**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C.20549**

 

**FORM 10-QSB**

 

| **ý**                           | **QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                       |
|--------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                 |                                                                                                                                                                                              |
|                                 | **For the quarterly period ended  September 30, 2003**                                                                                                                                       |
|                                 |                                                                                                                                                                                              |
| **o**                                | **TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                      |
|                                 |                                                                                                                                                                                              |
|                                 | **For the transition period  from             to             ** |
|                                 |                                                                                                                                                                                              |
| **Commission File Number 000-49882** |

 

**MINDEN BANCORP, INC.**

(Exact name of small business issuer asspecified in its charter)

 
| **United States**                                                        |   | **13-4203146**                        |
|--------------------------------------------------------------------------|--------|---------------------------------------|
| (State or other jurisdiction of  incorporation or organization)          |   | (I.R.S. Employer  Identification No.) |
|                                                                     |   |                                  |
| **415 Main Street, Minden, Louisiana 71058**                             |
| (Address of principal executive offices)                                 |
|                                                                     |   |                                  |
| Issuer’s telephone number, including area  code: **(318) 377-0523** |

 

Check mark whether the issuer (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities and Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.  Yes  ý  No  o

 

Shares of common stock, par value $.01 per share, outstanding as ofSeptember 30, 2003: The registrant had 1,454,750 shares of common stockoutstanding, of which 800,112 shares were held by Minden Mutual HoldingCompany, the registrant’s mutual holding company, and 654,638 shares were heldby the public and directors, officers and employees of the registrant.

 

Transitional Small Business Disclosure Format (checkone):Yes  o  No  ý.

 

 

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**Minden Bancorp, Inc.**

** **

**Form 10-QSB**

** **

**Quarter Ended September 30, 2003**

 

**PART I - FINANCIAL INFORMATION**

 

Interim Financial Information required byRule 10-01 of Regulation S-X and Item 303 of Regulation S-B is included in thisForm 10-QSB as referenced below:

 
|                            |                                                            | **Page** |
|---------------------------------|-----------------------------------------------------------------|----------|
| Item  1 -                       | Financial  Statements                                           | 1        |
|                            |                                                            |     |
| Item 2 -                        | Management’s  Discussion and Analysis or Plan of Operation | 11       |
|                            |                                                            |     |
| Item 3 -                        | Controls  and Procedures                                        | 14       |
|                            |                                                            |     |
| **PART II - OTHER INFORMATION** |                                                            |
|                            |                                                            |     |
| Item 1 -                        | Legal Proceedings                                               | 15       |
|                            |                                                            |     |
| Item 2 -                        | Changes in Securities and Use of Proceeds                       | 15       |
|                            |                                                            |     |
| Item  3 -                       | Defaults  Upon Senior Securities                                | 15       |
|                            |                                                            |     |
| Item  4 -                       | Submission  of Matters to a Vote of Security Holders            | 15       |
|                            |                                                            |     |
| Item 5 -                        | Other  Information                                              | 15       |
|                            |                                                            |     |
| Item  6 -                       | Exhibits  and Reports on Form 8-K                               | 15       |
|                            |                                                            |
| Signatures                      | 17                                                              |
|                            |                                                            |

 

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MINDEN BANCORP, INC. ANDSUBSIDIARY

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2003 (UNAUDITED) AND DECEMBER 31, 2002(AUDITED)

 
|                                                                                                      |   | **September  30, 2003**               |   | **December  31, 2002** |   |
|-----------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|------------------------|--------|
|                                                                                                      |   | **(in  thousands except share data)** |   |
| ASSETS                                                                                                    |   |                                  |   |                   |   |
|                                                                                                      |   |                                  |   |                   |   |
| Cash and  noninterest-bearing deposits                                                                    |   | $                                     | 1,036  |                   | $      | 1,613 |   |
| Interest-bearing demand deposits                                                                          |   | 694                                   |   | 256                    |   |
| Federal funds sold                                                                                        |   | 1,450                                 |   | 1,375                  |   |
| Total cash and cash equivalents                                                                           |   | 3,180                                 |   | 3,244                  |   |
|                                                                                                      |   |                                  |   |                   |   |
| Investment securities:                                                                                    |   |                                  |   |                   |   |
| Securities held-to-maturity (estimated market  value of $1,519 - 2003 and $2,398-2002)                    |   | 1,462                                 |   | 2,297                  |   |
| Securities available-for-sale, at estimated market  value                                                 |   | 29,865                                |   | 18,112                 |   |
|                                                                                                      |   |                                  |   |                   |   |
| First National Bankers Bank stock, at cost                                                                |   | 210                                   |   | 210                    |   |
| Federal Home Loan Bank stock, at cost                                                                     |   | 629                                   |   | 472                    |   |
| Loans, net of allowance for loan losses                                                                   |   | 57,840                                |   | 52,337                 |   |
| Accrued interest receivable                                                                               |   | 394                                   |   | 271                    |   |
| Premises and equipment, net                                                                               |   | 2,254                                 |   | 2,205                  |   |
| Repossessed assets                                                                                        |   | 52                                    |   | 35                     |   |
| Other assets                                                                                              |   | 361                                   |   | 385                    |   |
|                                                                                                      |   |                                  |   |                   |   |
| Total assets                                                                                              |   | $                                     | 96,247 |                   | $      | 79,568 |   |
|                                                                                                      |   |                                  |   |                   |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                 |   |                                  |   |                   |   |
|                                                                                                      |   |                                  |   |                   |   |
| Liabilities:                                                                                              |   |                                  |   |                   |   |
| Deposits:                                                                                                 |   |                                  |   |                   |   |
| Noninterest-bearing                                                                                       |   | $                                     | 3,799  |                   | $      | 4,500 |   |
| Interest-bearing                                                                                          |   | 62,223                                |   | 52,356                 |   |
| Total deposits                                                                                            |   | 66,022                                |   | 56,856                 |   |
| Accrued dividends on savings                                                                              |   | 259                                   |   | 212                    |   |
| Deferred federal income taxes                                                                             |   | 382                                   |   | 505                    |   |
| Federal Home Loan Bank advances                                                                           |   | 11,000                                |   | 4,000                  |   |
| Other liabilities                                                                                         |   | 263                                   |   | 347                    |   |
| Total liabilities                                                                                         |   | 77,926                                |   | 61,920                 |   |
| Stockholders’ equity:                                                                                |   |                                  |   |                   |   |
| Preferred stock-1,000,000 shares authorized-none  issued                                                  |   | —                                |   | —                 |   |
| Common stock, par value $.01 per share; 4,000,000  shares issued; 1,454,750 shares issued and outstanding |   | 15                                    |   | 15                     |   |
| Additional paid-in capital                                                                                |   | 16,623                                |   | 16,600                 |   |
| ESOP loan (47,091 shares unreleased)                                                                      |   | (471                                  | )      | (503                   | )      |
| Retained earnings                                                                                         |   | 1,667                                 |   | 824                    |   |
| Accumulated other comprehensive income                                                                    |   | 487                                   |   | 712                    |   |
| Total stockholders’ equity                                                                           |   | 18,321                                |   | 17,648                 |   |
|                                                                                                      |   |                                  |   |                   |   |
| Total liabilities and stockholders’ equity                                                           |   | $                                     | 96,247 |                   | $      | 79,568 |   |

 

See accompanying notes tounaudited consolidated financial statements.

 

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MINDEN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OFINCOME

FOR THE THREE AND NINEMONTHS ENDED SEPTEMBER 30, 2003 AND 2002

 

UNAUDITED

 
|                                                 |   | **Three  Months Ended**               |   | **Nine  Months Ended** |   |
|------------------------------------------------------|--------|---------------------------------------|--------|------------------------|--------|
|                                                 |   | **Sept. 30,  2003**                   |   | **Sept. 30,  2002**    |   | **Sept. 30,  2003** |   | **Sept. 30,  2002** |   |
|                                                 |   | **(in  thousands except share data)** |   |
| Interest and dividend income:                        |   |                                  |   |                   |   |   |   |   |   |
| Loans, including fees                                |   | $                                     | 1,069  |                   | $      | 955 |   | $ | 3,138 |   | $ | 2,706 |   |
| Investments-taxable:                                 |   |                                  |   |                   |   |   |   |   |   |
| Securities                                           |   | 38                                    |   | 50                     |   | 114 |   | 135 |   |
| Mortgage-backed securities                           |   | 162                                   |   | 154                    |   | 419 |   | 404 |   |
| Dividends                                            |   | 10                                    |   | 7                      |   | 26 |   | 21 |   |
| Other (federal funds/interest-bearing demand)        |   | 10                                    |   | 7                      |   | 30 |   | 20 |   |
| Total interest and dividend income                   |   | 1,289                                 |   | 1,173                  |   | 3,727 |   | 3,286 |   |
|                                                 |   |                                  |   |                   |   |   |   |   |   |
| Interest expense:                                    |   |                                  |   |                   |   |   |   |   |   |
| Interest-bearing deposits                            |   | 354                                   |   | 405                    |   | 1,095 |   | 1,231 |   |
| Interest on borrowed funds                           |   | 28                                    |   | 30                     |   | 78 |   | 71 |   |
| Total interest expense                               |   | 382                                   |   | 435                    |   | 1,173 |   | 1,302 |   |
|                                                 |   |                                  |   |                   |   |   |   |   |   |
| Net interest income                                  |   | 907                                   |   | 738                    |   | 2,554 |   | 1,984 |   |
| Provision for loan losses                            |   | —                                |   | —                 |   | — |   | — |   |
| Net interest income after provision for loan  losses |   | 907                                   |   | 738                    |   | 2,554 |   | 1,984 |   |
|                                                 |   |                                  |   |                   |   |   |   |   |   |
| Other operating income:                              |   |                                  |   |                   |   |   |   |   |   |
| Customer service fees                                |   | 56                                    |   | 49                     |   | 305 |   | 131 |   |
| Gain on sale of REO assets                           |   | 13                                    |   | —                 |   | 22 |   | — |   |
| Total other operating income                         |   | 69                                    |   | 49                     |   | 327 |   | 131 |   |
|                                                 |   |                                  |   |                   |   |   |   |   |   |
| Other operating expenses:                            |   |                                  |   |                   |   |   |   |   |   |
| Salaries and benefits                                |   | 292                                   |   | 185                    |   | 827 |   | 541 |   |
| Office occupancy expense                             |   | 45                                    |   | 29                     |   | 146 |   | 87 |   |
| Professional fees and supervisory examinations       |   | 37                                    |   | 48                     |   | 96 |   | 104 |   |
| SAIF insurance premium                               |   | 2                                     |   | 2                      |   | 7 |   | 6 |   |
| Other general and administrative expenses            |   | 116                                   |   | 148                    |   | 386 |   | 453 |   |
| Total other operating expenses                       |   | 492                                   |   | 412                    |   | 1,462 |   | 1,191 |   |
| Income before income taxes                           |   | 484                                   |   | 375                    |   | 1,419 |   | 924 |   |
|                                                 |   |                                  |   |                   |   |   |   |   |   |
| Income tax expense                                   |   | 174                                   |   | 130                    |   | 510 |   | 280 |   |
|                                                 |   |                                  |   |                   |   |   |   |   |   |
| Net income                                           |   | $                                     | 310    |                   | $      | 245 |   | $ | 909 |   | $ | 644 |   |
|                                                 |   |                                  |   |                   |   |   |   |   |   |   |   |   |   |
| Earnings per share                                   |   | $                                     | .22    |                   | $      | .17 |   | $ | .65 |   | $ | .46 |   |
| Earnings per share (fully diluted)                   |   | $                                     | .21    |                   | $      | .17 |   | $ | .63 |   | $ | .46 |   |

 

Seeaccompanying notes to unaudited consolidated financial statements.

 

2

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MINDENBANCORP, INC. AND SUBSIDIARY

CONSOLIDATEDSTATEMENT OF STOCKHOLDERS’ EQUITY

FOR THE NINEMONTHS ENDED SEPTEMBER 30, 2003

UNAUDITED

 
|                                                                                              |   | **Common  Stock**                     |   | **Additional  Paid-In  Capital** |   | **Retained  Earnings** |   | **Other  Comprehensive  Income** |   |
|---------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|----------------------------------|--------|------------------------|--------|----------------------------------|--------|
|                                                                                              |   | **(in  thousands except share data)** |   |
|                                                                                              |   |                                  |   |                             |   |                   |   |                             |   |
| Balance January 1, 2003                                                                      |   | $                                     | 15     |                             | $      | 16,600                 |   | $                                | 824    |   | $ | 712 |   |
| Net income                                                                                        |   | —                                |   | —                           |   | 909                    |   | —                           |   |
| Dividend declared                                                                                 |   | —                                |   | —                           |   | (66                    | )      | —                           |   |
| Amortization - Stock Incentive Plan                                                               |   | —                                |   | 23                               |   | —                 |   | —                           |   |
| Change in net unrealized gain (loss) on  securities available for sale, net of tax effect of $116 |   | —                                |   | —                           |   | (225                   | )      | (225                             | )      |
| Total comprehensive income                                                                        |   |                                  |   |                             |   | 684                    |   |                             |   |
|                                                                                              |   |                                  |   |                             |   |                   |   |                             |   |
| Balance Sept. 30, 2003                                                                            |   | $                                     | 15     |                             | $      | 16,623                 |   | $                                | 1,667  |   | $ | 487 |   |

 

See accompanying notes tounaudited consolidated financial statements.

 

3

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MINDEN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30,2003 AND 2002

UNAUDITED

 
|                                                                               |   | **2003** |   | **2002**            |   |
|------------------------------------------------------------------------------------|--------|----------|--------|---------------------|--------|
|                                                                               |   |     |   | **(In  Thousands)** |   |
| Cash flows from operating activities:                                              |   |     |   |                |   |
| Net income                                                                         |   | $        | 909    |                | $      | 644 |   |
| Adjustments to reconcile net income to net  cash provided by operating activities: |   |     |   |                |   |
| Depreciation                                                                       |   | 71       |   | 68                  |   |
| Deferred income taxes                                                              |   | —   |   | 15                  |   |
| Amortization-Stock Incentive Plan                                                  |   | 23       |   | —              |   |
| Stock dividends                                                                    |   | (87      | )      | (11                 | )      |
| Gain on sale of assets                                                             |   | (167     | )      | (1                  | )      |
| Increase in prepaid expenses and accrued  income                                   |   | (136     | )      | (98                 | )      |
| Increase in dividends payable and other  liabilities                               |   | 25       |   | 216                 |   |
| Net cash provided by operating activities                                          |   | 638      |   | 833                 |   |
|                                                                               |   |     |   |                |   |
| Cash flows from investing activities:                                              |   |     |   |                |   |
| Activity in available for sale securities:                                         |   | 5,674    |   | 352                 |   |
| Maturities, prepayments and calls                                                  |   |     |   |                |   |
| Purchases                                                                          |   | (17,689  | )      | (8,233              | )      |
| Activity in held to maturity securities:                                           |   |     |   |                |   |
| Maturities, prepayments and calls                                                  |   | 834      |   | 1,584               |   |
| Purchases                                                                          |   | —   |   | —              |   |
| Net increase in loans                                                              |   | (5,503   | )      | (8,860              | )      |
| Net (increase) decrease in real estate  owned                                      |   | (17      | )      | 25                  |   |
| Net increase in premises and equipment                                             |   | (144     | )      | (6                  | )      |
| Proceeds from sale of assets                                                       |   | 192      |   | —              |   |
| Purchase of FHLB Stock                                                             |   | (149     | )      | —              |   |
| Net cash used by investing activities                                              |   | (16,802  | )      | (15,138             | )      |
|                                                                               |   |     |   |                |   |
| Cash flows from financing activities:                                              |   |     |   |                |   |
| Net increase in deposits                                                           |   | 9,166    |   | 6,613               |   |
| Net increase in advances from FHLB                                                 |   | 7,000    |   | 2,000               |   |
| Proceeds from sale of common stock                                                 |   | —   |   | 5,403               |   |
| Dividends Paid                                                                     |   | (66      | )      | —              |   |
| Net cash provided by financing activities                                          |   | 16,100   |   | 14,016              |   |
|                                                                               |   |     |   |                |   |
| Net decrease in cash and cash equivalents                                          |   | (64      | )      | (289                | )      |
|                                                                               |   |     |   |                |   |
| Cash and cash equivalents at beginning of  the period                              |   | 3,244    |   | 1,841               |   |
|                                                                               |   |     |   |                |   |
| Cash and cash equivalents at end of the  period                                    |   | $        | 3,180  |                | $      | 1,552 |   |

 

Seeaccompanying notes to unaudited consolidated financial statements.

 

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MINDEN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30,2003 AND SEPTEMBER 30, 2002

UNAUDITED

 
|                                                          |   | **2003**            |   | **2002** |   |
|---------------------------------------------------------------|--------|---------------------|--------|----------|--------|
|                                                          |   | **(in  thousands)** |   |
|                                                          |   |                |   |     |   |
| Supplemental disclosures:                                     |   |                |   |     |   |
| Interest paid on deposits and borrowed  funds                 |   | $                   | 1,126  |     | $      | 1,273 |   |
|                                                          |   |                |   |     |   |
| Income taxes paid                                             |   | $                   | 659    |     | $      | 321 |   |
|                                                          |   |                |   |     |   |
| Noncash investing and financing activities:                   |   |                |   |     |   |
| Decrease in unrealized gain on securities  available for sale |   | $                   | 342    |     | $      | 31 |   |

 

Seeaccompanying notes to unaudited consolidated financial statements.

 

5

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MINDEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2003

 

**1.****             Presentation ofInterim Information**

On December 11, 2001, the Board ofDirectors of Minden Building and Loan Association, a Louisiana-charteredbuilding and loan association (the “Association”) adopted a plan ofreorganization pursuant to which the Association would convert to stock formand became a wholly-owned subsidiary of Minden Bancorp, Inc. (the“Company”).  The Company became amajority owned (55%) subsidiary of Minden Mutual/Holding Company.  The reorganization was consummated onJuly 2, 2002.  The unauditedconsolidated financial statements include Minden Bancorp, Inc. and itswholly-owned subsidiary, the Association. All intercompany transactions have been eliminated inconsolidation.  The Company’s onlysignificant asset is its investment in the Association.

 

In the opinion of the management of the Companyand the Association, the accompanying unaudited consolidated financialstatements include all normal adjustments considered necessary to presentfairly the consolidated financial position as of September 30, 2003 andDecember 31, 2002, and the consolidated results of operations and cashflows for the three and nine months ended September 30, 2003 and 2002, andthe consolidated statement of stockholders’ equity for the nine months endedSeptember 30, 2003.  Interimresults are not necessarily indicative of results for a full year. Theseinterim statements should be read in conjunction with the Company’sconsolidated audited financial statements and the notes thereto contained inthe Company’s Annual Report to stockholders for the fiscal year ended December 31,2002.

 

The financial statements and notes arepresented as permitted by Form 10-QSB, and do not contain certain informationincluded in the Company’s audited financial statements and notes for the yearended December 31, 2002.

 

**2.****             Summary of SignificantAccounting Policies**

The Association is a stock building and loanassociation.  The Association acceptscustomer demand, savings, and time deposits and provides residential fixed-ratemortgages, consumer and business loans to consumers.  The Association is subject to regulation by certain federal andstate banking agencies and undergoes periodic examinations by those regulatoryauthorities.  The Company’s onlysignificant asset and business activity is its investment in the Association.

 

*Use of Estimates*.  In preparing financial statements inconformity with accounting principles generally accepted in the United Statesof America, management is required to make estimates and assumptions thataffect the reported amounts of assets and liabilities as of the date of thebalance sheet and reported amounts of revenues and expenses during thereporting period.  Actual results coulddiffer from those estimates.  Materialestimates that are particularly susceptible to significant change in the nearterm relate to the determination of the allowance for loan losses, thevaluation of foreclosed real estate, deferred tax assets and tradingactivities.

 

*Significant Group Concentrations of CreditRisk*.  Most ofthe Association’s activities are with

6

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customers located within Webster Parish,Louisiana.

 

Note 3 summarizes the types of loans includedin the Association’s loan portfolio. The Association does not have any significant concentrations to any oneindustry or customer.

 

*Earnings per share (EPS)*.  EPS is calculated based upon 1,406,584shares (outstanding shares of common stock less ESOP shares not released orcommitted to be released).  Fullydiluted EPS is based upon the treasury stock method for the stock options.

 

**3.****             Loans andAllowance for Loan Losses**

The loan portfolio at September 30,2003, is as follows (in thousands):

 
|                                          |                                   | **Sept. 30,  2003** |   |
|-----------------------------------------------|----------------------------------------|---------------------|--------|
| First mortgage conventional loans             |                                   |                |   |
| Secured by one-to-four-family residences      |                                   | $                   | 35,985 |   |
| Commercial real estate                        |                                   | 8,901               |   |
| Commercial, other than real estate and SBA    |                                   | 8,902               |   |
| Consumer loans (including overdrafts of  $15) |                                   | 2,651               |   |
| Consumer loans secured by deposits            |                                   | 925                 |   |
| Construction loans                            |                                   | 1,799               |   |
| Total                                         |                                   | 59,163              |   |
| Less:                                         | Allowance for loan losses              |                | (898   | ) |
|                                          | Unfunded construction loan commitments |                | (425   | ) |
| Loans, net                                    |                                   | $                   | 57,840 |   |

 

Changes in the allowance for loan losses fornine months ended 9/30/03 are summarized as follows:

 
| Balance, January 1, 2003       |   | $      | 907    |   |
|-------------------------------------|--------|--------|--------|--------|
| Provision for loan losses           |   | — |   |
| Loans charged off-net of recoveries |   | (9     | )      |
| Balance, September 30, 2003    |   | $      | 898    |   |

 

The Association’s fee for the origination orassumption of a loan approximates its cost incurred on the loan.  As the net fees/costs are deemed immaterialto the financial statements, no deferred loan fees/costs have been deferred asprovided by SFAS 91.

 

The Association’s lending activity isconcentrated within Webster Parish, Louisiana. The majority of loans extended in this lending area are for one-to-fourfamily dwelling units; however, the Association is expanding its lendingactivities to commercial real estate, commercial business and consumerloans.  See above for detail.  The Association requires collateralsufficient in value to cover the principal amount of the loan.  Such collateral is evidenced by mortgages onproperty held and readily accessible to the Association.

 

7

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**4.****             Accrued InterestReceivable**

Accrued interest receivable atSeptember 30, 2003 consists of the following (in thousands):

 
| Loans                             |   | $  | 288    |   |
|-----------------------------------|--------|----|--------|--------|
| Mortgage-backed securities        |   | 99 |   |
| Investment securities and other   |   | 7  |   |
| Total accrued interest receivable |   | $  | 394    |   |

 

**5.****             Premises andEquipment**

Premises and equipment at September 30,2003 are summarized as follows (in thousands):

 
| Land and buildings                |   | $     | 2,261  |   |
|-----------------------------------|--------|-------|--------|--------|
| Furniture, fixtures and equipment |   | 438   |   |
| Total                             |   | 2,699 |   |
| Less-accumulated  depreciation    |   | 445   |   |
| Net premises and equipment        |   | $     | 2,254  |   |

 

**6.****             Deposits**

Deposits as of September 30, 2003 aresummarized as follows (in thousands):

 
| Demand deposit accounts (including official  checks of $420 in 2003) |   | $      | 8,747  |   |
|----------------------------------------------------------------------|--------|--------|--------|--------|
| Savings                                                              |   | 11,924 |   |
| Certificates of deposit:                                             |   |   |   |
| 1.00% — 1.99%                                                   |   | 4,941  |   |
| 2.00% — 2.99%                                                   |   | 32,197 |   |
| 3.00% — 3.99%                                                   |   | 7,845  |   |
| 4.00% — 4.99%                                                   |   | 317    |   |
| 5.00% — 5.99%                                                   |   | 51     |   |
| Total certificates of deposit                                        |   | 45,351 |   |
| Total deposits                                                       |   | $      | 66,022 |   |

 

**7.****             Retirement Plan**

The Association adopted a 401(k) definedcontribution retirement plan and discontinued its “SEP” plan, covering allemployees based upon a year of service. The plan provides for a 2% employer contribution (based uponcompensation) with a match of the employees’ contributions up to 6% based uponBoard approval.  Plan contributions (inthousands) for 2003 were $37.

 

**8.****             Commitments andContingencies**

In the ordinary course of business, theAssociation has outstanding commitments on which management does not anticipatelosses.  They include, among otherthings, commitments to extend credit and letters of credit undertaken in thenormal course of business and to purchase mortgage pool securities.  As of September 30, 2003, theAssociation had $4.9 million of loan commitments, and $ 4.7 million commerciallines of credit commitments, including loans in process.

 

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When entered into, these commitments representoff-balance sheet risk to the Association, with the contractual notional amountrepresenting the Association’s exposure to credit loss in the event ofnonperformance by the other party to the instruments.  Commitments to extend credit are agreements to lend to a customeras long as there is no violation of any condition established in thecontract.  They generally have fixedexpiration dates and require payment of a fee. Since many commitments are expected to expire without being drawn upon,the total commitments do not necessarily represent future cashrequirements.  The Association evaluateseach customer’s creditworthiness on a case-by-case basis, and obtains an amountof collateral it deems sufficient.

 

**9.****             Employee StockOwnership Plan (ESOP)**

The Company established an employee stockownership plan (the “ESOP”) in connection with the conversion and loaned (inthousands) the ESOP $524 to purchase 52,371 shares of common stock (3.6% of theoutstanding shares of the Company as of September 30, 2003). The loan ispayable over ten years at (in thousands) $66 per year ($16.5 per quarter)including interest.  AtSeptember 30, 2003, (in thousands) $471 remained contractually due on theloan.  As required by accountingstandards, the unreleased shares are not included in the calculation of EPS andthe loan receivable is shown as a reduction in stockholders’ equity.  The Association made a contribution (inthousands) of $16.5 for the quarter ending September 30, 2003.  As the note is paid, the shares are releasedand allocated to the participants in the ESOP. As of September 30, 2003, 5,280 of those shares have beenreleased.  It is anticipated that theAssociation will make contributions to the ESOP in amounts sufficient for theESOP to make the required note payments to the Company.

 

**10.****          Stock Based BenefitPlans**

The Company established the 2003 Recognitionand Retention Plan and Trust Agreement (“RRP”), which is a stock-basedincentive plan.  The RRP was approved bythe shareholders at the Company’s annual meeting held May 15, 2003.

 

The Company authorized 26,186 shares of theCompany’s common stock to be awarded under the RRP.  No shares had been purchased to fund the RRP as ofSeptember 30, 2003.  The Companyannounced at the end of September 2003, that it was commencing thepurchase of shares in open market transactions to fund the RRP.  Shares subject to awards under the RRPshares vest at 20% per year under the plan. As of September 30, 2003, awards covering 18,354 shares had beenmade.  As a result, expense for thisplan is being amortized over a 60-month period and is based upon the marketvalue of the Company’s stock as of the date of the awards which was $15.375with respect to all of the currently outstanding awards.  Compensation (in thousands) under the RRPfor the quarter and nine months ended September 30, 2003 was $23 and wasincluded in salaries and benefits.

 

The Company established the 2003 Stock OptionPlan (the “Option Plan”) under which 65,464 shares of Company common stock arereserved for the grant of stock options to directors, officers andemployees.  The Option Plan provides forvesting to participants at 20% per year. The options expire in ten years. The exercise price of the options is equal to the fair market value ofthe common stock on the grant date which was $15.375 with respect to all thecurrently outstanding options.  Optionscovering 49,885 shares were outstanding as of September 30, 2003.  No options were exercisable as ofSeptember 30, 2003.

 

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The Company’s Compensation Committee of theBoard of Directors oversees the RRP and theOption Plan.

 

The Company accounts for its stock options inaccordance with Accounting Principals Board Opinion No. 25, Accounting forStock Issued to Employees (APB 25). Under APB 25, since the exercise price of the Company’s employees’ stockoptions equals the market price of the underlying stock on the date of grant,no compensation expense is recognized.

 

Financial Account Standards Board (FASB)Statement No. 123, Accounting for Stock-Based Compensation (FAS No. 123)requires pro forma net income and earnings per share based upon the fair valuemethod of accounting for stock-based compensation plans.

 

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**Item 2****- Management’s Discussion and Analysis or Plan ofOperation.**

** **

**General**

 

The following discussion compares theconsolidated financial condition of the Company and its wholly ownedsubsidiary, the Association, at September 30, 2003 and December 31,2002, and the results of operations for the three and nine months endedSeptember 30, 2003 with the same periods in 2002.  Currently the business and management of theCompany is primarily the business and management of the Association.  This discussion should be read inconjunction with the interim consolidated financial statements and footnotesincluded herein.

 

The Company is the holding company for theAssociation.  Substantially all of theCompany’s assets are currently held in, and its operations are conductedthrough, its sole subsidiary, the Association. The Company’s business consists primarily of attracting deposits fromthe general public and using such deposits to make loans for the purchase and constructionof residential properties.  The Companyalso originates commercial real estate and commercial business loans as well asvarious types of consumer loans.

 

The Company is a federal corporationorganized for the purpose of being a unitary holding company of theAssociation.  In connection with theconsummation of the reorganization of the Association on July 2, 2002, theCompany acquired all of the capital stock of the Association in exchange for50% of the net proceeds from the offering of the Company’s common stock.  The Company issued approximately 45% of itscommon stock to persons who submitted orders in the offering.  Minden Mutual Holding Company owns theremaining approximately 55% of the Company’s outstanding common stock.  The only significant assets of the Companyare the capital stock of the Association, the Company’s loan to the ESOP (seeNote 9), and the remainder of the net offering proceeds retained by theCompany.

 

**Changes in Financial Condition**

 

Total assets increased by $16.7 million, or21.0%, from December 31, 2002 to September 30, 2003.  The increase was primarily due to a $5.5million, or 10.51%, increase in the Company’s net loan portfolio and a $10.9million, or 53.5%, increase in investment securities available for sale.  Cash and cash equivalents decreased by $64,000,or 1.98%, from December 31, 2002 to September 30, 2003.  The change was primarily due to theCompany’s cash accounts.

 

The $5.5 million increase in the Company’snet loan portfolio from December 31, 2002 was primarily due to a $3.0million, or 50.45%, increase in commercial business loans, a $3.1 million, or53.84%, increase in commercial real estate loans, and a $1.3 million, or54.34%, increase in consumer loans, partially offset by a $974,000, or 2.64%,decrease in one- to four-family residential loans and a $446,000, or 19.87%,decrease in construction loans.  Theshift in the portfolio composition reflects the Company’s increased emphasis onthe origination of higher yielding commercial and consumer loans.  Deposits increased by $9.2 million, or 16.12%,at September 30, 2003 compared to the year ended December 31,2002.  The increase in the Company’sdeposits over December 31, 2002 levels was primarily due to a $9.9million, or 18.85%, increase in interest-bearing deposits.  Recent consolidation of other financialinstitutions in the Company’s market area

 

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and the historically low interest rate environment have contributed tothe increases in both its deposits and its loan portfolio.

 

The increases in the Company’s loan portfolioand investment securities was largely funded by the net proceeds of theAssociation’s reorganization into the mutual holding form of reorganization andthe related stock offering of the Company’s common stock.

 

The Company’s total classified assets forregulatory purposes at September 30, 2003 amounted to $417,000, all ofwhich were classified as substandard. The classified assets at September 30, 2003 consisted of 11 mortgageloans and 1 real estate owned property consisting of residential real estate.

 

Total stockholders’ equity increased by$673,000, or 3.81%, in the first nine months of 2003, primarily due to incomeof $909,000, partially offset by a decrease of $225,000 in the net change inunrealized gain on investment securities and $66,000 in dividends declared.Stockholders’ equity at September 30, 2003 totaled $18.3 million comparedto $17.6 million at December 31, 2002.

 

**Results of Operations**

 

The Company’s profitability depends primarilyon its net interest income, which is the difference between interest anddividend income on interest-earning assets, principally loans, investmentsecurities and interest-earning deposits in other institutions, and interestexpense on interest-bearing deposits and borrowings from the Federal Home LoanBank of Dallas. Net interest income is dependent upon the level of interestrates and the extent to which such rates are changing. The Company’sprofitability also depends, to a lesser extent, on other operating income, theamount of the provision for loan losses, other operating expenses and federaland state income taxes.

 

Net income increased by $65,000, or 26.53%,in the quarter ended September 30, 2003 compared to the quarter endedSeptember 30, 2002 and increased by $265,000 or 41.15% for the nine monthsended September 30, 2003 over the comparable period in 2002.  The increase in net income for the 2003periods was primarily due to an increase in net interest income which waspartially offset by increases in other operating expenses and income taxexpenses. Net interest income increased by $169,000, or 22.90%, and $570,000,or 28.73%, for the three and nine months ended September 30, 2003,respectively, over the comparable 2002 periods, which was partially offset byincreases in other operating expenses of $80,000, or 19.42%, and $271,000, or22.75%, and increases in income tax expense of $44,000, or 33.85%, and$230,000, or 82.14%, respectively, in the 2003 periods as compared to the sameperiods in 2002.

 

The increase in net interest income in the2003 periods was due primarily to an increase in net loans and investments of$5.7 million or 6.83% for the quarter and $16.4 million or 22.57% for the ninemonth period, offset in part by a decline in the net interest rate spread.  The net interest rate spread was 2.8% forthe nine months ended September 30, 2003 compared to 3.5% for the ninemonths ended September 30, 2002. The net interest rate spread was 3.0% for the three months endedSeptember 30, 2003 compared to 3.4% for the three months endedSeptember 30, 2002.

 

Total interest and dividend income increasedby $116,000, or 9.89%, for the quarter ended September 30, 2003, over thecomparable quarter of 2002.  This wasprimarily due to an increase in

 

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income from loans (including fees) of $114,000 in the quarter endingSeptember 30, 2003 compared to the quarter ending September 30, 2002.

 

Total interest expense decreased by $53,000,or 12.18%, for the quarter ended September 30, 2003 over the comparablequarter of 2002. The decrease in the quarter was due to a decrease in totalinterest paid on deposits of $51,000 and a $2,000 decrease in interest paid onFederal Home Loan Bank advances. The decrease in interest paid on deposits was aresult of lower average interest rates paid during the 2003 period which waspartially offset by an increase in the average balance.  The decrease in interest paid on FederalHome Loan Bank advances was caused by a decrease in average rates which was partiallyoffset by an increase in the average balance of borrowed funds.

 

No provision for losses on loans was made forthe quarters ended September 30, 2003 or 2002 or the nine months endedSeptember 30, 2003 or 2002.  AtSeptember 30, 2003, the Company’s non-accruing loans amounted to$79,000.  The allowance for loan lossesamounted to $898,000 at September 30, 2003, representing 1.53% of totalloans held in portfolio and 1136.71% of total non-performing loans at suchdate.

 

Other operating income increased in thequarter ended September 30, 2003 by $20,000, or 40.82%, over the quarterended September 30, 2002 and $196,000, or 149.62%, for the nine monthperiod.  The increase for the nine monthperiod is attributable to increased transaction service charges and fees and tothe gain on the sale of real estate owned and other assets.

 

Otheroperating expenses increased in the quarter ended September 30, 2003 by$80,000, or 19.42%, over the quarter ended September 30, 2002 and$271,000, or 22.75%, for the nine months ended September 30, 2003.  The increase in the quarter was due to a$107,000 increase in salaries and benefits, a $16,000 increase in officeoccupancy, offset partially by a $32,000 decrease in other general andadministrative expenses.  Salaries andbenefits expense increased in the period due to an increase in staff size and,to a lesser extent, to increased compensation related to stock benefit planexpenses including the ESOP and the RRP. Other general and administrativeexpenses decreased primarily because of lower data processing expenses.

 

Income tax expense increased in the quarterand for the nine months ending September 30, 2003 by $44,000 and $230,000,respectively, over the comparable 2002 period due primarily to increased incomebefore taxes.

 

**Liquidity and Capital Resources**

 

The Company adjusts its liquidity levels tofund deposit outflows, repay its borrowings and to fund loan commitments.  The Company also adjusts liquidity asappropriate to meet asset and liability management objectives.

 

The Company’s primary sources of funds aredeposits, amortization and prepayment of loans and mortgage-backed securities,maturities of investment securities and other short-term investments, andearnings and funds provided from operations. In addition, the Company invests excess funds in short-terminterest-earning accounts and other assets, which provide liquidity to meetitslending requirements.

 

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A significant portion of the Company’sliquidity consists of securities classified as available for sale and cash andcash equivalents.  The Company’s primarysources of cash are net income, principal repayments on loans andmortgage-backed securities and increases in deposit accounts.  If the Company requires funds beyond itsability to generate them internally, borrowing agreements exist with theFederal Home Loan Bank of Dallas which provide an additional source of funds.

 

The Association is required to maintainregulatory capital sufficient to meet tangible, core and risk-based capitalratios of at least 1.5%, 3.0% and 8.0%, respectively.  At September 30, 2003, the Association exceeded each of itsregulatory capital requirements with ratios of 18.5%, 18.5% and 37.5%,respectively, of total adjusted assets, total adjusted assets and totalrisk-weighted assets.

 

**Item3****.  Controls and Procedures**

 

Our management evaluated, with theparticipation of our Chief Executive Officer and Chief Financial Officer, theeffectiveness of our disclosure controls and procedures (as defined in Rules13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934) as of the endof the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief FinancialOfficer have concluded that our disclosure controls and procedures are designedto ensure that information required to be disclosed by us in the reports thatwe file or submit under the Securities Exchange Act of 1934 is recorded,processed, summarized and reported within the time periods specified in theSEC’s rules and regulations and are operating in an effective manner.

 

No change in our internal control overfinancial reporting (as defined in Rules 13a-15(f) or 15(d)-15(f) under theSecurities Exchange Act of 1934) occurred during the most recent fiscal quarterthat has materially affected, or is reasonably likely to materially affect, ourinternal control over financial reporting.

 

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Minden Bancorp, Inc.

Form 10-QSB

Quarter Ended September 30, 2003

 

**PARTII****- OTHERINFORMATION**

Item 1 -   Legal Proceedings:

 

There are no matters required to be reported under this item.

 

Item 2 -   Changes in Securities andUse of Proceeds:

 

(a)-(c)     Notapplicable.

 

(d)      On July 2, 2002, the Company consummated theoffering of 45% of its common stock at $10 per share in connection with thereorganization of the Association into the mutual holding company form oforganization, resulting in gross proceeds of $6,546,380.  Net proceeds amounted to $6,027,380, ofwhich 50% was used by the Company to purchase all of the Association’s commonstock.  Of the proceeds retained by theCompany, $523,710 was used to make a loan to the ESOP in order to fund thepurchase of 52,371 shares of the Company’s common stock by the ESOP.  The remaining net proceeds are being used bythe Association as working capital, funding lending activities and investing ininvestment securities.

 

Item 3 -   Defaults Upon SeniorSecurities:

 

There are nomatters required to be reported under this item.

 

Item 4 -   Submission of Matters to aVote of Security Holders:

 

There are nomatters required to be reported under this item.

 

Item 5 -   Other Information:

 

There are nomatters required to be reported under this item.

 

Item 6 -   Exhibits and Reports on Form8-K:

 

(a)           The following exhibitsare filed herewith:

 
| 31.1   |   | Certification of the Chief Executive Officer pursuant to Rule 13a-14  of the Securities Exchange At of 1934, as amended, as adopted pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002  |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                 |
| 31.2   |   | Certification of the Chief Financial Officer pursuant to Rule 13a-14  of the Securities Exchange Act of 1934, as amended, as adopted pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002 |

 

 

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| 32.1   |   | Certification of Chief Executive Officer pursuant to Section 906  of the Sarbanes-Oxley Act of 2002 |
|--------|--------|----------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                     |
| 32.2   |   | Certification of Chief Financial Officer pursuant to Section 906  of the Sarbanes-Oxley Act of 2002 |

 

(b)           Reports on Form 8-K:

 
| **Date**                |   | **Item and  Description**                                                                                                                                                                           |   |
|-------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| July 8, 2003       |   | Item 9.  On July 8, 2003,  the Company issued a press release announcing the declaration of its second  cash dividend.                                                                    |   |
|                    |   |                                                                                                                                                                                                |   |
| August 13, 2003    |   | Item 12.  On August 13,  2003, the Company issued a press release reporting its earnings for the three  and six months ending June 30, 2003.                                         |   |
|                    |   |                                                                                                                                                                                                |   |
| September 23, 2003 |   | Item 9. On September 23, 2003, the Company issued a press  release reporting that it had adopted a stock repurchase program and would be  purchasing shares to fund its restricted stock plan. |   |

 

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**SIGNATURES**

 

 

In accordancewith the requirements of the Securities Exchange Act of 1934, the registrantcaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 

 
|                                          |   |   |                 | MINDEN BANCORP, INC.                  |
|-----------------------------------------------|--------|--------|----------------------|---------------------------------------|
|                                          |   |   |                 |
|                                          |   |   |                 |
| Date:   November 14, 2003 |   |   | /s/ A. David Evans   |
|                                          |   |   |                 | A. David Evans                        |
|                                          |   |   |                 | President and Chief Executive Officer |
|                                          |   |   |                 |                                  |
|                                          |   |   |                 |                                  |
| Date:   November 14, 2003 |   |   | /s/ Becky T. Harrell |
|                                          |   |   |                 | Becky T. Harrell                      |
|                                          |   |   |                 | Chief Financial Officer and Treasurer |

 

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