UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-KSB
(Mark One)
(X) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1998
Commission file number 000-21658
MINDEN BANCSHARES, INC.
(name of small business issuer in its charter)
LOUISIANA
(State or other jurisdiction of incorporation or organization)
72-0980704
(I.R.S. Employer Identification No.)
401 Main Street, Minden, Louisiana 71055
(Address of principal executive offices- Zip code)
(318) 377-4283
Issuer's telephone number
Securities registered under Section 12(b) of the Exchange Act:
None
(Title of each class)
None
Name of each exchange on which registered
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $2.50 par value
(Title of Class)
Page 1 of 48 Pages
Exhibit Index on Page 41
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
Check if disclosure of delinquent filers in response to item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
Issuers' revenues for its most recent fiscal year: $24,598,000.
State the aggregate market value of the voting stock held by nonaffiliates
computed by reference to price at which the stock was sold, or the average bid
and asked prices of such stock as of a specified date within the past 60 days:
As of March 9, 1999 - $28,037,000.
State the number of shares outstanding of each of the issuer's classes, of
common equity, as of the latest practical date: As of March 9, 1999 - 280,583
shares Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement, which will be filed
within 120 days of the end of the registrant's fiscal year, are incorporated by
reference into Part III of this Report.
Transitional Small Business Disclosure Form (check one): Yes [ ] No [ X ]
FORM 10-KSB
INDEX
PART I Page
Item 1. Business 4
Item 2. Properties 16
Item 3. Legal Proceedings None
Item 4. Submission of Matters to a Vote of Security Holders None
PART II
Item 5. Market for Registrant's Common Equity and Related 17
Stockholder Matters
Item 6. Management's discussion and Analysis of Financial
Condition and Results of Operations 17
Item 7. Financial Statements 24
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures None
PART III
Item 9. Directors and Executive Officers of the Registrant 41
Item 10. Executive Compensation 41
Item 11. Security Ownership of Certain Beneficial Owners and
Management 41
Item 12. Certain Relationships and Related Transactions 41
PART IV
Item 13. Exhibits and Reports on Form 8-K 42
Signatures 43
MINDEN BANCSHARES, INC.
FORM 10-KSB
PART I
ITEM 1. BUSINESS
GENERAL
Minden Bancshares, Inc. ("Minden Bancshares"), a business organized under
the laws of Louisiana and a registered bank holding company under the Federal
Bank Holding Company Act of 1956 was organized in 1983 to acquire all of the
stock of Minden Bank & Trust Company ("Minden Bank") pursuant to a
reorganization that was consummated on January 21, 1985.
The principal asset of Minden Bancshares is all of the outstanding stock of
Minden Bank, all of which is owned by Minden Bancshares. As of December 31,
1998, Minden Bancshares had, on a consolidated basis, total assets of
$328,375,000, total deposits of $280,371,000 and total stockholders' equity of
$36,114,000. The principal executive offices of Minden Bancshares and its
wholly owned subsidiary are located at 401 Main Street, Minden, Louisiana
71055.
At December 31, 1998, Minden Bancshares' wholly owned subsidiary, Minden
Bank, had 97 full time and 11 part time employees.
Minden Bancshares and its subsidiary, Minden Bank, derive all of their
income from banking and bank-related services. The holding company structure
serves as a mechanism to enhance Minden Bank's ability to meet its customer's
requirements for financial services and provides flexibility for expansion of
Minden Bancshares' banking business.
SUBSIDIARY ENTITY
Minden Bank is a state-chartered bank organized under the laws of Louisiana
and is a member of the Federal Reserve System. Through its three locations in
Minden, its branch location in Sarepta, Louisiana and its three branches in
Shreveport, Louisiana , (See "ITEM 2 PROPERTIES" for descriptions) Minden Bank
conducts a general banking and trust business. It is a full service bank
offering (i) retail banking services, such as demand, savings and time deposits,
money market checking, lending, safe deposit boxes, money orders, travelers
checks and six ATM locations, (ii) commercial account services which include,
in addition to above, commercial lending, stand-by letters of credit, wire
transfers, and night depository services.
Minden Bank's deposit base is such that the loss of one depositor or a
group of depositors would not have a materially adverse effect on its business
and earnings. Also, the loan portfolio is also diversified so that one industry
or group of related industries does not comprise a material portion of the loan
portfolio. Minden Bank's business is not seasonal.
At December 31, 1998, Minden Bank had total assets and deposits of
$328,375,000 and $280,424,000 respectively.
ACQUISITIONS
On May 21, 1997, Minden Bank acquired First Federal Savings Bank (FFSB)
in Shreveport, Louisiana, described under "ITEM 2. PROPERTIES," merged it into
Minden Bank and began operating the location as its Youree Drive Branch.
Minden Bank acquired assets of $35,289,000 and liabilities of $31,750,000.
Minden Bank paid $5,411,200 cash for all of the outstanding stock of FFSB and
accounted for the acquisition under the purchase method. The purchase price
was $1,872,000 in excess of FFSB book value and was recorded as goodwill.
COMPETITION
Minden Bancshares is the largest bank holding company and Minden Bank is
the largest bank headquartered and located in Webster Parish. Through its
banking subsidiary, Minden Bancshares services customers in Webster, Caddo and
surrounding parishes. The Shreveport acquisitions discussed above are Minden
Bank's only facilities located outside Webster Parish.
Banking in the market area served by Minden Bank is highly competitive.
Competition is provided by other financial holding companies and institutions
located in Webster parish and throughout the State of Louisiana. In early 1998,
Hibernia Corporation, headquartered in New Orleans, Louisiana, with statewide
operations in Louisiana and portions of Texas through its banking subsidiary,
Hibernia National Bank, and Peoples Holding Corporation, headquartered in
Minden, Louisiana, with operations in Webster, Bossier and Claiborne Parishes
through its subsidiary bank, Peoples Bank & Trust Company, announced the
acquisition of Peoples Holding Corporation by Hibernia Corporation. The
acquisition was completed in November, 1998. Peoples Holding Corporation had
consolidated assets of $228 million at December 31, 1997 and has been Minden
Bank's main source of competition in the Minden, Louisiana area for many years.
Minden Bancshares and its banking subsidiary, Minden Bank, not only compete with
other bank holding companies and banks, but with savings and loan associations,
insurance companies, finance companies, credit unions, pension trusts, and other
institutions that provide investment services to the public. Minden Bank
anticipates intense competition from the established local, state, regional, and
national banks and bank holding companies.
SUPERVISION AND REGULATION
General
Minden Bancshares is a registered bank holding company subject to
regulation by the FRB under the BHCA. Minden Bancshares is required to file
financial information with the FRB periodically and is subject to periodic
examination by the FRB. The BHCA requires FRB approval for bank acquisitions by
bank holding companies and regulates the activities of bank holding companies.
Minden Bancshares is also subject to regulation by the OFI and must file
periodic information with that state agency. The OFI also conducts periodic
examination of Minden Bancshares.
Minden Bank is a member of the Federal Reserve System and as such, is
subject to the supervision of and is regularly examined by the FRB and the OFI.
The FRB and OFI approve all acquisitions or establishments of additional
branches along with the closing of any existing branches. Minden Bank is also
subject to supervision of and may be examined by the FDIC.
Recent Legislation
In December 1991, the Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA") was enacted. This act provided for recapitalization of the
Bank Insurance Fund ("BIF") and the Savings Association Insurance Fund ("SAIF")
of which Minden Bank is a member, substantially revised statutory provisions,
including capital standards. FDICIA provided insurance rate structure which
provided lower rates for stronger capitalized banks and banks with higher
supervisory ratings. The BIF became fully funded in 1995 and the SAIF became
fully funded in 1996 thereby reducing BIF and SAIF FDIC premiums. See "FDIC
Insurance Assessments" below.
Monetary Policies
The results of operation of Minden Bancshares and its banking subsidiary
are affected by the credit policies of monetary authorities particularly the
Board of Governors of the Federal Reserve System. The instruments of monetary
policy employed by the Federal Reserve Board include open market operations in
United States Government Securities, changes in the discount rate on member bank
borrowings and changes in reserve requirements against member bank deposits. In
view of changing conditions in the national economy and in the money markets, as
well as the effective action by monetary and fiscal authorities, including the
Federal Reserve System, no prediction can be made as to possible future changes
in interest rates, deposit levels, loan demand or the business and earnings of
Minden Bancshares and its banking subsidiary.
FDIC Insurance Assessments
Minden Bank is subject to FDIC insurance assessments. Effective May 1,
1995, the FDIC revised the BIF assessment rates from 0.23% to 0.4% for the
healthiest banks while retaining 0.31% for the weakest banks when the BIF became
fully funded. The BIF rate schedule was reduced to 0.0% for the healthiest
banks to 0.27% for the weakest banks effective January 1, 1996. SAIF
assessment rates were 0.23% for the healthiest banks to 0.31% for the weakest
banks until October 1, 1996, whereby provisions of the Deposits Insurance Funds
Act of 1996 (Funds ) reduced the rates to 0.0% for the healthiest banks and
0.27% of weakest Oakar SAIF banks. Also, effective October 1, 1996, under the
Funds Act, a one time assessment was made on all SAIF insured institutions and
all BIF insured banks with Oakar deposits to fully fund the SAIF. The Funds Act
also provided for separate assessments under BIF and SAIF effective January 1,
1997, for FICO bond servicing. The FICO assessments under BIF and SAIF were at
the quarterly rates of 0.00311% and 0.01555%, respectively in the first half of
1998 and at the quarterly rates of 0.00305% and 0.01525%, respectively in the
second half of 1998. Minden Bank had $35,834,110 of SAIF deposits in the first
half of 1998 and $36,550,792 and 37,647,315, respectively of SAIF deposits in
the 1998 third and fourth quarters. Minden Bank's Oakar deposits insured under
the SAIF are the result of the acquisition in 1994 of the Minden branch of the
failed Oak Tree Federal Savings Bank and the 1997 acquisition of FFSB.
Selected Statistical Information
SELECTED FINANCIAL DATA
The following selected financial data is not covered by the auditor's report
and should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operation" which are included later.
Years Ended December 31,
------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
Operations:
Interest Income $21,906 20,028 17,255 15,015 11,100
Interest Expense 9,716 8,750 7,420 6,301 4,213
------- ------ ------ ------ ------
Net Interest Income 12,190 11,278 9,835 8,714 6,887
Provision for Loan Losses - - - - -
------- ------ ------ ------ ------
Net Interest Income After
Provision for Loan Losses 12,190 11,278 9,835 8,714 6,887
Noninterest Income 2,692 2,465 2,208 1,804 1,128
Noninterest Expense 6,575 6,278 5,359 5,233 3,740
------- ------ ------ ------ ------
Income Before Taxes 8,307 7,465 6,684 5,285 4,275
Income Tax Expense 2,603 2,384 2,073 1,617 1,336
------- ------ ------ ------ ------
Net Income $ 5,704 5,081 4,611 3,668 2,939
======= ====== ====== ====== ======
Per Share:
Earnings Per Share $ 20.33 18.11 16.43 13.07 10.43
Book Value at End of Period<F1> 128.71 112.96 98.15 85.55 67.74
Cash Dividends 5.00 4.00 3.25 2.75 2.25
Total Shares Outstanding
(thousands) 281 281 281 281 281
Balances at End of Period:
Investment Securities $150,628 124,916 105,231 88,525 90,057
Loans, net of unearned interest 140,320 136,889 115,346 99,381 66,225
Allowance for Possible
Loan Losses 3,392 3,603 3,306 3,387 3,395
Total Assets 328,375 292,078 250,032 227,011 172,565
Deposits 280,371 248,183 215,996 196,096 145,264
Stockholders' Equity 36,114 31,686 27,536 24,009 19,021
Average Balances:
Total Average Assets 307,515 277,084 241,234 210,199 169,353
Total Average Shareholders'
Equity 34,423 29,852 25,867 21,998 19,380
Ratios:
Return on Average Assets 1.85% 1.83% 1.91% 1.75% 1.74%
Return on Average Equity 16.57% 17.02% 17.83% 16.67% 15.17%
Average Stockholders' Equity
to Average Assets 11.19% 10.77% 10.72% 10.47% 11.44%
<F1> These amounts reflect unrealized gains and losses on available for sale
securities in the stockholders' equity section of the balance sheet, required
upon the adoption of FASB 115 in 1994. The book value per share at the end of
1998, 1997, 1996, 1995 and 1994 without including the unrealized gains and
losses on available for sale securities would have been $127.32, $112.00,
$97.88, $84.69 and $74.37, respectively.
<TABLE>
<CAPTION>
SELECTED STATISTICAL INFORMATION
CONSOLIDATED AVERAGE BALANCES, INTEREST INCOME/EXPENSE,
YIELDS/RATES, VOLUME AND RATE/VOLUME VARIANCE ANALYSIS
TAXABLE EQUIVALENT BASIS
------------------------
(in thousands)
YEARS ENDED DECEMBER 31,
------------------------
1998 1997
-------------------------- -------------------------
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
-------- ------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Earning Assets:
Loans, net of
unearned income <F2> $141,042 13,432 9.52% 128,612 12,353 9.60%
Investment Securities:
Taxable (available for sale) 101,849 6,110 6.00% 92,517 5,643 6.10%
Nontaxable (held to maturity) 17,554 1,232 7.02% 14,964 1,062 7.10%
-------- ------ ------- ------
Total investment securities 119,403 7,342 6.15% 107,481 6,705 6.24%
Federal funds sold 21,197 1,112 5.25% 18,771 1,018 5.42%
Interest-bearing balances with
other banks 6,854 365 5.33% 5,279 247 4.68%
-------- ------ ------- ------
Total earning assets 288,496 22,251 7.71% 260,143 20,323 7.81%
Allowance for loan losses (3,562) (3,509)
Unrealized gain (loss) on available
for sale securities 728 108
Cash and due from banks 11,150 10,660
Other assets 10,703 9,682
-------- -------
Total Assets $307,515 277,084
======== =======
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Demand $ 27,701 690 2.49% 26,097 645 2.47%
Savings 58,836 1,817 3.09% 53,413 1,636 3.06%
Certificates of deposit less
than $100,000 and other time
deposits 99,371 5,183 5.22% 91,075 4,752 5.22%
Certificates of deposit of
$100,000 or more 29,179 1,510 5.17% 25,966 1,386 5.34%
-------- ------ ------- ------
Total interest-bearing
deposits 215,087 9,200 4.28% 196,551 8,419 4.28%
Securities sold under agreements to
repurchase 10,833 516 4.76% 7,589 324 4.27%
Notes payable - - - % 72 7 8.75%
-------- ------ ------- ------
Total interest-bearing
liabilities 225,920 9,716 4.30% 204,212 8,750 4.28%
Noninterest-bearing demand deposits 45,215 41,137
Other liabilities 1,957 1,883
Stockholders' equity 34,423 29,852
-------- -------
Total liabilities and
stockholders' equity $307,515 277,084
======== =======
Net interest income/net interest spread 12,535 3.41 11,573 3.53%
===== =====
Net yield on earning assets 4.34% 4.45%
===== =====
Taxable equivalent adjustment:
Nontaxable (held to maturity)
investment securities 345 295
------ ------
Net interest income 12,190 11,278
====== ======
<F2> Loans on nonaccrual status have been included in the computation of average
balances.
</TABLE>
<TABLE>
<CAPTION>
SELECTED STATISTICAL INFORMATION
CONSOLIDATED AVERAGE BALANCES, INTEREST INCOME/EXPENSE,
YIELDS/RATES, VOLUME AND RATE/VOLUME VARIANCE ANALYSIS
TAXABLE EQUIVALENT BASIS
------------------------
(in thousands)
Variance Increase (Decrease)
Interest Attributable To
Volume Income/Expense -----------------------------------
Increase (Decrease) Increase (Decrease) 1998 1997
----------------------- ------------------- ---------------- ----------------
1998-1997 1997-1996 1998 1997 Volume Rate<F3> Volume Rate<F3>
--------- --------- ---- ---- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Earning Assets:
Loans, net of
unearned income $12,430 20,263 1,079 1,781 1,193 (114) 1,978 (197)
Investment Securities:
Taxable (available for sale) 9,332 11,893 467 870 569 (102) 704 166
Nontaxable (held to maturity) 2,590 329 170 29 184 (14) 23 6
-------- -------- ------ ------ ------ ------- ------ -------
Total investment securities 11,922 12,222 637 899 753 (116) 727 172
Federal funds sold 2,426 (1,616) 94 (51) 131 (37) (85) 34
Interest-bearing balances with other banks 1,575 3,392 118 150 74 44 174 (24)
-------- -------- ------ ------ ------ ------- ------ -------
Total earning assets 28,353 34,261 1,928 2,779 2,151 (223) 2,794 (15)
-------- -------- ------ ------ ------ ------- ------ -------
Allowance for loan losses
Unrealized gain (loss) on available
for sale securities
Cash and due from banks
Other assets
Total Assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Deposits:
Demand $ 1,604 1,781 45 41 40 5 44 (3)
Savings 5,423 3,611 181 114 166 15 111 3
Certificates of deposit
less than $100,000
and other time deposits 8,296 15,690 431 829 430 1 816 13
Certificates of deposit
of $100,000 or more 3,213 5,524 124 309 172 (48) 291 18
-------- -------- ------ ------ ------ ------- ------ -------
Total interest-bearing deposits 18,536 26,606 781 1,293 808 (27) 1,262 31
Securities sold under agreements
to repurchase 3,244 1,289 192 45 139 53 57 (12)
Notes payable (72) (90) (7) (8) (7) 0 (8) 0
-------- -------- ------ ------ ------ ------- ------ -------
Total interest-bearing liabilities 21,708 27,805 966 1,330 940 26 1,311 19
-------- -------- ------ ------ ------ ------- ------ -------
Noninterest-bearing demand deposits
Other liabilities
Stockholders' equity
Total liabilities and
stockholders' equity
Net increase in net earning assets $ 6,645 6,456 962 1,449 1,211 (249) 1,483 (34)
========= ========= ====== ====== ====== ======= ======= =======
Net yield on earning assets
Taxable equivalent adjustment:
Nontaxable (held to maturity)
investment securities
Net interest income
<F3> The change in interest due to both rate and volume has been allocated
to the rate componet.
</TABLE>
INVESTMENT SECURITIES PORTFOLIO
-------------------------------
The carrying amounts of investment securities held by Minden Bank &
Trust Company ("Minden Bank"), the wholly owned banking subsidiary of Minden
Bancshares, Inc. ("Minden Bancshares") at the dates indicated are
summarized as follows (in thousands):
December 31,
1998 1997 1996
---------- --------- ---------
Held to Maturity:
State and Political Subdivisions $ 18,191 16,502 14,784
---------- --------- ---------
Available for Sale:
U.S. Treasury and Agency 131,848 108,005 90,334
Federal Reserve Bank Stock 1,533 1,400 1,205
---------- --------- ----------
133,381 109,405 91,539
Unrealized Gains (losses) 589 409 113
---------- --------- ----------
Total Available for Sale Securities 133,970 109,814 91,652
---------- --------- ----------
Total Investment Securities $ 152,161 126,316 106,436
========== ========= ==========
Minden Bank did not own an aggregate book value of securities in any
one issuer that exceeded 10% of total equity capital.
The following table shows maturities of investment securities (in thou-
sands) at amortized cost held by Minden Bank at December 31, 1998 together
with the weighted average yields:
<TABLE>
<CAPTION>
U.S. Weighted State and Weighted Weighted
Government Average Political Average Other Average
& Treasury Yield Subdivisions Yield<F4> Securities Yield
---------- -------- ------------ -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Due 1 year or less $ 38,792 5.38% 1,257 6.74% 1,533 6.00%
Due after 1 year
through 5 years 65,687 5.78% 4,768 7.02% _ _
Due after 5 years
through 10 years 16,450 5.91 7,918 7.04% _ _
Due after 10 years 10,919 5.83% 4,248 6.78% _ _
---------- -------- ----------- -------- ---------- --------
Total $131,848 5.68% 18,191 6.96% 1,533 6.00%
========== ======== =========== ======== ========== ========
<F4>Computed on taxable equivalent basis.
</TABLE>
LOAN PORTFOLIO
--------------
There are no foreign loans in Minden Bank's loan portfolio. The amount of
loans outstanding for the indicated years are shown in the following table ac-
cording to type of loan (in thousands):
December 31,
1998 1997
------ ------
Commercial, financial and agricultural loans $ 36,995 33,884
Construction loans secured by real estate 4,868 3,298
Other loans secured by real estate 72,390 75,021
Held for sale 1,275 480
Installment and single payment loans 24,214 22,186
Other loans 876 2,183
------- -------
Total Loans $140,618 137,052
Less: Unearned income 298 163
Reserve for possible loan losses 3,392 3,603
------- -------
Net Loans $136,928 133,286
======== =======
The following table presents maturities and interest rate sensitivity with
respect to selected loan categories as of December 31, 1998. Maturities, which
are presented in thousands, are based on remaining scheduled repayments of
principal.
Due Over One
One Year Year Through Over
Loan Category or Less Five Years Five Years Total
-------- ---------- ---------- -------
Commercial, financial and
agricultural $24,423 12,512 60 $36,995
Construction loans secured
by real estate 4,022 821 25 4,868
------ ------ ----- ------
Total $28,445 13,333 85 $41,863
======= ====== ===== =======
Loans due after one year:
Having Predetermined Interest Rates $11,456
Having Floating Interest Rates 1,962
-------
Total $13,418
=======
RISK ELEMENTS IN LOAN PORTFOLIO
The following table sets forth the nonperforming assets at December 31,
1998 and December 31, 1997 (in thousands).
Years Ended December 31,
1998 1997
------ ------
Nonaccrual (Impaired-Cash Basis) Loans $ 85 $ 562
Past-Due Loans 914 587
Restructured Loans 0 0
------ ------
Total Non-performing Loans 999 1,149
Other Real Estate Loans 116 278
------ ------
Total Non-performing Assets $1,115 $1,427
====== ======
In addition to the non-performing loans discussed above, management has
identified other loans for which payments are current that are subject to poten-
tial future classification as nonperforming. As of December 31, 1998 there were
no loans which met this classification as compared to $71 thousand a year ago.
Nonaccrual (impaired-cash basis) loans are those loans on which it appears
that the collection of all principal and interest under the loan terms is un-
likely under either the projection of cash flows or values of underlying col-
lateral. Once a determination has been made as to the projected amount which
may be collected, any probable under collection is first applied to accrued
interest by reversal against current year earnings with any further under col-
lection anticipated being reflected by a partial charge off of principal
against the reserve for possible loans losses, leaving the anticipated col-
lectible portion as the loan balance which does not accrue interest until
such time as it appears probable that the loan will be fully collectible as
to principal and interest, at which time, it will be reinstated with the
principal increase being recognized as recovery by crediting to reserve for
possible loan losses and the accrued interest being recognized as interest
income. Collections on impaired loans upon which full collection of principal
and accrued interest is unlikely, are first applied to the remaining principal,
with any excess then being applied to the partially charged off principal by
credit to the reserve for possible loan losses, with any additional collection
then being recognized as interest income. Nonaccrual (impaired-cash basis)
loans amounted to 0.06% of total loans at December 31, 1998 and 0.41% of total
loans at December 31, 1997. Interest income on nonaccrual loans which would
have been reported on an accrual basis amounted to approximately $29,000 for the
year ended December 31, 1998 and $68,000 for the year ended December 31, 1997.
Interest income included cash basis interest of $123,000 in 1998 and $108,000
in 1997. Cash basis interest provided increase of 1 basis point in the yield
on average loans for 1998 and 1997. Interest income for 1998 and 1997 did not
include any interest on restructured loans.
Management groups small homogenous loans - residential mortgage, consumer
installment and small business loans of $20 thousand or less - collectively for
evaluation due to the inability to obtain customer cash flow information to pro-
ject future collections. Due to the inability to project future cash flows, all
of the nonaccrual (impaired) loans discussed are valuated based upon net realiz-
able value of underlying collateral. Loans which become past due 90 days or
more, unless due to seasonal fluctuations, are reviewed for impairment.
Other real estate owned normally represents properties acquired as loan
satisfactions which are recorded at the lower of the investment in the loan with
respect to which the assets were acquired, or the fair value of each property,
with the initial write-downs charged to the reserve for loan losses. Subsequent
write-downs of such properties are reflected as such on the income statement and
gains and losses on disposal are accordingly reflected on the income statement.
SUMMARY OF LOAN LOSS EXPERIENCE
-------------------------------
The following table summarizes the balance in the allowance for loan
losses of Minden Bank at the end of each period, changes in the allowance
arising from charge-offs and recoveries by category and the provision charged to
expense for the fiscal years ended December 31, 1998 and December 31, 1997:
Years Ended December 31,
1998 1997
---- ----
(Amounts are in 000's)
Balance at beginning of period $3,603 3,306
Charge-Offs-All Domestic
Commercial, financial & agricultural 65 42
Real Estate - construction 24 87
Real Estate - mortgage 44 36
Installment loans to individuals 343 150
Lease financing - -
Foreign - -
------ -----
Total 476 315
------ -----
Recoveries-All Domestic
Commercial, financial & agricultural - -
Real Estate - construction - -
Real Estate - mortgage 191 294
Installment loans to individuals 74 65
Lease financing - -
Foreign - -
------ -----
Total 265 359
------ -----
Net charge-offs (recoveries) 211 (44)
Additions charged to operations - -
Acquired in First Federal Savings Bank acquisition - 253
------ -----
Balance at end of period $3,392 3,603
====== =====
Ratio of net charge-offs during the period
to average loans outstanding during the period 0.15% (0.03%)
The reserve of Minden Bank is based upon management's analysis of the
portfolio and current and expected economic conditions. This analysis includes a
study of loss experience, internal loan reviews, a review of delinquencies, and
an estimate of the possibility of loss in view of the risk characteristics of
the portfolio. In addition, since 1989, management has attempted to maintain its
reserve in an amount equal to or greater than its nonperforming assets. This
objective has been achieved with the reserve account being 2.41% and 2.63% of
total loans at December 31, 1998 and 1997, respectively.
ALLOCATION OF RESERVE FOR POSSIBLE LOAN LOSSES
----------------------------------------------
Management has allocated the reserve for possible loan losses according to
amounts deemed reasonably necessary to provide for possible losses within the
categories of loans set forth in the table below. In determining the allocation,
management reviews loans monthly taking into consideration each borrower's abil-
ity to repay, repayment record, past credit history and underlying collateral
values before classifying a loan to our watch list as (1) watch list, (2) sub-
standard, or (3) non-accrual. Specific reserves are allocated to the loans
placed on the watch list based upon individual factors. All other loans are
assigned a 2.5% loss factor except to the extent loans are not secured by cash
or the government. Because the allocation is based on estimates and subjective
judgment, it is not necessarily indicative of the special amounts or loan
categories in which charge-offs may ultimately occur. The amount of the reserve
applicable to each category and the percentage of loans in each category to
loans are presented below.
For the Years Ended December 31
1998 1997
---------------- ---------------
(amounts are in 000's)
% of % of
Loans in Loans in
Amount Category Amount Category
------ -------- ------ --------
Commercial, financial
and agricultural $ 892 26% 901 25%
Construction loans
secured by real estate 118 4% 72 2%
Other loans secured by
real estate 1,777 52% 1,982 55%
Installment and single payment 584 17% 576 16%
Foreign - - - -
Other 21 1% 72 2%
------ ---- ----- ----
Total $3,392 100% 3,603 100%
====== ==== ===== ====
OTHER INTEREST-BEARING ASSETS
-----------------------------
There were no other "nonperforming interest-bearing assets" held by Minden
Bank at December 31, 1998 or 1997.
DEPOSITS - AVERAGE BALANCES AND AVERAGE RATES PAID
--------------------------------------------------
The daily average amounts of deposits (in 000's) together with the rates
paid on such deposits is presented below for the periods indicated:
Years Ended December 31,
1998 1997
--------- ---------
Noninterest-bearing demand deposits $ 45,215 41,137
Rate Paid 0% 0%
Interest-bearing demand deposits $ 27,701 26,097
Rate Paid 2.49% 2.47%
Savings Deposits $ 58,836 53,413
Rate Paid 3.09% 3.06%
Time Deposits $128,550 117,041
Rate Paid 5.21% 5.24%
Total interest-bearing deposits $215,087 196,551
Total deposits $260,302 237,688
Average Rate Paid 3.53% 3.54%
MATURITIES SCHEDULE FOR TIME CERTIFICATES OF DEPOSITS OVER $100,000
-------------------------------------------------------------------
Maturity schedules for time certificates of deposit of more than $100,000
are presented below (in 000's) for the dates indicated:
Year Ended
December 31, Average
1998 Rate
----------- -------
3 months or less $22,970 4.87%
Over 3 months through 12 months 8,757 5.14%
Over 12 months 4,058 5.52%
------- ------
Total outstanding $35,785 5.01%
======= ======
RETURN ON EQUITY AND ASSETS
---------------------------
The following table presents the net income, average assets, average
equity, return on assets (net income divided by average assets), return on
equity (net income divided by average equity) and equity to assets ratio
(average equity divided by average assets) for the periods indicated:
Years Ended December 31,
1998 1997
----------- -----------
(amounts in 000's)
Net Income $ 5,704 $ 5,081
Average Assets 307,515 277,084
Average Equity 34,423 29,852
Return on Average Assets 1.85% 1.83%
Return on Average Equity 16.57% 17.02%
Dividend Payment Ratio 24.59% 22.08%
Average Equity to Average
Assets Ratio 11.19% 10.77%
ITEM 2. PROPERTIES
Minden Bank has eight banking locations including the main office, which
are all owned by Minden Bank.
The main office of Minden Bank is presently located in a two-story office
building at 401 Main Street, Minden, Louisiana. The premises consist of
approximately 22,000 total square feet of office space, all of which is occupied
by Minden Bank.
Minden Bank has two branches in the City of Minden. They are located and
described as follows:
1. 200 Homer Road. The former Webster Bank main office consists of
approximately 7,000 total square feet office space all of which is
occupied by Minden Bank.
2. 1316 Sibley Road. The former Webster Bank branch consists of
approximately 3,500 square feet of office space of which all is
occupied by Minden Bank.
Minden Bank also has a branch located on Louisiana Highway 371, Sarepta,
Louisiana 71071, which is approximately 25 miles northwest of the City of
Minden. The premises in Sarepta consist of approximately 1,500 square feet of
office space of which all is occupied by Minden Bank.
The four Shreveport branches are located and described as follows:
1. 6250 Hearne Avenue. This branch consists of approximately 3,400 total
square feet of office space all of which is occupied by Minden Bank.
2. 1633 North Market Street. This branch consists of approximately 4,500
total square feet of office space all of which is occupied by Minden
Bank. Our commercial lending department for the Shreveport area
market is currently housed at the North Market branch.
3. 3400 Line Avenue. This branch consists of approximately 1,600 total
square feet of office space all of which is occupied by Minden Bank.
4. 6601 Youree Drive. This branch consists of approximately 3,000 total
square feet of office space all of which is occupied by Minden Bank.
PART II
ITEM 5. MARKET FOR MINDEN BANCSHARES' COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Minden Bancshares' Common Stock is not traded on any exchange and there is
no established public trading market. The transfer of stock represents a
process between buyers and sellers and prices of stock are not always reported
to Minden Bancshares' management. During the first quarter of 1997, there were
five transfers totaling 1,812 shares with one transfer of 312 shares reported
at price of $100.00. During the second quarter of 1997, there were two trans-
fers totaling 2,235 shares for which no prices were reported. During the third
quarter of 1997, there were three transfers totaling 4,062 shares with one
transfer of 120 shares reporting price of $120.00. During the fourth quarter
of 1997, there were three transfers totaling 609 shares with one transfer of
369 shares reporting price of $102.98, one transfer of 120 shares reporting
price of $120.00 and one transfer of 120 shares reporting price of $125.00.
Minden Bancshares purchased into Treasury 38 shares from one shareholder for
$92.00 in the second quarter of 1997. During the first quarter of 1998, there
was one transfer totaling 62 shares at reported price of $112.90. During the
second quarter of 1998, there were two transfers totaling 3,405 shares, with
only one transfer of 64 shares reporting price, that of $120.00. During the
third quarter of 1998, there were two transfers, one for 43 shares at reported
price of $110.00 and one for 15 shares at reported price of $106.00. During
the fourth quarter of 1998, there was one transfer of 236 shares at reported
price of $110.00. In 1998, Minden Bancshares purchased into Treasury 16
shares in the second quarter for $101.00 and 62 shares in the fourth quarter
for $109.00.
Minden Bancshares declared and paid semi-annual dividends during 1998 and
1997 as listed.
1998 1997
----- -----
First half $ .85 $ .75
Second half 4.15 3.25
----- -----
Totals $5.00 $4.00
===== =====
Minden Bancshares has paid semi-annual dividends each year since its
acquisition of Minden Bank in 1985 and Minden Bank paid dividends for at least
twenty consecutive years prior to 1985. It is the present intention of Minden
Bancshares' Board of Directors to continue the dividend payments; however,
future dividends must necessarily depend on earnings, financial condition,
appropriate legal restrictions and other factors relevant at the time the Board
of Directors considers its dividend policy.
At December 31, 1998, Minden Bancshares had approximately 461 shareholders
of record.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following analysis should be read in conjunction with Minden
Bancshares historical financial statements, notes and charts appearing elsewhere
herein.
FINANCIAL PERFORMANCE OVERVIEW
------------------------------
Two key measures of profitability used by the banking industry are return
on average assets (ROA) and return on average equity (ROE). For the year ended
December 31, 1998, Minden Bancshares ROA was 1.85% compared to 1.83% for the
year ended December 31, 1997 and 1.91% for the year ended December 31, 1996.
ROE, a measure of the effective use of shareholders' investment, was 16.57% in
1998, compared to 17.02% in 1997 and 17.83% in 1996. Minden Bancshares' results
for both ROE and ROA for the years 1998, 1997 and 1996 compare favorably to the
ROA and ROE of banks of similar size.
Another financial indicator used in the banking industry is net interest
margin which is a measure that demonstrates the effectiveness of a bank in man-
aging the yield derived from earning assets. Net interest margin is the net
yield which earnings from interest represent on total average earning assets.
Key factors affecting net interest margin are the level of interest rates, the
amount of noninterest-bearing funds supporting earning assets, net interest
spread (which is defined as the difference between the annualized yield on
average earning assets on a tax equivalent basis and the annualized rate on
funds) and the level of earning assets which may be affected by nonaccrual and
restructured loans.
The following table sets forth the net interest margin and net interest
spread on a tax equivalent basis for Minden Bancshares on a consolidated basis
for the years ended December 31, 1998, 1997 and 1996:
Years Ended December 31,
------------------------
1998 1997 1996
Net Interest Margin - Tax Equivalent 4.34% 4.45% 4.48%
Net Interest Spread - Tax Equivalent 3.41% 3.53% 3.56%
The decrease in Minden Bank's net interest margin for the period ended
December 31, 1998 is due to increased competition for loans and deposits with
loan rates being pressured lower while being required to pay proportionately
higher rates to retain and increase deposits. The decrease in Minden Bank's
net interest margin for the period ending December 31, 1997 was due to lower
net interest margin of FFSB being consolidated into Minden Bank and Minden
Bancshares.
RESULTS OF OPERATIONS
---------------------
Minden Bancshares' net income increased in each of its last three years.
Net income for Minden Bancshares was $5,704,000 for the year ended December 31,
1998, an increase of $623,000 or 12.26% over net income of $5,081,000 in 1997
which increased by $470,000 or 10.19% over net income for 1996. The increase in
1998 earnings ove 1997 by 12.26% was due to greater than anticipated growth for
1998 in which average total assets increased by $30,431,000 or 10.98%. The
increase in 1997 net income of 10.19% over 1996 is attributable to the acqui-
sition of FFSB along with continued deposit growth.
The following is a comparison of per share earnings of Minden Bancshares
for the years ended December 31, 1998, 1997 and 1996 which reflects the change
in net income:
12 Months Ended December 31,
1998 1997 1996
----- ----- -----
Earnings Per Share: $20.33 $18.11 $16.43
NET INTEREST INCOME (TAX EQUIVALENT BASIS)
------------------------------------------
Net interest income, the difference between interest income and interest
expense, is the prime component of Minden Bancshares' earnings. In 1998, tax
equivalent net interest income was $12,535,000, an increase of $962,000 or 8.31%
over 1997. In 1998, tax equivalent net interest income was $12,535,000 on
average earning assets of $288,496,000 which represents a net interest margin
of 4.34% compared to 4.45% net interest margin on tax equivalent net interest
income of $11,573,000 on average earning assets of $260,143,000 in 1997.
Interest income for 1998 increased by $1,928,000 or 9.49% over 1997 while
interest expense increased by $966,000 or 11.04% over 1997.
In 1997, tax equivalent net interest income was $11,573,000 on average
earning assets of $260,143,000 which represents a net interest margin of 4.45%
compared to 4.48% on tax equivalent net interest income of $10,124,000 on
average earning assets of $225,882,000 for 1996. Interest income for 1997
increased by $2,779,000 or 15.84% over 1996. Of the $2,779,000 increase in
interest income, $757,000 of the increase resulted from increase in loan
volume as the result of the FFSB acquisition and $1,024,000 of the increase
resulted from other loan volume increases for total of $1,781,000 increase
in interest income on loans. Interest income on investment securities in-
creased by $883,000 or 16.21% from the FFSB acquisition and deposit growth.
Interest expense for 1997 increased by $1,330,000 or 17.92% over 1996. Of
the $1,330,000 increase in interest expense, $927,000 is attributable to the
FFSB acquisition with difference occurring from deposit growth.
NET YIELD ON EARNINGS ASSETS/SPREAD
-----------------------------------
Minden Bancshares' net interest income is influenced by changes in
interest rates as well as volume.
Average earning assets of Minden Bancshares consisting of loans, taxable
and nontaxable investment securities, federal funds sold and interest-bearing
balances due from banks, for 1998 increased $28,353,000 or 10.90% over 1997.
The yield on earning assets decreased to 7.71% from 7.81% in 1997 due to
decrease in overall interest rates. Average interest-bearing liablilites
increased by $21,708,000 or 10.63% during 1998 over 1997 and the cost of these
funds increased to 4.30% from 4.28% in 1997.
During 1997, average earning assets increased $34,261,000 or 15.17% over
1996. The yield on interest-earning assets increased to 7.81% during 1997 from
7.77% during 1996 mainly from the acquisition of FFSB and continued loan and
deposit growth. Average interest-bearing liabilities increased $27,805,000 or
approximately 15.76% during 1997 when compared to the prior year. The average
cost of these funds increased from 4.21% in 1996 to 4.28% in 1997. Net interest
margin decreased to 4.45% in 1997 from 4.48% in 1996. The net interest margin
was reduced primarily from the acquisition of FFSB, whose net interest margin
was lower than Minden Bank's at the time of acquisition.
Management anticipates that the net interest margin for 1999 will compare
with 1998 or decrease slightly.
EARNING ASSETS
--------------
Average assets at Minden Bancshares increased during each of the last three
fiscal years. During 1998 average assets increased by $30,431,000 or 10.98% over
1997. In 1997, average assets increased $35,850,000 or 14.86% over 1996.
Average earning assets of Minden Bancshares, consisting of loans, taxable
and nontaxable investment securities, federal funds sold and interest-bearing
balances due from banks increased over the last three fiscal years. During
1998, average earning assets increased $28,353,000 or 10.90% over 1997. In
1997, average earning assets of Minden Bancshares increased $34,261,000 or
15.17% over 1996.
Consolidated average earning assets of Minden Bancshares increased by
$28,353,000 during 1998. Average loans increased by $12,430,000 in 1998 to
$141,042,000 as compared to an increase of $34,261,000 in 1997 to $128,612,000.
The increase in 1998 over 1997 has been due to loan demand. Average loans
increased $20,263,000 in 1997 to $128,612,000 as compared to an increase
of $28,366,000 in 1996 to $108,349,000. Of the $20,263,000 increase in
average loans for 1997 over 1996, $8,918,000 was attributable to the FFSB
acquisition with balance having been derived from increased loan demand.
The following table summarizes loan activities for the periods indicated.
For The Years Ended December 31,
1998 1997 1996
------- ------ ------
(dollars in 000's)
Average Loans $141,042 128,612 108,349
Dollar Change 12,430 20,263 20,852
Percent Change 9.66% 18.70% 23.83%
Interest $ 13,432 12,353 10,572
Dollar Change 1,079 1,781 1,908
Percent Change 8.73% 16.85% 22.02%
Yield 9.52% 9.60% 9.76%
Change (0.08%) (0.16%) (0.14%)
Minden Bank's investment portfolio is another primary source of earnings.
Securities purchased are primarily low risk and are purchased as long term
investments. Management maintains the portfolio to provide marketability and
risk diversification. Securities transactions are not entered into in anticipa-
tion of taking gains on short term price movements. In addition, restructuring
activities are infrequent and are carried out in conjunction with a prudent
overall business plan which does not result in a pattern of gains being realized
and losses being deferred on investment securities.
Average investment securities increased in 1998 and 1997. As Minden Bank's
average earning assets increased significantly in 1998 and 1997, the amounts in
investment securities increased by lesser amounts due to loan funding require-
ments. Available funds were used by management to purchase taxable and tax-
exempt securities in 1998 and 1997.
The following table summarizes investment activities for the periods
indicated:
For The Years Ended December 31,
1998 1997 1996
-------- -------- --------
(dollars in 000's)
Investment Securities
(Average Balances at Amortized Cost)
U.S. Treasury & Other $ 24,493 34,979 42,345
U.S. Government Agencies 77,356 57,538 38,279
State and Political Subdivisions 17,554 14,964 14,635
-------- ------- -------
Total $119,403 107,481 95,259
======== ====== ======
Dollar Increase (decrease) $ 11,922 12,222 5,073
Percent Increase (decrease) 11.09% 12.83% 5.63%
Interest Income
U.S. Treasury & Other $ 1,561 2,198 2,654
U.S. Government Agencies 4,549 3,445 2,120
State and Political Subdivisions 887 767 743
-------- ------ ------
Total $ 6,997 6,410 5,517
======== ====== ======
Portfolio Yield 5.86% 5.96% 5.79%
Portfolio Yield - Tax Equivalent 6.15% 6.24% 6.09%
Average federal funds sold, another major component of average earning
assets, increased to $21,197,000 or 12.92% in 1998 from $18,771,000 for the
prior year. The yield on federal funds sold decreased to 5.25% for 1998 from
5.42% for the prior year.
INTEREST-BEARING DEPOSITS
-------------------------
Average noninterest-bearing deposits increased to $45,215,000 in 1998, an
increase of $4,078,000 or 9.91% over the prior year. In 1998, average interest-
bearing deposits increased to $215,087,000, an $18,536,000 or 9.43% increase
over the prior year.
The following table reflects average interest-bearing deposit activities
for the periods indicated:
For the Years Ended December 31,
1998 1997 1996
------- ------- -------
(dollars in 000's)
Average Interest-Bearing Demand $ 27,701 26,097 24,316
Dollar Change 1,604 1,781 2,642
Percent Change 6.15% 7.32% 12.19%
Interest Expense $ 690 645 604
Dollar Change 45 41 61
Percent Change 6.98% 6.79% 11.23%
Yield 2.49% 2.47% 2.48%
Change 0.02% (0.01%) (0.02%)
Average Savings Deposits $ 58,836 53,413 49,806
Dollar Change 5,423 3,607 5,304
Percent Change 10.15% 7.24% 11.92%
Interest Expense $ 1,817 1,636 1,522
Dollar Change 181 114 205
Percent Change 11.06% 7.49% 15.57%
Yield 3.09% 3.06% 3.06%
Change 0.03% 0.00% 0.11%
Average Other Time Deposits $128,550 117,041 95,827
Dollar Change 11,509 21,214 13,447
Percent Change 9.83% 22.14% 16.32%
Interest Expense $ 6,693 6,138 5,000
Dollar Change 555 1,138 851
Percent Change 9.04% 22.76% 20.51%
Yield 5.21% 5.24% 5.22%
Change (0.03%) 0.02% 0.18%
PROVISION FOR LOAN LOSSES
-------------------------
The provision for loan losses is the charge made against earnings to keep
the allowance for possible loan losses at a level management considers adequate
considering the nature of the loan portfolio and current economic conditions in
the marketplace. Management estimates the required allowance for possible loan
losses and the provision thereto by taking into consideration current economic
trends, changes in the character and size of the loan portfolio, nonperforming
loans, past loss experience, the ability of borrowers to repay based upon
financial statements and sources of cash flow, repayment performance and
history, underlying collateral values securing loans and other factors which
deserve recognition in estimating credit losses.
No provision was charged to income in 1998 or 1997. Net charge-offs
for 1998 increased by $255,000 to $211,000 when compared to net recoveries for
1997 of $44,000. Management was of the belief that no provision for 1998 was
needed although loans had increased by $3,431,000 to $140,320,000 from
$136,889,000 at December 31, 1997. The reserve for loan losses was
$3,392,000 or 2.42% of total loans outstanding at December 31, 1998 as compared
to $3,603,000 or 2.63% of total loans outstanding at December 31, 1997.
Net recoveries for 1997 increased by $388,000 to $297,000 when compared
to net charge-offs of $91,000 for 1996. The net recoveries for 1997 of
$297,000 include $253,000 of loan reserve acquired in the FFSB acquisition.
The reserve for loan losses was $3,603,000 or 2.63% of total loans outstanding
as of December 31, 1997 compared to $3,306,000 or 2.87% of total loans out-
standing as of December 31, 1996.
The following table summarizes provision and allowance activities for the
periods indicated:
For the Years Ended December 31,
1998 1997 1996
------- ------- -------
(dollars in 000's)
Loans, Net $140,320 136,889 115,346
Allowance for Possible Loan Losses 3,392 3,603 3,306
Percent of Loans 2.42% 2.63% 2.87%
Provision for Possible Loan Losses $ 0 0 0
Net Charge-Offs (recoveries) 211 (297) 91
Percent of Average Loans 0.15% (0.22%) 0.08%
NONINTEREST INCOME
------------------
Noninterest income consists primarily of service charges, trust department
fees and other fees and commissions. During 1998, noninterest income increased
by $227,000 to $2,692,000, or 9.21% over 1997, due primarily to growth and
volume increases. Of the $226,000 increase in noninterest income for 1998 over
1997, $170,000 was for loan origination fees on home mortgage loans. During
1997, noninterest income increased by $257,000 to $2,465,000, or 11.64% over
1996, due to new services provided and increased fees for services provided. Of
the $257,000 increase in noninterest income for 1997 over 1996, $152,000 was
for loan origination fees on home mortgage loans originating at the Youree Drive
Branch (formerly First Federal savings Bank) and gain on sale of investment
securities was reflected in the amount of $81,000.
NONINTEREST EXPENSE
-------------------
This category of expense includes salaries, employee benefits, occupancy
expense, furniture and equipment expense and other expenses. Total noninterest
(total operating expenses) for 1998 amounted to $6,575,000, a $297,000 or
4.73% increase over 1997. During 1998, there was a decrease in occupancy
expense due to the nonrecurring expenses incurred in 1997 explained below.
There were increases in certain categories in 1998 over 1997 due to a full
year's operation of the Youree Drive branch acquired in May, 1997. There were
increases in data processing costs due to the acquisition and installation in
December, 1998 of new computer system for employee training, related expenses
and supply costs for new forms and supplies.
Total noninterest expenses for 1997 amounted to $6,278,000, a $919,000 or
17.15% increase over total operating expenses for 1996. The increase in total
operating expenses in 1997 over 1996 was attributable in part to the acquisi-
tion of FFSB and its operation as our "Youree Drive" branch. Of the $302,000
increase in salaries and employee benefits for 1997 over 1996, $183,000 was
attributable to the Youree Drive Branch with the balance being attributable to
staff and salary increases. Of the $59,000 increase in occupancy expense,
$32,000 was applicable to the Youree Drive branch. Also included in occupancy
expense for 1997, were $84,000 expended for repairs of the Line Avenue Branch.
Of the $116,000 increase in capital stock tax for 1997, $36,000 was attributable
to the FFSB acquisition. Of the $320,000 increase in other operating expenses
for 1997, $65,000 was applicable to furniture and equipment expense for the
Youree Drive Branch and $54,000 was applicable to the purchase of a long-term
data processing contract which FFSB had entered into prior to purchase and for
the conversion of data onto Minden Bank's computer system, and $146,000 was
expended for advertising during 1997 as compared to $63,000 for 1996.
LIQUIDITY
---------
A key to success as a community bank is to maintain adequate liquidity in
order to satisfy customer needs in a satisfactory response time. To achieve this
goal, Minden Bank monitors its asset and liability mix on a routine basis.
The primary sources of liquidity include cash and due from banks, federal
funds sold and investment securities. Additionally, Minden Bank has the ability
to borrow and purchase federal funds on a short term basis from other financial
institutions as a source of liquidity should the need arise.
The loan to deposit ratio at Minden Bank averaged 54.18% during 1998
compared to 54.11% in 1997 and 52.27% in 1996. Average federal funds sold were
$21,197,000, $18,771,000 and $20,387,000, respectively during 1998, 1997 and
1996. Additionally, at December 31, 1998, Minden Bank had investment securities
with an amortized cost of $151,572,000, of which $41,582,000 or 27.44% mature
within one year, $70,455,000 or 46.48% mature within two to five years, and
$39,535,000 or 26.08% mature in over five years. Additional sources of liquidity
which are available, are borrowing from the Federal Reserve Bank as a member
bank and the purchase of federal funds on a daily basis from other banks. Minden
Bancshares does not anticipate any events which will require liquidity beyond
that which is available from the above referenced sources.
INTEREST RATE SENSITIVITY
-------------------------
The interest rate sensitivity of Minden Bancshares' assets and liabilities
provides an indication of the extent to which Minden Bancshares' net interest
income may be affected by interest rate movements. An indicator of the rate
sensitivity structure of a financial institution's balance sheet is the
difference between its interest rate sensitive assets and interest rate
sensitive liabilities which is referred to as the "Gap". The table below
presents Minden Bancshares' Gap position at December 31, 1998:
<TABLE>
<CAPTION>
After 3 After 6
Within Within Within After Year End
3 Months 6 Months 12 Months One Year Balance
---------- -------- --------- -------- ----------
(dollars in 000's)
<S> <C> <C> <C> <C> <C>
Earning Assets:
Loans $ 51,411 8,867 9,881 70,161 $ 140,320
Securities available for sale 23,405 16,325 9,221 85,019 133,970
Securities held to maturity 490 402 364 16,935 18,191
All other 3,090 _ _ _ 3,090
---------- -------- --------- -------- ----------
Total Earning Assets $ 78,396 25,594 19,466 172,115 $ 295,571
---------- -------- --------- -------- ----------
Funding Sources:
Time deposits $ 51,352 25,395 33,711 27,950 $138,408
Other interest-bearing deposits 94,360 _ _ _ 94,360
Securities sold under agreements
to repurchase 6,500 885 1,867 681 9,933
Noninterest-bearing sources _ _ _ 52,870 52,870
---------- --------- -------- -------- ----------
Total Funding Sources $ 152,212 26,280 35,578 81,501 $ 295,571
---------- --------- -------- -------- ----------
Gap Summary:
Periodic net earning assets $ (73,816) (686) (16,112) 90,614 $ _
---------- --------- -------- -------- ----------
Cumulative net earning assets $ (73,816) (74,502) (90,614) - $ -
========== ========== ======== ======== ==========
Periodic net earning assets/
Total earning assets (24.87%) (0.23%) (5.45%) 30.65% _
Cumulative ratio of earning assets
to interest-bearing liabilities (24.87%) (25.20%) (30.65%) _ -
</TABLE>
This table is based upon a point in time and may not always be meaningful
because it is based upon the earliest possible maturity or repricing and not
what may be a normal change in our interest rates. Also, this table does not
consider subsequent changes in interest rate structures or spreads between
asset and liability categories. Interest rate changes do not always occur
equally to interest-earning assets and interest-bearing liabilities. Interest
rates on interest-bearing demand deposits, "Now", money market and savings
accounts which may be immediately adjusted may not change in proportion to
changes in interest rates. Management believes that Minden Bancshares' asset
and liability mix is adequately positioned to adjust to interest rate changes.
CAPITAL ADEQUACY
----------------
Risk based capital guidelines issued by the Federal Reserve Board became
effective March 15, 1989. The guidelines require minimum levels of capital based
upon a risk rating of the contingent obligations. A minimum of 8% of total cap-
ital to risk-adjusted assets will be required, of which one-half of the 8% must
consist primarily of tangible common shareholders equity ("Tier 1 Capital"). At
December 31, 1998 Minden Bancshares' Tier 1 capital ratio was 20.84% and its
total risk based capital ratio was 22.10% under the most restrictive, fully
phased in, risk based guidelines.
In addition, effective September 7, 1990, the Federal Reserve Board imple-
mented an additional 3% minimum Tier 1 leverage ratio (the "Leverage Ratio") to
be maintained in conjunction with the risk based capital standard. The Leverage
Ratio gauges the amount of Tier 1 capital (less certain intangibles including
goodwill) to total average assets (less certain intangibles including goodwill).
At December 31, 1998, Minden Bancshares' Leverage Ratio was 10.10%. The Federal
Reserve Board can require a bank to maintain a Leverage Ratio greater than 3%
if, in its opinion, the bank is anticipating significant growth or is operating
with less than well diversified risks.
INFLATION
---------
Inflation has a significant impact on the growth of total assets in the
banking industry. It requires increases in equity capital at higher than normal
rates in order to maintain an appropriate equity to asset ratio. Minden Banc-
shares presently has the intent and ability to maintain proper equity to asset
ratios primarily by periodically adjusting its pricing of services and banking
products to take into consideration current costs. The consolidated financial
statements and related financial data of Minden Bancshares have been prepared in
accordance with generally accepted accounting principles which requires the
measurement of financial position and operating results in terms of historical
dollars without considering changes in the relative purchasing power of money
over time due to inflation.
RECENT ACCOUNTING PRONOUNCEMENTS
--------------------------------
RECENT ACCOUNTING PRONOUNCEMENTS
In June of 1998, the Financial Accounting Standards Board (FASB) issued
FAS 133, Accounting for Derivative instruments and Hedging, effective for
all fiscal quarters of fiscal years beginning after June 15, 1999. FAS 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and
for hedging activities. Management does not anticipate any impact by this
SFAS upon its financial statements because it does not currently hold any
derivative contracts or engage in any hedging activities and does not
anticipate engaging in any such activities.
OTHER ACCOUNTING ISSUES
-----------------------
Year 2000
- ---------
The problem now known as the "Year 2000" is the inability of older computer
systems, software and other equipment which have only maintained a two digit
year in date information to chronologically align dates with the occurrence of
the year 2000.
The Board of Directors adopted a "Year 2000 Policy" to insure that all
information systems and other areas which may be affected by the "Year 2000"
millennium change are properly and expeditiously addressed to insure the contin-
uation of normal business operations of the Bank into the next millennium. In
the "Year 2000 Policy," provision is made for a "Year 2000 Plan" whereby an EDP
Steering Committee headed by the Vice President and Data Center Manager would
identify the areas which may be affected by the "Year 2000," and would address
these issues by making necessary recommendations to the Board of Directors
for approval.
The EDP Steering Committee researched the need to upgrade the Bank's
"Mainframe" computer and software and made recommendations to the Board of
Directors, which approved the acquisition. The installation of the new
computer system was completed as the close of business on December 10, 1998,
and began processing effective December 11, 1998. The software supplier has
warranted the new software as "Year 2000 Compliant." Formal testing
procedures in accordance with the vendor's instructions are to be conducted
by the end of March, 1999. All personal computers in service by the Bank
have been tested, and necessary upgrades have been ordered and installed.
Under the Bank's "Year 2000 Policy," all computer systems and electronic
date sensitive devices were to be tested, with necessary upgrades made, and cer-
tified as to their "Year 2000" readiness by the end of the first quarter, 1999.
It is anticipated the Bank will accomplish its goals relating to it's electronic
date sensitive devices.
Due to concern by banking regulators regarding the risk to the Bank from
effects to larger loan and deposit customers, service providers, vendors and
other sources, if their computer systems fail due to not being year 2000 com-
pliant, the Bank created a year 2000 task force to assess these risks. The
Bank has mailed questionaire to its larger commercial accounts, both loan
and deposit customers, regarding the capacity of their computer systems to
meet year 2000 compliance and is currently evaluating current service
providers, vendors and other sources which may provide an operating or
financial risk to the Bank.
ITEM 7. FINANCIAL STATEMENTS
January 13, 1999
The Board of Directors and Stockholders
Minden Bancshares, Inc. and Subsidiary
Minden, Louisiana
INDEPENDENT AUDITOR'S REPORT
----------------------------
We have audited the accompanying consolidated balance sheets of Minden
Bancshares, Inc. and Subsidiary as of December 31, 1998 and 1997, and the
related consolidated statements of income, comprehensive income, changes in
stockholders' equity, and cash flows for each of the three years in the
period ended December 31, 1998. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Minden
Bancshares, Inc. and Subsidiary as of December 31, 1998 and 1997, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
As discussed in Note 1.c. to the consolidated financial statements, the Company
changed its method of reporting changes in unrealized gains and losses on
certain investment securities in 1998.
HEARD, MCELROY & VESTAL, L.L.P.
Certified Public Accountants
Shreveport, Louisiana
MINDEN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1997
ASSETS 1998 1997
------ ---- ----
(in thousands, except per share data)
Cash and cash equivalents:
Cash and due from banks - Note 2 $ 15,856 17,196
Federal funds sold 12,000 4,500
--------- ---------
27,856 21,696
Investment securities - Note 3
Securities available for sale 132,437 108,414
Securities held to maturity 18,191 16,502
--------- ---------
150,628 124,916
Federal Reserve Bank and FHLB stock 1,533 1,400
Loans, less allowance for loan losses
of $3,392 and $3,603 - Notes 4 and 8 136,928 133,286
Accrued interest receivable 2,595 2,642
Bank premises and equipment - Note 5 4,167 3,662
Real estate owned
other than bank premises - Note 13 116 278
Other Assets - Notes 6 and 11 4,552 4,198
--------- ---------
TOTAL ASSETS $328,375 292,078
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES:
Deposits:
Noninterest bearing $ 47,603 42,045
Interest bearing - Note 10 232,768 206,138
--------- ---------
Total Deposits 280,371 248,183
Securities sold under
repurchase agreement 9,933 10,809
Accrued interest payable 1,227 986
Other liabilities 730 414
--------- ---------
Total Liabilities 292,261 260,392
STOCKHOLDERS' EQUITY:
Common stock, par value $2.50 per share;
500,000 shares authorized;
309,816 shares issued;
280,583 and 280,511 shares
outstanding, respectively 775 775
Additional paid-in capital 11,214 11,205
Undivided profits - Note 7 25,038 20,737
Treasury stock-at cost-shares
29,305-1997 and 29,267-1996 (1,302) (1,300)
Accumulated other comprehensive
income 389 269
--------- ---------
Total Stockholders' Equity 36,114 31,686
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $328,375 292,078
========= =========
The accompanying notes are an integral part of the financial statements.
MINDEN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
December 31, 1998, 1997 and 1996
1997 1996 1995
---- ---- ----
(in thousands, except per share data)
INTEREST INCOME:
Interest and fees on loans $ 13,432 12,353 10,572
Investment securities:
Taxable 6,022 5,563 4,704
Tax-exempt 887 767 743
Federal funds sold 1,112 1,018 1,069
Federal Reserve stock and other 453 327 167
-------- -------- --------
Total interest income 21,906 20,028 17,255
INTEREST EXPENSE:
Deposits 9,200 8,419 7,126
Securities sold under
repurchase agreement and other 516 331 294
-------- -------- --------
Total interest expense 9,716 8,750 7,420
-------- -------- --------
Net interest income 12,190 11,278 9,835
Provision for loan losses - Note 4 - - -
-------- -------- --------
Net interest income after
provision for loan losses 12,190 11,278 9,835
-------- -------- --------
OTHER INCOME:
Service charges 1,991 1,798 1,574
Insurance commissions 231 292 300
Gain (loss) on investment securities - 81 -
Other operating income 470 294 334
-------- -------- --------
Total other income 2,692 2,465 2,208
OPERATING EXPENSES:
Salaries and employee benefits 3,264 3,087 2,785
Occupancy expense 433 550 491
Amortization 268 216 143
Writedown on real estate owned
other than bank premises 7 - -
FDIC insurance 48 42 (6)
Stationery, supplies and printing 553 501 518
Data processing fees 224 138 120
Capital stock tax 418 367 251
Other operating expenses 1,360 1,377 1,057
-------- -------- --------
Total operating expenses 6,575 6,278 5,359
-------- -------- --------
INCOME BEFORE INCOME TAXES 8,307 7,465 6,684
INCOME TAXES - NOTE 6 2,603 2,384 2,073
-------- -------- --------
NET INCOME $ 5,704 5,081 4,611
======== ======== ========
EARNINGS PER SHARE $ 20.33 18.11 16.43
======== ======== ========
The accompanying notes are an integral part of the financial statements.
MINDEN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
December 31, 1998, 1997 and 1996
1997 1996 1995
---- ---- ----
(in thousands, except per share data)
NET INCOME $ 5,704 5,081 4,641
OTHER COMPREHENSIVE INCOME
Unrealized gains(losses) on invest-
ments, net of deferred taxes of
$62, $100 and $84 120 275 (164)
LESS-reclassification of gains
realized during the period - 81 -
-------- ------- -------
Total other comprhensive income 120 194 (164)
-------- ------- -------
COMPREHENSIVE INCOME $ 5,824 5,275 4,477
======== ======= =======
The accompanying notes are an integral part of the financial statements.
MINDEN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Accumulated
Total Additional Other
Stockholders' Common Paid-In Undivided Treasury Comprehensive
Equity Stock Capital Profits Stock Income
------------- ------- ---------- --------- -------- --------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 24,009 775 11,205 13,078 (1,288) 239
- ----------------------------
Net income 4,611 -- -- 4,611 -- --
Cash dividends paid (911) -- -- (911) -- --
Purchase of 109 shares common
stock (9) -- -- -- (9) --
Change in unrealized market value
of securities, net of taxes
of $84 (164) -- -- -- -- (164)
------------- ------- ---------- --------- -------- --------------
Balance at December 31, 1996 $ 27,536 775 11,205 16,778 (1,297) 75
- ----------------------------
Net income 5,081 -- -- 5,081 -- --
Cash dividends paid (1,122) -- -- (1,122) -- --
Purchase of 38 shares common
stock (3) -- -- -- (3) --
Change in unrealized market value
of securities, net of taxes
of $100 194 -- -- -- -- 194
------------- ------- --------- --------- -------- ----------
Balance at December 31, 1997 $ 31,686 775 11,205 20,737 (1,300) 269
Net income 5,704 -- -- 5,704 -- --
Cash dividends paid (1,403) -- -- (1,403) -- --
Issuance of 150 shares of stock 15 -- 9 -- 6 --
Purchase of 78 shares common
stock (8) -- -- -- (8) --
Change in unrealized market value
of securities, net of taxes
of $62 120 -- -- -- -- 120
------------- ------- --------- --------- -------- ----------
Balance at December 31, 1998 36,114 775 11,214 25,038 (1,302) 389
- ---------------------------- ============= ======= ========== ========= ======== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
MINDEN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
December 31, 1998, 1997 and 1996
1998 1997 1996
--------- -------- --------
(in thousands, except per share data)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,704 5,081 4,611
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 500 482 405
Writedown on real estate owned
other than bank premises 7 - -
(Increase) in loans held for sale (795) (480) -
(Gain) loss on investment securities - (81) -
(Gain) on sale of real estate owned other than
bank premises (45) - (42)
(Increase) decrease in accrued interest receivable 47 (464) 150
(Increase) decrease in other assets (713) 87 69
Increase in accrued interest payable 241 126 73
Increase (decrease) in other liabilities 316 282 (5)
--------- -------- --------
Total adjustments (442) (48) 650
--------- -------- --------
Net cash provided by operating activities 5,262 5,033 5,261
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from AFS securities-maturities 94,291 90,068 22,515
Proceeds from HTM securities 968 518 183
Purchase of investment securities and
Federal Reserve Bank stock - Note 3 (120,923)(110,466) (39,324)
Proceeds from sales of real estate owned
other than bank premises 504 150 285
Purchase of equipment (707) (801) (88)
Purchase of goodwill - (1,873) -
Net (increase) in loans - Note 11 (3,151) (20,703) (16,552)
--------- -------- --------
Net cash (used) by investing activities (29,018) (43,107) (32,981)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (1,403) (1,122) (911)
Net increase in noninterest-bearing deposits
- Note 11 5,558 3,848 2,499
Net increase in interest-bearing deposits
- Note 11 26,630 28,339 17,401
Net increase (decrease) in securities sold
under repurchase agreement (876) 5,391 (384)
Payments on note payable - (90) (90)
Purchase of 78, 38, and 109 shares treasury stock (8) (3) (9)
Issuance of 150 shares of common stock 15 - -
--------- -------- --------
Net cash provided by financing activities 29,916 36,363 18,506
--------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,160 (1,711) (9,214)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 21,696 23,407 32,621
--------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 27,856 21,696 23,407
========= ======== ========
CASH PAYMENTS:
Interest $ 9,475 8,624 7,347
========= ======== ========
Income taxes $ 2,740 2,270 1,933
========= ======== ========
The accompanying notes are an intgral part of the financial statements.
MINDEN BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
a. CONSOLIDATION
The accompanying financial statements include the accounts of Minden
Bancshares, Inc. (the Company) and its wholly-owned subsidiary, Minden
Bank and Trust Company (the Bank). The Company was organized as a bank
holding company under Federal Reserve Bank laws on June 27, 1983. The
holding company did not transact any business until 1985. The Bank has
locations in Minden, Sarepta, and Shreveport, Louisiana.
b. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from
those estimates.
Material estimates that are particularly susceptible to significant
change relate to the determination of the allowance for losses on loans
and the valuation of real estate acquired in connection with foreclosures
or in satisfaction of loans. In connection with the determination of the
allowances for losses on loans and foreclosed real estate, management
obtains independent appraisals for significant properties.
Most of the Bank's business activity is with customers located within the
Minden/Shreveport, Louisiana area. The loan categories are detailed in
Note 4. The economy of the area is diversified but depends on timber,
agriculture, and oil and gas. Although these areas of the economy and the
economy in general in the area are doing well, it could decline in the
future.
While management uses available information to recognize losses on loans,
future additions to the allowances may be necessary based on changes in
local economic conditions. In addition, regulatory agencies, as an
integral part of their examination process, periodically review the
Bank's allowances for losses on loans and foreclosed real estate. Such
agencies may require the Bank to recognize additons to the allowances
based on thier judgements about information available to them at the
time of thier examination. Because of these factors, it is reasonably
possible that the allowances for losses on loans may change materially
in the near future.
c. INVESTMENT SECURITIES
The Bank's investments in securities are classified in two categories and
accounted for as follows.
Securities to be held to maturity
---------------------------------
Bonds, notes and debentures (municipal bonds) for which the Bank has the
positive intent and ability to hold to maturity are reported at cost,
adjusted for amortization of premiums and accretion of discounts which
are recognized in interest income using the effective interest method
over the period to maturity.
Securities available for sale
-----------------------------
Securities available for sale consist of bonds, notes and debentures not
classified as trading securities nor as securities to be held to
maturity.
Declines in the fair value of individual held-to-maturity and available-
for-sale securities below their cost that are other than temporary have
resulted in write-downs of the individual securities to their fair value.
The related write-downs have been included in earnings as realized
losses. There were no write-downs in 1998, 1997 or 1996.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
------------------------------------------------------
Unrealized holding gains and losses, net of tax, on securities available
for sale have been reported as direct increases in stockholders' equity,
net of related deferred tax effects, are now accounted for as other
comprehensive income, as required by FASB Statement 130 "Reporting
Comprehensive Income." This statement also requires that cumulative
changes in unrealized gains and losses on such securities be accounted
for in in accumulated other comprehensive income as part of shareholders'
equity. All prior periods presented in the financial statements have
been restated, as required by FASB No. 130.
Gains and losses on the sale of securities available for sale are
determined using the specific-identification method.
d. LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans are stated at the amount of unpaid principal, reduced by unearned
discount and an allowance for loan losses. Unearned discount on certain
installment loans is recognized as income under the rule of seventy-
eights, which approximates interest on the outstanding balance. Interest
on other loans is calculated by using the simple interest method on
daily balances of the principal amount outstanding. The accrual of
interest on loans is usually discontinued when interest is past due by
ninety days. Upon such occurrence, all unpaid accrued interest on such
loans is reversed.
The allowance for loan losses is established through a provision for
loan losses charged to expense. Loans are charged against the allowance
for loan losses when management believes that the collectibility of the
principal is unlikely. The allowance is an amount that management
believes will be adequate to absorb possible losses on existing loans
that may become uncollectible, based on evaluations of the collectibility
of loans and prior loan loss experience. The evaluations take into
consideration such factors as changes in the nature and volume of the
loan portfolio, overall portfolio quality, review of specific problem
loans, and current economic conditions that may affect the borrowers'
ability to pay.
e. BANK PREMISES AND EQUIPMENT
Bank premises and equipment are carried at cost less accumulated
depreciation. Depreciation is provided over the estimated useful lives
of the respective assets on the straight-line and accelerated methods of
depreciation. Expenditures for major renewals and betterments of premises
and equipment are capitalized and those for maintenance and repairs are
charged to expense as incurred.
f. INCOME TAXES
Provisions for income taxes are based on taxes payable or refundable for
the current year (after exclusion of nontaxable income such as interest
on state and municipal securities) and deferred taxes on temporary
differences between the amount of taxable income and pretax financial
income and between the tax bases of assets and liabilities and their
reported amounts in the financial statements. Deferred tax assets and
liabilities are included in the financial statements at currently enacted
tax rates applicable to the period in which the deferred tax assets and
liabilities are expected to be realized or settled as prescribed in FASB
Statement No. 109, Accounting for Income Taxes. As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are adjusted
through the provision for income taxes.
g. FEDERAL FUNDS
Federal funds sold are stated at the cash amount loaned to the member
bank. Interest is recognized on a daily basis as the funds are regularly
rolled over.
h. PENSION PLAN
In 1997, the Bank adopted a 401(k) Plan whereby employees with 12 months
or more service on the semiannual entry dates and are at least 21 years
old become eligible to make elective contributions and will share in the
employer discretionary contribution for the year. Prior to 1997, the
Bank contributed to each eligible employee's individual retirement
account under its simplified employee pension program. The percentage
of contributions to the 401(k) Plan for 1998 and 1997 and the employer
SEP for 1996 were set by the Board of Directors at 6%. Contributions
(in thousands) to these plans in 1998, 1997, and 1996 amounted to
approximately $137, $130 and $115.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
------------------------------------------------------
i. EARNINGS PER SHARE
Earnings per share are computed using the weighted number of shares
outstanding during each year. The number of weighted average outstanding
shares was 280,565 in 1998, 280,527 in 1997, and 280,623 in 1996. The
dilutive effect of FASB No. 128 is considered immaterial (less than 10
cents per share) and thus not presented.
j. CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Bank considers all cash
on hand, demand deposits with other banks, and federal funds sold to be
cash equivalents.
2. CASH AND DUE FROM BANKS
-----------------------
The Bank, as a member of the Federal Reserve System, is required to maintain
certain average reserve balances at the Federal Reserve Bank and/or in cash
on hand. The required balance (in thousands) at December 31, 1998 and 1997
was $2,943 and $2,133.
3. INVESTMENT SECURITIES
---------------------
The carrying amounts of investment securities as shown in the consolidated
balance sheets of the Bank and their approximate fair values at December 31
(in thousands) were as follows:
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- --------
Securities available for sale -
December 31, 1998 -
U.S. Treasury 20,274 185 16 20,443
U.S. Government agency securities 111,574 653 233 111,994
--------- ---------- ---------- --------
131,848 838 249 132,437
========= ========== ========== ========
Securities to be held to maturity -
December 31, 1998 -
State and municipal securities 18,191 647 67 18,771
========= ========== ========== ========
Securities available for sale -
December 31, 1997 -
U.S. Treasury 35,949 219 6 36,162
U.S. Government agency securities 72,056 334 138 72,252
--------- ---------- ---------- --------
108,005 553 144 108,414
========= ========== ========== ========
Securities to be held to maturity -
December 31, 1997 -
State and municipal securities 16,502 441 2 16,941
========= ========== ========== ========
Assets, principally securities, carried at approximately (in thousands) $65,550
at December 31, 1998 and $51,794 at December 31, 1997 were pledged to secure
public deposits and for other purposes required or permitted by law.
Gross purchases (in thousands), of securities for 1998, 1997 and 1996 are
detailed below.
1998 1997 1996
-------- -------- --------
PURCHASES:
Purchases of available for sale securities 118,133 108,035 38,632
Purchase of Federal Reserve Bank stock 133 195 168
Purchases of held to maturity securities 2,657 2,236 524
-------- -------- --------
Total 120,923 110,466 39,324
======== ======== ========
3. INVESTMENT SECURITIES (CONTINUED)
---------------------------------
Gains (in thousands) of $81 were realized on sales of securities available
for sale in 1997. No losses were recognized. No gain or losses were recog-
nized on the maturities and call of bonds held to maturity in 1998, 1997
and 1996.
The scheduled maturities (in thousands) of securities to be held to
maturity and securities available for sale at December 31, 1998 were as
follows:
SECURITIES TO BE SECURITIES AVAILABLE
HELD TO MATURITY FOR SALE
------------------ --------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
--------- ------- -------- ---------
Due in one year or less 1,257 1,264 38,792 38,819
Due from one year to five years 4,768 4,939 65,687 66,179
Due from five to ten years 7,918 8,263 16,450 16,507
Due after ten years 4,248 4,305 10,919 10,932
--------- ------- --------- --------
18,191 18,771 131,848 132,437
========= ======= ========= ========
4. LOANS
-----
Loans (in thousands) at December 31, 1998 and 1997 consisted of the following:
1998 1997
--------- --------
Commercial, financial and agricultural $ 36,995 33,884
Real estate - construction 4,868 3,298
Real estate - mortgage 72,390 75,021
Held for sale 1,275 480
Installment - individuals 24,214 22,186
Other 876 2,183
--------- --------
140,618 137,052
Unearned discount (298) (163)
--------- --------
140,320 136,889
Allowance for loan losses (3,392) (3,603)
--------- --------
$136,928 133,286
========= ========
Changes in the allowance for loan losses (in thousands) are summarized as
follows:
1998 1997 1996
-------- -------- --------
Beginning balance $ 3,603 3,306 3,397
Provision charged to operations - - -
Loans charged off (489) (315) (244)
Recoveries 278 612 153
-------- -------- --------
Ending balance $ 3,392 3,603 3,306
======== ======== ========
Commitments to fund loans at December 31, 1998, 1997 and 1996 (in thousands)
amounted to approximately $24,182-1998, $24,523-1997, $17,432-1996. Loans on
which the accrual of interest has been discontinued amounted (in thousands) to
approximately $91, 547 and $346 at December 31, 1998, 1997 and 1996. Had
these loans been current in accordance with their original terms, related
interest income (in thousands) would have approximated $32, $36 and $36 for
1998, 1997 and 1996. There are no loans on which the accrual of interest has
been reduced, or whose terms have been otherwise modified.
Loan origination fees and certain direct origination costs are capitalized.
4. LOANS (continued)
-----------------
The Bank grants commercial and consumer loans to customers in Minden and
Shreveport, Louisiana and the surrounding area. Although the Bank has a
diversified loan portfolio, a substantial portion of loan repayment is
dependent upon the general business climate in Minden and Shreveport.
5. BANK PREMISES AND EQUIPMENT
---------------------------
Bank premises and equipment (in thousands) at December 31, 1998 and 1997 are
summarized as follows:
Estimated
Useful Lives 1997 1996
------ ------
Land $ 1,463 1,463
Buildings and improvements 8-50 Years 3,615 3,107
Furniture, fixtures and equipment 5-15 Years 880 725
Vehicles 3- 5 Years 32 28
------- ------
5,990 5,323
Less - accumulated depreciation 1,823 1,661
------- ------
Bank premises and equipment $ 4,167 3,662
======= ======
Depreciation (in thousands) charged to operations in 1998, 1997 and 1996
amounted to $202, 232 and $193 respectively.
6. INCOME TAXES
------------
Federal income tax expense (in thousands) for December 31, 1998, 1997 and
1996 is as follows:
1998 1997 1996
----- ---- ----
Currently payable $ 2,719 2,393 1,932
Deferred (prepaid) (116) (9) 141
------- ----- -----
Income tax expense 2,603 2,384 2,073
======= ===== =====
Federal statutory tax rate 34.0% 34.0% 34.0%
Tax-exempt income (3.6) (3.6) (3.8)
Other - net .9 1.5 .8
------- ----- -----
Effective tax rate 31.3% 31.9% 31.0%
======= ===== =====
Included in other assets are deferred federal income taxes (in thousands) of
$528 and $473 at December 31, 1998 and 1997. Cumulative undistributed earnings
(in thousands) of the subsidiary Bank that have been recorded by the Company,
and for which no income taxes have been accrued, amounted to approximately
$36,065 at December 31, 1998. These earnings have been reinvested in the
subsidiary Bank.
The deferred tax asset at December 31, 1998 and 1997 consists of the
following:
1997 1996
---- ----
Defered tax assets: (in thousands
Reserve for loan losses $ 834 891
ORE write downs 7 38
----- ----
841 929
Deferred tax liability:
Discount on investments (113) (317)
----- ----
728 612
Net unrealized appreciation on securities AFS (200) (139)
----- ----
Net deferred tax assets (based upon 34% tax rate) 528 473
===== ====
Management has determined that no valuation allowance is necessary.
7. UNDIVIDED PROFITS
-----------------
At December 31, 1998 and 1997, the Bank's undivided profits were legally
available for dividends. The Bank is subject to various regulatory capital
requirements administered by federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary actions by regulators that, if undertaken, could
have a direct material effect on the Bank's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt cor-
rective action, the Bank must meet specific capital guidelines that involve
quantitative measures of the Bank's assets, liabilities, and certain off-
balance-sheet items as calculated under regulatory accounting practices.
The Bank's capital amounts and classification are also subject to qualita-
tive judgments by the regulators about components, risk weightings, and
other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to
average assets (as defined). Management believes, as of December 31, 1998,
that the Bank meets all capital adequacy requirements to which it is
subject.
As of December 31, 1998, the most recent notification from the Office of the
Comptroller of the Currency categorized the Bank as well capitalized under
the regulatory framework for prompt corrective action. To be categorized as
well capitalized the Bank must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the table. There are
no conditions or events since that notification that management believes has
changed the institution's category.
The Bank's actual capital amounts (in thousands) and ratios are also
presented in the table.
<TABLE>
<CAPTION>
To Be Well Capitalized
Under Prompt
For Capital Corrective
Actual Adequancy Purposes: Action Provisions:
--------------- ------------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
As of December 31,1998:
Total Captial > > > >
(to Risk Weighted Assets) $34,357 22.1% =$12,439 = 8.0% = $15,549 =10.0%
Tier 1 Captial > > > >
(to Risk Weighted Assets) $32,396 20.8% = $6,219 = 4.0% = $ 9,329 = 6.0%
Tier 1 Captial > > > >
(to Average Assets) $32,396 10.1% = $9,620 = 3.0% = $16,033 = 5.0%
</TABLE>
8. RELATED PARTY TRANSACTIONS
--------------------------
At December 31, 1998 and 1997, certain officers, directors, or companies in
which they have 10% or more beneficial ownership, were indebted to the Bank
in the aggregate amount (in thousands) of $11,068 and $8,453, respectively.
Deposits with the Bank from the above related parties amounted (in thou-
sands) to $25,852 and$16,482 at December 31, 1998 and 1997. Below is a
summary of the loan activity for 1998 and 1997 (in thousands):
1998 1997
------- ------
Beginning balance 8,453 10,557
Additional borrowings 6,946 3,686
Repayments of borrowings 4,331 5,790
------- ------
Ending balance 11,068 8,453
======= ======
The Bank is included in a consolidated federal tax return and records its
liability to the parent, when applicable, for the tax benefits arising from
the parent operating loss.
9. COMMITMENTS AND CONTINGENCIES
-----------------------------
There are outstanding commitments and contingent liabilities on which
management does not anticipate losses. They include, among other things,
commitments to extend credit and letters of credit undertaken in the normal
course of business. Outstanding letters of credit (in thousands) amounted to
$2,452 at December 31, 1998 and $933 at December 31, 1997. These
commitments represent off-balance sheet risk to the Bank, with the
contractual notional amount representing the Bank's exposure to credit loss
in the event of nonperformance by the other party to the instruments.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. They
generally have fixed expiration dates and require payment of a fee. Since
many commitments are expected to expire without being drawn upon, the total
commitments do not represent future cash requirements. The Bank evaluates
each customer's credit worthiness on a case-by-case basis, and obtains
an amount of collateral it deems sufficient.
10. TIME DEPOSITS
-------------
Time deposits (in thousands) of $100,000 or more amounted to $35,785 at
December 31, 1998 and $28,507 at December 31, 1997. Maturities (in
thousands) over five years: $18,174 - 1999, $8,552 - 2000, $6,058 - 2001,
$1,782 - 2002, and $356 - 2003, and $863-thereafter.
11. ACQUISITION
-----------
The Bank completed its purchase of three branches of Hibernia National Bank
in Shreveport, Louisiana as of March 24, 1995. Total assets acquired were
approximately $35.4 million, consisting of (in millions) cash $13.7, loans
$20.6 and fixed assets $1.1. Liabilities acquired were approximately $37.5
million consisting of deposits (in millions) of $35.9 and other liabilities
of $1.6. The Bank paid approximately $2.1 million in excess of assets
acquired and this amount was allocated to deposit-based intangibles and is
being amortized over 15 years. Amortization (in thousands) included in the
income statement for 1998, 1997 and 1996 is $143 for each year. The deposit
base intangible net of amortization is included in other assets.
The Bank acquired First Federal Savings Bank (FFSB) in Shreveport,
Louisiana. An agreement was signed on January 23, 1997 to acquire FFSB and
the purchase was completed in May 1997. FFSB had assets of $36.481 million
and liabilities of $33.051 million.
The Bank paid $5,411,200 cash for FFSB and accounted for the transaction as
a purchase. The purchase price was $1,872,531 over book value. The goodwill
is included in other assets and is being amortized over 15 years. Amort-
ization (in thousands) included in the income statement for 1998 and 1997
was $125 and $73.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
Statement of Financial Accounting Standards No. 107, Disclosures About Fair
Value of Financial Instruments (Statement 107), requires that the company
disclose estimated fair values for its financial instruments. Fair-value
estimates, methods, and assumptions are set forth below for its financial
instruments.
a. INVESTMENT SECURITIES
The fair value of investment securities, except certain agency and state
and municipal securities, is estimated based on bid prices published in
financial newspapers or bid quotations received from securities dealers.
The fair value of certain agency and state and municipal securities is
not readily available through market sources other than dealer
quotations, so fair value estimates are based on quoted market prices of
similar instruments, adjusted for differences between the quoted
instruments and the instruments being valued. The carrying value and
estimated fair value of investment securities at December 31, 1998 and
1997, are disclosed in Note 3.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
-----------------------------------------------
b. LOANS
Fair values are estimated for portfolios of loans that have similar
financial characteristics. Loans are segregated by type and maturity.
Each loan category is further segmented into fixed and adjustable rate
interest terms.
The fair value of performing loans is calculated by discounting scheduled
cash flows through the estimated maturity using estimated market discount
rates that reflect the credit and interest rate risk inherent in the
loan. The estimate of maturity is based on the company's historical
experience with repayments for each loan classification, modified, as
required, by an estimate of the effect of current economic and lending
conditions. For purposes of estimating fair value, loans with a remaining
maturity of three months or less and adjustable rate loans are assumed to
be carried at approximate fair value due to repricing at current market
rates.
Fair value for significant nonperforming loans is based on recent
external appraisals. If appraisals are not available, estimated cash
flows are discounted using a rate commensurate with the risk associated
with the estimated cash flows. Assumptions regarding credit risk, cash
flows and discount rates are judgmentally determined using available
market information and specific borrower information. The following
table presents information on loans (in thousands):
1998 1997
------------------ -------------------
Book Estimated Book Estimated
Value Fair Value Fair
(Gross) Value (Gross) Value
------------------ -------------------
Loans 140,320 142,034 136,889 137,352
======== ======== ======== ========
c. DEPOSIT LIABILITIES
Under Statement 107, the fair value of deposits with no stated maturity,
such as noninterest-bearing demand deposits, savings, and interest-
bearing transaction accounts is equal to the amount payable on demand
as of December 31, 1998 and 1997. The fair value of certificates of
deposit is based on the discounted value of contractual cash flows.
The discount rate is estimated using the rates currently offered for
deposits of similar remaining maturities. The following table presents
information on deposits (in thousands):
1998 1997
----------------- -----------------
Estimated Estimated
Book Fair Book Fair
Value Value Value Value
------- ------- ------- -------
Noninterest-bearing demand 47,603 47,603 42,045 42,045
Savings and interest-bearing demand 94,360 94,360 81,275 81,275
Certificates of deposit 138,408 139,244 124,863 126,277
------- ------- ------- -------
280,371 281,207 248,183 249,597
======= ======= ======= =======
d. OTHER CATEGORIES OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and due from banks, federal funds sold,
accrued interest receivable and payable, securities sold under agreements
to repurchase, note payable, and loan commitments approximate fair value
because of the short maturities or periodic repricing of these instru-
ments.
e. LIMITATIONS
Fair value estimates are made at a specific point in time, based on rele-
vant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result
from offering for sale at one time the Company's entire holdings of par-
ticular financial instruments. Because no market exists for a significant
portion of the Company's financial instruments, fair-value estimates are
based on judgments regarding future expected loss experience, current
economic conditions, risk characteristics of various financial instru-
ments, and other factors. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment and therefore
12. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
-----------------------------------------------
cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.
Fair value estimates are based on existing on-and off-balance sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that
are not considered financial instruments.
13. OTHER REAL ESTATE
-----------------
Other real estate owned represents property acquired through foreclosure
or deeded in lieu of foreclosure on loans on which the borrowers have
defaulted as to payment of principal and interest. Amounts are carried at
the lower of cost of acquisition or the asset's fair value less estimated
costs to sell. Reductions in the balance at the date of acquisition are
charged to the allowance for loan losses. Any subsequent write-downs to
reflect current fair value are charged to noninterest expense. There were
no allowances for possible write-downs at December 31, 1998 or 1997. The
Bank implemented FASB Statement No. 114, Accounting by Creditors for
Impairment of a Loan, in 1995. No significant change occurred due to this
pronouncement as impaired loans are deemed immaterial and no specific
reserve is allocated to them.
14. ADVERTISING
-----------
Advertising expense is expensed as incurred. Advertising expense charged
to operations (in thousands) in 1998, 1997 and 1996 amounted to $126, $146
and $63, respectively.
15. YEAR 2000 DISCLOSURES
---------------------
The Bank is subject to regulatory oversight in managing potential problems
related to Year 2000. As a result of interagency guidance set forth by the
Federal Financial Institutions Examination Council, it formulated a plan
incorporating target dates for the completion of tasks related to each of
the major phases inherent in the Year 2000 project: awareness , assessment,
renovation, validation and implemenation. The Bank spent (in thousands)
approximately $500 in 1998 to comply with its Year 2000 plan; it anticipates
(in thousands) an additional $30 will be necessary to complete this project.
As of December 31, 1998, the Bank was on schedule in meeting its target
dates.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information as to the Directors and Executive Officers of the
Registrant is shown under the caption "Information Concerning Directors and
Nominees" on pages 3 through 6 of the Proxy Statement relating to the Annual
meeting of shareholders to be held on April 13, 1999, and is incorporated by
reference to this Report.
ITEM 10. EXECUTIVE COMPENSATION
The information set forth under the caption "Directors Fees" on page 7 of
the Proxy Statements relating to the Annual Meeting of Shareholders to be held
on April 13, 1999, and the information set forth under the caption "Executive
Compensation" on pages 8 and 9 of such Proxy Statement is incorporated by
reference to this Report.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Voting Securities and
Principal Holders Thereof" on pages 2 and 3 of the Proxy Statement relating to
the Annual Meeting of Shareholders to be held on April 13, 1999, is incorporated
by reference to this Report.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Transactions and Relations
with Directors and Associates and Affiliates of Directors" on page 10 of the
Proxy Statement relating to the Annual meeting of Shareholders to be held on
April 13, 1999, is incorporated by reference to this Report.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits listed below, as required by Item 601 of Regulation S-B,
have been filed or are being filed as a part of this Report.
Exhibit
Number Exhibit
3 (i) Articles of Incorporation as amended, of the Registrant, filed
on August 14, 1996, at Exhibit 3(I) to Form 10-QSB for the
quarterly period ended June 30, 1996, is incorporated by
reference
3 (ii) By-Laws of the Registrant filed on May 14, 1996, at Exhibit
3(ii) to Form 10-QSB for the quarterly period ended March 31,
1996, is incorporated by reference
4 (i) The instrument(s) defining the rights of holders of equity
securities of the Registrant are the By-Laws listed at 3(ii)
above.
21 List of Subsidiaries
27 Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
MINDEN BANCSHARES, INC.
(Registrant)
March 26, 1999 Jack E. Byrd, Jr.
Director,
President and Chief
Executive Officer
Pursuant to requirements of the Securities Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated:
Harry E. McInnis, Jr. James D. Madden
Director and Director
Chairman of the Board March 26, 1999
March 26, 1999
S. Douglas Madden
R. Thad Andress Director
Director March 26, 1999
March 26, 1999
John W. Montgomery
Don L. Brice Director
Director March 26, 1999
March 26, 1999
Joe E. Ratcliff
Dr. Edward D. Brown Director
Director March 26, 1999
March 26, 1999
R. E. Woodard, III
Dr. Gary G. Daniel Director
Director March 26, 1999
March 26, 1999
Robert W. Hines, Jr.
Hal K. Jackson Vice President and
Director Chief Financial Officer
March 26, 1999 March 26, 1999
LIST OF SUBSIDIARIES
EXHIBIT 21
Subsidiaries of Minden Bancshares, Inc.
State of
Name Incorporation
Minden Bank & Trust Company Louisiana
Minden Bank & Trust Company, the only subsidiary of Minden Bancshares,
Inc. is a wholly-owned subsidiary.
FINANCIAL DATA SCHEDULE
EXHIBIT 27
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
DECEMBER 31, 1998 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 15,856
<INT-BEARING-DEPOSITS> 3,090
<FED-FUNDS-SOLD> 12,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 132,437
<INVESTMENTS-CARRYING> 18,191
<INVESTMENTS-MARKET> 18,771
<LOANS> 140,320
<ALLOWANCE> 3,392
<TOTAL-ASSETS> 328,375
<DEPOSITS> 280,371
<SHORT-TERM> 0
<LIABILITIES-OTHER> 9,933
<LONG-TERM> 0
0
0
<COMMON> 775
<OTHER-SE> 35,339
<TOTAL-LIABILITIES-AND-EQUITY> 328,375
<INTEREST-LOAN> 13,432
<INTEREST-INVEST> 6,997
<INTEREST-OTHER> 1,477
<INTEREST-TOTAL> 21,906
<INTEREST-DEPOSIT> 9,200
<INTEREST-EXPENSE> 9,716
<INTEREST-INCOME-NET> 12,190
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6,575
<INCOME-PRETAX> 8,307
<INCOME-PRE-EXTRAORDINARY> 5,704
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,704
<EPS-PRIMARY> 20.33
<EPS-DILUTED> 20.33
<YIELD-ACTUAL> 4.34
<LOANS-NON> 85
<LOANS-PAST> 914
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,603
<CHARGE-OFFS> 476
<RECOVERIES> 265
<ALLOWANCE-CLOSE> 3,392
<ALLOWANCE-DOMESTIC> 3,392
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
