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:
280,583 as of April 30, 1999
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, 1999 and December 31, 1998 4
Consolidated Statements of Income for
the Three Months Ended March 31, 1999
and 1998 5
Consolidated Statements of Comprehensive
Income for the Three Months Ended
March 31, 1999 and 1998 6
Consolidated Statements of Cash Flows
for the Three Months ended March 31,
1999 and 1998 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, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
March December
1999 1998
-------- --------
ASSETS
- ----------------------------------------- (in thousands, except per share data)
Cash and Cash Equivalents:
Cash and Due From Banks $18,374 $15,856
Federal Funds Sold 26,000 12,000
-------- ----------
Total 44,374 27,856
-------- ----------
Securities:
Held to Maturity 17,369 18,191
Available for Sale 115,521 132,437
--------- ----------
Total 132,890 150,628
--------- ----------
Federal Reserve Bank and Federal Home Loan Bank Stock 1,603 1,533
Loans, Less Allowance for Loan Losses of $3,381 and $3,392 141,638 136,928
Accrued Interest Receivable 2,699 2,595
Bank Premises and Equipment 4,434 4,167
Real Estate Owned Other Than Bank Premises 18 116
Other Assets 4,322 4,552
--------- ----------
Total Assets $331,978 $328,375
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------
Liabilities:
- -----------
Deposits:
Interest Bearing $237,406 $232,768
Noninterest Bearing 45,953 47,603
--------- ----------
Total Deposits 283,359 280,371
Securities Sold Under Repurchase Agreement 8,946 9,933
Accrued Interest Payable 1,119 1,227
Other Liabilities 1,165 730
--------- ----------
Total Liabilities 294,589 292,261
--------- ----------
Stockholders' Equity:
- --------------------
Common Stock, par value $2.50 per share; 500,000
shares authorized; 309,816 shares issued;
280,583 and 280,583 shares outstanding 775 775
Additional Paid-In Capital 11,214 11,214
Undivided Profits 26,478 25,038
Accumulated Other Comprehensive Income 224 389
Treasury Stock-At Cost (1,302) (1,302)
--------- ----------
Total Stockholders' Equity 37,389 36,114
--------- ----------
Total Liabilities and Stockholders' Equity $331,978 $328,375
========= ==========
See accompanying notes.
MINDEN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
1999 1998
-------- --------
Interest Income: (in thousands, except per share data)
- ---------------
Interest and Fees on Loans $3,338 $3,249
Securities:
Held to Maturity (non-taxable) 221 211
Available for Sale 1,776 1,484
Federal Funds Sold 242 217
Federal Reserve Stock and Other 22 19
Interest-Bearing Balances with Banks 67 83
-------- --------
Total Interest Income 5,666 5,263
-------- --------
Interest Expense:
- ----------------
Savings and Interest-Bearing Demand Deposits 677 584
Time Deposits 1,771 1,622
Securities Sold Under Repurchase Agreement and Other 121 118
-------- --------
Total Interest Expense 2,569 2,324
-------- --------
Net Interest Income 3,097 2,939
Provision for Loan Losses 0 0
-------- --------
Net Interest Income After Provision for Loan Losses 3,097 2,939
-------- --------
Other Income:
- ------------
Service Charges 439 382
Other Operating Income 269 221
-------- --------
Total Other Income 708 603
-------- --------
Operating Expenses:
- ------------------
Salaries and Employee Benefits 892 819
Occupancy Expense 116 106
Furniture and Equipment Expense 68 74
Amortization 81 78
Capital Stock Taxes 121 106
Stationery, Supplies and Printing 53 61
Other Operating Expenses 368 331
-------- --------
Total Operating Expense 1,699 1,575
-------- --------
Income Before Income Taxes 2,106 1,967
Income Taxes 666 619
-------- --------
Net Income $1,440 $1,348
======== ========
Earnings Per Share $5.13 $4.81
======== ========
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, 1999 AND 1998
(UNAUDITED)
1999 1998
-------- --------
(in thousands, except per share data)
Net Income $1,440 $1,348
-------- --------
Other Comprehensive Income:
Unrealized Gains (Losses) on Securities:
Unrealized Gains (Losses) Arising during Period (250) 328
Less: Reclassification Adjustment for Gains
Arising during Period 0 0
-------- --------
Total Gains (Losses) Arising during Period (250) 328
Tax (Expense) Benefit 85 (111)
-------- --------
Other Comprehensive Income (165) 217
-------- --------
Comprehensive Income $1,275 $1,565
======== ========
See accompanying notes
MINDEN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
1999 1998
--------- ---------
Cash Flows from Operating Activities: (in thousands, except per share data)
- ------------------------------------
Net Income $1,440 $1,348
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 146 142
(Gain) Loss on Sale of Other Real Estate Owned (13) (13)
(Increase) Decrease in Accrued Interest Receivable (104) (41)
(Increase) Decrease in Other Assets 235 14
Increase (Decrease) in Accrued Interest Payable (108) (41)
Increase (Decrease) in Other Liabilities 434 95
--------- ---------
Total Adjustments 590 156
--------- ---------
Net Cash Provided (Used) by Operating Activities 2,030 1,504
--------- ---------
Cash Flows from Investing Activities:
- ------------------------------------
Proceeds from Sales/Maturities of Investment Securities:
Available for sale 27,853 26,403
Held to maturity 822 347
Purchase of Investment Securities:
Available for sale (11,257) (19,945)
Held to maturity 0 (870)
Proceeds from Sale of Other Real Estate Owned 111 67
Purchase of Equipment (333) (35)
Net (Increase) Decrease in Loans (4,710) (4,221)
--------- ---------
Net Cash (Used) by Investing Activities 12,486 1,746
--------- ---------
Cash Flows from Financing Activities:
- ------------------------------------
Dividends Paid 0 0
Net Increase (Decrease) in Noninterest Bearing Deposits (1,596) 567
Net Increase (Decrease) in Interest-Bearing Deposits 4,585 3,303
Net Increase (Decrease) in Securities Sold Under
Repurchase Agreements (987) (1,413)
Purchase of Treasury Stock 0 0
--------- ---------
Net Cash Provided by Financing Activities 2,002 2,457
--------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents 16,518 5,707
Cash and Cash Equivalents at Beginning of Period 27,856 21,696
--------- ---------
Cash and Cash Equivalents at End of Period $44,374 $27,403
========= =========
Cash Payments: Interest $2,677 $2,366
========= =========
Income Taxes 0 $600
========= =========
See accompanying notes.
MINDEN BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 1999
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.
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, 1999,
the fair market value of securities available for sale was $339,000 more than
amortized cost and at December 31, 1998, the fair market value was $589,000
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, 1999, and
December 31, 1998, are as follows:
Securities Held to Maturity
---------------------------
Gross Gross Estimated
Book Unrealized Unrealized Market
Value Gains Losses Value
-------- ---------- ---------- --------
March 31, 1999 $17,369 530 78 $17,821
December 31, 1998 18,191 647 67 18,771
4. Accumulated Other Comprehensive Income
Three Months Ended Three Months Ended
March 31, 1999 March 31, 1998
----------------------- -----------------------
Accumulated Accumulated
Unrealized Other Unrealized Other
Gains (Losses) Comprehensive Gains (Losses) Comprehensive
on Securities Income on Securities Income
-------- --------- -------- -------
Beginning Balance $389 $389 $269 $269
Current-period Change (165) (165) 217 217
-------- --------- -------- --------
Ending Balance $224 $224 $486 $486
======== ========= ======== ========
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, 1999,
and 1998, were 280,583 and 280,511 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
1999 1998 1998
--------- ----------- ---------
Interest income $5,666 $5,662 $5,263
Interest expense 2,569 2,573 2,324
--------- ----------- ---------
Net interest income 3,097 3,089 2,939
Provision for possible loan losses 0 0 0
--------- ----------- ---------
Net interest income after provision 3,097 3,089 2,939
Noninterest income 708 752 603
Noninterest expense 1,699 1,660 1,575
--------- ----------- ---------
Income before taxes 2,106 2,181 1,967
Income tax expense 666 677 619
--------- ----------- ---------
Net Income $1,440 $1,504 $1,348
========= =========== =========
Earnings per share <F1> $5.13 $5.36 $4.81
Dividends declared per share $0.00 $4.15 $0.00
Average shares outstanding 280.6 280.6 280.5
Book value per share $133.25 $128.71 $118.54
Selected Quarter End Balances:
Loans $145,019 $140,320 $140,929
Deposits 283,360 280,371 252,053
Debt 8,946 9,933 9,396
Equity 37,389 36,114 33,251
Total Assets 331,978 328,375 296,154
Selected Average Balances:
Loans $142,717 $142,000 $138,006
Deposits 285,806 274,260 249,023
Debt 10,129 11,680 10,688
Equity 36,836 36,160 32,434
Total Assets 334,660 324,625 293,647
Selected Ratios (%)
Return on average assets 1.75% 1.84% 1.86%
Return on average equity 15.85% 16.50% 16.86%
Net interest margin (taxable equivalent) 4.10% 4.14% 4.45%
Tier 1 risk-based capital 20.94% 20.84% 20.32%
Total risk-based capital 22.20% 22.10% 21.59%
Leverage 10.26% 10.10% 10.11%
<F1> Earnings per share is based on the weighted average number of shares
outstanding in the respective period
OVERVIEW
The Company's first quarter 1999 net income totaled $1,440 thousand,
($5.13 per share) up 7 percent from $1,348 thousand ($4.81 per share) in the
first quarter, 1998 and down 4 percent from $1,504 thousand ($5.36 per share)
in the fourth quarter, 1998.
The return on average assets was 1.75 percent for the first quarter, 1999
down 6 percent from the first quarter, 1998 of 1.86 percent and down 5 percent
from the fourth quarter, 1998 of 1.84 percent.
The return on average equity was 15.85 percent for the first quarter, 1999,
a decrease of 6 percent from the first quarter, 1998 of 16.86 percent and a 4
percent decrease from the fourth quarter, 1998 of 16.50 percent.
The 1999 first quarter earnings benefited from a 5 percent increase in net
interest income and a 17 percent increase in other income and was detrimented
by an 8 percent increase in noninterest expense when compared to the 1998
first quarter. The 1999 first quarter earnings benefited from a slight (less
than 1 percent) increase in net interest income and was detrimented by a 6
percent decrease in other income and an 2 percent increase in noninterest
expense when compared to the 1998 fourth quarter.
Total assets at March 31, 1999 increased to $331,978 thousand, up 12
percent from a year ago and up 1 percent from December 31, 1998.
RESULTS OF OPERATIONS
NET INTEREST INCOME First Fourth First
Quarter Quarter Quarter
1999 1998 1998
(in thousands) ========= ========= =========
Total Interest Income $5,666 $5,662 $5,263
Total Interest Expense 2,569 2,573 2,324
--------- --------- ---------
Net Interest Income 3,097 3,089 2,939
Taxable-Equivalent Adjustment
to Interest Income 86 90 81
--------- --------- ---------
Net Interest Income-
Taxable Equivalent Basis <F2> $3,183 $3,179 $3,020
========= ========= =========
AVERAGE BALANCES (in thousands):
Interest-Earning Assets <F3> $314,808 $305,076 $275,000
========= ========= =========
Interest-Bearing Liabilities $247,442 $238,228 $218,185
Interest-Free Funds 67,366 66,848 56,815
--------- --------- ---------
Total Investable Funds $314,808 $305,076 $275,000
========= ========= =========
AVERAGE INTEREST RATES (fully taxable): <F2>
Yield On:
Interest-Earning Assets <F3> 7.41% 7.49% 7.88%
Interest-Bearing Liabilities 4.21% 4.28% 4.32%
--------- --------- ---------
Spread on Interest-Bearing Funds 3.20% 3.21% 3.56%
Contribution of Interest-Free Funds 0.90% 0.93% 0.89%
--------- --------- ---------
Net Yield on Interest-Earning Assets 4.10% 4.14% 4.45%
========= ========= =========
<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 $376 thousand for the first quarter, 1999,
as compared to a positive $268 thousand for the first quarter, 1998, and
a positive $598 thousand for the fourth quarter of 1998.
Net Interest Income
The Company's net interest income for the 1999 first quarter was $3,097
thousand, an increase of $158 thousand or 5% over $2,939 thousand in the 1998
first quarter, and an increase of $8 thousand or 0 percent from $3,089 thousand
in the fourth quarter, 1998. Interest Income for the first quarter, 1999,
increased $403 thousand or 8 percent over the first quarter, 1998, and
increased $4 thousand or 0 percent over the fourth quarter, 1998. Interest
expense for the first quarter, 1999, increased $245 thousand or 11 percent over
the first quarter, 1998, and decreased $4 thousand or 0 percent from the fourth
quarter, 1998.
Of the $403 thousand increase in interest income in the first quarter,
1999, over the same period last year, $89 thousand was in interest income on
loans and $292 thousand was in interest income on investment securities. The
increase in interest income on loans is due to growth while the increase in
interest income on investment securities is due to deposit growth in excess of
loan growth which was invested.
Average Interest-Earning Assets
Average interest-earning assets were $314,808 thousand for the 1999 first
quarter, $39,808 thousand more than the 1998 first quarter of $275,000 thousand.
Average loans increased by $4,711 thousand, average investment securities
increased by $29,988 thousand (at amortized cost), average Federal funds sold
increased by $4,972 thousand and interest bearing balances with banks increased
by $4 thousand during the first quarter, 1999 over the first quarter, 1998.
Average Interest-Bearing Liabilities
Average interest-bearing liabilities for the 1999 first quarter were
$247,442 thousand, compared to $218,185 thousand for the same period last year.
Average time deposits for the 1999 first quarter were $142,217 thousand, an
increase of $17,151 thousand over the same period last year and average savings
and interest-bearing demand deposits for the 1999 first quarter were $95,096
thousand, an increase of $12,665 thousand over the same period last year.
Average securities sold under agreements to repurchase averaged $10,129 thousand
during the first quarter, 1999, a decrease of $559 thousand from the first
quarter, 1998.
Net Yield on Interest-Earning Assets
The net yield on interest-earning assets was 4.10% in the first quarter of
1999, a decrease of 35 basis points from 4.45% in the same period last year.
The contributing factors have been the increased competition for loans and the
high interest rate market for deposits with the Bank's deposit growth over the
past year having exceeded its loan growth with the excess deposit growth having
been invested in lower yielding fixed rate investment securities and Federal
funds sold.
Management expects that the net yield on earning assets will remain
constant or increase slightly during the balance of 1999.
PROVISION FOR LOAN LOSSES
The Company made no provision for loan losses in the 1999 first quarter or
the 1998 first quarter. Management does not anticipate any provision for loan
losses during 1999. 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,
1999 1998 1998
(in thousands) ========= ============ =========
Service Charges $439 $453 $382
Insurance Commissions 40 54 49
Mortgage Loan Origination and
Service Release Fees 100 119 37
Other Operating Income 129 126 135
------ ------ ------
Total Other Income $708 $752 $603
====== ====== ======
Other income for the 1999 first quarter was $708 thousand, up from $603
thousand for the same period last year, and down from $752 thousand for the
fourth quarter, 1998. 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,
1999 1998 1998
(in thousands) ========= ============= ========
Salaries and Employee Benefits $892 $799 $819
Occupancy Expense 116 97 106
Furniture and Equipment Expense 68 54 74
Amortization 81 66 78
Capital Stock Tax 121 100 106
Stationery, Supplies and Printing 53 77 61
Other Operating Expenses 368 467 331
------- ------- -------
Total Operating Expenses $1,699 $1,660 $1,575
======= ======= =======
Operating expenses for the 1999 first quarter were $1,699 thousand, up from
$1,575 thousand in the 1998 first quarter and up from $1,660 thousand in the
fourth quarter, 1998.
Salaries and employee benefits in the 1999 first quarter were $892
thousand, compared to $819 thousand in the same period last year and $799
thousand in the fourth quarter, 1998. The increase over both periods last
year is the result of salary increases and additional staff positions.
Occupancy expense for the 1999 first quarter was $116 thousand as compared
to $106 thousand for the same period last year and $97 thousand for the fourth
quarter, 1998. The increase in occupancy expense in the first quarter, 1999
over both periods in 1998 is due primarily to inflation.
Other operating expenses were $368 thousand for the 1999 first quarter as
compared to $331 thousand for the same period last year and $467 thousand in the
fourth quarter, 1998. The major portion of the variation in the fourth quarter,
1998 was for expenses related to our computer conversion.
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, 1998 stationery, supplies and printing amount reflects
new form orders for our new computer system and major orders of forms for the
upcoming year.
INCOME TAXES
In the 1999 first quarter, the Company recorded income tax expense of
$666 thousand, compared to $619 thousand for the same period last year.
The effective tax rate was 31.6% for the 1999 first quarter and 31.5% for
the 1998 first quarter. The effective tax rates in 1999 and 1998 reflect
change in composition of the Company's pre-tax income, primarily tax-exempt
income.
RECENT ACCOUNTING PRONOUNCEMENTS
In June of 1998, the Financial Accounting Standards Board (FASB) issued
FAS 133, Accounting for Derivative Instruments and Hedging, effective for
all fiscal quarters of fiscal years beginning after June 15, 1999. FAS 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and
for hedging activities. Management does not anticipate any impact by this
SFAS upon its financial statements because it does not currently hold any
derivative contracts or engage in any hedging activities and does not
anticipate engaging in any such activities.
In October of 1998, the Financial Accounting Standards Board (FASB)
issued FAS 134, Accounting for Mortgage-Backed Securities Retained after
the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise, effective the first fiscal quarter beginning after December 15,
1998. On the date this Statement is applied, an enterprise may reclassify
mortgage-backed securities and other beneficial interests retained after the
securitization of mortgage loans held for sale from the trading category,
except for those with sales commitments in place. Those securities and
other interests shall be classified based on the entity's ability and intent,
on the date this Statement is initially applied, to hold those investments.
Management has not been impacted by this Statement because it does not engage
in mortgage banking activities.
OTHER ACCOUNTING ISSUES
Year 2000
---------
The problem now known as the "Year 2000" is the inability of older computer
systems, software and other equipment which have only maintained a two digit
year in date information to chronologically align dates with the occurrence of
the year 2000.
The Board of Directors adopted a "Year 2000 Policy" to insure that all
information systems and other areas which may be affected by the "Year 2000"
millennium change are properly and expeditiously addressed to insure the contin-
uation of normal business operations of the Bank into the next millennium. In
the "Year 2000 Policy," provision is made for a "Year 2000 Plan" whereby an EDP
Steering Committee headed by the Vice President and Data Center Manager would
identify the areas which may be affected by the "Year 2000," and would address
these issues by making necessary recommendations to the Board of Directors
for approval.
The EDP Steering Committee researched the need to upgrade the Bank's
"Mainframe" computer and software and made recommendations to the Board of
Directors, which approved the acquisition. The installation of the new
computer system was completed in the fourth quarter, 1998. The software
was warranted as "Year 2000 Compliant." Formal testing procedures in
accordance with the vendor's instructions have been concluded. All personal
computers in service by the Bank have been tested, and necessary upgrades
have been ordered and installed. The Bank has expended approximately $500
thousand in complying with its "Year 2000 Policy" and anticipates that
additional expenditures will not exceed $30 thousand.
In accordance with the Bank's "Year 2000 Policy," all computer systems
and electronic date sensitive devices were tested by the end of the first
quarter, 1999. The Bank did not receive test results until early in the
second quarter, 1999. The Bank accomplished its goals relating to it's
electronic date sensitive devices with the receipt of its test results.
Due to concern by banking regulators regarding the risk to the Bank from
effects to larger loan and deposit customers, service providers, vendors and
other sources, if their computer systems fail due to not being year 2000 com-
pliant, the Bank created a year 2000 task force to assess these risks. The
Bank has mailed questionaire to its larger commercial accounts, both loan and
deposit customers, regarding the capacity of their computer systems to meet
year 2000 compliance and is currently evaluating current service providers,
vendors and other sources which may provide an operating or financial risk to
the Bank.
CREDIT PORTFOLIO
Loan Portfolio
The Company's loans outstanding, totaled $145,019 thousand at March 31,
1999 as compared to $140,320 thousand at December 31, 1998 and $140,929 thousand
at March 31, 1998. The changes in the amounts of loans outstanding has been due
to changes in loan demand.
The following table sets forth the loan classifications at March
31, 1999, December 31, 1998 and March 31, 1998:
--------------------------------
March 31, Dec 31, March 31,
(in thousands) 1999 1998 1998
--------- --------- ---------
Commercial, Financial & Agricultural Loans $36,592 $36,995 $35,871
Construction Loans Secured by Real Estate 5,083 4,868 4,587
Held for Sale 758 1,275 1,216
Other Loans Secured by Real Estate 76,100 72,390 74,499
Installment and Single Payment Loans 24,429 24,214 22,740
Other Loans 2,310 876 2,155
--------- --------- ---------
Total Loans 145,272 140,618 141,068
Less Unearned Discount 253 298 139
--------- --------- ---------
Total Loans net of Unearned Discount $145,019 $140,320 $140,929
========= ========= =========
Non-performing Assets
The following table sets forth the non-performing assets at March 31, 1999,
December 31, 1998 and March 31, 1998:
----------------------------
March 31, Dec. 31, March 31,
1999 1998 1998
(in thousands) ------- ------- -------
Non-Accrual (Impaired-Cash Basis) Loans $260 $ 85 $361
Past-Due Loans 871 914 897
Restructured Loans 0 0 0
------- ------- -------
Total Non-performing Loans 1,131 999 1,258
Other Real Estate Owned 18 116 378
------- ------- -------
Total Non-performing Assets $1,151 $1,115 $1,636
======= ======= =======
In addition to the non-performing loans discussed above, management ident-
fies other loans for which payments are current that are subject to poten-
tial future classification as nonperforming. As of March 31, 1999 there were
no loans identified as compared to $71 thousand a year ago.
Nonaccrual (impaired-cash basis) loans are those loans on which it appears
that the collection of all principal and interest under the loan terms is un-
likely under either the projection of cash flows or values of underlying col-
lateral. Once a determination has been made as to the projected amount which
may be collected, 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 0.18% of total loans at March 31, 1999 and 0.26% of total
loans at March 31, 1998. Interest income on nonaccrual loans which would
have been reported on an accrual basis amounted to approximately $6,000 for the
quarter ended March 31, 1999 and $10,000 for the quarter ended March 31, 1998.
Interest income included cash basis interest of $83,000 in the quarter, 1999 and
$14,000 in the quarter ended March 31, 1998. Cash basis interest provided
increases of 24 basis points in the yield on average loans in the first quarter,
1999 and 4 basis points in the first quarter, 1998. Interest income for the
first quarters, 1999 and 1998 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 at March 31, 1998 included former branch located at 324 Homer
Road which was closed January 4, 1995. The former branch was capitalized at its
depreciated value and was subsequently written down by $91 thousand. The former
branch location was sold in the fourth quarter 1998.
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, 1999, and 1998.
First Quarter
-------------------------
1999 1998
(in thousands) ------------ ------------
Balance at Beginning of Period $3,392 $3,603
Charge-Offs
Commercial, Financial, Agricultural 5 0
Real Estate - Construction 0 0
Real Estate - Mortgage 0 10
Installment Loans to Individuals 81 47
------- -------
Total 86 57
Recoveries
Commercial, Financial, Agricultural 33 0
Real Estate - Construction 0 0
Real Estate - Mortgage 22 10
Installment Loans to Individuals 20 20
------- -------
Total 75 30
------- -------
Net Recoveries(Charge-Offs) (11) (27)
Additions Charged to Operations 0 0
------- -------
Balance at End of Period $3,381 $3,576
======= =======
The following table reflects the allowance coverage ratios at
March 31, 1999, December 31, 1998 and March 31, 1998.
March 31, Dec 31, March 31,
For the Quarter Ended: 1999 1998 1998
-------- -------- --------
Allowance for Loan Losses to:
Loans at Period-End 2.33% 2.41% 2.54%
Average Loans 2.37% 2.39% 2.59%
Non-performing Loans 298.94% 339.54% 284.26%
Non-performing Assets 293.74% 304.22% 218.58%
Total Net Charge-Offs (annualized) to:
Loans at Period-End 0.03% 0.40% 0.08%
Average Loans 0.03% 0.40% 0.08%
Allowance for Loan Losses 1.32% 16.96% 3.00%
Management deems its allowance for loan losses at March 31, 1999, 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, 1999, was $37,389 thousand, up from
$36,114 thousand at December 31, 1998 and $33,251 thousand at March 31, 1998.
Stockholders' equity at March 31, 1999, reflects positive impact of $224
thousand of accumulated other comprehensive income composed entirely of net
unrealized gains on securities available for sale as compared to positive im-
pacts of $389 thousand at December 31, 1998 and $486 thousand at March 31, 1998.
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, 1999, the Company's Tier 1
Capital to risk-weighted assets ratio was 20.94% and the Total Capital to risk-
weighted assets ratio was 22.20%.
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,
1999 1998 1998
(in thousands, except ratios) -------- ------- --------
Tier 1 Capital
Common Stockholders' Equity $33,951 $32,445 $29,283
Tier 2 Capital
Reserve for Possible Loan Losses 2,043 1,982 1,823
-------- -------- --------
Total Qualifying Capital $35,994 $34,427 $31,106
======== ======== ========
Risk Weighted Assets $162,124 $157,182 $144,105
Tier 1 Capital Ratio 20.94% 20.64% 20.32%
Total Capital Ratio 22.20% 21.90% 21.59%
Tier 1 Leverage Ratio 10.26% 10.12% 10.11%
Common Stock Dividends
For the first quarters of 1999 and 1998, 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 49.93% during the 1999 first quarter and
55.41% during the 1998 first quarter. Cash on hand and due from banks averaged
$16,748 thousand in the 1999 first quarter and $16,437 thousand in the 1998
first quarter. Federal Funds sold averaged $21,328 thousand in the 1999 first
quarter and $16,356 thousand in the 1998 first quarter.
At March 31, 1999, investment securities, at amortized cost, totaled
$134,154 thousand, of which $33,287 thousand or 24.81% mature or reprice within
one year, $67,466 thousand mature or reprice within two to five years, and
$33,401 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 were at the annual
rates of 0.0126% and 0.0610% under SAIF for the first quarter of 1999. Minden
Bank was assessed on $38,023,788 of deposits under SAIF in the 1999 first
quarter as the result of the acquisition 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, 1999 and 1998
(Thousands)
1999 1998
------------------------ ------------------------
Average Rate Average Rate
Balance Interest <F4> Balance Interest <F4>
--------- -------- ----- --------- -------- -----
ASSETS
Interest Bearing Balances
Due from Banks $5,251 $67 5.17% $5,247 $83 6.41%
Federal Funds Sold 21,328 242 4.60% 16,356 217 5.38%
Investment Securities <F5> 143,974 2,083 5.88% 113,986 1,776 6.32%
Federal Reserve Bank/ Federal
Home Loan Bank Stocks 1,538 22 5.80% 1,405 19 5.41%
Loans 142,717 3,338 9.49% 138,006 3,249 9.55%
--------- -------- --------- --------
Total Interest-
Earning Assets 314,808 $5,752 7.41 275,000 $5,344 7.88%
Allowance for Loan Losses (3,412) (3,588)
Cash and Due from Banks 11,497 11,190
Other Assets <F5> 11,372 10,654
--------- ---------
Total Assets $334,265 $293,256
========= =========
LIABILITIES
Deposits $237,313 $2,448 4.18% $207,497 $2,206 4.31%
Securities Sold Under
Repurchase Agreements 10,129 121 4.84% 10,688 118 4.48%
--------- -------- --------- --------
Total Interest-
Bearing Liabilities 247,442 $2,569 4.21% 218,185 $2,324 4.32%
-------- ----- -------- -----
Demand Deposits 48,493 41,526
Other Liabilities 1,839 1,453
--------- ---------
Total Liabilities 297,774 261,164
--------- ---------
STOCKHOLDERS' EQUITY
Common Stockholders'
Equity <F5> 36,491 32,092
--------- ---------
Total Liabilities and
Stockholders' Equity $334,265 $293,256
========= =========
SPREAD ON INTEREST-BEARING FUNDS 3.20% 3.56%
===== =====
NET INTEREST INCOME AND NET
YIELD ON INTEREST-EARNING ASSETS $3,183 4.10% $3,020 4.45%
======== ===== ======== =====
<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 12, 1999 BY:s/ Jack E. Byrd, Jr.
------------------------
Jack E. Byrd, Jr.
President and CEO
May 12, 1999 BY:s/ Robert W. Hines, Jr.
------------------------
Robert W. Hines, Jr.
Vice-President and
Chief Financial Officer