UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1999
Commission file Number 2-89561
Teche Bancshares, Inc.
Louisiana 72-1008552
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
606 South Main Street, St. Martinville, Louisiana 70582
(Address of principal executive offices 70582
Registrant's telephone number, including area code:
(318) 394-9726
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 ( )
Indicated the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
Common Stock, $10 Par Value - 27,925 shares as of June 30, 1999.
TECHE BANCSHARES, INC. AND SUBSIDIARY
St. Martinville, Louisiana
(UNAUDITED)
CONSOLIDATED BALANCE SHEETS
June 30, 1999 and December 31, 1998
(Dollars in Thousands)
June 30, December 31
1999 1998
ASSETS
Cash and due from banks $1,592 $1,574
Interest-bearing deposits with banks 34 73
Securities Available for Sale at mkt value 21,262 18,334
Securities Held To Maturity (Market Value
of $2,224 and $5,617, respectively) 2,208 5,583
Other securities at cost 375 354
Federal funds sold - 1,500
Loans, net of allowance for loan losses
of $207 and $173, respectively) 20,320 16,354
Bank premises, furniture, and equipment 761 808
Accrued interest receivable 377 357
Other real estate owned 228 230
Other assets 207 116
----------------------
Total assets $47,364 $45,283
======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits -
Non-interest demand 6,529 $6,795
Interest bearing -
NOW and MMDA accounts 5,363 6,744
Savings 4,134 3,593
Time, $100 and over, 10,748 10,339
Other time 10,610 10,626
----------------------
Total deposits 37,384 38,097
Accrued interest payable 140 164
Federal Home Loan Borrowings 3,216 3,260
Fed Funds Purchased 1,325 0
Repurchase Agreements 1,325 -
Other liabilities and accrued expenses 286 184
----------------------
Total liabilities 43,675 41,705
Stockholders' equity:
Common stock ($10 par value, 100,000
shares authorized, 28,125 shares
issued and outstanding) 281 281
Surplus 1,143 1,143
Retained earnings 2,239 2,065
----------------------
3,663 3,489
Less: 200 shares of treasury stock (19) (19)
Market Value Allowance on
AFS Bonds 44 108
----------------------
Total stockholders' equity 3,688 3,578
----------------------
Total liabilities and stockholders' equity $47,364 $45,283
======================
The accompanying notes are an integral part of this statement.
TECHE BANCSHARES, INC. AND SUBSIDIARY
St. Martinville, Louisiana
(UNAUDITED)
CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended June 30, 1999 and 1998;
(Dollars in Thousands except Earnings per Share and Average Shares)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
Interest income:
Interest and fees on loans $445 $361 $842 $702
Interest on investment securities -
U.S. government's 310 300 655 594
State/political sub's 13 13 27 26
Dividends on equities - 3 - 3
Interest on balances from banks - 3 1 5
Interest on federal funds 7 44 34 77
--------------------------------------------
Total interest income 775 724 1,559 1,407
Interest expense:
Interest on deposits $321 $349 $639 $659
Interest on fed funds purchased 5 - 5 -
Interest on borrowed funds 45 - 91 -
--------------------------------------------
Total interest expense 371 349 735 659
--------------------------------------------
Interest inc. before provision 404 375 824 748
Provision for Credit Losses 35 0 35 0
--------------------------------------------
Net interest income 369 375 789 748
--------------------------------------------
Other income:
Service charges deposits 74 69 141 127
Gain on sale of ORE - - - -
Gain on sale of Securities 1 1 1 2
Other income and charges 26 26 43 46
--------------------------------------------
Total other income 101 96 185 175
Other expenses:
Salaries/employee benefits 186 163 375 330
Occupancy expense 56 64 111 115
Loss on sale of ORE - 0 - 0
Other operating expenses 117 102 238 193
--------------------------------------------
Total other expenses 359 329 724 638
--------------------------------------------
Income before income taxes 111 142 250 285
Income taxes 35 43 76 87
--------------------------------------------
Net income $76 $99 $174 $198
Net income per share $2.74 $3.54 $6.23 $7.09
Average shares outstanding 27,925 27,925 27,925 27,925
The accompanying notes are an integral part of this statement.
TECHE BANCSHARES, INC. AND SUBSIDIARY
St. Martinville, Louisiana
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
For the Six Months Ended June 30, 1999 and 1998
Allowance for
Unrealized Unrealized
Common Loss on Gain (Loss)
Stock, Marketable on
Treasury & Equity AFS
Surplus Securities Securities Total
Balances, January 1, 1999 $3,470 $0 $108 $3,578
Net income six months 174 - $174
Change in Unrealized AFS (64) ($64)
------ ------ ------ ------
Balances, June 30, 1999 $3,644 $0 $44 $3,688
====== ====== ====== ======
Balances, January 1, 1998 $3,124 $0 $118 $3,242
Net income six months 198 - $198
Change in Unrealized AFS (25) ($25)
------ ------ ------ ------
Balances, June 30, 1998 $3,322 $0 $93 $3,415
====== ====== ====== ======
The accompanying notes are an integral part of this statement.
TECHE BANCSHARES, INC. AND SUBSIDIARY
St. Martinville, Louisiana
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Six Months Ended June 30, 1999 and 1998
June 30, June 30,
1999 1998
Cash flows from operating activities:
Net income $174 $198
Adjustments to reconcile net income
to net cash provided by
operating activities -
Depreciation of bank premises 59 39
Provision for Credit Losses 35 0
(Gain) Loss on Other real estate - 0
(Gain) Loss on sale of securities (1) (2)
Write down of other real estate owned 7 -
(Inc)dec accrued int receivable (20) (42)
(Inc) dec other assets (91) (68)
Inc(dec) accrued interest payable (24) 20
Inc(dec) other liabilities 101 91
Net cash provided by operating ----------------------
activities 240 236
Cash flows from investing activities:
Dec(inc) in interest bearing deposits in banks 40 -
Dec(inc) in federal funds 1,500 (950)
Dec(inc) in investment securities 363 (2,692)
Net dec (inc) in loans (4,001) (1,671)
Capital expenditures premises & equip (12) (64)
Dec(inc) in other real estate owned (5) 0
----------------------
Net cash used in investing activities (2,115) (5,377)
Cash flows from financing activities:
Net increase (decrease) in -
Demand deposits (266) (431)
NOW and MMDA (1,381) 551
Savings deposits 542 272
Time deposits $100,000 and over 408 2,746
Other time deposits (16) 252
Federal Home Loan Borrowings (44) 1,830
Increase in federal funds purchased 1,325 -
Increase in repurchase agreements 1,325 -
----------------------
Net cash provided by financing activities 1,893 5,220
Net increase in cash and cash equivalents 18 79
Cash and cash equivalents, beginning 1,574 1,633
Cash and cash equivalents, end of period $1,592 $1,712
Cash paid during the period:
Interest $759 $639
Income Taxes $80 $86
The accompanying notes are an integral part of this statement.
TECHE BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
The information furnished reflects all normal, recurring adjustments
which are, in the opinion of management, necessary for a fair statement of
Teche Bancshares, Inc. and its subsidiary for the six (6) months ended June
30, 1999. Results for the interim period presented are not necessarily
indicative of results which may be expected for any other interim period or
for the year as a whole.
TECHE BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE QUARTER ENDED JUNE 30, 1999.
Liquidity
Liquidity is the ability to insure that adequate funds are available to
satisfy contractual liabilities, fund operations, meet withdrawal
requirements of depositors and provide for customer's credit needs in a
timely manner. Our primary source of liquidity is our core deposits. We
supplement our core deposits with a line of credit with one of our
correspondent banks, public fund time deposits, repurchase agreements with
correspondent banks and a line of credit with the Federal Home Loan Bank. Our
sources of liquidity are adequate to fund the loan demand that we are
experiencing.
The primary source of funding for the parent company is dividends from the
Bank. Management believes the parent's current sources of funds are
sufficient to meet its liquidity needs for the foreseeable future.
Capital Resources and Asset Quality
Our consolidated risk based capital to asset ratio was 17.24% and Tier one
capital ratio was 7.71% at June 30, 1999. The bank only risk based capital
ratio was 17.2% and Tier one capital ratio was 7.68%. Banks are required to
maintain a risk weighted capital to asset ratio of 8% and Tier one capital
ratio of 5%. Our risk based capital ratio and Tier one capital ratio both
exceed the required amount. Our capital ratio has declined due to rapid
growth that we have experienced in total assets. Our asset growth has out
paced our earnings growth in the short run period ending June 30, 1999.
Management is monitoring our capital ratio and asset growth to assure that
the bank will continue to have adequate capital to support its assets.
Asset quality continues to be satisfactory due to our emphasis on credit
quality in our loan portfolio. Management is of the opinion that we have all
of our problem credits identified and that an adequate allowance has been
made for any potential future losses.
We continuously monitor the quality of our loans. Loans past due 90 days or
greater still accruing at June 30, 1999, were $66,795 an increase of $32,162
from December 31, 1998. Loans on which the accrual of interest had been
discontinued at June 30, 1999 totalled $0 which is down $24,210 as compared
to the amount at December 31, 1998.
We own one piece of other real estate. At the present time our other real
estate is leased with an option to purchase. The income proceeds received on
the lease are being matched with an offsetting write down of other real
estate. At June 30, 1999 other real estate totalled $228,120 which is down
$1,600 from December 31, 1998.
Results of Operations
Net Income. Our net income for the six (6) months ended June 30, 1999 was
$174,003 down $23,953 as compared to that of the same period last year. The
decrease in net income was mostly due to increases in salaries and employee
benefits and other operating expenses.
Revenue. Our net interest income for the six (6) months ended June 30, 1999
is up $41,663 as compared to the same period in 1998. During the first half
of the year we have experienced loan growth that has improved our interest
margin. The bank's loan portfolio increased $3,966,272 since the beginning
of the year.
Provision for Loan Losses. Our bad debt reserve totalled $207,339 at June 30,
1999 which represents 1.01% of our gross loans. During the first half of
1999, we added $35,000 to our reserve for loan loss account. We increased
our provision for loan losses to set aside reserves for the increase in loans
that we have experienced. Our reserve for loan loss balance was considered
adequate at June 30, 1999.
Other Income. Our other income is up $10,192 when compared to the same period
last year. The increase was mostly due to an increase in NSF fee income.
Other Expenses. Other expenses are up $86,129 as compared to the same time
last year. Other expenses increased due to increases in salaries and
employee benefits and other operating expenses. Salaries and benefits
increased as the result of raises that were provided in the fourth quarter of
1998 and the addition of two new loan employees. Other operating expenses
increased due to the depreciation and maintenance costs associated with the
purchase of a new check sorter and check image equipment. Our previous check
sorter was fully depreciated.
Provision for Income Tax. A provision is made for income tax to reflect one
half (6/12ths) of the annualized income tax that we anticipate we will incur.
The provision for income tax for the period ended June 30, 1999 was $76,493
as compared to $86,814 for the same period last year. The decrease in income
tax was due to decreased income for the current year.
Year 2000 Preparation. Teche Bancshares, Inc. relies on automation to manage
information. Since the earliest days of electronic computers, programmers
have used two digits to represent the year in date fields (YYMMDD). In the
1960s when this convention became standard, the two-digit representation made
economic sense because it economized computer memory and saved storage space.
The year 2000 problem exists because a two-digit representation of the year
will be interpreted in many applications to mean the year 1900, not 2000,
unless the date or program logic is modified. Without modification, many
date sensitive software applications will provide illogical or erroneous
data.
We have inventoried our software, hardware and environmental systems. We
have identified those critical systems that needed modification in our
business and remediated the affected programs. We have replaced our check
sorter with a new check sorter and image system. We have updated our main
application computer software to one provided by our software vendor that is
year 2000 ready. We have performed testing on all critical systems and have
determined that they are Year 2000 ready. The total expenditures associated
with the purchase of the new check sorter and conversion of our main
application software were $236,000. These expenditures were capital in
nature and will be depreciated over a five-year period. We do not anticipate
that any further significant expenditures will be necessary.
We have considered the effect of the year 2000 on our major customers. We
are maintaining a list of major customers and monitoring their progress. We
will be considering the progress of our major customers in our calculation of
the reserve for loan loss throughout the year 1999.
We have prepared a contingency plan for dealing with possible worst case
scenarios. This plan was approved by our board of directors June 30, 1999.
PART II - OTHER INFORMATION
Item #1 Legal proceedings
Inapplicable
Item #2 Changes in Securities
Inapplicable
Item #3 Defaults Upon Senior Securities
Inapplicable
Item #4 Submission of Matters to be a Vote of Securities Holders
Inapplicable
Item #5 Other information
Inapplicable
Item #6 Exhibits and Reports on Form 8-K
Inapplicable
TECHE BANCSHARES, INC.
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Bank has duly caused this quarterly report to be signed on its behalf by the
undersigned thereunto duly authorized.
TECHE BANCSHARES, INC.
Registrant
/s/ Alcee J. Durand, Jr.
August 13, 1999 Alcee J. Durand, Jr.
Date President/CEO
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