U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31,
1998
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
TO
Commission file number 000-21658
MINDEN BANCSHARES, INC.
(Exact name of small business issuer as specified in its charter)
Louisiana 72-0980704
(State or other jurisdiction of (IRS Employer Identification No.)
Incorporation or organization)
401 Main Street, Minden, Louisiana 71055
(Address of principal executive offices)
(318) 377-4283
(Issuer's telephone number)
Check whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act of 1934 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 ( )
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
280,661 as of April 30, 1998
Transitional Small Business Disclosure Format (Check one):
Yes ( ) No (X)
Page 1 of 25 Pages
Exhibit Index - Page 22
FORM 10-QSB
INDEX
PART I Page
Item 1. Financial Statements - Minden Bancshares,
Inc. and Subsidiary
Consolidated Balance Sheets as of
March 31, 1998 and December 31, 1997 4
Consolidated Statements of Income for
the Three Months Ended March 31, 1998
and 1997 5
Consolidated Statements of Comprehensive
Income for the Three Months Ended
March 31, 1998, and March 31, 1997 6
Consolidated Statements of Cash Flows
for the Three Months ended March 31,
1998, and 1997 7
Notes to Consolidated Financial
Statements 8-9
Item 2. Management's Discussion and Analysis 10-22
PART II
Item 6. Exhibits and Reports on Form 8-K 23
PART I - Financial Information
------------------------------
ITEM 1. FINANCIAL STATEMENTS
MINDEN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
March December
1998 1997
-------- --------
ASSETS
- ----------------------------------------- (in thousands, except per share data)
Cash and Cash Equivalents:
Cash and Due From Banks $16,403 $17,196
Federal Funds Sold 11,000 4,500
-------- ----------
Total 27,403 21,696
-------- ----------
Securities:
Held to Maturity 17,025 16,502
Available for Sale 102,190 108,414
--------- ----------
Total 119,215 124,916
--------- ----------
Federal Reserve Bank and Federal Home Loan Bank Stock 1,494 1,400
Loans, Less Allowance for Loan Losses of $3,576 and $3,603 137,353 133,286
Accrued Interest Receivable 2,683 2,642
Bank Premises and Equipment 3,633 3,662
Real Estate Owned Other Than Bank Premises 378 278
Other Assets 3,995 4,198
--------- ----------
Total Assets $296,154 $292,078
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------
Liabilities:
- -----------
Deposits:
Interest Bearing $209,441 $206,138
Noninterest Bearing 42,612 42,045
--------- ----------
Total Deposits 252,053 248,183
Securities Sold Under Repurchase Agreement 9,396 10,809
Accrued Interest Payable 945 986
Other Liabilities 509 414
--------- ----------
Total Liabilities 262,903 260,392
--------- ----------
Stockholders' Equity:
- --------------------
Common Stock, par value $2.50 per share; 500,000
shares authorized; 309,816 shares issued;
280,511 and 280,549 shares outstanding 775 775
Additional Paid-In Capital 11,205 11,205
Undivided Profits 22,085 20,737
Accumulated Other Comprehensive Income 486 269
Treasury Stock-At Cost (1,300) (1,300)
--------- ----------
Total Stockholders' Equity 33,251 31,686
--------- ----------
Total Liabilities and Stockholders' Equity $296,154 $292,078
========= ==========
See accompanying notes.
MINDEN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
1998 1997
-------- --------
Interest Income: (in thousands, except per share data)
- ---------------
Interest and Fees on Loans $3,249 $2,767
Securities:
Held to Maturity (non-taxable) 211 185
Available for Sale 1,484 1,257
Federal Funds Sold 217 224
Federal Reserve Stock and Other 19 17
Interest-Bearing Balances with Banks 83 26
-------- --------
Total Interest Income 5,263 4,476
-------- --------
Interest Expense:
- ----------------
Savings and Interest-Bearing Demand Deposits 584 557
Time Deposits 1,622 1,287
Securities Sold Under Repurchase Agreement and Other 118 68
-------- --------
Total Interest Expense 2,324 1,912
-------- --------
Net Interest Income 2,939 2,564
Provision for Loan Losses 0 0
-------- --------
Net Interest Income After Provision for Loan Losses 2,939 2,564
-------- --------
Other Income:
- ------------
Service Charges 382 392
Trust Department Fees 0 2
Other Operating Income 221 159
-------- --------
Total Other Income 603 553
-------- --------
Operating Expenses:
- ------------------
Salaries and Employee Benefits 819 708
Occupancy Expense 106 94
Furniture and Equipment Expense 74 64
Amortization 78 40
Capital Stock Taxes 106 81
Stationery, Supplies and Printing 61 39
Other Operating Expenses 331 328
-------- --------
Total Operating Expense 1,575 1,354
-------- --------
Income Before Income Taxes 1,967 1,763
Income Taxes 619 549
-------- --------
Net Income $1,348 $1,214
======== ========
Earnings Per Share $4.81 $4.33
======== ========
Dividends Declared Per Share $0.00 $0.00
======== ========
See accompanying notes.
MINDEN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
1998 1997
-------- --------
(in thousands, except per share data)
Net Income $1,348 $1,214
-------- --------
Other Comprehensive Income:
Unrealized Gains (Losses) on Securities:
Unrealized Gains (Losses) Arising during Period 328 (440)
Less: Reclassification Adjustment for Gains
Arising during Period 0 0
-------- --------
Total Gains (Losses) Arising during Period 328 (440)
Tax (Expense) Benefit (111) 149
-------- --------
Other Comprehensive Income 217 (291)
-------- --------
Comprehensive Income $1,565 $923
======== ========
See accompanying notes
MINDEN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
1998 1997
--------- ---------
Cash Flows from Operating Activities: (in thousands, except per share data)
- ------------------------------------
Net Income $1,348 $1,214
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 142 96
(Gain) Loss on Sale of Other Real Estate Owned (13) 0
(Increase) Decrease in Accrued Interest Receivable (41) (214)
(Increase) Decrease in Other Assets 14 (3)
Increase (Decrease) in Accrued Interest Payable (41) (3)
Increase (Decrease) in Other Liabilities 95 784
--------- ---------
Total Adjustments 156 660
--------- ---------
Net Cash Provided (Used) by Operating Activities 1,504 1,874
--------- ---------
Cash Flows from Investing Activities:
- ------------------------------------
Proceeds from Sales/Maturities of Investment Securities:
Available for sale 26,403 21,164
Held to maturity 347 339
Purchase of Investment Securities:
Available for sale (19,945) (19,048)
Held to maturity (870) (266)
Proceeds from Sale of Other Real Estate Owned 67 0
Purchase of Equipment (35) (35)
Net (Increase) Decrease in Loans (4,221) (5,222)
--------- ---------
Net Cash (Used) by Investing Activities 1,746 (3,068)
--------- ---------
Cash Flows from Financing Activities:
- ------------------------------------
Dividends Paid 0 0
Net Increase (Decrease) in Noninterest Bearing Deposits 567 (622)
Net Increase (Decrease) in Interest-Bearing Deposits 3,303 1,330
Net Increase (Decrease) in Securities Sold Under
Repurchase Agreements (1,413) 1,491
Purchase of Treasury Stock 0 0
--------- ---------
Net Cash Provided by Financing Activities 2,457 2,199
--------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents 5,707 1,005
Cash and Cash Equivalents at Beginning of Period 21,696 23,407
--------- ---------
Cash and Cash Equivalents at End of Period $27,403 $24,412
========= =========
Cash Payments: Interest $2,366 $1,915
========= =========
Income Taxes $600 $0
========= =========
See accompanying notes.
MINDEN BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 1998
1. Basis of Presentation
The unaudited interim consolidated financial statements of Minden
Bancshares, Inc. and subsidiary are prepared in accordance with generally
accepted accounting principles for interim financial information.
On May 21, 1997, Minden Bank & Trust Company ("Minden Bank"), wholly
owned subsidiary of Minden Bancshares, Inc. ("the Company"),acquired all of
the outstanding shares of First Federal Savings Bank ("First Federal")in
Shreveport, Louisiana, and merged it into itself. First Federal's
stockholders' equity was $3,539,000 on the date of acquisition and Minden Bank
paid $5,411,000 resulting in $1,872,000 of goodwill being recorded. The
acquisition was recorded under the "Purchase Method" and the entries recording
the purchase are summarized as follows:
ASSETS ACQUIRED ($Thousands)
Cash and due from banks $ 2,931
Investment securities-AFS 17,622
Net loans 14,487
Facilities and equipment 232
Other assets 17
Goodwill 1,872
--------
Total Assets 37,161
========
LIABILITIES ACQUIRED
Non-interest bearing deposits 148
Interest bearing deposits 31,505
--------
Total Deposits 31,653
Other liabilities 97
--------
Total Liabilities 31,750
--------
Net Cash Payment $ 5,411
========
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the financial
position and the results of operations for the interim periods presented have
been included.
2. Statement of Cash Flows
For purposes of the Consolidated Statements of Cash Flows, the Company
has defined cash equivalents as those amounts included in the balance sheets
captions Cash and due from banks and Federal funds sold. Cash flows from
loans and deposits of the Company's bank subsidiary are reported on a net
basis.
3. Investment Securities
The specific identification method is used to determine realized gains
and losses on sales of investment securities which is included in other
operating income.
Debt securities available for sale are carried at fair market value by
means of valuation account in accordance with SFAS 115. At March 31, 1998,
the fair market value of securities available for sale was $736,000 more than
amortized cost and at December 31, 1997, the fair market value was $408,000
more than amortized cost.
Debt securities held to maturity are carried at cost, adjusted for the
amortization of premiums and accretion of discount. The amortized cost and
estimated market value of securities held to maturity at March 31, 1998, and
December 31, 1997, are as follows:
Securities Held to Maturity
---------------------------
Gross Gross Estimated
Book Unrealized Unrealized Market
Value Gains Losses Value
-------- ---------- ---------- --------
March 31, 1998 $17,025 474 34 $17,465
December 31, 1997 16,502 441 2 16,941
4. Accumulated Other Comprehensive Income
Three Months Ended Three Months Ended
March 31, 1998 March 31, 1997
----------------------- -----------------------
Accumulated Accumulated
Unrealized Other Unrealized Other
Gains (Losses) Comprehensive Gains (Losses) Comprehensive
on Securities Income on Securities Income
-------- --------- -------- -------
Beginning Balance $269 $269 $75 $75
Current-period Change 217 217 (291) (291)
-------- --------- -------- --------
Ending Balance $486 $486 ($216) ($216)
======== ========= ======== ========
5. Earnings per Common Share
The earnings per common share are computed by dividing the net income for
the interim periods by the weighted average number of common shares outstanding.
The weighted average number of shares outstanding in the first quarters, 1998,
and 1997, were 280,511 and 280,549 respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
MINDEN BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
QUARTERLY CONSOLIDATED INCOME SUMMARY
AND SELECTED FINANCIAL DATA
(in thousands, except per share and ratio data)
Three Months Ended
---------------------------------
March 31 December 31 March 31
1998 1997 1997
--------- ----------- ---------
Interest income $5,263 $5,333 $4,476
Interest expense 2,324 2,347 1,912
--------- ----------- ---------
Net interest income 2,939 2,986 2,564
Provision for possible loan losses 0 0 0
--------- ----------- ---------
Net interest income after provision 2,939 2,986 2,564
Noninterest income 603 598 553
Noninterest expense 1,575 1,713 1,354
--------- ----------- ---------
Income before taxes 1,967 1,871 1,763
Income tax expense 619 584 549
--------- ----------- ---------
Net Income $1,348 $1,287 $1,214
========= =========== =========
Earnings per share <F1> $4.81 $4.59 $4.33
Dividends declared per share $0.00 $3.25 $0.00
Average shares outstanding 280.5 280.5 280.5
Book value per share $118.54 $112.96 $101.44
Selected Quarter End Balances:
Loans $140,929 $136,889 $120,533
Deposits 252,053 248,183 216,701
Debt 9,396 10,809 6,999
Equity 33,251 31,686 28,459
Total Assets 296,154 292,078 253,935
Selected Average Balances:
Loans $138,006 $136,381 $116,766
Deposits 249,023 251,360 216,399
Debt 10,688 8,925 6,182
Equity 32,434 31,472 28,121
Total Assets 293,647 294,278 252,074
Selected Ratios (%)
Return on average assets 1.86% 1.74% 1.95%
Return on average equity 16.86% 16.22% 17.51%
Net interest margin (taxable equivalent) 4.45% 4.46% 4.54%
Tier 1 risk-based capital 20.32% 19.90% 22.11%
Total risk-based capital 21.59% 21.17% 23.38%
Leverage 10.11% 9.59% 10.71%
<F1> Earnings per share is based on the weighted average number of shares
outstanding in the respective period
OVERVIEW
The Company's first quarter 1998 net income totaled $1,348 thousand,
($4.81 per share) up 11 percent from $1,214 thousand ($4.33 per share) in the
first quarter, 1997 and up 5 percent from $1,287 thousand ($4.59 per share) in
the fourth quarter, 1997.
The return on average assets was 1.86 percent for the first quarter, 1998,
down 5 percent from the first quarter, 1997 of 1.95 percent and up 7 percent
from the fourth quarter, 1997 of 1.74 percent.
The return on average equity was 16.86 percent for the first quarter, 1998,
a decrease of 4 percent from the first quarter, 1997 of 17.51 percent and a 4
percent increase from the fourth quarter, 1997 of 16.22 percent.
The 1998 first quarter earnings benefited from an 15 percent increase in
net interest income and a 9 percent increase in other income and was detrimented
by a 16 percent increase in noninterest expense when compared to the 1997 first
quarter. The 1998 first quarter earnings were detrimented by a 2 percent
decrease in net interest income and benefited from a 1 percent increase in
noninterest income and an 8 percent decrease in noninterest expense when
compared to the 1997 fourth quarter.
Total assets at March 31, 1998 increased to $296,154 thousand, up 17
percent from a year ago and up 1 percent from December 31, 1997.
RESULTS OF OPERATIONS
NET INTEREST INCOME First Fourth First
Quarter Quarter Quarter
1998 1997 1997
(in thousands) ========= ========= =========
Total Interest Income $5,263 $5,333 $4,476
Total Interest Expense 2,324 2,347 1,912
--------- --------- ---------
Net Interest Income 2,939 2,986 2,564
Taxable-Equivalent Adjustment
to Interest Income 81 78 73
--------- --------- ---------
Net Interest Income-
Taxable Equivalent Basis <F2> $3,020 $3,064 $2,637
========= ========= =========
AVERAGE BALANCES (in thousands):
Interest-Earning Assets <F3> $275,000 $273,657 $235,440
========= ========= =========
Interest-Bearing Liabilities $218,185 $215,498 $185,114
Interest-Free Funds 56,815 58,159 50,326
--------- --------- ---------
Total Investable Funds $275,000 $273,657 $235,440
========= ========= =========
AVERAGE INTEREST RATES (fully taxable): <F2>
Yield On:
Interest-Earning Assets <F3> 7.88% 7.84% 7.84%
Interest-Bearing Liabilities 4.32% 4.33% 4.19%
--------- --------- ---------
Spread on Interest-Bearing Funds 3.56% 3.51% 3.65%
Contribution of Interest-Free Funds 0.89% 0.93% 0.89%
--------- --------- ---------
Net Yield on Interest-Earning Assets 4.45% 4.44% 4.54%
========= ========= =========
<F2> Reflects an adjustment to the net interest income amount included in the
Statement of Income to permit comparisons of yields on tax-exempt and
taxable assets.
<F3> Based upon amortized cost of all investment securities. Adjustments to
fair market value for available for sale investment securities amounted
to averages of a positive $268 thousand for the first quarter, 1998,
as compared to a positive $44 thousand for the first quarter, 1997, and
a positive $407 thousand for the fourth quarter of 1997.
Net Interest Income
The Company's net interest income for the 1998 first quarter was $2,939
thousand, an increase of $375 thousand or 15% over $2,564 thousand in the 1997
first quarter, and a decrease of $47 thousand or 2 percent from $2,986 thousand
in the fourth quarter, 1997. Interest Income for the first quarter, 1998,
increased $787 thousand or 18 percent over the first quarter, 1997, and
decreased $70 thousand or 1 percent from the fourth quarter, 1997. Interest
expense for the first quarter, 1998, increased $412 thousand or 22 percent over
the first quarter, 1997, and decreased $23 thousand or 1 percent from the fourth
quarter, 1997.
Of the $787 thousand increase in interest income in the first quarter,
1998, over the same period last year, $482 thousand was in interest income on
loans and $253 thousand was in interest income on investment securities. The
Youree Drive Branch, formerly First Federal Savings Bank, which was acquired on
May 21, 1997, recorded $313 thousand of interest income on loans in the first
quarter, 1998, with the balance of interest income on loans being derived from
increased loan growth. The increase in interest income on investment securities
is due primarily to growth as the result of the First Federal Savings Bank
acquisition.
Average Interest-Earning Assets
Average interest-earning assets were $275,000 thousand for the 1998 first
quarter, $39,560 thousand more than the 1997 first quarter of $235,440 thousand.
Average loans increased by $21,240 thousand, average investment securities
increased by $15,421 thousand (at amortized cost), and interest bearing balances
with banks increased by $3,136 thousand during the first quarter, 1998 over the
first quarter, 1997 while the average Federal funds sold decreased by $433
thousand. Of the $39,560 thousand increase in average earning assets during the
first quarter, 1998 over 1997, approximately 62 percent is attributable to the
First Federal acquisition with the balance from continued overall growth.
Average Interest-Bearing Liabilities
Average interest-bearing liabilities for the 1998 first quarter were
$218,185 thousand, compared to $185,114 thousand for the same period last year.
Average time deposits for the 1998 first quarter were $125,066 thousand, an
increase of $24,815 thousand over the same period last year and average savings
and interest-bearing demand deposits for the 1998 first quarter were $82,430
thousand, an increase of $3,749 thousand over the same period last year.
Average securities sold under agreements to repurchase averaged $10,688 thousand
during the first quarter, 1998, an increase of $4,596 thousand over the first
quarter, 1997.
Net Yield on Interest-Earning Assets
The net yield on interest-earning assets was 4.45% in the first quarter of
1998, a decrease of 9 basis points from 4.54% in the same period last year. The
major contributing factor has been the acquisition of First Federal Savings Bank
which had a smaller net interest margin than Minden Bank due to the high ratio
of time deposits to total deposits.
Management expects that the net yield on earning assets will remain
constant or increase slightly during the balance of 1998.
PROVISION FOR LOAN LOSSES
The Company made no provision for loan losses in the 1998 first quarter or
the 1997 first quarter. Management does not anticipate any provision for loan
losses during 1998. A discussion of the Company's loan portfolio, net charge-
off and recoveries, and allowance for loan losses appears on pages 13-16.
OTHER INCOME
Three Months Ended
--------------------------------
March 31, December 31, March 31,
1998 1997 1997
(in thousands) ========= ============ =========
Service Charges $382 $428 $392
Trust Fees 0 0 2
Insurance Commissions 49 53 77
Mortgage Loan Origination and
Service Release Fees 37 52 0
Other Operating Income 135 65 82
------ ------ ------
Total Other Income $603 $598 $553
====== ====== ======
Other income for the 1998 first quarter was $603 thousand, up from $553
thousand for the same period last year, and up from $598 thousand for the
fourth quarter, 1997. The increase in service charges are the result of
increased fees for banking services along with volume increases.
OPERATING EXPENSES
Three Months Ended
--------------------------------
March 31, December 31, March 31,
1998 1997 1997
(in thousands) ========= ============= ========
Salaries and Employee Benefits $819 $810 $708
Occupancy Expense 106 159 94
Furniture and Equipment Expense 74 79 64
Amortization 78 90 40
Capital Stock Tax 106 97 81
Stationery, Supplies and Printing 61 82 39
Other Operating Expenses 331 396 328
------- ------- -------
Total Operating Expenses $1,575 $1,713 $1,354
======= ======= =======
Operating expenses for the 1998 first quarter were $1,575 thousand, up from
$1,354 thousand in the 1997 first quarter, and down from $1,713 thousand in the
fourth quarter, 1997.
Salaries and employee benefits in the 1998 first quarter were $819
thousand, compared to $708 thousand in the same period last year and $810
thousand in the fourth quarter, 1997. The increase over the first quarter last
year was due primarily to the First Federal acquisition and the increase over
the fourth quarter, 1997 is the result of salary increases.
Occupancy expense for the 1998 first quarter was $106 thousand as compared
to $94 thousand for the same period last year and $159 thousand for the fourth
quarter, 1997. The increase in occupancy expense in the first quarter, 1998
over 1997 is due to the First Federal acquisition. The decrease from the fourth
quarter, 1997 is due to nonrecurring building repairs completed in the 1997
fourth quarter.
Other operating expenses were $331 thousand for the 1998 first quarter as
compared to $328 thousand for the same period last year and $396 thousand in the
fourth quarter, 1997.
Capital stock tax, which is the assessment on shareholders equity under the
advalorem tax program in the state of Louisiana, increases as earnings increase
and stockholders' equity increases with accumulated earnings.
The fourth quarter, 1997 stationery, supplies and printing amount reflects
major orders of forms for the upcoming year.
INCOME TAXES
In the 1998 first quarter, the Company recorded income tax expense of $619
thousand, compared to $549 thousand for the same period last year.
The effective tax rate was 31.5% for the 1998 first quarter and 31.1% for
the 1997 first quarter. The effective tax rates in 1998 and 1997 reflect
change in composition of the Company's pre-tax income, primarily tax-exempt
income and nondeductible goodwill amortization in 1998.
RECENT ACCOUNTING PRONOUNCEMENTS
In June of 1997, the Financial Accounting Standards Board (FASB) issued
SFAS 130,Reporting Comprehensive Income, effective for fiscal years beginning
after December 15, 1997. SFAS 130 discusses how to report and display compre-
dhensive income and its components. Comprehensive income is defined as "the
change in equity [net assets] of a business enterprise during a period from
transactions and other events and circumstances from non owner sources. It
includes all changes in equity during a period except those resulting from
investments by owners and distributions to owners." This statement divides
comprehensive income into net income and other comprehensive income. The only
item that management anticipates that will be included in other comprehensive
income will be the net unrealized gain or loss on investment securities class-
ified as "available for sale," therefore there should be no material impact by
this SFAS on operations or financial statements.
In June of 1997, the Financial Accounting Standards Board (FASB) issued
SFAS 131, Disclosures about Segments of an Enterprise and Related Information,
effective for fiscal years beginning after December 15, 1997. SFAS 131 requires
that public business enterprises report certain information about operating
segments in complete sets of financial statements of the enterprise and in
condensed financial statements of interim periods issued to shareholders. It
also requires that public business enterprises report certain information about
their products and services, the geographic areas in which they operate, and
their major customers. At the current time, the Company does not meet the
additional reporting requirements of this SFAS.
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 has 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 will
identify the areas which may be affected by the "Year 2000," and will address
all issues and will make any necessary recommendations to the Board of Directors
for approval.
The EDP Steering Committee has researched the need to upgrade the Bank's
"Mainframe" computer and software and has made recommendations to the Board of
Directors, which has approved the acquisition. The scheduling for installation
of the new computer system and software is in process and installation should be
completed in the fourth quarter, 1998. All personal computers in service by
the Bank are being tested, and necessary upgrades are being ordered and
installed. There are some computer networks with which the Bank communicates
that have advised that their upgrades to meet the "Year 2000" requirements will
not be in place until the first quarter, 1999.
Under the Bank's "Year 2000 Policy," all computer systems and electronic
date sensitive devices are to be tested, with necessary upgrades made, and cer-
tified as to their "Year 2000" readiness by the end of the first quarter, 1999.
CREDIT PORTFOLIO
Loan Portfolio
The Company's loans outstanding, totaled $140,929 thousand at March 31,
1998 as compared to $136,889 thousand at December 31, 1997 and $120,533 thousand
at March 31, 1997. The increase of December, 1977 over March, 1997 was affected
by the First Federal acquisition and increased loan demand while the increase
for March, 1998 over December, 1997 was due to increased loan demand.
The following table sets forth the loan classifications at March
31, 1998, December 31, 1997 and March 31, 1997:
--------------------------------
March 31, Dec 31, March 31,
(in thousands) 1998 1997 1997
--------- --------- ---------
Commercial, Financial & Agricultural Loans $35,871 $33,673 $31,568
Construction Loans Secured by Real Estate 4,587 3,778 3,525
Other Loans Secured by Real Estate 75,715 75,237 64,587
Installment and Single Payment Loans 22,740 22,186 18,569
Other Loans 2,155 2,178 2,398
--------- --------- ---------
Total Loans 141,068 137,052 120,647
Less Unearned Discount 139 163 114
--------- --------- ---------
Total Loans net of Unearned Discount $140,929 $136,889 $120,533
========= ========= =========
Non-performing Assets
The following table sets forth the non-performing assets at March 31, 1998,
December 31, 1997 and March 31, 1997:
----------------------------
March 31, Dec. 31, March 31,
1998 1997 1997
(in thousands) --------- -------- ---------
Non-Accrual (Impaired-Cash Basis) Loans $361 $562 $332
Past-Due Loans 897 587 317
Restructured Loans 0 0 0
----- ------- -------
Total Non-performing Loans 1,258 1,149 649
Other Real Estate Owned 378 278 252
----- ------- -------
Total Non-performing Assets $1,636 $1,427 $901
===== ======= =======
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 March 31, 1998 these loans
totaled $71 thousand as compared to $425 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, the anticipated 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 0.26% of total loans at March 31, 1998 and 0.28% of total
loans at March 31, 1997. Interest income on nonaccrual loans which would
have been reported on an accrual basis amounted to approximately $10,000 for the
quarter ended March 31, 1998 and $9,000 for the quarter ended March 31, 1997.
Interest income included cash basis interest of $14,000 in the quarter, 1998 and
$19,000 in the quarter ended March 31, 1997. Cash basis interest provided
increases of 4 basis points in the yield on average loans in the first quarter,
1998 and 7 basis points in the first quarter, 1997. Interest income for the
first quarters, 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 evaluated based upon net
realizable 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.
Other real estate currently includes former branch located at 324 Homer Road
which was closed January 4, 1995. The former branch was capitalized at its
depreciated value and has subsequently been written down by $91 thousand.
Allowance for Loan Losses
The allowance for loan losses is available to absorb potential credit
losses from the entire loan portfolio. The appropriate level of the allowance
is based on analyses of the loan portfolio and reflects an amount which, in
management's judgment, is adequate to provide for potential losses. The
analyses include consideration of such factors as the risk rating of individual
credits, the size and diversity of the portfolio, particularly in terms of
industry, economic and political conditions, prior loss experience and results
of periodic credit reviews of the portfolio. Based upon the results of these
analyses, the allowance for losses is increased, from time to time, by charges
to income to the extent management considers appropriate.
The accompanying table reflects the activity in the allowance for loan
losses for the three months ended March 31, 1998, and 1997.
First Quarter
-------------------------
1998 1997
(in thousands) ------------ ------------
Balance at Beginning of Period $3,603 $3,306
Charge-Offs
Commercial, Financial, Agricultural 0 0
Real Estate - Construction 0 0
Real Estate - Mortgage 10 32
Installment Loans to Individuals 47 35
------- -------
Total 57 67
Recoveries
Commercial, Financial, Agricultural 0 0
Real Estate - Construction 0 0
Real Estate - Mortgage 10 56
Installment Loans to Individuals 20 11
------- -------
Total 30 67
------- -------
Net Recoveries(Charge-Offs) (27) 0
Additions Charged to Operations 0 0
------- -------
Balance at End of Period $3,576 $3,306
======= =======
The following table reflects the allowance coverage ratios at
March 31, 1998, December 31, 1997 and March 31, 1997.
March 31, Dec 31, March 31,
For the Quarter Ended: 1998 1997 1997
-------- -------- --------
Allowance for Loan Losses to:
Loans at Period-End 2.54% 2.63% 2.74%
Average Loans 2.59% 2.64% 2.83%
Non-performing Loans 284.26% 313.58% 509.40%
Non-performing Assets 218.58% 252.49% 366.93%
Total Net Charge-Offs (annualized) to:
Loans at Period-End 0.02% (0.03%) 0.00%
Average Loans 0.02% (0.03%) 0.00%
Allowance for Loan Losses 0.76% (1.16%) 0.00%
Management deems its allowance for loan losses at March 31, 1998, to be
adequate. The Company considers that it has sufficient reserves to absorb
losses that may currently exist in the portfolio. The Company will continue to
reassess the adequacy of its allowance for loan losses and make provisions
accordingly.
CAPITAL
Total stockholders' equity at March 31, 1998, was $33,251 thousand, up from
$31,686 thousand at December 31, 1997 and $28,459 thousand at March 31, 1997.
Stockholders' equity at March 31, 1998, reflects positive impact of $486
thousand for net unrealized gains on securities available for sale as compared
to positive impact of $269 thousand at December 31, 1997 and negative impact of
$216 thousand at March 31, 1997.
Risk-Based Capital Ratios
In January, 1989, the Federal Reserve Board ("FRB") issued risk-based
capital guidelines which require banking organizations to maintain certain
ratios of "Qualifying Capital" to "risk-weighted assets." "Qualifying Capital"
is classified into Tier 1 and Tier 2 Capital. Tier 1 Capital applicable to the
Company consists only of common equity. Tier 2 Capital applicable to the
Company consists only of qualifying allowance for loan losses. The amount of
Tier 2 Capital may not exceed Tier 1 Capital. In calculating "risk-weighted
assets", certain risk percentages, as specified by the FRB, are applied to
particular categories of both on- and off-balance sheet assets. Effective
December 31, 1992, the guidelines require that banking organizations maintain a
minimum ratio of Tier 1 Capital to risk-weighted assets of 4% and a minimum
ratio of Tier 1 and Tier 2 Capital ("Total Capital") to risk-weighted assets of
8% (the "final risk-based guidelines"). At March 31, 1998, the Company's Tier 1
Capital to risk-weighted assets ratio was 20.32% and the Total Capital to risk-
weighted assets ratio was 21.59%.
Leverage Ratios
The Tier 1 leverage ratio is defined as Tier 1 Capital (as defined under
the risk-based capital guidelines) divided by average total assets (net of
allowance for loan losses). The minimum leverage ratio is 3% for banking
organizations that do not anticipate significant growth and that have well-
diversified risk, excellent asset quality, high liquidity and good earnings.
Other banking organizations are expected to have ratios of at least 4% to 5%,
depending upon their particular condition and growth plans. Higher capital
ratios could be required if warranted by the particular circumstances, or risk
profile, of a given banking organization. The FRB has not advised the Company
of any specific minimum Tier 1 leverage ratio applicable to it.
The table which follows sets for the Company's Tier 1 and Tier 2 Capital,
risk weighted assets, including off balance sheet items, and the Company's risk-
based capital ratios under the final guidelines as well as Tier 1 leverage
ratios.
Capital and Ratios
March 31, Dec 31, March 31,
1998 1997 1997
(in thousands), except ratios -------- ------- --------
Tier 1 Capital
Common Stockholders' Equity $29,283 $27,868 $26,793
Tier 2 Capital
Reserve for Possible Loan Losses 1,823 1,773 1,537
-------- -------- --------
Total Qualifying Capital $31,106 $29,641 $28,330
======== ======== ========
Risk Weighted Assets $144,105 $140,025 $121,188
Tier 1 Capital Ratio 20.32% 19.90% 22.11%
Total Capital Ratio 21.59% 21.17% 23.38%
Tier 1 Leverage Ratio 10.11% 9.59% 10.71%
Common Stock Dividends
For the first quarters of 1998 and 1997, the Board of Directors of the
Company declared no dividends. Future dividend policies will be determined by
the Board of Directors in light of earnings and financial condition of the
Company and its subsidiary and other factors, including applicable governmental
regulations and policies.
LIQUIDITY MANAGEMENT
The objective of liquidity management is to ensure the availability of
sufficient cash flows to meet all financial commitments and to capitalize on
investment opportunities. Liquidity management addresses the Company's ability
to meet deposit withdrawals on demand or at contractual maturity, to service
indebtedness and to make new loans and investments as opportunities arise. The
Company monitors and reviews 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, the bank subsidiary 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 averaged 55.42% during the 1998 first quarter and
53.96% during the 1997 first quarter. Cash on hand and due from banks averaged
$16,437 thousand in the 1998 first quarter and $13,887 thousand in the 1997
first quarter. Federal Funds sold averaged $16,356 thousand in the 1998 first
quarter and $16,789 thousand in the 1997 first quarter.
At March 31, 1998, investment securities, at amortized cost, totaled
$119,973 thousand, of which $51,916 thousand or 43.27% mature or reprice within
one year, $53,125 thousand mature or reprice within two to five years, and
$14,932 thousand mature in over five years.
The Company does not anticipate any events which would require liquidity
beyond that which is available from the above referenced sources.
SUPERVISION AND REGULATION
Dividends
Substantially all of the funds used by the Company to pay dividends to its
shareholders are derived from dividends paid to it by its subsidiary bank, which
are subject to certain legal restrictions. Under Louisiana law, state chartered
banks cannot pay dividends in excess of current year earnings plus undistributed
earnings of the prior year without the prior approval of the Commissioner of
Financial Institutions. Under Federal law, dividends by state chartered banks
in excess of current year earnings plus undistributed earnings of the two prior
years would require FRB approval.
In addition to the dividend restrictions described above, the FRB and the
Federal Deposit Insurance Corporation ("FDIC") have authority under the
Financial Institutions Supervisory Act to prohibit or to limit the payment of
dividends by banking organizations they supervise, including the Company and its
bank subsidiary if, in the banking regulators' opinions, payment of a dividend
would constitute an unsafe or unsound practice in light of the financial
condition of the banking organization.
Other
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 the Bank is a member of both and substantially revised statu-
tory provisions, including capital standards. FDICIA provided insurance rate
structure which provides 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.
Minden Bank is subject to FDIC insurance assessments. Effective May 1,
1995, the FDIC revised the BIF assessment rates from 0.23% to 0.04% for the
highest rated 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 healthiest
banks to 0.27% for the weakest banks effective January 1, 1996. SAIF assess-
ment rates were 0.23% for the healthiest banks to 0.31% for the weakest banks
until October 1, 1996, whereby provisions of the Deposit Insurance Funds Act of
1996 ("Funds") reduced the rates to 0.0% for the healthiest banks to 0.27% for
the 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 are at the annual
rate of 0.1296% for 1998 and 0.648% under SAIF for 1998. Minden Bank has
$35,834,110 of deposits in 1998 insured under SAIF as the result of the acqui-
sition in 1994 of the Minden branch of the failed Oak Tree Federal Savings Bank,
and the 1997 acquisition of First Federal Savings Bank.
MINDEN BANCSHARES, INC. AND SUBSIDIARY
Consolidated Net Interest Income and Average Balances
Three Months Ended March 31, 1998 and 1997
(Thousands)
1998 1997
------------------------ ------------------------
Average Rate Average Rate
Balance Interest <F4> Balance Interest <F4>
--------- -------- ----- --------- -------- -----
ASSETS
Interest Bearing Balances
Due from Banks $5,247 $83 6.41% $2,111 $26 4.99%
Federal Funds Sold 16,356 217 5.38% 16,789 224 5.41%
Investment Securities <F5> 113,986 1,776 6.32% 98,565 1,515 6.23%
Federal Reserve Bank/ Federal
Home Loan Bank Stocks 1,405 19 5.41% 1,209 17 5.70%
Loans 138,006 3,249 9.55% 116,766 2,767 9.61%
--------- -------- --------- --------
Total Interest-
Earning Assets 275,000 $5,344 7.88 235,440 $4,549 7.84%
Allowance for Loan Losses (3,588) (3,325)
Cash and Due from Banks 11,190 11,776
Other Assets <F5> 10,654 8,154
--------- ---------
Total Assets $293,256 $252,045
========= =========
LIABILITIES
Deposits $207,497 $2,206 4.31% $178,932 $1,844 4.18%
Securities Sold Under
Repurchase Agreements 10,688 118 4.48% 6,092 66 4.39%
Long-Term Debt 0 0 0.00% 90 2 9.01%
--------- -------- --------- --------
Total Interest-
Bearing Liabilities 218,185 $2,324 4.32% 185,114 $1,912 4.19%
Demand Deposits 41,526 37,466
Other Liabilities 1,453 1,344
--------- ---------
Total Liabilities 261,164 223,924
--------- ---------
STOCKHOLDERS' EQUITY
Common Stockholders'
Equity <F5> 32,092 28,121
--------- ---------
Total Liabilities and
Stockholders' Equity $293,256 $252,045
========= =========
SPREAD ON INTEREST-BEARING FUNDS 3.56% 3.65%
NET INTEREST INCOME AND NET
YIELD ON INTEREST-EARNING ASSETS $3,020 4.45% $2,637 4.54%
======== ===== ======== =====
<F4> All rates are annualized
<F5> Based upon amortized cost of investment securities
PART II
-------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(1) 11 Computation of earnings per share
(This computation is provided in Note 4 to the
Financial Statements on Page 8 and Page 9 under
Management's Discussion and Analysis)
(2) 27 Financial Data Schedule
(b) Reports on Form 8-K
None
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 hereunto duly authorized.
MINDEN BANCSHARES, INC.
May 8, 1998 BY:s/ Jack E. Byrd, Jr.
------------------------
Jack E. Byrd, Jr.
President and CEO
May 8, 1998 BY:s/ Robert W. Hines, Jr.
------------------------
Robert W. Hines, Jr.
Vice-President and
Chief Financial Officer