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 December 31, 1997
-------------------------------------------------
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
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TECHE HOLDING COMPANY
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Louisiana 72-128746
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(State or other jurisdiction (I.R.S. employer identification no.)
of 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 February 11, 1998.
-----------------
Class Outstanding
- --------------------------- ----------------
$.01 par value common stock 3,437,530 shares
<PAGE>
TECHE HOLDING COMPANY
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1997
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,
1997 1997
------------- -------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents.................................................... $ 8,074 $ 5,868
Certificates of deposit...................................................... 635 634
Securities available-for-sale, at estimated
market value (amortized cost of $39,922 and $37,297)....................... 40,590 37,854
Loans receivable, net of allowance for loan losses
of $3,384 and $3,355)...................................................... 346,264 346,875
Accrued interest receivable.................................................. 1,999 2,051
Investment in Federal Home Loan Bank stock, at cost.......................... 3,986 3,927
Real estate owned, net....................................................... 41 33
Prepaid expenses and other assets............................................ 393 501
Premises and equipment, at cost less accumulated depreciation................ 6,609 6,354
------- -------
TOTAL ASSETS........................................................... $408,591 $404,097
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits..................................................................... $278,229 $280,302
Advances from Federal Home Loan Bank......................................... 71,917 65,398
Advance payments by borrowers for taxes and insurance........................ 1,122 1,742
Accrued interest payable..................................................... 435 309
Accounts payable and other liabilities....................................... 748 1,123
Deferred income taxes........................................................ 832 864
-------- ---------
Total liabilities...................................................... 353,283 349,738
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................................................. 41,804 41,642
Retained earnings.......................................................... 27,050 26,536
Unearned ESOP shares....................................................... (2,336) (2,419)
Unearned Compensation (MSP)................................................ (1,141) (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.................................................... 441 368
------- -------
Total stockholders' equity............................................. 55,308 54,359
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
CAPITAL............................................................ $408,591 $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
December 31,
--------------------------
1997 1996
---- ----
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans.................................... $6,810 $6,444
Interest and dividends on investments......................... 185 276
Interest on mortgage-backed securities........................ 506 552
Other interest income......................................... 40 35
----- -----
7,541 7,307
----- -----
INTEREST EXPENSE:
Deposits...................................................... 3,377 3,163
Advances from Federal Home Loan Bank.......................... 908 915
----- -----
4,285 4,078
----- -----
NET INTEREST INCOME............................................. 3,256 3,229
PROVISION FOR LOAN LOSSES....................................... 45 60
----- -----
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES............................................... 3,211 3,169
----- -----
NON-INTEREST INCOME:
Service charges and other..................................... 713 467
Gain on sale of real estate owned............................ 0 1
Other income.................................................. 123 79
----- -----
TOTAL NON-INTEREST INCOME....................................... 836 547
----- -----
GAIN ON SALE OF SECURITIES...................................... 7 3
----- -----
NON-INTEREST EXPENSE:
Compensation and employee benefits............................ 1,383 1,166
Occupancy expense............................................. 533 399
Marketing and professional.................................... 160 207
Other operating expenses...................................... 574 609
----- -----
Total non-interest expense................................ 2,650 2,381
----- -----
INCOME BEFORE INCOME TAXES...................................... 1,404 1,338
----- -----
INCOME TAXES.................................................... 491 455
----- -----
NET INCOME...................................................... $ 913 $ 883
===== =====
BASIC INCOME PER COMMON SHARE AND
COMMON SHARES EQUIVALENT SINCE CONVERSION..................... $0.30 $0.29
==== ====
DILUTED INCOME PER COMMON SHARE AND
COMMON SHARE EQUIVALENT ...................................... $0.28 $0.29
==== ====
DIVIDENDS DECLARED PER COMMON SHARE $0.125 $0.125
===== =====
</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 Three Months
Ended December 31,
---------------------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ..................................................................... $ 913 $ 883
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............................................. (52) (51)
Provision for loan losses.................................................... 45 60
(Gain) on sale of securities................................................. (7) (3)
Depreciation................................................................. 149 103
Accretion of deferred loan fees and other.................................... (28) (25)
Accretion of discounts on loans.............................................. (25) (37)
Payment of SAIF Special Assessment........................................... -- (1,824)
Other items - net............................................................ 190 (18)
----- ------
Net cash provided by (used in) operating activities...................... 1,185 (912)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities available for sale............................. (7,145) (22)
Proceeds from maturities of investment securities available for sale............. 3,000 --
Principal repayments of mortgage-backed securities available for sale............ 1,550 2,073
Net loan repayments (originations)............................................... 619 (13,334)
Investment in FHLB stock......................................................... (59) (55)
Proceeds from sale of real estate owned.......................................... -- 15
Purchase of premises and equipment............................................... (404) (145)
Sales of investment securities available for sale................................ 29 21
------ ------
Net cash used in investing activities........................................ (2,410) (11,447)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits.............................................. (2,073) 9,634
Net increase in FHLB advances.................................................... 6,519 3,328
Net decrease in advance payments by borrowers for
taxes and insurance............................................................ (620) (492)
Dividends paid................................................................... (395) (395)
Purchase of common stock for treasury............................................ -- (1,398)
------ ------
Net cash provided by financing activities.................................... 3,431 10,677
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NET INCREASE (DECREASE) IN CASH.................................................... 2,206 (1,682)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..................................... 5,868 7,072
------ ------
CASH AND CASH EQUIVALENTS, END OF YEAR............................................. $ 8,074 $ 5,390
====== ======
</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, 1997 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, 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 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 quarter ended December 31,
1997, and required 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 months ended December 31,
1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
------------------ -----------------
<S> <C> <C>
Weighted average number of common
shares outstanding - used in computation
of basic income per common share................... 3,091,475 3,077,902
Effective of dilutive securities:
Stock options...................................... 155,875 -
MSP stock grants................................... 39,187 6,958
---------- ----------
Weighted average number of common
shares outstanding plus effect of dilutive
securities - used in computation of diluted
net income per common share........................ 3,286,537 3,084,860
========= =========
</TABLE>
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, 1997 and September 30, 1997
totaled $408.6 million and $404.1 million, respectively, an increase $4.5
million or 1.1%.
Securities available-for-sale totaled $40.6 million at December 31, 1997, which
represents an increase of $2.7 million or 7.2% as compared to September 30,
1997.
Loans receivable remained relatively stable, totalling $349.6 million at
December 31, 1997.
Total deposits, after interest credited, at December 31, 1997 were $278.2
million which represents an decrease of $2.1 million or .70% as compared to
September 30, 1997.
Advances increased $6.5 million or 10.0% due to the purchase of securities
coupled with a reduction in deposits.
Stockholders' equity increased to $55.3 million at December 31, 1997, from $54.4
million at September 30, 1997, primarily as a result of earnings for the
quarter.
COMPARISON OF EARNINGS FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND
1996
Net Income. The Corporation had net income of $913,000 for the three months
ended December 31, 1997 as compared to net income of $883,000 for the three
month period ended December 31, 1996. Earnings for the three months ended
December 31, 1997 represent an increase of $30,000 compared to 1996. This
increase was primarily due to increased fee income which was offset somewhat by
increases in expenses.
Total Interest Income. Total interest income increased by $234,000 or 3.2% to
$7.5 million for the three months ended December 31, 1997, from $7.3 million for
the three months ended December 31, 1996 due primarily to an increase in the
average balances of the loans offset somewhat by a decrease in the average
balance of the securities portfolios. Interest income on loans increased
$366,000 or 5.7% to $6.8 million for the period ended December 31, 1997 from
$6.4 million for the period ended December 31, 1996. The average yield on loans
decreased to 7.79% for the three months ended December 31, 1997 from 7.93% for
the same period in 1996, and the average yield on investment and mortgage-backed
securities decreased to 6.57% for December 1997 from 6.98% for 1996.
Total Interest Expense. Total interest expense increased to $4.3 million at
December 31, 1997 from $4.1 million for the December 1996 period, due primarily
to an increase in the average balance of interest-bearing deposits.
Net Interest Income. Net interest income remained relatively stable, increasing
$28,000 for the three month period ended December 31, 1997 as compared to the
same period ended December 31, 1996.
5
<PAGE>
Provision for Loan Losses. The provision for loan losses decreased to $45,000
for the three month period ended December 31, 1997, as compared to $60,000 for
the same period ended December 31, 1996.
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 ^$289,000 from
$547,000 in the three month period ended December 31, 1996 to $836,000 in the
three month period ended December 31, 1997. 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 $268,000 over the
periods compared. This increase can be mainly attributed to increases in total
compensation resulting from the ESOP and other factors, and increased occupancy
expenses.
Gain on Sale of Securities. The Company experienced a $4,000 gain on the sale of
securities during the three months ended December 31, 1997 compared to a gain of
$3,000 during the same period ended December 31, 1996.
Income Tax Expense. Income taxes increased from $455,000 in 1996 to $491,000 in
1997 primarily due to an increase 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, 1997, the Bank was in
compliance with its three regulatory capital requirements as follows:
Amount Percent
------ -------
(In thousands)
Tangible capital....................... $49,724 12.2%
Tangible capital requirement........... 6,104 1.5
------ ----
Excess over requirement................ $43,620 10.7%
====== ====
Core capital........................... $49,724 12.2%
Core capital requirement............... 12,207 3.0
------ ----
Excess over requirement................ $37,517 9.2%
====== ====
Risk based capital..................... $52,556 22.8%
Risk based capital requirement......... 18,474 8.0
------ ----
Excess over requirement................ $34,082 14.8%
====== =====
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, 1997, such borrowed funds totaled $71.9
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 4% of its net
withdrawable accounts plus short term borrowings. 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,
--------------------------
1997(1) 1996(1)
------- -------
(Unaudited)
Return on average assets................. 0.90% 0.92%
Return on average equity................. 6.67 6.80
Average interest rate spread............. 2.45 2.64
Nonperforming assets to total assets..... 0.39 0.17
Nonperforming loans to total loans....... 0.45 0.20
Average net interest margin.............. 3.28 3.43
Tangible book value per share............ $16.09 $15.02
- ---------------
(1) Annualized where appropriate.
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, 1997. 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>
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 23, 1998 By: /s/Patrick O. Little
--------------------------------------
Patrick O. Little
President and Chief Executive Officer
(Principal Executive Officer)
Date: February 23, 1998 By: /s/J. L. Chauvin
--------------------------------------
J. L. Chauvin
Senior Vice President and
Chief Financial Officer
(Principal Financial 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> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1997
<CASH> 8,074
<INT-BEARING-DEPOSITS> 635
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 40,590
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 349,648
<ALLOWANCE> 3,384
<TOTAL-ASSETS> 408,591
<DEPOSITS> 278,229
<SHORT-TERM> 47,544
<LIABILITIES-OTHER> 3,137
<LONG-TERM> 24,373
0
0
<COMMON> 42
<OTHER-SE> 55,266
<TOTAL-LIABILITIES-AND-EQUITY> 408,591
<INTEREST-LOAN> 6,810
<INTEREST-INVEST> 692
<INTEREST-OTHER> 40
<INTEREST-TOTAL> 7,542
<INTEREST-DEPOSIT> 3,377
<INTEREST-EXPENSE> 4,285
<INTEREST-INCOME-NET> 3,257
<LOAN-LOSSES> 45
<SECURITIES-GAINS> 7
<EXPENSE-OTHER> 2,650
<INCOME-PRETAX> 1,404
<INCOME-PRE-EXTRAORDINARY> 1,404
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 913
<EPS-PRIMARY> .30<F1>
<EPS-DILUTED> .28
<YIELD-ACTUAL> 2.45
<LOANS-NON> 1,539
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,355
<CHARGE-OFFS> 22
<RECOVERIES> 6
<ALLOWANCE-CLOSE> 3,384
<ALLOWANCE-DOMESTIC> 3,384
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1> BASIC EARNINGS PER SHARE
</FN>
</TABLE>
