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 March 31, 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 March 31, 1999.
TECHE BANCSHARES, INC. AND SUBSIDIARY
St. Martinville, Louisiana
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, 1999 and December 31, 1998
(Dollars in Thousands)
March 31, December 31
1999 1998
ASSETS
Cash and due from banks $1,651 $1,574
Interest - bearing deposits with banks 78 73
Securities Available for Sale at mkt value 21,889 18,334
Securities Held To Maturity (Market Value
of $2,884 and $5,617, respectively) 2,848 5,583
Other securities at cost 375 354
Federal funds sold 3,025 1,500
Loans, net of allowance for loan losses
of $173 and $173, respectively) 16,991 16,354
Bank premises, furniture, and equipment 788 808
Accrued interest receivable 314 357
Other real estate owned 229 230
Other assets 134 116
----------------------
Total assets $48,322 $45,283
======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits -
Non-interest demand $7,774 $6,795
Interest bearing -
NOW and MMDA accounts 7,179 6,744
Savings 3,783 3,593
Time, $100 and over, 10,435 10,339
Other time 11,838 10,626
----------------------
Total deposits 41,009 38,097
Accrued interest payable 124 164
FHLB Borrowings 3,246 3,260
Other liabilities and accrued expenses 258 184
----------------------
Total liabilities 44,637 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 2,162 2,065
----------------------
3,586 3,489
Less: 200 shares of treasury stock (19) (19)
Market Value Allowance on
AFS Bonds 118 108
----------------------
Total stockholders' equity 3,685 3,578
----------------------
Total liabilities and stockholders' equity $48,322 $45,283
======================
The accompanying notes are an integral part of this statement.
TECHE BANCSHARES, INC. AND SUBSIDIARY
St. Martinville, Louisiana
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended March 31, 1999 and 1998;
(Dollars in Thousands except Earnings per Share)
Three Months Ended
March 31, March 31,
1999 1998
Interest income:
Interest and fees on loans $399 $342
Interest on investment securities -
U.S. government securities 344 292
State and political subdivisions 14 13
Interest on interest-bearing deposits
in banks 1 2
Dividends on equity securities 0 0
Interest on federal funds sold 26 33
----------------------
Total interest income 784 682
Interest expense:
Interest on deposits $318 $309
Interest on borrowed funds 46 0
----------------------
Total interest expense 364 309
----------------------
Net interest income 420 373
Provision for Credit Losses 0 0
----------------------
Net interest income after provision 420 373
----------------------
Other income:
Service charges on deposit accounts 67 59
Other income and charges 17 20
----------------------
Total other income 84 79
Other expenses:
Salaries and employee benefits 188 166
Occupancy expense 55 52
Other operating expenses 122 91
----------------------
Total other expenses 365 309
----------------------
Income before income taxes 139 143
Income taxes 42 44
----------------------
Net income $97 $99
======================
Net income per share of common stock $3.49 $3.55
======================
Average shares outstanding 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 Three Months Ended March 31, 1999 and 1998
Unrealized
Gain (Loss)
Common Stock on
Treas. Stk AFS
Surplus Securities Total
Balances, January 1, 1999 $3,470 $108 $3,578
Net income three months 97 97
Change in Unrealized AFS 10 10
------- ------ ------
Balances, March 31, 1999 $3,567 $118 $3,685
======= ====== ======
Balances, January 1, 1998 $3,125 $118 $3,243
Net income three months 99 99
Change in Unrealized AFS (35) (35)
------- ------ ------
Balances, March 31, 1998 $3,189 $118 $3,307
======= ====== ======
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 Three Months Ended March 31, 1999 and 1998
March 31, March 31,
1999 1998
Cash flows from operating activities:
Net income $97 $99
Adjustments to reconcile net income
to net cash provided by
operating activities -
Depreciation of bank premises 29 20
(Gain) Loss on sale of securities 0 0
Write down of other real estate 1 0
(Inc)dec accrued int receivable 43 (14)
(Inc) dec other assets (17) 10
Inc(dec) accrued interest payable (40) (9)
Inc(dec) other liabilities 74 29
Net cash provided by operating ----------------------
activities 187 135
Cash flows from investing activities:
Dec(inc) in interest bearing deposits
in banks (5) 0
Dec(inc) in federal funds (1,525) (1,950)
Dec(inc) in investment securities (810) (2,866)
Dec(inc) in other securities (21) 0
Net dec (inc) in loans (636) 30
Capital expenditures premises & equip (10) (8)
Proceeds from sale of securities 0 0
----------------------
Net cash used in investing activities (3,007) (4,794)
Cash flows from financing activities:
Net increase (decrease) in -
Demand deposits 978 (1,212)
NOW and MMDA 435 1,591
Savings deposits 190 156
Time deposits $100,000 and over 96 2,251
Other time deposits 1,212 231
FHLB Borrowings (14) 1,834
----------------------
Net cash provided by financing activities 2,897 4,851
Net increase in cash and cash equivalents 77 192
Cash and cash equivalents, beginning 1,574 1,633
Cash and cash equivalents, end of period $1,651 $1,825
Cash paid during the period:
Interest $404 $319
Income Taxes $0 $0
The accompanying notes are an integral part of this statement.
TECHE BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 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 three (3) months ended
March 31, 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 MARCH 31, 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 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 18.48% and Tier one
capital ratio was 7.41% at March 31, 1999. The bank only risk based capital
ratio was 18.42% and Tier one capital ratio was 7.39%. 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 March 31, 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 March 31, 1999, were $74,264 an increase of $5,994
from December 31, 1998. Loans on which the accrual of interest had been
discontinued at March 31, 1999 totalled $10,556 no change as compared to the
amount at December 31, 1998.
We are actively marketing our other real estate owned. At March 31, 1998
other real estate totalled $228,520. The one piece of real estate, a
commercial building, that we own is currently under a two year lease. We are
writing down the value of the building owned each month for the amount of
income earned on the lease. At the end of each of three two year option
periods the lessee has a purchase option on the building.
Results of Operations
Net Income. Our net income for the three (3) months ended March 31, 1999 was
$97,516 down $1,483 as compared to that of the same period last year. The
decrease in income was mostly attributed to an increase in salaries and
employee benefits from the hiring of two loan officers. One officer is an
experienced loan officer that we hired away from a large institution in our
area. The other employee is a loan officer trainee.
Revenue. Our net interest income for the three (3) months ended March 31,
1999 is up $48,109 as compared to the same period in 1998. The increase in
net interest income was the result of increases in the volume of loans and
investments. The increase in investments was due to the investment of funds
from growth in deposits experienced in the first quarter of 1998. We
invested our excess funds from deposits in investments to increase our yields
over fed funds. The increase in loans was partially due to the addition of
two new loan officers.
Provision for Loan Losses. Our bad debt reserve totalled $172,974 at March
31, 1999 which represents 1% of our gross loans. During the first quarter of
1999, we did not add to our reserve for loan loss account. Our reserve for
loan loss balance was considered adequate at March 31, 1999.
Other Income. Our other income is up $5,087 when compared to the same period
last year. The increase was mostly due to a increase in NSF fee income.
Other Expenses. Other expenses are up $56,930 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 our 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
fourth (3/12ths) of the annualized income tax that we anticipate we will
incur. The provision for income tax for the period ended March 31, 1999 was
$41,892 as compared to $44,143 for the same period last year. The decrease in
income tax was due to lower 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 anticipate that
the further expenditures necessary to become year 2000 ready will be
approximately $10,000. These expenditures will be primarily for new personal
computers and software associated with non-critical ancillary systems.
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 are in the process of preparing a contingency plan for dealing with
possible worst case scenarios. This plan should be complete by June 30, 1999
and will be continually updated from that date to year-end.
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.
May 13, 1999 Alcee J. Durand, Jr.
Date President/CEO
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