<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
-----------------------------------------
Commission file number 000-22487
--------------------------------
GREAT GUARANTY BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
72-0493576
LOUISIANA (I.R.S. Employer
(State of Incorporation) Identification Number)
175 NEW ROADS STREET
NEW ROADS, LOUISIANA 70760
(Address of principal executive offices)
(504)638-5641
(Registrant's telephone number, including area code)
Check whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. YES NO X
---- ----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 143,374 SHARES AS OF OCTOBER
31, 1997
<PAGE> 2
GREAT GUARANTY BANCSHARES, INC.
FORM 10-QSB
SEPTEMBER 30, 1997
INDEX
<TABLE>
<CAPTION>
PAGE
REFERENCE
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<S> <C> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS 1
Consolidated Balance Sheets as of September 30, 1997 1
Consolidated Statements of Income for the nine
months and for the quarters ended September 30, 1997 and 1996 2
Consolidated Statements of Cash Flows for the nine months ended September 30,
1997 and 1996 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 5
Material Changes in Financial Condition 5
Nine Months Ended September 30, 1997 Compared with Nine Months Ended
September 30, 1996 5
September 30, 1997 Compared with December 31, 1996 6
Loan Loss Provision 6
Income Taxes 6
PART II - OTHER INFORMATION 7
ITEM 1. LEGAL PROCEEDINGS 7
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 8
SIGNATURES 8
EXHIBIT INDEX 8
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GREAT GUARANTY BANCSHARES, INC.
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Cash and due from banks $ 2,051,134
Interest-bearing deposits with banks 297,000
Federal Funds Sold 950,000
Investments securities - available for sale 16,555,294
Restricted investments in equity securities 211,000
Loans, net of allowance for loan losses of $240,392 21,193,606
Properties and equipment, net 649,812
Accrued interest receivable 341,469
Other Assets 165,475
------------
TOTAL ASSETS $ 42,414,790
============
LIABILITIES AND SHAREHOLDER'S EQUITY
LIABILITIES
Demand deposits $ 6,461,091
NOW accounts 5,615,632
Savings deposits 8,544,980
Time deposits, $1200,000 and over 1,583,774
Other time deposits 14,644,156
------------
Total deposits $ 36,849,633
Notes Payable 2,595,130
Accrued expenses and other liabilities 503,029
Federal Funds Purchased 0
------------
Total liabilities $ 39,947,792
------------
SHAREHOLDER'S EQUITY
Common stock - $7.50 par value, 500,000 shares
authorized, 143,374 shares issued and outstanding 1,075,305
Capital surplus 2,411,471
Retained deficit (1,046,135)
Unrealized gain (loss) on securities available for
sale, net of tax of ($7,839) 26,357
------------
Total shareholders' equity $ 2,466,998
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 42,414,790
============
</TABLE>
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<PAGE> 4
GREAT GUARANTY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Sept. 30, Three Months Ended Sept. 30,
1997 1996 1997 1996
---------------------------- -----------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 1,416,030 $ 1,189,650 $ 454,406 $ 387,132
Interest on investment securities 929,643 888,702 295,926 281,651
Interest on Federal Funds sold 22,954 89,163 7,120 32,751
Interest on Deposits with Banks 25,631 40,366 4,873 20,584
----------- ----------- ----------- -----------
Total interest income $ 2,394,257 $ 2,207,881 $ 762,324 $ 722,118
----------- ----------- ----------- -----------
INTEREST EXPENSE
Interest on notes payable 260,636 299,306 73,353 98,899
Interest on deposits 797,459 709,532 271,361 239,631
----------- ----------- ----------- -----------
Total interest expense $ 1,058,095 $ 1,005,838 $ 344,714 $ 338,530
----------- ----------- ----------- -----------
NET INTEREST INCOME $ 1,336,162 $ 1,202,043 $ 417,610 $ 383,588
PROVISION (CREDIT) FOR LOAN LOSSES (14,500) 0 0 $ 0
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES $ 1,350,662 $ 1,202,043 $ 417,610 $ 383,588
NON INTEREST INCOME
Service charges on deposit accounts $ 228,009 $ 276,451 $ 80,628 $ 90,841
Other service charges and fees 9,612 10,273 3,629 3,495
Net investment securities gains (losses) (1,263) 4,295 (1,263) 0
Other income 9,854 11,784 102 1,225
----------- ----------- ----------- -----------
$ 246,212 $ 301,803 $ 83,096 $ 95,561
----------- ----------- ----------- -----------
NON INTEREST EXPENSE
Salaries and employee benefits $ 688,828 $ 656,178 $ 237,320 $ 219,518
Occupancy expense 173,543 167,912 62,193 57,966
Data processing 107,916 103,388 36,622 31,431
Legal fees 73,939 84,929 7,565 23,120
Other expense 295,461 223,283 29,248 54,350
----------- ----------- ----------- -----------
$ 1,339,686 $ 1,235,690 $ 372,947 $ 386,385
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY ITEMS $ 257,188 $ 268,156 $ 127,759 $ 92,764
INCOME TAX EXPENSE 77,156 80,447 38,156 20,814
----------- ----------- ----------- -----------
NET INCOME BEFORE EXTRAORDINARY
ITEMS $ 180,032 $ 187,709 $ 89,603 $ 71,950
EXTRAORDINARY ITEM-GAIN FROM LITIGATION
NET OF TAX OF $458,688 1,759,017 0 0 $ 0
----------- ----------- ----------- -----------
NET INCOME $ 1,939,049 $ 187,709 $ 89,603 $ 71,950
=========== =========== =========== ===========
PER COMMON SHARE DATA:
NET INCOME $ 13.52 $ 1.31 $ 0.62 $ 0.50
----------- ----------- ----------- -----------
AVERAGE SHARES OUTSTANDING 143,374 143,374 143,374 143,374
=========== =========== =========== ===========
</TABLE>
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<PAGE> 5
GREAT GUARANTY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) PAGE 1 OF 2
<TABLE>
<CAPTION>
Nine months ended Sept. 30,
----------------------------
1997 1996
----------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,939,049 $ 187,709
Adjustments to reconcile net income to net
cash provided by operating activities:
Extraordinary item (gross amount) (2,217,705) 0
Depreciation 83,387 83,559
Provision for loan losses (14,500) 0
Deferred tax 497,688 80,447
Stock dividends received (8,900) (8,600)
Net investment securities (gains) losses 1,263 (4,295)
(Increase) decrease in accrued income and other assets 65,222 175,921
Increase (decrease) in accrued expenses and other liabilities 334,442 (45,331)
----------- -----------
Net cash provided by (used in) operating activities $ 679,946 $ 469,410
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales/maturities of investment securities
Available for sale $ 4,125,093 $ 8,738,603
Purchase of investment securities
Available for sale (893,210) (6,499,570)
Net change in:
Interest bearing deposits with banks 991,571 (1,690,181)
Federal Funds Sold (950,000) (50,000)
Loans (4,355,394) (1,053,501)
Purchase of equipment and building improvements (68,345) (71,184)
----------- -----------
Net cash (used in) provided by investing activities $(1,150,285) $ (625,833)
----------- -----------
</TABLE>
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<PAGE> 6
GREAT GUARANTY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(UNAUDITED) PAGE 2 OF 2
<TABLE>
<CAPTION>
Nine months ended Sept 30,
----------------------------
1997 1996
----------------------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in non-interest-bearing
demand, savings and NOW accounts $ 95,444 $ 1,012,357
Net increase (decrease) in time deposit 520,037 62,186
Payments on stockholder notes payable (200,000) 0
Payments on other notes payable (1,581,401) (776,619)
Net change in federal funds purchased (700,000) 0
Proceeds from litigation - extraordinary item 2,217,705 0
Redemption of preferred stock (237,117) 0
----------- -----------
Net cash provided by (used in) financing activities $ 114,668 $ 297,924
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND DUE FROM BANKS (355,671) 141,501
CASH AND DUE FROM BANKS AT BEGINNING
OF PERIOD 2,406,805 1,725,550
----------- -----------
CASH AND DUE FROM BANKS AT END
OF PERIOD $ 2,051,134 $ 1,867,051
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Cash paid during the year for:
Interest $ 1,042,426 $ 1,006,991
=========== ===========
Income taxes $ 0 $ 0
=========== ===========
</TABLE>
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<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
MATERIAL CHANGES IN FINANCIAL CONDITION.
In connection with resolution of all pending litigation in June, 1997,
Bancshares received a cash payment of approximately $2.2 million. See discussion
of "Legal Proceedings," incorporated herein by reference, pp. 20-21 of Amendment
No. 1 to Form 10-SB, which amendment was filed by Bancshares on July 1, 1997
(the "Amendment"). Of this cash payment, $1.7 million was applied to reduction
of Bancshares' indebtedness. The balance of the cash receipt was applied in
June, 1997, to redemption of all outstanding Preferred Stock ($300 thousand),
(ii) a capital contribution by Bancshares to Guaranty Bank ($127 thousand), and
(iii) payment of costs related to the litigation. For a discussion of the
Preferred Stock redemption, see "Recent Sales of Unregistered Securities,"
incorporated herein by reference, p. 19 of the Amendment. The material changes
in Bancshares' financial condition incident to the receipt and application of
$2.2 million in proceeds on resolution of legal proceedings are reflected in
comparative discussions below.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1996.
Balance Sheet
Total Assets at September 30, 1997 were $42.4 million compared to $40.6
million at September 30, 1996. Total loans increased to $21.2 million at
September 30, 1997 from $15.8 million at September 30, 1996, while securities
decreased to $16.5 million from $18.1 million and deposits increased to $36.8
million from $36.1 million as of those dates. Shareholders' equity in Bancshares
increased to $2.5 million at September 30, 1997 from $321 thousand at September
30, 1996, as a result of cash receipts on resolution of litigation in June,
1997. Shareholder's equity in Bank was $3.7 million at September 30, 1997, up
from $3.1 million at September 30, 1996.
Income
The income of Bancshares is ordinarily attributable almost entirely to
dividends on earnings of Guaranty Bank. Consolidated net income of Bancshares is
generally determined by deduction of interest and expenses incurred by
Bancshares from the net income earned by Guaranty Bank. However, during June,
1997, final resolution of pending litigation provided extraordinary income to
Bancshares of approximately $2.2 million.
Income not including extraordinary items for the nine months ended
September 30, 1997 was $180 thousand compared to $188 thousand during the same
period in 1996. Interest income increased to $2.394 million for the nine month
period ended September 30, 1997 compared to $2.208 million for the same period
in 1996, principally as a result of an increase in loans. Non-interest income
totaled $246 thousand for the nine month period, compared to $302 thousand for
the same period in 1996. Interest expense increased to $1,058 thousand during
the nine month period ended September 30, 1997, up from $1,006 thousand during
the nine month period ended September 30, 1996, due primarily to increased
deposits, while non-interest expense increased to $1,340 thousand from $1,236
thousand during the same periods.
Subsequent Events
In August 1997, the Bank and Bancshares presented to and received
approval from its primary regulators, State of Louisiana Office of Financial
Institutions, the FDIC and the Federal Reserve Bank of Atlanta, of a "Capital
Plan" for the payment of dividends during 1997 and 1998 to Bancshares as
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<PAGE> 8
part of a plan to pay in full its indebtedness and distribute dividends to its
shareholders. The proposal called for the payment of dividends to Bancshares for
the remaining year 1997, only to the extent that its Tier 1 Capital exceeds 6%.
The 6% limitation allowed a dividend of $1.316 million for the remainder of 1997
without reducing Tier 1 Capital below 6%.
The proposed dividend was made up of three components: I) $50,000 in
August to pay an installment on Bancshares' note and cover legal expenses, ii)
$1.230 million in September to reduce Bancshares balance on its note and iii)
pay a $36,000 dividend (.25c per shares) to shareholders in December 1997.
In October, Bancshares reduced its indebtedness from $1.400 million to
$165 thousand with the remainder of its indebtedness to be paid in full by the
first quarter of 1998. The Bank's regulatory agencies requested that the Bank
obtain separate approval for the distribution of dividends to shareholders in
December.
SEPTEMBER 30, 1997 COMPARED WITH DECEMBER 31, 1996
Balance Sheet
Total assets increased to $42.4 million at September 30, 1997, an
increase of .01% from $42.0 million at December 31, 1996. Total loans increased
by $4.3 million, or 25.6%, to $21.1 million at September 30, 1997 compared to
$16.8 million at December 31, 1996, while securities declined $3.1 million to
$16.6 million at September 30, 1997, primarily in order to fund a portion of the
increased loan volume and also as a result of securities that were called
without the proceeds being reinvested in new securities.
Total deposits increased by $.6 million to $36.8 million at September
30, 1997, a .017% increase from $36.2 million at December 31, 1996. Non-interest
bearing deposits increased at a 2.43% rate, compared to a 1.53% growth in
interest bearing deposits. During the first nine months of 1997, shareholders'
equity in Bancshares increased to $2.4 million from $571 thousand at December
31, 1996 due primarily to the resolution of pending litigation and consequent
collection by Bancshares of approximately $2.5 million. During the same periods,
shareholders' equity in Guaranty Bank increased from $3.1 million at year-end
1996 to $3.8 million at September 30, 1997.
LOAN LOSS PROVISION
As a result of management's assessment of the adequacy of the allowance
for possible loan losses, the Bank recorded no loan loss provision. The
allowance for possible loan losses at September 30, 1997 was $240 thousand,
1.13% of total loans, compared to $255 thousand, or 1.49% of total loans, at
December 31, 1996 and $270 thousand or 1.70% at September 30, 1996. 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.
INCOME TAXES
Bancshares has a net operating loss carryforward at December 31, 1996
of approximately $1.9 million. In connection with resolution of pending
litigation, Bancshares received approximately $2.2 million in June, 1997
resulting in an income tax gain of $1.2 million. Net operating loss will offset
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<PAGE> 9
most or all of 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.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See "Legal Proceedings", pp. 20-21 of Amendment No. 1 to Form 10-SB,
which amendment was filed July 1, 1997 by Great Guaranty Bancshares, Inc.; said
discussion of Legal Proceedings is incorporated herein by reference.
-7-
<PAGE> 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
(4) Instrument defining the rights of Security Holders,
Including Indentures. See Exhibits 3.1 (Form of Stock
Certificate for Common Stock), 3.2 (Stock Redemption
Agreement) and 3.3 (Written Agreement with Federal
Reserve Board) to Form 10-SB filed by Great Guaranty
Bancshares, Inc. April 30, 1997, as amended by
Amendment No. 1 filed July 1, 1997, which exhibits
are incorporated herein by reference.
(27) Financial Data Schedule.
(28) Information Incorporated by Reference:
(I) "Legal Proceedings", pp. 20-21 of Amendment
No. 1 filed July 1, 1997 to Form 10-SB;
(ii) "Recent Sales of Unregistered Securities",
p. 19 of Amendment No. 1 filed July 1, 1997
to Form 10-SB.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the period for which
this report is filed.
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<PAGE> 11
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
GREAT GUARANTY BANCSHARES, INC.
Dated: August 14, 1997 By: /s/ DANIEL R. DOMINGUE, JR.
-----------------------------------
Daniel R. Domingue, Jr.
Authorized Representative
of Great Guaranty Bancshares, Inc.
and President and CEO of Guaranty
Bank & Trust Company
By: /s/ LARRY J. ROBERTS
-----------------------------------
Larry J. Roberts
Acting Chief Financial Officer
of Great Guaranty Bancshares, Inc.
and Chief Financial Officer of
Guaranty Bank & Trust Company
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<PAGE> 12
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
Exhibit (27) Financial Data Schedule
Exhibit (28) Information Incorporated by Reference
(I) (I) Legal Proceedings
(ii) (ii) Recent Sales of Unregistered Securities
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,051,134
<INT-BEARING-DEPOSITS> 297,000
<FED-FUNDS-SOLD> 950,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 16,555,294
<INVESTMENTS-CARRYING> 16,555,294
<INVESTMENTS-MARKET> 16,555,294
<LOANS> 21,193,606
<ALLOWANCE> 240,392
<TOTAL-ASSETS> 42,414,790
<DEPOSITS> 36,849,633
<SHORT-TERM> 2,595,130
<LIABILITIES-OTHER> 503,029
<LONG-TERM> 0
0
0
<COMMON> 1,075,305
<OTHER-SE> 1,391,693
<TOTAL-LIABILITIES-AND-EQUITY> 42,414,790
<INTEREST-LOAN> 1,416,030
<INTEREST-INVEST> 929,643
<INTEREST-OTHER> 48,585
<INTEREST-TOTAL> 2,394,257
<INTEREST-DEPOSIT> 797,459
<INTEREST-EXPENSE> 1,058,095
<INTEREST-INCOME-NET> 1,336,162
<LOAN-LOSSES> (14,500)
<SECURITIES-GAINS> (1,263)
<EXPENSE-OTHER> 1,339,686
<INCOME-PRETAX> 257,188
<INCOME-PRE-EXTRAORDINARY> 180,032
<EXTRAORDINARY> 1,759,017
<CHANGES> 0
<NET-INCOME> 1,939,049
<EPS-PRIMARY> 13.52
<EPS-DILUTED> 13.52
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE> 1
EXHIBIT (28)
INFORMATION INCORPORATED BY REFERENCE
(28)(I) 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.
<PAGE> 2
(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.
<PAGE> 3
EXHIBIT (28)(ii) 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."
