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 September 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 September 30, 1999.
TECHE BANCSHARES, INC. AND SUBSIDIARY
St. Martinville, Louisiana
(UNAUDITED)
CONSOLIDATED BALANCE SHEETS
September 30, 1999 and December 31, 1998
(Dollars in Thousands)
Sept. 30, Dec. 31,
1999 1998
ASSETS
Cash and due from banks $1,762 $1,574
Interest-bearing deposits with banks 39 73
Securities Available for Sale at mkt value 19,071 18,334
Securities Held To Maturity (Market Value
of $1,624 and $5,617, respectively) 1,615 5,583
Other securities at cost 380 354
Federal funds sold 800 1,500
Loans, net of allowance for loan losses
of $223 and $173, respectively) 21,811 16,354
Bank premises, furniture, and equipment 756 808
Accrued interest receivable 366 357
Other real estate owned 223 230
Other assets 212 116
----------------------
Total assets $47,035 $45,283
======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits -
Non-interest demand 7,065 $6,795
Interest bearing -
NOW and MMDA accounts 5,605 6,744
Savings 3,968 3,593
Time, $100 and over, 12,230 10,339
Other time 10,782 10,626
----------------------
Total deposits 39,650 38,097
Accrued interest payable 140 164
Federal Home Loan Borrowings 3,186 3,260
Fed Funds Purchased - 0
Repurchase Agreements - -
Other liabilities and accrued expenses 339 184
----------------------
Total liabilities 43,315 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 2,345 2,065
----------------------
3,769 3,489
Less: 200 shares of treasury stock (19) (19)
Market Value Allowance on
AFS Bonds (30) 108
----------------------
Total stockholders' equity 3,720 3,578
----------------------
Total liabilities and stockholders' equity $47,035 $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
Three Months Ended September 30, 1999 and 1998;
Nine Months Ended September 30, 1999 and 1998;
(Dollars in Thousands except Earnings per Share and Average Shares)
Three Months Ended Six Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1999 1998 1999 1998
Interest income:
Interest and fees on loans $492 $378 $1,335 $1,080
Interest on investment securities -
U.S. government's 300 295 954 888
State/political sub's 13 14 39 40
Dividends on equities - 3 9 6
Interest on balances from banks - 3 2 8
Interest on federal funds 2 34 36 112
--------------------------------------------
Total interest income 807 727 2,375 2,134
Interest expense:
Interest on deposits $315 $359 $953 $1,018
Interest on fed funds purchased 8 - 14 -
Interest on borrowed funds 46 - 136 -
--------------------------------------------
Total interest expense 369 359 1,103 1,018
--------------------------------------------
Interest inc. before provision 438 368 1,272 1,116
Provision for Credit Losses 15 0 50 0
--------------------------------------------
Net interest income 423 368 1,222 1,116
--------------------------------------------
Other income:
Service charges deposits 75 65 217 193
Gain on sale of ORE - 10 - 10
Gain on sale of Securities - - 1 2
Other income and charges 23 18 66 64
--------------------------------------------
Total other income 98 93 284 269
Other expenses:
Salaries/employee benefits 192 160 566 490
Occupancy expense 59 56 171 172
Loss on sale of ORE - 0 - 0
Other operating expenses 110 105 349 298
--------------------------------------------
Total other expenses 361 321 1,086 960
--------------------------------------------
Income before income taxes 160 140 420 425
Income taxes 63 31 140 118
--------------------------------------------
Net income $97 $109 $280 $307
Net income per share $3.46 $3.90 $10.01 $10.99
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 Nine Months Ended September 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 nine months 280 - $280
Change in Unrealized AFS (138) ($138)
------ ------ ------ ------
Balances, Sept. 30, 1999 $3,750 $0 $(30) $3,720
====== ====== ====== ======
Balances, January 1, 1998 $3,124 $0 $118 $3,242
Net income nine months 307 - $307
Change in Unrealized AFS (6) ($6)
------ ------ ------ ------
Balances, Sept. 30, 1998 $3,431 $0 $112 $3,543
====== ====== ====== ======
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 Nine Months Ended Sept. 30, 1999 and 1998
Sept. 30, Sept. 30,
1999 1998
Cash flows from operating activities:
Net income $280 $307
Adjustments to reconcile net income
to net cash provided by
operating activities -
Depreciation of bank premises 89 62
Provision for Credit Losses 50 -
(Gain) Loss on Other real estate - (9)
(Gain) Loss on sale of securities (1) (2)
Write down of other real estate owned 12 -
(Inc)dec accrued int receivable (9) (64)
(Inc) dec other assets (97) (87)
Inc(dec) accrued interest payable (24) 4
Inc(dec) other liabilities 155 150
Net cash provided by operating ----------------------
activities 455 361
Cash flows from investing activities:
Dec(inc) in interest bearing deposits in banks 35 -
Dec(inc) in federal funds 700 (275)
Dec(inc) in investment securities 3,094 (5,224)
Purchase of other securities (26) -
Net dec (inc) in loans (5,507) (2,732)
Capital expenditures premises & equip (37) (67)
Dec(inc) in other real estate owned (5) -
Proceeds from sale of other real estate - 10
----------------------
Net cash used in investing activities (1,746) (8,288)
Cash flows from financing activities:
Net increase (decrease) in -
Demand deposits 270 516
NOW and MMDA (1,138) 549
Savings deposits 374 135
Time deposits $100,000 and over 1,891 3,023
Other time deposits 156 521
Federal Home Loan Borrowings (74) 3,296
Increase in federal funds purchased - -
Increase in repurchase agreements - -
----------------------
Net cash provided by financing activities 1,479 8,040
Net increase in cash and cash equivalents 188 113
Cash and cash equivalents, beginning 1,574 1,633
Cash and cash equivalents, end of period $1,762 $1,746
Cash paid during the period:
Interest $1,128 $1,014
Income Taxes $119 $129
The accompanying notes are an integral part of this statement.
TECHE BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS
September 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 nine (9) months ended
September 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 SEPTEMBER 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 17.38% and Tier one
capital ratio was 7.97% at September 30, 1999. The bank only risk based
capital ratio was 17.33% and Tier one capital ratio was 7.94%. 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 September 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 September 30, 1999, were $66,674 an increase of
$32,041 from December 31, 1998. Loans on which the accrual of interest had
been discontinued at September 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 September 30, 1999 other real estate totalled $222,720 which is
down $7,000 from December 31, 1998.
Results of Operations
Net Income. Our net income for the nine (9) months ended September 30,
1999 was $279,587 down $27,342 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 nine (9) months ended September 30,
1999 is up $105,485 as compared to the same period in 1998. We have
experienced loan growth that has improved our interest margin during 1999.
The bank's loan portfolio increased $5,456,935 since the beginning of the
year. Much of the increase in loans is attributable to the hiring of a new
loan officer and loan officer trainee.
Provision for Loan Losses. Our bad debt reserve totalled $222,940 at
September 30, 1999 which represents 1.01% of our gross loans. During the
first nine months of 1999, we added $50,000 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 September 30, 1999.
Other Income. Our other income is up $15,370 when compared to the same period
last year. The increase was mostly due to an increase in the volume of NSF
fee income.
Other Expenses. Other expenses are up $126,341 as compared to the same time
last year. Other expenses increased due to an approximately $76,000 increase
in salaries and employee benefits and an approximately $50,000 increase in
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 three
fourths (9/12ths) of the annualized income tax that we anticipate we will
incur. The provision for income tax for the period ended September 30, 1999
was $140,215 as compared to $118,359 for the same period last year. The
increase in income tax was due to the provision for loan loss and write-down
of other real estate expenses not being deductible for tax purposes.
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
have considered the progress of our major customers in our calculation of the
reserve for loan loss.
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.
November 10, 1999 Alcee J. Durand, Jr.
Date President/CEO
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