SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
----------------------------------------
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________________ to ____________________
Commission file number 0-25538
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TECHE HOLDING COMPANY
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Louisiana 72-128746
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
211 Willow Street, Franklin, Louisiana 70538
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (318) 828-3212
-----------------
N/A
- -------------------------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date February 1, 1997 .
------------------
Class Outstanding
- ---------------------------- --------------------
$.01 par value common stock 3,437,530 shares
<PAGE>
TECHE HOLDING COMPANY
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1996
INDEX
Page
Number
------
PART I - CONSOLIDATED FINANCIAL INFORMATION OF TECHE
HOLDING COMPANY
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of Financial 5
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Materially Important Events 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES
<PAGE>
TECHE HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, September 30,
1996 1996
----------- -------------
(unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents ........................................ $ 5,390 $ 7,072
Certificates of deposit .......................................... 915 914
Securities available-for-sale, at estimated
market value (amortized cost of $41,901 and $43,960) ........... 42,449 44,496
Loans receivable, net of allowance for loan losses
of $3,235 and $3,182) .......................................... 329,552 316,216
Accrued interest receivable ...................................... 1,962 1,868
Investment in Federal Home Loan Bank stock, at cost .............. 3,758 3,703
Real estate owned, net ........................................... 31 46
Prepaid expenses and other assets ................................ 319 783
Premises and equipment, at cost less accumulated depreciation..... 4,534 4,492
--------- ---------
TOTAL ASSETS ............................................... $ 388,910 $ 379,590
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits ......................................................... $ 264,357 $ 254,723
Advances from Federal Home Loan Bank ............................. 70,228 66,900
Advance payments by borrowers for taxes and insurance ............ 1,431 1,923
Accrued interest payable ......................................... 283 283
Accounts payable and other liabilities ........................... 1,004 1,655
SAIF special assessment .......................................... -- 1,824
--------- ---------
Total liabilities .......................................... 337,303 327,308
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 10,000,000 shares
authorized; 4,232,000 shares issued .......................... 42 42
Preferred stock, 5,000,000 shares authorized;
none issued .................................................. -- --
Additional paid in capital ..................................... 41,466 41,436
Retained earnings .............................................. 24,738 24,250
Unearned ESOP shares ........................................... (2,668) (2,751)
Unearned Compensation (MSP) .................................... (1,786) (1,900)
Treasury stock - 795,000 and 691,000 shares, at cost ........... (10,547) (9,149)
Unrealized gain on securities available-for-sale, net of
deferred income taxes ........................................ 362 354
--------- ---------
Total stockholders' equity ................................. 51,607 52,282
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
CAPITAL ................................................... $ 388,910 $ 379,590
========= =========
</TABLE>
- ---------------------
* The consolidated balance sheet at September 30, 1996 has been taken from
the audited balance sheet at that date.
See notes to unaudited consolidated financial statements.
1
<PAGE>
TECHE HOLDING COMPANY
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
For Three Months
December 31,
------------------
1996 1995
------- -------
INTEREST INCOME
Interest and fees on loans................ $6,444 $5,294
Interest and dividends on investments..... 276 440
Interest on mortgage-backed securities.... 552 446
Other interest income..................... 35 30
------ ------
7,307 6,210
INTEREST EXPENSE:
Deposits.................................. 3,163 2,919
Advances from Federal Home Loan Bank...... 915 316
------ ------
4,078 3,235
NET INTEREST INCOME......................... 3,229 2,975
PROVISION FOR LOAN LOSSES................... 60 75
------ ------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES........................... 3,169 2,900
------ ------
NON-INTEREST INCOME:
Service charges and other................. 467 300
Gain on sale of real estate owned......... 1 1
Other income.............................. 79 87
------ ------
TOTAL NON-INTEREST INCOME................... 547 388
------ ------
GAIN ON SALE OF SECURITIES.................. 3 69
------ ------
NON-INTEREST EXPENSE:
Compensation and employee benefits........ 1,166 1,007
Occupancy expense......................... 399 350
Marketing and professional................ 207 137
Other operating expenses.................. 609 475
------ ------
Total non-interest expense............ 2,381 1,969
------ ------
INCOME BEFORE INCOME TAXES.................. 1,338 1,388
------ ------
INCOME TAXES................................ 455 478
------ ------
NET INCOME.................................. $ 883 $ 910
====== ======
EARNINGS PER COMMON SHARE $ 0.27 0.23
====== ====
DIVIDENDS DECLARED PER COMMON SHARE $0.125 0.125
====== =====
See notes to unaudited consolidated financial statements.
2
<PAGE>
TECHE HOLDING COMPANY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
For the Three Months
Ended December 31,
---------------------
1996 1995
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income ......................................................... $ 883 $ 910
Adjustments to reconcile net income to net cash provided by
operating activities:
Accretion of discount and amortization of premium on investments
and mortgage-backed securities ............................... (51) (203)
Provision for loan losses ...................................... 60 75
(Gain) on sale of securities ................................... (3) (69)
Depreciation ................................................... 103 88
Accretion of deferred loan fees and other ...................... (25) (32)
Accretion of discounts on loans ................................ (37) (28)
Payment of SAIF Special Assessment ............................. (1,824) --
Other items - net .............................................. (18) (35)
Net cash provided by (used in) operating activities......... (912) 706
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities available for sale ............... (22) --
Purchase of mortgage-backed securities available for sale .......... -- --
Purchase of mortgage-backed securities held to maturity ............ -- (220)
Purchase of investment securities held to maturity
Principal repayments on mortgage-backed securities available
for sale ......................................................... 2,073 471
Principal payments on mortgage-backed securities held to maturity... 1,966
Loans originated, net of repayments ................................ (13,334) (7,449)
Investment in FHLB stock ........................................... (55) (44)
Proceeds from sale of real estate owned ............................ 15 17
Purchase of premises and equipment ................................. (145) (146)
Sales of investment securities available for sale .................. 21 489
-------- --------
Net cash used in investing activities .......................... (11,447) (4,916)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits ........................................... 9,634 5,527
Net increase in FHLB advances ...................................... 3,328 300
Net decrease in advance payments by borrowers for
taxes and insurance .............................................. (492) (351)
Dividends paid ..................................................... (395) (487)
Repurchase of common stock for MSP ................................. -- (1,473)
Purchase of common stock for treasury .............................. (1,398) --
-------- --------
Net cash provided by financing activities ...................... 10,667 3,516
-------- --------
NET DECREASE IN CASH ................................................. (1,682) (694)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ....................... 7,072 6,400
-------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR ............................... $ 5,390 $ 5,706
======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
3
<PAGE>
TECHE HOLDING COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - PRINCIPLES OF CONSOLIDATION
The consolidated financial statements as of and for the three month period
ended December 31, 1996 include the accounts of Teche Holding Company (the
"Corporation") and its subsidiary, Teche Federal Savings Bank (the
"Bank"). The Corporation's business is conducted principally through the
Bank. All significant intercompany accounts and transactions have been
eliminated in consolidation.
NOTE 2 - BASIS OF PRESENTATION
The accompanying consolidated financial statements were prepared in
accordance with instructions for Form 10-Q and, therefore, do not include
all information necessary for a complete presentation of consolidated
financial condition, results of operations, and cash flows in conformity
with generally accepted accounting principles. However, all adjustments,
consisting of normal recurring accruals, which, in the opinion of
management, are necessary for a fair presentation of the consolidated
financial statements have been included. The results of operations for the
period ended December 31, 1996 are not necessarily indicative of the
results which may be expected for the entire fiscal year or any other
period.
NOTE 3 - EARNINGS PER SHARE
Earnings per share for the three month periods ended December 31, 1996 and
1995 are calculated by dividing the net earnings for the periods by the
average shares outstanding of 3,221,000 and 3,928,000 shares for the three
months ended December 31, 1996 and 1995, respectively.
NOTE 4 - SECURITIES RECLASSIFICATION
On November 15, 1995, the Financial Accounting Standards Board issued
implementation guidance with respect to SFAS No. 115 "Accounting for
Certain Investments in Debt and Equity Securities." This guidance allowed
a company to reassess its designation of securities as held-to- maturity
and, if deemed appropriate, make a one time reclassification of
held-to-maturity securities between November 15, 1995 and December 31,
1995. During this period, the Bank reclassified mortgage-backed and
investment securities with an amortized cost of $42.0 million and a net
unrealized gain of $1,018,000 ($672,000 net of income taxes) from
securities held-to- maturity to securities available-for-sale.
NOTE 5 - RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 126 "Accounting for Transfers and servicing of
Financial Assets and Extinguishments of Liabilities" which provides
revised accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities. The Corporation does
not anticipate that the adoption of this statement in 1997 will have a
significant effect on its financial condition or results of operations.
4
<PAGE>
TECHE HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
GENERAL
The Corporation's total assets at December 31, 1996 and September 30, 1996
totaled $388.9 million and $379.6 million, respectively, an increase $9.3
million or 2.45%.
Securities available-for-sale totaled $42.4 million at December 31, 1996, which
represents a slight decrease of $2.0 million or 4.60% as compared to September
30, 1996.
Loans receivable increased $13.3 million or 4.22% due to loan origination.
Total deposits, after interest credited, at December 31, 1996 were $264.4
million which represents an increase of $9.6 million or 3.78% as compared to
September 30, 1996.
Stockholders' equity decreased slightly to $51.6 million at December 31, 1996,
from $52.3 million at September 30, 1996, primarily as a result of the purchase
of common stock by the Corporation pursuant to its stock repurchase program
offset by net income.
Advances increased $3.3 million or 5.0% due to increased lending needs.
COMPARISON OF EARNINGS FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND
1995
Net Income. The Corporation had net income of $883,000 for the three months
ended December 31, 1996 as compared to net income of $910,000 for the three
month period ended December 31, 1995. Earnings for the three months ended
December 31, 1996 represent a decrease of $27,000 compared to 1995. This
decrease was primarily due to increased non-interest expenses offset somewhat by
increases in both net interest income and non-interest income.
Total Interest Income. Total interest income increased by $1,097,000 or 17.7% to
$7.3 million for the three months ended December 31, 1996, from $6.2 million for
the three months ended December 31, 1995 due primarily to an increase in both
the average balances of the loans and mortgage-backed securities portfolios.
Interest income on loans increased $1.15 million or 21.72% to $6.4 million for
the period ended December 31, 1996 from $5.3 million for the period ended
December 31, 1995. The average yield on loans decreased to 7.93% for December
1996 from 8.11% for 1995, while the average yield on investment and
mortgage-backed securities increased to 6.98% for December 1996 from 6.89% for
1995.
Total Interest Expense. Total interest expense increased to $4.1 million at
December 31, 1996 from $3.2 million for the December 1995 period, due to an
increase in market rates of interest and average balances and an increase in the
average balance of advances.
Net Interest Income. Net interest income remained relatively stable, increasing
$254,000 for the three month period ended December 31, 1996 as compared to the
same period ended December 31, 1995.
5
<PAGE>
Provision for Loan Losses. The provision for loan losses decreased to $60,000
for the three month period ended December 31, 1996, as compared to $75,000 for
the same period ended December 31, 1995.
Management periodically estimates the likely level of losses to determine
whether the allowance for loan losses is adequate to absorb possible losses in
the existing portfolio. Based on these estimates, an amount is charged or
credited to the provision for loan losses and credited or charged to the
allowance for loan losses in order to adjust the allowance to a level determined
to be adequate to absorb anticipated future losses.
Management's judgment as to the level of losses on existing loans involves the
consideration of current and anticipated economic conditions and their potential
effects on specific borrowers, an evaluation of the existing relationships among
loans, known and inherent risks in the loan portfolio and the present level of
the allowance, results of examination of the loan portfolio by regulatory
agencies and management's internal review of the loan portfolio. In determining
the collectibility of certain loans, management also considers the fair value of
any underlying collateral.
Non-interest Income. Total non-interest income increased by $159,000 from
$388,000 in the three month period ended December 31, 1995 to $547,000 in the
three month period ended December 31, 1996. This increase is due primarily to
the increase of service fee income associated with increased demand account
volume.
Non-interest Expense. Total non-interest expense increased by $412,000 over the
periods compared. This increase can be mainly attributed to increases in total
compensation resulting from the ESOP and other factors, including continued
growth, and marketing fees for new products offered by the Bank, and stationary,
supplies, postage and other operating expenses.
Gain (Loss) on Sale of Securities. The Company experienced a $3,000 gain on the
sale of securities during the three months ended December 31, 1996 compared to a
gain of $69,000 during the same period ended December 31, 1995.
Income Tax Expense. Income taxes decreased from $478,000 in 1995 to $455,000 in
1996 primarily due to an decrease in income before income taxes.
6
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Under current Office of Thrift Supervision ("OTS") regulations, the Bank
maintains certain levels of capital. On December 31, 1996, the Bank was in
compliance with its three regulatory capital requirements as follows:
Amount Percent
------ -------
(In thousands)
Tangible capital..................... $44,405 11.4%
Tangible capital requirement......... 5,829 1.5
------ ----
Excess over requirement.............. $38,576 9.9%
====== ====
Core capital......................... $44,405 11.4%
Core capital requirement............. 11,659 3.0
------ ----
Excess over requirement.............. $32,746 8.4%
====== ====
Risk based capital................... $46,881 22.1%
Risk based capital requirement....... 16,936 8.0
------ ----
Excess over requirement.............. $29,945 14.1%
====== ====
Management believes that under current regulations, the Bank will continue
to meet its minimum capital requirements in the foreseeable future. Events
beyond the control of the Bank, such as increased interest rates or a downturn
in the economy in areas in which the Bank operates could adversely affect future
earnings and as a result, the ability of the Bank to meet its future minimum
capital requirements.
The Bank's liquidity is a measure of its ability to fund loans, pay
withdrawals of deposits, and other cash outflows in an efficient, cost effective
manner. The Bank's primary source of funds are deposits and scheduled
amortization and prepayment of loan and mortgage-backed principal. During the
past several years, the Bank has used such funds primarily to fund maturing time
deposits, pay savings withdrawals, fund lending commitments, purchase new
investments, and increase liquidity. Historically, the Bank was able to fund its
operations internally but has recently borrowed funds from the Federal Home Loan
Bank of Dallas. As of December 31, 1996, such borrowed funds totaled $70.2
million. Loan payments, maturing investments and mortgage-backed security
prepayments are greatly influenced by general interest rates, economic
conditions and competition.
The Bank is required under federal regulations to maintain certain
specified levels of "liquid investments," which include certain United States
government obligations and other approved investments. Current regulations
require the Bank to maintain liquid assets of not less than 5% of its net
withdrawable accounts plus short term borrowings. Short term liquid assets must
consist of not less than 1% of such accounts and borrowings, which amount is
also included within the 5% requirement. Those levels may be changed from time
to time by the regulators to reflect current economic conditions. The Bank has
maintained liquidity in excess of regulatory requirements. Furthermore, from
time to time, the Bank utilizes FHLB advances to the extent necessary to
maintain its liquidity.
7
<PAGE>
Impact of Inflation
The consolidated financial statements of the Corporation and notes
thereto, presented elsewhere herein, have been prepared in accordance with GAAP,
which require the measurement of financial position and operating results in
terms of historical dollars without considering the change in the relative
purchasing power of money over time due to inflation. The impact of inflation is
reflected in the increased cost of the Corporation's operations. Unlike most
industrial companies, nearly all the assets and liabilities of the Corporation
are financial. As a result, interest rates have a greater impact on the
Corporation's performance than do the effects of general levels of inflation.
Interest rates do not necessarily move in the same direction or to the same
extent as the prices of goods and services.
Additional Key Operating Ratios
At or For the Three
Months Ended
December 31,
----------------------
1996(1) 1995(1)
(Unaudited)
Return on average assets................. 0.92% 1.12%
Return on average equity................. 6.80% 5.89%
Average interest rate spread............. 2.64% 2.87%
Nonperforming assets to total assets..... 0.17% 0.35%
Nonperforming loans to total loans....... 0.20% 0.42%
Average net interest margin.............. 3.43% 3.76%
Tangible book value per share............ $15.02 $14.59
8
<PAGE>
TECHE HOLDING COMPANY AND SUBSIDIARIES
PART II
ITEM 1. LEGAL PROCEEDINGS
Neither the Corporation nor the Bank was engaged in any legal
proceeding of a material nature at December 31, 1996. From time to
time, the Corporation is a party to legal proceedings in the
ordinary course of business wherein it enforces its security
interest in loans.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER MATERIALLY IMPORTANT EVENTS
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule (in electronic filing only)
(b) Reports on Form 8-K
None.
9
<PAGE>
TECHE HOLDING COMPANY AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TECHE HOLDING COMPANY
Date: February 14, 1997 By: /s/Patrick O. Little, Jr.
-------------------------
Patrick O. Little, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
Date: February 14, 1997 By: /s/J. L. Chauvin
--------------------------
J. L. Chauvin
Senior Vice President and
Chief Financial Officer
(Principal Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 5,390
<INT-BEARING-DEPOSITS> 915
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 44,496
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 332,787
<ALLOWANCE> 3,235
<TOTAL-ASSETS> 388,910
<DEPOSITS> 264,357
<SHORT-TERM> 70,228
<LIABILITIES-OTHER> 2,718
<LONG-TERM> 0
0
0
<COMMON> 42
<OTHER-SE> 51,565
<TOTAL-LIABILITIES-AND-EQUITY> 388,910
<INTEREST-LOAN> 6,444
<INTEREST-INVEST> 828
<INTEREST-OTHER> 35
<INTEREST-TOTAL> 7,307
<INTEREST-DEPOSIT> 3,163
<INTEREST-EXPENSE> 4,078
<INTEREST-INCOME-NET> 3,229
<LOAN-LOSSES> 60
<SECURITIES-GAINS> 3
<EXPENSE-OTHER> 2,381
<INCOME-PRETAX> 455
<INCOME-PRE-EXTRAORDINARY> 883
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 883
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
<YIELD-ACTUAL> 3.43
<LOANS-NON> 271
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,182
<CHARGE-OFFS> 8
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 3,235
<ALLOWANCE-DOMESTIC> 3,235
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
