SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
------------------------------------
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-25538
TECHE HOLDING COMPANY
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(Exact name of registrant as specified in its charter)
Louisiana 72-128746
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(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
211 Willow Street, Franklin, Louisiana 70538
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (318) 828-3212
-----------------------------
N/A
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Former name, former address and former fiscal year,
if changed since last report.
Indicate by check x/ 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 July 31, 1998 .
Class Outstanding
- --------------------------- ----------------
$.01 par value common stock 3,438,880 shares
<PAGE>
TECHE HOLDING COMPANY
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1998
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 6
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Materially Important Events 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES
<PAGE>
TECHE HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
At At
June 30, September 30,
1998 1997*
------------------ ---------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents.................................................... $ 9,705 $ 5,868
Certificates of deposit...................................................... 654 634
Securities available-for-sale, at estimated
market value (amortized cost of $38,880 and $37,297)....................... 39,581 37,854
Loans receivable, net of allowance for loan losses
of $3,466 and $3,355)...................................................... 348,929 346,875
Accrued interest receivable.................................................. 2,027 2,051
Investment in Federal Home Loan Bank stock, at cost.......................... 3,826 3,927
Real estate owned, net....................................................... 51 33
Prepaid expenses and other assets............................................ 450 501
Premises and equipment, at cost less accumulated depreciation................ 7,203 6,354
------- -------
TOTAL ASSETS........................................................... $412,426 $404,097
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits..................................................................... $282,996 $280,302
Advances from Federal Home Loan Bank......................................... 68,643 65,398
Advance payments by borrowers for taxes and insurance........................ 1,466 1,742
Accrued interest payable..................................................... 508 309
Accounts payable and other liabilities....................................... 891 1,123
Deferred Income Taxes........................................................ 842 864
-------- ---------
Total liabilities...................................................... 355,346 349,738
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, 5,000,000 shares authorized;
none issued.............................................................. -- --
Common stock, $.01 par value, 10,000,000 shares
authorized; 4,232,000 shares issued...................................... 42 42
Additional paid in capital................................................. 41,947 41,642
Retained earnings.......................................................... 28,261 26,536
Unearned ESOP shares....................................................... (2,169) (2,419)
Unearned Compensation (MSP)................................................ (907) (1,258)
Treasury stock - 795,000 shares, at cost................................... (10,552) (10,552)
Unrealized gain on securities available-for-sale, net of
deferred income taxes.................................................... 458 368
------- -------
Total stockholders' equity............................................. 57,080 54,359
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
CAPITAL............................................................ $412,426 $404,097
======= =======
</TABLE>
- ---------------------
* The consolidated balance sheet at September 30, 1997 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)
<TABLE>
<CAPTION>
For Three Months For Nine Months
Ended June 30, Ended June 30,
-------------------------------------- -----------------------------
1998 1997 1998 1997
------------------ ----------------- -------------- ------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans..................... $6,917 $6,682 $ 20,604 $19,654
Interest and dividends on investments.......... 135 265 446 815
Interest on mortgage-backed securities......... 527 494 1,575 1,546
Other interest income.......................... 51 45 140 111
------- ------ ------- ------
7,630 7,486 22,765 22,126
------ ------ ------ ------
INTEREST EXPENSE:
Deposits....................................... 3,185 3,334 9,699 9,644
Advances from Federal Home Loan Bank........... 935 865 2,866 2,703
------- ------ ------ ------
4,120 4,199 12,565 12,347
------ ------ ------ ------
NET INTEREST INCOME.............................. 3,510 3,287 10,200 9,779
PROVISION FOR LOAN LOSSES........................ 45 60 135 180
------- ------ ------- ------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES................................ 3,465 3,227 10,065 9,599
------ ------ ------- ------
NON-INTEREST INCOME:
Service charges and other...................... 763 586 2,170 1,646
Gain on sale of real estate owned.............. -- 12 13 21
Other income................................... 96 51 323 148
------- ----- ------- ------
TOTAL NON-INTEREST INCOME........................ 859 649 2,506 1,815
------- ----- ------ ------
GAIN ON SALE OF SECURITIES....................... 54 3 104 270
------- ----- ------- ------
NON-INTEREST EXPENSE:
Compensation and employee benefits............. 1,385 1,321 4,150 3,712
Occupancy expense.............................. 633 466 1,705 1,321
Marketing and professional..................... 197 171 557 573
Other operating expenses....................... 571 537 1,750 1,630
------- ------ ------ ------
Total non-interest expense................. 2,786 2,495 8,162 7,236
------- ------ ------ ------
INCOME BEFORE INCOME TAXES....................... 1,592 1,384 4,513 4,448
------- ------ ------ ------
INCOME TAXES..................................... 578 473 1,590 1,511
------- ------ ------ ------
NET INCOME....................................... $ 1,014 $ 911 $ 2,923 $ 2,937
======= ====== ====== ======
BASIC EARNINGS PER COMMON SHARE.................. $ .33 $ .30 $ .94 $ .96
======= ==== ====== ====
DILUTED EARNINGS PER
COMMON SHARE................................... $ 0.31 $ .29 $ .89 $ .94
====== ==== ====== ====
DIVIDENDS DECLARED PER COMMON SHARE.............. $ .125 $.125 $ .375 $.375
====== ==== ===== ====
</TABLE>
See notes to unaudited consolidated financial statements.
2
<PAGE>
TECHE HOLDING COMPANY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
For the Nine Months
Ended June 30,
-------------------------
1998 1997
------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ..................................................................... $ 2,923 $ 2,937
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses.................................................... 135 180
(Gain) on sale of securities................................................. (104) (270)
Depreciation................................................................. 466 339
Accretion of deferred loan fees and other.................................... (65) (77)
Accretion of discounts on loans.............................................. (176) (114)
Payment of SAIF Special Assessment........................................... -- (1,824)
Other items - net............................................................ 765 1,134
----- ------
Net cash provided by operating activities................................ 3,944 2,305
----- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities available for sale............................. (12,471) (5,071)
Proceeds from maturities of investment securities available for sale............. 3,000 2,050
Principal repayments on mortgage-backed securities available
for sale....................................................................... 7,632 5,799
Loans originated, net of repayments.............................................. (1,948) (25,559)
Decrease (increase) in investment in FHLB stock.................................. 101 (165)
Purchase of premises and equipment............................................... (1,315) (1,921)
Sales of investment securities available for sale................................ 437 857
------ ------
Net cash used in investing activities........................................ (4,564) (24,010)
------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits......................................................... 2,694 23,823
Net increase in FHLB advances.................................................... 3,245 3,574
Net decrease in advance payments by borrowers for
taxes and insurance............................................................ (276) (307)
Dividends paid................................................................... (1,198) (1,185)
Purchase of common stock for treasury............................................ -- (1,398)
----- ------
Net cash provided by financing activities.................................... 4,465 24,507
------ ------
NET INCREASE (DECREASE) IN CASH.................................................... 3,845 2,802
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..................................... 5,860 7,072
------ ------
CASH AND CASH EQUIVALENTS, END OF YEAR............................................. $ 9,705 $ 9,874
====== ======
</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 and nine
month periods ended June 30, 1998 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 periods ended June 30, 1998 and 1997 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
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting No. 128, "Earnings Per Share."
This Statement simplifies the standards for computing income per common
share previously required under APB Opinion No. 15, "Earnings Per
Share." Basic income per common share (EPS) excludes dilution and is
computed by dividing net income by the weighted-average number of
common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the net
income of the Company. Diluted EPS is computed by dividing net income
by the total of the weighted-average number of shares outstanding plus
the effect of outstanding options and MSP stock grants. SFAS No. 128 is
effective for the periods in the year ended September 30, 1998, and
requires restatement of all prior period EPS data. Following is a
summary of the information used in the computation of basic and diluted
income per common share for the three and nine months ended June 30,
1998 and 1997.
4
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
---------------------------------- ---------------------------------
1998 1997 1998 1997
---------------- --------------- --------------- ---------------
(In thousands)
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding - used in computation
of basic earnings per common share................. 3,119 3,053 3,107 3,059
Effective of dilutive securities:
Stock options...................................... 134 90 146 45
MSP stock grants................................... 39 34 34 18
Weighted average number of common
shares outstanding plus effect of dilutive
securities - used in computation of diluted ------- ------- ------- -------
earnings per common share.......................... 3,292 3,177 3,287 3,122
======= ======= ======= =======
</TABLE>
NOTE 4 - RECENT ACCOUNTING PRONOUNCEMENTS
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities. The FASB issued SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" (SFAS No. 125) and SFAS No. 127,
"Deferral of the Effective Date of Certain Provisions of FASB Statement
No. 125" (SFAS No. 127) in June and December 1997, respectively. SFAS
No. 125 provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities. It
requires entities to recognize servicing assets and liabilities for all
contracts to service financial assets, unless the assets are
securitized and all servicing is retained. The servicing assets will be
measured initially at fair value, and will be amortized over the
estimated useful lives of the servicing assets. In addition, the
impairment of servicing assets will be recognized through a valuation
allowance. SFAS No. 125 also addresses the accounting and reporting
standards for securities lending, dollar-rolls, repurchase agreements
and similar transactions. The Company has prospectively adopted SFAS
No. 125 on January 1, 1998. However, in accordance with SFAS No. 127,
the Company will defer adoption of the standard as it relates to
securities lending, dollar-rolls, repurchase agreements and similar
transactions until January 1, 1998. The Company does not expect the
adoption of SFAS No. 125 to have a material impact on its consolidated
financial statements.
Reporting Comprehensive Income. In June 1997, the FASB issued SFAS No.
130, Reporting Comprehensive Income (SFAS 130). SFAS 130, which is
effective for fiscal years beginning after December 15, 1997,
establishes standards for reporting and display of comprehensive income
and its components in a full set of general-purpose financial
statements. Comprehensive income represents the change in equity of a
business enterprise during a period from transactions and other events
from nonowner sources. Comprehensive income is comprised of net income
and other comprehensive income. SFAS 130 does not change the
classifications currently comprising net income. Other comprehensive
income is classified into foreign currency items, minimum pension
liability adjustments and unrealized gains and losses on certain
investments in debt and equity securities. All components of
comprehensive income shall be reported in the period in which they are
recognized and be displayed in the financial statements. The total of
other comprehensive income for a period shall be transferred to a
component of equity on a
5
<PAGE>
separate line-item. As such, net unrealized gain (loss) on securities
available-for-sale will become a component of other comprehensive
income upon implementation of SFAS 130. The Company will adopt SFAS 130
by no later than the first quarter of the year ended September 30,
1999.
Disclosure About Segments of Enterprise. In June 1997, the FASB issued
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information (SFAS 131). This Statement establishes standards relating
to public business enterprises' reporting of information about
operating segments in financial reports issued to shareholders. It also
established standards for related disclosures about products and
services, geographic areas, and major customers. This Statement is
effective for financial statements for periods beginning after December
15, 1997. In the initial year of application, comparative information
for earlier years is to be restated. This Statement need not be applied
to interim financial statements in the initial year of application.
SFAS 131 is not expected to change the reporting requirements of the
Company.
6
<PAGE>
TECHE HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
GENERAL
The Company's total assets at June 30, 1998 and September 30, 1997 totaled
$412.4 million and $404.1 million, respectively, an increase of 2.1%, primarily
due to increases in cash and cash equivalents.
Securities available-for-sale totaled $39.6 million at June 30, 1998, which
represents an increase of $1.7 million or 4.6% as compared to September 30, 1997
as the Company used excess liquidity to purchase additional securities.
Loans receivable, net of the allowance for loan losses, remained relatively
stable, increasing $2.1 million or .6%.
Total deposits, after interest credited, at June 30, 1998 were $283.0 million
which represents an increase of approximately 1% as compared to September 30,
1997.
Advances from the Federal Home Loan Bank of Dallas increased $3.2 million or
5.0% due primarily to the purchase of mortgage backed securities coupled with a
decline in deposits.
Stockholders' equity increased $2.7 million or 5.0% from September 30, 1997 to
June 30, 1998, primarily as a result of net income offset somewhat by the
payment of dividends.
MARKET RISK
Net interest income, the primary component of the Bank's net income, is derived
from the difference between the yield on interest-earning assets and the cost of
interest-bearing liabilities. The Bank has sought to manage its exposure to
changes in interest rates by monitoring the effective maturities of repricing
characteristics of interest-earning assets and interest-bearing liabilities. The
matching of the Bank's assets and liabilities may be analyzed by examining the
extent to which its assets and liabilities are interest rate sensitive and by
monitoring the expected effects of interest rate changes on its net interest
income and net portfolio value.
The ability to maximize net income is largely dependent upon achieving a
positive interest rate spread that can be sustained during fluctuations in
prevailing interest rates. The Bank is exposed to interest rate risk as a result
of the difference in the maturity of interest-bearing liabilities and
interest-earning assets and the volatility of interest rates. Since most deposit
accounts react more quickly to market interest rate movements than do
traditional mortgage loans because of their shorter terms to maturity, increases
in interest rates may have an adverse effect on the Bank's earnings. Conversely,
this same mismatch will generally benefit the Bank's earnings during periods of
declining of stable interest rates.
The Company attempts to manage its interest rate exposure by shortening the
maturities of its interest-earning assets by emphasizing adjustable rate
mortgages ("ARMS"), originating shorter term loans such as residential
construction and consumer loans and the investment of excess liquidity in
purchased loans, adjustable rate mortgage-backed securities and other securities
which relatively short terms to maturity. Furthermore, the Company works to
manage the interest rates it pays on deposits while maintaining a stable deposit
base and providing quality services to its customers. In recent years, the Bank
has increased its short-term borrowings while continuing to rely primarily upon
deposits as its source of funds. At June 30, 1998, the weighted average term to
repricing of the Company's ARM loan and
7
<PAGE>
mortgage-backed securities portfolio was approximately 26 months. In contrast,
$55.2 million of the Bank's certificate accounts and $72.4 million of the Bank's
regular deposit accounts (e.g. NOW, money market, savings) out of $282.9 million
of total deposits mature or reprice within one year or less. Based on past
experience, however, management believes that much of the Bank's deposits will
remain at the Bank. Furthermore, the Bank has approximately $37.6 million in
short-term borrowings and $14.2 million in adjustable rate mortgage-backed
securities and $4.4 million in short-term government securities.
Management believes that it has adequate capital to accept a certain degree of
interest rate risk. In accepting some interest rate risk, the Bank was able to
increase its net interest income in a low interest rate environment that existed
during the earlier years. Should interest rates rise, management believes the
Bank's capital position will enable it to withstand such a negative impact on
earnings while the Bank adds higher yielding assets.
COMPARISON OF EARNINGS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 1998 AND
1997
Net Income. The Company had net income of $1.0 million and $2.9 million for the
three and nine months ended June 30, 1998 as compared to net income of $911,000
and $2.9 million for the three and nine month periods ended June 30, 1997,
respectively. The increase during the three month period was due primarily to
increased net interest margin. The decrease during the nine month period was due
primarily to a greater gain on the sale of securities in 1997 due to greater
activity. Earnings, before the gain on the sale of equity securities ("core
earnings") for the three and nine months ended June 30, 1998 remained relatively
stable, totaling $979,000 and $2.9 million, respectively.
Total Interest Income. Total interest income increased by $144,000 or 1.9% and
639,000 or 2.9% for the three and nine months ended June 30, 1998, respectively,
as compared to the same periods ending June 30, 1997 due primarily to an
increase in the average balances of the loans. The average yield on loans
decreased to 7.85% for the nine months ended June 30, 1998 from 7.87% in 1997.
This decrease was offset somewhat by an increase in interest and/or dividends
earned on mortgage-backed and investment securities available for sale.
Total Interest Expense. Total interest expense remained relatively stable for
the three and nine month periods. The slight decrease during the three month
period was due to lower rates paid on deposits and advances, offset somewhat by
increased average balances. The slight increase in the nine month period was
primarily due to an increase in the average balance of advances.
Net Interest Income. Net interest income increased 6.8% and 4.3% for the three
and nine month periods ended June 30, 1998 as compared to the same periods ended
June 30, 1997.
Provision for Loan Losses. The provision for loan losses decreased $15,000 and
$45,000 for the three month and nine month periods.
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.
8
<PAGE>
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 during both periods
primarily due to an increase in service fee income associated with increased
demand account volume.
Non-interest Expense. Total non-interest expense increased both periods due
primarily to increases in total compensation resulting from the ESOP and other
factors, including improvements to facilities and equipment. Such increases
were offset somewhat by decreased deposit insurance costs.
Gain on Sale of Securities. The Company experienced gains of $54,000 and
$104,000 on the sale of securities during the three and nine months ended June
30, 1998 compared to gains of $3,000 and $270,000 during the same periods ended
June 30, 1997. The decreases during the nine month period in fiscal 1998 were
due to reduction in the sales by the Company of its equity securities holdings.
Income Tax Expense. Income taxes increased during the periods primarily due to
an increase in income before income taxes.
YEAR 2000
The Bank has a year 2000 committee that is addressing potential year 2000
("Y2K") issues with its internal an external computer systems. The committee has
assessed the Bank's automated systems and has contacted third party vendors to
provide appropriate assurances regarding their ability to address any Y2K
issues.
Most of the critical data processing of the Bank is provided by a third party
national service bureau. The Bank was selected by and is currently assisting the
service bureau in its internal core system testing which will continue through
December of 1998. During this period the Bank expects to test its internal
systems with that of the service bureau for comparability in live environment.
The Bank continues to evaluate appropriate courses of action and currently does
not expect additional expenses to have a material effect on its financial
position and results of operations. However, factors outside of the Bank's
control and unexpected service bureau problems, if any, could impact the Bank's
ability to process data and could have a significant adverse impact on the
financial condition and results of operations of the Bank.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Under current Office of Thrift Supervision ("OTS") regulations, the Bank
maintains certain levels of capital. On June 30, 1998, the Bank was in
compliance with its three regulatory capital requirements as follows:
Amount Percent
------ -------
(In thousands)
Tangible capital............................. $52,106 12.76%
Tangible capital requirement................. 16,337 4.00
------ ----
Excess over requirement...................... $35,769 8.76%
====== ====
Core capital................................. $52,106 12.76%
Core capital requirement..................... 16,337 4.00
------ ----
Excess over requirement...................... $35,769 8.76%
====== ====
Risk based capital........................... $54,869 24.88%
Risk based capital requirement............... 17,645 8.00
------ ----
Excess over requirement...................... $37,224 16.88%
====== =====
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 June 30, 1998, such borrowed funds totaled $68.6 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 investment. Current regulations
require the Bank to maintain liquid assets of not less than 4% of its net
withdrawable accounts plus short term borrowings. This level 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.
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
10
<PAGE>
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
<TABLE>
<CAPTION>
At or For the Three Months At or For Nine Months
Ended Ended
June 30, June 30,
------------------------ -------------------------
1998(1) 1997(1) 1998(1) 1997(1)
------- ------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C>
Basic Earnings per Common Share:
Before Gain on Sale of Securities...... $0.31 $0.30 $0.92 $0.90
After Gain on Sale of Securities....... $0.33 $0.30 $0.94 $0.96
Diluted Earnings per Common Share:
Before Gain on Sale of Securities...... $0.30 0.28 $0.87 $0.88
After Gain on Sale of Securities....... $0.31 0.28 $0.89 $0.94
Annualized Return on Avg. Assets:
Before Gain on Sale of Securities...... 0.96% .93% 0.94% 0.95%
After Gain on Sale of Securities....... 1.00% .93% 0.96% 1.01%
Annualized Return on Avg. Equity:
Before Gain on Sale of Securities...... 6.90% 6.88% 6.82% 7.04%
After Gain on Sale of Securities....... 7.15% 6.89% 6.99% 7.49%
Net Interest Margin...................... 3.55% 3.43% 3.44% 3.43%
Other Expenses/Average Assets........... 2.74% 2.55% 2.68% 2.68%
Other Income/Average Assets.............. 0.84% 0.66% 0.82% 0.62%
</TABLE>
- -----------------
(1) Annualized where appropriate.
Selected Financial Data
June 30, 1998 September 30, 1997
----------------- ---------------------
Ratio of Equity to Assets.............. 13.8% 13.5%
Book Value per Common Share............ $16.60 $15.81
Non-performing Assets/Total
Assets................................. 0.27% 0.28%
11
<PAGE>
TECHE HOLDING COMPANY AND SUBSIDIARIES
PART II
ITEM 1. LEGAL PROCEEDINGS
Neither the Company nor the Bank was engaged in any legal proceeding
of a material nature at June 30, 1998. From time to time, the Company
is a party to routine legal proceedings in the ordinary course of
business, such as claims to enforce liens, condemnation proceedings on
properties in which the Company holds security interests, claims
involving the making and servicing of real property loans, and other
issues incident to the business of the Company. There were no lawsuits
pending or known to be contemplated against the Company at June 30,
1998 that would have a material effect on the operations or income of
the Company or the Bank, taken as a whole.
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
On June 25, 1998, the Company announced that it adopted a plan to
repurchase up to 10% or 343,800 shares of the Company's common stock.
The repurchases are expected to be made in open-market transactions
ending by June 17, 2000. The repurchases are subject to the
availability of stock, market conditions, the trading price of the
stock and the Company's financial performance. Such repurchased shares
will become treasury shares and will be utilized for general corporate
and other purposes, including the issuances of shares in connection
with the exercise of stock options.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
<S> <C>
(a) Exhibits
3.1 Articles of Incorporation of Teche Holding Company*
3.2 Bylaws of Teche Holding Company*
4.0 Stock Certificate of Teche Holding Company*
10.1 Form of Teche Federal Savings Bank Management Stock Plan**
10.2 Form of Teche Holding Company 1995 Stock Option Plan**
11.0 Statement regarding computation of earnings per share (see Note 3 to the Notes to
Unaudited Consolidated Financial Statements included herein)
27.0 Financial Data Schedule***
</TABLE>
12
<PAGE>
b) Reports on Form 8-K
None.
- ------------------
* Incorporated herein by reference into this document from the Exhibits to
Form S-1, Registration Statement, initially filed with the Commission on
December 16, 1994, Registration No. 33- 87486.
** Incorporated herein by reference into this document from the Exhibits to
the Registrant's Form 10-K for the fiscal year ended September 30, 1995,
filed with the Commission.
*** Only in electronic filing.
13
<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: August 14, 1998 By: /s/ Patrick O. Little
------------------------------------------
Patrick O. Little
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 14, 1998 By: /s/ J. L. Chauvin
------------------------------------------
J. L. Chauvin
Vice President and Chief Financial Officer
(Principal Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION DERIVED FROM THE
QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 9,705
<INT-BEARING-DEPOSITS> 654
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 39,581
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 352,395
<ALLOWANCE> 3,466
<TOTAL-ASSETS> 412,426
<DEPOSITS> 282,996
<SHORT-TERM> 37,640
<LIABILITIES-OTHER> 3,707
<LONG-TERM> 31,003
0
0
<COMMON> 42
<OTHER-SE> 57,038
<TOTAL-LIABILITIES-AND-EQUITY> 412,426
<INTEREST-LOAN> 20,604
<INTEREST-INVEST> 2,021
<INTEREST-OTHER> 140
<INTEREST-TOTAL> 22,765
<INTEREST-DEPOSIT> 9,699
<INTEREST-EXPENSE> 12,565
<INTEREST-INCOME-NET> 10,200
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<EXPENSE-OTHER> 8,162
<INCOME-PRETAX> 4,513
<INCOME-PRE-EXTRAORDINARY> 4,513
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,923
<EPS-PRIMARY> .94
<EPS-DILUTED> .89
<YIELD-ACTUAL> 2.65
<LOANS-NON> 701
<LOANS-PAST> 0
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<ALLOWANCE-OPEN> 3,414
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</TABLE>
