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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
AMENDMENT NO. 1
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) of the Securities Exchange Act of 1934
GREAT GUARANTY BANCSHARES, INC.
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(Name of Small Business Issuer in its charter)
LOUISIANA 72-0493576
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
175 NEW ROADS STREET, NEW ROADS, LOUISIANA 70760
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (504) 638-5641
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
- ------------------------------------ --------------------------------
N/A N/A
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Securities to be registered under Section 12(g) of the Act:
COMMON STOCK $7.50 PAR VALUE
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(Title of class)
- --------------------------------------------------------------------------------
(Title of class)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Page No.
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<S> <C>
PART I
ITEM 1 DESCRIPTION OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS . . . . . . . . . . . . . . . . . . . . . 10
ITEM 3 DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ITEM 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ITEM 5 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ITEM 6 EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ITEM 7 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . . 16
ITEM 8 DESCRIPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . 16
PART II
ITEM 1 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS . . . . . . . . . . . . . . . 17
ITEM 2 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ITEM 3 CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS . . . . . . . . . . . . . . . . . 19
ITEM 4 RECENT SALES OF UNREGISTERED SECURITIES . . . . . . . . . . . . . . . . . . . 19
ITEM 5 INDEMNIFICATION OF DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . 19
PART F/S FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
PART III EXHIBITS
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
</TABLE>
<PAGE> 3
PART I
DESCRIPTION OF BUSINESS
GENERAL
Great Guaranty Bancshares, Inc. ("Bancshares"), a Louisiana
corporation and a registered bank holding company under the Federal Bank
Holding Company Act of 1956 (the "HC Act"), was incorporated in 1981 to acquire
the outstanding stock of Guaranty Bank and Trust Company ("Guaranty Bank" or
"Bank"). Guaranty Bank is a wholly owned subsidiary of Bancshares, and
Bancshares has no other subsidiaries. While Bancshares and Guaranty Bank are
distinct entities regulated by different regulatory bodies, the income of
Bancshares is almost entirely derived from dividends paid by Guaranty Bank.
Therefore, the value of Bancshares and its securities are dependant upon the
value of Guaranty Bank. At December 31, 1996, Bancshares had total
consolidated assets of approximately $42 million, and shareholders' equity of
approximately $571 thousand while Guaranty Bank had assets of approximately
$41.8 million and shareholders' equity of approximately $3.5 million.
Bancshares' executive offices are located at 175 New Roads Street, New Roads,
Louisiana, 70760 and its telephone number is (504) 638-8621.
Guaranty Bank was organized as a Louisiana state bank in 1957.
Guaranty Bank provides full service consumer and commercial banking services
principally in Pointe Coupee Parish in the State of Louisiana through its main
banking office at 175 New Roads Street, New Roads, Louisiana and at two (2)
full service branches located in Livonia and Jarreau, Louisiana. Deposits of
Guaranty Bank are insured by the Federal Deposit Insurance Corporation ("FDIC")
up to the applicable legal limits. Guaranty Bank offers an array of deposit
services, including demand accounts, NOW accounts, certificates of deposit, and
money market accounts, and provides safe deposit boxes, night depository,
individual retirement accounts and electronic and drive-in banking services.
Guaranty Bank's lending activities consist principally of real estate,
consumer, commercial and agricultural loans, with no material concentration of
loans to borrowers in any line of business. At December 31, 1996, Guaranty
Bank had outstanding approximately $17.1 million in loans, of which 19.9% were
in commercial loans to borrowers engaged in various lines of business, 16.0%
were in consumer loans, 56.1% were in primarily residential real estate loans,
and 8.0% were in agricultural loans. Guaranty Bank's deposits represent a
cross-section of the area's economy, and there is no material concentration of
deposits from any single customer or group of customers. At December 31, 1996,
Guaranty Bank had total deposits of approximately $36.2 million.
PROPERTY
The executive offices of Bancshares and Guaranty Bank are located at
175 New Roads Street, New Roads, Louisiana 70760 and are owned by Guaranty
Bank. Guaranty Bank also owns the buildings and land at Highway 78 in Livonia,
Louisiana and Highway 413 in Jarreau, Louisiana, where the Bank's branches are
located, and on Highway 1 in Morganza, Louisiana, which the Bank uses for
record storage. No premises occupied by the Bank are leased, and none of the
properties owned by the Bank is subject to a mortgage.
EMPLOYEES
At December 31, 1996, Bancshares had no full-time employees. As of
that date, Guaranty Bank had 24 full-time employees, including 5 executive
officers, and no part-time employees. None of Guaranty Bank's employees are
subject to a collective bargaining agreement, and management considers its
relationship with its employees to be good.
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COMPETITION
The Bank's general market area consists principally of Pointe Coupee
Parish in the State of Louisiana. The market area has a population of
approximately 23,000 and contains numerous banks and other financial
institutions. Guaranty Bank experiences substantial competition in attracting
and retaining deposits and making loans.
The primary competitive factors for deposits are interest rates, the
quality and range of financial services offered, convenience of office
locations and office hours. Competition for loan customers is generally a
function of interest rates, loan origination fees and other charges,
restrictive covenants and compensating balances and other services offered.
The Bank competes with numerous other commercial banks, savings associations
and credit unions for customer deposits, as well as with a broad range of
financial institutions in consumer and commercial lending activities. In
addition to banks and savings associations, other businesses in the financial
services industry compete with the Bank for retail and commercial deposit funds
and for retail and commercial loan business. Competition for loans and
deposits is intense among the financial institutions in the area and has
increased due to recent acquisitions of community banks by regional holding
companies with greater resources than those of Bancshares. The size of these
institutions allows certain economics of scale not available to Bancshares or
the Bank.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 (the "Interstate Banking Act") authorized the acquisition of banks in any
state by bank holding companies, subject to compliance with federal and state
antitrust laws, the Community Reinvestment Act (the "CRA") and specific deposit
concentration limits. The Interstate Banking Act removes most state barriers
to interstate acquisitions of banks and ultimately will permit multistate
banking operations to merge into a single bank. Enactment of the Interstate
Banking Act has resulted in increased competition from out-of-state financial
institutions and their holding companies. See "Supervision and Regulation."
LENDING ACTIVITIES
The Bank's lending activities consist principally of commercial,
consumer, real estate and agricultural loans. As of December 31, 1996 these
categories accounted for approximately 19.9%, 16.0%, 56.1% and 8.0%,
respectively, of the Bank's total loan portfolio. Real Estate mortgage loans
represent the Bank's largest category of loans. A significant amount of those
real estate loans were to commercial customers where the collateral for the
loans included the real estate occupied by the customers' businesses.
Therefore, many loans classified as real estate mortgage loans could be
characterized as commercial loans that are collateralized by real estate.
Commercial real estate loans typically involve large loan balances to single
borrowers or groups of related borrowers. These borrowers may be more sensitive
to changes in economic conditions than are residential loan customers. Also
sensitive to general economic and employment conditions are those loans
categorized as consumer or installment loans, for which the Bank relies heavily
for its assurance of repayment on the employment status and earning capacity of
the borrower. The Bank's agricultural loans generally consist of operating
lines used to finance farming operations through the growing season and term
loans to finance farm equipment purchases. Agricultural loans are subject to
credit risks incident to crop failures and fluctuation in crop prices.
The Bank's major source of income is interest and fees charged on
loans. Interest income on loans is recognized based on principal amounts
outstanding, at applicable interest rates. Accrual of interest on impaired
loans is discontinued when reasonable doubt exists as to the full, timely
collection of interest or principal or when payment of principal or interest is
contractually past due 90 days, unless the loan is well secured and in the
process of collection. When a loan is placed on nonaccrual status, all
interest previously accrued, but not collected, is reversed against current
period interest income. Income on such loans is then recognized only to the
extent that cash is received and when the future collection of principal is
probable. Interest accruals are resumed on such loans only when they are
brought current with respect to principal and interest and when, in the opinion
of management, the loans are estimated to be fully collectible as to both
principal and interest.
The interest rates charged for the various loans made by the Bank vary
with the degree of risk, size, and maturity of the loans and prevailing money
market rates. The Bank's overall lending operations are guided by its loan
policy, which outlines the basic policies and procedures by which lending
operations are conducted. Generally, the policy addresses loan authority,
underwriting and collateral requirements, terms, interest rate considerations,
and compliance with laws and regulations. The Bank requires that current credit
reports be obtained on all borrowers. All loans must have a completed
application along with appropriate financial information, including company
and/or personal financial statements with supporting schedules. Collateral
values must be supported by appropriate valuations independent of the borrower.
Under the Bank's loan policy, individual loan officer authority varies from
$40,000 to $75,000 for secured loans and $7,000 to $15,000 for unsecured loans.
Loans in excess of individual officer authority require approval of the Loan
Officers' Committee, which consists of the Bank's three loan officers, the
President/CEO and the Supervisor of Loan Operations. This Committee approves
secured loans up to $150,000 and unsecured loans up to $75,000. Loans in excess
of the authority of the Loan Officers' Committee require approval by the Board
of Directors. The Loan Administration Department reviews all loans to assure
compliance with policy guidelines and lending authority, and to verify
supporting financial data and related documentation and collateral
documentation.
The Bank's policy is to make no loans to single borrowers in excess of
an aggregate amount of up to twenty-five percent (25%) of the Bank's unimpaired
capital and unimpaired surplus, up to a maximum loan to any single borrower of
$500,000. The Bank, on occasion, sells participations in loans when necessary
to stay within lending limits or to otherwise limit the Bank's exposure. The
Bank's attempts to reduce the risk of undue concentrations of loans to multiple
borrowers engaged in similar activities that would cause them to be similarly
impacted by economic or
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other conditions. At December 31, 1996, no such concentration exceeded 10% of
the Bank's loan portfolio.
Types of Loans
The following table sets forth Guaranty Bank's loan distribution as of
the indicated dates (in thousands of dollars):
<TABLE>
<CAPTION>
December 31,
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1996 1995
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<S> <C> <C>
Commercial, financial and agricultural $ 4,776 $ 5,058
Real estate 9,572 7,568
Installment 2,731 2,367
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Total $ 17,079 $ 14,993
======== =========
</TABLE>
Maturities
The following table shows the maturity or repricing frequency of loans
outstanding as of December 31, 1996 (in thousands of dollars).
<TABLE>
<S> <C>
Maturity of fixed rate Loans:
Within one year $ 2,286
After one but within five years 5,527
After five years 5,708
---------
Total fixed rate loans 13,521
Variable rate loans repricing at least quarterly 3,532
Nonaccrual loans 26
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Total loans $ 17,079
=========
</TABLE>
An allowance for loan losses is maintained at a level considered
adequate to absorb any losses which may exist in the loan portfolio. The
allowance is increased by provisions charged to operations and by recoveries on
loans previously charged off, and is reduced by charge-offs. Guaranty Bank
makes regular credit reviews of the loan portfolio and considers past loss
experience, current economic conditions, review of specific problem loans, and
other factors in determining the adequacy of the allowance balance.
Nonperforming Loans
The following table summarizes nonperforming loans as of the indicated
dates (in thousands of dollars):
<TABLE>
<CAPTION>
December 31,
---------------------------
1996 1995
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<S> <C> <C>
Nonaccrual loans $ 26 $ 9
Accruing loans past due 90 days or more 0 0
Restructured loans not included above 0 0
</TABLE>
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Loan Loss Experience
The following table summarizes Guaranty Bank's loan loss experience
for each of the last two (2) years (in thousands of dollars):
<TABLE>
<CAPTION>
December 31,
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1996 1995
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<S> <C> <C>
Balance at beginning of period $ 262 $ 280
Charge-offs:
Commercial, financial and agricultural 0 12
Installment 0 3
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Total Charge-offs 0 15
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Recoveries:
Commercial, financial and agricultural 0 12
Installment 8 8
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Total Recoveries 8 20
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Net charge-offs 8 5
Provision charged (credited) to operations (15) (23)
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Balance at end of period 255 262
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Ratio of net charge-offs to average loans outstanding 0% 0%
</TABLE>
DEPOSITS
The following tale summarizes Guaranty Bank's outstanding deposits as
of the indicated dates (in thousands of dollars):
<TABLE>
<CAPTION>
December 31,
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1996 1995
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<S> <C> <C>
Noninterest-bearing demand deposits $ 6,305 $ 7,565
Interest-bearing demand deposits 5,053 3,298
Savings deposits 9,168 9,066
Time deposits 15,708 15,060
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Total $ 36,234 $ 34,989
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</TABLE>
Maturities of time deposits of $100,000 or more outstanding as of
December 31, 1996 are summarized as follows (in thousands of dollars):
<TABLE>
<CAPTION>
Time Certificates of Deposit
----------------------------
<S> <C>
3 months or less $ 401
Over 3 through 12 months 667
Over 12 months 100
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Total $ 1,168
===========
</TABLE>
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<PAGE> 7
INVESTMENT SECURITIES
The investment policy of Guaranty Bank is an integral part of its
overall asset/liability management. The objective of the Bank's investment
policy is a portfolio which will provide liquidity necessary to facilitate
making loans and to cover deposit fluctuations while at the same time achieving
a satisfactory investment return on the funds invested. With the
implementation of Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities, the Bank is
required to classify its portfolio into three categories: "Held to Maturity",
"Trading Securities", and "Available for Sale".
"Held to Maturity" includes debt securities that the Bank has positive
intent and ability to hold to maturity; these securities are reported as
amortized cost. "Trading Securities" include debt and equity securities that
are purchased and held solely for the purpose of selling them in the short-term
future for trading profits; these securities are reported at fair market value
with unrealized gains and losses included in earnings. "Available for Sale"
securities include those acquired with the intention of disposal prior to
maturity, although these securities may be held to maturity; these securities
are reported at fair market value with unrealized gains and losses excluded
from the earnings and reported as a separate component of shareholders' equity.
As of December 31, 1996, the Bank's entire investment portfolio was classified
as "Available for Sale."
The following table sets forth the carrying amounts of investment
securities at the dates indicated (in thousands dollars):
<TABLE>
<CAPTION>
December 31,
---------------------------
1996 1995
---------------------------
<S> <C> <C>
U.S. Treasury securities and obligations of other
U.S. Government agencies and corporations $ 10,012 $ 9,903
Obligations of state and political subdivisions 0 20
Mortgage-backed bonds and collateralized
mortgage obligations 9,660 10,602
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Total $ 19,762 $ 20,525
======== =========
</TABLE>
SUPERVISION AND REGULATION
Bank holding companies and banks are extensively regulated under both
federal and state law. Set forth below is a summary of certain laws which
relate to the regulation of Bancshares and Guaranty Bank. The description does
not purport to be complete and is qualified in its entirety by reference to the
applicable laws and regulations.
Bancshares. Bancshares is subject to regulation under the Louisiana
Banking Law ("LBL") and the BHC Act. Bancshares is required to file with the
Federal Reserve Board quarterly and annual reports and such additional
information as the Federal Reserve Board may require pursuant to the BHC Act.
The Federal Reserve Board may conduct examinations of Bancshares and its
subsidiaries. The Commissioner imposes similar reporting and examination
requirements upon Bancshares under the LBL.
The Federal Reserve Board may require that a bank holding company
terminate an activity or terminate control of or liquidate or divest certain
subsidiaries or affiliates when the Federal Reserve Board believes the activity
or the control of the subsidiary or affiliate constitutes a significant risk to
the
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<PAGE> 8
financial safety, soundness or stability of any of its banking subsidiaries.
The Federal Reserve Board also has the authority to regulate provisions of
certain bank holding company debt, including authority to impose interest
ceilings and reserve requirements on such debt. Under certain circumstances, a
bank holding company must file written notice and obtain approval from the
Federal Reserve Board prior to purchasing or redeeming its equity securities.
In addition, Bancshares is subject to a specific, Written Agreement with the
Federal Reserve Board dated November 18, 1985 pursuant to which Bancshares must
obtain consent of the Federal Reserve Board for (i) declaration or payment of
dividends, (ii) acceptance from Bank of any dividend or other form of payment
representing a reduction of capital from Bank, or (iii) any increase in
indebtedness. The written agreement with the Federal Reserve Board also
requires Bancshares to provide, within 30 days following the end of each
calendar quarter, (a) Bancshares' balance sheet for the quarter, (b)
Bancshares' income statement for the period ending that quarter, (c) the Bank's
Report of Condition as of the end of the quarter, and (d) the Bank's Report of
Income for the period ending that quarter.
Under the BHC Act and regulations adopted by the Federal Reserve
Board, a bank holding company and its non- banking subsidiaries are prohibited
from requiring certain tie-in arrangements in connection with any extension of
credit, lease or sale of property or furnishing of services. Further,
Bancshares is required by the Federal Reserve Board to maintain certain levels
of capital.
Bancshares is required to obtain the prior approval of the Federal
Reserve Board for the acquisition of more than five percent of the outstanding
shares of any class of voting securities or substantially all of the assets of
any bank or bank holding company. Prior approval of the Federal Reserve Board
is also required for the merger or consolidation of Bancshares and another bank
holding company.
Bancshares is prohibited by the BHC Act, except in certain statutorily
prescribed instances, from acquiring direct or indirect ownership or control of
more than five percent of the outstanding voting shares of any company that is
not a bank or bank holding company and from engaging directly or indirectly in
activities other than those of banking, managing or controlling banks or
furnishing services to its subsidiaries. However, Bancshares may, subject to
the prior approval of the Federal Reserve Board, engage in any, or acquire
shares of companies engaged in, activities that are deemed by the Federal
Reserve Board to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto. In making any such determination,
the Federal Reserve Board is required to consider whether the performance of
such activities by Bancshares or an affiliate can reasonably be expected to
produce benefits to the public, such as greater convenience, increased
competition or gains in efficiency, that outweigh possible adverse effects,
such as undue concentration of resources, decreased or unfair competition,
conflicts of interest or unsound banking practices.
Under Federal Reserve Board regulations, a bank holding company is
required to serve as a source of financial and managerial strength to its
subsidiary banks and may not conduct its operations in an unsafe or unsound
manner. In addition, it is the Federal Reserve Board's policy that, in serving
as a source of strength to its subsidiary banks, a bank holding company should
stand ready to use available resources to provide adequate capital funds to its
subsidiary banks during periods of financial stress or adversity and should
maintain the financial flexibility and capital-raising capacity to obtain
additional resources for assisting its subsidiary banks. A bank holding
company's failure to meet its obligations to serve as a source of strength to
its subsidiary banks will generally be considered by the Federal Reserve Board
to be an unsafe and unsound banking practice or a violation of the Federal
Reserve Board's regulations or both. This doctrine has become known as the
"source of strength doctrine". Although the Unites States Court of Appeals for
the Fifth Circuit found the Federal Reserve Board's source of
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<PAGE> 9
strength doctrine invalid in 1990, stating that the Federal Reserve Board had
no authority to assert the doctrine under the BHC Act, the decision was
reversed by the United States Supreme Court on procedural grounds. The
validity of the source of strength doctrine is likely to continue to be the
subject of litigation until definitely resolved by the courts or by Congress.
Guaranty Bank. Guaranty Bank is subject to primary supervision,
examination and regulation by the Commissioner and the FDIC. If, as a result
of an examination of a bank, the FDIC should determine that the financial
condition, capital resources, asset quality, earnings prospects, management,
liquidity or other aspects of the bank's operations are unsatisfactory or that
the bank or its management is violating or has violated any law or regulation,
various remedies are available to the FDIC. Such remedies include the power to
enjoin "unsafe or unsound practices," to require affirmative action to correct
any conditions resulting from any violation or practice, to issue an
administrative order that can be judicially enforced, to direct an increase in
capital, to restrict the growth of the bank, to assess civil monetary
penalties, to remove officers and directors, and to terminate a bank's deposit
insurance.
Various requirements and restrictions under the laws of the United
States and the State of Louisiana affect operations of the Bank. Federal and
Louisiana statutes and regulations relate to many aspects of the Bank's
operations, including reserves against deposits, interest rates payable on
deposits, loans or investments, mergers and acquisitions, borrowings,
dividends, locations of branch offices, capital requirements and disclosure
obligations to depositors and borrowers. Further, the Bank is required to
maintain certain levels of capital. The deposits of the Bank are insured by
the FDIC in the manner and to the extent provided by law.
Capital Levels. The FDIC and Federal Reserve Board have established
guidelines with respect to the maintenance of appropriate levels of capital by
banks or bank holding companies under their jurisdiction. Compliance with the
standards set forth in such guidelines and other provisions of federal law
could limit the amount of dividends which the Bank or Bancshares may pay. The
following table sets forth the capital amounts and ratios required by
regulation and Guaranty Bank's actual capital ratios and amounts:
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<PAGE> 10
<TABLE>
<CAPTION>
To Be Well
Capitalized
Under Prompt
For Capital Corrective Action
Actual Adequacy Purposes Provisions
------ ----------------- ----------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1996
Total Capital (to Risk Weighted Assets):
Guaranty Bank . . . . . . . . . . . . . . $3,701 19.2% $1,543 8.0% $1,928 10.0%
Tier I Capital (to Risk Weighted Assets):
Guaranty Bank . . . . . . . . . . . . . . $3,460 17.9% $ 771 4.0% $1,157 6.0%
Tier I Capital (to Average Assets)
Guaranty Bank . . . . . . . . . . . . . . $3,460 8.4% $1,655 4.0% $2,068 5.0%
AS OF DECEMBER 31, 1995
Total Capital (to Risk Weighted Assets):
Guaranty Bank . . . . . . . . . . . . . . $4,096 23.8% $1,421 8.0% $1,777 10.0%
Tier I Capital (to Risk Weighted Assets):
Guaranty Bank . . . . . . . . . . . . . . $3,835 22.3% $ 711 4.0% $1,066 6.0%
Tier I Capital (to Average Assets)
Guaranty Bank . . . . . . . . . . . . . . $3,835 9.4% $1,622 4.0% $2,028 5.0%
</TABLE>
Restrictions on Transfers of Funds to Bancshares by the Bank.
Substantially all of Bancshares' revenues, on an unconsolidated basis,
including funds available for the payment of dividends and other operating
expenses, are the result of dividends paid by the Bank. Bancshares is a legal
entity separate and distinct from the Bank. Bancshares' ability to pay cash
dividends is limited by Louisiana law. There also are statutory and regulatory
limitations on the amount of dividends which may be paid to Bancshares by the
Bank. Louisiana law restricts the amount available for cash dividends by state
banks without approval by the Commissioner. In addition, as discussed above,
under Bancshares' Written Agreement with Federal Reserve Board, Bancshares must
obtain consent of the Federal Reserve Board to accept any dividend from Bank.
The FDIC and Federal Reserve Board also have authority to prohibit the Bank
from engaging in what, in their respective opinion, constitutes an unsafe or
unsound practice in conducting the Bank's business. It is possible, depending
upon the financial condition of the Bank and other factors, that the FDIC or
Federal Reserve Board could assert that the payment of dividends or other
payments might, under some circumstances, be an unsafe or unsound practice.
The Bank is subject to certain restrictions imposed by federal law on any
extensions of credit to, or the issuance of a guarantee or letter of credit on
behalf of, Bancshares or other affiliates, the purchase of or investments in
stock or other securities thereof, the taking of such securities as collateral
for loans and the purchase of assets of Bancshares or other affiliates. Such
restrictions prevent Bancshares and such other affiliates from borrowing from
the Bank unless the loans are secured by marketable obligations of designated
amounts. Further, such secured loans and investments by the Bank to or in
Bancshares or to or in any other affiliate is limited to 10 percent of the
Bank's capital and surplus (as defined by federal regulations) and such secured
loans and investments are limited, in the aggregate, to 20 percent of the
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<PAGE> 11
Bank's capital and surplus (as defined by federal regulations). Additional
restrictions on transactions with affiliates may be imposed on the Bank under
other provisions of federal law.
Prompt Corrective Action and Other Enforcement Mechanisms. Federal law
requires such federal banking agency to take prompt corrective action to
resolve the problems of insured depository institutions, including but not
limited to those that fall below one or more prescribed minimum capital ratios.
The law requires each federal banking agency to promulgate regulations defining
the following five categories in which an insured depository institution will
be placed, based on the level of its capital ratios: well capitalized,
adequately capitalized, undercapitalized, significantly undercapitalized and
critically undercapitalized. At December 31, 1996 and 1995, the Bank was
categorized as "well capitalized."
In addition to measures taken under the prompt corrective action
provisions, commercial banking organizations may be subject to potential
enforcement actions by federal regulators for unsafe or unsound practices in
conducting their businesses or for violations of any law, rule, regulation or
any condition imposed in writing by the agency or any written agreement with
the agency. Enforcement actions may include the imposition of a conservator or
receiver, the issuance of a cease and desist order that can be judicially
enforced, the termination of insurance of deposits (in the case of a depository
institution), the imposition of civil money penalties, the issuance of
directives to increase capital, the issuance of formal and informal agreements,
the issuance of removal and prohibition orders against institution-affiliated
parties and the enforcement of such actions through injunctions or restraining
orders based upon a judicial determination that the agency would be harmed if
such equitable relief was not granted.
Safety and Soundness Standards. In July 1995, the federal banking agencies
adopted final guidelines establishing standards for safety and soundness, as
required by the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"). The guidelines set forth operational and managerial standards
relating to internal controls, information systems and internal audit systems,
loan documentation, credit underwriting, interest rate exposure, asset growth
and compensation, fees and benefits. Guidelines for asset quality and earnings
standards will be adopted in the future. The guidelines establish the safety
and soundness standards that the agencies will use to identify and address
problems at insured depository institutions before capital becomes impaired.
If an institution fails to comply with a safety and soundness standard, the
appropriate federal banking agency may require the institution to submit a
compliance plan. Failure to submit a compliance plan or to implement an
accepted plan may result in enforcement action.
Interstate Banking and Branching. Under the Interstate Banking Act, a bank
holding company that is adequately capitalized and managed may obtain approval
under the BHC ACT to acquire an existing bank located in another state without
regard to state law. A bank holding company would not be permitted to make
such an acquisition if, upon consummation, it would control (a) more than 10%
of the total amount of deposits of insured depository institutions in the
United States or (b) 30% or more of the deposits in the state in which the bank
is located. A state may limit the percentage of total deposits that may be
held in that state by any one bank or bank holding company if application of
such limitation does not discriminate against out-of-state banks. An
out-of-state state bank holding company may not acquire a state bank in
existence for less than a minimum length of time that may be prescribed by
state law except that a state may not impose more than a five-year existence
requirement.
The Interstate Banking Act also permits, beginning June 1, 1997, mergers of
insured banks located in different states and conversion of the branches of the
acquired bank into branches of the resulting bank. Each state may permit such
combinations earlier than June 1, 1997, and may adopt legislation to prohibit
interstate mergers after that date in that state or in other states by that
state's banks. The same concentration limits discussed in the preceding
paragraph apply. Louisiana has not adopted legislation
- 9 -
<PAGE> 12
to "opt out" of interstate mergers. The Interstate Banking Act also permits a
national or state bank to establish branches in a state other than its home
state if permitted by the laws of that state, subject to the same requirements
and conditions as for a merger transaction.
The Interstate Banking Act will likely increase competition from
out-of-state banks in the markets in which Bancshares operates, although it is
difficult to asses the impact that such increased competition may have on
Bancshares' operations.
Community Reinvestment Act. Under the CRA, a bank's applicable regulatory
authority (which is the FDIC for the Bank) is required to assess the record of
each financial institution which it regulates to determine if the institution
meets the credit needs of its entire community, including low-and
moderate-income neighborhoods served by the institution, and to take that
record into account in its evaluation of any application made by such
institution for, among other things, approval of the acquisition or
establishment of a branch or other deposit facility, an office relocation, a
merger or the acquisition of shares of capital stock of another financial
institution. The regulatory authority prepares a written evaluation of an
institution's record of meeting the credit needs of this entire community and
assigns a rating. The Bank has undertaken significant actions to comply with
the CRA. The Bank received a "satisfactory" rating in its most recent review
by regulators with respect to its compliance with the CRA.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis of the financial condition and
results of operations of Bancshares should be read in conjunction with the
consolidated financial statements, accompanying footnotes, and other
supplemental financial information appearing elsewhere in this Registration
Statement.
THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1996
BALANCE SHEET
Total Assets at March 31, 1997 were $43.3 million compared to $39.4 million at
March 31, 1996. Total loans increased to $19.0 million at March 31, 1997 from
$15.0 million at March 31, 1996, while securities increased to $19.1 million
from $18.4 million and deposits increased to $38.1 million from $34.3 million
as of those dates. Shareholders' equity in Bancshares increased to $562
thousand at March 31, 1997 from $461 thousand at March 31, 1996. Shareholder's
equity in Bank was $3.3 million at March 31, 1997, up from $3.1 million at
March 31, 1996.
INCOME
Income before income taxes of Guaranty Bank for the three months ended March
31, 1997 was $192 thousand compared to $188 thousand during the same period in
1996. Interest income increased to $799 thousand for the three month period
ended March 31, 1997 compared to $748 thousand for the same period in 1996,
principally as a result of an increase in loans. Non-interest income totaled
$82 thousand for the three month period, compared to $100 thousand for the same
period in 1996. Interest expense increased to $514 thousand during the quarter
ended March 31, 1997, up from $488 thousand during the three month period ended
March 31, 1996, due primarily to increased deposits.
1996 COMPARED WITH 1995
BALANCE SHEET
Total assets increased to $42.0 million at December 31, 1996, an
increase of 2.9% from $40.8 million at December 31, 1995. Total loans
increased $2.1 million, or 14.0%, to $17.1 million compared to $15.0 million at
December 31, 1995, while securities declined $.8 million to $19.8 million at
December 31, 1996, primarily in order to fund a portion of the increased loan
volume.
Total deposits increased by $1.2 million to $36.2 million at December
31, 1996, a 3.4% increase from $35.0 million at December 31, 1995.
Non-interest bearing deposits declined at a 16.7% rate, compared to a 9.1%
growth in interest bearing deposits. During 1996, shareholders' equity in
Bancshares increased to $571 thousand from $444 thousand at December 31, 1995;
during the same periods, shareholders' equity in Guaranty Bank declined from
$3.92 million at year-end 1995 to $3.46 million at December 31, 1996, due
primarily to the payment by Guaranty Bank to Bancshares of an extraordinary
dividend of $700 thousand with which Bancshares reduced its outstanding bank
debt.
INCOME
The income of Bancshares is attributable almost entirely to dividends
on earnings of Guaranty Bank. Consolidated net income of Bancshares is
determined by deduction of interest and expenses incurred by Bancshares from
the net income earned by Guaranty Bank. Income before income taxes of
- 10 -
<PAGE> 13
Guaranty Bank for the year ended December 31, 1996 increased to $719.5
thousand from $717.9 thousand during 1995. Bancshares consolidated net income
decreased to $217 thousand for the year ended December 31, 1996 from $495
thousand during 1995. The decline in Bancshares' consolidated net income in
1996 from 1995 was primarily attributable to the tax effect of recording $331
thousand in operating loss carryforwards in 1995 that had not been recorded
prior thereto because of uncertainties incident to pending litigation. See
"Legal Proceedings." Those uncertainties were eliminated in 1995 with the
payment by Bancshares, subject to appeal, of the judgment amount awarded by the
trial court in that litigation. See discussion of "Income Taxes" below.
Bancshares consolidated net income per share was $1.51 in 1996 compared to
$3.45 in 1995. No income tax was due by Guaranty Bank or Bancshares on 1995 or
1996 income as a result of recognition of loss carry forwards from prior
years' operations.
Interest income increased $52 thousand Or 1.7% to $3.0 million for
1996, principally as a result of an increase in loans. Noninterest income
totaled $396 thousand for the year ended December 31, 1996, up 7.3% from $369
thousand for the year ended December 31, 1995, due primarily to increased
service charges and fees.
EXPENSES
Interest expense increased from $1.2 million during 1995 to $1.4
million for the year ended December 31, 1996, due primarily to an increase in
interest bearing deposits and an increase in notes payable for borrowings by
Bancshares for payment, subject to appeal, of the trial court's judgment award
in pending litigation with The 400 Group. See "Legal Proceedings." Noninterest
expense for the year ended December 31, 1996 totaled $1.8 million, a decrease
of $221 thousand, or 11.1%, from the $2.0 million for the year ended December
31, 1995, due primarily to a decrease in legal fees and expenses relating to
pending litigation.
PROVISIONS FOR POSSIBLE LOAN LOSSES
As a result of management's assessment of the adequacy of the
allowance for possible loan losses, the Bank recorded no loan loss provisions
in 1995 or 1996. The year-end 1996 allowance for possible loan losses was $255
thousand, 1.5% of total loans, compared to $262 thousand, or 1.7% of total
loans, at December 31, 1995. On a monthly basis, Bank management performs an
analysis to determine the adequacy of the reserve for possible loan losses. It
is the policy of the Bank to maintain a loan loss reserve account that is
appropriate when compared to the quality of its loan portfolio and sufficient
to meet anticipated future loan losses. The loan loss provision is calculated
as of the last day of each month. A provision of 1% - 1.25% of total loans has
been deemed to be adequate. In the event that a deficiency exists, the Bank
will increase the actual loan loss reserve to a satisfactory level.
In recent years, the Bank maintained a loan loss ratio in excess of
2.5%, which was well above peer group and industry averages. The Bank has
steadily reduced its target reserve to 1% - 1.25% of total loans based on the
quality of its loan portfolio and the absence of loan problems, as reflected in
a consistent delinquency ratio below 3.0% of total loans delinquent by 30 days
and over. The Bank has incurred only approximately $13 thousand in charged off
loans since 1990 and currently has less than $30 thousand in non-performing
loans.
The FDIC recently completed an examination of the Bank as of December
31, 1996 and determined that the Bank's loan loss reserve of between 1% and
1.25% of total loans is adequate and that the methodology for calculation of
the reserve is reasonable.
INCOME TAXES
Bancshares has a net operating loss carryforward at December 31, 1996
of approximately $1.9 million and certain other tax attributes as disclosed in
Note 7 to the financial statements. Under Financial Accounting Standards Board
Opinion #109, in order to record the tax effects of tax attributes, it must be
more likely than not that the tax attributes can be used to offset future tax
liability. The principal considerations in making this determination are the
predictability of future taxable income during the period of the carryforward,
and the availability without limitation of the net operating loss. Prior to
1995, as a result of pending litigation, there was a concern that there could be
a change in control of Bancshares that would limit the availability of net
operating loss for income tax purposes. Because of the results in the
litigation, however, it was determined that there would be no change in control
of Bancshares, that the net operating loss would not, therefore, be limited, and
that predicted profits would be sufficient to use the carryforward. As a result,
Bancshares recorded a net deferred tax asset in 1995 of approximately $539
thousand.
Also in connection with the final judgment in that litigation,
Bancshares received approximately $2.2 million subsequent to March 1997
resulting in an income tax gain of $1.2 million. Net operating loss will offset
the gain for income tax purposes. Bancshares management estimates that,
beginning in 1998, Bancshares will have no net operating losses remaining and
that it will, therefore, begin to pay federal income tax during 1998.
EARNING ASSET/INTEREST BEARING LIABILITIES YIELDS AND RATES
Bancshares has no earning assets independent of Guaranty Bank, and its
only interest bearing liabilities are promissory notes in the total principal
amount of $3.1 million at December 31, 1996, as compared to $3.8 million at
December 31, 1995, which bear interest at a floating rate based on the Chase
Manhattan Bank prime rate and averaged 9.42% in 1996 and 9.73% in 1995. In
connection with resolution of all pending litigation in June, 1997, Bancshares
received a cash payment of approximately $2.2 million, of which Bancshares
applied $1.7 million to reduction of Bancshares' indebtedness to $1.4. See
"Legal Proceedings." The balance of the litigation proceeds was applied to (i)
redemption of outstanding Preferred Stock ($300 thousand), see "Recent Sales of
Unregistered Securities," (ii) capital contribution to the Bank ($127
thousand), and (iii) payment of costs related to the litigation. Bancshares
anticipates that the $1.4 million in remaining indebtedness will be amortized
over ten (10) years in monthly installments of approximately $18,000,
commencing August, 1997. The average balances and yields for interest-bearing
assets and interest-bearing liabilities of Guaranty Bank for 1996 and 1995 are
as set forth in the following table (in thousands of dollars):
- 11 -
<PAGE> 14
<TABLE>
<CAPTION>
Year Ended December 31, 1996 Year Ended December 31, 1995
---------------------------- ----------------------------
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------- ------- ---- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Real estate loans $ 10,643 $ 983 9.23% $ 9,078 $ 890 9.80%
Installment loans 2,328 251 10.79 2,078 236 11.32
Commercial and Industrial loans 2,795 271 9.70 2,422 239 9.87
U.S. Treasury and government agency
securities 16,767 1104 6.59 20,392 1,304 6.39
Municipal securities 0 0 0 0 0 0
Other securities (AID & TCO) 3,155 233 7.39 2,142 194 9.06
Federal funds sold and securities sold
under agreements to repurchase 1,939 105 5.42 887 54 6.09
Total earning assets $ 37,622 $ 2,947 7.83 $37,008 $2,917 7.88
======= =======
INTEREST-BEARING LIABILITIES:
Interest-bearing transaction accounts $ 3,667 $ 68 1.85 $ 3,207 $ 57 1.78
Money market deposits 2,043 41 2.01 2,210 44 1.99
Savings deposits 7,122 163 2.30 7,063 162 2.30
Time deposits 15,416 687 4.46 15,559 657 4.22
Federal funds purchased and securities
purchased under agreements to resell 0 0 0 0 0 0
FHLBB Borrowings 1,368 100 7.37 1,211 87 7.23
Total interest-bearing liabilities $ 29,616 $ 1,059 3.58 $ 29,250 $1,007 3.44
======== ------- ---- ======== ------ ====
Net interest income (1)(2) $ 1,888 $1,910
======= ======
Net interest margin (1)(2) 4.25% 4.44%
===== =====
</TABLE>
- ------------------------------
(1) Does not include interest bearing notes payable by Bancshares
(2) Neither Bancshares nor Bank has any investments in municipal bonds
or other tax-free assets, and there is, therefore, no adjustment
for the tax-free equivalent basis.
- 12 -
<PAGE> 15
The changes in components of net interest income caused by changes in
average earning asset and liability volumes and changes in rates for 1996 and
1995 are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
1996 Compared to 1995 1995 Compared to 1994
--------------------- ---------------------
Volume Rate Net Volume Rate Net
------ ---- --- ------ ---- ---
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Real estate loans $ 153 $(52) $ 101 $133 $(15) $ 118
Installment loans 27 (16) 16 (94) 60 (34)
Commercial and Industrial loans 37 (4) 33 (49) 60 11
U.S. Treasury and government agency
securities (232) 39 (193) 72 153 225
Municipal securities 0 0 0 (5) (5) (10)
Other securities 92 (36) 56 73 91 104
Federal funds sold and securities sold
under agreements to repurchase 64 (6) 58 (62) 58 (4)
Total earning assets 48 (18) 30 (30) 404 374
INTEREST-BEARING LIABILITIES:
Interest-bearing transaction accounts 8 2 10 (12) (12) (24)
Money market deposits (3) 0 (3) (19) (7) (26)
Savings deposits 1 0 1 3 (12) (9)
Time deposits (6) 36 30 (39) 191 152
Federal funds purchased and securities
purchased under agreements to resell 0 0 0 0 0 0
FHLB Borrowings 11 2 13 82 0 82
Total interest-bearing liabilities 13 39 52 (40) 213 173
Net interest income, tax equivalent 35 (57) (22) 10 191 201
</TABLE>
The increase (decrease) due to changes in average balances reflected
in the above table was calculated by applying the preceding year's rate to the
current year's change in the average balance. The increase (decrease) due to
changes in average rates was calculated by applying the current year's change
in the average rates to the current year's average balance. Using this method
of calculating increases (decreases), an increase or decrease due to both
changes in average balances and rates is reflected in the changes attributable
to average rate changes.
INTEREST RATE SENSITIVITY.
Interest rate risk is the potential impact of changes in interest
rates on net interest income. The risk results from disparities in repricing
opportunities of assets and liabilities over a period of time. As a means for
limiting this risk, Bank management estimates the effects of changing interest
rates and various balance sheet strategies on net interest income and adjusts
the mix of floating and fixed-rate assets and liabilities and/or changes pricing
schedules.
The degree of interest rate sensitivity is not equal for all types of
assets and liabilities. The Bank's experience indicates that the repricing of
interest-bearing demand, savings and money market accounts does not move with
the same volatility as general market rates. Additionally, these deposit
categories, along with non-interest demand deposits, have historically been
stable sources of funds to the Bank, with longer implicit maturity than their
contractual availability.
Set forth below is the Bank's interest rate sensitivity position at
December 31, 1996. This profile is based on a point in time and does not
consider subsequent changes in interest rate levels or spreads between asset and
liability categories. A negative gap implies that earnings would decrease in a
rising interest rate environment and increase in a falling interest rate
environment.
<TABLE>
<CAPTION>
(In Thousands)
0-3 3-12 1-3 3-5 5-10 10-20 20+
--- ---- --- --- ---- ----- ---
ASSETS: MONTHS MONTHS YEARS YEARS YEARS YEARS YEARS TOTAL
------ ------ ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash $ 3,695 - - - - - - $ 3,695
Securities 7,182 2,199 4,870 3,553 1,233 724 - 19,761
Loans 6,649 2,065 3,110 2,690 2,565 - - 17,079
Loan & Lease Reserves - - - - - - (255) (255)
Fixed and Other Assets - - - - - - 1,502 1,502
TOTAL ASSETS $17,526 $4,264 $7,980 $6,243 $3,798 $ 724 $1,247 $41,782
======= ====== ====== ====== ====== ====== ====== =======
SOURCES OF FUNDS:
Non-Interest Deposits 2,333 1,908 1,054 1,012 - - - 6,307
NOW & Savings Deposits 993 3,068 4,080 4,223 - - - 12,364
Money Market Deposits 313 934 311 300 - - - 1,858
Time Deposits 5,813 7,758 1,090 1,047 - - - 15,708
Short Term Debt 700 - - - - - - 700
Long Term Debt - - - - 1,276 - - 1,276
Other Liabilities - - - - - - 110 110
Shareholder's Equity - - - - - - 3,459 3,459
TOTAL SOURCE OF $10,152 $13,668 $6,535 $6,582 $1,276 - $3,569 $41,782
FUNDS ------- ------- ------ ------ ------ ------ ------ -------
GAP 7,374 (9,404) 1,445 (339) 2,522 724 (2,322) -
CUMULATIVE GAP $ 7,374 $(2,030) $ (585) $ (924) $1,598 $2,322 - -
</TABLE>
RETURN ON EQUITY AND ASSETS
The return on equity and assets by Bancshares and Guaranty Bank for
the years ending December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------- ---------------------
Guaranty Guaranty
Bank Bancshares Bank Bancshares
---- ---------- ---- ----------
<S> <C> <C> <C> <C>
Return on average assets 1.2% .5% 2.1% 1.2%
Return on average equity 12.8% 42.7% 24.0% 960.3%
Dividend payout ratio 209.0% --- 40.8% ---
Average equity to average assets 9.2% 1.2% 8.9% ---
</TABLE>
- --------------------
(1) Includes $700,000 extraordinary dividend paid in January 1996 to Bancshares
by Guaranty Bank to reduce Bancshares' outstanding debt.
- 13 -
<PAGE> 16
DESCRIPTION OF PROPERTY
The Bank's principal office is located at 175 New Roads Street, New
Roads, Louisiana 70760. The facility has 10,100 square feet in two buildings
with drive-up windows and a night depository. The Bank owns this property free
of any and all liens and encumbrances. The Bank also operates two (2)
full-service branches located in Livonia, Louisiana and Jarreau, Louisiana.
The Livonia branch is a 3,500 square foot facility opened in 1980 and the
Jarreau branch is a 1,400 square foot facility opened in 1981. The Bank owns
these properties free of any and all liens and encumbrances. The Bank also
owns a 2,780 square foot facility in Morganza, Louisiana which is presently
used by the Bank for record storage.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of June 15, 1997, the following person was known by Bancshares
to be the beneficial owner of more than five (5%) percent of the outstanding
shares of voting securities of Bancshares:
<TABLE>
<CAPTION>
Name of Beneficial Owner Shares Beneficially Owned Percent of Class
------------------------ ------------------------- ----------------
<S> <C> <C>
H.T. Olinde, Jr. 12,488(1) 8.71%
</TABLE>
(1) Includes shares voted by Mr. Olinde but owned by Brown Brokerage Co.
(369 shares) and B. Olinde & Sons (3,036 shares).
SECURITY OWNERSHIP OF MANAGEMENT
The following table indicates the beneficial ownership as of June 15,
1997, of Bancshares voting securities by (i) each director of Bancshares, (ii)
the chief executive officer of Guaranty Bank, and (iii) all directors and
executive officers of Bancshares and Guaranty Bank as a group:
<TABLE>
<CAPTION>
Name and Position Shares Beneficially Owned Percent of Class
----------------- ------------------------- ----------------
<S> <C> <C>
Joseph L. Dabadie, Jr., Director 140 *
Craig A. Major, Director 436 *
H.T. Olinde, Jr., Director 12,488 8.71%
J. Lane Orillion, Director 150 *
F. Gregory Roy, Director 348 *
Daniel R. Domingue, Jr., Chief Executive 312 *
Officer of Guaranty Bank
Directors and Executive Officers 14,340 10.0%
as a group (10 persons)
</TABLE>
- ---------------------
*less than 1.0%
- 14 -
<PAGE> 17
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
DIRECTORS
The directors of Bancshares are as follows:
Joseph L. Dabadie, Jr., age 70, has been a director since 1993. Mr.
Dabadie retired from the U.S. Army in 1988 with the rank of Brigadier General,
and since his retirement has worked as a safety director for Reliable
Production, Inc.
Craig A. Major, age 49, has been a director since 1993. Mr. Major has
been a cattle rancher for over twenty- five years and is the owner and operator
of Bar "M" Ranch and has also been the owner and operator of Major's Truck
Stop since 1991.
H.T. Olinde, Jr., age 69, was a founder of Guaranty Bank in 1957 and
serves as Chairman of the Board. Mr. Olinde served as a director from 1957
until his resignation in 1984 and was re-elected director in 1993. Mr. Olinde
is a shareholder and executive officer of B. Olinde & Sons, Inc., which owns
and operates retail furniture stores, a wholesale beer distributorship, and
various property interests.
J. Layne Orillion, age 49, has been a director since 1993. Mr.
Orillion is President and owner of Lo-Vac, Inc., which he founded in 1982.
Lo-vac, Inc. provides vacuum truck and transportation services to the oil and
gas and petrochemical industries of South Louisiana.
F. Gregory Roy, age 45, has been a director since 1993. Mr. Roy is a
50% owner of P & G Farms, Inc. and has been in farming since 1978.
Each director has been elected without specific term to serve until
his successor is duly qualified and elected.
The foregoing directors of Bancshares are also directors of Guaranty
Bank. Additional directors of Guaranty Bank are Daniel R. Domingue, Jr. and
Larry J. Roberts; see discussion of "Executive Officers" below.
EXECUTIVE OFFICERS
The executive officers of Guaranty Bank are as follows:
Beverly B. David, age 53 is a Vice-President and head of bank
operations and has served in that capacity since 1989. Mrs. David also serves
as the bank's Cashier and Security Officer.
Daniel R. Domingue, Jr., age 52, has served as the Bank's President
and Chief Executive Officer and as a director of Guaranty Bank since 1994.
Prior to joining Guaranty Bank, Mr. Domingue served for five years as
President/CEO of Bank of Lafayette. Mr. Domingue has been in banking for over
twenty-three years.
R. Keith Miller, age 46, is Executive Vice President and is the Bank's
Senior Lending Officer. Mr. Miller has been an executive officer since joining
Guaranty Bank in 1982 and has been in banking for twenty-five years.
- 15 -
<PAGE> 18
J. Wade O'Neal, age 40, has been employed by Guaranty Bank for
seventeen years and has, since 1989, served as Vice-President and head of Loan
Administration. Mr. O'Neal also serves as the Bank's Compliance Officer.
Larry J. Roberts, age 57, serves as Senior Vice-President and Chief
Financial Officer and has been employed by Guaranty Bank for twenty-five years.
Mr. Roberts also serves as Secretary to the Board of Guaranty Bank and as
Treasurer of Bancshares.
EXECUTIVE COMPENSATION
Daniel R. Domingue, Jr. serves as the authorized representative of Bancshares
and as President and Chief Executive Officer of Guaranty Bank, for which he
received aggregate cash compensation during the three years ended December 31,
1996 as set forth in the cash compensation table below. No executive officer or
employee of Bancshares or Guaranty Bank earned aggregate compensation during
any of the three years ended December 31, 1996 exceeding $100,000.
<TABLE>
<CAPTION>
Name of Individual and Position Year Salary Bonus Other
------------------------------- ---- ------ ----- -----
<S> <C> <C> <C> <C>
Daniel R. Domingue, Jr., Guaranty 1994(1) $50,000 $ 8,000 $4000
Bank President and CEO 1995 75,000 7,500 7125(2)
1996 75,000 15,000 8250(2)
</TABLE>
- -----------------
(1) Partial year, commencing May 1, 1994
(2) Includes living allowance at $500 per month and Bank's 401(k)
matching contribution
401 (k) Plan. Under Guaranty Bank's 401(k) Plan, officers and
employees of the Bank may make contributions to the Plan with pre-tax salary
reductions. The Bank matches contributions up to three (3%) percent of the
contributing employee's gross salary.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Various directors and executive officers of Guaranty Bank and
Bancshares, and their respective family members and affiliated firms were
customers of and had transactions with the Bank during 1995 and 1996 in the
ordinary course of business. Similar transactions may be expected to take
place in the ordinary course of business in the future. All outstanding loans
and commitments included in such transactions were made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons and did not, in the opinion
of management, involve more than normal risks of collectibility or present
other unfavorable features.
Since the beginning of 1995, no transaction between Guaranty Bank or
Bancshares and any executive officer, director or holder of more than 5% of the
capital stock of Bankshares has involved an amount in excess of $60,000 except
as indicated below, for which transactions the following information is
provided: (i) name of the person; (ii) relationship to Bancshares/Guaranty
Bank; (iii) nature of the transaction and (iv) the amount involved in the
transaction.
(i) Craig A. Major; (ii) director of Bancshares; (ii) personal loans
to or endorsed by Mr. Major; (iv) at March 31, 1997, $92,437 outstanding.
(i) J. Layne Orillion; (ii) director of Bancshares; (iii) loans and
line of credit commitments to Mr. Orillion and affiliated entities; (iv) at
March 31, 1997, $50,156 outstanding with $500,000 in available credit
commitments.
(i) F. Gregory Roy; (ii) director of Bancshares; (iii) loans and line
of credit commitments to Mr. Roy and affiliated entities; (iv) at March 31,
1997, $475,664 outstanding with $127,000 in available credit commitments.
(i) James E. Kissner; (ii) holder of more than 5% of the capital stock
of Bancshares; (iii) loan by Mr. Kissner to Bancshares at the prime rate of New
York banks, but not less than 8.75% per annum, secured by a subordinate
security interest in the common stock of Guaranty Bank; (iv) the $200,000
principal amount of this loan, with all accrued interest, was paid in full by
Bancshares on June 5, 1997.
(k) H.T. Olinde, Jr., (ii) director of Bancshares; (iii) purchase by
Mr. Olinde on December 29, 1995 of approximately 10 acres of real estate from
Guaranty Bank; (iv) purchase price of $210,000, cash.
DESCRIPTION OF SECURITIES
GENERAL
The authorized capital stock of Bancshares consists of 500,000 shares
of $7.50 par value Common Stock, 500,000 shares of no par value, nonvoting
Series A Preferred Stock, and 2,000,000 shares of no par value, voting Series B
Preferred Stock. At June 15, 1997 there were outstanding 143,374 shares of
Common Stock. No shares of either Series A or Series B Preferred Stock are
outstanding as of June 15, 1997, as a result of redemption by Bancshares on
June 11, 1997 of all 24,462 shares of Series A and all 21,559 shares of Series
B Preferred Stock outstanding on that date. All of the outstanding shares of
Bancshares capital stock are fully paid and nonassessable.
- 16 -
<PAGE> 19
COMMON STOCK
The holders of Bancshares Common Stock are entitled to one vote for
each share held of record and are entitled to receive dividends when, as and if
declared by the Board of Directors out of funds legally available for payment
of dividends. In the event of liquidation, dissolution or winding-up of the
company, the holders of Common Stock are entitled to share ratably in all
assets remaining for distribution after payment of liabilities and after
provision for the liquidation preference of any class of stock that has
liquidation preference over the Common Stock. Holders of Common Stock have
preemptive rights.
PREFERRED STOCK
Bancshares has authorized two series of preferred stock - Series A
nonvoting Preferred Stock and Series B voting Preferred Stock, none of either
series of which are outstanding. See "General" above. The holders of
Bancshares Series A Preferred Stock have no voting rights but are entitled to
receive dividends identically with the Common Stock, on a share for share basis
and at the same rate, when, as and if such dividends are declared by the Board
of Directors. The holders of Bancshares Series B Preferred Stock have rights
and preferences identical to those of the Series A Preferred Stock, and, in
addition, holders of Series B Preferred Stock are entitled to one vote for each
share held of record on all matters to be voted on by the shareholders. Upon
liquidation, dissolution or winding-up of the corporation, the holders of the
shares of Series A and Series B Preferred Stock shall be entitled to receive
and to be paid out of the assets of the corporation available for distribution
to its shareholders, before any payment or distribution shall be made on the
Common Stock, the amount of $1.00 per share. To the extent funds are available
after payment of the $1.00 per share liquidation preference to the Series A and
Series B Preferred Stock, the holders of Common Stock shall be entitled to
receive the amount of $1.00 per share, and thereafter, the remainder of the
assets and funds of the corporation available for distribution to the
shareholders shall be distributed ratably among all holders of Series A and
Series B Preferred Stock and the holders of Common Stock on a share for share
basis. In the event that funds are insufficient to permit payment in full of
the $1.00 preferential amount due the Series A and Series B Preferred Stock,
then the assets shall be distributed among holders of the Series A and Series B
Preferred Stock ratably, in proportion to the full amounts to which they are
respectively entitled.
PART II
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS
There is no public trading market for the Bancshares Common Stock or
Preferred Stock. Neither the Common Stock nor the Preferred Stock of
Bancshares has ever traded, and does not trade, on or through any exchange,
established quotation or listing system or market-maker. To the knowledge of
Bancshares management, there have been no sales or exchanges of the Bancshares
Common Stock or Preferred Stock within the past two years, nor have there been
any cash dividends declared or paid on
- 17 -
<PAGE> 20
the Bancshares Common Stock or Preferred Stock within the past two years,
except that, on June 11, 1997, all outstanding shares of the Series A and
Series B Preferred Stock were redeemed by Bancshares in accordance with prior
agreement for an amount equal to the original issue price $5.11 per share, plus
interest on that amount at the "prime" rate plus one (1%) percent per annum,
from the date of original issue, August 22, 1994, through the date of
redemption. On such basis, the price paid on June 11, 1997 by Bancshares on
redemption of the Preferred Stock was $6.46 per share of Series A or Series B
Preferred Stock. At June 15, 1997, the total 143,374 shares of Bancshares
Common Stock were held of record by 518 shareholders.
LEGAL PROCEEDINGS
Guaranty Bank is, from time to time, a party to routine litigation
arising from regular business activities incident to furnishing financial
services. In addition, Bancshares and/or Guaranty Bank were parties to the
following legal proceedings, all of which were resolved during June, 1997:
(1) H.T. Olinde, Jr., et al. v. The 400 Group, et al., 18th
Judicial District Court, Suit Number 27,859, Division "Ad Hoc". Bancshares and
Guaranty Bank were substitute plaintiffs in this action, originally filed in
May, 1993 by the shareholders of Bancshares as a derivative action against
former directors and certain others ("The 400 Group"), seeking declaration of
the amount due under promissory notes evidencing advances by The 400 Group to
or for the benefit of Bancshares in 1987-88. The total amount advanced by The
400 Group was $1 million, including $400,000 for purchase of a promissory note
made by Bancshares, on which note the principal and interest due at the time of
purchase by The 400 Group was $1.7 million. After trial on the merits in
August, 1994, the trial court awarded judgment for approximately $3.6 million
against Bancshares, including the full face amount, approximately $2.4 million,
on the promissory note purchased by The 400 Group for $400,000. The judgment
amount was paid by Bancshares in July, 1995, subject to appeal. On appeal, the
Louisiana First Circuit Court of Appeal modified the judgment and reduced the
trial court's judgment to return of the original advances, plus reasonable
interest, a total of approximately $1.8 million. On May 9, 1997, the Louisiana
Supreme Court declined to review the ruling of the First Circuit, leaving that
ruling as the final judgment in the case. Pursuant to the final judgment, on
June 4, 1997 the 400 Group paid to Bancshares a total of approximately $2.2
million in refund due in this claim, as well as for settlement of actions 2 and
3 discussed below.
(2) Team Bank and Trust Company (now known as Guaranty Bank &
Trust Company) v. Thomas R. Bryan, et al., 18th Judicial District Court, Suit
Number 28,255, Div. "D". This claim was filed by Guaranty Bank in September,
1993 against certain of its former directors for breach of fiduciary duty
incident to causing payment by Guaranty Bank of a total of approximately
$127,000 in charges by third parties for services which Guaranty Bank asserts
were for the benefit of the defendants. This claim was resolved on June 4,
1997, in connection with resolution and settlement of claims (1) and (2)
discussed herein.
(3) Thomas R. Bryan v. Guaranty Bank & Trust Company, 18th
Judicial District Court, Suit Number 28,873, Div. "A". In August, 1993 the
Bank's chief executive officer, Thomas R. Bryan, who was also the president of
The 400 Group (described above), was dismissed for his actions on behalf of The
400 Group and adverse to Guaranty Bank and Bancshares. In May, 1994, Mr. Bryan
filed suit for alleged breach of his employment agreement with Guaranty Bank.
This claim was resolved on June 4, 1997 in connection with resolution and
settlement of claims (1) and (2) discussed above.
- 18 -
<PAGE> 21
(4) Raymond Long, et al. v. Great Guaranty Bancshares, Inc., et
al., 18th Judicial District Court, Suit Number 23,413, Div. "C". In 1988, a
former director, Raymond Long, sued Guaranty Bank, Bancshares and the Bank's
chief executive officer at that time, Thomas R. Bryan, for $1.5 million
alleging, among other things, that Guaranty Bank wrongfully dishonored checks.
This action remained dormant for several years by agreement of the parties
will remain dormant pending final decision in the litigation with The 400 Group
described above, and was dismissed by the plaintiff in June, 1997 upon
resolution of all claims involving The 400 Group.
CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS
There has been no change in nor disagreement with the independent
accountants of Bancshares or Guaranty Bank during the two most recent fiscal
years.
RECENT SALES OF UNREGISTERED SECURITIES
In July, 1994, the directors of Bancshares loaned to Bancshares the
sum of $219,200 pursuant to convertible debentures of a form approved by the
Bancshares Board of Directors and by the Federal Reserve Board for funding of
expenses of Bancshares' ongoing litigation with its prior directors and others.
See "Legal Proceedings". The debentures stipulated interest on the principal
amount at the "prime" rate as it may from time to time exist, as published in
the Wall Street Journal, plus one (1%) percent per annum. On August 22, 1994,
by agreement of Bancshares and the holders of the debentures, the debentures
were converted into 42,896 shares of the previously authorized Series B
Preferred Stock at the conversion price of $5.11 per share, based on
information then available regarding value of Bancshares and subject to the
right of Bancshares to redeem shares of the Preferred Stock if necessary to
avoid dilution of the holders of Common Stock upon completion of pending
litigation. In furtherance of that redemption right, the holders of the
Preferred Stock granted to Bancshares the right to redeem the Preferred Shares
for the original issue price plus an amount equal to interest on the issue
price at the prime rate, plus one (1%) percent per annum, from the issue date
through the date of redemption. On December 29, 1995 Bancshares issued to
Raymond R. Long, 3,125 shares of Series B Preferred Stock in payment of
indebtedness by Bancshares to Mr. Long, subject to the right of Bancshares to
redeem said shares on terms and conditions identical to those described above.
On December 28, 1995 a total of 24,462 shares of the Series B voting Preferred
Stock were converted to shares of Series A, nonvoting Preferred Stock on a
share for share basis, on agreement of Bancshares with the holders of said
shares. The shares of Series A and Series B Preferred Stock referred to above
were issued on exemption from registration pursuant to the intrastate offering
exemption, Section 3(a)(11) of the Securities Act of 1933. The Company did not
use any underwriters in connection with the offering, and no securities sales
commissions were paid. In accordance with the right of redemption granted to
Bancshares on conversion of the debentures, all of the shares of Series A and
Series B Preferred Stock were redeemed by Bancshares on June 11, 1997. See
"Market Price of and Dividends on the Registrant's Common Equity and Other
Shareholder Matters."
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 83 of the Louisiana Business Corporation Law ("LBCL") provides
that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any action, suit or proceeding, whether civil,
criminal, administrative, or investigative (other than an action by or in the
right of the corporation), by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee, or agent of
another business, foreign or nonprofit corporation, partnership, joint venture,
or other
- 19 -
<PAGE> 22
enterprise. The indemnity may include expenses, including attorney fees,
judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit, or proceeding if he acted
in good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. Section 83 further provides that a Louisiana corporation may
indemnify officers and directors in an action by or in the right of the
corporation under the same conditions except that no indemnification is
permitted without judicial approval if the director or officer shall have been
adjudged to be liable for willful or intentional misconduct in the performance
of his duty to the corporation. Where an officer or director is successful on
the merits or otherwise in any defense of any action referred to above or any
claim therein, the corporation must indemnify him against such expenses that
such officer or director actually incurred. Section 83 permits a corporation
to pay expenses incurred by the officer or director in defending an action,
suit or proceeding in advance of the final disposition thereof if approved by
the board of directors.
Article 9 of the Bancshares Articles of Incorporation provides that
Bancshares shall indemnify any person threatened with or who is made a party to
any legal proceeding by reason of the fact that he is serving or has served as
a director, officer or employee of Bancshares. Such indemnification shall
include expenses actually and reasonably incurred by such person in connection
with the defense or settlement of such proceeding if (i) he is successful on
the merits or otherwise or (ii) he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
corporation.
- 20 -
<PAGE> 23
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995 AND MARCH 31, 1997 AND 1996
-21-
<PAGE> 24
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995 AND MARCH 31, 1997 AND 1996
-21-
<PAGE> 25
C O N T E N T S
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITORS' REPORT 23
CONSOLIDATED STATEMENTS OF CONDITION
December 31, 1996 and 1995
March 31, 1997 and 1996 (unaudited) 24-25
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1996, 1995 and 1994
Three months ended March 31, 1997 and 1996 (unaudited) 26-27
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended December 31, 1996 and 1995 and 1994 28-29
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1996, 1995 and 1994
Three months ended March 31, 1997 and 1996 (unaudited) 30-31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 32-54
</TABLE>
-22-
<PAGE> 26
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Great Guaranty Bancshares, Inc.
New Roads, Louisiana
We have audited the accompanying consolidated statements of condition of Great
Guaranty Bancshares, Inc. and Subsidiary as of December 31, 1996 and 1995, and
the related consolidated statements of income, changes in shareholders' equity
and cash flows for each of the years during the three year period ended
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Great Guaranty
Bancshares, Inc. and Subsidiary as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years during
the three year period ended December 31, 1996 in conformity with generally
accepted accounting principles.
POSTLETHWAITE & NETTERVILLE, APAC
Baton Rouge, Louisiana
April 4, 1997, except as to Note 17, which
date is June 4, 1997
-23-
<PAGE> 27
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
CONSOLIDATED STATEMENTS OF CONDITION
A S S E T S
<TABLE>
<CAPTION>
December 31 March 31
------------------------- -------------------------
1996 1995 1997 1996
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash and due from banks $ 2,406,805 $ 1,725,550 $ 2,357,550 $ 1,677,842
Interest-bearing deposits
with banks 1,288,571 -- 792,000 999,818
Federal funds sold -- 1,825,000 300,000 1,400,000
Investment securities - available
for sale 19,761,011 20,525,539 19,157,007 18,398,042
Restricted investments in equity
securities 202,100 190,600 205,000 193,600
Loans, net of allowance for
loan losses 16,823,712 14,731,246 19,013,203 14,985,016
Properties and equipment, net 664,854 704,848 651,037 723,372
Accrued interest receivable 355,583 371,516 351,482 307,734
Other assets 547,695 764,055 527,697 728,900
----------- ----------- ----------- -----------
TOTAL ASSETS $42,050,331 $40,838,354 $43,354,976 $39,414,324
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
-24-
<PAGE> 28
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31 March 31
---------------------------- ----------------------------
1996 1995 1997 1996
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
LIABILITIES
Demand deposits $ 6,304,731 $ 7,565,089 $ 7,333,486 $ 6,747,452
NOW deposits 5,053,484 3,297,949 5,552,381 3,480,442
Savings deposits 9,168,044 9,066,175 9,387,223 9,169,979
Time deposits, $100,000 and over 1,168,073 739,137 1,269,775 507,560
Other time deposits 14,539,820 14,320,907 14,560,341 14,402,556
------------ ------------ ------------ ------------
Total deposits 36,234,152 34,989,257 38,103,206 34,307,989
Notes payable 4,376,531 5,187,718 4,358,117 4,462,613
Accrued expenses and other
liabilities 168,587 216,563 327,502 173,617
Federal funds purchased 700,000 -- -- --
------------ ------------ ------------ ------------
Total liabilities 41,479,270 40,393,538 42,788,825 38,944,219
------------ ------------ ------------ ------------
COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY
Preferred stock - Series A, no par;
500,000 shares authorized; 24,462
shares issued and outstanding 126,037 126,037 126,037 126,037
Preferred stock - Series B, no par;
2,000,000 shares authorized; 21,559
shares issued and outstanding 111,080 111,080 111,080 111,080
Common stock - $7.50 par value,
500,000 shares authorized; 143,374
shares issued and outstanding 1,075,305 1,075,305 1,075,305 1,075,305
Capital surplus 2,411,471 2,411,471 2,411,471 2,411,471
Retained deficit (3,151,760) (3,368,831) (3,087,305) (3,317,486)
Unrealized gain (loss) on securities
available for sale, net of tax (1,072) 89,754 (70,437) 63,698
------------ ------------ ------------ ------------
Total shareholders' equity 571,061 444,816 566,151 470,105
------------ ------------ ------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 42,050,331 $ 40,838,354 $ 43,354,976 $ 39,414,324
============ ============ ============ ============
</TABLE>
-25-
<PAGE> 29
GREAT GUARANTY BANCSHARES, INC. Page 1 of 2
NEW ROADS, LOUISIANA
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
Years ended December 31, March 31,
----------------------------------------- -------------------------
1996 1995 1994 1997 1996
----------- ----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on
loans $ 1,671,939 $ 1,485,824 $ 1,193,181 $ 454,833 $ 396,400
Interest on investment
securities 1,210,354 1,456,679 1,203,397 317,739 316,480
Interest on federal funds sold 105,250 53,622 94,746 12,876 27,974
Interest on deposit with
banks 61,860 1,044 65,786 13,622 6,780
----------- ----------- ----------- ----------- -----------
Total interest income 3,049,403 2,997,169 2,557,110 799,070 747,634
----------- ----------- ----------- ----------- -----------
INTEREST EXPENSE
Interest on notes payable 396,691 311,423 65,069 115,874 104,629
Interest on deposits 959,466 919,507 838,009 261,339 233,892
----------- ----------- ----------- ----------- -----------
Total interest expense 1,356,157 1,230,930 903,078 377,213 338,521
----------- ----------- ----------- ----------- -----------
NET INTEREST INCOME 1,693,246 1,766,239 1,654,032 421,857 409,113
PROVISION (CREDIT) FOR LOAN
LOSSES (15,000) (23,106) (35,000) -- --
----------- ----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,708,246 1,789,345 1,689,032 421,857 409,113
----------- ----------- ----------- ----------- -----------
NONINTEREST INCOME
Service charges on deposit
accounts 342,481 342,179 225,401 70,534 89,627
Other service charges and fees 27,738 16,078 29,663 1,936 860
Net investment securities gains (losses) -- -- (6,497) 9,897 --
Other income 25,617 11,149 19,867 -- 9,979
----------- ----------- ----------- ----------- -----------
395,836 369,406 268,434 82,367 100,466
----------- ----------- ----------- ----------- -----------
NONINTEREST EXPENSE
Salaries and employee benefits 887,540 885,009 902,879 216,188 218,343
Occupancy expense 227,632 200,996 235,877 54,842 53,106
Data processing 170,990 154,139 89,640 35,368 36,975
Legal fees 107,884 319,105 322,860 5,600 33,886
Other expense 379,773 435,313 542,297 93,583 89,588
----------- ----------- ----------- ----------- -----------
1,773,819 1,994,562 2,093,553 405,581 431,898
----------- ----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME
TAXES 330,263 164,189 (136,087) 98,643 77,681
INCOME TAX EXPENSE (BENEFIT) 113,192 (331,126) -- 34,188 26,310
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 217,071 $ 495,315 $ (136,087) $ 64,455 $ 51,371
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
-26-
<PAGE> 30
GREAT GUARANTY BANCSHARES, INC. Page 2 of 2
NEW ROADS, LOUISIANA
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
Years ended December 31, March 31,
----------------------------------------- -------------------------
1996 1995 1994 1997 1996
----------- ----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
PER COMMON SHARE DATA:
Net income (loss) $ 1.51 $ 3.45 $ (.95) $ .45 $ .36
=========== =========== =========== =========== ===========
Average shares outstanding 143,374 143,374 143,374 143,374 143,374
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
-27-
<PAGE> 31
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
AND THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
Preferred Stock
----------------------------------------------
Series A Series B
--------------------- ----------------------
# of # of
Shares Amount Shares Amount
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993 -- $ -- -- $ --
Net (loss) -- -- -- --
Preferred stock issued -- -- 42,896 219,200
Change in unrealized gain (loss) on
securities available for sale -- -- -- --
--------- --------- --------- ---------
BALANCE AT DECEMBER 31, 1994 -- -- 42,896 219,200
Net income -- -- -- --
Preferred stock issued -- -- 3,125 17,917
Exchange of Class B stock (voting)
for Class A stock (non-voting) 24,462 126,037 (24,462) (126,037)
Change in unrealized gain (loss) on
securities available for sale -- -- -- --
--------- --------- --------- ---------
BALANCE AT DECEMBER 31, 1995 24,462 126,037 21,559 111,080
Net income -- -- -- --
Change in unrealized gain (loss) on
securities available for sale -- -- -- --
--------- --------- --------- ---------
BALANCE AT DECEMBER 31, 1996 24,462 126,037 21,559 111,080
Net income -- -- -- --
Change in unrealized gain (loss) on
securities available for sale -- -- -- --
--------- --------- --------- ---------
BALANCE AT MARCH 31, 1997 24,462 $ 126,037 21,559 $ 111,080
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
-28-
<PAGE> 32
<TABLE>
<CAPTION>
Unrealized
Common Stock Gain (Loss) on
- ----------------------------- Securities Total
# of Capital Retained Available Shareholders'
Shares Amount Surplus Deficit for Sale Equity
- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
143,374 $ 1,075,305 $ 2,411,471 $ (3,728,059) $ -- $ (241,283)
-- -- -- (136,087) -- (136,087)
-- -- -- -- -- 219,200
-- -- -- -- (40,071) (40,071)
- ------------- ------------- ------------- ------------- ------------- -------------
143,374 1,075,305 2,411,471 (3,864,146) (40,071) (198,241)
-- -- -- 495,315 -- 495,315
-- -- -- -- -- 17,917
-- -- -- -- -- --
-- -- -- -- 129,825 129,825
- ------------- ------------- ------------- ------------- ------------- -------------
143,374 1,075,305 2,411,471 (3,368,831) 89,754 444,816
-- -- -- 217,071 -- 217,071
-- -- -- -- (90,826) (90,826)
- ------------- ------------- ------------- ------------- ------------- -------------
143,374 1,075,305 2,411,471 (3,151,760) (1,072) 571,061
-- -- -- 64,455 -- 64,455
-- -- -- -- (69,365) (69,365)
- ------------- ------------- ------------- ------------- ------------- -------------
143,374 $ 1,075,305 $ 2,411,471 $ (3,087,305) $ (70,437) $ 566,151
============= ============= ============= ============= ============= =============
</TABLE>
-29-
<PAGE> 33
GREAT GUARANTY BANCSHARES, INC. Page 1 of 2
NEW ROADS, LOUISIANA
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
Years ended December 31, March 31,
-------------------------------------------- ----------------------------
1996 1995 1994 1997 1996
------------ ------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 217,071 $ 495,315 ($ 136,087) $ 64,455 $ 51,371
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation 119,589 114,029 111,082 27,440 29,897
Provision for loan losses (15,000) (23,106) (35,000) -- --
Deferred tax expense (benefit) 113,192 (331,126) -- 34,188 26,310
Net amortization in investment
premium\discounts (4,708) 36,180 74,998 10,573 (1,177)
Write down of other real estate -- 46,128 60,500 -- --
Stock dividends received (11,500) (11,400) (3,200) (2,900) (3,000)
Net gain on sale of other real estate (24,204) (9,308) -- -- --
Net investment securities losses -- -- 6,497 (9,897) --
(Increase) decrease in accrued income
and other assets (5,187) 107,522 105,885 10,089 82,025
Increase (decrease) in accrued expenses
and other liabilities (56,150) (1,495,570) (133,073) 163,222 (100,158)
------------ ------------ ------------ ------------ ------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 333,103 (1,071,336) 51,602 297,170 85,268
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales/maturities of
investment securities
Held to maturity -- 5,200,201 8,606,001 -- --
Available for sale 9,044,870 -- 455,155 1,872,253 4,261,218
Purchase of investment securities
Held to maturity -- (3,423,951) (10,177,647)
Available for sale (8,413,250) -- (997,066) (1,362,775) (2,103,312)
Net change in:
Interest bearing deposits with banks (1,288,571) 392,000 2,438,183 496,571 (999,818)
Federal funds sold 1,825,000 (1,125,000) 3,425,005 (300,000) 425,000
Loans (2,077,466) (2,854,106) (375,427) (2,189,491) (261,270)
Purchase of equipment and
building improvements (79,595) (151,058) (31,056) (13,623) (48,421)
Proceeds from sale of other real estate 195,281 374,000 33,475 -- --
------------ ------------ ------------ ------------ ------------
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (793,731) (1,587,914) 3,376,623 (1,497,065) 1,273,397
------------ ------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these statements.
-30-
<PAGE> 34
GREAT GUARANTY BANCSHARES, INC. Page 2 of 2
NEW ROADS, LOUISIANA
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
Years ended December 31, March 31,
----------------------------------------- --------------------------
1996 1995 1994 1997 1996
----------- ----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in non-interest-
bearing demand, savings and NOW
deposit accounts $ 597,048 $ (698,095) $(1,655,039) $ 1,746,831 $ (531,340)
Net increase (decrease) in time deposits 647,849 (451,547) (2,090,527) 122,223 (149,928)
Payments on bank notes payable (700,524) (2,076,117) -- -- (700,000)
Proceeds of issuance of note payable -- 3,800,524 -- -- --
Net advances (repayments) on FHLB
line of credit (102,490) 1,156,198 222,176 (18,414) (25,105)
Net change in federal funds
purchased 700,000 -- -- (700,000) --
Proceeds of issuance of preferred stock -- 17,917 219,200 -- --
----------- ----------- ----------- ----------- -----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 1,141,883 1,748,880 (3,304,190) 1,150,640 (1,406,373)
----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH
AND DUE FROM BANKS 681,255 (910,370) 124,035 (49,255) (47,708)
CASH AND DUE FROM BANKS AT
BEGINNING OF PERIOD 1,725,550 2,635,920 2,511,885 2,406,805 1,725,550
----------- ----------- ----------- ----------- -----------
CASH AND DUE FROM BANKS AT
END OF PERIOD $ 2,406,805 $ 1,725,550 $ 2,635,920 $ 2,357,550 $ 1,677,842
=========== =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 1,361,830 $ 1,506,382 $ 868,546 $ 325,532 $ 315,848
=========== =========== =========== =========== ===========
Income taxes $ -- $ -- $ -- $ -- $ --
=========== =========== =========== =========== ===========
Non-cash investing and financing activities:
Stock dividends - FHLB $ 11,500 $ 11,400 $ 3,200 $ 2,900 $ 3,000
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
-31-
<PAGE> 35
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Great Guaranty Bancshares, Inc.
(the Company) and Subsidiary conform to generally accepted accounting
principles and the prevailing practices within the banking industry. A
summary of significant accounting policies is as follows:
Basis of Presentation
The consolidated financial statements include the accounts of
Bancshares and its wholly-owned subsidiary, Guaranty Bank & Trust
Company (the Bank). The Bank operates and extends credit primarily in
and around Pointe Coupee Parish, Louisiana. All significant
intercompany accounts and transactions have been eliminated. Assets
held in an agency or fiduciary capacity are not assets of the Bank
and, accordingly, are not included in the accompanying consolidated
financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Investment in Debt Securities
The Bank's investments in debt securities are classified into two
categories and accounted for as follows:
o Securities to be Held to Maturity. Consists of bonds, notes, and
debentures for which the Bank has the positive intent and ability
to hold to maturity. These securities are reported at cost,
adjusted for amortization of premiums and accretion of discounts
which are recognized in interest income using the interest method
over the period to maturity.
o Securities Available for Sale. Consists of bonds, notes and
debentures that are available to meet the Bank's operating needs.
These securities are reported at fair value as determined by
quoted market prices.
Declines in the fair value of individual held to maturity and
available for sale securities below their cost that are other than
temporary have resulted in write-downs of the individual securities to
their fair value. The related write-downs have been included in
earnings as realized losses.
Unrealized holding gains and losses, net of tax, on securities
available for sale are reported as a net amount in a separate
component of shareholders' equity until realized.
Realized gains and losses on the sale of securities are determined
using the specific-identification method.
-32-
<PAGE> 36
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Loans Receivable
Loans receivable that management has the intent and ability to hold for
the foreseeable future or until maturity or pay-off are reported at
their outstanding principal adjusted for any charge-offs, the allowance
for loan losses, and any deferred fees or costs on originated loans and
unamortized premiums or discounts on purchased loans.
A loan is considered impaired when the present value of expected future
cash flows discounted at the loan's effective interest rate (or,
alternatively, the observable market price of the loan or the fair value
of the collateral) is less than the recorded investment in the loan. The
Company excludes from this testing installment loans and mortgage loans.
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as
they become due. When interest accrual is discontinued, all unpaid
accrued interest is reversed. Interest income is subsequently recognized
only to the extent cash payments are received.
The allowance for loan losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic
evaluation of the adequacy of the allowance is based on the Bank's past
loan loss experience, known and inherent risks in the portfolio, adverse
situations that may affect the borrower's ability to repay, the
estimated value of any underlying collateral, and current economic
conditions.
Foreclosed Real Estate
Real estate properties acquired through, or in lieu of, loan foreclosure
are to be sold and are initially recorded at fair value at the date of
foreclosure establishing a new cost basis. After foreclosure, valuations
are periodically performed by management and the real estate is carried
at the lower of carrying amount or fair value less cost to sell. Revenue
and expenses from operations and changes in the valuation allowance are
included in loss on foreclosed real estate.
Bank premises and equipment
Bank premises and equipment are stated at cost less accumulated
depreciation which is computed using either straight-line or accelerated
methods over the estimated useful lives of the assets, which range from
three to 30 years.
Income Taxes
Provisions for income taxes are based on taxes payable or refundable for
the current year (after exclusion of non-taxable income such as interest
on state and municipal securities) and deferred taxes on temporary
differences between the amount of taxable income and pretax financial
income and between the tax bases of assets and liabilities and their
reported amounts in the financial statements. Deferred tax assets and
liabilities are included in the financial statements at currently
enacted income tax rates applicable to the period in which the deferred
tax assets and liabilities are expected to be realized or settled as
prescribed in FASB Statement No. 109, Accounting for Income Taxes. As
changes in tax laws or rates are enacted, deferred tax assets and
liabilities are adjusted through the provision for income taxes.
-33-
<PAGE> 37
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Earnings per share
Earnings per share are calculated on the basis of the weighted average
number of shares outstanding.
Cash and cash equivalents
For purposes of reporting cash flows, cash and cash equivalents are
defined as those amounts included in the balance sheet caption "Cash and
due from banks."
Off-Balance Sheet Financial Instruments
In the ordinary course of business, the Bank has entered into
off-balance sheet financial instruments consisting primarily of
commitments to extend credit. Such financial instruments are recorded in
the financial statements when they are funded.
Fair Values of Financial Instruments
Statement of Financial Accounting Standards (SFAS) 107, Disclosures
about Fair Value of Financial Instruments, requires disclosure of fair
value information about financial instruments, whether or not recognized
in the balance sheet. In cases where quoted market prices are not
available, fair values are based on estimates using present value or
other valuation techniques. Those techniques are significantly affected
by the assumptions used, including the discount rate and estimates of
future cash flows. In that regard, the derived fair value estimates
cannot be substantiated by comparison to independent markets and, in
many cases, could not be realized in immediate settlement of the
instruments from its disclosure requirements. Accordingly, the aggregate
fair value amounts presented do not represent the underlying value of
Bancshares.
The following methods and assumptions were used by Bancshares in
estimating its fair value disclosures for financial instruments:
Cash and Cash Equivalents - The carrying amounts reported in the
balance sheets for cash and cash equivalents approximate those
assets' fair values.
Interest-bearing deposits in other banks - Fair values for
interest-bearing deposits in other banks are estimated using a
discounted cash flow analysis that applies interest rates currently
being offered on certificates to a schedule of aggregated
contractual maturities on such time deposits.
Investment Securities - Fair values for investment securities are
based on quoted market prices, where applicable. If quoted market
prices are not available, fair values are based on quoted market
prices of comparable instruments.
-34-
<PAGE> 38
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair Values of Financial Instruments (continued)
Loans Receivable - For variable-rate loans that reprice frequently
and have no significant change in credit risk, fair values are
based on carrying values. Fair values for certain mortgage loans
(e.g., one-to-four family residential), credit card loans, and
other consumer loans are based on quoted market prices of similar
loans sold in conjunction with securitization transactions,
adjusted for differences in loan characteristics. Fair values for
commercial real estate and commercial loans are estimated using
discounted cash flow analyses, using interest rates currently being
offered for loans with similar terms to borrowers of similar credit
quality. Fair values for impaired loans are estimated using
discounted cash flow analyses or underlying collateral values,
where applicable.
Deposit liabilities - The fair values disclosed for demand deposits
are, by definition, equal to the amount payable on demand at the
reporting date (that is, their carrying amounts). The carrying
amounts of variable-rate, fixed-term money market accounts and
certificates of deposit approximate their fair values at the
reporting date. Fair values for fixed-rate certificates of deposit
are estimated using a discounted cash flow calculation that applies
interest rates currently being offered on certificates to a
schedule of aggregated expected monthly maturities on time
deposits.
Short-term borrowings - The carrying amounts of federal funds
purchased, borrowings under repurchase agreements, and other
short-term borrowings maturing within 90 days approximate their
fair values. Fair values of other short-term borrowings are
estimated using discounted cash flow analyses based on the Bank's
current incremental borrowing rates for similar types of borrowing
arrangements.
Long-term debt - The fair values of the Company's long-term debt
are estimated using discounted cash flow analyses based on the
Company's current incremental borrowing rates for similar types of
borrowing arrangements.
Accrued interest - The carrying amount of accrued interest payable
approximates fair value.
Off-Balance Sheet Instruments - Fair values for off-balance sheet
lending commitments are based on fees currently charged to enter
into similar agreements, taking into account the remaining terms of
the agreements and the counterparties' credit standing.
Reclassification
Certain amounts in the 1995 and 1994 financial statements have been
reclassified to conform with the current year presentation.
-35-
<PAGE> 39
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. INVESTMENT SECURITIES
<TABLE>
<CAPTION>
December 31, 1996
--------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Available for Sale
U.S. Treasury & U. S. Agency $ 8,200,023 $ 31,059 $ -- $ 8,231,082
Mortgage backed securities 9,660,253 15,765 (48,448) 9,627,570
Agency for International
Development bonds 1,902,359 -- -- 1,902,359
------------- ------------- ------------- -------------
$ 19,762,635 $ 46,824 $ (48,448) $ 19,761,011
============= ============= ============= =============
Restricted Investments in
Equity Securities
Stock in Federal Home
Loan Bank, at cost $ 202,100 $ -- $ -- $ 202,100
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
--------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Available for Sale
U.S. Treasury & U. S. Agency $ 7,914,918 $ 61,290 $ (7,807) $ 7,968,401
Mortgage backed securities 10,519,865 136,812 (54,407) 10,602,270
Municipal securities 20,000 104 -- 20,104
Agency for International
Development bonds 1,934,764 -- -- 1,934,764
------------- ------------- ------------- -------------
$ 20,389,547 $ 198,206 $ (62,214) $ 20,525,539
============= ============= ============= =============
Restricted Investments in
Equity Securities
Stock in Federal Home
Loan Bank, at cost $ 190,600 $ -- $ -- $ 190,600
============= ============= ============= =============
</TABLE>
-36-
<PAGE> 40
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. INVESTMENT SECURITIES (continued)
During 1995, the Bank reassessed the classifications of investment
securities and transferred securities from held to maturity to available
for sale having amortized costs of $13,912,703 and fair value of
$13,982,936. Gross unrealized gains were $130,833 and unrealized losses
were $60,600 at the date of transfer.
Investments in restricted equity securities consist of stock of the
Federal Home Loan Bank. These investments' fair values are based on the
recoverability of their par value. The Bank is required to maintain an
investment balance in FHLB equal to 5% of its outstanding advances with
the Federal Home Loan Bank (see Note 6). These investments are pledged as
collateral against borrowings from the FHLB.
The amortized cost and estimated market value of debt securities at
December 31, 1996, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
Securities Available for Sale
-----------------------------
Amortized Fair
Cost Value
------------ -------------
<S> <C> <C>
Due in one year or less $ 6,043,926 $ 6,061,576
Due from one year to five years 6,089,455 6,114,056
Due from five years to ten years 3,436,552 3,418,234
Due after ten years 4,192,702 4,167,145
----------- -----------
$19,762,635 $19,761,011
=========== ===========
</TABLE>
For purposes of the maturity table, mortgage-backed securities, which are
not due at a single maturity date, have been allocated over maturity
groupings based on the weighted-average contractual maturities of
underlying collateral. The mortgage-backed securities may mature earlier
than their weighted-average contractual maturities because of principal
prepayments.
Investment securities with an approximate cost of $1,000,000 and
$2,440,000 and an approximate fair value of $1,000,000 and $2,428,000 at
December 31, 1996 and 1995, respectively, were pledged to secure public
deposits and for other purposes as required or permitted by law.
Proceeds from sales of securities available for sale were $1,308,040
resulting in gross realized gains of $1,817 and gross realized losses of
$8,314 for 1994. No securities were sold in 1996 or 1995.
-37-
<PAGE> 41
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. LOANS
The components of loans in the statements of condition at December 31
were as follows:
<TABLE>
<CAPTION>
(In Thousands)
-------------------------
1996 1995
-------- --------
<S> <C> <C>
Commercial $ 1,065 $ 1,330
Commercial real estate 2,345 2,594
Residential real estate 9,572 7,568
Consumer 2,731 2,367
Agricultural 1,366 1,134
Less: Allowance for loan losses (255) (262)
-------- --------
$ 16,824 $ 14,731
======== ========
</TABLE>
An analysis of the change in the allowance for loan losses follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Balance, beginning of year $ 261,601 $ 279,961 $ 313,636
Loans charged off -- (15,802) (869)
Recoveries 8,218 20,548 2,194
Provision (credit) for loan losses (15,000) (23,106) (35,000)
--------- --------- ---------
Balance, end of year $ 254,819 $ 261,601 $ 279,961
========= ========= =========
</TABLE>
The current year's allowance for loan losses of $254,819 was considered
adequate to provide for future losses and resulted in a credit in
provisions for loan losses of $15,000.
Included in other assets is $171,076 at December 31, 1995, of property
acquired through foreclosure. There are no impaired loans or property
acquired through foreclosures at December 31, 1996.
4. TIME DEPOSITS
At December 31, 1996, the scheduled maturities of time deposits are as
follows: (in thousands)
<TABLE>
<S> <C>
Within 3 months or less $ 4,945
Over 3 months through 12 months 7,137
Over 1 year through 5 years 2,344
Over 5 years 1,282
-------
$15,708
=======
</TABLE>
-38-
<PAGE> 42
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. PROPERTIES AND EQUIPMENT
Components of properties and equipment included in the statement of
condition at December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Cost:
Land $ 276,990 $ 276,990
Bank premises 1,278,978 1,278,403
Furniture and equipment 518,636 452,175
----------- -----------
Total cost 2,074,604 2,007,568
Less: accumulated depreciation (1,409,750) (1,302,720)
----------- -----------
Net book value $ 664,854 $ 704,848
=========== ===========
</TABLE>
Depreciation expense amounted to $119,589, $114,029 and $111,082 for the
years ended December 31, 1996, 1995, and 1994, respectively.
6. NOTES PAYABLE
Long-Term Debt
The Bank periodically borrows funds from the Federal Home Loan Bank under
an Advances, Collateral Pledge and Security Agreement dated April 20,
1994. Under this agreement, the Bank is eligible to receive advances up
to a maximum amount, based on the value of collateral pledged as
determined by FHLB guidelines. Each advance has a fixed rate, determined
as of the date of the advance and a repayment term of 113-132 months. All
advances are secured by a blanket floating lien on all of the Bank's 1-4
single family first mortgage loans, Federal Home Loan Bank stock and
deposits with the Federal Home Loan Bank. The carrying amounts and
assigned values of collateral pledged under this agreement are as follows:
<TABLE>
<CAPTION>
December 31, 1996
--------------------------
Carrying Assigned
Amount Value
----------- ----------
<S> <C> <C>
FHLB stock $ 202,100 $ 202,100
Deposits with FHLB 66,140 66,140
1-4 single family first mortgage 9,451,390 6,143,403
----------- ----------
$ 9,719,630 $6,411,643
=========== ==========
divided by 110%
-----------
Maximum advances available $ 5,828,766
Advances outstanding (1,276,531)
-----------
Advances available and unused $ 4,552,235
===========
</TABLE>
-39-
<PAGE> 43
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. NOTES PAYABLE (continued)
Advances outstanding under this agreement totalled $1,378,374 at December
31, 1995.
Scheduled future principal payments of advances outstanding as of December
31, 1996 are as follows:
<TABLE>
<S> <C>
1997 $ 109,749
1998 118,274
1999 127,463
2000 137,370
2001 148,052
Thereafter 635,623
-----------
$ 1,276,531
===========
</TABLE>
The weighted average interest rate of all advances outstanding as of
December 31, 1996 was 7.5%. Interest expense on these advances amounted
to $86,808, $99,793 and $6,167 for 1996, 1995 and 1994, respectively.
Demand Notes Payable
The Company owes a note payable to a bank in the principal amount of
$2,900,000, which is due on demand and bears interest at the Chase
Manhattan Prime rate plus 1%. The interest rate on the note in effect at
December 31, 1996 was 9.25%. Under the terms of this note, if no demand
is made, the note is payable in full on January 15, 1997. Interest is
payable on the note upon maturity. This loan is secured, by a pledge of
100% of the Subsidiary Bank's common stock. Subsequent to the date of
these financial statements, the Company renewed this note payable under
essentially the same terms for a 90 day period. As of December 31, 1995,
the Company owed $3,600,000 under a similar borrowing arrangement with
this Bank.
The Company owes to an individual a note payable dated December 8, 1995 in
the amount of $200,000, bearing interest at New York Prime, but not less
than 8.75% per annum. Interest is payable monthly. The principal was
scheduled to mature on December 31, 1996. As the holder of the note has
not made demand for payment as of December 31, 1996, the principal remains
outstanding and interest continues to accrue under the original terms.
This note is secured by 100% of the Subsidiary Bank's common stock,
subordinate to the security interest of the debtee bank mentioned in the
previous paragraph. This individual is a shareholder of the Company.
-40-
<PAGE> 44
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. INCOME TAXES
The source and tax effect of items reconciling income tax expense to the
amount computed by applying the federal income tax rates in effect to
income before income tax expense for the years ended December 31, 1996,
1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1996 % 1995 % 1994 %
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Tax based on statutory rate $ 112,289 34.0% $ 55,824 34.0% $ (46,269) (34.0)%
Tax exempt interest (485) (.1) (1,943) (1.2) -- --
Effect of tax brackets -- -- (9,763) (5.9) -- --
Change in valuation allowance -- -- (375,244) (228.6) 46,269 34.0
Non-deductible expenses 1,388 .4 -- -- -- --
--------- --------- --------- --------- --------- ---------
$ 113,192 34.3% $(331,126) (201.7)% $ -- --
========= ========= ========= ========= ========= =========
</TABLE>
In accordance with Statement of Financial Accounting Standards No. 109,
deferred income taxes are provided on the tax effect of changes in
temporary differences. Deferred tax assets are subject to a valuation
allowance if their realization is less likely than not. Deferred tax
assets (liabilities) which are included in other assets (net) on the
accompanying statements of condition are comprised of the following at
December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Unrealized investment gains - available for sale $ -- $ (46,237)
Stock dividends received on investments (8,874) (4,964)
Allowance for loan losses (200,048) (194,924)
Depreciation on premises and equipment -- (342)
--------- ---------
Gross deferred tax liability (208,922) (246,467)
--------- ---------
Unrealized investment losses - available-for-sale 552 --
Writedowns of foreclosed property -- 102,572
Net operating loss carryforward 662,016 672,620
Depreciation on premises and equipment 8,650 --
Business credit carryforwards and other 9,379 10,354
--------- ---------
Gross deferred tax asset 680,597 785,546
Valuation allowance -- --
--------- ---------
680,597 785,546
--------- ---------
Net deferred tax asset $ 471,675 $ 539,079
========= =========
</TABLE>
In 1994 the net deferred tax asset was reduced to zero through allowance
due the litigation (see Note 9). In 1995 the valuation allowance was
removed due to the outcome of the litigation.
-41-
<PAGE> 45
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. INCOME TAX (continued)
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Taxes payable currently $ -- $ -- $ --
Deferred tax expense (benefit) 113,192 (331,126) --
------------ ------------ ------------
$ 113,192 $ (331,126) $ --
============ ============ ============
</TABLE>
At December 31, 1996, the Company has available net operating loss
carryforwards of approximately $1,950,000 which may provide tax benefits
that will begin to expire in 2000. These carryforwards could become
limited under applicable Sections of the 1986 Internal Revenue Code if more
than a 50% change of ownership occurs.
8. RELATED PARTIES
Certain officers and directors, and companies in which they have 10 percent
or more beneficial ownership, were indebted to the Bank in the aggregate
amounts of $763,650 and $754,278 at December 31, 1996 and 1995,
respectively. During 1996 and 1995, $593,568 and $363,834 of new loans
were made, and loan repayments totaled $584,196 and $267,110, respectively.
9. CONTINGENCIES AND COMMITMENTS
The Bank's financial statements do not reflect various commitments and
contingent liabilities which arise in the normal course of business and
which involve elements of credit risk, interest rate risk and liquidity
risk. These commitments and contingent liabilities are described in Note
14 - Financial Instruments.
Litigation
The Company is a plaintiff in an action seeking declaration of the amount,
if any, due under promissory notes evidencing advances by the defendant
creditor to or for the benefit of Great Guaranty Bancshares in 1987-88. In
its reconventional demand, the defendant sought judgment on the notes and,
in the alternative, 90% of the capital stock of the holding company in
exchange for cancellation of the notes. After trial on the merits in
August 1994, the defendant's alternative demand for delivery of holding
company stock in exchange for cancellation of indebtedness was denied, but
judgment for approximately $3.6 million was awarded against the holding
company on the notes. The trial court's judgment was appealed by both
parties.
In 1995 the Company delivered to the defendants the judgment amount, with
reservation of all rights on appeal. The delivery of the judgment amount
was financed through a loan with an area bank. The stock of the Bank is
pledged as collateral on this debt of its holding company. (See Note 6)
-42-
<PAGE> 46
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. CONTINGENCIES AND COMMITMENTS (continued)
In December 1996, the appellate court modified the trial court's judgment
and reduced the amount due to the defendant to approximately $1.8 million.
If the appellate court's ruling becomes the final judgment, a balance would
be owed back to the Company of approximately $1.8 million plus accrued
interest from July 10, 1995 (the date the trial court's judgment was
delivered to the defendant).
In March 1997, the defendant requested review of the appellate court's
ruling by the Supreme Court of Louisiana. As of the date of issuance of
these consolidated financial statements, it is uncertain whether or not
this case will be heard by the Supreme Court. Should the Supreme Court
decline to hear the appeal, the appellate court's ruling would become the
final judgment, and, thus, the Company would be entitled to recoup the $1.8
million overpayment plus accrued interest. Should the Supreme Court accept
the case for review, its decision would be final.
Inasmuch as the judgment in this case is not final, neither the overpayment
resulting from the appellate court's ruling nor the interest accrued
thereon is recorded in the statements of condition.
The Company and its subsidiary are also parties to other litigation and
claims arising in the normal course of business. Management, after
consultation with legal counsel, believes that the liabilities, if any,
arising from such litigation and claims will not be material to the
Company.
10. SIGNIFICANT GROUP CONCENTRATION OF CREDIT RISK
All of the Bank's loans and commitments have been granted to customers in
the Bank's market area and the concentrations of credit by type of loan
are set forth in Note 3. The distribution of commitments to extend credit
approximates the distribution of loans outstanding. Commitments to extend
credit were granted primarily to agricultural and commercial borrowers.
Although the Bank has a diversified loan portfolio, a substantial portion
of its debtors' ability to honor their contracts is dependent upon the
agribusiness economic sector.
11. REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could
have a direct material effect on the Bank's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines that
involve quantitative measures of the Bank's assets, liabilities and
certain off-balance sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk
weightings, and other factors.
-43-
<PAGE> 47
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. REGULATORY MATTERS (continued)
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier I capital (as defined in the regulations)
to risk-weighted assets (as defined), and of Tier I capital (as defined)
to average assets (as defined). In addition to the minimum levels of
capital which are standard for all Banks under the authority of the FDIC,
the Bank must maintain a minimum Tier 1 leverage capital ratio of 7%.
This higher standard is a required condition to the Bank's release from a
cease and desist order in 1993. Management believes, as of December 31,
1996, that the Bank meets all capital adequacy requirements to which it is
subject.
As of December 31, 1996, the most recent notification from the Office of
the Comptroller of the Currency categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, the Bank must maintain minimum total
risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in
the table. There are no conditions or events since that notification that
management believes have changed the institution's category.
The Bank's actual capital amounts (in thousands) and ratios as of December
31, 1996 and 1995 are also presented in the table.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes: Action Provisions:
------------------- ------------------- -------------------
Amount Ratio Amount Ratio Amount Ratio
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996:
Total Capital
(to Risk Weighted Assets) $ 3,701 19.2% $ 1,543 >= 8.0% $ 1,928 >= 10.0%
Tier I Capital
(to Risk Weighted Assets) 3,460 17.9 771 >= 4.0 1,157 >= 6.0
Tier I Capital
(to Average Assets) 3,460 8.4 1,655 >= 4.0 2,068 >= 5.0
As of December 31, 1995:
Total Capital
(to Risk Weighted Assets) 4,096 23.8 1,421 >= 8.0 1,777 >= 10.0
Tier I Capital
(to Risk Weighted Assets) 3,835 22.3 711 >= 4.0 1,066 >= 6.0
Tier I Capital
(to Average Assets) 3,835 9.4 1,622 >= 4.0 2,028 >= 5.0
</TABLE>
-44-
<PAGE> 48
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. RESTRICTIONS ON DIVIDENDS
The Bank is subject to certain restrictions on the amount of dividends
that it may declare without prior regulatory approval. The amount that
the Bank may declare in any one year is equal to one-half of the current
year's earnings, exclusive of non-recurring items. At December 31, 1996,
there is no amount available for dividends.
13. EMPLOYEE BENEFITS
The Bank maintains a 401(k) plan for its employees, which allows them to
make contributions to the plan with pre- tax salary reductions. The Bank
matches contributions dollar for dollar up to three percent of employees'
gross salary. Contributions to the plan were $22,831 and $10,348 for 1996
and 1995, respectively.
14. FINANCIAL INSTRUMENTS
The Bank is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit, standby letters of credit and financial guarantees. Those
instruments involve, to varying degrees, elements of credit and
interest-rate risk in excess of the amount recognized in the statement of
financial position. The contract or notional amounts of those instruments
reflect the extent of the Bank's involvement in particular classes of
financial instruments.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit,
standby letters of credit, and financial guarantees written is represented
by the contractual notional amount of those instruments. The Bank uses
the same credit policies in making commitments and conditional obligations
as it does for on-balance-sheet instruments. Unless otherwise noted, the
Bank does not require collateral or other security to support financial
instruments with credit risk.
Commitments to Extend Credit and Financial Guarantees. Commitments to
extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and
may require payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Bank's experience
has been that approximately 60 percent of loan commitments are drawn upon
by customers. The Bank evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained, if it is deemed
necessary by the Bank upon extension of credit, is based on management's
credit evaluation of the counter-party. Collateral held varies but may
include accounts receivable; inventory, property, plant, and equipment;
and income-producing commercial properties.
The Bank has not been required to perform on any financial guarantees
during the past two years. The Bank has not incurred any losses on its
commitments in either 1996 or 1995.
- 45 -
<PAGE> 49
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. FINANCIAL INSTRUMENTS (continued)
The estimated fair values of the Company's financial instruments were as
follows:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
--------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- --------- --------- ---------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks,
interest-bearing deposits
with banks, and federal funds sold $ 3,695 $ 3,695 $ 3,551 $ 3,551
Securities available for sale 19,761 19,761 20,526 20,526
Restricted equity securities 202 202 191 191
Loans receivable 16,824 16,564 14,731 14,830
Accrued interest receivable 356 356 372 372
Financial liabilities:
Deposit liabilities 36,232 36,265 34,989 35,269
Short-term borrowings 700 700 -- --
Long-term debt 1,285 1,345 1,387 1,387
Bank note payable 2,900 2,900 3,600 3,600
Off-balance-sheet instruments:
Commitments to extend credit -- -- -- --
Credit card arrangements -- -- -- --
</TABLE>
A summary of the Bank's commitments and contingent liabilities at December
31, 1996, is as follows:
<TABLE>
<CAPTION>
Notional
Amount
-------------
<S> <C>
Commitments to extend credit $ 3,991,262
Credit card arrangements 450,950
</TABLE>
- 46 -
<PAGE> 50
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. BANK ONLY FINANCIAL STATEMENTS
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1996 AND 1995
A S S E T S
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Cash and due from banks $ 2,406,805 $ 1,725,550
Interest-bearing deposits with banks 1,288,571 --
Federal funds sold -- 1,825,000
Investment securities - available for sale 19,761,011 20,525,539
Restricted investments in equity securities 202,100 190,600
Loans, net of allowance for loan losses 16,823,712 14,731,246
Properties and equipment, net 664,854 704,848
Accrued interest receivable 355,583 371,516
Other assets 279,644 486,401
----------- -----------
TOTAL ASSETS $41,782,280 $40,560,700
=========== ===========
</TABLE>
- 47 -
<PAGE> 51
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. BANK ONLY FINANCIAL STATEMENTS (continued)
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1996 AND 1995
LIABILITIES AND SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
LIABILITIES
Demand deposits $ 6,307,152 $ 7,565,089
NOW deposits 5,053,484 3,297,949
Savings deposits 9,168,044 9,066,175
Time deposits, $100,000 and over 1,168,073 739,137
Other time deposits 14,539,820 14,320,907
------------ ------------
Total deposits 36,236,573 34,989,257
Notes payable 1,276,531 1,378,374
Accrued expenses and other liabilities 110,111 268,447
Federal funds purchased 700,000 --
------------ ------------
Total deposits 38,323,215 36,636,078
------------ ------------
COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDER'S EQUITY
Common stock - $7.50 par value
Authorized - 200,000 shares; issued
and outstanding - 96,242 shares 721,815 721,815
Capital surplus 4,958,601 4,816,639
Accumulated deficit (2,220,279) (1,703,586)
Unrealized gain (loss) on securities
available for sale, net of tax of $(552)
and $46,237, respectively (1,072) 89,754
------------ ------------
Total shareholder's equity 3,459,065 3,924,622
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 41,782,280 $ 40,560,700
============ ============
</TABLE>
- 48 -
<PAGE> 52
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. BANK ONLY FINANCIAL STATEMENTS (continued)
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 1,671,939 $ 1,485,824 $ 1,193,181
Interest on investment securities 1,210,354 1,456,679 1,203,397
Interest on federal funds sold 105,250 53,622 94,746
Interest on deposits with banks 61,860 1,044 65,786
----------- ----------- -----------
Total interest income 3,049,403 2,997,169 2,557,110
----------- ----------- -----------
INTEREST EXPENSE
Interest on borrowed funds 100,203 86,808 6,167
Interest on deposits 959,466 919,873 838,009
----------- ----------- -----------
Total interest expense 1,059,669 1,006,681 844,176
----------- ----------- -----------
NET INTEREST INCOME 1,989,734 1,990,488 1,712,934
PROVISION (CREDIT) FOR LOAN LOSSES (15,000) (23,106) (35,000)
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 2,004,734 2,013,594 1,747,934
----------- ----------- -----------
NONINTEREST INCOME
Service charges on deposit accounts 342,481 342,179 225,401
Other service charges and fees 27,738 16,078 29,663
Net investment securities gains (losses) -- -- (6,497)
Other income 25,617 1,840 19,867
----------- ----------- -----------
395,836 360,097 268,434
----------- ----------- -----------
NONINTEREST EXPENSE
Salaries and employee benefits 887,540 885,009 902,879
Occupancy expense 227,632 200,996 235,877
Legal fees 15,654 18,571 49,795
Data processing 170,990 154,139 89,640
Other expense 379,201 397,117 469,411
----------- ----------- -----------
1,681,017 1,655,832 1,747,602
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 719,553 717,859 268,766
INCOME TAX EXPENSE (BENEFIT) 245,551 (141,782) 101,173
----------- -----------
NET INCOME $ 474,002 $ 859,641 $ 167,593
=========== =========== ===========
</TABLE>
- 49 -
<PAGE> 53
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. PARENT ONLY FINANCIAL STATEMENTS
CONDENSED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Cash in subsidiary bank $ 2,421 $ 8,761
Investment in subsidiary 3,459,065 3,924,622
Dividends receivable -- 114,000
Deferred tax asset 395,185 404,788
----------- -----------
Total Assets $ 3,856,671 $ 4,452,171
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued interest payable $ 58,476 $ 79,697
Due to subsidiary bank 127,134 127,134
Notes payable 3,100,000 3,800,524
----------- -----------
Total Liabilities 3,285,610 4,007,355
----------- -----------
Preferred stock - Series A, no par; 500,000 shares
authorized; 24,462 shares issued and outstanding 126,037 126,037
Preferred stock - Series B, no par; 2,000,000 shares
authorized; 21,559 shares issued and outstanding 111,080 111,080
Common stock - $7.50 par value; 500,000 shares
authorized; 143,374 shares issued and outstanding 1,075,305 1,075,305
Paid in surplus 2,411,471 2,411,471
Retained deficit (3,151,760) (3,368,831)
Unrealized gain (loss) on securities AFS (1,072) 89,754
-----------
Total Shareholders' Equity 571,061 444,816
----------- -----------
Total Liabilities and Shareholders' Equity $ 3,856,671 $ 4,452,171
=========== ===========
</TABLE>
- 50 -
<PAGE> 54
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. PARENT ONLY FINANCIAL STATEMENTS (CONTINUED)
CONDENSED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
INCOME
Dividends received from subsidiary $ 990,694 $ 350,639 128,943
--------- --------- ---------
990,694 350,639 128,943
--------- --------- ---------
EXPENSES
Interest expense 296,488 224,249 58,902
Legal fees 92,230 300,534 273,067
Other expenses 572 28,889 72,884
--------- --------- ---------
389,290 553,672 404,853
--------- --------- ---------
INCOME (LOSS) BEFORE EQUITY IN
UNDISTRIBUTED EARNINGS
OF SUBSIDIARY 601,404 (203,033) (275,910)
Equity in undistributed earnings
of subsidiary (516,692) 509,003 38,650
--------- --------- ---------
INCOME (LOSS) BEFORE TAXES 84,712 305,970 (237,260)
INCOME TAX EXPENSE (BENEFIT) (132,359) (189,345) (101,173)
--------- --------- ---------
NET INCOME (LOSS) $ 217,071 $ 495,315 $(136,087)
========= ========= =========
</TABLE>
- 51 -
<PAGE> 55
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. PARENT ONLY FINANCIAL STATEMENTS (CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 217,071 $ 495,315 $ (136,087)
Adjustments to reconcile net
income (loss) to cash provided
by operating activities:
Equity in undistributed earnings
of subsidiary 516,692 (509,003) (38,650)
Changes in operating assets and liabilities:
Dividends receivable 114,000 -- --
Accrued interest payable (21,220) (1,532,722) 58,902
Income tax benefit derived from tax
loss generated (132,359) (189,345) (101,173)
----------- ----------- -----------
Cash (used in) provided by operating activities 694,184 (1,735,755) (217,008)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of notes payable -- 3,800,524 --
Payments on note payable (700,524) (2,076,117) --
Proceeds of issuance of preferred stock -- 17,917 219,200
----------- ----------- -----------
Cash (used in) provided by financing activities (700,524) 1,742,324 219,200
----------- ----------- -----------
Net increase (decrease) in cash (6,340) 6,569 2,192
Cash - beginning of year 8,761 2,192 --
----------- ----------- -----------
Cash - end of year $ 2,421 $ 8,761 $ 2,192
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 317,707 $ 1,677,364 $ --
=========== =========== ===========
Income taxes $ -- $ -- $ --
=========== =========== ===========
</TABLE>
- 52 -
<PAGE> 56
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. SUBSEQUENT EVENT
Subsequent to December 31, 1996, the Supreme Court of Louisiana declined
to hear the appeal of the defendant in the court action described in Note
9 to the financial statements. On June 4, 1997, $2,217,705 was collected
in settlement of the amounts owed to the Company as a result of the
court's decision. Below is a pro-forma condensed statement of financial
condition as of March 31, 1997 and pro-forma statement of income for the
three month period ended March 31, 1997, which reflect the historical
transactions as well as the collection of the settlement amount and
disbursements thereof as if the collection and disbursements of the
settlement amount occurred prior to March 31, 1997.
<TABLE>
<CAPTION>
(Unaudited)
(In thousands)
-------------
<S> <C>
Cash and investments $ 23,030
Loans 19,013
Other assets 1,128
--------
Total Assets $ 43,171
========
Deposits $ 38,103
Notes payable 2,658
Other liabilities 327
--------
Total Liabilities 41,088
--------
Common stock 1,075
Surplus 2,411
Retained earnings (1,333)
Unrealized gain (loss) on AFS securities (70)
--------
Total Stockholders' Equity 2,083
--------
Total Liabilities and Stockholders' Equity $ 43,171
========
</TABLE>
- 53 -
<PAGE> 57
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. SUBSEQUENT EVENT (continued)
Statement of Income
<TABLE>
<CAPTION>
(Unaudited)
(In thousands)
------------
<S> <C>
Interest income $ 799
Interest expense (439)
------------
Net interest income 360
Provision for loan loss 0
------------
Net interest income after provision for loan loss 360
Non-interest income 2,300
Non-interest expense (406)
------------
Net income before income tax expense 2,254
Income tax expense (437)
------------
Net Income $ 1,817
============
</TABLE>
- 54 -
<PAGE> 58
PART III EXHIBITS
EXHIBIT INDEX
Exhibit 2.1* Articles of Incorporation
Exhibit 2.2* By-laws
Exhibit 3.1* Form of Stock Certificate for Common Stock
Exhibit 3.2* Stock Redemption Agreement
Exhibit 3.3* Written Agreement with Federal Reserve Board
Exhibit 6.1* Agreement for Cash Sale of Real Estate by Guaranty
Bank & Trust Company to H.T. Olinde, Jr.
Exhibit 6.2* Secured Promissory Note dated November 17, 1995,
payable by Great Guaranty Bancshares, Inc. to James
E. Kissner, with related Pledge and Security
Agreement dated December 8, 1995 by Bancshares in
favor of James E. Kissner
- -----------------
* Previously Filed.
- 55 -
<PAGE> 59
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the registrant caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
GREAT GUARANTY BANCSHARES, INC.
Dated: June 30, 1997 By: /s/ DANIEL R. DOMINGUE, JR.
--------------------------------------
Daniel R. Domingue, Jr.
Authorized Representative
- 56 -
<PAGE> 60
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT INDEX
- ------- -------------
Exhibit 2.1* Articles of Incorporation
Exhibit 2.2* By-laws
Exhibit 3.1* Form of Stock Certificate for Common Stock
Exhibit 3.2* Stock Redemption Agreement
Exhibit 3.3* Written Agreement with Federal Reserve Board
Exhibit 6.1* Agreement for Cash Sale of Real Estate by Guaranty
Bank & Trust Company to H.T. Olinde, Jr.
Exhibit 6.2* Secured Promissory Note dated November 17, 1995,
payable by Great Guaranty Bancshares, Inc. to James
E. Kissner, with related Pledge and Security
Agreement dated December 8, 1995 by Bancshares in
favor of James E. Kissner
- -----------------
* Previously Filed.
