<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
/ / Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
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Commission file number 000-22487
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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 registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
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N/A N/A
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Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK $7.50 PAR VALUE
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(Title of class)
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(Title of class)
Check whether the issuer (1) 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 X NO
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $3,267,882
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as
of a specified date within the past 60 days. (See definition of affiliate in
Rule 12b-2 of the Exchange Act). NO COMMON EQUITY HAS BEEN SOLD, NOR BID OR
ASKED PRICE QUOTED, WITHIN THE PAST 60 DAYS.
State 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 DECEMBER
31, 1997
Transitional Small Business Disclosure Format (check one): YES NO X
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<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
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<S> <C> <C>
PART I
ITEM 1 DESCRIPTION OF BUSINESS . . . . . . . . . . . . . . . . 1
ITEM 2 DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . 9
ITEM 3 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . 10
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS . . . . . . . . . . . . . . . . . 10
PART II
ITEM 5 MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . 10
ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS . . . . . . . . . . 10
ITEM 7 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . 14
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE . . . . . . . . . . . . . . . . . . . . 45
PART III
ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT . . . . . . . . . 45
ITEM 10 EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . 46
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . 46
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS . . . . . . . . . . . . . . . . . . . 47
ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . 48
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
<PAGE> 4
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, 1997, Bancshares had total
consolidated assets of approximately $41.4 million, and shareholders' equity of
approximately $2.5 million while Guaranty Bank had assets of approximately
$41.3 million and shareholders' equity of approximately $2.5 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, 1997, Guaranty
Bank had outstanding approximately $22.7 million in loans, of which 15% were in
commercial loans to borrowers engaged in various lines of business, 14% were in
consumer loans, 60% were in primarily residential real estate loans, and 11%
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, 1997, Guaranty Bank
had total deposits of approximately $37.1 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, 1997, Bancshares had no full-time employees. As of
that date, Guaranty Bank had 25 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.
<PAGE> 5
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, 1997 these
categories accounted for approximately 15%, 14%, 60% and 11%, respectively, of
the Bank's total loan portfolio. 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 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. 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 other conditions.
At December 31, 1997, no such concentration exceeded 10% of the Bank's loan
portfolio.
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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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1997 1996
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<S> <C> <C>
Commercial, financial and agricultural $ 3374 $ 2431
Real estate 16,088 11,917
Installment 3219 2731
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Total $ 22,681 $ 17,079
======== =========
</TABLE>
Maturities
The following table shows the maturity or repricing frequency of loans
outstanding as of December 31, 1997 (in thousands of dollars).
<TABLE>
<S> <C>
Maturity of fixed rate Loans:
Within one year $ 3420
After one but within five years 6468
After five years 9232
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Total fixed rate loans 19,120
Variable rate loans repricing at least quarterly 3538
Nonaccrual loans 23
---------
Total loans $ 22,681
=========
</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,
------------------
<S> <C> <C>
1997 1996
------------------
Nonaccrual loans $ 23 $ 26
Accruing loans past due 90 days or more 7 12
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:
<TABLE>
<CAPTION>
December 31,
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1997 1996
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<S> <C> <C>
Balance at beginning of period $ 254,819 $ 261,601
Charge-offs:
Commercial, financial and agricultural
Installment -- --
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Total Charge-offs 3613 0
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Recoveries:
Commercial, financial and agricultural _ __
Installment _ _
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Total Recoveries 1665 8218
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Net charge-offs 1948 8218
Provision charged (credited) to operations 14500 15000
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Balance at end of period 238,371 254,819
=========== ===========
Ratio of net charge-offs to average loans outstanding .00% .00%
</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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1997 1996
---------------------
<S> <C> <C>
Noninterest-bearing demand deposits $ 6778 $ 6307
Interest-bearing demand deposits 5388 5053
Savings deposits 8166 9168
Time deposits 16,813 15,708
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Total $ 37,145 $ 36,236
======== ========
</TABLE>
Maturities of time deposits of $100,000 or more outstanding as of
December 31, 1997 are summarized as follows (in thousands of dollars):
<TABLE>
<CAPTION>
Time Certificates of Deposit
----------------------------
<S> <C>
3 months or less $ 408
Over 3 through 12 months 1,189
Over 12 months 203
----------
Total $ 1,800
==========
</TABLE>
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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, 1997, 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,
--------------------
1997 1996
--------------------
<S> <C> <C>
U.S. Treasury securities and obligations of other
U.S. Government agencies and corporations $ 4,022 $ 8,231
Obligations of state and political subdivisions -- --
Mortgage-backed bonds and collateralized
mortgage obligations 8,379 9,628
Agency for International Development Guaranteed Notes 1,877 1,902
------- --------
Total $ 14,278 $ 19,761
======= ========
</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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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 strength doctrine
invalid in 1990, stating that the Federal Reserve Board had no authority to
assert the
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<PAGE> 10
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:
<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, 1997
Total Capital (to Risk Weighted Assets):
Guaranty Bank ........................... . . . . . . . . . . . $ 2689 13.3% $1617 > 8% $2021 > 10%
Tier I Capital (to Risk Weighted Assets):
Guaranty Bank ........................... . . . . . . . . . . . $ 2451 12.1% $ 808 > 4% $1213 > 6%
Tier I Capital (to Average Assets)
Guaranty Bank ........................... . . . . . . . . . . . $ 2451 5.8% $1678 > 4% $2098 > 5%
AS OF DECEMBER 31, 1996
Total Capital (to Risk Weighted Assets):
Guaranty Bank ........................... . . . . . . . . . . . $ 3701 19.2% $1543 > 8% $1928 > 10%
Tier I Capital (to Risk Weighted Assets):
Guaranty Bank ........................... . . . . . . . . . . . $ 3460 17.9% $ 771 > 4% $1157 > 6%
Tier I Capital (to Average Assets)
Guaranty Bank ........................... . . . . . . . . . . . $ 3460 8.4% $1655 > 4% $2068 > 5%
</TABLE>
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<PAGE> 11
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
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, 1997 and 1996, 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
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<PAGE> 12
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 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 an "outstanding" rating in its most recent review
by regulators with respect to its compliance with the CRA.
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
- 9 -
<PAGE> 13
(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.
LEGAL PROCEEDINGS
Neither Bancshares nor Guaranty Bank is currently a party to any
litigation other than routine litigation arising from regular business
activities incident to furnishing financial services. Material legal
proceedings involving Bancshares and Guaranty Bank were resolved during 1997.
See "Legal Proceedings", pp. 20-21 of Amendment No. 1 to Form 10-SB, which
amendment was filed July 1, 1997 by Bancshares; said discussion of Legal
Proceedings is incorporated herein by reference.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of 1997 to a vote
of security holders, through the solicitation of proxies or otherwise.
PART II
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no public trading market for the Bancshares Common Stock. The
Common Stock of Bancshares does not trade and has never traded, 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 within the past two years, except for one
transaction during 1997 in which 4,449 shares were purchased and sold for a
price unknown to Bancshares. At December 31, 1997, the total 143,374 shares of
Bancshares Common Stock were held of record by 518 shareholders. During the
past two years, a total of $.25 per share in dividends have been paid on the
Bancshares Common Stock, in a single dividend declared in the fourth quarter of
1997 and paid in January, 1998. See "Description of Business - Restrictions on
Transfers of Funds to Bancshares by the Bank."
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.
1997 COMPARED WITH 1996
BALANCE SHEET
Total assets decreased to $41.3 million at December 31, 1997 from
$41.8 million at December 31, 1996. Total loans increased by $5.6 million, or
32.7%, to $22.7 million from to $17.1 million at December 31, 1996, while
securities declined $5.5 million to $14.3 million at December 31, 1997,
primarily in order to fund a portion of the increased loan volume.
- 10 -
<PAGE> 14
Total deposits increased by $.9 million to $37.1 million at December
31, 1997, from $36.2 million at December 31, 1996. Non-interest bearing
deposits increased by 7.4%, compared to a 1.46% growth in interest bearing
deposits. During 1997, shareholders' equity in Bancshares increased to $2.5
million from $571 thousand at December 31, 1996 as a result of net income of
$2.2 million which included an extraordinary item of $1.9 million resulting
from forgiveness of indebtedness income on resolution of litigation. See
"Legal Proceedings"; during the same periods, shareholders' equity in Guaranty
Bank declined from $3.5 million at December 31, 1996 to $2.5 million at
December 31, 1997, due primarily to the payment by Guaranty Bank to Bancshares
of an extraordinary dividend of $1.3 million with which Bancshares reduced its
outstanding bank debt.
INCOME
The income of Bancshares is attributable almost entirely to dividends
from 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 Guaranty Bank for the
year ended December 31, 1997 increased to $505 thousand from $474 thousand
during 1996. Bancshares consolidated net income increased to $2.2 million for
the year ended December 31, 1997 from $217 thousand during 1996 as a result,
primarily of an extraordinary item of $1.9 million in forgiveness of
indebtedness income realized on resolution of legal proceedings. See "Legal
Proceedings."
Interest income increased $218 thousand, or by 7.16%, to $3.3 million
for 1997, principally as a result of an increase in loans. Noninterest income
totaled $350 thousand for the year ended December 31, 1997, a decrease of 11.3%
from $395 thousand for the year ended December 31, 1996, due primarily to
decreased income from service charges and fees.
EXPENSES
Interest expense increased from $1.1 million during 1996 to $1.2
million for the year ended December 31, 1997, due primarily to an increase in
interest bearing deposits. Noninterest expense for the year ended December 31,
1997 totaled $1.7 million, resulting in no change from the $1.7 million for the
year ended December 31, 1996.
PROVISIONS FOR POSSIBLE LOAN LOSSES
As a result of management's assessment of the adequacy of the
allowance for possible loan losses, the Guaranty Bank loan loss allowance was
reduced at year-end 1997 to $238 thousand, or 1.1% of total loans, from $255
thousand, or 1.5% of total loans, at December 31, 1996.
- 11 -
<PAGE> 15
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 $165 thousand at December 31, 1997, down from $3.1 million at
December 31, 1996, as a result of application to be outstanding indebtedness of
sums received by Bancshares on resolution, during 1997 of Legal Proceedings.
See "Legal Proceedings". The promissory notes bear interest at a floating rate
based on the Chase Manhattan Bank prime rate and averaged 9.5% in 1997 and
9.25% in 1996. The average balances and yields for interest-bearing assets and
interest-bearing liabilities of Guaranty Bank for 1997 and 1996 on a
tax-equivalent basis are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
Year Ended December 31, 1997 Year Ended December 31, 1996
--------------------------------- ----------------------------
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 $14,724 $ 1,282 8.71% $10,643 $ 983 9.23%
Installment loans 2,695 274 10.17% 2,328 251 10.79%
Commercial and Industrial loans 2,568 253 9.85% 2,795 271 9.70%
U.S. Treasury and government agency
securities 16,441 1,084 6.59% 16,762 1,104 6.59%
Municipal securities -- -- -- -- -- --
Other securities (AID & TCD) 2,391 131 5.48% 3,155 233 7.39%
Federal funds sold and securities sold
under agreements to repurchase 682 35 5.13% 1,939 105 5.42%
Total earning assets $39,501 $ 3,059 7.74% 37,622 $ 2,947 7.83%
======= =====
INTEREST-BEARING LIABILITIES:
Interest-bearing transaction accounts $ 5,568 $ 107 1.92% $ 3,667 $ 68 1.85%
Money market deposits 1,660 33 1.99% 2,043 41 2.01%
Savings deposits 7.192 162 2.25% 7,122 163 2.30%
Time deposits 16,065 770 4.79% 15,416 687 4.46%
Federal funds purchased and securities
purchased under agreements to resell 356 17 4.77% --
FHLBB Borrowings 1,221 92 25.00% 1,368 100 7.37%
Total interest-bearing liabilities $32,062 $ 1,181 3.68% $29,616 1,059 3.58%
======= ------- ----- ======= ------- -----
Net interest income, tax equivalent (not including
interest bearing note payable by Bancshares) $ 1,878 $ 1,188
======= =======
Net interest margin, tax equivalent (not including
interest bearing note payable by Bancshares) 4.06% 4.25%
===== =====
</TABLE>
VOLUME/RATE ANALYSIS
The changes in components of net interest income caused by changes in
average earning asset and liability volumes and changes in rates for 1997 and
1996 are as follows (in thousands of dollars):
- 12 -
<PAGE> 16
<TABLE>
<CAPTION>
1997 Compared to 1996 1996 Compared to 1995
-------------------------- -----------------------------
Volume Rate Net Volume Rate Net
------ ---- ----- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Real estate loans $ 354 (55) $ 299 $ 153 $ (52) $ 101
Installment loans 36 (14) 22 27 (16) 16
Commercial and Industrial loans (22) 4 (18) 37 (4) 33
U.S. Treasury and government agency
securities (21) -- (21) (232) 39 (193)
Municipal securities 0 0 0 0 0 0
Other securities (42) (60) (102) 92 (36) 56
Federal funds sold and securities sold
under agreements to repurchase (64) (6) (70) 64 (6) 58
Total earning assets 241 (131) 110 48 (18) 30
INTEREST-BEARING LIABILITIES:
Interest-bearing transaction accounts 36 4 40 8 2 10
Money market deposits (8) -- (8) (3) 0 (3)
Savings deposits 2 (4) (2) 1 0 1
Time deposits 31 51 82 (6) 36 30
Federal funds purchased and securities
purchased under agreements to resell 17 -- 17 0 0 0
FHLB Borrowings (11) 2 (9) 11 2 13
Total interest-bearing liabilities 67 53 120 13 29 52
Net interest income, tax equivalent 174 (184) (10) 35 (57) (22)
</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.
RETURN ON EQUITY AND ASSETS
The return on equity and assets by Bancshares and Guaranty Bank for
the years ending December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
---------------------- -----------------------
Guaranty Guaranty
Bank Bancshares Bank Bancshares
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Return on average assets 1.2% 68.5% 1.2% .5%
Return on average equity 17.0% 145.2% 12.8% 42.7%
Dividend payout ratio 300.8%(1) 1.6% 209.0%(2) --
Average equity to
average assets 7.16% 46.9% 9.2% 1.2%
</TABLE>
______________________
(1) Includes $1.3 million extraordinary dividend paid in September 1997 to
Bancshares by Guaranty Bank. (2) Includes $700,000 extraordinary dividend paid
in January 1996 to Bancshares by Guaranty Bank.
- 13 -
<PAGE> 17
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
- 14 -
<PAGE> 18
C O N T E N T S
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
INDEPENDENT AUDITORS' REPORT 16
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, 1997 and 1996 17 - 18
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1997, 1996 and 1995 19 - 20
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended December 31, 1997, 1996 and 1995 21
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1997, 1996 and 1995 22 - 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 24 - 44
</TABLE>
<PAGE> 19
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Great Guaranty Bancshares, Inc.
New Roads, Louisiana
We have audited the accompanying consolidated statements of financial condition
of Great Guaranty Bancshares, Inc. and Subsidiary as of December 31, 1997 and
1996, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the years during the three year
period ended December 31, 1997. 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, 1997 and 1996, and the
results of their operations and their cash flows for each of the years during
the three year period ended December 31, 1997 in conformity with generally
accepted accounting principles.
/s/ Postlethwaite & Netterville
Baton Rouge, Louisiana
February 25, 1998
- 16 -
<PAGE> 20
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1997 AND 1996
A S S E T S
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cash and due from banks $ 2,008,689 $ 2,406,805
Interest-bearing deposits with banks 198,000 1,288,571
Federal funds sold 1,125,000 --
Investment Securities
Available-for-sale 14,277,636 19,761,011
Investments in restricted equity securities 214,200 202,100
Loans receivable, net of allowance for loan losses
of $238,371 and $254,819, respectively 22,443,067 16,823,712
Accrued interest receivable 329,130 355,583
Premises and equipment, net 680,119 664,854
Other assets 90,739 547,695
----------- -----------
TOTAL ASSETS $41,366,580 $42,050,331
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-17-
<PAGE> 21
L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
LIABILITIES
Demand deposits $ 6,735,334 $ 6,304,731
NOW deposits 5,388,446 5,053,484
Savings deposits 8,165,704 9,168,044
Time deposits, $100,000 and over 1,799,852 1,168,073
Other time deposits 15,012,896 14,539,820
------------ ------------
Total deposits 37,102,232 36,234,152
Notes payable 1,339,252 4,376,531
Accrued expenses and other liabilities 135,568 168,587
Federal funds purchased and securities sold
under agreements to repurchase 240,659 700,000
Dividends payable 35,843 --
------------ ------------
Total liabilities 38,853,554 41,479,270
------------ ------------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Preferred stock-Series A, no par; 500,000 shares authorized;
-0- and 24,462 shares issued and outstanding, respectively -- 126,037
Preferred stock-Series B, no par; 2,000,000 shares authorized;
-0- and 21,559 shares issued and outstanding, respectively -- 111,080
Common Stock - $7.50 par value, 500,000 shares
authorized; 143,374 shares issued and outstanding 1,075,305 1,075,305
Additional paid-in capital 2,411,471 2,411,471
Accumulated deficit (1,011,241) (3,151,760)
Net unrealized gain (loss) on securities available-for-sale,
net of tax of $19,314 and ($552), respectively 37,491 (1,072)
------------ ------------
Total stockholders' equity 2,513,026 571,061
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 41,366,580 $ 42,050,331
============ ============
</TABLE>
-18-
<PAGE> 22
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
PAGE 1 OF 2
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 2,017,513 $ 1,671,939 $ 1,485,824
Interest on investment securities 1,185,028 1,210,354 1,456,679
Interest on federal funds sold 35,485 105,250 53,622
Interest on deposits with banks 29,856 61,860 1,044
----------- ----------- -----------
Total interest income 3,267,882 3,049,403 2,997,169
----------- ----------- -----------
INTEREST EXPENSE
Interest on deposits 1,072,050 959,466 919,507
Interest on notes payable 266,465 396,691 311,423
Interest on federal funds purchased
and securities sold under agreements to repurchase 17,141 -- --
----------- ----------- -----------
Total interest expense 1,355,656 1,356,157 1,230,930
----------- ----------- -----------
NET INTEREST INCOME 1,912,226 1,693,246 1,766,239
Provision (credit) for loan losses (14,500) (15,000) (23,106)
----------- ----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,926,726 1,708,246 1,789,345
----------- ----------- -----------
NON-INTEREST INCOME
Service charges on deposit accounts 305,781 342,481 342,179
Other service charges and fees 22,229 27,738 16,078
Other income 22,869 25,617 11,149
----------- ----------- -----------
Total non-interest income 350,879 395,836 369,406
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-19-
<PAGE> 23
GREAT GUARANTY BANCSHARES
NEW ROADS, LOUISIANA
PAGE 2 OF 2
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
NON-INTEREST EXPENSES
Salaries and employee benefits $ 914,462 $ 887,540 $ 885,009
Occupancy expense 234,281 227,632 200,996
Data processing fees 103,215 87,501 77,686
Loan processing fees 91,722 83,489 76,453
Legal fees 103,254 107,884 319,105
Other expense 383,487 379,773 435,313
----------- ----------- -----------
Total non-interest expense 1,830,421 1,773,819 1,994,562
----------- ----------- -----------
INCOME BEFORE TAXES AND EXTRAORDINARY
ITEM 447,184 330,263 164,189
Income tax expense 131,215 113,192 (331,126)
----------- ----------- -----------
INCOME BEFORE EXTRAORDINARY ITEM 315,969 217,071 495,315
EXTRAORDINARY ITEM
Gain on forgiveness of debt (net of income tax of $294,953) 1,922,752 -- --
----------- ----------- -----------
NET INCOME 2,238,721 217,071 495,315
Premium paid on redemption of preferred stock 62,359 -- --
----------- ----------- -----------
NET INCOME AVAILABLE FOR COMMON
SHAREHOLDERS $ 2,176,362 $ 217,071 $ 495,315
=========== =========== ===========
PER COMMON SHARE DATA:
Income before extraordinary item $ 1.77 $ 1.51 $ 3.45
Extraordinary item 13.41 -- --
----------- ----------- -----------
NET INCOME PER COMMON SHARE $ 15.18 $ 1.51 $ 3.45
=========== =========== ===========
Average shares outstanding 143,374 143,374 143,374
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-20-
<PAGE> 24
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Preferred Stock
----------------------------------------------------------
Series A Series B
------------------------ --------------------------
Shares Amount Shares Amount
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE, 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, DECEMBER 31, 1995 24,462 126,037 21,559 111,080
Net income -- -- -- --
Change in unrealized gain (loss) on
securities available-for-sale -- -- -- --
------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1996 24,462 126,037 21,559 111,080
Net income -- -- -- --
Redemption of preferred stock
at premium (24,462) (126,037) (21,559) (111,080)
Dividends declared -- -- -- --
Change in unrealized gain (loss)
on securities available-for-sale -- -- -- --
------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1997 -- $ -- -- $ --
======= =========== =========== ===========
<CAPTION>
Common Stock Additional
------------------------- Paid-in Accumulated
Shares Amount Capital Deficit
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 143,374 $ 1,075,305 $ 2,411,471 $(3,864,146)
Net income -- -- -- 495,315
Preferred stock issued -- -- -- --
Exchange of Class B stock (voting)
for Class A stock (non-voting) -- -- -- --
Change in unrealized gain (loss) on
securities available-for-sale -- -- -- --
--------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1995 143,374 1,075,305 2,411,471 (3,368,831)
Net income -- -- -- 217,071
Change in unrealized gain (loss) on
securities available-for-sale -- -- -- --
--------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1996 143,374 1,075,305 2,411,471 (3,151,760)
Net income -- -- -- 2,238,721
Redemption of preferred stock
at premium -- -- -- (62,359)
Dividends declared -- -- -- (35,843)
Change in unrealized gain (loss)
on securities available-for-sale -- -- -- --
--------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1997 143,374 $ 1,075,305 $ 2,411,471 $(1,011,241)
========= =========== =========== ===========
<CAPTION>
Unrealized
Gain (Loss)
on Securities Total
Available- Stockholders'
For-Sale Equity
------------- --------------
<S> <C> <C>
BALANCE, DECEMBER 31, 1994 $ (40,071) $ (198,241)
Net income -- 495,315
Preferred stock issued -- 17,917
Exchange of Class B stock (voting)
for Class A stock (non-voting) -- --
Change in unrealized gain (loss) on
securities available-for-sale 129,825 129,825
----------- -----------
BALANCE, DECEMBER 31, 1995 89,754 444,816
Net income -- 217,071
Change in unrealized gain (loss) on
securities available-for-sale (90,826) (90,826)
----------- -----------
BALANCE, DECEMBER 31, 1996 (1,072) 571,061
Net income -- 2,238,721
Redemption of preferred stock
at premium -- (299,476)
Dividends declared -- (35,843)
Change in unrealized gain (loss)
on securities available-for-sale 38,563 38,563
----------- -----------
BALANCE, DECEMBER 31, 1997 $ 37,491 $ 2,513,026
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-21-
<PAGE> 25
GREAT GUARANTY BANCSHARES, INC.
BATON ROUGE, LOUISIANA
PAGE 1 OF 2
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,238,721 $ 217,071 $ 495,315
Adjustments to reconcile net income to net
cash provided by (used in) operating activities
Depreciation 121,111 119,589 114,029
Provision for loan losses (14,500) (15,000) (23,106)
Deferred income tax expense (benefit) 131,215 113,192 (331,126)
Extraordinary item (1,922,752) -- --
Net amortization on investment premium\discounts 43,422 (4,708) 36,180
Write down of other real estate -- -- 46,128
Stock dividends received (12,100) (11,500) (11,400)
Net gain on sale of other real estate -- (24,204) (9,308)
Net investment securities gains (15,046) (4,293) --
(Increase) decrease in accrued income and other assets 119,115 (894) 107,522
(Decrease) in accrued expenses and other liabilities (33,019) (56,150) (1,495,570)
----------- ----------- -----------
Net cash provided by (used in) operating activities 656,167 333,103 (1,071,336)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales/maturities/principal
paydowns of investment securities:
Held-to-maturity -- -- 5,200,201
Available-for-sale 9,937,654 9,044,870 --
Purchase of investment securities
Held-to-maturity -- -- (3,423,951)
Available-for-sale (4,497,700) (8,413,250) --
Net change in:
Interest-bearing deposits with banks 1,090,571 (1,288,571) 392,000
Federal funds sold (1,125,000) 1,825,000 (1,125,000)
Loans (5,604,855) (2,077,466) (2,854,106)
Purchase of equipment and building improvements (136,376) (79,595) (151,058)
Proceeds from sale of other real estate -- 195,281 374,000
----------- ----------- -----------
Net cash used in investing activities (335,706) (793,731) (1,587,914)
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-22-
<PAGE> 26
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
PAGE 2 OF 2
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in non-interest-bearing
demand,savings, and NOW accounts $ (236,777) $ 597,048 $ (698,095)
Net increase (decrease) in time deposits 1,104,855 647,849 (451,547)
Payments on bank notes payable (2,935,000) (700,524) (2,076,117)
Proceeds of issuance of notes payable -- -- 3,800,524
Net advances (repayments) on FHLB line of credit (110,453) (102,490) 1,156,198
Net changes in federal funds purchased and
securities sold - repurchase agreement (459,431) 700,000 --
Redemption of preferred stock (299,476) -- 17,917
Settlement proceeds 2,217,705 -- --
----------- ----------- -----------
Net cash provided by (used in) financing activities (718,577) 1,141,883 1,748,880
----------- ----------- -----------
Net increase (decrease) in cash and due from banks (398,116) 681,255 (910,370)
Cash and due from banks - beginning of year 2,406,805 1,725,550 2,635,920
----------- ----------- -----------
Cash and due from banks - end of year $ 2,008,689 $ 2,406,805 $ 1,725,550
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 1,409,434 $ 1,361,830 $ 1,506,382
=========== =========== ===========
Income taxes $ -- $ -- $ --
=========== =========== ===========
Non-cash investing and financing activities:
Stock dividends - FHLB $ 12,100 $ 11,500 $ 11,400
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-23-
<PAGE> 27
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Great Guaranty Bancshares (the Company) is a bank holding company whose
principal activity is the ownership and management of its wholly-owned
subsidiary, Guaranty Bank and Trust (the Bank). The Bank generates
commercial (including agricultural), mortgage and consumer loans and
receives deposits from customers located primarily in Pointe Coupee
Parish, Louisiana, and the surrounding area. The Bank operates under a
state bank charter and provides full banking services. As a state bank,
the Bank is subject to regulation by the Louisiana Office of Financial
Institutions and the Federal Deposit Insurance Corporation.
The accounting and reporting policies of Great Guaranty Bancshares, Inc.
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
revenue and expenses during the reporting period.
The determination of the adequacy of the allowance for loan losses is
based on estimates that are particularly susceptible to significant
changes in the economic environment and market conditions. In
connection with the determination of the estimated losses on loans,
management obtains independent appraisals for significant collateral.
The Bank's loans are generally secured by specific items of
collateral including real property, consumer assets, and business
assets. Although the Bank has a diversified loan portfolio, a
substantial portion of its debtors' ability to honor their contracts
is dependent on local economic conditions in the agricultural
industry.
- 24 -
<PAGE> 28
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Use of Estimates (continued)
While management uses available information to recognize losses on
loans, further reductions in the carrying amounts of loans may be
necessary based on changes in local economic conditions. In addition,
regulatory agencies, as an integral part of their examination
process, periodically review the estimated losses on loans. Such
agencies may require the Bank to recognize additional losses based on
their judgments about information available to them at the time of
their examination. Because of these factors, it is reasonably
possible that the estimated losses on loans may change materially in
the near term. However, the amount of the change that is reasonably
possible cannot be estimated.
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 result in write-downs of the individual securities to their
fair value. The related write-downs are 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 stockholders' equity until realized.
Realized gains and losses on the sale of securities are determined
using the specific-identification method.
- 25 -
<PAGE> 29
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.
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 the lower of
the loan value or fair value at the date of foreclosure. 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 of the real estate 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
Deferred tax assets and liabilities are reflected 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 changes in tax laws or rates are enacted, deferred tax
assets and liabilities are adjusted through the provision for income
taxes.
- 26 -
<PAGE> 30
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. Preferred stock dividends and
premiums paid for redemptions of preferred stock are deducted from
net income in performing the calculation.
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.
- 27 -
<PAGE> 31
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 1996 and 1995 financial statements have been
reclassified to conform with the current year presentation.
- 28 -
<PAGE> 32
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. INVESTMENT SECURITIES
<TABLE>
<CAPTION>
December 31, 1997
----------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Available-for-Sale
- ------------------
U.S. Treasury & U. S. Agency $ 4,000,000 $ 21,720 $ -- $ 4,021,720
Mortgage-backed securities 8,343,883 79,460 (44,376) 8,378,967
Agency for International
Development bonds 1,876,949 -- -- 1,876,949
------------ ------------ ------------ ------------
$ 14,220,832 $ 101,180 $ (44,376) $ 14,277,636
============ ============ ============ ============
Restricted Investments in
- -------------------------
Equity Securities
-----------------
Stock in Federal Home
Loan Bank, at cost $ 214,200 $ -- $ -- $ 214,200
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
----------------------------------------------------------------
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>
- 29 -
<PAGE> 33
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. INVESTMENT SECURITIES (continued)
Gross realized gains and losses on sales of available-for-sale securities
were as follows:
<TABLE>
<CAPTION>
Gains Losses
------- -------
<C> <C> <C>
1997 $18,863 $ 3,823
1996 4,295 --
1995 -- --
</TABLE>
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, 1997, 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 $ 1,603,223 $ 1,603,347
Due from one year to five years 3,777,101 3,808,641
Due from five years to ten years -- --
Due after ten years 8,840,508 8,865,648
----------- -----------
$14,220,832 $14,277,636
=========== ===========
</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, 1997 and 1996, respectively, were pledged to secure public
deposits and for other purposes as required or permitted by law.
- 30 -
<PAGE> 34
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)
----------------------
1997 1996
-------- --------
<S> <C> <C>
Commercial $ 939 $ 1,065
Commercial real estate 2,461 2,345
Residential real estate 13,627 9,572
Consumer 3,219 2,731
Agricultural 2,435 1,366
Less: Allowance for loan losses (238) (255)
-------- --------
$ 22,443 $ 16,824
======== ========
</TABLE>
An analysis of the change in the allowance for loan losses follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Balance, beginning of year $ 254,819 $ 261,601 $ 279,961
Loans charged off (3,613) -- (5,802)
Recoveries 1,665 8,218 20,548
Provision (credit) for loan losses (14,500) (15,000) (23,106)
--------- --------- ---------
Balance, end of year $ 238,371 $ 254,819 $ 261,601
========= ========= =========
</TABLE>
The Company had impaired loans of $23,437 at December 31, 1997. In
conformity with FASB Statement 114, as amended by FASB Statement 118, no
loss has been recognized on these loans due to collateral values exceeding
the loan balances. There were no impaired loans or properties acquired
through foreclosures at December 31, 1996.
4. TIME DEPOSITS
At December 31, 1997, the scheduled maturities of time deposits are as
follows: (in thousands)
<TABLE>
<S> <C>
Within 3 months or less $ 5,032
Over 3 months through 12 months 9,861
Over 1 year through 5 years 1,920
Over 5 years --
-------
$16,813
=======
</TABLE>
- 31 -
<PAGE> 35
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. PROPERTIES AND EQUIPMENT
Components of properties and equipment included in the statements of
condition at December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cost:
Land $ 276,990 $ 276,990
Bank premises 1,278,978 1,278,978
Furniture and equipment 655,012 518,636
----------- -----------
Total cost 2,210,980 2,074,604
Less: accumulated depreciation (1,530,861) (1,409,750)
----------- -----------
Net book value $ 680,119 $ 664,854
=========== ===========
</TABLE>
Depreciation expense amounted to $121,111, $119,589 and $114,029 for the
years ended December 31, 1997, 1996, and 1995, 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, 1997
---------------------------
Carrying Assigned
Amount Value
----------- -----------
<S> <C> <C>
FHLB stock $ 214,200 $ 214,200
Deposits with FHLB 72,140 72,140
1-4 single family first mortgage loans 13,484,238 4,719,483
----------- -----------
$13,770,578 $ 5,005,823
=========== ===========
Maximum advances available (value divided by 110%) $ 4,550,748
Advances outstanding (1,174,252)
-----------
Advances available and unused $ 3,376,496
===========
</TABLE>
- 32 -
<PAGE> 36
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. NOTES PAYABLE (continued)
Advances outstanding under this agreement totalled $1,276,531 at December
31, 1996.
Scheduled future principal payments of advances outstanding as of December
31, 1997 are as follows:
<TABLE>
<S> <C>
1998 $ 125,743
1999 127,463
2000 137,370
2001 148,052
2002 159,568
Thereafter 476,056
-----------
$ 1,174,252
===========
</TABLE>
The weighted average interest rate of all advances outstanding as of
December 31, 1997 was 7.5%. Interest expense on these advances amounted to
$91,786, $99,793 and $86,808 for 1997, 1996 and 1995, respectively.
Demand Notes Payable
The Company owes a note payable to a bank in the principal amount of
$165,000 at December 31, 1997, 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, 1997 was 9.5%. Under the terms of this note, if
no demand is made, the note is payable in full on March 31, 1998. Interest
is payable upon maturity. This loan is secured, by a pledge of 100% of the
Subsidiary Bank's common stock. As of December 31, 1996, the Company owed
$2,900,000 under a similar borrowing arrangement with this bank, along
with a note payable to an individual of $200,000.
- 33 -
<PAGE> 37
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. INCOME TAXES
The Company and the subsidiary Bank file a consolidated income tax return.
The reasons for the differences between the statutory federal income tax
rates and the effective tax rates applied to income before income taxes
and extraordinary item are summarized as follows:
<TABLE>
<CAPTION>
1997 % 1996 % 1995 %
--------- ---- --------- ---- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Tax based on statutory rate $ 152,043 34.0% $ 112,289 34.0% $ 55,824 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)
Other (20,828) (4.7) 1,388 .4 -- --
--------- ---- --------- ---- --------- ------
$ 131,215 29.3% $ 113,192 34.3% $(331,126) (201.7%)
========= ==== ========= ==== ========= ======
</TABLE>
In accordance with Statement of Financial Accounting Standards No. 109,
deferred income taxes are provided on the tax effect of changes in
temporary differences. Deferred tax assets are subject to a valuation
allowance if their realization is less likely than not. Deferred tax
assets (liabilities) which are included in other assets (net) on the
accompanying statements of condition are comprised of the following at
December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Unrealized investment gains - available-for-sale ($ 19,314) $ --
Stock dividends received on investments (12,988) (8,874)
Allowance for loan losses (205,107) (200,048)
--------- ---------
Gross deferred tax liability (237,409) (208,922)
--------- ---------
Unrealized investment losses - available-for-sale -- 552
Net operating loss carryforward 228,487 662,016
Depreciation on premises and equipment 4,111 8,650
Business credit carryforwards and other 36,009 9,379
--------- ---------
Gross deferred tax asset 268,607 680,597
Valuation allowance -- --
--------- ---------
268,607 680,597
--------- ---------
Net deferred tax asset $ 31,198 $ 471,675
========= =========
</TABLE>
- 34 -
<PAGE> 38
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. INCOME TAXES (continued)
The consolidated provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Taxes payable currently $ 5,557 $ -- $ --
Deferred tax expense (benefit) 125,658 113,192 (331,126)
--------- --------- ---------
$ 131,215 $ 113,192 $(331,126)
========= ========= =========
</TABLE>
At December 31, 1997, the Company has available net operating loss
carryforwards of approximately $670,000 which begin to expire in 2002.
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 $1,379,818 and $763,650 at December 31, 1997 and
1996, respectively. During 1997 and 1996, $1,709,609 and $593,568 of new
loans were made, and loan repayments totaled $1,093,441 and $584,196,
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 further described
in Note 15 - Financial Instruments.
The Company and its subsidiary are parties to 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. EXTRAORDINARY GAIN
For the past several years, the Company has been a plaintiff in an action
seeking declaration of the amount, if any, due under promissory notes held
by a defendant creditor comprised of a group of individuals, including
stockholders of the Company. These notes evidenced advances originally
made to 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.
- 35 -
<PAGE> 39
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. EXTRAORDINARY GAIN (continued)
In 1995 the Company delivered to the defendants the judgment amount,
with reservation of all rights on appeal. 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.
In April 1997, the Supreme Court of Louisiana reviewed the appellate
court's ruling and re-affirmed.
The extraordinary gain recognized in the accompanying statement of
income results from the forgiveness of the debt equal to the unpaid
principal amount of the original notes payable plus accrued interest,
less the amount ultimately declared as payable to the holders of the
notes. Also included in the extraordinary gain is related interest
income on the excess of the delivery amount over the ultimate amount due
to the defendant plus related court costs.
The gain is tax effected to the extent of taxable amounts. Some of the
gain was applied retroactively, thereby utilizing tax benefits of
previous years that had previously expired. The tax effect of $294,953
consists of amortization of deferred tax assets representing net
operating losses carried forward.
11. 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.
12. 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.
- 36 -
<PAGE> 40
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. 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 these minimum capital levels which are standard for all
banks under the authority of the FDIC, the Bank is required to maintain a
minimum Tier I to Average Assets ratio of 6% (rising to 7% in 1999). This
higher standard is required as a condition to the FDIC and the Louisiana
Office of Financial Institution granting permission for a dividend to the
holding company of $1,521,865 in 1997. However, year-end audit adjustments
to amortize deferred tax assets caused the Bank to fall below the 6% Tier
1 capital level. Management has discussed this matter with the FDIC and
the Louisiana Office of Financial institution and believes the Bank will
come to compliance in early 1998.
As of December 31, 1997, 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, 1997 and 1996 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, 1997:
Total Capital
(to Risk Weighted Assets) $2,689 13.3% $1,617 >8.0% $2,021 >10.0%
- -
Tier I Capital
(to Risk Weighted Assets) 2,451 12.1% 808 >4.0% 1,213 > 6.0%
- -
Tier I Capital
(to Average Assets) 2,451 5.8% 1,678 >4.0% 2,098 > 5.0%
- -
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%
- -
</TABLE>
- 37 -
<PAGE> 41
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. 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, 1997,
there is no amount available for dividends.
14. 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 $23,809, $22,831
and $10,348 for 1997, 1996, and 1995, respectively.
15. 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 90 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 1997 or 1996.
- 38 -
<PAGE> 42
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. FINANCIAL INSTRUMENTS (continued)
The estimated fair values of the Company's financial instruments were as
follows:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
------------------ -------------------
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 $ 3,332 $ 3,332 $ 3,695 $ 3,695
Securities available-for-sale 14,278 14,278 19,761 19,761
Restricted equity securities 214 214 202 202
Loans receivable 22,443 22,791 16,824 16,564
Accrued interest receivable 329 329 356 356
Financial liabilities:
Deposit liabilities 37,102 37,165 36,234 36,265
Short-term borrowings 241 241 700 700
Long-term debt 1,174 1,281 1,285 1,345
Bank note payable -- -- 2,900 2,900
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, 1997, is as follows:
<TABLE>
<CAPTION>
Notional
Amount
----------
<S> <C>
Commitments to extend credit $2,238,671
Credit card arrangements 304,915
</TABLE>
- 39 -
<PAGE> 43
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. BANK ONLY STATEMENTS OF FINANCIAL CONDITION
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1997 AND 1996
A S S E T S
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cash and due from banks $ 2,008,689 $ 2,406,805
Interest-bearing deposits with banks 198,000 1,288,571
Federal funds sold 1,125,000 --
Investment securities - available-for-sale 14,277,636 19,761,011
Restricted investments in equity securities 214,200 202,100
Loans, net of allowance for loan losses 22,443,067 16,823,712
Properties and equipment, net 680,119 664,854
Accrued interest receivable 329,130 355,583
Other assets 59,543 279,644
----------- -----------
TOTAL ASSETS $41,335,384 $41,782,280
=========== ===========
</TABLE>
- 40 -
<PAGE> 44
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. BANK ONLY STATEMENTS FINANCIAL OF CONDITION (continued)
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1997 AND 1996
L I A B I L I T I E S A N D S T O C K H O L D E R 'S E Q U I T Y
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
L I A B I L I T I E S
Demand deposits $ 6,777,740 $ 6,307,152
NOW deposits 5,388,446 5,053,484
Savings deposits 8,165,704 9,168,044
Time deposits, $100,000 and over 1,799,852 1,168,073
Other time deposits 15,012,896 14,539,820
----------- -----------
Total deposits 37,144,638 36,236,573
Notes payable 1,174,252 1,276,531
Accrued expenses and other liabilities 287,365 110,111
Federal funds purchased and securities sold
under agreements to repurchase 240,659 700,000
----------- -----------
Total liabilities 38,846,914 38,323,215
----------- -----------
COMMITMENTS AND CONTINGENT LIABILITIES -- --
----------- -----------
STOCKHOLDER'S EQUITY
Common stock - $7.50 par value
Authorized - 200,000 shares; issued
and outstanding - 96,242 shares 721,815 721,815
Additional paid-in capital 4,965,350 4,958,601
Accumulated deficit (3,236,186) (2,220,279)
Net unrealized gain (loss) on securities
available for sale, net of tax of $19,314
and ($552), respectively 37,491 (1,072)
----------- -----------
Total stockholder's equity 2,488,470 3,459,065
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $41,335,384 $41,782,280
=========== ===========
</TABLE>
- 41 -
<PAGE> 45
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. PARENT ONLY FINANCIAL STATEMENTS
CONDENSED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
A S S E T S
-----------
Cash in subsidiary bank $ 42,406 $ 2,421
Investment in subsidiary 2,488,470 3,459,065
Dividends receivable -- --
Deferred tax asset 186,260 395,185
----------- -----------
Total Assets $ 2,717,136 $ 3,856,671
=========== ===========
Accrued interest payable $ 3,267 $ 58,476
Due to subsidiary bank -- 127,134
Notes payable 165,000 3,100,000
Accrued dividends payable 35,843 --
----------- -----------
Total Liabilities 204,110 3,285,610
----------- -----------
L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y
- ----------------------------------------------------------------------
Preferred stock - Series A, no par; 500,000 shares authorized;
-0- and 24,462 shares issued and outstanding, respectively -- 126,037
Preferred stock - Series B, no par; 2,000,000 shares authorized;
-0- and 21,559 shares issued and outstanding, respectively -- 111,080
Common stock - $7.50 par value; 500,000 shares
authorized; 143,374 shares issued and outstanding 1,075,305 1,075,305
Additional paid-in capital 2,411,471 2,411,471
Accumulated deficit (1,011,241) (3,151,760)
Net unrealized gain (loss) on securities AFS 37,491 (1,072)
----------- -----------
Total Stockholders' Equity 2,513,026 571,061
----------- -----------
Total Liabilities and Stockholders' Equity $ 2,717,136 $ 3,856,671
=========== ===========
</TABLE>
- 42 -
<PAGE> 46
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. PARENT ONLY FINANCIAL STATEMENTS (continued)
CONDENSED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
INCOME
- ------
Dividends received from Subsidiary Bank $ 1,521,865 $ 990,694 $ 350,639
----------- ----------- -----------
EXPENSES
- --------
Interest expense 174,679 296,488 224,249
Legal fees 82,721 92,230 300,534
Other expenses 25,365 572 28,889
----------- ----------- -----------
282,765 389,290 553,672
----------- ----------- -----------
INCOME (LOSS) BEFORE EQUITY IN
- ------------------------------
UNDISTRIBUTED EARNINGS
----------------------
OF SUBSIDIARY 1,239,100 601,404 (203,033)
------------- ----------- ----------- -----------
Equity in undistributed earnings
of subsidiary (1,015,908) (16,692) 509,003
----------- ----------- -----------
INCOME BEFORE TAXES AND
-----------------------
EXTRAORDINARY GAIN 223,192 84,712 305,970
------------------ ----------- ---------- ----------
Income tax expense (benefit) (92,777) (132,359) (189,345)
----------- ----------- -----------
INCOME BEFORE EXTRAORDINARY
---------------------------
GAIN 315,969 217,071 495,315
---- ----------- ----------- -----------
EXTRAORDINARY GAIN
------------------
(Net of income tax) 1,922,752 -- --
----------- ----------- -----------
NET INCOME $ 2,238,721 $ 217,071 $ 495,315
- ---------- =========== =========== ===========
</TABLE>
- 43 -
<PAGE> 47
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. PARENT ONLY FINANCIAL STATEMENTS (continued)
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,238,721 $ 217,071 $ 495,315
Adjustments to reconcile net
income to cash (used in) provided
by operating activities:
Extraordinary item (1,922,752) -- --
Equity in undistributed earnings
of subsidiary 1,015,908 516,692 (509,003)
Changes in operating assets and liabilities:
Dividends receivable -- 114,000 --
Accrued interest payable (55,210) (21,220) (1,532,722)
Income tax benefit derived from tax
loss generated (92,777) (132,359) (189,345)
----------- ----------- -----------
Cash (used in) provided by operating activities 1,183,890 694,184 (1,735,755)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes payable -- -- 3,800,524
Principal payments on notes payable (2,935,000) (700,524) (2,076,117)
Proceeds from issuance of preferred stock -- -- 17,917
Redemption of preferred stock (299,476) -- --
Settlement received 2,217,705 -- --
Payments on amounts due subsidiary (127,134) -- --
----------- ----------- -----------
Cash (used in) provided by financing activities (1,143,905) (700,524) 1,742,324
----------- ----------- -----------
Net increase (decrease) in cash 39,985 (6,340) 6,569
Cash - beginning of year 2,421 8,761 2,192
----------- ----------- -----------
Cash - end of year $ 42,406 $ 2,421 $ 8,761
=========== =========== ===========
Supplemental disclosure of cash flow information: Cash paid for:
Interest $ 229,889 $ 317,707 $ 1,677,364
=========== =========== ===========
Income taxes $ -- $ -- $ --
=========== =========== ===========
</TABLE>
- 44 -
<PAGE> 48
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There has been no change in nor disagreement with the independent
accountants of Bancshares or Guaranty Bank during the two most recent fiscal
years.
PART III
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
DIRECTORS
The directors of Bancshares are as follows:
Joseph L. Dabadie, Jr., age 71, 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 50, 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 70, 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 50, has been a director since 1993. Mr.
Orillion is President and owner of Lo-Vac, Inc., which he founded in 1982.
F. Gregory Roy, age 46, has been a director since 1993. Mr. Roy has
been 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 54 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 53, 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-four years.
- 45 -
<PAGE> 49
R. Keith Miller, age 47, served during 1997 as Executive Vice
President and as the Bank's Senior Lending Officer. Prior thereto Mr. Miller
had been an executive officer since joining Guaranty Bank in 1982. Mr. Miller
resigned from Guaranty Bank, effective February 23, 1998.
J. Wade O'Neal, age 41, has been employed by Guaranty Bank for
eighteen 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 58, serves as Senior Vice-President and Chief
Financial Officer and has been employed by Guaranty Bank for twenty-six years.
Mr. Roberts also serves as Secretary to the Board of Guaranty Bank and as
Treasurer of Bancshares. Mr. Roberts has recently announced his intention to
retire from Guaranty Bank, effective April 17, 1998.
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, 1997 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, 1997 exceeding
$100,000, except Daniel R. Domingue, Jr. in 1997.
<TABLE>
<CAPTION>
Name of Individual and Position Year Salary Bonus Other
------------------------------- ---- ------- ----- -----
<S> <C> <C> <C> <C>
Daniel R. Domingue, Jr., 1995 $75,000 $ 7,500 $ 7,125(1)
Guaranty Bank President and CEO 1996 75,000 15,000 8,250(1)
1997 75,000 15,000 10,990(1)
</TABLE>
- ----------------
(1) Includes living allowance at $500 per month, Bank's 401(k) matching
contribution and incentive and vacation pay.
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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of February 28, 1998, the following persons were known by
Bancshares to be the beneficial owners 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.(1) 12,488 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).
- 46 -
<PAGE> 50
SECURITY OWNERSHIP OF MANAGEMENT
The following table indicates the beneficial ownership as of February
28, 1998, 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 606 *
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 14,806 10.03%
as a group (9 persons)
</TABLE>
- --------------------
*less than 1.0%
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 have had transactions with the Bank during the past two years
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 1996, no transaction between Guaranty Bank or
Bancshares and any executive officer, director or holder of more than 5% of the
capital stock of Bancshares 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; (iii) personal loans
to or endorsed by Mr. Major (iv) a total of $50,000 outstanding at December 31,
1997, with $20,000 in available commitments.
(i) F. Gregory Roy; (ii) director of Bancshares; (iii) loans and line
of credit commitments to Mr. Roy and affiliated entities; (iv) at total of
$399,527.74 outstanding at December 31, 1997, with $234,000.00 in available
commitments.
- 47 -
<PAGE> 51
EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS:
(3) (i) Articles of Incorporation. See Exhibit 2.1 to Form
10-SB filed by Great Guaranty Bancshares, Inc. April
30, 1997, as amended by Amendment No. 1 filed July 1,
1997, which exhibit is incorporated herein by
reference.
(ii) Bylaws. See Exhibit 2.1 to Form 10-SB filed by Great
Guaranty Bancshares, Inc. April 30, 1997, as amended
by Amendment No. 1 filed July 1, 1997, which exhibit
is incorporated herein by reference.
(4) Instrument defining the rights of Security Holders, Including
Indentures. See Exhibit 3.1 (Form of Stock Certificate for
Common Stock), Exhibit 3.2 (Stock Redemption Agreement) and
Exhibit 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.
(21) Subsidiaries of the Small Business Issuer. Great Guaranty
Bancshares, Inc. has one wholly owned subsidiary, Guaranty
Bank & Trust Company, a state bank organized under the laws of
the State of Louisiana.
(27) Financial Data Schedule.
REPORTS ON FORM 8-K:
No reports on form 8-K were filed during the period for which this
report is filed.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
GREAT GUARANTY BANCSHARES, INC.
Dated: March 31, 1998 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
- 48 -
<PAGE> 52
EXHIBIT INDEX
<TABLE>
<S> <C>
Exhibit 21 Subsidiaries of Great Guaranty Bancshares, Inc.
Exhibit 27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT (21) SUBSIDIARIES OF GREAT GUARANTY BANCSHARES, INC.
The sole subsidiary of Great Guaranty Bancshares, Inc. is Guaranty
Bank & Trust Company, a Louisiana state banking organization.
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,008,689
<INT-BEARING-DEPOSITS> 198,000
<FED-FUNDS-SOLD> 1,125,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 14,277,636
<INVESTMENTS-CARRYING> 14,277,636
<INVESTMENTS-MARKET> 14,277,636
<LOANS> 22,681,438
<ALLOWANCE> 238,371
<TOTAL-ASSETS> 41,366,580
<DEPOSITS> 37,102,232
<SHORT-TERM> 1,336,252
<LIABILITIES-OTHER> 412,070
<LONG-TERM> 0
0
0
<COMMON> 1,075,305
<OTHER-SE> 1,437,721
<TOTAL-LIABILITIES-AND-EQUITY> 41,366,580
<INTEREST-LOAN> 2,017,513
<INTEREST-INVEST> 1,185,028
<INTEREST-OTHER> 65,341
<INTEREST-TOTAL> 3,267,882
<INTEREST-DEPOSIT> 1,072,050
<INTEREST-EXPENSE> 1,355,656
<INTEREST-INCOME-NET> 1,912,226
<LOAN-LOSSES> (14,500)
<SECURITIES-GAINS> (1,263)
<EXPENSE-OTHER> 1,830,421
<INCOME-PRETAX> 447,184
<INCOME-PRE-EXTRAORDINARY> 315,215
<EXTRAORDINARY> 1,922,752
<CHANGES> 0
<NET-INCOME> 2,176,362
<EPS-PRIMARY> 15.18
<EPS-DILUTED> 15.18
<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>
