,326 Interest on Mortgage-Backed Securities................. 2,214 772 4,478 1,609 Interest on Deposits................................... 493 939 1,026 1,740 ------- ------- ------- ------- Total Interest Income.................................... 17,028 12,408 33,805 23,868 ------- ------- ------- ------- Interest Expense: Interest on Deposits................................... 8,261 5,481 16,238 10,640 Interest on Federal Home Loan Bank Advances............ 773 787 1,542 1,540 ------- ------- ------- ------- Total Interest Expense................................... 9,034 6,268 17,780 12,180 ------- ------- ------- ------- Net Interest Income...................................... 7,994 6,140 16,025 11,688 Provision for Loan Losses................................ 242 9 404 17 ------- ------- ------- ------- Net Interest Income After Provision for Loan Losses...... 7,752 6,131 15,621 11,671 ------- ------- ------- ------- Noninterest Income: Service Charges on Deposit Accounts.................... 798 445 1,511 831 Late Charges and Other Fees on Loans................... 326 223 526 393 Other Income........................................... 416 217 792 449 ------- ------- ------- ------- Total Noninterest Income................................. 1,540 885 2,829 1,673 ------- ------- ------- ------- Noninterest Expense: Salaries and Employee Benefits......................... 3,164 2,041 6,311 3,757 SAIF Deposit Insurance Premium......................... 114 257 225 508 Depreciation Expense................................... 278 242 562 446 Occupancy Expense...................................... 418 279 826 489 Computer Expense....................................... 271 142 610 282 Net Costs (Income) of Other Real Estate................ (35) 6 (59) 25 Franchise and Shares Tax Expense....................... 234 223 474 447 Amortization of Goodwill and Other Acquired Intangibles......................................... 382 38 783 40 Other Expenses......................................... 1,558 880 2,790 1,666 ------- ------- ------- ------- Total Noninterest Expense................................ 6,384 4,108 12,522 7,660 ------- ------- ------- ------- Income Before Income Tax Expense......................... 2,908 2,908 5,928 5,684 Income Tax Expense....................................... 1,156 1,054 2,381 2,051 ------- ------- ------- ------- Net Income............................................... $ 1,752 $ 1,854 $ 3,547 $ 3,633 ------- ------- ------- ------- ------- ------- ------- ------- Earnings Per Share--Primary and Fully Diluted............ $ 0.27 $ 0.27 $ 0.55 $ 0.53 ------- ------- ------- ------- ------- ------- ------- -------
See Notes to Unaudited Consolidated Financial Statements 4 ISB FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) (Dollars in Thousands)
Unearned Unearned Common Net Additional Common Stock Unrealized Total Common Paid In Retained Stock Held Held By Treasury Gain (Loss) Stockholders' Stock Capital Earnings By ESOP RRP Trust Stock On Securities Equity ------ ----------- --------- ----------- ----------- --------- --------------- ------------ Balance, January 1, 1996... $7,381 $ 65,293 $ 51,584 ($ 5,339) $ 0 $ 0 $ 758 $ 119,677 Net Income................. 3,633 3,633 Cash Dividends Declared.... (1,095) (1,095) Common Stock Released by ESOP Trust............... 211 367 578 Common Stock Acquired by Management Recognition Plan Trust............... (4,687) (4,687) Common Stock earned by Participants of Management Recognition Plan..................... 31 31 Change in Unrealized Gain (Loss) on Securities Available for Sale....... (592) (592) ------ --------- --------- --------- --------- --------- --------- ---------- Balance, June 30, 1996..... $7,381 $ 65,504 $ 54,122 ($ 4,972) ($ 4,656) $ 0 $ 166 $ 117,545 ------ --------- --------- --------- --------- --------- --------- ---------- ------ --------- --------- --------- --------- --------- --------- ---------- Balance, January 1, 1997... $7,381 $ 65,725 $ 54,660 ($ 4,612) ($ 4,476) ($ 4,859) $ 187 $ 114,006 Net Income................. 3,547 3,547 Cash Dividends Declared.... (1,342) (1,342) Common Stock Released by ESOP Trust............... 424 349 773 Common Stock Earned by Participants of Recognition and Retention Plan Trust............... 1 200 201 Treasury Stock Acquired.... (3,089) (3,089) Change in Unrealized Gain (Loss) on Securities Available for Sale....... (67) (67) ------ --------- --------- --------- --------- --------- --------- ---------- Balance, June 30, 1997..... $7,381 $ 66,150 $ 56,865 ($ 4,263) ($ 4,276) ($ 7,948) $ 120 $ 114,029 ------ --------- --------- --------- --------- --------- --------- ---------- ------ --------- --------- --------- --------- --------- --------- ----------
See Notes to Unaudited Consolidated Financial Statements 5 ISB FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands)
For the Six Months Ended ------------- June 30, June 30, 1997 1996 --------- --------- Cash Flows from Operating Activities: Net Income........................................................... $ 3,547 $ 3,633 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization...................................... 1,415 551 Provision for Loan Losses.......................................... 404 17 Compensation Expense Recognized on RRP............................. 201 31 Loss (Gain) on Sale of Premises and Equipment...................... 7 (57) Loss (Gain) on Sale of Real Estate Owned........................... (64) 16 Write-Down of Real Estate Owned to Market Value.................... 0 0 Gain on Loans Sold................................................. (91) 0 (Gain) Loss on Sale of Investments................................. 0 0 Amortization of Premium/Discount on Investments.................... 170 242 Current Provision for Deferred Income Taxes........................ 0 0 FHLB Stock Dividends............................................... (170) (114) Loans Originated for Resale........................................ (6,827) 0 Proceeds From Loans Sold to Others................................. 6,918 0 Income Reinvested on Marketable Equity Security.................... (163) (151) ESOP Contribution.................................................. 773 574 Net Change in Securities Classified as Trading..................... (116) (2,291) Changes in Assets and Liabilities: Decrease (Increase) in Accrued Interest Receivable............... (261) 250 Decrease (Increase) in Other Assets and Other Liabilities........ 263 76 ------- --------- Net Cash Provided by Operating Activities............................. 6,006 2,777 ------- --------- Cash Flows From Investing Activities: Proceeds from Sales of Available for Sale Securities............... 0 0 Proceeds from Maturities of Held to Maturity Securities............ 406 2,142 Proceeds from Maturities of Available for Sale Securities.......... 27,000 23,625 Purchases of Securities Held to Maturity........................... 0 (1,576) Purchases of Securities Available for Sale......................... (30,335) (2,995) Increase in Loans Receivable, Net.................................. (45,537) (26,770) Proceeds from ESOP Note Repayment.................................. 841 0 Proceeds from Sale of Premises and Equipment....................... 0 128 Purchases of Premises and Equipment................................ (2,820) (1,035) Proceeds from FHLB Stock Redemption................................ 0 0 Proceeds from Disposition of Real Estate Owned..................... 703 53 Purchases of Mortgage-Backed Securities............................ 0 0 Principal Collections on Mortgage-Backed Securities................ 16,134 4,219 Cash Paid In Excess of Cash Received on Bank Acquisitions.......... 0 5,614 Other Investing Activities......................................... 0 (75) ------- ------- Net Cash Provided by (Used in) Investing Activities................... (33,608) 3,330 ------- ------- Cash Flows From Financing Activities: Net Change in Demand, NOW, Money Market and Savings Deposit........ (78) 6,118 Net Change in Time Deposits........................................ 16,384 1,165 (Decrease) Increase in Escrow Funds and Miscellaneous Deposits, Net.................................................... 211 (14) Proceeds From FHLB Advances........................................ 0 8,195 Principal Repayments of FHLB Advances.............................. (503) (449) Proceeds from Issuance of Common Stock............................. 0 0 Dividends Paid to Shareholders..................................... (1,206) (1,056) Acquisition of Common Stock by RRP................................. 0 (4,687) Purchase of Treasury Stock......................................... (3,089) 0 Stock Conversion Costs Incurred.................................... 0 0 -------- -------- Net Cash Provided by (Used in) Financing Activities................... 11,719 9,272 -------- --------- Net Increase (Decrease) In Cash and Cash Equivalents................. (15,883) 15,379 Cash and Cash Equivalents at Beginning of Year....................... 53,385 51,742 -------- -------- Cash and Cash Equivalents at End of Period........................... $ 37,502 $ 67,121 --------- -------- --------- -------- Supplemental Schedule of Noncash Activities: Acquisition of Real Estate in Settlement of Loans................ $ 221 $ 108 Supplemental Disclosures: Cash Paid For: Interest on Deposits and Borrowings............................... $ 18,143 $ 11,807 Income Taxes...................................................... $ 2,075 $ 1,663
The accompanying Notes to Consolidated Financial Statements are an integral part of these Financial Statements. 6 ISB FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF FINANCIAL STATEMENT PRESENTATION The accompanying consolidated financial statements were prepared in accordance with instructions to Form 10-Q, and therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. All normal, recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the financial statements, have been included. These interim financial statements should be read in conjunction with the audited financial statements and note disclosures for ISB Financial Corporation (the "Company") previously filed with the Securities and Exchange Commission in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. BUSINESS The Company's principal business is conducted through it's wholly owned subsidiaries, Iberia Savings Bank, which conducts business from its main office located in New Iberia, Louisiana and 18 full-service branch offices located in the cities of New Iberia, Lafayette, St. Martinville, Crowley, Rayne, Kaplan, Jeanerette, Franklin, Morgan City and Abbeville and Jefferson Bank, which conducts business from its main office located in Gretna, Louisiana and 7 full-service branch offices located in the cities of Gretna, Marrero, River Ridge, Metairie, New Orleans and Kenner. The Banks' deposits are insured by the Federal Deposit Insurance Corporation ("FDIC") to the maximum extent permitted by law. The Company has previously announced its intentions to merge Jefferson Bank with and into Iberia Savings Bank and to convert Iberia Savings Bank to a Louisiana chartered commercial bank. It is anticipated that the transactions will be consummated in the third quarter of 1997. The Banks are subject to examination and regulation by the Office of Financial Institutions of the State of Louisiana, which is the Banks' chartering authority and primary regulator. The Banks are also subject to regulation by the FDIC and to certain reserve requirements established by the Federal Reserve Board ("FRB"). The Banks are members of the Federal Home Loan Bank of Dallas ("FHLB"). PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company, the Banks and the Banks' wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. 7 (2) LOANS RECEIVABLE Loans receivable (in thousands) at June 30, 1997 and December 31, 1996 consisted of the following: June 30, Dec. 31, 1997 1996 ---------- ---------- Mortgage Loans: Single-Family Residential.................. $ 385,745 $ 386,555 Multifamily................................ 2,298 2,279 Commercial Real Estate..................... 35,560 22,961 Construction............................... 11,343 14,064 ---------- ---------- Total Mortgage Loans..................... 434,946 425,859 ---------- ---------- Commercial Business Loans..................... 44,878 36,089 ---------- ---------- Consumer Loans: Home Equity................................ $ 28,438 $ 25,918 Automobile................................. 8,026 7,509 Indirect Automobile........................ 76,037 52,371 Mobile Home Loans.......................... 3,630 4,215 Educational Loans.......................... 9,385 9,345 Credit Card Loans.......................... 3,802 4,017 Loans on Savings........................... 12,334 12,487 Other...................................... 5,125 3,953 ---------- ---------- Total Consumer Loans..................... 146,777 119,815 ---------- ---------- Total Loans Receivable................... 626,601 581,763 ---------- ---------- Adjustments: Allowance for Loan Losses..................... (4,960) (4,615) Loans-in-Process.............................. (6,872) (6,059) Prepaid Dealer Participation.................. 3,575 2,555 Unearned Interest............................. (157) (143) Deferred Loan Fees, Net....................... (868) (922) Discount on Loans Purchased................... (1,288) (1,460) ---------- ---------- Loans Receivable, Net......................... $ 616,031 $ 571,119 ---------- ---------- ---------- ---------- 8 (3) EARNINGS PER SHARE Primary earnings per share were based on 6,421,433 weighted average shares outstanding during the three month period ended June 30, 1997 and 6,438,482 weighted average shares outstanding during the six months ended June 30, 1997. Fully diluted earnings per share were based on 6,470,182 weighted average shares outstanding during the three month period ended June 30, 1997 and 6,480,341 weighted average shares outstanding during the six months ended June 30, 1997. For the three months ended June 30, 1997, the weighted average number of common shares outstanding excludes (a) the weighted average unreleased shares owned by the ESOP of 435,012; (b) the weighted average shares owned by the Management Recognition Plan and Trust of 285,775 and (c) the weighted average shares purchased in Treasury Stock of 459,201. For the six months ended June 30, 1997, the weighted average number of common shares outstanding excludes (a) the weighted average unreleased shares owned by the ESOP of 443,734; (b) the weighted average shares owned by the Management Recognition Plan and Trust of 290,475 and (c) the weighted average shares purchased in Treasury Stock of 416,074. In February of 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings Per Share," ("SFAS 128") which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The Company does not believe that the effect of SFAS 128 on the calculation of fully diluted earnings per share for these quarters would be material. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CHANGES IN FINANCIAL CONDITION At June 30, 1997, the consolidated assets of the Company totalled $947.1 million, an increase of $17.8 million or 1.9% from December 31, 1996. Loans receivable, net, increased by $44.9 million, or 7.9%, to $616.0 million at June 30, 1997, compared to $571.1 million at December 31, 1996. Such increase was the result of a $12.6 million, or 54.9%, increase in commercial real estate loans, a $8.8 million, or 24.4%, increase in commercial business loans, a $2.5 million, or 9.7%, increase in home equity loans, a $23.7 million, or 45.2%, increase in indirect automobile loans and a $1.2 million, or 29.6%, increase in other consumer loans. Such increases were partially offset by a $2.7 million, or 19.3%, decrease in construction loans. The changes in the loan portfolio reflects management's efforts to increase the originations of commercial real estate, commercial business and indirect automobile loans. Such loans generally are considered to involve more risk than 1-4 family residential mortgage loans, but generally have higher yields. For additional information on loans, see Note 2 to the Notes to Consolidated Financial Statements. The increase in loans receivable was funded primarily by a decrease in interest bearing deposits at other institutions, a decrease in mortgage-backed securities and by an increase in customer deposits. Interest bearing deposits at other institutions decreased $18.5 million, or 43.4%, to $24.1 million at June 30, 1997, compared to $42.6 million at December 31, 1996. The Company's investment securities available for sale increased $3.3 million, or 3.2%, to $104.4 million at June 30, 1997, compared to $101.1 million at December 31, 1996. Such increase was the result of the purchase of $30.3 million of investment securities, which was partially offset by the maturity or redemption of $27.0 million of investment securities together with a $102,000 decrease in the market value of such securities and $130,000 of net premium amortization on such securities. Mortgage-backed securities decreased $16.2 million, or 10.7%, from December 31, 1996 to June 30, 1997. Such decrease was attributable entirely to repayments. Deposits increased $16.3 million, or 2.1%, to $776.6 million at June 30, 1997, compared to $760.3 million at December 31, 1996. Such increase was due to $3.1 million of net new deposits together with $13.2 million of interest credited. Advances from the FHLB of Dallas decreased $503,000, or 1.1%, to $47.2 million at June 30, 1997, compared to $47.8 million at December 31, 1996. The decrease in advances was attributable to shceduled payments made. The advances are amortizing, fixed-rate and long term and were used to fund additional originations of fixed-rate, long term single-family residential loans. Total stockholders' equity increased $23,000 to $114.0 million at June 30, 1997. The increase was the result of the Company's net income of $3.5 million, $773,000 of common stock released by the ESOPand $201,000 of common stock earned by participants of the 10 Recognition and Retention Plan, which was partially offset by the declaration of cash dividends on common stock of $1.3 million, a $67,000, after deferred taxes, decrease in net unrealized gains on securities available for sale, and $3.1 million of stock repurchased into treasury. RESULTS OF OPERATIONS The Company reported net income of $1.8 million for the three months ended June 30, 1997, compared to $1.9 million earned during the three month period ended June 30, 1996. The Company's net interest income increased by $1.9 million and total noninterest income increased by $655,000 during the three months ended June 30, 1997 compared to the second quarter of 1996. Such increases were offset by a $233,000 increase in provision for loan losses, a $2.3 million increase in noninterest expense and a $102,000 increase in income tax expense. The increase in noninterest expense includes an increase of $324,000 in the amortization of goodwill and other acquired intangibles. For the six months ended June 30, 1997 the Company earned $3.5 million compared to $3.6 million for the same period of 1996. The Company's net interest income increased $4.3 million and total noninterest income increased $1.2 million during the six months ended June 30, 1997 compared to the first six months of 1996. Such increases were offset by a $387,000 increase in provision for loan losses, a $4.9 million increase in noninterest expense and a $330,000 increase in income tax expense when comparing the first six months of 1997 to the same period of 1996. The increase in noninterest expense includes an increase of $743,000 in the amortization of goodwill and other acquired intangibles. The increases in net interest income, noninterest income and noninterest expense are due pricipally to the two acquisitions completed by the Company in 1996, which were Royal Bankgroup of Acadiana, Inc. ("Royal") of Lafayette, Louisiana, and its wholly owned subusidiary, Bank of Lafayette, and Jefferson Bancorp, Inc. ("Jefferson") of Gretna, Louisiana and its wholly owned subsidiary, Jefferson Federal Savings Bank. The Royal acquisition added $70.2 million of assets and $64.2 million of liabilities for a total cash price of $9.2 million. Goodwill of $3.2 million was recognized in the Royal transaction. The Jefferson acquisition added $266.2 million of assets and $229.4 of liabilities for a total cash price of $51.8 million. Goodwill of $11.1 million and a core deposit intangible of $3.8 million was recognized in the Jefferson transaction. 11 Average Balances, Net Interest Income and Yields Earned and Rates Paid The following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest income of the Bank from interest-earning assets and the resultant average yields (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rate; (iii) net interest income; (iv) interest rate spread; and (v) net interest margin. Information is based on average daily balances during the indicated periods.
Three Months Ended June 30, ------------------------------------------------------------------ 1997 1996 ------------------------------- --------------------------------- Yield/Cost Average Average At June 30, Average Yield/ Average Yield/ 1997 Balance Interest Cost(1) Balance Interest Cost(1) ------------- --------- --------- --------- --------- --------- ----------- (Dollars in Thousands) Interest-earning assets: Loans receivable: Mortgage loans 7.84% $421,252 $ 8,595 8.16% $348,870 $ 7,200 8.26% Commercial business loans 9.42 43,329 1,118 10.32 22,194 511 9.21 Consumer and other loans 9.59 139,929 3,086 8.82 74,000 1,940 10.49 -------- ------- -------- ------- Total Loans 8.37 604,510 12,799 8.47 445,064 9,651 8.67 -------- ------- -------- ------- Mortgage-backed securities 6.43 138,356 2,214 6.40 51,908 772 5.95 Investment securities 6.71 105,883 1,522 5.75 67,090 1,046 6.24 Other earning assets 6.17 29,443 493 6.70 71,232 939 5.27 -------- ------- -------- ------- Total interest-earning assets 7.81 878,192 17,028 7.76 635,294 12,408 7.81 Non-interest-earning assets 64,004 ------- 33,925 ------- -------- -------- Total assets $942,196 $669,219 -------- -------- -------- -------- Interest-bearing liabilities: Deposits: Demand deposits 2.04 $137,935 920 2.67 $ 98,403 491 2.00 Passbook savings deposits 2.60 118,804 765 2.58 58,403 402 2.75 Certificates of deposits 5.66 477,798 6,576 5.51 334,927 4,588 5.48 -------- ------- -------- ------- Total deposits 4.52 734,537 8,261 4.50 491,733 5,481 4.46 Borrowings 6.54 47,413 773 6.52 48,392 787 6.51 -------- ------- -------- ------- Total interest-bearing liabilities 4.64 781,950 9,034 4.62 540,125 6,268 4.64 Non-interest bearing demand deposits 36,192 Non-interest bearing liabilities 10,247 6,441 -------- -------- Total liabilities 828,389 546,566 Stockholders' Equity 113,807 122,653 -------- -------- Total liabilities and stockholders' equity $942,196 $669,219 -------- -------- -------- -------- Net interest-earning assets $ 96,242 $ 95,169 -------- -------- -------- -------- Net interest income/interest rate spread 3.17% $ 7,994 3.13% $6,140 3.17% ---- ------- ---- ------- ---- Net interest margin 3.64% 3.87% ---- ---- Ratio of average interest-earning assets to average interest-bearing liabilities 112.31% 117.62% ------ ------ Six Months Ended June 30, -------------------------------------------------------------------- 1997 1996 --------------------------------- -------------------------------- Average Average Average Yield/ Average Yield/ Balance Interest Cost(1) Balance Interest Cost(1) --------- ----------- --------- --------- ---------- --------- (Dollars in Thousands) Interest-earning assets: Loans receivable: Mortgage loans $417,720 $16,987 8.13% $344,465 $14,133 8.21% Commercial business loans 42,568 2,196 10.32 16,847 825 9.79 Consumer and other loans 133,266 5,949 8.93 63,124 3,235 10.25 -------- ------- -------- ------- Total Loans 593,554 25,132 8.47 424,436 18,193 8.57 -------- ------- -------- ------- Mortgage-backed securities 141,992 4,478 6.31 51,291 1,609 6.27 Investment securities 106,261 3,169 5.96 72,262 2,326 6.44 Other earning assets 32,487 1,026 6.32 65,591 1,740 5.31 -------- ------- -------- ------- Total interest-earning assets 874,294 33,805 7.73 613,580 23,868 7.78 Non-interest-earning assets 61,058 ------- 30,348 ------- -------- -------- Total assets $935,352 $643,928 -------- -------- -------- -------- Interest-bearing liabilities: Deposits: Demand deposits $137,112 1,773 2.59 $ 86,767 908 2.09 Passbook savings deposits 119,633 1,530 2.56 54,500 749 2.75 Certificates of deposits 473,388 12,935 5.46 327,871 8,983 5.48 -------- ------- -------- ------- Total deposits 730,133 16,238 4.45 469,138 10,640 4.54 Borrowings 47,538 1,542 6.49 47,185 1,540 6.53 -------- ------- -------- ------- Total interest-bearing liabilities 777,671 17,780 4.57 516,323 12,180 4.72 Non-interest bearing demand deposits 34,589 Non-interest bearing liabilities 9,132 5,970 -------- -------- Total liabilities 821,392 522,293 Stockholders' Equity 113,960 121,635 -------- -------- Total liabilities and stockholders' equity $935,352 $643,928 -------- -------- -------- -------- Net interest-earning $ 96,623 $ 97,257 -------- -------- -------- -------- Net interest income/interest rate spread $16,025 3.16% $11,688 3.06% ------- ---- ------- ---- Net interest margin 3.67% 3.81% ---- ---- Ratio of average interest-earning assets to average interest-bearing liabilities 112.42% 118.84% ------ ------
- ------------------------ (1) Annualized. 12 Net Interest Income Net interest income increased $1.9 million, or 30.2%, to $8.0 million in the three months ended June 30, 1997, compared to $6.1 million in the three months ended June 30, 1996. The increase was due to a $4.6 million, or 37.2%, increase in interest income, which was partially offset by a $2.8 million, or 44.1%, increase in interest expense. The increase in interest income was the result of a $242.9 million, or 38.2%, increase in the average balance of interest-earning assets, which was partially offset by a five basis point (100 basis points being equal to 1%) decrease in the yield thereon. The increase in interest expense was the result of a $241.8 million, or 44.8%, increase in the average balance of interest-bearing liabilities, which was partially offset by a two basis point decrease in the cost thereon. The Company's interest rate spread (the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities) and net interest margin (net interest income as a percentage of average interest-earning assets) amounted to 3.13% and 3.64%, respectively, during the three months ended June 30, 1997, compared to 3.17% and 3.87%, respectively, for the comparable period in 1996. The increase in average interest-earning assets and interest-bearing liabilities was the result primarily of the two 1996 acquisitions. For the six month period ending June 30, 1997, net interest income increased $4.3 million, or 37.1%, to $16.0 million compared to $11.7 million for the same period in 1996. The increase was due to a $9.9 million, or 41.6%, increase in interest income, which was partially offset by a $5.6 million, or 46.0%, increase in interest expense. The increase in interest income was the result of a $260.7 million, or 42.5%, increase in the average balance of interest-earning assets, which was partially offset by a five basis point decrease in the yield thereon. The increase in interest expense was the result of a $261.3 million, or 50.6%, increase in the average balance of interest-bearing liabilities, which was partially offset by a 15 basis point decrease in the cost thereon. The Company's interest rate spread and net interest margin amounted to 3.16% and 3.67%, respectively, during the six months ended June 30, 1997, compared to 3.06% and 3.81%, respectively, for the comparable period in 1996. Interest Income The Company's total interest income was $17.0 million for the three months ended June 30, 1997, compared to $12.4 million for the three months ended June 30, 1996. The reasons for the $4.6 million, or 37.2%, increase in interest income were a $3.1 million, or 32.6%, increase in interest income from loans, a $476,000, or 45.5%, increase in interest and dividends on investment securities and a $1.4 million, or 186.8%, increase in interest income from mortgage-backed securities, which was partially offset by a $446,000, or 47.5%, decrease in interest on deposits held at other financial institutions. The increase in interest income from loans was the result of a $159.4 million, or 35.8%, increase in the average balance of loans, which was partially offset by a 20 basis point decrease in the yield earned thereon. The increase in interest and dividends on investment securities was the result of a $38.8 million, or 57.8%, increase in the average balance of investment securities, which was partially offset by a 49 basis point decrease in the yield earned thereon. The increase in interest income from 13 mortgage-backed securities was the result of a $86.4 million, or 166.5%, increase in the average balance of mortgage-backed securities, together with a 45 basis point increase in the yield earned thereon. The decrease in interest on other earning assets, primarily deposits at other financial institutions, was the result of a $41.8 million, or 58.7%, decrease in the average balance of other earning assets, which was partially offset by a 143 basis point increase in the yield earned thereon. For the six months ended June 30, 1997, total interest income was $33.8 million compared to $23.9 million for the same period in 1996. The reasons for the $9.9 million, or 41.6%, increase in interest income were a $6.9 million, or 38.1%, increase in interest income from loans, a $843,000, or 36.2%, increase in interest and dividends from investment securities and a $2.9 million, or 178.3%, increase in interest income from mortgage-backed securities, which was partially offset by a $714,000, or 41.0%, decrease in interest income from deposits held at other financial institutions. The increase in interest income from loans was the result of a $169.1 million, or 39.8%, increase in the average balance of loans, which was partially offset by a 10 basis point decrease in the yield earned thereon. The increase in interest and dividends on investment securities was the result of a $34.0 million, or 47.0%, increase in the average balance of investment securities, which was partially offset by a 48 basis point decrease in the yield earned thereon. The increase in interest income from mortgage-backed securities was the result of a $90.7 million, 176.8%, increase in the average balance of mortgage-backed securities, together with a 4 basis point increase in the yield earned thereon. The decrease in interest income from other earning assets was the result of a $33.1 million, or 50.5%, decrease in the average balance of other earning assets, which was partially offset by a 101 basis point increase in the yield earned thereon. Interest Expense The Company's total interest expense was $9.0 million during the three months ended June 30, 1997, compared to $6.3 million for the three months ended June 30, 1996. The reason for the $2.8 million, or 44.1%, increase in interest expense was a $2.8 million, or 50.7%, increase in interest expense on deposits due to a $242.8 million, or 49.4%, increase in the average balance of deposits, together with a four basis point increase in the average cost thereof, which was partially offset by a $14,000, or 1.8%, decrease in interest expense paid on advances from the FHLB due to a $979,000, or 2.0%, decrease in the average balance of advances, which was partially offset by a one basis point increase in the cost thereof. The borrowings from the FHLB are used to fund fixed-rate, long term single-family residential loans. For the six months ended June 30, 1997, the company's total interest expense was $17.8 million, compared to $12.2 million for the same period in 1996. The reason for the $5.6 million, or 46.0%, increase in interest expense was a $5.6 million, or 52.6%, increase in interest expense on deposits due to a $261.0 million, or 55.6%, increase in the average balance of deposits, which was partially offset by a nine basis point decrease in the cost thereof. Interest expense on borrowings remained unchanged at $1.5 million for the six months ended June 30, 1997 and 1996. 14 Provision For Loan Losses The provision for loan losses was $242,000 in the three months ended June 30, 1997 as compared to $9,000 for the same period in 1996. The increased provision for loan losses was due to the increase in net loans experienced during the period. As of June 30, 1997, the ratio of the Company's allowance for loan losses to non-performing loans was 224.4%. The provision for loan losses was $404,000 in the six months ended June 30, 1997, compared to $17,000 for the same period in 1996. Noninterest Income Noninterest income increased $655,000, or 74.0%, in the three months ended June 30, 1997 to $1.5 million, compared to $885,000 for the three months ended June 30, 1996. Such increase was due primarily to a $353,000, or 79.3%, increase in service charges on deposit accounts, a $103,000, or 46.2%, increase in late charges and other fees on loans and a $199,000, or 91.7%, increase in other income. The increase in service charges on deposit accounts was due primarily to the increased number of accounts that are subject to such service charges. For the six months ended June 30, 1997, noninterest income increased $1.2 million, or 69.1%, to $2.8 million, compared to $1.7 million for the same period in 1996. Such increase was due primarily to a $680,000, or 81.8%, increase in service charges on deposit accounts, a $133,000, or 33.8%, increase in late charges and other fees on loans and a $343,000, or 76.4%, increase in other income. Noninterest Expense Noninterest expense increased $2.3 million, or 55.4%, in the three months ended June 30, 1997 to $6.4 million, compared to $4.1 million in the three months ended June 30, 1996. Such increase was due primarily to a a $1.1 million, or 55.0%, increase in salaries and employee benefits due primarily to expense of the ESOP and management recognition plans and salaries and benefits associated with the additional personnel needed to staff the branch offices acquired in 1996 and the two branch offices opened in 1997, a $139,000, or 49.8%, increase in occupancy expense due primarily to the 10 additional branches during the 1997 period compared to the 1996 period, a $129,000, or 90.8%, increase in computer expense, a $344,000 increase in amortization of goodwill and other acquired intangibles due to the Royal acquisition which took place in May of 1996 and the Jefferson acquisition which was consumated in October of 1996, and a $678,000, or 77.1%, increase in other noninterest expense, which was partially offset by a $143,000, or 55.6%, decrease in SAIF deposit insurance premium. For the six months ended June 30, 1997, noninterest expense increased $4.9 million, or 63.5%, to $12.5 million compared to $7.7 million for the same period in 1996. Such increase was primarily due to a $2.6 million, or 68.0%, increase in salaries and employee benefits, a $337,000, or 68.9%, increase in occupancy expense, a $328,000, or 116.3%, increase in computer expense, a $743,000 increase in amortization of goodwill and other acquired intangibles and a $1.1 million, or 67.5%, increase in other noninterest expense, which was partially offset by a $283,000, or 55.7%, decrease in SAIF deposit insurance premium. 15 Income Tax Expense Income tax expense increased $102,000, or 9.7%, in the three months ended June 30, 1997 to $1.2 million, compared to $1.1 million for the three months ended June 30, 1996. The increase in income tax expense reflects a increase in the effective tax rate due primarily to the nondeductability of the amortization of goodwill and other acquired intangibles for tax purposes. For the six months ended June 30, 1997, income tax expense increased $330,000, or 16.1%, to $2.4 million compared to $2.1 million for the same period in 1996. Liquidity and Capital Resources The Company's liquidity, represented by cash and cash equivalents, is a product of its operating, investing and financing activities. The Company's primary sources of funds are deposits, borrowings, amortization, prepayments and maturities of outstanding loans and mortgage-backed securities, maturities of investment securities and other short-term investments and funds provided from operations. While scheduled payments from the amortization of loans and mortgage-backed securities and maturing investment securities and short-term investments are relatively predictable sources of funds, deposit flows and loan and mortgage-backed security prepayments are greatly influenced by general interest rates, economic conditions and competition. In addition, the Company invests excess funds in overnight deposits and other short-term interest-earning assets which provide liquidity to meet lending requirements. The Bank has been able to generate sufficient cash through its deposits as well as borrowings. At June 30, 1997, the Company had $47.2 million in outstanding advances from the Federal Home Loan Bank of Dallas. Liquidity management is both a daily and long-term function of business management. Excess liquidity is generally invested in short-term investments such as over-night deposits. On a longer-term basis, the Company maintains a strategy of investing in various lending products. The Company uses its sources of funds primarily to meet its ongoing commitments, to pay maturing savings certificates and savings withdrawals, fund loan commitments and maintain a portfolio of mortgage-backed and investment securities. At June 30, 1997, the total approved loan commitments outstanding amounted to $26.8 million. At the same time, commitments under unused lines of credit, including credit card lines, amounted to $61.6 million. Certificates of deposit scheduled to mature in twelve months or less at June 30, 1997 totalled $253.4 million. Based on past experience, management believes that a significant portion of maturing deposits will remain with the Bank. The Company anticipates it will continue to have sufficient funds to meet its liquidity requirements. 16 At June 30, 1997, the Company and its subsidiaries had regulatory capital which was well in excess of regulatory requirements. The current requirements and the Company's actual levels as of June 30, 1997 are detailed below (dollars in thousands):
Required Capital Actual Capital ------------------- ---------------------- Amount Percent Amount Percent --------- --------- ---------- ----------- Tier 1 Leverage...................... $28,461 3.00% $ 96,888 10.21% Tier 1 Risk-Based.................... $20,333 4.00% $ 96,888 19.06% Total Risk-Based..................... $40,665 8.00% $101,848 20.04%
17 PART II--OTHER INFORMATION Item 1. Legal Proceedings--Not applicable Item 2. Changes in Securities--Not Applicable Item 3. Defaults Upon Senior Securities--Not Applicable Item 4. Submission of Matters to a Vote of Security Holders The Company's Annual Meeting of Stockholders was held on April 16, 1997. 1. With respect to the election of four directors to serve three-year terms expiring at the Annual Meeting of Stockholders to be held in the year 2000 or until their respective successors are elected and qualified, the following are the number of shares voted for each nominee: Cecil C. Broussard For 6,207,924 Withheld 19,669 Ray Hime For 6,208,126 Withheld 19,467 Larrey G. Mouton For 6,173,216 Withheld 54,377 Emile J. Plaisance, Jr. For 6,208,361 Withheld 19,232 2. With respect to the ratification of Castaing, Hussey & Lolan, L.L.P. as the Company's independent auditors for the fiscal year endeding December 31, 1997, the following are the number of shares voted: For 6,198,885 Against 22,913 Abstain 5,794 3. With respect to the amendment of the Company's Bylaws to require that a majority of the members of its Board of Directors be legal residents of Iberia Parish, Louisiana, the following are the number of shares voted: For 937,915 Against 3,569,711 Abstain 30,053 There were 1,689,914 "broker non-votes" cast at the Annual Meeting. Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K a) Not applicable. b) No Form 8-K reports were filed during the quarter. 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ISB FINANCIAL CORPORATION Date: August 8, 1997 By: /s/ Larrey G. Mouton --------------------------------- Larrey G. Mouton, President and Chief Executive Officer Date: August 8, 1997 By: /s/ Thomas E. Harrison --------------------------------- Thomas E. Harrison, Senior Vice President and Chief Financial Officer 19 EX-27 2 EX-27
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED FINANCIAL STATEMENTS AT JUNE 30, 1997 AND DECEMBER 31, 1996, CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996, AND FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 1997. 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 13,412 24,090 0 480 0 136,319 136,237 616,031 (4,960) 947,107 776,590 47,247 9,241 0 0 0 7,381 106,648 947,107 25,132 7,647 1,026 33,805 16,238 17,780 16,025 404 0 12,522 5,928 5,928 0 0 3,547 .55 .55 3.64 2,100 0 0 3,756 4,617 225 194 404 0 0 4,960
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