Item 1. Business
General -
Teche Bancshares, Inc. (Company) was organized during 1984 for the purpose of operating as a one bank holding company. As a result, Teche Bank and Trust Company (Bank) was acquired by Teche Bancshares, Inc. in a business combination accounted for as a pooling of interests. Teche Bancshares, Inc.'s sole source of income is derived from the earnings and dividends of its subsidiary, Teche Bank & Trust Company.
Teche Bank and Trust Company is a Louisiana chartered state bank engaged in the general banking business since September 27, 1969. The Bank's main office is located in the primary business district of St. Martinville, Louisiana. The Bank has two branches. One is located on the north side of town on the main thoroughfare. The other branch is in Coteau, Louisiana. The population of both areas is largely rural and the economy is based on agriculture, textiles and tourism.
The City of St. Martinville is located in the south central part of Louisiana. The Bank's primary market area, the City of St. Martinville, had a population of 7,965 in 1990. Its general market area, St. Martin Parish, Louisiana, had a population of 40,214 and has not experienced substantial population growth over the past several years.
The community of Coteau is located twelve miles south of St. Martinville in Iberia Parish. The primary market area of the Coteau Branch is the six mile circular radius from the branch that is within Iberia Parish. The population of the primary market area is approximately 6,450 people. There are no banks or branches of other financial institutions located within the primary market area.
Competition -
There are two other banks and one savings and loan in the Bank's primary market area. Competition for loans and deposits is intense among the financial institutions in the area.
In the Bank's general market area there are five other banks and two domestic savings and loan institutions aggressively pursuing loans, deposits and other accounts. Below is a list of banks and savings institutions having offices in St. Martin Parish with their total deposits as of December 31, 2000:
Bank Thousands of Dollars
Farmers-Merchants Bank and Trust $99,917 First Louisiana National Bank 60,710 Iberia Bank 11,276 MidSouth National Bank 35,406 St. Martin Bank and Trust 68,842 Teche Bank and Trust Co. 41,885 Teche Federal Savings Bank 23,402
Total parish bank deposits $341,438 ========
Regulation -
As a bank holding company, Teche Bancshares, Inc. is subject to the Bank Holding Company Act of 1956, as amended (the "Act"). The Act subjects Teche Bancshares, Inc. to supervision and regulation by the Federal Reserve Board, which includes periodic examinations and the obligation of Teche Bancshares, Inc. to file semi-annual and annual reports with the Federal Reserve Board. The Act requires prior approval by the Federal Reserve Board for acquisitions of more than 5 percent of the voting shares or substantially all of the assets of any bank or bank holding company. The Act prohibits Teche Bancshares, Inc. from engaging in any business other than banking or bank-related activities specifically allowed by the Federal Reserve Board. The Act also prohibits Teche Bancshares, Inc. and its subsidiary from engaging in certain tie-in arrangements in connection with the extension of credit, the lease or sale of property or the provision of any services. Under Title VI of the Financial Institutions, Reform, Recovery and Enforcement Act of 1989, the Act has been amended to authorize bank holding companies to acquire savings and thrift institutions without tandem operations restrictions. Teche Bancshares, Inc.'s one banking subsidiary ("The Bank") is subject to a variety of regulations concerning the maintenance of reserves against deposits, limitations on the rates that can be charged on loans or paid on deposits, branching, restrictions on the nature and amounts of loans and investments that can be made and limits on daylight overdrafts. The Bank is regulated by the Federal Deposit Insurance Corporation.
The Bank is limited in the amount of dividends they may declare. Prior approval must be obtained from the appropriate regulatory authorities before dividends can be paid by the Bank to Teche Bancshares, Inc. if the amount of adjusted capital, surplus and retained earnings are below defined regulatory limits. The Bank is also restricted from extending credit or making loans to or investments in Teche Bancshares, Inc. and certain other affiliates as defined in the Federal Reserve Act. Furthermore, loans and extensions of credit are subject to certain other collateral requirements.
The Federal Reserve Board has established guidelines with respect to the maintenance of appropriate levels of capital by registered bank holding companies and banks.
"Primary capital" for this purpose includes common stock, surplus, undivided profits, contingency and other capital reserves, and the allowance for loan losses. "Total capital" consists of primary capital plus secondary capital, which includes certain limited-life preferred stock and long-term debt that meets certain maturity and preference ranking criteria.
In January, 1989, the Federal Reserve Board issued risk-based capital guidelines to assist in the assessment of the capital adequacy of bank holding companies and banks. These guidelines include a new definition of capital and a framework for calculating risk-weighted assets by assigning assets and off-balance sheet items to broad risk categories. The risk-based capital guidelines also establish a schedule for achieving the minimum supervisory standards and provide for transitional arrangements during a phase-in-period (beginning year end 1990) to facilitate adoption and implementation of the measure at the end of 1997.
The table below indicates the Bank's capital measures at December 31, 2000. The bank meets the risk-based capital guidelines at December 31, 2000 as follows:
Regulatory Bank's Requirement Capital
Risk-based capital ratios: Tier 1 4.0% 17.15% ===== ====== Tier 2 - % 1.06% ===== ====== Total risk-based capital ratio 8.0% 18.21% ===== ======
Additional Financial Information - Average Balance Sheets: (in thousands) December 31, 2000 1999 1998 ASSETS ------ ----- ------
Cash and due from banks $ 1,840 $ 1,905 $ 1,794 Interest-bearing deposits in banks 70 48 135 Investments securities: U. S. Treasury securities 400 400 524 Federal agency securities 16,887 21,259 20,001 States and political subdivisions 1,106 1,166 1,218 Other securities 411 373 346 ------ ------ ------ Total investment securities 18,804 23,198 22,089
Federal funds sold 704 1,054 2,486 Loans, net of allowance for losses 25,322 19,519 15,038 Bank premises, and equipment 714 771 712 Accrued interest receivable 334 336 320 Other real estate owned 207 226 230 Other assets 196 275 350 --------- --------- --------- Total assets $48,191 $47,332 $43,154 ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities: Deposits - Demand $ 6,744 $ 6,885 $ 6,299 NOW and MMDA accounts 7,288 6,731 6,465 Savings 3,832 3,894 3,718 Time (100,000 and over) 10,029 11,043 10,177 Other time 12,249 11,075 10,504 ------ ------ ------ Total deposits 40,142 39,628 37,163 Federal funds purchased 33 131 3 Other borrowed funds 3,481 3,197 1,957 Securities repurchased 0 150 0 Accrued interest payable 195 159 158 Other liabilities & accrued expense 331 407 507 ------ ------ ------ Total liabilities 44,182 43,672 39,788 ------ ------ ------ Stockholders' equity: Common stock ($10 par value, 100,000 shares authorized, 28,125 shares issued and outstanding) 281 281 281 Surplus 1,139 1,139 1,139 Undivided profits 2,230 1,881 1,587 Paid in capital 380 380 380 Total stockholders' equity 4,030 3,681 3,387 Less: Treasury stock, at cost (21) (21) (21) -------- -------- -------- Net stockholders' equity 4,009 3,660 3,366 -------- -------- --------
Total liabilities and stockholders' equity $48,191 $47,332 $43,154 ======== ======== ========
Additional Financial Information (continued) -
Analysis of Net Interest Earnings Based on Average Amounts Outstanding: (in thousands) Year Ended December 31, 2000 1999 1998 Interest earning assets: Interest-bearing deposits, in banks $ 70 $ 48 $ 135 Interest earned on interest- bearing deposits 4 2 9 Yield on interest-bearing deposits 6.2% 4.3% 6.7% ====== ====== ======
U. S. Treasury and federal agency securities $17,288 $21,659 $20,524 Interest earned on U. S. Treasury and federal agency securities 1,129 1,237 1,190 Yield on U. S. Treasury and federal agency securities 6.5% 5.7% 5.8% ====== ====== ======
Obligations of states and political subdivisions $1,106 $1,165 $1,218 Interest earned on obligations of states and political subdivisions 51 52 53 Yield on obligations of states and political subdivisions 4.6% 4.5% 4.5% ====== ====== ======
Other securities $411 $373 $346 Interest/dividends earned on other securities 24 15 15 Yield on other securities 5.8% 4.1% 4.3% ====== ====== ======
Federal funds sold $ 704 $ 1,054 $2,486 Interest earned on federal funds sold 43 53 132 Yield on federal funds sold 6.1% 5.0% 5.3% ====== ====== ======
Net loans $25,322 $19,519 $15,038 Interest and fees earned on net loans 2,375 1,859 1,483 Yield on net loans 9.4% 9.5% 9.9% ====== ====== ======
Total interest earning assets $44,899 $43,819 $39,748 Interest earned on total interest-earning assets 3,626 3,218 2,883 Yield on total interest-earning assets 8.1% 7.3% 7.3% ====== ====== ======
Interest bearing liabilities: NOW and MMDA accounts $7,288 $ 6,731 $6,465 Interest paid on NOW AND MMDA accounts 157 144 141 Average rate on NOW AND MMDA accounts 2.2% 2.1% 2.2% ====== ====== ======
Additional Financial Information (continued) -
Analysis of Net Interest Earnings Based on Average Amounts Outstanding (continued): (in thousands) Year Ended December 31, 2000 1999 1998
Savings $ 3,832 $ 3,894 $3,718 Interest paid on savings 76 77 74 Average rate paid on savings 2.0% 2.0% 2.0% ====== ====== ======
Time deposits - $100,000 and over $10,029 $11,043 $10,177 Interest paid on time deposits, $100,000 and over 544 538 525 Average rate paid on time deposits, $100,000 and over 5.4% 4.9% 5.2% ====== ====== ======
Other time deposits $12,249 $11,074 $10,503 Interest paid on other time deposits 633 525 530 Average rate paid on other time deposits 5.2% 4.7% 5.0% ====== ====== ======
Federal funds purchase $ 33 $131 $ 3 Interest paid on federal funds purchased 2 7 - Average rate paid on federal funds purchased 5.9% 5.5% 7.6% ====== ====== ======
Other borrowed funds $3,481 $3,197 $1,956 Interest paid on other borrowed funds 204 181 114 Average rate paid on other borrowed funds 5.9% 5.7% 5.8% ====== ====== ======
Securities repurchased $ - $ 150 $ - Interest paid on securities repurchased - 8 - Average rate paid on securities repurchased 0.0% 5.1% 0.0% ====== ====== ======
Total interest bearing liabilities $36,912 $36,220 $32,823 Interest paid on total interest bearing liabilities 1,616 1,480 1,384 Average rate on total interest bearing liabilities 4.4% 4.1% 4.2% ====== ====== ======
Net yield on interest-earning assets (net interest- earnings divided by total interest-earning assets 4.5% 4.0% 3.8% ====== ====== ======
Changes in Interest Income and Expenses -
The following table shows, for the periods indicated, the change in interest income and interest expense for each major component of interest-earning assets and interest-bearing liabilities attributable to (i) changes in volume (change in volume multiplied by old rate), (ii) changes in rates (change in rate multiplied by old volume) and (iii) changes in rate/volume (change in rate multiplied by the change in volume). The change in interest income or expense attributable to the combination of rate variance and volume variance is included in the table, but such amount has also been allocated between, and included in the amounts shown as, changes due to rate and changes due to volume. The allocation of the change due to rate/volume variance was made in proportion to the amounts due solely to rate variance and solely to volume variance, which amounts are not included in the table. Balances of non-accrual loans and related income recognized have been included for computational purposes. Yields of tax exempt securities have not been computed on a tax equivalent basis.
Year Ended December 31, (dollars in thousands)
1997 v. 1998 Increase (Decrease) Due to Volume Rate Rate/Volume Total
Interest earnings assets: Increase (decrease) - Interest bearing deposits in banks - - 9 9 U. S. Treasury & Federal Agency Sec. 138 (110) (13) 15 State and political subdivisions 8 1 - 9 Federal Funds sold 83 - - 83 Net loans 166 - - 166 Total interest earning assets 395 (109) (4) 282
Interest-bearing liabilities: Increase (decrease) - NOW and MMDA accounts (1) (7) - (8) Savings 6 - - 6
Time deposits, $100,000 and over 142 - - 142 Other time deposits 3 - - 3 Federal funds purchased (2) - - (2) Securities repurchased (2) (2) 2 (2) Notes payable - stockholder - - - - Total interest-bearing liabilities 146 (9) 2 139
Increase (decrease) in net interest income 249 (100) (6) 143 ===== ===== ===== =====
1998 v. 1999 Increase (Decrease) Due to Volume Rate Rate/Volume Total
Interest earnings assets: Increase (decrease) - Interest bearing deposits in banks (6) (3) 2 (7) U. S. Treasury & Federal Agency Sec. 66 (21) (1) 44 State and political subdivisions (2) - - (2) Federal Funds sold (76) (7) 4 (79) Net loans 444 (60) (18) 366 Total interest earning assets 426 (91) (13) 322
Interest-bearing liabilities: Increase (decrease) - NOW and MMDA accounts 6 (6) - 0 Savings 4 - - 4 Time deposits, $100,000 and over 45 (31) (3) 11 Other time deposits 29 (32) (2) (5) Federal funds purchased 10 - (3) 7 Securities repurchased - - 8 8 Notes payable - stockholder - - - - Other Borrowed Funds 72 (2) (1) 69 Total interest-bearing liabilities 166 (71) (1) 94
Increase (decrease) in net interest income 260 (20) (12) 228 ===== ===== ===== =====
1999 v. 2000 Increase (Decrease) Due to Volume Rate Rate/Volume Total
Interest earnings assets: Increase (decrease) - Interest bearing deposits in banks 1 1 - 2 U. S. Treasury & Federal Agency Sec. (249) 173 (35) (111) State and political subdivisions (3) 1 - (2) Federal Funds sold (18) 12 (4) (10) Net loans 551 (20) (6) 525 Total interest earning assets 282 167 (45) 404
Interest-bearing liabilities: Increase (decrease) - NOW and MMDA accounts 12 7 1 20 Savings (1) - - (1) Time deposits, $100,000 and over (50) 55 (5) - Other time deposits 55 55 6 116 Federal funds purchased (5) 1 - (4) Securities repurchased (8) (8) 8 (8) Other Borrowed Funds 16 6 1 23 Total interest-bearing liabilities 19 116 11 146
Increase (decrease) in net interest income 263 51 (56) 258 ===== ===== ===== =====
Interest Sensitivity -
The Company's policy for interest-rate sensitivity management is to control the exposure of net interest income to interest rate movements. The relationship or gap between repricing dates of interest-earning assets and interest-bearing liabilities must be actively monitored and flexible enough to take advantage of changes in market rates. The Company follows such a policy and responds to market change by adjusting the structure of the assets and liabilities repricing within comparable time intervals. This enables the Company to respond to the volatility of interest rates, and thereby capitalize on profit opportunities while minimizing adverse changes in earnings.
The following table reflects the year-end position (in thousands) of the Company's interest-earning assets and interest-bearing liabilities which can either reprice or mature within the designated time periods. The interest sensitivity gaps can vary day-to-day and are not necessarily a reflection of the future. In addition, certain assets and liabilities within the same designated time period may nonetheless reprice at different times and at different levels.
After 1 Within Year But After 5 Non-interest 1 year Within 5 Years Earnings Total
ASSETS
Cash and due from banks $ - $ - $ - $ 2,714 $ 2,714 Int. Bearing deposits in banks 84 - - - 84 Securities available for sale 1,757 9,338 4,361 - 15,456 Securities held to maturity 2,553 583 25 - 3,161 Other securities - - - 431 431 Federal funds sold 100 - - - 100 Loans 9,476 7,703 10,459 - 27,638 Other assets - - - 1,417 1,417 ------- ------- ------ ------- ------- Total assets $ 13,970 $17,624 $14,845 $4,562 $51,001 ======= ======= ====== ======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Demand deposits $ - $ - $ - $ 7,045 $ 7,045 Interest-bearing deposits: NOW and MMDA's 2,642 6,164 - - 8,806 Savings 1,061 2,475 - - 3,536 Time, $100,000 and over 8,687 2,215 - - 10,902 Other time 10,982 615 - - 11,597
Other borrowed funds 144 673 3,434 - 4,251 Other liabilities - - - 469 469 Stockholder's equity - - - 4,395 4,395 ------- ------- ------ ------- ------- Total liabilities and stockholder's equity $23,516 $12,142 $3,434 $11,909 $51,001 ======= ======= ====== ======= ======= Interest rate sensitivity gap $(9,546) $ 5,482 $11,411 $(7,347) ======= ======= ====== =======
Investment Portfolio -
The following table indicates the composition of the Company's investments (in thousands) at December 31, 2000, 1999 and 1998 and shows the maturity distribution by carrying amount and yield (not on a taxable equivalent basis) of the Company's investment portfolio at December 31: Amortized Unrealized Unrealized Fair Cost Gains Losses Value
Securities available for sale: U.S. Government and Agency Securities $ 2,788 $ 9 $ (6) $ 2,791 Mortgage-backed securities 12,643 53 (31) 12,665 ------ --- ---- ------ Totals 15,431 62 (37) 15,456
Securities held to maturity: U.S. Government and Agency Securities - - - - State and Municipal Securities 945 5 - 950 Mortgage-backed Securities 2,216 - (4) 2,212 ------- --- ---- ------ Totals 3,161 5 (4) 3,162
Other Securities 431 - - 431 ------- --- ---- ------ Totals 431 - - 431
Total securities $19,023 $ 67 $(41) $19,049 ======= ==== ===== ========
Amortized Unrealized Unrealized Fair Cost Gains Losses Value
Securities available for sale: U.S. Government and Agency Securities $ 2,298 $ - $(54) $ 2,244 Mortgage-backed securities 15,583 30 (87) 15,526 ------ --- ---- ------ Totals 17,881 30 (141) 17,770
Securities held to maturity: U.S. Government and Agency Securities - - - - State and Municipal Securities 1,153 5 (2) 1,156 Mortgage-backed Securities 469 - (3) 466 ------- --- ---- ------ Totals 1,622 5 (5) 1,622
Other Securities 387 - - 387 ------- --- ---- ------ Totals 387 - - 387
Total securities $19,890 $ 35 $(146) $19,779 ======= ==== ===== ========
Amortized Unrealized Unrealized Fair Cost Gains Losses Value
Securities available for sale: U.S. Government and Agency Securities $ 2,399 $ 17 $ - $ 2,416 Mortgage-backed securities 15,771 152 (5) 15,918 ------ --- ---- ------ Totals 18,170 169 (5) 18,334
Securities held to maturity: U.S. Government and Agency Securities 206 - - 206 State and Municipal Securities 1,273 27 - 1,300 Mortgage-backed Securities 4,104 7 - 4,111 ------- --- ---- ------ Totals 5,583 34 - 5,617
Other Securities 354 - - 354 ------- --- ---- ------ Totals 354 - - 354
Total securities $24,107 $203 $ (5) $24,305 ========= ==== ===== ========
Investment Portfolio (Continued) -
Due After Due After Due in One Year Five Years One Year But Before But Before Due After or Less Five Years Ten Years Ten Years
Securities available for sale: U.S. Government and Agency Securities $ 400 $ 2,392 $ - $ - Mortgage-backed securities 1,358 6,947 1,462 2,899 ------ ----- ----- ----- Totals 1,758 9,338 1,462 2,899
Securities to be held to maturity: State and municipal securities 361 583 - - Mortgage-backed securities 2,193 - - 25 ------ ----- ----- ----- Totals 2,554 583 - 25
Other securities - - - 431
Total $4,312 $ 9,921 $1,462 $3,354 ====== ======= ======= ======
Weighted Average Yield
Securities available for sale: U.S. Government and Agency Securities 5.9% 6.2% 0.0% 0.0% ====== ====== ====== =====
Mortgage-backed securities 7.2% 7.1% 7.7% 7.5% ====== ====== ====== =====
Securities to be held to maturity: State and municipal securities 7.6% 6.4% 0.0% 0.0% ====== ====== ====== ======
Mortgage-backed securities 7.2% 0.0% 0.0% 0.0% ====== ====== ====== ======
Other securities 0.0% 0.0% 0.0% 5.8% ====== ====== ====== ======
Yields on tax exempt obligations have not yet been computed on a tax-equivalent basis. Loan Portfolio Information -
Types of Loans: 2000 1999 1998 1997 1996
Real estate loans $14,479 $11,501 $ 7,032 $ 8,474 $ 7,292 Commercial and industrial loans 10,258 8,594 7,128 2,560 2,630 Personal and consumer loans 3,157 2,689 2,381 2,897 3,006 All other loans 19 37 33 12 27 ------ ------ ----- ----- ----- Totals 27,913 22,821 16,574 13,943 12,955 Less: Unearned income (5) (16) (47) (65) (88) Allowance for loan losses (270) (233) (173) (171) (158) ------ ------ ----- ----- ----- Net loans $27,638 $22,572 $16,354 $13,707 $12,709 ======= ======= ======= ======= =======
Maturities and Sensitivities of Loans to Changes in Interest Rates (in thousands)
Repricing Repricing Repricing Repricing in one After one After five After Year or But Before but Before Ten 2000 less five Years Ten Years
Real estate $14,479 $ 949 $3,657 $3,581 $6,292 Commercial and industrial 10,258 7,396 2,299 422 141 Personal and consumer 3,157 1,387 1,747 23 - All other 19 19 - - - -------- -------- ------- ------ ------ Totals $27,913 $ 9,751 $7,703 $4,026 $6,433 ======== ======== ======= ====== ======
All loans due after one year are at predetermined interest rates.
Non-accrual, Past Due, Restructured and Impaired Loans: (in thousands) December 31, December 31, 2000 1999
Non-accrual loans $ - $ - ===== ===== Restructured loans $ - $ - ===== ===== Impaired loans $ - $ - ===== ===== Accruing loans past due 90 days or more at year end $148 $ 11 ===== =====
The Bank's policy is to place loans on non-accrual whenever it appears that interest will not be collected. Management's list of potential problem loans indicated a principal balance of $249,912 as of December 31, 2000.
At December 31, 2000, management believes that potential problem loans with credit problems have been adequately reserved for in the allowance for loan loss accounts.
The Bank has taken an aggressive approach to consumer lending yet management is still very conservative in making credit decisions. Management feels that by increasing the Bank's consumer loan base, it can spread risk in the loan portfolio and increase loan demand and profit margin at the same time.
Summary of Loan Loss Experience: December 31, 2000 1999 Balance, beginning of year $ 233 $ 173
Provision added to operations 37 60 --- --- Charge-offs: Personal loans 4 6 Business loans - - --- --- Total Charge off's 4 6 Recoveries: Personal loans 3 2 Business loans 1 4 --- --- Total Recoveries 4 6
Net allowance activity 37 60
Balance, end of year $ 270 $ 233 ===== ===== Ratio of allowance activity during the period to average loans outstanding during the period .15% .31% ===== =====
In determining the adjustments charged in operations, management considered the overall risk of loan losses in its loan portfolio, as well as considering the potential losses that might be incurred on specific loans.
Management does not allocate its allowance for loan loss by asset category; however, in determining the balance of the allowance for loan loss account, management considers the various risks inherent with the Bank's loan portfolio, as well as specific risk of certain loans. The allowance for loan losses is established through a provision for loan losses charged to expenses. Loans are charged against the allowance for loan losses when management believes that the collectibility of the principal is unlikely. The allowance is an amount that management believes will be adequate to absorb possible losses on existing loans that may become uncollectible, based on evaluations of the collectibility of loans and prior loan loss experience. The evaluations take into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans and current economic conditions that may affect the borrower's ability to pay.
Management approximates that the amount of charge-offs during the next full year of operation will be as follows:
(in thousands) Real estate loans $ - Commercial & industrial - Personal & consumer 20 All other loans - ------ Total $ 20 ======
Deposits -
See analysis of net interest earnings for average deposits and average rate paid. Non-interest bearing demand deposits have not been included in the net interest earnings, because they do not pay interest. Therefore, the average interest rate paid would be zero. The average balances for the past three years can be found on the average balance sheets.
Maturities of Time Certificates over $100,000 or More:
December Three Over Three Over Six Over 31, Months Through Through Twelve 2000 or less Six Twelve Months
Time Certificates - $100,000 or more $10,902 $1,707 $3,070 $3,910 $2,215 ====== ====== ====== ====== ======
Return on Average Equity and Assets -
December 31, December 31, December 31, 2000 1999 1998
Return on average assets 1.1% 0.9% .9% ===== ===== =====
Return on average equity 14.5% 11.2% 11.4% ===== ===== =====
Dividend payout ratio 7.6% 10.2% 10.8% ===== ===== =====
Equity to asset ratio 8.4% 7.8% 7.8% ===== ===== =====
Capital adequacy ratio 9.1% 8.7% 8.3% ===== ===== =====
Item 2.
Item 2. Properties
The main banking house is made of concrete and brick and has 3,200 square feet of working area. The main banking house and concrete parking lot are situated on three adjoining pieces of property on the outskirts of St. Martinville, Louisiana. The Bank also owns a piece of property on the outskirts of St. Martinville, Louisiana, on which they have a branch made of concrete and brick which has 1,660 square feet of working area. The Coteau Branch is constructed of brick with 1,170 square feet of working area. None of these properties carry a mortgage.
Item 3.
Item 3. Legal Proceedings
The Company is not involved in any legal actions.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders, through the solicitation of proxies or otherwise during the fourth quarter for calendar year ended December 31, 2000.
FORM 10-K
TECHE BANCSHARES, INC. PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Teche Bancshares, Inc.'s stock is not listed on any security exchange, and is not registered with the National Association of Security Dealers. Due to the lack of an active trading market, the Company does not have available information to furnish the high and low sales price on the range of bid and asked quotations for its stock. However, based upon stock sales during the fourth quarter of 2000, it is believed that the stock of the Company trades for approximately $90.00 per share. There can be no assurance that the limited inquiries adequately reflect the high and low bids on prices for the Holding Company's stock.
At December 31, 2000, Teche Bancshares, Inc. had approximately 371 stockholders.
Teche Bancshares, Inc. paid a dividend of $1.60 per share in 2000 and $1.50 per share in 1999 and in 1998. Future dividends paid by the Holding Company will depend upon the Bank's ability to pay dividends, which is restricted by applicable federal and state statutes.
Teche Bank & Trust Company is a Louisiana state banking corporation. Applicable Louisiana law prohibits a state bank from paying a dividend if its surplus remaining after payment of the dividend would be less than half the aggregate par value of its outstanding stock. In addition, a state bank is required to obtain the prior approval of the Louisiana Commissioner of Financial Institutions before declaring or paying a dividend in a given year if the total of all dividends declared and paid by the state bank during the year would exceed the total of its net profit for that year combined with the net profit from the immediately preceding year.
Item 6.
Item 6. Selected Financial Data (in thousands except per share)
2000 1999 1998 1997 1996
Investment securities $19,048 $19,779 $24,271 $19,578 $18,961
Loans 27,638 22,572 16,354 13,707 12,709
Deposits 41,885 40,185 38,097 33,721 32,375
Stockholders equity 4,395 3,766 3,878 3,242 2,847
Operating revenues 4,068 3,605 3,247 2,933 2,665
Net interest income 2,009 1,736 1,497 1,476 1,310
Provision for loan losses (37) (60) - (10) -
Net income 584 411 387 363 325
Earnings per share 20.91 14.72 13.87 12.98 11.65
Total assets 51,002 47,457 45,283 37,305 33,552
Cash dividend: Per share 1.60 1.50 1.50 1.50 1.35 Total 45 42 42 42 38
Item 7.
Item 7. Managements's Discussion and Analysis of Financial Condition and Results of Operations
2000 IN REVIEW
Our net income for the years ended December 31, 2000, 1999, and 1998 was $583,954, $411,164, and $387,395, respectively. Net income increased $172,790 in 2000 from $411,164 for the year ended 1999. Net income for 1999 increased $23,769 from $387,395 in 1998. Earnings per common share were $20.91 for 2000, $14.72 for 1999, and $13.87 for 1998. Return on average assets and return on equity was 1.21% and 15.5% for 2000. Return on average assets and return on equity was .9% and 11.2% for 1999. For 1998, return on average assets and return on equity was .9% and 11.4%.
Highlights for 2000 were as follows:
1. The year 2000 set a new record for profitability for your Bank. Net income increased 42% over that of the prior year. Return on Equity for the year 2000 was 15.5%.
2. For the year ended 2000, we increased our total assets by 1.7 percent. Average loans increased 29.7% over the average of 1999. This positive trend marks the ninth consecutive year of asset growth for Teche Bank.
3. We have embarked on an expansion that will double the size of our Coteau Office. After five years of operations, we have outgrown our existing building. Our Coteau office continues to be a thriving source of growth and profitability for the Bank.
EARNINGS ANALYSIS
Net interest Income
The largest source of operating revenue for the Company is net interest income. Net interest income represents the difference between total interest income earned on earning assets and total interest expense paid on interest-bearing liabilities. The amount of interest income is dependent upon many factors including the volume and mix of earning assets, the general level of interest rates and the dynamics of changes in interest rates. The cost of funds necessary to support earning assets varies with the volume and mix of interest-bearing liabilities and the rates paid to attract and retain such funds.
During the year ended 2000, we borrowed $1,240,000 in amortizing advances from the Federal Home Loan Bank giving us a balance in amortizing advances totalling $4,252,305. These fixed rate advances were used to offset fixed rate loans. These funds give us the ability to extend the maturities of our liabilities to better match them with our long-term assets. The average rate obtained on all advances borrowed was 6.1%.
Net interest income was $1,972,491 in 2000, compared to $1,675,882 in 1999. This change represents an increase of $296,609 over the previous year. We were able to increase our net interest income for the year ended 2000 because of growth in the bank's total loans.
Net interest income was $1,675,882 in 1999, compared to $1,496,636 in 1998. This change represents an increase of $179,246 over the previous year. Net interest income for the year ended 1999 increased due to growth in the bank's total loans.
Provision for Loan Losses
The provision for loan losses is the amount charged against current earnings which management believes is necessary to maintain the allowance at an adequate level at the time the charge is taken, considering the watch list trends, net charge-off experience, size of the loan portfolio and general economic conditions and trends. During 2000, we added $36,663 to our reserve for loan losses to assure that we had adequate reserves for the loan growth that we experienced. During 1999, we added $60,000 to our reserve for loan losses. During 1998, we made no addition to our reserve for loan losses. The allowance for loan loss at December 2000 was $270,198 or .96% of gross loans.
Other Income
Other income was $442,031 for 2000 as compared to $404,505 in 1999. The increase in other income was mostly due to an increase in income from service charges on demand deposit accounts, an increase in NSF fee income and an increase in commissions on credit life.
Other income was $404,505 for 1999 as compared to $363,528 in 1998. The increase in other income was mostly due to an increase in income from service charges on demand deposit accounts, an increase in the NSF fee charge and an increase in commissions on credit life.
Other Expenses
Other expenses were $1,570,797 for 2000 compared to $1,484,040 in 1999. The increase in other expense was mostly the result of increases in salaries and employee benefits. Salaries and employee benefits increased due to compensation increases made at the end of 1999 and due to a new bonus system that was implemented. The bank has adopted an incentive bonus system that will compensate bank employees if certain return on equity targets are met. During the year ended December 31, 2000, bank employees earned the maximum bonus.
Other expenses were $1,484,040 for 1999 compared to $1,311,240 in 1998. The increase in other expense was the result of increases in salaries and employee benefits, occupancy expenses, data processing expenses and other operating expenses. Salaries and employee benefits increased due to compensation increases made at the end of 1998. The increase in occupancy expenses and data processing expenses was due to depreciation and maintenance for a full year on the new check sorter and image capture system. Other operating expenses increased due to increases in office supplies expenses and the devaluation of other real estate owned by the bank.
Investments
During the first quarter of 1994 the Company adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (FAS 115). This pronouncement provides guidance regarding the appropriate classification of debt and equity securities in a company's balance sheet and also provides for the recognition of unrealized holding gains and losses as a result of changes in the fair value of securities available for sale. The carrying value of securities held to maturity continues to be amortized cost. Securities available for sale are now carried at their estimated fair value in accordance with FAS 115.
The carrying value of securities available for sale at the end of 2000 was adjusted up $25,486 to reflect an increase in market value from amortized cost. Securities held to maturity had a market value more than amortized cost of $444 at year end. Management considers the increase in value of the securities portfolio to be temporary in nature.
The carrying value of securities available for sale at the end of 1999 was adjusted down $110,667 to reflect a decrease in market value from amortized cost. Securities held to maturity had a market value less than amortized cost of $168 at year end. Management considers the decrease in value of the securities portfolio to be temporary in nature.
Loans
At December 31, 2000, loans, net of allowance for loan losses and unearned discount, were $27,638,294. This was an increase of $5,066,324 over $22,571,970 at the end of 1999. Average loans during the year 2000 were $25,545,763 up approximately $5,851,597 from the average of 1999.
At December 31, 1999, loans, net of allowance for loan losses and unearned discount, were $22,571,970. This was an increase of $6,218,002 over $16,353,968 at the end of 1998. Average loans during the year 1999 were $19,518,893 up approximately $4,480,931 from the average of 1998.
FINANCIAL CONDITION ANALYSIS
Deposits
At December 31, 2000 total deposits were $41,885,303 an increase of $1,700,093 over that of the prior year end balance. Average deposits for the year ended 2000 were $40,141,865 as compared to $39,627,441 in 1999. Average deposits are up due to growth in our local economy.
At December 31, 1999 total deposits were $40,185,210 an increase of $2,148,126 over that of the prior year end balance. Average deposits for the year ended 1999 were $39,627,441 as compared to $37,162,877 in 1998. Average deposits are up due to growth in our local economy and growth from some of our larger depositors.
Time deposits of $100,000 and greater were $10,902,040 at the end of 2000, a decrease of $390,815 over that of the prior year. The decrease was due to increased competition for Public Funds during the year resulting in less bids won. We bid aggressively to get Public Funds when we can earn a spread on these incremental funds. However, the increase in public fund interest from other banks has made these funds less attractive. We hold $2,000,000 in jumbo certificates from the State of Louisiana. Rates on these funds are attractive compared to alternatives for funding.
Time deposits of $100,000 and greater were $11,292,855 at the end of 1999, an increase of $953,814 over that of the prior year. The increase was due to increases in Public Funds from bids won during the year and from growth from several of our larger depositors. We also held $2,000,000 in jumbo certificates from the State of Louisiana during the year ended 1999.
Asset/Liability Management
The objective of asset/liability management is to maximize net interest income while balancing liquidity and capital needs and minimizing interest rate risk. The Asset/Liability Committee (ALCO) develops and reviews strategies which assist in the achievement of the Bank's goals. Strategies may include purchases and sales of securities to alter maturities and yields, and changes in the mix of earning assets and funding sources.
Changes in interest rates create interest rate risk. Interest rate risk is measured each month by using a static gap analysis. Based on the results of this model the ALCO committee determines the appropriate strategies and goals to follow.
Liquidity is needed to meet the cash requirements for deposit withdrawals and the funding of loans. A stable base of funding sources and an adequate level of assets readily convertible into cash provide liquidity. In order to maintain adequate liquidity, management attempts to ladder the maturities and cash flows of its investment portfolio so that cash flows will be available each year to reinvest or to meet the liquidity demands of the bank.
Credit Risk Management
Teche Bancshares, Inc. manages its credit risk by maintaining high credit underwriting standards and providing an adequate allowance for loan losses. We concentrate our lending to areas within our geographic market in order to keep the cost of managing assets low and in order to be informed of developments affecting our credits. Our credit underwriting standards emphasize cash flow and repayment ability and ensure that loans are properly structured and collateralized. An adequate allowance for loan losses provides for losses inherent in the loan portfolio.
Nonperforming Assets
Nonaccrual loans and other real estate owned are included in nonperforming assets. As of December 31, 2000, nonperforming assets were $197,520, a decrease of $19,800 from 1999. As of December 31, 1999, nonperforming assets were $217,320, a decrease of $22,956 from 1998. Nonaccrual loans at December 31, 2000, 1999 and 1998 were $0, $0, and $10,556, respectively. Other real estate owned was $197,520, $217,320, and $229,720 at December 31, 2000, 1999, and 1998, respectively. The improvement in nonperforming assets was accomplished through the reduction in non-accrual loans and the write-down of other real estate owned.
Watch List
The Bank's watch list includes loans which, for management purposes, have been identified as requiring a higher level of monitoring. These loans require monitoring due to conditions which, if not corrected, could increase credit risk. Watch list loans totaled $249,912, $227,555, and $223,904 at December 31, 2000, 1999, and 1998, respectively.
Capital and Dividends
The Company's risk based capital ratios at December 31, 2000 significantly exceeded the minimum regulatory guidelines. The Company's leverage ratio was 8.59% and risk based capital was 18.21%, well above the regulatory minimums of 3%-5% and 8%. The Company's capital to asset ratio including the effect on capital of mark to market changes in value of investments was 8.6% at December 31, 2000. Teche Bancshares, Inc.'s sole source of funds from which to pay dividends to stockholders is Teche Bank & Trust Company. During 2000 Teche Bank & Trust Company declared and paid a dividend to Teche Bancshares, Inc. of $44,680 which was paid to stockholders in the form of a dividend.
Fourth Quarter Results
Net income for the fourth quarter of 2000, 1999, and 1998 was $107,678, $131,577, and $80,466, respectively. The decrease in income for the quarter was due to adjustments to estimates made during the year, the book tax and deferred tax associated with timing differences, and bonuses paid. Income before income tax for the quarter ended December 31, 2000 was $138,963 as compared to $176,545 for the same quarter ended 1999.
Year 2000
Thanks to the diligence of our employees and management, we did not experience any significant disruptions with our computer systems during the year ended December 31, 2000, as the result of the year 2000 date change.
Item 8.
Item 8. Financial Statements and Supplementary Data
The audited financial statements of Teche Bancshares, Inc. are presented on pages 29 to 66.
TECHE BANCSHARES, INC. AND SUBSIDIARY
Financial Report
Years Ended December 31, 2000 and 1999
Page
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS Consolidated balance sheets 2 Consolidated statements of income 3 Consolidated statements of changes in stockholders' equity 4 Consolidated statements of cash flows 5 Notes to consolidated financial statements 6-28
SUPPLEMENTARY INFORMATION
Consolidated schedules of other operating expenses 30 Consolidating schedules - Consolidating balance sheet 32 Consolidating statement of income 33 Consolidating statement of cash flows 34
INDEPENDENT AUDITOR'S REPORT
The Board of Directors Teche Bancshares, Inc. and Subsidiary St. Martinville, Louisiana
We have audited the accompanying consolidated balance sheets of Teche Bancshares, Inc. and Subsidiary as of December 31, 2000 and 1999, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 2000. These consolidated financial statements are the responsibility of the Bank's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Teche Bancshares, Inc. and Subsidiary as of December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the consolidated financial statements taken as a whole. The supplementary information contained on pages 29-34 is presented for purposes of additional analysis and, although not required for a fair presentation of consolidated financial position, results of operations, and cash flows, was subjected to the audit procedures applied in the audits of the consolidated financial statements. In our opinion, the supplementary information is fairly presented in all material respects in relation to the consolidated financial statements taken as a whole.
Kolder, Champagne, Slaven, & Rainey, LLC A Corporation of Certified Public Accountants Breaux Bridge, Louisiana January 25, 2001
TECHE BANCSHARES, INC. AND SUBSIDIARY
Consolidated Balance Sheets December 31, 2000 and 1999 (in thousands)
2000 1999 ASSETS
Cash and due from banks $ 2,714 $ 2,159 Interest bearing deposits w/banks 85 89 Securities available for sale 15,456 17,770 Securities to be held to maturity 3,161 1,622 Other securities 431 387 Federal funds sold 100 1,475 Loans, net of allowance for loan losses and unearned discount on loans 27,638 22,572 Bank premises, furniture, fixtures and equipment 759 733 Accrued interest receivable 399 380 Other real estate owned 198 217 Other assets 61 53 --------- --------- Total assets $51,002 $47,457 ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES Deposits - Non-interest demand $ 7,045 $ 7,109 Interest bearing - NOW and MMDA accounts 8,806 6,424 Savings 3,536 3,740 Time, $100,000 and over 10,902 11,293 Other time 11,597 11,619 --------- -------- Total deposits 41,886 40,185
Accrued interest payable 238 192 Other borrowed funds 4,252 3,141 Other liabilities and accrued expenses 231 173 --------- -------- Total liabilities 46,607 43,691
STOCKHOLDERS' EQUITY Common stock ($10 par value, 100,000 shares authorized, 28,125 shares issued and outstanding) 281 281 Surplus 1,144 1,144 Retained earnings 2,973 2,433 Less: 200 shares of treasury stock (19) (19) Accumulated other comprehensive income 16 (73) --------- -------- Total stockholders' equity 4,395 3,766
Total liabilities and stockholders' equity $51,002 $47,457 =========== ==========
The accompanying notes are an integral part of this statement.
TECHE BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Income Years Ended December 31, 2000, 1999 and 1998 (in thousands)
2000 1999 1998
INTEREST INCOME Interest and fees on loans $2,375 $1,859 $1,483 Interest on investment securities: Interest on securities available for sale 982 1,031 913 Interest on securities to be held to maturity 147 206 277 Obligations of state and political subdivisions 51 52 54 Interest and dividends on other securities 24 15 15 Interest on federal funds(sold 43 53 132 Interest on deposits in banks 4 2 9 ----- ----- ----- Total interest income 3,626 3,218 2,883
INTEREST EXPENSE Interest on deposits 1,410 1,284 1,269 Federal funds purchased 2 7 - Interest on borrowed funds 204 181 114 Interest on securities repurchased - 8 - Other interest 1 2 3 ----- ----- ----- Total interest expense 1,617 1,482 1,386
Net interest income before recovery of possible loan losses 2,009 1,736 1,497
PROVISION FOR POSSIBLE LOAN LOSSES (37) (60) - ----- ----- ----- Net interest income after recovery of possible loan losses 1,972 1,676 1,497
OTHER INCOME Service charges on deposit accounts 341 302 272 Commissions income 54 44 34 ATM income 19 14 13 Net gain on security transactions - 1 2 Net other real estate gain - - 10 Other operating revenue 28 45 32 ----- ----- ----- Total other income 442 404 363
Income before other expenses 2,414 2,080 1,860
OTHER EXPENSES Salaries and employee benefits 871 779 677 Occupancy expenses 216 226 194 Furniture and equipment expenses 34 36 36 Data processing expenses 52 60 39 Net other real estate expense 3 1 10 Other operating expenses 394 381 355 ----- ----- ----- Total other expenses 1,570 1,484 1,311
Income before income taxes 844 596 549
INCOME TAX EXPENSE (BENEFIT) 260 185 162 ----- ------ ----- Net Income $ 584 $ 411 $ 387 ======= ======= ======= Net income per share of common stock-basic $20.91 $14.72 $13.87 ======= ======= ======= Net income per share of common stock-diluted $20.91 $14.72 $13.87 ======= ======= =======
Average shares outstanding 27,925 27,925 27,925 ======= ======= =======
The accompanying notes are an integral part of this statement.
TECHE BANCSHARES, INC. AND SUBSIDIARY Consolidated Statements of Changes in Stockholders' Equity Years Ended December 31, 2000, 1999 and 1998 (in thousands)
Accumulated Common Stk Other Treas. Stk Retained Comprehensive Surplus Earnings Income Total ------- ----- ------ ------- BALANCES, DECEMBER 31, 1997 $1,405 $1,720 $117 $3,242 ------- ----- ------ -------
Net income - 387 - 387
Other Comprehensive Income, Net of income tax of $56
Unrealized gain on securities, net of reclassification adjustment of $1 - - (10) (10) ------- ----- ------ ------- Total Comprehensive Income - 387 (10) 377
Cash Dividend, $1.50 per share - (41) - (41) ------- ----- ------ ------- BALANCES, DECEMBER 31, 1998 $1,405 $2,066 $107 $3,578
Net income - 411 - 411
Other Comprehensive Income, Net of income tax of $38
Unrealized gain on securities, net of reclassification adjustment of $4 - - (181) (181) ------- ----- ------ ------- Total Comprehensive Income - 411 (181) 230
Cash Dividend, $1.50 per share - (42) - (42) ------- ----- ------ ------- BALANCES, DECEMBER 31, 1999 $1,405 $2,435 (74) $3,766 ------- ----- ------ -------
Net income - 584 - 584
Other Comprehensive Income, Net of income tax of $9
Unrealized gain on securities, net of reclassification adjustment of $0 - - 90 90 ------- ----- ------ ------- Total Comprehensive Income - 584 90 674
Cash Dividend, $1.60 per share - (45) - (45) ------- ----- ------ ------- BALANCES, DECEMBER 31, 2000 $1,405 $2,974 16 $4,395 ======= ===== ====== =======
The accompanying notes are an integral part of this statement.
TECHE BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows Years Ended December 31, 2000, 1999 and 1998 (in thousands)
2000 1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 584 $ 411 $ 387 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of bank premises and equipment 98 118 89 (Gain) loss on other real estate owned - - (9) (Increase) decrease in: other assets (7) 62 4 accrued interest receivable (20) (22) (43) accrued interest payable 45 28 9 other liabilities 58 (10) (4) ----- ----- ----- Net cash provided by operating activities 758 587 433 ----- ----- ----- CASH FLOWS FROM INVESTING ACTIVITIES Increase in interest-bearing deposits in banks 5 (15) (71) (Increase) decrease in federal funds sold 1,375 25 (450) Proceeds from sales of securities available for sale - 746 1,200 Proceeds from maturities of securities availible for sale 6,054 4,672 8,361 Proceeds from maturities of securities held to maturity 893 10,711 4,776 Purchases of securities to be held to maturity (3,650) (698) (4,625) Purchases of securities available for sale (2,477) (11,121) (14,415) Net (increase) decrease in loans (5,066) (6,218) (2,647) Capital expenditures for bank premises and equipment (124) (44) (223) (Increase) decrease in other real estate owned 19 13 1 Proceeds from the sale of other real estate owned - - 10 ----- ----- ----- Net cash provided by (used in)investing activities (2,969) (1,929) (8,083) ------- ------- -----
CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in - Demand deposits (64) 314 159 NOW and MMDA 2,381 (319) (1,220) Savings deposits (205) 147 2 Time deposits, >= $100,000 (391) 953 1,451 Other time deposits (21) 992 1,544 Proceeds from long-term debt 1,240 - 3,325 Repayment of long-term debt (128) (119) (65) Dividends paid (45) (41) (41) ----- ----- ----- Net cash provided by financing activities 2,767 1,927 7,595 ------- ------ -----
Net increase (decrease) in cash and cash equivalents 556 584 (55)
CASH AND CASH EQUIVALENTS, beginning of year 2,158 1,574 1,630
CASH AND CASH EQUIVALENTS, end of year $ 2,714 $ 2,158 $ 1,575 ======= ======= =======
CASH PAID DURING THE YEAR
Interest $1,572 $ 1,454 $ 1,377 ====== ======= ======= Income taxes $ 255 $ 141 $ 204 ====== ======= =======
The accompanying notes are an integral part of this statement.
TECHE BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
A. Principles of Consolidation
The accompanying consolidated financial statements dated December 31, 2000, 1999 and 1998, include the accounts of Teche Bancshares, Inc. (Company) and \eche Bank and Trust Company (Bank), its wholly-owned subsidiary. Intercompany transactions and balances have been eliminated in consolidation.
B. Nature of Operations
Teche Bank and Trust Company is a Louisiana chartered state bank engaged in the general banking business since September 27, 1969. The Bank's main office is located in the primary business district of St. Martinville, Louisiana. The Bank also has two branches. One is located on the north side of town on the main thoroughfare. The other branch is located in Coteau, Louisiana, which is in Iberia Parish. This branch was opened in 1995. The population of both areas is largely rural and the economy is based on agriculture, textiles and tourism.
The City of St. Martinville and the Coteau Community are both located in the south central part of Louisiana. The Bank's primary market area is the Ci|y of St. Martinville and its general market area is St. Martin Parish, Louisiana.
C. Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
D. Accounting Changes
During 1998, the Bank adopted Financial Accounting Standards Board (FASB) Statements No. 128, Earnings per Share, and Statement No. 131, Reporting Comprehensive Income. Both of these Statements require restatement; however, the Statements only affect the presentation of information and have no effect on net income or on retained earnings.
E. Basis of Accounting
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles and in conformity with practices within the banking industry.
F. Cash and Cash Equivalents
For the purposes of presentation in the Consolidated Statements of Cash Flows, cash and cash equivalents are defined as those amounts included in the balance sheet caption "cash and due from banks". Cash, cash equivalents and due from banks at December 31 included the following: (in thousands) 2000 1999 1998 Cash and due from banks $2,714 $2,158 $1,575 ========== ========== ==========
The Bank maintains cash balances at several banks. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $100,000. The Bank had deposits at institutions and agency federal funds exceeding the insured amount by approximately $2,385,938.
G. Investment Securities
The Bank's investments in securities are classified in three categories and accounted for as follows:
Trading Securities -
Government Bonds held principally for resale in the near term and mortgage-backed securities held for sale in conjunction with the Bank's mortgage banking activities are classified as trading securities and recorded at their fair values. Unrealized gains and losses on trading securities are included in other income.
At December 31, 2000 and 1999, the Bank did not own any trading securities.
Securities to be Held to Maturity -
Bonds, notes and debentures for which the Bank has the positive intent and ability to hold to maturity are reported at cost, adjusted for amortization of premiums and accretion of discounts which are recognized in interest income using the interest method over the period to maturity.
Securities Available for Sale -
Securities available for sale consist of bonds, notes, debentures and certain equity securities not classified as trading securities nor as securities to be held to maturity.
Unrealized holding gains and losses, net of tax, on available for sale securities are reported as a net amount in other comprehensive income.
Declines in the fair value of individual held-to-maturity securities below their costs that are other than temporary result in write-downs of the individual securities to their fair value. The related write-downs will be included in earnings as realized losses.
Premiums and discounts are recognized in interest income using the interest method over the period to maturity.
Gains and losses on the sale of securities available for sale are determined using the specific-identification method.
H. Loans, Allowance for Loan Losses and Interest Income
Loans are stated at the amount of unpaid principal reduced by unearned discount and an allowance for loan losses. Unearned discount on installment loans is recognized as income over the terms of the loans by the sum-of-months digits method which approximates the interest method. Interest on other loans is calculated and accrued by using the simple interest method on daily balances of the principal amount outstanding.
The allowance for loan losses is established through a provision for loan losses charged to expenses. Loans are charged against the allowance for loan losses when management believes that the collectibility of the principal is unlikely. The allowance is an amount that management believes will be adequate to absorb possible losses on existing loans that may become uncollectible, based on evaluations of the collectibility of loans and prior loan loss experience. The evaluations take into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans and current economic conditions that may affect the borrowers' ability to pay.
Accrual of interest is discontinued on a loan when management believes, after considering economic and business conditions and collection efforts, that the borrowers' financial condition is such that collection of interest is doubtful.
I. Loan Origination Fees and Costs
The Bank charges minimal loan fees and direct origination costs. These charges are recognized as income at the time the loan is made.
J. Bank Premises, Furniture, Fixtures and Equipment
Bank premises, furniture, fixtures and equipment are carried at historical cost less accumulated depreciation. For book purposes, depreciation is computed using the straight-line method over the estimated useful lives of the assets which range from three to thirty-three years. For income tax purposes, depreciation of assets acquired prior to January 1, 1981, is calculated on the straight-line method and depreciation of assets acquired after December 31, 1980, is calculated using the Accelerated Cost Recovery (ACRS) or Modified Accelerated Cost Recovery (MACRS) System of the Internal Revenue Service. Maintenance and repairs which do not extend the life of banking premises and equipment are charged to operating expenses.
K. Other Real Estate Owned
Real estate properties acquired through or in lieu of loan foreclosure are initially recorded at the lower of the Bank's carrying amount or fair value less estimated selling cost at the date of foreclosure. Any write-downs based on the asset's fair value at the date of acquisition are charged to the allowance for loan losses. After foreclosure, these assets are carried at the lower of their new cost basis or fair value less cost to sell. Costs of significant property improvements are capitalized, whereas costs related to holding property are expensed as well as any interest costs. Valuations are periodically performed by management, and any subsequent write-downs are recorded as a charge to operations, if necessary, to reduce the carrying value of a property to the lower of its cost or fair value less cost to sell.
L. Income Taxes
Provisions for income taxes are based on amounts reported in the statements of income (after exclusion of non-taxable income such as interest on state and municipal securities) and include deferred taxes on temporary differences in the recognition of income and expense for tax and financial statement purposes. Deferred taxes are computed as prescribed in Financial Accounting Standards Board (FASB) Statement No. 109, Accounting for Income Taxes.
M. Post-Retirement Health Care and Life Insurance Benefits
The Bank does not pay the costs of providing continuing health care and life insurance benefits for its retired employees.
N. Compensated Absences
Employees of the bank are entitled to paid vacation depending upon length of service. Vacation must be taken in the year accrued and cannot be carried over. Sick leave accumulates on a monthly basis according to the years of service and is available for employees when needed. However, it does not vest nor is it payable at termination of employment. The bank's policy is to recognize the costs of compensated absences when actually paid to employees.
O. Financial Instruments
In the ordinary course of business the Bank has entered into off balance sheet financial instruments consisting of commitments to extend credit, commercial letters of credit and standby letters of credit. Such financial instruments are recorded in the financial statements when they become payable.
The following methods and assumptions were used by the Bank in estimating fair values of financial instruments as disclosed herein:
Cash and cash equivalents -- The carrying amount of cash and short-term instruments approximate their fair value.
Securities to be held to maturity and securities available for sale -- Fair values for investment securities are based on quoted market prices.
Loans receivable -- Fair values for variable and fixed rate loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.
Deposit liabilities -- The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts). The carrying amounts of variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.
Accrued interest -- The carrying amounts of accrued interest approximate their fair values.
Other borrowed funds - The fair value of the Bank's other borrowed funds was estimated using discounted cash flow analyses based on the Bank's current incremental borrowing rates for similar types of borrowing arrangements.
Other liabilities - The carrying amounts of other liabilities approximate their fair values.
Off-balance-sheet instruments -- Fair values for off-balance-sheet lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standing.
(2) Investment Securities
The carrying amounts of investment securities as shown in the consolidated balance sheets of the Bank and their approximate fair values at December 31 were as follows: (in thousands) Amortized Unrealized Unrealized Fair Cost Gains Losses Value
(in thousands) Securities available for sale: December 31, 2000 - U.S. Government and agency securities $ 2,788 $ 9 $ (6) $ 2,791 Mortgage-backed securities 12,642 53 (31) 12,665 ------- --- ------ ------- $15,431 $62 $ (37) $15,456 ======= === ====== =======
Securities available for sale: December 31, 1999 - U.S. Government and agency securities $ 2,298 $ - $(54) $ 2,244 Mortgage-backed securities 15,583 29 (86) 15,526 ------- --- ------ ------- $17,881 $29 $(140) $17,770 ======= === ====== =======
(in thousands) Securities to be held to maturity: December 31, 2000 - State and municipal securities 945 5 - 950 Mortgage-backed securities 2,216 - (4) 2,212 ------- --- ------ ------- $ 3,161 $ 5 $ (4) $3,162 ======= === ====== =======
Securities to be held to maturity: December 31, 1999 - State and municipal securities 1,153 4 (2) 1,155 Mortgage-backed securities 469 - (3) 466 ------- --- ------ ------- $ 1,622 $ 4 $ (5) $1,621 ======= === ====== =======
Investment securities carried at approximately $8,999,699 at December 31, 2000 and $8,280,131 at December 31, 1999 were pledged to secure public deposits and for other purposes required or permitted by law.
Gross realized gains and losses on sales of investment securities for the years ended December 31, were as follows: (in thousands) 2000 1999 Gross realized gains: Mortgage backed securities $ - $ 2 Other securities - - --- ---- Total realized gains $ - $ 2 === ====
Gross realized losses: U.S. government & agency securities $ - $ - Mortgage-backed securities - 1 Other securities - - --- ---- Total realized losses $ - $ 1 === ====
The maturities of debt securities at December 31, 2000 were as follows: (in thousands)
Securities to be Securities Held to Maturity Available for Sale ---------------- ---------------- Amortized Fair Amortized Fair Cost Value Cost Value --------- ----- -------- ----- Due in one year or less $2,553 $2,554 $ 1,763 $ 1,757 Due from one to five years 583 587 9,327 9,338 Due from five to ten years - - 1,448 1,462 Due after ten years 25 21 2,893 2,899 ------ ------ ------- ------- $3,161 $3,162 $15,431 $15,456 ====== ====== ======= =======
For purposes of the maturity table, mortgage-backed securities, which are not due at a single maturity date, have been allocated over maturity groupings based on the weighted- average contractual maturities of underlying collateral. The mortgage-backed securities may mature earlier than their weighted-average contractual maturities because of principal prepayments.
(3) Other Securities
Other securities at December 31 consist of the following stock in industry-related financial institutions:
2000 1999 Shares Amount Shares Amount
Federal Home Loan Bank Dallas 2,805 $280,500 2,368 $236,800 Louisiana Independent Bancshares, Inc. 600 150,000 600 150,000 -------- ------ $430,500 $386,800 ======== ========
These securities are valued at cost. The stock in Federal Home Loan Bank of Dallas is considered to be a restricted security and is required to be maintained.
(4) Loans
Major classifications of loans are as follows: (in thousands) 2000 1999
Real estate loans $14,479 $11,502 Commercial and industrial loans 10,258 8,594 Personal and consumer loans 3,157 2,689 All other loans (including overdrafts) 19 36 ------- ------- 27,913 22,821 Less: Unearned discount (5) (16) Allowance for loan losses (270) (233) ------- ------- Loans, net $27,638 $22,572 ======= =======
Concentrations of credit risk arising from financial instruments exist in relation to certain groups of customers. A group concentration arises when a number of counterparties have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. The Bank does not have a significant exposure to any individual customer or counterparty. A geographic concentration arises because the Bank operates primarily in the south central part of Louisiana. The Bank also has a concentration in real estate loans.
The amount of credit risk (which approximates carrying value) represents the maximum accounting loss that would be recognized at the reporting date if counterparties failed completely to perform as contracted and any collateral or security proved to be of no value. The bank has experienced little difficulty in accessing collateral (described in Note 17) when required.
Loans on which the accrual of interest has been discontinued or reduced amounted to $0 at December 31, 2000 and 1999, respectively. If interest on those loans had been accrued, such income would have approximated $0 for 2000 and 1999, and $1,135 for 1998. The Bank did not recognize any interest income on nonaccrual loans during 2000.
Changes in the allowance for loan losses are as follows: (in thousands) 2000 1999 1998
Balance, beginning of period $233 $173 $171 Provision added to operations 37 60 - Loans charged off (4) (6) (11) Recoveries 4 6 13 ---- ---- ---- Balance, end of period $270 $233 $173 ==== ==== ====
Management is of the opinion that the allowance for loan losses account at December 31, 2000 is sufficient to cover any possible loan losses.
(5) Bank Premises, Furniture, Fixtures and Equipment
The following is a summary of fixed assets and accumulated depreciation as of December 31, 2000 and 1999: (in thousands) 2000 1999
Land $ 301 $ 266 Bank buildings and improvements 786 770 Furniture, fixtures and equipment 708 745 Construction in progress 48 - ----- ----- 1,843 1,782 ===== ===== Accumulated depreciation and amortization (1,084) (1,049) ----- ----- $ 759 $ 733 ===== =====
Depreciation expense for the periods ended December 31, 2000, 1999 and 1998, amounted to $97,999, $118,498, and $89,314, respectively.
(6) Other Real Estate Owned
Other real estate owned consists of real estate acquired through the foreclosure of loans. It is valued at the lower of its fair value or recorded investment in the related loan at the date of foreclosure. Other real estate owned at December 31, 2000 and 1999 is composed of the following: (in thousands) 2000 1999
Other real estate owned, acquisition value $ 235 $ 230 Add: Renovation costs - 5 Less: Allowance for other real estate losses (37) (18) ----- ----- Net value $ 198 $ 217 ===== =====
Changes in the allowance for losses on other real estate are as follows: (in thousands) 2000 1999 1998
Balances, beginning of period $ 17 $ - $ 33 Provision charged to operations 20 17 - Sales of properties - - (33) ----- ----- ----- Balances, end of period $ 37 $ 17 $ - ===== ===== =====
(7) Deposits
The aggregate amount of short-term jumbo time deposits, each with a minimum denomination of $100,000, was approximately $10,902,040 and $11,292,855 in 2000 and 1999, respectively.
At December 31, 2000, the scheduled maturities of time deposits are as follows: (in thousands)
Year Ended December 31, Maturities
2001 $16,596 2002 5,311 2003 265 2004 17 2005 310 ------ $22,499 ====== Members of the board of directors had $8,701,723 and $7,598,993 of deposits at December 31, 2000 and 1999, respectively.
(8) Other Borrowed Funds
Teche Bank has borrowed monies from the Federal Home Loan Bank of Dallas (FHLB) in the form of (10) advances. All advances are secured by approximately $4,300,000 of mortgage loans and mortgage-backed securities. At December 31, 2000, the Bank had approximately $1,368,000 of unused lines of credit with FHLB to be drawn upon as needed.
2000 1999 (in thousands)
Note payable to FHLB, fixed interest at 5.82%, payable in equal monthly installments of $5 through March 1, 2008 $ 390 $ 432
Note payable to FHLB, fixed interest at 5.93%, payable in equal monthly installments of $3 through February 1, 2008 with a balloon payment of $421 payable on February 20, 2008 482 489
Note payable to FHLB, fixed interest at 5.93%, payable in equal monthly installments of $7 through March 1, 2013 723 762
Note payable to FHLB, fixed interest at 5.45%, payable in equal monthly installments of $6 through September 1, 2013 with a balloon payment of $699 payable on September 23, 2013 970 984
Note payable to FHLB, fixed interest at 5.26%, payable in equal monthly installments of $4 through October 1, 2013 450 474
Note payable to FHLB, fixed interest at 7.93%, payable in equal monthly installments of $2 through May 1, 2015 with a balloon payment of $201 payable on May 8, 2015 259 -
Note payable to FHLB, fixed interest at 7.43%, payable in equal monthly installments of $2 through August 1, 2015 with a balloon payment of $196 payable on August 3, 2015 248 -
Note payable to FHLB, fixed interest at 7.07%, payable in equal monthly installments of $3 through November 1, 2015 with a balloon payment of $377 payable on November 2, 2015 480 -
Note payable to FHLB, fixed interest at 6.28%, payable in equal monthly installments of $1 through December 1, 2015 with a balloon payment of $157 payable on January 1, 2016 200 -
Note payable to FHLB, fixed interest at 6.21%, payable in equal monthly installments of $1 through January 1, 2016 50 474 ------ ------ $4,252 $3,141 ====== ======
Following are maturities of long-term debt: (in thousands) Amount
2001 $ 145 2002 154 2003 163 2004 173 2005 183 2006 - 2010 1,290 2011 - 2015 1,988 2016 156 ------ 4,252 ======
(9) Contingent Liabilities and Commitments
A. The consolidated financial statements do not reflect various commitments and contingent liabilities which arise in the normal course of business and which involve elements of credit risk, interest rate risk and liquidity risk. These commitments and contingent liabilities are described in Note 17 - Financial Instruments.
B. The Bank is not involved as a defendant in any legal actions arising from normal business activities.
(10) Concentration of Credit
All of the Bank's loans, commitments, and standby letters of credit have been granted to customers in the Bank's market area as described in Note 1, Item B. The concentration of credit by type of loan is set forth in Note 4. Investments in state and municipal securities also involve governmental entities within the Bank's market area. The Bank, as a matter of policy, does not extend credit to any single borrower or group of related borrowers in excess of $900,000.
(11) Income Taxes
The Bank utilizes FASB Statement 109 to account for income taxes.
The components of income tax expense for the years ended December 31, 2000, 1999 and 1998 are as follows: (in thousands) 2000 1999 1998
Income taxes currently payable: Federal $ 282 $ 205 $ 154
Deferred tax asset (liability) due to timing differences (22) (20) 8 ----- ---- ----- Total income tax expense $ 260 $ 185 $ 162 ===== ===== =====
The effective tax rate of 30.8 percent in 2000, 31.1 percent in 1999, and 29.3 percent in 1998, differs from the statutory rate of 34 percent principally because of temporary differences between tax purposes and financial reporting purposes.
A reconciliation of income tax expense at the statutory rate to the effective rate follows:
Percent of Earnings Before Taxes
2000 1999 1998
Computed at the expected statutory rate 34.0% 34.0% 34.0% Temporary differences giving rise to deferred tax amounts (2.6) (3.3) 1.3 Temporary difference recognized this year .5 (1.0) (1.6) Other (1.1) 1.4 (4.4) ----- ----- -----
Income tax expense-effective rate 30.8% 31.1% 29.3% ===== ===== =====
Temporary differences giving rise to the deferred tax amounts consist primarily of the excess of allowance for loan losses for tax purposes over the amount for financial reporting purposes and the excess of accumulated depreciation for tax purposes over accumulated depreciation for financial reporting purposes.
Amounts for deferred tax assets and liabilities are as follows: (in thousands) 2000 1999
Deferred tax asset $ 13 $ 4 Deferred tax liability (77) (45) ----- ----- Net deferred tax asset (liability) $ (64) $ (41) ===== ===== (12) Net income per share of common stock
Earnings per share amounts are computed based on the weighted average number of shares actually outstanding. The number of shares used in the computations was 27,925 in 2000, 1999 and 1998.
(13) Pension Plan
The Bank has a non-contributory, money-purchase pension plan that covers any employee that has completed one (1) year of service and has attained age 21. Pension costs include certain service costs, which are accrued and funded currently. Pension expenses charged to operations in 2000 and 1999 were $0 and 1998 were $59,353. The Bank's pension plan was replaced by a 401(k) Plan as of January 1, 1999 (see Note 14).
(14) 401(k) Plan
The Bank has a 401(k) Plan whereby substantially all employees participate in the Plan. This plan began January 1, 1999. Employees may contribute up to 15 percent of their compensation subject to certain limitations based on federal tax laws. The Bank has the option to make matching contributions. Matching contributions vest to the employee equally over a 7 year period. For the year ended December 31, 2000 and 1999, expense attributable to the Plan amounted to $69,592 and $60,268, respectively.
(15) Related Party Transactions
A. At December 31, 2000 and 1999, certain officers, directors and related companies were indebted to the Bank in the aggregate amount of $1,132,839 and $1,186,245, respectively. These loans were made at prevailing interest rates.
B. The Bank leases an automobile from one of the directors in the amount of approximately $6,000 per year.
C. The Bank paid director fees to members of the board of directors in the amount of $63,000, $70,500, and $70,400, for 2000, 1999 and 1998, respectively.
D. A company owned by one of the directors is performing the remodeling project referred to in Note (5). The total project is expected to cost approximately $160,000.
(16) Regulatory Restrictions
Banking regulations limit the amount of dividends that may be paid without prior approval of the Bank's regulatory agency. Prior approval shall be required if the total of all dividends declared and paid by the Bank during any one year would exceed the total of its net profits of that year combined with the net profits from the immediate preceding year.
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgements by the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes, as of December 31, 1999, that the Bank meets all capital adequacy requirements to which it is subject.
As of December 31, 2000, the bank was categorized as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain a minimum total risk based, Tier I risk- based, and Tier I leverage ratios as set forth in the table. There are no conditions or events since that time that management believes havm changed the institution's category.
The Bank's actual capital amounts and ratios are also presented in the table.
To Be Well Capitalized Under For Capital Prompt Corrective Actual Adequacy Purposes Action Provision Amount Ratio Amount Ratio Amount Ratio As of December 31, 2000: Total Capital (to risk weighted assets) $4,649 18.2% $2,042 >=8% $2,553 >=10%
Tier I Capital (to risk weighted assets) $4,378 17.2% $1,021 >=4% $ 1,532 >= 6%
Tier I Capital (to average assets $4,378 9.1% $1,928 >=4% $2,410 >= 5%
As of December 31, 1999: Total Capital (to risk weighted assets) $4,072 17.9% $1,817 >=8% $2,271 >=10%
Tier I Capital (to risk weighted assets) $3,839 16.9% $ 908 >=4% $ 1,362 >= 6%
Tier I Capital (to average assets $3,839 8.1% $1,893 >=4% $2,367 >= 5%
(17) Financial Instruments
The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit, credit card arrangements, and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the statement of financial position. The contract or notional amounts of those instruments reflect the extent of the Bank's involvement in particular classes of financial instruments.
The Bank's exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit is presented by the contractual notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. Credit risk represents the accounting loss that would be recognized at the reporting date if counterparties failed completely to perform as contracted. The credit risk amounts are equal to the contractual amounts, assuming that the amounts are fully advanced and that, in accordance with the requirements of FASB Statement No. 105, "Disclosure of Information about Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit Risk," collateral or other security is of no value. The bank's policy is to require customers to provide collateral prior to the disbursement of approved loans. Collateral is either in the form of a security interest or a mortgage on the underlying property. At December 31, 2000, the Bank was exposed to credit risk on commitments to extend credit having contract amounts of $2,830,156, summarized as follows: (in thousands)
Commitments to extend credit $ 2,806 Credit Card arrangements - Standby letters of credit 24 -------- $ 2,830 ========
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained, if it is deemed necessary by the Bank upon extension of credit, is based on management's credit evaluation of the counterparty. Collateral held varies but may include accounts receivable; inventory, property, plant and equipment; and income-producing commercial properties.
Commitments to extend credit, credit card arrangements, and standby letters of credit all include exposure to some credit loss in the event of nonperformance by the customer. The Bank's credit policies and procedures for credit commitments and financial guarantees are the same as those for extensions of credit that are recorded on the consolidated balance sheets. The Bank does not anticipate any material losses as a result of the contingent liabilities and commitments.
The estimated fair values of the Bank's financial instruments were as follows: (in thousands) Carrying Fair Value Value December 31, 2000: Financial assets: Cash and due from banks, interest bearing deposits with banks, and Federal funds sold $ 2,899 $ 2,899 Securities available for sale 15,456 15,456 Securities to be held to maturity 3,161 3,162 Loans 27,638 27,828 Accrued interest receivable 399 399
Financial liabilities: Deposit liabilities 41,885 41,638 Accrued interest payable 238 238 Other borrowed funds 4,252 4,262 Other liabilities 231 231
Off balance sheet instruments: Commitments to extend credit - 2,806 Credit card arrangements - - Stand by letter of credit - 24
December 31, 1999: Financial assets: Cash and due from banks, interest bearing deposits with banks, and Federal funds sold $ 3,723 $ 3,723 Securities available for sale 17,770 17,770 Securities to be held to maturity 1,622 1,622 Loans 22,572 22,432 Accrued interest receivable 380 380
Financial liabilities: Deposit liabilities 40,185 40,225 Accrued interest payable 192 192 Other borrowed funds 3,141 3,141 Other liabilities 173 173
Off balance sheet instruments: Commitments to extend credit - 2,966 Credit card arrangements - - Stand by letter of credit - 52
(18) Parent Company Only Financial Statements
BALANCE SHEETS December 31, 2000 and 1999 (in thousands)
2000 1999 ASSETS
Current assets: Cash $ - $ 1 Investment in Teche Bank & Trust Co. 4,385 3,756 Other assets 10 10 ----- ----- Total assets $4,395 $3,766 ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: $ - $ - --- --- Stockholders' equity: Common stock, $10 par value, 100,000 shares authorized, 28,125 shares issued and outstanding 281 281 Surplus 1,144 1,144 Retained earnings 2,973 2,433 Treasury stock (19) (19) Accumulated other comprehensive income 16 (73) ----- ----- Total stockholders' equity 4,395 3,766 ----- ----- Total liabilities and stockholders' equity $4,395 $3,766 ====== ======
STATEMENTS OF INCOME Years Ended December 31, 2000, 1999 and 1998 ( (in thousands) 2000 1999 1998
Income: Income from subsidiary $540 $369 $345 Interest and dividends on corporate securities 45 43 42 Other income - - 1 --- --- --- Total income 585 412 388 --- --- --- Operating expenses: Legal and professional fees - - - FDIC and state assessments 1 1 1 Miscellaneous expense - - - Interest on stockholder loans - - - --- --- --- Total operating expenses 1 1 1 --- --- --- Net income $584 $412 $387 ==== ==== ====
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY Years Ended December 31, 2000, 1999 and 1998 (in thousands) Accumulated Common Stk Other Treas. Stk Retained Comprehensive Surplus Earnings Income Total ------- ----- ------ ------- BALANCES, DECEMBER 31, 1997 $1,405 $1,720 $117 $3,242 ------- ----- ------ -------
Net income - 387 - 387
Other Comprehensive Income, Net of income tax of $56
Unrealized gain on securities, net of reclassification adjustment of $1 - - (10) (10) ------- ----- ------ ------- Total Comprehensive Income - 387 (10) 377
Cash Dividend, $1.50 per share - (41) - (41) ------- ----- ------ ------- BALANCES, DECEMBER 31, 1998 $1,405 $2,066 $107 $3,578
Net income - 411 - 411
Other Comprehensive Income, Net of income tax of $(37)
Unrealized gain on securities, net of reclassification adjustment of $1 - - (181) (181) ------- ----- ------ ------- Total Comprehensive Income - 411 (181) 230
Cash Dividend, $1.50 per share - (42) - (41) ------- ----- ------ ------- BALANCES, DECEMBER 31, 1999 $1,405 $2,435 $(74) $3,766
Net income - 584 - 584
Other Comprehensive Income, Net of income tax of $9
Unrealized gain on securities, net of reclassification adjustment of $0 - - 90 (181) ------- ----- ------ ------- Total Comprehensive Income - 584 90 674
Cash Dividend, $1.60 per share - (45) - (45) ------- ----- ------ ------- BALANCES, DECEMBER 31, 2000 $1,405 $2,974 $ 16 $4,395 ====== ===== ====== =======
STATEMENTS OF CASH FLOWS Years Ended December 31, 2000, 1999 and 1998 (in thousands) 2000 1999 1998
Cash flows from operating activities: Net income $ 584 $ 411 $ 387 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed earnings of subsidiary bank (539) (370) (345) Changes in: Due to subsidiary - - - Other assets - - (1) ---- ---- ----- Net cash provided by operating activities 45 41 41 ---- ---- ----
Cash flows from financing activities: Dividends paid (45) (42) (41) Decrease in notes payable - - - ---- ---- ---- Net cash used in financing activities (45) (42) (41) ---- ----- ---- Net increase (decrease) in cash - (1) -
Cash, beginning of period - 1 1 ---- ---- ---- Cash, end of period $ - $ - $ 1 ==== ==== ====
SUPPLEMENTARY INFORMATION TECHE BANCSHARES, INC. AND SUBSIDIARY
Consolidated Schedules of Other Operating Expenses Years Ended December 31, 2000, 1999 and 1998 (in thousands)
2000 1999 1998
Advertising $ 23 $ 23 $ 21 Armored car service 4 4 4 Audits and examinations 19 16 18 ATM expense 24 23 23 Cash short 5 4 3 Club account fees 24 22 20 Collections 3 2 2 Committee fees 3 3 3 Conventions and seminar 5 3 9 Correspondent bank service charges 48 44 34 Courier service - 2 3 Directors' fees 63 71 70 Donations 3 3 3 Dues and subscriptions 7 4 3 FDIC and state assessments 22 20 19 Insurance 23 22 29 Lease expense 6 6 6 Legal and professional fees 3 2 4 Miscellaneous 7 6 6 Office expense 44 52 44 Postage and freight 24 22 21 Other taxes and licenses 2 1 1 Travel and entertainment 12 9 9 ORE Devaluation 20 17 - ---- ---- ---- $394 $381 $355 ==== ==== ====
CONSOLIDATING SCHEDULES TECHE BANCSHARES, INC. AND SUBSIDIARY Consolidating Balance Sheet December 31, 2000 (in thousands) Teche Teche Bancshares, Elimination Teche Bank and Inc. and Entries Bancshares, Trust Subsidiary Dr (Cr) Inc. Company
ASSETS Cash and due from banks $ 2,714 $ - $ - $2,714 Interest bearing deposits 85 - - 85 Securities available for sale 15,456 - - 15,456 Securities to be held to maturity 3,161 - - 3,161 Other securities 431 - - 431 Federal funds sold 100 - - 100 Loans 27,913 - - 27,913 Less: Allowance for loan losses (270) - - (270) Unearned discount on loans (5) - - (5)
Bank premises, furniture, fixtures and equipment 759 - - 759 Accrued interest receivable 399 - - 399 Other real estate owned 198 - - 198 Investment in subsidiary - (4,385) 4,385 - Other assets 61 (10) 10 61 ----- ---- --- ----- Total assets $51,002 $(4,395) $4,395 $51,002 ======= ======== ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS Non-interest demand $ 7,045 $ - $ - $ 7,045 Interest-bearing - NOW and MMDA accounts 8,806 - - 8,806 Savings 3,536 - - 3,536 Time,$100,000 and over10,902 - - 10,902 Other time 11,597 - - 11,597 ------ --- --- ------ Total deposits 41,886 - - 41,886
Accrued interest payable 238 - - 238 Other borrowed funds 4,252 - - 4,252 Other liabilities and accrued expenses 231 10 - 241 ------ --- --- ------ Total liabilities 46,607 10 - 46,617 ------ --- --- ------ STOCKHOLDERS' EQUITY Common stock 281 281 281 281 Surplus 1,144 1,519 1,144 1,519 Retained earnings 2,973 2,568 2,973 2,568 Less: 200 shares of treasury stock (19) - (19) - Net unrealized gain on securities available for sale, (16) (16) (16) (16) ----- ---- ----- ----- Total stockholders' equity 4,395 4,385 4,395 4,385 ----- ----- ----- ----- Total liabilities and stockholders' equity $51,002 $4,395 $4,395 $51,002 ======= ====== ====== ======= TECHE BANCSHARES, INC. AND SUBSIDIARY Consolidating Statement of Income For the Year Ended December 31, 2000 (in thousands) Teche Teche Bancshares, Elimination Teche Bank and Inc. and Entries Bancshares, Trust Subsidiary Dr (Cr) Inc. Company
INTEREST INCOME Interest and fees on loans $2,375 $ - $ - $2,375 Interest on investment securities - Interest on securities available for sale 982 - - 982 Interest on securities held to maturity 147 - - 147 State and municipal obligations 51 - - 51 Interest and dividends on other securities 24 45 45 24 Interest on federal funds sold 43 - - 43 Interest on deposits in banks 4 - - 4 ----- --- --- ----- Total interest income 3,626 45 45 3,626 ----- --- --- ----- INTEREST EXPENSE Interest on deposits 1,410 - - 1,410 Interest on federal funds purchased 2 - - 2 Interest on borrowed funds 204 - - 204 Interest on securities repurchased - - - - Other interest 1 - - 1 --- --- --- ---- Total interest expense 1,617 - - 1,617 --- --- --- ----- Net interest income 2,009 45 45 2,009
Provision for loan losses 37 - - 37 ----- --- --- ----- Net interest income after provision for loan losses 1,972 45 45 1,972
OTHER INCOME Service charges, collection and exchange charges 341 - - 341 Commissions income 54 - - 54 ATM income 19 - - 19 Net gain on security transactions - - - - Other operating revenue 28 - - 28 ---- --- --- ---- Total other income 442 - - 442 ---- --- --- ---- Income before other expenses 2,414 45 45 2,414
OTHER EXPENSES Salaries and employee benefit 871 - - 871 Occupancy expenses 216 - - 216 Furniture and equipment 34 - - 34 Data processing expenses 52 - - 52 Net other real estate exp. 3 - - 3 Other operating expenses 394 - 1 393 ---- ---- ---- ----- Total other expenses 1,570 - 1 1,569 ----- ---- ---- ----- Income before income tax expense and equity in earnings of subsidiary 844 46 45 845
INCOME TAX EXPENSE (260) - - (260) ------ ---- ---- ----- Income before equity in earnings of subsidiary 584 46 45 585
EQUITY IN EARNINGS OF SUBSIDIARY - 539 539 - ----- ----- ----- ----- Net income $ 584 $ 585 $ 584 $ 585 ===== ===== ===== =====
TECHE BANCSHARES, INC. AND SUBSIDIARY Consolidating Statement of Cash Flows For the Year Ended December 31, 2000 (in thousands)
Teche Teche Bancshares, Elimination Teche Bank and Inc. and Entries Bancshares, Trust Subsidiary Dr (Cr) Inc. Company
CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 584 $(585) $ 584 $ 585
Adjustments to reconcile net income to net cash provided by operating activities - Equity in earnings of subsidiary - 539 (539) - Depreciation of bank premises and equipment 98 - - 98 Increase in other assets (7) - - (7) Increase in accrued interest receivable (20) - - (20) Increase (decrease) in accrued interest payable 45 - - 45 Decrease in other liabilities 58 - - 58 ----- --- --- ----- Net cash provided by operating activities 758 (46) 45 759
CASH FLOWS FROM INVESTING ACTIVITIES Decrease in interest-bearing deposits in banks 5 - - 5 Decrease in federal funds sold 1,375 - - 1,375 Proceeds from sales of securities available for sale - - - - Proceeds from maturities of securities available for sale 6,054 - - 6,054 Proceeds from maturities of securities held to maturity 893 - - 893 Purchases of securities to be held to maturity (3,650) - - (3,650) Purchases of securities available for sale (2,477) - - (2,477) Net increase in loans (5,066) - - (5,066) Capital expenditures for bank premises and equipment (124) - - (124) Decrease in other real estate owned 19 - - 19 ------ ---- ---- ------ Net cash used in investing activities (2,969) - - (2,969) ------ ---- ---- ------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in - Demand deposits (64) - - (64) NOW and MMDA 2,381 - - 2,381 Savings deposits (205) - - (205) Time deposits $100,000 and over (391) - - (391) Other time (21) - - (21) Proceeds from long-term debt 1,240 - - 1,240 Repayment of long-term debt (128) - - (128) Dividends paid (45) 46 (45) (46) ------ ---- ---- ----- Net cash provided by (used in) financing activities 2,767 46 (45) 2,766 ------ ---- ---- ----- Net increase (decrease) in cash and cash equivalents 556 40 (40) 556
CASH AND CASH EQUIVALENTS, beginning of year 2,158 (194) 194 2,158 ------- ----- ----- ------- CASH AND CASH EQUIVALENTS, end of year $ 2,714 $(154) $ 154 $ 2,714 ======= ===== ==== =======
FORM 10-K
TECHE BANCSHARES, INC. PART II (CONTINUED)
Item (9) Disagreements on Accounting and Financial Disclosure
There were no reporting disagreements on any matter of accounting principle or financial statement disclosure.
FORM 10-K
TECHE BANCSHARES, INC PART III
Item (10) Directors and Executive Officers of the Registrant - ------------------------------------------------------------- Directors - ---------- Number of Shares Owned Ownership as Beneficially a Percent Including Direct of Total Name and Title and Term as and Indirect Outstanding Address Age Occupation Director Ownership Shares - -------- --- ---------- -------- ------------ ----------- Tilden A. Bonin, Jr. St. Martinville, LA 65 Retired Sept., 1969 1,100 3.9% to Present
James B. Bulliard, Sr. St. Martinville, LA 65 Owner & GM Sept., 1969 3,109 11.1% Manager Food to Present Processor
Harris J. Champagne, Jr. New Iberia, LA 38 Insurance October, 1996 197 .7% Sales to Present
Gaston L. Dautreuil, Jr. St. Martinville, LA 70 Owner Sept., 1969 2,765 9.9% Electrical to Present Contractor
Larry C. Degeyter St. Martinville, LA 59 Owner, June, 1981 806 2.9% Building to Present Contractor
Melvin Douet St. Martinville, LA 55 Owner, June, 1996 463 1.7% Douet to Present Motors, Inc.
Alcee J. Durand, Jr. St. Martinville, LA 42 President March, 1991 1,036 3.7% Banking to Present Item 10.
Item 10. Directors and Executive Officers of the Registrant (continued)
Directors (continued) - ---------- Number of Shares Owned Ownership as Beneficially a Percent Including Direct of Total Name and Title and Term as and Indirect Outstanding Address Age Occupation Director Ownership Shares - -------- --- ---------- -------- ------------ ----------- Darnell E. Fontenot New Iberia, LA 62 Owner, Aug., 1996 319 1.1% Mobile to Present Home Co.
Charles A. Fuselier St. Martinville, LA 59 Sheriff June, 1981 414 1.5% to Present
Hubert Hulin, Sr. St. Martinville, LA 82 Retired June, 1981 1,800 6.4% to Present
Murphy Oubre St. Martinville, LA 74 Rice Sept., 1969 874 3.1% Farmer to Present
FORM 10-K
TECHE BANCSHARES, INC. PART III (CONTINUED)
Executive Officers and Significant Employees - -------------------------------------------- Other Office Held Name Age Title with Bank Occupation - -------------- ---- ------- --------- ---------- Alcee J. Durand, Jr. 42 President/ - Banker more CEO than 5 years
Brian Friend 41 Cashier - CPA, Banker Vice-President more than 5 years
Charles M. Durand 38 Vice- - Banker more President than 5 years
Glenn Bienvenu 51 Vice- - Banker more President than 5 years
Ave Laperouse 43 Assistant - Banker less Vice President than 5 years
Jackie C. Leblanc 47 Assistant - Banker more Vice President than 5 years
Jean L. Potier 57 Assistant - Banker more Vice-President than 5 years
Al Viator 46 Assistant - Banker more Vice-President than 5 years
Ruth Sweeney 52 Assistant - Banker more Vice-President than 5 years
Family Relationships
No family relationships exist between any members of the Board of Directors.
Item (11) Executive Compensation - Cash Compensation Number in Cash Compensation Group Group Title 1998 1999 2000 - --------- ------------- ---- ---- ---- 1 President/CEO $77,178 $73,329 $89,821
3 Vice-Presidents - - 150,224 2 Vice-Presidents 83,992 90,913 -
5 Assistant Vice-Presidents 139,247 138,548 165,207
Compensation Pursuant to Plans
The Bank has a non-contributory money purchase pension plan that covers any employee that has completed one year of service and has attained age 21. The Bank contributes 10 percent of an employee's annual salary to the plan. During 2000, the Bank contributed $0 to the Plan on behalf of all officers and employees. The Bank's pension plan was replaced by a 401(k) plan as of January 1, 1999.
The Bank has a 401(k) plan whereby substantially all employees participate in the Plan. This plan began January 1, 1999. Employees may contribute up to 15 percent of their compensation subject to certain limitations based on federal tax laws. The Bank has the option to make matching contributions. Matching contributions vest to the employee over a 7 year period. For the year ended December 31, 2000, expense attributable to the Plan amounted to $69,592.
Item (12) Security Ownership of Certain Beneficial Owners and Mgmt
Security Ownership of Certain Beneficial Owners:
Title of Type of Country of Amount Percent Name and Address Class Ownership Citizenship Owned of Class - ---------------- ----- --------- ----------- ------ ------- James B. Bulliard, Jr. St. Martinville, LA Common Stock U.S.A. 3,109 11.1%
Gaston L. Dautreuil, Jr. St. Martinville, LA Common Stock U.S.A. 2,765 9.9%
Hubert Hulin, Sr. St. Martinville, LA Common Stock U.S.A. 1,800 6.4%
Security Ownership of Management: Title of Type of Shares Percent Group Class Ownership Owned of Class - ---------------------- ----- --------- ----- -------- Directors and Officers Common Stock 13,063 46.8%
Item (13) Certain Relationship and Related Transactions
From time to time in the ordinary course of its business, the Bank has extended credit to its Officers and Directors and to businesses in which its Officers and Directors own an interest. The Bank intends to continue this policy because of the business deposits and income that these activities generate for the Bank. Such loans are made only with the approval of the Board of Directors; are judged by the same credit guidelines and standards as are applied to loans of a comparable nature made to others; are made on substantially the same terms, including interest rates, collateral and repayment terms as those prevailing at the time for comparable transactions with others; and do not involve more than the normal risk of collectibility or present other unfavorable features.
Largest Aggregate Amt. Outstanding Amount Average Relation Year Ending Outstanding Interest Name to Company 12/31/00 as of 12/31/00 Rate - ------------ ---------- --------- -------------- ------ Tilden A. Bonin, Jr. Director $ 94,571 $ 68,074 8.48%
Harris Champagne, Jr. Director 52,010 47,096 8.05%
Gaston L. Dautreuil, Jr. Director 82,015 46,391 6.90%
Larry C. Degeyter Director 529,762 96,411 7.84%
Melvin P. Douet Director 348,590 306,500 10.00%
Alcee J. Durand, Jr. Director 66,710 66,710 7.30%
Charles Fuselier Director 523,091 501,657 9.06%
Total outstanding at December 31, 2000 $1,132,839 =========
FORM 10-K
TECHE BANCSHARES, INC. PART IV
Item (14) Exhibits, Financial Statement Schedules and Reports on Form 8-K
1. Financial Statements
The financial statements, including notes, are listed in the index to the financial statements filed as part of this annual report.
2. Exhibits
3. Reports on Form 8-K
No reports on Form 8-K were filed by Bancshares during quarter ended December 31, 2000.
Page Number Exhibit Number ------ -------------------------------------- ------- (3) Articles of Incorporation of Registrant as currently in effect incorporated herein by reference to Exhibit 3 Registrant Registration Statement on Form S-14, filed February 21, 1984
(11) Computation of Earnings Per Share 50
(12) Computation of Ratios 19
(13) Annual Report to Security Holders 29-64
(21) Subsidiary of Registrant 71
(23) Consent of Experts and Council -
(22) Subsidiaries of the Registrant - ----- ------------------------------ Teche Bank and Trust Company Louisiana
FORM 10-K
TECHE BANCSHARES, INC. PART IV (CONTINUED)
Pursuant to the requirements of Section 13 or 15(d) 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 BANCSHARES, INC.
Date: March 28, 2000 By:/s/ Alcee J. Durand, Jr. ----------------------- --------------------- Alcee J. Durand, Jr. President/Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By:/s/Tilden A. Bonin,Jr. By:/s/Alcee J. Durand, Jr. __________________________ __________________________ Tilden A. Bonin, Jr Date Alcee J. Durand Date Director Director, President and Chief Executive Officer
By:/s/James B. Bulliard, Sr. By:/s/Darnell Fontenot __________________________ __________________________ James B. Bulliard, Sr.Date Darnell Fontenot Date Director Director
By:/s/Harris J. Champagne, Jr. By:/s/Charles A. Fuselier __________________________ __________________________ Harris J. Champagne, Jr.Date Charles A. Fuselier Date Director Director
By:/s/Gaston L. Dautreuil,Jr. By:/s/Hubert Hulin, Sr. __________________________ __________________________ Gaston L. Dautreuil, Jr.Date Hubert Hulin, Sr. Date Director Director
By:/s/Larry C. Degeyter By:/s/Murphy Oubre __________________________ __________________________ Larry C. Degeyter Date Murphy Oubre Date Director Director
By:/s/Melvin Douet __________________________ Melvin Douet Date Director