**UNITED STATES**

 

**SECURITIESAND 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 March 31,  2003**                                                                  |
|       |                                                                                                                |
| **o**      | **TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                             |
|       |                                                                                                                |
|       | **For the transition period  from             to** |
|       |                                                                                                                |

**CommissionFile Number 000-49882**

 

| **MINDEN BANCORP, INC.**                                           |
|--------------------------------------------------------------------|
| (Exact name of small business issuer as  specified 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**

 

Shares of common stock, par value $.01 per share, outstanding as ofApril 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 (check one):

Yes o   No ý.

 

 

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**MindenBancorp, Inc.**

 

**Form10-QSB**

 

**QuarterEnded March 31, 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                                            | 3        |
|                            |                                                            |     |
| Item 2 -                        | Management’s Discussion and Analysis or  Plan of Operation | 11       |
|                            |                                                            |     |
| Item 3 -                        | Controls and Procedures                                         | 13       |
|                            |                                                            |     |
| **PART II - OTHER INFORMATION** |                                                            |
|                            |                                                            |     |
| Item 1 -                        | Legal  Proceedings                                              | 14       |
|                            |                                                            |     |
| Item 2 -                        | Changes  in Securities and Use of Proceeds                      | 14       |
|                            |                                                            |     |
| Item 3 -                        | Defaults  Upon Senior Securities                                | 14       |
|                            |                                                            |     |
| Item 4 -                        | Submission  of Matters to a Vote of Security Holders            | 14       |
|                            |                                                            |     |
| Item 5 -                        | Other  Information                                              | 14       |
|                            |                                                            |     |
| Item 6 -                        | Exhibits  and Reports on Form 8-K                               | 14       |
|                            |                                                            |     |
| Signatures                      | 15                                                              |
|                            |                                                            |     |
| Certifications                  | 16                                                              |

 

2

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**PART1 - FINANCIAL INFORMATION**

 

Item 1.Financial Statements

 

MINDEN BANCORP, INC. AND SUBSIDIARY

 

CONSOLIDATED BALANCE SHEETS

 

 

MARCH 31, 2003 (UNAUDITED) AND DECEMBER 31,2002

 
|                                                                                            |   | **March 31,  2003**                   |       | **December  31, 2002** |   |
|-------------------------------------------------------------------------------------------------|--------|---------------------------------------|------------|------------------------|--------|
|                                                                                            |   | **(in  thousands except share data)** | ** ** |
|                                                                                            |   |                                  |       |                   |   |
| ASSETS                                                                                          |   |                                  |       |                   |   |
|                                                                                            |   |                                  |       |                   |   |
| Cash and noninterest-bearing deposits                                                           |   | $                                     | 1,392      |                   | $      | 1,613 |   |
| Interest-bearing demand deposits                                                                |   | 629                                   |       | 256                    |   |
| Federal funds sold                                                                              |   | 175                                   |       | 1,375                  |   |
| Total cash and cash equivalents                                                                 |   | 2,196                                 |       | 3,244                  |   |
|                                                                                            |   |                                  |       |                   |   |
| Investment securities:                                                                          |   |                                  |       |                   |   |
| Securities held-to-maturity (estimated  market value of $2,398-2002 and $2,103-2003)            |   | 2,018                                 |       | 2,297                  |   |
| Securities available-for-sale, at estimated  market value                                       |   | 18,895                                |       | 18,112                 |   |
|                                                                                            |   |                                  |       |                   |   |
| First National Bankers Bank stock, at cost                                                      |   | 210                                   |       | 210                    |   |
| Federal Home Loan Bank stock, at cost                                                           |   | 475                                   |       | 472                    |   |
| Loans, net of allowance for loan losses                                                         |   | 55,023                                |       | 52,337                 |   |
| Accrued interest receivable                                                                     |   | 288                                   |       | 271                    |   |
| Premises and equipment, net                                                                     |   | 2,248                                 |       | 2,205                  |   |
| Real estate owned                                                                               |   | 182                                   |       | 35                     |   |
| Other assets                                                                                    |   | 361                                   |       | 385                    |   |
|                                                                                            |   |                                  |       |                   |   |
| Total assets                                                                                    |   | $                                     | 81,896     |                   | $      | 79,568 |   |
|                                                                                            |   |                                  |       |                   |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                       |   |                                  |       |                   |   |
|                                                                                            |   |                                  |       |                   |   |
| Liabilities:                                                                                    |   |                                  |       |                   |   |
| Deposits:                                                                                       |   |                                  |       |                   |   |
| Noninterest-bearing                                                                             |   | $                                     | 3,313      |                   | $      | 4,500 |   |
| Interest-bearing                                                                                |   | 55,825                                |       | 52,356                 |   |
| Total deposits                                                                                  |   | 59,138                                |       | 56,856                 |   |
| Accrued dividends on savings                                                                    |   | 276                                   |       | 212                    |   |
| Deferred federal income taxes                                                                   |   | 460                                   |       | 505                    |   |
| Federal Home Loan Bank advances                                                                 |   | 4,000                                 |       | 4,000                  |   |
| Other liabilities                                                                               |   | 191                                   |       | 347                    |   |
| Total liabilities                                                                               |   | 64,065                                |       | 61,920                 |   |
|                                                                                            |   |                                  |       |                   |   |
| Commitments and contingencies                                                                   |   | —                                |       | —                 |   |
|                                                                                            |   |                                  |       |                   |   |
| Stockholders’ equity:                                                                      |   |                                  |       |                   |   |
| Preferred stock-1,000,000 shares  authorized-none issued                                        |   | —                                |       | —                 |   |
| Common stock, par value $.01; 4,000,000  shares issued; 1,454,750 shares issued and outstanding |   | 15                                    |       | 15                     |   |
| Additional paid-in capital                                                                      |   | 16,600                                |       | 16,600                 |   |
| ESOP loan (49,251-2003, 50,291-2002, shares  unreleased)                                        |   | (492                                  | )     | (503                   | )      |
| Retained earnings                                                                               |   | 1,070                                 |       | 824                    |   |
| Accumulated other comprehensive income                                                          |   | 638                                   |       | 712                    |   |
| Total stockholders’ equity                                                                 |   | 17,831                                |       | 17,648                 |   |
|                                                                                            |   |                                  |       |                   |   |
| Total liabilities and stockholders’ equity                                                 |   | $                                     | 81,896     |                   | $      | 79,568 |   |

 

See accompanying notes to unauditedconsolidated financial statements.

 

3

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MINDEN BANCORP, INC. AND SUBSIDIARY

 

CONSOLIDATED STATEMENT OF INCOME

 

FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND2002

 

(UNAUDITED)

 
|                                                 |   | **Three  Months Ended**               |       |
|------------------------------------------------------|--------|---------------------------------------|------------|
|                                                 |   | **March 31,  2003**                   |       | **March 31,  2002** | ** ** |
|                                                 |   | **(in  thousands except share data)** | ** ** |
|                                                 |   |                                  |       |   |   |
| Interest and dividend income:                        |   |                                  |       |   |   |
| Loans, including fees                                |   | $                                     | 1,006      |   | $ | 850 |   |
| Investments-taxable:                                 |   |                                  |       |   |   |
| Securities                                           |   | 40                                    |       | 40 |   |
| Mortgage-backed securities                           |   | 123                                   |       | 122 |   |
| Dividends-FHLMC/FHLB                                 |   | 7                                     |       | 7 |   |
| Other (federal funds/interest-bearing  demand)       |   | 9                                     |       | 7 |   |
| Total interest and dividend income                   |   | 1,185                                 |       | 1,026 |   |
|                                                 |   |                                  |       |   |   |
| Interest expense:                                    |   |                                  |       |   |   |
| Interest-bearing deposits                            |   | 376                                   |       | 420 |   |
| Interest on borrowed funds                           |   | 23                                    |       | 16 |   |
| Total interest expense                               |   | 399                                   |       | 436 |   |
|                                                 |   |                                  |       |   |   |
| Net interest income                                  |   | 786                                   |       | 590 |   |
| Provision for loan losses                            |   | —                                |       | — |   |
|                                                 |   |                                  |       |   |   |
| Net interest income after provision for  loan losses |   | 786                                   |       | 590 |   |
|                                                 |   |                                  |       |   |   |
| Other operating income:                              |   |                                  |       |   |   |
| Customer service fees                                |   | 52                                    |       | 38 |   |
| Gain on sale of REO                                  |   | 9                                     |       | — |   |
| Total other operating income                         |   | 61                                    |       | 38 |   |
|                                                 |   |                                  |       |   |   |
| Other operating expenses:                            |   |                                  |       |   |   |
| Salaries and benefits                                |   | 266                                   |       | 230 |   |
| Office occupancy expense                             |   | 53                                    |       | 50 |   |
| Professional fees and supervisory  examinations      |   | 25                                    |       | 22 |   |
| SAIF insurance premium                               |   | 2                                     |       | 2 |   |
| Other general and administrative expenses            |   | 119                                   |       | 95 |   |
| Total other operating expenses                       |   | 465                                   |       | 399 |   |
|                                                 |   |                                  |       |   |   |
| Income before income taxes                           |   | 382                                   |       | 229 |   |
|                                                 |   |                                  |       |   |   |
| Income tax expense                                   |   | 136                                   |       | 55 |   |
|                                                 |   |                                  |       |   |   |
| Net income                                           |   | $                                     | 246        |   | $ | 174 |   |
|                                                 |   |                                  |       |   |   |
| Earnings per share                                   |   | $                                     | .17        |   | N/A |   |

 

See accompanying notes to unauditedconsolidated financial statements.

 

4

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MINDEN BANCORP, INC. AND SUBSIDIARY

 

CONSOLIDATED STATEMENT OF STOCKHOLDERS’EQUITY

 

FOR THE THREE MONTHS ENDED MARCH 31, 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                                                                                       |   |                                  |       |                             |       | 246                    |       |                             |       |
|                                                                                             |   |                                  |       |                             |       |                   |       |                             |       |
| Change in net unrealized gain (loss) on  securities available for sale, net of tax effect of $38 |   |                                  |       |                             |       | (74                    | )          | (74                              | )          |
|                                                                                             |   |                                  |       |                             |       |                   |       |                             |       |
| Total comprehensive income                                                                       |   |                                  |       |                             |       | 172                    |       |                             |       |
|                                                                                             |   |                                  |       |                             |       |                   |       |                             |       |
| Balance March 31, 2003                                                                           |   | $                                     | 15         |                             | $          | 16,600                 |       | $                                | 1,070      |   | $ | 638 |   |

 

See accompanying notes to unauditedconsolidated financial statements.

 

5

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MINDEN BANCORP, INC. AND SUBSIDIARY

 

CONSOLIDATED STATEMENT OF CASH FLOWS

 

FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND2002

 

(UNAUDITED)

 
|                                                                               |   | **2003**            |       | **2002** |   |
|------------------------------------------------------------------------------------|--------|---------------------|------------|----------|--------|
|                                                                               |   | **(in  thousands)** | ** ** |
|                                                                               |   |                |       |     |   |
| Cash flows from operating activities:                                              |   |                |       |     |   |
| Net income                                                                         |   | $                   | 246        |     | $      | 644 |   |
| Adjustments to reconcile net income to net  cash provided by operating activities: |   |                |       |     |   |
| Depreciation                                                                       |   | 24                  |       | 68       |   |
| Deferred income taxes                                                              |   | (42                 | )          | 15       |   |
| Stock dividends                                                                    |   | (69                 | )          | (11      | )      |
| (Gain) on sale of assets                                                           |   | (9                  | )          | (1       | )      |
| (Increase) in prepaid expenses and accrued  income                                 |   | (26                 | )          | (98      | )      |
| Decrease in dividends payable and other  liabilities                               |   | 46                  |       | 216      |   |
| Net cash provided by operating activities                                          |   | 170                 |       | 833      |   |
|                                                                               |   |                |       |     |   |
| Cash flows from investing activities:                                              |   |                |       |     |   |
| Activity in available for sale securities:                                         |   |                |       |     |   |
| Maturities, prepayments and calls                                                  |   | 1,922               |       | 352      |   |
| Purchases                                                                          |   | (2,807              | )          | (8,233   | )      |
| Activity in held to maturity securities:                                           |   |                |       |     |   |
| Maturities, prepayments and calls                                                  |   | 278                 |       | 1,584    |   |
| Purchases                                                                          |   | —              |       | —   |   |
| Net (increase) in loans                                                            |   | (2,675              | )          | (8,860   | )      |
| Net (increase) in real estate owned                                                |   | (143                | )          | 25       |   |
| Purchases of premises and equipment                                                |   | (66                 | )          | (6       | )      |
| Net cash (used) by investing activities                                            |   | (3,491              | )          | (15,138  | )      |
|                                                                               |   |                |       |     |   |
| Cash flows from financing activities:                                              |   |                |       |     |   |
| Net increase in deposits                                                           |   | 2,273               |       | 6,613    |   |
| Net increase (decrease) in advances from  FHLB                                     |   | —              |       | 2,000    |   |
| Proceeds from sale of common stock                                                 |   |                |       | 5,403    |   |
| Net cash provided by financing activities                                          |   | 2,273               |       | 14,016   |   |
|                                                                               |   |                |       |     |   |
| Net increase (decrease) in cash and cash  equivalents                              |   | (1,048              | )          | (289     | )      |
|                                                                               |   |                |       |     |   |
| Cash and cash equivalents at January 1                                             |   | 3,244               |       | 1,841    |   |
|                                                                               |   |                |       |     |   |
| Cash and cash equivalents at March 31                                              |   | $                   | 2,196      |     | $      | 1,552 |   |

 

See accompanying notes to unauditedconsolidated financial statements.

 

6

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MINDEN BANCORP, INC. AND SUBSIDIARY

 

CONSOLIDATED STATEMENT OF CASH FLOWS

 

FOR THE THREE MONTHS ENDED MARCH 31, 2003

 

(UNAUDITED)

 
|                                                          |   | **2003**            |       | **2002** |   |
|---------------------------------------------------------------|--------|---------------------|------------|----------|--------|
|                                                          |   | **(in  thousands)** | ** ** |
|                                                          |   |                |       |     |   |
| Supplemental disclosures:                                     |   |                |       |     |   |
| Interest paid on deposits and borrowed  funds                 |   | $                   | 338        |     | $      | 388 |   |
| Income taxes paid                                             |   | 206                 |       | 30       |   |
|                                                          |   |                |       |     |   |
| Noncash investing and financing activities:                   |   |                |       |     |   |
| Decrease in unrealized gain on securities  available for sale |   | $                   | 112        |     | $      | 73 |   |

 

See accompanying notes to unauditedconsolidated financial statements.

 

7

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MINDEN BANCORP, INC. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

(UNAUDITED)

 

MARCH 31, 2003

 

**1.       Presentationof Interim Information**

On December 11, 2001, the Board of Directorsof Minden Building and Loan Association, a Louisiana-chartered building andloan association (the “Association”), adopted a plan of reorganization pursuantto which the Association would convert to stock form and became a wholly ownedsubsidiary of Minden Bancorp, Inc. (the “Company”).  In connection with the reorganization, the Company became amajority owned (55%) subsidiary of Minden Mutual Holding Company.  The reorganization was consummated on July2, 2002. The unaudited consolidated financial statements include the Companyand its wholly owned subsidiary, the Association.  The financial information at December 31, 2002 was obtainedfrom the Company’s consolidated audited financial statements. Information forinterim financial data for 2002 represents the Association’s results. Allintercompany transactions have been eliminated in consolidation.  The Company’sonly significant assets are its investment in the Association, and its loan tothe Company’s employee stock ownership plan (ESOP).

 

In the opinion of the management of theCompany and the Association, the accompanying unaudited consolidated financialstatements include all normal adjustments considered necessary to presentfairly the consolidated financial position as of March 31, 2003 and 2002, andthe consolidated results of operations and cash flows for the three monthsended March 31, 2003 and 2002, and the consolidated statement of stockholders’equity for the three months ended March 31, 2003.  Interim results are not necessarily indicative of results for afull year.

 

The unaudited financial statements and notesare presented as permitted by Form 10-QSB, and do not contain certaininformation included in the Company’s audited financial statements and notesfor the year ended December 31, 2002.

 

**2.       Summaryof Significant Accounting Policies**

The Association is a Louisiana-charteredbuilding and loan association.  TheAssociation accepts customer demand, savings, and time deposits and providesresidential fixed-rate mortgages, consumer and business loans toconsumers.  The Association is subjectto the regulations of certain federal and state agencies and undergoes periodicexaminations by those regulatory authorities. The Company’s only significant asset and business activity is itsinvestment 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 Credit Risk.*  Most of the Association’s activities arewith customers located within Webster Parish, Louisiana.  Note 2 to the financial statementssummarizes the types of investment securities in which the Association makesinvestments, and

 

8

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**2.       Summaryof Significant Accounting Policies**   **(Continued)**

 

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 1,404,806shares (outstanding stock less ESOP shares not released).

 

**3.       Loansand Allowance for Loan Losses**

The loan portfolio at March 31, 2003, is asfollows (in thousands):

 
| First mortgage conventional loans:                |   |   |   |
|---------------------------------------------------|--------|--------|--------|
| Secured by one-to-four-family residences          |   | $      | 36,475 |   |
| Commercial real estate                            |   | 7,143  |   |
| Commercial, other than real estate                |   | 7,602  |   |
| Consumer loans (including overdrafts of  $15)     |   | 2,416  |   |
| Consumer loans secured by deposits                |   | 963    |   |
| Construction loans                                |   | 2,110  |   |
| Total                                             |   | 56,709 |   |
| Less:    Allowance for loan losses |   | (907   | )      |
| Unfunded construction loan commitments            |   | (779   | )      |
| Loans, net                                        |   | $      | 55,023 |   |
|                                              |   |   |   |

Changes in the allowance for loan losses aresummarized as follows:
|                                |   |   |   |
|-------------------------------------|--------|--------|--------|
| Balance, January 1                  |   | $      | 907    |   |
| Provision for loan losses           |   | — |   |
| Loans charged off-net of recoveries |   | — |   |
| Balance, March 31                   |   | $      | 907    |   |

 

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.

 

**4.       AccruedInterest Receivable**

Accrued interest receivable at March 31, 2003consists of the following (in thousands):

 

| Loans                             |   | $  | 216    |   |
|-----------------------------------|--------|----|--------|--------|
| Mortgage-backed securities        |   | 65 |   |
| Investment securities and other   |   | 7  |   |
| Total accrued interest receivable |   | $  | 288    |   |

 

9

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**5.       Premisesand Equipment**

Premises and equipment are summarized asfollows (in thousands):

 

| Land and buildings                |   | $     | 2,328  |   |
|-----------------------------------|--------|-------|--------|--------|
| Furniture, fixtures and equipment |   | 396   |   |
| Total                             |   | 2,724 |   |
| Less-accumulated  depreciation    |   | 476   |   |
| Net premises and equipment        |   | $     | 2,248  |   |

 

**6.       Deposits**

Deposits as of March 31, 2003 are summarizedas follows (in thousands):

 

| Demand deposit accounts (including official  checks of $263 in 2003) |   | $      | 7,187  |   |
|----------------------------------------------------------------------|--------|--------|--------|--------|
| Passbook savings                                                     |   | 10,437 |   |
| Certificates of deposit:                                             |   |   |   |
| 2.00% — 2.99%                                                   |   | 19,320 |   |
| 3.00% — 3.99%                                                   |   | 18,275 |   |
| 4.00% — 4.99%                                                   |   | 1,898  |   |
| 5.00% — 5.99%                                                   |   | 1,850  |   |
| 6.00% — 6.99%                                                   |   | 171    |   |
| Total certificates of deposit                                        |   | 41,514 |   |
| Total deposits                                                       |   | $      | 59,138 |   |

 

**7.       PensionPlan**

The Association has adopted a 401(k)retirement plan,  covering all full timeemployees based upon a year of service. The plan provides for a 2% employer contribution (based uponcompensation) with a match of the employees contribution up to 6% based uponBoard approval.  Plan contributions (inthousands) for 2003 were $11.

 

**8.       Commitmentsand Contingencies**

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.  As of March31, 2003 (in thousands), the Association had $6.8 million of loan commitmentsand lines of credit outstanding, including loans in process.

 

When entered into, these commitmentsrepresent off-balance sheet risk to the Association, with the contractualnotional amount representing the Association’s exposure to credit loss in theevent of nonperformance by the other party to the instruments.  Commitments to extend credit are agreementsto lend to a customer as long as there is no violation of any conditionestablished in the contract.  Theygenerally have fixed expiration dates and require payment of a fee.  Since many commitments are expected toexpire without being drawn upon, the total commitments do not necessarilyrepresent future cash requirements.  TheAssociation evaluates each customer’s creditworthiness on a case-by-case basis,and obtains an amount of collateral it deems sufficient.

 

**9.       EmployeeStock Ownership Plan**

The Company established an ESOP and loaned(in thousands) the ESOP $524 to purchase 52,371 shares of common stock.  The remaining balance due (in thousands) of$492 is payable over ten years at (in thousands) $66 per year includinginterest. As required by accounting standards, the unreleased shares are notincluded in the calculation of EPS and the loan receivable is shown as areduction in stockholders’ equity. The Association adopted an employee stockownership plan (ESOP) in July 2002 through its parent company, Minden Bancorp,Inc. (MBC). The Association made a contribution (in thousands) of $16.5 the quarterending March 31, 2003 and is included in salaries and benefits on the incomestatement. The 

 

10

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ESOP owns 52,371 shares (3.6%) of theoutstanding shares of MBC. The ESOP borrowed the funds from MBC to purchasethose shares. As the note is paid, the shares will be released and allocated tothe participants of the plan. As of March 31, 2003, 3,120 of those shares havebeen released. It is anticipated that the Association will make contributionsto the ESOP in amounts sufficient for the ESOP to make the required notepayments to MBC. The quarterly payments (in thousands) are $16.5 and annual are$66 (in thousands).

 

Item 2 -Management’s Discussion and Analysis or Plan of Operation.

 

**General**

 

The following discussion compares theconsolidated financial condition of the Company and its wholly ownedsubsidiary, the Association, at March 31, 2003 and December 31, 2002, and theresults of operations for the three months ended March 31, 2003 with the sameperiod in 2002.  Currently the businessand management of the Company is primarily the business and management of theAssociation.  This discussion should beread in conjunction with the interim consolidated financial statements andfootnotes included 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 andconstruction of residential properties. The Company also originates commercial loans and various types ofconsumer loans.

 

The Company is a federal corporation organizedfor the purpose of being a unitary holding company of the Association.  In connection with the consummation of thereorganization of the Association on July 2, 2002, the Company acquired all ofthe capital stock of the Association in exchange for 50% of the net proceedsfrom the offering of the Company’s common stock.  The Company issued approximately 45% of its common stock topersons who submitted orders in the offering. Minden Mutual Holding Company owns the remaining approximately 55% ofthe Company’s outstanding common stock. The only significant assets of the Company are the capital stock of theAssociation, the Company’s loan to the ESOP, and the remainder of the netoffering proceeds retained by the Company.

 

**Changes in Financial Condition**

 

Total assets increased by $2.33 million, or2.93%, from December 31, 2002 to March 31, 2003.  The increase was primarily due to a $2.69 million, or 5.13%,increase in the Company’s net loan portfolio and a $504,000, or 2.47%, increasein investment securities.  Cash and cashequivalents decreased by $1.0 million, or 32.3%, from December 31, 2002 toMarch 31, 2003. The decrease was primarily due to the Company’s reduction inits interest-bearing deposits in other institutions.

 

The $2.69 million increase in the Company’snet loan portfolio from December 31, 2002 was primarily due to a $1.69 millionor 28.48%, increase in commercial loans, other than real estate, a $1.36million, or 23.46%, increase in commercial real estate loans, and a $143,000,  or 4.42%, increase in consumer loans, whichwas partially offset by a $484,000, or 1.31%, decrease in one-to-four familyresidential loans and a $135,000, or 6.01%, decrease in constructionloans.  The Company has increased itsemphasis on the origination of higher yielding commercial and consumerloans.  Deposits increased by $2.28million, or 4.19%, at March 31, 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 $3.47 million, or6.63%, increase in interest-bearing deposits. Recent consolidation of other financial institutions in the Company’smarket area and the historically low interest rate environment have contributedto the increases in its deposits and loan portfolio.  The increases in the Company’s loan portfolio and investmentsecurities were largely funded by the net proceeds of the Association’sreorganization into the mutual holding form of reorganization and the relatedstock offering of the Company’s common stock.

 

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The Company’s total classified assets forregulatory purposes at March 31, 2003 amounted to $581,000, all of which wereclassified as substandard.  Theclassified assets at March 31, 2003 consisted of thirteen mortgage loans andone residential property of real estate owned.

 

Total stockholders’ equity increased by$183,000, or 1.04%, in the first three months of 2003.  Net income of $246,000 increased equityduring the period which was partially offset by a decrease of $74,000 in thenet change in unrealized gain on investment securities. Stockholders’ equity atMarch 31, 2003 totaled $17.8 million compared to equity of $17.6 million atDecember 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, andinterest expense on interest-bearing deposits and borrowings from theFederal Home Loan Bank of Dallas. Net interest income is dependent upon thelevel of interest rates and the extent to which such rates are changing. TheCompany’s profitability also depends, to a lesser extent, on other operatingincome, provision for loan losses, other operating expenses and federal andstate income taxes.

 

Net income increased by $72,000, or 41.4%, inthe quarter ended March 31, 2003 compared to the quarter ended March 31,2002.  The increase in net income forthe period was primarily due to an increase in net interest income which waspartially offset by increases in other operating expenses and income taxexpenses.  The increase in the March 31,2003 quarter was due primarily to an increase of $196,000 in net interestincome which was partially offset by an increase in other operating expenses of$66,000 and an increase in income tax expense of $81,000.

 

Net interest income increased by $196,000, or33.2%, in the quarter ended March 31, 2003 and over the quarter ended March 31,2002. This was due to an increase in net loans and investments of $14.3 millionand an increase in the net interest rate spread of .03%. Net interest incomewas 1.46% for the three months ended March 31, 2003, compared to 1.62% as ofthe three months ended March 31, 2002. Interest expense for the three monthsended March 31, 2003 was .50% compared to .69% for the period ended March 31,2002.

 

Total interest and dividend income increasedby $159,000, or 15.5%, for the quarter over the comparable quarter of2002.  This was primarily due to anincrease in income from loans receivable and fees of $156,000 in the quarterending March 31, 2003 compared to the quarter ending March 31, 2002.

 

Total interest expense decreased by $37,000,or 8.5%, for the quarter over the comparable quarter of 2002. The decrease inthe quarter was primarily due to a decrease in total interest paid on depositsof $44,000 and was partially offset by an increase in interest paid on FederalHome Loan Bank advances of $7,000. The decrease in interest paid on depositswas a result of lower average interest rates paid which was partially offset byan increase in average balances.  Theincrease in interest paid on Federal Home Loan Bank advances was caused by anincrease in average balances which was partially offset by a decrease inaverage rates paid.

 

No provision for losses on loans was made forthe quarters ended March 31, 2003 or 2002. At March 31, 2003, the Company’s non-accruing loans amounted to$184,000.  The allowance for loan lossesamounted to $907,000 at March 31, 2003, representing 1.60% of the total loansheld in portfolio and 492.93% of the total non-accruing loans at such date.

 

Other operating income increased in thequarter ended March 31, 2003 by $23,000, or 60.5%, over the quarter ended March31, 2002.  The increase for the periodis attributable to increased transaction service charges and fees and to a gainon the sale of real estate owned.

 

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Other operating expenses increased in thequarter ended March 31, 2003 by $66,000, or 16.5%, over the quarter ended March31, 2002.  The increase in the quarterwas due to a $36,000 increase in employee compensation and benefits, a $3,000increase in office occupancy expense, a $3,000 increase in professional feesand supervisory examinations and a $24,000 increase in other general andadministrative expenses.  Compensationexpenses increased in the period due to an increase in the number of staff and,to a lesser extent, through increased compensation to current employees.  The increase in professional fees reflectthe cost associated with being a public company following the Association’sreorganization into the mutual holding company form of organization.  Other general and administrative expensesincreased primarily due to higher data processing expenses due to increasedloan and deposit activity in the 2003 period.

 

Income tax expense increased in the quarterended March 31, 2003 by $81,000 over the comparable 2002 period due primarilyto increased income before 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-backedsecurities, maturities of investment securities and other short-terminvestments, and earnings and funds provided from operations.  In addition, the Company invests excessfunds in short-term interest-earning accounts and other assets,which provide liquidity to meet lending requirements.

 

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 and mortgage-backedsecurities and increases in deposit accounts.  If the Company requires funds beyond its ability to generate theminternally, borrowing agreements exist with the Federal Home Loan Bank ofDallas 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 March 31, 2003, the Association exceeded each of its capitalrequirements with ratios of 21.1%, 21.1% and 41.1%**,**respectively.

 

Item 3.  Controls and Procedures

 

Under the supervision and with theparticipation of the Company’s management, including its chief executiveofficer and chief financial officer, the Company has evaluated theeffectiveness of the design and operation of its disclosure controls andprocedures within 90 days of the filing date of this quarterly report, andbased on such evaluation, the Company’s chief executive officer and chieffinancial officer have concluded that these controls and procedures areeffective.  There were no significantchanges in the Company’s internal controls or in other factors that couldsignificantly affect these controls subsequent to the date of their evaluation.

 

The Company’s controls and other proceduresare designed to ensure that information required to be disclosed by the Companyin the reports that it files or submits under the Securities Exchange Act of1934 (the “Exchange Act”) is recorded, processed, summarized and reported,within the time periods specified in the Securities and Exchange Commission’srules and forms.  Disclosure controlsand procedures include, without limitation, controls and procedures designed toensure that information required to be disclosed by the Company in the reportsthat it files under the Exchange Act is accumulated and communicated to theCompany’s management, including the chief executive officer and chief financialofficer, as appropriate to allow timely decisions regarding requireddisclosure.

 

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Minden Bancorp, Inc.

Form 10-QSB

Quarter Ended March 31, 2003

 

**PARTII****- OTHERINFORMATION**

 

Item 1-         Legal Proceedings:

 

There are nomatters required to be reported under this item.

 

Item 2-         Changes in Securities andUse of Proceeds:

 

(a)-(c)     Not applicable.

 

(d)                                 On July 2, 2002, theCompany consummated the offering of 45% of its common stock at $10 per share inconnection with the reorganization of the Association into the mutual holdingcompany form of organization, 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 retained by theCompany are being used as working capital, funding lending activities andinvesting in investment securities.

 

Item 3-         Defaults Upon SeniorSecurities:

 

There are nomatters required to be reported under this item.

 

Item 4-         Submission of Matters toa Vote 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 onForm 8-K:

 

(a)           The following exhibits are filedherewith:

 
| **EXHIBIT NO.** |   | **DESCRIPTION**                                                           |
|-----------------|--------|---------------------------------------------------------------------------|
|            |   |                                                                      |
| 99.1            |   | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of  2002. |
| 99.2            |   | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of  2002. |

 

(b)           Reports on Form 8-K:

 
| **DATE** |   | **ITEM AND  DESCRIPTION**                                                                                                      |
|----------|--------|--------------------------------------------------------------------------------------------------------------------------------|
|     |   |                                                                                                                           |
| 2/6/03   |   | Item 9 - On February 6, 2003, the Company issued a press release  reporting its earnings for the year ended December 31, 2002. |

 

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**SIGNATURES**

 

In accordance with the requirements of the Securities Exchange Act of1934, the registrant caused this report to be signed on its behalf by theundersigned, thereunto duly authorized.

 

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

 

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**CERTIFICATION****PURSUANT TO**

**SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

 

I, A. David Evans, the Chairman of the Board, President and ChiefExecutive Officer of Minden Bancorp, Inc., certify that:

 

1.             I have reviewedthis quarterly report on Form 10-QSB of Minden Bancorp, Inc.;

 

2.                                       Based on myknowledge, this quarterly report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this quarterly report;

 

3.                                       Based on myknowledge, the financial statements, and other financial information includedin this quarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this quarterly report;

 

4.                                       The registrant’sother certifying officers and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

 

a)                                      designed suchdisclosure controls and procedures to ensure that material information relatingto the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which thisquarterly report is being prepared;

 

b)                                     evaluated theeffectiveness of the registrant’s disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)                                      presented in thisquarterly report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

 

5.                                       The registrant’sother certifying officers and I have disclosed, based on our most recentevaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunctions):

 

a)                                      all significantdeficiencies in the design or operation of internal controls which couldadversely affect the registrant’s ability to record, process, summarize andreport financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)                                     any fraud, whetheror not material, that involves management or other employees who have asignificant role in the registrant’s internal controls; and

 

6.                                       The registrant’sother certifying officers and I have indicated in this quarterly report whetheror not there were significant changes in internal controls or in other factorsthat could significantly affect internal controls subsequent to the date of ourmost recent evaluation, including any corrective actions with regard tosignificant deficiencies and material weaknesses.

 
| Date: May 14, 2003 | /s/ A. David Evans                                           |
|--------------------|--------------------------------------------------------------|
|               | A. David Evans                                               |
|               | Chairman of the Board, President and Chief Executive Officer |

 

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**CERTIFICATIONPURSUANT TO**

**SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

 

I, Becky T. Harrell, the Chief Financial Officer and Treasurer ofMinden Bancorp Inc., certify that:

 

1.             I have reviewedthis quarterly report on Form 10-QSB of Minden Bancorp, Inc.;

 

2.                                       Based on myknowledge, this quarterly report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this quarterly report;

 

3.                                       Based on myknowledge, the financial statements, and other financial information includedin this quarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this quarterly report;

 

4.                                       The registrant’sother certifying officers and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

 

a)                                      designed suchdisclosure controls and procedures to ensure that material information relatingto the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which thisquarterly report is being prepared;

 

b)                                     evaluated theeffectiveness of the registrant’s disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)                                      presented in thisquarterly report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

 

5.                                       The registrant’sother certifying officers and I have disclosed, based on our most recentevaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunctions):

 

a)                                      all significantdeficiencies in the design or operation of internal controls which couldadversely affect the registrant’s ability to record, process, summarize andreport financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)                                     any fraud, whetheror not material, that involves management or other employees who have asignificant role in the registrant’s internal controls; and

 

6.                                       The registrant’sother certifying officers and I have indicated in this quarterly report whetheror not there were significant changes in internal controls or in other factorsthat could significantly affect internal controls subsequent to the date of ourmost recent evaluation, including any corrective actions with regard tosignificant deficiencies and material weaknesses.

 

 
| Date: May 14, 2003 | /s/ Becky T. Harrell                  |
|--------------------|---------------------------------------|
|               | Becky T. Harrell                      |
|               | Chief Financial Officer and Treasurer |

 

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